FUGRO N.V. Annual Report 2004 - Jaarverslag.com · Fugro has no competitors offering global services on the same scale and of the same scope. The offshore Geotechnical, offshore Survey,

A n n u a l R e p o r t 2 0 0 4F U G R O N . V.

MARINER

Fugro N.V.

Veurse Achterweg 10

P.O. Box 41

2260 AA Leidschendam

The Netherlands

Telephone: +31 (0)70 3111422

Fax: +31 (0)70 3202703

E-mail: [email protected]

www.fugro.com

Chamber of Commerce

’s-Gravenhage

number 120091

F o r c e f u l

U n b e a t a b l e

G r o w t h

R e s u l t s

O p e r a t i o n s

S o u r c e : ‘ a s e c r e t a d m i r e r ’

A n n u a l R e p o r t 2 0 0 4

C o n t e n t s

A n n u a l a c c o u n t s 2 0 0 4

1 Consolidated IFRS income statement 68

2 Consolidated IFRS statement of total result for the period 69

3 Consolidated IFRS balance sheet 70

4 Consolidated IFRS statement of cash flows 71

5 Notes to the consolidated IFRS financial statements 73

6 Subsidiaries and Associates of Fugro N.V. 119

7 Statements of reconciliation on first time adoption of IFRS 122

8 Dutch GAAP annual report 134

9 Consolidated Dutch GAAP balance sheet 137

10 Consolidated Dutch GAAP income statement 138

11 Consolidated Dutch GAAP statement of total income and expense 139

12 Consolidated Dutch GAAP statement of cash flows 140

13 Dutch GAAP equity movements 141

14 Notes to the consolidated Dutch GAAP financial statements 142

15 Dutch GAAP company balance sheet 145

16 Dutch GAAP company income statement 146

17 Notes to the Dutch GAAP company financial statements 147

18 Other information 150

Historic review 152

Report of Stichting Administratiekantoor Fugro 154

Declaration of independence 155

Report N.V. Algemeen Nederlands Trustkantoor over the year 2004 155

Glossary 156

Major developments in 2004 2

Preface from the President and Chief Executive Officer 3

Profile 4

Fugro’s activities and markets 5

Key figures 6

Mission, financial targets, strategy and policy 8

Theme: Fugro and its European foundation 11

Report of the Supervisory Board 15

Report of the Board of Management 21

General business development 21

Historic overview based on constant

average currency rates 21

Financial developments 25

Dividend proposal 27

Organisation and personnel 27

Sustainable business 29

Information and

Communication Technology (ICT) 32

Business Principles 33

Research and development 33

Market development and trends 34

Backlog 36

Post balance sheet date events 36

Prospects 37

Geotechnical services 40

Survey services 43

Geoscience services 46

Corporate Governance 49

IFRS 54

Risk management 56

Information for shareholders 60

Fugro’s contribution to society 64

• In the year under review turnover rose by 23% to

EUR 1,021.6 million (2003: EUR 830.1 million). Based on

the average 2003 dollar exchange rate (USD 1 = EUR 0.88),

turnover would have amounted to EUR 1,057.1 million.

The increase in turnover was, for the most part, due to the

acquisition of Thales GeoSolutions, which was included

in the consolidation as of 2003 (for six weeks since

19 November). Autonomous growth was 10%, in part

thanks to the market improving in the course of 2004.

Acquisitions and disposals in the year under review on

balance increased turnover by 16%.

• The net result before amortisation of goodwill rose by 48%

to EUR 66.7 million (2003: EUR 45.1 million). The net

profit margin rose to 6.5% (2003: 5.4%) and was in line

with forecasts made earlier. The net result after

amortisation of goodwill amounted to EUR 49.5 million

(2003: EUR 32.4 million); an increase of 53%.

• Earnings per share before amortisation of goodwill rose

by 44% to EUR 4.49 (2003: EUR 3.12). Earnings per share

after amortisation of goodwill amounted to EUR 3.33

(2003: EUR 2.24). Cash flow per share rose by 36% to

EUR 8.90 (2003: EUR 6.54).

• All the business units contributed towards the improved

net result. Although the results of the Survey division

were somewhat disappointing, the results of the Airborne

Survey activities – part of the Geoscience division – were

extremely good.

• Although investments in the oil and gas industry rose by

around 8% (in dollar terms) in 2004 compared with the

previous year, most suppliers to the oil and gas industry

have not felt proportional benefits from these increased

investments.

• It is proposed that the dividend in cash or (certificates of)

shares be increased to EUR 1.90 (2003: EUR 1.85).

• The activities of Fugro-TGS were successfully integrated

into the Survey division in the early part of 2004. The full

effects of the approximately EUR 40 million annual

savings in operating costs will become apparent in 2005.

Fugro’s position as a global supplier of services to the oil

and gas industry has been significantly reinforced.

• Mr. G-J. Kramer (1942), President and Chief Executive

Officer since early 1983, will step down as President and

Chief Executive Officer in October 2005 and will retire at

the end of December 2005. Mr. K.S. Wester (1946), who has

worked for Fugro since 1981 and been a member of the

Board since 1996, has been named as his successor.

Mr. A. Jonkman (1954) joined the Board as Chief Financial

Officer in May 2004.

• For a year Fugro has been in compliance with the Dutch

Corporate Governance code. The General Meeting of

Shareholders of 19 May 2004 approved the Company’s

Corporate Governance policy, including the explained

deviations from the Code.

• On 19 May 2004 the first meeting of holders of depository

receipts of shares (certificates) was held. The certificate

holders expressed their confidence in the management of

Stichting Administratiekantoor Fugro.

• Fugro’s financial reporting for 2004 complies fully with

both the Dutch accounting regulations and those of the

IFRS with comparable figures for the year 2003.

This means that Fugro is complying with this regulation

a year earlier than is legally required.

M a j o r d e v e l o p m e n t s i n 2 0 0 4

2

All figures mentioned in the Annual Report (page 2 to 65) refer to the Annual Accounts based on Dutch GAAP, which will be proposed for adoption to the

Annual General Meeting on 19 May 2005.

D e a r s h a r e h o l d e r

2004 was a very successful year for Fugro, in part thanks

to the speedy integration of Fugro-TGS. The turnover of

EUR 1,021.6 million means we have reached the one

billion euro milestone, never before achieved in Fugro’s

history. We also achieved a reasonably good result of

EUR 66.7 million before amortisation of goodwill, with

a cash flow of EUR 132.1 million. Mainly due to a difficult

first half year, we view 2004 as a transitional year.

The appropriateness of the strategic course has again

proven to be correct, but we must take a further step

forward in order to achieve our target net margin before

amortisation of goodwill of 7.5% – 8% again.

The world economy developed only moderately,

market conditions remained rather disappointing and

there was a further substantial drop in the dollar

exchange rate, yet we were once again able to improve the

organisation on many fronts. And that is something of

which we can rightfully be proud. This progress is partly

thanks to past investments and strategic acquisitions, for

example in the Geoscience division. Fugro’s transparent

and sustainable business operations are extremely

important for a good understanding of our focus on the

future and, therefore, for the confidence our stakeholders

have in Fugro.

We want to demonstrate our confidence in the

future to our shareholders in the amount of the dividend.

It is proposed that the dividend for 2004 be raised to

EUR 1.90 (2003: EUR 1.85).

We are gratified by the fact that already in 2004 our

shareholders approved our Corporate Governance, which

means we are in compliance with the Dutch Corporate

Governance code.

The implementation of the new IFRS accounting

principles kept Fugro busy in 2004. As you can see on

pages 68 to 133 our reporting over the past year is fully in

accordance with the IFRS standards with comparable

figures for 2003, as well as in accordance with Dutch

reporting regulations. This means that Fugro is

complying with the legal requirement a year ahead

of schedule.

The developments in the year under review have

resulted in an excellent strategic foundation and a good

financial framework. Organisationally Fugro is well

structured, ready for the future and in an excellent

position in all our markets. At the same time, economic

conditions are gradually improving globally and it is

anticipated that the investments of the oil and gas

industry, that have thus far not been forthcoming, will

finally materialise in 2005 and bring benefits to suppliers

such as Fugro. In a nutshell, the prospects for most of our

activities are good.

These developments mean that at this moment the

order book is well filled and healthy. Fugro is working

towards achieving the net profit margin of 7.5% – 8% in

the near future. Our sights are also set on an average

annual autonomous growth of around 5% – the growth

we achieved in the past. Expedient acquisition candidates

will be evaluated. During the last twenty years, Fugro has

worked consistently on building a unique global portfolio

of activities in niche markets. This means we face not only

the short-term but also the long-term future with

confidence.

Next year, my successor K.S. Wester will write this

preview. I want to personally thank the readers, share-

holders, employees and clients for the trust you have

placed in me since 1983 and I hope you feel that this trust

has been rewarded. Many thanks for all your support.

Yours sincerely,

Fugro N.V.

G-J. Kramer

President and Chief Executive Officer

P r e f a c e f r o m t h e P r e s i d e n t a n d C h i e f E x e c u t i v e O f f i c e r

3

4

G e o s c i e n c e d i v i s i o nS u r v e y d i v i s i o nG e o t e c h n i c a l d i v i s i o n

Investigation of and advice

regarding the physical

characteristics of the soil,

foundation design and

construction materials.

Precise positioning services,

geological advice, topographic,

hydrographic and geological

mapping and support services

for construction projects and

data management.

Gathering and interpreting

geophysical and geological

data, quantitative and

qualitative estimation of oil,

gas, mineral and water

resources and the optimisation

of their production.

F U G R O G R O U P

P r o f i l e

Fugro collects and interprets data related to the earth’s

surface and the soils and rocks beneath. On the basis of

this the Company provides advice, generally for purposes

related to the oil and gas industry, the mining industry

and the construction industry.

Fugro operates around the world at sea, on land and

from the air, using professional, highly specialised

staff supported by advanced technologies and systems,

many of which have been developed in-house. Fugro has

28 vessels and owns 75 CPT trucks and 40 aircraft.

Fugro’s objective is to occupy a leading market position by

providing high- quality services supported by

technological developments. This requires a strong

international or regional market position. Fugro was

founded in 1962, has been listed on Euronext N.V. in

Amsterdam since 1992 and has been included in the

Amsterdam Midkap Index since March 2002. Fugro

has over 7,600 staff permanently stationed in over

50 countries.

For complete company information see www.fugro.com.

Organisationally Fugro comprises three divisions: Geotechnical, Survey and Geoscience.

5

F u g r o ’s a c t i v i t i e s a n d m a r k e t s

Fugro has no competitors offering global services on the

same scale and of the same scope.

The offshore Geotechnical, offshore Survey, Development

& Production, Airborne Survey and Positioning business

units operate worldwide. In these markets Fugro holds

leading positions. The competition varies per segment

and geographical region. The oil and gas industry is the

major client in these markets. The British market

research agency Douglas-Westwood estimates that the

World Ocean Survey market (including offshore

Geotechnical and offshore Survey) in total is

USD 2.5 billion per annum.

The onshore activities revolve around local or regional

markets. Fugro has a presence in many countries and its

market positions vary per region. Most orders are carried

out within a hundred kilometres of the relevant office.

Market

Local/regional markets

Global market

Global market

Local/regional markets

Global market

Global market

Global market

Market position

Strong regional position,

varying by country/region

Strong leading position

Leading position

Strong regional position,

varying by country/region

Strong position in niche

markets

Leading position in niches

Leading position

G e o t e c h n i c a l

Onshore

Offshore

S u r v e y

Offshore

Onshore

Positioning

G e o s c i e n c e

Development & Production

Airborne Survey

Major clients

Government, industry and

construction contractors

Oil and gas companies,

contractors

Oil and gas companies

Government, industry and

construction contractors

Agriculture, mining and

survey services

Oil and gas companies

Mining and oil and gas

companies

R e s u l t (x EUR mln.)

Turnover

Turnover from own services

Operating result

Cash flow

Net result before amortisation of goodwill 5)

Net margin before amortisation of goodwill (%) 5)

Net result after amortisation of goodwill 5)

Interest cover (factor)

C a p i t a l (x EUR mln.)

Total assets

Group equity 1) 2)

Solvency (%) 1) 2)

Solvency (%) 1) 2) 3)

Return on shareholders’ equity (%) 1) 2) 4)

Return on invested capital (%) 1) 2)

A s s e t s (x EUR mln.)

Tangible fixed assets

Investments (including acquisitions)

Depreciation of tangible fixed assets

D a t a p e r s h a r e (x EUR 1.–)

Capital and reserves 1) 2)

Operating result

Cash flow

Net result before amortisation of goodwill 5)

Net result after amortisation of goodwill 5)

Dividend

Share price: year-end

Share price: highest

Share price: lowest

Average price/earnings ratio after amortisation of goodwill 5)

Average dividend yield (%)

I s s u e o f n o m i n a l s h a r e s (in thousands)

At year-end

Entitled to dividend

Average

N u m b e r o f e m p l o y e e s

At year-end

K e y f i g u r e sFor a reconciliation between IFRS and Dutch GAAP please refer to pages 54, 55 and 122 through 132.

6

For figures based on Dutch GAAP the following holds: 1) After providing for a cash dividend of 50% in 2001 and before.

2) Since 2002, no accrual for dividend has been included.

IFRS2004

1,008.0

643.4

104.2

125.8

56.4

5.6

49.3

3.7

983.4

228.2

22.8

32.9

25.9

14.5

233.0

71.0

66.1

14.40

7.02

8.48

3.80

3.32

1.90

61.40

65.65

40.20

15.9

3.6

15,548

15,137

14,840

7,615

IFRS2003

822.4

549.0

63.3

80.5

25.7

3.1

18.9

2.2

1,056.0

213.7

20.0

29.1

10.9

7.5

268.8

124.0

54.0

13.93

4.37

5.56

1.77

1.30

1.85

40.80

51.45

24.51

29.1

4.9

15,166

14,577

14,464

8,472

DutchGAAP2004

1,021.6

646.4

111.0

132.1

66.7

6.5

49.5

4.0

970.4

264.8

26.8

37.1

18.0

11.7

232.1

113.1

65.4

16.73

7.48

8.90

4.49

3.33

1.90

61.40

65.65

40.20

15.9

3.6

15,548

15,137

14,840

7,615

Change in %

23.1

18.9

45.5

39.6

47.9

20.4

52.8

17.6

(5.8)

8.7

14.5

12.1

2.3

30.0

(1.9)

(7.5)

32.1

5.4

41.9

36.1

43.9

48.7

2.7

50.5

27.6

64.0

(5.9)

(26.5)

Change in %

22.6

17.2

64.6

56.3

119.5

80.6

160.8

68.2

(6.9)

6.8

14.0

13.1

137.6

93.3

(13.3)

(42.7)

22.4

3.4

60.6

52.5

114.7

155.4

2.7

50.5

27.6

64.0

(45.4)

(26.5)

DutchGAAP2003

830.1

543.5

76.3

94.6

45.1

5.4

32.4

3.4

1,030.0

243.7

23.4

33.1

17.6

9.0

236.7

122.3

49.5

15.88

5.27

6.54

3.12

2.24

1.85

40.80

51.45

24.51

16.9

4.9

15,166

14,577

14,464

8,472

7

3) Subordinated convertible debenture bond treated as Group equity.

4) Before amortisation of goodwill.

5) For IFRS: before amortisation intangible fixed assets.

DutchGAAP2002

945.9

617.5

111.9

119.2

72.2

7.6

60.2

6.1

793.2

274.3

34.3

46.9

27.4

15.4

192.3

100.0

46.9

18.28

7.79

8.30

5.03

4.19

1.85

43.13

66.00

39.50

12.6

3.5

14,862

14,395

14,359

6,923

DutchGAAP2001

909.8

578.1

98.5

105.3

61.7

6.8

56.3

7.8

814.8

247.6

30.0

42.3

35.7

19.1

163.3

89.4

43.6

16.68

7.42

7.93

4.65

4.24

1.60

50.10

75.65

43.00

14.0

2.7

14,670

14,256

13,276

6,953

DutchGAAP2000

712.9

462.8

73.7

85.6

46.0

6.5

46.0

8.1

474.7

104.7

22.2

43.2

42.7

24.7

120.5

49.0

39.6

8.41

5.92

6.87

3.69

3.69

1.36

68.75

71.25

37.25

14.8

2.5

12,762

12,567

12,458

5,756

0

220

440

660

880

1,100

IFRS2003

2004 IFRS2004

2003200220012000

0

150

300

450

600

750

IFRS2003

2004 IFRS2004

2003200220012000

0

30

60

90

120

150

IFRS2003

2004 IFRS2004

2003200220012000

0

15

30

45

60

75

IFRS2003

2004 IFRS2004

2003200220012000

0

1

2

3

4

5

6

IFRS2003

2004 IFRS2004

2003200220012000

(x EUR 1 mln.)

T u r n o v e r

(x EUR 1 mln.)

N e t r e v e n u e

(x EUR 1 mln.)

C a s h f l o w

(x EUR 1 mln.)

N e t r e s u l t 4) 5)

(x EUR 1.–)

N e t r e s u l t p e r s h a r e 4) 5)

8

M i s s i o n

Fugro’s mission is to be the world’s leading company in

the offshore, onshore and airborne collection of,

interpretation of, and advising on data related to the

earth’s surface and the soils and rocks beneath, primarily

aimed at providing advice to the:

• oil and gas industry;

• mining industry and

• construction industry.

This mission is achieved through:

• providing a high-quality service;

• professional, highly-specialised staff and

• advanced, generally state-of-the-art, unique

technologies and systems.

F i n a n c i a l t a r g e t s

Fugro’s target is to achieve a structural increase in

earnings per share for its shareholders. Fugro’s long-term

policy is aimed at generating a steady growth in net profit

by both improving net margin and increasing turnover.

To achieve this a clear and consistently implemented

strategy for all stakeholders is vital. Fugro is aiming for

a net profit margin before amortisation of goodwill of

7.5 – 8% of turnover. This equates to an EBITA margin of

10 – 12%. The EBITA per division is included in the

developments per division (pages 40 – 48). Other

important financial targets are:

• maintaining a healthy balance sheet and solvency

(30 – 35%);

• a strong cash flow with an average annual growth per

share of 10%;

• a healthy interest cover (EBIT/Interest > 5) and

• a growth in earnings per share averaging 10% per

annum.

With the exception of the capitalisation of goodwill and

its amortisation over a maximum of twenty years,

introduced as of 2001, in the past few decades under

Dutch GAAP Fugro had not implemented any material

changes to its accounting system.

Fugro has incorporated the IFRS standards into its

financial reporting over 2004. Please see pages 54 and 55

for a summary of the way in which IFRS standards have

influenced Fugro’s annual accounts and pages 122 – 133

for a detailed explanation. The effects of the transition to

IFRS have no influence on Fugro’s strategy, operational

development and cash flow and does not materially alter

the historical picture of Fugro.

S t r a t e g y

Long-term (3 – 5 years)

In the long-term Fugro aims at achieving equilibrium

between its various activities in order to achieve its

targets. This is an essential component of its strategy.

Fugro strives for a good balance between services related

to exploration and production activities of the oil and gas

industry and those related to other markets and also

between offshore and onshore activities. This diverse

range of cohesive activities reduces Fugro’s vulnerability

to market fluctuations in one particular sector and the

broad spread of its activities, in terms of both products

and geography, ensures a good management of business

risks. Avoiding dependence on one market or single group

of clients is an essential component of the Company’s

strategy. The result is a company that is less cyclical than

it would be if Fugro did not operate globally and for more

than one group of clients.

Profit margins vary per activity depending on the specific

market circumstances. On average, the target profit

margin is higher for the more risky and capital intensive

offshore and airborne activities than for the onshore

activities. The aim is to achieve robust but controlled

profit growth through:

• a broad but cohesive activity portfolio;

• the manner in which Fugro is financed;

• the organisational structure;

• management based more on net result than on

turnover growth.

M i s s i o n , f i n a n c i a l t a r g e t s , s t r a t e g y a n d p o l i c y

– 60%

– 40%

– 20%

0%

20%

40%

60%

1994A

1995A

1996A

1997A

1998A

1999A

2000A

2001A

2002A

2003A

2004F

2005F

E&P spending

Oil price

A =

F =

Actual

Forecast

– 30%

– 20%

– 10%

0%

10%

20%

30%

C h a n g e i n o i l p r i c e a g a i n s t E & P s p e n d i n g

o f t h e o i l c o m p a n i e s (1994 – 2005)

One way a higher margin can be achieved is by having

significant large market shares for Fugro’s core activities

and in niche markets. The target margin can be achieved

through:

• increasing scale of operations;

• increasingly strong market positions;

• considerable research and development;

• being selective about the projects that are taken on

and

• the acquisition of companies with a high added-value.

To sum up, Fugro’s combination of professional and

specialised staff, technologies (mostly developed in-house)

and related high-value services enables Fugro to offer

clients more and more added value.

Short-term (1 – 2 years)

Fugro’s short-term aim is to again achieve a target margin

(net profit margin before amortisation of goodwill) of

7.5% – 8% of turnover. After the successful integration of

Fugro-TGS in 2004 and the mediocre economic

development and market circumstances of recent years,

the focus is also on achieving at least the historical

average annual autonomous turnover growth of around

5%. Possible acquisitions will be evaluated as and when

they present themselves rather than being planned

systematically beforehand. After the acquisition of Thales

GeoSolutions the solvency declined due to the bankloan

that was taken out to finance the acquisition. In 2005

Fugro will focus on the further optimalisation of its

financing structure, also related to the expiration of the

EUR 100 million convertible subordinated notes and the

above mentioned bankloan of EUR 142 million

(outstanding EUR 127 million).

In the ICT area Fugro is developing an ICT security policy

that is in line with the ISO 17799 and BS 7799 standards.

A major portion of the operating companies are ISO

quality certified. Fugro aims to achieve ISO quality

certification for all relevant operating companies within

two years.

After several important acquisitions the organisation

structure of the business unit Development & Production

will be further optimised. In 2004 this process started by

the clustering of the ‘imaging’ activities in the new

company Fugro Seismic Imaging. The refocus of

Development & Production will be continued in the next

two years to further improve the decisiveness and

position in this promising market.

P o l i c y

Sustainability, transparency and reliability have been

core policy themes for Fugro for a very long time. Fugro’s

(financial) targets and the implementation of its strategy

will be achieved on the basis of the following elements:

Market positions and acquisitions

Fugro’s policy is based primarily on maintaining and,

wherever possible, expanding its existing market

positions. Complementing and broadening its package

of services is a primary objective. Growth in other sectors,

by reacting positively and flexibly to developments in

new growth markets, is an equally important policy

component. To broaden its base and ensure continued

sustainable growth Fugro generally completes several

acquisitions each year, usually to strengthen or acquire

good market positions or to obtain valuable technologies.

9Source: ABN AMRO

Brent Blend, scale left.

E&P spending, scale right.

Because acquisitions always involve a measure of risk, in

general an extremely thorough and extensive due

diligence is carried out before the decision to acquire a

company is taken. This limits the risks considerably.

Acquisition evaluation is based not only on financial

criteria but also on:

• added-value for Fugro;

• cohesion with Fugro’s activities and culture;

• growth potential;

• a leading position in a niche market or region;

• technical and management skills;

• risk profile.

Research and development

Research and development are of strategic importance for

Fugro. The search for ways to expand and improve its

services to clients is unceasing and cooperation with its

clients plays an important role in this. Many new ideas are

generated through joint development projects. Specific

measuring equipment, such as the ‘Georanger I’, an

unmanned aircraft for geophysical surveys that went into

operation in 2004 and analytical models play a major role.

Cooperation and scale advantages

Effective cooperation between the various business units

and critical mass are key factors for the successful

execution of large assignments. Capacity utilisation can

be improved by the exchange of equipment and

employees between the various activities and by

broadening staff training. Fugro stimulates cooperative

technological renewal, both within and outside the

Group, by clustering the available knowledge and

increasing its investment footprint. The integration of

information systems and the utilisation of scale

advantages enhance the service provided to clients.

10

S t r e n g t h s

• Excellent strategic basis

• Good market positions in many niche markets

• High quality services

• Sound financial and management systems

W e a k n e s s e s

• Solvency under desired level after acquisition of

Thales GeoSolutions in 2003

• Structure of Development & Production activities

• Vulnerability to rapid, strong changes in

the dollar rate

O p p o r t u n i t i e s

• Increase investment of oil and gas industry

• Growing demand for oil and gas

• Increasing number of infrastructural projects

• Growing demand from mining industry

• Demand for optimisation of oil and gas fields in

production

T h r e a t s

• Global negative economic developments

• Further downward development of dollar

exchange rate

• Collapse of oil price or demand for oil

With its birthplace and head office in Leidschendam,

the Netherlands, Fugro is firmly embedded in Europe.

Fugro was established in 1962 and immediately began

acquiring geotechnical assignments in various European

countries via its mother company Nederhorst. In Belgium

(foundation studies for a motorway) and Switzerland, and

in other countries as well, Fugro’s professionalism and

expertise in the technical arena quickly gained renown.

At the beginning of the seventies Fugro began acting as

a consultant to the oil and gas industry in the North Sea

– an activity that has expanded into the most important

cornerstone of Fugro’s business. In the ensuing period

Fugro offices were established in several European

countries; the United Kingdom (in part coupled with oil

and gas exploration) and Germany. In the ’90s the

Company expanded further, first into Russia and Belgium

and then into Norway, Italy, Luxembourg and France.

Very soon Fugro was also active, on a project basis, in

Southern Europe. Today Fugro is keeping a sharp eye open

for opportunities in eastern Europe.

Fugro carries out projects – from its home base in the

Netherlands, where many new (technological) initiatives

are developed, and through specialists at its international

operating companies – in far more countries than those

in which it has offices. In Europe this often involves

providing services related to infrastructure projects.

Fugro very quickly built up a good reputation with these

activities, and within the oil and gas industry. This is

essential when it comes to the larger, challenging

projects which are a clear target for Fugro.

Fugro’s good reputation was solidified by the Company’s

introduction on the stock exchange on 7 April 1992.

This meant Fugro was quoted on the former Amsterdamse

Effectenbeurs (Amsterdam Stock Exchange). Today Fugro

is one of the leading Midkap-funds of Euronext

Amsterdam, with a (partially determined by its history)

large group of international and, in particular, European

shareholders. Listing on the stock exchange was essential

for Fugro’s further growth as it enabled the financing of

its robust and systematic expansion.

Thanks to Fugro’s international expansion its turnover

has, in absolute terms, increased substantially not only in

Europe but also from outside Europe. Today around half

of Fugro’s total turnover (2004: EUR 480 million) is

achieved in Europe while around 9% of the total turnover

is invoiced from the Netherlands. In 1987, when the

Company had been in existence for 25 years, the

European turnover also amounted to approximately 50%

of the total turnover.

In the 42 years since its founding, Fugro has expanded

into a globally-operating company, offering a broad

package of services and active in many niche markets.

Today the Company is still managed from its head office

in Leidschendam by a multinational Board of

Management and primarily local management in the

over 50 countries in which Fugro has local offices.

This enables Fugro’s operating companies to reap

the benefits and opportunities of being part of a

multinational organisation while, at the same time,

retaining their own culture and identity. They can also

avail themselves of the professional expertise and

motivation afforded by the Fugro network. In the future

Europe will continue to form a firm foundation for Fugro

as an integral component of our global organisation.

F u g r o a n d i t s E u r o p e a n f o u n d a t i o n

11

1 9 6 2N L

1962

Countries in Europe where Fugro is active

Establishment Fugro

1 9 6 2N L

1 9 6 3B

1 9 6 8U K

1 9 7 5D

Fugro established Fugro’s sonar cone

becomes the global

standard

Geotechnical survey

using Fugro’s vessel

‘Greta’

1962 1963 1966 1970 1975 1976 1980

Fugro’s field

service

Fugro’s

1,000th order

In 1962, Fugro N.V. – a company for soil investigations and foundation technology – was founded.

Very soon Fugro began looking beyond the Dutch borders and received its first international order from

Belgium. Over the following decades the Company expanded into a worldwide service provider.

Currently Fugro employs 890 staff in the Netherlands.

N e d e r l a n dN L

Fugro N.V. quoted on the

Euronext Amsterdam stock

exchange; opening price

EUR 17.24

1 9 9 4N , I , C H

1 9 9 8F

1 9 9 2R U S

2 0 0 3D K

Turnover EUR 1 billion

3D laser scanning

1984 1985 1990 1992 1995 2000 20042003

First Managers’ Meeting

14

From left to right:

M.W. Dekker (Vice Chairman), F.H. Schreve (Chairman), Th. Smith,

J.A. Colligan, P.J. Crawford and P. Winsemius.

S u p e r v i s o r y B o a r d

S u p e r v i s o r y B o a r d

Supervisory Board members do not hold any position

that could adversely affect their independence.

During the year under review no Supervisory Board

member held shares, depository receipts of shares or

options on shares or depository receipts of shares in

Fugro. A profile of the Supervisory Board is published

on Fugro’s website.

name Mr. F.H. Schreve (1942) 1) 3)

function Chairman

nationality Dutch

first appointed 1984

current term up to May 2006

expertise general management, strategy, management

& organisation, HRM

other functions dean TSM Business School, Supervisory Board member

of OPG N.V., as well as several other companies;

also various management functions

name Mr. M.W. Dekker (1938) 1) 2) 3)

function Vice Chairman

nationality Dutch



expertise finance and control

other functions former chairman of the Board of NPM Capital N.V.,

Supervisory Board memberships including Koninklijke

Boskalis Westminster N.V. (chairman), F. van Lanschot

Bankiers N.V., IHC Holland N.V., Dutch Flower Group B.V.

and JSI International N.V.

name Mr. P.J. Crawford (1951) 2)

nationality British



expertise operational management and information technology

other functions Supervisory Board member of Crimsonwing Ltd.

(chairman), and Avanti Capital plc. (chairman)

name Mr. J.A. Colligan (1942) 1)

nationality British



expertise operational management and oil & gas industry

other functions former Director of Shell Exploration & Production,

Director Society of Petroleum Engineers Foundation

name Mr. Th. Smith (1942) 3)

nationality American



expertise operational management and marketing

other functions Chairman of the Board of Smith Global Services L.P.,

member of the University of Houston Board of Regents

and University of Houston College of Business Dean’s

Executive Advisory Board and Director of Houston Area

Research

name Mr. P. Winsemius (1942) 2)

nationality Dutch



expertise strategy, innovation and technology development

other functions former Minister of Housing, Physical Planning and

Environment, former partner of McKinsey & Company,

member of the Netherlands Scientific Council for

Government Policy, professor management of

sustainable development, University of Tilburg

(the Netherlands), member of the Supervisory Board

of Kempen & Co (chairman)

Secretary to the Supervisory Board

Ms. J.M.E. Feije (1964)

1) Member of Remuneration Committee2) Member of Audit Committee3) Member of Nomination Committee

15

T o t h e s h a r e h o l d e r s

We are pleased to offer you the Report of the Management

and the 2004 Annual Accounts of Fugro N.V.

At the end of 2004 Fugro was in a good position, in part

thanks to Thales GeoSolutions which was acquired in

2003 and successfully integrated into Fugro in 2004.

Various positive developments in 2004 justify our

confidence in Fugro’s future.

As far as the profit appropriation is concerned we endorse

the Board of Management’s proposal stated on page 27 to

increase the level of the dividend to EUR 1.90 per ordinary

(certificate of) share (2003: EUR 1.85). This dividend

comprises either a cash payment or a settlement in

(certificates of) shares, whichever the shareholder prefers.

The 2004 Annual Accounts are accompanied by an

unqualified auditor’s report. We propose that you

adopt the Annual Accounts and report during the

Annual General Meeting of Shareholders on 19 May 2005

and also discharge the Board of Management for its

management in 2004 and the Supervisory Board for

its supervision in 2004.

Since 1987, Fugro’s international character has been

clearly reflected in the composition of the Supervisory

Board. All the Supervisory Board members are

independent persons in the sense of the Dutch Corporate

Governance Code. A summary of the data, required and

relevant for the execution of the tasks of the Supervisory

Board, of each Supervisory Board member is included on

page 14 of this Annual Report. The profile of the

Supervisory Board describes the range of expertise that

should be represented in our Board. This relates to

strategy, finance, financial control, information

technology, management and organisation, HRM and

social policy, marketing, innovation and technology

development and the oil and gas industry. In our opinion

the Supervisory Board fulfils these requirements.

Considering the backgrounds and wide expertise and

experience of the current members in 2004 we did not

deem additional training to be expedient. An annual

component has been an extensive visit to one or more

Fugro companies. New Board members follow a tailor-

made introduction programme.

In the year under review the Supervisory Board met five

times with the Board of Management in accordance with

a fixed schedule. All the meetings were attended by all the

Supervisory Board members. During each meeting a topic

relevant to Fugro was discussed in depth. The major issues

discussed in these meetings were Fugro’s strategy,

financial results and the reports of each committee.

Developments in the oil and gas industry and the

integration of Fugro-TGS were other important topics.

The implications (for the financial reporting) of the

implementation of IFRS were also discussed. The way in

which Fugro is handling this issue is explained on pages

54 – 55. Regular items on the agenda, besides general

business development, were health, safety & environment

(HSE), the investments in rapidly advancing technological

developments, the filling of various management

positions, the risks inherent to the Company’s activities

and the outcome of the Board’s judgement on the set-up

and functioning of the risk management and control

systems.

Informal meetings between Board members took place on

several occasions. The functioning of the Board of

Management, the Supervisory Board and the individual

Board members were discussed in the absence of the

Board of Management. The findings of the external

auditors were discussed with the external auditor.

Individual Supervisory Board members were in contact

with the Board of Management on a number of occasions.

The Chairman of the Supervisory Board in particular was

in frequent contact with the Board of Management.

The Audit Committee met three times during 2004 in the

presence of the external auditor. During the relevant

meetings the annual accounts and half-yearly accounts

were discussed as was the external auditor’s draft report

to the Supervisory Board. Topics discussed during the

meetings were goodwill on acquisitions (including

reorganisations), impairment models and the results of

these models for several of the most important recent

acquisitions. The changing of the pension scheme in the

Netherlands from a final salary to an average salary

system was also discussed. Other general topics, such as

taxation, claims and disputes were also discussed in

depth and another important subject was the transition

to IFRS. The potential changes and their consequences, as

well as the progress of the conversion, were discussed as

was the Financial Handbook. Risk areas such as hedging,

R e p o r t o f t h e S u p e r v i s o r y B o a r d

fluctuations in foreign currency exchange rates and

insurance were also on the agenda as was the functioning

of the internal and external control mechanisms and the

internal audit group’s working plan. The Audit

Committee was informed of important findings from the

control visits. During every meeting the external auditor

was given the opportunity to discuss issues with members

of the Audit Committee in the absence of Fugro staff.

Limited use was made of this opportunity.

The Remuneration Committee met three times. Topics

discussed included the remuneration of the individual

directors, the remuneration policy and the share option

scheme. The remuneration of the individual Board of

Management members recommended by the

Remuneration Committee was approved by the

Supervisory Board, within the remuneration policy

approved by the Annual General Meeting of Shareholders

on 19 May 2004. For more information regarding the

remuneration of individual Board members see pages 116

– 118 of this Annual Report. The main lines of Fugro’s

remuneration policy are as follows; a) a fixed salary

component, b) a variable component, c) long-term

components (option plan), and d) secondary employment

benefits, including the pension scheme. As far as the fixed

salary component is concerned, in 2004 the

Remuneration Committee consulted an external research

bureau regarding the level and composition of the

remuneration of the members of the Board of

Management. The study involved looking at the

remuneration levels in comparable (Peer group)

companies. For Fugro this means internationally

operating, stock exchange listed companies listed in

either the Midkap index, the top end of the Small cap

index or the bottom end of the AEX. Fugro’s policy is to be

somewhere in the middle of this group. The conclusion of

the study was that the fixed salary component was not

completely in line with comparable companies. In the

light of this it was decided to make further inroads into

the shortfall. The variable component is determined

annually on the basis of three criteria: 1) the profitability

of the Company over the relevant financial year,

2) strategic developments in the relevant financial year,

3) the achievement of individual targets. The variable

component amounts to a maximum of 58% of the fixed

salary. Fugro has had an option scheme for many years

already (the long-term component) which is justified in

the Annual Accounts. The secondary employment

conditions are in conformance with the market.

The pension agreement structure is based on an available

premium system. The Nomination Committee met twice

and concentrated on preparations for the nomination of

members of the Supervisory Board and the Board of

Management. Proposals for appointment to the

Supervisory Board are presented to the Annual General

Meeting of Shareholders which decides on the

appointments.

During the Annual General Meeting of Shareholders on

19 May 2004, Mr. P. Winsemius was reappointed as

a member of the Supervisory Board for a term of four

years. In accordance with the roster, on 19 May 2005

Mr. M.W. Dekker will resign. Mr. Dekker has served the

Company as a member of the Supervisory Board for

fourteen years. The Supervisory Board of Fugro has

benefited from Mr. Dekker’s extensive experience from

his functions as chairman of NPM Capital N.V. and as

member of the Supervisory Board of Dutch and

international companies. As chairman of the audit

committee, Mr. Dekker was instrumental in advising the

Supervisory Board from this increasingly important body

with respect to changes in reporting, insight and

judgement. We are extremely grateful to him for his

endeavours and for making his very broad experience

available to Fugro. To fill the vacancy the Supervisory

Board will propose to the Annual General Meeting of

Shareholders on 19 May 2005 that Mr. F.J.G.M Cremers

be appointed as a member of the Supervisory Board.

The relevant information about Mr. Cremers is available

in full under the relevant agenda item. At this juncture

it was stated that between 1997 and the end of 2004,

Mr. Cremers was the Chief Financial Officer and a

member of the Board of Management of VNU N.V. Prior to

this he spent 21 years with the Royal Dutch/Shell group.

Mr. Cremers has wide ranging financial expertise and

experience in the oil and gas industry. It will be proposed

to the Annual General Meeting of Shareholders that

Mr. P.J. Crawford, who has been a member of Fugro’s

Supervisory Board since 1997 and who, in accordance

with the roster is due to resign, be reappointed as a

member of the Supervisory Board for a period of four

years. His details are also presented to the shareholders

under the relevant agenda item.

Also in relation to the changes in members we intend to

combine the Remuneration and Nomination Committee

in 2005. This will be proposed to the General Meeting of

Shareholders.

16

During the Annual General Meeting of Shareholders on

19 May 2004 Mr. A. Jonkman was appointed a member

of the Board of Management for a period of four years.

Mr. G-J. Kramer will step down from his position as

President and Chief Executive Officer in October 2005

– a position he has held for over 23 years – and will retire

at the end of December 2005. As was announced in 2004,

Mr. K.S. Wester, who joined Fugro in 1981 and has been a

member of the Board of Management since 1996, will

succeed Mr. Kramer as President and Chief Executive

Officer.

In a changeable (economic) climate, and despite an

adverse foreign currency exchange rate, in 2004 Fugro

achieved good results. From a long-term perspective

Fugro is in an excellent position in its markets thanks to

the efforts of the Board of Management, the management

team and Fugro’s international, professional and

supportive staff. We are full of admiration for all that

was achieved in 2004 thanks to their efforts.

Leidschendam, 10 March 2005

F.H. Schreve, Chairman

M.W. Dekker, Vice-chairman

J.A. Colligan

P.J. Crawford

Th. Smith

P. Winsemius

17

The German REO 26

at work

Fugro Geotechnik

GmbH established

1962 1975 1980 1981 1985

1 9 6 2N L

1 9 6 8U K

1 9 6 3B

In 1975 Fugro Geotechnik GmbH was established in Bremen. The Bremen office worked very closely

with the Fugro office in Groningen. In 1978 the German office purchased its first sounding van.

Further expansion in Germany took place in 1992 with the acquisition of the geological company

UWG in Berlin. Currently there are 102 employees in Germany.

D e u t s c h l a n dD

1 9 9 8F

Testing the composition of the ground water

as part of a feasibility study for

a metro station in Berlin

Gesellschaft für

Umwelt- und

Wirtschaftsgeologie

mbH (UWG) acquired

1990 1992 1995 2000 2001

1 9 9 4N , I , C H

1 9 9 2R U S

2 0 0 3D K

Sounding tests in the

port basin of

Mittelplate in the

North Sea

2004

20

From left to right:

A. Jonkman, G-J. Kramer, K.S. Wester, F.E. Toolan, Ms. J.M.E. Feije,

P. van Riel, J.E. Kasparek, J. Ruegg and O.M. Goodman.

E x e c u t i v e C o m m i t t e e

Fugro N.V. is the holding company for a large number of

operating companies located throughout the world and carrying

out a variety of activities. To promote client focus and efficiency

the Group’s organisation is highly decentralised.

The management of the operating companies reports directly to

the Executive Committee.

B o a r d o f M a n a g e m e n t

The Board of Management of Fugro N.V. comprises three people:

name G-J. Kramer (1942)

function President and Chief Executive Officer

nationality Dutch

employed by Fugro since 1983

first appointed to current position 1983

subsidiary functions include membership of the Supervisory

Boards of Koninklijke BAM NBM N.V.

(chairman), Damen Shipyards Group N.V.,

Koninklijke Schelde Groep B.V. (chairman),

Waterleiding Doorn, member of the

Monitoring Committee Corporate

Governance Code, chairman of the board of

IRO, member of the advisory board of TNO,

various directorships

name K.S. Wester (1946)

function Director

nationality Dutch



subsidiary functions include directorship of Nedeco

name A. Jonkman (1954)

function Chief Financial Officer

nationality Dutch




O t h e r m e m b e r s E x e c u t i v e C o m m i t t e e

name O.M. Goodman (1956)

function Director Positioning and Onshore Survey

nationality Irish



name J.E. Kasparek (1942)

function Director North & South America

nationality American



name P. van Riel (1956)

function Director Development & Production

nationality Dutch



name J. Ruegg (1944)

function Director Offshore Survey

nationality Swiss



name F.E. Toolan (1944)

function Director Offshore Geotechnical

and Airborne Survey

nationality British



name Ms. J.M.E. Feije (1964)

function General Counsel & Company Secretary

nationality Dutch



G E N E R A L B U S I N E S S D E V E L O P M E N T

The 2004 reporting year can be categorised as a

transitional year for Fugro. Strategically Fugro is now in

a better position than ever before. Although a reasonable

result was achieved in 2004, it is clear that the Group

must take a further step forwards. Fugro’s management is

based on a target net margin of 7.5% – 8% (before

amortisation of goodwill) and there were several positive

developments in the year under review which justify

Fugro’s view that further improvements are possible in

the coming years:

• The successful integration of Fugro-TGS (see box on

page 22) demanded a great deal of time, effort and

energy from the Board and the management in 2004.

• More stringent cost consciousness was introduced in

the newly integrated companies as were the Fugro

Business Principles and (reporting) procedures.

• To allow the organisation to stabilise, in 2004 there

was a deliberate decision not to make any substantial

acquisitions.

• The market remained weak during the early months of

the year. The oil and gas industry’s decisions to

increase investment budgets were not made until 2004

was well underway, resulting in delayed orders to

service providers such as Fugro.

• The dollar to EUR exchange rate once again remained

under pressure throughout the year under review.

In 2004 the average dollar exchange rate was

EUR 0.81 (2003: EUR 0.88). This had a negative effect

of around EUR 4 million on the net result due to the

strong decline of the dollar. The effect is shown in the

table on this page.

• With the approval of the 2004 Annual General Meeting

of Shareholders, Fugro has complied with the Dutch

Corporate Governance Code a year earlier than

required.

• Similarly, the implementation of the IFRS standards

has put pressure on the organisation. Fugro’s reporting

over 2004 not only complies with Dutch accounting

principles but also with all the IFRS regulations, with

comparable figures for 2003. Fugro is fulfilling its

reporting obligations a year earlier than legally

required and at the end of 2005 a three-year period

reported on the basis of the IFRS standards will be

available for comparison. The 2004 result before

amortisation of intangible fixed assets according to

IFRS is EUR 10.3 million below the Dutch GAAP result.

The 2003 result was significantly lower than the result

which was reported according to Dutch GAAP.

R e p o r t o f t h e B o a r d o f M a n a g e m e n t

21

(Result x EUR 1 mln.)

H i s t o r i c o v e r v i e w

b a s e d o n c o n s t a n t a v e r a g e

c u r r e n c y r a t e s o v e r 2 0 0 0

Turnover

Turnover from own services

Operating result

Cash flow

Net result before amortisation of goodwill

Net margin before amortisation of goodwill

Net result after amortisation of goodwill

Net margin after amortisation of goodwill

Interest cover (factor)

Change in %

30.0

26.1

51.7

46.8

54.2

18.2

61.8

25.0

23.1

2004

1,232.0

786.0

130.8

157.2

79.7

6.5%

61.5

5.0%

4.8

2003

947.8

623.5

86.2

107.1

51.7

5.5%

38.0

4.0%

3.9

2002

975.4

637.9

114.6

122.1

74.0

7.6%

61.7

6.3%

6.2

2001

906.1

574.8

97.7

104.5

61.1

6.7%

55.5

6.1%

7.7

2000

712.9

462.8

73.7

85.6

46.0

6.5%

46.0

6.5%

8.1

All figures mentioned in the Annual Report (pages 2 – 66) refer to the Annual Accounts based on Dutch GAAP, which will be proposed for

adoption to the Annual General Meeting on 19 May 2005. For a statement of the changes due to IFRS, refer to pages 54 – 55.

A detailed explanation is included in the Annual Accounts (pages 122 – 133).

22

Fugro’s acquisition of Thales GeoSolutions on

19 November 2003 and its subsequent integration

were successful. Not only did the integration run

according to plan, which meant that by the end of

2004 the commercial fruits of the acquisition were

already being harvested, and the one-time expenses

(around EUR 22 million) and the operational cost

savings (around EUR 40 million) annually from

2005 on were more favourable than anticipated (full

savings as from 2005).

Over the past decades Fugro has amassed

considerable experience and a long and successful

track record with the acquisition and decentralised

integration of companies. Since 1984 around

100 small and larger companies have been acquired.

This is one of the reasons behind Fugro’s growth

from a turnover of around EUR 50 million in 1984

to EUR 1,022 million in 2004. The net result before

amortisation of goodwill has relatively risen even

more steeply – from EUR 1.6 million in 1984 to

EUR 66.7 million in 2004.

When considering an acquisition Fugro works with

a checklist of around 35 company-specific criteria.

Thales GeoSolutions was also checked against this

list before being classed as a definite candidate for

acquisition. Subsequently a detailed action plan

was drawn-up together with Thales GeoSolutions so

the two companies could jointly arrive at the best

solution for the integration. To reduce uncertainty

and unrest within the organisation, the integration

of Thales GeoSolutions into the Fugro structure was

started immediately after the acquisition. By the

end of 2003 every Fugro-TGS office had been visited

by three members of the Executive Committee.

During these visits the integration plans for each

office were discussed and the implementation

process started.

Several charter agreements with ship owners were

cancelled immediately after the acquisition and

shortly after that the necessary redundancy

procedures were started.

Thales GeoSolutions had a centralised

organisational structure with highly-qualified,

talented and experienced staff. Cooperation with

Fugro-TGS staff is excellent, partly because the

Fugro-TGS staff are now working in a company for

which survey is a core activity and in which

emphasis is put on own, direct responsibility.

The financial reporting of the various Fugro-TGS

companies has followed the Fugro system since the

end of 2003. The integration of the different units

has been carried out at a local level under the

supervision of the integration team set up by Fugro.

The highly complementary nature of the two

companies is another major success factor. Fugro’s

position in the offshore Survey, Positioning and

offshore Geotechnical markets has been

strengthened significantly, as has its presence in

the Middle East, Latin America and China. As a

result Fugro has become an even more efficient

market player – one that is able to offer customers

competitive services. Fugro-TGS has added talented

and experienced staff to the organisation.

The acquisition has also led to higher than

anticipated savings on overheads in areas such as

marketing, administration and premises. This has

improved the efficiency of the available equipment,

such as the use of vessels, and avoided double R&D

costs. Combining Fugro-TGS with Fugro’s global

network has led to a substantial improvement in

efficiency and to synergy.

Fugro has submitted a claim against Thales S.A.

in relation to the conclusion of the purchase

agreement, regarding Thales GeoSolutions.

Currently, this claim has not been valued.

Successful integration of Thales GeoSolutions (Fugro-TGS)

Setting-up a static

axial-compression

load test

23

Fugro’s overall turnover rose by 23.1% to EUR 1,021.6

million. This increase was mainly due to the acquisition

of Thales GeoSolutions in 2003 and its consolidation as of

19 November (six weeks), and the growing number of

orders during 2004. Against this, exchange rate effects

caused by the drop in the rate of the dollar and dollar

related currencies compared to the euro put some

pressure on both the turnover and the result. Had the

exchange rate remained the same as in 2003, turnover

would have amounted to EUR 1,057.1 million and the net

result before amortisation of goodwill would have been

EUR 70.6 million. The net result before amortisation of

goodwill has now risen by 48% to EUR 66.7 million

(2003: EUR 45.1 million).

After amortisation of goodwill the net result was

EUR 49.5 million (2003: EUR 32.4 million). It is proposed

that the dividend for 2004 be increased to EUR 1.90 per

(certificate of) share (2003: EUR 1.85).

The flow of orders increased in the third quarter of 2004.

As a result, the overall performance of the Geotechnical

and Geoscience divisions was good. The Airborne Survey

business in particular gained ground after being rather

sluggish around the end of 2003 and showed excellent

results. By contrast, in 2004 the Survey segment’s

performance was still less than satisfactory.

To summarise, five of the seven business units achieved

good results in 2004 while two business units – offshore

Survey and onshore Survey still have room for

improvement.

In May 2004, Mr. P. van Riel (1956) – one of the founders of

Fugro-Jason – was appointed Chief Operating Officer of

Development & Production and joined the Executive

Committee of Fugro N.V. The acquisitions in recent years

and the formation of this separate business unit, which

now generates a substantial portion of the annual

turnover, led to this appointment.

During the year under review Fugro completed two small

acquisitions:

• the acquisition of the business and assets of C&M

Storage in the United States (activities include data

management for oil and gas companies);

• the acquisition of the remaining 50% ownership of the

seismic research vessels ‘Geo Baltic’ and ‘Geo Pacific’.

2003

1 9 9 2 ( y e a r o f e s t a b l i s h m e n t )R U S

(on 31 December, x EUR 1 mln.)

T u r n o v e r d i s t r i b u t i o n p e r d i v i s i o n

Geotechnical

Survey

Geoscience

Total

USD average

2000

281

314

118

713

1.09

2001

309

392

209

910

1.13

2002

323

371

252

946

1.06

2003*

280

346

204

830

0.88

2004

278

478

266

1,022

0.81

* The turnover of Fugro-TGS has been consolidated as from its acquisition date (19 November 2003).

The historical figures for offshore Survey and Development & Production have been recalculated in line with the structure

introduced in 2002.

Several divestments also took place including:

• the sale of the ROV activities in the United States,

Mexico and Canada;

• the sale of the 50% interest in BSN Bodemsanering

Nederland B.V.;

• the sale of Geometius B.V.;

• the sale of the environmental activities of

Fugro Ingenieursbureau B.V. in the Netherlands.

In 2004 Fugro was awarded a number of major

assignments:

• Fugro Geoteam carried out a 1,200 km2 3D seismic

survey in Qatar;

• Fugro Airborne Surveys was selected to carry out a

project in the Niger Republic financed by the EU

(662,000 linear kilometres);

• in Nigeria Fugro Airborne Surveys was awarded the

order to collect, process and interpret 556,000 linear

kilometres of magnetic and radiometric data and

21,000 linear kilometres of electromagnetic data.

• in Canada Fugro Airborne Surveys was awarded

the first commercial project for the ‘Georanger I’

(an unmanned airborne vehicle). The new technology

will be used for mineral exploration in Canada.

• Fugro’s office in California has carried out two LNG

projects for landing facilities. The ‘Fugro Explorer’

– a vessel specially equipped for geotechnical

investigations – and a floating crane for use in coastal

waters were employed in these projects.

24

(on 31 December, x EUR 1 mln.)

G e o g r a p h i c a l d i s t r i b u t i o n o f t u r n o v e r *

The Netherlands

Europe (excluding the Netherlands)

North and South America

Asia and Australia

Near East, Middle East and Africa

Total

* Based on the place of business of the subsidiary that executes the project.

** The turnover of Fugro-TGS has been consolidated as from its acquisition date (19 November 2003).

2004

95

385

302

141

99

1,022

2003

110

303

226

135

56

830

2002

136

307

278

150

75

946

2001

125

298

273

162

52

910

2000

101

205

227

143

37

713

(in percentages)

T u r n o v e r g r o w t h

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Average (1995 – 2004)

Total

23.1

(12.2)

4.0

27.6

30.4

(5.4)

20.0

28.0

27.0

(1.2)

14.1

Exchangerate

differences

(2.7)

(9.4)

(3.4)

0.6

10.6

2.9

(1.7)

10.9

4.0

(7.1)

0.5

Divest-ments

(0.6)

(0.6)

(7.4)

(0.9)

Acquisi-tions

16.2

4.9

4.0

8.6

8.9

1.8

3.2

6.0

3.0

1.0

5.8

Auto-nomous

10.2

(7.7)

3.4

18.4

10.9

(9.5)

18.5

18.5

20.0

4.9

8.8

**

25

F I N A N C I A L D E V E L O P M E N T S

T u r n o v e r d e v e l o p m e n t

In 2004 turnover rose by 23.1% to EUR 1,021.6 million,

compared with EUR 830.1 million in 2003. A major

portion of this turnover increase was due to the

acquisition of Thales GeoSolutions. Against this there was

a negative currency exchange effect caused by the drop in

the dollar exchange rate. The increase in turnover is

depicted in the table on page 24.

The average dollar exchange rate in 2004 was EUR 0.81,

compared with an average of EUR 0.88 in 2003.

C o s t s

The costs of work contracted out and other external costs

rose by 31% to EUR 375.2 million.

Staff costs rose by 11% to EUR 333.7 million.

Depreciation of tangible fixed assets rose by 32% to

EUR 65.4 million.

Other operating costs rose by 16% to EUR 136.3 million.

I n t e r e s t a n d t a x e s

After balancing, interest liabilities amounted to

EUR 23.2 million (2003: EUR 18.5 million).

Tax charges on the net result before amortisation of

goodwill remained unchanged at 20.2% (2003: 20.2%).

Tax charges on the net result after amortisation of

goodwill amounted to 25.2% (2003: 25.9%).

N e t r e s u l t b e f o r e a m o r t i s a t i o n o f

g o o d w i l l

The net result before amortisation of goodwill rose by

47.9% to EUR 66.7 million (2003: EUR 45.1 million), after

deducting third party interests in the profits of subsidiary

companies. This amounts to EUR 4.49 per share (2003:

EUR 3.12). In 2004 there was no extraordinary income

or expenses. Exchange rate effects reduced the net

result before amortisation of goodwill by around

EUR 4 million. The costs of the implementation of

IFRS and the Dutch Corporate Governance Code were

booked in 2004. These costs amount to approximately

EUR 3 million.

M a r g i n d e v e l o p m e n t

The net profit margin before amortisation of goodwill

over the financial year was 6.5% (2003: 5.4%) and is thus

in line with forecasts made earlier. The target remains

7.5% – 8%.

N e t r e s u l t a f t e r a m o r t i s a t i o n o f g o o d w i l l

The net result after amortisation of goodwill was

EUR 49.5 million, after deducting third party interests,

53% higher than in 2003 (EUR 32.4 million).

This amounts to EUR 3.33 per share (2003: EUR 2.24).

At EUR 93.8 million EBIT was 47% higher than in 2003

(EUR 63.6 million).

0

25

50

75

100

125

0

15

30

45

60

75

IFRS2003

2004 IFRS2004

2003200220012000IFRS2003

2004 IFRS2004

2003200220012000

(x EUR 1 mln.)

O p e r a t i n g r e s u l t *

(x EUR 1 mln.)

N e t r e s u l t *

* Before amortisation of goodwill (Dutch GAAP).* Before amortisation of goodwill (Dutch GAAP).

26

C a s h f l o w a n d i n v e s t m e n t s

In 2004 the total cash flow from operations amounted to

EUR 132.1 million (2003: EUR 94.6 million). This equates

to EUR 8.90 per share (2003: EUR 6.54) and is thus the

highest in the history of Fugro.

Investments in tangible fixed assets (including

acquisitions) against this cash flow amounted to

EUR 113.1 million (2003: EUR 122.3 million). This included

considerable investment in an office in Wallingford

(United Kingdom) where several companies added to the

Group over the years have been clustered together.

The overall level of investments in the year under review

was, in Fugro terms, higher also due to the investment in

the aforementioned building in Wallingford.

B a l a n c e o f r e c e i v a b l e s

The average days outstanding for receivables was 67 days

(2003: 75 days).

G o o d w i l l

In 2004 the addition to goodwill on acquisitions

amounted to EUR 29.2 million (2003: EUR 91.5 million).

This comprised the amount paid over and above the book

value of the assets and liabilities plus provisions for

reorganisations and adjustment to Fugro’s accounting

principles. The final allocation of the costs of the business

combination with regard to Thales GeoSolutions to the

assets acquired and liabilities and contigent liabilities

assumed was made, resulting in an adjustment to

goodwill of EUR 26.6 million. The final goodwill of

Thales GeoSolutions amounted to EUR 90.3 million.

EUR 1.3 million is related to the acquisition of

C&M Storage. As Fugro acquires companies as long-term

investments, the goodwill on most acquisitions is

amortised over a period of up to twenty years. At the end

of 2004 the book value of the goodwill was EUR 302

million (2003: EUR 292 million). The total amount of

goodwill in the period 1984 – 2004 was EUR 559 million.

Amortisation of goodwill in 2004 amounted to

EUR 17.2 million.

B a l a n c e s h e e t r a t i o s

Solvency at the end of 2004 was 37.1% (end of 2003: 33.1%).

Shareholders’ equity, excluding the subordinated

convertible bond, amounted to EUR 264.8 million. At the

end of 2004 the current ratio amounted to 1.4 (end of

2003: 1.4). Working capital decreased by EUR 5.4 million

to EUR 132.3 million (2003: EUR 137.6 million).

The value of seismic survey data is itemised on the

balance sheet as ‘Stocks and work in progress’. Such

a data library is typical of companies that carry out

this type of exploratory surveys and contains valuable

information that is offered and sold to various interested

parties. Virtually no data acquired before 2002 is included

Preparing for

pile-driving

1 9 9 2 ( y e a r o f e s t a b l i s h m e n t )R U S

2003

D e v e l o p -

m e n t o f

g o o d w i l l *

1984 – 1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Total

IFRS Book valueas of

31 -12

190.9

253.1

274.4

Book valueas of

31 -12

–

0

0

0

0

0

0

0

0

0

0

0

0

0

0

237.9

218.0

291.9

302.1

Goodwill(EURmln.)

–

0.3

0.5

0.1

0.7

17.1

14.1

2.9

40.3

5.2

3.0

18.1

16.9

35.3

37.4

242.8

3.2

91.5

29.2

558.6

* Up until 2000 goodwill was deducted directly from the

shareholders’ equity; the goodwill under IFRS has been

recalculated as of 1 January 2003.

IFRSGoodwill

(EURmln.)

68.2

22.9

27

on the balance sheet and the capitalised book value,

on the basis of cost price less depreciation, amounts to

EUR 40 million (2003: EUR 22 million).

D I V I D E N D P R O P O S A L

It is proposed that the dividend for 2004 be increased to

EUR 1.90 per ordinary share (2003: EUR 1.85) and paid,

depending on the choice of the shareholder, either:

• in cash; or

• in (certificates of) ordinary shares.

The proposed dividend corresponds to a dividend

percentage of 43% of the net result before amortisation of

goodwill. After amortisation of goodwill this amounts to

58%.

Shareholders and certificate holders have until 10 June

2005 to indicate their dividend preference. The number of

(certificates of) ordinary shares that entitle the

shareholder to one new (certificate of) share will be

determined on 14 June 2005 based on the average share

price at the close of business on the stock exchange on the

preceding three days. To arrive at a whole number,

a maximum of 5% of the share price will be added or

deducted.

The dividend will be made payable on 16 June 2005.

O R G A N I S A T I O N A N D P E R S O N N E L

O r g a n i s a t i o n a l s t r u c t u r e

Fugro is organised in three segments: Geotechnical,

Survey and Geoscience. The Board of Management is

responsible for Group policy, strategy, acquisitions and

internal coordination. The Holding Company also

handles matters which, for reasons of efficiency, (high-

value) specialisation or financing are best handled

centrally. Fugro’s philosophy is that the segments’

operating companies should be able to operate as

autonomously as possible within the framework of the

Group’s policy, business principles and internal risk

management systems. This enhances the quality of the

operating companies’ management. Delegation is firmly

interwoven in the Company’s culture. Where appropriate

for the client, cooperative links are forged between or

within the segments. This results in synergy developing

naturally, particularly when complex and integrated

projects are involved, and increases profitability.

It also increases the creativity and involvement of the

organisation as a whole, as well as the staff’s

opportunities for professional challenges and self-

development.

P e r s o n n e l p o l i c y

Fugro’s personnel policy is aimed at attracting and

employing professional and skilled people. The advice

and services provided by Fugro must be state-of-the-art

and reliable. Fugro’s personnel policy is also aimed at

offering its staff opportunities to develop as far as

possible. Fugro’s goal is to be a good employer and one

which takes local customs into account. The very low

outflow of highly trained management and staff indicates

the Company’s success in this respect.

The successful integration of Fugro-TGS has raised the

number of professionals significantly and also increased

the personal development opportunities available to staff.

A proper internal career development policy ensures the

optimum utilisation of highly-qualified staff and specific

skills throughout the organisation. The policy is aimed at

developing staff who are flexible and experienced enough

to be promoted to management positions or to become

technical specialists. To this end Fugro has built-up good

contacts with universities. Business and management

skills are becoming increasingly important. Fugro

supports talent development and management

development and this is reflected in the operating

28

companies’ training schemes. Fugro also has at its

disposal a worldwide pool of experienced freelance

professionals who are employed regularly by Fugro on a

project basis.

Staff pension schemes and other such benefits are

maintained and take local customs and regulations into

account. Absence due to sickness is also monitored at the

level of individual operating companies. Fugro does not

consider it constructive to give a total picture of all the

Human Resources policies within the Group due to the

diversity in the many countries in which Fugro operates.

Flexibility through exchangeability is an important

aspect of Fugro’s policy. To this end, the same systems are

used throughout the Group whenever possible and both

short and long-term staff exchange programmes have

been developed. Once again, during 2004 a number of

staff were asked to work in fields other than those for

which they were primarily employed. This policy

contributes towards maintaining a high level of capacity

utilisation and allowing (valuable) employees to be

retained. As a result of the integration of Fugro-TGS,

redundancy was unavoidable for 426 of the combined

staff. These redundancies have resulted in considerable

savings in (double) overhead. The total number of

employees at the end of the year fell by 857 to 7,615 (2003:

8,472). The average number of employees over the year

was 7,864 (2003: 7,160). This increase was almost entirely

the result of the acquisition of Fugro-TGS, which was

consolidated for only six weeks of 2003 and for the whole

of 2004.

P e r s o n n e l f i g u r e s

Average number of employees during the year

Turnover per employee (x EUR 1,000)

Turnover own services per employee (x EUR 1,000)

Geographical distribution at year-end

The Netherlands

Europe excluding the Netherlands

North and South America

Asia and Australia

Near East, Middle East and Africa

Total at year-end

A GPS survey in Lisbon,

Portugal

2 0 0 3P O R

2003

2000

5,492

129.9

84.3

1,041

1,122

1,440

1,202

951

5,756

2001

6,523

139.5

88.6

1,164

1,749

1,658

1,449

933

6,953

2002

7,003

135.1

88.2

1,121

1,717

1,663

1,444

978

6,923

2003

7,160

115.9

75.9

993

2,238

2,333

1,776

1,132

8,472

2004

7,864

129.9

82.2

890

1,954

2,268

1,391

1,112

7,615

F l e x i b l e s a l a r y s y s t e m s a n d o p t i o n

s c h e m e

Fugro stimulates participation and rewards effort and

results. Flexible salary systems and an option scheme

have been in operation for many years and the

management and staff are encouraged to own Fugro

shares; 8.5% of Fugro’s issued shares, excluding share

options yet to be exercised, is held by the management

and staff. In 2004 493 staff have been granted options.

For more information please see page 60 – 63

(Information for Shareholders) and page 88 – 91 of the

Annual Accounts.

S U S T A I N A B L E B U S I N E S S

G e n e r a l

Fugro is very aware of its social role and obligations.

A concern for people, the environment and society is,

therefore, at the heart of its policy. Fugro also follows

codes of behaviour for quality control, integrity and the

maintaining of Fugro’s good reputation.

H e a l t h , S a f e t y a n d t h e E n v i r o n m e n t

( H S E )

Fugro is active in over 50 countries and complies with the

various laws and regulations related to Health, Safety and

the Environment. In 2004 Fugro tightened its internal

regulations in the area of Health, Safety and the

Environment. Every operating company is responsible for

operating an HSE management system suited to its

activities. The principle is that the operating company

should not only comply with the specifically relevant laws

and regulations but should also take a proactive and

preventative position. In general this means that,

if possible and applicable, higher standards than those

demanded by the applicable legislation should be set.

In the year under review a great deal of effort was

dedicated to making Fugro’s Airborne activities even

safer. These activities now comply fully with or exceed the

stipulated standards, which were drawn-up primarily for

the oil and gas industry. Health and safety in the

workplace and while carrying out projects is a primary

concern and safeguarding health and safety is an

important component of Fugro’s policy, particularly

when Fugro’s activities are carried out in a potentially

hazardous environment. Fugro is striving to make our

stringent safety standards for the Airborne Survey

activities the norm within the industry.

Acoustic measuring

of vibration rods for a

wind turbine project

in Nieuwpoort,

Belgium

2004

29

In general Fugro’s activities have little or no effect on the

environment. Even so, Fugro pays due attention to the

environment and is careful to protect it. Preventing or

reducing environmental damage is a fundamental policy

element. Thanks to its work within its own disciplines

Fugro has gained extensive knowledge of environmental

problems and contributes towards their solution. A high

proportion of Fugro’s activities is carried out on behalf of

the oil and gas industry and, when involved in these

activities, Fugro complies with the stringent demands the

industry places on contractors.

Q u a l i t y

Fugro pays a great deal of attention to quality.

The trustworthiness of the data or advice provided is

a high priority. By developing the right systems, such

as those for use in deepwater, Fugro remains abreast of its

clients’ changing needs. A programme for monitoring

client satisfaction has been in operation for many years.

In Fugro’s view, quality should not only apply to the

service provided to clients, it should also apply to general

standards and values, a people-friendly working

environment and mutual respect.

In the year under review, the results of a customer

satisfaction survey in the offshore Survey sector became

available. Clients are, in general, positive and have

indicated that, among other things, they consider Fugro

a reliable partner. Fugro’s broad package of services and

activities are highly valued. The recommendations

resulting from this survey have now been incorporated

into the business processes.

1 9 9 4 ( y e a r o f e s t a b l i s h m e n t )B

1 9 6 8U K

1 9 7 5D

Fugro’s first

soundings at sea

over the Leman Bank,

the United Kingdom

Fugro Ltd. established

1962 1968 1980197519741970

1 9 6 2N L

1 9 6 3B

1985

Fugro carried out its first project in the United Kingdom in 1968. In 1974 Fugro Ltd. was established.

This was Fugro’s first foreign office. Between 1993 and 2002 Fugro made several large acquisitions,

including the survey activities of Marconi-UDI, the onshore company FES and Robertson Research

International Ltd. The acquisition of Thales GeoSolutions in 2003 increased Fugro’s scale of operations

in the UK considerably. Currently Fugro employs 1,214 staff in the UK.

U K U n i t e d K i n g d o m

A Fugro jack-up platform in front of the Houses of Parliament

Thales GeoSolutions acquired

1 9 9 4N , I , C H

1 9 9 2R U S

1 9 9 8F

2 0 0 3D K

A seabed survey to detect WWII mines: a shipwreck was also located during this project

200420041995 2000 20031990

32

S o c i e t y

Fugro is a company that aims to be at the heart of society

and involvement in the community is an important

aspect of Fugro’s operations. This applies not only to the

Company as a whole but also to its staff. As a socially

responsible business Fugro provides active support to a

large number of social initiatives. Sometimes Fugro’s

support is in the form of a financial donation, at other

times its contribution is in the form of knowledge,

experience or something else. Fugro’s sponsorship

embraces many different social fields – education, music,

art, culture, sport and general social goals.

Operating company managers are encouraged to become

actively involved in their local community and to support

charitable and cultural events.

I N F O R M A T I O N & C O M M U N I C A T I O N

T E C H N O L O G Y ( I C T )

Once again 2004 was a year in which substantial efforts

were invested in Fugro’s ICT organisation. ICT security

policies are been introduced in line with the standards as

set by ISO 17799 and BS 7799. In 2004 the Fugro-TGS

operating companies were linked to the secure global

data communications network. This network is used for

both internal (Intranet) and external (Extranet)

communications as well as for applications such as

e-mail, file transfer and internet access.

Fugro pays a great deal of attention to security aspects

related to the use of ICT infrastructure in general and the

Internet in particular. In 2004 the emphasis was on

internal security. The ICT security organisation has been

formalised with four regional security officers managed

by a global security officer who reports directly to the

Executive Committee. Most of the data communications

between the operating companies is transmitted cost

efficiently and effectively secured via the internet.

The data traffic over Fugro’s network is protected from

hackers through the use of the latest VPN (Virtual Private

Network) encryption technology. The security of Fugro’s

network is maintained and monitored by an independent

company 24 hours a day, seven days a week. External

communications are routed via a limited number of

internet gateways which are constantly monitored for

viruses or hacking attempts. Staff can only access the

network from locations outside the company via a token

based authentication system.

To guarantee the stringent demands stipulated for the

safety and security of ICT systems, Fugro consults external

companies for advice regarding its ICT policy and for

monitoring the security of the Company’s ICT

infrastructure. Once again, in the year under review ICT

audits were carried out so that potential problems in ICT

systems would be signalled early and could be solved and

to raise the level of ICT security awareness of the entire

Company.

ICT systems are playing an increasingly important role in

Fugro’s global activities. This is being driven by the need

to improve communications and efficiency in order to

maintain, and where possible extend, the Company’s

current competitive position. ICT facilitates the

improvement to the Group’s productivity and helps to

create new commercial activities within every segment.

Contribution to culture and society

• Hermitage-Amsterdam, Amsterdam

• Museum Beelden aan Zee, Scheveningen

• The Concertgebouw in Amsterdam as well as the

sponsorship of several concerts

• Residential orchestra, The Hague

• Delft Chamber Music Festival, Delft

• Zonnebloem Foundation, Breda

• Ski 8000; ski expedition to the Himalaya

• University fund, Delft

• International Liszt Concours

Fugro carried out an

assignment in Switzer-

land using the REO 3 as

early as May 1964.

1 9 9 4 ( y e a r o f e s t a b l i s h m e n t )C H

1964

1 9 9 4 ( y e a r o f e s t a b l i s h m e n t )I

A cable route survey

along the

Mediterranean coast

with the ‘M/V Hamour’

1999

33

B U S I N E S S P R I N C I P L E S

Within Fugro a number of ‘Golden Rules’ have been

developed which cover Fugro’s most important

organisational, operational and other characteristics.

These are not unbreakable rules and deviation from them

is permitted if this can be justified. The ‘Golden Rules’ do,

however, put Fugro’s culture and way of working into

words.

The most important rules concern market position,

authorisation levels, divisional cooperation,

communication and the use of Group standards. When

a Group company takes these rules to heart it has grasped

the essence of the Fugro culture.

The other rules are the result of experience and relate to

Group relationships, such as the use of resources within

the Group and the sharing of technology, or concern the

control of risks and provide guidelines regarding the

expansion of activities. Operational issues, such as quality

and safety, project and contract management and

training are explained and financial guidelines are also

provided.

The ‘Golden Rules’ sometimes appear to be very obvious.

Implementing them can, however, involve a great deal

of work and can result in decisions being overturned or a

business opportunity not being acted upon. But applying

the ‘Golden Rules’ not only protects managers – and

Fugro as a whole – against a great many risks, it also

stimulates fellowship within the Group.

R E S E A R C H A N D D E V E L O P M E N T

In 2004 new technologies were developed and innovative

R&D-projects were executed. Technological research and

development has played a key role for Fugro right from

the beginning. Fugro’s current market position and its

services and software rely, to a great extent, on state-of-

the-art equipment that enables data to be acquired more

and more precisely and interpreted more and more

accurately. Technological developments often take place

in close cooperation with the client as the client is

interested in solving a specific problem. In 2004 Fugro

once again invested heavily in a number of major

technologies, the most important of which are listed

below:

• Inertial navigation; a new system on which

development started in 2003 and that is aimed at

significantly improving (acoustic) positioning in

(deep)water. This system went into operation in 2004

and during 2005 it will be further improved and

expanded.

• The improvement of the drilling system on board

the ‘Bucentaur’. The ‘Fugro Explorer’ also underwent

an adaptation to improve its ability to operate in bad

weather.

• The digital video that will replace analogue video tapes

in the Remotely Operated Vehicles (ROV). Thanks to the

digital technology the quality of the video is excellent.

Digital storage has provided considerable

improvements in both the reporting of and the access

to the information. In 2004 the prototypes of these

developments were tested. The new system will go into

operation in 2005.

• Many software developments related to the improved

processing of data.

• The use of the Autonomous Underwater Vehicle (AUV)

in deepwater, which has led to excellent, high-value

data being collected more efficiently.

• The further development of the Volumetrix

(Fasttracker) software, which thanks to its unique

‘UpdateAbility’ concept enables users to construct and

maintain reservoir models with exceptional efficiency.

• The optimisation of airborne measuring through the

use of so-called UAVs (unmanned airborne vehicles).

These are remotely controlled unmanned airborne

vehicles equipped with a range of sensors.

• Further development and adaptation of the cone for

geotechnical applications.

• An offshore frame with which soil surveys can be

carried out on seabed slopes with a gradient of up to

30 degrees has been designed, built and put into use.

Monitoring related to

a bridge and tunnel

project in the Grote Belt,

Denmark

2 0 0 3 ( y e a r o f e s t a b l i s h m e n t )D K

1989

Detailed image of Cap de

Greus (Golfe du Lion)

generated on the basis of

data gathered using a

multi-beam echo sounder

2004

M A R K E T D E V E L O P M E N T A N D T R E N D S

T h e o i l a n d g a s m a r k e t

69% of Fugro’s turnover is related to the oil and gas

industry (2003: 67%). Strategically Fugro’s activities in this

market are aimed at two different money streams:

the exploration and development of new fields and the

production of oil and gas in existing fields. This means

that Fugro’s involvement with an oil or gas field spans

twenty to thirty years – almost its entire life cycle (see

illustration). During 2004, many oil and gas companies

took the decision to increase their investment budgets.

Unfortunately, by the end of the year this had still not

resulted in more than a trickle of additional orders for

suppliers to the sector, such as Fugro. The less than

expected contribution of oil and gas related orders in

the year under review was also, to some extent, a

consequence of share buy-back programmes right across

the sector – programmes from which Fugro and kindred

suppliers reaped no benefit.

The prospects are, however, positive. In 2005 Fugro

expects to be able to benefit from the increase of the E&P

budgets. On the one hand the ’majors’ increasingly need

to locate and exploit new fields just to maintain their

production levels. On the other hand it is vital for the

development of the global economy that the

international oil companies, including state-owned oil

companies, can meet the growing demand for oil and gas

products. Although much of the increased demand comes

from countries such as China and India, the upturn of its

economy is also resulting in a clear increase in demand

from the United States. Many of the anticipated

exploration and development activities, especially

deepwater projects, will be in the Gulf of Mexico, West

Africa and Brazil. The Middle East, the Caspian Sea,

Mexico and parts of Asia and Australia will also become

interesting regions once again.

The worldwide demand for gas is also continuing to

increase. Gas is considered a strong growth market.

The supply of liquefied natural gas (LNG) answers some of

this demand. The increasing number of LNG terminals

under development, for which Fugro is also providing

services, and the high oil prices makes the development of

gas fields some distance away from the commercial

markets more attractive. This is particularly true for the

Middle East, which is within acceptable transport range

of India, China and Japan and which has substantial gas

reserves. Australia and Indonesia have been exporting gas

for many years. The use of LNG also makes complying

with the stipulations of the Kyoto Agreement easier for

the purchasing countries. It will also accelerate the shift

to the development of a global gas market and ensure that

gas prices remain attractive compared to the alternatives.

The oil and gas companies will invest in both deepwater

fields and onshore fields. Fugro is in an excellent position

to offer this sector a wide package of services all over the

world, because in 2004 it once again invested selectively

to ensure it could answer the market’s needs. According

to market research, in 2005 the level of investment by oil

and gas companies (in dollars) will increase by at least

6% compared with the growth of nearly 8% in 2004.

Taking into account an increase of the oil price, the

34

Geophysical Survey

Geotechnical investigation & consultancy

ROV survey and construction support

Structural instrumentation

Metocean

Positioning

Data management

Reservoir engineering

Fugro Services

Exploration Design Instal-lation

Operation Abandon-ment

Exploration and development budget Production budget

L i f e o f f i e l d s e r v i c e s (20 – 30 years)

35

surveys expect a 10% growth compared to the year before.

It is expected that most of the growth will be in the Far

East, Africa and the Middle East. The forecast is that in the

coming period over USD 10 billion per annum will be

spent on the development of oil and gas fields in regions

where the sea is more than 500 metres deep remains

unchanged. In general, deepwater oilfields are larger and

more productive, which makes them attractive despite

the fact that they require higher investments.

The global economic growth (demand side) and the

relatively limited production and logistics capacity that

cannot be increased quickly (supply side), coupled with

global political uncertainty, meant that oil prices

remained at well over USD 25 a barrel during the year

under review. The average price per barrel of Brent in

2004 was USD 38.22 (2003: USD 28.48). Oil prices are

expected to remain elevated for the time being, partly

because the production from some existing fields is

decreasing rapidly (depletion effect) and quickly

increasing production elsewhere is not possible for many

oil companies. Nonetheless, this depletion effect offers

further opportunities for Fugro in general and the

Geoscience division in particular, because there will be an

increasing interest in detailed reservoir information,

aimed at maintaining production levels for as long as

possible and to produce as much as possible from the

existing oil and gas fields.

An oil price of USD 20 or more is sufficient to ensure the

stability of Fugro’s services. Various publications have

indicated that, because demand is outstripping supply,

oil companies are basing their investment viability

calculations on a, yet again, increased price of at least

USD 20 – 22 per barrel instead of the historical USD 15 per

barrel, or the USD 20 that was applicable in 2003. This will

make more projects appear economically viable. Taking

into account the development time of projects Fugro

expects to be able to profit from this situation in 2005 and

the ensuing years.

O t h e r m a r k e t s e g m e n t s

During the 2004 financial year Fugro’s non oil and gas

related activities showed a marked improvement

compared with 2003. This positive development was due

to both cost savings by Fugro and a steady improvement

in the global economy, which resulted in an increase in

construction-related investment in several countries.

This sector, which is very regionally-oriented, accounts

for around 30% of Fugro’s activities (2003: 33%). Although

in relative terms activities in this sector have decreased,

partly due to the good opportunities offered by the oil and

gas industry in the near future, in terms of turnover

Fugro’s construction and infrastructure related activities

will continue to increase structurally. The longer-term

requirement for the development of construction and

infrastructure works will also remain high. Fugro carries

out large assignments for airports, land reclamation,

harbour extension, railways, tunnels, large buildings and

other initiatives in various places around the world.

Over the years Fugro has steadily and constantly

strengthened its market position. This is partly due to the

fact that clients prefer to assign an increasingly broad

spectrum of tasks to a single supplier. Fugro’s unique

combination of activities, specialisms, equipment and

technologies, as well as its size and leading market

positions, mean that Fugro can profit from this trend to

the full. There is increasing cooperation between the

Group’s business units, this clustering of activities is

particularly apparent for large infrastructure projects.

It is not only the oil and gas prices that are high, so too are

mineral prices and this is resulting for the first time since

1996 in substantially increased spending for exploration

by the mining industry. In 2004 this had a favourable

influence on the Airborne Survey activities and Fugro has

seen a substantial increase in the demand for projects.

B A C K L O G

At the beginning of 2005 the backlog amounted to

EUR 589.2 million – higher than a year earlier (2004:

EUR 573.1 million). The backlog is calculated using year-

end exchange rates. The figures for 2003 and earlier have

been adjusted for comparison purposes.

The backlog of work in EUR rose by 2.8% compared with

2004, despite the dollar falling from EUR 0.79 to EUR 0.73

for USD 1. Had the exchange rate remained the same

the backlog would have increased by 6.6% compared

with 2004.

P O S T B A L A N C E S H E E T D A T E E V E N T S

During the first months of 2005 the conversion of the

convertible notes has started. Up to the end of February

2005, 409 notes have been offered for conversion. Fugro

36

(x EUR 1 mln.)

B a c k l o g a t s t a r t o f t h e y e a r

( f o r t h e n e x t t w e l v e m o n t h s )

Geotechnical

Onshore definite

Onshore probable

Offshore definite

Offshore probable

Survey

Offshore definite

Offshore probable

Onshore definite

Onshore probable

Positioning definite

Positioning probable

Geoscience

Development & Production definite

Development & Production probable

Airborne Survey definite

Airborne Survey probable

Total

Applicable USD-rate

2001

64.4

42.3

23.1

36.9

166.7

80.2

96.9

18.9

19.5

14.3

2.9

232.7

11.5

19.8

9.5

7.1

47.9

447.3

EUR 1.08

2002

78.2

32.1

30.8

24.5

165.6

69.9

119.1

11.8

24.4

14.6

2.6

242.4

38.5

32.2

25.8

17.4

113.9

521.9

EUR 1.13

2003

61.5

32.8

35.7

17.1

147.1

79.6

84.5

10.2

15.6

13.2

6.6

209.7

37.0

42.2

20.4

9.5

109.1

465.9

EUR 0.95

2004

50.9

35.8

24.3

20.4

131.4

118.6

122.5

7.4

13.2

12.9

3.8

278.4

64.8

60.1

26.2

12.2

163.3

573.1

EUR 0.79

2005

49.8

25.0

37.9

24.0

136.7

131.5

121.8

10.0

13.1

15.8

3.2

295.4

72.1

51.0

25.1

8.9

157.1

589.2

EUR 0.73

Recalculated at the exchange rates of 31 December 2003, the backlog at the start of 2005 would have been EUR 21.8 million more

(EUR 611.0 million).

Backlog comprises turnover for the coming twelve months and includes:

– awarded projects not yet started, and unfinished elements of on-going projects (definite);

– projects that are highly likely to be awarded (probable).

37

has entered into an arrangement to refinance the

remaining balance of the convertible subordinated notes

and the bankloan used for the acquisition of Thales

GeoSolutions. The final funding mix will be determined

shortly.

Fugro reached an agreement to sell the standard diving

activities in Mexico. Also Fugro reached an agreement to

sell its 40% interest in Chartco, located in the United

Kingdom. The company acquired assets and business of

BTW Ltd. in New Zealand. Fugro has been rewarded two

orders to execute geophysical and geotechnical surveys

for LNG projects. The Board of Euronext Amsterdam N.V.

has confirmed that Fugro has correctly applied the Listing

and Issuing Rules when issuing the profit warning on

2 December 2003.

P R O S P E C T S

Due to the successful integration of Fugro-TGS, which

offers Fugro considerable cost advantages, Fugro is now,

more than ever before, the leading market player when

it comes to answering the needs of clients in the oil and

gas industry. The Company’s global presence has been

strengthened, especially in Latin America and China and

in the offshore Survey, Positioning and offshore

Geotechnical market sectors. Fugro can, therefore,

operate more efficiently and offer increasingly high-value

services.

Investments in the oil and gas sector (expressed in USD)

are expected to be at least 6% higher in 2005 than in the

previous year. It is estimated that 5% of this will end up

with the suppliers. Positive developments are expected

from deepwater projects, especially in the Gulf of Mexico,

West Africa and Brazil. Good capacity utilisation is once

again anticipated in the Middle East, the Caspian Sea and

Asia. Developments in the North Sea and Canada are

expected to remain stagnant. The fact that several large

oil companies are now using an average price of USD 22 or

higher when calculating the economic feasibility for the

Prospects summarised

• Excellent strategic foundation of Fugro

• A well structured (financial) organisation

• Synergy and cost advantages through the

successful integration of Fugro-TGS

• Leading market position improved still further

• Investments in the oil and gas sector rising by 6%

• Positive developments in many regions and

market sectors

• A steadily improving global economy

• Forecasts for the whole of 2005 to be included in

the interim report

development of new fields and improving existing fields

is also positive.

With its Geoscience activities, and especially the

Development & Production business unit, Fugro is

reaping the benefits of its focus on improving production

from (existing) oil and gas sources. The Airborne Survey

activities, in addition to the traditional markets such as

mining, will increasingly profit from the developments in

the oil and gas market and the demand for the

identification of fresh water reserves.

The focus on land usage remains high worldwide and the

market is growing. In this sector Fugro is in a good

position to increase its share of large infrastructure

projects in 2005.

Further growth is expected for the positioning activities.

There is a structural increase in demand for extremely

accurate systems, such as those offered by Fugro.

Fugro has an excellent strategic foundation, a good

financial framework and a good organisational structure

and is, therefore, in a very good position in the various

markets in which it operates. At the same time the global

economy is gradually improving. Most of Fugro’s

activities are developing well, a statement supported by

the size of the order book/backlog at the start of 2005. As

in the past, it is still too early to make a reliable forecast

regarding turnover and profit development for the whole

of 2005. Our forecast for the entire year will be included

in the interim report to be published in August 2005.


G-J. Kramer, President and Chief Executive Officer

K.S. Wester, Director

A. Jonkman, Chief Financial Officer

1 9 6 2N L

1 9 7 5D

1 9 6 8U K

1 9 6 3B

Setting-up a seismic

snow streamer in

Spitsbergen

Geoteam AS acquired

1962 1991 19951994

1 9 9 2R U S

1 9 9 4N , I , C H

Fugro’s acquisition of Geoteam AS in 1994 established the Company in Norway since 1994. In 2003

Oceanor, a company specialising in amongst others meteorology, was acquired. Over the years Norway

has grown into a major base of operations for Fugro’s seismic services. In 2004 Fugro employed 257 staff

in Norway.

N o r g eN

The first 3D survey in

the North Sea

Projects in the

United States

and Brazil The gathering of 2D seismic data in the North Sea with the ‘Polar Princess’

2004200320001998 1999

1 9 9 8F

2 0 0 3D K

Oceanor acquired

The ‘Geo Pacific’, a vessel used for 2D and 3D seismic surveys,

has been fully owned by Fugro since 2004

G o a l s a n d s t r a t e g y

The Geotechnical services division investigates and

advises on the physical characteristics of soils and rocks,

both onshore and offshore. It also investigates and advises

on materials used in construction.

The onshore geotechnical services are oriented primarily

towards infrastructure, land reclamation and

construction activities. Fugro is active in many countries

and generally occupies strong local positions. To a great

extent the results of the division are dependent on

developments in the local economies. In addition to its

regular work, the business unit concentrates primarily on

larger and technically challenging projects with better

margins.

The offshore activities focus mainly on the oil and gas

industry but also on larger projects in coastal waters.

The size of the oil and gas companies’ investment budgets

influences the results. Due to its strong leading position

and scale advantages, Fugro can maintain its

technological lead and focus on new markets, or niche

markets such as deepwater projects. The division’s longer-

term target is an improvement of the result through a

better margin on an increasing turnover. Where it is

worthwhile the geographical spread will be broadened.

G e n e r a l b u s i n e s s d e v e l o p m e n t

Onshore Geotechnical services showed a good

performance compared with 2003 thanks to internal cost

savings and as a result of the steadily improving global

economy, which meant an increase in construction-

related projects in a number of regions. Business also

improved for the offshore Geotechnical services,

particularly with regard to the development of new oil

and gas fields and coastal infrastructure projects. On

balance turnover, amounting to EUR 278 million, hardly

changed (2003: EUR 280 million), despite the reduced

dollar exchange rate.

The operational result before amortisation of goodwill

(EBITA) increased by 6.7% to EUR 32 million

(2003: EUR 30 million). This equates to a margin on

turnover of 12% (2003: 11%). Expressed as a percentage of

the invested capital the operating result was 20%

(2003: 19%).

G e o t e c h n i c a l s e r v i c e s

40

O n s h o r e

• probing, drilling and measuring;

• quality testing of construction materials;

• laboratory and environmental testing;

• advisory and design assignments related to foundations

for buildings and land reclamation.

O f f s h o r e

• seabed soil investigations;

• advising on foundations for offshore structures,

tunnels, bridges and harbour construction;

• collecting data for a variety of purposes including the

laying of underwater pipelines and cables;

• monitoring large structures such as offshore

platforms, bridges and tunnels.

K.S. Wester F.E. Toolan

0

70

140

210

280

350

20042003200220012000

(x EUR 1 mln.)

T u r n o v e r

O n s h o r e G e o t e c h n i c a l s e r v i c e s

The onshore activities are characterised by local or

regional markets and competition. Fugro has a presence

in many countries and its market position varies per

region or country. In most countries there are many

competitors who do not have the expertise and global

support enjoyed by the Fugro offices. The Company’s size

puts Fugro in a strong market position when it comes to

large infrastructure projects.

The development of the European activities remained

somewhat hesitant due to the rather sluggish

development of the economy. Nevertheless business

developed better than in 2003. In the United Kingdom

business once again developed extremely well. In the

Netherlands the volume of work stabilised but prices

came under pressure. The 50% interest in BSN

Bodemsanering Nederland was sold as were the Dutch

environmental activities of Fugro Ingenieursbureau B.V.

The environmental activities are now restricted to the

collection of environmental data. In Germany business

remained difficult while in France there was a clear

improvement compared with 2003.

In the United States, activities developed well and the

results were better than for 2003. In California the

activities improved dramatically, partly thanks to several

follow-on orders for large infrastructure projects in San

Francisco Bay awarded by the authorities at the end of

2003. Fugro was also involved with several LNG projects.

In the south (Texas) progress was once again good as

a result of the relationship with the oil and gas sector

which was doing well.

In the Far East it was a difficult year in Hong Kong.

The volume of work fell still further because of cutbacks

in government investment. This led Fugro to adjust its

Hong Kong organisation in line with the volume of work.

Despite the margins being under pressure a positive

result was achieved. The activities in China, although only

modest in size, increased and produced a good return.

Business continued to develop well in the Middle East.

When the war in Iraq ended at the beginning of 2003 the

flow of orders picked up. This resulted in a good volume

of work, especially in Qatar, Oman, the United Arab

Emirates and Saudi Arabia. After the attacks in 2004

additional security measures were put in place for the

staff without this causing undue hindrance to our

activities.

O f f s h o r e G e o t e c h n i c a l s e r v i c e s

Fugro occupies a leading position in the offshore

Geotechnical services niche market in part thanks to its

worldwide presence and specialist equipment. Most of the

competitors are smaller players active in local markets.

In 2004 business developed better for the offshore

Geotechnical services business unit than in 2003,

especially in the area of new oil and gas field development

and projects related to coastal infrastructure. Fugro’s

coastal infrastructure project activities included

investigations relating to LNG landing facilities.

Nevertheless, in several regions margins came under

some pressure as a result of increasing (regional)

competition. Substantial investments in 2004 and earlier

years, plus the successful integration of Thales

GeoSolutions, do, however, mean that when it comes to

deepwater projects, which are increasing in number and

size, Fugro is extremely well equipped and uniquely

41

(amounts x EUR 1 mln.)

K e y f i g u r e s G e o t e c h n i c a l

Revenue

Operating result before amortisation of goodwill (EBITA)

Invested capital


Investments

Operating result (EBITA)

as a % of turnover

as a % of invested capital

2000

281

30

90

10

11

11

33

2001

309

26

109

10

14

8

24

2002

323

35

153

11

63

11

23

2003

280

30

160

13

13

11

19

2004

278

32

163

12

21

12

20

positioned worldwide. Fugro’s considerable expertise

often plays a deciding role when it comes to the

acquisition of orders for investigations in deepwater.

In 2004 this expertise resulted in the acquisition of,

among other projects, several deepwater projects in West

Africa, Norway and Egypt. Another project was carried out

in the Mediterranean Sea, off the coast of Croatia. In the

United States off the California coast, a great deal of work,

which included the use of the ‘Fugro Explorer’, was

carried out in connection with the development of vast

harbour facilities for several LNG projects. In the Gulf of

Mexico substantial activities were carried out for PEMEX.

To the west of Australia Fugro was involved with several

projects for the oil sector and in South East Asia Fugro was

active near Indonesia, Vietnam, Thailand and India. Most

of these activities were related to potential oil projects in

areas where ‘shallow’ gas hazards were expected to be

located. During the year the ‘Markab’ carried out a project

near New Zealand before sailing to the Caspian Sea to

carry out work on behalf of a Western oil company.

In 2004 Fugro also reaped the first benefits of a number of

new initiatives aimed at the changing activities in the

North Sea. The services are targeted at the larger,

independent companies and are related to oil fields in the

final phase of their life cycle. The North Sea is in a

transitional phase – the big international oil companies

are partly moving out of the region and the larger

independents are moving in. Very few new projects are

being carried out in this interim period although Norway

is the positive exception to this rule.

42


The Survey services division comprises three business

units and concentrates on mapping the topography and

geological composition of the earth’s surface and precise

positioning.

Most of the offshore services are carried out on behalf of

the oil and gas industry and are offered all over the world.

Fugro’s technological lead provides opportunities to

capture a large share of the growing market for the

development of deepwater fields. The results of this

business unit are closely linked to the level of investment

by the oil companies.

Onshore services focus on local/regional markets in the

government, utility, industry and construction sectors.

Unlike traditional land survey service providers, Fugro

focuses on technologically advanced solutions and new

applications. This opens up possibilities for further

growth for this business unit.

The positioning unit offers precise satellite positioning

services throughout the world to onshore markets such as

agriculture and mining and to specific offshore niche

markets. These services are also frequently used by other

Fugro business units in conjunction with other Fugro

activities. With the introduction of the advanced HP (High

Performance) system with sub-decimetre accuracy, Fugro

has differentiated itself from the increasing number of

freely available GPS systems. The HP system is also

generating opportunities in new markets, such as

automated guidance systems.

High reliability, excellent service and clustering with

other Fugro services increase the competitive advantage.

The objective is to achieve both growth and a further

margin improvement.

S u r v e y s e r v i c e s

43

J. Ruegg O.M. Goodman

O f f s h o r e

• geophysical and site surveys related to the positioning

of drilling rigs;

• route surveys for pipelines and underwater cables;

• positioning services above water (Starfix and Skyfix) and

underwater;

• survey support for construction projects at sea,

generally using dynamically positioned (DP) ships and

ROVs (Remote Operated Vehicles – unmanned

underwater vehicles) and AUV’s (autonomous

underwater verhicles);

• annual inspection of pipelines;

• oceanography.

O n s h o r e

• advanced land survey activities;

• data management, conversion and mapping;

• photogrammetry;

• geographic registration for asset management;

• fixed wing and helicopter based LiDAR mapping

services.

P o s i t i o n i n g

• development and operation of accurate positioning

services such as OmniSTAR, Starfix, SkyFix and

SeaSTAR-DP;

• provision of positioning services to professional end

users on land, at sea and in the air;

• tracking services for ships, vehicles, etc.

0

100

200

300

400

500

20042003200220012000

(x EUR 1 mln.)

T u r n o v e r


In the year under review the Survey division achieved

a turnover of EUR 478 million compared with EUR 346

million in 2003, an increase of 38.2%. This was partly

thanks to the integration of Fugro-TGS. The operating

result before amortisation of goodwill (EBITA) rose to

EUR 49 million (2003: EUR 33 million). This equates to 10%

of the turnover (2003: 10%). Expressed as a percentage of

the invested capital the operating result amounted to 21%

(2003: 18%).

O f f s h o r e S u r v e y

Since the integration of Fugro-TGS, Fugro has occupied

a leading position in the global market for offshore survey

services. The international oil and gas industry seeks

service providers who can provide a wide range of services

worldwide. A great many smaller players are active in this

market at a local level.

Although turnover and result were higher than in 2003,

2004 was an eventful and somewhat disappointing year

for this business unit. Regrettably the integration of

Fugro-TGS resulted in over 400 employees having to be

made redundant. The process was completed on schedule,

during the first months of the year under review, but did,

however, involve a considerable part of the organisation,

which to a degree diverted the focus away from the

normal (commercial) business activities. In the current

financial year the focus will again be firmly fixed on the

normal business activities.

On a regional level, the unit profited from positive

developments in the Gulf of Mexico and the companies

working in the Caspian Sea, India and the Middle East,

where markets are growing, can look back on a very good

year. By contrast, 2004 was a disappointing year in Latin

America due to several bad contracts in Brazil and

Mexico, inherited from Thales S.A. Developments in

Africa and Europe were somewhat affected by the

integration of Fugro-TGS. In South-East Asia and the

Pacific the year began badly due to adverse market

conditions but in the course of the year underwent a

noticeable recovery, so much so that at the end of the year

business was developing well. The joint venture in China

is progressing well. The contract to carry out a pre-

construction survey along the eastern coast of Russia as

part of the Sakhalin II project was extended by a year.

The Autonomous Underwater Vehicle (AUV) was used in

West Africa to carry out an extensive (4,700 km) survey in

1,500 metre deep water. During 2004 we have also

invested in a second AUV system and Fugro will expand

the hydrographic mapping capability with an airborne

LiDAR system in 2005. If possibilities are there, in the

upcoming period Fugro will more often use AUV’s which

further optimise Fugro’s services. In October 2004 12

ROVs in North America have been sold.

A worldwide survey was carried out in mid-year to verify

customers’ perception of Fugro’s performance, following

the acquisition of Fugro-TGS. The reaction of customers

was found to be very positive overall but also assisted in

identifying improvements.

44


K e y f i g u r e s S u r v e y *

Revenue

Operating result before amortisation of goodwill (EBITA)**

Invested capital


Investments


as a % of turnover


* Offshore Survey’s historical figures have been recalculated in line with the structure introduced in 2002.

** Including circa EUR 4.5 million negative from Fugro-TGS.

2000

314

41

87

17

28

13

47

2001

392

65

110

22

50

17

59

2002

371

50

111

22

19

13

45

2003

346

33

182

23

94

10

18

2004

478

49

233

36

34

10

21

O n s h o r e S u r v e y

The onshore survey activities take place in a market

sector, and against competition, that is locally or

regionally oriented. Fugro has a presence in many

countries and focuses on the provision of high-value

measurement technologies and specialist data

interpretation. Market positions vary per region or

country.

The business faced a difficult year in the key markets of

Australia and the Netherlands. In part, this is due to a

trend towards outsourcing of data management and

conversion projects to low-salary countries. To improve

competitiveness of the business Fugro is following a two-

track policy. On the one hand Fugro is concentrating

increasingly on operating as a service provider with ‘back

offices’ in low salary countries. On the other hand the

focus for these services is on generating greater added-

value through better utilisation and coordination of the

combined (international) Group activities.

In contrast, the onshore field survey activities for the oil

and gas industry once again developed very positively in

2004, especially in the Middle East, the United States and

Canada.

2004 was a reasonably good and profitable year for the

FLI-MAP activities although competition is increasing as

a result of the emergence of alternative systems. Fugro

invested in a fixed wing LiDAR system which will enable a

further expansion of the activities in this growth market.

Both technologically and procedurally the onshore survey

companies must meet increasingly stringent demands

for their products and services. At the same time,

the opportunities and (international) market potential

are increasing. In many ways Fugro is in a unique position

to benefit from the opportunities arising from this

development.

P o s i t i o n i n g

Although there are other companies active around the

world in the market for positioning services, Fugro

occupies a strong market position in the high accuracy

GPS augmentation positioning sector.

2004 was a good year for the positioning activities.

The agriculture sector made a strong recovery, especially

in Australia where the drought ended at the end of 2003.

Offshore, the dynamic positioning activities continued to

grow in turnover and result. However, subscriber growth

for the OmniSTAR-HP was slower than expected in 2004,

constrained partly by the availability of third party

hardware and by operational issues. Geometius B.V.,

a company specialising in the sale of GPS equipment in

the Netherlands, was sold.

The integration of the Fugro-TGS activities not only led to

a substantial strengthening of the market position but,

simultaneously, to the possibility for significant

(infrastructure) cost savings. The services which are

functionally very similar (OmniSTAR/Landstar and

Starfix/Skyfix) have been merged, while services such as

Skyfix-XP have enabled Fugro’s service portfolio to be

expanded.

In the market for high-precision positioning Fugro has

established itself as a leading player. Fugro concentrates

on the professional user who needs high-performance

global services. Thanks to its development of innovative

products and systems, often in cooperation with strategic

business partners, Fugro can offer services that are more

accurate (sub-decimetre) than those offered by the

competing commercial service providers and ‘free

services’. Fugro also focuses, successfully, on new,

developing markets without ‘free services’, such as Africa

and the Middle East. Services are also offered in the area

of asset monitoring (OmniSTAR AM) for vehicle tracking

and pipeline monitoring.

45


The Geoscience division concentrates on the gathering

and interpretation of geophysical data and the

quantitative and qualitative evaluation of resources

including oil, gas and minerals plus the optimisation of

their production. The Geoscience division comprises two

business units: Development & Production and Airborne

Survey.

In addition to the gathering and interpretation of data,

Development & Production focusses primarily on

reducing the costs of and improving the efficiency of oil

field exploitation, development and production through,

amongst other things, the application of advanced data

processing, interpretation and modelling technology

developed in-house. These services are for an important

part funded out of the less cyclical production budgets.

Development & Production is active worldwide and

occupies a strong position as a supplier of high-value

services in the field of integrated geophysics and geology

aimed at improving knowledge regarding reservoirs.

The upstream oil and gas industry is the major client for

the services provided by this division with which Fugro

clearly targets the producers/owners in the sector.

Airborne Survey gathers geophysical data around the

world, primarily for the mining industry but also

increasingly for the oil and gas companies.

The increasingly stringent safety requirements and better

technology provided by Fugro offer growth opportunities

in other markets, such as the oil and gas industry, and for

organisations such as the Worldbank.

A further expansion and development of the Geoscience

division must, in the future, lead to improved margins

and increased turnover.


The Geoscience division achieved a turnover of

EUR 266 million (2003: EUR 204 million). The operating

result before amortisation of goodwill (EBITA) amounted

to EUR 29 million (2003: EUR 13 million). This corresponds

with a margin on turnover of 11% (2003: 6%). Expressed as

a percentage of the invested capital the operating result

amounted to 11% (2003: 6%).

G e o s c i e n c e s e r v i c e s

46

D e v e l o p m e n t & P r o d u c t i o n

• seismic and gravity data acquisition;

• seismic and gravity data processing and interpretation;

• reservoir modelling and engineering;

• quantifying and qualifying oil and gas reserves;

• data management;

• provision of information to enhance reservoir recovery.

A i r b o r n e S u r v e y

• collection of geophysical data for industries

including mining and oil and gas;

• mineral and water stocks location and saline layer

detection;

• geological mapping;

• environmental studies.

P. van Riel F.E. Toolan

0

60

120

180

240

300

20042003200220012000

(x EUR 1 mln.)

T u r n o v e r

D e v e l o p m e n t & P r o d u c t i o n

Development & Production offers a broad spectrum of

related services worldwide. Its competitors are primarily

companies focussing specifically on offering only one or

a limited set of these services. For example, the seismic

market has five, larger (of which two are very large),

international players including Fugro plus a number of

smaller, local players.

The Development & Production activities developed

better in 2004 than in the previous year. The focus

remained firmly fixed on a further improvement of the

results. The benefits of cooperation and synergy between

the various companies became increasingly apparent.

During the first half of 2004 the seismic activities still had

to cope with a market that, due to a combination of

overcapacity and a reticent investment policy, remained

difficult. In the second half of the year the situation did,

however, improve as far as the investments in exploration

activities were concerned. This trend is expected to

continue during the current year. The sale of seismic

multi-client data accelerated in the second half of 2004.

This market is highly volatile as a result of changes to the

legislation and regulations governing the oil and gas

sector, which differ greatly from one country to another.

During the year under review the processing of seismic

data within Fugro’s different operating companies was, to

a great extent, centralised into one group. This offers

good opportunities for further growth because it means

the needs of the market can be answered properly.

The (pre)processing of seismic data is, on the one hand,

an almost automatic follow-up to the acquisition of the

data and, on the other hand, extremely important for the

subsequent phase – reservoir interpretation and

modelling – where Fugro plays a leading role.

The activities in the field of reservoir modelling did not

develop entirely satisfactorily during the year under

review, although the results did show a slight growth.

In this sector Fugro plays a leading role worldwide in

terms of both technology and expertise and, therefore,

supplies a large measure of added-value. To further

improve the results, Fugro streamlined the organisation

during the year under review. This streamlining has also

improved the geographical focus. In the coming years the

current firm foundation of this core activity will form the

basis for substantial further development with new

technologies and services.

The Geoscience activities showed robust growth in 2004

with a good result. The classic, technical services in

support of exploration activities were widely used in both

geographic and product terms. The sale of multi-client

data went well. The activities in the field of Data Solutions

(data management, storage and manipulation), a fast

growing market, were expanded further in 2004.

The acquisition of the business and assets of C&M Storage

in Texas, the United States, which works for over sixty oil

and gas companies, has reinforced our position and offers

good opportunities for further growth.

47


K e y f i g u r e s G e o s c i e n c e *

Revenue

Operating result before amortisation of goodwill (EBITA)

Invested capital


Investments


as a % of turnover


* The historical figures for Development & Production have been recalculated in line with the structure introduced in 2002.

2000

118

3

74

13

10

3

4

2001

209

7

250

8

25

3

3

2002

252

27

251

14

18

11

11

2003

204

13

233

13

15

6

6

2004

266

29

261

17

13

11

11

A i r b o r n e S u r v e y

In the regions where Fugro operates its Airborne Survey

activities the Company’s worldwide presence puts it in

a leading position. For the most part the competition

operates in the regional markets or in niche markets for

specific applications.

The growth of the Airborne Survey activities in Canada,

Australia and Africa was excellent and produced a good

result. Not only were new orders received at the end of

2003, including orders from organisations such as the

Worldbank, the Islamic Bank and the EU (in Nigeria,

Mauritania, Angola, Madagascar and Mozambique), but

the substantial improvement of the mining industry also

played a role as they benefited from the explosive global

growth in the demand for minerals.

Once again a substantial investment was made in new

technologies during the year under review. Airborne data

acquisition can now be optimised by using the ‘Georanger

I’ (Unmanned Airborne Vehicle). This is a small, remotely

controlled aircraft equipped with a variety of sensors.

In 2005 it is expected that the UAV will be regularly used

for airborne data acquisition. In addition, several

conventional aircraft were replaced by newer models.

Fugro occupies a leading position in this global market.

Traditionally the mining industry is the most important

market for the Airborne activities although water

resource mapping (primarily in the Middle East) and

projects on behalf of oil and gas companies are growth

markets.

Airborne surveying is cheaper than conventional

methods. Using Airborne surveying, Fugro can carry out

high-quality geophysical investigations usually at a far

lower cost and also in places where it would otherwise be

impossible. In combination with other Fugro companies

this business unit utilises the growth opportunities

created by synergy and (technological) cooperation within

and outside the Geoscience segment. This is guaranteed

by a focussed structure and constantly improving health

& safety systems, for which Fugro wishes to set the

standards.

48

G e n e r a l

Fugro sets great store by achieving a balance between the

interests of its various stakeholders. Enterprise, integrity,

openness and transparent management as well as good

supervision of the management are the starting points for

Fugro’s Corporate Governance policy. The Company also

endeavours to treat social interests with respect.

A p p r o v a l b y t h e A n n u a l G e n e r a l M e e t i n g

o f S h a r e h o l d e r s

After having received a detailed explanation of the

Company’s Corporate Governance structure and policy,

on 19 May 2004, the Annual General Meeting of

Shareholders approved Fugro’s Corporate Governance.

As a consequence, Fugro complies with the Dutch

Corporate Governance Code.

The Company’s Articles of Association were amended

accordingly on 3 September 2004. The underlying

documentation, amongst which are the relevant rules

and regulations as well as the Articles of Association and

the Administrative Conditions of Stichting Administratie-

kantoor Fugro, are published on the Company’s website:

www.fugro.com under corporate area/corporate

governance

T h e m a i n p o i n t s o f t h e C o r p o r a t e

G o v e r n a n c e S t r u c t u r e

Fugro applies the major part of the Principles and

Provisions of the Code, in so far as they are applicable,

with the following exceptions.

Best practice provision II.1.1

The duration of the existing employment contracts with

Mr. G-J. Kramer and Mr. K.S. Wester is at variance with this

provision. These contracts were signed before the Code

came into force; rights that have been agreed cannot be

rescinded.


It has been decided to apply the notification obligation to

stocks in listed companies which operate in the same area

as the company or are related thereto. On the one hand

this is a restriction, but on the other hand it is an

extension such that international listed companies or

clients are brought within the scope of the provision.


The employment agreements between Fugro and

Mr. G-J. Kramer and Mr. K.S. Wester do not include

agreements regarding termination recompense.

This means that general labour law provisions are

applicable. Fugro will not amend the existing

employment agreements. The agreements were signed

before the Code came into force; rights that have been

agreed cannot be rescinded.

Best practice provision III.3.5

Mr F.H. Schreve and Mr M.W. Dekker do not fulfil the

condition contained in this provision. They were

reappointed as members of the Supervisory Board

by the Annual General Meeting of Shareholders before

the Code came into force.

Principle IV.2

Maintaining its operational independence is crucial for

Fugro (see page 50 for the reasons for this). One of the

ways to safeguard this independence is to issue

certificates (depository receipts) of shares. The issuing of

share certificates is, therefore, considered by Fugro to be

a necessary protective measure. According, when

Stichting Administratiekantoor Fugro is executing its

voting rights the criterion used is that the interests of the

company and its associated enterprise and all others

involved will be ensured in the best possible way.

Best practice provision IV.2.1

In variance with this provision, the Administrative

Conditions of Stichting Administratiekantoor Fugro do

not stipulate in which instances and under what

conditions the certificate holders may ask the

Administrative Office to convene a meeting.


As a consequence of Best Practice provision IV.2.2 the

Board has decided that certificate holders representing at

least 15% of the issued share capital in the form of

certificates are allowed to convene a meeting to indicate a

nominated person as a member of the Stichting’s Board.

C o r p o r a t e G o v e r n a n c e

49


Stichting Administratiekantoor Fugro’s regulations

include a provision regarding the granting of a proxy to

exercise the right to vote to holders of share certificates.

The proxy can, however, be limited, excluded or recalled

in the circumstances stated in the Administrative

Conditions of Stichting Administratiekantoor Fugro.

This is in accordance with the legal regulation which

came into force on 1 October 2004.

C o m p l i a n c e w i t h a n d o b s e r v a t i o n

o f t h e C o d e

In the 2004 financial year Fugro complied with its

Corporate Governance Code. In particular the Board of

Management deems that the Company has complied with

the best practice provisions II.3.2 to II.3.4 inclusive and

III.6.1 to III.6.3 inclusive. No transactions have taken place

in which (potentially) conflicting interests of material

substance related to Board members or Supervisory Board

members have played a part. No transactions in the

context of best practice provision III.6.4 have taken place.

Fugro will present every substantial amendment in its

Corporate Governance to the Annual General Meeting of

Shareholders for discussion.

P r o t e c t i v e m e a s u r e s

When carrying out assignments Fugro can have access to

clients’ extremely confidential information. For this

reason Fugro can only carry out its activities if it can

safeguard its independence in relation to its clients.

The centre of gravity of Fugro’s protection against an

unwanted take-over rests on the one hand on the issuing

of certificates of ordinary shares and, on the other hand,

on the possibility of issuing protective cumulative

preference shares. In addition, protective preference

shares may also be issued by the Fugro subsidiaries Fugro

Consultants International N.V. and Fugro Financial

International N.V. to Stichting Continuïteit Fugro

(see page 150).

The protective measures are primarily intended to

safeguard Fugro’s independence in relation to its clients.

Only share certificates not entitled to voting rights are

listed and traded on Euronext Amsterdam N.V.

The restricted convertible certificates are issued by

Stichting Administratiekantoor Fugro and the Stichting’s

management exercises the voting rights of the underlying

shares in such a way that the interests of the Group, its

associated companies and all stakeholders are

safeguarded as far as is possible. For the composition of

the Management of the Stichting Administratiekantoor

Fugro see page 150.

Certificate holders:

• may, after the timely deposition of their certificates,

attend and speak at shareholders’ meetings;

• are entitled to request from the Administratiekantoor

a proxy to exercise the right to vote for the shares that

underlie their certificates. The Board of the

Administratiekantoor may only limit, exclude or recall

this proxy if: a) a public bid for the (certificates of)

shares in Fugro N.V. has been announced or issued or

there is a reasonable expectation that this will occur,

without the consent of the Company: b) 25% or more of

the subscribed capital of the Company is held by one

holder of (certificates of) shares or by a number of

holders collaborating on the basis of a mutual

agreement, or: c) exercising the right to vote may, in

the opinion of the Administratiekantoor, conflict with

the overall interests of the Company;

• may, as long as they are natural persons, not having a

mutual arrangement to co-operate, exchange their

certificates for ordinary shares up to a maximum of 1%

of the share capital per shareholder.

Any issuing of protective preference shares will be carried

out by Stichting Beschermingspreferente aandelen Fugro.

On 19 May 2004 the Annual General Meeting of

Shareholders designated (for the most recent time) the

Board of Management of Fugro as the body which, for the

period until 19 May 2007 is authorised, with the approval

of the Supervisory Board, to: (a) issue and/or grant rights

to acquire all preference shares – by which is understood

both protective preference shares and financing

preference shares – and ordinary shares in the subscribed

capital and, (b) limit or exclude the priority rights on

shares to be issued. Now that no option agreement

between Fugro and Stichting Beschermingspreferente

aandelen Fugro has been signed, the Board of

Management should, on the basis of its appointment as

the body authorised to issue shares, when a threat of an

50

unwanted take-over is such that an immediate issue of

preference shares by Stichting Beschermingspreferente

aandelen Fugro is advisable, decide to issue shares with

the approval of the Supervisory Board.

The objective of Stichting Beschermingspreferente

aandelen Fugro is the promotion of the interests of Fugro

and the companies maintained by Fugro and the

companies in the Fugro Group, in such a way that the

interests of Fugro and of all involved with Fugro are

safeguarded in the best possible manner and influences

which could damage the independence and/or continuity

and/or the identity of Fugro and its associated companies

to the detriment of those interests are prevented as far as

possible, as is the execution of anything that is related to

or could be beneficial to the above. The options on

protective preference shares granted to Fugro

Consultants International N.V. and Fugro Financial

International N.V. were approved by the Annual General

Meeting of Shareholders in 1999. The objective of

Stichting Continuïteit Fugro is the same as that of

Stichting Beschermingspreferente aandelen Fugro.

The protective measures described above will, especially

in a take-over situation, be put into effect when this is in

the interests of protecting the confidentiality of clients’

data, safeguarding Fugro’s independence and defining

Fugro’s position in relation to that of the aggressor and

the aggressor’s plans and will create the possibility of

seeking the necessary alternatives. The protective

measures will not be put into effect to protect the Board

of Management’s own position. Due to the uncertainty

regarding the situations with which Fugro could be

confronted, the use of the protective measures in

circumstances other than those described above cannot

be discounted.

51

In France the accent is on the geotechnical services. A specialist office of the offshore survey division is

also located in France. At the end of 2004 there were 262 staff.

Fugro France SA

founded

1962 1998 1999

1 9 6 2N L

1 9 7 5D

1 9 6 8U K

1 9 6 3B

1 9 9 2R U S

1 9 9 4N, I, C H

1 9 9 8F

F

Four French

geotechnical

companies

acquired

2000

F r a n c e

2 0 0 3D K

2004

Activities at the

Nimes Arena

Positioning of a

hoisting crane during

the extension of

Monaco harbour

200320022001

As of 2005, Fugro being a listed company on the stock

exchange, has to report its financial statements in

accordance with International Financial Reporting

Standards (IFRS). Fugro has decided to early adopt IFRS

and reports over the financial year 2004 in accordance

with IFRS (and Dutch GAAP as required under Dutch law),

with comparative figures for 2003. The 2003 results under

IFRS are significantly lower compared to the 2003 Dutch

GAAP results. The most significant decrease in the income

statement related to the accounting of the reorganisation

costs related to the Fugro-TGS acquisition. When the

buyer forms a provision for reorganisation costs at the

moment of acquisition, under IFRS these costs have to be

recorded through the profit and loss account. These costs

are therefore no longer part of the goodwill, as under

Dutch GAAP.

The impact of the transition to IFRS will not, however,

influence Fugro’s strategy, operational development and

cash flow in any way and will not result in any material

changes to the historical picture of Fugro.

The items in Fugro’s annual accounts that are subject to

more material changes in valuation and/or presentation

due to the transition to IFRS are:

• Goodwill in so far as this application results in a

different valuation of assets and liabilities at the

moment of acquisition (whether or not these assets

and liabilities were previously identified separately);

Under IFRS goodwill is no longer amortised but is

tested annually for impairment;

• Taxation through a different (earlier) timing of

recognition of unused tax losses carried forward in so

far as it is probable these will be realised;

• Provisions for major repairs and maintenance which are not

allowed under IFRS. Under IFRS costs for major repairs

and maintenance are capitalised as a separate

component of property, plant and equipment and

depreciated over their usefull life;

• Pension liabilities because liabilities that qualify as

‘defined benefit plans’ under IFRS must be recognised

in the balance sheet.

• Other provisions in so far as these are not allowed under

IFRS;

• Certain specific long-term financial lease agreements

relating to two vessels under shared ownership, which

under IFRS qualify as financial leases and therefore no

longer can be treated off-balance sheet (these vessels

were acquired in full ownership by Fugro in 2004);

• Financial instruments which will be recognised at fair

value.

In the table on the left the statements of reconciliation

between Dutch GAAP and IFRS for the relevant periods

(equity as of 1 January 2003, 31 December 2003 and

31 December 2004). The table on page 55 shows the

reconciliation of the 2003 and 2004 results. It has to be

said that it is expected under IFRS the net result will be

structurally EUR 4 – 7 million below the Dutch GAAP

result before amortisation of goodwill, mainly due to the

different accounting treatment for issued options and

differences in tax charges. As historical data are not yet

available, the estimates cannot be benchmarked.

The shareholders’ equity compared to Dutch GAAP has

been corrected by EUR 11.8 million as at 1 January 2003

and will develop as from this starting position.

Explanation

• According to IAS 19 a pension liability is recognised for

defined benefit plans being the total of the net present

value of the defined benefit obligation at balance sheet

date, plus any actuarial gains (less actuarial losses)

I F R S

54

(in EUR x 1 mln.)

S h a r e h o l d e r s ’ e q u i t y

Dutch GAAP

Defined benefit

pension obligations

Recognition of unused

tax losses carried forward

Taxation effect of corrections

in equity

Release of provisions

Reallocation of

goodwill/introduction of

capitalised software

Restructuring costs

Lapsed amortisation of

goodwill

Equity component

convertible notes

Revaluation assets under

financial lease

Valuation of hedges

Other

IFRS

31-12-2004

260.1

(42.8)

6.8

15.5

3.2

(15.1)

(22.7)

29.9

0.7

4.3

(15.0)

(1.0)

223.9

31-12-2003

240.8

(38.7)

8.3

12.4

5.6

(12.5)

(17.5)

12.7

3.2

4.3

(6.3)

(1.1)

211.2

01-01-2003

271.7

(41.5)

6.4

12.8

4.2

(6.4)

–

–

5.7

5.8

2.1

(0.9)

259.9

minus any past service cost not yet recognised minus

the fair value at balance sheet date of assets out of

which the obligations are to be settled.

• According to IAS 12 deferred taxes are recognised for

unused tax losses carried forward to the extent that it

is probable that future taxable profit will be available

against which the unused tax losses can be utilised.

• According to IAS 16 and 37 maintenance provisions

are no longer allowed. Furthermore, a reorganisation

provision has been released to equity as of 1 January

2003 because this is no longer allowed under IFRS.

• According to IFRS items in ‘intangible assets‘ in the

opening balance sheet have been reassessed which

resulted in the recognition of intangible assets (mainly

software) which are amortised over their useful life.

Furthermore, the Dutch GAAP amortisation of

goodwill has been reversed. Impairment tests have not

resulted in impairment losses.

• A special adjustment is the reversal of the

restructuring provision of EUR 22.7 million relating to

the acquisition of Thales GeoSolutions which was

recorded against goodwill under Dutch GAAP which is

not allowed under IFRS 3. EUR 17.5 million of this

amount is attributable to 2003 and EUR 5.2 million

to 2004.

• The capitalisation of two financial leases regarding

two vessels according to IAS 17 and the applied

revaluation to fair value, resulting in an increase of the

carrying value by EUR 5.8 million;

• In accordance with IAS 32 and 39 the equity

component of the convertible notes has been

recognised separately. The difference in the fair value

of the hedging instruments with regard to the future

interest-bearing payments from the Private placement

has been recorded in the equity.

The differences in the income statement are mainly

explained in the disclosure on the differences in equity.

Another, almost neutral in result, item is the reallocation

of some 50% shareholdings (third party costs, other costs,

depreciation of property, plant and equipment and

interest costs).

The box shows the main standards of IFRS and IAS, as used

for the preparation of this Annual Report.

The Annual Accounts (pages 68 – 133) contains

explanation on IFRS.

55

(in EUR x 1 mln.)

I n c o m e

s t a t e m e n t

Dutch GAAP

Capitalisation of software

Software depreciation

Reversal of goodwill

amortisation

Reversal restructuring

provision

Costs option plan

Interest convertible notes

Other

IFRS

2003

32.4

4.6

(6.8)

12.7

(17.5)

(1.9)

(2.5)

(2.1)

18.9

2004

49.5

4.4

(7.1)

17.2

(5.2)

(3.5)

(2.6)

(3.4)

49.3

Applied standards of IFRS and IAS

IFRS1: first-time adoption of IFRS

IFRS2: share-based payment

IFRS3: business combinations

IAS 1: presentation financial

statements

IAS 2: inventories

IAS 7: cash flow statements

IAS 8: accounting policies, changes

in accounting estimates and

errors

IAS 10: post balance sheet date

events

IAS 11: construction contracts

IAS 12: income taxes

IAS 14: segment reporting

IAS 16: property, plant and

equipment

IAS 17: leases

IAS 18: revenue recognition

IAS 19: employee benefits

IAS 21: effects of changes in foreign

exchange rates

IAS 23: borrowing costs

IAS 24: related party disclosures

IAS 27: consolidated and separate

financial statements

IAS 28: investments in associates

IAS 31: interests in joint ventures

IAS 32: financial instruments:

disclosure and presentation

IAS 33: earnings per share

IAS 34: interim reporting

IAS 36: impairment of assets

IAS 37: provisions, contingent

liabilities and contingent

assets

IAS 38: intangible assets

IAS 39: financial instruments:

recognition and

measurement

56

O P E R A T I O N A L

A c t i v i t y p o r t f o l i o

While the core activities show a high degree of cohesion

they also target highly diverse markets, clients and

regions. A high proportion of the services provided

offshore and by the Development & Production unit are

related to the oil and gas market. Fugro’s dependence on

the cyclic investment in oil and gas exploration has been

reduced in favour of the more stable investments in oil

and gas production. The other activities are dependent on

developments in markets that include infrastructure,

construction and mining. The influence of positive and

negative cyclical effects is moderated by:

• the cohesion between the various activities;

• the wide geographical spread;

• the diversity of clients;

• strong market positions and

• the size of the Group.

O r d e r s t r e a m a n d p r i c e c h a n g e s

Fugro’s orders are partly awarded on the basis of long-

term preferred supplier agreements. Having a large

number of clients supports Fugro’s independence and

improves its stability. In the course of a year Fugro

executes many projects for clients. The projects carried

out for any individual client do not, however, account for

more than 4% of total turnover.

To carry out its assignments Fugro has at its disposal

highly trained staff and technically advanced, and

therefore costly, equipment. Much of Fugro’s work

involves short-term orders. Fugro is, to a degree, sensitive

to price changes and sudden changes in exchange rates,

to which the Company can adapt quickly. Fugro’s budgets

are, to a great extent, based on the expected investments

by the oil and gas companies. Substantial fluctuations in

oil prices (up or down) do not lead to rapid changes in

these investments, unless there is a structural drop in

prices to less than USD 20 per barrel.

R i s k m a n a g e m e n t

Fugro’s long-term risks are limited due to:

• The wide diversity of highly cohesive activities

• No client or assignment accounting for more than 4% of Fugro’s total turnover

• Mostly state-of-the-art owned and in-house developed technologies and professional staff

• Due to mainly short contracts: capability to adjust quickly to exchange rates and price changes

• Not being structurally vulnerable unless oil prices fall below USD 20 per barrel

• A balanced and flexible vessel fleet (owned by Fugro and chartered)

• Short-term loans (EUR 295 million) amounting to only 30% of the balance sheet total

• Hardly any or no risks related to pension obligations

• Good internal risk management and control systems

Fugro’s risk management policy is aimed at the long-term sustainable management of its business activities and the

limitation or, where possible, the appropriate hedging of the risks. Due to Fugro’s wide diversity of markets, clients and

regions and its broad portfolio of activities, quantifying all possible existing risks which are relevant for the Group as a

whole is virtually impossible. Risks are, however, quantified wherever this is possible and useful. Examples of these risks

are the influence of the US dollar.

7%

69%

5%

19%

Oil & gas

Construction/infrastructure

Mining

Other

(For the year 2004)

I n d i c a t i o n b r e a k d o w n

t u r n o v e r p e r s e c t o r

C a p a c i t y p l a n n i n g

Fugro is constantly alert for signals that indicate changes

in market conditions so it can react quickly and

efficiently. Sudden and very unexpected changes in

market conditions are, however, always possible. Some of

Fugro’s surveying activities precede investment by clients

and generally take place at the start of the activity or

investment cycle. This means Fugro’s activities can be the

first to be affected by changes in market conditions.

Delays and breaks in the flow of orders can lead to

temporary losses due to under-utilisation of capacity.

The weather and the availability of vessels are key factors

for offshore activities. Weather influences are calculated

into the budgets and averaged out over the year and the

regions in which Fugro is active. As far as vessels are

concerned, Fugro’s objective is to build-up a fleet in which

around half the available vessels are Group owned, about

35% are on long-term charter and the remaining 15% are

chartered on a project basis. The exchange of manpower

and equipment between the various business units

results in increased capacity utilisation.

F I N A N C I A L

B a l a n c e s h e e t

Fugro follows an active policy to optimise its balance

sheet ratios and thus limit financial risks and maintain

the Company’s long-term financial solvency. Being

quoted on the stock exchange provides a very worthwhile

contribution towards achieving the Company’s (financial)

targets and enables Fugro to make a well considered

selection of the optimum financing mix when, for

example, involved in an acquisition process.

Future interest rate risks are limited to short-term loans

and the bank loan regarding the acquisition of Thales

GeoSolutions (outstanding EUR 127 million), which has

a variable interest rate. The Company’s objective is to

limit the effect of interest rate changes on the results.

At the moment of closing, the interest rate risk as well as

the currency risk of the Private Placement nominated in

USD was fully hedged till maturity.

Fugro applies prudent accounting principles based on the

Dutch reporting regulations. Leasing and off-balance

sheet constructions are avoided as far as possible and the

policy is to depreciate relatively quickly. Software,

whether purchased or developed in-house, is not

capitalised on the balance sheet with the exception of

substantial external expenditure for software packages

57

E x c h a n g e

r a t e s

( i n E U R )

31 December 2004

30 June 2004

31 December 2003

30 June 2003

31 December 2002

30 June 2002

31 December 2001

30 June 2001

31 December 2000

30 June 2000

GBPaverage

1.47

1.49

1.45

1.46

1.59

1.61

1.62

1.62

1.65

1.65

GBPend ofperiod

1.42

1.49

1.42

1.45

1.53

1.54

1.64

1.66

1.61

1.58

USDaverage

0.81

0.82

0.88

0.90

1.06

1.11

1.13

1.13

1.09

1.06

USDend ofperiod

0.73

0.82

0.79

0.88

0.95

1.00

1.13

1.18

1.08

1.05

USD

GBP

50%

14%

28%

8%

USD related

EUR and other

(For the year 2004)

I n d i c a t i o n b r e a k d o w n

t u r n o v e r p e r c u r r e n c y

with regard to administrative and technical applications.

The seismic and geological database is depreciated

quickly and systematically with an average term of less

than 2.5 years. Research and development costs are

charged directly to the results. A portion of these costs is

accounted for as project-related turnover costs. Fugro has

evaluated the book value of its assets, including goodwill,

within the framework of its normal balance sheet

evaluation. This evaluation has shown that no

extraordinary depreciation of these assets is necessary.

Under IFRS Fugro continues to value the balance sheet

and profit and loss account as prudently as possible

within the framework of the regulations. Goodwill is

no longer amortised. An impairment account will be

drawn-up each year. Off-balance sheet constructions

continue to be avoided in the future. IFRS does demand

specific valuation methodologies and presentations.

Fugro complies with these requirements and explains

them if appropriate.

F o r e i g n e x c h a n g e r a t e s

Fugro limits its sensitivity to changes in foreign currency

rates, but is not immune to exchange rate differences

caused by rapid changes in the rates and to exchange rate

differences. As most of Fugro’s income in local currencies

is used for local payments, the effect of negative or

positive currency changes on operational activities at

a local level is minimal. Fugro’s international monetary

streams are limited and, like the receivables and

liabilities, are generally in US dollars or dollar related

currencies.

Where possible and desirable forward exchange contracts

are signed (at a local level). The major factor with which

Fugro has to cope is translation effects. A change of

USD 0.05 in the dollar to euro exchange rate has an effect

of around EUR 2.5 million on the net result. In addition,

rapid and radical changes in exchange rates can influence

the balance sheet and profit and loss account, partly due

to the duration between submitting quotes and the

(delayed) award of orders, during which period forward

exchange contracts would not be appropriate. This

creates an additional foreign currency risk which cannot

be quantified in advance. The optimisation of the use

of forward exchange contracts is under continuous

attention of the organisation.

P e n s i o n p r o v i s i o n s

Fugro operates pension schemes for its staff in accordance

with the regulations and customs in each of the countries

in which the Company operates. As of 31 December 2004

the final salary scheme in the Netherlands has been

replaced by an average salary scheme. This scheme is

classified as a ‘defined contribution’ scheme.

This classification is, however, still seen as a defined

benefit scheme under IFRS similar to all schemes in the

Netherlands. However, hardly any future risks are

involved in this scheme.

In the Netherlands the pension commitments are fully

re-insured on the basis of a guarantee contract.

The pledged commitments are fully financed.

In the United States, Fugro has a 401K system for its staff.

Fugro contributes towards the deposits of its staff in

accordance with agreed principles and taking the

regulations of the American tax authorities – the IRS –

into account. This system is free of risk for Fugro.

In the UK Fugro operates a defined contribution scheme

for eligible staff. Measures have been taken to ensure that

the reserves needed to honour past defined benefit

scheme agreements are available when required.

In the other countries where Fugro has organised

retirement provisions for its staff, obligations arising

from these provisions are covered by items included in

the balance sheet of the relevant operating companies.

I n s u r a n c e a n d l e g a l r i s k s

Fugro is insured against a number of risks. Risks related

to occupational liability and general liability are covered

at a global and Group level. Locally, risks related to

equipment are covered. In addition, adequate cover for

aspects related to normal business operations, such as

the vehicle fleet, medical insurance and buildings,

is arranged at a local level. Several group companies are,

within the context of normal business operations,

involved in claims either as the claimant or the

defendant. Based on developments thus far, Fugro’s

financial position is not expected to be materially

influenced by any of these actions.

58

I N T E R N A L S Y S T E M S

G e n e r a l

Constant monitoring of its markets and its operational

and financial results is intrinsic to Fugro’s modus

operandi due to the generally short-term nature of its

assignments. Clarity and transparency are an absolute

must for assessing and evaluating risks. These are

fundamental characteristics of the Fugro culture. Due to

the wide variety of markets, clients and regions and

Fugro’s extensive activity portfolio the operating

company management is responsible for the application,

fulfilment and monitoring of the internal systems.

The monitoring systems are embedded within the

internal control framework described below.

C o r p o r a t e H a n d b o o k

Fugro’s Corporate Handbook contains precise

instructions for, among other aspects, risk management.

F i n a n c i a l H a n d b o o k

This contains detailed guidelines for the financial

reporting. The IFRS standard has now been incorporated

into this handbook.

P l a n n i n g

The business plans of every unit are translated into

budgets. Adherence to the budgets is checked on a

quarterly basis. The operating company managements

must report immediately any unforeseen circumstances

that arise or any substantial deviation from the budgets

to the responsible member of the Executive Committee

and the Board. The monthly reports the operational

management submits to the Holding Company include

an analysis of the achievement of the approved plans.

A u t h o r i s a t i o n l e v e l

Managers are bound to clear restrictions regarding

representative authorisation. Projects and contracts with

value or risks that exceed specified amounts must be

approved by Regional Managers or by the responsible

member of the Executive Committee or the Board as

appropriate.

L e t t e r o f r e p r e s e n t a t i o n

Every six months all regional managers and controllers of

operating companies and the responsible member of the

Executive Committee sign a detailed statement related to

the financial reporting/internal control.

I n t e r n a l A u d i t

Internal audits are carried out by the Holding Company

regularly and frequently. The findings are reported

directly to the President and Chief Executive Officer.

P e e r r e v i e w s

Regular so-called peer reviews are also carried out

whereby an operating company is investigated by a team

of employees from other operating companies.

The results are reported directly to the Board.

A u d i t C o m m i t t e e

The Audit Committee, which comprises three members of

the Supervisory Board, ensures an independent

monitoring of the risk management process from the

perspective of its supervisory role. The Audit Committee

focuses on the quality of the internal and external

reporting, the effectiveness of the internal controls and

on the functioning of the external accountants and

auditors.

E x t e r n a l a u d i t s

The annual accounts of Fugro N.V. and subsidiaries are

checked regularly by external auditors on the basis of

‘International Standards on Auditing’.

A d v i s o r y r o l e s

The external auditor fulfils no advisory roles (except for

due diligence projects and activities related to the annual

accounts). These roles are fulfilled by using third party

experts in fields such as tax and insurance.

W h i s t l e - b l o w e r ’ s r e g u l a t i o n s

Whistle-blower’s regulations have been in operation since

March 2004. The objective is to ensure that a possible

infringement of the existing policies and procedures can

be notified without this notification having any adverse

consequences for the ‘whistle-blower’.

D e c l a r a t i o n

The Board deems that in the current situation the

internal risk management and control systems as

described above are adequate and effective.

No substantial changes were introduced during the 2004

financial year. Various matters have been discussed with

the Audit Committee and the Supervisory Board.

59

L i s t i n g o n t h e s t o c k e x c h a n g e

Fugro share certificates (depository receipts of shares) are

listed on Euronext N.V. in Amsterdam. Since 4 March 2002

Fugro has been included in Euronext’s Amsterdam

Midkap-index (AMX), with an estimated weighting factor

on 1 March 2005 of 3.5% of the index. The market

capitalisation of the Company amounts to over EUR 1

billion. Since 8 July 2002 Fugro share (certificate) options

have also been traded on Euronext Amsterdam Derivative

Markets and since May 2000 the convertible subordinated

debenture bond, which expires on 3 April 2005, has been

traded on Euronext N.V.

As was the case in 2003, in 2004 trading in Fugro

(certificates of) shares was stimulated by four liquidity

providers.

As far as is known, 77.5% of the certificates are held by

foreign investors, mainly from the United Kingdom and

the United States.

Data per share can be found on pages 6 and 7 (key figures)

and on pages 62 and 152 – 153.

D i v i d e n d p o l i c y

Fugro strives for a dividend pay-out ratio of 30 to 50% of

the net result before amortisation of goodwill.

The shareholder may choose between a dividend entirely

in cash or entirely in (certificates of) shares charged to the

reserves. In 2004 around 65% of the shareholders opted to

receive the dividend for 2003 in (certificates of) shares (in

2003: 45%). 381,977 shares have been issued for this

purpose.

S h a r e / c e r t i f i c a t e h o l d i n g s o f

5 % o r m o r e

In February 2005 the following share/certificate holders

with a holding of 5% or more were known to Fugro:

ING Verzekeringen N.V. (incl. certificates) 10.79%

Fortis Utrecht N.V. (certificates) 6.75%

Woestduin Holding N.V. (shares) 6.99%

Stichting Administratiekantoor Fugro (shares) 88.14%

I n f o r m a t i o n f o r s h a r e h o l d e r s

60

11 March 2005

19 May 2005, 14.00 hrs

23 May 2005

14 June 2005 (after trading hours)

16 June 2005

24 June 2005

12 August 2005

25 November 2005

10 March 2006

I m p o r t a n t d a t e s

Publication of the 2004 Annual Report, press conference with webcast,

analysts’ meeting with conference call facility and webcast

Annual General Meeting of Shareholders in Leidschendam, Green Park Hotel,

dual language webcast (Dutch and English)

Ex-dividend date

Determination and publication of the optional dividend in (certificates of)

shares

Payment of the 2004 dividend

Press release regarding developments in the first half of 2005

Publication of 2005 half-yearly report and announcement of profit forecast for

2005, press conference with webcast, analysts’ meeting with conference call

facility and webcast

Press release regarding developments in the second half of 2005

Publication of the 2005 Annual Report, press conference with webcast,

analysts’ meeting with conference call facility and webcast

C h a n g e s i n

i s s u e d s h a r e s

Issued on 1/1

Optional dividend

Issued on 31/12

Purchased for option scheme

as of 31/12

Entitled to dividend as of 31/12

Average number of

outstanding shares

Maximum issue through

convertible bond

2003

14,862,214

303,698

15,165,912

588,862

14,577,050

14,464,310

1,557,390

2004

15,165,912

381,977

15,547,889

410,401

15,137,488

14,839,730

1,557,390

R e m o t e l y v o t i n g b y p r o x y n o t p o s s i b l e

Within the limits as set in the Articles of Association,

Fugro allows proxy voting for shareholders and holders of

certificates at an Annual General Meeting. Fugro is

following with interest the developments with regard to

proxy voting and electronic voting. As soon as new

legislation comes into force, Fugro will consider if it will

make use of the given possibilities.

S a f e g u a r d i n g F u g r o ’ s i n d e p e n d e n c e

When carrying out assignments Fugro may have access to

clients’ extremely confidential information. This means

Fugro can only carry out its activities whilst its

independence can be guaranteed. For this reason, the

shareholders have, in the past, approved several

safeguards. Please see page 50 with regard to Corporate

Governance.

61

M o v e m e n t s t o s h a r e s

p u r c h a s e d f o r o p t i o n

s c h e m e

Situation on 1/1

Purchased

Exercised

Situation on 31/12

Granted, not exercised options

as of 31/12

A t t e n d a n c e

a t A G M s

AGM 15 May 2004*

AGM 15 May 2003*

AGM 17 May 2002

AGM 10 May 2001

AGM 10 May 2000

AGM 12 May 1999

* Certificates with voting authorisation (see page 154).

0

16

32

48

64

80

0

600

1,200

1,800

2,400

3,000

2002 2003 2004 20052000 200119991998199719961995199419931992

(Since introduction in April 1992 to February 2005)

C e r t i f i c a t e p r i c e a n d v o l u m e t r e n d

Highest and lowest closing-prices per month in Euros,

(bar diagram, scale left).

Share trade volume per month (x 1,000),

(line diagram, scale right).

2004

588,862

15,219

(193,680)

410,401

1,240,600

2003

466,882

150,000

(28,020)

588,862

1,196,450

Shares (incl, SAF)

14,506,664

13,749,493

13,836,939

12,020,618

11,757,075

11,892,593

Certificates

1,882,628

439,486

191,814

5,546

35,190

711,959

% ofsubscribed

capital

99.4%

99.6%

96.8%

95.0%

93.2%

92.6%

62

%year-end

2004

15.4

0.9

0.2

1.4

9.0

2.9

21.6

26.1

22.5

100.0

P a r t i c i p a t i o n s a n d o p t i o n s

As far as is known, around 8.5% of Fugro’s shareholders’

equity (and an unknown number of certificates) and

1,240,600 options are held by directors, management

and staff.

Of all the options issued from 1999 upto 2004, 89.6% were

still outstanding on 31 December 2004. These options give

rights to 1,240,600 (certificates of) shares. As of

31 December 2004 266,200 new options (exercise price

EUR 61.40, commencing date 1 January 2005) have been

granted to 493 people. Of these options 29.8% have been

granted to directors of Fugro. See also pages 89 – 91.

Option rights are granted to an extensive group of

employees. The granting of option rights is dependent on

the achievement of the targets of the Group in total and of

the individual operating companies. The individual

performance of the relevant employee is also taken into

consideration when deciding the number of option rights

to be granted.

The granted staff options have an exercise price that is

equal to the share price of the certificates at the end of the

year. Since 2000 the annually issued options have had an

exercise period of six years. The exercise of options within

the first three years is financially very unattractive for

(x EUR 1.–)

D a t a p e r s h a r e

Cash flow

Net result before amortisation of

goodwill*

Net result after amortisation of

goodwill*

Dividend

Dividend/net result before

amortisation of goodwill*

Dividend/net result after

amortisation of goodwill*

0

3,200

6,400

9,600

12,800

16,000

End ’96 End ’97 End ’98 End ’99 End ’00 End ’01 End ’02 End ’04

The Netherlands

United Kingdom

United States

France

Germany

Luxembourg

Belgium

Switzerland

Other

End ’03

(x 1,000)

D i s t r i b u t i o n o f s h a r e h o l d e r s

IFRS 2004

8.48

3.80

3.32

1.90

47%

54%

IFRS 2003

5.56

1.77

1.30

1.85

101%

136%

2004

8.90

4.49

3.33

1.90

42%

57%

2002

8.30

5.03

4.19

1.85

37%

44%

2001

7.93

4.65

4.24

1.60

34%

38%

2000

6.87

3.69

3.69

1.36

37%

37%

2003

6.54

3.12

2.24

1.85

59%

83%

* For IFRS: intangible fixed assets.

63

residents of the Netherlands and not permitted for

foreign option holders.

In 2004, the number of shares re-purchased by the

Company amounted to 15,219 at an average price of

EUR 50.00. These shares are held for the purpose of the

option scheme and are not entitled to dividend.

The exercise of options outstanding at the end of 2004,

including the options issued in December, could – after

using the re-purchased shares – lead to the issued share

capital being increased, in phases, by a maximum of 5.3%.

Since the beginning of 2005, 3,220 options have been

exercised.

I n v e s t o r R e l a t i o n s

In addition to the dates listed in the agenda,

presentations for analysts and investors are given every

year, particularly during the months of March/April and

August/September. During these presentations Fugro’s

strategy and activities are explained in detail by members

of the Board. In 2004 investors in many financial centres

around the world were visited. Individual and collective

personal contact with investors and analysts is also

maintained via one-on-one meetings (in 2004 around 300),

presentations and telephone conferences. Fugro also

offers information via its website: www.fugro.com.

For the third year in succession, Fugro’s Annual Report

was nominated for the Sijthoff-Prijs and in November

Fugro was nominated for the prize for the best investor

relations amongst the Dutch Midkap funds. This prize is

awarded by Rematch on the basis of a survey involving

over 360 analysts, journalists, fund managers and

investors. In December the Scenter research company

presented Fugro with a transparency certificate for its

2003 Annual Report.

P r e v e n t i o n o f m i s u s e o f i n s i d e r

i n f o r m a t i o n

Fugro considers the prevention of misuse of inside

information for trading in its stock to be essential to its

relationship with the outside world. Regulations to

prevent the misuse of inside information, based on

article 46 and in accordance with the Supervision of the

Stock Transactions Act 1995, are in force and widely

applied within Fugro. In addition to these regulations,

several hundred employees are bound by internal

regulations – ‘the Model code to prevent the misuse of

inside information’. Fugro has appointed a Compliance

Officer for many years.

O t h e r i n f o r m a t i o n

An interactive version of the Annual Report is available on

the website www.fugro.com. This version includes

extensive functions and allows the annual accounts to be

imported in spreadsheets.

More information about Fugro shares is available on

the website www.fugro.com. Fugro can be contacted via

e-mail [email protected] and by telephone

(+31 (0)70 – 311 14 22).

0

50

100

150

200

250

AMX

Fugro

20012000 2002 2003 2004

D e v e l o p m e n t F u g r o s h a r e s a n d A M X i n d e x (January 2000 = 100)

The Greek Gold

February 2004 – August 2004

The Hermitage Amsterdam opened

with an exhibition of jewellery from

the Greek settlements around the

Black Sea loaned by the Russian

Hermitage. These golden bracelets,

torques and laurel wreaths date from

the sixth to the second centuries BC.

The exhibition also included finds

from the famous tombs of

Nympheum and Olbia. In addition to

the jewellery the exhibition included

articles that placed the jewellery in

context, such as Greek vases

decorated with female figures

bedecked with an array of jewellery,

silver articles with decorative

engraving, and moulds that gave

an insight into the way the jewellery

was made.

F u g r o ’s c o n t r i b u t i o n t o s o c i e t y

64

The Amstelhof which will house the Hermitage from the end of 2007.

Photo bottom right: The Hermitage in Saint Petersburg.

Photos: Hermitage State Museum, Saint Petersburg

In this context, in 2004 Fugro N.V. signed a multi-year contract

with the Hermitage Amsterdam and from 2005 Fugro will act as

main sponsor of the International Franz Liszt Piano Competition.

Contributions towards the upkeep of items of cultural importance

is one of the principles of Fugro’s sponsorship policy.

The sponsoring of major international musical events also plays

a prominent role in this policy.

T h e h i s t o r y o f t h e H e r m i t a g e

In 1852 Tsar Nicolas I opened the State Hermitage Museum in the former

imperial palace in Saint Petersburg. The collection comprised over three million

items including old masters, (post) impressionist works and classical antiquities.

The establishment of the Amsterdam Hermitage was inspired by the historical

links between Amsterdam and Saint Petersburg and the Russian Hermitage’s

desire to open satellites. In the first phase of the Hermitage Amsterdam several

different small exhibitions of works from the collection of the Hermitage in

Saint Petersburg have been organised. It is anticipated that the Hermitage

Amsterdam will begin exhibiting in the renovated Amstelhof at the end of 2007.

Hermitage Amsterdam

Nicolas & Alexandra,

the last tsar and tsarina

September 2004 – February 2005

This exhibition presents the life of

Russia’s last imperial family. The tsar

and tsarina – Nicolas II (1868 – 1918)

and Alexandra (1872 – 1918) had four

daughters and one son. After the

abdication of the tsar the entire

family was murdered by the

Bolsheviks in 1918. The numerous

personal effects, state documents,

paintings, photographs and ‘objets

d’art’ on display in the Hermitage

Amsterdam tell an impressive,

personal and poignant story about

the last tsar and tsarina and their

children.

Venice

March 2005 – September 2005

Both Saint Petersburg and

Amsterdam are often called

‘the Venice of the North’. The Venice

exhibition brings eighteenth-century

Venetian art from Russia to the

Netherlands. In this century Venice

was a blossoming cultural centre with

numerous artists. City views by

Canaletto and Bellotto, caprices by

Guardi and works by Tiepolo and

Longhi can be seen in the Amsterdam

Hermitage. Marvellous examples of

the renowned Venetian glass enhance

the exhibition.

April 2005

The International Liszt Piano

Competition for young pianists is held

once every three years in

Muziekcentrum Vredenburg in

Utrecht. For the Competition the key

values for the global promotion of

young talent are ambition, excellence

and commitment. Several preliminary

rounds, involving over fifty candidates

from around the world, will culminate

in a final Gala Evening on 16 April

2005. Three finalists will play for the

prize which will be presented on that

evening. The winner will then begin an

international tour.

International Liszt Piano Competition

65

66

A n n u a l A c c o u n t s 2 0 0 4

F U G R O N . V .

1 Consolidated IFRS income statement 68

2 Consolidated IFRS statement of

total result for the period 69

3 Consolidated IFRS balance sheet 70

4 Consolidated IFRS statement of cash flows 71

5 Notes to the consolidated IFRS financial

statements 73

6 Subsidiaries and Associates of Fugro N.V. 119

7 Statements of reconciliation on first time

adoption of IFRS 122

8 Dutch GAAP annual report 134

9 Consolidated Dutch GAAP balance sheet 137

10 Consolidated Dutch GAAP income statement 138

11 Consolidated Dutch GAAP statement of

total income and expense 139

12 Consolidated Dutch GAAP statement of

cash flows 140

13 Dutch GAAP equity movements 141

14 Notes to the consolidated Dutch GAAP

financial statements 142

15 Dutch GAAP company balance sheet 145

16 Dutch GAAP company income statement 146

17 Notes to the Dutch GAAP company

financial statements 147

18 Other information 150

(EUR x 1,000)

(5.25) Revenue

(5.25) Third party costs

Net revenue own services

(5.29) Other income

(5.30) Personnel expenses

(5.35) Depreciation

(5.36) Amortisation

(5.31) Other operating expenses

Operating profit before financing costs

(5.32) Financing income

(5.32) Financing expenses

Net financing costs

Share of profit of non-consolidated subsidiaries

Profit before tax

(5.33) Income tax expense

Profit for the period

Profit for the period attributable to:

Equity holders of the parent

Minority interest


(5.45) Basic earnings per share (EUR)

(5.45) Diluted earnings per share (EUR)

1 C o n s o l i d a t e d I F R S i n c o m e s t a t e m e n tFor the year ended 31 December

2003

822,372

(273,372)

549,000

16,889

(297,829)

(54,004)

(6,780)

(144,004)

63,272

237

(32,558)

(32,321)

181

31,132

(11,436)

19,696

18,872

824

19,696

1.30

1.47

2004

1,008,008

(364,644)

643,364

16,540

(331,623)

(66,139)

(7,078)

(150,828)

104,236

2,391

(34,237)

(31,846)

139

72,529

(19,944)

52,585

49,317

3,268

52,585

3.32

3.29

68

2003

(43,695)

1,283

805

(5,527)

(1,569)

(48,703)

19.696

(29,007)

(29,831)

824

(29,007)

2004

(23,770)

2,330

(2,153)

(6,339)

(2,167)

(32,099)

52,585

20,486

17,218

3,268

20,486

(EUR x 1,000)

Foreign exchange translation differences

Option costs (net of tax)

Actuarial gains and losses on pensions (net of tax)

Cash flow hedges:

Effective portion of changes in fair value

Other movements

Net loss recognised directly in equity

Net profit for the period

Total result for the period

Attributable to:


Minority interest

Total recognised income and expenses for the period

2 C o n s o l i d a t e d I F R S s t a t e m e n t o f t o t a l r e s u l t f o r t h e p e r i o dFor the year ended 31 December

69

(EUR x 1,000)

A s s e t s

(5.35) Property, plant and equipment

(5.36) Intangible assets

(5.38) Financial fixed assets

(5.40) Deferred tax assets

Total non-current assets

(5.41) Inventories

(5.42) Trade and other receivables

Income tax receivables

(5.43) Cash and cash equivalents

Total current assets

Total assets

E q u i t y

Issued and paid-in capital

Share premium

Reserves

Retained earnings

Total equity attributable to equity holders of the parent

Minority interests

(5.44) Total equity

L i a b i l i t i e s

(5.46) Interest-bearing loans and borrowings

(5.47) Employee benefits

(5.48) Provisions

(5.40) Deferred tax liabilities

Total non-current liabilities

Bank overdraft

(5.46) Interest-bearing loans and borrowings

(5.49) Trade and other payables

(5.48) Provisions

Other taxes and social securities

Income tax payable

Total current liabilities

Total liabilities

Total equity and liabilities

3 C o n s o l i d a t e d I F R S b a l a n c e s h e e tAs at 31 December

2003

268,801

273,951

14,663

20,403

577,818

37,001

370,773

5,174

65,237

478,185

1,056,003

3,033

207,159

(17,868)

18,872

211,196

2,468

213,664

431,895

45,044

584

1,483

479,006

44,436

2,263

269,443

22,448

15,286

9,457

363,333

842,339

1,056,003

2004

232,956

293,991

9,287

24,627

560,861

51,802

336,124

8,233

26,330

422,489

983,350

3,110

207,159

(35,673)

49,317

223,913

4,327

228,240

184,268

48,208

1,075

3,722

237,273

41,018

227,887

219,594

963

16,812

11,563

517,837

755,110

983,350

70

2003

63,272

54,004

6,780

(17,224)

(1,551)

181

3,542

1,944

110,948

18,033

24,737

(20,706)

14,928

147,940

(22,678)

(6,902)

118,360

4,222

310

113

124

(63,037)

(44,067)

(4,557)

(2,353)

(109,245)

2004

104,236

66,139

7,078

(19,411)

(1,409)

139

723

3,531

161,026

29,363

(18,583)

(49,858)

(19,731)

102,217

(25,668)

(19,498)

57,051

27,101

6,943

2,114

277

(4,638)

(80,963)

(4,436)

(1,560)

(55,162)

(EUR x 1,000)

C a s h f l o w s f r o m o p e r a t i n g a c t i v i t i e s

Operating profit before financing costs (EBIT)

Adjustments for:

Depreciation

Amortisation

Foreign exchange losses

Differences in third party interests

Share of profit of associates

Gain on sale of property, plant and equipment

Cost of granted option rights

Operating profit before changes in working capital and provisions

Increase in trade and other receivables

In(de)crease in inventories

Increase in trade and other payables

Increase in provisions and employee benefits

Cash generated from the operations

Interest paid

Income taxes paid

Net cash from operating activities

C a s h f l o w s f r o m i n v e s t i n g a c t i v i t i e s

Proceeds from sale of plant and equipment

Proceeds from sale of investments

Interest received

Dividends received

Acquisition of subsidiary, net of cash acquired

Acquisition of property, plant and equipment

Development intangible fixed assets

Acquisition of other investments

Net cash from investing activities

4 C o n s o l i d a t e d I F R S s t a t e m e n t o f c a s h f l o w sFor the year ended 31 December

71

(EUR x 1,000)

C a s h f l o w s f r o m f i n a n c i n g a c t i v i t i e s

Proceeds from the issue of share capital

Proceeds from other non-current borrowings

Repurchase of own shares

Repayment of borrowings

Dividends paid

Net cash from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at 1 January

Effect of exchange rate fluctuations on cash held

Cash and cash equivalents at 31 December

Presentation in the balance sheet

Cash and cash equivalents

Bank overdrafts

4 C o n s o l i d a t e d I F R S s t a t e m e n t o f c a s h f l o w s ( c o n t i n u e d )For the year ended 31 December

2003

886

37,950

(5,139)

(12,089)

(14,616)

6,992

16,107

5,879

(1,185)

20,801

65,237

(44,436)

20,801

2004

8,016

–

(761)

(33,822)

(9,426)

(35,993)

(34,104)

20,801

(1,385)

(14,688)

26,330

(41,018)

(14,688)

72

5.1 G e n e r a l

Fugro N.V. is a company domiciled in Leidschendam, the Netherlands. The consolidated IFRS financial

statements of the Company for the year ended 31 December 2004 comprise the Company and its subsidiaries

(together referred to as the ‘Group’) and the Group’s interest in associates and jointly controlled entities.

A summary of the main subsidiaries is included in chapter 6. The financial statements have been prepared

by the Board of Management and released for publication on 11 March 2005. The financial statements 2004

have been adopted by the Supervisory Board on 10 March 2005 and will be submitted for approval to the

Annual General Meeting of Shareholders on 19 May 2005.

5.2 Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting

Standards (IFRS) and its interpretations adopted by the International Accounting Standards Board (IASB). These

are the Group’s first consolidated financial statements in accordance with IFRS. The Group has applied IFRS 1.

An explanation of how the transition to IFRS has affected the reported financial position, financial

performance and cash flows of the Group is provided in chapter 7.

S i g n i f i c a n t a c c o u n t i n g p o l i c i e s

5.3 B a s i s o f p r e p a r a t i o n

The financial statements are presented in EUR x 1,000, unless mentioned otherwise. The euro is the functional

and presentation currency of Fugro. The financial statements are prepared on the historical cost basis except

that the following assets and liabilities are stated at their fair value: (derivative) financial instruments, and

employee benefits resulting from Defined Benefit plans. Recognised assets and liabilities that are hedged are

stated at fair value in respect of the risk that is hedged.

The preparation of the financial statements in accordance with IFRS requires management to make

judgements, estimates and assumptions that effect the application of policies and reported amounts of assets

and liabilities, income and expenses. The estimates and associated assumptions are based on historical

experience and various other factors that are believed to be reasonable under the circumstances, the result of

which form the basis of making the judgements about the carrying values of the assets and liabilities that are

not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and the underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognised in the period in which the estimate is revised if the revision affects only that period or

in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of IFRS that have significant effect on the financial

statements and estimates with a significant risk of material misstatement in the next year are disclosed in

note 5.62.

The accounting policies have been consistently applied consistently by Group entities to all periods presented

in these consolidated financial statements and in preparing an opening IFRS balance sheet at 1 January 2003 for

the purposes of transition to IFRS.

5.4 B a s i s o f c o n s o l i d a t i o n

5.4.1 Subsidiaries

Subsidiaries are those entities controlled by the Company. Control exists when the Company has the power,

directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its

activities. The financial statements of subsidiaries are included in the consolidated financial statements from

the date that control commences until the date that control ceases.

5.4.2 Associates

Associates are those entities in which the Group has significant influence, but no control, over the financial and

operating policies. The consolidated financial statements include the Group’s share of the total recognised gains

and losses of associates on an equity accounted basis, from the date that significant influence commences until

73

5 N o t e s t o t h e c o n s o l i d a t e d I F R S f i n a n c i a l s t a t e m e n t s

the date that significant influence ceases. When the Group’s share of losses exceeds the carrying amount of the

associate, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the

extent that the Group has incurred obligations in respect of the associate.

5.4.3 Other investments

Other investments are those entities in whose activities the Group holds a minority interest and has no control.

These investments are carried at cost and dividends received are accounted for in the income statement when

these become due.

5.4.4 Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are

eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with

associates and jointly controlled entities are eliminated to the extent of the Group’s interest in the enterprise.

Unrealised gains arising from transactions with associates are eliminated against the investment in the

associate. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there

is no evidence of impairment.

5.5 F o r e i g n c u r r e n c y

5.5.1 Foreign currency transactions and translation

Transactions in foreign currencies are translated to EUR at the average foreign exchange rate for the month in

which the transaction takes place. Monetary assets and liabilities denominated in foreign currencies at the

balance sheet date are translated to EUR at the foreign exchange rate effective at that date. Foreign exchange

differences arising on translation are recognised in the income statement. Non- monetary assets and liabilities

that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the

date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at

fair value are translated to EUR at foreign exchange rates effective at the date the values were determined.

A summary of the main currency exchange rates applied in the year under review and the preceding years

reads as follows:

2004

2003

2002

5.5.2 Financial statements of foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on

consolidation, are translated to EUR at foreign exchange rates effective at the balance sheet date. The revenues

and expenses of foreign operations are translated to EUR at rates approximating to the foreign currency

exchange rates effective at the dates of the transactions. These are not considered an integral part of the

Company’s operations. Foreign exchange differences arising on translation are recognised directly in equity.

5.5.3 Net investment in foreign operations

Exchange differences arising from the translation of the net investment in foreign operations, and related

hedges are taken to the translation reserve. They are released into the income statement upon disposal.

In respect of all foreign currency operations, any differences that have arisen since 1 January 2003, the date of

transition to IFRS, are presented as a separate component of equity. Translation differences that arose before

that date of transition to IFRS in respect of all foreign entities are not presented as a separate component.

74

GBP average

1.47

1.45

1.59

GBP at year-end

1.42

1.42

1.53

USD average

0.81

0.88

1.06

USD atyear-end

0.73

0.79

0.95

5.6 D e r i v a t i v e f i n a n c i a l i n s t r u m e n t s

The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate

risks arising from operational, financing and investment activities. In accordance with its treasury policy,

the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives

that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised initially at cost. Subsequent to initial recognition, derivative

financial instruments are stated at fair value. Recognition of any resultant gain or loss depends on the nature of

the item being hedged (refer accounting policy 5.7).

The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to

terminate the swap at the balance sheet date, taking into account current interest rates and the current

creditworthiness of the swap counterparties. The fair value of forward exchange contracts is their quoted

market price (forward price) at the balance sheet date.

5.7 H e d g i n g

5.7.1 Cash flow hedges

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised

asset or liability, or a highly probable forecasted transaction, the effective part of any gain or loss on the

derivative financial instrument is recognised directly in equity. When the forecasted transaction subsequently

results in the recognition of a non-financial asset or a non financial liability, or the forecasted transaction for a

non-financial asset or a non-financial liability, the associated cumulative gain or loss is removed from equity and

included in the initial cost or other carrying amount of the non-financial asset or liability.

If the hedge of a forecasted transaction subsequently results in the recognition of a financial asset or a

financial liability, the associated gains and losses that were recognised directly in equity are classified into profit

or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss.

For cash flow hedges, other than those covered by the preceding two policy statements, the associated

cumulative gain or loss is removed from equity and recognised in the income statement in the same period

or periods during which the hedged forecast transaction affects profit or loss. The ineffective part of any

gain or loss is recognised in the income statement immediately.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of

the hedge relationship but the hedge forecast transaction is still expected to occur, the cumulative gain or loss at

that point remains in equity and is recognised in accordance with the above policy when the transaction occurs.

If the hedges transaction is no longer expected to take place, the cumulative gain or loss recognised in equity is

recognised in the income statement immediately.

5.7.2 Hedge of monetary assets and liabilities

Where a derivative financial instrument is used to hedge economically the foreign exchange exposure of a

recognised monetary asset or liability any gain or loss on the hedging instrument is recognised in the income

statement.

5.7.3 Hedge of net investment in foreign operation

The portion of the gain or loss on an instrument used to hedge a net investment in a foreign operation that is

determined to be an effective hedge is recognised directly in equity. The ineffective portion is recognised

immediately in income statement.

5.8 P r o p e r t y , p l a n t a n d e q u i p m e n t

5.8.1 Owned assets

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (refer

accounting policy 5.14). The cost of self-constructed assets includes the cost of materials, direct labour and

an appropriate proportion of directly allocated overheads.

The Group has elected under IFRS 1 to use the previous GAAP value of property, plant and equipment as

deemed cost under IFRS as at 1 January 2003, with the exception of two vessels that were revalued to fair market

75

value leading to an increase in book value of EUR 10.9 million. Fugro has acquired full ownership of these two

vessels in 2004.

Property that is being constructed or developed for future use is classified as property, plant and equipment

and stated at cost until construction or development is complete, at which time it is reclassified as property,

plant or equipment.

Where an item of property, plant and equipment comprises major components having different useful lifes,

these components are accounted for as separate items of property, plant and equipment.

5.8.2 Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as

finance leases. Plant and equipment acquired by way of finance lease is stated at an amount equal to the lower of

its fair value and the present value of the minimum lease payments at inception of the lease, less accumulated

depreciation (refer accounting policy 5.8.4) and impairment losses (refer accounting policy 5.14). Lease payments

are accounted for as described in accounting policy 5.22.3 and 5.22.4.

5.8.3 Subsequent cost

The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing

part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with

the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised

in the income statement as an expense as incurred.

5.8.4 Depreciation

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each

part of an item of property, plant and equipment. Land is not depreciated.

The useful economical life various among the different items of the tangible fixed assets are:

Category

Buildings

Plant and equipment

Vessels and platforms

Survey equipment

Aircraft

ROV’s

Oceanographic equipment

Computers and office equipment

Transport equipment

Fixtures and fittings

Maintenance

Used plant and machinery

5.9 I n t a n g i b l e a s s e t s

5.9.1 Goodwill

All business combinations are accounted for by applying the ‘purchase accounting method’. Goodwill represents

amounts arising on acquisition of subsidiaries, associates and joint ventures. In respect of business acquisitions

that have occurred since 1 January 2003, goodwill represents the difference between the cost of the acquisition

and the fair value of the net identifiable assets acquired.

In respect of acquisitions prior to 1 January 2003, goodwill is included on the basis of its deemed cost, which

represents the amount recorded under previous GAAP. The accounting treatment of business combinations that

occurred prior to 1 January 2003 has, with the exception of intangible fixed assets, not been reconsidered in

76

Years

20 – 40

4

2 – 10

3 – 5

5 – 10

6

2

3 – 4

4

5 – 10

3 – 5

1 – 2

preparing the Group’s opening IFRS balance sheet as at 1 January 2003 (see note 7.6.1) since Fugro elected under

IFRS 1 to apply IFRS 3 prospectively as from the date of transition to IFRS.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating

units and is not amortised but is tested annually for impairment (refer accounting policy 5.14). In respect of non-

consolidated subsidiaries, the carrying amount of goodwill is included in the carrying amount of the investment

in the subsidiary.

Negative goodwill arising on an acquisition is recognised directly in the income statement.

5.9.2 Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical

knowledge and understanding, is recognised in the income statement as an expense as incurred.

The group spends significant amounts on research and development. Since the majority of these activities

take place within contracts with third parties it is not feasible to properly determine the total costs on spending

for these technical developments. These expenditures are recognised in the income statement as an expense as

incurred.

Expenditure on development activities, whereby research findings are applied to a plan or design for new or

improved software, is capitalised if the product is technically and commercially feasible and the Group has

sufficient resources to complete development. The capitalised expenditure includes the cost of materials, direct

labour and an attributable proportion of direct overheads. Capitalised software is stated at cost less accumulated

amortisation (refer below) and impairment losses (refer accounting policy 5.14). The estimated useful lifetime

for software is five years.

At IFRS transition date, the Group reassessed its development projects under IFRS which resulted in the

capitalisation of software development cost in the IFRS opening balance sheet (refer note 7.6.2).

5.9.3 Other intangible assets

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (refer

below) and impairment losses (refer accounting policy 5.14).

Expenditure on internally generated goodwill is recognised in the income statement as an expense as

incurred.

5.9.4 Subsequent expenditure

Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future

economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as

incurred.

5.9.5 Amortisation

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of

intangible assets unless such lives are indefinite. Goodwill and intangibles assets with an indefinite life are

systematically tested for impairment at each balance sheet date. Other intangible assets (software) are amortised

from the date they are available for use.

5.10 I n v e s t m e n t s

5.10.1 Investments in associates and non-consolidated subsidiaries

Investments in associates and non-consolidated subsidiaries are valued using the equity method, unless in the

case of a negative equity and there is a clear understanding that the entity is neither obliged nor willing

to support the investee to continue its operations when required, in which case the valuation does not fall

below zero.

When these investments are derecognised, the cumulative gain or loss previously recognised directly in

equity is recognised in profit or loss.

77

5.11 I n v e n t o r i e s

5.11.1 Seismic data libraries

The seismic data libraries consist of completed and in progress seismic data that can be sold non-exclusively to

one or more clients. These seismic data libraries are valued at the lower of cost or net realisable value. Cost

includes direct costs and directly attributable overhead, but excluding a profit element. The net realisable value

is reassessed at each reporting date.

5.11.2 Inventories

Other inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated

selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

The cost of other inventories is based on the first-in first-out principle and includes expenditure incurred in

acquiring the inventories and bringing them to their existing location and condition.

5.12 T r a d e a n d o t h e r r e c e i v a b l e s

5.12.1 Work in progress

Work in progress concerning services rendered on work not yet completed, is stated at cost plus profit

recognised to date (refer accounting policy 5.21.1) less a provision for foreseeable losses and less progress

billings. Costs include all expenditure related directly to specific projects and an allocation of fixed and variable

overheads incurred in the Group’s contract activities based on normal operating capacity.

5.12.2 Other trade other receivables

Services rendered on contract work completed but not yet billed to customers are included in trade receivables

as unbilled revenues.

Trade and other receivables are stated at their cost less impairment losses (refer accounting policy 5.14).

5.13 C a s h a n d c a s h e q u i v a l e n t s

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on

demand and form an integral part of the Group’s cash management are included as a component of cash and

cash equivalents for the purpose of the statement of cash flows.

5.14 I m p a i r m e n t

The carrying amounts of assets, inventories and deferred tax assets (refer accounting policy 5.23),

are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any

such indication exists, the asset’s recoverable amount is calculated.

For goodwill and intangible assets that are not available for use, the recoverable amount is determined at

each balance sheet date.

An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit

exceeds its recoverable amount. Impairment losses are recognised in the income statement.

Goodwill was tested for impairment at 1 January 2003, the date of transition to IFRS, even though no

indication for impairment existed.

5.14.1 Calculation of recoverable amount

The recoverable amount of assets is the higher of its fair value less costs to sell and its value in use.

In assessing the value in use, the estimated future cash flows are discounted to their present value using a

pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific

to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is

determined for the cash-generating unit to which the asset belongs.

78

5.14.2 Reversals of impairment

An impairment loss in respect of a held-to-maturity security or receivable is reversed if the subsequent increase

in recoverable amount can be related objectively to an event occurring after the impairment loss was

recognised.

An impairment loss in respect of goodwill is not reversed in a subsequent period.

In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to

determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the

carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss

had been recognised.

5.15 S h a r e c a p i t a l

5.15.1 Share capital

Share capital is classified as equity. The Group has not issued preference shares.

5.15.2 Repurchase of share capital

When share capital recognised as equity is repurchased, the amount of the consideration paid, including

directly attributable costs, is recognised as a change in equity. Repurchased shares are reported as reserve for

own shares and presented as a deduction from total equity.

5.15.3 Dividends

Dividends are recognised as a liability in the period in which they are declared.

5.16 C o n v e r t i b l e n o t e s

Convertible notes that can be converted to share capital at the option of the holder, where the number of shares

issued does not vary with changes in their fair value, are accounted for as compound financial instruments, net

of attributable transaction costs. The equity component of the convertible notes is calculated as the difference

between the issue proceeds and the present value of the future interest and principal payments, discounted

at the market interest rate applicable to similar liabilities that do not have a conversion option. The interest

expense recognised in the income statement is calculated using the effective interest rate method.

5.17 I n t e r e s t - b e a r i n g b o r r o w i n g s

Interest-bearing borrowings are recognised initially at fair value, less attributable transaction costs. Subsequent

to initial recognition, interest-bearing borrowings are stated at amortised cost.

5.18 E m p l o y e e b e n e f i t s

5.18.1 Defined contribution plans

Obligations for contributions to defined contribution pension plans and related plans are recognised as an

expense in the income statement as incurred.

5.18.2 Defined benefit plans

The Group’s net obligation in respect of defined benefit pension plans and related plans is calculated separately

for each plan by calculating the present value of future benefits that employees have earned in return for their

service in the current and prior periods; that benefit is discounted to determine the present value, and the fair

value of any plan assets is deducted. The discount rate is the yield at balance sheet date on high quality corporate

or government bonds that have maturity dates approximating the terms of the Group’s obligations.

The calculation is performed by qualified actuaries using the projected unit credit method.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by

employees is recognised as an expense in the income statement on a straight-line basis over the average period

until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised

immediately in the income statement.

79

Under IFRS 1, all actuarial gains and losses as at 1 January 2003, the date of transition to IFRS, were recognised.

In respect of actuarial gains and losses that arise subsequent to 1 January 2003 in calculating the Group’s

obligation in respect of a plan, the Group has adopted the IAS 19 amendment from December 2004 which

permits an entity to recognise all actuarial gains and losses in the periode in which they occur outside profit

and loss in the statement of total result for the period.

Where the calculation results in a benefit to the Group, the recognised asset is limited to the net total of any

unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or

reductions in future contributions to the plan.

5.18.3 Long term service benefits

The Group’s net obligation in respect of long term service benefits, other than pension plans, is the amount of

future benefit that employees have earned in return for their service in the current and prior periods.

The obligation is calculated using the projected unit credit method and is discounted based on high quality

corporate or government bonds that have maturity dates approximating the terms of the Group’s obligations.

5.18.4 Share based payment transactions

The share option programme allows Group employees to acquire shares of the Company. The fair value of

options is recognised as an employee expense with the corresponding increase in equity. The fair value is

measured at grant date and spread over the period during which the employees become unconditionally

entitled to the options. The fair value of the options granted from 7 November 2002 onwards is measured

using a binominal model, taking into account the terms and conditions upon which the options were granted.

The amount recognised as an expense is adjusted annually to reflect the actual number of share options that vest.

5.19 P r o v i s i o n s

A provision is recognised in the balance sheet when the Group has a legal or constructive obligation as result of a

past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the

effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that

reflects current market assessments of the time value of money and, where appropriate, the risks specific to the

liability.

5.19.1 Restructuring

A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring

plan, and the restructuring has either commenced or has been announced publicly. Future operating costs are

not provided for.

5.19.2 Onerous contracts

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a

contract are lower than the unavoidable cost of meeting its obligations under the contract.

5.20 T r a d e a n d o t h e r p a y a b l e s

Trade and other payables are stated at cost.

5.21 R e v e n u e

5.21.1 Services rendered

Revenue from services rendered is recognised in the income statement in proportion to the stage of completion

of the transaction at the balance sheet date. The stage of completion is assessed using the proportion of contract

cost incurred for work performed to balance sheet date compared to work performed in relation to the

estimated total contract cost method as this method is most appropriate for the majority of the services

provided by the Group (which are mainly based on daily rates for staff and equipment or rates per (square) mile

for vessels and airplanes).

80

For fixed price contracts revenue is recognised when: (i) the total contract revenue can be measured reliably; (ii)

it is probable that future economic benefits will flow to the Group as a result of that contract;

(iii) contract costs to completion and the stage of completion at the balance sheet date can be measured reliably;

and (iv) contract costs can be identified clearly and measured reliably so that actual cost can be compared with

prior estimates.

In case of cost plus contracts (mainly daily rates or rates per (square) mile), revenue of the contract is recorded

when: (i) it is probable that future economic benefits will flow to the Group as a result of that contract; and (ii)

contract costs can be identified clearly and measured reliably.

No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due,

associated costs or the possible return of goods.

5.21.2 Royalty, software licences and subscription income

Royalty, software licences and subscription income from (intangible) assets are recognised in the period during

which the underlying services (such as information or signals) have been provided.

5.21.3 Government grants

An unconditional government grant is recognised in the balance sheet when the grant becomes receivable.

Any other government grant is initially recognised in the balance sheet as deferred income when there is

reasonable assurance that it will be received and that the Group will comply with the conditions attaching to it.

Grants that compensate the Group (partly) for expenses incurred are recognised as revenue in the income

statement on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate

the Group for the cost of an asset are recognised in the income statement as revenue on a systematic basis over

the useful life of the asset.

5.21.4 Other income

Other income regards income not related to the key business activities of the Group, like income from the sale of

non-monetary assets and or liabilities, exceptional and/or non-recurring items.

5.22 E x p e n s e s

5.22.1 Third party costs

Third party costs are matched with related revenues on contracts and accounted for on a historical cost basis.

5.22.2 Operating lease payments

Payments made under operating leases are recognised in the income statement on a straight-line basis over the

term of the lease. Lease incentives received are recognised in the income statement as an integral part of the

total lease expense.

5.22.3 Financial lease payments

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding

liability. The finance charge is allocated to each period in such a way that this results in a constant periodical

interest rate for the remaining balance of the liability during the lease term.

5.22.4 Net financing costs

Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method,

interest receivable on funds invested, dividend income, foreign exchange gains and losses, and gains and losses

on hedging instruments that are recognised in the income statement (refer accounting policy 5.7).

Interest income is recognised in the income statement as it accrues, taking into account the effective yield on

the asset. Dividend income is recognised in the income statement on the date the entity’s right to receive the

payments is established which in the case of quoted shares is usually the ex-dividend date.

81

The interest expenses component of finance lease payments is recognised in the income statement using the

effective interest rate method.

5.23 I n c o m e t a x

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the

income statement except to the extent that it relates to items recognised directly to equity, in which case it is

recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or

substantially enacted at the balance sheet date, and any adjustment to tax in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences

between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used

for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax

purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit and

differences relating to investments in subsidiaries to the extent that they will probably not reverse in the

foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or

settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at

the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be

available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer

probable that the related tax benefit will be realised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the

liability to pay the related dividend.

5.24 S t a t e m e n t o f c a s h f l o w

The statement of cash flow is prepared using the indirect method. The cash flow statement distinguishes

between operational, investing and financing activities. Cash flows in foreign currencies are converted at the

average rates during the reporting period. Currency exchange differences are separately shown. Payments and

receipts of corporate taxes are included as cash flow form operational activities and interest is shown as cash

flow from financing activities as far as the interest is related to long term financing; remaining interest is

included in operational cash flow. Cash flows as a result from acquisition/divestment of financial interest in

group companies and subsidiaries are included as cash flow from investment activities, taking into account the

available cash in these interests. Dividends paid are part of the cash flow from financing activities. In its report

Fugro defines a segment as a division.

5.25 S e g m e n t r e p o r t i n g

Segment information is presented in respect of the Group’s business and geographical segments. The primary

format, business segments, is based on the Group’s management and internal reporting structure. Segment

results, assets and liabilities include items directly attributable to a segment as well as those that can be

allocated on a reasonable basis. Unallocated items comprise mainly deferred tax, interest-bearing loans,

borrowings and expenses, and corporate assets and expenses. Segment capital expenditure is the total cost

incurred during the period to acquire segment assets that are expected to be used for more than one period.

The Group defines a segment as a division in its reports.

82

5.25.1 Business segments

As an engineering firm with operations throughout the world, the Group delivers its services to clients located

all over the globe and collects and interprets data related to the earth’s surface and the soils and rocks beneath.

On the basis of this data the Group provides advice, generally for purposes related to the oil and gas industry,

the mining industry and the construction industry. The Group recognises three groups of services as business

segments:

The Geotechnical division provides a group of related services. These concern investigations and advice

regarding the physical characteristics of the soil, foundation design and materials for construction.

The activities are mainly design related. The client base of the pre-design phase activities is focussed on advice

concerning the prime question of whether the foundation of a structure will be safe, both on- and offshore.

Laboratory testing supports the reporting service. In principle geotechnical services are rendered in a very early

stage of a development.

The Survey division provides a group of related services. This concerns positioning services, geological advice,

topographic, hydrographical and geological mapping and support services for construction projects and data

management. These activities are mainly provided in the installation, construction and maintenance phase.

In a large number of cases Group-companies supply information like weather forecasting, signals for precise

positioning (the signals are also used for rig moves). Moreover, special equipment is used to assist clients with

construction of offshore structures (ROV, AUV, etc). These activities do not include soil sampling nor penetration

of the earth’s surface. Survey services are rendered during a construction phase.

The Geoscience division provides a range of related services. This concerns gathering and interpreting

geophysical data, quantitative and qualitative estimates of oil, gas, mineral and water resources leading to

advising on the optimisation of their production. These are mainly exploration related activities (to determine

what resources are there). The clients get advice about the potential presence of oil/gas, minerals and water and

also about the quantitative and qualitative data regarding natural resources. The division also has techniques to

advise clients on how to extract the natural resources in the most optimal way.

The segments are managed on a worldwide basis, and operate in four principal geographical areas,

The Netherlands, Europe/Africa, Near/Middle East/Asia/Australia and the Americas.

In presenting information on the basis of geographical segments, segment revenue is based on the geographical

location of operating companies. Segment assets are based on the geographical location of the assets.

Inter-segment pricing is determined on an arm’s length basis.

83

Business segments

(EUR x 1,000)

Revenue from external customers

Inter-segment revenue

Total revenue

Segment result

Unallocated expenses

Profit from operations

Net financing costs

Income from associates

Income tax expense

Minority interest

Extraordinary item

Net profit for the year

Segment assets

Unallocated assets

Total assets

Segment liabilities

Unallocated liabilities

Total liabilities

Depreciation

Amortisation

Capital expenditure

Development immaterial fixed assets

84

ConsolidatedUnallocated/EliminationsGeoscienceSurveyGeotechnical

2003

822,372

–

822,372

63,272

–

63,272

(32,321)

181

(11,436)

(824)

–

18,872

968,939

87,064

1,056,003

690,780

365,223

1,056,003

54,004

6,780

53,095

4,557

2004

1,008,008

–

1,008,008

104,236

–

104,236

(31,846)

139

(19,944)

(3,268)

–

49,317

910,458

72,892

983,350

688,402

294,948

983,350

66,139

7,078

68,730

5,771

2003

4,171

(51,529)

(47,358)

(13,770)

–

–

4,536

–

4,240

–

2004

–

(62,155)

(62,155)

(43,775)

–

–

11,502

–

2,410

–

2003

184,811

5,057

189,868

3,914

351,490

300,433

13,483

4,202

12,709

4,557

2004

265,459

6,183

271,642

37,514

407,565

340,444

15,377

4,457

13,103

5,771

2003

352,136

22,485

374,621

30,837

457,561

328,019

23,064

2,578

26,458

–

2004

470,026

27,637

497,663

70,634

355,298

279,793

28,980

2,621

32,037

–

2003

281,254

23,987

305,241

42,291

159,888

62,328

12,921

–

9,688

–

2004

272,523

28,335

300,858

39,863

147,595

68,165

10,280

–

21,180

–

Geographical segments

(EUR x 1,000)

Revenue from

external customers

Segment assets

Depreciation

Amortisation

Capital expenditure

5.26 A c q u i s i t i o n s a n d d i s p o s a l o f s u b s i d i a r i e s

5.26.1 Acquisitions 2004

In June 2004 the Group acquired (and paid in cash) all the business of C&M Storage Inc., United States of America

for a consideration of EUR 4.9 million. The acquisition was accounted for using the purchase accounting

method. After the initial allocation of the cost of the business combination to the net assets acquired and

liabilities (EUR 3.1 million) other intangible fixed assets amounting to EUR 1.3 million were recorded.

The company stores oil/exploration company core samples for a monthly rental fee. C&M Storage has an annual

turnover of USD 2 million and 18 employees working for the company have been transferred to other Group

companies. Also, the remaining 50% interest of the seismic vessels ‘Geo Baltic’ and ‘Geo Pacific’ has been

acquired. The price of this acquisition amounted to EUR 10.3 million. The purchase resulted in negative goodwill

of EUR 2.2 million. This item has been recorded in the profit and loss.

If and to the extent that the acquisition date for all business combinations effected during 2004 had been the

beginning of that period the combined revenue of the Group for 2004 would have been hardly changed.

5.26.2 Acquisitions 2003

5.26.2.1 Thales GeoSolutions Group

On 19 November 2003 the Group acquired all the shares of the former Thales subsidiaries forming the

Thales GeoSolutions Group (purchase price EUR 142.5 million). These companies mainly carry out offshore

activities in the Survey segment. The acquisition was accounted for using the purchase accounting method.

After the initial allocation of the cost of the business combination to the assets acquired and liabilities and

contingent liabilities assumed goodwill amounting to EUR 46.2 million was recorded per 19 November 2003. In

the six weeks to 31 December 2003 the Fugro-TGS realised a net loss from operations of EUR 4.5 million included

in the consolidated net profit for the year 2003.

In 2004 the Fugro-TGS companies have been integrated into various Fugro entities within the Survey division.

Subsequently, the final allocation of the cost of the business combination to the assets acquired and liabilities

and contingent liabilities assumed was made resulting in an adjustment to goodwill of EUR 22.9 million.

Fugro has a dispute with the Seller regarding the final transaction price. This has been formulated in a claim

against the Seller. The outcome of the claim is currently not valued. A possible adjustment of the transaction

price will result in an adjustment of goodwill.

5.26.2.2 Svitzer Ltd.

In June 2003 the Group acquired all the shares in Svitzer Ltd. The Svitzer group of companies operates vessels in

the Survey market and executes projects. In the six months to 31 December 2003 the subsidiary was integrated

into existing Group companies and as such did not contribute as an entity to the consolidated net profit for the

year. The purchase price for Svitzer Ltd was 1 GBP, the goodwill is EUR 8.2 million.

85

2003

822,372

1,056,003

54,004

6,780

53,095

2004

1,008,008

983,350

66,139

7,078

68,730

Consolidated

2003

–

–

–

–

–

2004

–

–

–

–

–

Unallocated

2003

225,435

225,697

10,002

190

11,805

2004

300,194

85,374

15,757

335

18,775

Americas

2003

175,315

187,626

9,676

2,578

15,347

2004

195,531

197,291

14,959

2,621

13,361

Near and Middle East/

Asia/Australia

2003

319,436

464,285

26,201

227

23,393

2004

414,975

525,276

30,752

337

30,872

Europe other/Africa

2003

102,186

178,395

8,125

3,785

2,550

2004

97,308

175,409

4,671

3,785

5,722

Netherlands

5.26.2.3 Foundation Exploration Services Ltd.

Foundation Exploration Services Ltd (100%) was added to the Fugro group in January 2003. Foundation

Exploration Services Ltd., Basingstroke, UK (turnover GBP 6.5 million, about 100 employees). The company is one

of the largest geotechnical companies in the UK. The purchase price was about GBP 4.1 million. The company

was immediately thereafter integrated with the onshore activities of one of the Group companies in the United

Kingdom.

5.26.2.4 Oceanor Holding ASA

The acquisition of Oceanor Holding ASA took place in March 2003. Oceanor Holdings ASA, Trondheim, Norway

(turnover NOK 100 million, about 50 employees). The company is a leading supplier of water control systems and

meteorological and oceanological services. The public offering for the company that was listed at the Oslo stock

exchange was NOK 40 million. As from the date of acquisition the company contributed a small loss to the net

consolidated result.

5.26.2.5 Petcom

All the shares of Petcom Inc were acquired in January 2003. Petcom Inc., Dallas, USA (turnover USD 1.6 million,

8 employees). This company provides state-of-the-art petrophysical software and services to the oil and gas

industry. The purchase price was USD 3 million.

5.26.2.6 Volumetrix

Volumetrix Ltd was acquired by the Fugro group in May 2003 for an amount of EUR 2.3 million.

Volumetrix developes reservoir modelling software (Fasttracker).

5.26.2.7 Seiscan

The entire share capital of Seiscan was acquired in July 2003 at an acquisition price of EUR 0.3 million.

Excluding TGS the 2003 acquisitions contributed to the groups’ result in 2003 an amount of approximately

EUR 500.

5.26.3 Disposal

In October 2004 the Group disposed of the 50% shareholding in the associate Bodem Sanering Nederland

(BSN) B.V. This equity accounted associate contributed EUR 181 to the consolidated net profit for the year ended

31 December 2003 and EUR 139 for the nine months ended 30 September 2004.

Furthermore, the ROV activities in the Untied States, Mexico and Canada have been sold for USD 16.5 million.

These activities were part of the acquisition of Thales GeoSolutions in 2003. The gain on disposal has been

recorded against goodwill.

Also, the environmental advisory activities of Fugro Ingenieursbureau B.V. in the Netherlands have been sold.

The proceeds are negligible.

Finally, Fugro’s interest in Geometius B.V. has been sold. The proceeds amounted to EUR 150.

In 2003, no disposals have taken place.

86

5.26.4 Effect of acquisitions and disposal

The acquisitions and disposal had the following effect on the Group’s assets and liabilities.

(EUR x 1,000)

Property, plant and equipment

Other fixed assets

Inventories

Trade and other receivables

Deferred taxes


Minority interest

Interest-bearing loans and borrowings

Provisions

Current tax liabilities

Trade payables

Net identifiable assets and liabilities

Goodwill/(negative goodwill) on acquisition

Consideration paid/(received), in cash

Cash (acquired)/disposed of

Net cash outflow/(inflow)

In 2004 the Group determined the final valuation on the assets and liabilities acquired in its 2003 acquisition

of Thales GeoSolutions. This valuation was not complete at the time of publishing the 2003 financial statements.

As a result of the valuation, the above value attributed to assets has been reduced by EUR 22.9 million

(refer note 5.3). A corresponding adjustment has been made to goodwill (refer note 5.26.2).

The adjustments have been made effective at the date of acquisition, and the consecutive amendments to

depreciation and amortisation have been recognised in the current year. If the 2003 financial statements had

been restated, net profit for 2003 would have been increased by EUR 0.3 million, relating to reduced

depreciation for the six weeks of the consolidation of Fugro-TGS in 2003.

5.27 G o v e r n m e n t g r a n t s

The company has not been awarded any significant government grants.

5.28 T h i r d p a r t y c o s t s

Refers to direct operating expenses from third parties that are project related (thus the third party cost of sales)

and the movement in work in progress compared to the previous reporting date.

87

Acquisition2003

79,916

3,786

31,496

86,084

2,268

26,834

(943)

(105,421)

(3,489)

(270)

(100,211)

20,050

69,821

89,871

26,834

63,037

Acquisition2004

(9,935)

1,335

(3,782)

(5,286)

1,061

–

–

–

–

(97)

(1,535)

(18,239)

22,877

4,638

–

4,638

5.29 O t h e r i n c o m e

(EUR x 1,000)

Release of unused provisions

Government credits

Negative goodwill

Gain on disposal of property, plant and equipment

Sundry income

5.30 P e r s o n n e l e x p e n s e s

(EUR x 1,000)

Wages and salaries

Compulsory social security contributions

Costs option plan

Contributions to defined contribution plans

Contributions to defined benefit plans

In(de)crease in liability for long service leave

5.30.1 Share based payments

In 1989 the Group established a share option programme for employees.

Option rights are granted dependent on the achievement of the targets of the operating companies and their

staff. The individual performance of the relevant employee is also weighted in the granting of the number of

option rights. Senior management receives options also based on the profitability of the company of the past

year, the development of the strategic activities in the past year and personal targets.

In accordance with the programme, the options are exercisable at the closing price of the share on the last

trading day of the year, EUR 61.40 per share as at 31 December 2004. The options for foreign employees vest over

a three-year period, starting at the end of three years’ continued employment. For Dutch employees the options

vest immediately. However, when exercised within three years after granting, 90% of a possible gain will be

withheld by the company. Options expire three years respectively six years after their exercise date.

88

2003

–

85

–

3,579

13,225

16,889

2004

2,700

249

2,220

1,023

10,348

16,540

2003

257,545

25,257

1,944

6,649

6,434

–

297,829

2004

287,083

28,297

3,531

5,999

6,724

(11)

331,623

During the year no shares were issued in relation to the option plan (2003: nil). As per 31 December 2004 the

following options were outstanding:

1997

1998

1999

2000

2001

2002

2003

2004

* For the years 2001 through 2003 this only relates to options granted to Dutch residents.

The options are granted at the end of the respective financial years.

The weighted average share price during 2004 was EUR 52.92 (2003: EUR 40.05).

One option gives right to one (certificate of an) ordinary share in Fugro N.V. At the end of 2004 266,200

options are granted to 493 employees. These options have an issue price of EUR 61.40.

Concerning the options granted in 2004 17.1% (2003: 17.7%) are classified as ‘incentive stock options’.

In 2004 calculations were made to determine the expectation value of the options granted as from 7

November 2002 as a consequence of adopting of IFRS 2.

The valuation of the options granted is based on the so-called ‘binominal method’, whereby early exercise, as

well as the chance on employee departure during the vesting period is taken into account. A difference exists

between options granted to Dutch residents and to foreign residents. For the latter group of employees a vesting

period of three years starting at the first of January of the year following the granting. For Dutch residents the

granting is considered unconditional. The costs recognised for the options are based on the valuation principles

listed here and consist of the options granted to Dutch residents in the year and a pro rata share of the costs of

the options granted (as from 7 November 2002) to foreign employees during the vesting period.

The recognition and measurement principles in IFRS 2 have not been applied for option arrangements

granted before 7 November 2002.

89

Exerciseprice

(EUR)

28.04

19.97

36.90

68.75

50.10

43.13

40.80

61.40

Exercis-able at 31-12-2004

–

–

72,250

207,750

114,700

123,950

123,150

–

641,800

Out-standing at 31-12-

2004

–

–

72,250

207,750

215,150

234,600

244,650

266,200

1,240,600

Exercised in 2004

50,930

59,250

83,500

–

–

–

–

–

193,680

Expired in 2004

1,870

1,450

200

5,150

5,850

7,850

6,000

–

28,370

Out-standing at 01-01-

2004

52,800

60,700

155,950

212,900

221,000

242,450

250,650

–

1,196,450

Issued

166,000

170,850

166,700

226,400

227,700

246,650

250,650

266,200

1,721,150

Number of parti-cipants

194

231

266

336

347

406

429

493

Duration

5 years

5 years

6 years

6 years

6 years

6 years

6 years

6 years

Date of issue

*

Options outstanding at 1 January

Forfeited during the period

Options granted during the period

Options exercised during the period

Options outstanding at 31 December

Exercisable at the end of the period

The Group has sold 193,680 shares held by Fugro. The average puchase price of these shares was EUR 48.29 per

share. The options were exercised mainly in October 2004, when the market price of the shares was between

EUR 59.00 and EUR 63.00 per share.

The options outstanding at 31 December 2004 have an exercise price in the range of EUR 36.90 to EUR 68.75

and a weighted average contractual life of 4 years (2003: 3 years).

The valuation principles used for determining the expectation value are as follows:

The date of valuation is equal to the date of granting (year end). The duration of the options is six years.

The volatility is based on the historical analysis of the daily share price fluctuations over the period 1993

through the reporting date. The expected return on dividend is based on a historical analysis of the dividends

paid out during the period 1994 through reporting date. Concerning early leave different percentages for

different categories of staff are used: Directors 1%, Executive Committee members 2%, managers of operating

companies 7%. The expected behaviour for exercising the options for the Directors is estimated till the end

of the vesting period and for the other two groups with a multiple of three.

Average share price

Excercise price

Granting

Volatility

Dividend

Risk free interest

Costs of granted option rights at the end of 2002 in EUR



90

Number ofoptions

987,100

(13,280)

250,650

(28,020)

1,196,450

617,050

Weighted averageexercise

price

46.73

54.98

40.80

25.30

45,83

Number ofoptions

1,196,450

(28,370)

266,200

(193,680)

1,240,600

641,800

Weighted averageexercise

price

45.83

46.50

61.40

29.40

45,84

2004 2003

Dutch residents

40.05

40.80

2003

37%

3.2%

3.8%

–

1,441,498

–

Foreign residents

52.39

43.13

2002

36%

3.3%

3.73%

501,844

–

–

Dutch residents

52.92

61.40

2004

33%

3.2%

3.3%

–

–

2,497,898

Foreign residents

40.05

40.80

2003

37%

3.2%

3.8%

501,844

531,657

–

2004 2003

Share options are granted under a service condition and, for grants to key management personnel, a non-market

performance condition. Such conditions are not taken into account in the grant date fair value measurement of

the services received. There are no market conditions associated with the share option grants.

5.30.2 Number of employees as at 31 December

Technical staff

Management and administrative staff

Temporary and contract staff

Average number of employees during the year

5.31 O t h e r o p e r a t i n g e x p e n s e s

(EUR x 1,000)

Maintenance and operational supplies

Indirect operating expenses

Occupancy costs

Communication and office expenses

Restructuring costs

Loss on disposal of property, plant and equipment

Other indirect operating expenses

The most important task of the external auditor is the audit of the annual accounts of Fugro N.V. Furthermore,

the auditor is assisting with due diligence processes and annual accounts related work. Tax advice is in principle

given by specialist firms or specialised departments of local audit firms, which hardly ever are involved in the

audit of the annual accounts of the relevant subsidiary. Other than these advisory services, Fugro makes only

limited use of external advisors. In the case that these services are required specialists are engaged that are not

associated with the external auditor.

The fees paid for the above mentioned services, which are included in Other expenses (other) are evaluated on

a regular basis and in line with the market.

91

Total

6,304

1,521

647

8,472

7,160

Foreign

5,573

1,356

550

7,479

6,129

Domestic

731

165

97

993

1,031

Total

5,682

1,460

473

7,615

7,864

Foreign

4,991

1,335

399

6,725

6,945

Domestic

691

125

74

890

919

20032004

2003

30,221

26,204

22,529

19,720

20,265

37

25,028

144,004

2004

36,715

32,003

25,126

21,058

4,340

300

31,286

150,828

5.32 N e t f i n a n c i n g c o s t s

(EUR x 1,000)

Interest income

Interest expenses

Dividend income

Net foreign exchange loss

Exchange gains on USD long term loans

Loss on financial hedging instruments

5.33 I n c o m e t a x e x p e n s e

Recognised in the income statement

(EUR x 1,000)

Current tax expense

Current year

Under/(over) provided in prior years

Deferred tax from expense

Origination from and reversal of timing differences

Decrease tax percentage

Benefit of tax losses recognised

Total income tax expense in the income statement

Reconciliation of effective tax rate

(EUR x 1,000)

Profit before tax

Income tax using the domestic corporation tax rate

Effect of tax rates in foreign jurisdictions (rates decreased)

Non-deductible expenses

Tax exempt costs

Tax charge on non local activities

Effect of tax losses utilised

Effect of non-recognised tax losses

Under/(over) provided in prior years

Non-compensable losses

92

2003

25,177

(113)

(124)

7,381

(19,091)

19,091

32,321

2004

28,733

(2,114)

(277)

5,504

(7,271)

7,271

31,846

2003

8,635

184

8,819

2,635

–

(18)

2,617

11,436

2004

19,060

(612)

18,448

(808)

20

2,284

1,496

19,944

2003

31,132

10,741

(5,469)

251

–

497

(18)

–

184

5,250

11,436

2003%

34.5

(17.6)

0.8

–

1.6

(0.1)

–

0.6

16.9

36.7

2004

72,529

25,022

(12,800)

350

(408)

1,139

2,284

(202)

(612)

5,171

19,944

2004%

34.5

(17.6)

0.5

(0.6)

1.6

3.1

(0.3)

(0.8)

7.1

27.5

Deferred tax credit recognised directly in equity

(EUR x 1,000)

Relating to net loss recognised directly in equity

Relating to hedge results

Relating to share option rights

Exchange rate differences

Unrecognised tax losses changed over the period as follows:

Unrecognised tax losses

(EUR x 1,000)

As of 1 January

Movements during the period:

Additional losses

Utilised


Change from reassessment

Resulting from acquisitions

As of 31 December

Reference is also made to note 5.40.

5.34 C u r r e n t t a x a s s e t s a n d l i a b i l i t i e s

The current tax liability of EUR 3,330 (2003: EUR 4,283) represents the balance of income tax payable and

receivable in respect of current and prior periods that exceed receipts.

93

2003

(395)

2,847

(661)

748

2,539

2004

1,019

2,582

(1,201)

20

2,420

2003

16,599

5,250

–

(218)

(919)

9,359

30,071

2004

30,071

5,171

(202)

(759)

405

–

34,686

5.35 P r o p e r t y , p l a n t a n d e q u i p m e n t

(EUR x 1,000)

Costs

Balance at 1 January 2003

Acquisitions through business combinations

Other additions

Disposals

Effect of movements in foreign exchange rates

Balance at 31 December 2003

Depreciation



Depreciation charge for the year

Disposals



Carrying amounts

At 1 January 2003

At 31 December 2003

94

Total

612,459

205,377

53,095

(34,707)

(58,835)

777,389

378,362

134,489

54,004

(26,943)

(31,324)

508,588

234,097

268,801

Other

123,640

94,683

11,733

(9,544)

(11,165)

209,347

97,068

48,359

13,166

(4,789)

(9,235)

144,569

26,572

64,778

Vessels

144,400

8,500

6,879

–

(22,291)

137,488

38,367

6,200

11,094

–

(5,694)

49,967

106,033

87,521

Plant andequip-ment

267,193

98,451

25,653

(20,602)

(19,058)

351,637

221,003

78,626

27,158

(19,790)

(14,894)

292,103

46,190

59,534

Land and buildings

77,226

3,743

8,830

(4,561)

(6,321)

78,917

21,924

1,304

2,586

(2,364)

(1,501)

21,949

55,302

56,968

2003

(EUR x 1,000)

Costs



Reclassification ROVs

Other additions

Disposals



Depreciation and impairment losses



Reclassification ROVs

Depreciation charge for the year

Disposals



Carrying amounts

At 1 January 2004

At 31 December 2004

5.35.1 Impairment loss and subsequent reversal

The company has not incurred nor reversed any impairment losses in 2004 and 2003.

5.35.2 Tangible assets per segment

The category vessels include vessels and survey equipment. The carrying value of tangible fixed assets is

distributed as follows:

– Geotechnical division EUR 61 million (2003: EUR 57 million);

– Survey division EUR 83 million (2003: EUR 130 million);

– Geoscience division EUR 89 million (2003: EUR 82 million).

5.35.3 Assets under construction

Assets under construction included in other amount to EUR 3.2 million (2003 EUR 2.6 million).

95

2004

Total

777,389

2,296

–

68,732

(97,450)

(24,308)

726,659

508,588

–

–

66,139

(65,412)

(15,612)

493,703

268,801

232,956

Other

209,347

1,345

(63,600)

14,311

(32,110)

(4,184)

125,109

144,569

–

(29,300)

14,086

(24,599)

(3,474)

101,282

64,778

23,827

Vessels

137,488

–

–

4,328

(16,476)

(4,658)

120,682

49,967

–

–

7,042

(15,816)

(1,408)

39,785

87,521

80,897

Plant andequip-ment

351,637

–

63,600

32,222

(46,386)

(12,357)

388,716

292,103

–

29,300

42,387

(23,995)

(10,020)

329,775

59,534

58,941

Land and buildings

78,917

951

–

17,871

(2,478)

(3,109)

92,152

21,949

–

–

2,624

(1,002)

(710)

22,861

56,968

69,291

5.35.4 Leased vessels and equipment

Through mid 2004 the Group leased vessels and on board survey equipment under two finance lease

agreements. The Group used the possibility to purchase the vessels at a beneficial price. At 31 December 2003

the net carrying amount relating to leased vessels and on board equipment amounted to EUR 35.2 million.

As from the date of acquisition (24 May 2004) these tangible fixed asset are accounted for as owned.

Consequently the lease obligations have been replaced by loans in 2004.

5.35.5 Security

Land and Buildings includes EUR 21 million (2003: EUR 21 million) in the Netherlands, EUR –

(2003: EUR 4.6 million) in the United Kingdom, in Hong Kong EUR – (2003: EUR 4.7 million) and in Australia

EUR – million (2003: EUR 1.8 million) serve as security for mortgage loans (refer note 5.46).

5.36 I n t a n g i b l e f i x e d a s s e t s

(EUR x 1,000)

Cost



Adjustments prior period

Internally developed intangible fixed assets



Amortisation and impairment losses


Amortisation charge for the year



Carrying amount

At 1 January 2003

At 31 December 2003

96

Total

233,192

68,040

1,781

4,557

(4,869)

302,701

21,347

6,780

623

28,750

211,845

273,951

Other

1,800

–

–

–

60

1,860

330

189

8

527

1,470

1,333

Software

40,496

1,633

–

4,557

1,066

47,782

21,017

6,591

615

28,223

19,479

19,559

Goodwill

190,896

66,377

1,781

–

(5,995)

253,059

–

–

–

–

190,896

253,059

2003

(EUR x 1,000)

Cost



Adjustments prior period

Internally developed intangible fixed assets



Amortisation and impairment losses


Amortisation charge for the year



Carrying amount

At 1 January 2004

At 31 December 2004

In 2004 significant amounts were spent on research and development expenditure has been recognised in the

profit and loss account, just as in 2003.

5.36.1 Amortisation charge

The amortisation charge is separately recognised in the income statement.

5.37 I m p a i r m e n t t e s t s f o r c a s h g e n e r a t i n g u n i t s c o n t a i n i n g g o o d w i l l

The following units have significant carrying amounts of goodwill:

(EUR x 1,000)

Airborne

Survey

Jason group

Robertson group

Other

Total

97

Total

302,701

1,335

22,877

4,436

(2,041)

329,308

28,750

7,078

(511)

35,317

273,951

293,991

Other

1,860

1,335

–

–

(30)

3,165

527

334

(26)

835

1,333

2,330

Software

47,782

–

–

4,436

(507)

51,711

28,223

6,744

(485)

34,482

19,559

17,229

Goodwill

253,059

–

22,877

–

(1,504)

274,432

–

–

–

–

253,059

274,432

2004

2003

19,163

69,350

77,721

78,630

8,195

253,059

2004

18,475

92,126

77,466

78,587

7,778

274,432

Annually the Group carries out impairment tests on these balances using the relevant cash-generating unit.

The system and calculation method are already described in separate notes. The period for the discounted cash

flow calculations is in principle indefinite. However the Group has set the period at 50 years, subject to periodic

evaluation, for the following reasons.

The group is for over 70% serving the oil and gas industry. The services are in principle of such a nature that

our clients use us to help them to explore and extract mineral resources.

Experts are without doubt that these mineral resources will continue to be available to mankind for many

decades and their reports indicate periods between 50 and 100 years.

Easy accessible places may ‘dry-up’ but with new techniques and means also more hostile areas can be

exploited. The Group has with its high market shares and specialised techniques a solid position to continue

to serve its customers.

The Group recognises that the search for alternative means of energy, like wind, nuclear and hydro energy

will continue. These means however will have limited output and will be difficult to transport. Moreover

environmental issues will prevent that these sources will overtake the current resources oil and gas.

The recoverable amounts of the various cash generating units that carry goodwill are determined on

calculations of value in use. Those calculations use cash flow projections based on actual operating results and a

five year forecast. Cash flows for further future periods are extrapolated using growth rate percentages varying

from 0 to 3.5% which are deemed appropriate because of the long term nature of the business. These growth

rates are also consistent with the long term averages in the industry. A pre-tax discount rate of 9.5% has been

used discounting the projected cash flows.

An exception to the growth rates mentioned above has been made for the calculation of the recoverable

amount of the cash generating unit that carries the goodwill of the Jason group. Here the growth rate used after

the five years forecast stands at 10%. The reason for the higher growth rate is that the main activities of the Jason

group of companies concentrate on the analysis of oil field reservoirs for the oil & gas industry, including state-

owned companies.

The key assumptions and the approach to determine their value are the growth rates that are based on

analysis of the long-term market price trends in the oil and gas industry adjusted for actual experience.

The carrying amounts of the units remain below the recoverable amounts and as such no impairment losses

are accounted for. Future adverse changes in the assumptions could however reduce the recoverable amounts

below the carrying amount.

5.38 F i n a n c i a l f i x e d a s s e t s

The Group holds the following non-consolidated subsidiaries, associates and other investments:

(EUR x 1,000)

Non-consolidated subsidiaries at equity value

Other investments at cost

Long term loans

Other long term receivables

The Group’s share in realised profit in the above mentioned non-consolidated subsidiaries amounted to EUR 139

in 2004 (2003: EUR 181). In October 2004, the Group sold its interest in BSN (refer to note 5.26.3).

98

2003

2,642

5,896

4,361

1,764

14,663

2004

2,562

1,609

3,907

1,209

9,287

5.39 O t h e r i n v e s t m e n t s

The Group has the following other investments accounted for at cost:

Name of the company

LaCoste & Romberg, Scintrex, Inc.

5.40 D e f e r r e d t a x a s s e t s a n d l i a b i l i t i e s

Deferred tax assets and liabilities are attributable to the following items:

(EUR x 1,000)


Intangible assets

Other investments

Interest loans and borrowings

Employee benefits

Provisions

Tax value of recognised loss carry-forwards

Other items

Tax (assets)/liabilities

Set off of tax

Net tax (assets)/liabilities

99

Profit/loss

205

Owner-ship

10%

Revenues

9,583

Equity

5,057

Liabilities

1,418

Assets

6,475

2003

(200)

(4,788)

1,422

1,041

13,230

1,131

8,314

(1,230)

18,920

–

18,920

2004

(260)

(5,005)

44

4,512

13,602

2,036

6,820

(844)

20,905

–

20,905

2003

(3,301)

(4,852)

–

–

(13)

(55)

–

(1,336)

(9,557)

8,074

(1,483)

2004

(3,904)

(5,113)

–

–

(183)

(55)

–

(1,115)

(10,370)

6,648

(3,722)

2003

3,101

64

1,422

1,041

13,243

1,186

8,314

106

28,477

(8,074)

20,403

2004

3,644

108

44

4,512

13,785

2,091

6,820

271

31,275

(6,648)

24,627

NetLiabilitiesAssets

With respect to the capitalised deferred tax assets an amount of EUR 6,820 (2003: EUR 8,314) is dependent on

future taxable profits in excess of profits arising from the reversal of existing taxable temporary differences.

At 31 December 2004 no deferred tax liabilities relating to an investment in a subsidiary have been

recognised (2003: nil).

In some of the countries where the Group operates, local tax laws provide that gains on disposal of certain

assets are tax exempt, provided that the gains are not distributed. At balance sheet date, no tax reserves exempt

which would result in a tax liability should the subsidiaries pay dividends from these reserves.

Movement in temporary differences during the year

(EUR x 1,000)


Intangible assets

Other investments


Employee benefits

Share based payments

Provisions

Tax value of recognised loss carry-forward

Exchange differences

Other items

(EUR x 1,000)


Intangible assets

Other investments


Employee benefits

Share based payments

Provisions

Tax value of recognised loss carry-forward

Exchange differences

Other items

100

Balance31-12-2004

(260)

(5,005)

44

4,512

13,602

–

2,036

6,820

–

(844)

20,905

Recog-nised in

equity

–

–

–

2,582

1,019

(1,201)

–

–

20

–

2,420

Recog-nised inincome

(331)

(217)

(1,378)

889

(647)

1,201

905

(2,284)

(20)

386

(1,496)

Acqui-sitions

271

–

–

–

–

–

–

790

–

–

1,061

Balance01-01-2004

(200)

(4,788)

1,422

1,041

13,230

–

1,131

8,314

–

(1,230)

18,920

2004

Balance31-12-2003

(200)

(4,788)

1,422

1,041

13,230

–

1,131

8,314

–

(1,230)

18,920

Recog-nised in

equity

–

–

–

2,847

(395)

(661)

–

–

748

–

2,539

Recog-nised inincome

416

(225)

(2,078)

850

(156)

661

(1,017)

18

(748)

(338)

(2,617)

Acqui-sitions

316

–

–

–

–

–

–

1,952

–

–

2,268

Balance01-01-2003

(932)

(4,563)

3,500

(2,656)

13,781

–

2,148

6,344

–

(892)

16,730

2003

Deferred tax assets have not been recognised in respect of the following items:

Unrecognised deferred tax assets

(EUR x 1,000)

Compensable temporary differences

Tax losses

Capital allowances

Total

Of the total recognised and unrecognised deferred tax assets an amount of EUR 96 expires in periods varying

from two to five years. An amount of EUR 3,560 expires between five and ten years and an amount of EUR 37,850

can be offset indefinitely. The deductible temporary differences do not expire under current tax legislation.

Deferred tax assets have not been recognised in respect of these items because it is not probable that future

taxable profit will be available against which the Group can utilise these benefits.

5.41 I n v e n t o r i e s

(EUR x 1,000)

Work in progress

Inventories

Seismic libraries

(EUR x 1,000)

Work in progress

Costs less provision for losses

Addition for profit element

Less: contractual advances received

During 2004 EUR 3,515 (2003: EUR 2,304) of inventories were recognised as an expense and EUR 415 was written

down in the profit and loss account (2003: EUR 11).

(EUR x 1,000)

Seismic data

Net realisable value

101

2003

1,729

20,107

8,235

30,071

2004

4,516

20,269

9,901

34,686

2003

8,419

6,588

21,994

37,001

2003

10,664

3,379

(5,624)

8,419

2004

7,295

4,847

39,660

51,802

2004

14,120

2,619

(9,444)

7,295

2003

21,994

2004

39,660

5.42 T r a d e a n d o t h e r r e c e i v a b l e s

(EUR x 1,000)

Unbilled turnover on completed projects

Other trade receivables

Non-trade receivables

Fair value derivatives

Trade receivables due from non-consolidated subsidiaries

At 31 December 2004 trade receivables include retentions of EUR 4.8 million (2003: EUR 3.3 million) relating to

work in progress.

Trade receivables are shown net of impairment losses amounting to EUR 17.2 million (2003: EUR 7.6 million)

arising from identified doubtful receivables from customers.

5.43 C a s h a n d c a s h e q u i v a l e n t s

(EUR x 1,000)

Bank balances, cash, and cash equivalents

Bank overdrafts

Cash and cash equivalents in the statement of cash flows

5.44 C a p i t a l a n d r e s e r v e s

Reconciliation of movement in capital and reserves

(EUR x 1,000)


Changes in accounting policy

to IFRS

Restated balance at 1 January 2003

Total recognised gains and losses

Exercised option rights personnel

Own shares acquired

Addition to reserves

Stockdividend

Dividends to shareholders


102

2003

51,264

253,071

65,876

562

–

370,773

2004

62,496

228,872

44,192

417

147

336,124

2003

65,237

(44,436)

20,801

2004

26,330

(41,018)

(14,688)

Total equity

274,250

(12,102)

262,148

(29,615)

(129)

(4,124)

–

–

(14,616)

213,664

Minorityinterest

2,552

(300)

2,252

216

–

–

–

–

–

2,468

Total

271,698

(11,802)

259,896

(29,831)

(129)

(4,124)

–

–

(14,616)

211,196

Retainedearnings

60,218

–

60,218

18,872

–

–

(45,540)

(62)

(14,616)

18,872

Reserve for ownshares

–

(19,555)

(19,555)

–

(129)

(4,124)

–

–

–

(23,808)

Other reserves

1,350

6,348

7,698

519

–

–

45,540

–

–

53,757

Hedgingreserve

–

1,381

1,381

(5,527)

–

–

–

–

–

(4,146)

Translationreserve

–

24

24

(43,695)

–

–

–

–

–

(43,671)

Share premium

207,159

–

207,159

–

–

–

–

–

–

207,159

Share capital

2,971

–

2,971

–

–

–

–

62

–

3,033

2003

(EUR x 1,000)


Total recognised gains and losses

Share options exercised

by employees

Addition to reserves

Own shares acquired

Stockdividend

Dividends to shareholders


5.44.1 Share capital and share premium

(In thousands of shares)

On issue and fully paid at 1 January

Stock dividend 2003 respectively 2002

Repurchased for option plan at year end

On issue at 31 December – fully paid

At 31 December 2004 the authorised share capital comprised 80,000,000 ordinary shares (2003: 57,554,500). No

preference shares have been issued. The shares have a par value of EUR 0.20 (refer note 5.15).

The holders of ordinary shares are entitled to receive dividends as approved by the Annual General Meeting

from time to time and are entitled to one vote per share at meetings of the Company. As per 31 December 2004

the Directors propose a dividend to be paid out in the form of a cash dividend of EUR 1.90 (2003: EUR 1.85) per

(depository receipts of) share with a nominal value of EUR 0.20 or in the form of (depository receipts of) ordinary

shares with a nominal value of EUR 0.20 charged to the reserves. This dividend proposal is currently part of

retained earnings.

5.44.2 Share premium

The share premium is considered to be paid in capital.

5.44.3 Translation reserve

The translation reserve comprises all foreign exchange differences, as from transition date, arising from the

translation of the financial statements of foreign operations that are not integral to the operations of the

Company, as well as from the translation of liabilities that hedge the Company’s net investment in a foreign

subsidiary.

103

Total equity

213,664

19,077

5,686

–

(761)

–

(9,426)

228,240

Minorityinterest

2,468

1,859

–

–

–

–

–

4,327

Total

211,196

17,218

5,686

–

(761)

–

(9,426)

223,913

Retainedearnings

18,872

49,317

–

(9,369)

–

(77)

(9,426)

49,317

Reserve for ownshares

(23,808)

–

5,686

–

(761)

–

–

(18,883)

Other reserves

53,757

(1,990)

–

9,369

–

–

–

61,136

Hedgingreserve

(4,146)

(6,339)

–

–

–

–

–

(10,485)

Translationreserve

(43,671)

(23,770)

–

–

–

–

–

(67,441)

Share premium

207,159

–

–

–

–

–

–

207,159

Share capital

3,033

–

–

–

–

77

–

3,110

2004

2003

14,862

304

(589)

14,577

2004

15,166

382

(411)

15,137

Ordinary shares

5.44.4 Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow

hedging instruments where the hedged transactions have not yet occurred.

5.44.5 Reserve for own shares

The Company has, in view of its option plan repurchased 15,219 (certificates of) own shares during the year

under review with an average price of EUR 50.0 (2003: 150,000 certificates with an average price of EUR 34.26).

Further 193,680 certificates with a nominal value of EUR 0.20 were sold with an average exercise price of EUR

58.26 following the exercise by the option holders (2003: 28,020 certificates at EUR 25.30). As per the end of the

year under review the Company holds 410,401 own shares (2003: 588,862). The number of treasury shares held by

the Company at the end of the year under review amounts to 2.6% of the issued and paid up capital (2003: 3.9%).

5.44.6 Dividends

After the balance sheet date the following dividends were proposed by the Board of Management. There are no

income tax consequences related to this proposal.

(EUR x 1,000)

EUR 1.90 per qualifying ordinary share (2003: EUR 1.85)

5.45 E a r n i n g s p e r s h a r e

The average basic earnings per share for the period amounts to EUR 3.32 (2003: EUR 1.30); the diluted earnings

per share amount to EUR 3.29 (2003: EUR 1.47).

The calculation of basic earnings per share at 31 December 2004 was based on the net profit attributable to

ordinary shareholders of 49,317 (2003: EUR 18,872) and a weighted average number of ordinary shares

outstanding during the year ended 31 December 2004 of 14,840 (2003: 14,464), calculated as follows:

5.45.1 Basic earnings per share

Net profit attributable to ordinary shareholders

(EUR x 1,000)



104

2003

26,967

26,967

2004

28,760

28,760

2003

18,872

18,872

2004

49,317

49,317

Weighted average number of ordinary shares


Issued ordinary shares at 1 January

Effect of own shares purchased

Effect of shares issued due to exercised option rights

Effect of shares issued due to optional dividend

Weighted average number of ordinary shares at 31 December

5.45.2 Diluted earnings per share

The calculation of diluted earnings per share at 31 December 2004 was based on net profit attributable to

ordinary shareholders of EUR 54,072 (2003: EUR 23,609) and a weighted average number of ordinary shares

outstanding during the year ended 31 December 2004 of 16,428 (2003: 16,080), calculated as follows:

Net profit attributable to ordinary shareholders (diluted)

(EUR x 1,000)


After-tax effect of interest on convertible notes

Net profit attributable to ordinary shareholders (diluted)

Weighted average number of ordinary shares (diluted)


Weighted average number of ordinary shares at 31 December

Effect of conversion of convertible notes

Effect of share options on issue

Weighted average number of ordinary shares (diluted) at 31 December

105

2003

14,395

(111)

13

167

14,464

2004

14,577

(11)

64

210

14,840

2003

14,464

1,557

59

16,080

2004

14,840

1,557

33

16,430

IFRS

18,872

4,737

23,609

DutchGAAP

32,420

3,088

35,508

DutchGAAP

49,456

3,088

52,544

IFRS

49,317

4,755

54,072

2004 2003

5.46 I n t e r e s t - b e a r i n g l o a n s a n d b o r r o w i n g s

This note provides information about the contractual terms of the Group’s interest-bearing loans and

borrowings. For more information about the Group’s exposure to interest rate and currency risk, refer

to note 5.50 and 5.51.

(EUR x 1,000)

Non-current liabilities

Secured bank loans

Private placement loans in USD

Private placement loan in EUR

Cash flow hedge on loans in USD

Currency difference on future interest in USD

Convertible notes

Financial lease liabilities/asset loans

Mortgage loans

Other loans

Subtotal

Less: Current portion of long-term loans*

* Agreement has been reached with regard to the refinancing of these items (new maturity: 5 years).

Terms and debt repayment schedule

(EUR x 1,000)

Secured bank loans

Private Placement loans:

44 million USD bonds 2012 at 6.45%



20 million Eurobonds 2012, fixed at 6.45%

Convertible notes:

EUR – fixed at 4.75%

Other loans

The bank loans are secured by land and buildings with a carrying amount of EUR 19.0 million (2003: EUR 18.7

million).

106

2003

142,489

94,136

20,000

41,458

6,282

96,153

17,530

14,355

1,755

434,158

2,263

431,895

2004

127,486

86,923

20,000

48,729

14,978

99,218

–

14,609

212

412,155

227,887

184,268

More than5 years

–

55,231

48,955

46,444

20,000

–

5,809

176,439

2 – 5years

–

–

–

–

–

–

2,206

2,206

1 – 2years

–

–

–

–

–

–

5,623

5,623

1 year or less

127,486

–

–

–

–

99,218

1,183

227,887

Total

127,486

55,231

48,955

46,444

20,000

99,218

14,821

412,155

5.46.1 Secured bank loans

In 2003 a loan facility of EUR 200 million was agreed with Rabobank Nederland to finance the acquisition of

Thales GeoSolutions. The loan has a term of two years with no repayment during the first year. The interest rate

is fixed at EURIBOR plus 70 basis points. The loan conditions are the same as for the Private Placement loans

explained hereunder.

5.46.2 Private Placement USD loans

In May 2002 long term loans were concluded with twenty American and two British institutional investors.

The conditions for the loans are based on annual accounts prepared under the previous accounting principles

(Dutch GAAP):

– Equity > EUR 200 million

– EBITA/Interest > 2.5

– Debt/EBITA < 3.0

– Debt (excluding private placement and convertible notes) < 15% of the consolidated balance sheet total.

At the 12 month rolling forward measurement dates in 2003 and 2004, the company complied with the above

conditions.

The currency exchange risk on the loans in USD and also the (future) interest payable on these loans are

hedged for the entire term of the loans by means of ‘cross currency swaps’. Since the hedges are regarded as

perfect, hedge accounting is applied. Initial recognition has taken place at the exchange rate of the transaction.

At reporting date the loans are valued at the closing rate. The currency exchange difference on the loans

between the initial exchange rate or the exchange rate at the last revision date is accounted for in the profit and

loss account. Further the related ‘cross currency swaps’ are converted at market value at reporting date.

Differences between the initial market value or the last revision and the market value per reporting date are also

included in the profit and loss account.

For the year under review the currency exchange differences on loans in USD amount to EUR 7,271 positive

(2003: EUR 19,091 positive), while the movement due to the change in the fair value of the related currency

hedge financial instruments amounts to EUR 15,967 negative (2003: EUR 27,466 negative). The latter amount is

debited to equity, less the part that is attributable to the loans as hedge result being EUR 7,271 (2003: EUR 19,091)

which amount is charged to the profit and loss account.

Every five years, for the first time in 2007, based on the currency exchange USD - EUR the conversion rate of

the loans, deviations that lead to a higher loan amount in EUR than originally recognised or at the last reset date

result in an inflow of cash for the group amounting to the difference. Deviations that lead to a lower loan

amount in EUR than originally recognised or at the last reset date result in an outflow (inflow) of cash for the

group amounting to the difference to the issuer of the hedge instrument.

With respect to the hedge contracts relating to the future interest payments on the USD loans during the

year under review an amount of EUR 6,339 (2003: EUR 5,527) net after taxes has been charged to equity as a

result of the decline in the currency exchange rate of the USD against the EUR. The in the equity recorded

cumulative currency exchange difference on these hedge contracts concerning the future interest payments

amounts to EUR 14,983 (2003: EUR 6,282).

107

Convertible notes

(EUR x 1,000)

Proceeds from issue of convertible notes

Transaction costs

Net proceeds

Amount classified as equity

Transaction costs amortised

Carrying amount of liability at 31 December

The recognised amount of the convertible notes classified as equity of EUR 657 is net of attributable transaction

costs.

From 12 May 2000 till 21 March 2005 the holders have the option to convert notes held for share certificates at

a conversion price of EUR 64.21 per treasury share of nominal EUR 0.20 each. The Company has the right to

redeem the convertible notes if, as from 3 April 2003, the stock exchange price of the Company’s treasury shares

at least equals 130% of the conversion price during consecutive 30 days. Notes that are not converted to ordinary

share certificates will be redeemed at face value on 3 April 2005.

5.46.3 Finance lease liabilities

Finance lease liabilities are payable as follows:

(EUR x 1,000)

Less than one year

Under the terms of the lease agreements, no contingent rents are payable. In 2003 the interest on the financial

lease obligations amounts to 9%; at the end of 2004 no financial leases exist.

5.46.4 Mortgage and other loans

The average interest rate on mortgage loans and other loans over one year amounts to 4.9% (2003: 4.8%).

108

2003

100,000

(2,500)

97,500

(3,222)

1,875

96,153

2004

100,000

(2,500)

97,500

(657)

2,375

99,218

20032004

Principal

17,530

Interest

2,338

Payments

8,951

Principal

–

Interest

–

Payments

–

5.47 E m p l o y e e b e n e f i t s

(EUR x 1,000)

Present value of funded obligations

Fair value of plan assets

Present value of net obligations

Recognised actuarial gains (losses)

Recognised liability for defined benefit obligations

Liability for long service leave

Total employee benefits

Liability for defined benefit obligations

The Group makes contributions to a number of defined benefit plans that provide pension benefits for

employees upon retirement in a number of countries being: the Netherlands, United Kingdom, and Norway.

In all other countries the pension plans are classified as Defined Contribution plans and/or similar

arrangements for employees, if customary, are maintained, taking local circumstances into account. As in the

USA a 401 K plan exists the contribution of which is based on an agreed scheme in conformity with IRS

regulations.

As of 31 December 2004 the existing final pay pension scheme in the Netherlands has been replaced by

a average pay pension scheme. This scheme qualifies as a ‘defined benefit plan’ according to IFRS.

In the Netherlands the ‘defined benefit’ pension plans comprising mitigated final pay arrangements are fully

re-insured. In determining the annual costs the nature of the plan is recognised which includes (conditional)

indexation of pension benefits insofar as the return on the separated investments surpasses the actuarial

required interest. The required reserves of these obligations are, net of plan assets, recognised in the balance

sheet.

In the United Kingdom pension obligations exist as a result of two final pay ‘defined benefit’ plans, that were

terminated in 2001. The required reserves for these obligations are, net of plan assets, recognised in the balance

sheet.

In Norway a ‘defined benefit’ pension plan exists that, combined with the available State pension plan, leads

to a pension on the age of 67 years based on a defined maximum. The contribution of the employer consists of

a premium based on an expected return on plan assets and the (positive or negative) investment risk.

Movements in the net liability recognised in the balance sheet

(EUR x 1,000)

Net liability at 1 January

Contributions received

Expense recognised in the income statement

Actuarial differences


Net liability at 31 December

109

2003

162,234

117,979

44,255

(1,238)

43,017

2,027

45,044

2004

174,588

130,277

44,311

2,075

46,386

1,822

48,208

2003

46,273

(7,324)

7,970

(1,238)

(2,664)

43,017

2004

43,017

(7,894)

7,950

3,313

–

46,386

Expenses recognised in the income statement

(EUR x 1,000)

Current service costs

Interest on obligation

Expected return on plan assets

Past service costs

Results on change of pension plans

The expenses are recognised in the following line items in the income statement:

(EUR x 1,000)

Personnel expenses

Interest

Actual return on plan assets

Liability for defined benefit obligations

Principal actuarial assumptions at the balance sheet date (expressed as weighted averages):

Discount rate at 31 December

Expected return on plan assets at 31 December

Future salary increases

Medical cost trend rate

Future pension increases

110

2003

6,399

7,985

(6,449)

17

18

7,970

2004

6,023

8,827

(7,601)

234

467

7,950

2003

6,434

1,536

7,970

6,449

2004

6,724

1,226

7,950

7,601

2003

5 – 6%

5 – 8%

3%

n/a

2 – 3%

2004

5 – 6%

4 – 8%

3%

n/a

1 – 3%


(EUR x 1,000)

Balance at 1 January

Provisions made during

the year

Provisions used during the year

Provisions reversed during

the year


Balance at 31 December

Non-current

Current

5.48.1 Restructuring

The provision of EUR 21,525 at 1 January 2004 was used to restructure certain of the Group’s activities resulting

from the acquisition of Thales GeoSolutions. The estimated costs are based on a detailed plan agreed between

management and employees’ representatives. The restructuring was completed in the course of 2004.

5.49 O t h e r p a y a b l e s

(EUR x 1,000)

Other trade payables

Advance instalments to construction work in progress

Non-trade payables and accrued expenses

5.50 T r a n s l a t i o n r i s k a n d c u r r e n c y r i s k

The global nature of the business expose the operations and reported financial results and cash flows to the risks

arising from fluctuations in the exchange rates. The Group’s business is exposed to currency risk whenever it has

revenues in a currency that is different from the currency in which it incurs the costs of generating those

revenues. Once the revenues are offset against the incurred costs in the same currency, the remainder may be

affected if the value of the currency in which the revenues are generated declines in the interim relative to the

Group’s reporting currency. This risk exposure primarily affects the operations of the Group that generates a

significant portion of its revenues in foreign currencies and incurs its costs primarily in Euros.

Cash inflows and outflows of the business segments are offset if they are denominated in the same currency.

This means that revenues generated in a particular currency balance out costs in the same currency, even if the

revenues arise from a different transaction than that in which the costs are incurred. As a result, only the

unmatched amounts are subject to currency risk.

To mitigate the impact of currency exchange rate fluctuations, the Group continually assesses the exposure

to currency risks and a portion of those risks is hedged by using derivative financial instruments. The principal

derivative financial instruments used to cover foreign currency exposure are forward foreign currency exchange

contracts.

111

2003

74,341

17,127

177,975

269,443

2004

66,554

14,467

138,573

219,594

Total

2,044

22,033

(1,045)

–

–

23,032

584

22,448

23,032

Other

1,840

145

(478)

–

–

1,507

–

1,507

1,507

Onerouscontracts

–

–

–

–

–

–

–

–

–

Restruc-turing

204

21,888

(567)

–

–

21,525

584

20,941

21,525

Total

23,032

5,915

(26,888)

(10)

(11)

2,038

1,075

963

2,038

Other

1,507

–

(1,447)

(60)

–

–

–

–

–

Onerouscontracts

–

745

(439)

50

(8)

348

–

348

348

Restruc-turing

21,525

5,170

(25,002)

–

(3)

1,690

1,075

615

1,690

2004 2003

The principal amounts of the Group’s USD loans and the future interest payments (see note 5.46) have been fully

hedged by means of ‘cross currency swap’ transactions using the same dates as the loans and the interest

thereon are due for (re)payment.

Forecasted transactions

The Group classifies its firm commitments from forward exchange contracts hedging and forecasted

transactions as cash flow hedges and states them at fair value. The fair value of forward exchange contracts at

1 January 2003 was adjusted against the opening balance of the hedging reserve at that date. The net fair value

of forward exchange contracts used as hedges of firm commitments and forecasted transactions at 31 December

2004 was EUR 417 (2003: EUR 562), comprising assets of EUR 417 (2003: 927) and liabilities EUR – (2003: 365) that

were recognised in fair value derivatives.

5.50.1 Effect of currency translation

Many of the Group’s subsidiaries are located outside the euro zone. Since the financial reporting currency of the

Group is the euro, income statements of these subsidiaries are translated into euros in order to include their

financial result in the consolidated financial statements. Period-to-period changes in the average exchange rate

for a particular country’s currency can significantly affect the translation of both revenues and operating

income denominated in that currency into euros. Unlike the effect of exchange rate fluctuations on transaction

exposure, the exchange rate translation risk does not affect local currency cash flows.

The Group has assets and liabilities outside the euro zone. These assets and liabilities are denominated in

local currencies and reside primarily in the United States, United Kingdom and Far East holding subsidiaries.

When the net assets are converted into euros, currency fluctuations result in period-to period changes in those

net asset values. The equity position of the holding company reflects these changes in net asset values and the

long term currency risk inherent in these investments are periodically evaluated. In general the Group does not

hedge against this type of risk, except in specific circumstances.

5.51 I n t e r e s t r a t e r i s k

The Group holds a variety of interest rate sensitive assets and liabilities to manage the liquidity and cash needs

of the day-to-day operations. The long term external financing of the Group is primarily based on liabilities

bearing long term fixed interest rates.

5.52 C r e d i t r i s k

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit

evaluations are performed on all customers requiring credit over a certain amount. The Group does not require

collateral in respect of financial assets.

Investments are allowed only in liquid securities and only with counterparties that have a credit rating equal

to or better than the Group. Transactions involving derivative financial instruments are with counterparties,

that have high credit ratings and with whom the Group has a signed netting agreement. Given their high credit

ratings, management does not expect any counterparty to fail to meet its obligations.

At balance sheet date there were no significant concentrations of credit risk. The maximum exposure to

credit risk is represented by the carrying amount of each financial asset, including derivative financial

instruments, in the balance sheet.

5.53 H e d g i n g

The Group adopts a policy of reducing its exposure to changes in interest rates on bank loans by entering into

agreements with a fixed rate. Further the currency risks on long term financial liabilities in foreign currencies

are fully hedged. Cross currency swaps, denominated in EUR, have been entered into to achieve this purpose.

The swaps mature over the next 15 years following the maturity of the related loans (refer following table) and

have interest rates ranging from 6.45% to 6.58%. At 31 December 2004 the Group had cross currency swap

contracts with a notional contract amount of USD 120 million (2003: USD 120 million).

112

The Group classifies interest rate cross currency swaps as cash flow hedges and states them at fair value.

The fair value of swaps at 1 January 2003 was adjusted against the opening balance of the hedging reserve at

that date. The net fair value of swaps at 31 December 2004 was EUR 14,978 (2003: EUR 6,282) comprising assets of

EUR 48,729 (2003: EUR 41,458) and liabilities of EUR 63,707 (2003: EUR 47,740) These amounts were recognised as

fair value derivatives.

5.54 E f f e c t i v e i n t e r e s t r a t e s a n d r e p r i c i n g a n a l y s i s

In respect of income-earning financial assets and interest-bearing financial liabilities, the following table

indicates their effective interest rates at the balance sheet date and the periods in which they reprice.

(EUR x 1,000)

Cash and cash equivalents*

Secured bank loans

USD fixed rate loan

EUR fixed rate loan

Convertible notes*

Effect of cross currency swaps

Effect of interest rate swaps

Mortgage and other loans*

Bank overdrafts*

(EUR x 1,000)

Cash and cash equivalents*

Secured bank loans

USD fixed rate loan

EUR fixed rate loan

Convertible notes*

Effect of cross currency swaps

Effect of interest rate swaps

Mortgage and other loans*

Finance lease liabilities*

Bank overdrafts*

113

* These assets/liabilities bear interest at a fixed rate.

2004

More than5 years

–

–

(86,923)

(20,000)

–

(48,729)

(14,978)

(5,809)

–

(176,439)

2 – 5years

–

–

–

–

–

–

–

(2,206)

–

(2,206)

1 – 2years

–

–

–

–

–

–

–

(5,623)

–

(5,623)

6 – 12months

–

(127,486)

–

–

–

–

–

(1,183)

–

(128,669)

6 monthsor less

26,330

–

–

–

(99,218)

–

–

–

(41,018)

(113,906)

Total

26,330

(127,486)

(86,923)

(20,000)

(99,218)

(48,729)

(14,978)

(14,821)

(41,018)

(426,843)

Effectiveinterest

rate

0

2.83

6.45

6.45

7.81

6.45

6.45

5.58

3.75

2003

More than5 years

–

–

(94,136)

(20,000)

(41,458)

(6,282)

(6,535)

(17,530)

–

(185,941)

2 – 5years

–

–

–

–

–

–

–

(2,732)

–

–

(2,732)

1 – 2years

–

(142,489)

–

–

(96,153)

–

–

(4,580)

–

–

(243,222)

6 – 12months

–

–

–

–

–

–

–

(2,263)

–

–

(2,263)

6 monthsor less

65,237

–

–

–

–

–

–

–

–

(44,436)

20,801

Total

65,237

(142,489)

(94,136)

(20,000)

(96,153)

(41,458)

(6,282)

(16,110)

(17,530)

(44,436)

(413,634)

Effectiveinterest

rate

0

2.83

6.45

6.45

7.81

6.45

6.45

5.58

9.00

3.75

5.55 R e c o g n i s e d a s s e t s a n d l i a b i l i t i e s

Changes in the fair value of forward exchange contracts that economically hedge monetary assets and liabilities

in foreign currencies and for which no hedge accounting is applied are recognised in the income statement.

Both the changes in fair value of the forward contracts and the foreign exchange gains and losses relating

to the monetary items are recognised as part of ‘net financing costs’ (refer note 5.22.4). The fair value of forward

exchange contracts used as economic hedges of monetary assets and liabilities in foreign currencies at

31 December 2004 was EUR 417 (2003: EUR 562), comprising of assets EUR 417 (2003: 927) and liabilities

EUR – (2003: EUR 365) recognised in fair value derivatives.

5.56 S e n s i t i v i t y a n a l y s i s

In managing interest rate and currency risks the Group aims to reduce the impact of short term fluctuations on

the Group’s earnings. Over the longer term, however, permanent changes in foreign exchange and interest rates

would have an impact on consolidated earnings.

At 31 December 2004 it is estimated that a general increase of one percentage point in interest rates would

decrease the Group’s profit before tax by approximately EUR 2.5 million (2003: EUR 2.5 million). Interest rate

swaps have been included in this calculation.

It is estimated that a general increase of one percentage point in the value of the EUR against other foreign

currencies would have decreased the Group’s profit before tax by approximately EUR 0.4 million for the year

ended 31 December 2004 (2003: EUR 0.4 million). The forward exchange contracts have been included in this

calculation.

5.57 F a i r v a l u e s

The fair values of the following financial instruments differ from their carrying amounts shown in the

balance sheet:

(EUR x 1,000)

Trade and other receivables (excl WIP)


Forward exchange contracts

Secured bank loans

Convertible notes

Mortgage loans

USD fixed rate loans

EUR fixed rate loan

Cash flow hedge on USD loans

Cross currency interest swap

Finance lease liabilities

Bank overdraft

Trade and other payables

Total

Unrecognised gains/(losses)

Estimation of fair values

The following summarises the major methods and assumptions used in estimating the fair values of the

financial instruments reflected in the table.

114

Fairvalue

319,509

65,237

562

(142,489)

(99,900)

(14,355)

(94,136)

(23,352)

(41,458)

(6,282)

(17,530)

(44,436)

(269,443)

(368,073)

(7,099)

Carryingamount

319,509

65,237

562

(142,489)

(96,153)

(14,355)

(94,136)

(20,000)

(41,458)

(6,282)

(17,530)

(44,436)

(269,443)

(369,974)

–

Fairvalue

273,628

26,330

417

(127,486)

(102,260)

(14,609)

(86,923)

(24,034)

(48,729)

(14,978)

–

(41,018)

(219,594)

(379,256)

(7,076)

Carryingamount

273,628

26,330

417

(127,486)

(99,218)

(14,609)

(86,923)

(20,000)

(48,729)

(14,978)

–

(41,018)

(219,594)

(372,180)

–

2004 2003

Derivatives

Forward exchange contracts are marked to market using listed market prices.

Interest bearing borrowings

Fair value is calculated based on discounted expected future principal and interest cash flows.

Convertible notes

The fair value is based on quoted market prices.

Fair value lease liabilities

The fair value is estimated as the present value of future cash flows, discounted at market interest for

homogeneous lease arrangements.

Trade and other receivable/payables

For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect

the fair value. All other receivables/payables are discounted to determine the fair value.

Interest rates used for determining fair value

The group uses the government yield curve as of 31 December 2004 plus an adequate constant credit spread to

discount financial instruments. The interest rates used are as follows:

Derivatives

Loans and borrowings

Leases

Fair value has been determined either by reference to the market value at the balance sheet date or by

discounting the relevant cash flows using current interest rates for similar instruments.

5.58 O f f b a l a n c e s h e e t c o m m i t m e n t s

5.58.1 Operational leases as lessee

Non-cancellable operating lease rentals are payable as follows:

(EUR x 1,000)

Less than one year

Between one and five years

More than five years

The Group leases a number of offices and warehouse/laboratory facilities under operating leases. The leases

typically run for an initial period of between five and ten years, with an option to renew the lease after that date.

Lease payments are increased annually to reflect market rentals. None of the leases includes contingent rentals.

The Group does, in principle, not act as a lessor.

5.58.2 Capital commitments

During the year ended 31 December 2004 the Group entered into a contract to purchase property, plant and

equipment for EUR 888 (2003: EUR nil).

115

4.75% – 6.5%

9%

2003

4.75% – 6.5%

n/a

2004

2003

14,234

11,980

8,394

34,608

2004

12,677

11,017

5,946

29,640

5.58.3 Contingencies

The Group has contingent liabilities arising from contracts with a duration of more than one year such as

guarantees and lease obligations.

The holding company has issued a net worth statement for a line of credit for the companies in the United States.

Some the Group companies are, as a result of their normal business activities, involved either as plaintiffs or

defendants in claims. Based on information presently available the financial position of the Group is not likely

to be significantly influenced by any of these matters.

The holding company and the majority of the Dutch operating companies form a fiscal unit for corporate tax.

Each of the operating companies is severally liable for tax to be paid by all companies that belong to the fiscal unit.

5.59 S u b s e q u e n t e v e n t s

During the first months of 2005 the conversion of the convertible notes has started. Up to the end of February

2005 409 notes have been offered for conversion. Fugro has entered into an arrangement to refinance on a long-

term basis the remaining balance of the convertible subordinated notes and the bankloan used for the

acquisition of Thales GeoSolutions. The final funding mix will be determined shortly.

Fugro reached an agreement to sell the standard diving activities in Mexico. Also Fugro reached an agreement

to sell its 40% interest in Chartco, located in the United Kingdom. The company acquired assets and business of

BTW Ltd. in New Zealand. Fugro has been rewarded two orders to execute a large geophysical and geotechnical

survey for a LNG project in Nigeria.

5.60 R e l a t e d p a r t i e s

5.60.1 Identity of related parties

The Group also has a related party relationship with its subsidiaries, its associates (refer note 14), and with its

statutory Directors.

5.60.2 Transactions with statutory Directors and executive officers

Directors of the Company and management control 8.5% of the voting shares of the Company.

In addition to their salaries, the Group contributes to a post-employment defined benefit plan on their behalf.

Executive officers also participate in the Group’s share option programme (refer note 5.30.1).

The remuneration of the statutory Directors for 2004 and 2003 is as follows:

(in EUR)

Fixed salary

Bonus with respect to the previous year

Pension costs

Valuation of options granted

Total

1) Excluding subsequently calculated backservice up to 2002 of EUR 624.

2) Mr A. Jonkman became a statutory Director as from 19 May 2004.

The statutory Directors have the availability of a company car and a mobile telephone. They also receive a

limited monthly allowance to cover expenses.

The remuneration of the statutory Directors is determined by the Remuneration Committee. In 2004 an

independent investigation took place to review the level and composition of the remuneration of the statutory

Directors. The conclusion from this investigation was that the remuneration with regard to the fixed salary

component were out of step with the remuneration of statutory Directors in similar positions elsewhere.

116

K.S.Wester

2003

265,615

135,520

284,861

335,610

1,021,606

2004

298,987

88,500

411,211

463,050

1,261,748

G-J. Kramer

2003

442,000

228,666

357,3151)

402,732

1,430,713

2004

492,000

147,333

779,900

555,660

1,974,893

A. Jonkman

2003

–

–

–

–

n/a2)

2004

135,938

–

143,239

343,000

622,177

It was decided to eliminate this backlog. As a consequence the back service obligation for Mr G-J Kramer would

be significant. The pension agreement structure is based on an available premium system. In connection with

the resignation of Mr. Kramer in 2005, in 2004 a sum of EUR 875 of which EUR 440 is reported in the income

statement over 2004, was paid in order to meet the pension obligations Fugro agreed with Mr. Kramer at the

time. The relevant period is 2005 to 2007. The remunerations are adjusted as from 2003 based on the conclusions

of the independent investigation. Upon determining the level of bonuses the realisation of company and

personal targets are taken into account.

There are no guarantees or obligations towards or on behalf of the statutory Directors. Hereunder the

information of the options granted to members of the statutory Directors is given on an individual basis.

Statutory Directors

G-J. Kramer

Total

K.S. Wester

Total

A. Jonkman

Total

Total

117

1) Bonus in the bookyear; paid in the next year.

2) Shares not sold subsequent to exercise of option rights.

3) Shares partly sold subsequent to exercise of option rights.

4) Weighted averege.

Bonus1)

5

6

5

7

7

7

4

6

5

6

5

7

7

7

4

6

6

Expiring date

31-12-2004

31-12-2004

31-12-2005

31-12-2006

31-12-2007

31-12-2008

31-12-2009

31-12-2010

31-12-2004

31-12-2004

31-12-2005

31-12-2006

31-12-2007

31-12-2008

31-12-2009

31-12-2010

31-12-20084)

31-12-2010

Shareprice at

exercisedate

62.25

62.25

62.25

62.21

59.54

62.074)

Exerciseprice

28.04

19.97

36.90

68.75

50.10

43.13

40.80

61.40

28.04

19.97

36.90

68.75

50.10

43.13

40.80

61.40

45.844)

61.40

Number at 31 Dec.

2004

–

–

–

32,400

32,400

32,400

32,400

32,400

162,000

–

–

13,500

27,000

27,000

27,000

27,000

27,000

148,500

37,600

20,000

20,000

330,500

Forfeitedin 2004

–

–

–

–

Exercisedin 2004

16,2002)

16,2002)

16,2002)

48,600

13,500

13,5003)

27,000

2,700

–

75,600

Grantedin 2004

32,400

32,400

27,000

27,000

20,000

20,000

79,400

Number at 1 Jan.2004

16,200

16,200

16,200

32,400

32,400

32,400

32,400

178,200

13,500

13,500

13,500

27,000

27,000

27,000

27,000

148,500

40,300

–

326,700

Year

1997

1998

1999

2000

2001

2002

2003

2004

1997

1998

1999

2000

2001

2002

2003

2004

1997 – 2003

2004

Number ofmonthsIn EURNumber of option rights

118

(in EUR)



P.J. Crawford

J.A. Colligan

Th. Smith

P. Winsemius

There are no options granted and no assets available to the members of the Supervisory Board. There are no loans

outstanding to the members of the Supervisory Board and no guarantees given on behalf of members of the

Supervisory Board.

5.60.3 Other related party transactions

5.60.3.1 Joint venture

The Group has not entered into any joint ventures.

5.61 G r o u p e n t i t i e s

5.61.1 Significant subsidiaries

For an overview of (significant) subsidiaries we refer to chapter 6.

5.62 E s t i m a t e s a n d m a n a g e m e n t j u d g e m e n t s

Management discussed with the Audit Committee the development and choice of, and supply of information on

the critical accounting principles and estimates and also practice of these principles.

Key sources of estimation uncertainty

Note 5.57 contains information about the assumptions and their risk factors relating to goodwill impairment.

In Note 5.50 detailed analysis is given on the foreign currency exposure of the Group and risks in relation to

foreign exchange movements.

Critical accounting judgements in applying the Group’s accounting policies

Except as already described in the notes to the financial statements no other critical accounting judgements in

applying the Group’s accounting policies exist that require further explanation.

2003

40,000

33,000

31,000

28,000

16,800

31,000

179,800

2004

43,000

36,000

31,000

31,000

38,000

31,000

210,000

6 S u b s i d i a r i e s a n d A s s o c i a t e s o f F u g r o N . V .(Including statutory seat and interest)

119

Unless mentioned differently the interest of Fugro N.V., direct or indirect amounts to 100%.

Insignificant subsidiary companies in terms of third party revenue and balance sheet total have been deleted.

These subsidiary companies are fully incorporated into the consolidated annual accounts of Fugro N.V.,

unless indicated differently. Companies in which the Group participates and which are not included in

the consolidated Annual Accounts are marked by an #.

Company % Office, Country Company % Office, Country

Fugro Mauritius Ltd. (Sucursal EM Angola) Luanda, Angola

Fugro Airborne Surveys Pty Ltd. Perth, Australia

Fugro Ground Geophysics Pty Ltd. Perth, Australia

Fugro Holdings (Australia) Pty Ltd. Perth, Australia

Fugro Multi Client Services Pty Ltd. Perth, Australia

Fugro Spatial Solutions Pty Ltd. Perth, Australia

Fugro Survey Pty Ltd. Perth, Australia

Fugro-Jason Australia Perth, Australia

Kevron Aerial Surveys Pty Ltd. Perth, Australia

Kevron Geophysics Pty Ltd. Perth, Australia

OmniSTAR Pty Ltd. Perth, Australia

Robertson Research Australia Pty Ltd. Perth, Australia

Azeri-Fugro # 40% Baku City, Azerbaijan

Fugro Caspian B.V. Baku City, Azerbaijan

Fugro (TGS) Caspian Ltd. Baku City, Azerbaijan

Fugro België N.V. Mechelen, Belgium

Fugro Engineers S.A. Brussels, Belgium

Fugro International Ltd. Hamilton, Bermuda

Fugro Airborne Surveys Ltd. Gaborone West, Botswana

Fugro do Brasil Ltda Rio de Janeiro, Brazil

Fugro Marsat Servicide Submarinos Ltda Rio de Janeiro, Brazil

Geomag S/A Prospeccoes Aerogeofisicas 20% Rio de Janeiro, Brazil

LASA Engenhariae Prospeccoes S.A. 20% Rio de Janeiro, Brazil

Fugro Sdn Bhd (Brunei) Bandar Seri Begawan, Brunei Darussalam

Fugro TGS Brunei Sdn Bhd Kuala Belait, Brunei Darussalam

Geodetic Surveys (B) Sdn Bhd 70% Kuala Belait, Brunei Darussalam

Fugro (Canada) Inc. New Brunswick, Canada

Fugro Airborne Surveys Corp. Ottawa, Ontario, Canada

Fugro Airborne Surveys Corp. Mississauga, Toronto, Canada

Fugro Airborne Surveys Quebec Ltd. St-Laurent, Montreal, Canada

Fugro Jacques GeoSurveys Inc. 70% St. John’s, Newfoundland, Canada

Fugro/SESL Geomatics Ltd. Calgary, Alberta, Canada

China Offshore Fugro GeoSolutions Co, Ltd. 50% Shekou, Shenzhen, China

Fugro Offshore Survey (Shenzhen) Company Ltd. Shekou, Shenzhen, China

Fugro (Beijing) Engineering Consultants Ltd. Beijing, China

Shanghai Fugro Geotechnique Co. Ltd. 60% Shanghai, China

Fugro Denmark AS Esbjerg, Denmark

Fugro Egypt Ltd Cairo, Egypt

Fugro M.I.S.R. 75% Cairo, Egypt

Fugro S.A.E. Cairo, Egypt

Fugro TGS Ltd (Equatoria Guinea) Malabo, Equatorial Guinea

Fugro Geoid S.A.S. Clapiers, France

Fugro France S.A. Nanterre, France

Fugro Geotechnique S.A. Nanterre, France

Fugro Topnav S.A.S. Paris (Massy), France

Fugro Topnav S.A.S. Port Gentil, Gabon

Fugro Consult GmbH Berlin, Germany

IGF GmbH Könz, Germany

Fugro Airborne Surveys (Pty) Ltd Accra, Ghana

Fugro (Hong Kong) Ltd. Wanchai, Hong Kong

Fugro Data Services Ltd. Wanchai, Hong Kong

Fugro FLI-MAP International Ltd. Wanchai, Hong Kong

Fugro Geosciences International Ltd. Wanchai, Hong Kong

Fugro Holdings (Hong Kong) Ltd. Wanchai, Hong Kong

Fugro International (Hong Kong) Ltd. Wanchai, Hong Kong

Fugro Investment (Hong Kong) Ltd. Wanchai, Hong Kong

Fugro Marine Survey International Ltd. Wanchai, Hong Kong

Fugro SEA Ltd. Wanchai, Hong Kong

Fugro Survey (Middle East) Ltd. Wanchai, Hong Kong

Fugro Survey International Ltd. Wanchai, Hong Kong

Fugro Survey Ltd. Wanchai , Hong Kong

Fugro Survey Management Ltd. Wanchai, Hong Kong

Fugro Technical Services Ltd. Fo Tan, Shatin, N.T., Hong Kong

Cedec Geotechnical Services (Hong Kong) Ltd. Fo Tan, Shatin, N.T., Hong Kong

Geotechnical Instruments (Hong Kong) Ltd. Fo Tan, Shatin, N.T., Hong Kong

Terraform-FGS Ltd. Fo Tan, Shatin, N.T., Hong Kong

MateriaLab Consultants Ltd. Tuen Mun, N.T., Hong Kong

Fugro Geonics Pvt. Ltd. 90% Navi Mumbai, India

Fugro India Pvt. Ltd. New Mumbai, India

Fugro Geotech (Pvt) Ltd. Navi Mumbai, India

Fugro Geodetic Indonesia Jakarta Selatan, Indonesia

Fugro-Jason Netherlands B.V. Jakarta Selatan, Indonesia

P.T. Fugro Indonesia Jakarta Selatan, Indonesia

P.T. Kalvindo Raya Semesta Jakarta Selatan, Indonesia

120

Company % Office, Country Company % Office, Country

Fugro Oceansismica S.p.A. Roma, Italy

Robertson Italia S.a.r.l. Milan, Italy

Fugro Geoscience Co., Ltd. Tokyo, Japan

Fugro Japan Co., Ltd. Tokyo, Japan

Fugro Caspian B.V. Almaty, Kazakhstan Republic

Fugro Kazakhstan LLC Atyrau, Kazakhstan Republic

Fugro KazProject LLC Atyrau, Kazakhstan Republic

Fugro Eco Consult S.a.r.l. Munsbach, Luxembourg

Fugro (Macau) Limitada Engenharia Geotecnica Macau, Macau

Fugro Geodetic (Malaysia) Sdn Bhd 30% Kuala Lumpur, Malaysia

Fugro GEOS Sdn Bhd Kuala Lumpur, Malaysia

Fugro Geosciences (Malaysia) Sdn Bhd Kuala Lumpur, Malaysia

Fugro TGS Malaysia Sdn Bhd Kuala Lumpur, Malaysia

Fugro-Jason (M) Sdn. Bhd Kuala Lumpur, Malaysia

Fugro Airborne Surveys Ltd. Port- Louis, Mauritius

Fugro Aircraft Leasing Ltd. Port- Louis, Mauritius

Fugro Mauritius Ltd. Port- Louis, Mauritius

Fugro-Chance de Mexico S.A. de C.V. Ciudad Del Carmen, Campeche, Mexico

Fugro TGS Mexicana S.A de C.V. Ciudad Del Carmen, Campeche, Mexico

Geomundo S.A. de C.V. Ciudad Del Carmen, Campeche, Mexico

Ingenieria Subacquatica S.A. de C.V. Ciudad Del Carmen, Campeche, Mexico

Fugro Airborne Surveys (Pty) Ltd. Klein Windhoek, Namibia

Fugro TGS Namibia (Pty) Ltd. Walvis Baai, Namibia

Ecodemka B.V. Leidschendam, Netherlands

Fugro C.I.S. B.V. Leidschendam, Netherlands

Fugro Caspian B.V. Leidschendam, Netherlands

Fugro Ecoplan B.V. Leidschendam, Netherlands

Fugro Engineers B.V. Leidschendam, Netherlands

Fugro Ingenieursbureau B.V. Leidschendam, Netherlands

Fugro Intersite B.V. Leidschendam, Netherlands

Fugro Nederland B.V. Leidschendam, Netherlands

Fugro Survey B.V. Leidschendam, Netherlands

Fugro Vastgoed B.V. Leidschendam, Netherlands

Fugro-Inpark B.V. Leidschendam, Netherlands

OmniSTAR B.V. Leidschendam, Netherlands

Oserco B.V. Leidschendam, Netherlands

Fugro Robertson B.V. Leiden, Netherlands

Fugro-Jason Netherlands B.V. Rotterdam, Netherlands

Osiris B.V. Heemstede, Netherlands

Fugro Airborne Surveys N.V. Willemstad, Curaçao, Netherlands Antilles

Fugro Cable N.V. Willemstad, Curaçao, Netherlands Antilles

Fugro Curaçao N.V. Willemstad, Curaçao, Netherlands Antilles

Fugro Gravity N.V. Willemstad, Curaçao, Netherlands Antilles

Fugro Jacques N.V. 70% Willemstad, Curaçao, Netherlands Antilles

Fugro Satellite Services N.V. Willemstad, Curaçao, Netherlands Antilles

Fugro SeaSTAR N.V. Willemstad, Curaçao, Netherlands Antilles

Fugro Survey Caribbean N.V. Willemstad, Curaçao, Netherlands Antilles

Fugro BTW Ltd. New Plymouth, New Zealand

Fugro Survey (Nigeria) Ltd. Port Harcourt, Nigeria

Fugro Consultants Nigeria Ltd. Port Harcourt, Nigeria

Fugro Geotechnics AS Oslo, Norway

Fugro Multi Client Services AS Oslo, Norway

Fugro Norway AS Oslo, Norway

Fugro SeaSTAR AS Oslo, Norway

Fugro Starfix (Europe) AS Oslo, Norway

Fugro Survey AS Oslo, Norway

Fugro-Geoteam AS Oslo, Norway

Oceanor ASA Trondheim, Norway

Fugro Middle East & Partners LLC Muscat, Oman, Sultanate of

Fugro Geodetic Ltd. Karachi, Pakistan

Fugro Peninsular Geotechnical Services Doha, Qatar, State of

Fugro Project Ltd. Moscow, Russia

Fugro-Jacques NSTC Moscow, Russia

Fugro Geoscience GmbH Moscow, Russia

Fugro Project Ltd. Yuzhno-Sakhalinsk, Russia

Fugro-Geostatika Co Ltd. St. Petersburg, Russia

Sevoteam 50% St. Petersburg, Russia

Fugro-Suhaimi Ltd. 50% Dammam, Saudi Arabia

Fugro Geodetic Pte Ltd. Singapore, Singapore

Fugro Geosoft Solutions Pte Ltd. Singapore, Singapore

Fugro Holdings (Singapore) Pte Ltd. Singapore, Singapore

Fugro OmniSTAR Pte Ltd. Singapore, Singapore

Fugro Singapore Pte Ltd. Singapore, Singapore

Fugro Survey Pte Ltd. Singapore, Singapore

Fugro-GEOS Pte Ltd. Singapore, Singapore

Fugro Airborne Surveys (Pty) Ltd. Johannesburg, South Africa

Fugro Survey Africa (Pty) Ltd. Cape Town, South Africa

OmniSTAR (Pty) Ltd. Cape Town, South Africa

TPA-Fugro S.A. # 40% Madrid, Spain

Fugro Data Services AG Zug, Switzerland

Fugro Finance AG Zug, Switzerland

Fugro Geodetic AG Zug, Switzerland

Fugro Geoscience GmbH Zug, Switzerland

Fugro Survey GmbH Zug, Switzerland

Fugro Survey Pte Ltd. Bangkok, Thailand

Oceanor Thailand Co Ltd. Bangkok, Thailand

Siam Fugro Co. Ltd. Bangkok, Thailand

Fugro Survey Caribbean Inc. Chaguaramas, Trinidad and Tobago

Fugro Caspian B.V. Ashgabat, Turkmenistan

Fugro Middle East B.V. Dubai, United Arab Emirates

Fugro-Jason Middle East Dubai, United Arab Emirates

Robertson Research International Dubai, United Arab Emirates

Fugro Survey (Middle East) Ltd. Abu Dhabi, United Arab Emirates

Fugro TGS Overseas Ltd Abu Dhabi, United Arab Emirates

Fugro TGS (Saudi Arabia) Abu Dhabi, United Arab Emirates

Fugro-GEOS UAE Abu Dhabi, United Arab Emirates

121

Company % Office, Country

Alluvial Mining Ltd. Great Yarmouth, United Kingdom

Fugro Engineering Services Ltd. Basingstoke, United Kingdom

Fugro Airborne Surveys Ltd. Hemel Hempstead, United Kingdom

Fugro Ltd. Hemel Hempstead, United Kingdom

Fugro SL Ltd. Hemel Hempstead, United Kingdom

Fugro-Robertson Aberdeen Ltd. Aberdeen, United Kingdom

Fugro Survey Limited Aberdeen, United Kingdom

Global Positioning Systems Ltd. Aberdeen, United Kingdom

Fugro-GEOS Ltd. Swindon, United Kingdom

Fugro-Jason (UK) Ltd. Woking, Surrey, United Kingdom

Fugro-Robertson International Ltd. Llandudno, United Kingdom

Fugro Seismic Imaging Ltd. Swanley, United Kingdom

Fugro (USA), Inc. Houston, United States

Fugro Airborne Surveys Inc. Houston, United States

Fugro Geosciences, Inc. Houston, United States

Fugro GeoServices, Inc. Houston, United States

Fugro Gulf, Inc. Houston, United States

Fugro Multi Client Services, Inc. Houston, United States

Fugro Consultants LLP Houston, United States

Fugro, Inc. Houston, United States

Fugro-GEOS, Inc. Houston, United States

Fugro-Jason Inc. Houston, United States

Fugro-McClelland Marine Geosciences, Inc. Houston, United States

Fugro-Robertson, Inc. Houston, United States

Fugro Seismic Imaging Inc. Houston, United States

OmniSTAR, Inc. Houston, United States

John Chance Land Surveys Inc. Lafayette, United States

Fugro Chance Inc. Lafayette, United States

Fugro Pelagos, Inc. San Diego, United States

Fugro Seafloor Surveys, Inc. Seattle, United States

Fugro West, Inc. Ventura, United States

Petcom Inc Richardson, United States

Fugro-McClelland Marine Geosciences, Inc. Caracas, Venezuela

As stated in note 5.1, these are the Group’s first financial consolidated statements prepared in accordance with

IFRS.

The accounting policies set out in note 5.2 have been applied in preparing the financial statements for the

year ended 31 December 2004, the comparative information presented in these financial statements for the year

ended 31 December 2003 and in preparation of an opening IFRS balance sheet as at 1 January 2003 (the Group’s

date of transition).

In preparing its opening IFRS balance sheet, the Group had adjusted amounts reported previously in financial

statements prepared in accordance with Dutch GAAP. An explanation of how the transition from Dutch GAAP to

IFRS has affected the Group’s financial position, financial performance and cash flows is set out in the following

tables and the notes that accompany the tables.

122

7 S t a t e m e n t s o f r e c o n c i l i a t i o n o n f i r s t t i m e a d o p t i o n o f I F R S

(EUR x 1,000)

A s s e t s


Intangible assets

Financial fixed assets

Deferred tax assets


Inventories




Total assets

E q u i t y

Issued capital

Share premium

Reserves

Retained earnings

Total equity

Minority interest



Employee benefits

Provisions

Deferred tax liabilities


Bank overdraft



Provisions

Current tax liabilities and social premiums

Income tax payable


Total liabilities

Total equity, minority interest and liabilities

7.1 R e c o n c i l i a t i o n o f I F R S o p e n i n g b a l a n c e s h e e t

As at 1 January 2003

123

Effect oftransition

to IFRS

41,804

(6,172)

(12,038)

18,034

41,628

(32,037)

27,938

(560)

(4,659)

36,969

–

–

(11,802)

–

(11,802)

(300)

16,163

42,866

(91)

1,256

60,194

–

–

(2,256)

(6,068)

(138)

(2,956)

(11,418)

49,071

36,969

Dutch GAAP

192,293

218,016

21,096

–

431,405

62,279

274,784

24,777

361,840

793,245

2,971

207,159

1,350

60,218

271,698

2,552

273,520

4,749

295

49

278,613

18,338

1,762

194,767

7,980

12,851

5,051

240,677

518,995

793,245

IFRS

234,097

211,844

9,058

18,034

473,033

30,242

302,722

24,217

357,181

830,214

2,971

207,159

(10,452)

60,218

259,896

2,252

289,683

47,615

204

1,305

338,807

18,338

1,762

192,511

1,840

12,713

2,095

229,259

568,066

830,214

7.2 R e c o n c i l i a t i o n o f b a l a n c e s h e e t

As at 31 December 2003, respectively 31 December 2004

124

20032004

Effect oftransition

to IFRS

32,112

(17,991)

(9,758)

19,306

23,669

(35,101)

32,327

5,174

(51)

2,349

26,018

(16,039)

(13,548)

(29,587)

(481)

19,195

40,684

(1,805)

(1,434)

56,640

(91)

4,698

(2,132)

(7,172)

4,143

(554)

56,086

26,018

Dutch GAAP

236,689

291,942

24,421

1,097

554,149

72,102

338,446

–

65,288

475,836

1,029,985

3,033

207,159

(1,829)

32,420

240,783

2,949

412,700

4,360

2,389

2,917

422,366

44,436

2,354

264,745

24,580

22,458

5,314

363,887

786,253

1,029,985

IFRS

232,956

293,991

9,287

24,627

560,861

51,802

336,124

8,233

26,330

422,489

983,350

3,110

207,159

(35,673)

49,317

223,913

4,327

184,268

48,208

1,075

3,722

237,273

41,018

227,887

219,594

963

16,812

11,563

517,837

755,110

983,350

Effect oftransition

to IFRS

840

(8,098)

(1)

24,627

17,368

(42,875)

40,545

(2,115)

–

(4,445)

12,923

–

–

(36,080)

(139)

(36,219)

(339)

(213,206)

44,640

(1)

(2,367)

(170,934)

–

226,704

(2,187)

(1,783)

(2,376)

57

220,415

49,481

12,923

Dutch GAAP

232,116

302,089

9,288

–

543,493

94,677

295,579

10,348

26,330

426,934

970,427

3,110

207,159

407

49,456

260,132

4,666

397,474

3,568

1,076

6,089

408,207

41,018

1,183

221,781

2,746

19,188

11,506

297,422

705,629

970,427

IFRS

268,801

273,951

14,663

20,403

577,818

37,001

370,773

5,174

65,237

478,185

1,056,003

3,033

207,159

(17,868)

18,872

211,196

2,468

431,895

45,044

584

1,483

479,006

44,436

2,263

269,443

22,448

15,286

9,457

363,333

842,339

1,056,003

(EUR x 1,000)

A s s e t s


Intangible assets

Financial fixed assets

Deferred tax assets


Inventories


Income tax receivable



Total assets

E q u i t y

Issued capital

Share premium

Reserves

Retained earnings

Total equity

Minority interest



Employee benefits

Provisions

Deferred tax liabilities


Bank overdraft



Provisions

Current tax liabilities

Income taxes payable


Total liabilities

Total equity, minority interest and liabilities

(EUR x 1,000)

Revenue

Third party costs

Net revenue own services

Other income

Personnel expenses

Depreciation

Amortisation

Other operating expenses

Profit from operations (EBIT)

Financial income

Financial expenses

Income from non-consolidated subsidiaries

Profit before tax

Income tax expense

Profit after tax

Minority interest


Basic earnings per share (EUR)

Diluted earnings per share (EUR)

7.3 R e c o n c i l i a t i o n o f i n c o m e s t a t e m e n t

For the financial year 2003 respectively 2004

125

2003

Effect oftransition

to IFRS

(7,695)

13,148

5,453

16,889

2,366

(4,521)

5,906

(26,428)

(335)

(1,168)

(12,630)

181

(13,952)

224

(13,728)

180

(13,548)

(0.94)

(0.74)

Dutch GAAP

830,067

(286,520)

543,547

–

(300,195)

(49,483)

(12,686)

(117,576)

63,607

1,405

(19,928)

–

45,084

(11,660)

33,424

(1,004)

32,420

2.24

2.21

IFRS

822,372

(273,372)

549,000

16,889

(297,829)

(54,004)

(6,780)

(144,004)

63,272

237

(32,558)

181

31,132

(11,436)

19,696

(824)

18,872

1.30

1.47

2004

Effect oftransition

to IFRS

(13,631)

10,598

(3,033)

16,540

2,083

(772)

10,163

(14,507)

10,474

277

(8,925)

139

1,965

(2,175)

(210)

71

(139)

(0.01)

0.09

Dutch GAAP

1,021,639

(376,242)

646,397

–

(333,706)

(65,367)

(17,241)

(136,321)

93,762

2,114

(25,312)

–

70,564

(17,769)

52,795

(3,339)

49,456

3.33

3.20

IFRS

1,008,008

(364,644)

643,364

16,540

(331,623)

(66,139)

(7,078)

(150,828)

104,238

2,391

(34,237)

139

72,529

(19,944)

52,585

(3,268)

49,317

3.32

3.29

(EUR x 1,000)

Cash flows from operating activities


Adjustments for:

Depreciation

Amortisation


Minority interest

Result non-consolidated subsidiaries

Gain on sale of property, plant and equipment

Costs granted option rights

Operating profit before changes in working

capital and provisions

In(de)crease in trade and other receivables


In(de)crease in trade and other payables

Increase in provisions and employee benefits

Cash generated from the operations

Interest paid

Income tax paid


7.4 R e c o n c i l i a t i o n o f c a s h f l o w s t a t e m e n t

For the financial year 2003 respectively 2004

126

2003

Effect oftransition

to IFRS

(8,463)

4,521

(5,906)

6,849

(1)

181

(37)

1,944

(912)

(4,389)

3,064

(80)

(255)

(2,572)

(2,750)

2,994

(2,387)

Dutch GAAP

71,735

49,483

12,686

(24,073)

(1,550)

–

3,579

–

111,860

22,422

21,673

(20,626)

15,183

150,512

(19,928)

(9,896)

120,688

IFRS

63,272

54,004

6,780

(17,224)

(1,551)

181

3,542

1,944

110,948

18,033

24,737

(20,706)

14,928

147,940

(22,678)

(6,902)

118,360

2004

Effect oftransition

to IFRS

5,208

772

(10,163)

(137)

213

112

–

3,531

(464)

(8,218)

7,774

(2,089)

4,208

1,211

(356)

(2,806)

(1,951)

Dutch GAAP

99,028

65,367

17,241

(19,274)

(1,622)

27

723

–

161,490

37,581

(26,357)

(47,769)

(23,939)

101,006

(25,312)

(16,692)

(59,002)

IFRS

104,236

66,139

7,078

(19,411)

(1,409)

139

723

3,531

161,026

29,363

(18,583)

(49,858)

(19,731)

102,217

(25,668)

(19,498)

57,051

(EUR x 1,000)

Cash flows from investing activities



Interest received

Dividends received



Development intangible fixed assets



Cash flows from financing activities


Proceeds from long-term loans



Dividends paid




Effect of exchange rate fluctuations on cash held


Presentation in balance sheet


Bank overdraft

127

2003

Effect oftransition

to IFRS

(158)

(1,608)

(1,292)

124

19,386

(1,658)

(4,557)

1,090

11,327

–

–

–

(8,490)

–

(8,490)

509

(560)

–

(51)

(51)

–

(51)

Dutch GAAP

4,380

1,918

1,405

–

(82,423)

(42,409)

–

(3,443)

(120,572)

886

37,950

(5,139)

(3,599)

(14,616)

15,482

15,598

6,439

(1,185)

20,852

65,288

(44,436)

20,852

IFRS

4,222

310

113

124

(63,037)

(44,067)

(4,557)

(2,353)

(109,245)

886

37,950

(5,139)

(12,089)

(14,616)

6,992

16,107

5,879

(1,185)

20,801

65,237

(44,436)

20,801

2004

Effect oftransition

to IFRS

(15,842)

(9,806)

–

–

5,020

42,112

(4,436)

49

17,097

2,330

–

–

(17,425)

–

(15,095)

51

(51)

–

–

–

–

–

Dutch GAAP

42,943

16,749

2,114

277

(9,658)

(123,075)

–

(1,609)

(72,259)

5,686

–

(761)

(16,397)

(9,426)

(20,898)

(34,155)

20,852

(1,385)

(14,688)

26,330

(41,018)

(14,688)

IFRS

27,101

6,943

2,114

277

(4,638)

(80,963)

(4,436)

(1,560)

(55,162)

8,016

–

(761)

(33,822)

(9,426)

(35,993)

(34,104)

20,801

(1,385)

(14,688)

26,330

(41,018)

(14,688)

7.5 I n t r o d u c t i o n

In the Netherlands IFRS is not yet accepted for statutory purposes for the financial year 2004. Therefore the

annual report 2004 of the Group has been prepared under a dual accounting based principle. The consolidated

financial statements are presented for both Dutch GAAP and IFRS based financial figures. The Fugro N.V.

company financial statements however are presented on Dutch GAAP basis only. Please note that the Dutch

GAAP based company financial statements are the legally required statutory accounts.

As stated in note 5.1, these are the Group’s first consolidated financial statements prepared in accordance

with IFRS.

The accounting policies set out in note 5.2 have been applied in preparing the financial statements for the

year ended 31 December 2004, the comparative information presented in these financial statements for the year

ended 31 December 2003 and in the preparation of an opening IFRS balance sheet at 1 January 2003 (the Group’s

date of transition)

In preparing its opening IFRS balance sheet, the Group has adjusted amounts reported previously in financial

statements prepared in accordance with its former basis of accounting (Dutch GAAP). An explanation of how the

transition from Dutch GAAP to IFRS has affected the Group’s financial position, financial result and cash flows is

set out in the tables and the notes that accompany the tables.

7.6 E x p l a n a t i o n o f t r a n s i t i o n t o I F R S ( n u m b e r s x E U R 1 , 0 0 0 )

7.6.1 Property, plant and equipment

Under Dutch GAAP, certain leases were classified as operating lease based on quantified criteria. Under IFRS

(IAS 17) those leases are classified as finance leases since the Group holds substantially all the risks and rewards

to the ownership of the related assets. These assets are recognised in the balance sheet of the group.

The effect is to increase Property, plant and equipment by EUR 41,804 at 1 January 2003, by EUR 32,112 at

31 December 2003 and by EUR 840 at 31 December 2004. As a result depreciation charges increase by

EUR 4,521 for the year ended 31 December 2003 and EUR 772 for the year ended 31 December 2004.

The effect is also to increase Interest-bearing loans and borrowings by EUR 16,163 at 1 January 2003,

by EUR 19,195 at 31 December 2003 and decreased by EUR 213,206 at 31 December 2004. This decrease is caused

by the classification as short-term of some loans that will be redeemed in 2005.

The Group did not elect to measure items of property, plant and equipment at the date of transition to IFRS

(1 January 2003) at its fair value with the exception of two vessels as set out in note 5.8. Instead, previous GAAP

values were used as deemed cost, taking into consideration the impact of application of the component approach.

Under IFRS (IAS 16) the Group applied the component approach and reassessed the useful life of the

components at 1 January 2003, 31 December 2003 and 31 December 2004. Under Dutch GAAP, maintenance

costs for overhauls and dry-docking were accrued for over the period until the next overhaul or dry-docking was

carried out. A separate component was recognised for overhaul and dry-docking cost that are performed on

a regular basis. The carrying value of property, plant and equipment decreased with EUR 3,818 at 1 January 2003,

EUR 357 at 31 December 2003 and EUR 173 at 31 December 2004.

7.6.2 Intangible assets

The Group has applied IFRS 3 to all business combinations that have occurred since 1 January 2003 (the date of

transition to IFRS). In addition, the group has elected not to apply IFRS 3 retrospectively to business

combinations that have occurred before 1 January 2003.

At transition date to IFRS (1 January 2003), the Group identified certain intangibles (mainly software)

that meet the recognition criteria of IAS 38. These intangible assets were acquired in business combinations

and were subsumed in goodwill under Dutch GAAP. Consequently, Intangible assets increase with EUR 19,479 at

1 January 2003, EUR 19,559 at 31 December 2003 (after capitalisation of EUR 4,557) and EUR 17,229 at

31 December 2004 (after capitalisation of EUR 4,436). Consistent with IFRS (IFRS 1), the Group decreased goodwill

with EUR 27,121 at 1 January 2003, EUR 38,883 at 31 December 2003 and EUR 27,657 at 31 December 2004. Since

software is amortised under IFRS and is not recognised under Dutch GAAP, amortisation charges increased with

EUR 6,780 for the year ended 31 December 2003 and EUR 7,078 for the year ended 31 December 2004.

128

Under IFRS (IFRS 3) goodwill is measured at cost less any accumulated impairment losses. Under Dutch GAAP,

goodwill was amortised over its useful life. Consequently, amortisation cost decreased by EUR 12,686 for the year

ended 31 December 2003 and EUR 17,241 for the year ended 31 December 2004, resulting in an increase of

Goodwill with EUR 12,686 at 31 December 2003 and EUR 17,241 at 31 December 2004.

Furthermore, the Group tested the goodwill for impairment at the date of transition to IFRS in accordance

with the provisions of IFRS (IFRS 1 and IAS 36). It followed that no impairment loss over 2003 was required.

Under Dutch GAAP, the Group recorded a restructuring provision of EUR 17,500 (against goodwill) relating to

a business combination acquired in 2003. Under IFRS (IFRS 3) this restructuring provision is not allowed to be

recorded against goodwill as the provision does not qualify under IAS 37 from the perspective of the acquiree

(but has been set-up by the acquirer). Consequently, other operating expenses increased with EUR 17,500

for the year ended 31 December 2003 and with EUR 5,170 in 2004, and goodwill decreased with EUR 17,500

at 31 December 2003 and EUR 22,670 as of 31 December 2004 compared to Dutch GAAP.

7.6.3 Investments in non-consolidated subsidiaries/other investments

Under Dutch GAAP a 50% shareholding was fully consolidated with the elimination of a 50% minority interest.

However, the Group believes that they have no control, but significant influence over the shareholding which

was classified as an associate under IFRS (IAS 28) and accounted for under the equity method. The minority

interest that was recorded under Dutch GAAP has been released (EUR 301 at 1 January 2003 respectively

EUR 481 at 31 December 2003). As a result of this property, plant and equipment decreased with EUR 2,611 at

1 January 2003 and EUR 2,442 at 31 December 2003. Working capital increased with EUR 2,013 at 1 January 2003

and with EUR 1,480 at 31 December 2003. Further two 50% participations in partnerships of which all the risk

and return are substantially for the Group have been eliminated against the capitalisation of the underlying

assets and the inclusion of the lease obligations concerning the assets. At 1 January 2003 financial fixed assets

decreased with EUR 12,342 and with EUR 9,758 at 31 December 2003. In 2004 the partner shares in the

partnerships were fully acquired by the Group.

7.6.4 Deferred tax assets

Under Dutch GAAP, unused tax losses carried forward were recorded if there was a high degree of probability

that these tax losses carried forward would be realised. Under IFRS (IAS 12) deferred tax assets are recognised for

unused tax losses carried forward to the extent that it is probable that future taxable profit will be available

against which the unused tax losses can be utilised. Consequently, deferred tax assets increased at 1 January

2003 with EUR 19,231, at 31 December 2003 with EUR 20,750 and at 31 December 2004 with EUR 22,364.

Unlike IFRS, Dutch GAAP allowed deferred tax assets and deferred tax liabilities to be offset where they were

not related to income taxes levied by the same taxation authority. The effect of the change at transition date is

to increase deferred tax assets and deferred tax liabilities by EUR 392 at 1 January and a decrease by EUR 1,604

at 31 December 2003.

7.6.5 Equity

The Group has elected as first time adopter to use the IFRS (IFRS 1) exemption whereby the cumulative

translation differences for all foreign entities are deemed to be zero at the date of transition to IFRS (1 January

2003). As from this date the translation differences in respect of all foreign entities is presented as a separate

component of equity.

129

7.6.6 Employee benefits

7.6.6.1 Pensions

Under Dutch GAAP the Group recognised the contribution and the related staff costs on the basis of premiums

charged.

The Group has adopted the IAS 19 amendment from December 2004 which permits an entity to recognise all

actuarial gains and losses in the periode in which they occur outside profit and loss in the statement of

recognised income and expense. The Group has elected under IFRS (IFRS 1) to recognise all cumulative actuarial

gains and losses at the date of transition to IFRS. Consequently, an employee benefit liability of EUR 46,273 is

recorded at 1 January 2003 against equity. Under Dutch GAAP a pension provision of EUR 4,749 has been

recorded at 1 January 2003.

Further long term service liabilities are presented under this heading under IFRS at 1 January 2003 EUR 1,884

of which EUR 383 was already provided for, at 31 December 2003 EUR 2,027 of which 728 was already provided

for. At 31 December 2004 the corresponding amount are EUR 1,822, of which EUR 674 was already provided for

under Dutch GAAP.

The employee benefit liability amounts to EUR 43,017 at 31 December 2003 and EUR 46,386 at 31 December

2004, compared to the previous GAAP pension provision of EUR 4,360 respectively EUR 3,568.

7.6.6.2 Share-based payments

The Group applied IFRS 2 to its active share-based arrangements at 1 January 2004, except for equity-settled

share-based payment arrangements granted before 7 November 2002.

Under Dutch GAAP these equity-settled share-based payment arrangements were not valued at balance sheet

date (but only disclosed in the notes to the financial statements).

Consistent with IFRS (IFRS 2), the Group accounts for the equity-settled share-based payment arrangements at

fair value measured at grant date. As a consequence employee benefit related liabilities increase with EUR 1,944

at 31 December 2003 and personnel expenses increased by the same amount. Furthermore, exployee benefit

related liabilities have increased by EUR 3,531 for the year ended 31 December 2003 and personnel expenses

increased by the same amount.

7.6.7 Provisions

Under IFRS (IAS 37) maintenance provisions are no longer allowed. Consequently, the maintenance provision

of EUR 4,160 at 1 January 2003, EUR 2,946 at 31 December 2003 and EUR 1,783 at 31 December 2004 have been

released against retained earnings respectively the result for the year ending at 31 December 2003 and

31 December 2004. This resulted in a reduction of other operating expenses by EUR 2,245 for the year ended

31 December 2003 and EUR 1,386 for the year ended 31 December 2004.

Further a reorganisation provision taken under Dutch GAAP in 2002 of EUR 2,204 does not qualify under IFRS.

Consequently this amount has been reversed and taken into retained earning at 1 January 2003. The result for

the year ended 31 December 2003 has been decreased with EUR 2,204 forming this provision in 2003 under IFRS.

130

7.6.8 Financial instruments

The Group has under IFRS 1 split the compound financial instruments (the convertible loan) into a separate

liability and equity component. Furthermore, the Group has applied IAS 32, 39 and IFRS 4 as of IFRS transition

date. Applying the effective interest method this results in an increase in equity at 1 January 2003 of EUR 5,721.

Financing cost in the year ended 31 December 2003 increased with EUR 2,499 and EUR 2,565 for the year ended

at 31 December 2004.

Under Dutch GAAP financial instruments were not recognised in the financial statements.

Under IFRS (IAS 32 & IAS 39) financial instruments are included at fair value or amortised cost depending on

the nature of the financial instruments.

As a consequence the Group has applied hedge accounting for a number of perfect foreign currency hedge

contracts regarding the repayments as well as the interest payments on long term USD loans. As a consequence

the related currency exchange differences on the USD loans are offset against an equal amount of value changes

in the financial instrument. For the year ended 31 December 2003 these differences amounted to EUR 19,091

and for the year ended 31 December 2004 EUR 7,271.

The fair value of the financial hedging instruments on the future interest payments on the USD loans

are recognised in equity and amount to EUR 2,092 positive at 1 January 2003 and EUR 6,282 negative at

31 December 2003. At 31 December 2004 the fair value amounted to EUR 14,978 negative.

The fair value changes as a result of short term foreign currency contracts in relation to future transactions

are recognised in the profit and loss account. At 1 January 2003 the effect on retained earnings of these

derivatives amount to EUR 735. At 31 December 2003 the effect amounts to EUR 1,120; at 31 December 2004 the

effect was EUR 1,555. In the year ended 31 December 2003 the amount of changes in value of these derivatives

amounts to EUR 385; for the year ended 31 December 2004 EUR 435.

7.6.9 Work in progress

A large portion of the work in progress under Dutch GAAP qualifies as unbilled receivables under IAS 38.

As a consequence the amount of the work in progress presented under IFRS is substantially lower than under

Dutch GAAP. As per 31 December 2004 the amount of unbilled receivables classified under trade and other

receivables under IFRS is EUR 42,512 (31 December 2003: EUR 34,707 and 1 January 2003: EUR 32,037).

131

7.7 R e c o n c i l i a t i o n o f r e t a i n e d e a r n i n g s

As at 1 January 2003, 31 December 2003 and respectively (EUR x 1,000)

Total retained earnings in accordance with Dutch GAAP

Release of provisions

Re-allocation goodwill/introduction depreciated software

Lapsing of amortised goodwill under IFRS

Reorganisation costs in equity

Introduction of DB plan (net) obligations

Long term service leave obligations

Equity component in convertible loan

Valuation of financial instruments in connection with

foreign currency cash flow hedges

Valuation of short term foreign currency exchange contracts

Capitalisation of partnership asset minus liabilities

Adjustments on accounts receivables

Adjustments of inventory

Tax effect IFRS adjustments to equity

Recognition of tax assets from tax losses


Total equity in accordance with IFRS

132

1-1-2003

271,698

4,215

(6,353)

–

–

(41,524)

(1,501)

5,721

2,092

735

5,759

(177)

–

12,838

6,393

–

259,896

31-12-2003

240,783

5,588

(12,498)

12,686

(17,500)

(38,657)

(1,299)

3,222

(6,282)

1,120

4,326

(365)

(368)

12,436

8,314

(310)

211,196

31-12-2004

260,132

3,231

(15,142)

29,927

(22,670)

(42,818)

(1,148)

657

(14,978)

1,555

4,326

(365)

(368)

15,544

6,820

(790)

223,913

7.8 A u d i t o r s ’ R e p o r t o n t h e c o n s o l i d a t e d I F R S A n n u a l a c c o u n t s 2 0 0 4

Introduction

We have audited the consolidated IFRS financial statements (‘financial statements’) of Fugro N.V.,

Leidschendam, for the year 2004 (as set out on pages 68 to 133). These financial statements are the responsibility

of the company’s Management. Our responsibility is to express an opinion on these financial statements based

on our audit.

Scope

We conducted our audit in accordance with auditing standards generally accepted in the Netherlands. Those

standards require that we plan and perform the audit to obtain reasonable assurance about whether the

financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial statements. An audit also includes assessing the

accounting principles used and significant estimates made by Management, as well as evaluating the overall

presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the company as at

31 December 2004 and of the result for the year then ended in accordance with the International Financial

Reporting Standards.

The Hague, 10 March 2005

KPMG Accountants N.V.

133

8.1 G e n e r a l

The Annual Accounts of Fugro N.V. as presented hereafter are prepared in conformity with Generally Accepted

Accounting Principles in the Netherlands and compliant with the legal requirements concerning annual

reporting as included in Titel 9 Book 2 BW.

These accounting principles are in general in accordance with the valuation principles as applied in the

primary consolidated annual accounts prepared under IFRS. Reference is made to the accounting principles

on the pages 73 through 83 of this annual report.

The notes to the consolidated Annual Accounts under IFRS form an integral part of the Annual Accounts

prepared under Dutch GAAP. Material differences are separately disclosed in this paragraph.

8.2 C o n s o l i d a t i o n

Refer to note 5.4 to the consolidated IFRS financial statements.

8.3 F o r e i g n c u r r e n c i e s


8.4 P r e s e n t a t i o n

Referring to article 362, clause 4 of part 9 of book 2 of the Netherlands Civil Code, there is a deviation from the

rules on Models of Annual Accounts for the presentation of the profit and loss account. This deviation is

amongst others because of comparison purposes, especially with respect to the presentation of the amortisation

of goodwill.

8.5 R e s e a r c h a n d d e v e l o p m e n t

The Group is deeply committed to research and development. However, as research and development is

frequently contained within projects at cost price, or lower, a precise quantification of the amounts incurred is

not possible.

8.6 I n t a n g i b l e f i x e d a s s e t s – g o o d w i l l

Goodwill is determined as the difference between the acquisition price and the fair value of the acquired assets

and liabilities. The fair value is determined internally. As of the first of January 2001, the goodwill payment is

capitalised and amortised over the estimated lifetime, with a maximum of twenty years using a straight line

method.

8.7 T a n g i b l e f i x e d a s s e t s



The Group’s share in associated companies where the Group has significant influence are recorded in the

consolidated financial statements on an equity accounted basis, using the most recent financial statements that

use the Group’s accounting policies. Participations over which a significant influence can be exercised are

valued at the net capital asset in accordance with the accounting principles of Fugro N.V. Participations over

which no significant control can be exercised are valued at the acquisition price.

Long-term receivables included here are stated at nominal value less any provisions considered necessary.

134

8 D u t c h G A A P a n n u a l r e p o r t

8.9 S t o c k s o f c o n s u m a b l e s a n d w o r k i n p r o g r e s s

Refer to note 5.11 and 5.12.1. Unlike under IFRS work in progress is presented in total separate from advances

received in total which are included in short term liabilities; so not on a contract by contract basis.

Refer to note 5.11.2 to the consolidated IFRS financial statements with respect to the multi-client seismic library.

8.10 R e c e i v a b l e s

These receivables are stated at nominal value less a provision for doubtfull debts if required.

8.11 L i q u i d a s s e t s


8.12 L i a b i l i t i e s a n d l o a n s

Long-term and current liabilities and loans are stated at their nominal amounts.


Provisions are built up for actual or legally enforceable obligations and are taken into account at nominal value

except for those relating to the group’s obligations for pension backservice, which are based upon actuarial

valuations.

8.14 D e f e r r e d t a x e s

Deferred taxes may arise as a result of temporary differences between the business economic and fiscal

valuation of assets and liabilities. The deferred taxes are included at nominal value and calculated using the tax

rates valid on the balance sheet date. Deferred tax receivables are only included as far as they are offset by

deferred tax obligations that relate to the same periods, or if in some other manner there is a high degree of

probability that these deferred receivables can be realised. Deferred tax assets are included as other receivables.

8.15 C o n t i n g e n t l i a b i l i t i e s

These include conditional and unconditional liabilities resulting from agreements such as guarantees,

lease obligations et cetera.

8.16 T u r n o v e r

Refer to note 5.21 to the consolidated IFRS financial statements. For segment information, refer to note 5.25.

8.17 T h i r d p a r t y c o s t s

Refer to note 5.22.1 to the consolidated IFRS financial statements.

8.18 D e p r e c i a t i o n

Refer to note 5.8.4 to the consolidated IFRS financial.

8.19 A m o r t i s a t i o n

Goodwill is amortised over the estimated useful live to a maximum of 20 years.

8.20 I m p a i r m e n t o f a s s e t s

Refer to note 5.14.

8.21 P e r s o n n e l e x p e n s e s a n d o t h e r o p e r a t i n g c o s t s

Personal expenses and other operating costs are reported in the period to which they relate.

135

8.22 I n t e r e s t r e c e i v a b l e ( p a y a b l e )

These relate to interest income receivable from and expenses payable to third parties.

8.23 T a x e s

These are computed on the commercial result before tax and after taking into account all fiscal facilities

available. Taxes on profit are computed in accordance with the rates of taxation in the various countries in

which companies of the group operate. Amounts of tax which have not yet fallen due and are caused by timing

differences are included in the deferred tax assets / liabilities.

8.24 A c c o u n t i n g p r i n c i p l e s f o r t h e c a s h f l o w s t a t e m e n t


136

(EUR x 1,000)

F i x e d a s s e t s

(14.1) Intangible fixed assets

(14.2) Tangible fixed assets


Current assets

(14.4) Stocks and work in progress

(14.5) Accounts receivable

Cash and Banks

Total assets

Equity

Third party interests

(13) Group equity

(14.6) Provisions

(14.7) Long term debts

(14.9) Short term liabilities

Total liabilities and shareholders equity

9 C o n s o l i d a t e d D u t c h G A A P b a l a n c e s h e e t(before proposed appropriation of result)

137

2003

291,942

236,689

24,421

553,052

72,102

339,543

65,288

476,933

1,029,985

240,783

2,949

243,732

34,246

412,700

339,307

1,029,985

2004

302,089

232,116

9,288

543,493

94,677

305,927

26,330

426,934

970,427

260,132

4,666

264,798

13,479

397,474

294,676

970,427

(EUR x 1,000)

(14.10) Revenues

(14.10) Third party costs

(14.11) Staff costs

(14.12) Depreciation

(14.13) Other operational expenses

Operating result before amortisation of goodwill

(14.14) Amortisation of goodwill

Operating result (EBIT)

(14.14) Interest revenues

(14.15) Financing costs

Operational result before taxes

(14.16) Taxation

Operating result after taxes

Third party share

Net result


Net result per share before amortisation of goodwill (EUR)

Net result after dilution (EUR)*

Net result per share after amortisation of goodwill (EUR)

Net result after dilution (EUR)*

* Refer to note 5.45.2 for calculation of the dilution effect.

1 0 C o n s o l i d a t e d D u t c h G A A P i n c o m e s t a t e m e n t

138

2003

830,067

(286,520)

(300,195)

(49,483)

(117,576)

(753,774)

76,293

(12,686)

63,607

1,405

(19,928)

(18,523)

45,084

(11,660)

33,424

(1,004)

32,420

45,106

3.12

3.00

2.24

2.21

2004

1,021,639

(375,242)

(333,706)

(65,367)

(136,321)

(910,636)

111,003

(17,241)

93,762

2,114

(25,312)

(23,198)

70,564

(17,769)

52,795

(3,339)

49,456

66,697

4.49

4.25

3.33

3.20

(EUR x 1,000)

Foreign exchange translation differences

Other movements

Net loss recognised directly in equity

Net profit for the period

Total result for the period

Attributable to:


Minority interest

Total recognised income and expenses for the period

1 1 C o n s o l i d a t e d D u t c h G A A P s t a t e m e n t o f t o t a l i n c o m e a n d e x p e n s e(For the year ended 31 December)

139

2003

(42,629)

(6,090)

(48,719)

32,420

(16,299)

(17,303)

1,004

(16,299)

2004

(23,104)

2,423

(20,681)

49,456

28,775

25,436

3,339

28,775

1 2 C o n s o l i d a t e d D u t c h G A A P s t a t e m e n t o f c a s h f l o w s(For the year ended 31 December)

140

2003*

71,735

49,483

12,686

(24,073)

(1,550)

–

3,579

–

111,860

22,422

21,673

(20,626)

15,183

150,512

(19,928)

(9,896)

120,688

4,380

1,918

1,405

–

(82,423)

(42,409)

(3,443)

(120,572)

886

37,950

(5,139)

(3,599)

(14,616)

15,482

15,598

6,439

(1,185)

20,852

65,288

(44,436)

20,852

2004

99,028

65,367

17,241

(19,274)

(1,622)

27

723

–

161,490

37,581

(26,357)

(47,769)

(23,939)

101,006

(25,312)

(16,692)

59,002

42,943

16,749

2,114

277

(9,658)

(123,075)

(1,609)

(72,259)

5,686

–

(761)

(16,397)

(9,426)

(20,898)

(34,155)

20,852

(1,385)

(14,688)

26,330

(41,018)

(14,688)* Adjusted for comparison purposes.

(EUR x 1,000)

C a s h f l o w f o r o p e r a t i o n a l a c t i v i t i e s

Operating profit before financing costs

Adjustments for:

Depreciation

Amortisation


Change in minority interest

Share of profit associates

Result on sale of fixed assets

Equity settled share based payments

Operating profit before changes in working capital and provisions

Decrease in trade and other receivables


In(de)crease in trade and other payables

In(de)crease in provisions and employee benefits

Cash generated from operating activities

Interest paid

Income tax paid (received)


C a s h f l o w f r o m i n v e s t i n g a c t i v i t i e s



Interest received

Dividends received





C a s h f l o w f r o m f i n a n c i n g a c t i v i t i e s


Proceeds from other non-current borrowings



Dividends paid




Effects of exchange rate fluctuations on cash held


Presentation in balance sheet:


Bank overdrafts

The following tables show the details of recognised income resulting in the equity movements for the reporting

period and the comparative data for the previous reporting period.

(EUR x 1,000)

Opening balance 1 January 2003

Stock dividend previous year

Cash dividend previous year

Addition to other reserves

Exercised options

Repurchase/purchase share certificates

Currency exchange differences group companies

Other

Result for the year

Total recognised income

Closing balance 31 December 2003

(EUR x 1,000)

Opening balance 1 January 2004

Issue of shares

Stock dividend previous year

Cash dividend previous year

Exercised options

Repurchase/purchase share certificates

Currency exchange differences group companies

Other

Result for the year

Total recognised income

Closing balance 31 December 2004

141

1 3 D u t c h G A A P e q u i t y m o v e m e n t s

Unappro-priated

retainedprofit

60,218

(62)

(14,616)

(45,540)

–

–

–

–

32,420

(27,798)

32,420

Other reserves

5,860

–

–

45,540

886

(5,139)

(1,837)

–

39,450

45,310

ReserveCurrency

differ-ences

(4,510)

–

–

–

–

–

(42,629)

–

–

(42,629)

(47,139)

Capital surplus

207,159

–

–

–

–

–

–

–

–

–

207,159

Issued and paid

up capital

2,971

62

–

–

–

–

–

–

–

62

3,033

Total 2003

271,698

–

(14,616)

–

886

(5,139)

(42,629)

(1,837)

32,420

(30,915)

240,783

Unappro-priated

retainedprofit

32,420

(77)

(9,426)

(22,917)

–

–

–

–

49,456

17,036

49,456

Other reserves

45,310

–

–

22,917

5,686

(761)

–

(2,502)

–

25,340

70,650

ReserveCurrency

differ-ences

(47,139)

–

–

–

–

–

(23,104)

–

–

(23,104)

(70,243)

Capital surplus

207,159

–

–

–

–

–

–

–

–

–

207,159

Issued and paid

up capital

3,033

77

–

–

–

–

–

–

–

77

3,110

Total 2004

240,783

–

(9,426)

–

5,686

(761)

(23,104)

(2,502)

49,456

19,349

260,132

Reference is made to the notes with the consolidated balance sheet in accordance with IFRS. Differences between

Dutch GAAP and IFRS are explained hereunder.


Refer to note 5.36 and 5.37 of the consolidated financial statements based on IFRS.

N o t e s t o t h e c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s

(EUR x 1,000)

Intangible fixed assets

As of 1 January

Purchase value

Cumulative amortisation

Book value

Movement during the year

Goodwill related to the acquisition of business combinations

Change goodwill previous years

Amortisations


As of 31 December

Purchase value

Accumulated amortisation

Balance


Refer to note 5.35 for the consolidated financial statements based on IFRS.

As at 31 December 2003 leased assets are not recognised (EUR 17,530) contrary to IFRS where these qualify

as financial lease. In 2004 these assets were acquired. The remaining difference of EUR 840 is caused by the

IFRS interpretation of the components approach.



Financial fixed assets at 31 December 2003 are, compared to IFRS, EUR 9,758 higher. The difference relates to

the accounting treatment of the 50% ownership of two vessels. Fugro has acquired full ownership of these two

vessels in 2004 (refer to note 5.8.1).

142

1 4 N o t e s t o t h e c o n s o l i d a t e d D u t c h G A A P f i n a n c i a l s t a t e m e n t s

2003

234,240

(16,224)

218,016

91,475

–

(12,686)

(4,863)

73,926

320,463

(28,521)

291,942

2004

320,463

(28,521)

291,942

1,335

27,897

(17,241)

(1,844)

10,147

349,695

(47,606)

302,089

14.4 S t o c k s a n d w o r k i n p r o g r e s s

Refer to note 5.41 for the consolidated financial statements based on IFRS. Work in progress includes unbilled

receivables.

IFRS requires a different presentation of work in progress as outlined in note 7.6.9. This causes the difference

in carrying value of EUR at 31 December 2004 under Dutch GAAP.

14.5 A c c o u n t s r e c e i v a b l e s

Refer to note 5.42 for the consolidated financial statements based on IFRS. Under Dutch GAAP accounts

receivable do not include unbilled receivables; these are included under work in progress.

This heading does include the tax receivables which, for different amounts, are under IFRS separately

presented on the face of the balance sheet. Under IFRS EUR 368 was written off from inventories to reflect fair

value.


(EUR x 1,000)

As of 1 January

Allocation

Addition related to acquisition

Withdrawals

As of 31 December

The other provisions comprise mainly maintenance provisions.

14.7 L o n g t e r m d e b t s


The convertible loan included under this heading is valued at its nominal value of EUR 100 million.

The valuation of the private placement loans in USD is based on the currency exchange rate used to hedge

the nominal amounts of these loans. Lease obligations (as at 31 December 2003) are disclosed in the notes

14.8 S h o r t t e r m l i a b i l i t i e s


Short term liabilities do not include amounts invoiced which at a project level surpass the work in progress.

Furthermore, tax liabilities are included which under IFRS are presented on the face of the balance sheet.

143

Total 2004

34,246

10,523

–

(31,290)

13,479

Other

4,895

2,181

–

(4,945)

2,131

Restruct-uringcosts

22,074

5,170

–

(25,553)

1,691

Deferred

2,917

3,172

–

–

6,089

Pensionobliga-

tions

4,360

–

–

(792)

3,568

Total 2003

12,706

4,270

20,405

(3,135)

34,246

14.9 O f f - b a l a n c e r i g h t s a n d o b l i g a t i o n s


Under Dutch GAAP the off-balance sheet commitments in 2003 for shorter than one year are EUR 10,080

higher and for two to five years EUR 21,846 higher with regard to lease obligations, mainly due to vessels that

have been reported as tangible fixed assets under IFRS.

14.10 R e v e n u e


Revenue includes the movement in work in progress EUR 7,918 (2003: EUR 254). Consolidation of a 50%

subsidiary contributes EUR 5,713 (2003: EUR 7,949) to revenue under Dutch GAAP.

14.11 P e r s o n n e l e x p e n s e s


Apart from the absence of option costs EUR 3,531 in 2004 (2003: EUR 1,944) the personnel expenses deviate

as a result of not recognizing the consequences following from the calculations for the Defined Benefit plans

and the consolidation of a 50% subsidiary EUR 932 (2003: EUR 912).

14.12 D e p r e c i a t i o n


Depreciation does not contain for 2004 the leased assets EUR 1,781 (2003: EUR 4,750). Furthermore,

depreciation from the consolidated 50% subsidiary amounts to EUR 423 (2003: EUR 557).

14.13 O t h e r o p e r a t i n g e x p e n s e s


These include lease payments to an amount of EUR 3,187 (2003: EUR 8,500) and exclude in 2003 and 2004 a

total amount of EUR 22,700 reorganisation expenses following acquisitions, which is under Dutch GAAP taken

into goodwill.

14.14 A m o r t i s a t i o n o f g o o d w i l l

Capitalised goodwill is amortised over a period of maximum 20 years, contrary to IFRS, which does not allow

goodwill to be amortised.

14.15 F i n a n c i n g c o s t s


Under Dutch GAAP this item does not include interest on lease payments (2003: EUR 3,750), the amortisation

of the effective interest on the convertible loan EUR 2,565 (2003: EUR 2,499) and foreign exchange rate

differences on short term hedge contracts EUR 417 (2003: EUR 562 positive).

14.16 T a x e s


At year-end 2004 income tax receivable is EUR 8,233 (2003: EUR 5,174) and income tax payable is EUR 11,563

(2003: EUR 9,457). The Group has not recognised deferred tax assets relating to temporary differences and

deferred tax liabilities of EUR 6,089 (2003: 2,917). Tax losses carried forward are valued in the balance sheet at

year-end 2004 at EUR 910 (2003: EUR 1,096).

The difference between the nominal tax rate (34.5% based on the Dutch rate) en the effective tax rate (25%)

over 2004 is primarily caused by the application of local lower tax rates.

14.17 A r t i c l e 4 0 2

The Company profit and loss account is prepared under the application of Article 402 Book 2 BW.

144

(EUR x 1,000)

F i x e d a s s e t s

(17.1) Intangible fixed assets

(17.2) Tangible fixed assets


Current assets

(17.4) Receivables

Cash and banks

Total assets

(17.5) E q u i t y

Issued and paid in capital

Capital surplus

Other reserves

Net result for the year

(17.6) Provisions

(17.8) Long term debts

(17.9) Short term liabilities

Total shareholders equity and liabilities

1 5 D u t c h G A A P C o m p a n y b a l a n c e s h e e tBefore appropriation of result

145

2004

77,907

548

435,810

514,265

15,636

4,381

20,017

534,282

3,110

207,159

407

49,456

260,132

185

256,364

17,601

534,282

2003

82,558

651

448,859

532,068

16,573

–

16,573

548,641

3,033

207,159

(1,829)

32,420

240,783

324

256,364

51,170

548,641

(EUR x 1,000)

Net result subsidiaries

Other results


(14.14) Amortisation of goodwill

Net result for the year

Added to unappropriated result

Other results concern the costs of the Company less reimbursements from subsidiaries.

1 6 D u t c h G A A P C o m p a n y i n c o m e s t a t e m e n t

146

2003

39,298

(2,262)

37,036

(4,616)

32,420

32,420

2004

60,279

(6,172)

54,107

(4,651)

49,456

49,456


17.1.1 Goodwill

(EUR x 1,000)

Opening balance 1 January

Acquisition costs


Book value

Movements during the year

Amortisation

(EUR x 1,000)

Closing balance 31 December

Acquisition cost


Book value


(EUR x 1,000)


Investments (net)

Depreciation

Book value 31 December

(EUR x 1,000)


Acquisition cost

Cumulative depreciation

Book value 31 December

1 7 N o t e s t o t h e D u t c h G A A P C o m p a n y f i n a n c i a l s t a t e m e n t s

147

2003

93,024

(5,850)

87,174

(4,616)

2003

93,024

(10,466)

82,558

2004

93,024

(10,466)

82,558

(4,651)

2004

93,024

(15,117)

77,907

2003

883

10

(242)

651

2004

651

335

(438)

548

2003

1,676

(1,025)

651

2004

2,011

(1,463)

548


The full list of group companies is included in the pages 119 through 121.

(EUR x 1,000)


Net result subsidiaries

Acquired subsidiaries

Loans

Dividend received


Other


* Included herein is a loan to a group company bearing an interest of 5%. In principle the loan will be repaid in two years.

17.4 R e c e i v a b l e s

(EUR x 1,000)

Receivables from group companies

Taxes and social security premiums

Other receivables


17.5 E q u i t y

Reference is made to page 141.


(EUR x 1,000)

Pensions

Other


17.7 P e n s i o n o b l i g a t i o n s

The calculations of the provision for pensions take into account an interest of 3% (2003: 3%).

148

Total 2003

345,499

39,298

101,807

18,414

(11,985)

(42,629)

(1,545)

448,859

Total 2004

448,859

60,279

8,520

(65,872)

–

(23,104)

7,128

435,810

*Loans/receivablesfrom groupcompanies

79,904

–

–

(65,872)

–

76

–

14,108

Partici-pation in

group companies

368,955

60,279

8,520

–

–

(23,180)

7,128

421,702

2003

4,969

6,856

4,748

16,573

2004

5,174

6,562

3,900

15,636

2003

233

91

324

2004

185

–

185

17.8 L o n g t e r m d e b t s

(EUR x 1,000)

Convertible subordinated loan

Private Placement loans


For the notes to the convertible loan and the Private Placement loans reference is made to note 5.46.2 of the

consolidated IFRS statements.

The average interest on long term debt amounts to 5.8% per annum (2003: 5.8%).

17.9 S h o r t t e r m l i a b i l i t i e s

(EUR x 1,000)

Banks current-accounts

Trade creditors

Interest payable Private Placement

Interest payable convertible loan

Group companies

Other payables


17.10 G u a r a n t e e s

In principle the company does not provide parent company guarantees in favour of its subsidiaries, unless

significant commercial reasons exist.

The company has deposited declarations of joint and several liabilities for a number of Dutch subsidiaries at

the relevant Chambers of Commerce.

The Company has deposited a list with the Chambers of Commerce which included all financial interests of

the Group in subsidiaries as well as a reference to each subsidiary for which such a declaration of liability has

been deposited.


149

Over 5 years

–

156,364

156,364

Total

100,000

156,364

256,364

Over 5 years

–

156,364

156,364

Total

100,000

156,364

256,364

2004 2003

2003

35,561

1,832

1,502

3,562

–

8,713

51,170

2004

–

1,651

1,502

3,562

719

10,167

17,601

Executive Directors

G-J. Kramer, President and Chief Executive Officer

K.S. Wester, Director

A. Jonkman, Chief Financial Officer

Supervisory Board



J.A. Colligan

P. J. Crawford

Th. Smith

P. Winsemius

18.3 F o u n d a t i o n B o a r d s

Stichting Administratiekantoor Fugro

The Board of the Stichting Administratiekantoor Fugro

comprises Messrs.:

name function term

R. van der Vlist, Chairman Board member 2008

J.V.M. Commandeur Board member 2005

J.F. van Duyne Board member 2007

W. Schatborn Board member 2006

Stichting Beschermingspreferente Aandelen Fugro

The Board of the Stichting Beschermingspreferente

Aandelen Fugro comprises Messrs.:

name function term

S.C.J.J. Kortmann, Chairman Board member B 2006

J.V.M. Commandeur Board member B 2008

J.C. de Mos Board member B 2005

P.H. Vogtländer Board member B 2007

F.H. Schreve Board member A 2006

Apart from Mr. Schreve no Board member has any links

with Fugro.

Stichting Continuïteit Fugro

The Board of the Stichting Continuïteit Fugro in the

Dutch Antilles is composed as follows:

name function term

F.D. Leo, Chairman Board member B 2006

A.C.M. Goede Board member B 2005

R. de Paus Board member B 2007

M.A. Pourier Board member B 2008

F.H. Schreve Board member A Fixed

Apart from Mr. Schreve no Board member has any links

with Fugro.

18.4 P r o f i t a p p r o p r i a t i o n

Article 36 of the Articles of Association (as far as relevant):

36.2 a. From the profit, first of all and if possible, shall

be paid the percentage referred to under b.

below of the compulsory amount paid-up on

the protective preference shares at the start of

the financial year for which the distribution is

made.

b. The percentage referred to under a. shall equal

the average Euribor interest rate calculated for

loans with a term of one year – weighted

1 8 O t h e r i n f o r m a t i o n

18.1 A u d i t o r s ’ R e p o r t o n t h e D u t c h

G A A P a n n u a l a c c o u n t s 2 0 0 4

Introduction

We have audited the Dutch GAAP financial statements

(‘financial statements’) of Fugro N.V., Leidschendam for

the year 2004 (as set out on pages 134 to 149). These

financial statements are the responsibility of the

company’s Management. Our responsibility is to express

an opinion regarding these financial statements, based

on our audit.

Scope

We conducted our audit in accordance with auditing

standards generally accepted in the Netherlands. Those

standards require that we plan and perform the audit to

obtain reasonable assurance about whether the financial

statements are free of material misstatement. An audit

includes examining, on a test basis, evidence supporting

the accounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles

used and significant estimates made by Management,

as well as evaluating the overall presentation of the

financial statements. We believe that our audit provides

a reasonable basis for our opinion.

Opinion

In our opinion, the financial statements give a true and

fair view of the financial position of the company as at

31 December 2004 and of the result for the year then

ended, in accordance with accounting principles

generally accepted in the Netherlands, and comply with

the financial reporting requirements included in Part 9,

Book 2 of the Netherlands Civil Code.

The Hague, 10 March 2005

KPMG Accountants N.V.

18.2 P o s t B a l a n c e S h e e t d a t e e v e n t s

Reference is made to note 5.59.

150

provisions contained in Paragraph have been

applied. The Board of Management shall be

authorised, subject to the approval of the

Supervisory Board, to resolve to distribute an

amount equal to the deficit referred to in the

previous sentence from the reserves, with the

exception of the reserves formed by way of

a share premium on the issue of financing

preference shares, respectively convertible

financing preference shares.

36.5 In the event that the first issue of financing

preference shares, respectively convertible

financing preference shares of a series, takes

place during the course of a financial year,

the dividend on the relevant series of financing

preference shares, respectively the convertible

financing preference shares, will be

proportionately decreased to the first day of

issue.

36.6 After application of the provisions contained in

Paragraphs 2 to 5 inclusive, no further dividend

distributions shall be made on the protective

preference shares or the financing preference

shares, respectively the convertible financing

preference shares.

36.7 From the profit remaining after application of

the provisions contained in Paragraphs 2 to 5

inclusive, the Board of Management – subject

to the approval of the Supervisory Board – shall

make such reservations as the Board of

Management deems necessary. To the extent

that the profit is not reserved by application of

the previous sentence, it shall be at the disposal

of the General Meeting either to be wholly or

partially reserved or to be wholly or partially

distributed to holders of ordinary shares in

proportion to the number of ordinary shares

they hold.

18.5 P r o p o s e d p r o f i t a p p r o p r i a t i o n

In accordance with Article 36 of the Articles of Association, we

propose a dividend of EUR 28.8 million be paid out in the form of

a cash payment of EUR 1.90

per (depositary receipt of) share with a nominal value of EUR

0.20 or in the form of (depository receipts of) ordinary shares

with a nominal value of EUR 0.20 charged to the reserves.

according to the number of days for which this

interest rate applied – during the financial year

for which the distribution is made, plus a

maximum of four percentage points this last

increase shall, each time, be fixed for a period

of five years by the Board of Management,

subject to the approval of the Supervisory

Board.

36.3 a. Subsequently and if possible a dividend shall be

paid on the financing preference shares of each

series, respectively the convertible financing

shares of each series, equal to a percentage

calculated on the effective amount paid-up on

the financing preference shares of the relevant


preference shares of the relevant series, at the

time the relevant series was first issued

including any share premium, which

percentage shall be related to the average

effective return on ‘general government loans’

with a term of 7 to 8 years, calculated and

determined in the manner specified below.

b. The percentage of the dividend for the

financing preference shares of each series,

respectively the convertible financing

preference shares of each series, shall be

calculated by taking the arithmetic average of

the average effective return on the loans

referred to above, as calculated by the Central

Bureau of Statistics and published in the

Official List of Euronext N.V. for the last

5 trading days prior to the date of the first issue

of financing preference shares of the relevant


preference shares of the relevant series, or prior

to the day on which the dividend percentage is

adjusted, if necessary raised or lowered by an

increase or decrease determined at the time of

issue by the Board of Management and

approved by the Supervisory Board and

amounting to a maximum of two percentage

points depending on the market conditions,

which increase or decrease may differ for

each series.

36.4 In the event that in any financial year the profit

is insufficient to make the distributions

referred to in Paragraph 3 of this article, the

provisions contained in Paragraph 3 shall only

be applied in subsequent financial years after

the deficit has been made good and after the

151

R e s u l t (x EUR 1,000)

Turnover

Third party costs

Net revenue

Operating result before goodwill

Cash flow

Net result before goodwill

of which non-recurring items

B a l a n c e s h e e t (x EUR 1,000)

Tangible fixed assets

Investments

of which in acquisitions


Net current assets 2)

Total assets

Provisions

Long-term liabilities

Capital and reserves 2)

K e y r a t i o s (in %) 3)

Operating result/turnover

Net result/turnover

Net result/net revenue

Net result/capital and reserves 2)

Group’s equity/total assets 2)

Interest cover

D a t a p e r s h a r e (x EUR 1.–) 3)

Capital and reserves 2)

Operating result 4)

Cash flow 4)

Net result 4)

Dividend

S h a r e p r i c e (x EUR 1.–)

Year-end share price

Highest share price

Lowest share price

N u m b e r o f e m p l o y e e s

At year-end

S h a r e s i n i s s u e (x 1,000)

Of nominal EUR 0.20 at year-end

Of nominal NLG 1.– at year-end



152

H i s t o r i c r e v i e w 1)

1998

578,207

197,258

380,948

61,669

74,057

37,800

–

108,181

61,487

6,081

36,257

7,170

338,021

8,894

24,368

90,575

10.7

6.5

9.9

45.0

27.9

12.1

7.62

5.19

6.23

3.18

1.13

19.97

43.97

16.25

5,136

12,170

1999

546,760

176,067

370,648

61,805

77,233

40,704

–

114,035

37,301

9,257

36,529

15,066

380,495

10,573

23,234

107,909

11.3

7.4

11.0

41.0

29.3

13.1

9.18

5.09

6.36

3.35

1.23

36.90

39.90

16.40

5,114

12,612

2000

712,934

250,132

462,765

73,697

85,596

46,024

–

120,526

49,008

3,686

39,572

92,269

474,741

6,746

120,713

101,453

10.3

6.5

9.9

45.4

22.1

8.1

8.41

5.92

6.87

3.69

1.36

68.75

71.25

37.25

5,756

12,762

2001

909,817

331,685

578,132

98,470

105,301

61,732

–

163,298

89,352

11,196

43,569

(50,514)

814,772

8,056

121,450

244,660

10.8

6.8

10.7

35.7

30.4

7.8

16.68

7.42

7.93

4.65

1.60

50.10

75.65

43.00

6,953

14,670

2002

945,899

328,401

617,498

111,873

119,161

72,220

–

192,293

100,036

24,852

46,941

129,071

793,245

12,706

273,520

271,698

11.8

7.6

11.7

27.4

34.6

6.1

18.28

7.79

8.30

5.03

1.85

43.13

66.00

39.50

6,923

14,862

2003

830,067

286,520

543,547

76,293

94,589

45,106

–

236,689

122,325

70,889

49,483

137,626

1,029,985

34,246

412,700

240,783

9.2

5.4

8.3

17.6

23.7

3.4

15.88

5.27

6.54

3.12

1.85

40.80

51.45

24.51

8,472

15,166

2004

1,021,639

375,242

646,397

111,003

132,064

66,697

232,116

113,140

45,938

65,367

132,258

970,427

13,479

397,474

260,132

10.9

6.5

10.3

26.6

27.3

4.0

16.73

7.48

8.90

4.49

1.90

61.40

65.65

40.20

7,615

15,548

1) Based on Dutch GAAP

2) In 2003 and 2002 no accrued dividend has been incorporated.

3) Before amortisation of goodwill.

4) Unlike preceding years the figures as from the year 1999 have been calculated based upon the wweeiigghhtteedd average number of outstanding shares.

1984

49,644

22,507

27,136

2,314

3,766

1,588

–

5,627

2,768

–

2,178

2,904

27,862

1,316

2,314

4,810

4.7

3.2

5.9

39.6

17.3

–

3.27

1.57

2.56

1.08

–

327.10

–

–

553

15

1985

45,786

16,518

29,269

1,225

5,082

2,087

–

8,486

6,171

–

2,995

3,313

28,089

1,225

2,904

7,714

2.7

4.5

7.1

33.1

24.4

–

5.25

0.83

3.46

1.42

–

524.60

–

–

587

15

1986

35,440

12,207

23,234

(2,950)

(45)

(2,995)

–

10,664

5,128

–

2,950

(681)

22,916

1,860

3,585

4,629

(8.3)

(8.4)

(12.9)

(48.3)

20.2

–

2.46

(1.57)

(0.02)

(1.59)

–

24.63

–

–

524

188

1987

65,798

20,057

45,741

1,588

4,220

272

–

10,482

1,860

–

3,948

4,129

35,168

1,180

3,358

9,711

2.4

0.4

0.6

3.8

30.2

–

2.43

0.39

1.05

0.07

–

24.26

–

–

941

400

1988

77,007

28,997

48,010

3,630

5,445

2,087

–

14,929

6,262

–

3,358

3,948

43,336

953

6,489

10,936

4.7

2.7

4.3

20.2

27.9

–

2.80

0.10

1.40

0.54

0.18

28.03

–

–

969

390

1989

80,591

27,091

53,501

6,625

8,077

4,629

–

15,202

4,765

–

3,449

4,810

45,287

817

5,400

13,432

8.2

5.7

8.7

38.0

31.3

–

3.14

1.55

1.89

1.08

0.36

31.42

–

–

1,105

428

1990

107,637

42,338

65,299

7,941

10,165

5,491

–

21,010

10,664

4,084

4,674

1,543

55,996

771

5,218

15,973

7.4

5.1

8.4

37.3

30.0

–

3.63

1.81

2.31

1.25

0.45

36.22

–

–

1,275

441

1991

140,808

41,249

99,559

15,746

19,467

11,526

–

48,237

36,212

24,913

7,941

20,783

104,143

635

33,217

35,803

11.2

8.2

11.6

44.5

34.7

–

6.97

3.06

3.79

2.24

0.68

49.99

–

–

2,029

716

1992

178,926

52,412

126,514

13,568

20,465

8,849

–

48,055

14,294

5,854

11,617

19,694

121,522

4,629

6,671

56,586

7.6

4.9

7.0

19.1

47.0

–

6.58

1.57

2.38

1.03

0.59

11.75

17.92

9.76

2,664

9,086

1993

221,490

65,344

156,146

18,015

26,728

12,388

–

55,497

25,639

4,901

14,339

17,334

141,579

3,403

7,260

62,168

8.1

5.6

7.9

20.9

44.7

–

6.84

1.98

2.94

1.37

0.68

16.70

17.83

10.57

2,824

9,092

1994

300,130

100,104

200,026

21,146

33,625

13,931

–

65,254

39,434

11,662

19,694

23,733

176,702

2,450

30,449

58,402

7.0

4.6

7.0

23.1

33.8

–

5.57

2.01

3.20

1.33

0.68

15.52

19.01

14.75

3,557

11,510

1995

296,636

99,378

197,258

12,434

26,773

7,170

(4,538)

64,800

24,776

3,222

19,603

9,121

170,122

2,723

23,823

51,050

4.2

2.4

3.6

13.1

30.4

–

4.44

1.08

2.33

0.62

0.32

7.85

16.56

5.81

3,968

11,511

1996

375,276

123,337

251,939

25,911

39,479

16,018

–

68,521

27,000

1,724

23,460

11,571

216,272

4,447

18,741

61,260

6.9

4.3

6.4

28.5

28.9

–

5.44

2.30

3.51

1.42

0.68

13.93

14.84

7.71

4,222

11,513

1997

482,096

172,346

309,750

46,195

60,670

31,084

3,630

93,479

58,220

5,763

29,586

6,308

289,512

7,805

17,153

77,370

9.6

6.4

10.0

44.8

27.7

10.4

6.60

3.93

5.17

2.65

1.00

28.04

33.13

13.75

4,429

11,918

153

The Board of the Stichting comprises Messrs.:

R. van der Vlist, Chairman

J.V.M. Commandeur

J.F. van Duyne

W. Schatborn

Mr. Van der Vlist was General Secretary of N.V.

Koninklijke Nederlandsche Petroleum Maatschappij.

Mr. Commandeur was a member of the Board of

Management of Nagron Nationaal Grondbezit N.V.

Mr. Van Duyne was Chairman of the Board of

Management of Koninklijke Hoogovens N.V. and later

CEO of Corus. Mr. Schatborn was a member of the Board

of Management of Stork.

In accordance with the roster, in June 2005

Mr. Commandeur will resign from the Board of the

Stichting. As Mr. Commandeur has already been a

member of the Board for 14 years, his reappointment is

not deemed advisable. The Board intends to appoint

Mr L.P.E.M. van den Boom. In accordance with Art. 4.3 of

the Articles of Association, the Board offers holders of

depository receipts of shares with a holding of 15% of the

issued depository receipts of shares the opportunity to

request, before 22 April 2005 , that the Board convenes a

Meeting of holders of depository receipts of shares in

order to nominate a candidate for membership of the

Stichting Board. The request should be submitted to the

Stichting’s office, in writing, and should state the name

and address of the nominee.

In 2004 the remuneration of the Board amounted to

EUR 21,000 and the total costs of the Stichting amounted

to EUR 91,457.

On 31 December 2004, 13,367,060 ordinary shares with

a nominal value of EUR 0.20 were in administration,

against which 13,367,060 depository receipts of shares in

denominations of 1, 10 and 100 shares with a nominal

value of EUR 0.20 had been issued in CF-form. During the

financial year 11,714 certificates were converted into

ordinary shares and 58,611 ordinary shares were

converted into certificates. 304,874 depository receipts

of shares were issued as a result of the stock dividend.

The activities related to the administration of the

shares are carried out by the administrator of the

Stichting: Administratiekantoor van het Algemeen

Administratie en Trustkantoor B.V. in Amsterdam.

The address of the Stichting is Veurse Achterweg 10,

2264 SG Leidschendam, the Netherlands.

Leidschendam, 23 February 2005

The Board

R e p o r t o f S t i c h t i n g A d m i n i s t r a t i e k a n t o o r F u g r o

In accordance with Article 19 of the Administration

Conditions for the ordinary shares in the name of Fugro

N.V., the undersigned issue the following report to

holders of depository receipts of shares (certificates).

During 2004 all the Stichting’s activities were related

to the administration of ordinary shares against which

depository receipts of shares have been issued. The Board

met twice during 2004; the meetings were dedicated to

preparations for the Annual General Meeting of

Shareholders in Fugro N.V. and on 30 September 2004 the

Meeting, held after the publication of the half-yearly

results of Fugro N.V., was dedicated to the general

business. Another topic discussed was Corporate

Governance within the Company.

On 6 April 2004 the Articles of Association and the

Administrative Conditions were amended to comply with

the Dutch Corporate Governance Code, with the

exception of Best Practice stipulation IV. 2.8 (see also

page 50). Since then all the members of the Stichting’s

Board have been independent of the Company. The Board

may offer holders of depository receipts of shares the

opportunity to recommend candidates for appointment

to the Board. Further regulations related to the holding of

a meeting of holders of depository receipts of shares have

been drawn-up. The Stichting is authorised to accept

voting instructions from holders of depository receipts of

shares and to cast these votes during a General Meeting of

Shareholders. The Stichting has taken advice regarding

the aforementioned amendments to the Articles of

Association and the Administrative Conditions.

The Board attended the Annual General Meeting

of Shareholders in Fugro N.V. on 19 May 2004 and

represented 73.1% in favour of the votes cast.

The Stichting voted for all the points put to the vote.

In accordance with the Administrative Conditions,

holders of depository receipts of shares were offered

the possibility of voting, in accordance with their own

opinion, as authorised representatives of the Stichting.

This opportunity was taken by 54 holders of depository

receipts of shares with 1,882,628 certificates.

A Meeting of Holders of Depository Receipts of Shares

also took place on 19 May 2004. 11 holders of depository

receipts of shares, representing 1,935,576 certificates

attended, or were represented at this Meeting. The

Meeting expressed its confidence in the Stichting’s Board.

The minutes of this Meeting are published on the

Company’s website (www.fugro.com).

154

R e p o r t N . V . A l g e m e e n N e d e r l a n d s

T r u s t k a n t o o r o v e r t h e y e a r 2 0 0 4

Regarding 4.75% in depository receipts of ordinary shares

convertible subordinated debenture bond 2000 per 2005 of

EUR 100,000,000.– at the cost of Fugro N.V.

In accordance with Article 10 sub 2 of the deed of trust

dated 29 March 2000 as executed by notary F.K. Buijn,

we issue the following report.

Unless already settled or converted in accordance with

the trust deed, the bonds will be settled at par on 3 April

2005. The bonds may be converted into depository

receipts of ordinary shares in Fugro N.V. with a nominal

value of EUR 0.20 at a conversion price of EUR 64.21.

During the year no bonds have been offered for con-

version so that on 31 December 2004 the outstanding

amount of the bond was EUR 100,000,000.–.

In accordance with Article 4 sub 11 of the deed of trust,

Fugro N.V. has reserved in the name of the trustee as

many ordinary shares as are required to enable the full

conversion of all outstanding bonds.

Early settlement of the bonds by Fugro N.V. is possible

at any time on condition that for a period of 30

subsequent days the closing price of the depository

receipts of ordinary shares in Fugro N.V. as quoted in the

Official Price List of Euronext Amsterdam N.V,

Amsterdam is at least 130% of the conversion price on

each of these days.

In the case of a ‘Change of Control’ as referred to in

Article 3.4 of the trust deed, the holders of bonds will be

permitted to offer their bonds for early settlement on the

date specified by Fugro N.V. without prejudice to the

other Articles of the trust deed.

We have not found any cause for comment or action.

Amsterdam, 3 February 2005

N.V. Algemeen Nederlands Trustkantoor ANT

L.J.J.M. Lutz

D e c l a r a t i o n o f i n d e p e n d e n c e

The Board of Management of Fugro N.V. and the Board

of the Stichting Administratiekantoor Fugro hereby

declare that, in their joint opinion, with regard to the

independence of the management of the Stichting

Administratiekantoor Fugro, they are in compliance with

the conditions as stipulated in Enclosure X of the

Fondsenreglement (fund regulations) of Euronext

Amsterdam N.V. in Amsterdam.

Leidschendam, 23 February 2005

Fugro N.V.

The Board of Management

Stichting Administratiekantoor Fugro

The Board

155

Seastar-dp: DGPS positioning system, specifically for use on board DP ships.

Seismic: acoustic measurement of seabed characteristics and stratification with the

objective of detecting oil and gas. These measurements are conducted using specialised

ships equipped with powerful acoustic energy sources and long receiving streamers

(hydrophones) to measure 9sub) seabed acoustic echoes.

Skyfix: DGPS positioning system originating from Thales GeoSolutions.

Starfix: DGPS positioning system, specifically for use offshore. This system is intended

for the professional user and, in addition to a high degree of accuracy, is equipped with

a wide range of data analysis and quality control possibilities.

Survey Services: services related to the measurement, management and mapping of

locations, objects and operations, most of which involve a substantial navigation and

positioning component.

UAV (Unmanned Airborne Vehicle): unmanned autonomous mini-aircraft

equipped with electromagnetic measuring equipment.

F i n a n c i a l t e r m s

Debt (on ‘Private Placement’ covenants): long-term loans including obligations

arising from leasing agreements.

Dividend yield: dividend as a percentage of the (average) share price.

Interest cover: operating result after goodwill (EBIT) compared with the net interest

charges.

Invested capital: the capital made available to the Company, i.e. Group equity plus

the available loans and the balance of current account deposits/withdrawals.

Net profit margin: profit as a percentage of turnover. Fugro calculates this

percentage on the profit before amortisation of goodwill.

Net revenue from own services (NROS): turnover minus work contracted-out and

other external costs.

Private placement: long-term financing (10 – 15 years), entered into in May 2002 via

a private placement with twenty American and two British institutional investors.

Return on invested capital: the profit (before profit appropriation) including third

party interests and interest charges as a percentage of the average invested capital.

Solvency: shareholders’ equity as a percentage of the balance sheet total, whereby the

subordinated convertible debenture bond is considered as equity.

G l o s s a r y

T e c h n i c a l t e r m s

2D Seismic: acoustic measuring technology which uses single ship-towed hydrophone

streamers. This technique generates a 2D cross-section of the deep seabed and is used

primarily when initially reconnoitring for the presence of oil or gas reservoirs.

3D Seismic: accoustic measuring technology which uses multiple ship-towed long

hydrophone streamers. This technique generates a 3D model of the deep seabed and is

used to locate and analyse oil and gas reservoirs.

3 DiQ (3D Integrated Quantitative): technology for the development of integrated

(geology, geophysics, reservoir engineering) quantitative oil and gas reservoir models;

these models are used to optimise the risks, costs and efficiency of oil and gas field

development and production.

AM (asset management): a management system that ensures the efficient use of

business equipment such as ships, measuring equipment, etc.

Asset monitoring: tracking the location and usage of business equipment such as

ships, measuring equipment, etc.

AUV (Autonomous Underwater Vehicle): an unmanned submersible launched

from a ‘mother-ship’ but not connected to it via a cable. Propulsion and control are

autonomous and use pre-defined mission protocols.

Construction Support: offshore services related to the installation and construction

of structures such as pipelines, drilling platforms and other oil and gas related

infrastructure, usually involving the use of ROVs.

D&P: Development & Production (of oil and gas fields).

DGPS (Differential Global Positioning System): a GPS based positioning system

using territorial reference points to enhance accuracy.

DP (dynamic positioning): an automatic pilot which controls a ship’s engines and

rudder, generally to ensure the vessel maintains station. Such systems require input

from an accurate positioning system as a reference.

EM: electromagnetic.

FLI-MAP: a system that, with the help of a laser fan beam in a helicopter, generates

accurate relief maps.

Geophysics: the mapping of subterranean soil characteristics using non-invasive

techniques such as sound.

Geoscience: a range of scientific disciplines (geology, geophysics, petroleum

engineering, bio stratification, geochemistry, etc.) related to the study of rocks, fossils

and fluids.

Geotechnics: the determination of subterranean soil characteristics using invasive

techniques such as probing, drilling and sampling.

GIS: Geographic Information System.

GPS: Global Positioning System.

Gravity: precision gravity measurements to detect anomalies that could indicate the

presence of oil or gas.

HP (high-performance): decimetre positioning accuracy.

Omnistar: DGPS positioning system specifically for use onshore. This system

differentiates itself through its compactness and ease of use.

Reservoir engineering: techniques for predicting the production behaviour of oil

and gas reservoirs and the optimisation of the eventual exploitation on the basis of

a reservoir model, rock and fluid characteristics and flow models.

ROV: Remotely Operated Vehicle. Unmanned submersible launched from a ship and

equipped with measuring and manipulation equipment. A cable to the mother-ship

provides power, video and data communication.

156

C o l o p h o n

Fugro N.V.

Veurse Achterweg 10

2264 SG Leidschendam

The Netherlands

Telephone: +31 (0)70 3111422

Fax: +31 (0)70 3202703

Production:

C&F Report Amsterdam B.V.

Photography:

Fugro N.V.,

Picture Report, Amsterdam,

Hermitage Amsterdam,

International Liszt Concours.

Text:

Boogaard Communications

Consultancy (BCC) v.o.f.

This annual report is a

translation of the official

report published in the Dutch

language.

The annual report is also

available on our website

www.fugro.com.

For complete information, see www.fugro.com

GEOTECHNIEK

MILIEU ONDERZOEK

Documents

FUGRO N.V. Annual Report 2004 - Jaarverslag.com · Fugro has no competitors offering global services on the same scale and of the same scope. The offshore Geotechnical, offshore Survey,