fugro n.v. annual report 2005 - jaarverslag.com · fugro operates around the world at sea, on land...

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05

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.V.

A n n u a l R e p o r t 2 0 0 5F U G R O N . V.

GEOTECHNIEK

MILIEU ONDERZOEK

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 Haaglanden

number 27120091

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

Concept and realisation:

C&F Report Amsterdam B.V.

Photography:

Fugro N.V.,

Picture Report, Amsterdam,

Peter Boer, and others.

Fugro has endeavored to

fulfil all legal requirements

related to copyright. Anyone

who, despite this, is of the

opinion that other copyright

regulations could be applicable

should contact Fugro.

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

Cautionary Statement regarding Forward-Looking Statements

This annual report may contain forward-looking statements. Forward-looking statements are statements that are not historical facts, including

(but not limited to) statements expressing or implying Fugro N.V.’s beliefs, expectations, intentions, forecasts, estimates or predictions (and the

assumptions underlying them). Forward-looking statements necessarily involve risks and uncertainties. The actual future results and situations

may therefore differ materially from those expressed or implied in any forward-looking statements. Such differences may be caused by various

factors (including, but not limited to, developments in the oil and gas industry and related markets, currency risks and unexpected operational

setbacks). Any forward-looking statements contained in this announcement are based on information currently available to Fugro N.V.’s manage-

ment. Fugro N.V. assumes no obligation to in each case make a public announcement if there are changes in that information or if there are

otherwise changes or developments in respect of the forward-looking statements in this annual report.

A n n u a l R e p o r t 2 0 0 5

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 5

1 Consolidated income statement 66

2 Consolidated statement of recognised income and expense 67

3 Consolidated balance sheet 68

4 Consolidated statement of cash flows 69

5 Notes to the consolidated financial statements 71

6 Subsidiaries and Associates of Fugro N.V. 116

7 Company balance sheet 120

8 Company income statement 121

9 Notes to the company financial statements 122

10 Other information 128

Auditors’ report 2005 128

Post balance sheet date events 128

Foundation Boards 129

Profit appropriation 129

Proposed profit appropriation 130

Historic review 132

Report of Stichting Administratiekantoor Fugro 134

Declaration of independence 135

Report N.V. Algemeen Nederlands Trustkantoor 135

Glossary 136

Major developments in 2005 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 active throughoutthe lifecycle of an oil or gas field 11

Report of the Supervisory Board 15

Report of the Board of Management 21

General business development 21

Historic overview based on average

currency rates over 2001 21

Financial developments 23

Dividend proposal 26

Organisation and personnel 26

Sustainable business 28

Information and Communication Technology 32

Business Principles 32

Research 33

Market development and trends 33

Backlog 35

Post balance sheet date events 36

Prospects 36

Geotechnical services 40

Survey services 42

Geoscience services 45

Corporate Governance 48

Safety awards 51

Risk management 54

Information for shareholders 58

Fugro’s contribution to society 62

Fugro takes the prize 63

• In the year under review turnover rose by 15.1% to

EUR 1,160.6 million (2004: EUR 1,008.0 million).

Organic growth was 12.0%, while acquisitions and disposals

on balance increased turnover by 0.3%. Turnover rose by 2.8%

due to currency effects other than those related to the USD.

• The net result improved by 102% and rose to EUR 99.4 million

(2004: EUR 49.3 million).

• The net profit margin based on the IFRS principles of

valuation which are now applicable rose to 8.6% (2004: 4.9%).

• Earnings per share rose by 82% to EUR 1.51 (2004: EUR 0.83,

taking into account the four for one share split of

20 June 2005). Cash flow per share was 26% higher at

EUR 2.67 (2004: EUR 2.12).

• All three divisions contributed towards the much improved

net result. The contribution towards profit made by the

offshore activities in the Survey division showed a

considerable improvement compared with 2004.

• In 2005 Fugro made several strategic acquisitions in China,

India and New Zealand. A new company called Fugro-

OceansatPEG was established in Brazil.

• As announced in several external publications, investments

by the oil and gas industry (in dollars) in 2005 were around

20% higher than in 2004. These investments are now leading

to a visible increase in demand for services from suppliers to

the oil and gas industry.

• In March 2005, about 95% of the 4.75% convertible

subordinated bond of EUR 100 million issued in 2000 was

converted into shares. The remainder was redeemed. Due to

the conversion the number of issued shares has risen by 9.5%

(68,825,192 shares per 31 December 2005).

• In April 2005 a five year senior unsecured convertible bond of

EUR 125 million was issued at 2.375%. The conversion price

is EUR 24.25.

• To finance further growth, in April 2005 Fugro also arranged

a five-year revolving credit line of EUR 100 million at an

interest rate of Euribor plus 35 base points.

• On 20 June 2005 a share split was implemented (four for one).

The number of issued shares on 31 December 2005 was

68,825,192 (31 December 2004: converted 62,191,556).

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

shares (whichever the shareholder prefers) be increased to

EUR 0.60, (2004: converted EUR 0.48).

• Mr. K.S. Wester (1946), who joined Fugro in 1981 and has

been a Director of Fugro N.V. since 1996, was appointed

President and Chief Executive Officer as of 1 October 2005.

He succeeded Mr. G-J. Kramer (1942) who retired on

31 December 2005 after nearly 23 years with Fugro.

• Fugro now has annual IFRS accounting figures covering the

past three years. Fugro’s financial reporting for 2004 and

2005 complied fully with the IFRS reporting regulations.

These IFRS reports are accompanied by an unqualified audit

opinion.

M a j o r d e v e l o p m e n t s i n 2 0 0 5

2

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

o t h e r s t a k e h o l d e r s ,

As the new President and Chief Executive Officer of Fugro

I am delighted to be able to present to you the best year in

Fugro’s history up till now. At the same time a special

word of thanks to my predecessor Mr. G-J. Kramer is called

for. He stepped down as President and Chief Executive

Officer on 1 October 2005 after having led Fugro in an

excellent manner since 1983. I consider that it is my job to

continue to follow the successful course on which the

company has been set. We make our strategy transparent

for all our stakeholders, the organisation is well equipped

on every front and the market conditions for the coming

period appear to be good.

The results for 2005 were good. Turnover rose to

a record level of EUR 1,161 million. Most of this growth

was organic. The net result (EUR 99 million) rose,

comparatively speaking, even more. The positive

development of the result meant that the net profit

margin rose to 8.6% (2004: 4.9%). The way we see things at

the moment we believe that under the current market

conditions a target margin of 8% – 8.5% under IFRS

regulations is feasible.

There are a number of factors that instil us with

confidence for the future. Since mid 2004, a major

portion of the global increase in investments by the oil

and gas industry has benefited suppliers such as Fugro.

Much of the investment has been made to compensate

for the depletion of existing fields. It is generally believed,

provided that the oil price remains above USD 30 –

USD 40, this type of investment is expected to continue in

the coming years. In addition to the depletion effect there

is also an increasing demand from up-and-coming

economies such as China and India.

To a certain extent the same development also

applies for Fugro’s other core activities in mining and

infrastructure. With economies picking up the need for

raw materials remains strong, which means a structural

increase in the demand for minerals. Fugro plays an

active role in the process of locating raw materials and

minerals, but is also involved in the search for, the

increasingly scarce, underground fresh water reserves.

The market for complex infrastructure projects, a market

in which Fugro is involved on a very regular basis, is still

regionally-oriented. There is a structural growth in the

world’s population. The transport of goods and people is

increasing and the protection of living and working

environments from natural forces requires continuous

and increasing attention. This is leading to construction

activities both on land and in coastal waters.

Fugro offers a wide range of services with as the

common denominator the collection and interpretation

of data related to the earth’s surface and the soils and

rocks beneath. A clear synergy effect is created within

Fugro because expertise and experience gained by one

business unit is developed further or used by other

services and activities. Our investments and strategic

acquisitions also contribute towards this goal.

These elements remain components of our policy,

which means that in the coming years there will be

substantial investments, including investment in

new seismic equipment.

The number of employees will also rise. The confidence

our employees place in Fugro is expressed by the low staff

turnover. We express the confidence to our shareholders

through the dividend that is increasing in-line with the

company’s development. It is proposed that for 2005

the dividend is increased with 25% to EUR 0.60 (2004:

converted EUR 0.48).

Fugro’s foundations are firm, the markets in which

we operate are picking up all over the world and our order

portfolio is healthy. We remain focussed on a healthy

autonomous growth supplemented by growth through

acquisitions. Possible acquisition candidates are always

evaluated extremely carefully and acquisitions only take

place if they fit within Fugro’s culture and global activity

portfolio. To summarise, we have confidence in the

future.

Yours faithfully,

Fugro N.V.

K.S. Wester

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 offshore and onshore

construction projects, as well as

data management.

Acquisition, processing and

interpretation of seismic and

geological data, reservoir

modeling and estimation of

oil, gas, mineral and water

resources and the optimisation

of their exploration,

development and 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 soil 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, including infrastructure

projects.

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. The equipment

Fugro uses to carry out its work includes over thirty

vessels, several hundred CPT (Cone Penetration Test)

and drilling units and approximately forty aeroplanes

and helicopters as well as some sixty ROVs (Remotely

Operated Vehicles).

Fugro’s objective is to hold a leading market position

due to its technological developments and quality.

This requires a strong international or regional market

presence.

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 approximately 8,500 staff permanently

stationed in over 50 countries.

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 the same scale of

cohesive activities world wide.

The offshore Geotechnical, offshore Survey, Development

& Production, Airborne Survey and Positioning business

units operate in a global market. Fugro holds a leading

position in almost all of these markets. The competition

varies per activity and geographical region. The oil and

gas industry is the major client in these markets.

The onshore activities revolve around local or regional

markets. Fugro operates 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

IFRS2005

1,160.6

754.9

144.1

176.1

99.4

8.6

7.2

1,138.7

470.8

40.9

51.0

30.4

20.8

262.8

90.4

69.4

6.76

2.18

2.67

1.51

0.48

27.13

27.40

15.14

14.1

2.2

68,825

67,886

65,976

8,534

IFRS2004

1,008.0

643.4

104.2

125.8

49.3

4.9

3.7

983.4

228.2

22.8

32.9

25.9

14.5

233.0

71.0

66.1

3.60

1.76

2.12

0.83

0.48

15.35

16.41

10.05

15.9

3.6

62,192

60,548

59,360

7,615

IFRS2003

822.4

549.0

63.3

80.5

18.9

2.3

2.2

1,056.0

213.7

20.0

29.1

10.9

7.5

268.8

124.0

54.0

3.48

1.09

1.39

0.33

0.46

10.20

12.86

6.13

29.1

4.9

60,664

58,308

57,856

8,472

Change in %

15.1

17.3

38.3

40.0

101.6

75.5

94.6

15.8

106.3

79.4

55.0

17.4

43.4

12.8

27.3

5.0

87.8

23.9

25.9

81.9

–

76.7

67.0

50.6

(11.3)

(38.9)

K e y f i g u r e s 4)

6

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

Turnover

Turnover from own services

Operating result

Cash flow

Net result before amortisation of goodwill

Net margin before amortisation of goodwill (%)

Net result

Net margin (%)

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)

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.–) 5)

Capital and reserves 1) 2)

Operating result

Cash flow


Net result

Dividend

Share price: year-end

Share price: highest

Share price: lowest

Average price/earnings ratio

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) 5)

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

1) After providing for a cash dividend

of 50% in 2001.

2) Since 2002, no accrual for dividend

has been included.

3) Convertible bond treated as Group

equity.

4) Based on IFRS from 2003 onwards.

5) Figures 2001 through 2004 adjusted

for share split.

DutchGAAP2002

945.9

617.5

111.9

119.2

72.2

7.6

60.2

6.4

6.1

793.2

274.3

34.3

46.9

27.4

15.4

192.3

100.0

46.9

4.57

1.95

2.07

1.26

1.05

0.46

10.78

16.50

9.88

12.6

3.5

59,448

57,580

57,436

6,923

DutchGAAP2001

909.8

578.1

98.5

105.3

61.7

6.8

56.3

6.2

7.8

814.8

247.6

30.0

42.3

35.7

19.1

163.3

89.4

43.6

4.17

1.86

1.98

1.16

1.06

0.40

12.53

18.91

10.75

14.0

2.7

58,680

57,024

53,104

6,953

7

0

250

500

750

1,000

1,250

20052004200320022001

0

160

320

480

640

800

20052004200320022001

0

40

80

120

160

200

20052004200320022001

0

25

50

75

100

125

20052004200320022001

0.0

0.4

0.8

1.2

1.6

2.0

20052004200320022001

(x EUR 1 mln.)

T u r n o v e r 4)

(x EUR 1 mln.)

N e t r e v e n u e 4)

(x EUR 1 mln.)

C a s h f l o w 4)

(x EUR 1 mln.)

N e t r e s u l t 4)

(x EUR 1.–)

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

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 and

interpretation of 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 the 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 of around 8% of

turnover.

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 of more than 5 (EBIT/Interest)

and

• a growth in earnings per share averaging 10%

per annum.

Fugro’s financing strategy is aimed at the utilisation

and/or optimisation of:

• the ratio between risk and return of the various

business activities;

• the relationship between shareholders’ equity and

short-term / long-term loans;

• the use of both public and private capital markets;

• the duration and phasing of the different financing

components.

The transition to IFRS has not had any influence on

Fugro’s (financing)strategy, operational development

and cash flow and does not materially alter the historic

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 for the oil and

gas industry and those related to other markets, such as

mining and infrastructure. This also results in a certain

balance 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 good control of

business risks. In the most important sector – oil and gas –

the spread of Fugro’s services across both the exploration

and exploitation phases is a key factor. 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%

1995A

1994A

1996A

1997A

1998A

1999A

2000A

2001A

2002A

2003A

2004A

2006F

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

substantial market shares for Fugro’s core activities and

in niche markets. The target margin can be achieved

through:

• increasing operational scale;

• strong market positions;

• considerable and continuous research;

• being selective about the projects that are

taken on and

• the acquisition of companies with a high

added-value.

Concluding, 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 maintain a target margin of

at least 8% of turnover. The focus is also on achieving at

least the historical average annual organic turnover

growth of over 5%. Possible acquisitions will be evaluated

as and when they present themselves rather than being

planned systematically beforehand.

In the ICT area Fugro has developed 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.

The organisational structure of the Development

& Production business unit was optimised in 2005.

The attention for this business unit will be continued

during the coming period, to further improve the

decisiveness and position in this promising market.

Fugro’s position in the offshore seismic market will be

strengthened further in 2006 to make operating on a

global basis more efficient. The balance between contract

and multi-client work will depend on the opportunities

that are available in the market, but both types of work

will continue to be components of Fugro’s strategy for

the seismic activities. Fugro will also invest in the further

expansion and modernisation of equipment, in particular

underwater measuring equipment.

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:

• market positions and acquisitions;

• research, and

• cooperation and scale advantages.

M a r k e t p o s i t i o n s a n d a c q u i s i t i o n s

Fugro’s policy is based primarily on rooting and, wherever

possible, expanding its existing strong market positions.

Complementing and broadening its package of closely

related services is a primary objective. Growth in other

sectors, by reacting positively and flexibly to

developments in new growth markets, is an equally

9

Brent Blend in percentage, scale left.

E&P spending in percentage, scale right.

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. 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 qualities;

• risk profile.

R e s e a r c h

Research is of strategic importance for Fugro. The search

for ways to expand and improve its service 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 and analytical models play an important role

in this. Each year Fugro invests an estimated minimum of

4% of turnover on research. Some of this investment takes

place during the execution of projects.

C o o p e r a t i o n a n d s c a l e a d v a n t a g e s

Effective cooperation between the various business

units and critical mass are key factors for the successful

execution of large assignments. Capacity utilisation

can be optimised 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 technology and services

• Sound financial and risk management systems

W e a k n e s s e s

• Vulnerability to rapid, strong changes in

the dollar rate

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

• Increased investment by the oil and gas industry

• Growing demand for oil and gas

• Optimisation of existing oil and gas fields

• More and larger infrastructure projects

• Increased mining activities

T h r e a t s

• Global negative economical developments

• Collapse of the demand for oil, gas and/or mining

industry products

• Technical staff training not keeping pace

with market demand

O u r p l a n e t contains many natural resources, such as water, minerals, oil and gas.

Efficient exploration of these resources starts with identification of their possible locations.

Fugro supports this exploration by collecting and interpreting information about the earth’s

surface, seabed and subsurface. In oil and gas, Fugro provides this global industry with

specialist services at every phase of an oil or gas field’s life-cycle: from exploration and

development to the production and transportation of oil and gas. Fugro is also involved when

an installation is removed.

O i l , g a s a n d c o a l are fossil fuels formed in the earth’s crust from the remains of

plants and animals that lived millions of years ago. Oil, produced primarily from the remains

of tiny organisms (plankton) that lived in warm seas, is a liquid and seeps through the rocks

until it collects under an impermeable layer in a subterranean reservoir. Natural gas is formed

in the same way as oil and is also found in such reservoirs. This means that when searching for

oil as gas the focus is on locating areas with source rock and where the structure of the earth’s

crust indicates that oil or gas could have collected.

L a r g e o i l a n d g a s r e s e r v e s have been found all over the world. Sometimes they

are far from the users’ markets in inhospitable areas: in the polar regions, Alaska for example,

tropical rain forests in Nigeria and Indonesia, or under stormy seas, such as the North Sea.

The exploration for and sustainable production of oil and gas and its transportation, via

pipelines or vessels, are expensive but very important for human welfare. Today, natural gas

meets around a quarter of the world’s energy requirements and its importance is growing.

Natural gas is a clean fuel and can be piped to end users in a very simple way.

R e s e a r c h i n t o t h e h i s t o r y of tectonic plates (continental drift), and the ancient

earth’s flora and climate conditions has given us a good idea of the places where oil and gas

may be found. Fugro has advanced analysis techniques to assist in this. Drilling, laboratory

research and airborne and seismic surveys help towards defining the geological structure.

This increases the chance of success in locating extractable quantities of oil and gas.

T h e e n o r m o u s i n v e s t m e n t s that go hand-in-hand with the exploration for and

development of viable new fields means efficient exploitation of oil and gas is extremely

important. It was the shallow, easy to find onshore fields that were developed first; on the

shores of the Caspian Sea, in the USA (Pennsylvania, Oklahoma, California, Texas, et cetera)

and throughout the Middle and Far East. Subsequently, oil and gas were discovered offshore

continental shelf areas around the world. The steep global rise in the demand for energy and

the depletion of existing fields mean, however, that the oil and gas fields in areas that are

more difficult to explore and develop, particularly those in deep water, are becoming

economically interesting. This is now possible thanks to the dramatic improvements in the

technologies needed to map these fields and make their exploitation both economically viable

and sustainable.

F U G R O : a c t i v e t h r o u g h o u t t h e l i f e c y c l e

o f a n o i l o r g a s f i e l d

11

I N T R O D U C T I O N

F u g r o i s i n v o l v e d i n v i r t u a l l y t h e e n t i r e l i f e c y c l e o f o i l a n d

g a s f i e l d s . I t s t a r t s w i t h r e s e a r c h i n t o t h e f o r m a t i o n o f t h e

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

s e e k o u t c o n d i t i o n s w h i c h f a c i l i t a t e t h e d e v e l o p m e n t o f o i l

a n d g a s . I n a n e x t s t a g e F u g r o i s i n v o l v e d w i t h a c t i v i t i e s

r e l a t e d t o o i l a n d g a s f i e l d e x p l o r a t i o n a n d d e v e l o p m e n t a s

w e l l a s p r o d u c t i o n a n d t r a n s p o r t a t i o n . T h e b r o a d s p e c t r u m

o f c l i e n t s i n t h e o i l a n d g a s s e c t o r f o r w h i c h F u g r o c a r r i e s

o u t t h e s e a c t i v i t i e s i n c l u d e s t h e o i l c o m p a n i e s , b u t a l s o

t h e c o n s t r u c t i o n c o m p a n i e s t h a t d e s i g n , b u i l d a n d i n s t a l l

t h e s t r u c t u r e s .

There are many thousands of oil and gas

structures sited in seas and oceans all over

the globe. There are over 8,000 in the Gulf of

Mexico alone. Fugro is involved at various

stages of the development of many oil and

gas fields.

The study of plate tectonics

and the climate in the distant

past is of considerable

assistance when it comes to

searching for new oil and gas

fields now and in the future.

Renewables

Nuclear

Coal

HISTORY

World marketed energy use by fuel type

PROJECTIONS

Gas

Oil

Qud

rilli

on B

TU

0

50

100

150

200

250

202520152002199019801970

Extracting oil and gas in deeper and deeper water increases the complexity

of the installations because additional underwater connections have to be

made between the wells, pipelines and floating platforms.

Fugro checks the

placement and connection

of underwater

installations using ROVs

(un-manned submersibles)

equipped with

underwater cameras.

Although alternative energy sources can eventually

replace oil and gas, for many years ahead oil and gas

will remain the primary energy source.

The development of gas is of major importance because

in the medium term it can provide relatively clean

energy and in the longer term it could serve as basis for

the production of hydrogen gas.

©N

SW

Source: Energy Information Administration

14

From left to right:

F.J.G.M. Cremers, J.A. Colligan, P. Winsemius, F.H. Schreve (Chairman),

P.J. Crawford, Th. Smith.

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 J.A. Colligan (1942) 1)

nationality British

first appointed 2003

current term up to May 2007

expertise management strategy and risks inherent to the

company’s business; management selection;

management recommendation and development; oil

and gas industry

other functions former Director of Shell Exploration & Production,

Director Society of Petroleum Engineers Foundation

name Th. Smith (1942) 1)

nationality American




company’s business; management selection; manage-

ment recommendation and development; innovation

and technology development, oil and gas industry

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 P. Winsemius (1942) 2)

nationality Dutch




company’s business; 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), chairman of the Supervisory Board

of Kempen & Co

Secretary to the Supervisory Board

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

name F.H. Schreve (1942) 1)

function Chairman

nationality Dutch




company’s business; management selection;

management recommendation and development;

compliance; shareholders’ and employees’ relations

other functions Supervisory Board member of OPG N.V., as well as several

other companies; also various management functions

name P.J. Crawford (1951) 2)

nationality British



expertise internal risk management and control systems;

information and communication technology;

innovation and technology development

other functions Supervisory Board member of Crimsonwing Ltd.

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

name F.J.G.M. Cremers (1952) 2)

nationality Dutch



expertise financial administration and accounting; internal risk

management and control systems; compliance; oil and

gas industry; shareholders’ and employees’ relations

other functions former CFO and member of the Board of Management of

VNU N.V. from 1997 until the end of 2004. Prior to that,

21 years with Royal Dutch/Shell Group in different

management positions in several countries, member of

the Supervisory Board of N.V. Nederlandse Spoorwegen

(Dutch Railways), Vopak N.V. and Rodamco Europe N.V.,

member of the committee ‘Kapitaalmarkt’ of the Dutch

financial authority AFM.

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

15

Fugro can look back on a good year. Turnover and net

result rose to record levels. The further strengthening of

its global position meant 2005 was a successful year for

Fugro in other respects as well.

This was partly a consequence of the consistent

application of its strategy on a financial, organisational

and professional skills basis. This also forms a firm

foundation for good results in the future. Current market

conditions would appear to contribute towards this

positive long-term view.

A n n u a l a c c o u n t s a n d d i v i d e n d p r o p o s a l

This Annual Report includes the 2005 Annual Accounts,

which are accompanied by an unqualified auditors’

report. We propose that the shareholders adopt the 2005

Annual Accounts and discharge the Board of Management

for its management and the Supervisory Board for its

supervision.

As far as profit appropriation is concerned, we endorse

the Board of Management’s proposal, stated on page 26,

to increase the dividend to EUR 0.60 per ordinary

(certificate of) share (2004 converted: EUR 0.48). This

dividend comprises either a cash payment or a settlement

in (certificates of) ordinary shares, whichever the

shareholder prefers.

C o m p o s i t i o n a n d p r o f i l e o f

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

Since 1987, Fugro’s international character has been

clearly reflected in the composition of the Supervisory

Board. Three nationalities are represented: Dutch (3x),

British (2x) and American (1x). Information on each

member of the Supervisory Board 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. All six Supervisory Board members are

independent persons in the sense of the Dutch Corporate

Governance Code.

In our opinion the Supervisory Board meets the stipulated

requirements and we deem the composition to be

suitable. To remain up-to-date with new developments,

in 2005 the entire Supervisory Board devoted an

afternoon and evening to the study of the Corporate

Governance Code and the latest insights in this field.

An extensive visit to one or more Fugro companies is also

an annual activity. During the year under review the

operating companies in Australia and the Netherlands

were visited. Mr. Cremers, who joined the Supervisory

Board in 2005, followed an introduction programme.

P l e n a r y a c t i v i t i e s

In the year under review the entire Supervisory Board met

five times with the Board of Management. All meetings

were almost always attended by the entire Supervisory

Board. For the most part, these meetings were also

attended by the other members of the Executive

Committee. Two meetings were combined with visits to

various operating companies.

The major issues discussed during the meetings were

the financial results, the overall strategy, the strategies

of the different business units and the reports of each

committee. Intended acquisitions and disposals and

developments in the oil and gas and mining industries

were also discussed. Regular items on the agenda were

Health, Safety & Environment (HSE), major investments,

the filling of various senior management positions, ICT

and the risks inherent to the Company’s activities as well

as the Board’s opinion regarding the set-up and

functioning of the risk management and control systems.

Meetings between Board members took place on several

occasions. The functioning of the Board of Management,

the Supervisory Board and the individual Board members

was discussed in the absence of the Board of Management.

The findings of the external auditor during audits 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 Chairman of the Board of

Management, but other Supervisory Board members

also had bilateral contact with individual members of

the Board of Management and the Executive Committee.

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

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

The members of the Audit Committee are

Mr. F.J.G.M. Cremers (Chairman), Mr. P.J. Crawford and

Mr. P. Winsemius. Collectively these members possess the

required experience and financial expertise to supervise

the Company’s financial activities, annual accounts and

risk profile. The Audit Committee met three times during

2005 and a meeting that had been postponed took place

in January 2006. The external auditor attended these

meetings. During the relevant meetings the annual

accounts and half-yearly accounts were discussed. Topics

such as taxation, claims and disputes were discussed in

depth. Risk areas, such as hedging, fluctuations in foreign

currency exchange rates and insurance were also

discussed as were 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.

R e m u n e r a t i o n a n d

N o m i n a t i o n C o m m i t t e e

The General Meeting of Shareholders of 19 May 2005

approved the proposal to amalgamate the Remuneration

Committee and the Nomination Committee.

The combined committee (henceforth the Remuneration

& Nomination Committee) met twice and the previously

separate Committees each met once. The members of

the Remuneration & Nomination Committee are

Mr. F.H. Schreve (Chairman), Mr. J.A.Colligan and

Mr. Th. Smith.

In the area of remuneration, the topics discussed

included the remuneration of the individual Directors

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. This remuneration policy has been

published on the website www.fugro.com. For a summary

of the remuneration of the individual members of the

Board of Management, please see pages 113 and 114 of the

Annual Accounts. The remuneration report can also

be viewed on the website.

The main lines of Fugro’s remuneration policy are as

follows:

a) a fixed salary component. An external study carried out

in 2004 concluded that this component was not in-line

with comparable companies. It was decided to make

further inroads into the shortfall in 2005.

b) a variable component. This is determined annually and,

in 2005, amounted to a maximum of 58% of the fixed

salary. The variable component is determined on the

basis of three criteria:

1) the profitability of the Company over the financial

year;

2) strategic developments in the financial year;

3) the achievement of individual targets.

c) a long-term component (option scheme). Fugro has had an

option scheme for many years. An overview of the

option scheme is included in the Annual Accounts.

d) secondary employment benefits, including the pension

scheme. The secondary employment benefits conform

to the market. The pension agreement structure is

based on an available premium system.

Other topics discussed were the functioning of individual

members of the Board of Management, the transfer of

Mr. G-J. Kramer’s tasks to his successor Mr. K.S. Wester,

and the preparations for the Supervisory Board’s

nomination of members of the Board of Management.

The Supervisory Board’s proposals for appointments to

the Board of Management are presented to the Annual

General Meeting of Shareholders, which decides on

the appointments.

A p p o i n t m e n t s

Board of Management

First of all, a very special word of thanks to Mr. G-J. Kramer

who stepped down as President and Chief Executive

Officer on 1 October 2005 and retired on 31 December

2005. Mr. Kramer led the Board of Management for

23 years. Throughout these years he successfully and

energetically managed and steered the healthy growth

that enabled the Company to acquire a leading global

position. Considerable attention was paid to Mr. Kramer’s

retirement both within the company and amongst

external contacts.

Mr. Kramer’s successor, Mr. K.S. Wester, joined Fugro in

1981 and has been a member of the Board of Management

since 1996. We are convinced that he will be able to

extend Fugro’s firm foundations.

16

To supplement the Board of Management the Supervisory

Board will propose to the Annual General Meeting on

10 May 2006 that Messrs. P. van Riel and A. Steenbakker

be appointed as members of the Board of Management.

With these appointments expertise in both the oil and

gas industry and the construction industry will be well

represented within the Board of Management.

Mr. van Riel is a Dutch national. He founded Jason

Geosystems and has worked for Jason Geosystems since

1986. Jason was acquired by Fugro in 2001. In March 2004

Mr. van Riel was appointed a member of the Executive

Committee and COO (Chief Operating Officer) of the

Geoscience Services division’s Development & Production

activities, which include the offshore seismic survey

activities.

Mr. Steenbakker is a Dutch national. He joined Fugro in

September 2005 as COO of the Geotechnical Services

onshore activities and as a member of the Executive

Committee. Prior to joining Fugro Mr. Steenbakker

worked for Fluor where, since 1983 he filled various

international management positions within the oil and

gas division. In his last position with Fluor he was, as

Senior Vice-president, responsible for the oil and gas

division in Europe, Africa and the Middle East, strategy

development and the implementation of Fluor’s

international maintenance services.

Further details concerning Messrs. Van Riel and

Steenbakker will be presented under the relevant agenda

item. If approved by the Annual General Meeting of

Shareholders on 10 May 2006 the Board of Management

of Fugro N.V. will comprise, as of that date:

K.S. Wester, President and Chief Executive Officer

A. Jonkman, Chief Financial Officer

P. van Riel, Director

A. Steenbakker, Director

Supervisory Board

On 19 May 2005 Mr. F.J.G.M. Cremers was appointed as a

new member of the Supervisory Board for a term of four

years. On the same date Mr. P.J. Crawford was reappointed

for a new term of four years. The Supervisory Board will

propose to the shareholders that Messrs. F.H. Schreve and

Th. Smith, who will step down on 10 May 2006 in

accordance with the roster, be reappointed.

The proposal to appoint Mr. Schreve, whose first

appointment was in 1983 when Fugro was not a listed

company, constitutes a deviation from best practice

stipulation III.3.5 of the Corporate Governance Code

because he will have served as a member of the

Supervisory Board for longer than 12 years. However,

the Supervisory Board attaches great importance to the

reappointment of Mr. Schreve, amongst others in view of

the supervision by the Supervisory Board of the changes

in composition of the Board of Management. This requires

continuity from the Supervisory Board and continuity of

its composition. Reappointment of Mr. Schreve would

safeguard this, the more given his tenure and knowledge

of the company and his experience in this field.

Futhermore the Supervisory Board will propose to the

Annual General Meeting of Shareholders on 10 May 2006

that Mr G-J. Kramer is appointed a member of the

Supervisory Board. Mr Kramer can not be considered to be

an independent member of the Supervisory Board within

the sense of the Corporate Governance Code. However,

the Supervisory Board as such complies with the

requirement of independence, since all other members

are deemed to be independent.

The data of Messrs. Schreve, Smith and Kramer will be

presented to the Annual General Meeting of Shareholders

under the relevant agenda item.

I n c o n c l u s i o n

We would like to express our appreciation to the Board of

Management, the Executive Committee, the international

professional staff and all Fugro’s employees for

everything they achieved in 2005. Without their efforts

Fugro would not have reached the leading market

position it occupies today. The year 2005 was

exceptionally satisfying in many respects. From a long-

term perspective Fugro is in an excellent position for

sustained growth. The transparent strategy and good

management structure will continue to serve the

interests of all Fugro’s stakeholders.

Leidschendam, 9 March 2006

F.H. Schreve, Chairman

J.A. Colligan

P.J. Crawford

F.J.G.M. Cremers

Th. Smith

P. Winsemius

17

E X P L O R AT I O N

B a s e d o n g e o l o g i c a l s t u d i e s F u g r o u s e s

t e c h n o l o g i e s t h a t i n c l u d e m a r i n e s e i s m i c

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

t h e s e a b e d . T h e s e l o c a t i o n s a r e t h e r e f o r e

i n v e s t i g a t e d b y a m o n g s t o t h e r s s e i s m i c

s u r v e y s . T e s t d r i l l i n g i s e x t r e m e l y e x p e n s i v e .

S o i t i s i m p o r t a n t t h a t a p r e l i m i n a r y s t u d y

m a p s t h e f i e l d a s a c c u r a t e l y a s p o s s i b l e

b e f o r e t e s t b o r e s a r e d r i l l e d t o a s c e r t a i n

h o w m u c h o i l o r g a s i s p r e s e n t .

Offshore seismic surveys enable

Fugro to map the subsurface with

high accuracy. Such a survey is

carried out by towing cables fitted

with sensors behind a vessel.

Sound waves, generated by a source

just behind the vessel, provide

information regarding the structure

of the subsurface, which is

schematically represented on this

page.

Fugro’s experts can, with the help of

geological information and seismic

surveys, assess which geological

formations are conducive to holding

oil and gas.

Offshore seismic surveys are

carried out using cables up to

twelve kilometres long that are

fitted with sensors and towed behind

a vessel. The cables are deployed from

the quarter-deck of the vessel.

Increasingly Fugro is using low above land

flying aircrafts when searching for oil and gas.

These are fitted with sensors that detect changes

in the magnetic and gravity fields due to the

rocks below. As with a seismic survey the

information collected about the

subsurface is used to map the

earth’s structure.

E x p l o r a t i o n – A p p r a i s a l – D e v e l o p m e n t

Gas

Seal

Oil

Source rock

Reservoir rock

20

From left to right:

O.M. Goodman, P. van Riel,

J.E. Kasparek, A. Steenbakker

(employed by Fugro since

1 September 2005), K.S. Wester

(President and Chief Executive Officer

since 1 October 2005), G-J. Kramer

(retired since 1 January 2006),

A. Jonkman, J.M.E. Feije,

F.E. Toolan, J. Ruegg.

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

As of 1 January 2006, the Board of Management of Fugro N.V.

comprises two people:

name K.S. Wester (1946)

function President and Chief Executive Officer

nationality Dutch

employed by Fugro since 1981

first appointed to current position 2005

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 A. Steenbakker (1957)

function Director Onshore Geotechnical

nationality Dutch



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



(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

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 1

Turnover

Turnover from own services

Operating result

Cash flow


Net margin before amortisation of goodwill

Net result

Net margin

Interest cover (factor)

Change in %

11.2

13.9

35.4

28.8

85.8

69.2

67.3

IFRS2004

1,235.8

787.4

134.5

160.9

64.7

5.2%

4.9

IFRS2003

952.7

627.6

88.2

109.2

39.8

4.2%

4.0

DutchGAAP2002

976.8

638.9

116.2

123.4

75.2

7.7%

63.1

6.5%

6.3

DutchGAAP2001

909.8

578.1

98.5

105.3

61.7

6.8%

56.3

6.2%

7.8

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

For Fugro 2005 was the best year in Fugro’s history up till

now. Not only did both turnover and net result reach

record highs, target margin was also exceeded.

Furthermore 2005 was a year in which the effect of

acquisitions and currency exchange rates on the turnover

was relatively small. The success in 2005 was due to a

number of structural factors, which will continue into

the future:

• In the last decade Fugro’s structure, composition and

market positions have been enhanced to the point that

the company’s portfolio of activities is now well

balanced. This limits the cyclical effect on the

Company and enables high capacity utilisation to be

achieved continuously.

• In the second half of 2004 and 2005 investments by

the oil and gas industry increased significantly all over

the world. This has led to more demand for services

from suppliers. The postponement of investments in

the past, the depletion of existing fields, and the

steadily increasing global demand for energy are

the main reasons.

• The substantial increase in seismic activities, which in

2005 constituted around 13% of Fugro’s turnover. This

includes also good sales of Fugro’s multi-client data,

which generally mark the beginning of the oil and gas

field development cycle. Fugro is involved in the entire

oil and gas field cycle (see page 11) and the radical

increase in investments has had a positive effect on

Fugro in a number of phases.

• Fugro’s involvement with the infrastructure project

and mining industry markets, both of which began

picking up in 2005.

• The policy related to continuous investment in (new)

technological equipment and the unceasing focus on

innovative research has had a positive effect on Fugro’s

business development. The same is true for the

constant emphasis on staff training and development.

• The successful integration of Thales GeoSolutions into

the Offshore Survey division in 2004 contributed

towards the good results achieved in 2005.

The Remotely Operated Vehicles (ROVs) that came with

this acquisition were well used.

In financial terms, Fugro’s business development in 2005

can be summarised as follows:

• Fugro’s overall turnover rose by 15.1% to

EUR 1,160.6 million of which 12.0% was achieved

through organic growth;

• net result rose by 101,6% to EUR 99.4 million

(2004: EUR 49.3 million);

• the net profit margin rose to 8.6% (2004: 4.9%);

• all three divisions contributed towards

the substantially improved result;

• it is proposed that the dividend for 2005 is increased

to EUR 0.60 per (certificate of) ordinary share

(2004: EUR 0.48).

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

IFRS2005

1,373.7

896.8

182.1

207.2

120.2

8.8%

8.2

During the year under review Fugro completed several

smaller but strategically important acquisitions:

• the acquisition of the business activities of BTW

Hydrographic in New Zealand, this comany provides

survey services to the oil and gas industry;

• the acquisition of a 100% interest in Comprehensive

Geotechnical Investigation in Zhejiang, China.

This company is licensed to carry out onshore

geotechnical activities throughout China;

• the acquisition of Elcome Surveys in Mumbai, India,

a major supplier of survey, geotechnical and

oceanographic services in India and the Middle East.

In addition, the market position in California, the USA,

was strengthened by the acquisition of geotechnical

engineering bureau España Geotechnical Consulting

(EGC) based in Roseville, Sacramento Valley.

Furthermore Fugro acquired Beardall, Parry and

Associates in Wales. This company is specialised in the

evaluation of oil and gas prospects and fields.

The organisation was also reinforced through the

establishment of the new company Fugro-OceansatPEG in

Brazil. The company will carry out offshore survey,

positioning, oceanographic, metocean, ROV and diving

activities primarily for the oil and gas industry. Fugro

holds a 62% interest in this company.

The seismic market has undergone robust growth and

Fugro’s goal is to improve its already strong position in

the offshore seismic market and its global services

offering. For this purpose Fugro wants to operate with a

fleet of around eight vessels, some owned by Fugro, some

chartered. At the end of 2005 Fugro took the first steps

towards this with the signing of a long-term charter

agreement from May 2006 for the ‘Geo Atlantic’, as well

as a multi-year charter for the ‘Geo Celtic’ – a 3-D seismic

new-build vessel that will be launched in mid 2007.

At the beginning of 2006 a three-year charter agreement

was signed for the seismic vessel ‘Geo Barents’ that will be

launched in November 2006. Fugro will obtain ownership

in November 2009. This expansion brings about a further

modernisation of the fleet and means Fugro has six

seismic vessels at its disposal for a number of years.

In addition, to maintain flexibility on a project and/or

short-term basis, two or three additional vessels will be

chartered to bring the fleet of vessels working in the

seismic market up to around eight.

In 2005 several divestments of a limited size took place:

• the sale of the 40% interest in Chartco, in the UK, active

in the field of nautical information for shipping;

• the sale of the standard diving activities in Mexico;

• the sale of two laboratory activities in Wales, the UK

(including environmental analyses).

The turnover from these activities amounted to

EUR 15 million per annum. These activities do not fit in

Fugro’s strategy for the future.

For the figures related to these acquisitions and

divestments please see the annual accounts pages 83

through 85 and 96.

In 2005 Fugro was awarded and completed a number of

major assignments, including:

• a large project for Brass LNG in Nigeria. A geophysical

and geotechnical survey was carried out (both onshore

and in coastal waters) for LNG/LPG facilities;

• the measurement, using the FLI-MAP system, of

approximately 700 km of dams for the

Hoogheemraadschap (polder authority) Delfland;

• a marine geotechnical survey offshore Brazil.

The ‘Fugro Explorer’ was used to collect data on

the seabed soils in water depths of up to 2,100 metres

that the client will use for the design and construction

of platforms, underwater installations and pipelines;

• hydrographic and geophysical investigation of the

western Nile delta (Egypt) for BP Exploration using

Fugro’s newest AUV (Autonomous Underwater

Vehicle);

• a geophysical, geotechnical and environmental survey

in the United Arab Emirates for Fluor Mideast;

• the mapping, using FLI-MAP of the damage caused to

levees around New Orleans by hurricane Katrina.

Fugro is also active in assisting to repair the damage to

offshore constructions caused by the two hurricanes in

the USA.

22

DutchGAAP2001

309

392

209

910

1.13

Dutch GAAP2002

323

371

252

946

1.06

IFRS2003*

282

354

186

822

0.88

IFRS2004

273

470

265

1,008

0.81

IFRS2005

304

565

292

1,161

0.81

23

In the year under review Fugro also acquired orders that

will be carried out or started in 2006, including:

• a geophysical airborne survey of various regions in

the Republic of Ghana;

• a five-year contract from the National Oceanic and

Atmospheric Administration (NOAA-NOS), part of

the US Department of Commerce, for hydrographic

surveys and related services in USA waters;

• various three-dimensional (3D) seismic surveys along

the coast of Norway for the Norwegian oil company

Statoil;

• a three-dimensional seismic survey off the coast

of Morocco: the collection of data over around

2,200 square kilometres of sea-bed;

• an airborne geophysical survey of areas of Papua

New Guinea that was started in July 2005 and will

take four years to complete.

In January 2006, the new company Fugro-OceansatPEG

SA, which was set-up in 2005 and in which Fugro holds

a 62% interest, received an order (contract value

USD 25.4 million) from the Brazilian oil company

Petrobras for inspection services and the management of

construction activities in Brazilian waters. The contract

was signed for two years with an option of extension for a

further two years.

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

To enable a proper comparison of information regarding

the Fugro shares, all the 2004 figures take into account

the share split (four for one) of 20 June 2005.

G e n e r a l / d o l l a r e x c h a n g e r a t e

The average dollar rate for 2005 was EUR 0.81 equal to

EUR 0.81 in 2004. Due to – amongst others – a rising trend

of the US dollar rate in the course of the year, a positive

exchange rate result was realised of approximately

EUR 4 million (2004: an exchange loss of EUR 5.5 million).

In addition, the balance sheet was influenced by the

dollar. The dollar rate at the end of 2005 was EUR 0.85

compared with EUR 0.73 at the end of 2004. This resulted

in Fugro’s (shareholders’) equity position being 17%

higher at the end of 2005.

(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

* 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.

Airborne survey at

Cullaton Lake,

Nunuvut, Canada

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

In 2005 turnover rose by 15.1% to EUR 1,160.6 million,

compared with EUR 1,008.0 million in 2004. The increase

in turnover is depicted in the table below. This shows that

most of the turnover increase was achieved through

organic growth (12.0%).

C o s t s

As a result of the higher turnover there were also higher

costs.

The third party costs rose by 11.3% to EUR 405.7 million.

Personnel expenses rose by 9.0% to EUR 361.0 million.

Depreciation of tangible fixed assets rose by 5.0% to

EUR 69.4 million.

Other operating expenses rose by 22.5% to

EUR 184.7 million.

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 other/Africa

Near and Middle East/Asia/Australia

North and South America

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).

IFRS2005

100

489

234

338

1,161

IFRS2004

97

415

196

300

1,008

IFRS2003

102

327

167

226

822

DutchGAAP2002

136

326

206

278

946

DutchGAAP2001

125

305

207

273

910

(in percentages)

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

2005 (IFRS)

2004 (IFRS)

2003 (IFRS)

2002

2001

2000

1999

1998

1997

1996

Average (1996 – 2005)

Total

15.1

22.6

(13.1)

4.0

27.6

30.4

(5.4)

20.0

28.0

27.0

15.6

Exchangerate

differences

2.8

(2.7)

(9.4)

(3.4)

0.6

10.6

2.9

(1.7)

10.9

4.0

1.5

Divest-ments

(1.1)

(0.6)

(0.6)

(7.4)

(1.0)

Acquisi-tions

1.4

16.2

4.9

4.0

8.6

8.9

1.8

3.2

6.0

3.0

5.8

Organic

12.0

9.7

(8.6)

3.4

18.4

10.9

(9.5)

18.5

18.5

20.0

9.3

**

25

N e t f i n a n c i n g c o s t a n d t a x e s

Net interest amounted to EUR 16.2 million (2004:

EUR 31.8 million). A new convertible bond loan of

EUR 125 million with an interest rate of 2.375% had a

positive influence on the net interest – the subordinated

convertible debenture bond of EUR 100 million redeemed

in 2005 carried an interest rate of 4.75%. In addition, less

use was made of the existing credit lines. Rate of

exchange differences are included in net financing costs

(2005: profit EUR 4 million, 2004: loss EUR 5.5 million).

Tax charges on the profit before tax decreased to 20.9%

(2004: 27.5%).

The effective tax rate is somewhat lower than originally

expected at the transition to IFRS.

This is the result of further efficiency in the company tax

and financing structure as well as the possibility to use

the non-recognised tax losses in a number of countries

due to the better results in these countries.

Considering the available non-recognised tax losses, the

effective tax charge is expected to stay at the same level

for the next few years to come.

N e t r e s u l t

The net result rose by 101.6% to EUR 99.4 million (2004:

EUR 49.3 million), after deducting third party interests

in the profits of subsidiary companies. This amounts to

EUR 1.51 per share (2004: EUR 0.83). Translation

differences improved the net result by circa EUR 3

million.

There were no impairments (extraordinary devaluations)

of assets in 2005.

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

The net profit margin rose to 8.6% (2004: 4.9%).

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

At EUR 144.1 million the operating result was 38.2%

higher than in 2004 (EUR 104.2 million).

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

In 2005 the total cash flow from operations amounted

to EUR 176.1 million (2004: EUR 125.8 million).

This equates to EUR 2.67 per share (2004: EUR 2.12).

Investments in tangible fixed assets (including

acquisitions) against this cash flow amounted to

EUR 90.4 million (2004: EUR 71.0 million).

O u t s t a n d i n g r e c e i v a b l e s

The average number of days outstanding for receivables

was 68 days (2004: 67 days).

I n t a n g i b l e a s s e t s / g o o d w i l l

In 2005 the addition of intangible assets resulting from

acquisitions, or goodwill, amounted to EUR 8.3 million

(2004: EUR 22.9 million). The effect of exchange variance

amounted to EUR 6.5 million. Goodwill comprises the

amount paid over and above the real value of the

identifiable assets and liabilities and adjustment to

Fugro’s principles of valuation. At the end of 2005 the

book value of goodwill was EUR 289.2 million (2004:

EUR 274.4 million). Goodwill is not amortised but is

checked at least annually for impairments (extraordinary

devaluation).

0

30

60

90

120

150

200520042003200220010

25

50

75

100

125

20052004200320022001

(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 *

FLI-MAP-project in

Schwandorf, Germany

* As of 2003 based on IFRS. * As of 2003 based on IFRS.

In 2005, as in previous years, Fugro invested in new

seismic survey data, which is presented on the balance

sheet as ‘Stocks’. Such a data library is typical of

companies that carry out this type of exploration surveys

and contains valuable information that is offered and

sold, under licence, to various interested parties and

which still could contain considerable profit potential.

Virtually no data acquired during or before 2003 is

included on the balance sheet.

The net book value amounts to EUR 48.8 million (2004:

EUR 39.7 million).

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

It is proposed that the dividend for 2005 be increased to

EUR 0.60 per ordinary share (2004: EUR 0.48), 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 40% of the net result.

Shareholders and certificate holders have until 26 May

2006 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 31 May 2006 based on the average share

price at the close of business on the stock exchange on 29,

30 and 31 May. 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 2 June 2006.

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 divisions: Geotechnical,

Survey and Geoscience. The Board of Management is

responsible for Group policy, strategy, acquisitions,

investments, risk management, financing 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 divisions’ 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 into the Company’s culture. Where

appropriate for the client, cooperative links are forged

between or within the divisions. This results in synergy

26

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

Solvency at the end of 2005 was 40.9% (end of 2004: 22.8%).

Shareholders’ equity, excluding the convertible bond,

amounted to EUR 465.5 million.

In March 2005, about 95% of the 4.75% convertible

subordinated bond of EUR 100 million taken out in 2000

was converted. The remainder was redeemed. As a result,

the number of issued shares rose by 9.5%. In April 2005 a

new convertible bond of EUR 125 million at 2.375% was

taken out. This loan has a term of five years and a

conversion price of EUR 24.25.

In April 2005 Fugro also arranged a five-year revolving

credit line of EUR 100 million at an interest rate of

Euribor plus 35 base points for the utilised portion.

At the end of 2005 the current ratio was 1.7 (end of 2004:

0.8). Working capital rose by EUR 317.8 million to

EUR 222.5 million (2004: EUR 95.3 million negative).

D e v e l o p -

m e n t o f

g o o d w i l l *

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002 (IFRS)

2003 (IFRS)

2004 (IFRS)

2005 (IFRS)

Total

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

68.2

22.9

8.3

537.3

* Up until 2000 goodwill was deducted directly from the

shareholders’ equity; the goodwill under IFRS has been

recalculated as of 31 December 2002.

Book valueas of

31 -12

0

0

0

0

0

0

0

0

0

0

0

0

0

0

237.9

190.9

253.1

274.4

289.2

27

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 and offering

them, on a continuous basis, opportunities for training.

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. Nevertheless, in

2005 the outflow was slightly higher than normal. Clients

were, and are, interested in our professional staff – a

scarce commodity in the labour market. This means that a

good internal career development policy is vital to retain,

and utilise to the full, good people and specific skills for

the organisation. The policy is aimed at developing staff

who are flexible and who are capable of rising to fill

management positions or to become technical specialists.

To foster the recruitment of new talent 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

companies’ training schemes. Fugro also has at its

disposal a worldwide pool of experienced freelance

professionals who are employed regularly on a project

basis.

Staff pension schemes and other such benefits are

maintained and take local customs and regulations into

account. In the Netherlands changes related to the

pension (average salary regulation) and medical

insurance schemes have been implemented. Absence due

to sickness is also monitored at the individual operating

company level. Fugro does not consider that including a

total picture of all the Human Resources policies within

the Group in the Annual Report would be constructive

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 2005 a number of

staff were asked to work in fields other than those for

which they were primarily employed. This policy

contributed towards maintaining a high level of capacity

utilisation and allowed (valuable) employees to be

retained.

In view of the favourable market conditions and

prospects, the number of employees was increased by

919 to 8,534 during the year (2004: 7,615). Approximately

Cone Penetration Test for

the foundation of a bridge

near Roßla, Germany.

P e r s o n n e l d a t a

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

Europa other/Africa

Middle East/Asia/Australia

North and South America

Total at year-end

Dutch GAAP2001

6,523

139.5

88.6

1,164

1,999

2,132

1,658

6,953

Dutch GAAP2002

7,003

135.1

88.2

1,121

2,002

2,137

1,663

6,923

IFRS2003

7,160

114.9

76.7

993

2,707

2,439

2,333

8,472

IFRS2004

7,864

128.2

81.8

890

2,232

2,225

2,268

7,615

IFRS2005

8,121

142.9

93.0

839

2,457

2,594

2,644

8,534

half of this number resulted from acquisitions.

The average number of employees over the year was

8,121 (2004: 7,864).

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; approximately 8% of Fugro’s issued shares,

excluding share options yet to be exercised, is held by the

management and staff (at the end of 2005). In 2005,

521 staff were granted options (2004: 493).

For more information please see pages 58 to 62

(Information for Shareholders) and pages 86 to 89 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 sets great store by sustainability and, therefore, on

Corporate Social Responsibility (CSR). Fugro, along with

21 other large Dutch companies, participated in a

Stichting Nationaal Initiatief Duurzame Ontwikkeling

(National Initiative for Sustainable Development) project

based on the OECD (Organisation for Economic

Cooperation and Development) guidelines for

multinational companies. A survey of the internal

compliance with these OECD guidelines in the field of

Corporate Social Responsibility showed that Fugro has

high standards and makes good provision for its

employees. It was also concluded that Fugro:

• Due to its global presence and highly decentralised

structure, can be confronted with conflict between

(the lack of) local legislation and regulations and the

high standards for which Fugro strives;

• Operates with relatively few expatriates. Local

managements can interpret the policy within the

corporate rules from their own perspective and

respecting local cultures;

• Does not wish to play a political role regarding the

desirability of developing, or not developing, projects.

Fugro provides services when this is agreed with the

client and when so doing would not conflict with local

legislation and regulations or Fugro’s business

principles.

Fugro’s CSR policy comprises clear codes of behaviour and

regulations related to:

• health, safety and the environment (HSE);

• quality management;

• the recruitment of employees and their opportunities

for development (see page 27: personnel policy);

• confusion of interests;

• honest competition and good purchasing;

• social responsibility;

• upholding or enhancing Fugro’s good reputation.

Fugro’s CSR policy is implemented pragmatically and

thus does not include explicitly every component of the

OECD guidelines. This is partly due to the fact that Fugro

is a company that is oriented around professional staff

and that is not involved with mass production (in low

wage countries) and therefore does not cause any

environmental pollution through industrial emissions.

In addition, a number of ethical standards are intrinsic

to the culture of integrity that has always been present

within Fugro.

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. Every operating company is responsible

for implementing a HSE management system. The

principle is that the operating company should not only

comply with the specifically relevant legislation and

regulations but should also adopt a pro-active and

preventative stance. In general this means that, if possible

and applicable, higher standards than those demanded by

the relevant legislation should be set. Health and safety in

the workplace and while carrying out projects is a priority

and safeguarding health and safety is an important

component of Fugro’s policy, especially when Fugro’s

activities are carried out in a potentially hazardous

environment. Fugro also works towards influencing

wider industry standards, for example, Fugro is striving

to make its stringent safety standards for the Airborne

Survey activities the norm within the industry.

28

Artist’s impression of the

seismic vessel ‘Geo Celtic’,

that will be ready for launch

mid 2007.

29

In general Fugro’s activities have little 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

component. Through 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 m a n a g e m e n t

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 and

the conclusions have, where desirable or useful, been

implemented. 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.

To this end, (recognised) quality management systems are

applied within operating companies.

C o r p o r a t e S o c i a l R e s p o n s i b i l i t y

Fugro is part of society and involvement in the

community is, therefore, an important aspect of its

operations. This is why Fugro supports a large number of

social initiatives. Sometimes this support is in the form of

a financial contribution, sometimes Fugro contributes

expertise and experience or some other form of active

support. Fugro focuses on general social goals by

supporting institutions such as universities and other

education establishments and industry branch

organisations which may promote our interests. Fugro

also provides support in specific social fields, such as

music, art, culture and sport. Operating company

managers are encouraged to become actively involved in

their local community and to support charitable and

cultural events.

U p h o l d i n g o r e n h a n c i n g F u g r o ’ s g o o d

r e p u t a t i o n

Although each operating company is, in fact, a separate

enterprise, each one contributes towards the reputation

of the Group. Because Fugro’s good reputation is priceless

when it comes to maintaining and expanding our client

base, upholding and protecting our reputation has the

highest priority.

A thorough investigation of the

seabed is vital to ensure that

underwater installations are

securely supported or anchored.

To this end Fugro collects sea-bed

samples and brings them to the

surface in their original condition.

The profile of the sea-bed often resembles a

mountainous landscape. In regions such as the Gulf of

Mexico, where a great many oil and gas installations

are sited, the accurate charting of the sea-bed is

essential for the design of these structures and for

pipeline routing.

© O

RIG

INAL

IMAG

E M

AD

E B

Y S

HELL

& P

TEC

HN

OLO

GY C

O.

Starfix antenna

Acoustic modems

USBL transducer

Generally the installations are built in a

dock or a shipyard and then towed to their

predefined location. Precise positioning and

secure anchoring at the site are essential.

T h o r o u g h r e s e a r c h i s v i t a l f o r t h e d e s i g n a n d s a f e

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

o f o i l a n d g a s f r o m o f f - s h o r e f i e l d s . F u g r o i s

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

o f t h e s e a - b e d , c u r r e n t s , w a t e r d e p t h s , e t c e t e r a .

D E V E L O P M E N T

©SBM

Autonomous Underwater Vehicles are

ideally suited for surveys in very deep

water (up to over 3,000 metres), as the

use of towed equipment has some

limitations, e.g., due to ocean currents

and less accurate positioning.

Palaeo plate reconstruction.

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

T E C H N O L O G Y

ICT systems play an important role in Fugro’s global

activities. This is driven not only by the need to improve

communications and efficiency, but also by the need to

generate a competitive advantage.

Fugro pays a great deal of attention to the security aspects

of the ICT infrastructure. Fugro’s ICT security team

comprises a global security officer, who reports directly to

the Executive Board, and four regional security officers.

Fugro’s ICT security team is responsible for maintaining

and supervising the e-security aspects of the ICT

infrastructure used by the operating companies to access

the Intranet and for Extranet and Internet applications.

Fugro interfaces with the outside world via a number of

well-protected Internet access gateways. The ICT security

systems on these gateways and the Virtual Private

Network (VPN) infrastructure via which the operating

companies are connected to these gateways are

maintained and monitored by a leading Managed

Security Service Provider (MSSP) 24 hours a day, seven

days a week.

The operating companies are responsible for the security

of their own data and ICT systems within their Local Area

Network (LAN) under guidelines and policy set centrally.

Fugro’s ICT security team also plays a role in the training

of local ICT staff regarding such aspects as security and

the best way to make optimum use of Fugro ICT facilities.

In 2005 ‘security audits’ were carried out at a number of

operating companies to evaluate the effectiveness of their

security measures, the extent to which they complied

with the Group’s ICT security policy and to highlight, in

good time, any system problems.

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 Company standards.

When an operating 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.

32

Soil investigation

offshore Doha, Qatar.

33

R E S E A R C H

During 2005 Fugro once again made considerable

progress with regard to regular (product) development.

Technological research plays a key role for Fugro as the

Company’s market position and services rely, in part,

on state-of-the-art equipment and software that enables

information to be acquired more and more precisely and

complex data to be interpreted more and more

accurately. (Product) developments often take place in

close cooperation with the client as the client is

interested in solving a specific problem. The most

important technological (product) developments of 2005

are listed below:

• the further improvement and expansion of the inertial

navigation system that was introduced successfully in

2004. This development is aimed primarily at sub-sea

positioning in deep water. Development will continue

in 2006;

• the development of extremely accurate time

measurement systems with which measurements can

be compared and correlated with millisecond

precision. This is primarily needed to compensate for

vessel movement when using Dynamic Positioning

systems.

• the improvement of satellite navigation systems to

achieve measurements with a (vertical) accuracy of

5 centimetres;

• the optimisation and visualisation of multi-beam data

processing with which the sea bed can be measured

extremely accurately and the measurements displayed

graphically;

• putting the digital video into operation on the

Remotely Operated Vehicles (ROVs). Digital video and

storage provides considerable improvements in both

the reporting of and access to the information;

• various software developments related to improving

the processing and interpretation of (geophysical) data

and for reservoir modelling;

• the first, and successful, employment of the

Autonomous Underwater Vehicle (AUV), the ‘Hugin’,

for a large project in Egypt. The ‘Hugin’, one of the

three AUVs of this type in the world, operates in deep

water where it collects extremely high-quality data

very efficiently. The Hugin’s following ‘assignments’

will be in Indonesia, Brazil and Nigeria;

• the further improvement of the ‘Georanger I’

(Unmanned Airborne Vehicle) to optimise airborne

measuring by flying a remotely controlled airborne

vehicle along a pre-programmed route. The UAV,

which is equipped with various sensors, was used

regularly during 2005.

In addition to the regular (innovative) research activities

directly related to its core activities, Fugro was also

involved in a number of complementary activities and

initiatives including:

• wind energy, where Fugro provides the Chairman of

the IRO wind group, because this form of energy

generation generally also involves (offshore)

infrastructure-related activities;

• the Eurogia-cluster. This is an initiative for sustainable

and safe energy provision in the context of a cleaner

and safer future;

• Fugro’s participation in two investigations related to

gas hydrates (frozen gas crystals) in deep water.

These are potential energy sources and, in addition,

this knowledge could also be used when giving advice

regarding drilling for oil and gas sources in deep water.

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

During 2004 and in 2005 the investment budgets of many

oil and gas companies rose substantially. In 2005 this

made a considerable contribution towards the increased

turnover of suppliers to this sector such as Fugro.

The depletion of existing fields, the postponement of

investments in previous years, and the world’s rising

energy needs mean that in the coming years the oil

and gas industry must continue to make substantial

investments in new fields in order to be able to continue

meeting the demand.

The oil and gas related portion of Fugro’s turnover

amounts to 71% (2004: 72%). Fugro’s strategic focus in this

sector is on two segments and two money streams: the

exploration for and development of new fields, and the

optimisation of the production of oil and gas from

existing fields. This means that over a period of 20 to 30

years Fugro can be involved at different times and with

different services throughout virtually the entire life-

cycle of gas and oil fields. Clearly Fugro is profiting from

the increase in the oil and gas companies’ investment

budgets which focus on both onshore and offshore fields.

Many of the exploration and development activities,

especially the deep water projects, continue to be located

in the Gulf of Mexico, West Africa and Brazil. The Middle

Geo-environmental

measurements of Antwerp

harbour, Belgium.

East, the Caspian Sea, Mexico and parts of Asia and

Australia are also active regions. There is also far more

interest in detailed knowledge regarding reservoirs

aimed at maintaining production levels from existing

fields for as long as possible and extracting the maximum

amount of oil and gas from these reservoirs.

Gas is also a strong growth market. The global demand for

gas continues to increase. Liquid natural gas (LNG) meets

some of this demand. The increasing number of LNG

terminals under development, for which Fugro provides

services in various parts of the world, plus high oil prices,

is making the development of gas fields located at some

distance from the user markets more attractive. This is

especially applicable in the Middle East where there are

considerable gas reserves within transportation distance

of India, China and Japan. Further large-scale

developments are also taking places in countries that

have been exporting gas for some time, such as Australia

and Indonesia. The use of LNG also means that the

purchasing countries can more readily comply with the

stipulations of the Kyoto Agreement. This will strengthen

the trend towards the creation of a global gas market and

could result in gas remaining more attractive than the

alternatives.

The oil and gas companies will, therefore, invest in both

deep water fields and in existing offshore and onshore

fields. Fugro is in an excellent position to offer this sector

a wide range of services anywhere in the world. According

to recent external market research, investment (in

dollars) by oil and gas companies increased by around 20%

in 2005 and will increase by around 15% more in 2006.

Despite the high investment involved in their

development, the deep water fields are, in general, larger

and more productive and, therefore, more attractive.

The global economic growth (demand side) and the

relatively limited production and logistics capacity that

cannot be increased quickly (supply side) meant that oil

prices remained at well over USD 55 a barrel for most of

the year. The average price per barrel of Brent in 2005 was

USD 56.70 (2004: USD 38.22). Oil prices are expected to

remain high (over USD 40) for the time being. Various

publications have indicated that, because demand is

outstripping supply, oil companies are basing their

investment viability calculations on an oil price of USD 25

– 30 or higher per barrel instead of the historical USD 15

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

more projects economically viable. Taking into account

the development time of projects, Fugro expects to be able

to profit from this situation in 2006 and the ensuing

years.

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

In 2005, Fugro’s non oil and gas related activities showed

an improvement compared with the previous year.

This was due to the gradual strengthening of the

economies in a number of regions, which resulted in the

construction related activities in several countries

picking up. These infrastructure related activities, which

have a very regional nature, account for around 21% of

Fugro’s activities (2004: 21%). Relatively speaking, the

share of this sector is currently lower than the historic

norm for Fugro partly due to the good opportunities

offered by the oil and gas industry. Having said that,

as far as turnover is concerned Fugro’s construction

and infrastructure related activities could increase

structurally. The need for infrastructure development

will remain high for a considerable time. Fugro carried

out large orders involving airports, land reclamation,

(LNG) harbour expansions, railways, tunnels and large

buildings all over the world. This is another segment

in which Fugro has, over the years, steadily and

continuously strengthened its market position. One

reason for this is that clients increasingly want to place

the responsibility for more and more of a project’s various

investigation activities in the hands of a single supplier.

Thanks to its unique combination of activities,

specialisms, equipment and technologies, combined with

its scale and market position, Fugro can profit from this

trend. Cooperation between the different Group business

units is increasing. The clustering of activities is

especially noticeable in large infrastructure projects in

coastal waters.

The high price of minerals has led to a significant increase

in exploration-related investment by mining companies.

The extra investment in this sector means more demand

for the necessary data. This has had a positive effect on the

Airborne Survey activities and here too Fugro saw an

increase in the demand for projects in 2005.

The mining industry related activities accounted for

around 6% of the turnover (2004: 5%).

34

35

B A C K L O G

At the beginning of 2006 the backlog amounted to

EUR 814.1 million – an increase of EUR 224.9 million

compared with a year earlier (2005: EUR 589.2 million).

The backlog calculation is based on end of year exchange

rates. Partly due to the increase in the dollar rate from

EUR 0.73 to EUR 0.85 for one USD, the backlog in EUR was

38% higher compared with 2005. Had the dollar rate

remained the same the increase would have been 29%.

(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

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

2006

63.3

34.2

50.6

18.4

166.5

202.4

169.3

16.1

16.7

19.0

5.6

429.1

130.2

40.5

32.5

15.3

218.5

814.1

EUR 0.85

Recalculated at the exchange rates of 31 December 2004, the backlog at the start of 2006 would have been EUR 54.0 million lower

(EUR 760.1 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).

‘Southern Supporter’

active for the Greater

Gorgon Development

Project, Australia.

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

In January Fugro’s Supervisory Board decided to propose

to the Annual General Meeting of Shareholders on 10 May

2006 that Messrs. P. van Riel and A. Steenbakker be

appointed to the Board of Management as of that date

(see also the report of the Supervisory Board on page 17).

In January the Board of Management announced that

Mr. F.E. Toolan, member of the Executive Committee and

COO of offshore Geotechnical Services and Airborne

Survey, would retire per 1 July 2006. As of the same date

Mr. W.S. Rainey will be appointed COO of Geotechnical

Services and Mr. S.J. Thomson will be appointed COO of

Airborne Survey. Both Mr. Rainey and Mr. Thomson have

been working a long time for Fugro.

In January 2006 Fugro signed a three-year charter contract

with the Norwegian shipyard Uksnoy & CO A/S for the

seismic vessel ‘Geo Barents’. The vessel will be ready for

launching in November 2006 and Fugro will obtain

ownership in November 2009.

During January 2006 Fugro Holdings Ltd. in the UK

acquired a 100% interest in Surrey Geotechnical

Consultants Ltd. for an amount of EUR 0.6 million.

P R O S P E C T S

The prospects for suppliers to the oil and gas industry are

positive. Fugro is well equipped to fulfil the needs of

clients in this sector efficiently all over the world.

As indicated in external reports, in 2006 investments by

the oil and gas industry are expected to increase (in dollar

terms) around 15% compared to 2005. A significant

portion of this will be spent with providers of services

such as seismic surveys. Other survey activities will also

reap the benefits of this increased investment. Good

developments are expected for deep water projects,

especially in the Gulf of Mexico, West Africa and Brazil.

Good capacity utilisation is also foreseen in the Middle

East, the Caspian Sea and Asia.

Fugro will also harvest the rewards of its focus on

improving the production of (existing) oil and gas sources

through its Development & Production activities. In

addition to traditional markets, such as the mining

industry, the Airborne Survey activities are enjoying more

and more interest as a result of the developments in the

oil and gas industry and the demand for the

identification of fresh water reserves. In 2006 there will

still be a need for assistance with the repair and

inspection of oil and gas installations and infrastructure

in the USA damaged by hurricanes Katrina and Rita in

2005. Fugro is also in a good position to increase its share

of large infrastructure projects in 2006.

Organisationally the Company is structured efficiently

and effectively with a good strategic foundation and a

sound financial framework. This means that Fugro is in a

good starting position in all the various markets in which

it operates all over the world. At the same time, economic

conditions are improving steadily, a view supported by

the size of the order backlog at the beginning of 2006.

36

Structural Health Moni-

toring System for bridge

the Shenzhen Western

Corridor, Hong Kong.

37

Investments, including investments in new seismic and

underwater measuring equipment, are essential for

Fugro, we expect that investments in 2006 will be around

EUR 100 million higher than normal. We will also

continue recruiting and training new staff in order to be

able to meet the demand. Due to the short-term nature of

a part of our projects we only can, like in previous years,

give a forecast for the full year at the presentation of the

half-yearly report 2006 in August.




P r o s p e c t s s u m m a r i s e d :

• good prospects for suppliers to the oil and gas

industry;

• according to external reports the investments

by oil and gas companies expected to increase by

15% in 2006;

• high demand for offshore seismic survey;

• continuous demand for minerals (mining industry);

• due to the growth in the world’s population

further expansion of transportation systems (for

which large infrastructural projects are

necessary, such as roads, harbours and airports);

• positive developments, both offshore and

onshore, in many regions;

• leading market positions in which investments

will continue.

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

p r o d u c i n g , o n l y a p o r t i o n o f t h e a v a i l a b l e

o i l a n d g a s i s b r o u g h t t o t h e s u r f a c e .

T o o p t i m i s e t h i s p r o c e s s m o r e a n d m o r e

u s e i s b e i n g m a d e o f 3 D c o m p u t e r

m o d e l l i n g o f t h e s u b s u r f a c e f o r m a t i o n s .

B r i n g i n g a l l t h e a v a i l a b l e i n f o r m a t i o n

t o g e t h e r i n a c o m p u t e r m o d e l e n a b l e s

F u g r o t o a n a l y s e t h e o i l a n d g a s

r e s e r v o i r s s o t h a t t h e e n t i r e f i e l d c a n b e

d e v e l o p e d a s e f f i c i e n t l y a s p o s s i b l e .

P R O D U C T I O N

Fugro can produce three-dimensional

analyses of an oilfield that show the degree of

linkage between oil and gas compartments

in a field and whether the wells are correctly

positioned for extraction.

The stratification and permeability of the

subsurface have a major effect on the degree to

which oil and gas can flow towards the collection

point. This type of flow can be charted using

modern computer analysis.

Fugro’s satellite positioning

systems enable offshore

installations to be positioned

– with decimetre accuracy –

anywhere in the ocean.

Infrared satellite photographs enable ocean

currents to be charted. The Gulf of Mexico is

one of the regions where Fugro has carried

out this type of analysis.

The exponential increase in computer

capacity means that we can now work

far more quickly and accurately.

Fugro assists in the design of offshore oil

and gas installations such that they can

withstand the forces of nature.

©CORB IS/ZE F A

In the Gulf of Mexico there is a vast

network of oil and gas pipelines,

most of them underwater, and their

positions must be accurately

recorded. Fugro has a unique

database of information collected

over decades at its disposal.

Just how useful this database is was

proven after the Katrina en Rita

hurricanes.

©OCEANNUMERICS

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 projects, land reclamation and

construction activities. Fugro is active in many countries

and generally occupies strong local positions. To a great

extent the Division’s results 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 higher rmargins 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

Although, as expected, onshore Geotechnical Services’

turnover and result rose slightly, there is still room for

a further improvement of the results. Offshore

Geotechnical Services showed an improvement, especially

where work was related to the development of new oil

and gas fields.

On balance turnover rose by 11% to EUR 304 million

(2004: EUR 273 million). The operating result rose by 15%

to EUR 46 million (2004: EUR 40 million). This equates to a

margin on turnover of 15% (2004: 15%). Expressed as a

percentage of the invested capital the operating result

was 26% (2004: 21%).

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.

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

40

0

70

140

210

280

350

20052004200320022001

(x EUR 1 mln.)

T u r n o v e r *

A. Steenbakker

(as of 1 September 2005)

F.E. Toolan

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.

* As of 2003 based on IFRS.

In 2005 the European activities recovered from the

hesitant development of past years. In the Netherlands

the market improved steadily and in Germany a positive

result was achieved. A healthy growth of the activities was

again visible in the United Kingdom. In France there is

still room for improvement of the results.

In the United States, business developed well in Texas.

Although the hurricanes resulted in some stagnation of

the onshore activities they could also, in time, lead to

additional work. In California Fugro had a reasonable

year with good prospects. There was, however, some

stagnation of the activities due to the start of follow-on

orders for LNG-projects being delayed while the clients

decided on plant locations.

The activity level was high in all the Middle East countries

in which Fugro is active. A large number of onshore and

coastal infrastructure projects were developed, partly

thanks to the flow of income from the oil and gas sector.

This resulted in a very good volume of work in Qatar,

Oman, the United Arab Emirates and Saudi Arabia.

In the Far East the situation stabilised in Hong Kong. In

recent years the capacity in Hong Kong has been adjusted

in-line with the volume of work. Hong Kong also serves as

a base for the further expansion of the activities in China

where Fugro now has four offices for geotechnical

services.

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.

The combination of this position and Fugro’s recognised

expertise is often the deciding factor for the acquisition

of orders, including deep water surveys. Most of the

competitors are smaller players active in regional

markets.

Offshore Geotechnical Services continued to make good

progress in 2005. There was a marked trend towards more

and larger deep water projects related to the development

of new oil and gas fields. The geographical spread of the

activities also increased with deep water projects being

carried out off Brazil, West Africa, India, Malaysia and

Australia. The ‘Fugro Explorer’ spend eight months off

Brazil carrying out a series of assignments for various

clients. At the start of the financial year Fugro acquired a

large order for investigations related to LNG/LPG shipping

facilities in the Brass River region of Nigeria. The Offshore

Geotechnical Services, Onshore Geotechnical Services and

Offshore Survey business units worked together on the

project, which was completed in 2005. Fugro also worked

on several large LNG-projects in Australia.

In 2005 Fugro reaped the benefits of earlier initiatives

taken in response to the changes in the activities in the

North Sea. Fugro’s services here are increasingly focused

on the larger independent companies and are related to

oil fields in the final phase of their life-cycle.

In the year under review selective investment was made

in technology and equipment and our vessels are now

better equipped for deep water projects. Fugro also took

part in two surveys related to gas hydrates in deep water.

These are not only potential sources of energy but the

knowledge gained can also be useful when offering advice

concerning drilling for oil in deep water.

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 (EBIT)

Invested capital


Investments


as a % of turnover

as a % of invested capital

* Before amortisation of goodwill

Dutch GAAP2001

309

26

109

10

14

8

24

Dutch GAAP2002

323

35

153

11

63

11

23

IFRS2003

282

42

201

13

10

15

21

IFRS2004

273

40

188

10

21

15

21

IFRS2005

304

46

175

10

12

15

26

* *


The Survey services division concentrates on mapping

the topography and geological composition of the earth’s

surface, both on land and at sea, the registration of data

regarding 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.

The onshore services focus on local/regional markets in

the government, utility, industry and construction

sectors. In addition to traditional land surveys, Fugro

focuses on technologically advanced solutions and new

applications. This opens up possibilities for further

growth for this business unit.

The positioning business unit offers precise satellite

positioning services throughout the world to onshore

markets such as agriculture and mining and to specific

offshore niche markets. Given the availability of free

public DGPS services, Fugro differentiates its satellite

positioning services through technical performance

(accuracy, reliability and coverage) and customer support.


In the year under review the Survey division achieved a

turnover of EUR 565 million (2004: EUR 470 million) – an

increase of 20%. The operating result rose by 37% to

EUR 97 million (2004: EUR 71 million). This equates to 17%

of the turnover (2004: 15%). Expressed as a percentage of

the invested capital the operating result amounted to 44%

(2004: 40%).

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

42

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;

• deepwater surveys using AUVs (Autonomous

Underwater Vehicles);

• survey support for construction projects at sea,

generally using DP (dynamically positioned) vessels and

ROVs (Remotely Operated Vehicles);

• (annual) inspections of pipelines;

• oceanography.

O n s h o r e

• advanced land survey activities;

• data management, conversion and mapping;

• LiDAR and photographic mapping;

• geographic registration and asset management.

• specialist services such as geomonitoring and

dimensional control.

P o s i t i o n i n g

• development and operation of extremely accurate

positioning services such as OmniSTAR, Starfix,

SkyFix and SeaSTAR-DP;

• support of professional end-users on land, at sea

and in the air;

• tracking services for vessels, vehicles, etc.

200520042003200220010

120

240

360

480

600

(x EUR 1 mln.)

T u r n o v e r *


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

Fugro occupies a leading position in the global market for

offshore survey services and aims to further extend this

position. 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.

After the successful integration of Thales GeoSolutions in

2004, the focus in 2005 concentrated again on the regular

business activities. The survey activities had an excellent

year thanks to the substantial increase in investment by

the oil companies and also due to increased activities in

the gas sector. The underwater cable market showed a

slight improvement.

The activity level was high for all the business lines and in

all regions and profited from better than expected

business development. In the Gulf of Mexico progress was

as anticipated in the early part of the year, but towards

the end of the year activity levels rose due to the

considerable amount of repair and inspection work

required for offshore installations as a result of

hurricanes. Activity levels were also high in the Middle

East and the Caspian Sea; and Europe, Africa and Latin

America also showed improvement. Large development

projects in the gas sector meant a high activity level in

Australia.

In 2005 the preceding year’s investments in the

Autonomous Underwater Vehicle (AUV) began to bear

fruit. The AUV was used for surveys in very deep water

and, because of the superior (measuring) results that were

achieved, the demand for this technology is growing.

Where possible, Fugro will use the AUVs to further

optimise the service provision. In 2005 Fugro also carried

out airborne surveys using a new LiDAR system which

takes laser-assisted measurements from the air that are

then used to prepare hydrographic maps. Fugro’s

approximately 60 Remotely Operated Vehicles (ROVs),

were kept very busy due to the increase of the underwater

construction activities. In 2006 the number of ROV’s will

be increased by at least eight.

The currently strong market in which Fugro operates

means more capacity is required. This creates the

possibility for further sustainable growth. For this reason

Fugro is carrying out, with success, a worldwide

campaign aimed at attracting highly-qualified

professional staff from, among other places, the new

Eastern European EU member states.

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

The onshore survey activities take place in a market, and

against competition, that is often locally or regionally

oriented. Fugro offers onshore survey services in a

number of countries. Fugro focuses on the provision of

special measurement and interpretation services using

the latest technology.

43

Dutch GAAP2001

392

65

110

22

50

17

59

Dutch GAAP2002

371

50

111

22

19

13

45

IFRS2003

354

31

267

23

26

9

12

IFRS2004

470

71

179

29

32

15

40

IFRS2005

565

97

222

25

41

17

44


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

Revenue


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.

*** Before amortisation of goodwill

***** ***

During 2005 the onshore survey activities developed well.

Although there is room for improvement the results were

clearly better than 2004 right across the board.

In Australia results improved partly thanks to the cost

reductions implemented in 2004. Here too a LiDAR

mapping system was introduced, which opened new

markets.

The Dutch infrastructure related activities still faced

weak market circumstances, but the organisation has

now been matched to the volume of work and is in a

position to benefit from the positive market trend that

appears to have settled in.

The onshore survey activities for the oil and gas industry

once again developed positively in the Middle East,

the United States and Canada.

In the year under review Fugro invested in FLI-MAP 400

and, with this new generation of systems, expects to

achieve a technological lead in the market. FLI-MAP 400 is

an ultra-modern measuring system for pipeline,

highways, utilities and railway routes. In the aftermath of

hurricane Katrina Fugro used the FLI-MAP laser system to

map the damage to the levees surrounding New Orleans.

The outsourcing of data management and conversion

projects to lower cost countries is continuing. As the focus

of this service is also on more and more added-value, use

is being made of the combined (international) Group

activities.

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, in recent

years Fugro has built-up a leading market position in the

high-accuracy (sub-decimetre) sector.

In 2005 Fugro’s positioning activities once again achieved

a further improvement in turnover and result.

The increase in sales of OmniSTAR-HP system signal

subscriptions in the United States, Australia and Europe,

was mainly due to the fact that compatible hardware

(from third parties) became available at a reasonable

price. OmniSTAR-HP/XP is used primarily for applications

in the agriculture sector. Furthermore there has been no

slow-down in the growth of the offshore Dynamic

Positioning (DP) activities. This shows there is a clear need

for the high accuracy and reliability that Fugro’s systems

can provide.

In the market for high-precision positioning Fugro has

established itself as a leading player on land, at sea and in

the air. Fugro concentrates on the professional user who

needs high-performance services. Thanks to its

development of innovative products and systems, often in

cooperation with strategic business partners, Fugro can

offer measuring systems that are far more accurate (sub-

decimetre) than those offered by the competing

commercial service providers and ‘free services’.

Fugro is keeping a close watch on developments related to

the European Galileo satellite system and anticipates

being able to augment this system. This system may offer

greater accuracy than GPS, but will probably not become

operational during this decade.

44


The Geoscience division concentrates on the gathering

and interpretation of geophysical and geological data and

the 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.

Development & Production concentrates on the gathering

and interpretation of data and on reducing the costs of

and improving the efficiency of oil field exploitation,

development and production. This is achieved by,

amongst other things, the application of advanced data

interpretation and modelling technology developed in-

house. To a great extent these services are funded out of

the less cyclical production budgets. Development &

Production is active worldwide and occupies a strong

position in the field of seismic surveys at sea and as a

supplier of non-exclusive data and high-value services in

the field of integrated geophysical and geological data

processing and interpretation aimed at improving

knowledge regarding reservoirs. The upstream oil and gas

industry is the major client for these services and Fugro

clearly targets the oil and gas companies in the sector.

Airborne Survey collects geophysical data around the

world for the mining industry and for oil and gas

companies. One result of Fugro’s stringent safety

demands and state-of-the-art technology is that the oil

and gas industry has rediscovered these services for the

regional geological mapping. There are also growth

opportunities in other markets and with aid

organisations such as the World Bank.


The Geoscience division achieved a 10% higher

turnover of EUR 292 million (2004: EUR 265 million).

The operating result rose by 19% to EUR 44 million (2004:

EUR 37 million). This equates to a margin on turnover of

15% (2004: 14%). Expressed as a percentage of the invested

capital the operating result amounted to 24% (2004: 23%).

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. The seismic market comprises

a number of segments in which different players are

active. Fugro concentrates on specialist 2D work and

medium-sized 3D surveys. In this segment there are four

major competitors. The 3D market in particular showed a

strong recovery during 2005.

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

45

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 interpolation

• geological interpretation and modelling;

• 3D integrated seismic reservoir characterisation;

• reservoir engineering;

• data management;

• non-exclusive data sales.

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

• collection, processing and interpretation of

geophysical data for industries including mining

and oil and gas;

• mineral and water stocks location and saline layer

detection;

• geological mapping;

• environmental and engineering studies for a wide

range of purposes;

• non-exclusive data sales.

P. van Riel F.E. Toolan

0

60

120

180

240

300

20052004200320022001

(x EUR 1 mln.)

T u r n o v e r *


In 2005 the Development & Production activities

continued to develop. Better contract conditions were

obtained, especially in the seismic market. The focus

continues to be aimed at the further improvement of

turnover and margins. Expectations in this respect are

positive due to the considerable effort put into optimising

project management in 2005. After several large

acquisitions in preceding years the streamlining of the

business unit is now virtually complete. The activities

that were acquired as part of past acquisitions but that

did not fit in with Fugro’s strategy, such as environmental

laboratories, have now been divested. The current

structure and clustering of activities is enabling more and

more benefits to be reaped from cooperation and synergy

between the various companies. This improves the

decisiveness and position in this very promising market.

There was an increase in willingness to invest within the

oil and gas industry which started in the second half of

2004 and continued throughout 2005. This led to a high

demand for and robust growth of our exploration

activities. The continuing decline in production from

existing oil fields (depletion effect), the increasing

demand for oil and gas and the persisting high oil and gas

prices mean this trend is expected to continue. This

resulted in far more seismic activities including sales of

Fugro’s geological and seismic multi-client data, such as

in the Gulf of Mexico.

In August Fugro placed a bid for the Norwegian company

Exploration Resources in order to acquire a number of the

company’s seismic vessels. These vessels were already

being used by Fugro in a cooperative undertaking

relationship. Fugro decided not to raise its bid as a result

of a higher bid from another bidder.

As the cooperation will come to an end during 2006,

Fugro has obtained the required capacity in another way.

In October 2005 Fugro took the first steps with the signing

of a long-term charter agreement for the ‘Geo Atlantic’.

This vessel, which was built in 2000, will be converted for

the collection of seismic data with state-of-the-art

technology. Fugro also placed orders for two 3D seismic

streamer installations one of which is destined for the

‘Geo Atlantic’. In November Fugro signed a long-term

charter agreement for a new 3D seismic vessel (Geo Celtic)

that will be ready for launch in mid 2007. Vessels’ deck

construction has been developed in accordance with

Fugro’s specification so it can be fitted with the newest

seismic equipment. This seismic equipment will

incorporate the latest developments, including 4D

capability. All the seismic equipment on

the Geo Celtic will be owned by Fugro. At the beginning of

2006, a three-year charter agreement was signed for the

3D ‘Geo Barents’ seismic vessel. The Geo Barents will be

ready for launch in November 2006 and its ownership will

be transferred to Fugro in November 2009.

The expansions mentioned above will bring about the

further modernisation of the fleet and will, by mid 2007,

put six seismic vessels at Fugro’s disposal. In addition, to

retain flexibility, two or three vessels will be chartered on

46

Dutch GAAP2001

209

7

250

8

25

3

3

Dutch GAAP2002

252

27

251

14

18

11

11

IFRS2003

186

4

105

13

13

2

4

IFRS2004

265

37

159

16

13

14

23

IFRS2005

292

44

180

18

18

15

24


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

Revenue


Invested capital


Investments


as a % of turnover


* The historical figures have been recalculated in line with the structure introduced in 2002.

** Before amortisation of goodwill.

** **

a project and/or short-term basis. This will enable Fugro to

operate in the seismic market with the desired fleet size

of around eight vessels.

In 2005, the seismic data processing activity showed a

healthy growth, partly through further international

expansion. The growth of this business unit is a

consequence not only of the increased amount of data

collected, but also as a result of the growing reservoir

characterisation activities. The results in the field of

reservoir modelling were satisfactory, but could be better.

In this sector Fugro plays a leading role worldwide, in

terms of both technology and expertise, which means

considerable added-value for the client. Towards the end

of 2005 the streamlining of this business unit was

completed, which also improved the geographical focus.

In the coming years this Fugro core activity will be further

developed with new technologies and services.

In 2005, the activities related to Data Solutions (data

management, storage and processing) – a fast-growing

market for oil and gas companies – also developed

positively. Further (international) expansion took place as

a result of new contracts in Norway and the Netherlands.

The goal for the geological service activities is

international and growing organically. Good steps in this

direction were taken with the acquisition of large

contracts in Mexico and Pakistan and the opening of a

service centre in Dubai. In the area of non-exclusive data

and studies good growth was achieved in a healthy

market.

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

Fugro has a worldwide presence with its Airborne Survey

activities and, partly because of this, a leading market

position in the regions in which it is active. The (local)

competitors in these regional markets are also active in

niche markets for specific applications.

In 2005 the Airborne Survey activities continued to make

excellent progress in Canada, South America, Africa and

Australia. Thanks to this a higher turnover and a good

result was achieved. The oil and gas industry’s interest in

regional geological mapping using airborne survey is

increasing worldwide. The global demand for minerals

remains high, which means the mining activities

continued to develop energetically.

In Canada there was a high demand for surveys from the

mining industry, partly as a result of the continuing

global demand for minerals and raw materials.

In 2005 there was an improvement in business

development in South America due to increased activities

for the mining and oil and gas industries in Brazil.

In Africa orders were received from, among others, the

World Bank and the EU (including in Niger and Ghana). In

addition, projects started in 2004 were continued in

various countries including Nigeria, Angola and

Madagascar.

In Asia a significant order, which will take four years to

complete, was granted by the Ministry of Mining in Papua

New Guinea.

Australia continued to develop robustly as a result of

activities in the mining industry (uranium, diamonds and

base metals) and in the oil and gas industry.

In 2005 investments in both technological developments

and safety aspects related to Airborne Survey were once

again high. There were further improvements to the

‘Georanger I’ (Unmanned Airborne Vehicle) whereby

airborne measuring is optimised by flying a remotely

controlled aircraft along a pre-programmed route.

The UAV, which is equipped with various sensors, went

into commercial operation in 2005. In addition several

older piston engined aircraft were replaced with modern

twin turbine aircraft. New electromagnetic measuring

equipment was fitted in both helicopters and aircraft.

Fugro occupies a leading position in this global market.

Traditionally the most important market segment for the

Airborne activities is the mining industry: the search for

water (particularly in the Middle East) and surveys for

specific oil companies are new markets. Fugro can carry

out soil and rock surveys from the air for far lower costs

and in places where it would be difficult to do so from the

ground. This business unit, along with other Fugro

companies, utilises the growth opportunities offered by

synergy and (technological) cooperation within and

outside the Geoscience division.

47

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

Fugro complies with the Dutch Corporate Governance

Code. Fugro’s Corporate Governance was approved by the

Annual General Meeting of Shareholders of 19 May 2004.

The Company’s Articles of Association were amended

accordingly on 3 September 2004. During the meeting of

19 May 2005 the amalgamation of the Remuneration and

Nomination Committee, and the Chairmanship of the

Committee were approved. All the underlying

documentation, including the relevant rules and

regulations and the Articles of Association and the

Administrative Conditions of Stichting

Administratiekantoor Fugro, are published on the

Company’s website: www.fugro.com under 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 explanations.

Best practice provision II.1.1

The duration of the existing employment contract with

Mr. K.S. Wester deviates from this provision. This contract

was signed before the Code came into force. Fugro cannot

rescind rights that have been granted.


It has been decided to apply the notification obligation to

stocks in listed companies which operate in the same

area, or a related area, as the Company. While on the one

hand this does restrict the working of the provision it

does, on the other hand, extend the working to include

competing companies or clients listed on foreign

exchanges.


The employment agreement with Mr. K.S. Wester does not

include agreements regarding termination recompense.

This means that general Labour Law provisions are

applicable. Fugro does not intend to amend the existing

employment agreement.

Best practice provision III.3.5

The duration of the appointment of Mr. F.H. Schreve does

not comply with the condition laid down in this

provision. He was reappointed as a member of the

Supervisory Board by the Annual General Meeting of

Shareholders before the Code came into force.

Principle III.5

On 19 May 2005 the Remuneration Committee and the

Nomination Committee were amalgamated into one

committee that carries out the tasks in both areas.

Separate Remuneration and Nomination committees

(with separate meetings) has proven impractical due to

the fact that the Supervisory Board is small and three of

its members are not resident in the Netherlands.

Best practice provision III. 5.11

The Chairmanship of the Remuneration and Nomination

Committee is now carried out by the Chairman of the

Supervisory Board. In the Supervisory Board’s opinion this

Committee should be chaired by a Dutch national.

In view of the current composition of the Board and the

individual expertise of its members, the current

Chairman of the Supervisory Board has been chosen.

Principle IV.2

Maintaining its operational independence is crucial for

Fugro (see page 49 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. When Stichting

Administratiekantoor Fugro exercises its voting rights,

the criteria that is used is that the interests of the

Company, its associated companies and all others

involved are safeguarded in the best possible way.

Best practice provision IV.2.1

In deviance with this provision, the Administrative

Conditions of Stichting Administratiekantoor Fugro do

not stipulate in which instances and under what

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

48

conditions certificate holders may ask the Administrative

Office to convene a meeting, with the exception in respect

of the recommendation rights regarding the nomination

of a member of the Stichting’s Board (see the explanation

of Best practice provision IV.2.2).


As a consequence of Best Practice Provision IV.2.2, the

Board of Stichting Administratiekantoor Fugro has

decided that certificate holders representing at least 15%

of the issued share capital in the form of certificates may

request that a meeting of certificate holders is convened

in order to make a recommendation regarding the

nomination of a member of the Stichting’s Board.


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 may, however, be limited, excluded or recalled

in the instances stated in the Administrative Conditions

of Stichting Administratiekantoor Fugro. This is in

accordance with the legal regulation that 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 2005 financial year Fugro complied with its

Corporate Governance Code. In particular the Board of

Management deems that the Company has complied with

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 to 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. and to Stichting Continuïteit Fugro

(see page 50).

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 N.V. in Amsterdam. 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 129.

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, 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

49

period until 19 May 2007 is authorised, with the approval

of the Supervisory Board, to: 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, limit or exclude the priority rights on shares

to be issued. If no option agreement between Fugro and

Stichting Beschermingspreferente Aandelen Fugro has

been signed and the threat of an unwanted take-over is

such that an immediate issue of preference shares by

Stichting Beschermingspreferente Aandelen Fugro is

advisable, the Board of Management should, on the basis

of its appointment as the body authorised to issue shares,

with the approval of the Supervisory Board, decide to

issue preference shares.

The objective of Stichting Beschermingspreferente

Aandelen Fugro is the promotion of the interests of Fugro

and the companies maintained by Fugro as well as 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.

50

• Fugro Survey in Australia received the Silver Safe Way

Achiever Award during the Safety Way Awards

Conference in Freo, Australia organised by the IFAP

(Industrial Foundation for Accident Prevention) (photo 1).

• Fugro Survey in Aberdeen was awarded the ‘Royal

Society for the Prevention of Accidents Gold

Medal Award’. This prize forms part of a prestigious

British award scheme to recognise excellence in health and

safety performance by private and public sector

organisations (photo 2).

• In 2005, Fugro Survey Middle East received the ‘ZADCO

Excellence in Safety Award’ presented at a ceremony

in Abu Dhabi (photo 3).

• Fugro Geotechnical Services was the recipient of the ‘Safety

Merit Award’ by the Hong Kong Construction Association.

This award is presented to companies which succeed in

maintaining accident figures of well below the industry

average and which also could demonstrate their efforts to

implement and promote internal safety management

systems.

• Fugro McClelland Marine Geosciences has won the Jones

F. Devlin Award for safety from the Chamber of Shipping

of America (CSA). With this prize Fugro’s American

operating company has received recognition for the high

level of safety aboard the Fugro Explorer – a state-of-the-art

geotechnical drilling vessel. In the past three years there has

not been a single lost-time accident on the Fugro Explorer.

• In June 2005 Fugro GEOS was awarded the ‘British Safety

Council International Safety Award for 2004’.

The British Safety Council commented: ‘By making safety

an important feature of everyday work practice, Fugro’s

British operating company is reducing accidents while

improving productivity and profitability.’

• MCCI (McDermott) rewarded the crew of the DSV ‘Tofique

Ismaylov’ with the ROV-safety prize for successfully

passing the milestone of 100 launching and recovery

operations without incidents as well as 1,000 hours of ROV

Operations.

S a f e t y a w a r d s

Gary Moore, State Manager CGU Insurance (left) and Huw Ellis of

Fugro Survey in Australia.

‘Royal Society for the prevention of Accidents Gold Medal Award’

Kingsley Ashford-Brown of Fugro Survey Middle East, receives the ZADCO

Award from Hafidh Al Maskari, Engineering Team Leader, and Abdullah

Taher, Chief Surveyor, of ZADCO.

3

2

1

1 2 3

51

T h e s h a r p i n c r e a s e i n o i l p r i c e s m e a n s t h a t g a s i s b e c o m i n g a n

i n c r e a s i n g l y i m p o r t a n t g l o b a l e n e r g y s o u r c e . E x t r e m e c o o l i n g i s

u s e d t o l i q u e f y g a s ( L N G ) s o i t c a n b e t r a n s p o r t e d o v e r l o n g d i s t a n c e s

i n s p e c i a l s h i p s . S p e c i a l i n s t a l l a t i o n s t h a t c o m p l y w i t h e x t r e m e l y

s t r i n g e n t s a f e t y d e m a n d s a r e n e c e s s a r y f o r b o t h l o a d i n g a n d

u n l o a d i n g . P i p e l i n e s c a n b e u s e d t o t r a n s p o r t g a s o v e r s h o r t e r

d i s t a n c e s .

T R A N S P O R T A N D

S T O R A G E

© O

MA

N L

NG

.

Computer simulation is

used to design LNG

shipping facilities.

Fugro’s soil information

and current measurements

have considerable influence

on the final design.

In regions where the sea-bed

is irregular, selecting the right

route for underwater pipelines

so that they are not damaged by

bending is essential.

The liquid gas (LNG) storage tanks must

comply with stringent safety demands.

Fugro has a wide range of inspection and

monitoring techniques in-house with

which to check the condition of these

installations.

As the demand for gas is increasing

so too is the size of the LNG vessels

and the docking, mooring and

processing facilities. These on the

photograph are in the Middle East.

LNG installations are sometimes sited in remote areas such as this – the ‘Brass River’ LNG-project in the

Nigerian rain forest. Fugro’s investigations included determining the load bearing capacity of the soils which

was of vital importance for designing the foundations of the installation.

54

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 cyclic effects is moderated by:

• the cohesion between the 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

Some of Fugro’s orders are 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 30 – 40 per barrel.

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

F u g r o ’ s l o n g - t e r m r i s k s a r e l i m i t e d d u e t o :

• the wide diversity of highly cohesive activities;

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

• proprietory, state-of-the-art technologies, most of which are developed in house, and professional staff;

• the ability to adjust quickly to exchange rate and price changes due to mainly short contracts;

• a balanced and flexible fleet composition (Fugro owned and chartered);

• short-term loans (EUR 317 million) amounting to only 28% of the balance sheet total;

• limited risk, 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 limiting

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

broad portfolio of activities, quantifying all the existing risks relevant for the Group as a whole is virtually impossible.

Risks are, however, quantified wherever this is possible and useful. This applies in particular to the influence of the US

dollar.

Oil & gas

Construction/infrastructure

Mining

Other

2%

71%

6%

21%

(for the year 2005)

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 interruptions 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 a balanced fleet in which

around half the vessels are owned by the Company,

around 35% are chartered on a long-term basis 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.

The Company’s objective is to limit the effect of interest

rate changes on the results. At the moment of closing

both the interest rate risk and the currency risk of the

Private Placement, expressed in USD, were fully hedged

for the full term.

Off balance sheet constructions are avoided, with the

exception of charters of a number of vessels, as part of

normal business. Software, whether purchased or

developed in-house, is not capitalised on the balance

sheet with the exception of substantial external

expenditure for software packages related to

administrative and technical applications. The seismic

and geological database is reduced quickly and

55

E x c h a n g e

r a t e s ( i n E U R )

31 December 2005

30 June 2005

31 December 2004

30 June 2004

31 December 2003

30 June 2003

31 December 2002

30 June 2002

31 December 2001

30 June 2001

GBPaverage

1.46

1.47

1.47

1.49

1.45

1.46

1.59

1.61

1.62

1.62

GBPend ofperiod

1.46

1.49

1.42

1.49

1.42

1.45

1.53

1.54

1.64

1.66

USDaverage

0.81

0.78

0.81

0.82

0.88

0.90

1.06

1.11

1.13

1.13

USDend ofperiod

0.85

0.83

0.73

0.82

0.79

0.88

0.95

1.00

1.13

1.18

USD

GBP

48%

12%

29%

11%

USD related

EUR and other

(for the year 2005)

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

systematically with an average term of less than 2.5 years.

Research 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 any of these

assets is necessary.

C u r r e n c y e x c h a n g e r a t e c o n v e r s i o n

Fugro limits its susceptibility to changes in foreign

currency exchange rates but is not immune to exchange

rate losses caused by rapid changes in the rates and

exchange rate differences. As most of Fugro’s income in

local currencies is used for local payments, the effect of

negative or positive currency movements 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 contend is translation effects. 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) awarding 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 paid constant attention.

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 regulations and customs in each of the countries in

which the Company operates. Since 1 January 2005, Fugro

has operated an average salary scheme in the

Netherlands. Under IFRS this is classified as a ‘defined

benefit’ scheme. In the Netherlands the pension

commitments are fully re-insured on the basis of a

guarantee contract. The accrued benefits 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 number of pension schemes.

The only pension schemes open for new staff are defined

contribution schemes. There is one defined benefits

scheme which remains open for long serving staff and

there are other defined benefit schemes which have been

closed but have ongoing liabilities to their members.

Measures have been taken that the reserves needed to

honour current and past defined benefit scheme

arrangements 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, general liability and equipment

are covered at a Group level. Risks related to equipment

are insured at a local level. 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 operating 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 noticeably

influenced by any of these actions.

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.

56

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.

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 by clear restrictions regarding

representative authorisation. Projects and contracts with

value or risks that exceed specified amounts must be

approved by either Regional Managers or by either 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 operating company managing

directors 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

Additional internal audits are carried out by the Holding

Company regularly and frequently. The findings are

reported directly to the Board of Management.

P e e r r e v i e w s

In addition, regular so-called peer reviews are also carried

out whereby an operating company is investigated by a

team from other operating companies. The results are

reported directly to the Executive Committee.

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 internal and external 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 of 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 relating 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

Fugro operates a Whistle-blower’s regulation.

The objective is to ensure that a possible infringement

of the policy and procedures can be reported without

the reporting having any adverse consequences for

the ‘whistle-blower’.

D e c l a r a t i o n

The Board believes that the internal risk management

and control systems as described above provide a

reasonable level of assurance that the financial

statements do not include any material misstatements

and that these systems operated properly during the year

under review. The Board has no indication that these

systems shall not operate properly in the current year.

No substantial changes to these systems were introduced

during the 2005 financial year and no significant changes

are currently expected.

57

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 2006 of approximately 6% of the index.

The market capitalisation of the Company at the end of

February 2006 amounts to over EUR 2 billion. Since 8 July

2002, Fugro share (certificate) options have also been

traded on Euronext Amsterdam Derivative Markets. Since

May 2005 the convertible debenture bond, which expires

on 27 April 2010, has been traded on the stock exchange.

In 2005 trading in Fugro share certificates was stimulated

by four liquidity providers.

As far as is known, 76% of the certificates are held by

foreign investors, mainly from the United Kingdom and

the United States.

Information per share can be found on pages 6 and 7

(key figures) and on pages 60, 102 and 103.

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

Fugro strives for a pay-out ratio of 35 to 55% of the net

result under the IFRS regulations. The shareholder may

choose between a dividend entirely in cash or entirely in

(certificates of) shares charged to the reserves. In 2005

around 51% of the shareholders opted to receive the

dividend for 2004 in (certificates of) shares (in 2004: 65%).

735,740 shares have been issued for this purpose.

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

The Agenda of the shareholders meeting will be published

as a pdf-document on our website www.fugro.com.

Hard copies of the agenda can be ordered by telephone

(+31 70 311 14 22) or by e-mail ([email protected]).

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

58

10 March 2006

10 May 2006, 14.00 hrs

12 May 2006

26 May 2006

31 May 2006 (after trading hours)

2 June 2006

23 June 2006

11 August 2006

24 November 2006

9 March 2007

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

Publication of the 2005 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

Latest date for notification of dividend preference

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

shares, based on the average share price at the close of business on the stock

exchange on 29, 30 and 31 May

Payment of the 2005 dividend

Press release regarding developments in the first half of 2006

Publication of 2006 half-yearly result and announcement of profit forecast for

2006, press conference with webcast, analysts’ meeting with conference call

facility and webcast

Press release regarding developments in the second half of 2006

Publication of the 2006 annual results, press conference with webcast,

analysts’ meeting with conference call facility and webcast

C h a n g e i n i s s u e d

s h a r e

Issued on 1/1

Optional dividend

Conversion of subordinated

convertible bond

Issued on 31/12

Purchased for option plan

at 31/12

Entitled to dividend

as of 31/12

Average number of

outstanding shares

Maximum issue through

convertible loan

2004

60,663,648

1,527,908

–

62,191,556

1,641,604

60,549,952

59,358,920

6,229,560

2005

62,191,556

735,740

5,897,896

68,825,192

938,696

67,886,496

65,976,492

5,154,640

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 m o r e t h a n 5 %

In February 2006 the following share/certificate holders

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

ING Verzekeringen N.V. (incl. certificates) 9.50%

Woestduin Holding N.V. (shares) 6.23%

Stichting Administratiekantoor Fugro (shares) 87.27%

R e m o t e 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 specified in the Articles of Association,

Fugro allows proxy voting for shareholders and certificate

holders during an Annual General Meeting of

Shareholders. As soon as the relevant legislation comes

into force Fugro will consider whether it will make use of

the available options regarding remote voting and

electronic voting.

59

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

p l a n

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 19 May 2005*

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 134).

2005

1,641,604

92

(703,000)

938,696

5,351,200

2004

2,355,448

60,876

(774,720)

1,641,604

4,962,400

Shares (incl. SAF)

16,572,975

14,506,664

13,749,493

13,836,939

12,020,618

11,757,075

11,892,593

Certificates

4,007,242

1,882,628

439,486

191,814

5,546

35,190

711,959

% ofsubscribed

capital

99.4%

99.4%

99.6%

96.8%

95.0%

93.2%

92.6%

0

6

12

18

24

30

0

3,000

6,000

9,000

12,000

15,000

2000 2001 2002 2003 2004 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).

(January 2000 – December 2005)

Source: Datastream

2005

2.67

1.51

0.48

31

2004

2.12

0.83

0.48

54

2003

1.39

0.33

0.46

83

2002

2.08

1.26

1.05

0.46

37

44

2001

1.98

1.16

1.06

0.40

34

38

60

%year-end

2005

19.1

1.2

0.5

1.1

12.1

3.6

16.1

22.2

24.1

100.0

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 48 with regard to Corporate

Governance.

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, on 31 December 2005 around 8% of

Fugro’s shareholders’ equity (and an unknown number of

certificates) were held by directors and staff as well as

5,351,200 options.

Of all the options issued from 1999 to 2005, on

31 December 2005 80% were still outstanding. These

options give rights to 5,351,200 (certificates of) shares.

On 31 December 2005 1,155,000 new options (exercise

price EUR 27.13 commencing date 1 January 2006) were

granted to a total of 521 people. Of these options 28% were

granted to the Board of Management of Fugro. See also

page 114.

(x EUR 1.–)

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

Cash flow


Net result

Dividend

Dividend/net result before amortisation of goodwill (%)

Dividend/net result (%)

0

14,000

28,000

42,000

56,000

70,000

The Netherlands

United Kingdom

United States

France

Germany

Luxembourg

Belgium

Switzerland

Other

End ’05End ’04End ’03End ’02End ’01End ’00End ’99End ’98End ’97End ’96

(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

61

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.

Staff options are granted for an exercise price that is

equal to the stock exchange value 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 residents of the Netherlands and not

permitted for foreign option holders.

In 2005, the number of share certificates re-purchased by

Fugro was 92 at an average price of EUR 17.31.

At 31 december 2005 Fugro held 938,696 shares for the

purpose of the option scheme and are not entitled to

dividend. The exercise of options outstanding at the end

of 2005, including the options granted in December,

could – after using the re-purchased shares – lead to the

issued share capital being increased, in phases, by a

maximum of 6.4%. Since the beginning of 2006 83,800

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 2005 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 2005 over 300),

presentations and telephone conferences. Fugro also

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

On 3 November 2005, Fugro’s 2004 Annual Report was

awarded the Henri Sijthoff Prize for Mid and Smallkap

funds. Fugro had been nominated for this prize in each of

the three preceding years. The Henri Sijthoff Prize is

awarded annually to companies that stand out positively

through their public information and financial reporting.

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 insider

information when trading in its stock to be essential to its

relationship with the outside world. Regulations to

prevent the misuse of inside information, in accordance

with the Supervision of Stock Transactions Act, are in

force within Fugro. 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 search functions.

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 70 311 14 22).

0

50

100

150

200

250

AMX

Fugro

20022001 2003 2004 2005

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 2001 = 100)

62

F u g r o ’ s i n v o l v e m e n t i n s o c i e t y i s r e f l e c t e d

i n i t s s p o n s o r s h i p p o l i c y t h r o u g h w h i c h

F u g r o c o n t r i b u t e s t o w a r d s t h e p r e s e r v a t i o n

o f c u l t u r a l h e r i t a g e s u c h a s t h e H e r m i t a g e

i n A m s t e r d a m , t h e A m s t e r d a m ’ s C o n c e r t -

g e b o u w a s w e l l a s , f o r e x a m p l e , t h e s e a -

g o i n g t u g b o a t ‘ H o l l a n d ’ . C l a s s i c a l m u s i c ,

e d u c a t i o n a n d o t h e r s o c i a l g o a l s o c c u p y

a p r o m i n e n t p l a c e i n F u g r o ’ s s p o n s o r s h i p

p o l i c y .

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

S e a - g o i n g t u g b o a t ‘ H o l l a n d ’

The sea-going tug ‘Holland’, built in 1951, has had an

illustrious history in which it has carried out around

200 notable rescues. Fugro supports the Foundation

that wants to maintain, renovate and exploit this

vessel as a sailing legacy.

S c h o l a r s h i p

Fugro is a knowledge-intensive company employing well

educated and trained staff. The Company wants to

motivate young people to follow technical courses. This is

why in 2005 Fugro established a scholarship for talented

students at the University of Port Harcourt, Nigeria.

The annual scholarship is awarded to the technical

student who has achieved the best overall marks in the

year-three examinations.

The Residentie Orkest performing in Concertgebouw Amsterdam

T h e R e s i d e n t i e O r k e s t

Fugro has been one of the main sponsors of the

Residentie Orkest, which celebrated its centenary

in 2000. At Fugro’s request, in October 2005,

this prominent orchestra left its home base in the

Dr Anton Philipszaal in The Hague to perform – with

Jaap van Zweden as Honorary Guest Conductor –

in Amsterdam’s Concertgebouw during the get-

together on the occasion of the retirement of

President and Chief Executive Officer G-J. Kramer.

T h e C o n c e r t g e b o u w i n A m s t e r d a m

The Concertgebouw in Amsterdam is one of the

world’s most famous concert halls and is renowned

for its perfect acoustics. Completed in 1888, the

Concertgebouw has been the Netherlands’ centre of

classical music for over a century. Fugro sponsors

special concerts in the Concertgebouw. This year

Fugro has also made a financial contribution towards

the production of a CD with performances of Mozart

works by the Koninklijk Concertgebouw chamber

orchestra.

I n 2 0 0 5 F u g r o o n c e a g a i n r e c e i v e d s e v e r a l

a w a r d s . T h e C o m p a n y s e e s e v e r y a w a r d a s

a r e c o g n i t i o n o f t h e d e d i c a t i o n w i t h w h i c h

F u g r o ’ s s t a f f c o n t r i b u t e t o w a r d s t h e

C o m p a n y ’ s f u r t h e r d e v e l o p m e n t . A m o n g t h e

m o r e n o t a b l e a w a r d s r e c e i v e d b y F u g r o i n

t h e p a s t y e a r w e r e :

‘ H e n r i S i j t h o f f - P r i j s 2 0 0 4 ’

( T h e N e t h e r l a n d s )

Fugro won the Henri Sijthoff-Prijs for the best financial

reporting over 2004 in the ‘Mid and Smallcap’ category.

The Henri-Sijthoff-Prijs is awarded annually by Het

Financieele Dagblad (financial daily newspaper) to

companies which stand out favourably through the

high quality of their public information and financial

reporting. Jury member Prof. J. Frijns: ‘It is a full and

orderly report that provides extensive insight into the

Company’s goals and strategy and that includes clear,

quantified information per division.’ The jury was also

very appreciative of the quality of the annual accounts

and, in particular, the clear way in which the IFRS link

was presented.

‘ B u s i n e s s o f t h e y e a r

2 0 0 5 ’ ( C a n a d a )

During the Annual Lunch of the

Dutch-Canadian Chamber of

Commerce which took place on

Canada Business Day in Rotterdam,

Fugro was proclaimed the winner of

the Business of the year 2005 award.

Fugro earned the honorary title

because over the past few years it

has successfully established or

acquired eleven companies in

six Canadian provinces that have

developed new technology in

Canada.

‘ A n g l o - D u t c h A w a r d

f o r E n t e r p r i s e ’

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

Fugro’s British operating

company, Fugro Survey Limited,

was proclaimed the winner

of the Anglo-Dutch Award

for Enterprise by the NBCC

(Netherlands British Chamber

of Commerce). This award is

given to companies which, in

the opinion of the NBCC,

have contributed successfully

towards British-Dutch trade

relationships.

‘ A l a s k a S u r v e y p r o j e c t o f t h e y e a r ’

( U S A )

The Alaska Surveying and Mapping Conference

Committee honoured Fugro Pelagos, Inc. with the

‘2005 Alaska Survey Project of the year-award’.

This prize is a recognition of the innovative manner

in which Fugro has contributed towards the nautical

charting of the Sitka region – a complex area of

islands and rugged coastlines for which no sea chart

was available. The survey was commissioned by the

National Oceanic and Atmospheric Administration

(NOAA) and carried out using both laser technology

and echo-sounding systems.

F u g r o t a k e s t h e p r i z e

63

K.S. Wester (in the middle), President

and CEO of Fugro, receives the award

from Mr W.F. Dutilh, Chairman of the

NCCC, and Her Excellency Mrs Colleen

Swards, Canada’s Ambassador to the

Netherlands.

Bob Richards, Vice President Alaska

Division and Jana Lage, projects and

logistics manager of Fugro Pelagos.

G-J. Kramer and Prof. J. Frijns

A n n u a l A c c o u n t s 2 0 0 5

F U G R O N . V .

1 Consolidated income statement 66

2 Consolidated statement of

recognised income and expense 67

3 Consolidated balance sheet 68

4 Consolidated statement of cash flows 69

5 Notes to the consolidated financial

statements 71

6 Subsidiaries and Associates of Fugro N.V. 116

7 Company balance sheet 120

8 Company income statement 121

9 Notes to the company financial statements 122

10 Other information 128

(EUR x 1,000)

(5.25) Revenue

(5.28) Third party costs

Net revenue own services

(5.29) Other operating income

(5.30) Personnel expenses

(5.35) Depreciation

(5.36) Amortisation

(5.31) Other operating expenses

Operating profit before financing costs (EBIT)

Financial income

Financial expenses

(5.32) Net financing costs

(5.38) Share of profit of associated 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 n c o m e s t a t e m e n tFor the year ended 31 December

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

0.83

0.82

2005

1,160,615

(405,701)

754,914

9,661

(361,002)

(69,445)

(5,318)

(184,740)

144,070

718

(16,953)

(16,235)

240

128,075

(26,745)

101,330

99,412

1,918

101,330

1.51

1.40

66

2004

(25,179)

2,330

(2,153)

(6,339)

–

(2,167)

(33,508)

52,585

19,077

17,218

1,859

19,077

2005

36,884

4,023

3,891

(2,062)

8,710

(167)

51,279

101,330

152,609

151,610

999

152,609

(EUR x 1,000)

Foreign exchange translation differences (incl. minority interests)

Stock option costs for employees (net of tax)

Actuarial gains and losses on pensions (net of tax)

Cash flow hedges:

Effective portion of changes in fair value (net of tax)

Issue of convertible loan

Other movements

Net result recognised directly in equity


Total result for the period

Attributable to:

Equity holders of the parent

Minority interest

Total recognised income and expense for the period

2 C o n s o l i d a t e d s t a t e m e n t o f r e c o g n i s e d i n c o m e a n d e x p e n s eFor the year ended 31 December

67

(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

Unappropriated result

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

(5.43) Bank overdraft


(5.49) Trade and other payables

(5.48) Provisions

Other taxes and social security charges

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 b a l a n c e s h e e tAs at 31 December

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

2005

262,759

310,270

5,012

21,512

599,553

61,949

400,354

1,912

74,892

539,107

1,138,660

3,441

301,539

61,068

99,412

465,460

5,326

470,786

300,753

47,155

398

2,946

351,252

35,430

1,122

248,096

1,047

17,951

12,976

316,622

667,874

1,138,660

68

2004

104,236

66,139

7,078

(11,052)

(1,150)

139

–

(723)

–

3,531

168,198

17,743

(20,684)

(45,281)

(19,720)

100,256

(25,668)

(18,985)

55,603

28,547

6,943

2,114

277

–

(4,638)

(80,963)

–

(4,436)

(1,560)

(53,716)

(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

Movement in minority interests

Share of profit of associates

Result on sale of activities

Gain on sale of property, plant and equipment

Result on sale of financial assets

Cost of granted option rights

Operating cash flow before changes in working capital

and provisions

Movement in trade and other receivables

Movement in inventories

Movement in trade and other payables

Movement 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 property, plant and equipment

Proceeds from sale of investments

Interest received

Dividends received

Disposal of subsidiaries, net of cash disposed of

Acquisition of subsidiaries, net of cash acquired

Acquisition of property, plant and equipment

Acquistion of intangible assets

Development intangible assets

Acquisition of other investments

Net cash from investing activities

4 C o n s o l i d a t e d 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

69

2005

144,070

69,445

5,318

(4,439)

(1,824)

240

(2,228)

(1,514 )

(403)

5,873

214,538

(16,821)

(4,014)

(8,628)

(507)

184,568

(20,990)

(16,543)

147,035

11,766

5,244

479

239

17,458

(25,861)

(82,973)

(334)

(4,416)

(42)

(78,440)

(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

Sale 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 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

2004

–

–

(761)

8,016

(33,820)

(9,426)

(35,991)

(34,104)

20,801

(1,385)

(14,688)

26,330

(41,018)

(14,688)

2005

94,674

124,300

–

9,351

(231,330)

(14,088)

(17,093)

51,502

(14,688)

2,648

39,462

74,892

(35,430)

39,462

70

5.1 G e n e r a l

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

the Company for the year ended 31 December 2005 comprise the Company and its subsidiaries (together referred

to as the ‘Group’) and the Group’s interest in associates. 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 10 March 2006. The financial statements 2005 have been approved by the Supervisory Board on

9 March 2006 and will be submitted for adoption to the Annual General Meeting of Shareholders on 10 May

2006.

5.2 S t a t e m e n t o f c o m p l i a n c e

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

Standards (IFRS) laid down by the International Accounting Standards Board and adopted by the European

Union (EU-IFRS).

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 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.

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

judgements, estimates and assumptions that affect 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 EU-IFRS that have a 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 to all periods presented in these consolidated

financial statements.

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, taking into account the impact of potential voting

rights that are presently exercisable. 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

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 legal or constructive obligations on behalf of the associate.

71

5 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

5.4.3 Other investments

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

significant influence. 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 value was determined.

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

reads as follows:

2005

2004

2003

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. Foreign exchange differences arising on translation are

recognised directly in a separate component of 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.

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.

72

GBP average

1.46

1.47

1.45

GBP at year-end

1.46

1.42

1.42

USD average

0.81

0.81

0.88

USD atyear-end

0.85

0.73

0.79

Derivative financial instruments are recognised initially at cost. The gain or loss on remeasurement at fair value

is recognised immediately in profit and loss. 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 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, 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 hedged 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 attributable overheads to these assets.

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

under construction and stated at cost until construction or development is complete, at which time it is

reclassified as land and buildings or plant and equipment or vessels or other property, plant and 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.

73

5.8.2 Leased assets

Leases with terms in 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.

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 estimated useful life of 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,

goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable

assets acquired.

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

units and is not amortised but is tested for impairment annually or when there is an indication for impairment

(refer accounting policy 5.14). In respect of associated subsidiaries, the carrying amount of goodwill is included

in the carrying amount of the investment in the subsidiary.

The excess of the Group’s interest in the net fair value of Fugro’s identifiable assets, liabilities and contingent

liabilities over cost is recognised directly in the income statement.

74

Years

20 – 40

4

2 – 10

3 – 5

5 – 10

6

2

3 – 4

4

5 – 10

3 – 5

1 – 2

5.9.2 Research

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. 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.

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 or when there is an indication for impairment.

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

Investments in associates are valued using fair value, and if not available, the equity method, unless in the case

of a negative equity and there is a clear understanding that the Group 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 translation difference previously recognised

directly in equity is recognised in profit or loss.

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 an attributable portion of direct overheads, but excluding a profit element. The net

realisable value is reassessed at each reporting date.

75

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 directly

attributable overheads incurred in the Group’s contract activities based on normal operating capacity.

5.12.2 Trade and 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 other than 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 or when there is an indication for impairment.

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.

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying

amount of any goodwill allocated to the cash-generating units and then to reduce the carrying amount of the

other assets, in the unit on a pro rato basis.

5.14.1 Calculation of recoverable amount

The recoverable amount of the Group’s investments in held-to-maturity securities and receivables carried at

amortised cost is calculated at the present value of estimated future cash flows, discounted at the effective

interest rate computed at initial recognition of these assets. Receivables with a short duration are not

discounted.

The recoverable amount of assets is the higher of their net selling price and 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.

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.

76

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 is an indication that an impairment loss

recognised in prior periods may no longer exist or may have decreased.

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 and sale of share capital

When share capital recognised as equity is repurchased or sold, the amount of the consideration paid or

received, 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. Transaction costs that relate to the issue of a compound financial instrument

are allocated to the liability components. The equity component of the convertible notes is calculated as the

excess of the issue proceeds over 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 other long-term employee benefits 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 other long-term employee benefits 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.

77

The Group adopted the IAS 19 amendment from December 2004 which permits an entity to recognise all

actuarial gains and losses in the period in which they occur outside profit and loss in the statement of

recognised income and expense.

Where the calculation results in a benefit to the Group, the recognised asset is limited to 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 a 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 to third parties 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 total contract cost 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).

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.

78

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 GNSS correction 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 operating income

Other operating income concerns 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 income.

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.

Net revenue own services is the sum of revenue realised from third parties less third party cost.

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.

The interest expenses component of finance lease payments is recognised in the income statement using the

effective interest rate method.

79

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 taken 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 determined 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 determined 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 on cash held are separately shown.

Payments and receipts of corporate taxes are included as cash flow from operational activities and interest paid

is shown as cash flow from operating activities. Cash flows as a result from acquisition/divestment of financial

interest in subsidiaries and associates 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.

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. Inter-

segment pricing is determined on an arm’s length basis. 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 corporate assets and expenses. Segment

capital expenditure is the total amount incurred during the period to acquire segment assets that are expected

to be used for more than one period.

The Group defines a division as a segment in its reports.

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 soil and rock 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.

80

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, GNSS correction

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). In general 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 these natural resources. The division also has

techniques which help clients to assess 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 other/Africa, Near and 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.

81

Business segments

(EUR x 1,000)

Revenue from

external customers

of which inter-segment revenue

Segment result

Profit from operations

Net financing costs

Income from associates

Income tax expense

Net profit for the year

Segment assets

Unallocated assets

Total assets

Segment liabilities

Unallocated liabilities

Total liabilities

Depreciation

Amortisation

Capital expenditure tangible

fixed assets

Capital expenditure

intangible assets

82

2004

1,008,008

–

104,236

104,236

(31,846)

139

(19,944)

52,585

910,458

72,892

983,350

688,402

294,948

983,350

66,139

7,078

68,730

5,771

2005

1,160,615

–

144,070

144,070

(16,235)

240

(26,745)

101,330

1,042,006

96,654

1,138,660

732,282

406,378

1,138,660

69,445

5,318

80,357

23,445

Consolidated

2004

–

(62,155)

(43,775)

–

–

11,502

–

2,410

–

2005

–

(46,954)

(42,977)

–

–

16,098

–

9,475

–

Unallocated/Eliminations

2004

265,459

6,183

37,514

407,565

340,444

15,377

4,457

13,103

5,771

2005

291,660

6,006

44,382

418,493

321,840

17,532

5,191

17,616

4,816

Geoscience

2004

470,026

27,637

70,634

355,298

279,793

28,980

2,621

32,037

–

2005

565,342

17,272

96,934

435,848

316,634

25,349

112

41,461

17,109

Survey

2004

272,523

28,335

39,863

147,595

68,165

10,280

–

21,180

–

2005

303,613

23,676

45,731

187,665

93,808

10,466

15

11,805

1,520

Geotechnical

Geographical segments

(EUR x 1,000)

Revenue from

external customers

Segment assets

Depreciation

Amortisation intangible assets

Capital expenditure tangible

fixed assets

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 2005

5.26.1.1 BTW Hydrographic Ltd.

In March 2005 the Group acquired (and paid in cash) BTW Hydrographic Ltd. (BTW) in New Plymouth, New

Zealand for EUR 0.7 million. As a result of the acquisition, a goodwill is recognised and accounted for under

intangible assets for the amount of EUR 0.6 miljoen. The company has nine employees. BTW provides

hydrographic survey services to the oil and gas industry of New Zealand as well as services to the civil

engineering community. The annual turnover is approximately EUR 1.6 million.

5.26.1.2 Comprehensive Geotechnical Investigation (Zhejiang) Co. Ltd.

Also in March 2005 a 100% stake in Comprehensive Geotechnical Investigation (Zhejiang) Co. Ltd. was acquired

for EUR 3.2 million. This Chinese company, which is licensed to carry out geotechnical work throughout China,

achieved a turnover of approximately EUR 1.4 million in 2004. The company has 62 employees. The recognised

goodwill amounts EUR 1.0 million.

5.26.1.3 Elcome Surveys Pvt. Ltd.

On 1 October 2005 Fugro acquired all of the share capital of Elcome Surveys Pvt. Ltd. For an amount of

EUR 5.9 million. Elcome Surveys Pvt. Ltd. is located in Mumbai, India. The company is a major supplier of survey,

geotechnical and oceanographic services offshore India and in the Arabian Gulf. Elcome Surveys Pvt. Ltd. has

69 employees. The recognised intangible assets amount to EUR 4.9 million, of which EUR 3.7 million is goodwill.

The annual turnover amounts to approximately EUR 5.0 million.

5.26.1.4 Fugro/OceansatPEG

As per 1 October 2005 Fugro Marsat Ltda. and OceansatPEG have established a new company in Brazil. Fugro has

significant influence in this combined enterprise with a share of 62% in the new company. The company

involves some 250 employees. The value added to the company is EUR 8.3 million. The annual turnover

contribution for the Group is approximately EUR 20.0 million. The company is active in the oil and gas industry

in South America and also supplies survey services. The recorded goodwill is EUR 11.5 million.

5.26.1.5 Beardall, Parry and Associates Ltd.

In October 2005 Fugro Robertson Ltd. in Wales acquired Beardall, Parry and Associates Ltd. for a purchase price

of EUR 0.3 million. Beardall, Parry and Associates Ltd. is specialised in the evaluation of oil and gas prospects,

fields and companies. The goodwill is EUR 0.3 million. At the time of acquisition the company held three

employees. The annual turnover is approximately EUR 0.9 million.

83

2004

1,008,008

983,350

66,139

7,078

68,730

2005

1,160,615

1,138,660

69,445

5,138

80,357

Consolidated

2004

300,194

85,374

15,757

335

18,775

2005

337,735

301,695

17,724

535

18,205

Americas

2004

195,531

197,291

14,959

2,621

13,361

2005

234,007

199,205

15,889

–

15,289

Near and Middle East/

Asia/Australia

2004

414,975

525,276

30,752

337

30,872

2005

489,141

455,544

31,566

419

36,581

Europe other/Africa

2004

97,308

175,409

4,671

3,785

5,722

2005

99,732

182,216

4,266

4,364

10,282

Netherlands

5.26.1.6 España Geotechnical Consulting Inc.

As per 1 December 2005 Fugro acquired España Geotechnical Consulting Inc. in Roseville for EUR 1.1 million.

There are twenty employees working for the company. España is specialised in geotechnical, geological and

earthquake engineering and construction material testing. The annual turnover is around EUR 2.4 million and

as a result of the acquisition, an amount of EUR 0.4 million is accounted for under other intangible assets.

5.26.1.7 Thales GeoSolutions

During 2005, Fugro and Thales reached a final settlement on the purchase price of Thales GeoSolutions.

The agreement resulted in a decrease of the goodwill amount of EUR 4.1 million.

5.26.2 Disposals

5.26.2.1 Sale diving activity Mexico

Fugro sold the diving activity in Mexico in 2005. The sales revenue of EUR 0.6 million is part of the above

mentioned goodwill adjustment for Thales GeoSolutions. The annual turnover for 2004 was around

EUR 9.0 million.

5.26.2.2 Sale of laboratories Wales

During the financial year, two laboratories in Wales have been sold for a net amount of EUR 6.3 million.

Approximately EUR 4.2 million has been deducted from the goodwill amount of Fugro Robertson Ltd.

The remainder has been accounted for in the profit and loss account of 2005. The annual turnover of the activity

amounts to EUR 5.0 million.

84

5.26.4 Effect of acquisitions and disposal

The acquisitions and disposals had the following effect on the Group’s assets and liabilities.

(EUR x 1,000)

Property, plant and equipment

Intangible assets

Other fixed assets

Inventories

Trade and other receivables

Current tax receivables

Deferred taxes


Interest-bearing loans and borrowings

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)

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).

5.29 O t h e r o p e r a t i n g i n c o m e

(EUR x 1,000)

Release of unused provisions

Government grants

Negative goodwill

Gain on disposal of property, plant and equipment

Sundry income

85

(9,935)

1,335

–

(3,782)

(5,286)

–

1,061

–

–

(97)

(1,535)

(18,239)

22,877

4,638

–

4,638

Balance of acquistionsand divest-

ments 2004Acquisition

2005Divestment

2005

(4,701)

–

187

314

2,570

–

–

7,702

–

–

(4,877)

1,195

(8,723)

(7,528)

(9,930)

(17,458)

12,142

1,677

102

25

9,724

1,117

–

(5,017)

(4,592)

(765)

(10,587)

3,826

17,018

20,844

5,017

25,861

2004

2,700

249

2,220

1,023

10,348

16,540

2005

582

386

–

1,745

6,948

9,661

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 employees

Contributions to defined contribution plans

Expense relating to defined benefit plans

Increase 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 contribution of the employee to the development of the long-

term strategy.

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 27.13 per share as at 31 December 2005.

For Dutch residents the granting is considered as unconditional, the options can be exercised immediately

upon grant date although a fine (of 90%) would have to be paid. The costs relating to the Dutch residents are

therefore accounted for during the service period only (i.e. the 12 months period prior to grant date, being the

current financial year).

Foreign residents however are not entitled unconditionally to the option rights at the grant date, the Group

presumes that in addition to the service period during the 12 months prior to granting, services will be received

in the future. In the Fugro option plan, foreign residents can exercise their options only after three years (the

‘vesting period’) after the grant date if they are still employed by Fugro at that date. These options therefore have

a service period of one year and vest over a three year period starting at the first of January of the year following

the grant date. The costs of options for foreign residents therefore will be accounted for over a four year period.

86

2004

287,083

28,297

3,531

5,999

6,724

(11)

331,623

2005

309,220

30,583

5,873

10,373

4,650

303

361,002

During the year no shares were issued in relation to the option plan (2004: nil). As per 31 December 2005 the

following options were outstanding:

1999

2000

2001

2002

2003

2004

2005

* For the years 2002 through 2004 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 2005 was EUR 20.70 (2004: EUR 13.23).

One option gives right to one depository receipt of shares in Fugro N.V. At the end of 2005 1,155,000 new

options were granted to 521 employees. These options have an issue price of EUR 27.13.

Concerning the options granted in 2005 14.2% (2004: 17.1%) are classified as ‘incentive stock options’.

In 2005 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 of employee departure during the vesting period is taken into account. 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 service period and the vesting period.

The recognition and measurement principles in IFRS 2 have not been applied for option arrangements

granted before 7 November 2002.

87

Exerciseprice

(EUR)

9.23

17.19

12.53

10.78

10.20

15.35

27.13

Exercis-able at 31-12-2005

–

638,000

641,600

486,600

486,400

554,000

–

2,806,600

Out-standing at 31-12-

2005

–

638,000

641,600

916,600

953,000

1,047,000

1,155,000

5,351,200

Exercised in 2005

286,000

187,200

214,400

6,400

5,000

4,000

–

703,000

Expired in 2005

3,000

5,800

4,600

15,400

20,600

13,800

–

63,200

Out-standing at 01-01-

2005

289,000

831,000

860,600

938,400

978,600

1,064,800

–

4,962,400

Issued

666,800

905,600

910,800

986,600

1,002,600

1,064,800

1,155,000

6,692,200

Number of parti-cipants

266

336

347

406

429

493

521

Duration

6 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 703,000 shares held by Fugro for options exercised in 2005. The average puchase price of

these shares was EUR 11.95 per share. The related options were exercised throughout the year.

The options outstanding at 31 December 2005 have an exercise price in the range of EUR 10.20 to EUR 27.13

and a weighted average contractual life of 4 years (2004: 4 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 departure, 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 by 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




88

Number ofoptions

4,785,800

(113,480)

1,064,800

(774,720)

4,962,400

2,567,200

Weighted averageexercise

price

11.46

11.63

15.35

7.35

11.46

Number ofoptions

4,962,400

(63,200)

1,155,000

(703,000)

5,351,200

2,806,600

Weighted averageexercise

price

11.46

12.23

27.13

12.41

16.07

2005 2004

Dutch residents

13.23

15.35

2004

33%

3.20%

3.30%

–

–

2,497,898

–

Foreign residents

10.01

10.20

2003

37%

3.20%

3.80%

501,844

531,657

–

–

Dutch residents

20.70

27.13

2005

31%

3.60%

3.30%

–

–

–

3,555,771

Foreign residents

20.70

27.13

2005

31%

3.60%

3.30%

501,844

531,657

568,812

715,040

2005 2004

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 equipment

Restructuring costs

Research expensed as incurred

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 assists 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 such 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 indirect operating expenses are

evaluated on a regular basis and in line with the market.

89

Total

5,682

1,460

473

7,615

7,864

Foreign

4,991

1,335

399

6,725

6,945

Nether-lands

691

125

74

890

919

Total

6,306

1,663

565

8,534

8,121

Foreign

5,680

1,552

463

7,695

7,276

Nether-lands

626

111

102

839

845

20042005

2004

36,715

32,003

25,126

21,058

4,340

–

300

31,286

150,828

2005

38,050

35,882

27,226

23,342

1,928

166

231

57,915

184,740

5.32 N e t f i n a n c i n g c o s t s

(EUR x 1,000)

Interest expenses

Interest income

Dividend income

Net foreign exchange variance

Exchange results on USD long term loans

Results 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 expense

Origination from and reversal of timing differences

Decrease tax percentage

Utilisation of tax losses recognised

Effect of write down of deferred tax asset

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 (lower rates)

Non-deductible expenses

Tax exempt income

Tax charge on non local activities

Effect of tax losses utilised and temporary differences

Effect of non-recognised tax losses

Under/(over) provided in prior years

Non-compensable losses

90

2004

28,733

(2,114)

(277)

5,504

(7,271)

7,271

31,846

2005

20,990

(479)

(239)

(4,037)

12,289

(12,289)

16,235

2004

19,060

(612)

18,448

(808)

20

2,284

–

1,496

19,944

2005

25,604

1,378

26,982

(5,188)

238

4,116

597

(237)

26,745

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

2005

128,075

40,344

(12,747)

315

(1,716)

4,540

(237)

(5,132)

1,378

–

26,745

2005%

31.5

(9.9)

0.2

(1.3)

3.5

(0.2)

(4.0)

1.1

–

20.9

Deferred tax credit recognised directly in equity

(EUR x 1,000)

Relating to actuarial gains and losses on pensions

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 11,064 (2004: EUR 3,330) represents the balance of income tax payable and

receivable in respect of current and prior periods less advance tax payments.

91

2004

1,019

2,582

(1,201)

20

2,420

2005

(1,310)

462

(1,850)

122

(2,576)

2004

30,071

5,171

(202)

(759)

405

–

34,686

2005

34,686

1,414

(5,132)

1,627

689

111

33,395


(EUR x 1,000)

Costs

Balance at 1 January 2005

Acquisitions through business combinations

Other additions

Disposals

Effect of movements in foreign exchange rates

Balance at 31 December 2005

Depreciation and impairment losses



Depreciation charge for the year

Disposals



Carrying amounts

At 1 January 2005

At 31 December 2005

92

2005

Total

726,659

17,039

80,357

(32,687)

54,207

845,575

493,703

6,982

69,445

(22,435)

35,121

582,816

232,956

262,759

Other

125,109

1,645

17,972

(17,297)

11,504

138,933

101,282

1,293

12,047

(10,385)

9,389

113,626

23,827

25,307

Vessels

120,682

5,577

4,274

(446)

9,197

139,284

39,785

912

5,374

(701)

2,824

48,194

80,897

91,090

Plant andequip-ment

388,716

6,898

48,178

(14,653)

27,100

456,239

329,775

4,410

48,269

(11,006)

21,423

392,871

58,941

63,368

Land and buildings

92,152

2,919

9,933

(291)

6,406

111,119

22,861

367

3,755

(343)

1,485

28,125

69,291

82,994

(EUR x 1,000)

Costs



Reclassification ROVs

Other additions

Disposals



Depreciation and impairment losses



Reclassification ROVs


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.

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 76 million (2004: EUR 61 million);

– Survey division EUR 107 million (2004: EUR 83 million);

– Geoscience division EUR 80 million (2004: EUR 89 million).

5.35.3 Assets under construction

Assets under construction included in other amount to EUR 3.4 million (2004 EUR 3.2 million).

93

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

2004

5.35.4 Leased vessels and equipment

The Group has no leased vessels and equipment that have to be included in property, plant and equipment.

5.35.5 Security

Land and Buildings includes EUR 23 million (2004: EUR 19 million) in the Netherlands, that serves as security for

mortgage loans (refer note 5.46).


(EUR x 1,000)

Cost



Adjustments prior period

Internally developed intangible assets



Amortisation and impairment losses


Amortisation charge for the year



Carrying amount

At 1 January 2005

At 31 December 2005

94

Total

329,308

18,695

(8,723)

4,750

7,949

351,979

35,317

5,318

1,074

41,709

293,991

310,270

Other

3,165

1,677

–

73

579

5,494

835

584

197

1,616

2,330

3,878

Software

51,711

–

–

4,677

863

57,251

34,482

4,734

877

40,093

17,229

17,158

Goodwill

274,432

17,018

(8,723)

–

6,507

289,234

–

–

–

–

274,432

289,234

2005

(EUR x 1,000)

Cost



Adjustments prior period

Internally developed intangible assets



Amortisation and impairment losses


Amortisation charge for the year



Carrying amount

At 1 January 2004

At 31 December 2004

In 2005 significant amounts were spent on research which have been recognised in the profit and loss account,

the same accounts for 2004.

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

95

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

2004

18,475

92,126

77,466

78,587

7,778

274,432

2005

20,786

103,731

78,013

77,011

9,693

289,234

Annually or when there is an indication for impairment the Group carries out impairment tests on these

balances for 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.

About 70% of the Group’s activities relate to 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 hydrocarbon and mineral resources.

Experts are without doubt that these resources will continue to be available to mankind for many decades

and their reports indicate periods between 50 and 100 years.

Easily accessible places may ‘dry-up’ but with new techniques and means more hostile areas can also 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 harnessing alternative means of energy, like wind, nuclear and hydro electric

energy will continue. These sources however have limited output and will be difficult to transport.

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 7% 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 based on value in use. A pre-tax discount rate of

9.5% has been used for discounting the projected cash flows.

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 associated subsidiaries, associates and other investments:

(EUR x 1,000)

Associated subsidiaries

Other investments at cost

Long term loans

Other long term receivables

The Group’s share in realised profit in the above mentioned associated subsidiaries amounted to

EUR 240 thousand in 2005 (2004: EUR 139 thousand).

In 2005 the 40% share in Chartco, in the UK was divested. The selling price amounted to EUR 0.7 million.

96

2004

2,562

1,609

3,907

1,209

9,287

2005

1,780

1,413

250

1,569

5,012

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


Employee benefits

Provisions

Tax value of recognised loss carry-forwards

Other items

Tax assets/(liabilities)

Set off of tax components

Net tax assets/(liabilities)

With respect to the recognised deferred tax assets, an amount of EUR 2,300 thousand (2004: EUR 6,820 thousand)

is dependent on future taxable profits in excess of profits arising from the reversal of existing taxable temporary

differences.

At 31 December 2005 no deferred tax liabilities relating to an investment in a subsidiary have been

recognised (2004: 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 reserves exist which

would result in a tax liability should the subsidiaries pay dividends from these reserves.

97

Profit/loss

1,329

Owner-ship

10%

Revenues

7,816

Equity

1,346

Liabilities

5,667

Assets

7,013

2004

(260)

(5,005)

44

4,512

13,602

2,036

6,820

(844)

20,905

–

20,905

2005

3,223

(5,691)

(1,508)

5,321

13,829

2,887

2,300

(1,795)

18,566

–

18,566

2004

(3,904)

(5,113)

–

–

(183)

(55)

–

(1,115)

(10,370)

6,648

(3,722)

2005

(4,157)

(6,150)

(1,857)

(8)

–

(676)

–

(2,269)

(15,117)

12,171

(2,946)

2004

3,644

108

44

4,512

13,785

2,091

6,820

271

31,275

(6,648)

24,627

2005

7,380

459

349

5,329

13,829

3,563

2,300

474

33,683

(12,171)

21,512

NetLiabilitiesAssets

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

Deferred tax assets have not been recognised in respect of the following items:

Unrecognised deferred tax assets

(EUR x 1,000)

Deductible temporary differences

Tax losses

Capital allowances

Total

98

2004

4,516

20,269

9,901

34,686

2005

4,177

18,777

10,441

33,395

Balance31-12-2005

3,223

(5,691)

(1,508)

5,321

13,835

–

2,887

2,300

–

(1,801)

18,566

Recog-nised in

equity

–

–

–

462

(1,310)

(1,850)

–

(92)

220

(6)

(2,576)

Recog-nised inincome

3,483

(686)

(1,552)

347

1,543

1,850

851

(4,428)

(220)

(951)

237

Acqui-sitions

–

–

–

–

–

–

–

–

–

–

–

Balance01-01-2005

(260)

(5,005)

44

4,512

13,602

–

2,036

6,820

–

(844)

20,905

2005

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

Of the total recognised and unrecognised deferred tax assets in respect of tax losses carried forward an amount

of EUR 644 thousand expires in periods varying from two to five years. An amount of EUR 2,558 thousand expires

between five and ten years and an amount of EUR 17,875 thousand can be offset indefinitely. The deductible

temporary differences and capital allowances 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

Inventories

During 2005 EUR 8,858 thousand (2004: EUR 3,515 thousand) of inventories were recognised as an expense and

EUR 117 thousand (2004: EUR 415 thousand) was written down in the profit and loss account.

(EUR x 1,000)

Seismic data

Net realisable value


(EUR x 1,000)

Unbilled revenue on completed projects

Trade receivables

Non-trade receivables

Fair value derivatives

Trade receivables due from associated subsidiaries

99

2004

7,295

4,847

39,660

51,802

2004

14,120

2,619

(9,444)

7,295

2005

7,615

5,569

48,765

61,949

2005

7,334

686

(405)

7,615

2004

39,660

2005

48,765

2004

62,496

228,872

44,192

417

147

336,124

2005

82,583

261,804

55,631

–

336

400,354

At 31 December 2005 trade receivables include retentions of EUR 2.3 million (2004: EUR 4.8 million) relating to

work in progress.

Trade receivables are shown net of impairment losses amounting to EUR 23.4 million (2004: EUR 17.2 million)

arising from identified doubtful receivables from customers.


(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)


Total recognised gains and losses

Share options exercised

by employees

Addition to reserves

Issued shares/stockdividend

Dividends to shareholders


(EUR x 1,000)


Total recognised gains and losses

Share options exercised

by employees

Addition to reserves

Own shares acquired

Stockdividend

Dividends to shareholders


100

2004

26,330

(41,018)

(14,688)

2005

74,892

(35,430)

39,462

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

Unappro-priatedresult

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

Total equity

228,240

152,609

9,351

–

94,674

(14,088)

470,786

Minorityinterest

4,327

999

–

–

–

–

5,326

Total

223,913

151,610

9,351

–

94,674

(14,088)

465,460

Unappro-priatedresult

49,317

99,412

–

(35,192)

(37)

(14,088)

99,412

Reserve for ownshares

(18,883)

–

9,351

–

–

–

(9,532)

Other reserves

61,136

16,457

–

35,192

–

–

112,785

Hedgingreserve

(10,485)

(2,062)

–

–

–

–

(12,324)

Translationreserve

(67,441)

37,803

–

–

–

–

(29,638)

Share premium

207,159

–

–

–

94,380

–

301,539

Share capital

3,110

–

–

–

331

–

3,441

2005

5.44.1 Share capital and share premium

(In thousands of shares)

On issue and fully paid at 1 January

Convertible converted into ordinary shares

Stock dividend 2004 respectively 2003

Repurchased for option plan at year end

On issue at 31 December – fully paid

At 31 December 2005 the authorised share capital comprised 320,000,000 ordinary shares (2004: 320,000,000).

No preference shares have been issued. The shares have a par value of EUR 0.05 (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 2005

the Directors propose a dividend to be paid out in the form of a cash dividend of EUR 0.60 (2004: EUR 0.48) per

depository receipt of a share with a nominal value of EUR 0.05 or in the form of (depository receipts of) ordinary

shares with a nominal value of EUR 0.05 charged to the reserves. This dividend proposal is currently part of

unappropriated result.

5.44.2 Share premium

The share premium can be considered as paid in capital.

5.44.3 Translation reserve

The translation reserve comprises all foreign exchange differences, as from 1 January 2003, 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.

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 92 (certificates of) own shares during the year under

review with an average price of EUR 17.31 (2004: 60,876 certificates with an average price of EUR 12.50). Further

703,000 certificates were sold with an average price of EUR 20.96 following the exercise by the option holders

(2004: 774,720 certificates at EUR 14.57). As per the end of the year under review the Company holds 938,696 own

shares (2004: 1,641,604). The number of treasury shares held by the Company at the end of the year under review

amounts to 1,4% of the issued and paid up capital (2004: 2.6%).

101

2004

60,664

–

1,528

(1,644)

60,548

2005

62,191

5,898

736

(939)

67,886

Ordinary shares

5.44.6 Unappropriated result

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 0.60 per qualifying ordinary share (2004: EUR 0.48)

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 1.51 (2004: EUR 0.83); the diluted earnings

per share amount to EUR 1.40 (2004: EUR 0.82).

The calculation of basic earnings per share at 31 December 2005 was based on the net profit attributable to

ordinary shareholders of EUR 99,412 thousand (2004: EUR 49,317 thousand) and a weighted average number

of ordinary shares outstanding during the year ended 31 December 2005 of 65,976 thousand (2004:

59,360 thousand), calculated as follows:

5.45.1 Basic earnings per share

Net profit attributable to ordinary shareholders

(EUR x 1,000)

Net profit for the year


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

Effect of conversion convertible loan

Weighted average number of ordinary shares at 31 December

102

2004

28,760

28,760

2005

40,732

40,732

2004

49,317

49,317

2005

99,412

99,412

2004

58,308

(44)

256

840

–

59,360

2005

60,550

–

450

397

4,579

65,976

5.45.2 Diluted earnings per share

The calculation of diluted earnings per share at 31 December 2005 was based on net profit attributable to

ordinary shareholders of EUR 101,640 thousand (2004: EUR 54,072 thousand) and a weighted average number

of ordinary shares outstanding during the year ended 31 December 2005 of 72,415 thousand (2004:

65,720 thousand), 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

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

Mortgage loans

Other loans

Subtotal

Less: Current portion of long-term loans

103

2004

59,360

6,228

132

65,720

2005

65,976

5,155

1,284

72,415

2004

49,317

4,755

54,072

2005

99,412

2,228

101,640

2004

127,486

86,923

20,000

48,729

14,978

99,218

14,609

212

412,155

227,887

184,268

2005

–

99,270

20,000

36,440

17,503

114,723

9,835

4,104

301,875

1,122

300,753

Terms and debt repayment schedule

(EUR x 1,000)

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 23.0 million

(2004: EUR 19.0 million).

5.46.1 Credit facilities

In 2005 a revolving credit facility was agreed with ABN-AMRO Bank N.V. and Rabobank of EUR 100 million for a

five years term. The interest rate is fixed at EURIBOR plus 35 basis points.

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 2004 and 2005, 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 effective, 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 balance sheet date is accounted for in the profit and loss account.

Further the related ‘cross currency swaps’ are converted at market value at the 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 12,289 thousand

positive (2004: EUR 7,271 thousand negative), while the movement due to the change in the fair value of the

related currency hedge financial instruments amounts to EUR 14,814 thousand positive (2004: EUR 15,967

thousand negative). The latter amount is debited to equity, less the part that is attributable to the loans as hedge

result being EUR 12,289 thousand (2004: EUR 7,271 thousand) 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.

104

More than5 years

56,178

49,794

47,241

20,000

114,723

7,157

295,093

2 – 5years

–

–

–

–

–

2,199

2,199

1 – 2years

–

–

–

–

–

888

888

1 year or less

–

–

–

–

–

2,573

2,573

Total

56,178

49,794

47,241

20,000

114,723

12,817

300,753

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 2,062 thousand (2004: EUR 6,339 thousand negative) net after taxes has been

added to equity as a result of the increase 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 17,503 thousand (2004: EUR 14,978 thousand).

5.46.3 Convertible notes

(EUR x 1,000)

Proceeds from issue of convertible notes

Redemption of convertible loan

Converted into ordinary shares

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 7,555 is net of attributable

transaction costs.

From 12 May 2000 till March 2005 the holders of the EUR 100 million subordinated convertible loan had the

option to convert notes held for share certificates at a conversion price of EUR 16.05 per treasury share of

nominal EUR 0.05 each. During the six months ended 30 June 2005 the holders converted EUR 94.7 million of

notes into 5,897,804 share certificates.

From 6 June 2005 up to and including 20 April 2010 holders of the EUR 125 million convertible loan have the

option to convert notes held for share certificates at a conversion price of EUR 24.25 per depository receipt of

share of nominal EUR 0.05 each. The Group has the right to redeem the convertible notes if, as from 11 May

2008, the closing price of depository receipts of shares shall on 20 out of 30 consecutive trading days at least

equal 130% (EUR 31.53) of the conversion price. Notes that are not converted to ordinary shares will be redeemed

at face value on 27 April 2010.

5.46.4 Mortgage and other loans

The average interest rate on mortgage loans and other loans over one year amounts to 9.4% (2004: 5.6%).

105

2004

100,000

–

–

(2,500)

97,500

(657)

2,375

99,218

2005

225,000

(5,326)

(94,674)

(3,202)

121,798

(7,555)

480

114,723

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 qualify 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 to which is based on an agreed scheme in conformity with IRS regulations.

As of 1 January 2005 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’ under IFRS.

In the Netherlands the ‘defined benefit’ pension plans 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 UK Fugro operates a number of pension schemes. The only pension schemes open for new staff are

defined contribution schemes. There is one defined benefits scheme which remains open for long serving staff

and there are other defined benefit schemes which have been closed but have ongoing liabilities to their

members. Measures have been taken that the reserves needed to honour current and past defined benefit

scheme arrangements are available when required.

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 made

Expense recognised in the income statement

Actuarial differences


Net liability at 31 December

106

2004

174,588

130,277

44,311

2,075

46,386

1,822

48,208

2005

187,000

142,686

44,314

(1,817)

42,497

4,658

47,155

2004

43,017

(7,894)

7,950

3,313

–

46,386

2005

46,386

(6,586)

6,029

(3,892)

560

42,497

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

107

2004

6,023

8,827

(7,601)

234

467

7,950

2005

4,038

9,587

(8,208)

1,087

(475)

6,029

2004

6,724

1,226

7,950

7,601

2005

4,650

1,379

6,029

8,208

2004

5 – 6%

4 – 8%

3%

n/a

1 – 3%

2005

4 – 5%

4 – 8%

2 – 3%

n/a

1 – 3%

5.48 P r o v i s i o n s

(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

5.49 T r a d e a n d o t h e r p a y a b l e s

(EUR x 1,000)

Trade payables

Advance instalments to construction work in progress

Fair value derivatives

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 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 relative to the Group’s

reporting currency. This risk exposure primarily affects those operations of the Group that generates a

significant portion of their revenues in foreign currencies and incurs their 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.

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.

108

2004

66,554

14,467

–

138,573

219,594

2005

77,631

22,670

499

147,296

248,096

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

Total

2,038

2,037

(2,630)

–

–

1,445

398

1,047

1,445

Other

–

–

–

–

–

–

–

–

–

Onerouscontracts

348

381

(182)

–

–

547

–

547

547

Restruc-turing

1,690

1,656

(2,448)

–

–

898

398

500

898

2005 2004

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 net fair value of forward exchange contracts

used as hedges of firm commitments and forecasted transactions at 31 December 2005 was EUR 499 thousand

(2004: EUR 417 thousand), comprising assets of EUR – (2004: EUR 417 thousand) and liabilities EUR 499 thousand

(2004: –) 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 2005 the Group had cross currency swap

contracts with a notional contract amount of USD 120 million (2004: USD 120 million).

The Group classifies interest rate cross currency swaps as cash flow hedges and states them at fair value.

The net fair value of swaps at 31 December 2005 was EUR 17,503 thousand (2004: EUR 14,978 thousand)

comprising assets of EUR 36,440 thousand (2004: EUR 48,729 thousand) and liabilities of EUR 53,943 thousand

(2004: EUR 63,707 thousand). These amounts were recognised as fair value derivatives.

109

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)


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)


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

* These assets/liabilities bear interest at a fixed rate.

110

2005

More than5 years

–

(99,270)

(20,000)

–

(36,440)

(17,503)

(7,157)

–

(180,370)

2 – 5years

–

–

–

(114,723)

–

–

(2,199)

–

(116,922)

1 – 2years

–

–

–

–

–

–

(888)

–

(888)

6 – 12months

–

–

–

–

–

–

( 2,573)

–

(2,573)

6 monthsor less

74,892

–

–

–

–

–

–

(35,430)

39,462

Total

74,892

(99,270)

(20,000)

(114,723)

(36,440)

(17,503)

(12,817)

(35,430)

(261,291)

Effectiveinterest

rate

0.00

6.45

6.45

3.83

6.45

6.45

9.39

3.75

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

0.00

2.83

6.45

6.45

7.81

6.45

6.45

5.58

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 2005 was EUR 499 thousand (2004: EUR –), comprising of assets EUR – (2004: 417 thousand) and

liabilities EUR 499 thousand (2004: EUR –) 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 2005 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 0.4 million negative (2004: EUR 2.5 million

negative). 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 0.1 million positive for the

year ended 31 December 2005 (2004: EUR 0.4 million negative). 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 – Assets

Forward exchange contracts – Liabilities

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

Bank overdraft

Trade and other payables

Total

Unrecognised gains/(losses)

111

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)

–

Fairvalue

317,771

74,892

–

(499)

–

(157,500)

(9,835)

(99,270)

(24,034)

(36,440)

(17,503)

(35,430)

(248,096)

(235,944)

(46,811)

Carryingamount

317,771

74,892

–

(499)

–

(114,723)

(9,835)

(99,270)

(20,000)

(36,440)

(17,503)

(35,430)

(248,096)

(189,133)

–

2005 2004

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.

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 the quoted market price as per 31 December 2005.

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

Receivables

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 C o m m i t m e n t s n o t i n c l u d e d i n t h e b a l a n c e s h e e t

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 and vessels under operating leases.

The leases typically run for an initial period of between three and ten years, with in most cases an option to

renew the lease after that date. Lease payments are increased annually to reflect market rentals. None of the

leases include contingent rentals.

The Group does, in principle, not act as a lessor.

112

4.75% – 6.5%

n/a

n/a

2005

2004

12,677

11,017

5,946

29,640

2004

2005

29,563

109,483

56,000

195,046

3.83 – 6.5%

n/a

n/a

5.58.2 Capital commitments

During the year ended 31 December 2005 the Group entered into a contract to purchase property, plant and

equipment for EUR 840 thousand (2004: EUR 888 thousand).

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.

Some 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

In January Fugro’s Supervisory Board decided to propose to the Annual General Meeting of Shareholders on

10 May 2006 that Messrs. P. van Riel and A. Steenbakker be appointed to the Board of Management as of that date

(see also the report of the Supervisory Board on page 17).

In January the Board of Management announced that Mr. F.E. Toolan, member of the Executive Committee and

COO of offshore Geotechnical Services and Airborne Survey, would retire per 1 July 2006. As of the same date Mr.

W.S. Rainey will be appointed COO of Geotechnical Services and Mr. S.J. Thomson will be appointed COO of

Airborne Survey. Both Mr. Rainey and Mr. Thomson have been working a long time for Fugro.

In January Fugro signed a three-year charter contract with the Norwegian shipyard Uksnoy & CO A/S for the

seismic vessel ‘Geo Barents’. The vessel will be ready for launching in November 2006 and Fugro will obtain

ownership in November 2009.

On 27 January 2006 Fugro Holdings Ltd. in the UK acquired a 100% interest in Surrey Geotechnical Consultants

Ltd. for an amount of EUR 0.6 million.

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 6.7% of the voting shares of the Company.

Executive officers also participate in the Group’s share option programme (refer note 5.30.1).

The remuneration of the statutory Directors for 2005 and 2004 is as follows:

(in EUR)

Fixed salary

Bonus with respect to the previous year

Pension costs

Valuation of options granted

Total

* Mr. A. Jonkman became a statutory Director as from 19 May 2004.

113

K.S.Wester

2004

298,987

88,500

411,211

463,050

1,261,748

2005

397,240

149,000

364,540

766,140

1,676,920

G-J. Kramer

2004

492,000

147,333

779,900

555,660

1,974,893

2005

542,000

246,000

435,000

878,688

2,101,688

A. Jonkman

2004

135,938

–

143,239

343,000

622,177

2005

260,000

112,500

259,319

576,300

1,208,119

*

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.

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 retirement of Mr. Kramer in 2005, a sum of EUR 875 thousand was paid in 2004 (EUR 440 thousand is

reported in the income statement over 2004 and EUR 435 thousand is reported in the income statement of 2005)

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 Directors3)

G-J. Kramer

Total

K.S. Wester

Total

A. Jonkman

Total

Total

114

Bonus1)

7

7

7

4

6

7

5

7

7

7

4

6

7

6

7

Expiring date

31-12-2006

31-12-2007

31-12-2008

31-12-2009

31-12-2010

31-12-2011

31-12-2005

31-12-2006

31-12-2007

31-12-2008

31-12-2009

31-12-2010

31-12-2011

31-12-2009

31-12-2010

31-12-2011

Share price at

exerciseday

20.822)

Exerciseprice

17.19

12.53

10.78

10.20

15.35

27.13

9.23

17.19

12.53

10.78

10.20

15.35

27.13

11.462)

15.35

27.13

Number at 31-12-

2005

129,600

129,600

129,600

129,600

129,600

129,600

777,600

–

108,000

108,000

108,000

108,000

108,000

113,000

653,000

150,400

80,000

85,000

315,400

1,746,000

Forfeitedin 2005

–

–

–

–

Exercisedin 2005

–

54,000

54,000

–

54,000

Grantedin 2005

129,600

129,600

113,000

113,000

85,000

85,000

327,600

Number at 01-01-

2005

129,600

129,600

129,600

129,600

129,600

648,000

54,000

108,000

108,000

108,000

108,000

108,000

594,000

150,400

80,000

230,400

1,472,400

Year

2000

2001

2002

2003

2004

2005

1999

2000

2001

2002

2003

2004

2005

2000 – 2003

2004

2005

Number ofmonthsIn EURNumber of option rights

1) Bonus in the book year; paid in the next year.

2) Weighted average.

3) Adjusted for split of shares (4:1).

The remuneration of the Supervisory Board is as follows:

(in EUR)


J.A. Colligan

P.J. Crawford

F.J.G.M. Cremers

M.W. Dekker

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 5.37 contains information about the assumptions and their risk factors relating to goodwill impairment.

In Note 5.50 a 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.

115

2004

43,000

31,000

31,000

–

36,000

38,000

31,000

210,000

2005

43,000

31,000

31,000

20,523

15,000

41,000

31,000

212,523

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-Jason Australia Perth, Australia

Fugro Multi Client Services Pty Ltd. Perth, Australia

Fugro Seismic Imaging Pty Perth, Australia

Fugro Spatial Solutions Pty Ltd. Perth, Australia

Fugro Survey Pty Ltd. Perth, Australia

OmniSTAR Pty Ltd. Perth, Australia

Azeri-Fugro # 40% Baku City, Azerbaijan

Fugro Caspian B.V. Baku City, Azerbaijan

Fugro Survey Caspian Ltd. Baku City, Azerbaijan

Fugro België N.V. Mechelen, Belgium

Fugro Engineers S.A. Brussels, Belgium

Fugro Airborne Surveys Ltd. Gaborone West, Botswana

Acquamarine Engenharia e assistenze Técnica Ltda Rio de Janeiro, Brazil

Fugro do Brasil Ltda Rio de Janeiro, Brazil

Fugro OceansatPEG SA 62% Rio de Janeiro, Brazil

Fugro Geosolutions Brazil Serve de Levantemento 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 Survey (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 Jacques GeoSurveys Inc. 70% St. John’s, Newfoundland, Canada

Fugro/SESL Geomatics Ltd. Calgary, Alberta, Canada

Fugro Geoscience (Beijing) Ltd. Beijing, China

Fugro Technical Services (Guangzhou) Ltd. Guangzhou, China

Shanghai Fugro Geotechnique Co. Ltd. 60% Shanghai, China

China Offshore Fugro GeoSolutions

(Shenzhen) Co, Ltd. 50% Shekou, Shenzhen, China

Fugro Offshore Survey (Shenzhen) Company Ltd. Shekou, Shenzhen, China

Fugro Comprehensive Geotechnical

Investigation (Zhejiang) Co, Ltd. Zhejiang, 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

Racal Survey Equatorial Guinea Ltd 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 Certification Services Ltd. Fo Tan, Shatin, N.T., Hong Kong

Fugro Technical Services Ltd. Fo Tan, Shatin, N.T., Hong Kong

116

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)

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 #.

117

Company % Office, Country Company % Office, Country

Geotechnical Instruments (Hong Kong) Ltd. Fo Tan, Shatin, N.T., Hong Kong

Fugro Geotechnical Services Ltd. Fo Tan, Shatin, N.T., Hong Kong

MateriaLab Consultants Ltd. Tuen Mun, N.T., Hong Kong

Elcome Surveys Pvt. Ltd. Navi Mumbai, India

Fugro Geonics Pvt. Ltd. 90% Navi Mumbai, India

Fugro India Pvt. Ltd. Navi 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

Fugro Oceansismica S.p.A. Roma, Italy

Fugro Japan Co., Ltd. Tokyo, Japan

Fugro Caspian B.V. Almaty, Kazakhstan Republic

Fugro Kazakhstan LLC Atyrau, Kazakhstan Republic

Fugro KazProject LLP Atyrau, Kazakhstan Republic

Fugro Geoscience GmbH Tripolis,Libya

Fugro Eco Consult S.a.r.l. Munsbach, Luxembourg

Fugro (Macau) Limitada Engenharia Geotecnica Macau, Macau

Fugro Technical Services (Macau) Ltd. 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 (M) Sdn Bhd Kuala Lumpur, Malaysia

Fugro-Jason (M) Sdn. Bhd Kuala Lumpur, Malaysia

Fugro Airborne Surveys Ltd. Port- Louis, Mauritius

Fugro Mauritius Ltd. Port- Louis, Mauritius

Fugro-Chance de Mexico S.A. de C.V. Ciudad Del Carmen, Campeche, Mexico

Geomundo S.A. de C.V. Ciudad Del Carmen, Campeche, Mexico

Fugro Airborne Surveys (Pty) Ltd. Klein Windhoek, Namibia

Fugro Survey 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-Jason Netherlands B.V. Leidschendam, Netherlands

Fugro Marine Services B.V. Leidschendam, Netherlands

Fugro Nederland B.V. Leidschendam, Netherlands

Fugro Robertson 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

Osiris B.V. Leidschendam, 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 Jacques N.V. 70% Willemstad, Curaçao, Netherlands Antilles

Fugro Robertson Americas N.V. Willemstad, Curaçao, Netherlands Antilles

Fugro Satellite Services N.V. Willemstad, Curaçao, Netherlands Antilles

Fugro Starfix 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 Survey AS Oslo, Norway

Fugro-Geoteam AS Oslo, Norway

Fugro Oceanor AS 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 Engineering LLP Moscow, Russia

Fugro-Jacques NSTC Moscow, Russia

Fugro Geoscience GmbH Moscow, Russia

Geo Inzh Services LLP Moscow, 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

Fugro Data Services AG Zug, Switzerland

Fugro Finance AG Zug, Switzerland

Fugro Geodetic AG Zug, Switzerland

Fugro Geoscience GmbH Zug, Switzerland

Fugro Middle East GmbH Zug, Switzerland

Fugro Survey GmbH Zug, Switzerland

Fugro Survey Pte Ltd. Bangkok, Thailand

Fugro Oceanor Thailand Co Ltd. Bangkok, Thailand

Fugro Survey Caribbean Inc. Chaguaramas, Trinidad and Tobago

Fugro Caspian B.V. Ashgabat, Turkmenistan

118

Company % Office, Country

Fugro Middle East B.V. Dubai, United Arab Emirates

Fugro-Jason Middle East Dubai, United Arab Emirates

Fugro Survey (Middle East) Ltd. Abu Dhabi, United Arab Emirates

Fugro-GEOS UAE Abu Dhabi, United Arab Emirates

Fugro Survey Limited Aberdeen, United Kingdom

Alluvial Mining Ltd. Great Yarmouth, United Kingdom

Fugro-Robertson Ltd. Llandudno, United Kingdom

Fugro Seismic Imaging Ltd. Swanley, United Kingdom

Fugro Ltd. Wallingford, United Kingdom

Fugro Airborne Surveys Ltd. Wallingford, United Kingdom

Fugro Engineering Services Ltd. Wallingford, United Kingdom

Fugro-GEOS Ltd. Wallingford, United Kingdom

Fugro-Jason (UK) Ltd. Wallingford, Surrey, 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 LP 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 LP 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

Petcom Inc Richardson, United States

España Geotechnical Consulting Inc. Roseville, United States

Fugro West, Inc. Ventura, United States

Fugro-McClelland Marine Geosciences, Inc. Caracas, Venezuela

120

(EUR x 1,000)

A s s e t s

(9.1) Property, plant and equipment

(9.2) Intangible assets

(9.3) Financial fixed assets

Deffered tax assets


(9.4) Trade and other receivables

Income tax receivable

(9.6) Cash and cash equivalents

Totaal current assets

Total assets

(9.5) E q u i t y


Share premium

Reserves


Total equity




Bank overdraft




(9.8) Total current liabilities

Total liabilities


7 C o m p a n y b a l a n c e s h e e tBefore appropriation of result, as at 31 December

2005

381

72,495

681,920

6,007

760,803

15,781

5,321

–

21,102

781,905

3,441

301,539

61,068

99,412

465,460

287,936

287,936

14,998

–

13,212

299

28,509

316,445

781,905

2004

548

72,495

412,772

7,647

493,462

8,237

5,467

4,381

18,085

511,547

3,110

207,159

(35,673)

49,317

223,913

170,630

170,630

–

99,218

17,627

159

117,004

287,634

511,547

121

(EUR x 1,000)

Net result subsidiaries

Other results

Net result for the year

Added to unappropriated result

Other results concern the costs of the Company less reimbursements from subsidiaries.

8 C o m p a n y i n c o m e s t a t e m e n t

2004

59,343

(10,026)

49,317

49,317

2005

110,109

(10,697)

99,412

99,412

G e n e r a l

The company financial statements are part of the 2005 financial statements of Fugro N.V. With reference to the

company profit and loss account of Fugro N.V., use has been made of the exemption pursuant to Section 402 of

Book 2 of the Netherlands Civil Code.

P r i n c i p l e s f o r t h e m e a s u r e m e n t o f a s s e t s a n d l i a b i l i t i e s a n d t h e d e t e r m i n a t i o n

o f t h e r e s u l t

For setting the principles for the recognition and measurement of assets and liabilities and determination of the

result for its company financial statements, Fugro N.V. makes use of the option provided in section 2:362 (8) of

the Netherlands Civil Code. This means that the principles for the recognition and measurement of assets and

liabilities and determination of the result (hereinafter referred to as principles for recognition and

measurement) of the company financial statements of Fugro N.V. are the same as those applied for the

consolidated EU-IFRS financial statements. Participating interests, over which significant influence is exercised,

are stated on the basis of the equity method. These consolidated EU – IFRS financial statements are prepared

according to the standards laid down by the International Accounting Standards Board and adopted by the

European Union (hereinafter referred to as EU-IFRS). Please see pages 71 to 82 for a description of these

principles.

The share in the result of participating interests consists of the share of Fugro N.V. in the result of these

participating interests. Results on transactions, where the transfer of assets and liabilities between Fugro N.V.

and its participating interests and mutually between participating interests themselves, are not incorporated

insofar as they can be deemed to be unrealised.

C h a n g e i n a c c o u n t i n g p o l i c i e s

As a result of the application of the accounting principles used in the consolidated financial statements to the

company financial statements, Fugro N.V. has implemented a change in accounting policies. This change in

accounting policies is the result of using the option in section 2:362 (8) of the Netherlands Civil Code. By making

use of this option reconciliation is maintained between the consolidated and the company shareholders’ equity.

The company financial statements were previously prepared in compliance with the principles for

recognition and measurement of assets and liabilities and determination of the result referred to in Part 9,

Book 2 of the Netherlands Civil Code (BW2). The change in accounting policies, which is treated retrospectively,

has had an effect on the shareholders’ equity and the result. The impact on the shareholders’ equity as at

31 December 2004 amounts to EUR 36 million. The impact on the result for 2004 amounts to EUR 139 thousand

negative.

For the purposes of comparison, the comparative figures have been adjusted on the basis of the changed

accounting principles.

The reconciliation summaries for the company balance sheet and profit and loss account, in which the effects

of the change in accounting policies are stated for each item of the financial statements, are included under

sections 9.11 and 9.12. Furthermore, the classification of financial instruments for the calculation of the

company’s shareholders’ equity, the principle of economic reality must be used because this principle is used in

the consolidated EU-IFRS financial statements. Previously, the classification of components of the shareholders’

equity was based on the legal format of the financial instrument. The change in presentation related to this

is stated in the shareholders’ equity and is also presented separately in the reconciliation summary under

section 9.13.

9 N o t e s t o t h e 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

122

123


(EUR x 1,000)

Cost


Other acquisitions

Disposals


Depreciation



Disposals


Carrying amount

At 1 January

At 31 December


(EUR x 1,000)

Cost



Carrying amount

At 1 January

At 31 December

The capitalised goodwill is not amortised. Goodwill is systematically tested for impairment on each balance

sheet date, or when there is an indication for impairment. Goodwill represents amounts arising on acquisition

of subsidiaries. No impairment has been recognised.

2004 Other

1,676

225

110

2,011

1,025

327

111

1,463

651

548

2005 Other

2,011

297

(135)

2,173

1,463

401

(72)

1,792

548

381

2004 Goodwill

72,495

72,495

72,495

72,495

2005 Goodwill

72,495

72,495

72,495

72,495

9.3 F i n a n c i a l f i x e d a s s e t s

The list of siginificant group companies is included in the pages 116 through 118.

(EUR x 1,000)


Net result of group companies

Capital increase subsidiaries

Loans subsidiaries

Currency exchange differences

Other

Closing balance 31 December

* Included in loans subsidiaries is a loan bearing interest to a group company of 3,83% (2004: 5%). In principle the loan will be repaid

within two years.


(EUR x 1,000)

Receivables from group companies

Social security premiums

Other receivables


9.5 E q u i t y

For the notes to the equity reference is made to note 5.44 of the consolidated statements.


(EUR x 1,000)

Bank balances, cash, and cash equivalents


9.7 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

(EUR x 1,000)

Convertible loan

Private Placement loan


For the notes on the convertible loan and the Private Placement loans reference is made to note 5.46.3 of

the consolidated statements. The average interest in long-term debt amounts to 5,4% per annum (2004: 6,5%)

124

2004

4,381

4,381

2005

–

–

2004

5,174

410

2,653

8,237

2005

13,479

830

1,472

15,781

Total 2004

435,650

59,343

8,520

(65,872)

(23,922)

(947)

412,772

Total 2005

412,772

110,109

77,250

46,845

35,911

(967)

681,920

14,108

–

–

46,845

168

–

61,121

398,664

110,109

77,250

–

35,743

(967)

620,799

*Loans to/receivablesfrom groupcompanies

Partici-pation

in groupcompanies

2004

–

170,630

170,630

2005

114,723

173,213

287,936

9.8 C u r r e n t l i a b i l i t i e s

(EUR x 1,000)

Bank overdraft

Trade creditors

Interest convertible loan

Interest Private Placement

Convertible loan

Group companies


Other liabilities


9.9 C o m m i t m e n t s n o t i n c l u d e d i n t h e b a l a n c e s h e e t

Tax unit

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.

9.10 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 Chamber of Commerce. The company has deposited a list with

the Chamber of Commerce, which includes 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.

9.11 E f f e c t s o f c h a n g e i n a c c o u n t i n g p r i n c i p l e s o n t h e c o m p a n y i n c o m e

s t a t e m e n t

(EUR x 1,000)

Net result subsidiaries

Other results

Amortisation of goodwill

Net result for the year

Added to unappropriated result

The 2004 net result subsidiaries under IFRS is EUR 936 thousand less than under Dutch GAAP due to the net

impact of the various differences between IFRS and Dutch GAAP. For a detailed overview of these differences,

reference is made to the 2004 annual report (pages 54 through 55 and pages 122 through 132).

Other results are EUR 3,854 thousand less under IFRS compared to Dutch GAAP. This decrease is the net (after

tax) impact of the different accounting treatment of share-based payments and of compound financial

instruments (under IFRS the liability and equity component of the convertible loan are split).

Under IFRS (IFRS 3) goodwill is measured at cost less any impairment losses. Under Dutch GAAP, goodwill was

amortised over its useful life. Consequently, amortisation cost decreased by EUR 4,651 thousand for the year

ended 31 December 2004.

125

2004

–

1,651

3,562

1,502

99,218

719

159

10,193

117,004

2005

14,998

1,354

2,025

1,502

–

–

299

8,331

28,509

IFRS2004

59,343

(10,026)

–

49,317

49,317

Effect2004

(936)

(3,854)

4,651

(139)

(139)

DutchGAAP2004

60,279

(6,172)

(4,651)

49,456

49,456

126

9.12 E f f e c t s o f c h a n g e i n a c c o u n t i n g p r i n c i p l e s o n t h e c o m p a n y

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

As at 1 January 2004, respectively 31 December 2004

(EUR x 1,000)

A s s e t s


Intangible assets

Financial fixed assets

Deffered tax assets


Trade and other receivables

Income tax receivable


Total current assets

Total assets

E q u i t y


Share premium

Reserves


Total equity



Employee benefits

Provisions

Deferred tax liabilities


Bank overdraft




Total current liabilities

Total liabilities


DutchGAAP

31-12-04

548

77,907

435,810

–

514,265

10,169

5,467

4,381

20,017

534,282

3,110

207,159

407

49,456

260,132

256,364

185

–

–

256,549

–

–

17,442

159

17,601

274,150

534,282

Effect 31-12-04

–

(5,412)

(23,038)

7,647

(20,803)

(1,932)

–

–

(1,932)

(22,735)

–

–

(36,080)

(139)

(36,219)

(85,734)

(185)

–

–

(85,919)

–

99,218

185

–

99,403

13,484

(22,735)

IFRS 31-12-04

548

72,495

412,772

7,647

493,462

8,237

5,467

4,381

18,085

511,547

3,110

207,159

(35,673)

49,317

223,913

170,630

–

–

–

170,630

–

99,218

17,627

159

117,004

287,634

511,547

DutchGAAP

01-01-04

651

82,558

448,859

–

532,068

10,519

6,054

–

16,573

548,641

3,033

207,159

(1,829)

32,420

240,783

256,364

185

139

–

256,688

35,561

–

15,269

340

51,170

307,858

548,641

Effect 01-01-04

–

(10,063)

(13,209)

3,715

(19,557)

(217)

–

–

(217)

(19,774)

–

–

(16,039)

(13,548)

(29,587)

1,665

–

(139)

5,179

6,705

–

–

3,108

–

3,108

9,813

(19,774)

IFRS 01-01-04

651

72,495

435,650

3,715

512,511

10,302

6,054

–

16,356

528,867

3,033

207,159

(17,868)

18,872

211,196

258,029

185

–

5,179

263,393

35,561

–

18,377

340

54,278

317,671

528,867

Under IFRS (IFRS 3) goodwill is measured at cost less any impairment losses. Under Dutch GAAP, goodwill was

amortised over its useful life. Furthermore under IFRS 1 Fugro evaluated the business combinations for

intangibles subsumed in goodwill. As a result Fugro identified certain intangibles (mainly software) that meet

the recognition criteria of IAS 38. Consequently, intangibles decreased by EUR 5,412 thousand for the year ended

31 December 2004 since the intangibles were accounted for at subsidiary level.

Financial fixed assets under IFRS decrease with EUR 23,038 thousand as at 31 December 2004 and

EUR 13,209 thousand as at 1 January 2004 due to the net impact of the various differences between IFRS and

Dutch GAAP. For a detailed overview of these differences, reference is made to the 2004 annual report (pages 54

through 55 and pages 122 through 132).

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 with

EUR 3,715 thousand as at 1 January 2004 and with EUR 7,647 thousand as at 31 December 2004.

Under Dutch GAAP financial instruments were not recognised in the balance sheet. Under IFRS (IAS 32 and

IAS 39) financial instruments are included at the fair value or amortised cost depending on the nature of the

financial instruments. Furthermore, IFRS requires to split compound financial instruments (under IFRS the

liability and equity component of the convertible loan are split). Finally, the convertible loan was presented as

non-current under Dutch GAAP (which takes into account the expected renewal in 2005) and as current under

IFRS at 31 December 2004. The net impact of the above is an increase of the non-current portion of interest-

bearing loans and borrowings as at 1 January 2004 and a decrease of EUR 85,754 thousand as at 31 December

2004 under IFRS. The current portion of interest-bearing loans and borrowings increases under IFRS with

EUR 99,218 thousand as at 31 December 2004 (1 January 2004: nil).

For a detailed overview of these differences, reference is made to the 2004 annual report (pages 54 through 55

and pages 122 through 132).

9.13 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

The reconciliation is taken up in the annual report 2004, page 132.


127

Executive Directors



Supervisory Board


J.A. Colligan

P. J. Crawford

F.J.G.M. Cremers

Th. Smith

P. Winsemius

128

Opinion with respect to the company Financial

Statements

In our opinion, the company Financial Statements give a

true and fair view of the financial position of the

company as at 31 December 2005 and of the result for the

year then ended in accordance with accounting principles

generally accepted in the Netherlands and also comply

with the financial reporting requirements included in

Part 9 of Book 2 of the Netherlands Civil Code.

Furthermore we have established to the extent of our

competence that the annual report is consistent with the

company Financial Statements.

The Hague, 9 March 2006

KPMG Accountants N.V.

L.H. Barg RA

10.2 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.

1 0 O t h e r i n f o r m a t i o n

10.1 A u d i t o r s ’ R e p o r t 2 0 0 5

Introduction

We have audited the Financial Statements of Fugro N.V.,

Leidschendam, for the year 2005 as set out on pages 65 to

127. These Financial Statements consist of the

consolidated Financial Statements and the company

Financial Statements. 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 with respect to the consolidated Financial

Statements

In our opinion, the consolidated Financial Statements

give a true and fair view of the financial position of the

company as at 31 December 2005 and of the result and the

cash flows for the year then ended in accordance with

International Financial Reporting Standards as adopted

by the EU and also comply with the financial reporting

requirements included in Part 9 of Book 2 of the

Netherlands Civil Code as far as applicable.

Furthermore we have established to the extent of our

competence that the annual report is consistent with the

consolidated Financial Statements.

10.4 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. The profit shall, if sufficient, be applied first in

payment to the holders of white-knight

preference shares of a percentage as specified

below of the compulsory amount paid on these

shares as at the commencement of the financial

year for which the distribution is made.

b. The percentage referred to above in

subparagraph a. shall be equal to the average of

the Euribor interest charged for loans with a

term of one year – weighted by the number of

days for which this interest was applicable –

during the financial year for which the

distribution is made, increased by at most four

percentage points; this increase shall each time

be fixed by the Board of Management for a

period of five years, after approval by the

Supervisory Board.

36.3 a. Next, if possible, a dividend shall be paid on the

financing preference shares of each series and

on the convertible financing preference shares

of each series, equal to a percentage calculated

on the amount effectively paid on the financing

preference shares of the respective series and

the convertible financing preference shares of

the respective series, including a share

premium, if any, upon the first issue of the

series in question, and which percentage shall

be related to the average effective return on

‘state loans general with a term of 7 – 8 years’,

calculated and determined in the manner as

described hereinafter.

b. The percentage of the dividend for the

financing preference shares of each or for the

convertible financing preference shares of each

series, as the case may be, shall be calculated by

taking the arithmetic mean of the average

effective return on the aforesaid loans, as

prepared by the Central Bureau of Statistics

(Centraal Bureau voor de Statistiek) and

published in the Official List of Euronext

Amsterdam N.V. for the last five stock market

trading days preceding the day of the first issue

of financing preference shares of the respective

series or the convertible financing preference

shares of the respective series, as the case may

be, or preceding the day on which the dividend

percentage is adjusted, increased or decreased,

if applicable, by a mark-up or mark-down set by

10.3 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

(resigned as of 1 July)

J.F. van Duyne Board member 2007

W. Schatborn Board member 2006

L.P.E.M. van den Boom Board member 2009

(appointed 1 July)

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 2009

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 2009

R. de Paus Board member B 2007

M.A. Pourier Board member B 2008

F.H. Schreve Board member A Perma-

nent

Apart from Mr. Schreve no Board member has any links

with Fugro.

129

10.5 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 40.7 million

be paid out in the form of a cash payment of EUR 0.60 per

(depositary receipt of) share with a nominal value of

EUR 0.05 or in the form of (depository receipts of) ordinary

shares with a nominal value of EUR 0.05 charged to the

reserves.

the Board of Management upon issue and

approved by the Supervisory Board of at two

percentage points, depending on the market

conditions then obtaining, which mark-up or

mark-down 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

provisions contained in Paragraph 3 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.

130

R e s u l t (x EUR 1,000)

Turnover

Third party costs

Net revenue

Operating result 3)

Cash flow

Net result 3)

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) 5)

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.–) 5)

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) 5)

Of nominal EUR 0.20 at year-end

132

H i s t o r i c r e v i e w 3)

DutchGAAP 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

1.91

1.30

1.56

0.80

0.28

4.99

10.99

4.06

5,136

48,682

DutchGAAP 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

2.29

1.27

1.59

0.84

0.31

9.23

9.98

4.10

5,114

50,449

DutchGAAP 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

2.10

1.48

1.72

0.92

0.34

17.19

17.81

9.31

5,756

51,048

DutchGAAP 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

4.17

1.86

1.98

1.16

0.40

12.53

18.91

10.75

6,953

58,679

DutchGAAP 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

4.57

1.95

2.08

1.26

0.46

10.78

16.50

9.88

6,923

59,449

IFRS2003

822,372

273,372

549,000

63,272

80,480

18,872

–

268,801

123,983

70,888

54,004

114,852

1,056,003

584

431,895

211,196

9.2

2.3

8.3

17.6

20.2

2.2

3.48

1.09

1.39

0.33

0.46

10.20

12.86

6.13

8,472

60,664

IFRS2004

1,008,008

364,644

643,364

104,236

125,802

49,317

–

232,956

71,028

2,296

66,139

(95,348)

983,350

1,075

184,268

223,913

11.0

4.9

7.7

22.7

23.2

3.7

3.60

1.76

2.12

0.83

0.48

15.35

16.41

10.05

7,615

62,192

IFRS 2005

1,160,615

405,701

754,914

144,070

176,093

99,412

–

262,759

90,414

10,057

69,445

222,485

1,138,660

398

300,753

465,460

12.9

8.6

13.2

28.8

41.3

7.3

6.76

2.18

2.67

1.51

0.48

27.13

27.40

15.14

8,534

68,825

1) Based on IFRS as from 2003.

2) In 2003 and 2002 no accrued dividend has been incorporated.

3) For 2002 and earlier years, before amortisation of goodwill.

4) Unlike preceeding years the figures as from the year 1999 have been calculated based upon the wweeiigghhtteedd average number of outstanding shares.

5) As a result of the share split in 2005, the historical figures have been restated.

DutchGAAP 1984 4)

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

–

0.82

0.39

0.64

0.27

–

–

–

–

553

5,882

DutchGAAP 1985 4)

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

–

1.31

0.21

0.86

0.36

–

–

–

–

587

5,882

DutchGAAP 1986 4)

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

–

0.62

(0.39)

(0.01)

(0.40)

–

–

–

–

524

7,517

DutchGAAP 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

–

0.61

0.10

0.26

0.02

–

–

–

–

941

16,011

DutchGAAP 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

–

0.70

0.02

0.35

0.13

0.05

–

–

–

969

15,606

DutchGAAP 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

–

0.78

0.39

0.47

0.27

0.09

–

–

–

1,105

17,100

DutchGAAP 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

–

0.91

0.45

0.58

0.31

0.11

–

–

–

1,275

17,641

DutchGAAP 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

–

1.74

0.77

0.95

0.56

0.17

–

–

–

2,029

26,648

DutchGAAP 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

–

1.64

0.39

0.59

0.26

0.15

2.94

4.48

2.44

2,664

36,346

DutchGAAP 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

–

1.71

0.50

0.74

0.34

0.17

4.17

4.46

2.64

2,824

36,370

DutchGAAP 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

–

1.39

0.50

0.80

0.33

0.17

3.88

4.75

3.69

3,557

46,040

DutchGAAP 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

–

1.11

0.27

0.58

0.16

0.08

1.96

4.14

1.45

3,968

46,044

DutchGAAP 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

–

1.36

0.58

0.88

0.36

0.17

3.48

3.71

1.93

4,222

46,053

DutchGAAP 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

1.65

0.98

1.29

0.66

0.25

7.01

8.28

3.44

4,429

47,673

133

Stichting. In accordance with the Corporate Gouvernance

Code, he was not candidate for reappointment. In the

Report of the Stichting it was reported that, in accordance

with Art. 4.3 of the Articles of Association, the Board

offered 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 convene a Meeting of holders of depository receipts

of shares in order to nominate a candidate for

membership of the Stichting Board. As no request for

such a meeting was submitted the Board appointed

Mr L.P.E.M. van den Boom as a member of the Board as of

1 July 2005.

In accordance with the roster, Mr Schatborn will step

down from the Board of the Stichting on 30 June 2006.

The Board of the Stichting intends to reappoint

Mr Schatborn as a Board member for a period of four

years. The Board of the Stichting offers holders of

depository receipts of shares with a holding of 15% of the

issued depository receipts of shares the opportunity to

request, before 10 April 2006, that the Board convene a

meeting of holders of depository receipts of shares in

order to nominate a candidate for membership of the

Board of the Stichting. The request needs to be submitted

in writing and needs to mention name and address of the

proposed person.

The Board of the Stichting comprises Messrs.:

R. van der Vlist, Chairman

J.F. van Duyne

W. Schatborn

L.P.E.M. van den Boom

Mr. Van der Vlist was General Secretary of

N.V. Koninklijke Nederlandsche Petroleum Maatschappij.

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. Mr. Van den Boom was Member

of the Board of NIB Capital Bank N.V. and is currently

senior partner with Catalyst Advisors B.V.

In 2005 the remuneration of the Board amounted to

EUR 19,450 and the total costs of the Stichting amounted

to EUR 78,349.

On 31 December 2005, 60,062,761 ordinary shares with

a nominal value of EUR 0.05 were in administration,

against which 60,062,761 registered depository receipts of

shares with a nominal value of EUR 0.05 had been issued.

During the financial year 45,852 certificates were

converted into ordinary shares and 6,640,373 ordinary

shares were converted into certificates. 599,012

depository receipts of shares were issued as a result of the

R e p o r t o f S t i c h t i n gA 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 2005 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 2005; the meeting of

22 April 2005 was dedicated to preparations for the

Annual General Meeting of Shareholders in Fugro N.V.

and on 29 September 2005 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

and the Stichting.

On 10 June 2005 the Articles of Association and the

Stichting Administrative Conditions were amended in

view of the dematerialisation of the depository receipts of

shares (certificates) in Fugro N.V.

As of 20 June 2005 each share in the capital of

Fugro N.V. with a nominal value of EUR 0.20 has been split

in four shares with a nominal value of EUR 0.05. As of the

same date the depository receipts with a nominal value of

EUR 0.20 has been split in four depository receipts with a

nominal value of EUR 0.05.

The Stichting has taken advice regarding the

aforementioned amendments to the Articles of

Association and the Administrative Conditions.

All the members of the Stichting Board are

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 Board attended the Annual General Meeting of

Shareholders in Fugro N.V. on 19 May 2005 and

represented 63% of the votes cast. The Stichting voted in

favour of all the topics put to the vote during the meeting.

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 145 holders of depository

receipts of shares with 4,007,242 certificates.

In accordance with the roster, in June 2005

Mr. Commandeur resigned from the Board of the

134

2.375% in depository receipts of ordinary shares convertible

subordinated debenture bond 2005 per 2010 of EUR 125,000,000.–

at the cost of Fugro N.V.

To comply with the stipulations of Article 32 Clause 2

of the deed of trust executed by notary F.K. Buijn on

27 April 2005, we issue the following report.

The bonds at EUR 1,000.– have been issued in the form

of a collective bond amounting to EUR 125,000,000.–.

As a result of a share split the nominal value of each

share has been changed from EUR 0.20 to EUR 0.05.

In connection with this share split the conversion price

has been divided into four and changed from EUR 97.00 to

EUR 24.25 per ordinary share with a nominal value of

EUR 0.05.

Unless already purchased, settled or converted in

conformance with the trust deed, the bonds will be

settled at par on 27 April 2010. Between 6 June 2005 and

20 April 2010 inclusive the bonds may be converted into

depository receipts of ordinary shares in Fugro N.V. with a

nominal value of EUR 0.05 at a conversion price of

EUR 24.25.

During the year under review no bonds were

purchased or offered for conversion so that on

31 December 2005 the outstanding amount of the bond

was EUR 125,000,000.–-.

Fugro N.V. is authorised to repay the loan early (from

11 May 2008 onwards) on condition that Euronext

Amsterdam's Official Price List shows that the closing

price of the certificates of ordinary shares in Fugro N.V. on

Euronext Amsterdam N.V., Amsterdam, has been at least

130% of the then prevailing conversion price on at least

twenty days out of thirty consecutive trading days.

In the case of a ‘Change of Control’ as referred to in

Article 5 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, 6 February 2006

N.V. Algemeen Nederlands Trustkantoor ANT

L.J.J.M. Lutz

stock dividend and 5,897,896 depository receipts were

issued in connection with the conversion of a convertible

bond.

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 2006

The Board

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 2006

Fugro N.V.

The Board of Management

Stichting Administratiekantoor Fugro

The Board

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 5

Regarding 4.75% in depository receipts of ordinary shares

convertible subordinated debenture bond 2000 per 2005

originally of EUR 100,000,00.-- at the cost of Fugro N.V.

In accordance with Article 10 clause 2 of the deed of

trust dated 29 March 2000 as executed by notary

F.K. Buijn, we issue the following report.

During the year under review, up to and including the

seventh day of trading on the stock exchange before the

settlement date, bonds with a nominal value of

EUR 94,676,000 were offered for conversion.

On 3 April 2005 the outstanding amount of the bond,

which was EUR 5,324,000 could be settled.

All the bonds that could be settled were offered for

conversion into cash and the monies used to redeem the

loan in full.

135

ROV Remotely Operated Vehicle: Unmanned submersible launched from a vessel

and equipped with measuring and manipulation equipment. A cable to the mother-

vessel provides power, video and data communication.

Seastar-dp: DGPS positioning system, specifically for use on board DP vessels.

Seismic: Acoustic measurement of seabed characteristics and stratification with the

objective of detecting oil and gas. These measurements are conducted using specialised

vessels equipped with powerful acoustic energy sources and long receiving streamers

(hydrophones) to measure (sub) seabed acoustic echoes.

Skyfix: DGPS positioning system, see Starfix, but uses different underlying technology

to achieve the high degree of accuracy.

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 magnetic 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.

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 vessel-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: Acoustic measuring technology which uses multiple vessel-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 vessels, measuring equipment, etc.

Asset monitoring: Tracking the location and usage of business equipment such as

vessels, measuring equipment, etc.

AUV (Autonomous Underwater Vehicle): An unmanned submersible launched

from a ‘mother-vessel’ 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 vessel’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.

GNSS Global Navigation Satellite System: A collective term for GPS, the Russian

GLONASS system and the future European Gallileo System.

GPS: Global Positioning System.

Gravity: Precision gravity measurements to detect geological and other anomalies.

HP (high-performance): Decimetre positioning accuracy.

LiDAR: a measuring system based on laser technology that can make extremely

accurate recordings from an aircraft.

Omnistar: DGPS positioning system specifically for use onshore. This system

differentiates itself through its accuracy, global coverage 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.

136

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 Haaglanden

number 27120091

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

Concept and realisation:

C&F Report Amsterdam B.V.

Photography:

Fugro N.V.,

Picture Report, Amsterdam,

Peter Boer, and others.

Fugro has endeavored to

fulfil all legal requirements

related to copyright. Anyone

who, despite this, is of the

opinion that other copyright

regulations could be applicable

should contact Fugro.

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

Cautionary Statement regarding Forward-Looking Statements

This annual report may contain forward-looking statements. Forward-looking statements are statements that are not historical facts, including

(but not limited to) statements expressing or implying Fugro N.V.’s beliefs, expectations, intentions, forecasts, estimates or predictions (and the

assumptions underlying them). Forward-looking statements necessarily involve risks and uncertainties. The actual future results and situations

may therefore differ materially from those expressed or implied in any forward-looking statements. Such differences may be caused by various

factors (including, but not limited to, developments in the oil and gas industry and related markets, currency risks and unexpected operational

setbacks). Any forward-looking statements contained in this announcement are based on information currently available to Fugro N.V.’s manage-

ment. Fugro N.V. assumes no obligation to in each case make a public announcement if there are changes in that information or if there are

otherwise changes or developments in respect of the forward-looking statements in this annual report.

AN

NU

AL

RE

PO

RT

20

05

FU

GR

O N

.V.

A n n u a l R e p o r t 2 0 0 5F U G R O N . V.

GEOTECHNIEK

MILIEU ONDERZOEK

MARINER

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