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SUSTAINABILITY REPORT 2016 DAMEN SHIPYARDS GROUP

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SUSTAINABILITY REPORT 2016

DAMEN SHIPYARDS GROUP

2

1 1 WELCOME FROM OUR CEO

2 2 SUMMARY OF KEY FIGURES

3 3 THE WORLD OF DAMEN 3.1 Approach to sustainability within Damen 3.2 Our stakeholders and their information needs

13 4 FINANCIAL PERFORMANCE

17 5 INVESTING IN INNOVATION 5.1 Innovation through cooperation 5.2 Innovation in action

20 6 RESPONSIBLE PRODUCTION 6.1 Health and safety at our yards 6.2 Emissions, energy and waste 6.3 Improving procurement and local sourcing 6.4 Excellerate

25 7 STAKEHOLDER RELATIONSHIPS 7.1 Keeping our customers close 7.2 Sustaining our human capital

28 8 CONTRIBUTING TO COMMUNITIES WORLDWIDE 8.1 Offshore support 8.2 Public transport 8.3 Offshore supply 8.4 Dredging equipment

32 9 APPENDICES 9.1 About this report 9.2 GRI G4index 9.3 Glossary

40 CONTACT

CONTENTS

1SUSTAINABILITY REPORT 2016

We are seeing growing interest in the topic of sustainability amongst all our stakeholders. This further drives our already strong impulse to develop our sustainability performance. We this in mind, it is my pleasure to welcome you to the third Damen Sustainability Report. The global maritime industry has shown sustained economic weakness over the past few years, with no immediate structural improvements in sight. The impact of reduced activity in investments in offshore oil, gas and other commodities is still being felt and volumes and margins are under pressure. The growth in markets such as ferries and cruise, yachting, aquaculture and defence and security are not yet sufficient to compensate for this. The coming period will be one of adjustments. Regrettably, the adverse market conditions led to a restructuring of the Shiprepair & Conversion Division in 2017, notably in Rotterdam and Vlissingen in the Netherlands. In close consultation with the local work councils we agreed a fair social plan for those affected. Damen’s policy remains unchanged; despite the rough seas of our markets, we pursue controlled growth through a robust portfolio of product market combinations. The process of building or repairing ships and components is complex and we strive to perform all our activities in a safe manner.

SAFETY AS CORE VALUE

Safety is a core value and top priority at Damen, which is in line with our values as a family owned business – we take care of our personnel, clients, suppliers and other stakeholders. A variety of important initiatives have been implemented to further enhance the health and safety structure and culture of our organisation. Damen continues to strive for a safety culture that includes the management and internal and external colleagues working together to jointly ensure the safety of all.

WELCOME TO OUR 2016 SUSTAINABILITY REPORT

1

RENÉ H. BERKVENS

CHIEF EXECUTIVE OFFICER

DAMEN SHIPYARDS GROUP

EMPLOYER OF FIRST CHOICE

It is essential for Damen to distinguish itself as an attractive employer in its pursuit of continuous improvements and profitable growth. This applies to all of our employees, from welders to engineers and from buyers to service engineers, we want to be successful in hiring and retaining them. With digitisation in mind, we also going to require more other skillsets. Damen invests in its people and their professional development and strives to create an organisation where people thrive and have fun doing their job.

INNOVATION IS KEY

With new technologies and regulations influencing our business in the (near) future, Damen embarked on a strategic horizon scan dubbed ‘DAMEN 2025’. The programme gathered ideas from a broad range of personnel. Over the coming period a number of identified options will be further prioritised, investigated and developed. With the new IMO Regulations for ballast water treatment planned into force in September 2017, Damen is confident in its ability to offer effective systems for ship owners and operators to comply with these regulations. For instance, our pioneering mobile ballast water treatments system, the award-winning InvaSave 300, which can be operated in ports to support ship deballasting operations.

LOOKING FORWARD

We are pursuing further improvements in sustainability, mainly in setting clear targets, quantifying our performance as well as improving the process of collecting reliable data throughout the entire group.

Any suggestions you may have on what sustainability at Damen should entail and the way we report on it are greatly appreciated and we are happy to engage with you on this subject.

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2 SUSTAINABILITY REPORT 2016

SUMMARY OF KEY FIGURES

FINANCIAL/MARKET/CLIENTS

PRODUCTION VALUE 2016 nnnnn nnnnn nnnnn nnnnn nnnn 1.7 in € billion 2015 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnn 2.1 2014 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn 2.0

NET RESULT 2016 nnnnn nnnnn 29 in € million 2015 nnnnn nnnnn nnnnn nnnnn nnnnn 73 2014 nnnnn nnnnn nnnnn nnnnn 58

DELIVERIES 2016 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nn 219 # vessels 2015 nnnnn nnnnn nnnnn nnnnn nnnnn nn 181 2014 nnnnn nnnnn nnnnn nnnnn nnnn 160

REPAIR & MAINTENANCE JOBS 2016 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnn > 1,350 2015 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnn > 1,500 2014 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnn > 1,500

GLOBAL PRESENCE 2016 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnn 33 # shipyards 2015 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nn 32 2014 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nn 32

SOCIAL

AVERAGE FTE* 2016 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn n 9,300 2015 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnn 9,700 2014 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn 9,000

ABSENTEEISM 2016 nnnnn nn 3.2 in % ** 2015 nnnnn n 2.7 2014 nnnnn 2.3

SAFETY

LOST TIME INCIDENT FREQUENCY 2016 nnnnn nnnnn nnnnn 9.56 2015 nnnnn nnnnn nnnnn nn 11.36 2014 nnnnn nnnnn nnnnn 9.87

ENVIRONMENTAL

CO² EMISSIONS 2016 nnnnn nnnnn nnnnn nnnnn nnnnn 49,824 in tonnes 2015 nnnnn nnnnn nnnnn nnn 35,634 2014 nnnnn nnnnn nnnnn n 30,390

* Full Time Equivalent ** Damen Shipyards Gorinchem

3SUSTAINABILITY REPORT 2016

The Damen Shipyards Group operates around the world with 33 shipyards and ship repair and conversion yards. Damen Shipyards Group employs over 8,500 personnel. If we also include the employees of joint ventures, then the figure rises to more than 9,300 employees. These employees were involved in the delivery of over 200 vessels and the undertaking of 1,350 maintenance and repair projects in 2016, as well as provision of a diverse range of maritime services and products.

WHAT WE DO

Damen’s product and service offering is not only geographically spread, it is also diverse in its scope.

Included is the newbuilding of a wide range of vessels for niche markets across the maritime sectors, including tugs and workboats, defence and security, renewable and non-renewable offshore industries, ferries and public transport, dredgers, pontoons and barges and superyachts. At the same time, Damen Trading offers a platform by which clients can buy or sell a used Damen vessel.

With 50 floating and dry docks strategically located in north and west-Europe, the Middle-East and Asia, Damen also undertakes ship repair and conversion projects. Additionally, repair projects can be carried out by a growing team of harbour and voyage engineers.

Damen’s offering extends to the delivery of a comprehensive service package, covering maintenance, spare parts delivery, training and transfer of shipbuilding know-how.

The transfer of knowledge is also a key part of the work undertaken by Damen Civil, including in projects such as the construction and extension of shipyards. In these cases, Damen not only provides the engineering, materials and equipment, but also trains local personnel, furthering skills development in a region far beyond the execution of an individual project.

Damen also provides a wide range of marine components, with a particular focus on nozzles, rudders, anchor chains, winches and steel works.

SUSTAINABILITY PRIORITIES

With newbuilding (including building on site) and ship repair and conversion accounting for the bulk of Damen’s annual turnover at 89%, it forms the main focus of this report. Making up the largest portion of group activity, newbuilding has the largest social, economic and environmental impact.

THE WORLD OF DAMEN

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ANNUAL TURNOVER 2016 63% n Newbuilding 20% n Shiprepair & Conversion 6% n Building on site* 4% n Components 4% n Services 3% n others

* Building on site relates to newbuilding on third party yards via Damen Technical Cooperation.

OUR MARKETS

Shipbuilding is a global industry, with a scope covering a diverse sectoral range. Damen focuses its efforts on a number of niche market segments, as follows: n Harbour & Terminaln Seagoing Transport n Inland Shipping n Public Transportn Defence & Securityn Offshore Oil & Gas n Offshore Windn Dredging & Marine contractingn Fishingn Aquaculture n Yachtingn Sea & River Cruisingn Environmental Safety & Controln Shipbuilding & Maritime Constructionn Shiprepair & Conversion

SHIPYARDS

GLOBAL PRESENCE 2016 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnn 33 # shipyards 2015 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nn 32 2014 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nn 32

shipyards in The Netherlands 2016 nnnnn nnnnn nnnn 14 2015 nnnnn nnnnn nnnn 14 2014 nnnnn nnnnn nnnnn 15

shipyards in rest of the world 2016 nnnnn nnnnn nnnnn nnnn 19 2015 nnnnn nnnnn nnnnn nnn 18 2014 nnnnn nnnnn nnnnn nn17

NEW BUILDING 2016 nnnnn nnnnn nnnnn n 16 # shipyards 2015 nnnnn nnnnn nnnnn n 16 2014 nnnnn nnnnn nnnnn n 16

REPAIR & CONVERSION 2016 nnnnn nnnnn nn 12 # shipyards 2015 nnnnn nnnnn n 11 2014 nnnnn nnnnn n 11

NEWBUILDING & REPAIR 2016 nnnnn 5 # shipyards 2015 nnnnn 5 2014 nnnnn5

COMPANIES

GLOBAL PRESENCE 2016 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nn 52 # companies 2015 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn 50 2014 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnn 48

companies in the Netherlands 2016 nnnnn nnnnn nnnnn nnnnn nnnn 24 2015 nnnnn nnnnn nnnnn nnnnn nnn 23 2014 nnnnn nnnnn nnnnn nnnnn nn 22

companies in rest of the world 2016 nnnnn nnnnn nnnnn nnnnn nnnnn nnn 28 2015 nnnnn nnnnn nnnnn nnnnn nnnnn nn 27 2014 nnnnn nnnnn nnnnn nnnnn nnnnn n26

4 SUSTAINABILITY REPORT 2016

GLOBAL PRESENCE

Operating from headquarters in Gorinchem, the Netherlands, the Damen Shipyards Group operates 33 ship and repair and conversion yards and also works with various partner yards and business cooperation, providing global distribution of the products and servicesof the Damen portfolio.

www.damen.com/companies

DAMEN SHIPYARDS GROUP n Damen newbuild yard n Damen Shiprepair & Conversion yard n Damen Service Hub n Damen Company

SHIPYARDS

GLOBAL PRESENCE 2016 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnn 33 # shipyards 2015 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nn 32 2014 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nn 32

shipyards in The Netherlands 2016 nnnnn nnnnn nnnn 14 2015 nnnnn nnnnn nnnn 14 2014 nnnnn nnnnn nnnnn 15

shipyards in rest of the world 2016 nnnnn nnnnn nnnnn nnnn 19 2015 nnnnn nnnnn nnnnn nnn 18 2014 nnnnn nnnnn nnnnn nn17

NEW BUILDING 2016 nnnnn nnnnn nnnnn n 16 # shipyards 2015 nnnnn nnnnn nnnnn n 16 2014 nnnnn nnnnn nnnnn n 16

REPAIR & CONVERSION 2016 nnnnn nnnnn nn 12 # shipyards 2015 nnnnn nnnnn n 11 2014 nnnnn nnnnn n 11

NEWBUILDING & REPAIR 2016 nnnnn 5 # shipyards 2015 nnnnn 5 2014 nnnnn5

COMPANIES

GLOBAL PRESENCE 2016 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nn 52 # companies 2015 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn 50 2014 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnn 48

companies in the Netherlands 2016 nnnnn nnnnn nnnnn nnnnn nnnn 24 2015 nnnnn nnnnn nnnnn nnnnn nnn 23 2014 nnnnn nnnnn nnnnn nnnnn nn 22

companies in rest of the world 2016 nnnnn nnnnn nnnnn nnnnn nnnnn nnn 28 2015 nnnnn nnnnn nnnnn nnnnn nnnnn nn 27 2014 nnnnn nnnnn nnnnn nnnnn nnnnn n26

5SUSTAINABILITY REPORT 2016

LEGAL STRUCTURE

Damen Shipyards Group is the Dutch holding company of a privately owned group of companies, which form their base in the Netherlands.The companies are active in the field of I the design and construction of ships – in particular

according to standardised and modular design and building principles,

II ship repair and conversion, III ship components, IV provision of a range of associated maritime services and

products.

Damen Shipyards Group and its affiliated companies operate a number of wholly owned and joint venture shipbuilding and/or repair and conversion yards worldwide.

SALES

BUSINESS DEVELOPMENT

MARKET INTELLIGENCE

YARDS / COMPANIES

HUMAN RESOURCES

COMMUNICATIONS

BUSINESS UNITS

PRODUCT GROUPS

YARDS / COMPANIES

ENGINEERING

PURCHASS

ELECTRICAL & AUTOMATION

FINANCE

INSURANCE

IT&IM

COMPLIANCE

CUSTOMER FINANCE

EXECUTIVE BOARD

CHIEF COMMERCIAL OFFICERARNOUT DAMEN (1970) SINCE 2010

CHIEF FINANCIAL OFFICERFRANK EGGINK (1963) SINCE 2013

CHAIRMANKOMMER DAMEN (1944) SINCE 1969

DAMEN SHIPYARDS GROUPONE TIER BOARD

CHIEF EXECUTIVE OFFICERRENÉ BERKVENS (1956) SINCE 2006

SHIPREPAIR & CONVERSION

COMPONENTS

PRODUCT GROUP NAVAL

PRODUCT GROUP YACHTS

YARDS / COMPANIES

LEGAL

HEALTH & SAFETY

BUSINESS DEVELOPMENT (M&A)

R, D & I

CHIEF PRODUCTS OFFICERJAN-WIM DEKKER (1967) SINCE 2014

6 SUSTAINABILITY REPORT 2016

7SUSTAINABILITY REPORT 2016

DAMEN’S BUSINESS APPROACH

The geographically distributed Damen and partner yards work in symbiosis with centralised sales personnel and product groups based at Damen Shipyards Gorinchem, the Netherlands. Damen Shipyards Group has a central sales force that is responsible for the sale of the majority of newbuild vessels. Additionally, the group has a centralised sales force in Schiedam, the Netherlands, that is responsible for securing ship repair and conversion

projects. Lastly, certain yards have responsibility for sales within a specified region. Once a sale is secured, the subsequent work is carried out at the relevant yard location. This synergic methodology ensures a progressive effect on the development of the Damen portfolio and a cohesive approach to commercial activity, at the same time offering a cost-effective approach to production and distribution globally.

DAMEN TECHNICAL COOPERATION

CHIEF COMMERCIAL OFFICER CHIEF FINANCIAL OFFICERCHIEF EXECUTIVE OFFICER CHIEF PRODUCTS OFFICER

ICT

HR

FINANCE

COMMUNICATIONS

MARKETING

HSEQ

R & D

(SHARED) SERVICESCLIENTS

BENELUX

N, W & S EUROPE

E & SE EUROPE

AMERICAS

MIDDLE EAST

AFRICA

ASIA PACIFIC

ENGINEERING

PURCHASING

LOGISTICS

PRODUCTION

NAVAL

SHIPPING

PONTOONS & BARGES

FERRIES

OFFSHORE

HIGH SPEED CRAFT

WORKBOATS

TUGS

DREDGING

FISHING

YACHTS

COMPONENTS

SHIPREPAIR & CONVERSION

PRODUCT GROUPS

MANAGEMENT

SERVICES

OUR VALUE CHAIN

The Value chain of our operations differs per category. For our newbuilding activities it is as follows:

3RD PARTY SUPPLIER

RAW MATERIALS

CUSTOMER

3RD PARTY SUPPLIER

RAW MATERIALS

CUSTOMERCONTRACT

CONTRACT

SUBCONTRACTOR

SUBCONTRACTOR

SUPPLY OF COMPONENTSSUPPLY OF BLUEPRINTSBUILDING SUPPORT ACTIVITIESAFTER SALES ACTIVITIES

SUPPLY OF COMPONENTSSUPPLY OF BLUEPRINTSSOMETIMES BUILDING SUPPORT ACTIVITIES

DAMEN CENTRAL MANAGEMENT

DAMEN SHIPYARD

3RD PARTY SHIPYARD

PRODUCTION AT A DAMEN SHIPYARD

PRODUCTION AT A 3RD PARTY SHIPYARD

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9SUSTAINABILITY REPORT 2016

A sustainable future for all our stakeholders is at the heart of Damen’s organisational mission and our vision for the future. Our values balance long-term economic, environmental and social aspects based on the interests of our stakeholders. These values are part of our culture.

OUR MISSION

Damen is a client-focused, international and family-owned shipbuilder with Dutch roots. We design and build innovative ships of excellent quality, supported by a worldwide network of sales and services, including maintenance and repair and conversion facilities.

OUR VISION

Damen aims to become a global market leader in niche markets of shipbuilding, ship repair and conversion and related services and components, growing step-by-step and developing quality vessels and services. We want to exceed out clients' expectation in terms of quality, innovation and reliability. We aim to attract top customers, employees, suppliers and business partners in order to succeed in realising our vision.

MANAGEMENT APPROACH TO SUSTAINABILITY

Our board of directors holds the primary responsibility for sustainability at Damen. The board determines the main sustainability issues and is responsible for the group’s sustainability strategy and its performance. The foundation of our approach is in the Damen way of working – intrinsic values that are part of our culture.

We realised that, as a result of our robust growth, we needed to embed Damen’s values globally in our entities and in our contact with stakeholders. Therefore, in 2014, we externalised the Damen Code of Conduct, Business Principles and Core Values and published these.

In 2015, a second round of engagements was conducted to take stock of and share learnings about living the Code of Conduct. The code has been rolled out in all the group companies by local management. The set of policy documents was further complemented with a Supplier Code of Conduct (see chapter 6) and a policy document on Competition Law and was completed in 2016. Additional training has been arranged and the on-line training modules were published early 2016.

DAMEN CODE OF CONDUCT

1 Obeying the lawDamen companies and their employees must obey the laws and regulations of the countries in which they operate.

2 Community at largeDamen will conduct its activities in a socially responsible manner, respecting its employees and other stakeholders.

3 Employees – work environment – health and safetyDamen is committed to providing an attractive working environment for its employees.

4 CommunicationDamen will assure open and clear communication between employees and management on all aspects of the working environment.

5 Business integrityDamen will not allow bribery and/or any other forms of unethical business practice in its companies or by its employees.

6 CompetitionDamen supports the principles of free enterprise and fair competition.

7 Conflict of interestEmployees should avoid conflicts of interests between their private dealings and their responsibilities towards Damen.

8 Safeguarding information and assetsDamen recognises and respects the importance of protecting personal data.

APPROACH TO SUSTAINABILITY WITHIN DAMEN

3.1

Our relationship with our stakeholders is the foundation of our success and ability to grow. We have identified the groups of stakeholders that most affect, or are most affected by, our activities:n Customersn Staffn Financial institutions n Suppliersn Governmentsn Other business partnersn Society

WHAT OUR STAKEHOLDERS TELL US

Through our day-to-day activities, we have regular contact with all our main stakeholders. We have consulted them to find out their main expectations regarding sustainability at Damen. The following matrix shows the most relevant themes for Damen and its stakeholders and forms the basis of the content of this report.

The results of the stakeholder interviews have been incorporated into the materiality matrix.

3.2OUR STAKEHOLDERS AND THEIR INFORMATION NEEDS

INTERNAL STAKEHOLDERS VERY RELEVANT RELEVANT

EX

TE

RN

AL

STA

KE

HO

LDE

RS

VE

RY R

ELE

VAN

TR

ELE

VAN

T

nFINANCIAL PERFORMANCE

nINNOVATIONnENERGY

nEMISSIONS

nBALLAST WATER

nMARKET SHARE

nHEALTH AND SAFETY OF CUSTOMERS

TOTAL COST OF OWNERSHIPn

nLABOUR CONDITIONS/RIGHTS

nCORRUPTION/FRAUD

nTRAINING AND EDUCATION

nHEALTH AND SAFETY OF EMPLOYEES

nEMPLOYMENT

nLOCAL COMMUNITY

nSUSTAINABLE SUPPLY CHAIN

nRIGHTS OF INDIGENOUS PEOPLE

nTRANSPORT

nLEGAL COMPLIANCE

nGOOD GOVERNANCE

nEMPLOYEE RIGHTS

nINDIRECT ECONOMIC IMPACT

nKNOWLEDGE TRANSFER

nWASTE

nRAW MATERIAL

n(TRUTHFUL) MARKETING & COMMUNICATION

nEFFLUENTS

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MATERIALITY MATRIX DAMEN SHIPYARDS GROUP n main focus (included in report) n included in the report n not included in the report

n economic n environment n employees n society n human rights n product responsibility n other

11SUSTAINABILITY REPORT 2016

BUILDING

Indirect economic impactKnowledge transferEmploymentHealth and Safety of employeesTraining and educationLabour conditions/rightsSustainable supply chainCorruption/fraudLocal communityWaste

SUSTAINABILITY PRIORITIES

The impact of Damen-built vessels during their complete lifecycle is important to our stakeholders. Currently, the focus of our sustainability reporting is on the first three stages as this is where our main impact lies and where we can most influence the sustainability context in the total cost of ownership.

DESIGN

InnovationMarket shareFinancial performance

USE

EnergyEmissionsTotal cost of ownershipBallast waterHealth and Safety of customers

DEMOLITION

No material issues identified

ASD Tug 2810 Hybrid E3

ASD Tug 2810

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

TOTAL COST OF OWNERSHIP OF A HARBOUR TUG 43% n Crewing & Management 33% n Investment & Depreciation 15% n Energy costs 7% n Regular maintenance 3% n Cyclical maintenance

ASD Tug 2810 Hybrid E3

42% n Crewing & Management 36% n Investment & Depreciation 12% n Energy costs 5% n Regular maintenance 3% n Cyclical maintenance

ASD Tug 2810

42% n Crewing & Management 29% n Investment & Depreciation 18% n Energy costs 7% n Regular maintenance 4% n Cyclical maintenance

TOTAL COST OF OWNERSHIP OF AN ASD TUG 2810

Reducing energy consumption significantly lowers the total cost of ownership. Moreover, it is the best way to reduce a vessel’s environmental impact during its lifecycle, especially during a ship’s usage phase. This factor is the reason we focus on innovations in energy efficiency. This is gaining particular importance with stricter rules and regulations on atmospheric emissions, such as IMO Tier III that will ultimately become effective in 2021.

In the following chapters we explain Damen’s approach to the most relevant issues identified by our stakeholders. We show how we add value and mitigate negative effects.

12 SUSTAINABILITY REPORT 2016

OFFSHORE RENEWABLES “We have worked very closely with Damen to custom design an access and accommodation solution that exactly meets the specific needs of wind farm operators. ‘Bibby WaveMaster 1’ will operate with the greenest possible credentials. It is designed to give operators more access, more safety and more comfort when operating and servicing their wind farms.” STEPHEN BLAIKIE, CHIEF EXECUTIVE OFFICER BIBBY MARINE SERVICES

13SUSTAINABILITY REPORT 2016

Overall, the maritime industry globally has suffered sustained weakness over the past years and no immediate structural improvements are in sight. The impact of reduced offshore oil and gas activity is still being felt. No recovery of shipping markets is in sight and the construction of offshore wind farms has suffered some delays. The growth in the cruise, aquaculture and ferry sectors was not sufficient to compensate for the deterioration in other market segments. Turmoil in the Middle East continued. Iran is not yet open to business with Western countries. In Asia shipbuilding markets turned sour with accumulated losses of billions of dollars for Korean and Chinese yards. Nevertheless our main competitors remain European shipyards (including Turkey). These adverse market conditions have finally caught up with the Damen Shipyards Group.

In 2016, our production value came to € 1.7 billion, a decrease of 20% compared to 2015. The production value comprised € 1.2 billion newbuilding and € 0.5 billion repairs, components and services.

Our 2016 order intake was € 1.75 billion, an increase on the € 1.6 billion in 2015. At the end of 2016 the contract value of the order portfolio came to € 2.75 billion. Relative to the competition and in absolute terms, the order portfolio still represents a satisfactory activity level for the coming years, but profitability is under pressure and production is selectively reduced to align with commercial prospects (particularly high speed craft and offshore). That said, at year-end a number

of promising high value projects (naval, yachts, workboats, offshore oil & gas and renewables) were in various stages of negotiations and are anticipated to become effective in the first half of 2017.

The net result came to € 29 million in 2016, a decrease compared to the 73 million of 2015. The decrease in result and production value compared to 2015 is the outcome, in particular, of decreased order intake in both newbuilding and ship repair and conversion. The deteriorated result includes additional provisions for the strategic stock and for a refit project at Damen Shiprepair & Conversion.

The group has a healthy balance sheet with a solvency of 50%. Annual investments in 2016 came to € 57 million (2015: € 64 million).

SUSTAINABILITY PRIORITIES

The Group’s policy remains unchanged in essence; we continue to pursue controlled growth through a robust portfolio of product market combinations.As part of the Policy Plan 2016, a wide-ranging improvement programme is ongoing. The programme consists of initiatives focusing on governance, risk management, efficiency, streamlining of business processes, reduction of cycle times, financial control, working capital, compliance, and standardised IT environment, systems and applications.

4FINANCIAL PERFORMANCE

FINANCIAL/MARKET/CLIENTS

PRODUCTION VALUE 2016 nnnnn nnnnn nnnnn nnnnn nnnn 1.7 in € billion 2015 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnn 2.1 2014 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn 2.0

NET RESULT 2016 nnnnn nnnnn 29 in € million 2015 nnnnn nnnnn nnnnn nnnnn nnnnn 73 2014 nnnnn nnnnn nnnnn nnnnn 58

SOLVENCY RATIO 2016 nnnnn nnnnn nnnnn nnnnn nnnnn 50 in % 2015 nnnnn nnnnn nnnnn nnnnn nnnnn n 51 2014 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn 55

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ASD Tug 2810

42% n Crewing & Management 29% n Investment & Depreciation 18% n Energy costs 7% n Regular maintenance 4% n Cyclical maintenance

MARKET POSITION

Shipbuilding is a competitive global market. A robust portfolio of product market combinations sets Damen apart and helps cushion the impact of adverse market conditions, as the combinations are not all correlated. In 2016, we have made further progress towards our vision of becoming a global market leader in niche markets of shipbuilding, as indicated in the following table.

OUTLOOK

2017 and beyond does not provide a much changed economic outlook. The coming period will be one of adjustments. The group must re-balance its organisational and production capacity with the order intake and market requirements for both standard stock vessels as well as more customised vessels. Importantly, the restructuring of the Shiprepair & Conversion Division will be completed in 2017 in response to market expectations for the short and medium term.

All group companies must examine their cost structure and take action that this is properly balanced against the (financial) performance targets of the group. While it strengthens its core, Damen prepares for the future and sharpens its vision on how markets and customer needs will evolve and the role we will play in meeting these needs.

The order portfolio at the beginning of 2017 and the sales forecasts for the from form a basis for capacity utilisation at the production yards and for the engineering departments in the year ahead. In order to increase competitiveness, we will focus continuously on improving the (cost) efficiency of the production process at Damen yards while maintaining high quality and exploring the opportunities for further reduced delivery times.

SOLID BASIS FOR OUR FUTURE

To further support our future development, we are:n Improving our local presence close to our customers to

ensure faster response times for service, repairs, delivery of parts and, in conjunction with local shipyards, be able to facilitate berthing and provide a direct point of contact.

n Improving R&D and innovation activities, collaboration with research institutions and product development.

n Continuously improving our risk management system.

OUR RISK FRAMEWORK

Doing business necessarily involves taking risks. It is essential that the relevant risks be identified, so that Damen Shipyards Group can take appropriate and timely action to manage them.

Important measures have been taken to enable improved risk management. These include the Executive Board regulations and instructions for management of the group companies, setting out the authorities and the group risk framwork. The Board is informed of relevant trends by means of periodic reports. Major projects, investments, and acquisitions require the approval of the Board. Where possible, insurance has been taken out for the relevant risks.

The Executive Board acknowledge its responsibility and will identify and do its utmost to manage all risks and mitigate these to an acceptable level via a continuously improved risk management system. That said, not all risks associated with doing business can be completely eliminated.

Market risksDamen Shipyards Group has reduced its exposure to the economic cycle by pursuing a portfolio approach to its activities. In addition to the spread of activities in the construction of new vessels, repair and conversion, component production and services, there is also a spread across private and public/semi-public customers, geographical distribution, and different product market combinations. In addition, the potential volatility in the total order intake is partly absorbed by flexibility in production capacity by making use, to a significant extent, of temporary workers and subcontracting. Damen Shipyards Group devotes a great deal of attention to relationships with its customers and to customer satisfaction.

The oil and gas prices continue to exert a negative impact on the level of offshore oil and gas activities and, especially, investment decisions in this sector. The oil and gas companies and their suppliers and service providers continue to postpone or cancel investments. Another uncertainty involves instability in various regions around the world. This may also have a relevant impact on the volume and timing of sales in these areas.

MARKET SEGMENT

n Harbour & Terminaln Seagoing Transport n Inland Shippingn Public Transportn Defence & Securityn Offshore Oil & Gasn Offshore Windn Dredging & Marine contractingn Fishingn Aquaculture n Yachtingn Sea & River Cruisingn Environmental Safety & Controln Shipbuilding & Maritime Constructionn Shiprepair & Conversion

14 SUSTAINABILITY REPORT 2016

15SUSTAINABILITY REPORT 2016

Damen’s customers in the oil and gas related sectors are suffering the consequences of adverse market conditions, with associated liquidity and solvency consequences. With more high speed craft and platform supply vessels under construction, Damen will keep a watchful eye on these developments and maintain close contact with customers in order to stave off overcapacity of associated vessels in the market place. This would complicate our commercial efforts to continue to sell these particular vessels.

Operational risksThe main operational risk concerns the execution of projects. Measures have been taken for each phase of a project to mitigate or manage these risks. A risk analysis is carried out during the quotation phase, and major quotations require approval by the Board. Large components and systems procured from suppliers are secured with quotes and relevant currency risks are hedged. In the contracting phase, standard contracts are used as far as possible. The legal department is involved if there are any deviations and to record any supplementary arrangements that are made. During implementation of the project, attention focuses on procedures and effective project management and project control. Relevant suppliers and subcontractors are brought in at an early stage of the project. The measures taken mitigate the risks to an accepted level.

Financial risksThe financing risk is the risk that the continuity of the business is no longer guaranteed due to the lack of sufficient funding. Damen Shipyards Group has a Senior Facility Agreement (SFA), amounting to € 1.375 billion, which has been made available by a consortium of banks consisting of ABN AMRO Bank, BNP Paribas, Deutsche Bank, Rabobank, Crédit Agricole and ING Bank. In addition, the group has a number of financing facilities for diversification of group’s funding. It is considered that Damen Shipyards Group has solid funding for its activities.

The liquidity risk concerns the availability of financial resources and depends, in part, on fluctuations in working capital. Periodical liquidity forecasts, for both the short and long term, ensure that any problems are identified in a timely manner, to allow necessary mitigating actions to be taken. Attention is also paid to the management of working capital at all levels of the organisation. Credit risks are covered as far as possible by credit insurance, advanced payments and by settlement of outstanding claims on delivery of the vessel or completion of the assignment.

The Damen Shipyards Group does not deal in financial derivates (other than foreign currency hedging) and has procedures and policies in place to limite exposure. Currency risks are hedged at the time when obligations are entered into.

Compliance risksThe Damen Shipyards Group has a global footprint, selling and servicing vessels in many countries, and, in so doing, has to take a diverse range of changing legislation and regulations into account. Damen uses local expertise from intermediaries and/or local representatives in many countries to secure and execute projects. Damen’s business model contributes to the great success of the company and also poses an inherent heightened risk for compliance with relevant (local) legislation and regulations.

Damen has a robust and effective compliance programme in place with appropriate controls to prevent and minimise these risks. Damen’s Directors, staff and those that represent the group are required to comply with Damen’s Code of Conduct and Business Principles. This code clearly articulates the rules to follow and (behavioral) standards that should be met. It also includes detailed guidelines for, inter alia, health, safety, security and environment, import and export compliance, anti-bribery and corruption, financial compliance, competition law compliance, supplier conduct, know-your-customer, conflicts of interest, data protection, IT security. It includes a specific whistleblower policy. A new Personal & Business Integrity Policy was added to the compliance programme at the beginning of 2017, including detailed guidelines on gifts, hospitality, conflicts of interest, sponsorships, donations and political activities.

All relevant staff are subject to compulsory recurring classroom and on-line training of the aforementioned topics. Our suppliers are required to commit to our Supplier Code of Conduct. Intermediaries and local representatives are contractually bound to comply with this code and their activities are subject to clearly defined procedures, including thorough screening, contractual compliance obligations, and controls around commissions and fees.

Damen further strengthened its compliance and group governance in 2016 by appointing a dedicated Group Compliance Officer with supporting staff overseeing and further developing the compliance programme, and by installing a Group Risk & Audit Committee.

Notwithstanding all this risk mitigation, a complete elimination of compliance risk cannot be guaranteed.

An audit by the World Bank in 2014 revealed that tender documentation submitted for a Fisheries Patrol Boat under the West Africa Regional Fisheries Program in Sierra Leone in early 2013 was incomplete. This constitutes a fraudulent practice per the standards of the World Bank and resulted in debarment of one of Damen Shipyards Group’s subsidiaries from World Bank related projects, effective 2016. The World

Bank reduced the more standard debarment period of 36 months to 18 months as Damen fully cooperated with the World Bank’s audit and in recognition of Damen's compliance programme. Damen's compliance programme benchmarks well with the standards articulated in the World Bank Integrity Guidelines.

Dutch authorities visited the Damen Shipyards Gorinchem on Friday 13th of January 2017 and are performing an investigation. Both the exact focus of the investigation and the duration thereof are unclear. No formal charges have been filed to date. At present, no conclusions can be drawn in respect to the investigation.

Health and SafetyWe are actively managing Health and Safety standards in all countries in which we operate. The local legislation and regulations are observed, and the local management is responsible for compliance. With the aim of sharing knowledge and experience, a steering committee on Health and Safety, chaired by the CEO, has been set up, comprising representatives of a number of group companies. Ensuring a safe working environment for our employees and subcontractors enjoys high priority. Measures have been taken at the production sites, both in the Netherlands and abroad, to minimise the risk of incidents. In the event of such an incident, it must be registered centrally. Incidents will be evaluated and discussed periodically. From this process, Damen can learn and will be able to implement further procedures to avoid future incidents. In addition, Damen Shipyards Group has a proactive policy of reporting near misses and improvements by all employees.

16 SUSTAINABILITY REPORT 2016

DAMEN INNOVATION“The secret to Damen’s success is that, while standing on a strong foundation, the company never ceases to look forwards. Innovation has been a consistent theme throughout the long history of Damen – including the standardised shipbuilding concept for which we are so well known. Today, innovating for the future is a top priority and we continue, with our unique, in-house approach to R&D and initiatives that draw on the entire Damen team such as Project Morpheus. We also work together with our suppliers, leading research institutes and other partners to form innovation eco-systems to pioneer the solutions for tomorrow’s maritime world. “ SOLCO REIJNDERS

17SUSTAINABILITY REPORT 2016

INVESTING IN INNOVATION

DAMEN 2025

New technologies shall influence our business, but as of yet, it is unclear how and when. In fact, these developments may provide new opportunities. On different levels within the Group there is a demand for clarity on where do we go from here and how to deal with all these new technologies and developments.

The Group embarked on a strategic horizon scan dubbed ‘DAMEN 2025‘. This company wide programme aims to enhance awareness of these developments and how they may play on and give the Group a number of practical handles on where Damen stands today and what the various pathways are to move forward. These options are defined on top of the Group’s existing business. Through a process of analyses, interviews and workshops with an extensive group of young talent, more experienced Damen managers and external subject matter experts the team looked at today’s key markets and the impact of new technology. It is clear that some of Damen’s markets are under pressure, and that new and developing technologies will impact Damen business.

As the group intends to grow in a sustainable manner, Damen must do two things: improve its existing core business and professionalise with urgency and great determination, while cultivating its entrepreneurial flair. Simultaneously, Damen will start experimenting with new ways of innovation and new technologies and exploring new strategic options. Through the development process described above new themes have been identified that will affect the Damen value chain. In response to these themes a number of strategic options were articulated, for example the use of data analytics to improve and increase Damen’s services and repair business, or the development of unmanned vessels. Could Damen strengthen its role as process integrator or how can artificial or augmented intelligence make the building process more efficient?

Over the coming period a number of these identified and prioritised options will be further investigated and developed. An innovation challenge was introduced to stimulate improvements and new ideas. At the same time this effort is linked to the research and development agenda of the group in order to assure proper coordination and strengthening of ‘DAMEN 2025’ options and the Damen research and development agenda so that the most relevant subjects are chosen in the most efficient way.

R&D and innovation are important ways for Damen Shipyards Group to distinguish itself from competitors and to safeguard the relevance of its products and services. The research departments in Gorinchem, Vlissingen, Nijkerk, Singapore and Mykolaiv create new designs and product improvements for existing models, but policy development in this area is the responsibility of a central steering committee.

The order intake over the years is also leading to an increase in project support by Research. To ensure that there are no delays in the research projects of the different Product Groups or in Damen’s Group Research programme, this long-term research is carried out by a separate part of the research department in Gorinchem.

OUR SUSTAINABILITY PRIORITIES

Our stakeholders, in particular our customers, drive our R&D programme. Sustainability is high on our customers’ agenda and a societal licence to operate is defined by financial incentives and increasingly stringent rules and regulations. For that reason, we focus on the use phase of the ship, where innovation has the most potential to reduce environmental and safety risks while also delivering economic benefits.

We are continuously improving and investigating new technologies. We believe that standardisation is one of the answers to keeping investment costs low, which is why we invest considerable time and money to get the standard right.

THE DAMEN STANDARD

With Damen’s standardised shipbuilding concept, we offer our customers well-proven, innovative vessels for competitive prices. The standard hulls, which all have proven designs, can be modified to meet customer wishes and equipped with various options to suit specific jobs and regulations.

Advantages of The Damen Standard modular construction:n Fast response to customer requestsn Competitive pricingn Short delivery times by keeping up to 150 vessels in stockn Reliability through proven and tested technologyn Continuous product developmentn Interchangeability of vessels, crew, spares, equipmentn Low maintenance costsn Low total cost of ownershipn Guaranteed performancen Benchmark for the industryn Relatively higher resale value

5

Sharing knowledge stimulates the development of the best possible products. This is why Damen works nationally and internationally with customers such as the US Coastguard, independent research organisations and universities, including Delft University of Technology, TNO, MARIN, suppliers and classification societies. Furthermore, Damen plays an active role in the sector team for water and maritime technology and in its executive organisation ‘TKI Maritiem’, a consortium of government, knowledge institutes and the private sector working on innovation in joint industry projects (JIPs) and fundamental research to support the industry’s innovation agenda. Damen is also a member of the Innovation Council of the Netherlands Maritime Network.

A joint research programme is being undertaken with Delft University of Technology. Projects focus on basic knowledge and tool development, but also on the development of new concepts.

European research is coordinated by the industry’s Waterborne Technology Platform and the Vessels for the Future Research organisation. Ongoing and recently commenced projects within the EU’s Seventh Framework Programme for research and within ‘Horizon 2020’ focus in particular on sustainability and underwater mining. The European project Joint Operation for Ultra Low Emission Ships (JOULES) has recently been completed and resulted in a design and design evaluation methodology, a database of sustainable technology models and a number of sustainable design application cases for different ship types and time to market predictions. Within this 39 partner consortium, Damen was responsible for the coordination of the application design cases and three specific design cases.

Within the Horizon 2020 Innovation Action, LEANSHIPS aimed at demonstrating sustainable technology in an operational environment, Damen acts as consortium leader and is responsible for the demonstration of a CNG fuelled tug.

OUR CUSTOMERS’ CHANGING REQUIREMENTS

Our customers’ feedback underpins our innovation programmes. We work together not only to improve existing products, but also to continuously develop innovative solutions to meet new and changing requirements. The main innovation drivers from our customers’ perspective are operational effectiveness, safety and energy reduction. Serving our customers’ needs also means offering (green) solutions to respond to developments in rules and regulations.

STIMULATING LOCAL SHIPBUILDING

We have a long history of collaborating and sharing knowledge with shipyards around the world. We supply vessels ex-yard from one of our own shipyards or if customers prefer, we can build at a yard of their choice via Damen Technical Cooperation (DTC). This construction offers both economic and social benefits for Damen and its customers. For example, customers can use Damen’s knowledge and experience with proven designs (not just design concepts) together with Damen quality guarantees. Also, local shipbuilding and engineering knowledge is stimulated through Damen’s assistance during projects and in training of local personnel and management. DTC is another example of how economic, commercial and social benefits go hand in hand.

INTEGRATING SUPPLIER INNOVATION

When our suppliers improve their products with innovative solutions, this can impact ship designs. Therefore, we work together with our suppliers in developing new and innovative products to ensure we offer a fully integrated, compatible solution.

18 SUSTAINABILITY REPORT 2016

INNOVATION THROUGH COOPERATION

5.1

BALLAST WATER TREATMENT – INVASAVE“Our location on the Wadden Sea means that we have a responsibility to push forward the progress of sustainable shipping. We are fully prepared for the ratification of the IMO Ballast Water Management Convention. This project wouldn’t have been possible without the effort of some frontrunners like Royal Wagenborg, Van Gansewinkel, Imares, MEA-nl and Damen.”BART VAN DER KOLK, GRONINGEN SEAPORTS

The company is identifying and developing new ways to address growing ocean challenges, such as pioneering the world’s first mobile ballast water treatment vessel (InvaSave) to operate in ports and support ship deballasting operations. As the new IMO regulations for waterballast treatment are planned to go into force in September 2017 Damen is confident in offering an effective system for ship owners and operators to comply with these regulations.

In 2016, the first fully LNG-powered Damen EcoLiner inland shipping tanker commenced service. The EcoLiner is developed to deliver fuel savings for inland shipping operators, while at the same time cutting emissions. The design combines conventional, proven engineering with sustainable innovations, including the world’s first installations of the ACES Air-Lubricated Hull, a gas-electrical shaft propulsion system, and one of the first Van der Velden Flex Tunnels installations.

Following the deployment of Damen’s first Hybrid ASD Tug, four more are delivered or under construction. Three of these have been ordered by the Netherlands Ministry of Defence. While the emission reduction is up to 35% in comparison with a conventional tug, and the total cost of ownership 3% lower, market uptake of these new technologies would benefit from stringent rules and regulations or additional incentives for the adoption of such innovations.

The development of sensor technology and connectivity enables monitoring of Damen vessels and their systems and enhance product lifecycle management. This infrastructure is developed and available to provide real time information to the owner. The implications for the sustainability performance of Damen built vessels include fuel savings, maintenance optimisation, fleet management and future designs.

Other examples include the development of the ‘Nh 1816’ Damen Search and Rescue vessel and the Floating Tidal Platform project in partnership with Bluewater. The platform generates clean electricity from the tides in the Wadden Sea of the Netherlands. It is of an innovative modular design.

19SUSTAINABILITY REPORT 2016

5.2INNOVATION IN ACTION

RESPONSIBLE PRODUCTION

conversion, therefore, is a strong indicator of improvement within the other areas of our business operation.

In terms of environmental performance, we are currently focusing our efforts on the aspect of our operations which has the potential for highest impact – newbuilding, which represents 69% of group turnover at the time of writing. We are in the process of extending this focus to other parts of the group, including repair and conversion.

THE MAIN AREAS OF IMPACT DURING PRODUCTION

Shipbuilding and repair and conversion are complex processes, containing risks to health, safety and the environment. From steel cutting to delivery, Damen has identified and addressed the most relevant risks: energy consumption, working at height, hot work, working in confined spaces, releases to air or water, oil spillage, lifting, waste management, sea trials, etc.

MONITORING OUR PROCESSES

Over the recent years most of the operating companies within the group have successfully acquired certification towards ISO 9001, 14001 and OHSAS 18001 for their management systems.

We are moving forward with implementing the principles of the ISO 26000 that will provide guidance on how to operate in an ethical and transparent way that contributes to the health and welfare of society.

The annual audits that we perform at our main production sites ensure we remain consistent in our standards. The close communication we have implemented between the different companies within our group is a key factor in ensuring that we continue to improve our performance; wherever we are operating and in all that we do.

We invest a lot of effort into the management of health, safety and the environment as well as in improving efficiency at our shipyards in line with recognised safety and quality standards. Such practice ensures that we minimise the environmental impact of our products and ensure the safety of those working on them, not only during the production phase, but throughout the entire lifecycle.

In 2015, we developed health, safety, security, environment and quality policies, which were released at the beginning of 2016. All Damen companies and personnel working for or on behalf of Damen Shipyards Group are obliged to meet the requirements of these policies. We continue to implement further developments to these policies and to measure the positive effects they are having.

The maritime industries, and the industries which serve them, continue to show increasing interest in HSEQ performance and measurement; a trend which aligns with our own values. Because of this pattern we continue to increase our internal awareness of HSEQ-related matters and to develop leadership in this direction.

SUSTAINABILITY PRIORITIES

The most significant impact we can have on Damen’s health and safety performance is by developing the processes within the aspects of group activity which generate 89% of our turnover; newbuilding and repair and conversion. Our health and safety statistics contain a record of performance within these two operational areas.

The remaining 10%, consisting of, for example, Damen Marine Components, does not currently feature within the statistics. However, the performance of such operations is positively influenced by group-level policy making (One Damen) which is rolled out across the entire Damen Shipyards Group. An improved performance within newbuilding and repair and

6

MAERSK SUPPLY SERVICE“Maersk Connector is the result of a truly successful tri-party cooperation. Throughout the process Damen, DeepOcean and Maersk Supply Service have been equally committed to close dialogue and collaboration to maximize the project outcome for all parties. The vessel was delivered on time and on budget and it is very rewarding for us as a vessel owner to have ‘Maersk Connector’ as part of our 40-plus strong fleet.”CARSTEN GRAM HAAGENSEN, CHIEF COMMERCIAL OFFICER OF MAERSK SUPPLY SERVICE

20 SUSTAINABILITY REPORT 2016

21SUSTAINABILITY REPORT 2016

In line with our core values, Damen is committed to taking care of its personnel, clients and other stakeholders. Year after year, we set the goal of improving standards for health and safety (H&S) within the group.

HEALTH AND SAFETY INITIATIVES IN 2016

In 2016, we have taken several notable initiatives to further enhance the H&S structure and culture within the group companies:n Development and launch of the Governance of Risk and

Incident Prevention (GRIP) programme making the first global H&S standards available

n First global HSE Group days for managing directors and persons responsible for HSE

n Development of a digitalised tool for reporting safety observations on our operating sites in order to simplify reporting, improving information sharing and learning

n Continuation of occupational health & safety (and environment) audits, and JH143 Shipyard Risk Assessments on our newbuild yards.

OUR PERFORMANCE IN HEALTH AND SAFETY

Through the group we see a stabilising trend in the number of incidents, however, we believe there is always room for improvement. Activities that present a high risk of incidents include:n Working at heightn Manual handlingn Working with hand tools

Our primary focus for controlling the risks involved in these activities resulted in the development and publication of several operating H&S standards, guidelines and principles, safety alerts and other communication materials. The programme delivers additional practical documentation in eight different languages. Yards continue to maintain their own operating standards, however, the newly provided standards provide the basis for matters of standardisation and evaluation.

Standards are developed in alignment with legal requirements and industrial best practice and will appeal to common sense and practicality. In addition, the reporting model on incidents was amended and aligned and incident definitions were implemented to make benchmarking possible with our clients. At the end of 2016 we set up a safety observation tool. The tool makes it simple to collect, report, manage and analyse findings and is also available for mobile devices. We are able to make the next step, find the trends, connect them to the root causes of incidents and align them with implementation of standards through the GRIP programme.Further implementation of these standards at the building locations is supported by experts and monitored for effectiveness.

In respect to 2015 the number of reported issues HSE observations significantly. This reflects the further improved awareness of H&S within the groupand availability of a simplified reporting tooling. The increased awareness results in reducing our lost time incident frequency.

HEALTH AND SAFETY AT OUR YARDS

6.1

PERFORMANCE IN HEALTH & SAFETY – 2016 0 n Fatalities 108 n Lost Time Accidents (LTA) 51 n Lost Time Incidents (LTI) 1,400 n First Aid Cases (FAC) 12,846 n HSE observations

12,846

1,400

51

108

0

SAFETY

LOST TIME INCIDENT FREQUENCY 2016 nnnnn nnnnn nnnnn 9.56 2015 nnnnn nnnnn nnnnn nn 11.36 2014 nnnnn nnnnn nnnnn 9.87

LIFECYCLE PERSPECTIVE

Throughout the group, more and more companies are preparing for the transition to the new ISO 14001 : 2015 standard. New in the standard is the orientation to the lifecycle of the product, meaning “Consecutive and interlinked stages of a product (or service) system, from raw material acquisition or generation from natural resources to final disposal. lifecycle stages include acquisition of raw materials, design, production, transportation/delivery, use, end-of-life treatment and final disposal.” The new standards requires that the above orientation is integrated in all relevant business processes and controlled in the Management System.

Why consider lifecycle perspective? Following our policy, Damen Shipyards Group is committed to ensuring continuous improvement of our products and production methods with the objective of reducing our environmental impact. Being aware that the products we make represent the largest impact on our environment, Damen is duly focusing on optimising its designs, and constantly working on environmentally relevant product innovations. We focus on significant environmental impacts which can occur during the transport, delivery, use, end-of-life treatment or final disposal of our products or services.

AMBITIONS AND OBJECTIVES

We measure the Sustainability Development Goals set by the UN and the Paris Agreement at the 2015 United Nations Climate Change Conference (COP 21), on a ongoing basis. We continued in 2016 with our Carbon Footprint and Energy Management programme, consisting of monitoring and reducing of total energy consumption (electricity and gas), and reducing the carbon footprint of our production facilities.

Emissions and Waste With measuring our carbon footprint, we now have more insight into the environmental impact of our production processes. We continue the reduction of our greenhouse gas emissions (CO²) every year by 3% by monitoring our emissions and implementing reduction measurements. We aim to recycle 60% of all waste produced during our building process by 2020.

ConsumptionWe manage our electricity, gas and water consumption by continuous monitoring and implementing reduction measurements in the production processes. We have ambitions to reduce our electricity and gas consumption by 3% based on the COP 21 and resulting, amongst other things, in compliance with the European Energy Efficiency Directive (EED).

The trend in the displayed table shows an increase in CO². This is caused by an increase of yards reporting on environmental metrics over the course of 2016. As we are increasing the reporting of environmental metrics yard by yard, there is no good comparison possible with previous years. Therefore we have introduced another table, showing only the CO² emissions of the yards reported last year.

The carbon footprint of our yards is highly dependent on the level of activity of production and the number of deliveries in a year. The deliveries have their impact due to commissioning and seatrials of the vessels. During 2016, the group delivered a record number of vessels. For example, Damen Shipyards Galati delivered a number of larger vessels to customers from Canada, resulting in a higher carbon footprint. The impact of our production yards on the carbon footprint are reduced via purchasing of renewable energy. For example, since 2016, the electricity used at Damen Shipyards Gorinchem has been 100% renewable energy. This had a significant positive effect on the footprint, but will not stop us challenging ourselves to look for more opportunities in the future.

THE WAY FORWARD

In 2017 we continue with the expansion of performance monitoring and improving our monitoring tooling. In addition carbon energy and waste management systems resulting from our environmental management and management systems principles to continuous improvements. We challenge our yards to learn from each other with industrial best practices and look for disruptive solutions. Over the past few years, we have begun to seriously investigate our future energy demands, with pilot projects producing renewable energy in our own yards.

6.2ENERGY, EMISSIONS AND WASTE

22 SUSTAINABILITY REPORT 2016

CO² EMISSIONS OWN OPERATIONS

SHIPBUILDING 2016 nnnnn nnnnn nnnnn nnnnn nnnnn 49,824 in tonnes CO² 2015 nnnnn nnnnn nnnnn nnn 35,634 2014 nnnnn nnnnn nnnnn n 30,390

YARDS REPORTED LAST YEAR 2016 nnnnn nnnnn nnnnn nnnnn nnn 45,406 in tonnes CO² 2015 nnnnn nnnnn nnnnn nnn 35,634

23SUSTAINABILITY REPORT 2016

Our recent growth and international expansion provides us with opportunities to improve our supply chain. Together with our suppliers, we minimise costs and environmental impact, for example by sourcing locally as much as possible. As well as the trading hub in China, we also want to create a similar hub in Vietnam.

This will improve our local footprint. Sourcing locally creates mutual gains for Damen, our suppliers and local employees: we minimise transport costs and risks, we improve delivery times and we lower the environmental impact of our operations due to less fuel consumption for transport. By transferring operational responsibilities to our yards, Damen directly supports the improvement of local skills and competences.

For inland transports in China we are experimenting with delivery by train. This reduces the delivery time to 21 days and has a lower environmental impact. We are still evaluating this transportation method.

We are commencing a procurement programme to re-evaluate our sourcing strategy for the most important products we purchase, taking sustainability and local sourcing more explicitly into consideration.

The teams driving this are multi-functional and aim to ensure that all relevant elements are taken into account. The goal is to build sustainable supply chains and reduce the total cost footprint from start to finish. With less complexity, we achieve an improved design. We are furthermore optimising the use of our central warehouse in Gorinchem, the Netherlands, by giving it a pivotal role in consolidation of transports, thus reducing the overall number of shipment movements.

SUPPLIER CODE OF CONDUCT

In order to have a positive impact on our supply chain we have actively rolled out our Supplier Code of Conduct. In this we incorporated our business principles and asked our suppliers to comply with these. In the first phase we have started with all suppliers with a spend of over 500,000 euro. We will expand on this during 2017 to include smaller suppliers as well as suppliers being used locally by our yards.

Sustainability criteria in the code includes labour conditions (ILO Guidelines on Occupational Safety and Health; OHSAS 18001), environmental conditions (ISO 14001 and the Kyoto Environmental Standard (KES), Waste Management), ethics and integrity. We believe the Supplier Code of Conduct can support our dialogue with suppliers about shared responsibilities.

IMPROVING PROCUREMENT AND LOCAL SOURCING

6.3

In late 2014, the Excellerate programme was initiated to further improve Damen efficiency and competitiveness. In 1969, Kommer Damen revolutionised shipbuilding by producing standard vessels on stock. With this process the costs of shipbuilding were lowered and consistent, proven quality was achieved. The ‘Damen standard’ also proved to be valuable in resales. With Excellerate, the Damen Commercial New Build Division (CNBD) is taking the next step in industrialising and digitising shipbuilding.

Excellerate see the Damen Standard redefined using ‘smart customisation’ principles. Starting with market requirements, standard ships are developed from a standard core that meets basic market needs. In the next stage, options are pre-defined. Using these options clients can customise a ship according to their specific needs. Damen has a sales configurator in which (potential) customers can configure their conceptual new ships. By further integrating its shipyards in the process, Damen ensures its individual yards gain control of the operational processes. This not only applies to the shipyards producing standard vessels, but also to those involved in producing vessels engineered-to-order. The role of the CNBD headquarters in Gorinchem is transforming to one of governance, in which emphasis is placed on managing the ship types and the portfolio of shipyards and orchestrating the global supply chain.

The increased role of the shipyards results in an increase of skilled labour at the yards. Setting up a global supply chain will increase responsiveness, but will also benefit local economies. Additionally, Damen’s carbon footprint will be lowered due to a reduction of transport and travel of staff.

Excellerate has been rolled out already at Damen Shipyards Singapore and at Damen Song Cam Shipyard. Currently the focus is on Damen Shipyards Changde, following which attention will turn to Damen Shipyards Galati. The programme Excellerate will be completed early next year. This will continue to function as the foundation from which continuous improvement can be meaningfully pursued. Through the application of lean principles, operations efficiency will rise. The next steps towards further digitisation are already being taken with the PLM programme, during which state-of-the-art CAD/PDM tooling will be made available.

6.4EXCELLERATE

24 SUSTAINABILITY REPORT 2016

Damen Song Cam Shipyard Damen Shipyards Singapore

25SUSTAINABILITY REPORT 2016

STAKEHOLDER RELATIONSHIPS

Improving the sustainability context of our activities has our continuous attention and is only possible due to the strong and long-lasting relationships with all our main stakeholders.

For this report, we focus on the two stakeholder groups that most influence our organisation – our customers and our employees

7KEEPING OUR CUSTOMERS CLOSE

At Damen, the customer comes first. We pay close attention to the needs of our customers and strive to continuously improve our products and services in our wish to exceed those needs. We can only do this by staying close to them during the entire process, from contract signing to after-sales services.

CUSTOMER SURVEY

We continuously monitor our customer satisfaction at three key moments: contract, delivery and warranty. Periodically we also evaluate the relationship with our clients.

LISTENING TO OUR CUSTOMERS

In 2016, the results of the customer survey showed that overall we have maintained our level of customer satisfaction compared to previous years. Damen proactively engages with customers to learn where and how we can improve and this feedback is consistently taken on board in our continuous improvement plans.

NEW INITIATIVES

CAD / PDMA recurring theme among our customers is the need for accurate and timely ‘as built’ drawings of our products, as well as the desire for a more transparent and responsive drawing approval procedure. To support these requirements the Damen Shipyards Group has embarked on an ambitious programme to replace our core design, engineering and manufacturing tooling. Damen has selected Dassault Systems as its strategic supplier for the required CAD/PDM software. During the course of 2017, we expect to have the first products set up in the new environment.

UPDATE OF EARLIER INITIAVES

Local presenceOur globally located Service Hubs are proving a success with our customers. They allow us to deliver quicker, better service to our customers worldwide.

KnowledgeThe strengthening of our core competences regarding has resulted in improved electrical design of our products as well as a decrease in related warranty costs. Our customers have told us that they require deeper insight into their use of our products and, to this end, Damen is gearing up to deliver next generation digital services through online access to their vessels and different apps in the near future.

7.1

SOCIAL

AVERAGE FTE* 2016 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn n 9,300 2015 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnn 9,700 2014 nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn nnnnn 9,000

The Netherlands 2016 nnnnn nnnnn nnnnn 3,290 2015 nnnnn nnnnn nnnn 3,140 2014 nnnnn nnnnn nnnn 2,990

Rest of Europe 2016 nnnnn nnnnn nnnnn n 3,490 2015 nnnnn nnnnn nnnnn nn 3,710 2014 nnnnn nnnnn nnnnn n 3,540

Rest of the world 2016 nnnnn nnnnn nn 2,520 2015 nnnnn nnnnn nnn 2,850 2014 nnnnn nnnnn n 2,470

ABSENTEEISM 2016 nnnnn nn 3.2 in % ** 2015 nnnnn n 2.7 2014 nnnnn 2.3

* Full Time Equivalent ** Damen Shipyards Gorinchem

SUSTAINING OUR HUMAN CAPITAL

We invest in our people – they are our main asset in our bid to achieve our sustainability goals. We have a continuous need for excellent craftsmen and managers who can and will develop our workforce. Moreover, Damen strives to create an organisation where individuals thrive and, very importantly, have fun doing their job.

HOW WE DEVELOP THE MOST COMPETENT EMPLOYEES

We want to achieve Damen’s business goals by having the right person in the right job at the right time and provide continuous learning and development for all employees. This talent management is the key responsibility of each manager in Damen. It includes:

Onboarding‘Onboarding’ is the process in which new employees are handed the tools to help them be effective within Damen and to make them feel part of the family. In 2016, we designed a global onboarding programme, consisting of an e-learning module about Damen’s history, products and locations, and another about our General Business Principles and an Onboarding Communication Guideline for managers.

Performance managementUnderstanding and monitoring employee performance and development and aligning them towards Damen’s strategy is the purpose of performance management. This includes implementing the full performance cycle that starts with setting targets, then reviewing progress and long-term ambitions mid-year and in a final meeting at the end of the year.

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7.2Talent reviewsReviewing the performance and potential of our employees gives us input for a long-term people plan: what type of skills or people are we missing, who will retire soon, and do we need to recruit or develop?

Succession managementBoth performance management and talent reviews give us sustained input for our succession management discussions. It is important to have a clear view of who will be the successors of our current management cadre.

Learning and developmentBased on the information we gain through the performance cycle and talent reviews, we offer our employees development opportunities by setting interesting and challenging targets and by providing a complete set of courses, (team) coaching, e-learnings and knowledge sharing sessions. These programmes are part of the Damen Academy. The purpose of the Damen Academy is to organise learning and development centrally within Damen, in the most effective and efficient way possible.

In 2013, we started with the development of the Damen Academy in Gorinchem and in 2015 the roll out started in the rest of the Netherlands. We aim to have every Damen employee worldwide connected to this platform in 2019.Damen Leadership and Management Development programmes help future top-level specialists and managers to further develop their leadership skills. These (partly) international programmes have run since 2012 and allow staff to develop the knowledge and capabilities that will be indispensable to a leader in a global company like Damen. We run various programmes at different levels.

In 2016, we invested around € 5.2 million in Training & Education (around € 600 per FTE).Together with some members of the Netherlands Maritime Technology Association, we created the Netherlands Maritime Academy. This platform makes it possible for our employees to join training programmes of other companies in the maritime industry and vice versa.

Many employees work for our company for a long time. To stimulate them to share the experience and knowledge they gain we created the training ‘KnowledgeTransferer’ in collaboration with the Netherlands Maritime Technology Association. Through this training programme, employees can learn how to transfer their knowledge. We not only stimulate knowledge sharing within our company, but also with potential employees by, for example, teaching students at the Technical University of Delft. On the other hand, we organise short internships for lecturers to show them the practical side of the shipbuilding process.

OUR PERFORMANCE IN SUSTAINING OUR TALENT

We have several indicators that tell us how successfully we are managing our people. In 2012, we started our biennial employee survey as a way of closely monitoring progress toward our aim to be an employer of first choice. The main indicator is the engagement score. This score is based on three underlying indicators:1 Retention: I would prefer to remain with the company

even if a comparable job was available in another company2 Satisfaction: Taking everything into account, I am satisfied

with my current job.3 Pride: I am proud of my company and would recommend

my company to others as a good place to work.

The total number of respondents in 2016 was 7,004 (a participation rate of 80%). The overall conclusion is that Damen has committed and satisfied people, who are proud of our company.

Each Damen company uses the results of the survey to work on their areas for improvement. Actions taken include more attention to developing leadership skills and improved communication – for example through the organisation of a Leadership Summer School and development of an e-learning module about performance management.

In 2017 we will ask, (some of) our employees, in addition to the biennial employee survey, for feedback on specific topics on a more regular basis.

OUR FUTURE TALENT

Besides our focus on our existing talent, we also work hard to ensure we create a pipeline with talent for the future. We take part in relevant career events and have close relationships with educational institutes, universities and student associations.

We offer opportunities for internships and graduation projects and we have a traineeship programme. In 2016, we had:n 125 interns and graduate students n 30 trainees (management and functional)

Since 2012, we have annually organised the Damen Business Course, primarily intended for (technology) Master degree students. This intensive 5-day programme gives the students an excellent insight into working for our company. In 2016, we also organised for the second time a business course for Bachelor students, the so-called Damen Business Experience.

To support government initiatives around ‘Topsector Water’ we provide six scholarships to Bachelor and Master students of Naval Architecture on a yearly basis.

On average, about 50% of our interns, graduate students, trainees and participants of our business course/experience find a permanent position within Damen.

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DAMEN DEVELOPMENT PROGRAMMES

PARTICIPANTS

Damen Management Development 1 250Damen Management Development 2 85Damen Leadership Development 1 80Damen Leadership Development 2 45

DAMEN TRAINEES“As trainee, I change work environment every six to nine months, a time span which allows you to get a proper understanding of the job, but still keeping your everyday challenging. I am guided in my development by an inspiring Damen professional and an HR advisor. Furthermore, Damen wide programmes are available for personal growth, like the Leadership Development program that I started with thirteen colleagues from various departments. We work on leadership skills in different multi-day sessions and strategic assignments. This is done the ‘Damen way’ with a very personal approach and a good balance between work and fun.” NAOMI VAN DEN BERG, DAMEN TRAINEE

Damen is a true global player, a fact that contributes considerably to our business success. At the same time, we have a big impact on the areas in the world where we operate. We do our very best to be good guests and respectful to our hosts. We mitigate environmental, health and safety, and other risks with the same amount of effort and dedication as in the Netherlands.

Being a global player also means that we have a significant positive impact on our host communities. Damen contributes to generating wealth and jobs around the world, transferring technology, and training and developing people.

Damen respects human rights in line with the United Nations’ Universal Declaration of Human Rights and accepts the responsibility of respecting human rights when conducting our business.

In addition to the impact of our core business, we also have a group sponsoring policy, which can help Damen with corporate and employer branding. As part of our Corporate Social Responsibility programme, Damen companies are encouraged to support the community in which they operate and offer their employees the opportunity to play an active role in society while respecting their responsibilities towards Damen.

In addition, through our products, Damen is contributing to communities worldwide. For instance our products contribute in building offshore wind farms (8.1), connecting people (8.2) and are locally built using transfer of technology (8.3).

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8CONTRIBUTING TO COMMUNITIES WORLDWIDE

DAMEN OFFSHORE CARRIER 8500 ‘MAERSK CONNECTOR’ – MAERSK SUPPLY SERVICE

Damen Offshore Carrier 8500, the award winning ‘Maersk Connector’, has been customised to meet the challenge of reducing the cost of offshore renewable energy. The vessel is owned by Maersk Supply Service and on long-term charter with DeepOcean. A flexible platform for both transport and installation offshore, the vessel features a bespoke, 7,000 tonne carousel, capable of laying two cables simultaneously. ‘Maersk Connector’ features all the functionality of a DP2 vessel without sacrificing shallow water workability. In fact, the vessel is certified to ground out fully loaded in suitable ground locations for beach operations. In February, ‘Maersk Connector’ won the Offshore Support Journal Offshore Support Ship 2017 award.

SHALLOW DRAUGHT PAEESENGER FERRIESSOCIÉTÉ DE TRANSPORTE LAGUNAIRE

Last year, Damen signed a contract with Société de Transport Lagunaire (STL) to build sixteen shallow draught passenger ferries for the Ivory Coast. The contract represents a forward thinking presidential plan for the improvement of urban infrastructure in Abidjan. A key part of the plan is the development of cost-effective, reliable public transport solutions to reduce congestion and emissions in the city and its growing population. Damen designed the 18-metre ferries according to the standards of the International Association of Classification Societies. Each vessel is able to transport up to 130 passengers at speeds of up to 10 knots. Damen delivered the first ferry in January 2017, the remainder are delivered in batches of four every 8 weeks.

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OFFSHORE SUPPORT PUBLIC TRANSPORT

8.28.1

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PLATFORM SUPPLY VESSELS 5000 – WILSON, SONS

Wilson, Sons has recently delivered two Damen Platform Supply Vessels (PSV) 5000 to Wilson, Sons Ultratug Offshore – a joint venture between Wilson, Sons and Chilean maritime services provider Ultramar. Wilson, Sons built the Damen-designed vessels at its yard in Guaruja, Brazil using the Damen Technical Cooperation (DTC). With DTC, Damen provides its designs and allows local shipyards to make use of the Damen supply chain for materials and logistics anywhere in the world. This arrangement ensures local content requirements and stimulates the development of sustainable local industry and employment. Where required, Damen will provide local personnel with training in the building of its vessels, thus enabling transfer of technology and skills. DTC offers Wilson, Sons the opportunity to market the vessels from the Damen portfolio to its own clients. The two companies have been working together in this way for over 20 years.

¡VAMOS! – LAUNCH AND RECOVERY VEHICLE

¡VAMOS!, the Viable Alternative Mining Operating System, is a project funded by the European Union’s Horizon 2020 Research and Development Programme. The project aims to enable the exploitation and rehabilitation of underexploited and abandoned European deposits of raw materials. This goal will be met with a robotic, underwater mining vehicle. ¡VAMOS! features 17 project partners from nine EU countries, acting in close collaboration. ¡VAMOS! will contribute to ensuring the sustainable supply of raw materials whilst increasing benefits for society as a whole by introducing a number of research and innovation actions regarding automated mining, mining of small deposits and alternative mining. Damen’s role in this, tapping into the groups extensive experience in the dredging industry, is the delivery of the slurry circuitry components and the launch and recovery system.

8.48.3OFFSHORE SUPPLY DREDGING EQUIPMENT

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In this chapter we describe the reporting process and how Damen determined the material topics covered in this report.

REPORTING PROCESS, SCOPE AND BOUNDARIES

This report covers the year 2016. The report is part of Damen’s annual reporting and contains both financial and non-financial information, and both quantitative and qualitative information. The sustainability report, including its material topics, is the result of qualitative and quantitative data gathered throughout the organisation and its entities.

The content of this report has been approved by Damen’s Executive Board and reflects Damen Shipyards Group and all group owned companies and joint ventures (partner yards). When information is sourced outside this scope, this is stated explicitly.

Since sustainability reporting is still a new field for Damen we focus with this third report on the activities of our own operations. We realise that the material topics relevant to different phases of the lifecycles of Damen vessels (as represented in chapter 3.2) also impact stakeholders outside the boundaries of our own operations. We will take these issues and their impact into account in the further development of our approach to sustainability.

REPORTING CRITERIA

The report follows the Global Reporting Initiative G4 guidelines (GRI G4 Core), one of the world’s most prevalent standards for sustainability reporting. We refer to the GRI index in appendix 9.2 for detailed information and references. Regarding the Disclosures on Management Approach of our material topics, we have provided information on the topics of high importance. For the topics of medium importance, we concluded that not all information is available yet. We will continue to develop this in the future.

METHODS OF ESTIMATION, MEASUREMENT AND CALCULATION

We use generally accepted protocols to compile, measure and present information, including the GRI technical protocols for indicators comprised in the guidelines. Due to the nature of sustainability data there are some limitations associated with measuring and calculating data. No changes were made to definitions and measurement methods of the reported data compared to the 2015 reporting period.

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9APPENDICES ABOUT THIS REPORT

9.1

MATERIALITY PROCESS AND STAKEHOLDER CONSULTATION

In order to determine the most material topics for Damen and its stakeholders we formed a topic-list based on industry specific research and existing guidelines on sustainability, combined with Damen’s activities and unique characteristics. In 2014, we consulted internal and external stakeholders to indicate which of these topics they find most important to Damen and have the most impact on our current and future activities and performance. In total 26 topics were identified and placed in the categories economy, environment, employee, society, human rights, product responsibility and other. This resulted in a materiality matrix, validated by executive management, with topics of high, medium and low importance to both stakeholders and Damen’s executive management. The topics of high and medium importance form the basis of this report.

REPORTING INDICATORS

In our report we present different financial, social and HSEQ indicators. The most important indicators are described in more detail below:

FINANCIAL FIGURES

Our financial figures are derived from the financial data of Damen Shipyards Group N.V. and its Group companies. The accounting policies and presentation applied to the figures are consistent with those applied in preparing the consolidated financial statements of Damen Shipyards Group N.V. (filed at the Chamber of Commerce in Woerden, the Netherlands). These consolidated financial statements have been prepared in accordance with Title 9 Book 2 of the Netherlands Civil Code.

CLIENT SATISFACTION

Our client survey is designed to continuously measure the satisfaction of our customers at three key moments.Once every two years we also evaluate the relationship with our clients. The survey is executed annually in cooperation with MWM2, an independent research agency.

SOCIAL FIGURES

Our FTE figures are obtained from Damen Shipyards Gorinchem HR system for the Netherlands and the separate HR systems from Damen companies in the rest of the world. Entities in scope are all Damen-owned entities. FTEs at joint ventures are included pro rata. All employees are under a collective bargaining agreement. Our absenteeism figure represents Damen Shipyards Gorinchem in the Netherlands.

HEALTH, SAFETY, ENVIRONMENT & QUALITY

The health and safety figures in this report reflect the Damen Shipyards Group performance. The statistics are obtained under the responsibility of the individual operating entities, centrally collected and analysed at Damen Shipyards Gorinchem. The number of entities participating in these statistics is growing year by year.The calculation of CO² emissions are in accordance with the ISO 14064.

DATA COLLECTION (LIMITATIONS, ESTIMATIONS)

We are in the process of widening our monitoring scope, not all data from our shipyards regarding HSEQ was available or available in time for this report. We continue to improve our data gathering process for the future.

PUBLICATION

The 2016 sustainability report was published on 30th June 2017 on our corporate website www.damen.com

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JAMAICA DEFENCE FORCEThe Damen course is very informative. When we go back home we will be able to manage the vessels more effectively and we can pass this knowledge on to our juniors. The topics covered by the course are very much in line with what we have to do on a daily basis. It is also a nice balance between practical work and theory. Additionally, for many of us it is our first time in Europe and the whole package, including hotels, transport, flights, weekend tours, is very well put together. GARY HANSON, MARINE TECHNICIAN, JAMAICA DEFENCE FORCE

GENERAL STANDARD DISCLOSURES GRI G4 INDEX

INDICATOR DESCRIPTION REFERENCE

STRATEGY AND ANALYSIS

G4-1 Statement from the most senior decision-maker of the organisation 1 – WELCOME FROM OUR CEO

ORGANIZATIONAL PROFILE

G4-3 Name of the organisation TITLE

Contact

G4-4 Primary brands, products, and/or services 3 – THE WORLD OF DAMEN

What we do

G4-5 Location of organisation’s headquarters Contact

G4-6 Number of countries where the organisation operates, and names 3 – THE WORLD OF DAMEN

of countries with either major operations or that are specifically Global presence relevant to the sustainability issues covered in the report

G4-7 Nature of ownership and legal form Contact

G4-8 Markets served (including geographic breakdown, sectors served 3 THE WORLD OF DAMEN

and types of customers/beneficiaries) What we do

G4-9 Scale of the reporting organisation 2 – KEY FIGURES

G4-10 Total workforce by employment type, gender, employment 7.2 Sustaining our human capital contract and region

G4-11 Percentage of employees covered by collective bargaining 2 – KEY FIGURES

agreements 2016: 100% 2015: 100%

G4-12 Describe the organisation’s supply chain (incl. product or service 3 – THE WORLD OF DAMEN

providers, engaged suppliers in total number, type, and location, Our value chain (payments made to supplier)

G4-13 Significant changes during the reporting period relating to size, 3 THE WORLD OF DAMEN

structure, or ownership or its supply chain (incl. changes in location, 4 FINANCIAL PERFORMANCE

operations, facilities, capital information and supplier information)

G4-14 Explanation of whether and how the precautionary approach 4 FINANCIAL PERFORMANCE

or principle is addressed by the organisation Risk Management 5.5 Sustainability performance of

our own production processes

G4-15 Externally developed economic, environmental, and social 1 – WELCOME FROM OUR CEO

charters, principles, or other initiatives to which the organisation Damen follows the international subscribes or endorses shipbuilding rules and standards

of the IMO.

G4-16 Memberships in associations (such as industry associations) 5.1 Innovation through cooperation 7.1 Keeping our customers close

None of the information included in this report has been subject to external assurance.

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9.2

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INDICATOR DESCRIPTION REFERENCE

IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES

G4-17 Operational structure of the organisation, including main divisions, 9.1 About this report operating companies, subsidiaries, and joint ventures Reporting indicators (List all entities in the consolidated financial statements) Reporting process, scope and

boundaries

G4-18 Process for defining report content and the Aspect Boundaries 9.1 About this report and explain how the Reporting Principles have been implemented

G4-19 List all the material Aspects identified 3.1 Approach to sustainability within Damen

High importance topics – Financial Performance – Training and Education – Health and Safety of our

employees – Innovation – Energy – Emissions

G4-20 The Aspect Boundary within the organisation: Whether the Aspect is material within the organisation; The list of entities included in G4-17 for which the Aspect is or is not material; Specific limitation regarding the Aspect Boundary within the 9.1 About this report organisation

G4-21 The Aspect Boundary outside the organization: Whether the Aspect is material outside the organization; The list of entities for which the Aspect is material, relate to geographical location; Specific limitation regarding the Aspect Boundary outside the 9.1 About this report organisation

G4-22 Explanation of the effect of any re-statements Not applicable

G4-23 Significant changes from previous reporting periods in the Not applicable Scope and Aspect Boundaries

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INDICATOR DESCRIPTION REFERENCE

STAKEHOLDER ENGAGEMENT

G4-24 List of stakeholder groups engaged by the organisation 3.1 Approach to sustainability within Damen

Our stakeholders

G4-25 Basis for identification and selection of stakeholders with 3.1 Approach to sustainability whom to engage within Damen Our stakeholders 9.1 About this report

G4-26 Approaches to stakeholder engagement, including frequency of 3.1 Approach to sustainability engagement by type and by stakeholder group within Damen Our stakeholders

G4-27 Key topics and concerns that have been raised through stakeholder 3.1 Approach to sustainability engagement, and how the organisation has responded to those key within Damen topics and concerns, including through its reporting; Report the Our stakeholders stakeholder groups that raised each of the key topics and concerns

REPORT PROFILE

G4-28 Reporting period Jan-Dec 2016

G4-29 Date of most recent previous report Jan-Dec 2015

G4-30 Reporting cycle Annual

G4-31 Contact point for questions regarding the report or its contents Contact

G4-32 a Report the ‘in accordance’ option the organisation has chosen a ‘Core’ b Report the GRI Content Index for the chosen option b 9.2 GRI G4 index (see tables below) c Report the reference to the External Assurance Report, if the c Not applicable report has been externally assured

G4-33 Policy and current practice with regard to seeking external We did not seek external assurance assurance for the report for this report

GOVERNANCE

G4-34 Governance structure of organisation 3 THE WORLD OF DAMEN

Business approach

ETHICS AND INTEGRITY

G4-56 Internally developed statements of mission or values, codes of 3.1 Approach to sustainability conduct, and principles relevant to economic, environmental, and within Damen social performance and the status of their implementation 6 RESPONSIBLE PRODUCTION

SPECIFIC STANDARD DISCLOSURES

In our Materiality matrix we made the distinction between high and medium importance topics. Our Disclosure on Management Approach focuses on the high importance topics. In the coming period we will determine which medium importance topics need to be addressed in more detail. We refer to the medium importance topics throughout our report:

n Indirect economic impact, Knowledge transfer (chapter 4, 5.1, 6.3, 6.4, 7) n Employment, Labour conditions/rights (chapter 2, 6)n Corruption/fraud (chapter 3.1, 4)n Local community (chapter 8)n Sustainable supply chain (chapter 4, 6.3, 6.4)n Waste, Total cost of ownership, Ballast water (chapter 3.2, 6.2)n Health and Safety of customers (chapter 6.1)n Market Share (chapter 4)

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DMA & DESCRIPTION REFERENCE INDICATORS

SPECIFIC STANDARD DISCLOSURES

G4-DMA Training and Education 3 THE WORLD OF DAMEN

7.2 Sustaining our Human Capital

G4-LA11 Employees receiving performance and career development reviews For all employees. 7.2 Sustaining our Human Capital

G4-DMA Health and Safety of employees 2 KEY FIGURES

3 THE WORLD OF DAMEN

7.2 Sustaining our Human Capital

G4-LA6 Rates of injury, occupational disease, lost days, absenteeism, 2 KEY FIGURES

and work-related fatalities 6.1 Health and safety at our yards 7.2 Sustaining our Human Capital

G4-DMA Financial Performance 2 KEY FIGURES

3 THE WORLD OF DAMEN

4 FINANCIAL PERFORMANCE

G4-EC1 Direct economic value generated and distributed 2 KEY FIGURES

4 FINANCIAL PERFORMANCE

G4-DMA Innovation 3 THE WORLD OF DAMEN

5 INVESTING IN INNOVATION

G4-DMA Energy 2 KEY FIGURES

3 THE WORLD OF DAMEN

6.2 Emissions, energy and waste Our carbon footprint

G4-EN3 Energy consumption within the organisation. 2 KEY FIGURES

6.2 Emissions, energy and waste Our carbon footprint

G4-DMA Emissions 2 KEY FIGURES

3 THE WORLD OF DAMEN

6.2 Emissions, energy and waste Our carbon footprint

G4-EN15 GHG Emissions (scope 1, 2) 2 KEY FIGURES

G4-EN16 6.2 Emissions, energy and waste Our carbon footprint

ISO 9001 ISO 9001 is a certified, internationally accepted, quality management system which is designed for businesses that want to prove their ability to consistently provide products and services that meet the needs of their customers and other relevant stakeholders: www.iso.org

ISO 14001 ISO 14001 is a certified, internationally accepted, environmental management system which is designed to help businesses remain commercially successful without overlooking environmental responsibilities: www.iso.org

ISO 14064 ISO 14064 is a certified, internationally accepted, environmental management system that provides businesses with a complimentary set of tools and programmes to quantify, monitor, report and verify greenhouse gas emissions: www.iso.org

ISO 26000 ISO 26000 provides guidance on how businesses and organizations can operate in a socially responsible way. This means acting in an ethical and transparent way that contributes to the health and welfare of society.

JH143 The Joint Hull Committee has been conducting its JH143 Surveys since 2003, when a number of accidents, including fire and overturned cranes, took place in shipyards around the world.

Lost time injury frequency (LTIF)The number of LTi's * 1,000,000 number of hours worked

MARIN Maritime Research Institute Netherlands: www.marin.nl

OHSAS 18001 Occupational Health and Safety Management Systems 18001 is an internationally accepted method of assessing and auditing occupational health and safety management systems: www.ohsas-18001-occupational-health-and-safety.com

TCO Total cost of ownership

TNO the Netherlands Organisation of Applied Scientific Research: www.tno.nl

BCG-matrix Boston Consulting Group – matrix

BWM Convention Ballast Water Management Convention is the diminutive term commonly used when referring to the “International Convention for the Control and Management of Ships’ Ballast Water and Sediments”, adopted by the International Maritime Organisation (IMO) in February 2004. The BWM Convention was adopted with the aim of protecting the marine environment from the transfer of harmful aquatic organisms in ballast water carried by ships.

BWT(S) Ballast Water Treatment (Solution)

HSEQ Health, Safety, Environment & Quality

DSGo Damen Shipyard Gorinchem

Greenhouse Gas ProtocolThe Greenhouse Gas (GHG) Protocol, developed by the World Resources Institute (WRI) and the World Business Council on Sustainable Development (WBCSD), sets the global standard for how to measure, manage, and report greenhouse gas emissions: www.ghgprotocol.org

GRI The Global Reporting Initiative (GRI) is a leading organisation in the sustainability field. GRI promotes the use of sustainability reporting as a way for organisations to become more sustainable and contribute to sustainable development: www.globalreporting.org

GRIPGovernance of Risk and Incident Prevention programme

IMO The International Maritime Organisation (IMO) is the United Nations’ specialised agency with responsibility for the safety and security of shipping and the prevention of marine pollution by ships: www.imo.org/

ILO Guidelines on Occupational Safety and Health International Labour Standards Guidelines on Occupational Safety and Health are based on the principle that workers should be protected from sickness, disease and injury arising from their employment. The International Labour Organizsation (ILO) is a United Nations agency dealing with labour issues, particularly international labour standards, social protection, and work opportunities for all: www.ilo.org

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GLOSSARY

9.3

40 SUSTAINABILITY REPORT 2016

DAMEN SHIPYARDS GROUP

HeadquartersAvelingen-West 20 P.O. Box 14202 MS Gorinchem 4200 AA Gorinchem The Netherlands

For more information, feedback or suggestions on this report and its contents please contact us at [email protected]

CONTACT

[email protected] www.damen.com

P.O. Box 14200 AA Gorinchem

The Netherlands

Avelingen-West 204202 MS Gorinchem

Damen Shipyards Group is the copyright owner of this brochure – © Damen Shipyards Group 2017. All rights reserved.

Except with the prior express written permission of Damen Shipyards Group, this brochure and its content may not be distributed and/or commercially exploited.

phone +31 (0)183 63 99 22 fax +31 (0)183 63 21 89

DAMEN SHIPYARDS GROUP