A finite-difference method named WISDAM-II is developed for viscous flow about a steadily advancing ship involving free-surface waves. The Navier-Stokes equations in a rotational form are solved by a time-marching scheme in a boundary-fitted coordinate system which is deformed so as to fit the moving free-surface. Making use of the subgrid-scale turbulence model, the three-dimensional separation and the effect of the free-surface waves on the viscous flow are simulated and discussed.