**UNITED STATES****SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 20-F**

 

| **(Mark One)**                                   |
|--------------------------------------------------|
| **o**                                            | **REGISTRATION  STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF  1934** |
|                                             |   |
| **OR**                                           |
|                                             |   |
| **ý**                                       | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                             |   |
| **For  the fiscal year ended December 31, 2002** |
|                                             |   |
| **OR**                                           |
|                                             |   |
| **o**                                            | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                             |   |
| **Commission  file number: 0-22628**             |

 

**ARCADIS NV**

(Exact name of Registrantas specified in its charter)

 

**ARCADIS NV**

(Translation ofRegistrant’s name into English)

 

**The Netherlands**

(Jurisdiction ofincorporation or organization)

 

**Utrechtseweg 68, 6812 AH Arnhem, The Netherlands**

(Address of principalexecutive offices)

 

Securities registered or to be registered pursuant to Section 12(b) ofthe Act:  **None.**

 

Securities registered or to be registered pursuant to Section 12(g) ofthe Act:

 

**COMMONSTOCK, EUR 0.05 NOMINAL VALUE PER SHARE**

(Title of Class)

 

Securities for which there is a reporting obligation pursuant toSection 15(d) of the Act: **None**.

 

**Page 1 of 121 pages**

**The Index to Exhibits is located at page 92**

**This cover page consists of Two Pages**

 

Indicate the number of outstanding shares of each of the issuer’sclasses of capital or common stock as of the close of the period covered by theAnnual Report:

 

20,296,674 SHARES OFCOMMON STOCK, EUR 0.05 NOMINAL VALUE EACH

200 PRIORITY SHARES, EUR0.05 NOMINAL VALUE EACH

 

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Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

 

Yes   ý     No  o

 

Indicate by check mark which financial statement itemthe registrant has elected to follow.

 

Item 17   o    Item 18   ý

 

 

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**Table of Contents**

** **
| **Part 1**                                                           |   |
|----------------------------------------------------------------------|--------|
| Item 3.  KEY INFORMATION                                        |   |
|                                                                 |   | A.  Selected Financial Data | 3 |
|                                                                 |   | D. Risk  factors | 5 |
| Item  4.  INFORMATION ON THE COMPANY                            |   |
|                                                                 |   | A.  History and development | 7 |
|                                                                 |   | B.  Business overview | 9 |
|                                                                 |   | C. Organizational structure | 23 |
|                                                                 |   | D.  Property, plant and equipment | 23 |
| Item  5.  OPERATING AND FINANCIAL REVIEW AND  PROSPECTS         |   |
|                                                                 |   | A.  Operating results | 24 |
|                                                                 |   | B.  Liquidity and capital resources | 29 |
|                                                                 |   | C.  Research and development, patents and licenses, etc | 30 |
|                                                                 |   | D.  Trend information | 31 |
| Item  6.  DIRECTORS, SENIOR MANAGEMENT AND  EMPLOYEES           |   |
|                                                                 |   | A. Directors, and  senior management | 32 |
|                                                                 |   | B. Compensation | 36 |
|                                                                 |   | C.  Corporate governance | 36 |
|                                                                 |   | D.  Employees | 41 |
|                                                                 |   | E. Share ownership | 41 |
| Item  7.  MAJOR SHAREHOLDERS AND RELATED  PARTY TRANSACTIONS    | 44     |
| Item 8.  FINANCIAL INFORMATION                                  | 46     |
| Item 9.  THE OFFER AND LISTING                                  | 47     |
| Item 10. ADDITIONAL  INFORMATION                                     | 47     |
| Item  11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 52     |
|                                                                 |   |   |   |
| **Part II**                                                          |   |
| Item 15. CONTROLS AND  PROCEDURES                                    | 53     |
|                                                                 |   |   |   |
| **Part III**                                                         |   |
| Item 18. FINANCIAL  STATEMENTS                                       | 54     |
|                                                                 |   |   |   |
| SIGNATURES                                                           | 89     |
|                                                                 |   |   |   |
| CERTIFICATIONS                                                       | 90     |
|                                                                 |   |   |   |
| INDEX OF EXHIBITS                                                    | 92     |

 

2

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**PART 1**

 

**CAUTIONARYNOTE REGARDING FORWARD-LOOKING STATEMENTS**

 

This report, and documents incorporated by referenceinto this report, include forward-looking statements within the meaning of theUnited States Private Securities Litigation Reform Act of 1995.  These statements are based on the beliefsand assumptions of management and on information available to management at thetime such statements were made. Forward-looking statements include information concerning possible orassumed future results of operations, earnings, liquidity, cash flow andcapital expenditures, industry or market conditions, assets under management,acquisition activities and the effect of completed acquisitions, debt levelsand the ability to obtain additional financing or make payments on our debt,regulatory developments, demand for and pricing of the Company’s services andother aspects of its business, general economic conditions and statements that,in each case, are preceded by, followed by, or include words such as“believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “may,”“could,” “should,” “would” or similar expressions.

 

Forward-looking statements are not guarantees ofperformance.  They involve risks, uncertaintiesand assumptions.  Although the Companymakes such statements based on assumptions it believes to be reasonable, therecan be no assurance that actual results will not differ materially fromexpectations.  Many of the factors thatwill determine these results are beyond the Company’s ability to control orpredict.  The Company does not intend toreview or revise any particular forward-looking statements made or incorporatedby reference in this Form 20-F in light of future events, except as otherwiserequired by law.  Investors arecautioned not to rely unduly on any forward-looking statements.

 

The following important factors, and other importantfactors described elsewhere in this report or in the Company’s other filingswith the Securities and Exchange Commission, among others, could cause theCompany’s results to differ from any results that it may project, forecast, orestimate in any forward-looking statements: risks associated with possible changes in environmental legislation,changes in investment flow for infrastructure, changes in the investmentclimate for buildings and telecommunications infrastructure, risks related tothe Company’s ability to acquire and execute projects, fluctuations in currencyexchange rates, decreased tax revenues that support public works projects ofthe type for which the Company is engaged, and declining global economicconditions generally.

 

**ITEM1.    IDENTITY OF DIRECTORS, SENIORMANAGEMENT AND ADVISERS**

 

**Not Applicable**

 

**ITEM 2.    OFFERSTATISTICS AND EXPECTED TIMETABLE**

 

**Not Applicable**

 

**ITEM 3.    KEY INFORMATION**

 

**A.****                 Selectedfinancial data**

 

The selected consolidated financial data presentedbelow as of and for each of the years ending December 31, 2002, 2001, and 2000,1999 and 1998 have been derived from the audited Consolidated FinancialStatements of ARCADIS.  Such data shouldbe read in conjunction with, and are qualified by reference to, theConsolidated Financial Statements and the Notes thereto set forth in Item 18hereof. ARCADIS prepares its Consolidated Financial Statements in accordancewith Netherlands Generally Accepted Accounting Principles (GAAP), which differin certain respects from U.S. GAAP.  SeeNote 17 of Notes to the Consolidated Financial Statements of ARCADIS whichcontains reconciliations of net income and shareholders’ equity reflecting thesignificant differences in accounting practices.  For the convenience of the reader the EUR amounts as of and forthe year ending December 31, 2002 have been translated into U.S. dollars at theMay 30, 2003 noon buying rate in New York City for cable transfers in foreigncurrencies certified for customs purposes by the Federal Reserve Bank of NewYork of  € 0.8499 = US$ 1.00.

 

Amounts previously reported in Dutch guilders arereported in EUR using the irrevocably fixed conversion rate

 

3

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which became effective on January 1, 1999 (€ 1 = NLG 2.20371). See alsoNotes to the Consolidated Financial Statements.

 
|                                           |   | **For the  years ended December 31,**                  |   |
|------------------------------------------------|--------|--------------------------------------------------------|--------|
|                                           |   | **2002**                                               |   | **2002** |   | **2001** |   | **2000** |   | **1999** |   | **1998** |   |
|                                           |   | **US$**                                                |   | **EUR** |   | **EUR** |   | **EUR** |   | **EUR** |   | **EUR** |   |
|                                           |   | **(in  millions except shares and per share amounts)** |   |
| **Consolidated Statement of Income  Data** (a) |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| *Amounts in accordance with  Netherlands GAAP* |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Gross revenue                                  |   | 963.8                                                  |   | 819.1 |   | 797.4 |   | 776.2 |   | 655.5 |   | 578.6 |   |
|                                           |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Net revenue                                    |   | 679.8                                                  |   | 577.8 |   | 563.5 |   | 550.9 |   | 459.8 |   | 410.8 |   |
|                                           |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Income from  operations before taxes           |   | 47.9                                                   |   | 40.7 |   | 36.2 |   | 31.8 |   | 25.5 |   | 24.3 |   |
|                                           |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Net income, excluding  extraordinary items     |   | 29.0                                                   |   | 24.7 |   | 23.1 |   | 20.7 |   | 17.6 |   | 15.5 |   |
|                                           |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                     |   | 29.0                                                   |   | 24.7 |   | 25.1 |   | 20.7 |   | 17.6 |   | 13.7 |   |
|                                           |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Basic net income  per common share             |   | 1.44                                                   |   | 1.22 |   | 1.24 |   | 1.04 |   | 0.90 |   | 0.72 |   |
|                                           |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted net  income per common share           |   | 1.42                                                   |   | 1.21 |   | 1.23 |   | 1.04 |   | 0.90 |   | 0.72 |   |
|                                           |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Average number  of shares (in thousands)       |   | 20.291                                                 |   | 20.291 |   | 20.280 |   | 20.022 |   | 19.513 |   | 19.080 |   |
|                                           |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Dividend per  common share (d)                 |   | 0.56                                                   |   | 0.48 |   | 0.44 |   | 0.39 |   | 0.33 |   | 0.30 |   |
|                                           |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| *Amounts in accordance with**U.S.  GAAP*(b)    |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                     |   | 27.4                                                   |   | 23.3 |   | 24.5 |   | 24.3 |   | 19.0 |   | 14.8 |   |
|                                           |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Basic net income  per common share (c)         |   | 1.35                                                   |   | 1.15 |   | 1.21 |   | 1.21 |   | 0.98 |   | 0.78 |   |
|                                           |   |                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted net  income per common share (c)       |   | 1.35                                                   |   | 1.15 |   | 1.20 |   | 1.21 |   | 0.98 |   | 0.78 |   |

 
|                                           |   | **For the  years ended December 31,** |   |
|------------------------------------------------|--------|---------------------------------------|--------|
|                                           |   | **2002**                              |   | **2002** |   | **2001** |   | **2000** |   | **1999** |   | **1998** |   |
|                                           |   | **US$**                               |   | **EUR** |   | **EUR** |   | **EUR** |   | **EUR** |   | **EUR** |   |
|                                           |   | **(in  millions)**                    |   |
| **Consolidated Balance Sheet Data**(a)         |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| *Amounts in accordance with  Netherlands GAAP* |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                   |   | 404.5                                 |   | 343.8 |   | 309.9 |   | 298.8 |   | 296.3 |   | 253.1 |   |
| Long-term debt,  excluding current portion     |   | 32.4                                  |   | 27.6 |   | 22.0 |   | 23.1 |   | 5.7 |   | 6.4 |   |
| Capital stock                                  |   | 1.2                                   |   | 1.0 |   | 1.0 |   | 1.0 |   | 1.0 |   | 0.4 |   |
| Shareholders’  equity                     |   | 147.0                                 |   | 125.0 |   | 124.8 |   | 107.3 |   | 93.9 |   | 81.5 |   |
|                                           |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| *Amounts in accordance with U.S.  GAAP*        |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders’  equity                     |   | 193.7                                 |   | 164.6 |   | 230.0 |   | 210.2 |   | 184.2 |   | 161.0 |   |

 

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(a)          Following generallyaccepted accounting principles in the Netherlands, the partnership Euroconsult,in which the Company held a 65% interest until April 1, 1999, is consolidatedon a proportionate basis in the first quarter of 1999. The Company holds, andhas held since April 1, 1999 a 100% interest in Euroconsult and its results areconsolidated with the Company’s on a full basis since April 1, 1999. Under U.S.GAAP, such interest would be

 

4

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fully consolidated for the first quarter of 1999, butthe different accounting treatments have no effect on shareholders’ equity andnet income.

 

The Spanish company Grupo EP in which the Companyholds a 50% interest, is included in the consolidated financial statements on aproportional basis in conformity with NL GAAP. Under U.S. GAAP, the investmentin a joint venture would be accounted for under the equity method.  This variance from U.S. GAAP has no effecton shareholders’ equity and net income. Additional information is provided in Note 17 of the Notes to theConsolidated Financial Statements.

 

(b)         Net income in 2001 of €24.5 million, calculated in accordance with U.S. GAAP, includes the gain on thesale of the non-consolidated participation in Analytico of € 4.0 million (€0.20 per share) and the charge related to the restructuring of the Company’sproperty valuation activities in the Netherlands of € 2.0 million (€ 0.10 pershare). Net income in 1998 of € 14.8 million, calculated in accordance withU.S. GAAP, includes the loss from the divestment of Gebr. Becker GmbH, Germany,the restructuring of the contracting activities in the Netherlands in theamount of € 1.8 million (€ 0.10 per share), and the write-off of goodwill ofthe Company’s investment in Becker in the amount of € 1.7 million (€ 0.09 pershare).

 

(c)          Basic net income percommon share amounts calculated in accordance with U.S. GAAP are based upon theweighted average number of common shares outstanding during the period. Dilutednet income per common share amounts calculated in accordance with U.S. GAAP arebased upon the weighted average number of common shares outstanding during theperiod plus the dilutive effect of potential common shares outstanding duringthe period.

 

(d)         Dividend per common shareamounts represent amounts relating to each year which are approved and paid inthe following year. The dividend per outstanding share of common stock of €0.48 for the year ended December 31, 2002, was approved by the Annual GeneralMeeting of Shareholders of the Company on May 14, 2003.

 

The following table sets forth, for the fiscal periodsindicated, the high, low, average and period ending exchange rates for U.S.dollars expressed in EUR per U.S. dollar.

 
| **Period**                    |   | **High*** |   | **Low*** |   | **Average** |   | **End*** |   |
|-------------------------------|--------|-----------|--------|----------|--------|-------------|--------|----------|--------|
| Year ended  December 31, 1998 |   | 0.95      |   | 0.83     |   | 0.90        |   | 0.85     |   |
| Year ended  December 31, 1999 |   | 1.00      |   | 0.85     |   | 0.94        |   | 1.00     |   |
| Year ended  December 31, 2000 |   | 1.21      |   | 0.96     |   | 1.09        |   | 1.07     |   |
| Year ended  December 31, 2001 |   | 1.19      |   | 1.05     |   | 1.12        |   | 1.13     |   |
| Year ended  December 31, 2002 |   | 1.17      |   | 1.06     |   | 1.06        |   | 0.95     |   |

 

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* Quoted by the Amsterdam Foreign Exchange

 

**B.****                 Capitalizationand indebtedness**

 

Not applicable.

 

**C.****                 Reasonsfor the offer and use of proceeds**

 

Not applicable.

 

**D.****                 Riskfactors**

 

**Changesto regulations, particularly those relating to the environment, could weakenthe demand for the Company’s services.**

Demand for the Company’s principal environmentalservices is related to the response of governmental authorities to publicconcern for environmental issues.  Ifpublic concern for environmental issues weakens, or governments of countrieswhere the Company operates become less responsive to public concerns, therecould be substantially less demand for the environmental services offered bythe Company, which could have a material adverse effect on the Company’sbusiness.

 

5

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**Acontinued global recession could have an adverse effect on the Company’srevenues.**

Approximately 50% of the Company’s revenues arederived from clients in the private sector. As a result, the Company is exposedto general economic cycles which influence the willingness and ability ofprivate sector firms to invest in those segments of their businesses thatdemand the Company’s services. A continuation of the existing economic downturncould have a material negative effect on the Company’s ability to attract orretain business.

 

**Decreasesin government tax revenues, which support large public works projects, couldweaken demand for the Company’s services.**

The other approximately 50% of the Company’s revenuesare derived from clients in the public sector. These public sector clients relyon tax revenues to fund large public works projects of the type for which theCompany is often retained.  During aneconomic downturn, governments collect significantly less tax revenue and oftentry to limit discretionary expenditures to balance their budgets.  Government limits on spending forenvironmental remediation, infrastructure expansion or enhancement, publicsector building projects, real estate data services or telecommunicationsinfrastructure investments could have a material adverse effect on theCompany’s ability to attract or retain business.

 

**Theseasonality of the Company’s business may cause its revenues and earnings tofluctuate.**

The Company’s results mayfluctuate seasonally and over longer periods of time.  Factors contributing to such fluctuations include the manner inwhich clients from the public sector spend their budgets, as expenditures canoften be delayed pending approval by regulatory agencies or for other clientconsiderations; the level of subcontractor services; weather, which may limitthe amount of time Company professionals have in the field; and the number ofworking days available, which is influenced by public holidays and holidaysdeclared by the Company.

 

**The refusal or inability of theCompany’s clients to timely pay the Company for services could cause theCompany to have insufficient working capital.**

Although several differentfactors affect the Company’s financial position, working capital is the mostcritical.  Whether the Company canmaintain sufficient working capital during any given period is dependent uponfactors not entirely within the Company’s control, including the willingness orability of its clients to meet the contractual payment terms set forth by theCompany.  If the Company is not able tomaintain sufficient working capital, the Company’s growth and continuedoperations could be materially adversely affected.

 

**TheCompany’s international operations expose the Company to significant currencyrisk.**

ARCADIS does a substantial amount of business innon-euro countries. The currencies in these countries vary in value against theeuro over time.  Declines in the valueof these currencies as measured against the euro could result in a reduction inthe value, as reflected on the Company’s balance sheets of certain net assetsof foreign operations.

 

**TheCompany’s increased reliance on projects that involve an investment of equityexpose the Company to additional risk.**

The strategy of ARCADIS calls for increased involvementof the Company in what are referred to as “Design, Build, Finance and Operate”(DBFO) projects. The nature of these projects involves the investment by theCompany in the equity or assets of the project under development. Should such aproject fail, then the Company may lose some or all of the resources andcapital it has invested in the project. Of total gross revenues of ARCADIS lessthan 5% is generated by DBFO projects and less than 5% of total assets isinvested in DBFO projects.

 

**Competitionmay impede the Company’s growth level**

ARCADIS is engaged in highly competitive markets inall of its service areas.  In TheNetherlands, the European Union, the United States and outside the EuropeanUnion, ARCADIS competes with many other firms, ranging from small local firmsto large national and international firms. In addition to price, ARCADIS competes primarily on the basis of qualityof service, project management expertise, and ability to provide integrated solutions.  Other competitive factors includeapplication of state-of-the-art technology, geographic location andavailability of personnel.  Asignificant portion of ARCADIS’ revenue is generated through direct contact andnegotiations with clients resulting largely from existing relationships ratherthan through public or other bidding procedures.  The development of new and more efficient technology bycompetitors of ARCADIS may have an adverse effect on

 

6

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ARCADIS if such technology is not accessible to ARCADIS or isincompatible with the services provided by ARCADIS.

 

 

**ITEM 4****.    INFORMATION ON THE COMPANY**

 

**A. *History**and development of the Company***

 

ARCADIS N.V. is a public company organized under thelaws of the Kingdom of The Netherlands. Its principal office is located at: Utrechtseweg 68, 6812 AH, Arnhem,the Netherlands and the telephone number is *31-26-3778911.  The Company, including ARCADIS N.V. and itsconsolidated subsidiaries is an international provider of comprehensiveknowledge-based consulting services in the areas of infrastructure,environment, buildings and communications.

 

The initial predecessor of the Company wasincorporated in the Netherlands in 1888 under the name**Nederlandsche Heidemaatschappij**. Most ofthe commercial activities of the Company are undertaken under the trade nameARCADIS, which is also used herein to refer to ARCADIS N.V. and itsconsolidated subsidiaries. In some countries, the Company carries outoperations under different legal or commercial names for local competitivereasons.

 

##### **The Company’s Strategy**

After years of international expansion, ARCADISdeveloped a revised strategy in mid-2000 with a primary goal of increasingprofitable growth in the markets in which ARCADIS is already active. To reachthis goal, ARCADIS selected four strategic cornerstones:

 

•                      Organicearnings growth in the Company’s core business (organic growth represents thegross revenue increase the Company is able to generate on a year-over-yearcomparison in its existing – non acquired – businesses excluding exchange ratedifferences)

 

•                       Strong growth in selected marketsegments;

 

•                       Broadened service offerings toindustrial clients; and

 

•                       Strategic acquisitions.

 

Following is a summary of the Company’s progressimplementing these objectives during 2002. The Company re-evaluated, and in some cases revised, these objectivesduring the fall of 2002, as noted in the discussion of several of thecornerstones below.

 

# **Organic earningsgrowth in existing core businesses**

 

## ***Organic growth 2%***

Organic growth, which theCompany defines as growth derived from operations which are consolidated in theCompanies financial statements for longer than one year, excluding the effectsof exchange rate differences, in the Company’s core business activities in 2002totaled 2%, against a target growth rate of 6.5%. Growth was negativelyimpacted by the decline in the Netherlands of the property valuation activitiesand the decline in contracting activities. The decline in property valuationactivities is related to the cyclical nature of this business, whereas thedecline in contracting activities is the result of the Company’s strategy toreduce the number of activities with a less than average margin.  Excluding these effects, organic growthtotaled 4%. Although the Company did not reach its target growth rate,management was satisfied with the results given market conditions. TheCompany’s infrastructure activities, generating more than 50% of revenues,achieved an organic growth rate of 7%.

 

The positive organicgrowth was at least in part attributable to the Company’s increased effortsduring 2002 to cross-market expertise to strengthen and expand existing clientrelations. For example, rail expertise from the Netherlands applied duringearlier successful projects in Chile, is now used to secure involvement inprojects in the United States and in several European countries.

 

7

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## ***IncreasedProfitability***

In 2002, the Company’s operating margin, defined as theearnings before interest, taxes and amortization of goodwill as a percentage ofnet revenues, increased to 7.4%, up from 6.4% and 6.9%, respectively, in 2000and 2001.  The Company achieved thisresult by continuously concentrating on activities with higher margins andreducing or selling activities that yielded unacceptable margins. In addition,the Company reduced costs by integrating its operations and outsourcing routinetasks to countries with lower labor costs.

 

*Revisionsto Organic Growth Strategy*

By concentrating itsefforts on select clients, the Company believes it can increase its marketshare. To implement this strategy, the Company will strengthen the accountmanagement program and establish programs to more effectively leverage thefirm’s collective knowledge and global client relationships. This will requireusing specialized expertise to win new clients or market share with existingclients, as well as using relationships with multinational clients.

 

The Company also believesthat an essential part of organic growth should come from the sale of newproducts and services to existing clients. First, this involves using existingcompetencies to capitalize on new growth areas. Good examples of theseinitiatives are the wind energy projects in Germany, traffic management systemsprojects in the Netherlands, and new water management methods. Second, theCompany must develop new competencies to become active in future growthmarkets. To this end, ARCADIS has decided to focus on:

 

•                  ***Facility management***: ARCADIS intends tocapitalize on the trend among companies to outsource their non-core activities,including the management of buildings and industrial complexes. In an attemptto quickly gain ground in this growth market, the Company structured a jointventure with U.K.-based Aqumen at the end of 2002. In this joint venture,ARCADIS supplies the client contacts, while Aqumen brings its extensiveexperience in this field and its proprietary management and business systems.The joint venture is designed to manage clients’ non-core business activitiesusing long-term contracts.

 

•                  ***DBFO contracts***: Design, Build, Finance andOperate contracts involve obligations beyond the usual task of delivering acertain number of services or a specific result. These contracts include thedelivery of a total product (Design and Build), the financial arrangements(Finance), and the operation of the business for a certain period (Operate). Asfinancial investments in infrastructure are becoming scarce, projects involvingthese elements are becoming more common in the marketplace.  To bundle experience and mitigate risks, theCompany has assembled a group of experts at the corporate level to work withthe operating companies in developing initiatives in this area.

 

# **Growth ininfrastructure segment; decline in telecommunications segment**

In 2000, the Companyidentified its infrastructure and telecommunications market segments ascandidates for significant growth. With an organic growth rate of 7% in 2002,the Company met its expectations for growth in the infrastructure market. As aresult of the severe downturn in the telecom markets and the resultant decreasein investment budgets, the Company’s revenues in the telecom sector declinedsubstantially, short of the Company’s expectations.  The Company has adjusted its resources in the telecommunicationssegment to meet market demands, and it currently represents a small portion ofthe Company’s total revenues.

 

# **Expansion ofservices to industry**

The Company expects thatoffering expanded services to its industrial clients will increase organicgrowth. In 2002, the Company expandedits Multi National Clients (MNC) program that uses an account managementsystem to serve individual clients in several countries. ARCADIS has alsoestablished goals for each of its operating companies to increase revenuesderived from their prime industrial clients. In addition, ARCADIS developed or expanded its facility management andcompliance programs in the Netherlands and the United States, which the Companybelieves will be in increasing demand by industrial clients.

 

8

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# **StrategicAcquisitions**

 

*AcquisitionActivity During 2002*

During 2002, the Companycompleted one major and one niche acquisition and divested some non-corebusinesses.  The total amount spent onacquisitions of consolidated and non-consolidated companies during 2002 was €16.2 million, up from € 5.7 million in 2001 and € 7.3 million in 2000.

 

## ***France***

In mid-2002, the Companyacquired FC International SA, or FCI, a leading French infrastructure andengineering services company with 800 employees and annual gross revenue of €70 million. FCI derives 70% of its revenue from France, where it operates underthe brand names EEG Simecsol (infrastructure) and Gester (environment). With10% of its revenue generated in the Czech Republic, FCI also benefits frominvestments related to future admission of the Czech Republic to the EuropeanUnion. FCI generates it remaining revenue in the Middle and Far East. FCI’sexpertise is in the area of tunnels, bridges, and viaducts, and the applicationof this expertise throughout the ARCADIS network is consistent with theCompany’s growth through synergy strategy. ARCADIS paid € 12 million for thisacquisition, of which € 5.8 million was goodwill.

 

## ***Spain***

In the second quarter of2002, Grupo EP, in which ARCADIS holds a 50% share, acquired the Spanishcompany Casta (gross revenues € 4 million). Casta specializes in managinghousing and related services for senior citizens, capitalizing on the stronggrowth in Spain for services to seniors.

 

## ***Divestitures***

ARCADIS actively managesits portfolio of services, which means it also divests activities that lackstrategic fit or profitability.  During2002, the Company divested a non-profitable communications group in Spain.  The Company also sold a small environmentalgroup in the United States.

 

*Revisionsto Acquisition Strategy*

Acquisitions remain animportant cornerstone in the Company’s strategy and are aimed at strengtheningthe portfolio while expanding its home market positions in Europe and North andSouth America. Expansion in North America is still an important priority, notonly in the infrastructure segment, but also in services for industrialclients. The Company is considering expansion of its limited positions in theUnited Kingdom and Eastern Europe. The admission of Eastern European nations tothe European Union will involve considerable investments in the fields ofinfrastructure and environment, offering positive opportunities for ARCADIS.Poland and the Czech Republic, where the Company already is positioned, arefocus areas for expansion.

 

The financial criteriathe Company requires when considering an acquisition include:

 

•                  Positivecontribution to earnings per share

 

•                  A marginpreferably at the level of ARCADIS’ goals; and

 

•                  A projectedreturn on investment of 15% or more.

 

**B. *Business**overview***

 

The Company providesconsulting and engineering services in four principal business areas:infrastructure, environment, buildings, and communications. Recent developmentsin these business areas, and the relative contributions of each segment to theCompany’s 2002 performance, are noted below.

 

**Infrastructure**

This segment includes allARCADIS activities that are focused on designing physical living environments.This comprises planning areas for living, working, and recreational activities,as well as connecting these areas through highways, railroads, and waterways.Infrastructure development for the energy sector, as well as the watermanagement sector, is also a component of this segment.

This segment’s share oftotal revenues increased to 51% in 2002. In 2001, this was 47%.

 

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## **Most significant growth market**

With revenue growth of11% in 2002, the infrastructure segment was again the most significant growthsegment for ARCADIS, aided by the acquisition of FCI. Organic growth of theinfrastructure segment totaled 7%. In the second half of the year, organicgrowth softened, predominantly as a result of the decline in Dutch contractingactivities.  Excluding the decline inDutch contracting activities, growth of the segment totaled 14%, of which 10%was organic.  In the United States,investment budgets of individual states came under pressure, resulting in aslight decline in fourth quarter revenues. While 2002 revenues derived from theUnited States and the Dutch consulting activities contributed to growth, theprincipal revenue growth came from Belgium, Spain, and South America.

 

## **Rail infrastructure projects in the Netherlands**

Dutch rail infrastructureprojects yielded considerable work during 2002. The volume of major railprojects in the Netherlands declined slightly as the Company’s involvement inthe development of a high speed railway line from Amsterdam to Paris and in thedevelopment of a freight line to Germany is nearing completion. However, newrail projects such as the Hanzeline railway have or may offset this decline.

 

## **Cross-border rail development**

Outside the Netherlands,ARCADIS is also becoming more active in rail infrastructure projects. TheCompany’s comparative cross-border study of the technical and financialfeasibility of a freight railway connection between the Dutch city of Rotterdamand Belgium is one example. A decision regarding this investment is expected in2003. In Belgium, ARCADIS studied railway safety conditions. In Germany, theCompany evaluated the hydrogeological conditions in the area between the townsof Ebensfeld and Erfurt, where the German national railroad company DeutscheBahn plans to construct a new railroad. In Spain, ARCADIS worked on a number ofimportant rail infrastructure projects in the high-speed rail line network thathas expanded rapidly with the assistance of European subsidies. During 2002**, t**he Company completeddesigns for the East Guadarrama tunnel in Spain, a European tunneling projectwith a total length greater than 20 miles. During 2002, the Company was alsoawarded its first rail infrastructure project in Poland, which involvessupervising the construction of 30 miles of track on the pan-European railroadconnection between Berlin and Warsaw.

 

## **Light rail and metro systems**

To combat trafficcongestion, many highly populated urban areas are looking at opportunities toconstruct, expand, and improve light-rail or metro systems. During 2002, ARCADIS completed alarge-scale integrated safety study for the RijnGouweRoute, a light-railconnection planned between the Dutch towns of Gouda and Alphen a/d Rijn. InChile, ARCADIS was awarded an additional project for the design of a tunnel andfour stations as part of a 20-mile expansion of the subway network in thecapital of Santiago. In Madrid, ARCADIS managed the construction of theMetrosur, a subway line that connects the southern suburbs with the center ofthe Spanish capital. The Company’s newly-acquired subsidiary, FCI, continuedwork on the subway systems in Paris, Marseille, and Toulouse, as well as on thedesign of a new tramway system for the town of Strasbourg.

 

## **Traffic management**

ARCADIS’ experience intraffic management systems for railways can also be applied to improvingroadway systems. In 2002, ARCADIS was engaged to conduct a traffic study of theA1 highway between the Dutch towns of Eemnes and Hengelo; the Company evaluatedmore than 80 miles of highway for potential traffic-flow improvements. In theUnited States, ARCADIS was hired to work on an integrated traffic managementsystem for a major area of metropolitan Atlanta, which has some of the worsttraffic congestion in the United States. In addition to local traffic, thissystem considers interstate traffic for optimal traffic flow.

 

## **Energy infrastructure**

During 2002, ARCADISsecured several significant projects in the energy infrastructure market.  In Germany, the Company successfullycompleted several wind parks and developed an innovative design for anchoringwindmills in the sea. In Poland, ARCADIS completed preparations for theconstruction of an approximately 150-mile oil pipeline, including theenvironmental impact assessment, environmental permitting, and environmentalcontingency plans in case of leakage. In Brazil, the Company’s involvement withthe design and development of three emergency energy plan projects yieldedconsiderable work. These three energy plants with a total combined capacity ofapproximately 200 megawatts, are now operational.

 

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**Antwerp beltway project**

In Belgium, ARCADIS wasawarded a ten-year contract as project manager of the consortium that willcomplete the integrated restructuring of the complete infrastructure of theAntwerp region.  The Company was awardedthe contract following an international bidding process.

 

**Outlook**

Sluggish economic growthis expected to have little impact on the developments in the infrastructuremarket. This is, in part, the result of the long-term nature of largeinfrastructure projects and the great need for infrastructure investments inalmost all countries. Although large development projects like the constructionof the high-speed railway line and freight railway line in the Netherlands havepeaked, new budgets are being allocated for rail maintenance on existing tracksto increase capacity and improve on-schedule performance. This requires systemknowledge in switches, energy, signaling, and communications, all of which areareas in which ARCADIS is well positioned. In public-sector work in theNetherlands, tendering procedures cause delays in the awarding of projects. Asa result of shrinking government budgets, the Company expects moreopportunities for contracts in which private-sector parties play a larger rolein the development, financing, and operation of projects. In the United States,pressure on investment budgets of individual states is expected to continueduring 2003. The wastewater treatment market is expected to remain flat, whilemarkets for water management, real estate development, and homeland securityhave expanded. In Spain, state programs for transportation and water generate alarge volume of work. In Belgium, ARCADIS in early 2003 won a large project toupgrade approximately 800 dangerous road crossings throughout Flanders. Thisproject is a five-year contract. In France, ARCADIS FCI expects to benefit fromthe trend of private-sector parties conducting more public-sector work. InGermany and the Czech Republic projects were won to repair damages and consulton future prevention measures related to the flooding that took place in fall2002. In short, the infrastructure market offers ARCADIS a stable basis forrevenue development.

 

**Environment**

 

The environmental segmentof ARCADIS’ business generated 28% of revenues in 2002, compared to 29% in2001.  The environmental segmentincludes all activities related to the improvement and maintenance of air,soil, and surface water quality, nature projects, and projects related to noiseabatement, solid waste disposal, and external safety.

 

**SlightRevenue Decline**

Revenues in the Company’senvironmental segment decreased by 1% as a result of exchange rate declines andstrategic divestitures. Excluding these effects, revenues in the environmentalsegment grew by 5%.  This includes theenvironmental activities that were added through the acquisition of FCI.Organic growth in this segment of 2% was predominantly generated in the UnitedStates.  In Brazil, activities at HidroAmbiente – which the Company acquired in mid-2001 – increased considerably,especially through the awards of projects by multinational clients.Multinational clients also accounted for solid growth in Belgium and the UnitedKingdom. Influenced by the economic downturn, activities in the Company’s mostmature European environmental markets, the Netherlands and Germany, decreasedslightly.

 

**StrongPerformance in the United States**

In the United States,ARCADIS’ position as a market leader in soil and ground-water remediationconsulting expertise served to  expandmarket share, leading to organic growth of 5%. ARCADIS’ strategy is to invest in the development of innovative andaffordable remediation technology that adds value for private-sector clients.For example, ARCADIS’ involvement since 1998 with the remediation of a heavilycontaminated former industrial site in New York has saved the client a total ofUS$ 3 million when compared to the previous approach for the site. Theapplication of innovative technologies also forms the basis of the Company’s GuaranteedRemediation and Insurance ProgramTM (GRiPTM) in the United States. In thisprogram,  ARCADIS guarantees the pricingof the remediation, covering the increased exposure with an insurance policy.After initial successes of the GRiPTM in the private sector, the Company bid forand received two large five-year projects for the Department of Defensetotaling US$ 40 million in revenues for the remediation of active militaryinstallations. During 2002, the Company also acquired specific patents for soilremediation in the metals and mining industries and has already been awardedits first projects utilizing these patent technologies.

 

**Introductionof technology in Europe**

Prior to 2002, theCompany commenced initiatives to expand the Company’s position in the Europeansoil

 

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remediation market, in part by introducing technology developed byARCADIS in the United States to the European market.  2002 saw the emergence of a market for implementation of soilremediation projects in Belgium, instead of only studies and remediationplanning.  The Company’s strong growthin the United Kingdom is related to government policy directed at redevelopingpreviously used properties into new residential areas or industrial complexes.

 

**Assetmanagement approach**

Many companies arelocated on older sites in or near urban centers. These sites are oftencontaminated and do not meet current standards for (re)development, eitherbecause the facilities are obsolete or because improvements are  not feasible because of space constraints.For these situations, ARCADIS developed an approach in which remediation costsare compared to possible revenues generated from new activities at theredeveloped site. This asset management approach allows clients to weighremediation costs against future revenue streams from the redeveloped site.

 

**GoodPerformance in South America**

In both Chile and Brazil,ARCADIS benefitted from steady increases in demand for environmental services.In Chile, ARCADIS successfully completed studies of soil contamination in urbanareas and a group of large oil companies selected ARCADIS to assist in theredevelopment of the Las Salinas oil terminal. As part of the Las Salinasproject, ARCADIS delivered an environmental audit, performed risk analysis,studied soil and groundwater contamination, and developed remediation plans.Revenues in Brazil grew by approximately 18% during 2002, in part as a resultof the 2001 acquisition of Hidro Ambiente and in part a result of the Multi NationalClients Program, which yielded environmental projects from existing ARCADISclients in Brazil.

 

**Naturedevelopment increases**

The Company experiencedincreased demand for the “green” component of its environmental segment during2002.  In the Netherlands, the Companycompleted projects related to the Bird and Habitat Directives and otherrestructuring plans in rural areas. ARCADIS was involved in planning a newagricultural zone for the livestock breeding industry – under this approach,existing livestock companies are moved into the agricultural zone, abatingnuisances elsewhere and functions such as manure processing and water supplyare consolidated, resulting in increased efficiency.  ARCADIS also provided ecological advice, permitting, constructionmanagement, as well as bridge and road design and styling services for theconstruction of a one-half-mile nature bridge near the Dutch town of Hilversumthat will connect two nature reserves.

 

**Outlook**

In recent years, ARCADIShas demonstrated that an increase in environmental activities is possible, evenwith a downturn in the economy. The Company expects further expansion of itsshare of the market for environmental services in the United States during2003, particularly in the area of soil remediation. The GRiPTM approach for thefederal government and in particular the Department of Defense offers solidopportunities for the Company. The United States patents offer the Companyinroads to the metals and mining industries. In addition, the Company expectsthat its facility compliance initiatives, in which ARCADIS assumes themanagement of environmental assets for clients, will provide a significantcontribution to growth in 2003. Outside the United States, the Company believesgrowth will be driven primarily by expansion of operations in the less matureenvironmental markets such as France and Brazil. In Europe, the introduction ofthe Seveso II Directive should lead to a more stringent application ofenvironmental legislation for companies. Execution of the government-sponsoredremediation planning for industrial sites in the Netherlands should positivelyinfluence market conditions. The impetus in the green environment is theincreased attention for ecological development, which should result in new opportunitiesin the Netherlands, as well as in developing countries where ARCADISEuroconsult is earning a distinguished name in this field.

 

##### **Buildings**

Projects in this segmentinclude office buildings, manufacturing facilities, logistical centers, andmultifunctional stadiums.  This segmentrepresented 13% of total revenues in 2002, compared to 13% as well in 2001.

 

**Revenuesstabilize**

After a significantdecline in 2001, revenues stabilized in this segment during 2002 as a result ofacquisitions completed during the year. Excluding the effect of theseacquisitions, revenues declined by 3% during 2002. This

 

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was predominantly the result of declining private-sector investments, atrend that began in the United States in 2001. In Belgium and Spain,considerable growth during the first three quarters of 2002 leveled off in thefourth quarter. Demand in the Netherlands declined as a result of increasedvacant office space.

 

**Pickupin the United States**

Following a sharp declinein activities in the United States during 2001 as a result of weak economicconditions, revenues continued to decline to a lesser extent during 2002. Inmid-2002, ARCADIS won a number of large projects for the automotive industry,stabilizing the Company’s position in the second half of the year. ARCADISsecured a contact for the design of a new Hyundai automotive plant inMontgomery, Alabama. ARCADIS also won design-build project for the expansion ofexisting laboratory facilities in Southfield, Michigan for DENSO – a supplierof technology, systems, and components for the automotive industry. Theseprojects contributed to the increased revenues in the fourth quarter.

 

**Growthin Belgium and Spain**

The Company didexperience growth in its buildings segment in Belgium and Spain during 2002.The Company attributed the growth in Belgium to the increasing tendency of manycompanies to outsource their non-core activities. In Spain, the Company’sofferings of “turn-key” solutions for this segment benefited from relativelyfavorable market conditions generally.

 

**Alternativesfor the Dutch office market**

In the Netherlands, therewas a continued decline in market demand for office buildings during 2002, asthis segment is vulnerable to economic cycles. Representative projects commenced or completed during 2002 includedconstruction and design services for a parking garage, hotel, and mega movietheater complex in the Dutch town of Almere, technical support for an expansionof the Rijksmuseum in Amsterdam,  renovation of the parking garage under the famous Vrijthof Squarein the Dutch city of Maastricht, and design of interior climate control andenergy supply systems for, as well as general project management services of,the renovation and remodeling of the Unilever headquarters.

 

**Prisonsin Chile**

To remedy overcrowding inChile’s prisons, the Chilean government has issued concessions for the design,build, financing, and operation (DBFO) of prison complexes. During 2002, aconsortium for which ARCADIS provided sophisticated architectural andengineering design plans won the first concession.  ARCADIS also won an additional assignment to complete definitivetechnical plans for the prison complex.

 

**Outlook**

Activities in thebuildings segment are more cyclical than those in infrastructure andenvironment and have suffered more as a result of general economicconditions.  The Company’s backlog ofprojects in the United States suggests signs of a modest recovery.  The Company expects a continued downturn inEurope to hinder a recovery of the buildings segment in Europe during2003.  To reduce vulnerability to thesecycles, ARCADIS is diversifying its representation of certain client sectors totake advantage of opportunities in public-sector, health care, education, andpublic safety.  In addition, ARCADIScontinues to focus on expanding its involvement in projects offering highermargins such as consulting services, project management, and facilitymanagement.

##### ** **

##### **Communications**

This segment includesthree types of activities: the Dutch-based property valuation activities; thetelecommunications activities; and all other activities related to thegathering and processing of predominantly geographical information (GIS). In2002, the communications segment represented 8% of total revenues compared to11% in 2001.

 

# **Declining revenues**

Gross revenue in thecommunications segment declined by 18% in 2002. The organic decline totaled15%. The Company attributes the bulk of the decline to revenue shortfalls intelecommunications and property valuation activities. This decline was somewhatoffset by continued growth in the GIS business.

 

**Telecommunications market continuesto contract**

Revenues from theCompany’s telecommunications business declined by approximately 50% during 2002as a

 

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result of weak market conditions in the United States andelsewhere.  Because of limitedinvestment by telecom operators in Europe in Universal Mobile Telephone System(UMTS) rollouts, activities related to antenna installations have been reducedsignificantly. To meet the demand for a turnkey approach in the United States,the Company established ARCADIS Communications Construction  to work on behalf of U.S. Cellular to makemodifications to its cell phone network in North Carolina.

 

In the Netherlands,telecom revenues remained unchanged from last year as a result of the Company’sfocus on niche segments.  The Companyhas seen increased demand from municipalities in ARCADIS’ First Mile® concept, inwhich residential areas and industrial complexes are connected to a high-speedfiber optic backbone network.

 

 

**Stronggrowth in Geographical Information Systems**

The market for GIS anddata services, which during 2002 generated two-thirds of the Company’s revenuesin the communications segment, continued to grow. Organic growth of thisbusiness totaled 12%. GIS is a computer-based system that stores geographicaldata related to infrastructure, environment, and buildings and can be used todevelop new plans or analyze existing management and maintenance practices. ForProgress Energy in the United States, ARCADIS developed a GIS system that mapsall data related to the client’s network of pipelines, connectors, testingfacilities, and commercial properties. In Spain, the Company developed a GISsystem to map the approximately 7,000-mile water network of Canal de Isabel II,one of the largest water companies in Europe. In Poland, the Ministry for theEnvironment awarded ARCADIS a project to build a cadastral system for watermanagement. In England, GIS was successfully adapted for industrial clients,specifically in the mapping of environmental issues.  The Company developed a GIS system for the Petroleum Institute inGreat Britain that provides information regarding the risk of contamination atall gas stations in the United Kingdom.

 

**Outlook**

The Company expects a newround of property valuations to create growth in this business during thesecond half of 2003. The Company does not expect telecommunications market torecover in 2003. Limited investment in the UMTS market is expected to result infew project starts with relatively low margins. Growth in the GIS market isexpected to continue. ARCADIS expects a new cooperation agreement signed at theend of 2002 with ESRI,  a company withglobal presence that creates software products for GIS applications, toincrease growth opportunities in this segment.

 

**GeographicSegments**

As of 2002, ARCADISdistinguishes four regions for geographical segment reporting purposes: theNetherlands (excluding ARCADIS Euroconsult), other European Countries, Northand South America, and other countries.

 

### **The Netherlands**

# **Slight decrease inrevenue and profit**

Gross revenue in theNetherlands (after elimination of internal inter-regional revenue streams)declined by 3% to € 297 million, compared to €306 million during 2001 and € 298million during 2000, almost entirely as a result of the decline in contractingactivities, as discussed immediately below. Consulting activities, which constitute 80% of the Company’s revenues inthe Netherlands, grew 2% despite a decline in property valuation activities.Excluding the decline in property valuation activities, growth in consultingactivities totaled 5%, specifically attributable to gains in the infrastructuresegment. Operating income declined by 6% to € 16.9 million, compared to €18.0million in 2001 and € 17.4 million during 2000, predominantly as a result ofthe limited performance in contracting activities. Budget pressures in themunicipal market negatively impacted some parts of the consulting business.

 

# **Repositioningcontracting activities**

Historically, ARCADIShas, in the Netherlands, concentrated its contracting activities on sports andleisure, green amenities, and small-scale infrastructure projects. The declinein these activities in 2002 was partly the result of ARCADIS’ policy to focuson higher margin activities by conducting business in those segments in whichthe Company’s specialized knowledge and project management experience can yieldadded value. The poor conditions in the contracting market prompted ARCADIS torapidly implement this policy. As a result, ARCADIS has begun to reduce itsinvolvement in publicly tendered, competitively bid projects in which price isthe only differentiating factor. Following these reductions, such projects comprised approximately 20% ofthe Company’s contracting

 

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revenues. The remaining 80% of contracting revenues is consolidatedinto the three regional organizational units in the Netherlands that allowARCADIS to position itself as a modern engineering firm capable of deliveringtotal solutions in the form of turnkey projects in addition to providing designand consulting services.

 

# **Enhanced synergythrough integration**

In early 2002, allactivities in the Netherlands were integrated into one operating company,ARCADIS Nederland BV.  The effect of theconsolidation has been to improve cooperation, create greater synergy in themarket, improve efficiency, and reduce overhead costs.

 

### **Other European countries**

# **Strong revenuegrowth**

Gross revenue in otherEuropean countries (after elimination of internal inter-regional revenuestreams) (Belgium, Germany, France, Spain, United Kingdom, Czech Republic, andPoland) grew by 24%, totaling € 179 million, compared to €144 million during2001 and € 139 million during 2000. Acquisitions, generating 17% of therevenues, were the primary contributors to this growth. The acquisition of theFrench company FCI yielded the most significant impact. Operations by thesecountries yielded organic growth of 8%. Operating income improved by 48%,totaling € 7.4 million, compared to €5.0 million in 2001 and € 4.9 millionduring 2000. All countries, except Poland, contributed to this increase.

#### ** **

Through the acquisitionof FCI (annual gross revenue of approximately € 70 million) in mid-2002,ARCADIS gained a leading position in the French infrastructure andenvironmental market. Growth in Belgium, Spain, and the United Kingdom occurredin all business areas despite increased competition in the second half of theyear. In Spain, the Company achieved strong growth primarily in infrastructureactivities, although activities also grew in the buildings segment despite aconsiderable softening in the second half of the year. In the United Kingdom,strong growth in the environmental market served to further expand theCompany’s position in that market.

 

Conditions in the Germanmarket remained difficult. In response to this situation, ARCADIS implementedmeasures to reduce unprofitable activities, control costs, and ultimatelyimprove profitability. This resulted in an improvement of the quality ofrevenues, but a decline of 9% in volume throughout most of the Germanactivities. The measures taken had a positive impact on the margin and onoperating income compared to 2001. In Poland, the completion of a number oflarge remediation projects triggered a strong decline in revenues, resulting ina slightly negative operating income.

 

### **North and South America**

### **Improvement inoperating income**

Gross revenue in thisregion (after elimination of internal inter-regional revenue streams) declinedby 6% to € 291 million, compared to €310 million in 2001 and € 295 millionduring 2000. This decline is almost entirely attributable to the lower exchangerates of the Brazilian, Chilean, and American currencies against the euro. Thiscurrency effect was negative 8%. Organic growth, excluding this currencyeffect, totaled 3% and was entirely generated in Brazil and Chile.  Operating income developed very positively,rising 13% to € 17.5 million, compared to € 15.4 million in 2001  and € 13.1 million during 2000. Thisimprovement was primarily the result of growth in Brazil.

 

#### **Slight organic decline in the United States**

The two most importantbusiness segments, infrastructure and environment, developed very favorably,each producing an organic growth of 5%. This was, however, insufficient tooffset the decline in the two other segments. Ultimately, an organic decline of3% resulted. Despite major shifts in revenues the contribution to operatingincome remained level.

 

#### **Strong growth in Brazil and Chile**

In both Brazil and Chile,gross revenue grew considerably. Specifically, Brazil demonstrated stronggrowth, primarily as a result of three energy projects that were developed withprivate financing through a consortium. In addition to ARCADIS’ small equityparticipation in these projects, its contribution includes engineering andproject management services. The future impacts of the change in government arenot entirely clear yet.  It is possiblethat a shift in project type or a delay in project starts may occur. Growth inChile was predominantly a result of growth in

 

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the infrastructure market. In addition, ARCADIS is a minorityshareholder in a joint venture that involves managing waste products frommining companies that contributed to earnings.

 

#### **Other countries**

The activities in othercountries during 2002 involved projects in developing countries financed bydonors such as World Bank and the European Union. Gross revenue (afterelimination of internal inter-regional revenue streams)  grew by 37% to € 51 million, compared to €38million in 2001 and € 43 million during 2000, predominantly as a result of theacquisition of FCI. This company also has activities outside Europe, notably inthe Middle and Far East. In addition, the Company achieved an organic growth of5% in ARCADIS Euroconsult. The change in strategy for this unit, implementedsince 2000 and favoring growth in management consulting services, is producing positiveresults. These results include an increase of ARCADIS Euroconsult’scontribution to operating income during 2002. With the contribution from theacquisition of FCI, operating income generated by these other countries rose to€ 1.2 million from €0.4 million in 2001 and minus €0.2 million during 2000.

 

 

**MainOperating Companies**

The Company’s mainoperating companies, which also represent the Company’s major marketingchannels are ARCADIS G&M Inc., ARCADIS Nederland B.V. (which includes allof the former Dutch-based operating companies: ARCADIS Ruimtelijke OntwikkelingB.V., ARCADIS Bouw & Vastgoed B.V., ARCADIS Infra B.V., ARCADISPlanRealisatie B.V., ARCADIS Geo- en Vastgoedinformatie B.V.), ARCADISDeutschland GmbH, Grupo EP SA, ARCADIS Euroconsult B.V., ARCADIS Belgium(including Gedas N.V.), ARCADIS FCI SA, ARCADIS Logos Engenharia S.A. andARCADIS Geotecnica Consultores S.A.

 

**ARCADIS G & M, Inc.**

*General. * ARCADIS G&M (AG&M), a wholly-ownedsubsidiary of the Company, provides environmental consulting, engineering andcontracting services in the fields of groundwater, soil and air.  The company also provides comprehensiveservices in the area of infrastructure, transport and process engineering, aswell as a broad range of services in the buildings design and engineering area*. *Its client base includes majormulti-national companies in a variety of industries as well as U.S. federal,state and local government agencies*.*

 

*Environmental Consulting and Engineering Services. *AG&M’s consultingactivities are wide-ranging and typically include such projects as:investigation and identification of sources of chemical contamination ingroundwater; identification and evaluation of hydrologic factors incident tothe siting and operation of industrial plants, mines, power generatingstations, and waste-storage and disposal facilities; water supply explorationand development; investigation of groundwater contamination attributable to thedischarge of chemicals and wastes; and investigation of the velocities anddirections of contaminant migration.  Aspart of, or in addition to, its investigation and evaluation services, AG&Malso formulates remedial actions, including the design of groundwatermonitoring and treatment systems at industrial waste treatment and disposalsites, and the development and evaluation of strategies for the abatement ofchemical contamination of groundwater from various sources. AG&M also hasprovided technical guidance to governmental agencies with respect to thesignificance of groundwater, and methods for abating, controlling, andmonitoring groundwater contamination.

 

AG&M has expanded itsenvironmental engineering capabilities in recent years, among other things throughthe acquisition of Piedmont Olsen Hensley in 1996.  Among the principal engineering services provided are feasibilitystudies, construction management, and installation, operation and maintenanceof specialized remedial technologies, including bioremediation, soil vaporextraction, air sparging, hydraulic barriers, free product control andrecovery, steam-enhanced soil-venting, contaminated surface and groundwaterrecovery and treatment, wastewater treatment, stabilization/solidification,landfill caps and containment, and air quality control.

 

A relatively new serviceconcept introduced in the environmental services market is the GuaranteedRemediation and Insurance Program (GRiPTM). This product was createdfor the “brownfield” market, which involves the re-integration of former,polluted industrial estates into the urban environment. By means of GRiPTM,and its related Clean BaseTM program, AG&M is able to offerbusinesses, developers, municipalities and other government entitities wishingto reuse a location a guaranteed maximum price for site remediation. This isbacked up by an insurance scheme, which also limits the Company’s riskexposure. The advantage of this approach is that the quality guarantee speedsup development. As a result, these often derelict sites are woven back into theurban fabric,

 

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which benefits the total city environment.

 

Leaking hydrocarbons aresignificant sources of groundwater and soil contamination.  AG&M provides comprehensive assessment,containment and remediation services to its clients for both surface andsubsurface hydrocarbon releases. AG&M designs, installs, operates andmaintains hydrocarbon remediation systems on behalf of its clients.

 

Consistent with its strategyof providing its clients with a wide range of environmental services, AG&Malso has developed significant practices in expert testimony; modeling; riskevaluation and risk assessment services, bioremediation services, regulatorysupport, environmental equipment, environmental statistics, geophysics, andcommunity relations.

 

AG&M’s air qualityexpertise ensures that air quality impacts are fully evaluated and integratedinto site remediation and industrial source discharge projects.  Specific air quality services range frominvestigations through design to installation and operation, including sourceevaluation investigations (stack testing, compliance testing, diagnostictesting, continuous omissions monitoring, trial burn testing, air toxins testing,testing of remedial systems, ambient air sampling) and air quality consultingservices (permitting, omissions inventories, dispersion modeling).

 

AG&M providesspecialized contracting services for the construction and operation of remedialsystems.  These services are offeredprimarily in the southeastern United States and focus on installation ofsystems and the subsequent long-term operation of the installed equipment,maintenance and sampling of the treatment processes.

 

*Infrastructure, Transport and Process Engineering.*            AG&M also deliversservices in the areas of civil, transport and process engineering.

 

Civil engineeringactivities include consulting and mapping activities for cadastral purposes forutilities, facilities such as airports and industrial complexes, localgovernments for the purpose of planning, traffic purposes and buildingcodes.  Civil site engineering,permitting and land studies are also offered and include client assistance inthe areas of project scheduling, agency approvals, bidding and negotiations,public hearings, right of way acquisition and constructionmanagement/administration as well as extensive surveying capabilities.

 

Transportationengineering services offered include general transportation activities such asroadways, structures, airports, railroads, traffic engineering studies, trafficoperations design, pedestrian and bicycle facilities, intelligent vehiclehighway systems and parking analysis and design.  In roadway design, services offered include corridor planning,environmental planning, hydrology studies, traffic planning and design andconstruction services.

 

Process engineeringservices offered by AG&M cover a wide range of areas, includingproject/program management, facilities programming, master planning, architecture,structural, mechanical electrical and process engineering, constructionservices and management, computer aided design and drafting.

 

The Company also offersdesign, project management and other services related to the development ofinfrastructure for mobile telecommunications networks.

 

*Building design and construction engineering services.*Throughthe acquisition of Giffels Associates Inc., AG&M considerably expanded itsrange of services in the building design and construction engineering markets.The Company now offers architectural design, architectural development, civilengineering, structural engineering, mechanical engineering, electricalengineering, instrumentation & controls, manufacturing/industrial projectservices, as well as field operations.** **Itdoes so to many industries, including automotive, aviation, chemical,electronics & computers, food, forging & foundry, pharmaceutical,plastics, rubber, semiconductor, telecommunication and utilities businesses.

 

**ARCADIS Nederland B.V.**

*General*. ARCADIS Nederland B.V. (ANL) includes the former operating companiesARCADIS Ruimtelijke Ontwikkeling B.V., ARCADIS Bouw en Vastgoed B.V., ARCADISInfra B.V., ARCADIS PlanRealisatie B.V., and ARCADIS Geo- en VastgoedinformatieB.V., of which the activities as from January 1, 2002, are combined under

 

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one management. ANLoperates in the areas of multi-disciplinary consulting and engineering servicesand is involved in numerous projects in the major fields of business ofARCADIS, including infrastructure, environment buildings andcommunications.  Its client baseincludes major national and multi-national companies in a variety of industriesand central and local governments and government-related agencies,predominantly in the Netherlands. Employees operate within business units (the former operating companies)which, by combining forces, offer a wide range of services.

 

*Environmental Consulting and Engineering Services*.  ANL’s environmental services focus onprevention, management and remediation advice in connection with soil andgroundwater pollution and contamination, noise abatement, sewage and wastetreatment and process management, and general environmental infrastructure.

 

In addition to investigation,laboratory analysis and ecological evaluation services, ANL formulatesplanning, design and remedial actions, including the design of groundwatermonitoring and treatment systems at industrial waste treatment and disposalsites, as well as the development and evaluation of strategies for theabatement of pollution and contamination of soil and groundwater from varioussources.

 

In the area of noisereduction, ANL regularly coordinates noise reduction projects aimed at theinsulation of homes against noise from aviation, rail and road traffic.

 

ANL offers and providescorporate environmental protection systems analysis and developmentservices.  ANL also provides othergeneral and specialized corporate environmental consulting services.

 

*Planning, Design and Engineering Services for Infrastructure*.  ANL provides consulting/engineering servicesfor traffic and transportation planning: urban and regional infrastructureplanning, design, development and redevelopment; and industrial infrastructuredesign. ANL develops, among other things, new concepts for public transport inurban areas and advises transport authorities on optimal use of existinginfrastructure.  ANL also plans anddesigns roads, harbors, industrial sites and business parks.  ANL provides land surveying services andgeotechnical services for roads, railways and high-rise construction projects.

 

*Planning, Design and Engineering Services for HeavyInfrastructure*.  ANLprovides a wide variety of planning, design and engineering services for, aswell as assistance in connection with, the financial and economic aspects ofheavy infrastructure construction projects. ANL’s infrastructure activities include the planning, design andengineering of various types of transport infrastructure, including ports,railroads, roads and highways, waterways, bridges, tunnels and railroadstations.  Infrastructure projects arecarried out in close cooperation with urban planners, architects and transportplanners and, where needed and possible, in concert with other ARCADIScompanies.  ANL also offers projectmanagement with a specialization in cost control for large infrastructureprojects.

 

*Infrastructure Contracting Services*.  ANL provides contracting services in avariety of non-environmental market areas. In the infrastructure market areas,ANL contracts for designation planning, habitat improvement and moistureabatement projects. The Company’s infrastructure contracting projects includethe total upgrading of harbor areas and industrial sites, the relocation ofgreenhouse areas and the upgrading of residential areas for which numerousdisciplines are required and in which environmental activities (for example,soil clean-up) play a vital role. ANL also undertakes the construction andrenovation of gas and water mains and sewage systems.

 

*Planning, Design and Engineering Services for Buildings.*ANL’sarchitecture, structural engineering and design activities include involvementin prominent construction projects mainly in The Netherlands.  Such projects generally involve complexconstruction techniques and require extensive computerization of drafting andcalculation to provide efficient design and engineering services.  With increasing frequency, ANL is asked toprovide integrated consulting and engineering services. ANL also offers projectmanagement with a specialization in cost control for large constructionprojects.

 

*Land-use Planning and Industrial Development Services*.  In the land-use planning and design sector,ANL currently focuses on consulting services relating to land re-developmentprojects and their effects on the environment. Modern land-use planning techniques focus on achieving scientific aswell as sociologic equilibrium among agriculture, nature conservation,recreation, landscaping and inhabitants, and involve the application of a

 

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variety of scientific and specialized planningknowledge.

 

*Geographical Information Systems.* ANLcreates thematic maps of properties using interactive graphic systems.  ANL has developed sophisticated software forcomputerized inventorying and data processing for cartographic propertyregistration.  ANL also manages onbehalf of its clients private estates, forests, nature areas, agrarian areasand other land holdings.  Because of thecompany’s in-depth knowledge of real estate management, it can offer localauthorities, such as municipalities and water boards, a wide range of realestate-related services and products. These services include land surveying, digital topography, mapping andbuilding registration systems.

 

*Real Estate Data Services*.  ANL provides a wide range of real estatedata services.  These services focusprimarily on data collection, also through aerial photography, related to allsorts of real estate and the processing and supply through information systemsto meet the increasing need for information about real estate, such as propertyvalues, ownership and maintenance levels. ANL also advises industry andgovernmental and local authorities on the organization of real estateinformation systems.

 

*Outdoor Sports and Recreation Facilities ContractingServices*.  ANLprovides services for the construction of sports and recreation facilitiesthroughout The Netherlands.  TheCompany’s services in this market are multi-disciplinary and includepreparation of site selection studies and environmental impact analyses,planning and design facilities, as well as the physical construction of sportsfacilities, often in concert with third-party construction companies andsubcontractors. Certain sports facilities projects involve an integratedapproach including the specific planning, environmental, design orinfrastructure aspects of the particular project.

 

*Green Amenities and Nature Development Contracting Services*.  ANL also provides services relating to greenamenities and nature development projects. These services include landscaping and planting, planning, design,construction and long-term maintenance contracts. The Company’s green amenitiescontracting services are frequently part of integrated projects within TheNetherlands and neighboring countries that are being handled or managed by APRand that involve primary infrastructure of sports facilities aspects.

 

**ARCADIS Deutschland GmbH**

 

*General*.  ARCADISDeutschland, a German company in which ARCADIS holds a 100% equity interest,specializes in the fields of geotechnology and environmental protection. Thecompany offers a wide spectrum of services in both of these disciplines throughconsulting, planning, site/project supervision and research.

 

*Geotechnics*.  ARCADIS Deutschland’s fields of expertise in the geotechnicalarea include hydraulic construction, dam construction, landfills, industrialconstruction, high rise buildings, deep excavation pits, roads, tunnels,stabilization, specialized deep mining and remediation of endangeredconstruction materials.  The companyprovides consulting services throughout all phases of work including surveying,consultation, cost calculation, tendering services, building supervision,project management and data documentation.

 

*Environmental Protection*.  Since ARCADIS Deutschland believes thatsound environmental protection demands both technical competence andcreativity, it has developed diverse proficiencies in the following areas:  radioactive waste, water management,hydrogeology, protection of drinking water, contaminated commercial buildingsand industrial plants, asbestos removal, hazardous waste, landfill design andtechnology, mining engineering, process engineering, eco-toxicology, ecologicalstudies, environmental impact and modeling of pollutant transport of water andair.

 

Through its environmentalmanagement consulting, ARCADIS Deutschland provides support to its clients inimplementing environmental policies, compliance with legal requirements andreduction in environmental risks.  Thissupport function is accomplished through environmental audits, environmentalmanagement systems, waste management, and assessment of procedures, materialsand products.

 

**Grupo EPSA**

 

*General. *GrupoEP SA is a Spanish engineering firm in which the Company has a 50% equityinterest. Since

 

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its inception in 1956, Grupo EP has been instrumentalin the economic and technological development of Spain, collaborating withpublic administrations and private enterprises.  At present, and through a client-oriented approach, Grupo EP hasevolved as one of the most prominent engineering firms in Spain comprising agroup of diverse engineering services companies and a network of officesthroughout the country.  Itsparticipation has evolved also internationally with projects in more than 20countries throughout Europe, Latin America, Africa and Asia.  Grupo EP’s disciplines include construction,infrastructure, quality control, building and urban area management, geographicinformation systems and civil and industrial engineering encompassing geology,hydrology and energy, environmental services and rural development. Grupo EP’smulti-disciplinary approach provides a wide range of services from feasibilityengineering studies and design to supervision of construction, projectmanagement, quality control and operational assistance.

 

*Planning, Design and Engineering Services for Infrastructure. * Engineering services constituted Grupo EP’s original area ofactivity and Grupo EP has over 40 years of experience in the field.  Grupo EP provides a wide variety ofservices, are provided including planning, design and engineering services andassistance in the financial and economic aspects of heavy infrastructureconstruction projects.  Theseinfrastructure projects include transport infrastructure for ports, roads andhighways, waterways, bridges and tunnels, as well as integral hydrological infrastructurefor water supply, purification and optimal utilization, and irrigation.

 

*Construction Management and Quality Control.*  Grupo EP provides integrated services in thedesign and construction of industrial plants and stand alone buildings. Theseintegrated services include the formulation and architectural design up to thefinalization and delivery encompassing contract management, work surveillanceand coordination.  The group ofactivities is complemented by construction, including the undertaking ofturnkey projects or the actual construction of projects designed by independentteams. Additionally, Grupo EP provides technical-economical assistance andfeasibility analysis for industrial and civil construction, technical audits,inspection and control, as well as geomorphologic and geostructural studies.Grupo EP, through its vast network of laboratories, also provides services inthe areas of civil engineering, environmental, and food and agriculturalquality control.

 

*Environmental Services and Rural Development. *In environmental services,Grupo EP provides consulting and management services in order to achieveoptimal solutions to environmental problems in water, soil, air, urban andindustrial waste and energy. Grupo EP’s rural development activities, throughthe implementation of an integrated approach, are directed towards assessingthe problems and needs of mainly rural population in emerging markets both froman overall and local perspective. This integrated concept includes social andcultural aspects, agrarian economy, rural infrastructure, natural resources,institutional support, education and health.

 

**ARCADISEuroconsult**

 

*General. *ARCADISEuroconsult (AE) is the Company’s primary vehicle for providing rural andinstitutional planning and development services outside the European Union. AEhas subsidiaries and affiliates throughout the world, mainly in emergingmarkets, but also in the former Soviet bloc. AE services are primarilydevelopment oriented and are comprised of agricultural development, includingseed program management; natural resources development, including land andwater resources; ecological profiling and policy making; environmental impactassessment; and information technology services involving remote sensing andgeographical information systems.

 

*Land-use Planning and Institutional Development. *AE institutionaldevelopment division also undertakes activities in human resources development,cost recovery, management and organization development, privatization andinstitutional reform. In addition, AE provides international land informationservices for cadastral surveying systems, mapping, property registration,valuation and taxation, automation, and administrative and financialmanagement.

 

AE’s land-planningconsulting services in the rural development sector focus on land and waterengineering development, ecological awareness and environmental management inAfrica, Asia, the Middle East and Latin America. Rural planning activitiesoccasionally are financed by local governments, but more often financing isarranged on behalf of the client’s government by institutions such as the WorldBank, regional development banks, the United Nations, the European Union or theNetherlands Ministry of Foreign Affairs.

 

AE’s institutionaldevelopment services generally are commissioned by governmental agencies and

 

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international organizations, and involve the study,planning and design of sustainable and balanced institutional developmentareas. Institutional development involves not only the planning ofinfrastructure, living areas and utilities and other functional amenities, butalso the study and planning of a sustainable social environment that providesfor, among other things, educational, recreational and commercial facilities.

 

**ARCADIS Belgium (Gedas N.V) .**

 

*General.* ARCADIS Gedas N.V. (Gedas) is aBelgian consulting and engineering firm which is 100% owned by the Company.Gedas is involved in a diverse number of market areas including infrastructure,environment, buildings, water and telecommunications and industrial consultingand detachment services.

 

*Planning, Design and Engineering Services forInfrastructure.* In this area, Gedas offers a full range ofservices, including studies, design and planning services for rural and urbanenvironments. It also offers design for road infrastructure and civilengineering services for public sector projects related to infrastructure, suchas bridges and tunnels, among others.

 

*Environment.* Gedas performs remedialinvestigation and design projects and assists clients in procuring the rightpermits to operate industrial or other facilities. Gedas is a certifiedenvironmental coordinator in the Belgian market and also delivers environmentalauditing and management services. Waste management services are also offered.

 

*Buildings.*In the market area forbuildings, Gedas offers design, engineering and construction managementservices for industrial facilities, public sector buildings as well as commercialreal estate.

 

*Water.*In the market segment water, Gedasoffers a broad range of services including: groundwater procurement, surfacewater management, municipal and industrial waste water treatment as well aspermitting services.

 

*Telecommunications.* Activities in thismarket area include design, engineering and construction management servicesfor wireline telecommunications networks based on glass fiber technology,mobile telecommunications systems as well as telehousing.

 

*Industrial consulting and detachment services*.Gedas specialists, at the request of clients, may often work on site forextended periods to deliver industrial consulting services in a broad range ofareas to its industrial client base. This working practice provides the client withtemporary staff which has the experience and back-up of a large consultingorganization.

 

**ARCADIS FCI SA**

 

*General.*  ARCADISFCI S.A. is a French-based consulting engineering company that ARCADIS acquiredin 2002. FCI specializes in consulting and engineering services related toinfrastructure development and environmental services. ARCADIS FCI also has asmaller buildings engineering practice. In the French market, ARCADIS FCI isactive under the brand names EEG SIMECSOL (infrastructure & buildings) andGester (environmental). Founded in 1952 by a number of French engineers,ARCADIS FCI has grown through mergers and acquisitions as well a organicdevelopment to a level of revenues of approximately €70 million in 2002. Inaddition to its French activities, ARCADIS FCI also has a consultingengineering subsidiary in the Czech Republic, which is active under the brandname Geotechnika. In the market for donor financed projects (developmentprojects financed by European Union, World Bank etc.) the company is active inmany regions including Oman and the Phillippines. Brand names used for theseactivities include Sauti and Renardet and work performed includes consultingengineering related to irrigation and water management, among other things.

 

*Planning, Design and Engineering Services for Infrastructure*.  ARCADIS FCI provides consulting andengineering services for traffic and transportation planning; urban andregional infrastructure planning, design, development and redevelopment; andindustrial infrastructure design. ARCADIS FCI develops, among other things, newconcepts for public transportation in urban areas and advises transportationauthorities on optimal use of existing infrastructure.  ARCADIS FCI also plans and designs roads,industrial sites and business parks. ARCADIS

 

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FCI provides land surveying services and geotechnicalservices for roads, railways and high-rise construction projects.

 

*Planning, Design and Engineering Services for HeavyInfrastructure*. ARCADIS FCI provides a wide variety of planning, design and engineeringservices for, as well as assistance in connection with, the financial andeconomic aspects of heavy infrastructure construction projects.  ARCADIS FCI’s infrastructure activitiesinclude the planning, design and engineering of various types of transportationinfrastructure, including railroads, highways, bridges, tunnels and railroadstations.  Infrastructure projects arecarried out in close cooperation with urban planners, architects andtransportation planners and, where needed and possible, in concert with otherARCADIS companies. The company also offers project management with aspecialization in cost control for large infrastructure projects. ARCADIS FCIhas extensive experience and an excellent reputation in the construction designof large scale bridges and tunnels.

 

*Environment* ARCADIS FCI performs remedialinvestigation and design projects and assists clients in procuring the rightpermits to operate industrial or other facilities. The company also deliversenvironmental auditing and management services. Waste management services arealso offered.

 

 

**ARCADIS Logos Engenharia S.A.**

*General*.**Logos Engenharia S.A.(ALO), in which the Company owns a 50% + 1 share equity interest, is aBrazilian project management company involved in large and small scaleengineering and infrastructure projects. The firm operates under the brand nameARCADIS Logos. ALO is one of the leading companies in its field in Brazil hasheadquarters in São Paulo, Brazil, and is specialized in project managementservices.

 

In 2002, ALO expanded itsbusinesses through involvement in the development of energy production units inthe realm of the ‘Emergency Energy Plan’ from the Brazilian government. Underthis plan ALO designed, engineered and co-developed fossil and alternativeenergy plants together with other companies. ALO was also responsible for themanagement of these building projects.

 

Founded in 1970 by a group of Brazilian engineers, ALOhas rendered services in many types of projects of all sizes, mainly ininfrastructure, encompassing fields such as energy, sanitation, steelproduction, mining, transportation, urban development and government socialprograms.

 

ALO joined ARCADIS in September 1999, and isdeveloping a new business approach to offer a broader scope of work through theaddition of design expertise by acquiring engineering firms in Brazil. Thisstrategy will also make it possible for ALO to cover selected economy sectorsand spread geographically according to the distribution of the GNP in thecountry.

 

 

**ARCADISGeotecnica Consultores S.A.**

 

*General.* Geotecnica Consultores S.A. (AGC)is a Chilean engineering firm in which the Company has a 67% equity interest.The company belongs to the top five engineering consultancies in itsgeographical market. It provides environment, mining geotechnics, civil, aswell as general geotechnical engineering services, and provides projectmanagement and construction supervision services related to the above mentioneddisciplines on behalf of its clients. The company currently uses the nameARCADIS Geotecnica for marketing purposes.

 

*Environmental engineering services*. AGCoffers a wide range of environmental engineering services includingenvironmental audits, the procurement of permits as well as compliancemanagement on behalf of private industry customers. For both the public and theprivate sector, the company offers waste treatment consultancy and monitoringservices.

 

*Mining geotechnics*. Activities in the areaof mining geotechnics provided by AGC include overall mine design, stabilityinvestigations and consultancy, reinforcement design and conveyance systems. Inaddition, the company provides waste management consultancy servicesspecifically developed for the mining industry, among which the design oftailing dams and tailing control systems.

 

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*Civil engineering services.*  Civil engineering services offered by AGCinclude the design of foundations, excavations, as well as the design anddetailed engineering of roads, tunnels, bridges and maritime works such asharbor projects.

 

*Geology and geotechnical services.* Amongthe services offered in this area, AGC provides hydrogeological consulting, andservices in the area of rock and soil mechanics and offers computer modelingservices to support its clients in dealing with geotechnical issues.

 

**Competition**

 

ARCADIS is engaged in highlycompetitive markets in all of its service areas.  In The Netherlands, the European Union, the United States andoutside the European Union, ARCADIS competes with many other firms, rangingfrom small local firms to large national and international firms.  In addition to price, ARCADIS competesprimarily on the basis of quality of service, project management expertise, andability to provide integrated solutions. Other competitive factors include application of state-of-the-arttechnology, geographic location and availability of personnel.  A significant portion of ARCADIS’ revenue isgenerated through direct contact and negotiations with clients resultinglargely from existing relationships rather than through public or other biddingprocedures.  The development of new andmore efficient technology by competitors of ARCADIS may have an adverse effecton ARCADIS if such technology is not accessible to ARCADIS or is incompatiblewith the services provided by ARCADIS.

 

**C.****                 *Organizational**structure***

 

ARCADIS N.V. is notdirectly or indirectly owned or controlled by another corporation or by anygovernment, foreign or domestic. Only the major consolidated companies arelisted below, stating the percentage of ownership by the Company and thecountry in which they are domiciled, if outside the Netherlands.

 

ARCADIS G&M Inc., (100%) *USA*ARCADIS Nederland  BV (100%)ARCADIS Deutschland GmbH (100%)*Germany*Grupo EP Ingenieria y ServiciosIntegrales SA (50%) *Spain*ARCADIS Euroconsult BV (100%)ARCADIS Belgium (including Gedas NV)(100%)*Belgium*ARCADIS FC International SA (100%),*France*ARCADIS Logos Engenharia SA (50% +one share) *Brazil*ARCADIS Geotecnica Consultores SA(67%) *Chile*

 

**D.****                 *Property**, plant andequipment***

 

The principal propertyand equipment of ARCADIS consists of land, offices, operating facilities,storage grounds, workshops, vehicles, equipment and software which, at December31, 2002, represented approximately 16% of the Company consolidatedassets.  The Company believes that itsoffices, operating facilities, vehicles and equipment are well maintained,suitable, and adequate for its current operations and that suitable additionalor substitute space will be available as needed to accommodate any expansion ofoperations and for additional offices.

 

The Company headquartersare leased and are located in Arnhem, the Netherlands. The Company ownsregional offices, workshops, storage grounds and land throughout theNetherlands. The Company leases approximately 200****local offices throughout theNetherlands, Europe, the United States, Asia, Africa, Latin America andIndonesia.  During fiscal 2002,aggregate annual rental payments on real estate leased by the Company and itssubsidiaries approximated €33 million.

 

The principal assetsutilized in the Company’s consulting/engineering operations consist primarilyof computer equipment and software, instruments, operating equipment, workshopinventory, office inventory and reproduction equipment.  Some of the computer equipment isleased.  The principal assets utilizedin the Company contracting

 

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operations consist primarily of operating equipmentsuch as earth-moving equipment, front loaders and trucks, mowers, tractors,drainage machines and office and workshop inventory as well as computerequipment.  Some of the operatingequipment is leased.

 

The Company leasesapproximately 1,600 automobiles. During fiscal 2002, aggregate annual leasepayment on cars leased by the Company approximated €11 million.

 

At December 31, 2002, noenvironmental issues exist at any of the Company’s facilities that may affectthe utilization of such facilities.

 

**ITEM 5****.    OPERATING AND FINANCIAL REVIEW ANDPROSPECTS**

 

**A.****            Operating results**

 

**General**

 

Amounts previously reported in Dutch guilders are nowreported in EUR using the irrevocably fixed conversion rate which becameeffective on January 1, 1999 (€ 1 = NLG 2.20371). See also Notes to theConsolidated Financial Statements.

 

The Consolidated Financial Statements of the Companyare prepared in accordance with Netherlands law and Netherlands GAAP.Netherlands GAAP differs in certain respects from U.S. GAAP.  See Note 17 of the Notes to ConsolidatedFinancial Statements.

 

The Company’s results mayfluctuate from period to period due to project delays, occasioned by regulatoryagency approvals or client considerations, weather and the number of workingdays available.

 

There is only a limitedrisk that net cash flow, denominated in the currencies in which the operatingcompanies perform their purchasing and selling activities, will be negativelyinfluenced by exchange rate changes. As in 2001, at the end of 2002 financialinstruments have not been used to cover these currency risks.

 

The Company does not usefinancial instruments to cover the risk associated with the conversion into EURof equity and income from foreign operations and non-consolidated companiesoutside the EUR-zone.

 

In principle, the Companymanages interest rate risks by financing fixed assets and part of currentassets with shareholders’ equity, long-term debt, and other long-termliabilities. The remainder of current assets is financed with short-term debtincluding revolving bank credits with variable interest rates. Based on theCompany’s interest risk profile, financial instruments were not used during2002 (as well as 2001) to cover the risk.

 

**Criticalaccounting policies**

 

The Company considerscertain accounting policies related to revenue and cost recognition andallowance for doubtful accounts to be critical policies due to the estimationprocesses involved in each.

 

*Revenueand Cost Recognition*

 

Revenue from fixed feecontracts is recognized on the percentage of completion method, measuredgenerally by estimating the status of completion of the project and recognizingthe related estimated percentage of revenue and gross profit expected from theproject.

 

Revenue from cost-pluscontracts is recognized as costs are incurred plus applicable fees. Revenuefrom time-and-material contracts is recognized at contract rates as work isperformed and material costs are incurred.

 

Revenue is recognized onadditional services requested by clients for which a formal change order hasnot been obtained when the realization is probable and the amount can bereliably estimated.  Unbilled fees, atestimated

 

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billable amounts, represent revenue recognized forwhich billings had not yet been presented to customers.

 

Operational costs includeall direct material and labor costs and those indirect costs related tocontract performance, such as indirect labor. Selling, general, and administrativecosts are charged to expense as incurred. Provisions for estimated losses onuncompleted contracts are made in the period in which such losses aredetermined. Changes in job performance, job conditions, and estimatedprofitability, including those arising from contract penalty provisions, mayresult in revisions to estimated costs to complete and revenues to be earnedand are recognized in the period in which the revisions are determined.  The risk that these estimates may changegenerally increases as the duration of the project increases.

 

*Allowancefor Doubtful Accounts*

 

The Company is requiredto estimate the collectibility of its receivables. A considerable amount ofjudgment is required in assessing the ultimate realization of these receivables,including the credit-worthiness of each client. If the financial condition ofthe Company’s clients were to deteriorate, resulting in an impairment of theirability to make payments, additional allowances may be required.

 

**Resultsof operations**

 

The table below presents,for the periods indicated, (i) the percentage relationship that certain itemsin the Company’s Consolidated Statements of Income bear to net revenue and (ii)the percentage increase (decrease) in EUR amounts for such items from year to yearfor the three-year period ended December 31, 2002.

 
|                                                                        |   | **Percentages** |   | **Percent change** |   |
|-----------------------------------------------------------------------------|--------|-----------------|--------|--------------------|--------|
| **Year**                                                                    |   | **2002**        |   | **2001**           |   | **2000** |   | **02/01** |   | **01/00** |   |
| Gross revenue                                                               |   | 141.8           |   | 141.5              |   | 140.9 |   | 2.7 |   | 2.7 |   |
| Materials,  services of third parties and subcontractors                    |   | 41.8            |   | 41.5               |   | 40.9 |   | 3.2 |   | 3.8 |   |
| Net revenue                                                                 |   | 100.0           |   | 100.0              |   | 100.0 |   | 2.5 |   | 2.3 |   |
| Operational  costs                                                          |   | 89.8            |   | 90.4               |   | 90.4 |   | 1.9 |   | 2.3 |   |
| Depreciation                                                                |   | 2.8             |   | 2.7                |   | 3.2 |   | 3.4 |   | (14.1 | ) |
| Operating income                                                            |   | 7.4             |   | 6.9                |   | 6.4 |   | 10.5 |   | 10.5 |   |
| Financing  income/expenses net                                              |   | (0.4            | )      | (0.5               | )      | (0.6 | ) | (16.6 | ) | (19.9 | ) |
|                                                                        |   |            |   |               |   |   |   |   |   |   |   |
| Income from  operations before taxes                                        |   | 7.0             |   | 6.4                |   | 5.8 |   | 12.5 |   | 13.6 |   |
|                                                                        |   |            |   |               |   |   |   |   |   |   |   |
| Taxes                                                                       |   | 2.4             |   | 2.2                |   | 2.0 |   | 15.3 |   | 11.4 |   |
| Income of  consolidated companies from operations after taxes               |   | 4.6             |   | 4.2                |   | 3.8 |   | 11.0 |   | 14.9 |   |
| Income of  non-consolidated companies and long-term investments after taxes |   | 0.1             |   | 0.1                |   | 0.1 |   | 21.8 |   | (37.6 | ) |
|                                                                        |   |            |   |               |   |   |   |   |   |   |   |
| Group income  from operations after taxes                                   |   | 4.7             |   | 4.3                |   | 3.9 |   | 11.2 |   | 12.7 |   |
|                                                                        |   |            |   |               |   |   |   |   |   |   |   |
| Amortization of  goodwill                                                   |   | 0.0             |   | 0.0                |   | — |   | 198.4 |   | — |   |
| Minority  interest                                                          |   | 0.4             |   | 0.2                |   | 0.1 |   | 102.9 |   | 35.6 |   |
|                                                                        |   |            |   |               |   |   |   |   |   |   |   |
| Net income  excluding extraordinary items                                   |   | 4.3             |   | 4.1                |   | 3.8 |   | 6.6 |   | 11.6 |   |
| Extraordinary  items                                                        |   | —          |   | 0.3                |   | — |   |   |   |   |   |
|                                                                        |   |            |   |               |   |   |   |   |   |   |   |
| Net income after  extraordinary items                                       |   | 4.3             |   | 4.4                |   | 3.8 |   | (1.7 | ) | 21.0 |   |

 

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**Fiscal2002 compared to fiscal 2001**

 

# ***Net income***

 

Despite worsened economicconditions, ARCADIS improved profitability in 2002. Net income from operationsrose 7% to €24.9 million, compared to €23.2 million in 2001.  Net income from operations per shareincreased 7% to €1.22, compared to €1.14 in 2001.  The acquisition in mid-2002 of French FCI contributed to profitgrowth as of the third quarter.  To someextent, the declines in the exchange rates of U.S., Brazilian, and Chileancurrencies against the euro offset these gains. Excluding these exchange ratedeclines, profit  growth would havetotaled 11%. Net income (after amortization of goodwill and extraordinaryitems) totaled €24.7 million, or €1.21 per share, against €25.1 million, or€1.24 per share in 2001.  The decline innet income per share is partly due to the fact that net income in 2001 includedan extraordinary gain of € 2 million derived from the sale of anon-consolidated company. Since 2001, the Company has capitalized and amortizedpaid goodwill over the economic lifetime of the asset involved. The effect ofthis approach on results has been limited to date (2002: €0.2 million, 2001: €0.1million).

 

*Dividends*

 

Management has proposedand on May 14, 2003 the Annual General Meeting of Shareholders approved, thedividend to € 0.48 per share in 2002, compared to € 0.44 per share in 2001.This is an increase of 9%. The dividend will be paid out in cash. Calculated atthe 2002 closing price of ARCADIS shares on Euronext of € 7.94, the dividendyield is 6%, compared to 4.7% in 2001.

# ** **

# ***Gross revenue***

 

Gross revenue in 2002increased by 3% to €819 million, compared to €797 million in 2001. Acquisitionscontributed 4% to growth, while exchange rate declines exerted a negativeeffect of 3%. Organic growth was 2%, with the Company’s activities in Belgium,Spain, and South America demonstrating particularly strong growth. The Dutchconsulting activities, specifically in rail infrastructure, also contributed togrowth. Revenues in the United States declined slightly, as growth in theinfrastructure and environmental segments flattened before being able tocompensate for the declines in the buildings and telecom markets.

 

# ***Geographical distribution***

 

Acquisitions and currencyexchange rate developments produced a considerable shift in the geographicaldistribution of revenue in 2002. Revenue contribution from North and SouthAmerica declined to 36% from 39% in 2001. 36% of revenues were generated in theNetherlands compared to 38% in 2001. The largest increase was in other Europeancountries, which now represent 22% of revenue compared to 18% in 2001, while 6%of revenue came from other countries, up from 5% in 2001.

 

# ***Net revenue***

 

ARCADIS’ net revenueincreased 3% to €578 million from €563 million in 2001. Developments in netrevenue were comparable to developments in gross revenue.

 

# ***Operating income***

 

Operating income grew by11% in 2002, totaling  €42.9 million in2002 against €38.8 million in 2001. This was mainly the result of a substantialimprovement in the operational margin, which increased from 6.9% to 7.4%.Acquisitions also contributed to the increase in operating income; however, thenegative effects from the declines in exchange rates largely offset theseincreases. Excluding these currency fluctuations, operating income increased by16%. Except for the Netherlands, all regions, particularly other Europeancountries and South America, contributed to the improvement.

 

# ***Depreciation, financing expenses***

 

Depreciation roseslightly to a total €15.9 million. A decline resulting from the divestiture inmid-2001 of the composting activities was offset by an increase related to theacquisition of FCI in France. Despite this acquisition, financing expensesdecreased from €2.7 million in 2001 to €2.2 million in 2002. This was mainlythe  result of efforts to reduce theneed for working capital.

 

26

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# ***Tax rate***

 

The tax rate was 35.4%,slightly higher than the 34.6% in 2001. The higher rate is attributable to adecreased use of tax loss carry forwards, while in 2001 operational incomeincluded a non-taxable gain.

 

# ***Gain in contribution from non-consolidated companies;minority interest***

 

Contributions fromnon-consolidated companies rose from €0.5 million to €0.7 million. The increasewas primarily the result of a dividend related to an earlier sale of theparticipation in the Holland Environmental Venture Fund. Minority interest –the part of the profits that flows back to the co-owners of units which are not100% owned by ARCADIS – rose sharply, primarily the result of strong earningsgrowth in Brazil, where ARCADIS has 50% plus one share in the local operatingcompany.

 

# ***Number of outstanding shares***

 

The number of outstandingshares was almost unchanged at 20.3 million. Beginning in 2001, shareholderswere no longer given the choice for stock dividends, and as a result, nofurther dilution of earnings per share took place.

 

**Fiscal2001 compared to fiscal 2000**

 

*NetIncome*

 

ARCADIS’ results for thefull-year 2001 period reflected sustained growth in profitability despitedifficult economic conditions. Full-year net income before extraordinary itemsgrew by 12% to € 23.2 million. Net income per share before extraordinary items totaled€ 1.14, an increase of 10%. The increase in net income was attributable toorganic growth and was consistent with the financial goals outlined in ARCADIS’revised 2000 strategy. The operating margin (operating income as a percentageof net revenue) improved from 6.4% to 6.9%, also consistent with the Company’sfinancial goals. This increase was the result of an increase in operatingincome, which rose by 11% to € 38.8 million.

 

During 2001, ARCADISrecognized an extraordinary gain of € 2 million, or € 0.10 per share,reflecting the balance of an extraordinary gain realized from the book profiton the sale of a non-consolidated company and an extraordinary charge relatedto the restructuring of the Company’s property valuation activities in theNetherlands. Including this extraordinary gain, and after amortization ofgoodwill, net income for the full-year 2001 increased 21% to € 25.1 millionfrom € 20.7 million in 2000, while net income per share increased 19% to € 1.24from € 1.04 in 2000.

 

*Dividends*

 

Management raised thecash dividend to € 0.44 per share from € 0.39 per share in 2000, an increase of13%. Using the 2001 closing price of ARCADIS shares on Euronext of € 9.35, thedividend yield was 4.7%.

 

*Grossrevenue*

 

Full-year 2001 grossrevenue increased by almost 3% to € 797 million from € 776 million in 2000.This increase was almost exclusively the result of organic growth. For thefull-year 2001, fluctuations in exchange rates increased revenues by  0.5%. Revenue increases from acquisitions in the United States and Brazil weremore than offset by a decline resulting from the sale of the environmentalcontracting and composting activities in the Netherlands. Revenues were alsoaffected by the Company’s decision to reduce its presence in marginally profitableactivities.

 

*Geographicalrevenue*

 

The geographicaldistribution of revenue has changed only slightly in 2001. In 2001, 39% ofARCADIS’ revenues were derived from North and South America (2000: 38%), 38%from the Netherlands (2000: 39%), 18% from other European countries (2000:18%), and 5% from other countries (2000: 5%).

 

27

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*Netrevenue*

 

ARCADIS’ own productionor net revenue rose 2% to € 563 million, compared to € 551 million in 2000.Factors influencing gross revenue also affected net revenue. Because a numberof turnkey contracts were completed in the United States, gross revenue in thebuildings segment declined sharper than net revenue. Offsetting this declinewas an increase in the number of environmental turnkey contracts in the UnitedStates, as well as growth in the contracting activities in the Netherlands,which resulted in the overall ratio between gross revenue and net revenueremaining substantially unchanged.

 

*Operatingincome*

 

Operating incomeincreased approximately 11% from 2000 to 2001. The main contributors to thegrowth in operating income during 2001 were North and South America. In theUnited States, the infrastructure and environmental markets produced goodresults; while in South America, Chile demonstrated greatly improved results.The Netherlands also contributed to the improved operating income, mainly as aresult of increased activity in the infrastructure sector. However, thecontribution from the Company’s Dutch operations was modest because ofdecreased activity in property valuations. In Europe, the Belgian activitiescontributed well, while the improvements initiated in income development atARCADIS Euroconsult in 2000 continued in 2001.

 

*Operationalmargin*

 

 The operational margin – income fromoperations before taxes as a percentage of net revenue – rose from 6.4% in 2000to 6.9% in 2001. The Company attributed the increase to a heightened focus onsegments with higher profit margins.

 

*Depreciation,financing expenses*

 

Depreciation declinedfrom € 17.9 million in 2000 to € 15.4 million in 2001, primarily as a result ofthe divestiture of the capital-intensive environmental contracting andcomposting activities in the Netherlands. Financing expenses declined from €3.3 million in 2000 to € 2.7 million in 2001, principally attributable to theCompany’s policy to reduce working capital needs. Net working capital (work inprogress plus accounts receivable minus accounts payable) declined by 10% in2001.

 

*Taxrate*

 

The tax rate in 2001totaled 34.6% and was slightly lower than the 35.3% in 2000. The lower ratewas, among other things, the result of a good contribution to profits fromChile, where corporate tax rates are lower than the average in the othercountries in which ARCADIS is active.

 

*Contributionfrom non-consolidated companies, minority interest*

 

Contributions fromnon-consolidated companies totaled € 0.5 million in 2001 and were lower thanthe € 0.9 million achieved in 2000. This was mainly the result of the sale ofthe Company’s minority interest in Analytico, an environmental laboratory.Minority interest rose considerably, mostly as a result of improved earnings inChile.

 

*Numberof outstanding shares*

 

The number of outstandingshares was almost unchanged at 20.3 million during 2001. U.S. employeesparticipating in the Company’s stock purchase programs caused a slight increasein 2001. In 2001, a total of 9,283 shares were issued at an average price ofUS$ 7.40 per share. In 2001, no options were exercised. The average number ofoutstanding shares in 2001 was 20.3 million, an increase over the 20.0 millionin 2000. In mid-2000, 500,000 new shares were issued as a result of a stockdividend payment. Beginning in 2001, shareholders were no longer given thechoice of receiving their dividends in stock.

 

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**B.****                 Liquidity and capital resources**

 

Management believes thereare no transactions, arrangements and other relationships with non-consolidatedentities that could materially affect the Company’s liquidity or itsavailability of or requirements for capital resources.

 

**Fiscalyear 2002**

 

# ***Balance Sheet***

 

The balance sheet total of the Company****increased from €310 million at year-end2001 to €344 million at year-end 2002. The acquisition of FCI and the exchangerate declines in North and South America were the main factors contributing tothe increase. Under the line item ‘Intangible Fixed Assets’, an amount of €8.3million in goodwill was activated on December 31, 2002. This represents anincrease of €6.7 million compared to the prior year. Of this increase, €5.8million was related to the acquisition of FCI. The increase in fixed assets isalso related to this acquisition. As a percentage of gross revenue, workingcapital (inventories plus trade receivables minus accounts payable) roseslightly from 16.0% in 2001 to 16.6% in 2002.

 

At year-end 2002, €137 million was available inshort-term credit facilities. As of December 31, 2002 the Company had drawndown approximately €15 million on these facilities. In addition, banks havepledged guarantees related to projects for a total of €29 million. At year-end2002, ARCADIS’ long-term debt totaled €28 million.

 

On balance, shareholders’ equity remained unchanged at€125.0 million. Of the 2002 net income, €9.7 million was appropriated fordividend payment, while €15.0 million was added to shareholders’ equity. Thiswas offset by exchange rate declines valued at €11.8 million and a write-off of€3.2 million related to the temporary purchase of Company shares to covergranted options.

 

At year-end 2002, solvency (shareholders’equity as apercentage of balance sheet total) was 38.4%, which is slightly lower than the42.2% at year-end 2001, the result of currency exchange rate declines and, to alesser extent, the acquisition of FCI. The debt to equity ratio was 0.2 at year-end2002. The return on average capital invested (shareholders’ equity plusinterest-bearing debt) as of December 31, 2002 was 16.5%.

 

# ***Cash flow***

 

Cash flow, underNetherlands GAAP defined as net income plus depreciation, rose from €40.6million in 2001 to €40.8 million in 2002. Because of a decline in workingcapital, particularly in the last quarter of the year, the cash flow fromoperating activities (including changes in working capital and comparableitems) was €46 million. As a result, net cash (subtracting all interest-bearingdebt) at year-end 2002 was €10 million.

 

# ***Capital expenditures higher through acquisitions***

 

Capital expenditures for (in)tangible fixed assets(excluding goodwill effects from acquisitions) declined € 1.1 million to €14.2million from €15.3 million in 2002. This decline was predominantly the resultof the sale in the second half of 2001 of the capital-intensive compostingbusiness. Capital expenditures during 2002 were mainly related tocommunications and computer equipment. In 2002, the Company invested anadditional €16.3 million, compared to €7.1 million in 2001, in the acquisitionof consolidated and non-consolidated companies and in other long-term receivables.The primary acquisition was FCI, for which ARCADIS paid €12 million.

 

 

**Operational cash flow**

 

Cash flow, defined as netincome plus depreciation, rose from €40.6 million in 2001 to €40.8 million in2002, an increase of 1%. Development of total cash flow from operationalactivities (also including changes in working capital and comparable items) was€45.8 million in 2002, a decline of €3.9 million from 2001.

 

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Capital expendituresduring 2002 and 2001 were €14.2 and €15.3 million, respectively, principallyfor computer and communications equipment. The net amounts spent onacquisitions of consolidated and non-consolidated companies during 2002 and2001 were €16.2 million and €5.7 million. These amounts were paid from internalcash flow.

 

In 2000, the Companyconverted part of its short-term bank overdraft into two long-term loans, bothamounting to €9.1 million. These loans mature in May 2005, and have interestrates of 6.1% and 6.2%, respectively. The total short-term credit facilitiesamount to approximately €137 million. The Company has pledged a portion ofcurrent receivables and other assets to secure a small portion of the availablecredit facilities

 

*Commitments and contractualobligations*

ARCADIS has obligationsunder purchase agreements for property, plant and equipment, and othercommitments arising from the normal course of business which are not materialto the consolidated financial statements.

 

Payments made under non-cancelable operating leasesduring 2002, 2001 and 2000 were EUR 30.2 million, 25.7 million and EUR 30.3million, respectively.  Future minimumpayments for non-cancelable operating leases during the next five years andthereafter are as follows (in millions of EUR):

 

| **Years ending  December 31,** |   | **Amount** |   |
|--------------------------------|--------|------------|--------|
| 2003                           |   |       | 29.9   |   |
| 2004                           |   |       | 26.3   |   |
| 2005                           |   |       | 19.2   |   |
| 2006                           |   |       | 14.0   |   |
| 2007                           |   |       | 10.7   |   |
| Thereafter                     |   |       | 34.5   |   |
|                           |   |       |   |
| Total                          |   |       | 134.6  |   |

 

The aggregate maturity oflong-term debt as of December 31, 2002 is as follows:

 

| **Years  ending December 31,** |   | **Amount** |   |
|--------------------------------|--------|------------|--------|
|                           |   |       |   |   |
| 2003                           |   |       | 1.0    |   |
| 2004                           |   |       | 7.4    |   |
| 2005                           |   |       | 0.3    |   |
| 2006                           |   |       | 18.3   |   |
| 2007                           |   |       | 0.1    |   |
| Thereafter                     |   |       | 1.5    |   |
|                           |   |       |   |
| Total                          |   |       | 28.6   |   |

 

At December 31, 2002,ARCADIS had EUR 1.0 million commitments arising from acquisitions andparticipations.

 

Management believes thatcash and funds generated from operations, together with its existing financingagreements, will be sufficient to meet its working capital and capitalexpenditures requirements for 2003.

 

**C.****                 Researchand development, patents and licenses etc.**

 

The Company has spent between 0.5% and 1% of itsconsolidated gross revenues on research and development projects during each ofthe last three fiscal years. The Company expects that, consistent with pastexperience, most of its technological advances will be made in response tospecific needs and opportunities. The Company has benefited

 

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from its understanding of soil and water dynamics and fromtechnological and knowledge advances realized in connection with specificanalysis, planning, development, construction and treatment projects which ithas conducted for its clients.

 

The Company’s researchspecifically has resulted in the development of several field instruments forhydrocarbon detection which the Company uses for soil and groundwaterinvestigation.  Research continues toimprove these quick “no-lab” analysis methods. For environmental and ecological reports, data management and detailed engineering,the Company undertakes research in implementing and adjusting computer assisteddesign and software for geographical information systems.

 

The Company also has agroup of research and development specialists who are involved in theperformance of all remediation projects. This group of specialists continuouslymaintains and improves the Company’s core competence in the fields ofseparations technology and understanding of particle size distribution insoils, treatment of surface water and contaminated groundwater, and biologicaldegradation of hydrocarbons and biowaste.

 

 

**D.****                 Trendinformation (first quarter 2003)**

 

ARCADIS’ profitability remained stable in the firstquarter of 2003, compared to the same quarter a year earlier. Net income fromoperations was €3.9 million, or €0.19 per share, level with a year ago. Thisresult was achieved despite difficult market conditions and considerableexchange rate influences. The negative effect from declines in the value ofAmerican, Brazilian and Chilean currencies against the euro was 9%. Despitethis exchange rate effect, gross revenue also remained level with last year€193 million.

 

As with many companies, the lack of a economicrecovery combined with ongoing political uncertainty had a negative effect onmarket conditions for ARCADIS in the first quarter of 2003. This resulted inlower organic growth in company activities and margin pressure. However, bysticking to its charted strategic course focussed on profitable growth in theCompany’s existing geographical markets, ARCADIS was able to report stablerevenues and profits despite the difficult operating conditions and theconsiderable impact of exchange rates in the quarter.

 

The Company’s revenues for the 2003 first quarterreflect the impact of a negative currency effect of 9%, which was offset byacquisitions (mainly FCI in France), which contributed growth of 8%, andorganic growth of 1%. Organic growth mainly occured in Belgium and the UnitedKingdom. In the other countries where ARCADIS is present, the organic activitylevel was reasonably stable.

 

Of the 10% decline in operating income, 9% was causedby exchange rate differences. Acquisitions increased operating income by 7%,while organic contributions to operating income declined 8%. This decline predominantlyoccured in the Netherlands and Brazil. In the Netherlands, poorer marketconditions, combined with higher pension charges caused margin pressure, whilein Brazil, the change in government late last year has led to delays in projectawards. Because ARCADIS has a share in its Brazilian operations of slightlyover 50%, the decline in operating income is partially compensated for throughthe minority interest line. A slightly lower tax rate, better results ofnon-consolidated companies and a lesser influence of minority interest causednet income from operations to be level with last year.

 

 

## **Segment Developments**

The Company’sinfrastructure and environmental segments, which ARCADIS deems its two mostimportant segments, representing more than 80% of overall gross revenues,showed continued revenue growth during the first quarter of 2003, whilerevenues from its building and communications segments continued to decline.

 

Revenues for the Company’s infrastructure segmentincreased by 7% during the first quarter of 2003 compared to the same period last year.  The Company attributes the growth to its operations in Belgium,Germany, and, to a lesser extent, the United States.  The Company is currently conducting significant infrastructureprojects in those countries, including work on both a high-speed railway linefrom Ebensfeld and Erfurt and projects related to the 2002 floods in Germany.

 

Growth of the Company’s existing operations in itsenvironmental segment, while positive, was a modest 1% when compared to thefirst quarter of 2002.  The Companyattributed this growth to operations in Belgium and Brazil, both of which havean emerging market for environmental services.

 

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Revenues in the first quarter of 2003 in the Company’sbuildings segment, which is the most vulnerable to cyclical economicconditions, declined by 10% when compared to the same period last year.  In particular, revenues for this segmentdeclined in all European countries where ARCADIS operates.  The declines in Europe were partly offset bycontinued revenue growth in the United States.

 

Revenues in the Company’s communications segmentdeclined by 15% when compared to the first quarter of 2002, as a result of aslower-than-expected start to a new round of real estate valuations in theNetherlands and continued softness in the telecommunications market.  The Company continued to see positiveresults in its GIS operations during the quarter.

 

 

**Outlook**

The continued pooreconomic conditions and political insecurities have a dampening effect oninvestments in both the public and private sectors. The infrastructure marketprovides a stable basis for revenues for ARCADIS, with growth opportunitiesmainly existing in Europe. ARCADIS’ unique expertise in rail infrastructure,especially rail-based systems technology, offers opportunities for growth, notjust in the Netherlands but in other countries as well. In the environmentalmarket, the Company believes it can further increase its market share in theUnited States, while also expanding its presence in less developedenvironmental markets such as France and Brazil. In the buildings market, aslight recovery is visible in the United States, while recovery of the telecommarket is not expected for the time being. The new round of property valuationsin the Netherlands, as well as demand for GIS, can positively influencerevenues in the communications segment.

 

The long-term prospects for ARCADIS remain strong, but current economicreality results in pressure on revenues and profit. Through expansion of itsrelationships with existing clients and well-directed initiatives, ARCADIS willpursue existing opportunities for growth, of which its efforts in the facilitymanagement market is a good example. At the same time, the Company willcontinue to combat margin pressure by introducing cost reductions wherepossible. At current exchange rates of the U.S. dollar, the Brazilian reaal andthe Chilean pesos, the negative currency impact will not be fully compensatedby the contribution from acquisitions completed in 2002. ARCADIS’ balance sheetis healthy and offers enough room for expansion of activities by way of newacquisitions, which remains an important priority in 2003. In line with thestrategy, all these actions are directed at achieving growth in revenues andprofit, but in view of current market conditions it is not possible to givespecific guidance with regard to the 2003 results at this time.

 

 

**ITEM 6.  DIRECTORS , SENIOR MANAGEMENT AND EMPLOYEES**

 

**A.****            Directors and senior management**

The Company is a public company with limited liabilityincorporated under the laws of The Netherlands to which the rules for largecompanies, as set out in Sections 152 to 164 inclusive of Book 2 of the DutchCivil Code, or the “Large Company Rules”, apply. Under the Large Company Rules,companies must have a two-tier system of corporate governance, consisting of aSupervisory Board and a Managing Board (by ARCADIS called Executive Board). TheSupervisory Board supervises the policy conducted by the Managing Board, aswell as the company’s general course of affairs and its business. In additionit shall assist management with advice. In the performance of their duties themembers of the Supervisory Board shall be guided by the interest of the companyand the enterprise connected therewith.

 

Under the Large Company Rules, our day to daymanagement is vested with the Managing Board. Subject to certain statutoryexemptions, the following powers, among others, are vested in the SupervisoryBoard by the Large Company Rules: (1) appointment of the members of theSupervisory Board; (2) appointment and dismissal of the members of the ManagingBoard; (3) adoption of the annual accounts; and (4) approval of certainresolutions by the Managing Board. In performing their duties, members of theSupervisory Board must consider the interests of the company and its business.

 

The Company’s Supervisory Board is an independent andself-appointing entity. The Supervisory Board appoints a chairman and a vicechairman from among its members. Persons employed by the Company or anaffiliated company cannot be appointed as Supervisory Board members.

 

Supervisory Board members are appointed for a term offour years and may be re-appointed thereafter.

 

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Members of the Supervisory Board may serve a maximum term of 12 yearsfrom the date of their first appointment as member of the Supervisory Board.

 

The remuneration of each member of the SupervisoryBoard is determined by the general meeting of shareholders following a proposalto that effect by the Supervisory Board.

 

We made a number of changes to our articles ofassociation which will increase shareholders influence over the appointment ofthe members of the Executive Board and the Supervisory Board. This proposal wasdiscussed and decided upon in the meeting of Shareholders held at 5 June, 2003.

 

The members of the Supervisory Board of the Companyare currently as follows:

 
| **Name**                             |   | **Year of birth** |   | **Position**                         |
|--------------------------------------|--------|-------------------|--------|--------------------------------------|
| Luck M. van Leeuwen(a), (b), (c),(d) |   | 1933              |   | Supervisory Board member (Chairman)  |
| Ross A. Webber(a)                    |   | 1934              |   | Supervisory Board member (Secretary) |
| Andre A. van der Louw(c),(d)         |   | 1933              |   | Supervisory Board member             |
| Jan Peelen(b)                        |   | 1940              |   | Supervisory Board member             |
| Carlos Espinosa de Los  Monteros(b)  |   | 1944              |   | Supervisory Board member             |
| Rijnhard W.F. van Tets(a)            |   | 1947              |   | Supervisory Board member             |
| Gerrit Ybema                         |   | 1945              |   | Supervisory Board member             |

 

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(a)                                  Memberof the Audit Committee

(b)                                 Memberof the Selection and Remuneration Committee

(c)                                  Memberof the Integrity Committee

(d)                                 Termset to expire following the 2004 Annual General Meeting of Shareholders

 

**Prof.dr. Luck M. van Leeuwen**, age 69 has the Netherlandsnationality.  He was first appointed tothe Company’s Supervisory Board in April 1991 and was appointed chairman in2001.  He obtained a doctor in economicsdegree at the Rotterdam University in 1965. Prof. Van Leeuwen is a professor at the Catholic University Brabant inTilburg, The Netherlands. From 1987 until 1999, Mr. Van Leeuwen served as amember of the Netherlands Senate.  From1979-1994, Mr. Van Leeuwen was chairman of the executive board ofAssurantieconcern Stad Rotterdam anno 1720. He currently serves as a non-executive board member of the followinginstitutions: Berenschot Holding N.V., Betonson Beheer N.V., InternationalAdvisory Board Fortis, Colonnade N.V., Van Nieuwpoort Beheer N.V., AdvisoryBoard Institut voor Bedrijfskundigen (HBO), Arenthals Grant Thornton,Foundation Economic Cooperation Netherlands and Emerging Countries (SENO), andFoundation Administration Office Shares Royal Volker Wessels Stevin N.V.

 

**Mr.André A. van der Louw**, age 69, has the Netherlandsnationality.  He joined the Company’sSupervisory Board in June 1986.  He wasa member of the Netherlands Parliament from 1970 until 1971, and from 1982until 1983; chairman of the Netherlands Labor Party from 1971 until 1974; Mayorof the City of Rotterdam from 1974 until 1981; and Minister of Culture,Recreation and Social Works of the Netherlands from 1981 until 1982.  He was chairman of the Rijnmondraad from1983 to 1986; chairman of the Mediaraad from 1988 until 1994; and chairman ofthe Netherlands Broadcasting Corporation from 1994 until 1998.  Mr. van der Louw also serves as a member ofthe supervisory board of Stadion Feijenoord.

 

**Dr. RossA. Webber**, age 68, has the American nationality.  Mr. Webber serves the company as a member ofthe Company’s Supervisory Board since 1993. His prior positions were Vice President of the University of Pennsylvania(1981-1986) and Chairman Management Department Wharton School (10991-1995). Dr.Webber is Professor Emeritus at the Wharton School of the University ofPennsylvania and is a director of American Water Works Co. Inc.and NewJersey-American Water Company.

 

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**Mr.Carlos Espinosa de los Monteros**, age 58, has the Spanishnationality.  Mr. Espinosa serves as amember of the Company’s Supervisory Board since 1998.  His current position is chairman and CEO of the executive boardof Mercedes Benz España S.A. and Daimler Chrysler España Holding.  He previously was president of IBERIA S.A.from 1983 until 1985 and president of the National Institute for Industry (INI)in Spain from 1979 to 1983.  Mr.Espinosa currently serves as a member of the supervisory board of the followingcompanies:  Acciona S.A., Inditex S.A.(Zara), and Gonzalez Byass S.A.

 

**Drs. JanPeelen**, age 60, has the Netherlands nationality.  He was appointed as the Company’sSupervisory Board member in 2000. Mr. Peelen obtained a a doctor in businesseconomics degree from the Vrije Universiteit Amsterdam in 1964 and a certifiedpublic accountant degree from the Vrije Universiteit Amsterdam in 1970.  Mr. Peelen started his career with theUnilever group of companies in 1966 and served as chairman of Van den Bergh enJurgens NV from 1979 until 1983 and as chairman of Industrias Gessy Lever inBrasil from 1984 until 1987.  Since 1987Mr. Peelen was a member of the executive boards of Unilever N.V. and UnileverPLC. In this position he also served as director of personnel since 1996.  Mr. Peelen reached retirement age in 2000.He currently serves as chairman of the supervisory board of VVAA groep B.V. andas a member of the supervisory boards of Friesland Coberco Dairy Foods, AlbronBV and Bührmann NV, and is supervising board member of the University forAgriculture of Wageningen and the National Regie-Orgaan Genomics.

 

 

**Jhr.Drs. Rijnhard van Tets**, age 55, has the Netherlandsnationality.  Mr. Van Tets obtained aMaster in Law and Business Administration degree from the Universiteit Leidenin 1971.  His prior positions includevarious positions in the area of international banking and finance.  Mr. Van Tets retired from the executiveboard of the ABN-AMRO Bank on January 1, 2002 and currently serves as advisorto the executive board of the ABN-AMRO Bank. He joined the ABN-AMRO Bank (formerly known as the Algemene BankNederland) in 1983 and was a member of its executive board from 1988 until theend of 2001.  While at ABN-AMROBank, he held the following executive positions:  chairman of the Investment Banking Division of ABN-AMRO BankN.V. from 1990 until 2001, Senior Executive Vice President from 1986 until 1988and Executive Vice President of its Corporate Banking Division from 1983 to1986.  Prior to joining the ABN-AMROBank, Mr. Van Tets was Vice President of Corporate Finance with First BostonCorporation in New York from 1977 until 1983, Senior Vice President with SogonSwiss in New York from 1975 until 1977, and held functions with SocietéGénérale in Paris and  with BanqueEuropéenne  de Credit in Brussels from1973 until 1975.  Mr. Van Tets currentlyserves as a member of the supervisory board or similar corporate organ of thefollowing companies: International Securities Market Association (chairman),National Foundation Holland Casino, Wegener N.V. (chairman), Reliant EnergyEurope BV, Foundation Company Pensionfund Building Industry (chairman),Foundation Verenigd Bezit and Foundation Castle De Haar.

 

**Drs.Gerrit Ybema**, age 58, has the Netherlands nationality andserves as member of the Supervisory Board since May 2003.  Mr. Ybema obtained a degree in Economics,with specialization in Internal Economic Relations, from the RijksuniversiteitGroningen in 1977.  He has held manydiverse government positions.  Amongothers, he has been employed by the city of Enschede and by the province ofFriesland.  At the latter, he wasengaged in financial policy planning. In 1986 he became policy advisor to the College van Gedeputeerde Statenvan Friesland and fraction president for D’66 in the city council ofLeeuwarden.  In 1989 he was elected tothe Tweede Kamer of the Staten-Generaal. In 1994 he became president of the Vaste Commissie voor Financiën.  From August 1998 until July 2002, Mr. Ybemawas Secretary of State for Economic Affairs in the second cabinet of PrimeMinister Kok, with special focus on external trade. Mr. Ybema currently servesas president of the supervisory board of Northern Gateway Hosting B.V. inGroningen, The Netherlands.

 

The Company’s currentExecutive Board members are:

 
| **Name**         |   | **Year of birth** |   | **Year  of appointment** |   | **Position**                                  |
|------------------|--------|-------------------|--------|-------------------------------|--------|-----------------------------------------------|
| Harrie L.J. Noy  |   | 1951              |   | 1993                          |   | Executive Board member  (Chairman since 2000) |
| Steven M. Blake  |   | 1956              |   | 1999                          |   | Executive Board member                        |
| C. Michiel Jaski |   | 1959              |   | 2000                          |   | Executive Board member                        |
| Jan Zijlstra     |   | 1946              |   | 1999                          |   | Executive Board member                        |

 

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**Harrie L.J. Noy**M.Eng. (1951),****Chairman,was appointed Chairman of the Executive Board in 2000. He is a Dutchcitizen. He joined the Company in 1975 and was appointed Managing Director ofHeidemij Advies BV in 1990, Chairman of the board of Heidemij Advies BV in 1993and member of the Executive Board of the Company in 1994.  Non-executive board functions are with theCivieltechnisch Centrum Uitvoering Research en Regelgeving (CUR), FoundationHabiforum, VNO-NCW, Advisory Board Euronext and the Dutch-German Chamber ofCommerce.

 

**Steven B. Blake** M.Sc.Hydrology (1956) was appointedmember of the Company’s Executive Board in 1999.  He is an U.S. citizen.  Hebecame a director of the Hydrocarbon Services Division ofGeraghty&Miller in1989, was Vicepresident Programs & Strategic Operations Geraghty&Miller 1991-1994,was appointed President of Geraghty&Miller in 1994, and served as CEO ofARCADIS Geraghty&Miller, Inc from 1996 till 1999. Mr. Blake’s othernon-executive board functions are the Construction Industry Roundtable, the USNational Water Well Association and the Federal Relations Committee – CIRT.

 

**Jan Zijlstra**M.Eng. (1946) was appointed member of the Company’s Executive Board in1999.  He is a Dutch citizen. Mr.Zijlsttra started his career with ARCADIS in 1971 and he served in various (management) positionsthroughout his career, most recently as managing director of ARCADIS Bouw/Infra1997-1999. Other non-executive board functions are ONRI (Organization forConsulting and Engineering Firms), Foundation Toekomstbeeld der Techniek,Foundation P3&BI, Railforum and Foundation KNHM.

 

**C.Michiel Jaski (**1959), has the Dutch nationality. In May 2000,Mr. Jaski was appinted to the Company’s Executive Board.  Prior to his appointment to the Company’sExecutive Board, Mr. Jaski was a Global Vice President of Polyesters PlasticsPackaging Shell Chemicals Ltd. from 1999 until 2000; Global Marketing &Sales Director Polyesters Plastics Packaging Shell Chemicals Ltd. from 1998until 1999; Business Unit Manager Europa Shell Chemicals Ltd. from 1992 until1998; Sales Manager Benelux Shell Nederland Chemie from 1990 until 1992;Product Manager Shell Nederland Chemie from 1988 until 1990; Project ManagerInformation Technology Philips UK and Philips Belgium from 1986 until 1987; andInformation Analyst Philips from 1984 until 1985.

 

**Staff directors**

 
| **Name**         |   | **Year of birth** |   | **Year of Appointment** |   | **Principal Occupation**                    |
|------------------|--------|-------------------|--------|-------------------------|--------|---------------------------------------------|
| Hans  van Dord   |   | 1944              |   | 2000                    |   | Corporate Director Business Development     |
| Henk ten Cate    |   | 1953              |   | 2001                    |   | Corporate Director Finance                  |
| Wim  G.M. Rupert |   | 1945              |   | 1994                    |   | Corporate Director Human Resources          |
| Craig  E. Eisen  |   | 1951              |   | 2002                    |   | Corporate Director Mergers and Acquisitions |

 

**Senior management committee**

 

Besides the members of the Executive Board and thestaff directors, the other senior mangement committee members of the Companyare currently as follows:

 
| **Name**            |   | **Year of birth** |   | **Year of Appointment** |   | **Principal Occupation**                   |
|---------------------|--------|-------------------|--------|-------------------------|--------|--------------------------------------------|
| Joe A. Hastey       |   | 1948              |   | 1999                    |   | CEO – ARCADIS G&M                 |
| Yann Leblais        |   | 1952              |   | 2000                    |   | CEO – ARCADIS FCI                     |
| Erhard Robold       |   | 1956              |   | 1998                    |   | CEO – ARCADIS Deutschland             |
| Antonio Roch        |   | 1941              |   | 1999                    |   | CEO – ARCADIS Logos                   |
| Rein J. Sirre       |   | 1942              |   | 2000                    |   | Managing Director – ARCADIS Nederland |
| Kees T. Slingerland |   | 1960              |   | 2000                    |   | Managing Director – ARCADIS Nederland |

 

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| Ludo Smans         |   | 1947 |   | 1995 |   | Managing Director – ARCADIS Belgium     |
|--------------------|--------|------|--------|------|--------|----------------------------------------------|
| Luis Valenzuela    |   | 1943 |   | 1989 |   | CEO – ARCADIS Geotecnica                |
| Luis Villarroya    |   | 1953 |   | 1999 |   | CEO – Grupo EP                          |
| Simon P. Warmerdam |   | 1960 |   | 2000 |   | Managing Director – ARCADIS Euroconsult |

 

There are no family relationships among the directors and executiveofficers of the Company.

 

**B.****              Compensation**

 

The aggregate compensation, including directors’ feesand bonuses, paid or accrued to all directors and executive officers of theCompany as a group (23 persons) with respect to services of such persons in allcapacities during the fiscal year ended December 31, 2002, was €****4.4million.  The aggregate amount set asideor accrued to provide pension, retirement and similar benefits for thedirectors and executive officers of the Company, as a group, during the fiscalyear ended December 31, 2002, was €****0.3 million. Furthermore, in May 2002, 89,500 stock options were granted tothe mentioned members of the Executive Board and SMC with an exercise price of€ 10.79. All these options are exercisable 3 years after the grant date.

Below the information on the compensation of the members of theExecutive Board and the Supervisory board are shown on an individual basis.

 
| **Executive  Board**             |   | **Salary  (2)** |   | **Bonus  (3)** |   | **Pension  premium** |       | **Number  of options** |   |
|----------------------------------|--------|-----------------|--------|----------------|--------|----------------------|------------|------------------------|--------|
| *amounts  in thousands of euros* |   |            |   |           |   |                 | ** ** |                   |   |
| Harrie Noy                       |   | 316             |   | 114            |   | 56                   |       | 15,000                 |   |
| Steve Blake (1)                  |   | 370             |   | 138            |   | 7                    |       | 13,000                 |   |
| Michiel Jaski                    |   | 237             |   | 86             |   | 26                   |       | 10,000                 |   |
| Jan Zijlstra                     |   | 237             |   | 86             |   | 50                   |       | 10,000                 |   |

 

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1. The amounts are in US$.

2. The salaries of the Dutch members of the Executive Board were raisedby 3%, in line with the Company’s collective labor agreement; the salary of theAmerican Executive Board member was raised by 2.4%.

3. The bonus is based on the results achieved in 2001.

 
| **Supervisory Board**                                             |   | **Remuneration** |   |
|-------------------------------------------------------------------|--------|------------------|--------|
| *amounts  in thousands of euros*                                  |   |             |   |
|                                                              |   |             |   |
| Luck M. van  Leeuwen                                              |   | 38               |   |
| Carlos Espinosa de los Monteros                                   |   | 25               |   |
| André A. van der  Louw                                       |   | 25               |   |
| Jan Peelen                                                        |   | 25               |   |
| Ross A. Webber                                                    |   | 25               |   |
| Rijnhard W.F.  van Tets  (was appointed as of May 16,  2002) |   | 13               |   |

 

**C.****              Corporategovernance**

 

ARCADIS NV is astructured company in accordance with Book 2 of Dutch Civil Law. Reference ismade to the attached Articles of Association.

 

***Supervisory Board***

The Supervisory Board has ultimate responsibility forthe operations of the Company.  Underthe Company’s Articles of Association, the Supervisory Board may have a minimumof three, and a maximum of nine, members. Currently, there are seven members of the Supervisory Board.  Composition of the Supervisory Board isdesigned to mirror the international segments in which the Company operates,and its members are expected to have substantial knowledge and experience inareas pertinent to the Company’s operations.

 

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Under the current corporate structure, members of theSupervisory Board are nominated and appointed by the Supervisory Boarditself.  The shareholders of theCompany, at the Annual General Meeting of Shareholders, and the Central WorksCouncil (the Works Council is a Council to advice on and/or to approve somedecisions made by the Executive Board, as described in Dutch law and of whichthe members are appointed by and from the Dutch staff members of the company),may nominate candidates for the Supervisory Board and may object to anynomination made by the Supervisory Board.  Supervisory Board members are appointed for four-year terms, andno one person may serve more than three consecutive terms.

 

*SupervisoryBoard Committees*

Consistent with therecommendations of the Committee on Corporate Governance in the Netherlands,the Supervisory Board has formed the following committees to help govern theCompany’s increasingly complex and international operations:

 

**Selection and Remuneration Committee**. Thiscommittee selects and nominates candidates for appointment to the Supervisory Boardand the Executive Board. In addition, this committee advises the SupervisoryBoard on matters relating to the compensation of the members of the ExecutiveBoard, and the Senior Management Committee, the option plan policy, and theaward of options under existing option plans. This committee includes theChairman of the Supervisory Board and two other members.

 

**Audit Committee**. The Audit Committee isresponsible for ensuring the integrity of the company’s financial reports aswell as monitoring. It also focuses specific attention on the effectiveness ofrisk management and internal control processes. The Audit Committee reviews allperiodic financial reports, and conducts meetings with management, personsresponsible for the internal audit function, and the independent auditors toensure the accuracy of such reports. The Audit Committee was established inJanuary 2003 and is subject to its own set of regulations (the ARCADIS AuditCommittee Charter). The committee consists of the Chairman and two members ofthe Supervisory Board and conducts at least three meetings a year in thepresence of the Chairman of the Executive Board and the corporate FinanceDirector. All Supervisory Board members and Audit Committee members areindependent from the company.

 

**Integrity Committee**. This committee wasestablished at the end of 2002 to oversee the Company’s and its affiliates’compliance with the ARCADIS General Business Principles introduced in early2003. The committee consists of the Chairman of the Supervisory Board and oneother member.

 

***Executive Board***

The Executive Boardconsists of one or more member(s) who are, under the current corporatestructure, appointed by the Supervisory Board. The number of members isdetermined by the Supervisory Board after consultation with the Executive Boardand currently totals four. The Supervisory Board has appointed a chairman fromamong the members of the Executive Board and, in consultation with theExecutive Board, made a roster of activities. This roster is now based on thegeographical regions in which ARCADIS is active: the Netherlands, North andSouth America, other European countries, and rest of the world. Each member ofthe Executive Board is responsible for one of these regions. The chairman’sprimary responsibilities include oversight of finance, strategy, humanresources management, and corporate communications. Members of the ExecutiveBoard are appointed without a fixed term and may be removed by the SupervisoryBoard at any time.

 

**Senior Management Committee**

In the second half of 1995, the Company instituted aSenior Management Committee, consisting of the members of the Executive Board,the Corporate Staff Directors for Finance, Human Resources and CorporateDevelopment, as well as the Chief Executive Officers of the major operatingcompanies.  The principal goal of thisgroup is to stimulate the internal cooperation between the operatingcompanies.  On the other hand, theSenior Management Committee is also a sounding board in which Executive Boarddecisions are prepared and pre-discussed prior to their implementation.  In the past years, the Senior ManagementCommittee has been instrumental in forwarding the Company’s one firm strategy,as well as a number of cohesion programs.

 

**GeneralMeeting of Shareholders**

In accordance with Dutch Civil Law, the Company holdsa General Meeting of Shareholders each year. The Supervisory Board, theExecutive Board or stockholders holding at least 1% of the Company’s issuedcapital may

 

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call extraordinary meetings of shareholders. The party convening themeeting determines the agenda for an extraordinary meeting. Shareholdersholding at least 1% of the Company’s issued capital may also submit proposalsfor inclusion in any meeting up to sixty days prior to the meeting. All issuesshares carry voting rights for inclusion in any meeting to the nominal value ofsuch shares. Resolutions of the shareholders must be adopted by an absolutemajority of votes actually cast, subject to certain exceptions.

 

*Use ofproxies*

ARCADIS N.V. commonshares are quoted in the United States on the NASDAQ.  Since listing its shares on the NASDAQ, the Company has permittedshareholders in the United States to use proxies in connection with shareholdermeetings.  While the law in theNetherlands and the Company’s Articles of Association permit the Company toestablish a record date to encourage the use of proxy voting for shares quotedon Euronext Amsterdam NV, the Company has not traditionally done so.  Accordingly, shareholders in the UnitedStates who wish to vote their shares by proxy may be required to deposit themwith the Company for a longer period of time in order to vote on shareholderproposals, during which the value of the shares may fluctuate.

 

**Capitaland shares**

The Company’s authorizedshare capital consists of common stock (traded at Nasdaq and/or EuronextAmsterdam NV), cumulative financial preferred shares, priority shares, andcumulative preferred shares.

 

*Cumulative financing preferred shares*

Since 2002, the Company’s Articles of Associationincorporate the ability to issue shares of cumulative financing preferredstock, none of which are currently outstanding.  The issuance of shares of cumulative financing preferred stockallows the Company, when needed, to finance acquisitions from the issuance ofshare capital, which will strengthen shareholders’ equity without resulting ina dilution of the existing shareholders.

 

*Priorityshares*

The 200 priority sharesare held by the Stichting Prioriteit ARCADIS NV, a foundation. Major corporatedecisions require prior approval from the holder of these priority shares,including the issuance, acquisition, or disposal of shares in the Company;amendments to the Articles of Association; dissolution of the Company; filingfor bankruptcy; joint ventures of a material size and material investments oracquisitions. The board of Stichting Prioriteit ARCADIS NV has 20 members,including 10 members from the Executive and Supervisory Boards of the Companyand 10 representatives elected by and from the global employee-base ofARCADIS.  A 60% absolute majority of themembers of the board is required to approve any major corporatedecision, effectively giving the employees of the Company the ability to vetocertain major corporate events.  Thisboard meets twice a year to discuss the strategic development of the Company.

 

*CumulativePreferred Shares*

The Company’s Articles ofAssociation authorize the issuance of cumulative preferred shares up to thenumber of current outstanding common shares of ARCADIS NV stock, none of whichare currently outstanding.  StichtingPreferente Aandelen ARCADIS NV, established in 1995, which we refer to as theARCADIS Preferred Stock Foundation, has been granted the right to purchase allthe issued cumulative preferred shares, up to a maximum equal of the number ofoutstanding shares issued at the date in question. ARCADIS NV has been grantedthe right to issue the same number of preferred shares to the Foundation. Bothoptions may only be exercised provided the interest of ARCADIS NV, itsaffiliated enterprises and all parties involved were to warrant this pursuantto an option agreement entered into with the Company. The board of the ARCADISPreferred Stock Foundation consists of five persons, four persons appointed bythe Company’s Executive Board and one person appointed by and from the membersof the Supervisory Board.

 

*Shareissuance policy*

Annually, the GeneralMeeting of Shareholders is asked to authorize the issuance of shares and limitor exclude the related legal priority rights. Each year at the presentation ofthis agenda point, the goals and restrictions that will guide the ExecutiveBoard and the Supervisory Board when using this authorization are explained.The authorization is generally meant to provide an opportunity to actdecisively in case attractive expansion opportunities present themselves in theform of acquisitions.

 

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*StockOption Plans and Stock Purchase Plans*

In order to provideemployees and management with long term incentives tied to the Company’sperformance, ARCADIS NV has adopted Stock Option Plans and Stock PurchasePlans. Such plans are to be presented to and approved by the General Meeting ofShareholders to allow for certain tax advantages in the United States.

 

*Auditor*

The annual financialstatements of the Company, as drafted by the Executive Board, must be certifiedby a certified public accountant. The General Meeting of Shareholders has theauthority to appoint a certified public accountant. Should the General Meetingchoose not to use this authority, the auditor is appointed by the SupervisoryBoard. In 2001, in consultation with KPMG, a change in the partner conductingthe audit was made. To ensure the objectivity and independence of the auditor,all the work performed by KPMG, including general recommendations, must bereconciled by and is subject to the review and approval of the Audit Committee.

 

**Compensation**

 

*Supervisory Board*

The General Meeting ofShareholders determines compensation for members of the Supervisory Board.Supervisory Board members currently do not receive additional compensation forservice on Board Committees.

 

*Executive Board*

The Supervisory Board based on recommendations from theRemuneration Committee determines the compensation of members of the ExecutiveBoard. The Company’s policy is to compensate its senior executives at marketsrates as determined by comparison to other companies of similar size, scope andnature of operations, and performance as ARCADIS.  The compensation of members of the Executive Board is designed toprovide both short- and long-term incentives for performance and is developedin part based on information provided by independent consultants to the Company.  Packages provided to the members of theExecutive Board include the following components:

 

•*Fixed salary*. TheSupervisory Board based on recommendations by the Remuneration Committeeadjusts salary annually. For the Dutch members of the Executive Board, theincreases in 2002 matched those of Dutch employees who are not subject to thecollective labor agreement; Mr. Blake’s salary is based on salaries forsimilarly situated executives in the United States, and the increases during2002 were tied to the increases matching those of employees of ARCADIS G&Min the United States.

 

•*Variable salary*. Members ofthe Executive Board also receive performance-based compensation in the form ofannual bonuses.  The bonuses for whichthe members of the Executive Board are eligible are determined by theSupervisory Board after consultation with the Remuneration Committee and arebased in part on certain performance goals established at the beginning of eachyear. Bonuses can vary between 0% and 80% of the fixed salary (12 times themonthly salary) with 40% representing accomplishment of the goals. In 2001, thecriterion was the growth in earnings per share (excluding the effect fromacquisitions). Because earnings per share rose by 10% in 2001, the bonus thatwas paid in April 2002 was 40% of the fixed salary.  During 2002, the Company established additional criteria oncapital invested, and earnings per share (including acquisitions) so that theeffect of acquisitions on performance could also be included.

 

*• Compensations and other fringe benefits.*The members of the Executive Board are eligible for coverage of expenses andother fringe benefits (such as a company car) customary in the industry.

 

•*Pensions*. The Dutch membersof the Executive Board participate in the pension plan that is in place for theDutch ARCADIS companies. Payments from and contributions to the Dutch pensionplan are based on an individual’s projected salary at retirement, up to amaximum projected salary of €52,000 a year. Mr. Blake participates in the 401Kplan that is in effect in the United States.

 

•*Options*. ARCADIS has anoption plan for key employees. Members of the Executive Board are grantedoptions by the Supervisory Board based on the recommendations of theRemuneration Committee, which in part bases its decision on the performance ofthe members of the Executive Board.

 

The Company pledged no loans, advances, financialarrangements, or guarantees to members of the Executive

 

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Board, the Supervisory Board or to members of the Senior ManagementCommittee.

 

**Sustainablebusiness conduct**

Sustainable businessconduct implies that citizens, the government, and business together areresponsible for a healthy society. Companies are increasingly being evaluated –including by shareholders – on the contribution they provide in this area.Based on ARCADIS’ long history, the Company is very cognizant of its socialresponsibility. Of course, the fact that most of the activities undertaken byARCADIS are directly or indirectly related to the way in which the humanhabitat is designed strengthens this commitment and the ties with the publicdomain.

 

**Care forthe human habitat**

*Sustainabilityintegrated into services*

Sustainable developmentis a leading principle in all ARCADIS operations. Environmental activitiesdirectly contribute to a healthier living environment because they focus onproviding remedies for past contamination or modifying industrial processes tominimize future environmental effects. In other activities, the Company seeksto assist clients in finding sustainable solutions. This means that the Companyuses its many disciplines to illustrate the environmental effects of theprojects it undertakes. As a result, solutions are proposed to eliminate orlimit these effects, while taking into account all of the clients’ interests.Because ARCADIS has a strong local presence, the Company is positioned well tocreate solutions that fully fit into local settings. Interactive planning,whereby citizens are invited to actively participate in the design phase ofprojects, is an innovative tool with which ARCADIS has experience. Interactiveplanning is a prerequisite for sustainable development.

 

*Sustainabilityin operational management*

In ARCADIS’ ownoperations, the Company strives to minimize the environmental impact of itsactivities. This is done by separating waste streams, such as paper, andrecycling or reusing part of this waste; limiting mileage usage by company carsby encouraging the use of public transportation; and conducting energy savingspolicies in its offices.

 

*Relationshipwith KNHM*

One of the majorshareholders in ARCADIS is the KNHM Foundation (Koninklijke Nederlandsche Heidemaatschappij), a founding association ofthe Company. The goal of this foundation ‘improving the living and workingenvironment’ is closely mirrored in the activities of ARCADIS, with one majordifference: the Foundation is a non-profit organization. KNHM uses the proceedsfrom its assets – among which are dividends on its shares in ARCADIS -onprojects that improve environmental awareness and the quality of the livingenvironment. In a number of cases, KNHM cooperates with ARCADIS on these typesof projects, providing the Company with the opportunity for early involvementin project developments.

 

**Integritypolicy**

*Discussionsabout tendering procedures*

Since the end of 2001,the behavior of certain market participants in the tendering of projects in thecontracting business in the Netherlands has come under scrutiny. This resultedin a parliamentary investigation into ‘the building fraud’. Because theHeidemij name was reported in a number of press articles, ARCADIS conducted itsown investigation into the allegations. The findings indicated that a sectionof the contracting activities within one of the Dutch operating companies wasnot operating entirely up to standard. The section of the contractingactivities, which are won by public tenders, represents approximately 1% oftotal ARCADIS revenues. At the same time, the Dutch Competition Authorityinvestigated one specific case of possible involvement by ARCADISPlanrealisatie BV. The Authority released a press statement about the investigation.In the meantime, the report of the Authority has been published. Becausematerial financial consequences cannot be foreseen, no provisions have beentaken. Intensive deliberations about this issue, with the Supervisory Boardamong others, have occurred. Internally, all those involved have been toldirrefutably that ARCADIS will conduct its business within the confines of lawsand regulations. A decision was made to cease those contracting activitiesacquired by public tenders in which price is the sole determination for projectaward. In addition, ARCADIS globally introduced an integrity code that willbecome the basis for an active integrity policy.

 

*ARCADISGeneral Business Principles*

In fall 2002, ARCADIS, inclose cooperation with the Senior Management Committee and the SupervisoryBoard, drafted a code of General Business Principles. These principles indicatehow the Company wants to deal with

 

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integrity (which is one of the three core values of the Company). Thecode serves as a guideline for our business decisions and activities around theworld, is applicable to all levels of the organization, and applies to overallcompany activities as well as the behavior of individual employees.

 

The General BusinessPrinciples describe the commitments ARCADIS applies to itself in itsrelationships with society, clients, employees, and shareholders. With regardto society, this not only implies a commitment to abide by national laws andrespect local cultures, but also implies a commitment to respect thesurroundings and the environment when executing a project. With regard toclients, ARCADIS wants to be a reliable partner who continually works onimproving its services through investing in the collective knowledge and skillsof its employees. The Company also commits itself to delivering its servicesunder contractual obligations that are not contrary to its independentprofessional judgment and objectivity (professional integrity). In addition,full transparency regarding possible conflicts of interest in the execution ofour services is provided. With regard to employees, ARCADIS commits itself tobe an equal opportunity employer, offering personal development and careeropportunities in healthy and safe working conditions. In addition, the GeneralBusiness Principles contain guidelines for dealing with the provision andacceptance of gifts. The full text of the business principles can be found onARCADIS’ website (www.arcadis-global.com).

 

The ARCADIS GeneralBusiness Principles became effective globally in early 2003. The management ofeach of the operating companies is responsible for the implementation of theGeneral Business Principles. All employees will be provided with a copy of theprinciples. The principles stipulate that employees will not be heldresponsible for the loss of work resulting from abiding by the General BusinessPrinciples, nor will they suffer negative consequences if reporting violationsof the code. An offense, however, can lead to sanctions up to and includingtermination of employment with the Company. The General Business Principles donot offer tailor-made solutions for every dilemma we may encounter in theperformance of our jobs. Employees are, therefore, encouraged to recognize anddiscuss these dilemmas so that, where necessary, management can assumeresponsibility for the decision. It is through this active integrity policythat we can fulfill our commitment to integrity.

 

**D.****              Employees**

 

At the end of December 2002, the Company had 8,503total employees, compared to 7,658 at the end of 2001 and 7,742 at the end of2000.  For 2002, the average number ofemployees was 8,020, compared to 7,619 in 2001 and 7,657 in 2000.

 

At December 31, 2002, the geographic location of thestaff was: Netherlands 2,861 (2001: 3,013; 2000: 3,319), other Europeancountries 3,239 (2001: 2,333; 2000: 2,233) and North- and South-America 2,403(2001: 2,312; 2000: 2,190).

 

In 2002, the percentage of employees with a temporarycontract increased from 17% at January 1, 2002 to 19% at year end.

 

A small minority of the employees is a member of aunion.

 

**E.****                Share ownership**

 

The following table discloses, as of December 31,2002, interests held in the share capital of ARCADIS N.V.  by members of the Supervisory and ExecutiveBoards:

 
| **Name**         |   | **Shares(1)** |   | **% of Outstanding Capital** |   |
|------------------|--------|---------------|--------|------------------------------|--------|
| Harrie L.J. Noy  |   | 10,578        |   | 0.05                         | %      |
| Steven B. Blake  |   | 6,105         |   | 0.03                         | %      |
| C. Michiel Jaski |   | 321           |   | 0.00                         | %      |
| Jan Zijstra      |   | 196           |   | 0.00                         | %      |
| Ross A. Webber   |   | 1,130         |   | 0.01                         | %      |

 

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(1)               Excludesoptions held by such persons

 

The following table discloses, as of December 31,2002, outstanding options held by members of the

 

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Supervisory and Executive Boards:

 
|          |   | **Option  plan  from year** |   | **Granted in  year** |   | **Options  granted** |   | **Exercise  price** |   | **Exercised  2002** |   | **Outstanding** |   | **Expiration  date** |   |
|---------------|--------|-----------------------------|--------|----------------------|--------|----------------------|--------|---------------------|--------|---------------------|--------|-----------------|--------|----------------------|--------|
| Harrie Noy    |   | 2001                        |   | 2001                 |   | 30,000               |   | € 9.20         |   | —              |   | 30,000          |   | 05-23-2011           |   |
|          |   |                        |   | 2002                 |   | 15,000               |   | € 10.79        |   | —              |   | 15,000          |   | 05-22-2012           |   |
| Steve Blake   |   | *                           |   | **                   |   | 85,615               |   | ***                 |   | —              |   | 85,615          |   | 03-17-2009           |   |
|          |   | 1996                        |   | 2000                 |   | 18,750               |   | US$6.75             |   | —              |   | 18,750          |   | 05-17-2010           |   |
|          |   |                        |   | 2001                 |   | 18,750               |   | US$8.00             |   | —              |   | 18,750          |   | 05-23-2011           |   |
|          |   | 2001                        |   | 2001                 |   | 25,000               |   | € 9.20         |   | —              |   | 25,000          |   | 05-23-2011           |   |
|          |   |                        |   | 2002                 |   | 13,000               |   | € 10.79        |   | —              |   | 13,000          |   | 05-22-2012           |   |
| Michiel Jaski |   | 2001                        |   | 2001                 |   | 17,500               |   | € 9.20         |   | —              |   | 17,500          |   | 05-23-2011           |   |
|          |   |                        |   | 2002                 |   | 10,000               |   | € 10.79        |   | —              |   | 10,000          |   | 05-22-2012           |   |
| Jan Zijlstra  |   | 2001                        |   | 2001                 |   | 17,500               |   | € 9.20         |   | —              |   | 17,500          |   | 05-23-2011           |   |
|          |   |                        |   | 2002                 |   | 10,000               |   | € 10.79        |   | —              |   | 10,000          |   | 05-22-2012           |   |
| Ross Webber   |   |                        |   |                 |   | 5,000                |   |                |   |                |   |            |   |                 |   |

 

 

**OPTIONAND SHARE PURCHASE PLANS**

 

In order to align the goals of the Company’s managementand employees with the performance of the Company, ARCADIS NV has adopted stockoption plans, as well as two stock purchase plans.

 

**ARCADISN.V. 1994-1996 Incentive Plan**

At the time of the Company’s merger with Geraghty& Miller, Inc. in 1993, ARCADIS N.V. adopted and after 1994 expandedGeraghty & Miller’s existing stock option plans**,**which covered employees in the United States. These include7 plans: 1987 stock option plan; 1988 stock option plan; Reed option plan; 1989stock option plan; 1991 stock option plan; ARCADIS 1994 stock option plan andthe 1996 ARCADIS stock option plan.

Under these plans, options to purchase a maximum of 1,511,144 ARCADISN.V. common shares were available for issuance to the Company’s employees inthe United States.  These options may beexercised up to ten years after the date of grant and become vested in varioustime frames (varying from full after three years, or over a period of threeyears).

 

As of December 31, 2002, options to purchase anaggregate of 676,024 ARCADIS N.V. common shares were outstanding under the 1994and 1996 ARCADIS stock option plans, with an average exercise price ofUS$8.80.  On June 14, 2002, pursuant tothe 1996 stock option plan and in accordance with the terms of a new employmentagreement, the Company granted an option to purchase a total of 35,000 ARCADISN.V. common shares to the new Director for Mergers and Acquisitions at anexercise price of US$9.44 per share. On December 31, 2001, option holders hadthe opportunity to exercise 368,874 options against prices varying from US$6.75 to US$ 11.00.

 

Shares needed for the ARCADIS NV 1987-1991 and1994-1996 option plans will be issued through the NASDAQ when these options areexercised. For delivery of common shares resulting from options being exercisedduring 2002 under these plans, the Company issued 7,993 shares.

 

The closing price of ARCADIS shares on the NASDAQ onDecember 31, 2002 was US$ 8.38.

 

**ARCADISNV 2001 Long Term Incentive Share Option Plan**

In the May 23, 2001General Meeting of Shareholders,the Company adopted the ARCADIS NV 2001 Long Term Incentive Share Option Plan.Under this plan, options to purchase a maximum of 2,500,000 ARCADIS NV commonshares may be granted from 2001 to 2006 to key Company personnel.  The number of options to be granted eachyear pursuant to the 2001 plan is determined after comparing the actualincrease in earnings per share during the prior fiscal year to a targetincrease established by the Supervisory Board when the financial budget for theupcoming year is adopted. Options granted pursuant to the 2001 plan may beexercised up to ten years from the date of grant and become fully vested aftera period of three years, provided the participant is still employed by theCompany.  Options are usually granted onthe day after the Annual General Meeting of Shareholders, and the

 

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exercise price will match the closing price of ARCADIS NV shares on theEuronext Amsterdam stock exchange on the day on which the options are granted.

 

Based on anincrease in net income per share of 10% during 2002,  options to purchase a maximum of 265,000 ARCADIS N.V. commonshares could be granted pursuant to the 2001 plan.   On May 22, 2002, the Company issued options to purchase a totalof 254,100 ARCADIS N.V. common shares at an exercise price of € 10.79 per shareto 86 employees worldwide under the 2001 plan, according to the followingdistribution:

 
| Executive Board members:                   |   | 48,000 options |
|--------------------------------------------|--------|----------------|
| Management/employees ARCADIS NV            |   | 18,500 options |
| Management/employees ARCADIS Nederland BV  |   | 78,000 options |
| Management/employees ARCADIS G&M, Inc. |   | 86,000 options |
| Management/employees other operating units |   | 23,600 options |

 

In August 2002,the Company issued options to purchase a total of 9,000  ARCADIS N.V. common shares at an exerciseprice of € 8.50 per share to the management of FCI in connection with theacquisition. As of December 31, 2002, options to purchase a total of 458,100ARCADIS N.V. common shares were outstanding under the 2001 plan at an averageexercise price of € 10.07 per share.

 

In order tominimize dilution, it is the Company’s intention to purchase the shares to bereserved for issuance pursuant to the 2001 Plan on or before the date theoptions can be exercised.  On June 17,2002, the Company purchased 300,000 shares from the share register at a priceof €10.75 per share.

 

**ARCADISNV 1994 Employee Stock Purchase Plan**

The ARCADIS N.V.1994 Employee Stock Purchase Plan enabled U.S. employees to purchase a maximumof 230,000 ARCADIS NV shares from their employer at a discount of 10% untilJuly 1, 2002, when the plan was terminated.  In the period 1994-2002, the Company delivered 111,000 shares toemployees purchasing them through the plan.

 

**ARCADISNV 2002 Employee Share Participation Plan**

At the end of2001, in cooperation with the Lovinklaan Foundation, ARCADIS N.V. introduced anEmployee Share Participation Plan that enables employees to purchase ARCADIS NVshares from the Lovinklaan Foundation against a discount. The Employee ShareParticipation Plan is available to employees in the Netherlands, United States,and Belgium.

 

The discountpercentages are based on local laws and regulations and differ on acountry-to-country basis, varying from 10% (the Netherlands) to 15% (UnitedStates) and 16.67% (Belgium).

 

The shares usedfor this plan, as well as the discount in price, are provided by the LovinklaanFoundation. Therefore, this Employee Share Participation Plan in no way givesrise for the purchase or issuance of shares by ARCADIS N.V. itself.  The Lovinklaan Foundation is a shareholderin ARCADIS NV and, at December 31, 2002, held a 28.5% stake in the Company’sshare capital.

 

**Overviewof options granted**

 

The following table includes aggregate information for all options,including non-qualified stock options, granted pursuant to the Company optionplans during 2002.

 

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| **Option  plan  year** |   | **Granted**   |   | **Exercise  price** |       | **Cancelled** |       | **Exercised** |       | **Outstanding** |   | **Expiration** |   |
|------------------------|--------|---------------|--------|---------------------|------------|---------------|------------|---------------|------------|-----------------|--------|----------------|--------|
|                   |   |          |   |                |       |          |       |          |       |            |   |           |   |
| 1988                   |   | 88,769        |   | US$9.38             |       | —        |       | 83,306        |       | 5,463           |   | 1/29/03        |   |
| 1989                   |   | 49,206        |   | 9.38                |       | —        |       | 29,092        |       | 20,114          |   | 1/29/03        |   |
| 1991                   |   | 3,169         |   | 9.15                |       | —        |       | 437           |       | 2,732           |   | 4/22/03        |   |
| 1994                   |   | 92,868        |   | 9.50                |       | 54,628        |       | —        |       | 38,240          |   | 1/4/04         |   |
|                   |   | 10,000        |   | 11.00               |       | —        |       | —        |       | 10,000          |   | 9/15/04        |   |
|                   |   | 159,750       |   | 11.00               |       | 85,550        |       | 3,200         |       | 71,000          |   | 9/22/04        |   |
|                   |   | 20,000        |   | 8.50                |       | —        |       | —        |       | 20,000          |   | 5/1/06         |   |
|                   |   | 98,622        |   | 9.13                |       | 54,790        |       | 1,900         |       | 41,932          |   | 3/26/06        |   |
|                   |   | 51,878        |   | 9.13                |       | 35,210        |       | —        |       | 16,668          |   | 3/26/06        |   |
|                   |   | 10,000        |   | 10.63               |       | —        |       | —        |       | 10,000          |   | 8/19/06        |   |
|                   |   | 74,500        |   | 9.13                |       | 35,500        |       | 6,000         |       | 33,000          |   | 3/26/06        |   |
| 1996                   |   | 99,695        |   | 11.50               |       | 33,000        |       | —        |       | 66,695          |   | 4/1/08         |   |
|                   |   | 305           |   | 11.50               |       | —        |       | —        |       | 305             |   | 4/1/08         |   |
|                   |   | 82,500        |   | 6.75                |       | 20,625        |       | —        |       | 61,875          |   | 3/17/09        |   |
|                   |   | 11,374        |   | 8.25                |       | —        |       | —        |       | 11,374          |   | 7/1/09         |   |
|                   |   | 3,626         |   | 8.25                |       | —        |       | —        |       | 3,626           |   | 7/1/09         |   |
|                   |   | 122,123       |   | 6.75                |       | 11,500        |       | —        |       | 110,623         |   | 5/17/10        |   |
|                   |   | 6,627         |   | 6.75                |       | —        |       | —        |       | 6,627           |   | 5/17/10        |   |
|                   |   |          |   | 8.00                |       | 8,000         |       | —        |       | 102,937         |   | 5/23/11        |   |
|                   |   | 7,813         |   | 8.00                |       | —        |       | —        |       | 7,813           |   | 5/23/11        |   |
|                   |   | 35,000        |   | US$9.44             |       | —        |       | —        |       | 35,000          |   | 6/14/12        |   |
| 2001                   |   | 195,000       |   | € 9.20         |       | —        |       | —        |       | 195,000         |   | 5/23/11        |   |
|                   |   | 254,100       |   | 10.79               |       | —        |       | —        |       | 254,100         |   | 5/22/12        |   |
|                   |   | 9,000         |   | €8.50          |       | —        |       | —        |       | 9,000           |   | 8/9/12         |   |
| **Total**              |   | **1,596,862** |   |                | ** ** | **338,803**   | ** ** | **123,935**   | ** ** | **1,134,124**   |   |           |   |

 

**ITEM7.    MAJOR SHAREHOLDERS AND RELATEDPARTY TRANSACTIONS**

 

ARCADIS N.V. isnot directly or indirectly owned or controlled by another corporation or by anygovernment.  The following table lists,as of April 30, 2003:  (1) any person whois known to ARCADIS to be the owner of more than five percent of any class ofoutstanding ARCADIS N.V.voting securities; (2) the number of shares held bysuch person, and (3) the percentage ownership of any class of outstandingARCADIS voting securities owned by such persons. These major shareholders donot receive any preferential voting rights.

 

The total numberof outstanding common shares as of April 30, 2003 was 20,299,395.  Of the total outstanding number of shares ofcommon stock, 1,582,431 shares are traded on NASDAQ. The number of recordholders in the United States is 136. Shares traded on AEX are bearer shares.

 
| **Title of Class**                                                                |   | **Identity  of Person or Group**                                                                        |   | **Number of  Shares  Owned** |   | **Percent of****Class** |   |
|-----------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|-------------------------|--------|
| Common Stock, € 0.05 nominal value  (“ARCADIS Common Shares”)      |   | Stichting Lovinklaan (“Lovinklaan Foundation”) (a)                                            |   | 5,728,889                    |   | 28.22                   | %      |
|                                                                              |   |                                                                                                    |   |                         |   |                    |   |
|                                                                              |   | Koninklijke Nederlandsche  Heidemaatschappij (“KNHM”) (b)                                     |   | 1,263,409                    |   | 6.22                    | %      |
|                                                                              |   |                                                                                                    |   |                         |   |                    |   |
|                                                                              |   | Members of ARCADIS Executive Board, Members of  Supervisory Board and executive officers as a group (c) |   | 18,330                       |   | 0.09                    | %      |
|                                                                              |   |                                                                                                    |   |                         |   |                    |   |
|                                                                              |   | Fortis N.V                                                                                              |   | 1,946,108                    |   | 9.89                    | %      |
|                                                                              |   |                                                                                                    |   |                         |   |                    |   |
|                                                                              |   | Delta Deelnemingen Fonds (notification 2001)                                                            |   | 1,050,000                    |   | 5.17                    | %      |
|                                                                              |   |                                                                                                    |   |                         |   |                    |   |
|                                                                              |   | Smoorenburg BV                                                                                          |   | 1,030,707                    |   | 5.08                    | %      |
|                                                                              |   |                                                                                                    |   |                         |   |                    |   |
| Priority Shares, € 0.05 nominal value (“ARCADIS  Priority Shares”) |   | Stichting Prioriteit ARCADIS NV (“Priority Share  Foundation”) (d)                            |   | 200                          |   | 100                     | %      |

 

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(a)               The LovinklaanFoundation presently has five directors, elected by and from Dutch staffmembers of the Company, none of whom is an officer or director of ARCADIS.  The Lovinklaan Foundation has agreed not todispose of or pledge 4,000,000 of the ARCADIS Common Shares it holds withoutthe prior approval of the holder of the ARCADIS Priority Shares. LovinklaanFoundation funds the ARCADIS NV 2002 Employee Stock Purchase Plans, which arecurrently operational in the Netherlands, Belgium and the US. The ESPP’s enableemployees to purchase ARCADIS shares from Lovinklaan Foundation at apre-determined discount.

 

(b)              KNHM is anindependent non-profit association dedicated to environmental awareness andeducation.  KNHM is governed by a boardof trustees composed of 11 members. ARCADIS has the right to nominate one boardmember. Currently two members of the KNHM board of trustees are each a directoror executive officer of ARCADIS.  During2002, KNHM disposed of approximately 50% of its holdings of ARCADIS N.V. commonshares.

 

(c)               Certain members ofARCADIS’ Executive Board, members of ARCADIS’ Supervisory Board and executiveofficers own ARCADIS N.V. common shares directly. The number of shares listedfor the Executive and Supervisory Board members and executive officers as agroup reflects only those shares owned directly by such persons.

 

(d)              The ARCADIS PriorityShares are held by the Priority Share Foundation, a non-profit foundation whichhas 20 directors. To take action, the affirmative vote of twelve of thedirectors is required. Seven of the directors are members of ARCADIS’Supervisory Board, three are members of ARCADIS’ Executive Board, and ten areARCADIS employees who have been elected to serve as directors of the BellevueFoundation (a Foundation representing the international staff members ofARCADIS). The Priority Share Foundation has committed not to dispose of thePriority Shares except in the event of the dissolution of the Priority ShareFoundation, which must be approved by the directors of the Priority ShareFoundation. (See also Note 12 of the Notes to the Consolidated FinancialStatements).

 

The Stichting Preferente Aandelen ARCADIS N.V.(Preference Shares ARCADIS Foundation), established in Arnhem, has as itsobjective the protection and promotion of the interests of ARCADIS N.V. and itsaffiliated companies and all parties involved. The Board of this Foundationconsists of four persons appointed by the Company’s Executive Board and oneperson appointed by and from the members of the Company’s Supervisory Board,who acts as chairman. The Foundation has been granted the right to acquirepreference shares up to a maximum equal to the number of ordinary shares inissue at the date in question. ARCADIS N.V. has been granted the right to issuethe same number of preference shares to the Foundation. Both options may onlybe exercised upon the determination of the Board of the Preference SharesARCADIS Foundation that such exercise is in the best interest of ARCADIS N.V.,its affiliates, and all parties involved.

 

The Company has not been informed of any arrangements,other than those referred to above, which may result in a change in control ofthe Company.

 

**B.**                 **Relatedparty transactions.**

 

None.

 

**C.**                 **Interests ofexperts and counsel.**

 

Not applicable.

 

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**ITEM8. FINANCIAL INFORMATION**

 

**A.**                 **Consolidated Statements and Other FinancialInformation.**

 

**Consolidated Financial Statements**

 

The consolidated financial statements of the Companyand related audit report can be found at Item 18 of this report.

 

**Export sales**

 

Export sales do not constitute a significant portionof the Company’s total sales volume.

 

**Legal or arbitration proceedings**

 

ARCADIS N.V. and its group companies are from time totime involved in routine litigation. Management believes that the outcome of pending cases will not have amaterial effect on the consolidated financial condition, results of operations,or cash flows of ARCADIS N.V.

 

**Policy on dividend distributions**

 

ARCADIS’ long-term dividend policy is to recommend anaverage payment of an annual dividend ranging from 30% to 40% of netoperational income as reported under the Generally Accepted AccountingPrinciples in the Netherlands.

 

**B.**                 **SignificantChanges**

 

Since the date of the most recent interim financialstatements, no significant changes occurred. The most recent interim financialstatements were included in the first quarter 2003 report and published on May7, 2003.

 

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**ITEM9. THE OFFER AND LISTING**

 

**A.**                 **Price History of the Stock and Markets**

 

Until the end of 1997,ARCADIS Common Shares were listed on the National Market of the NationalAssociation of Security Dealers Automated Quotation System (“Nasdaq NM”) underthe symbol “HEIDF” and on the Amsterdam Stock Exchange under the symbol “HEIMY.”Because of the name change, at the end of 1997, the listing symbols on theNasdaq NM and on the Amsterdam Stock Exchange were changed into “ARCAF” and“ARCAD”.

 

The following table sets forth the high and low salesprices of the ARCADIS Common Shares as reported by the Nasdaq NM and by theAmsterdam Stock Exchange on a quarterly basis since the first quarter of 2000:

 
|                     |   | **NASDAQ  (U.S. Dollars)** |   | **AMSTERDAM  STOCK EXCHANGE (EUR)** |   |
|--------------------------|--------|----------------------------|--------|-------------------------------------|--------|
|                     |   | **High**                   |   | **Low**                             |   | **High** |   | **Low** |   |
|                     |   |                       |   |                                |   |   |   |   |   |
| **1998**                 |   | 12.375                     |   | 6.500                               |   | 11.53 |   | 5.90 |   |
|                     |   |                       |   |                                |   |   |   |   |   |
| **1999**                 |   | 9.000                      |   | 6.500                               |   | 8.65 |   | 6.10 |   |
|                     |   |                       |   |                                |   |   |   |   |   |
| **2000**                 |   | 8.000                      |   | 6.125                               |   | 9.10 |   | 7.00 |   |
|                     |   |                       |   |                                |   |   |   |   |   |
| **2001**                 |   |                       |   |                                |   |   |   |   |   |
| First quarter            |   | 8.875                      |   | 7.750                               |   | 9.70 |   | 8.40 |   |
| Second quarter           |   | 8.800                      |   | 7.350                               |   | 9.75 |   | 8.75 |   |
| Third quarter            |   | 8.810                      |   | 7.310                               |   | 9.45 |   | 8.00 |   |
| Fourth quarter           |   | 8.750                      |   | 7.758                               |   | 9.45 |   | 8.80 |   |
| Full year                |   | 8.875                      |   | 7.310                               |   | 9.75 |   | 8.00 |   |
|                     |   |                       |   |                                |   |   |   |   |   |
| **2002**                 |   |                       |   |                                |   |   |   |   |   |
| First quarter            |   | 9.450                      |   | 8.360                               |   | 10.65 |   | 9.40 |   |
| Second quarter           |   | 10.350                     |   | 8.890                               |   | 11.19 |   | 9.75 |   |
| Third quarter            |   | 10.300                     |   | 8.000                               |   | 10.53 |   | 8.15 |   |
| Fourth quarter           |   | 9.800                      |   | 8.280                               |   | 9.60 |   | 7.94 |   |
| Full year                |   | 10.350                     |   | 8.000                               |   | 11.19 |   | 7.94 |   |
|                     |   |                       |   |                                |   |   |   |   |   |
| **Most recent 6 months** |   |                       |   |                                |   |   |   |   |   |
| December 2002            |   | 8.760                      |   | 8.280                               |   | 8.75 |   | 7.94 |   |
| January 2003             |   | 9.300                      |   | 8.380                               |   | 8.75 |   | 7.95 |   |
| February 2003            |   | 9.240                      |   | 8.330                               |   | 8.50 |   | 7.81 |   |
| March 2003               |   | 8.390                      |   | 7.000                               |   | 7.62 |   | 6.43 |   |
| April 2003               |   | 9.100                      |   | 7.110                               |   | 8.10 |   | 6.41 |   |
| May 2003                 |   | 11.100                     |   | 9.100                               |   | 9.45 |   | 8.50 |   |

 

As of April 30,2003, approximately****9% of the outstanding ARCADIS Common Shareswere listed on Nasdaq.  At this date,there were 133 holders of record in the United States.

 

**ITEM10. ADDITIONAL INFORMATION**

 

**A.**                 **ShareCapital**

 

Not applicable.

 

47

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**B.**                 **Memorandumand articles of association**

 

The Articles of Association of ARCADIS NV, as approvedby the Extraordinary General Meeting of Shareholders at June 5, 2003, areincluded to this document as Exhibit 1.

 

**C.**                 **Material contracts**

 

There are no material contracts exceeding 5% of grossrevenue in any given year, other than contracts entered into in the ordinarycourse of business.

 

**D.**                 **Exchangecontrols**

 

There are currently no Netherlands laws, decrees orregulations that restrict the export or import of capital and there are noNetherlands exchange control restrictions on remittances of dividends on theARCADIS Common Shares, interest or other payments to non-resident holders ofARCADIS Common Shares.

 

There are currently no limitations on the right ofnon-resident or foreign owners to hold or vote the ARCADIS Common Sharesimposed by Netherlands law or by ARCADIS’ Articles of Association or otherconstituent documents of the Company. There are no restrictions on the remittance of dividends, interest, orother payments to non-resident ARCADIS shareholders.

 

**E.**                   **Taxation**

 

The following is asummary of Netherlands tax consequences to an owner of ARCADIS Common Shareswho is not, or is not deemed to be, a resident of the Netherlands or has notopted to be treated as a resident of the Netherlands for purposes of therelevant tax codes (a “non-resident Shareholder”). The summary does not addresstaxes imposed by the Netherlands and its political subdivisions, other than thetransfer tax, dividend withholding tax, distribution tax, individual income tax,corporate income tax, net wealth tax, and gift and inheritance tax.

 

*Transfertax*

 

No value added tax,stamp, documentary or registration duty or similar charge, will be imposedunder the laws of the Netherlands upon execution, delivery, transfer, combinationor split-up of ARCADIS Common Shares.

 

*Dividendwithholding tax*

 

To the extent that cashdividends are distributed by ARCADIS, such dividends would be subject underNetherlands tax law to withholding tax at a rate of 25%.

 

Dividends include:

1.                    distributionsin cash or in kind, including deemed and constructive distributions;

2.                    liquidationproceeds on redemption of the ARCADIS Common Shares in excess of the averagepaid-in capital as recognized for Netherlands dividend withholding tax purposesand, as a rule, the consideration for the repurchase of the ARCADIS CommonShares by ARCADIS in excess of the average paid-in capital recognized forNetherlands dividend withholding tax purposes, unless such repurchase is (a)for temporary investment or (b) exempt on the basis of the Dividend Tax Act1965;

3.                    the par valuein respect of the issue of ARCADIS Common Shares to a holder of the ARCADISCommon Shares, or an increase in the par value of the ARCADIS Common Shares, inexchange for a lower consideration, except where the issue or increase isfunded out of ARCADIS’s paid-in capital as recognized for Netherlands dividendwithholding tax purposes; and

4.                    partialredemption of the ARCADIS Common Shares to the extent this constitutes arepayment of contributed capital (as understood under the Dividend Tax Act1965), and to the extent ARCADIS has net profits (as that expression isunderstood for Netherlands dividend withholding tax purposes), unless theARCADIS Common Shares holders have resolved in a general meeting to make suchrepayment, and the par value of the ARCADIS Common Shares concerned has beenreduced by a corresponding amount by way of an amendment of the Articles 

 

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of Association.

 

An ARCADIS Common Shares holder residing outside theNetherlands may be entitled to a full or partial exemption from or refund ofNetherlands dividend withholding tax under an applicable double taxationconvention depending on its terms and conditions and subject to compliance bythe ARCADIS Common Shares holder with those terms and conditions.

 

An ARCADIS Common Shares holder residing in the UnitedStates may be entitled to a reduction of Netherlands dividend withholding tax,in general to a Netherlands dividend withholding tax of 15%, under the doubletax convention between the Netherlands and the United States with respect toincome (the ‘‘Treaty’’ ) subject to compliance by the ARCADIS Common Sharesholder with the applicable terms and conditions of the Treaty. Generally, aholder of the ARCADIS Common Shares will qualify for benefits under the Treaty(subject to compliance with the procedures for claiming benefits) if theholder:

1.                    is thebeneficial owner of the dividends paid;

2.                    is resident inthe United States according to the Treaty;

3.                    does not holdthe ARCADIS Common Shares in connection with the conduct of business in theNetherlands; and

4.                    is notrestricted in claiming the benefit of the Treaty under article 26 (Limitationon Benefits).

 

Dividends paid in respect of the ARCADIS Common Sharesto an exempt pension trust or similar organization, may qualify for anexemption from or, as the case may be, a complete refund of Dutch dividendwithholding tax under the Treaty, subject to compliance with the applicable termsand conditions.

 

On April 27, 2001, the Dutch Ministry of Financeannounced that legislation will be introduced with retroactive effect as fromApril 27, 2001, against so-called “dividend-stripping” transactions. Thislegislation was presented to Dutch Parlaiment on August 31, 2001.

 

Under this proposed legislation, a recipient of adividend is not considered the beneficial owner if it is plausible that:

•                  The recipientpaid consideration (in cash or in kind) in connection with the dividenddistribution, and the payment forms part of a sequence of transactions;

•                  An individual orcompany benefited, in whole or in part, directly or indirectly, from thedividend, where that individual or company is entitled to a less favourablerelief from dividend withholding tax than the recipient of the dividenddistribution; and

•                  The individualor company directly or indirectly retains or obtains a position in the shares,profit rights, or profit sharing bonds that is comparable to its position insimilar shares, profit rights or profit sharing bonds before the sequence oftransactions commenced.

 

The proposed legislation explicitly states that the term “sequence oftransactions” includes cases of a sole acquisition of one or more dividendrights and of the establishment of short-term rights of enjoyment on shares,while the transferor retains ownership of the shares. The proposed legislationstates that the anti-dividend-stripping rules also apply to transactionsentered into on the public stock market.

 

*DistributionTax*

 

ARCADIS may be subject toa special tax (‘‘distribution tax’’ ) at the rate of 20% to the extent that‘‘excessive’’ profit distributions are distributed in respect of the ARCADISCommon Shares in the period from 1 January, 2001 up to and including 31 December,2005. The Netherlands tax authorities hold the view that the distribution taxconstitutes a corporate income tax, not a withholding tax. For purposes of thedistribution tax, profit distributions (to be understood in its widest sense,and including distributions in cash, liquidation proceeds and proceeds from theredemption of shares) are considered to be ‘‘excessive’’ to the extent that,during a particular calendar year, the total amount of profit distributionsexceeds the highest of the following three amounts:

1.                    four per centof the fair market value of ARCADIS at the beginning of the relevant calendaryear;

2.                    twice theamount of the average annual profit distribution made by ARCADIS, on the basisof a consistent policy, during the three calendar years prior to 1 January,2001; and

3.                    the adjustedprofits (as defined in the ‘‘distribution tax’’ rules) of ARCADIS for thepreceding book year.

 

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The distribution tax due will be reduced pro rata tothe extent that the ARCADIS Common Shares have been held, at the time of thedistribution, for an uninterrupted period of at least three years byindividuals or legal entities (other than investment institutions as defined inthe Corporate Income Tax Act 1969) holding at least 5% of ARCADIS’s nominalpaid-in capital, provided such individuals or legal entities are resident inthe Netherlands, the Netherlands Antilles or Aruba, a Member State of theEuropean Union or a country with which the Netherlands has concluded aconvention for the avoidance of double taxation. For purposes of satisfying theabove-mentioned three-year period, consecutive ownership periods by differentqualifying ARCADIS Common Shareholders may be cumulated.

 

No distribution tax is levied insofar as the total ofthe profit distributions made during the period from 1 January, 2001 through to31 December, 2005 exceed the balance of assets, liabilities and provisions,calculated on the basis of the fair market value, less the fiscally recognizedpaid-in capital at the end of the last financial year which closes before 1January, 2001

 

*Individualincome tax and corporate income tax*

 

An ARCADIS Common Shareholder that is not a residentnor deemed to be a resident of the Netherlands for Netherlands tax purposeswill not be subject to the Netherlands income tax or corporate income tax inrespect of dividends received from, or capital gains realized in respect of adisposal of, the ARCADIS Common Shares, provided that:

1.                    the ARCADISCommon Shares are not attributable to a business or part of a business of theARCADIS Common Shareholder that is carried out through a permanentestablishment or a permanent representative in the Netherlands (‘‘Netherlandsbusiness’’);

2.                    the holder ofthe ARCADIS Common Shares does not have a substantial interest (a holding of atleast 5% of the share capital) or a deemed substantial interest in the Companyas defined in the Income Tax Act 2001, or in the event that such holder doeshave such interest, it forms part of the business assets of a business, otherthan a Netherlands business; and

3.                    in the case ofan individual holder of the ARCADIS Common Shares, the dividends received fromthe ARCADIS Common Shares and capital gain realized in respect of a disposal ofthe ARCADIS Common Shares are not regarded, on the basis of the Income Tax Act2001, as ‘‘taxable income from one or more activities performed in theNetherlands not being activities that generate taxable profit or taxablewages’’.

 

*Giftand Inheritance Taxes*

 

No gift or inheritance taxes will arise in theNetherlands with respect to a gift or inheritance of the ARCADIS Common Sharesfrom a person who is neither a resident nor deemed to be a resident of theNetherlands, unless:

1.                    such holder,at the time of the gift has, or at the time of death had, a business or aninterest in a business that is or was, in whole or in part, carried out througha permanent establishment or a permanent representative in the Netherlands andto which business or part thereof, as the case may be, the Common Shares are orwere attributable; or

2.                    in the case ofa gift of the Common Shares by an individual who at the date of the gift wasneither resident nor deemed to be resident of the Netherlands, such individualdies within 180 days after the date of the gift, while at the time of deathbeing resident or deemed to be resident of the Netherlands.

 

For purposes of Netherlands gift, estate andinheritance tax, an individual who holds the Netherlands nationality will bedeemed to be resident in the Netherlands if he has been resident in theNetherlands at any time during the ten years preceding the date of the gift ordeath. For purposes of Netherlands gift tax, an individual not holdingNetherlands nationality will be deemed to be resident in the Netherlands if hehas been resident in the Netherlands at any time during the twelve monthspreceding the date of the gift.

 

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**UnitedStates Taxation**

 

The following is asummary of certain U.S. federal income tax considerations relevant to thepurchase, ownership and disposition of Common Shares by a holder that is acitizen or resident of the United States or a U.S. domestic corporation or thatotherwise will be subject to U.S. federal income tax on a net income basis inrespect of the Common Shares (a “U.S. holder”). The summary does not purport tobe a comprehensive description of all of the tax considerations that may berelevant to adecision to purchase Common Shares. In particular, this summarydeals only with U.S. holders that will hold Common Shares as capital assets,and does not address the tax treatment of U.S. holders that may be subject tospecial tax rules, such as banks, tax-exempt entities, insurance companies,securities dealers, investors liable for alternative minimum tax, persons thathold Common Shares as part of an integrated investment (including a “straddle”)comprised of Common Shares and one or more other positions, persons whosefunctional currency is not the U.S. dollar, and holders of five percent or moreof the voting shares of the Company. The summary is based on the U.S./NL IncomeTax Treaty and the tax laws of the United States and The Netherlands in effecton the date hereof, which are subject to change. Prospective purchasers shouldconsult their own advisors as to the tax consequences of the purchase,ownership and disposition of the Common Shares in light of their own particularcircumstances, including the effect of any state, local or other national laws.

 

*Taxationof Dividends*

 

Distributions paid out ofthe Company’s current or accumulated earnings and profits (as determined underU.S. federal income tax principles) in respect of the Common Shares (includingthe amounts withheld in respect of Dutch withholding tax) generally will besubject to U.S. federal income taxation as foreign source dividend income, andwill not be eligible for the dividends received deduction generally allowed toU.S. corporations. Subject to generally applicable limitations and the discussionbelow, Dutch withholding tax imposed on dividends at the treaty rate will betreated as a foreign income tax eligible for credit against a U.S. holder’sU.S. federal income tax liability (or, at a U.S. holder’s election, may bededucted in computing taxable income). Foreign tax credits may not be allowedfor withholding taxes imposed in respect of certain short-term or hedgedpositions in securities or in respect of arrangements in which a U.S. holder’sexpected economic profit, after non-U.S. taxes, is insubstantial. Holdersshould consult their own advisors concerning the implications of these rules inlight of their particular circumstances. The Company expects to fund dividend distributions on the Common Shareswith dividends received from its subsidiaries organized outside theNetherlands. Under special Netherlands tax rules applicable to internationalholding company structures, the Company will be entitled in certaincircumstances to reduce the amount of taxes that it otherwise would be obliged topay to the Dutch tax authorities by an amount equal to 3 percent of the lesserof the dividends that it receives from its foreign subsidiaries and the netdividends that it pays to its shareholders. There is no authority directlyaddressing the implications of these special tax rules for the taxation ofdividends paid to U.S. holders. It is possible that the foreign tax creditsotherwise allowable for U.S. tax purposes in respect of Dutch withholding taxeson dividend income would be reduced by the proportion of the Dutch tax savingrealized by the Company that is measured by reference to those dividends. TheCompany will advise U.S. holders if it claims the benefit of this reduction inrespect of dividends on the Common Shares.

 

*Taxationof Capital Gains*

 

Gains or losses realizedby a U.S. holder on the sale or other disposition of Common Shares generallywill be treated for U.S. federal income tax purposes as capital gains orlosses, and generally will be long-term gains or losses if the Shares have beenheld for more than one year. Long-term capital gain recognized by an individualholder generally is subject to taxation at a maximum rate of 20 percent. Gain,if any, realized by a U.S. holder on the sale or other disposition of Sharesgenerally will be treated as U.S. source income for U.S. foreign tax creditpurposes.

 

*Non-U.S.Holders*

 

A holder of Shares thatis, with respect to the United States, a foreign corporation or a nonresidentalien individual (a “Non-U.S. holder”) generally will not be subject to U.S.federal income or withholding tax on dividends received on the Common Sharesunless the dividend income is effectively connected with the holder’s conductof a trade or business in the United States. A Non-U.S. holder of Shares willnot be subject to U.S. federal income tax or withholding tax in respect of gainrealized on the sale or other disposition of Common Shares, unless 

 

51

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(i) the gain iseffectively connected with the holder’s conduct of a trade or business in theUnited States or (ii) in the case of gain realized by an individual Non-U.S.holder, the Non-U.S. holder is present in the United States for 183 days ormore in the taxable year of the sale and certain other conditions are met.

 

*U.S.Backup Withholding and Information Reporting*

 

A U.S. holder may be subject to “backup withholding”at the rate of 31% with respect to payments of dividends or proceeds from asale of Common Shares, unless the holder (i) is a corporation or other “exemptrecipient,” and demonstrates this fact when so required, or (ii) provides acorrect taxpayer identification number, certifies that it is not subject tobackup withholding, and otherwise complies with applicable requirements of thebackup withholding rules. Any amount withheld under these rules will becreditable against the U.S. holder’s U.S. federal income tax liability. WhileNon-U.S. holders generally are exempt from backup withholding, a Non-U.S.holder may, in certain circumstances, be required to comply with certaininformation and identification procedures in order to prove this exemption. Inaddition, a U.S. holder may be subject to information reporting to the IRS withrespect to payment of dividends or proceeds from a sale of Common Shares.

 

**F.**                   **Dividend andPaying Agents**

 

Not applicable.

 

**G.**                 **Statement byExperts**

 

Not applicable.

 

**H.**                 **Documents ondisplay**

 

Copies of the Company’s 2002 Dutch and Englishlanguage Annual Reports and the Company’s 2002 Form 20-F are available,without charge from ARCADIS N.V., Corporate Development Department, P.O. Box33, 6800 LE Arnhem, the Netherlands (tel. +31 26 377 8286), or ARCADIS NV,Investor Relations, 88 Duryea Road, Melville, NY 11747, USA (tel. +1 516 3915262).

 

**I.**                      **SubsidiaryInformation**

 

In accordance witharticles 379, 392 and 414 Book 2 of the Dutch Civil Code, the list ofsubsidiaries is filed with the Chamber of Commerce in Arnhem, the Netherlands.

 

**ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

*ForeignExchange Risk*. ARCADIS does a substantial amount of business in non-euro countries. Thecurrencies in these countries may vary in value against the euro, posing apossible risk to the Company. This risk is predominantly limited to atranslation risk in that the Company’s revenues and costs are usually in thesame currency.  This currency-riskrelates to the Company’s net investment in its foreign subsidiaries. At yearend 2002, the total book value of net assets which are denominated in foreigncurrencies amounts to EUR 100.1 million. If the value of these foreigncurrencies would decrease or increase 10%, ARCADIS’ shareholders’ equity woulddecrease or increase by EUR 5.5 million.

 

Because costs,expenditures and revenues are quoted in the same currency in the vast majorityof the Company’s operations, there is only a limited risk that net cash flow,denominated in the currencies in which the operating companies perform theirpurchasing and selling activities, will be negatively influenced by exchangerate changes. As in 2001, at the end of 2002, financial instruments have notbeen used to cover these currency risks.

 

Financial instruments are not used to cover the riskassociated with the conversion into EUR of equity and income from foreignoperations and non-consolidated companies outside the EUR-zone.

 

52

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*InterestRate Risk*.  Inprinciple, ARCADIS manages interest rate risks by financing fixed assets andpart of current assets with shareholders’ equity, provisions and long-term debt.  The remainder of current assets is financedwith short-term debt including revolving bank credits with variable interestrates.  Based on the ARCADIS’ interestrisk profile, financial instruments were not used during 2002 (as well as 2001)to cover the risk. A movement in interest rate by 100 basis points would, basedon the Company’s financial instruments that are subject to changes in interestrates, have a negative or positive effect on net income of approximately € 0.1million.

 

**ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITYSECURITIES**

 

Not applicable.

 

**PART II**

 

**ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES**

 

Not Applicable.

 

**ITEM 14.  MATERIALMODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**

 

Not Applicable.

 

**ITEM15.  CONTROLS AND PROCEDURES**

 

ARCADIS NV has performed anevaluation, pursuant to Rule 13a-15 promulgated under the Securities ExchangeAct of 1934, as amended (the “Exchange Act”), of the effectiveness of thedesign and operation of ARCADIS’ disclosure controls and procedures. Based onthis evaluation, the Chairman and Chief Executive Officer of ARCADIS NV and theCorporate Director of Finance concluded that as of the Evaluation Date suchdisclosure controls and procedures were reasonably designed to ensure thatinformation required to be disclosed by ARCADIS in reports it files or submitsunder the Exchange Act is recorded, processed, summarized and reported withinthe time periods specified in the rules and forms of the Securities andExchange Commission.

 

Since the Evaluation Date, there have not been any significant changes inthe internal controls or in other factors that could significantly affect theinternal controls.

 

**ITEM 16.  RESERVED**

 

**PART III**

 

**ITEM 17.  FINANCIALSTATEMENTS**

 

ARCADIS has elected to report under Item 18.

 

53

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**ITEM18.  FINANCIAL STATEMENTS**

 

**INDEX TOFINANCIAL STATEMENTS**

 
| Independent Auditors’  Report                   |                                                                                                         |
|------------------------------------------------------|--------------------------------------------------------------------------------------------------------------|
|                                                 |
| Financial Statements:                                |
|                                                 | Consolidated Balance Sheets  as of December 31, 2002 and 2001.                                               |
|                                                 | Consolidated  Statements of Income for the years ended  December 31, 2002, 2001 and 2000.                    |
|                                                 | Consolidated  Statements of Cash Flows for the years ended  December 31, 2002, 2001 and 2000.                |
|                                                 | Consolidated  Statements of Shareholders’ Equity for the years ended  December 31, 2002, 2001 and 2000. |
|                                                 |
| Notes to  the Consolidated Financial Statements      |
|                                                 |
| Schedule II:  Valuation and Qualifying Accounts |
|                                                      |                                                                                                              |  |

 

54

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**IndependentAuditors’ Report**

 

The Executive Board and Supervisory Board ofARCADIS N.V.

 

We have audited the consolidated financial statements of ARCADIS N.V.and subsidiaries as listed in the accompanying index. In connection with ouraudits of the consolidated financial statements, we also have audited thefinancial statement schedule as listed in the accompanying index. Theseconsolidated financial statements and financial statement schedule are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these consolidated financial statements and the financial statementschedule based on our audits.

 

We conducted our audits in accordance with generally accepted auditingstandards in the Unites States. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe consolidated financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believethat our audits provide reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the financial position of ARCADISN.V. and subsidiaries at December 31, 2002 and 2001, and the results of theiroperations and their cash flows for each of the years in the three-year periodended December 31, 2002 in conformity with generally accepted accountingprinciples in The Netherlands. Also in our opinion, the related financialstatement schedule, when considered in relation to the basic consolidatedfinancial statements taken as a whole, presents fairly, in all material respects,the information set forth therein.

 

Generally accepted accounting principles in The Netherlands vary incertain significant respects from generally accepted accounting principles inthe United States. Application of generally accepted accounting principles inthe United States would have affected consolidated results of operations foreach of the years in the three-year period ended December 31, 2002 andconsolidated shareholders’ equity at December 31, 2002 and 2001, to the extentsummarized in Note 17 to the consolidated financial statements.

 

 

KPMG Accountants N.V.De Meern, The NetherlandsMarch 7, 2003May 14, 2003, with respect to the dividend proposal

 

55

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**ARCADIS NV**

**CONSOLIDATEDBALANCE SHEETS**

**(in thousands of EUR, except share amounts)**

 
|                                                                                                                                                                          |   | **At  December 31,** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|--------|
|                                                                                                                                                                          |   | **2002**             |   | **2001** |   |
| **ASSETS**                                                                                                                                                                    |   |                 |   |   |   |
| Current Assets:                                                                                                                                                               |   |                 |   |   |   |
| Cash and cash  equivalents (Note 4)                                                                                                                                           |   | 53,248               |   | 43,679 |   |
| Receivables  (Note 5)                                                                                                                                                         |   | 187,757              |   | 169,801 |   |
| Inventories  (Note 6)                                                                                                                                                         |   | 21,489               |   | 27,522 |   |
| Other current  assets                                                                                                                                                         |   | 17,940               |   | 17,180 |   |
|                                                                                                                                                                          |   |                 |   |   |   |
| Total current  assets                                                                                                                                                         |   | 280,434              |   | 258,182 |   |
|                                                                                                                                                                          |   |                 |   |   |   |
| Property, plant  and equipment (Note 7)                                                                                                                                       |   | 41,152               |   | 37,753 |   |
| Intangible  assets (Note 7)                                                                                                                                                   |   | 12,659               |   | 7,590 |   |
| Investments in  non-consolidated companies (Note 8)                                                                                                                           |   | 2,940                |   | 2,173 |   |
| Other long-term  investments                                                                                                                                                  |   | 1,440                |   | 569 |   |
| Other assets                                                                                                                                                                  |   | 5,187                |   | 3,678 |   |
|                                                                                                                                                                          |   |                 |   |   |   |
| Total assets                                                                                                                                                                  |   | 343,812              |   | 309,945 |   |
|                                                                                                                                                                          |   |                 |   |   |   |
| **LIABILITIES AND SHAREHOLDERS’  EQUITY**                                                                                                                                |   |                 |   |   |   |
| Current  Liabilities:                                                                                                                                                         |   |                 |   |   |   |
| Accounts payable                                                                                                                                                              |   | 64,202               |   | 66,562 |   |
| Accrued expenses                                                                                                                                                              |   | 6,177                |   | 8,603 |   |
| Other current  liabilities (Note 9)                                                                                                                                           |   | 99,217               |   | 68,008 |   |
| Current portion  of long-term debt (Note 10)                                                                                                                                  |   | 1,019                |   | 777 |   |
|                                                                                                                                                                          |   |                 |   |   |   |
| Total current  liabilities                                                                                                                                                    |   | 170,615              |   | 143,950 |   |
|                                                                                                                                                                          |   |                 |   |   |   |
| Long-term debt  (Note 10)                                                                                                                                                     |   | 27,566               |   | 22,006 |   |
| Other long-term  liabilities (Note 11)                                                                                                                                        |   | 13,537               |   | 13,052 |   |
|                                                                                                                                                                          |   |                 |   |   |   |
| Total  liabilities                                                                                                                                                            |   | 211,718              |   | 179,008 |   |
|                                                                                                                                                                          |   |                 |   |   |   |
| Minority  Interest                                                                                                                                                            |   | 7,135                |   | 6,125 |   |
| Shareholders’  equity (Note 12):                                                                                                                                         |   |                 |   |   |   |
| Priority shares  - EUR 0.05 par value - Authorized, issued and outstanding 200 shares as of  December 31, 2002 and 2001, respectively.                                        |   | —               |   | — |   |
| Cumulative  Financing preferred stock - EUR 0.05 par value- 10,000,000 shares  authorized.  No shares issued or  outstanding at December 31, 2002 and 2001               |   | —               |   | — |   |
| Cumulative  preferred stock - EUR 0.05 par value- 50,000,000 shares authorized.  No shares issued or outstanding at  December 31, 2002 and 2001                          |   | —               |   | — |   |
| Common stock -  EUR 0.05 par value- 40,000,000 shares authorized.  Issued and outstanding 20,296,674 and 20,284,441 shares at  December 31, 2002 and 2001, respectively. |   | 1,014                |   | 1,014 |   |
| Additional  paid-in capital                                                                                                                                                   |   | 35,066               |   | 34,954 |   |
| Revaluation  reserve group companies                                                                                                                                          |   | 14,561               |   | 14,561 |   |
| Foreign currency  translation adjustment                                                                                                                                      |   | (3,765               | )      | 7,901 |   |
| Retained earnings                                                                                                                                                             |   | 78,083               |   | 66,382 |   |
|                                                                                                                                                                          |   |                 |   |   |   |
| Total  shareholders’ equity                                                                                                                                              |   | 124,959              |   | 124,812 |   |
| Total  liabilities and shareholders’ equity                                                                                                                              |   | 343,812              |   | 309,945 |   |

 

**See Accompanying Notes to theConsolidated Financial Statements**

 

56

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**ARCADIS NV**

**CONSOLIDATEDSTATEMENTS OF INCOME**

**(in thousands of EUR, except share and per share amounts)**

 
|                                                                           |   | **For the  years ended December 31,** |   |
|--------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                           |   | **2002**                              |   | **2001** |   | **2000** |   |
|                                                                           |   |                                  |   |   |   |   |   |
| Gross revenue                                                                  |   | 819,137                               |   | 797,357 |   | 776,238 |   |
| Materials,  services of third parties and subcontractors                       |   | 241,358                               |   | 233,911 |   | 225,298 |   |
| Net revenue                                                                    |   | 577,779                               |   | 563,446 |   | 550,940 |   |
| Operational cost  (Note 14)                                                    |   | 518,913                               |   | 509,178 |   | 497,829 |   |
| Depreciation                                                                   |   | 15,945                                |   | 15,423 |   | 17,948 |   |
|                                                                           |   |                                  |   |   |   |   |   |
| Operating income                                                               |   | 42,921                                |   | 38,845 |   | 35,163 |   |
| Financing  income/(expense) net                                                |   | (2,215                                | )      | (2,657 | ) | (3,317 | ) |
|                                                                           |   |                                  |   |   |   |   |   |
| Income from  operations before taxes                                           |   | 40,706                                |   | 36,188 |   | 31,846 |   |
| Taxes on income  (Note 15)                                                     |   | 14,427                                |   | 12,509 |   | 11,229 |   |
|                                                                           |   |                                  |   |   |   |   |   |
| Income of  consolidated companies from operations, after taxes                 |   | 26,279                                |   | 23,679 |   | 20,617 |   |
| Income from  non-consolidated companies and long-term investments, after taxes |   | 660                                   |   | 542 |   | 868 |   |
|                                                                           |   |                                  |   |   |   |   |   |
| Group income  from operations after taxes                                      |   | 26,939                                |   | 24,221 |   | 21,485 |   |
|                                                                           |   |                                  |   |   |   |   |   |
| Amortization of  goodwill                                                      |   | (191                                  | )      | (64 | ) | — |   |
|                                                                           |   |                                  |   |   |   |   |   |
| Extraordinary  income/(expenses) before taxes                                  |   | —                                |   | 835 |   | — |   |
| Taxes on  extraordinary items                                                  |   | —                                |   | 1,117 |   | — |   |
| Extraordinary  income/(expenses) after taxes                                   |   | —                                |   | 1,952 |   | — |   |
|                                                                           |   |                                  |   |   |   |   |   |
| Group income  after taxes                                                      |   | 26,748                                |   | 26,109 |   | 21,485 |   |
| Minority  interest                                                             |   | (2,080                                | )      | (1,025 | ) | (756 | ) |
|                                                                           |   |                                  |   |   |   |   |   |
| Net income                                                                     |   | 24,668                                |   | 25,084 |   | 20,729 |   |
|                                                                           |   |                                  |   |   |   |   |   |
| Basic net income  per share of common stock                                    |   | 1.21                                  |   | 1.24 |   | 1.04 |   |
| Diluted net  income per share of common stock                                  |   | 1.20                                  |   | 1.23 |   | 1.04 |   |
|                                                                           |   |                                  |   |   |   |   |   |
| Basic weighted  average number of shares outstanding                           |   | 20.291                                |   | 20,280 |   | 20,022 |   |
| Diluted weighted  average number of shares outstanding                         |   | 20,357                                |   | 20,338 |   | 20,022 |   |

 

**See Accompanying Notes to the Consolidated FinancialStatements.**

 

57

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**ARCADIS NV**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(in thousands of EUR)**

 
|                                                                               |   | **For the  years ended December 31,** |   |
|------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                               |   | **2002**                              |   | **2001** |   | **2000** |   |
| **Cash flow from operating activities**                                            |   |                                  |   |   |   |   |   |
| Net income                                                                         |   | 24,668                                |   | 25,084 |   | 20,729 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |   |                                  |   |   |   |   |   |
| Minority  interest                                                                 |   | 2,080                                 |   | 1,025 |   | 756 |   |
| Depreciation and  amortization                                                     |   | 16,136                                |   | 15,487 |   | 17,948 |   |
| Income from  non-consolidated companies                                            |   | (364                                  | )      | 296 |   | (633 | ) |
| Decrease /  (increase) of receivables and other current assets                     |   | (5,116                                | )      | 4,520 |   | (17,245 | ) |
| Decrease of  inventories                                                           |   | 3,368                                 |   | 2,045 |   | 20,157 |   |
| (Decrease) /  increase of current liabilities                                      |   | 6,302                                 |   | (2,182 | ) | 10,735 |   |
| (Decrease) /  increase of long-term liabilities                                    |   | (1,307                                | )      | 3,430 |   | (2,738 | ) |
|                                                                               |   |                                  |   |   |   |   |   |
| Net cash  provided by operating activities                                         |   | 45,767                                |   | 49,705 |   | 49,709 |   |
|                                                                               |   |                                  |   |   |   |   |   |
| **Cash flow used in investing  activities**                                        |   |                                  |   |   |   |   |   |
| Investments in  property, plant & equipment and intangible assets              |   | (14,195                               | )      | (15,334 | ) | (17,173 | ) |
| Divestments of  property, plant & equipment and intangible assets              |   | 932                                   |   | 1,913 |   | 2,780 |   |
| Investments in  non-consolidated companies                                         |   | (4,992                                | )      | (2,869 | ) | (2,371 | ) |
| Divestments of  non-consolidated companies                                         |   | 1,493                                 |   | 7,018 |   | 3,023 |   |
| Investments in  consolidated interests, net of cash acquired                       |   | (11,247                               | )      | (2,834 | ) | (4,961 | ) |
| Divestments of  consolidated companies, net of cash sold                           |   | (36                                   | )      | (1,425 | ) | 473 |   |
| Purchase of own  shares                                                            |   | (3,225                                | )      | — |   | — |   |
|                                                                               |   |                                  |   |   |   |   |   |
| Net cash used in  investing activities                                             |   | (31,270                               | )      | (13,531 | ) | (18,229 | ) |
|                                                                               |   |                                  |   |   |   |   |   |
| **Cash flow used in financing  activities**                                        |   |                                  |   |   |   |   |   |
| Dividends paid                                                                     |   | (9,322                                | )      | (8,138 | ) | (3,208 | ) |
| Proceeds from  issuance of common stock                                            |   | 112                                   |   | 77 |   | 102 |   |
| Increase in  long-term debt                                                        |   | 6,929                                 |   | 867 |   | 19,905 |   |
| Repayment of  long-term debt                                                       |   | (1,504                                | )      | (1,097 | ) | (2,865 | ) |
| Net change in  short-term borrowings and bank overdrafts                           |   | 3,172                                 |   | (2,903 | ) | (39,419 | ) |
|                                                                               |   |                                  |   |   |   |   |   |
| Net cash  provided by (used in) financing activities                               |   | (613                                  | )      | (11,194 | ) | (25,485 | ) |
|                                                                               |   |                                  |   |   |   |   |   |
| Effect of exchange  rate differences on cash balances                              |   | (4,315                                | )      | 379 |   | 316 |   |
|                                                                               |   |                                  |   |   |   |   |   |
| **Cash and cash equivalents:**                                                     |   |                                  |   |   |   |   |   |
| Net increase  (decrease) during the year                                           |   | 9,569                                 |   | 25,359 |   | 6,311 |   |
| Balance at  beginning of year                                                      |   | 43,679                                |   | 18,320 |   | 12,009 |   |
|                                                                               |   |                                  |   |   |   |   |   |
| Balance at end  of year                                                            |   | 53,248                                |   | 43,679 |   | 18,320 |   |

 

**See Accompanying Notes to the Consolidated FinancialStatements**

 

58

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** **

**ARCADIS NV**

**CONSOLIDATED STATEMENT OFSHAREHOLDERS’ EQUITY**

**(in thousands of EUR, except per shareamounts)**

 
|                                                                                |   | **Priority  Shares** |   | **Common  Shares** |   | **Share  Capital** |   | **Additional  Paid-in  Capital** |   | **Revaluation  reserve  group  companies** |   | **Revaluation  reserve  real  estate** |   | **Statutory  Reserves** |   | **Foreign  currency  translation  adjustment** |   | **Retained  Earnings** |   | **Total** |   |
|-------------------------------------------------------------------------------------|--------|----------------------|--------|--------------------|--------|--------------------|--------|----------------------------------|--------|--------------------------------------------|--------|----------------------------------------|--------|-------------------------|--------|------------------------------------------------|--------|------------------------|--------|-----------|--------|
| Balance at December 31, 1999                                                        |   | 200                  |   | 19,769,117         |   | 988                |   | 27,357                           |   | 14,561                                     |   | 114                                    |   | —                  |   | 2,870                                          |   | 47,973                 |   | 93,863    |   |
| Net income                                                                          |   |                 |   |               |   |               |   |                             |   |                                       |   |                                   |   |                    |   |                                           |   | 20,729                 |   | 20,729    |   |
| Dividends declared****(EUR 0.39 per share)                                          |   |                 |   |               |   |               |   |                             |   |                                       |   |                                   |   |                    |   |                                           |   | (7,907                 | )      | (7,907    | )      |
| Issuance of shares of common stock                                                  |   |                 |   | 14,938             |   | 1                  |   | 101                              |   |                                       |   |                                   |   |                    |   |                                           |   |                   |   | 102       |   |
| Stock dividend                                                                      |   |                 |   | 491,103            |   | 25                 |   | 3,704                            |   |                                       |   |                                   |   |                    |   |                                           |   |                   |   | 3,729     |   |
| Reclassification stock dividend                                                     |   |                 |   |               |   |               |   | 3,715                            |   |                                       |   |                                   |   |                    |   |                                           |   | (3,715                 | )      | —    |   |
| Foreign currency translation adjustments                                            |   |                 |   |               |   |               |   |                             |   |                                       |   |                                   |   |                    |   | 2,872                                          |   |                   |   | 2,872     |   |
| Acquired goodwill and equity share in  goodwill paid for non-consolidated companies |   |                 |   |               |   |               |   |                             |   |                                       |   |                                   |   |                    |   |                                           |   | (6,126                 | )      | (6,126    | )      |
| Revaluation of real estate                                                          |   |                 |   |               |   |               |   |                             |   |                                       |   | (10                                    | )      |                    |   |                                           |   |                   |   | (10       | )      |
| Balance at December 31, 2000                                                        |   | 200                  |   | 20,275,158         |   | 1,014              |   | 34,877                           |   | 14,561                                     |   | 104                                    |   | —                  |   | 5,742                                          |   | 50,954                 |   | 107,252   |   |
| Net income                                                                          |   |                 |   |               |   |               |   |                             |   |                                       |   |                                   |   |                    |   |                                           |   | 25,084                 |   | 25,084    |   |
| Dividends declared****(EUR 0.44 per share)                                          |   |                 |   |               |   |               |   |                             |   |                                       |   |                                   |   |                    |   |                                           |   | (8,925                 | )      | (8,925    | )      |
| Issuance of shares of common stock                                                  |   |                 |   | 9,283              |   | 0                  |   | 77                               |   |                                       |   |                                   |   |                    |   |                                           |   |                   |   | 77        |   |
| Foreign currency translation adjustments                                            |   |                 |   |               |   |               |   |                             |   |                                       |   |                                   |   |                    |   | 2,159                                          |   |                   |   | 2,159     |   |
| Acquired goodwill and equity share in  goodwill paid for non-consolidated companies |   |                 |   |               |   |               |   |                             |   |                                       |   |                                   |   |                    |   |                                           |   | (731                   | )      | (731      | )      |
| Revaluation of real estate                                                          |   |                 |   |               |   |               |   |                             |   |                                       |   | (104                                   | )      |                    |   |                                           |   |                   |   | (104      | )      |
| Balance at December 31, 2001                                                        |   | 200                  |   | 20,284,441         |   | 1,014              |   | 34,954                           |   | 14,561                                     |   | —                                 |   | —                  |   | 7,901                                          |   | 66,382                 |   | 124,812   |   |
| Net income                                                                          |   |                 |   |               |   |               |   |                             |   |                                       |   |                                   |   |                    |   |                                           |   | 24,668                 |   | 24,668    |   |
| Dividends declared****(EUR 0.48 per share)                                          |   |                 |   |               |   |               |   |                             |   |                                       |   |                                   |   |                    |   |                                           |   | (9,742                 | )      | (9,742    | )      |
| Issuance of shares of common stock                                                  |   |                 |   | 12,233             |   | —             |   | 112                              |   |                                       |   |                                   |   |                    |   |                                           |   |                   |   | 112       |   |
| Temporary purchase ARCADIS shares of common  stock  to cover granted options   |   |                 |   |               |   |               |   |                             |   |                                       |   |                                   |   |                    |   |                                           |   | (3,225                 | )      | (3,225    | )      |
| Foreign currency translation adjustments                                            |   |                 |   |               |   |               |   |                             |   |                                       |   |                                   |   |                    |   | (11,666                                        | )      |                   |   | (11,666   | )      |
| Balance at December 31, 2002                                                        |   | 200                  |   | 20,296,674         |   | 1,014              |   | 35,066                           |   | 14,561                                     |   | —                                 |   | —                  |   | (3,765                                         | )      | 78,083                 |   | 124,959   |   |

 

**SeeAccompanying Notes to the Consolidated Financial Statements**

 

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**NOTES TO THECONSOLIDATED FINANCIAL STATEMENTS**

 

**NOTE 1.    Summary of Significant Accounting Policies**

 

**General**

 

ARCADIS N.V. is a public company organized under thelaws of the Kingdom of The Netherlands. Its principal office is located at: Utrechtseweg 68, 6812 AH, Arnhem,the Netherlands. Phone: *31-26-3778911.

 

ARCADIS N.V. and itsconsolidated subsidiaries (“ARCADIS” or the “Company”), is an internationalprovider of comprehensive knowledge-based consulting services in the areas ofinfrastructure, environment, buildings and communications**.**

 

The ConsolidatedFinancial Statements of ARCADIS NV (“ARCADIS”) have been prepared in accordancewith generally accepted accounting principles in the Netherlands (“NL GAAP” or“Netherlands GAAP”).  Note 17 includes asummary of the differences between Netherlands GAAP and U.S. GAAP that have amaterial effect on net income and shareholders’ equity.  Unless otherwise stated, and except forshare and per share amounts, all amounts are presented in thousands of EUR.

 

**Use ofEstimates in the Preparation of Financial Statements**

 

Management of the Companyhas made a number of estimates and assumptions relating to the reporting ofassets and liabilities and the disclosure of contingent assets and liabilitiesto prepare these financial statements. Actual results could differ from those estimates.

 

The Company estimates thecontract value, total contract cost and the extent of progress towardcompletion of fixed fee contracts and immediately recognizes a loss if thetotal estimated costs exceed the fixed fee. The actual costs to complete a project could differ from thoseestimates.

 

The Company’sallowance for doubtful accounts is based on management’s estimate of accountreceivables and unbilled fees, at estimated billable amounts, that areuncollectible.  Actual amountsuncollected could differ from the estimated uncollectible amounts.

 

**Principles of Consolidation**

 

The ConsolidatedFinancial Statements include the accounts of ARCADIS and the companies whichARCADIS directly and/or indirectly controls. All intercompany transactions have been eliminated.  On December 31, 1995, the Company acquired a50% interest in Grupo EP Eptisa, Spain. The investment is accounted for on aproportionate basis under NL GAAP, by recording the Company’s 50% share of theassets, liabilities and revenues and expense items of Grupo EP Eptisa.

 

**Conversion of Foreign Currencies**

 

Asset andliabilities denominated in foreign currencies are converted into EUR at ratesof exchange on the respective balance sheet dates. For statement of incomedata, amounts in foreign currencies are converted into EUR at the quarterlyaverage rate over the respective reported period. Exchange rate differences areincluded in income, except those arising from the translation of shareholders’equity of foreign entities outside the EUR countries, which are directly addedto or deducted from equity.

 

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**Principles of valuation of assets and liabilities**

 

*Cash equivalents.*Cashequivalents are carried at face value and consist of highly liquid investmentswith an initial maturity of three months or less.

 

*Receivables.*****Outstandingamounts due from customers for deliveries and work performed have been includedunder “Receivables” and are valued at nominal value, less provisions fordoubtful debts.

 

*Inventories.*Goods for resale, raw materials and supplies are valued at the lower of cost ormarket value on the balance sheet date.

 

Work in progressis valued at full cost price of the work performed per project, less advancesrequested from customers and installments, and increased by the related shareof expected profit on the project, calculated according to thepercentage-of-completion method. Included in this cost price is asystematically determined surcharge for indirect costs. When valuing work inprogress, provisions are made for expected losses on current projects, whichare calculated up to the completion of the project. Furthermore, projects forwhich no final confirmation of order has been received are valued at zero.

 

*Property, plant and equipment.*****Realestate is valued at historical cost. The level of annual depreciation ofbuildings is determined by the estimated economic life and amounts in general to3% of their book value at the beginning of the year. Land and rural propertiesare not depreciated.

 

Furniture andfixtures are valued at historical cost. Historical cost is reduced by annualdepreciation, based on the estimated economic life. For furniture and fixtures,annual depreciation is 12% to 33% of historical cost.

 

*Intangible assets.*Goodwill represents the amount paid in excess of the net fair value of assetsand liabilities acquired, calculated in accordance with the valuationprinciples of ARCADIS NV. Goodwill paid in the years up to and including 2000was charged directly to equity. Goodwill paid from 2001 onwards for newacquisitions is capitalized and amortized, based on its estimated economiclife. Software is valued at historical cost. Annual depreciation is 20% to 33%,unless software becomes obsolete, in which case, the entire book value iswritten off.

 

*Non-consolidated companies.*Investments in non-consolidated companies consist of investments incompanies over which ARCADIS can exercise significant influence. Theseinvestments are accounted for under the equity method.

 

*Long-term investments.*Minority investments in companies where ARCADIS is not in a position toexercise significant influence are stated at cost.  Dividends are accounted for as income at the time of receipt.

 

*Deferred taxes.*Provisions for deferred taxes are based on the timing differences between bookvalue and value for tax purposes of assets and liabilities at current rates.

 

*Pensions.*Pensionsand similar obligations are calculated on the basis of actuarial calculations.

 

*Others.* Otherassets and liabilities are stated at nominal value.

 

**Method of determination of income**

 

*Revenueand Cost Recognition*

 

Revenue from fixed feecontracts is recognized on the percentage of completion method, measuredgenerally by estimating the status of completion of the project and recognizingthe related estimated percentage of revenue and gross profit expected from theproject.

 

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Revenue from cost-pluscontracts is recognized as costs are incurred plus applicable fees. Revenuefrom time-and-material contracts is recognized at contract rates as work isperformed and material costs are incurred.

 

Revenue is recognized onadditional services requested by clients for which a formal change order hasnot been obtained when the realization is probable and the amount can bereliably estimated. Unbilled fees, at estimated billable amounts, representrevenue recognized for which billings had not yet been presented to customers.

 

Operational costs includeall direct material and labor costs and those indirect costs related tocontract performance, such as indirect labor. Selling, general, andadministrative costs are charged to expense as incurred. Provisions forestimated losses on uncompleted contracts are made in the period in which suchlosses are determined. Changes in job performance, job conditions, andestimated profitability, including those arising from contract penaltyprovisions, may result in revisions to estimated costs to complete and revenuesto be earned and are recognized in the period in which the revisions aredetermined.  The risk that theseestimates may change generally increases as the duration of the projectincreases.

 

Depreciation ofbuildings is calculated on the basis of the book value at the beginning of theyear. For software, furniture and fixtures, the level of depreciation isdetermined by the estimated economic life, and historical cost or the construction price is taken as the basis.

 

Income taxescomprise both actual and deferred taxes. No taxes are charged to profits to theextent that they can be offset against losses in prior years. Taxes arededucted from losses to the extent that they more likely than not can be offsetagainst taxes on profits in prior years.

 

The Companyrecords its proportionate share of earnings of investments in companiesaccounted for under the equity method. For long-term investments in whichARCADIS does not have significant influence, annual dividends received areincluded in income.

 

Non-project-relatedcosts, financing income/expenses and extraordinary items are accounted for inthe year to which these items relate.

 

**Cash flow statements**

 

Cash flowstatements have been prepared under the indirect method in accordance withDutch GAAP. Cash flows in foreign currencies have been translated into EURusing the average rates of exchange for the periods involved.

 

**Net Income Per Share of Common Stock**

 

Net income pershare of common stock is calculated by dividing net income by the weightedaverage of outstanding shares of common stock. The weighted average number of shares outstanding, and the weightedaverage number of diluted shares for the years presented were as follows:

 
| **Year** |   | **Priority Shares** |   | **Shares of Common  Stock** |   | **Diluted number of  Shares of Common  Stock** |   |
|----------|--------|---------------------|--------|-----------------------------|--------|------------------------------------------------|--------|
| 2002     |   | 200                 |   | 20,290,758                  |   | 20,356,675                                     |   |
| 2001     |   | 200                 |   | 20,279,999                  |   | 20,337,576                                     |   |
| 2000     |   | 200                 |   | 20,022,337                  |   | 20,022,337                                     |   |

 

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The diluted numberof shares is calculated by using the monthly number of options outstanding andthe monthly average stock price at the NASDAQ stock exchange. Only options withexercise prices above the average stock price are taken into account.

 

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**NOTE 2.    Acquisitions and Divestments**

 

In 2002, ARCADISacquired, through its Spanish subsidiary Grupo EP, a 100% interest in CastaS.A. Castaspecializes in facility management services and has focused its activitiesaround residences for dependent senior people. Annual gross revenues of Castaamount to approximately EUR 4 million. The company employs 140 people (mostlypart-time), and currently has a total of some 340 beds under management. Thetotal amount paid for this acquisition was EUR 1.7 million, includingapproximately EUR 1.5 million of goodwill. The acquisition of Casta was made toimprove ARCADIS’ strategy to further develop its position in the market forfacility management. The acquisition has been consolidated by Grupo EP as fromthe second quarter 2002.

 

In 2002, ARCADIS also acquired FC International SA, aFrench-based consulting engineering firm specializing predominantly ininfrastructure design and environmental consulting. This company employs almost800 people, and has annual gross revenues of approximately EUR 70 million. Thetotal amount paid for this acquisition was EUR 12 million, including EUR 5.8million of goodwill. This acquisition is made to increase in the strategy tobuild home market positions in key European markets. FCI was consolidated intoARCADIS’ financials as of July 1, 2002.

 

In 2001,ARCADIS  acquired through its Braziliansubsidiary ARCADIS Logos Engenharia SA a 100% interest in Enerconsult SA,SãoPaulo, Brazil, and a 70% interest in ARCADIS Hidro Ambiente SA, São Paulo,Brazil. The total amount paid for these interests was approximately EUR 1.6million, including approximately EUR 1.0 million of goodwill.

 

In 2001, theinterests in the minority participations Analytico BV and Sageos SA were sold.Total proceeds were EUR 8.6 million, and the gain was EUR 4.0 million. Inaccordance with Dutch GAAP, this amount has been taken into account asextraordinary gain.

 

In 2000, thefollowing interests, among others, were acquired and consolidated for the firsttime:

WSBC Civil Engineers, Inc. (100%), Houston, TX, United States (owned byARCADIS Geraghty & Miller, Inc. as of November 16, 2000). The purchaseprice was EUR 3.4 million, including goodwill amounting to EUR 2.4 million.

 

In 2000, the interests in ARCADIS Heidemij Realisatie Grondreiniging BV andAdviesbureau Grondzaken Limburg were sold. Proceeds were EUR 4.5million., which approximated book value.

 

All acquisitionsduring 2002, 2001, and 2000 were accounted for by the purchase method. Goodwillgenerated by these acquisitions for the year 2000 has been charged againstshareholders’ equity, while the goodwill paid in 2002 and 2001 was capitalizedand is amortized over its economic life, which normally is estimated to be 20years. None of the goodwill paid in 2002, 2001 and 2000 is deductible for taxpurposes.

 

**NOTE 3.    Geographic Data**

 

**Market Area Information**

 

Presented below isthe geographical segmentation which coincides with the Company’s reportingstructure. There is almost no differentiation in the type of services providedby the various group companies. Therefore no other segmentation information isincluded. The information presented below illustrates the performance in thegeographical areas in terms of gross revenue, operating income, identifiableassets, and expenditures and depreciation with respect to property, plant &equipment and intangible assets, and extraordinary items. Financing expensesand taxes on income, among others, are not presented, because the Companymanages its segments on an operating income basis.

 

As from 2001, thedefinition of the geographic areas has been slightly changed. The data ofARCADIS Euroconsult, which clients are located in Eastern Europe, Asia, Africaand Latin America, but which

 

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headquarters are located in the Netherlands, are now consideredseparately as Other regions. In earlier years these data were considered aspart of the Netherland’s data. The geographical information is in line with thedivision of tasks between the members of the Executive Board.

 

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| **GROSS REVENUE**        |   | **2002** |   | **2001** |   | **2000** |   |
|--------------------------|--------|----------|--------|----------|--------|----------|--------|
|                     |   |     |   |     |   |     |   |
| The Netherlands          |   | 302,012  |   | 310,687  |   | 300,761  |   |
| Europe                   |   | 180,047  |   | 145,251  |   | 138,861  |   |
| North and South  America |   | 291,753  |   | 309,558  |   | 294,800  |   |
| Other regions            |   | 51,492   |   | 37,770   |   | 43,201   |   |
| Subtotal                 |   | 825,304  |   | 803,266  |   | 777,623  |   |
| Intra group              |   | (6,167)  |   | (5,909)  |   | (1,385)  |   |
| Total gross  revenue     |   | 819,137  |   | 797,357  |   | 776,238  |   |

 
| **OPERATING INCOME**     |   | **2002** |   | **2001** |   | **2000** |   |
|--------------------------|--------|----------|--------|----------|--------|----------|--------|
|                     |   |     |   |     |   |     |   |
| The Netherlands          |   | 16,880   |   | 18,025   |   | 17,371   |   |
| Europe                   |   | 7,367    |   | 4,977    |   | 4,911    |   |
| North and South  America |   | 17,458   |   | 15,404   |   | 13,057   |   |
| Other regions            |   | 1,216    |   | 439      |   | (176     | )      |
| Total operating  income  |   | 42,921   |   | 38,845   |   | 35,163   |   |

 
| **ASSETS**                                                           |   | **2002** |   | **2001** |   | **2000** |   |
|----------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                                                                 |   |     |   |     |   |     |   |
| The Netherlands                                                      |   | 225,359  |   | 235,484  |   | 210,519  |   |
| Europe                                                               |   | 115,785  |   | 72,877   |   | 77,248   |   |
| North and South  America                                             |   | 96,389   |   | 105,793  |   | 99,459   |   |
| Other regions                                                        |   | 19,513   |   | 10,706   |   | 9,289    |   |
| Eliminations                                                         |   | (122,801 | )      | (121,335 | )      | (108,234 | )      |
|                                                                 |   |     |   |     |   |     |   |
|                                                                 |   | 334,245  |   | 303,525  |   | 288,281  |   |
| Non-consolidated  companies, long-term investments, and other assets |   | 9,567    |   | 6,420    |   | 10,474   |   |
|                                                                 |   |     |   |     |   |     |   |
| Total assets                                                         |   | 343,812  |   | 309,945  |   | 298,755  |   |

 
| **INVESTMENTS IN PROPERTY, PLANT & EQUIPMENT**    |   | **2002** |   | **2001** |   | **2000** |   |
|-------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                                                  |   |     |   |     |   |     |   |
| The Netherlands                                       |   | 5,150    |   | 7,894    |   | 7,009    |   |
| Europe                                                |   | 3,448    |   | 2,368    |   | 4,415    |   |
| North and South  America                              |   | 5,543    |   | 5,018    |   | 5,526    |   |
| Other regions                                         |   | 54       |   | 54       |   | 223      |   |
|                                                  |   |     |   |     |   |     |   |
| Total  investments in property, plant & equipment |   | 14,195   |   | 15,334   |   | 17,173   |   |

 

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| **DEPRECIATION**         |   | **2002** |   | **2001** |   | **2000** |   |
|--------------------------|--------|----------|--------|----------|--------|----------|--------|
|                     |   |     |   |     |   |     |   |
| The Netherlands          |   | 7,878    |   | 7,747    |   | 10,114   |   |
| Europe                   |   | 3,265    |   | 2,596    |   | 2,989    |   |
| North and South  America |   | 4,377    |   | 4,892    |   | 4,650    |   |
| Other regions            |   | 425      |   | 188      |   | 195      |   |
|                     |   |     |   |     |   |     |   |
| Total  depreciation      |   | 15,945   |   | 15,423   |   | 17,948   |   |

 
| **EXTRAORDINARY ITEMS**    |   | **2002** |   | **2001** |   | **2000** |   |
|----------------------------|--------|----------|--------|----------|--------|----------|--------|
|                       |   |     |   |     |   |     |   |
| The Netherlands            |   | —   |   | 1,952    |   | —   |   |
| Europe                     |   | —   |   | —   |   | —   |   |
| North and South  America   |   | —   |   | —   |   | —   |   |
| Other regions              |   | —   |   | —   |   | —   |   |
|                       |   |     |   |     |   |     |   |
| Total  extraordinary items |   | —   |   | 1,952    |   | —   |   |

 

**NOTE 4.    Cash and Cash Equivalents**

 

The Company’spolicy is to invest cash in excess of operating requirements in highly liquidinvestments with a maturity of three months or less. Cash and cash equivalentsat December 31, 2002, and 2001 consisted of the following:

 
|                                                         |   | **2002** |   | **2001** |   |
|--------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                         |   |     |   |     |   |
| Cash in banks  and on hand                                   |   | 52,210   |   | 42,253   |   |
| Cash in banks  restricted for taxes/social security premiums |   | 301      |   | 205      |   |
| Time deposits                                                |   | 737      |   | 1,221    |   |
|                                                         |   |     |   |     |   |
| Total cash and  cash equivalents                             |   | 53,248   |   | 43,679   |   |

** **

**NOTE 5.    Receivables**

 

Receivablesmaturing within one year as of December 31, 2002 and 2001 consisted of:

 

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|                                                                                                 |   | **2002** |   | **2001** |   |
|------------------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                                                                 |   |     |   |     |   |
| Trade  receivables, net of allowance for doubtful accounts of EUR 9,865 and EUR  9,267, respectively |   | 184,401  |   | 166,597  |   |
| Receivables from  non-consolidated companies                                                         |   | 3,356    |   | 3,204    |   |
|                                                                                                 |   |     |   |     |   |
| Total  receivables                                                                                   |   | 187,757  |   | 169,801  |   |

 

**NOTE 6.    Inventories**

 

Inventories atDecember 31, 2002 and 2001 consisted of:

 
|                        |   | **2002** |   | **2001** |   |
|-----------------------------|--------|----------|--------|----------|--------|
|                        |   |     |   |     |   |
| Raw materials  and supplies |   | 95       |   | 170      |   |
| Work in process             |   | 21,216   |   | 27,119   |   |
| Goods for resale            |   | 178      |   | 233      |   |
|                        |   |     |   |     |   |
| Total  inventories          |   | 21,489   |   | 27,522   |   |

 

Costs andEstimated Earnings on Uncompleted Contracts are as follows:

 
|                                     |   | **2002** |   | **2001** |   |
|------------------------------------------|--------|----------|--------|----------|--------|
|                                     |   |     |   |     |   |
| Costs incurred  on uncompleted contracts |   | 584,149  |   | 535,694  |   |
| Estimated  earnings                      |   | 28,075   |   | 22,005   |   |
|                                     |   | 612,224  |   | 557,699  |   |
| Less: Billings  to date                  |   | 591,008  |   | 530,580  |   |
|                                     |   |     |   |     |   |
| Total work in  process                   |   | 21,216   |   | 27,119   |   |

 

All amounts are expected to be collected within 1 year

 
|                                                         |   | **2002** |   | **2001** |   |
|--------------------------------------------------------------|--------|----------|--------|----------|--------|
| Costs incurred  and estimated earnings in excess of billings |   | 54,180   |   | 65,871   |   |
| Billings in  excess of costs incurred and estimated earnings |   | (32,964  | )      | (38,752  | )      |
|                                                         |   |     |   |     |   |
| Total work in  process (see note 17 e)                       |   | 21,216   |   | 27,119   |   |
|                                                         |   |     |   |     |   |
| Amount of  advances received                                 |   | 7,110    |   | 7,324    |   |
|                                                         |   |     |   |     |   |
| Amount of  retentions held by clients                        |   | 1,127    |   | 1,035    |   |

 

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**NOTE 7.    Property, Plant and Equipment and Intangible Assets**

 

Property, plantand equipment at December 31, 2002 and 2001 consisted of :

 
|                                 |   | **Land  and  Buildings** |   | **Furniture  and  Fixtures** |   | **Rural  Properties** |   | **Total** |   |
|--------------------------------------|--------|--------------------------|--------|------------------------------|--------|-----------------------|--------|-----------|--------|
|                                 |   |                     |   |                         |   |                  |   |      |   |
| **At  December 31, 2002**            |   |                     |   |                         |   |                  |   |      |   |
| Historical cost                      |   | 10,251                   |   | 101,523                      |   | 40                    |   | 111,814   |   |
| Accumulated  depreciation            |   | (2,421                   | )      | (68,241                      | )      | (-                    | )      | (70,662   | )      |
|                                 |   |                     |   |                         |   |                  |   |      |   |
| Book value on  historical cost basis |   | 7,830                    |   | 33,282                       |   | 40                    |   | 41,152    |   |
|                                 |   |                     |   |                         |   |                  |   |      |   |
| **At  December 31, 2001**            |   |                     |   |                         |   |                  |   |      |   |
| Historical cost                      |   | 6,614                    |   | 109,143                      |   | 139                   |   | 115,896   |   |
| Accumulated depreciation             |   | (2,014                   | )      | (76,129                      | )      | —                |   | (78,143   | )      |
|                                 |   |                     |   |                         |   |                  |   |      |   |
| Book value on historical cost basis  |   | 4,600                    |   | 33,014                       |   | 139                   |   | 37,753    |   |

 

Rural propertiesconsist of real estate which is not directly utilized by ARCADIS in its normaloperations.  At December 31, 2002, thebook value of property, plant & equipment financed by mortgages or capitalleases was EUR 1,847 (2001: EUR 1,895).

 

**Intangible Assets**

 

Intangible assetsconsist of capitalized goodwill and purchased software. The book value based onhistorical cost was as follows:

 
|                      |   | **2002** |   | **2001** |   |
|---------------------------|--------|----------|--------|----------|--------|
| **Goodwill**              |   |     |   |     |   |
| Historical cost           |   | 8,599    |   | 1,673    |   |
| Accumulated  amortization |   | (255     | )      | (64      | )      |
|                      |   |     |   |     |   |
| Bookvalue                 |   | 8,344    |   | 1,609    |   |
|                      |   |     |   |     |   |
| **Software**              |   |     |   |     |   |
| Historical cost           |   | 13,381   |   | 13,389   |   |
| Accumulated depreciation  |   | (9,066   | )      | (7,408   | )      |
|                      |   |     |   |     |   |
| Book value                |   | 4,315    |   | 5,981    |   |
|                      |   |     |   |     |   |
| Total book value          |   | 12,659   |   | 7,590    |   |

 

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**NOTE 8.    Investments in Non-Consolidated Companies**

 

The principalnon-consolidated interests at December 31, 2002  were a number of Dutch joint ventures. During 2001, the interestsin Analytico BV and SAGEOS SA were sold.

 

At December 31,2002 and 2001, consolidated retained earnings included nil and nilundistributed earnings, respectively, from ARCADIS investments innon-consolidated companies carried at equity value.

 

Accountsreceivable from and payables to non-consolidated companies are included in thefinancial statements as current assets and current liabilities, respectively.

 

**Summarized Financial Information of Non-ConsolidatedCompanies**

 

The followingtable presents summarized financial information of ARCADIS non-consolidatedcompanies in millions of EUR for fiscal years 2002 and 2001:

 
| **Balance sheet data**                           |   | **2002** |   | **2001** |   |
|--------------------------------------------------|--------|----------|--------|----------|--------|
|                                             |   |     |   |     |   |
| Current assets                                   |   | 15.2     |   | 19.8     |   |
| Non-current  assets                              |   | 1.8      |   | 1.1      |   |
|                                             |   |     |   |     |   |
| Total assets                                     |   | 17.0     |   | 20.9     |   |
|                                             |   |     |   |     |   |
| Current  liabilities                             |   | 14.4     |   | 8.0      |   |
| Non-current  liabilities                         |   | 3.4      |   | 3.3      |   |
| Shareholders’  equity                       |   | (0.8     | )      | 9.6      |   |
|                                             |   |     |   |     |   |
| Total  liabilities and shareholders’ equity |   | 17.0     |   | 20.9     |   |

 
| **Income statement data** |   | **2002** |   | **2001** |   | **2000** |   |
|---------------------------|--------|----------|--------|----------|--------|----------|--------|
|                      |   |     |   |     |   |     |   |
| Gross revenue             |   | 20.7     |   | 17.5     |   | 70.2     |   |
| Income before tax         |   | 0.2      |   | 0.9      |   | 1.1      |   |
| Net Income                |   | 0.0      |   | 0.9      |   | 1.1      |   |

 

**NOTE 9.    Other Current Liabilities**

 

Other currentliabilities includes items maturing within one year and at December 31, 2002and 2001 consisted of:

 

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|                                       |   | **2002** |   | **2001** |   |
|--------------------------------------------|--------|----------|--------|----------|--------|
|                                       |   |     |   |     |   |
| Taxes and social  security contributions   |   | 37,458   |   | 14,165   |   |
| Payable to  employees                      |   | 21,356   |   | 23,677   |   |
| Bank overdrafts  and short term borrowings |   | 15,026   |   | 10,659   |   |
| Dividends                                  |   | 9,742    |   | 8,925    |   |
| Other  liabilities                         |   | 15,635   |   | 10,582   |   |
|                                       |   |     |   |     |   |
| Total other  current liabilities           |   | 99,217   |   | 68,008   |   |

 

**NOTE 10. Long-Term Debt**

 

Long-term debt atDecember 31, 2002 and 2001 consisted of:

 
|                                                                                                      |   | **2002** |   | **2001** |   |
|-----------------------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                                                                      |   |     |   |     |   |
| Bank loans,  fixed interest rates of 6.1 and 6.2%, maturing in 2005                                       |   | 18,152   |   | 18,152   |   |
| Various bank  loans with interest rates between 2.5% and 10.0% and maturing between 2003  and 2015        |   | 9,353    |   | 3,645    |   |
| Capital lease  obligations with interest rates between 4.08% and 6.8% and maturing between  2003 and 2007 |   | 1,080    |   | 986      |   |
|                                                                                                      |   |     |   |     |   |
| Subtotal                                                                                                  |   | 28,585   |   | 22,783   |   |
| Current portion                                                                                           |   | (1,019   | )      | (777     | )      |
|                                                                                                      |   |     |   |     |   |
| Total long-term  debt                                                                                     |   | 27,566   |   | 22,006   |   |

 

The weightedaverage interest rate for 2002 and 2001 on interest bearing debt was 5.7%****and****6.1%,respectively.

 

The aggregate maturity oflong-term debt as of December 31, 2002 is as follows:

 

| **Years ending December 31,** |   | **Amount** |   |
|-------------------------------|--------|------------|--------|
|                          |   |       |   |
| 2003                          |   |       | 1,019  |   |
| 2004                          |   |       | 7,362  |   |
| 2005                          |   |       | 328    |   |
| 2006                          |   |       | 18,299 |   |
| 2007                          |   |       | 148    |   |
| Thereafter                    |   |       | 1,429  |   |
|                          |   |       |   |   |
| Total                         |   |       | 28,585 |   |

 

ARCADIS and itsconsolidated companies have short-term credit facilities available in theamount of EUR 137  million (2001: EUR126 million) under arrangements with banks at interest rates which

 

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approximate the bank’s prime rates. For a minor part of the available credit facilities, current receivablesand other assets have been pledged.  AtDecember 31, 2002, an amount of EUR 15.0 million (2001: EUR 10.7 million) wasutilized from these credit facilities, and approximately EUR 29 million wasused for guarantees, leaving approximately EUR 93 million available.

 

**NOTE 11.  Other Long-Term Liabilities**

 
|                               |   | **2002** |   | **2001** |   |
|------------------------------------|--------|----------|--------|----------|--------|
|                               |   |     |   |     |   |
| Pensions                           |   | 3,105    |   | 2,090    |   |
| Deferred taxes  (see Note 14)      |   | 5,611    |   | 8,183    |   |
| Other                              |   | 4,821    |   | 2,779    |   |
|                               |   |     |   |     |   |
| Total other  long-term liabilities |   | 13,537   |   | 13,052   |   |

 

The long-termliability for pensions is within foreign group companies based on local laborconditions. The long-term liability for deferred taxes is almost completelybased on the fact that the projects are valued according to thepercentage-of-completion method. The terms vary per project, but in total thenature is long-term. The other long-term liabilities consist largely of plannedrestructuring and reorganization costs, and litigation.

 

**NOTE 12. Shareholders’ Equity**

 

***Share capital.****  *AtDecember 31, 2002, ARCADIS’ authorized share capital was EUR 5,000,010, dividedinto 200 priority shares, par value EUR 0.05; 50,000,000 shares of cumulativepreferred stock, par value EUR 0.05; 10,000,000 shares of cumulative financingpreferred stock (divided over four series of 2,500,000 shares each), and40,000,000 shares of common stock, par value EUR 0.05.  At December 31, 2002, the number of sharesissued and outstanding consisted of 200 priority shares, and 20,296,674 sharesof common stock.  No shares of preferredstock are issued or outstanding.

 

The priorityshares are held by the “Stichting Prioriteit ARCADIS NV”, a non-profitfoundation which currently has 19 directors, consisting of six members of theSupervisory Board, three members of the Executive Board and ten members of theBoard of the Stichting Bellevue, a foundation established in Arnhem, who’s boardmembers are appointed by and from ARCADIS’ international employee base. Underthe Articles of Association, certain transactions by ARCADIS must be approvedby vote of at least eleven of the directors. Actions which require approval ofthe foundation are as follows:

 

(1)          The issuance andacquisition of ARCADIS shares or debentures;

(2)          Material transactionssuch as joint ventures, mergers, or partnerships;

(3)          Material investments oracquisitions (at least 25% of shareholders’ equity) and major increases ordecreases of equity interests;

(4)          Amendments to theArticles of Association;

(5)          Dissolution orbankruptcy of ARCADIS; and

(6)          Reduction of issuedcapital.

 

The StichtingPreferente Aandelen ARCADIS NV (Preference Shares ARCADIS Foundation)established in Arnhem, since 1995, has as its objective the protection andpromotion of the interests of ARCADIS NV and its affiliated companies and allparties involved.  The Board of thisFoundation consists of four persons appointed by the Company’s Executive Boardand one person appointed by and from the members of the Company’s SupervisoryBoard, who acts as chairman.  TheFoundation has been granted the right to acquire (see article 5 of Articles ofAssociation) the ARCADIS’ preferred (protection) shares up to a

 

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maximum equal to the number of outstanding shares issued at the date inquestion.  ARCADIS has been granted theright to issue the same number of preferred shares to the Foundation.  Both options may only be exercised providedthe interests of ARCADIS NV, its affiliated enterprises and all partiesinvolved were to warrant this.

 

***Stock options.  ***Priorto the 1993 merger with ARCADIS, the consolidated subsidiary ARCADIS Geraghty& Miller, Inc. had various stock option plans (“ARCADIS Geraghty &Miller Stock Option Plans”) which provided for the issuance of incentive ornon-qualified stock options to eligible employees.  As part of the Merger, ARCADIS assumed all of the outstandingoptions pursuant to the ARCADIS Geraghty & Miller Stock Option Plans andall of such outstanding options were converted into options to acquire ARCADISCommon Stock.  In addition, ARCADISadopted a new stock option plan which provides for the issuance of incentive ornon-qualified stock options to eligible employees of ARCADIS.  In general, ARCADIS options becomeexercisable over a three-year period and are subject to forfeiture in certaincircumstances .  Each of the plansprovide for an expiration date of 10 years, with exceptions in the case ofdeath, disability, termination or retirement.

 

A summary of thecombined activities under ARCADIS Stock Option Plans for each year in thethree-year period ended December 31, 2002 is as follows:

 
|                         |   | **Number of  ARCADIS  Shares** |   | **Exercise  price range in  US$** |   | **Number of  ARCADIS  Shares** |   | **Exercise price  range in  EUR** |   |
|------------------------------|--------|--------------------------------|--------|-----------------------------------|--------|--------------------------------|--------|-----------------------------------|--------|
|                         |   |                           |   |                              |   |                           |   |                              |   |
| Balance -  January 1, 2000   |   | 718,042                        |   | $6.75 to 15.10                    |   | —                         |   | —                            |   |
| Granted                      |   | 128,750                        |   | $6.75                             |   | —                         |   | —                            |   |
| Exercised                    |   | —                         |   | —                            |   | —                         |   | —                            |   |
| Cancelled                    |   | (127,899                       | )      | $6.75 to $15.10                   |   | —                         |   | —                            |   |
|                         |   |                           |   |                              |   |                           |   |                              |   |
| Balance -  December 31, 2000 |   | 718,893                        |   | $6.75 to $15.10                   |   | —                         |   | —                            |   |
| Granted                      |   | 118,750                        |   | $8.00                             |   | 195,000                        |   | 9.20                              |   |
| Exercised                    |   | —                         |   | —                            |   | —                         |   | —                            |   |
| Cancelled                    |   | (146,128                       | )      | $6.75 to $15.10                   |   | —                         |   | —                            |   |
| Balance -  December 31, 2001 |   | 691,515                        |   | $6.75 to $15.10                   |   | 195,000                        |   | 9.20                              |   |
| Granted                      |   | 35,000                         |   | $ 9.44                            |   | 263,100                        |   | € 8.50 to €10.79        |   |
| Exercised                    |   | (7,993                         | )      | $8.58 to $9.125                   |   | —                         |   | —                            |   |
| Cancelled                    |   | (42,498                        | )      | $6.75 to $15.10                   |   | —                         |   | —                            |   |
| Balance -  December 31, 2002 |   | 676,024                        |   | $6.75 to $11.50                   |   | 458,100                        |   | € 8.50 to € 10.79       |   |

 

At December 31,2002 and 2001, options to purchase 368,874 and 345,165 shares, respectively,were exercisable.

 

Total optionsoutstanding and exercisable at December 31, 2002 were as follows:

 

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|                        |   | **Options  Oustanding** |   |                  |   | **Options  Exercisable** |   |
|-----------------------------|--------|-------------------------|--------|-----------------------|--------|--------------------------|--------|
|                        |   | **Number**              |   | **Weighted  Average** |   | **Weighted  Average**    |   |   |   | **Number** |   | **Weighted  Average** |   |
| **Option Price  per share** |   |                    |   |                  |   | **Remaining  Life**      |   |   |   | **Exercisable  Price  Per Share** |   |   |   |   |   | **Exercise  Price Per Share** |   |
|                        |   |                    |   |                  |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| $6.75-8.50                  |   |                    |   | 324,875               |   | 7.2                      |   |   |   | $ | 7.35 |   |   |   | 66,125 |   | $ | 7.48 |   |
| $8.51-10.00                 |   |                    |   | 193,149               |   | 3.7                      |   |   |   | $ | 9.29 |   |   |   | 158,149 |   | $ | 9.26 |   |
| $10.01-11.50                |   |                    |   | 158,000               |   | 3.3                      |   |   |   | $ | 11.19 |   |   |   | 144,600 |   | $ | 11.38 |   |
|                        |   | Total                   |   | 676,024               |   |                     |   | Average |   | $ | 8.80 |   | Total |   | 368,874 |   | $ | 9.77 | average |
|                        |   |                    |   |                  |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|                        |   |                    |   |                  |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| EUR 8.50                    |   |                    |   | 9,000                 |   | 9.5                      |   |   |   | EUR 8.50 |   |   |   | — |   | — |   |
| EUR 9.20                    |   |                    |   | 195,000               |   | 8.5                      |   |   |   | EUR 9.20 |   |   |   | — |   | — |   |
| EUR 10.79                   |   |                    |   | 254,100               |   | 9.5                      |   |   |   | EUR 10.79 |   |   |   | — |   | — |   |
|                        |   | Total                   |   | 458,100               |   |                     |   | Average |   | EUR 10.07 |   |   |   |   |   |   |   |
|                             |        |                         |        |                       |        |                          |        |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

*Additional paid-in capital.*  Additional paid-in capital represents thepremium paid in excess of par value of shares at the time of issuance of newshares or exercise of stock options.  IfARCADIS declared a distribution to shareholders of additional paid-in-capital,at least EUR 16.5 million of the additional paid-in capital would not betaxable under the 1964 Dutch income tax legislation.

 

*Revaluation reserve group companies. *The revaluation reserve relates to thevaluation of subsidiary companies and arose in 1982 in connection with ARCADIS’reorganization.  The reserve can only bedistributed in part or in its entirety if some or all of the revalued companiesare divested.  At December 31, 2002, therevaluation reserve of EUR 14.6 million was not available for distribution.

 

*Revaluation reserve for real estate.*  Up to year end 2000, the periodic appraisalof real estate led to a revaluation which resulted in an increase in the bookvalue based on current cost, over the book value based on historical cost. Consequently,a revaluation reserve for real estate of EUR 0.1 million, after a provision fordeferred taxes, has been established. In 2001, the decision was made to no longer revalue the real estate.

 

*Statutory reserve. *Under Netherlands GAAP, a non-distributablestatutory reserve must be established and maintained by a holding company forthe non-distributable retained profits of its subsidiaries.  Distributions from this reserve are notpossible until the subsidiary for which the reserve is being maintained isitself allowed to make a distribution of its retained profits.  At December 31, 2002 and 2001, there was nostatutory reserve.

 

*Retained earnings. *The Executive Board is authorized todetermine, with the approval of the Supervisory Board, which portion of theprofits will be set aside for reserves. The holder of the priority shares is entitled to a dividend of 5% of thepar value of the priority shares.  Anyamount remaining after reserves is held for the benefit of theshareholders.  At December 31, 2002,retained earnings were reduced by a 2002 dividend of EUR 0.48 per outstandingshare of common stock.  On May 14, 2003,the Annual General Meeting of Shareholders of ARCADIS N.V. approved the 2002dividend proposal.  For fiscal year2001, a dividend was declared in the amount of EUR 0.44 per outstanding shareof common stock. There are no restrictions on the distribution of retainedearnings.

 

**NOTE 13**.**Commitments andContingent Liabilities**

 

ARCADIS hasobligations under purchase agreements for property, plant and equipment, andother commitments arising from the normal course of business which are notmaterial to the consolidated financial statements.

 

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Payments madeunder non-cancelable operating leases during 2002, 2001 and 2000 were EUR 30.2million, 25.7 million and EUR 30.3 million, respectively. Future minimumpayments for non-cancelable operating leases during the next five years andthereafter are as follows (in millions of EUR):

 

| **Years ending  December 31,** |   | **Amount** |   |
|-------------------------------------|--------|------------|--------|
|                                |   |       |   |
| 2003                                |   | 29.9       |   |
| 2004                                |   | 26.3       |   |
| 2005                                |   | 19.2       |   |
| 2006                                |   | 14.0       |   |
| 2007                                |   | 10.7       |   |
| Thereafter                          |   | 34.5       |   |
|                                |   |       |   |
| Total                               |   | 134.6      |   |

 

AtDecember 31, 2002, ARCADIS had EUR 1.0 million commitments arising fromacquisitions and participations.

 

**Litigation**

 

ARCADIS NV and itsgroup companies are from time to time involved in litigation issues, all ofwhich are contested. There are no asserted or pending claims or otherlitigation against ARCADIS which, in the opinion of ARCADIS’ Executive Boardand based on legal advice, could materially and adversely affect itsconsolidated financial condition or its results of operations or its cashflows.

 

**Financialinstruments**

 

In view of theshort term turnaround times involved, the book value of cash and cash equivalents,receivables and current liabilities approximate fair value.

 

The fair value ofARCADIS’ long-term debt does not materially differ from the carrying value.

 

**NOTE 14.  OPERATIONAL COST**

 

The operationalcost for the years 2002, 2001 and 2000 consist of following items:

 
|                                             |   | **2002** |   | **2001** |   | **2000** |   |
|--------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                                             |   |     |   |     |   |     |   |
| Salaries and  wages                              |   | 301,935  |   | 296,137  |   | 285,591  |   |
| Social charges                                   |   | 42,903   |   | 39,504   |   | 38,365   |   |
| Pension and  early retirement charges            |   | 11,014   |   | 8,621    |   | 5,657    |   |
| Other personnel  costs including temporary labor |   | 57,555   |   | 60,138   |   | 67,828   |   |
| Total personnel  cost                            |   | 413,407  |   | 404,400  |   | 397,441  |   |
| Other  operational cost                          |   | 105,506  |   | 104,778  |   | 100,388  |   |
|                                             |   | 518,913  |   | 509,178  |   | 497,829  |   |

 

**Note 15. Taxes on Income**

 

The tax effects ofsignificant timing differences that give rise to year-end deferred tax assetsand liabilities are offset within each taxable entity. Deferred tax assets inexcess of these amounts are recognized if their realization is more likely thannot.

 

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The geographicbreakdown of income before taxes, including income before taxes fromnon-consolidated companies and long-term investments and including grossextraordinary items in 2002, 2001 and 2000 are as follows:

 
|                 |   | **2002** |   | **2001** |   | **2000** |   |
|----------------------|--------|----------|--------|----------|--------|----------|--------|
|                 |   |     |   |     |   |     |   |
| The Netherlands      |   | 16,080   |   | 18,776   |   | 16,767   |   |
| Foreign              |   | 25,095   |   | 18,725   |   | 15,947   |   |
|                 |   |     |   |     |   |     |   |
| Income before  taxes |   | 41,175   |   | 37,501   |   | 32,714   |   |

 

Income taxes havebeen classified in the Consolidated Statements of Income as follows:

 
|                                    |   | **2002** |   | **2001** |   | **2000** |   |
|-----------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                                    |   |     |   |     |   |     |   |
| On Income from  operations before taxes |   | 14,427   |   | 12,509   |   | 11,229   |   |
| On Extraordinary  items                 |   | —   |   | (1,117   | )      | —   |   |
|                                    |   |     |   |     |   |     |   |
| Total income tax                        |   | 14,427   |   | 11,392   |   | 11,229   |   |

 

The geographicbreakdown of income taxes in the Consolidated Statements of Income is asfollows:

 
|            |   | **2002** |   | **2001** |   | **2000** |   |
|-----------------|--------|----------|--------|----------|--------|----------|--------|
|            |   |     |   |     |   |     |   |
| Current tax     |   |     |   |     |   |     |   |
| The Netherlands |   | 6,011    |   | 4,293    |   | 4,150    |   |
| Foreign         |   | 9,840    |   | 3,577    |   | 7,645    |   |
|            |   | 15,851   |   | 7,870    |   | 11,795   |   |
| Deferred tax    |   |     |   |     |   |     |   |
| The Netherlands |   | (1,310   | )      | 180      |   | 744      |   |
| Foreign         |   | (294     | )      | 3,342    |   | (1,310   | )      |
|            |   | (1,424   | )      | 3,522    |   | (566     | )      |
|            |   |     |   |     |   |     |   |
| Total taxes     |   | 14,427   |   | 11,392   |   | 11,229   |   |

 

AtDecember 31, 2002, operating loss carry-forwards for tax purposes amountedto EUR 0.5 million****which can be carried forward indefinitely.Net operating losses of EUR 0.8 million, EUR 2.9 million and EUR 1.2 millionwere utilized during 2002, 2001 and 2000, respectively. In 2001, operating losscarry-forwards amounting to EUR 4.3 million was eliminated because ofdeconsolidation.

 

The components ofdeferred taxes included in the Consolidated Balance Sheets at December 31,2002 and 2001 are as follows:

 

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|                                  |   | **December 31,  2002** |   | **December 31,  2001** |   |
|---------------------------------------|--------|-----------------------------|--------|-----------------------------|--------|
|                                  |   |                        |   |                        |   |   |   |   |   |
| Deferred tax  assets:                 |   |                        |   |                        |   |   |   |   |   |
| Net operating  losses                 |   | 184                         |   |                        |   | 346 |   |   |   |
| Less valuation  allowance             |   | (184                        | )      |                        |   | (346 | ) |   |   |
| Net deferred tax  assets              |   |                        |   | —                      |   |   |   | — |   |
|                                  |   |                        |   |                        |   |   |   |   |   |
| Deferred tax  liabilities:            |   |                        |   |                        |   |   |   |   |   |
| Work in process                       |   | 5,331                       |   |                        |   | 7,633 |   |   |   |
| Other                                 |   | 279                         |   |                        |   | 550 |   |   |   |
| Total gross  deferred tax liabilities |   |                        |   | 5,610                       |   |   |   | 8,183 |   |
|                                  |   |                        |   |                        |   |   |   |   |   |
| Net deferred tax  liabilities         |   |                        |   | 5,610                       |   |   |   | 8,183 |   |

 

The valuationallowance has been established to reserve for recognition of tax benefits onnet operating losses of certain subsidiary companies. The change in valuationallowance for fiscal 2002 amounted to a decrease of EUR 0.2 million, in 2001amounted to a decrease of EUR 3.3 million, and in 2000 to an decrease of EUR0.5 million.

 

The followingtable reconciles the normal corporate tax rate in the Netherlands to theeffective consolidated rates:

 
|                                   |   | **2002**   |   | **2001** |   | **2000** |   |
|----------------------------------------|--------|------------|--------|----------|--------|----------|--------|
|                                   |   |       |   |     |   |     |   |
| Corporate tax  rate in the Netherlands |   | 34.5       | %      | 35.0     | %      | 35.0     | %      |
| Non taxable  items                     |   | (0.7       | )      | (5.1     | )      | (2.2     | )      |
| Utilization of  loss carry forward     |   | (1.0       | )      | (2.7     | )      | (1.3     | )      |
| Effect of  different foreign tax rates |   | 2.7        |   | 2.9      |   | 2.9      |   |
| Other, net                             |   | (0.5  | )      | 0.3      |   | (0.1     | )      |
|                                   |   |       |   |     |   |     |   |
| Effective tax  rates                   |   | 35.0       | %      | 30.4     | %      | 34.3     | %      |

 

Non taxable itemsrelate mainly to income from non-consolidated companies and long-terminvestments and the gain on the sale of investments.

 

AtDecember 31, 2002, approximately EUR 66.2 million of retained earningswere considered to be permanently reinvested by certain foreign subsidiaries.It is not practicable to estimate the amount of the unrecognized deferred taxliability for these undistributed earnings. Consequently, deferred taxes havenot been provided for unremitted earnings of these subsidiaries.

 

**NOTE 16.  PensionPlans**

 

ARCADIS has anumber of defined benefit plans covering a large part of its employees. Thebenefits under these plans are based primarily on years of service andemployees’ compensation near retirement. The funding policy of the plans isconsistent with local requirements. Obligations under the defined benefit plansare met by systematically depositing funds with the trustees or separatefoundations, under insurance policies, or by financial statement accruals.

 

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Pension costsincluded in the Consolidated Statements of Income for the principal defined benefitplans amounted to EUR 5.1 million charge in 2002, EUR 2.3 million charge in2001 and EUR 2.1 million charge in 2000 as computed under Netherlands GAAP.

 

Pension costs forthese defined benefit plans computed in compliance with US GAAP in accordancewith Financial Accounting Standards Board Statement No. 87, “Employer’sAccounting for Pensions” (“SFAS 87”) for each of the years endedDecember 31, 2002, 2001, and 2000 were as follows:

 
|                                            |   | **2002** |   | **2001** |   | **2000** |   |
|-------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                                            |   |     |   |     |   |     |   |
| Service  cost-benefit earned during the period  |   | 13,755   |   | 10,244   |   | 9,431    |   |
| Interest cost on  projected benefit obligations |   | 31,878   |   | 29,949   |   | 29,287   |   |
| Expected return  on plan assets                 |   | (36,769  | )      | (39,909  | )      | (40,446  | )      |
| Net amortization  and deferral                  |   | (1,323   | )      | (8,801   | )      | (5,180   | )      |
|                                            |   |     |   |     |   |     |   |
| Net pension cost  (credit)                      |   | 7,541    |   | (8,517   | )      | (6,908   | )      |

 

The funded status ofthese defined benefit pension plans was as follows:

 
|                                                    |   | **2002**                                |   | **2001**                                 |       |
|---------------------------------------------------------|--------|-----------------------------------------|--------|------------------------------------------|------------|
|                                                    |   | **Accumulatd  benefits  exceed assets** |   | **Assets  exceed  accumulated benefits** | ** ** |
|                                                    |   |                                    |   |                                     |       |
| **Change  in Benefit Obligation**                       |   |                                    |   |                                     |       |
| Benefit  Obligation at beginning of the year            |   | 547,502                                 |   | 495,219                                  |       |
| Service cost                                            |   | 17,198                                  |   | 13,658                                   |       |
| Interest cost                                           |   | 31,878                                  |   | 29,949                                   |       |
| Benefits paid                                           |   | (25,584                                 | )      | (22,764                                  | )          |
| Actuarial  (gain)loss, including changes in assumptions |   | (7,694                                  | )      | 31,440                                   |       |
| Benefit obligation  at end of the year                  |   | 563,300                                 |   | 547,502                                  |       |
|                                                    |   |                                    |   |                                     |       |
|                                                    |   |                                    |   |                                     |       |
| **Change  in plan assets**                              |   |                                    |   |                                     |       |
| Fair value of  plan assets at beginning of year         |   | 610,020                                 |   | 657,235                                  |       |
| Actual return on  plan assets                           |   | (79,146                                 | )      | (29,985                                  | )          |
| Employer  contribution                                  |   | 5,067                                   |   | 2,120                                    |       |
| Plan  participants’ contributions                  |   | 3,443                                   |   | 3,414                                    |       |
| Benefits paid                                           |   | (25,584                                 | )      | (22,764                                  | )          |
| Fair value of  plan assets at end of year               |   | 513,800                                 |   | 610,020                                  |       |
|                                                    |   |                                    |   |                                     |       |
|                                                    |   |                                    |   |                                     |       |
| Prepaid  /(accrued) benefit costs                       |   |                                    |   |                                     |       |
| Funded status                                           |   | (49,500                                 | )      | 62,518                                   |       |
| (Asset) at  transition                                  |   | (2,101                                  | )      | (3,151                                   | )          |
| Unrecognized  actuarial loss                            |   | 124,426                                 |   | 16,211                                   |       |
| Unrecognized  prior service cost                        |   | (1,624                                  | )      | (1,896                                   | )          |
| Prepaid/accrued  benefit cost                           |   | 71,201                                  |   | 73,682                                   |       |
|                                                    |   |                                    |   |                                     |       |
| Classification  of the net balances is as follows:      |   |                                    |   |                                     |       |
| Prepaid benefit  costs                                  |   | 0                                       |   | 73,682                                   |       |
| Accrued benefit  liability                              |   | (25,599                                 | )      | 0                                        |       |
| Accumulated  other comprehensive income                 |   | 96,800                                  |   | 0                                        |       |
| Prepaid benefit  costs, net                             |   | 71,201                                  |   | 73,682                                   |       |

 

78

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The obligationswith respect to pension plans were determined using a discount rate of 5.25%for 2002, 5.75% for 2001, and 6% for 2000, and an assumed long-term rate ofcompensation increase of 2.25% for 2002, and 2.75% for 2001 and 2000. Theexpected long-term rate of return on plan assets, used in determining netpension cost was 6% in 2002, 2001 and 2000. Plan assets principally consist oflong-term interest earning investments, quoted and listed securities, and realestate assets.

 

The principaldefined benefit plans referred to above cover approximately 26% of ARCADISemployees. The remaining plans primarily represent defined contribution plans.Expenses for these plans totaled EUR 5.9 million in 2002, EUR 6.4 million in2001, and EUR 3.6 million in 2000, under both Netherlands and U.S. GAAP.

 

Due to thesubstantial decline of stock markets, at December 31, 2002, theaccumulated benefit obligation for the defined benefit plan exceeded the valueof plan assets. As a consequence, the Company recognized additional provisionsfor minimum pension liabilities in 2002 of € 96.8 million, through a directcharge against shareholders’ equity (€ 62.9 million after taxes). At the end of2001, the value of plan assets exceeded the accumulated benefit obligations.

 

**NOTE 17.  Application of GenerallyAccepted Accounting Principles in the United States of America**

 

The Netherlands’accounting principles (Netherlands GAAP) applied in the preparation of theConsolidated Financial Statements of ARCADIS N.V. differ in some respects fromthose generally accepted in the United States of America (U.S. GAAP). Thosedifferences which have a material effect on net income and/or shareholders’equity are as follows:

 

(a)  Under U.S. GAAP, the excess of the purchaseprice over the fair value of identifiable net assets acquired (“goodwill”) iscapitalized. Prior to the adoption of SFAS 141 and SFAS 142, goodwill wasamortized over its estimated useful life ranging between 10 and 25 years. Sincethe adoption of SFAS 141, which applies to all purchase business combinations completedafter June 30, 2001, and the adoption of SFAS 142, which applies to allexisting goodwill since January 1, 2002, goodwill is no longer amortized,but an annual impairment test is performed on the remaining unamortizedgoodwill. The Company performs its annual impairment test as of the end ofDecember each year. Under Netherlands GAAP, up to and including 2000,goodwill was directly charged to shareholders’ equity. From 2001 onward,goodwill arising from new acquisitions is capitalized and amortized, based onits estimated economic life.

 

(b)  Pension costs included in the ConsolidatedStatements of Income are computed in accordance with Netherlands GAAP. Fordefined benefit plans, those amounts are based on the premiums which ARCADIS isrequired to pay to the ARCADIS Pension Fund (the “Fund”). These premiums arecalculated using actuarial assumptions, which among others, do not take intoaccount future salary increases or employee turnover due to resignations,dismissals or disability. The present value is calculated by applying adiscount rate of 4%. These amounts are not reduced by credits relating tooverfunding of the Fund, which under Netherlands GAAP is computed by valuingassets at fair market value, unless refunds are actually received from the Fund.

 

U.S. GAAP isgenerally more prescriptive than Netherlands GAAP, and service costs are basedon calculations using actuarial assumptions which, among others, includeestimated future salary increases and estimated employee turnover related toresignations, dismissals and disability, and the present value is

 

79

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calculated by applying adiscount rate of 5.25% for 2002, 5.75% for 2001 and 6% for 2000. Moreover, netperiodic pension costs are reduced by credits, if any, representingamortization of overfunding of the Fund, which is calculated by valuing planassets at fair market value.

 

The differencebetween the pension cost computed under SFAS 87 (U.S. GAAP) and the onecomputed under Netherlands GAAP is shown in Note 16, and relates principally tothe difference in accounting treatment for over funded plans.

 

(c)  As stated in note 2, during 2001 ARCADISsold its interests in Analytico and Sageos. Furthermore, Grebner and some minorparticipations are in the process of liquidation. Under U.S. GAAP the goodwillassociated with these investments is written off.

 

(d)  Under Netherlands GAAP, dividends declaredsubsequent to year-end reduce shareholders’ equity in the year to which theyrelate. Under U.S. GAAP, dividends are accounted for in the year in which theyare declared.

 

(e)  Under Netherlands GAAP, the total balancesof work in process are presented on a net basis. Under U.S. GAAP, the grossamount of projects where costs incurred and estimated earnings exceed billingsmust be shown as an asset, and the gross amount of projects with billings inexcess of costs incurred and estimated earnings must be recorded as aliability. If ARCADIS would present the balance sheet applying this U.S. GAAPmethod, the balance sheet total would increase by EUR 33.0 million in 2002, andby EUR 38.8 million in 2001.

 

(f)  Under Netherlands GAAP, net deferred taxliabilities are classified as provision. Under U.S. GAAP, deferred taxliabilities are classified as current or noncurrent and offset based on theclassification of the related asset or liability for financial reporting.Deferred tax assets related to carryforwards are classified according to theexpected reversal date of the carryforward.

 

(g)  The Spanish company Grupo EP in whichARCADIS holds a 50% interest, is included in the consolidated financialstatements on a proportional basis in conformity with Netherlands GAAP. UnderU.S. GAAP, the investment in a joint venture should be accounted for under theequity method. This departure from U.S. GAAP would have no effect onshareholders’ equity and net income. Under the provisions available to foreignregistrants, the Company accordingly provides the following summarizedinformation of its pro rata interest.

 
| **Pro rata summarized financial information** |   | **2002** |       | **2001** |       | **2000** |       |
|-----------------------------------------------|--------|----------|------------|----------|------------|----------|------------|
|                                          |   |     | ** ** |     | ** ** |     | ** ** |
| Current assets                                |   | 33,813   |       | 32,572   |       | 26,473   |       |
| Non-current  assets                           |   | 9,030    |       | 5,814    |       | 5,440    |       |
| Total assets                                  |   | 42,843   |       | 38,386   |       | 31,913   |       |
|                                          |   |     |       |     |       |     |       |
| Current  liabilities                          |   | 24,013   |       | 23,909   |       | 19,239   |       |
| Non-current  liabilities                      |   | 8,905    |       | 5,793    |       | 3,738    |       |
| Minority  interest                            |   | 1,151    |       | 1,056    |       | 933      |       |
| Total  liabilities                            |   | 34,069   |       | 30,758   |       | 23,910   |       |
|                                          |   |     |       |     |       |     |       |
| Shareholders’  Equity                    |   | 8,774    |       | 7,628    |       | 8,003    |       |
|                                          |   |     |       |     |       |     |       |
| Gross revenue                                 |   | 64,785   |       | 57,712   |       | 46,802   |       |
|                                          |   |     |       |     |       |     |       |
| Group income  from operations                 |   | 1,396    |       | 1,251    |       | 1,487    |       |

 

80

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***Reconciliation of Net Income***

 
|                                                                                           |   | **2002** |       | **2001** |       | **2000** |       |
|------------------------------------------------------------------------------------------------|--------|----------|------------|----------|------------|----------|------------|
|                                                                                           |   |     | ** ** |     | ** ** |     | ** ** |
| Net income in  accordance with Netherlands GAAP Adjustments:                                   |   | 24,668   |       | 25,084   |       | 20,729   |       |
| Amortization of  goodwill (a)                                                                  |   | 191      |       | (2,332   | )          | (2,623   | )          |
| Pensions (b)                                                                                   |   | (2,362   | )          | 10,772   |       | 8,964    |       |
| Write off of  goodwill (c)                                                                     |   | —   |       | (5,715   | )          | —   |       |
| Income tax  effect of above adjustments                                                        |   | 827      |       | (3,305   | )          | (2,766   | )          |
|                                                                                           |   |     |       |     |       |     |       |
| Net income in  accordance with U.S. GAAP                                                       |   | 23,324   |       | 24,504   |       | 24,304   |       |
|                                                                                           |   |     |       |     |       |     |       |
| Basic net income  per common share in accordance with U.S. GAAP                                |   | 1.15     |       | 1.21     |       | 1.21     |       |
| Diluted net  income per common share in accordance with U.S. GAAP                              |   | 1.15     |       | 1.20     |       | 1.21     |       |
|                                                                                           |   |     |       |     |       |     |       |
| Weighted average  number of shares of common stock in accordance with U.S. GAAP (in thousands) |   | 20,291   |       | 20,280   |       | 20,003   |       |

 

Under U.S. GAAPitems classified as extra-ordinary for Netherlands GAAP would not be soclassified.

 

Basic net incomeper common share amounts in accordance with U.S. GAAP are based upon theweighted average number of the common shares outstanding during the period.Diluted net income per common share amounts in accordance with U.S. GAAP arebased upon the weighted average number of the common shares outstanding duringthe period plus the dilutive effect of potential common shares outstandingduring the period.

 

The dilutive effect of outstanding share options is as follows:

 
|                                       |   | **Years ended December 31,** |       |
|--------------------------------------------|--------|-----------------------------------|------------|
|                                       |   | **2002**                          |       | **2001** | ** ** | **2000** | ** ** |
|                                       |   |                              | ** ** |   | ** ** |   | ** ** |
| Weighted average  number of common shares  |   | 20,291                            |       | 20,280 |   | 20,022 |   |
| Common shares  issuable under option plans |   | 65                                |       | 66 |   | 4 |   |
|                                       |   | 20,356                            |       | 20,346 |   | 20,026 |   |

 

AtDecember 31, 2002, options to purchase 611,077 shares of common stock atprices ranging from US$6.75 to US$11.50 and options to purchase 458,100 sharesof common stock at prices ranging from EUR 8.50 to EUR 10.79 were outstanding,but not included in the computation of diluted earnings per share for the yearended December 31, 2002. The exercise price of these options was greaterthan the average market price of the common shares. These options expire atvarious dates from 2003 to 2012.

 

AtDecember 31, 2001, options to purchase 625,387 shares of common stock atprices ranging from US$6.75 to US$11.50 and options to purchase 195,000 sharesof common stock at the price of EUR 9.20 were outstanding, but not included inthe computation of diluted earnings per share for the year endedDecember 31, 2001. The exercise price of these options was greater thanthe average market price of the common shares. These options expire at variousdates from 2003 to 2011.

 

81

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AtDecember 31, 2000, options to purchase 715,313 shares of common stock atprices ranging from US$6.75 to US$15.10 were outstanding, but not included inthe computation of diluted earnings per share for the year endedDecember 31, 2000. The exercise price of these options was greater thanthe average market price of the common shares. These options expire at variousdates from 2003 to 2010.

 

**Stock-Based Compensation**

 

Statement ofFinancial Accounting Standards No. 123, Accounting for Stock-Based Compensationestablishes financial accounting and reporting standards for stock-basedemployee compensation plans. This statement defines a fair value based methodof accounting for employee stock options. However, it also allows an entity tocontinue to measure compensation cost for those plans using the intrinsic valuebased method of accounting prescribed by APB Opinion No. 25. ARCADIS accountsfor stock-based compensation plans under APB Opinion No. 25 and has recorded nostock-based compensation expense under U.S. GAAP in 2000, 2001 and 2002.Companies that continue to follow the intrinsic value based method mustdisclose pro-forma earnings and earnings per share information under the fairvalue method.

 

If the fair valuebased method of accounting had been applied, pro-forma net earnings andearnings per share would have been as follows:

 
|                                                                              |   | **2002**                  |       | **2001** | ** ** | **2000** | ** ** |
|-----------------------------------------------------------------------------------|--------|---------------------------|------------|----------|------------|----------|------------|
|                                                                              |   | **(Thousands  of euros)** | ** ** |
|                                                                              |   |                      |       |     |       |     |       |
| Net earnings for  the year in accordance With US GAAP as calculated above         |   | 23,324                    |       | 24,504   |       | 24,304   |       |
|                                                                              |   |                      |       |     |       |     |       |
| Effect of  recording stock-based compensation expense under the fair value method |   | (460                      | )          | (541     | )          | (187     | )          |
|                                                                              |   |                      |       |     |       |     |       |
| Pro-forma net  earnings after application of SFAS 123                             |   | 22,864                    |       | 23,963   |       | 24,117   |       |
|                                                                              |   |                      |       |     |       |     |       |
| Pro-forma net  earnings per common share after application of SFAS 123 in euros   |   | 1.13                      |       | 1.18     |       | 1.18     |       |

 

In calculating theforegoing pro-forma amounts, the fair value of each option grant was estimatedas of the date of grant using the Black-Scholes option-pricing model with thefollowing weighted average assumptions:

 
|                     |   | **2002** |       | **2001** | ** ** | **2000** | ** ** |
|--------------------------|--------|----------|------------|----------|------------|----------|------------|
|                     |   |     | ** ** |     | ** ** |     | ** ** |
| Dividend                 |   | 0.48     |       | 0.44     |       | 0.39     |       |
| Expected  volatility     |   | 50.0     | %          | 50.0     | %          | 52.0     | %          |
| Risk-free  interest rate |   | 3.5      | %          | 4.5      | %          | 4.5      | %          |
| Expected life of  option |   | 3 years  |       | 3 years  |       | 3 years  |       |
| Expected  forfeitures    |   | 0        | %          | 0        | %          | 0        | %          |

 

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***Reconciliation of Shareholders’ Equity***

 
|                                                            |   | **2002** |   | **2001** |   |
|-----------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                            |   |     |   |     |   |
| Shareholders’  equity in accordance with Netherlands GAAP  |   | 124,959  |   | 124,812  |   |
| Adjustments to  reported shareholders’ equity, net of tax: |   |     |   |     |   |
| Goodwill (a)                                                    |   | 41,801   |   | 43,611   |   |
| Pensions (b)                                                    |   | (25,599  | )      | 73,562   |   |
| Dividends (d)                                                   |   | 9,742    |   | 8,925    |   |
| Income tax  effect of above adjustments                         |   | 13,669   |   | (20,908  | )      |
|                                                            |   |     |   |     |   |
| Shareholders’  equity in accordance with U.S. GAAP         |   | 164,572  |   | 230,002  |   |

 

**Comprehensiveincome**

 

Comprehensive income/(loss) encompasses all changes inshareholders’ equity (except those arising from transactions with owners). Thecomprehensive income and accumulated other comprehensive income as show below,are presented based on U.S. GAAP numbers, and for the years endedDecember 31, 2002, 2001 and 2000 were as follows:

 
|                                 |   | **Comprehensive  Income** | ** ** | **Accumulated other  comprehensive  income** | ** ** |
|--------------------------------------|--------|---------------------------|------------|----------------------------------------------|------------|
|                                 |   |                      |       |                                         |       |
| Balance -  January 1, 2000      |   |                      | ** ** | 5,045                                        | ** ** |
| Comprehensive  income                |   |                      |       |                                         |       |
| Net income                           |   | 24,304                    |       |                                         |       |
| Foreign currency  translation        |   | 4,232                     |       | 4,232                                        |       |
| Other                                |   | 109                       |       | 109                                          |       |
| Comprehensive  income                |   | 28,645                    |       |                                         |       |
|                                 |   |                      |       |                                         |       |
|                                 |   |                      |       |                                         |       |
| Balance -  December 31, 2000    |   |                      |       | 9,386                                        |       |
| Comprehensive  income                |   |                      |       |                                         |       |
| Net income                           |   | 24,504                    |       |                                         |       |
| Foreign currency  translation        |   | 3,043                     |       | 3,043                                        |       |
| Other                                |   | 116                       |       | 116                                          |       |
| Comprehensive  income                |   | 27,663                    |       |                                         |       |
|                                 |   |                      |       |                                         |       |
| Balance -  December 31, 2001    |   |                      |       | 12,545                                       |       |
| Comprehensive  income                |   |                      |       |                                         |       |
| Net income                           |   | 23,324                    |       |                                         |       |
| Provision  minimum pension liability |   | (62,920                   | )          | (62,920                                      | )          |
| Foreign currency  translation        |   | (13,668                   | )          | (13,668                                      | )          |
| Comprehensive  income                |   | (53,264                   | )          |                                         |       |
|                                 |   |                      |       |                                         |       |
| Balance -  December 31, 2002    |   |                      |       | (64,043                                      | )          |

 

83

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Pension additionalminimum liability includes tax effects charged directly to shareholders’ equityof € 33.9 million for the year ended December 31, 2002. Revaluation ofreal estate and other changes include tax effects which have been chargeddirectly to shareholders equity of EUR 0.1 million income and EUR 0.0 millionincome expense for the years ended December 31, 2001 and 2000,respectively.

 

Foreign currencytranslation adjustments have no tax effect.

 

**New U.S. Accounting Pronouncements**

 

In July 2001,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards No. 142 “Goodwill and Other Intangible Assets” (“SFAS142”). SFAS 142 supercedes Accounting Principles Board Opinion No. 17 andaddresses the financial accounting and reporting standards for goodwill andintangible assets subsequent to their initial recognition. SFAS 142 requiresthat goodwill be separately disclosed from other intangible assets in thestatement of financial position, and no longer be amortized. It also requiresthat goodwill and other intangible assets be tested for impairment at leastannually.

 

SFAS 142 isrequired to be implemented effective January 1, 2002. The adoption of SFAS142 did not have an impact on ARCADIS’ financial results reported under U.S.GAAP. At December 31, 2002, for U.S. GAAP purposes, ARCADIS hasunamortized goodwill of EUR 41.6 million under U.S. GAAP. Amortization expenseunder U.S. GAAP related to goodwill was EUR 8.1 million and EUR 2.6 million forthe years ending December 31, 2001 and 2000, respectively.

 

InOctober 2001, FASB issued SFAS No. 144 “Accounting for the Impairment orDisposal of Long-Lived Assets” (“SFAS 144”). SFAS 144 supersedes Statement ofFinancial Accounting Standards No. 121(“SFAS 121”), “Accounting for theImpairment of Long-Lived Assets and for Long-Lived Assets to Be DisposedOf”, and the accounting and reporting provisions of Accounting Principles BoardOpinion No. 30, “Reporting the Results of Operations - Reporting the Effects ofDisposal of a Segment of a Business, and Extraordinary, Unusual andInfrequently Occurring Events and Transactions”, for the disposal of a segmentof a business (as previously defined in that Opinion). SFAS 144 intends toestablish a single accounting model, based on the framework established in SFAS121, for long-lived assets to be disposed of by sale and to resolve significantimplementation issues related to SFAS 121. SFAS 144 is not expected tosignificantly impact the assessment of impairment of long-lived assets by theCompany for U.S. GAAP purposes, other than the fact that SFAS 144 removesgoodwill from its scope and, therefore, eliminates the requirement of SFAS 121to allocate goodwill to long-lived assets to be tested for impairment. Asindicated above, goodwill is required to be assessed for impairment inaccordance with the provisions of SFAS 142. For U.S. GAAP purposes, the Companyhas adopted SFAS 144 effective January 1, 2002. The adoption of SFAS 144did not effect the Company’s financial statements prepared under U.S. GAAP.

 

InDecember 2002, the FASB issued SFAS No. 148, Accounting for Stock-BasedCompensation - Transition and Disclosure, an amendment of FASB Statement No.123. This Statement amends FASB Statement No. 123, Accounting for Stock-BasedCompensation, to provide alternative methods of transition for a voluntarychange to the fair value method of accounting for stock-based employeecompensation. In addition, this Statement amends the disclosure requirements ofStatement No. 123 to require prominent disclosures in both annual and interimfinancial statements. Certain of the disclosure modifications are required forfiscal years ending after December 15, 2002 and are included in the notesto these consolidated financial statements.

 

InJanuary 2003, the FASB issued Interpretation No. 46, Consolidation ofVariable Interest Entities, an interpretation of ARB No. 51. ThisInterpretation addresses the consolidation by business enterprises of variableinterest entities as defined in the Interpretation. The Interpretation appliesimmediately to variable interests in variable interest entities created afterJanuary 31, 2003, and to variable interests in variable interest entitiesobtained after January 31, 2003. For nonpublic enterprises, such as theCompany, with a variable interest in a variable interest entity created beforeFebruary 1, 2003, the Interpretation is applied to the enterprise no laterthan the end of the first annual reporting period beginning after June 15,2003 The application of this Interpretation is not expected to have a materialeffect on the Company’s financial

 

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statements. TheInterpretation requires certain disclosures in financial statements issuedafter January 31, 2003 if it is reasonably possible that the Company willconsolidate or disclose information about variable interest entities when theInterpretation becomes effective.

 

**NOTE 18.  Disclosuresabout Fair Value of Financial Instruments**

 

In view of theshort-term turnaround times involved, the book value of cash and cashequivalents, receivables and current liabilities approximate fair value.

 

The fair value ofARCADIS’ long term debt does not materially differ from the carrying value.

 

**NOTE 19.  SupplementalCash Flow Disclosures**

 

Changes ininventories, receivables and other current assets, current liabilities,long-term liabilities and long-term debt, as reported on the consolidatedstatements of cash flows, can be reconciled to changes in the respectivebalance sheet amounts between December 31, 2001 and 2002 as follows.Changes in the balance sheet items caused by new consolidations,deconsolidations and changes because of conversion of foreign currencies areeliminated.  Investments in anddivestments of consolidated companies are presented net of cash.

 
| **Cash  flow from operations** |   | **Inventories** | ** ** | **Receivables+  current assets** | ** ** | **Other  long-  term  liabilities** | ** ** | **Long term  debt** | ** ** | **Current  liabilities** | ** ** |
|--------------------------------|--------|-----------------|------------|----------------------------------|------------|-------------------------------------|------------|---------------------|------------|--------------------------|------------|
|                           |   |            |       |                             |       |                                |       |                |       |                     |       |
| Changes in  balance sheet      |   | (6,033          | )          | 18,716                           |       | 485                                 |       | 5,560               |       | 26,665                   |       |
| Eliminations:                  |   |            |       |                             |       |                                |       |                |       |                     |       |
| Exchange rate  differences     |   | 3,527           |       | 11,997                           |       | 1,068                               |       | 350                 |       | 7,707                    |       |
| (De)  consolidations           |   | (803            | )          | (25,015                          | )          | (2,860                              | )          | (692                | )          | (23,504                  | )          |
| Other  non-operational changes |   | (59             | )          | (582                             | )          |                                |       | 207                 |       | (199                     | )          |
| Bank overdrafts                |   |            |       |                             |       |                                |       |                |       | (4,367                   | )          |
| **Operational change 2002**    |   | **3,368**       | ** ** | **(5,116**                       | **)**      | **(1,307**                          | **)**      | **5,425**           | ** ** | **6,302**                | ** ** |

 
| **Issued  shares**                 |   | **2002** |   | **2001** | ** ** |
|------------------------------------|--------|----------|--------|----------|------------|
|                               |   |     |   |     |       |
| ARCADIS NV stock purchase plans    |   | 37       |   | 77       |       |
| ARCADIS NV stock options exercised |   | 75       |   |     |       |
|                               |   | **112**  |   | **77**   |       |

 
| **Dividends  paid**                                      |   | **2002**  |   | **2001**  |   |
|----------------------------------------------------------|--------|-----------|--------|-----------|--------|
|                                                     |   |      |   |      |   |
| Paid to  shareholders of ARCADIS NV                      |   | 8,925     |   | 7,907     |   |
| Paid to minority  shareholders of consolidated companies |   | 397       |   | 231       |   |
|                                                     |   | **9,322** |   | **8,138** |   |

 

85

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|                            |   | **Years ended December 31,** |   |
|---------------------------------|--------|-----------------------------------|--------|
|                            |   | **2002**                          |   | **2001** | ** ** | **2000** | ** ** |
| Cash paid during  the year for: |   |                              |   |   |   |   |   |
| Interest                        |   | 4,870                             |   | 6,025 |   | 7,109 |   |
| Income Taxes                    |   | 14,427                            |   | 14,053 |   | 3,394 |   |

 

Acquisitions ofconsolidated interests during 2002, 2001 and 2000 are summarized as follows:

 
|                                                                |   | **2002** |       | **2001** |       | **2000** |       |
|---------------------------------------------------------------------|--------|----------|------------|----------|------------|----------|------------|
|                                                                |   |     | ** ** |     | ** ** |     | ** ** |
| Property, plant  and equipment                                      |   | 6,287    |       | 102      |       | 481      |       |
| Working capital                                                     |   | 2,174    |       | 265      |       | 300      |       |
| Others, including  goodwill                                         |   | 2,786    |       | 2,467    |       | 4,180    |       |
|                                                                |   |     |       |     |       |     |       |
| Total  acquisitions of consolidated interests, net of cash acquired |   | 11,247   |       | 2,834    |       | 4,961    |       |

 

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**ARCADIS N.V.**

 

**SCHEDULEII**

 

**VALUATION AND QUALIFYING ACCOUNTS**

 
| **In millions of euros**     |   | **2002** |   | **2001** |   | **2000** |   |
|------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Balance at beginning of year |   | 9.9      |   | 9.3      |   | 9.3      |   |
| Addition charged to income   |   | 2.3      |   | 3.3      |   | 2.0      |   |
| Exchange rate results        |   | (0.5     | )      | 0.2      |   | 0.3      |   |
| Deductions                   |   | (3.0     | )      | (2.4     | )      | (2.1     | )      |
| Acquisitions / divestments   |   | 0.1      |   | (0.5     | )      | (0.2     | )      |
|                         |   |     |   |     |   |     |   |
| Balance at end of year       |   | 8.8      |   | 9.9      |   | 9.3      |   |

 

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**ITEM 19.  EXHIBITS**

 
| Exhibits filed as part of this Annual Report: |
|-----------------------------------------------|
| 10a                                           |   | - Information on members of the Supervisory Board,  Executive Board, Staff directors, and other members of the Senior Management  Committee |
| 10b                                           |   | - Form S-8 Independent Auditors’ Consent |
| 10c                                           |   | - Statement pursuant to par. 906 of the  Sarbanes-Oxley Act of 2002 |
| 10d                                           |   | - Statement pursuant to par. 906 of the  Sarbanes-Oxley Act of 2002 |
| 1                                             |   | - Articles of Association of ARCADIS NV |

 

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**SIG****NATURES**

 

Pursuant to the requirements of Section 12 of theSecurities Exchange Act of 1934, the registrant certifies that it meets all ofthe requirements for filing on Form 20-F and has duly caused this annual reportto be signed on its behalf by the undersigned, thereunto duly authorized.

 

 
|                      | ARCADIS N.V. |
|---------------------------|--------------|
|                      |         |   |
|                      |         |   |
| Dated: June 12, 2003 | By:          | /s/ Harrie L.J. Noy |   |
|                      |         | Harrie L.J. Noy |
|                      |         | Chairman of the Executive Board |

 

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**CERTIFICATIO****NS**

 

***Certification by the Chairman of the Executive Board ofARCADIS NV***

*** ***

I, Harrie L.J. Noy, certify that:

 

1. I have reviewed this annual report on Form20-F of ARCADIS NV (the “registrant”);

 

2. Based on my knowledge, this annual reportdoes not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this annual report;

 

3. Based on my knowledge, the financialstatements, and other financial information included in this annual report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this annual report;

 

4. The registrant’s other certifying officersand I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and have:

 

a) designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this annual report isbeing prepared;

 

b) evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within 90 daysprior to the filing date of this annual report (the “Evaluation Date”); and

 

c) presented in this annual report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

 

5. The registrant’s other certifying officersand I have disclosed, based on our most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent function):

 

a) all significant deficiencies in the designor operation of internal controls which could adversely affect the registrant’sability to record, process, summarize and report financial data and haveidentified for the registrant’s auditors any material weaknesses in internalcontrols; and

 

b) any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6. The registrant’s other certifying officersand I have indicated in this annual report whether or not there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 
| June 12, 2003                          |
|---------------------------------------------|
|                                        |
| /s/ Harrie L.J. Noy                         |   |
| Harrie L.J. Noy                             |
| Chairman of the Executive  Board ARCADIS NV |

 

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***Certification by the Chief Financial Officer of ARCADIS NV***

 

I, Henk W.M.W. ten Cate, certify that:

 

1. I have reviewed this annual report on Form20-F of ARCADIS NV (the “registrant”);

 

2. Based on my knowledge, this annual reportdoes not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this annual report;

 

3. Based on my knowledge, the financialstatements, and other financial information included in this annual report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this annual report;

 

4. The registrant’s other certifying officersand I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and have:

 

a) designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this annual report isbeing prepared;

 

b) evaluated the effectiveness of theregistrant’s disclosure controls and procedures as of a date within 90 daysprior to the filing date of this annual report (the “Evaluation Date”); and

 

c) presented in this annual report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

 

5. The registrant’s other certifying officersand I have disclosed, based on our most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent function):

 

a) all significant deficiencies in the designor operation of internal controls which could adversely affect the registrant’sability to record, process, summarize and report financial data and haveidentified for the registrant’s auditors any material weaknesses in internalcontrols; and

 

b) any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6. The registrant’s other certifying officersand I have indicated in this annual report whether or not there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 
| June 12, 2003                  |
|-------------------------------------|
|                                |
| /s/ Henk W.M.W. ten Cate            |   |
| Henk W.M.W. ten Cate                |
| Chief Financial Officer  ARCADIS NV |

 

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**INDEX OFEXHIBITS**

 
| 10a. |   | Information on members of the Supervisory Board,  Executive Board, Staff directors, and other members of the Senior Management  Committee |
|------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
| 10b. |   | Form S-8 Independent Auditors’ Consent                                                                                               |
| 10c. |   | Statement pursuant to par. 906 of the Sarbanes-Oxley  Act of 2002                                                                         |
| 10d. |   | Statement pursuant to par. 906 of the Sarbanes-Oxley  Act of 2002                                                                         |
| 1.   |   | Articles of Association of ARCADIS NV (English  translation).                                                                             |

 

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