**UNITEDSTATES**

**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**                                                |
| ** **                                            | ** ** |
| **x**                                                 | **ANNUAL REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                            | ** ** |
| **For the  fiscal year ended December 31, 2006** |
| ** **                                            | ** ** |
| **OR**                                                |
| ** **                                            | ** ** |
| **o**                                                 | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| **OR**                                                |
| ** **                                            | ** ** |
| **o**                                                 | **SHELL COMPANY PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934** |

 

**Commission file number: 0-22628**

**ARCADISN.V.**

(Exact name of Registrant as specified in its charter)

**ARCADISN.V.**

(Translation of Registrant’s name into English)

**TheNetherlands**

(Jurisdiction of incorporation or organization)

**NieuweStationsstraat 10, Arnhem, theNetherlands**

(Address of principal executive offices)

Securitiesregistered or to be registered pursuant to Section 12(b) of the Act:

**None.**

Securitiesregistered or to be registered pursuant to Section 12(g) of the Act:

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

(Title of Class)

Securitiesfor which there is a reporting obligation pursuant toSection 15(d) of the Act:

**None.**

Indicatethe number of outstanding shares of each of the issuer’s classes of capital orcommon stock as of the close of the period covered by this annual report:

**20,304,988 SHARES OF COMMON SHARES, €0.05 NOMINAL VALUE**

**200 PRIORITY SHARES, € 0.05 NOMINALVALUE**

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined inRule 405 of the Securities Act.        Yes x No o

If thisreport is an annual or transition report, indicate by check mark if theregistrant is not required to file reports pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934.      Yes o    No x

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

Yes x    No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer.  See definition of“accelerated filer and large accelerated filer” in Rule 12b-2 of the ExchangeAct).  (Check one):    Large accelerated filer x         Accelerated filer o                 Non-accelerated filer o

Indicateby check mark which financial statement item the registrant has elected tofollow.

o Item 17    x Item 18

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

Yes o No  x

 

----

**TABLE OFCONTENTS**
| CAUTIONARY NOTE REGARDING  FORWARD-LOOKING STATEMENTS |                                                                          |
|-------------------------------------------------------|-------------------------------------------------------------------------------|
| PRESENTATION  OF CERTAIN INFORMATION                  |                                                                          |
| **PART I**                                            |                                                                          |   |
| ITEM 1.                                               | IDENTITY OF  DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        |   |
| ITEM 2.                                               | OFFER  STATISTICS AND EXPECTED TIMETABLE                                      |   |
| ITEM 3.                                               | KEY INFORMATION                                                               |   |
|                                                  | A.                                                                            | Selected Financial  Data |   |
|                                                  | B.                                                                            | Capitalization  and Indebtedness |   |
|                                                  | C.                                                                            | Reasons For  the Offer and Use of Proceeds |   |
|                                                  | D.                                                                            | Risk  Factors |   |
| ITEM 4.                                               | INFORMATION ON  THE COMPANY                                                   |   |
|                                                  | A.                                                                            | History and  Development of the Company |   |
|                                                  | B.                                                                            | Business Overview |   |
|                                                  | C.                                                                            | Organizational  Structure |   |
|                                                  | D.                                                                            | Property, Plant  and Equipment |   |
| ITEM 4A.  UNRESOLVED STAFF COMMENTS                   |                                                                          |
| ITEM 5.                                               | OPERATING  AND FINANCIAL REVIEW AND PROSPECTS                                 |   |
|                                                  | A.                                                                            | Operating Results. |   |
|                                                  | B.                                                                            | Liquidity and  Capital Resources. |   |
|                                                  | C.                                                                            | Research  and Development, Patents and Licenses, etc. |   |
|                                                  | D.                                                                            | Trend Information |   |
|                                                  | E.                                                                            | Off-Balance  Sheet Arrangements |   |
|                                                  | F.                                                                            | Tabular  Disclosure of Contractual Obligations |   |
| ITEM 6.                                               | DIRECTORS,  SENIOR MANAGEMENT AND EMPLOYEES                                   |   |
|                                                  | A.                                                                            | Directors and  Senior Management |   |
|                                                  | B.                                                                            | Compensation |   |
|                                                  | C.                                                                            | Board  Practices |   |
|                                                  | D.                                                                            | Employees |   |
|                                                  | E.                                                                            | Share  Ownership |   |
| ITEM 7.                                               | MAJOR  SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            |   |
|                                                  | A.                                                                            | Major Shareholders |   |
|                                                  | B.                                                                            | Related  Party Transactions |   |
|                                                  | C.                                                                            | Interests of  Experts and Counsel |   |
| ITEM 8.                                               | FINANCIAL  INFORMATION                                                        |   |
|                                                  | A.                                                                            | Consolidated  Financial Statements and Other Financial Information |   |
|                                                  | B.                                                                            | Significant Changes |   |
| ITEM 9.                                               | THE OFFER AND  LISTING                                                        |   |
| ITEM 10.                                              | ADDITIONAL  INFORMATION                                                       |   |
|                                                  | A.                                                                            | Share  Capital |   |
|                                                  | B.                                                                            | Memorandum  and Articles of Association |   |
| * *                                              | C*.*                                                                          | Material contracts |   |
|                                                  | D.                                                                            | Exchange controls |   |
|                                                  | E.                                                                            | Taxation |   |
|                                                  | F.                                                                            | Dividend and paying  agents. |   |
|                                                  | G.                                                                            | Statement by experts. |   |
|                                                  | H.                                                                            | Documents on display |   |
|                                                  | I.                                                                            | Subsidiary  information |   |
| ITEM 11.                                              | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |   |
| ITEM 12.                                              | DESCRIPTION  OF SECURITIES OTHER THAN EQUITY SECURITIES                       |   |
| **PART  II**                                          |                                                                          |   |
| ITEM 13.                                              | DEFAULTS,  DIVIDEND ARREARAGES AND DELINQUENCIES                              |   |
| ITEM 14.                                              | MATERIAL  MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |   |
| ITEM 15.                                              | CONTROLS AND  PROCEDURES                                                      |   |
| ITEM  16.                                             | [RESERVED]                                                                    |   |
| ITEM 16A.                                             | AUDIT  COMMITTEE FINANCIAL EXPERT                                             |   |

 

i

----

 
| ITEM 16B.          | CODE OF ETHICS                                                          |   |
|--------------------|-------------------------------------------------------------------------|--------|
| ITEM 16C.          | PRINCIPAL  ACCOUNTANT FEES AND SERVICES                                 |   |
| ITEM 16D.          | EXEMPTIONS  FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.            |   |
| ITEM 16E.          | PURCHASES  OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |   |
| **PART  III**      |                                                                    |   |
| ITEM 17.           | FINANCIAL  STATEMENTS                                                   |   |
| ITEM 18.           | FINANCIAL  STATEMENTS                                                   |   |
| ITEM  19.          | EXHIBITS                                                                |   |
| SIGNATURES         |                                                                    |
| INDEX  OF EXHIBITS |                                                                    |

 

ii

----

**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. Thesestatements are based on the beliefs and assumptions of management and oninformation available to management at the time such statements were made.Forward-looking statements include information concerning possible or assumedfuture results of operations, earnings, liquidity, cash flow and capitalexpenditures, 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 our services and otheraspects of its business, general economic conditions and statements that, ineach 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, uncertainties and assumptions. Although wemake such statements based on assumptions we believe to be reasonable, ouractual results may differ materially from expectations. Many of the factorsthat will determine these results are beyond our ability to control or predict.We do not intend to review or revise any particular forward-looking statementsmade or incorporated by reference in this Form 20-F in light of futureevents, except as otherwise required by law. Investors are cautioned not torely unduly on any forward-looking statements.

The following important risk factors, and otherimportant factors described elsewhere in this report or in our other filingswith the Securities and Exchange Commission, among others, could cause ourresults to differ from any results that we may project, forecast, or estimatein any forward-looking statements:

·      cyclical downturns in theeconomy could have negative effect on investments by private companies in newinvestments;

·      decreased tax revenues maylimit the ability of governments to invest in the types of public works forwhich we are engaged;

·      changes in legislation,regulation and political priorities may weaken demand for our services;

·      changes in bidding proceduresof our clients may put competitive pressures on the amounts we can charge forour services;

·      inaccurate estimates of thetime or cost of a project may result in project losses;

·      malfunctions in ourinformation and communications technology may adversely affect our operations;

·      difficulties with theintegration of acquired businesses may distract the attention of our managementand adversely affect our operations; and

·      declines in the exchangerates of non-Euro countries may reduce the value of our assets.

**PRESENTATIONOF CERTAIN INFORMATION**

Unless the context requires otherwise(1) references to “ARCADIS,” “we,” “us” and “our” refer to ARCADIS N.V.and its consolidated subsidiaries, (2) references to “the Netherlands” areto The Kingdom of the Netherlands, (3) references to “United States” or “U.S.”are to the United States of America, (4) references to “Euros,” “EUR” and “€”are to the currency of the 12 European Union member states (including theNetherlands) participating in European Monetary Union, and (5) referencesto “dollars” or “$” are to the currency of the United States.

iii

----

**PART 1**

## **ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT ANDADVISERS**

Not Applicable

## **ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE**

Not Applicable

## **ITEM 3.  KEY INFORMATION**

**A. *Selected financial data.***

The selectedconsolidated financial data presented below as of December 31, 2006 andDecember 31, 2005 and for each of the three years during the period endedDecember 31, 2006 have been derived from our audited ConsolidatedFinancial Statements which have been prepared in accordance with InternationalFinancial Reporting Standards (IFRSs) as endorsed by the European Union and inconformity with the Dutch Civil Code, Book 2, Title 9, and the interpretationsof IFRS adopted by the International Accounting Standards Board. The selectedconsolidated financial data below should be read in conjunction with ourConsolidated Financial Statements and the Notes set forth in Item 18 of thisannual report.

For theconvenience of the reader, the amounts reflected in our selected consolidatedfinancial data as of and for the year ending December 31, 2006 aspresented in Euros have been translated into U.S. dollars. The exchange rateused is $1.00 = € 0.75930, the exchange rate as of December 31,2006. We do not represent that the translated amounts actually represent such U.S.dollar amounts or could be converted into U.S. dollars at the rates indicatedor at any other rate.

IFRS differs incertain significant respects from accounting principles generally accepted inthe United States (U.S. GAAP). See our reconciliation of IFRS to U.S. GAAP inNote 23 to our Consolidated Financial Statements.
|                                            | ** ** | **For the years ended December 31,**        | ** ** |
|--------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                 | ** ** | **2006**                                                             | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                 | ** ** | **$ **                                                          | ** ** | **€** | ** ** | **€** | ** ** | **€** | ** ** |
| ** **                                 | ** ** | **(in millions, except per share amounts)** | ** ** |
| **Consolidated  Statement of Income Data** |       |                                                                 |       |   |   |   |   |   |   |
| *Amounts  in accordance with IFRS*         |       |                                                                 |       |   |   |   |   |   |   |
| Gross revenue                              |       | 1,623.9                                                              |       | 1,233.0 |   | 1,001.1 |   | 900.8 |   |
| Operating income                           |       | 92.8                                                                 |       | 70.5 |   | 54.4 |   | 35.5 |   |
| Income before  taxes                       |       | 87.6                                                                 |       | 66.5 |   | 53.9 |   | 34.5 |   |
| Profit for the  period                     |       | 61.1                                                                 |       | 46.4 |   | 36.6 |   | 24.1 |   |
| Net income                                 |       | 59.2                                                                 |       | 44.9 |   | 33.4 |   | 22.2 |   |
| Basic net income  per common share (c)     |       | 2.92                                                                 |       | 2.22 |   | 1.65 |   | 1.10 |   |
| Diluted net  income per common share (c)   |       | 2.81                                                                 |       | 2.13 |   | 1.60 |   | 1.09 |   |
| Average number  of shares                  |       | 20.2                                                                 |       | 20.2 |   | 20.3 |   | 20.1 |   |
| Dividend per  common share (a)             |       | 1.32                                                                 |       | 1.00 |   | 0.66 |   | 0.48 |   |
|                                       |       |                                                                 |       |   |   |   |   |   |   |

 

1

----

 
| ** **                                                               | ** ** | **For the years ended December 31,**        | ** ** |
|--------------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                               | ** ** | **2006**                                                             | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                               | ** ** | **$ **                                                          | ** ** | **€** | ** ** | **€** | ** ** | **€** | ** ** | **€** | ** ** | **€** | ** ** |
| ** **                                                               | ** ** | **(in millions, except per share amounts)** | ** ** |
| **Consolidated Statement of  Income Data**                               |       |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| *Amounts in accordance with U.S.  GAAP*                                  |       |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Gross revenue of  continuing operations(b)                               |       | 1,566.4                                                              |       | 1,189.4 |   | 920.6 |   | 796.9 |   | 738.1 |   | 711.1 |   |
|                                                                     |       |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Net income of  continuing operations                                     |       | 71.2                                                                 |       | 54.1 |   | 24.3 |   | 14.0 |   | 22.8 |   | 21.8 |   |
| Net income/(loss) of  discontinued operations                            |       | —                                                               |       | — |   | 3.8 |   | 1.0 |   | (0.2 | ) | 1.4 |   |
| Basic net income per  common share of continuing operations (c)          |       | 3.52                                                                 |       | 2.67 |   | 1.20 |   | 0.70 |   | 1.14 |   | 1.09 |   |
| Basic net income/(loss)  per common share of discontinued operations (c) |       | —                                                               |       | — |   | 0.19 |   | 0.05 |   | (0.01 | ) | 0.07 |   |
| Diluted net income per  common share of continuing operations (c)        |       | 3.38                                                                 |       | 2.57 |   | 1.17 |   | 0.69 |   | 1.14 |   | 1.08 |   |
| Diluted net income per common share of discontinued operations (c)       |       | —                                                               |       | — |   | 0.18 |   | 0.05 |   | (0.01 | ) | 0.07 |   |

 
|                                      | ** ** | **As of December 31,** | ** ** |
|--------------------------------------|------------|---------------------------------------|------------|
| ** **                           | ** ** | **2006**                              | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                           | ** ** | **$ **                           | ** ** | **€** | ** ** | **€** | ** ** |
| ** **                           | ** ** | **(in millions)**                | ** ** |
| **Consolidated  Balance Sheet Data** |       |                                  |       |   |   |   |   |
| *Amounts  in accordance with IFRS*   |       |                                  |       |   |   |   |   |
| Total assets                         |       | 969.9                                 |       | 736.5 |   | 650.1 |   |
| Long-term debt                       |       | 157.1                                 |       | 119.3 |   | 116.1 |   |
| Common stock                         |       | 1.4                                   |       | 1.0 |   | 1.0 |   |
| Shareholders’ equity            |       | 248.8                                 |       | 188.9 |   | 176.2 |   |

 
| ** **                              | ** ** | **As of December 31,** | ** ** |
|-----------------------------------------|------------|---------------------------------------|------------|
| ** **                              | ** ** | **2006**                              | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                              | ** ** | **$€**                           | ** ** | **€** | ** ** | **€** | ** ** | **€** | ** ** | **€** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | **(in millions)**                | ** ** |
| **Consolidated Balance Sheet Data**     | ** ** | ** **                            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| *Amounts in accordance with U.S.  GAAP* |       |                                  |       |   |   |   |   |   |   |   |   |   |   |
| Total assets                            |       | 1,003.2                               |       | 761.7 |   | 755.4 |   | 441.0 |   | 348.6 |   | 365.2 |   |
| Long-term debt                          |       | 155.1                                 |       | 117.8 |   | 108.9 |   | 13.0 |   | 29.7 |   | 27.6 |   |
| Shareholders’ equity               |       | 296.8                                 |       | 225.4 |   | 262.0 |   | 158.3 |   | 173.3 |   | 162.9 |   |

 

----

(a)          Dividend per common share represents the dividend relating to a particularyear, although the dividend payment is approved and paid in the following year.The dividend per common share in U.S. dollars is: $1.32****in 2006 and $0.78****in 2005. The dividend payment of € 1.00 per outstanding share of common stock forthe year ended December 31, 2006, will be presented at the Annual GeneralMeeting of Shareholders on May 16, 2007.

(b)          Grossrevenue and operating income as reported in accordance with U.S. GAAP arepresented excluding the 50% revenues or income from the proportionallyconsolidated companies Grupo EP S.A. and ARCADIS Aqumen Facility ManagementB.V. and excluding the 33% revenues or income from the proportionallyconsolidated company Biogas SA. As of mid-June 2005, our 50% interest in GrupoEP S.A. was divested.

(c)          Basic net income per common share calculated in accordance with IFRS and U.S.GAAP is based upon the weighted average number of common shares outstanding duringthe periods indicated. Diluted net income per common share calculated inaccordance with IFRS and U.S. GAAP is based upon the weighted average number ofthe common shares outstanding during the periods indicated plus the dilutiveeffect of potential common shares outstanding during the periods indicated.

2

----

**ExchangeRate Information**

On April 30, 2007,the exchange rate between the Euro and U.S. dollar was € 0.73502 per $1.00. Thefollowing tables set forth, for the periods and dates indicated, informationregarding the exchange rate for the Euro expressed in Euros per $1.00. Therates used for the tables are based on quotes from the Amsterdam Foreign Exchange.
| **Period**                         | ** ** | **High** | ** ** | **Low** | ** ** | **Average(1)** | ** ** | **End** | ** ** |
|------------------------------------|------------|----------|------------|---------|------------|----------------|------------|---------|------------|
| Year ended  December 31, 2006 |       | €   | 0.85       |    | €     | 0.75           |       | €  | 0.80       |   | € | 0.76 |   |
| Year ended  December 31, 2005 |       | 0.86     |       | 0.74    |       | 0.81           |       | 0.85    |       |
| Year ended  December 31, 2004 |       | 0.85     |       | 0.73    |       | 0.80           |       | 0.73    |       |
| Year ended  December 31, 2003 |       | 0.96     |       | 0.79    |       | 0.88           |       | 0.79    |       |
| Year ended December 31, 2002  |       | 1.17     |       | 1.06    |       | 1.06           |       | 0.95    |       |
|                                    |            |          |            |         |            |                |            |         |            |  |  |  |  |

 

----

(1)          Average of the exchange rates on the last day of each month during the yearpresented.
| **Period**    | ** ** | **High** | ** ** | **Low** | ** ** |
|---------------|------------|----------|------------|---------|------------|
| April 2007    |       | €   | 0.75       |    | €     | 0.73 |   |
| March 2007    |       | 0.76     |       | 0.75    |       |
| February 2007 |       | 0.77     |       | 0.76    |       |
| January 2007  |       | 0.78     |       | 0.75    |       |
| December 2006 |       | 0.76     |       | 0.75    |       |
| November 2006 |       | 0.79     |       | 0.76    |       |
|               |            |          |            |         |            |  |  |

 

**B. *Capitalization and indebtedness.***

Not applicable.

**C. *Reasons for the offer and use of proceeds.***

Not applicable.

**D. *Risk factors.***

Our risks can begenerally categorized into market, operational, financial, and other risks.

***Market Risks***

**A globalrecession could have an adverse affect on our revenues.**

Approximately 55%of our revenue is derived from our private sector clients. As a result, we areexposed to general economic cycles which influence the willingness and abilityof private sector firms to invest in the types of activities that require ourservices. Private sector clients experiencing adverse economic conditions mayattempt to defer or withdraw from signed contracts, which could have a materialadverse effect on our revenues. Our facilities service area, where mostinvestments are from private sector companies, is the most sensitive todeclines in economic activity.

**Adecline in the financial markets may adversely affect our revenue.**

A sharp decline inthe financial markets can have a negative effect on our clients’ ability toinvest. In the past this happened in the telecommunications area, whereinvestment declined considerably in a very short period, resulting in asubstantial decrease in our revenue, and in 2004 we discontinued ourcommunications service area and combined the remaining operations with ourinfrastructure service area. If the financial markets were to decline, ourcurrent services areas could also be negatively impacted.

**Decreasesin government tax revenues, which support large public works projects, couldweaken demand for our services.**

Approximately 45%of our revenue is derived from clients in the public sector. These clients relyon tax revenues to fund large public works projects of the type for which weare often retained. During an economic downturn, governmental 

3

----

entities collectsignificantly less tax revenues and often try to limit discretionaryexpenditures to balance their budgets. Government limits on spending in regardto environmental remediation, infrastructure expansion or enhancement, orbuilding projects, could have a material adverse effect on our ability toattract and/or retain business.

**Changesin the political priorities in the countries in which we operate couldadversely affect public spending on the services that we provide.**

Changes inpolitical priorities can considerably influence public spending and, therefore,impact spending on the services we provide. Projects for which we are wellpositioned may be canceled or deferred. Elections can result in shifts inpolitical relationships leading to delays in the awarding of new contracts. Theinfrastructure area is the most sensitive to this risk.

**Changesto existing regulations and new legislation and/or regulations, could weakendemand for our services.**

We believe thatdemand for our principal environmental services is in part related to theresponse of governmental authorities to the public’s concern for environmentalissues. If, however, the public’s concern for environmental issues changes, orgovernmental entities in countries where we operate become less responsive toenvironmental issues, there could be substantially less demand for ourenvironmental services, which could have a material adverse effect on ourbusiness. Changes in regulations and legislation may also negatively affectcertain other areas of our business, such as the infrastructure and facilitiesactivities when it comes to substantial changes in building codes and/orenvironmental requirements related to such projects.

**Politicalinstability in the countries in which we operate can result in contracts beingcanceled or harm to our employees.**

As a result ofpolitical instability, contracts may be terminated or abandoned or the securityof our employees may be at risk, resulting in contract work being stoppedtemporarily or permanently. This risk arises particularly in the donor-financedmarket, which is primarily the****marketfor development projects, generally financed by non-governmental organizationssuch as the World Bank or regional development banks, in which we achieve onlya limited part of our revenues.

**Changesin the bidding behavior of our clients may result in competitive pricing pressurefor our services.**

Changes in thebidding pattern of clients can have a considerable effect on our revenue. Dueto European Union regulations, a trend is developing in a number of countriesto a more open bidding process where price competition is more important.Centralization and strengthening of the purchasing function in large companiesmay also affect our opportunities to secure profitable revenues. Changes in thebidding behavior of our clients or our potential clients may have a negativeimpact on our revenues.

**Concentrationthrough mergers, acquisitions or other forms of consolidation may lead toincreased purchasing power on the part of our clients.**

With theconcentration of companies, clients may disappear, and the purchasing power ofcustomers can increase, resulting in potential decreases in our revenue. Thesame phenomenon can occur with the government. The combination ofmunicipalities and water boards results in fewer, but more powerful,administrative units that, in a number of cases, now conduct activities thatwere formerly put out to bid.

***Operational Risks***

**Theservices we provide can result in considerable liability to us which we may notbe able to insure against.**

The services weprovide are associated with considerable liability risks. These risks can arisefrom errors in executing activities such as design or calculation errors,incorrect estimates of contamination, not meeting agreed schedules, exceedingcost estimates and implementing budgets, not complying with legislation andregulations, or omissions in quality guarantees that have been given. Toprotect against these risks we have obtained general and professional liabilityinsurance policies. These policies cover errors and omissions in the executionof projects and provide insurance against possible claims that arise during thecoverage period. If the insurance carrier does not renew coverage at the end ofthe policy term and we are unable to obtain replacement insurance withretroactive coverage, it is possible that claims will be denied even though theclaims are related to events or actions that occurred while coverage existed.Because insurance policies contain certain exclusions and have a maximum amountper claim, not all risks are covered. Additionally, our insurance carriers maynot be able to meet their obligations.

4

----

**We mayincur losses because we underestimate the time or the cost to complete aproject.**

Depending on thetype of contract, losses can occur in projects as a result of inaccurate timeand cost estimates, new techniques with undocumented cost and performanceresults, inexperienced staff, performance delays, additional consultingservices, the absence of information that was assumed would be available, orother unforeseen circumstances. Although many contracts also contain conditionsregarding payment of additional costs in the event of unforeseen circumstances,substantial project losses may occur, which may have a negative effect on ourresults of operations.

**If weare unable to accurately estimate the overall risks, revenues or costs on acontract, we may incur a lower profit or loss on the contract.**

Some of thecontracts we enter into with our clients have a fixed price or a cap. Undercost-plus contracts that have a cap, we are reimbursed for allowable costs andfees, which may be fixed or performance-based. If our costs exceed the contractcap or are not allowable under the provisions of the contract or any applicableregulations, we may not be able to obtain reimbursement for all such costs.Under fixed-price contracts, we receive a fixed price irrespective of theactual costs we incur and consequently, we will realize a profit on thefixed-price contract only if we can control our costs and prevent costover-runs on the contract.

**If weunderutilize our permanent employees, our profitability may be negativelyaffected.**

Many of ouremployees are permanently employed by us to retain their talent. If we are notable to charge our clients for services performed by these employees or if weare not able to charge our clients at the rates we have set for their services,our profitability could be negatively affected.

**If ourpartners or subcontractors fail to perform their contractual obligations on aproject, we could be exposed to legal liability, loss of reputation and reducedprofit or loss on the project.**

We account for investments in joint ventures using theproportionate method of consolidation, whereby our share of all assets,liabilities, revenues and expenses of the joint venture are included in ourconsolidated financial statements. Success on these joint projects depends inlarge part on whether our partners fulfill their contractual obligationssatisfactorily. In addition, approximately 30% of our gross revenue is derivedfrom work that is not performed by our own staff, but derived fromsubcontracting or other arrangements. If any of our partners or subcontractorsfail to satisfactorily perform their contractual obligations as a result offinancial or other difficulties, we may be required to make additional investmentsand provide additional services in order to make up for our partner’s orsubcontractor’s shortfall. If we are unable to adequately address our partner’sor subcontractor’s performance issues, then our client could terminate theseprojects, exposing us to legal liability, loss of reputation and risk of lossor reduced profit on the projects.

**Therefusal or inability of our clients to timely pay for services we provide tothem could cause us to have insufficient liquidity.**

We usually invoiceclients for our services according to the progress of the work. If our clientsrefuse or are unable to meet their contractual payment obligations, we may nothave sufficient cash to satisfy our liabilities, and our growth rate andcontinued operations could be adversely impacted.

**When weenter into turnkey contracts and Design, Build, Finance and Operate (DBFO)contracts, we face risks beyond those normally associated with our businessrelationships and contracts.**

Due to the natureof turnkey contracts and DBFO contracts, we take on additionalresponsibilities, such as providing engineering and construction services, andarranging financing, that go beyond the responsibilities normally associatedwith our business relationships and contracts. In particular, in turnkeycontracts, we face additional financial risks because of the size of thesecontracts, and the fact that many of the contracting services in thesecontracts are performed by third parties, who may not complete performance on atimely basis. In DBFO contracts, we may have an equity interest in the project,which causes us to have substantially more risk. We may face substantialdecreases in our revenues if we are unable to meet our obligations under eitherof these types of contracts.

**If ourinformation and communication technology systems do not work properly, ouroperations and management may be negatively affected.**

Our operation andmanagement are largely dependent on the use of information and communicationtechnology systems. Limited access and/or the malfunctioning of these systems,including both hardware and software, can negatively 

5

----

affect our operations andmanagement. Our security and backup measures may not be sufficient to protectthe integrity of our systems or to ensure that important data is not lost.

**If weare unable to productively use leased office space, our operating results maybe negatively affected.**

We usually leaseoffice space for periods from five to ten years. A downturn in activities mayleave us with unused office space which we may not be able to sublet.

**Failureto integrate acquired businesses or assets successfully will prevent us fromachieving the anticipated cost savings and other financial benefits from ouracquisitions.**

We have completedseveral acquisitions in the past three years and we will continue to pursuegrowth through selective strategic acquisitions of businesses and assets.However, we will only achieve the efficiencies, cost reductions and otherfinancial benefits, such as diversification of our current portfolio of clientsand services, which we would expect to result from these acquisitions, if wesuccessfully integrate the administrative, financial, technical and marketingorganizations of acquired businesses and assets, and implement appropriateoperations, financial and management systems and controls. We may haveinsufficient management resources to accomplish integrations, and even if weare able to do so successfully, we may not realize the level of cost savingsand other financial benefits that we expected to achieve.

The integration ofacquired operations with our own involves a number of risks, including:

·      thedisruption of our business and the diversion of our management’s attention fromother business concerns;

·      unanticipatedexpenses related to integration;

·      thepotential failure to realize anticipated revenue opportunities associated withacquisitions;

·      thepossible loss of our key professional employees or those of the acquiredbusinesses;

·      thepotential failure to replicate our operating efficiencies in the acquiredbusinesses’ operations;

·      ourincreased complexity and diversity compared to our operations prior to anacquisition;

·      thepossible negative reaction of clients to any acquisitions; and

·      unanticipatedproblems or legal liabilities, including responsibility as asuccessor-in-interest for undisclosed or contingent liabilities of acquiredbusinesses or assets.

***Financial Risks***

**Ourinternational operations expose us to significant currency risk.**

We do asubstantial amount of business in countries that do not use the Euro as theirfunctional currency. The currencies in these countries may fluctuate in valueagainst the Euro over time. Declines in the value of these currencies asmeasured against the Euro could result in a reduction in the value, asreflected on our balance sheet, of our assets.

**Theseasonality of our business may cause our revenues and earnings to fluctuate,adversely affecting the price of our stock.**

Our results mayfluctuate seasonally and over longer periods of time. Some of the factors thatcontribute to such fluctuations include: (1) the number of working daysavailable and the number of our employees on leave, (2) the manner inwhich our public sector clients allocate tax revenues, (3) the weather, whichmay limit the amount of time our professionals have in the field.

**Fluctuationsin our working capital and any substantial acquisition we may make may cause usto violate obligations under our short-term credit facility and other financingarrangements.**

As ofDecember 31, 2006, we had borrowed € 22.3 million under our short-termcredit facility and had a total of € 196.5 million available at year-end.Fluctuations in our working capital, which includes our work in progress andtrade 

6

----

receivables less accountspayable, may cause us to exceed the limits of our financing arrangements. Thismay cause us to violate the covenants and obligations under our short-termcredit facility. Additionally, if we make any substantial acquisitions, ourborrowings under the credit facility may increase and we may violate ourfinancing arrangements.

***Other Risks***

**The lossof our experienced employees could adversely affect revenue and results.**

Our success is,largely, dependent on attracting and keeping good employees. If for any reasonwe are not able to recruit enough people with the necessary expertise andskills from the employment market, or retain them, our revenue and result couldbe adversely affected. The departure of experienced employees to competitors orself-employment can be accompanied by the loss of clients and lead to a loss ofwork for us.

**Anydamage to our reputation may lead to ARCADIS being excluded from certainbidding processes.**

Any damage to ourreputation and name, such as by breaches of our code of conduct by our employees,among other events, may harm our reputation. Such damage could cause us to losebusiness or not be eligible to bid for business in certain industries andregions.

**ITEM4.  INFORMATION ON THE COMPANY**

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

**Introduction**

We are aninternational company that delivers consulting, engineering and projectmanagement services in the areas of infrastructure, environment and facilities.ARCADIS N.V. is a public company incorporated on August 16, 1982 under the lawsof The Kingdom of the Netherlands. Our initial predecessor was incorporated inthe Netherlands in 1888 under the name Nederlandsche Heidemaatschappij. Most ofour commercial activities are undertaken under the trade name ARCADIS. In somecountries, we operate under different legal or commercial names for localcompetitive reasons.

Our principaloffice is located at: Nieuwe Stationsstraat 10, 6811 KS Arnhem, the Netherlandsand our telephone number at that address is 31-26-3778911. Our principal officein the United States is located at: 630 Plaza Drive, Suite 200, HighlandsRanch, Colorado 80126-2377 and our telephone number at that address is720-344-3500.

**Strategy**

Our strategy,titled *Choices for growth*, whichwas revised in 2005, continues the course of profitable growth in home markets,which was introduced in mid-2000. The revised strategy introduces a strategicvision for each of the three service areas in which we are active,infrastructure, environment and facilities. This vision is based on a portfolioanalysis by service area in which market attractiveness and our competitiveposition were weighed for each activity. In addition, an analysis of strengthsand weaknesses was completed by service area and for ARCADIS as a whole.

Goals by servicearea were formulated for the next three to five years. The goals weretranslated into tangible plans for goal realization. As part of this process, “transnationalgrowth platforms” were initiated, aimed at bundling our strengths in areaswhere the market offers good prospects and we are strong. The transnationalgrowth platforms are made up of groups of employees who are strategicallyfocused on the following areas: rail, tunnels and bridges, environment andworldwide project consulting. This process strengthens the horizontal lines inthe company, offering prospects for additional growth in specific sectors.Further details are provided in the following sections on service areas.

The core elementsof the revised strategy can be summarized as follows:

*Strengtheningorganic growth in the three service areas by:*

·                              Expandinglocal positions in home markets;

·                              Usingtransnational growth platforms for specific sections;

·                              Leveraginggood relationships with multinational clients to further expand our services tothese clients;and

·                              Promotinginnovations aimed at developing new products and services.

7

----

*Focusingon activities with higher added value by:*

·                              Providingmore management services and front-end consulting; and

·                              Engagingin alternative contract arrangements, such as GRIP, RECLAIM and DBFO projects.

*Expandingthrough acquisitions aimed at:*

·                              Furtherstrengthening home markets, particularly in the United States and the UnitedKingdom;

·                              Strengtheningour portfolio by expanding services higher in the value chain, such as managementservices, broadening of environmental services, planning services, railactivities and water; and

·                              Buildinga position in Asia.

·                              Meetingour financial criteria, which includes being accretive to earnings per share;having a margin that is equal to or higher than the ARCADIS margin, andproducing a return on investment of 15% or more.

*Enhancing Brand Awareness through:*

·                              Proactiveimplementing our public relations and communications policy;

·                              Publishingin trade magazines; and

·                              Lecturingat trade fairs.

*Active Human Resources Policy:*

·                              Attracting,motivating and retaining talented employees.

**StrategicDevelopments**

***Profitable growth in home markets***

In mid-2000, valuecreation for shareholders became a leading element in our strategy in an effortto improve the Company’s long-term position. Since then, our strategy has beenaimed at the realization of the goals mentioned above. Profitable growth inhome markets in Europe and North and South America are key to that process asare organic growth, margin improvement and expansion of activities throughacquisitions. In recent years, organic growth has increased, and margins have improvedconsiderably. Acquisitions and divestments have led to a strong change in theportfolio. From 2000 to 2005, approximately € 150 million in gross revenue wasdivested. These divestments were predominantly non-core activities with lowermargins. They were replaced with more than € 400 million in gross revenue inconsultancy and management services with higher added value, higher margins andmore growth potential.

***Strategic position strongly improved***

The portfoliochanges have strongly improved our strategic position. The acquisition in 2005of BBL in the United States brought ARCADIS into the top 3 in the globalenvironmental market, and we are now the global market leader in environmentalservices to companies. In the infrastructure market, we have a recognizableposition with several specialties at the international level. In the facilitiesmarket, a transition was completed to higher value management services.Meanwhile, we have a top five position in many European countries and Brazil.Even though our activities in the United Kingdom have expanded considerably,and our presence in the United States has doubled since 2000, we still have notreached our desired position in those markets. In Asia, our position is stillmodest. Internal cooperation has improved considerably. ARCADIS’ name awarenesshas increased considerably, and in the labor market, ARCADIS has a solidreputation. Nevertheless, in both of these areas, significant progress canstill be made. Despite investments in acquisitions, our financial position isvery healthy with ample room for further expansion.

***Considerable value creation***

Thanks to thecontribution of many within ARCADIS, developments in recent years have led to aconsiderable creation of value. The market capitalization of the Company rosefrom € 173 million at year-end 2000 to € 945 million at year-end 2006.

***Progress in 2006***

In 2006,considerable progress was achieved in realizing our strategic goals.

**Integration of BBL progressing well**

The integration of BBL – acquired as of October 1, 2005 – within ourexisting U.S. organization, was a main priority in 2006. The basis for thisintegration is BBL’s successful client-focused business model. As of January 1,2007, organizational changes have been implemented, targeting enhanced efficiency,increased marketing power, and 

8

----

greater synergy in both the U.S. and internationally. A logical nextstep will be the introduction of a divisional structure that offers opportunityfor the planned future expansion of our position in the United States.

**Strong organic growth and highermargin**

At 10%, organic growth of gross revenue was much higher than our goalof 5%. The margin improved further to 9.4%, a clear demonstration that ARCADISis now active higher in the value chain with activities that create more addedvalue.

**Strong growth with multinationalclients**

BBL’s objective to serve their clients outside the United States drovetheir decision to join ARCADIS. ARCADIS’ Multinational Clients (MNC) programmakes it possible to serve global companies in multiple countries withconsistent quality, directed through an account management program. The BBLacquisition has increased the gross revenue in the MNC program to € 171million. The organic growth amounted to 15%.

**Transnational Growth Platforms formed**

As mentioned above, these initiatives were introduced in 2006 based onour revised 2005 strategy. The Transnational Growth Platforms (TGPs) arehorizontal business lines that target the creation of additional growth acrossoperating company borders. More information is provided in the sections onmarket developments by service area.

**Strengthening portfolio and homemarkets through acquisitions**

Even though the 2006 priority was the integration of already acquiredcompanies, considerable expansion through acquisitions was achieved in 2006 andincludes:
| Name                             | ** ** | **Country**   | ** ** | **Staff** | ** ** | **Gross  revenue in €  millions** | ** ** | **Consolidated  as of** | ** ** |
|----------------------------------|------------|---------------|------------|-----------|------------|--------------------------------------------------|------------|------------------------------|------------|
| In Situ  Technieken              |       | Netherlands   |       | 10        |       | 1.5                                              |       | 4/1/2006                     |       |
| Dresdner  Grundwasser Consulting |       | Germany       |       | 20        |       | 1.5                                              |       | 7/1/2006                     |       |
| Berkeley  Consulting             |       | U.K.          |       | 100       |       | 10                                               |       | 8/1/2006                     |       |
| ECOLAS                           |       | Belgium       |       | 60        |       | 6                                                |       | 10/1/2006                    |       |
| BCT                              |       | Belgium       |       | 65        |       | 6                                                |       | 10/1/2006                    |       |
| PinnacleOne                      |       | United States |       | 230       |       | 28                                               |       | 11/1/2006                    |       |
| **Total**                        |       |          | ** ** | **485**   | ** ** | **53**                                           | ** ** | ** **                   | ** ** |

 

In Situ Technieken, a Dutch-based company, strengthens our position insoil remediation and is consolidated in the company’s results as of April 1,2006. In Situ Technieken owns a technology that in certain soils leads toquicker and more cost-effective results. In Germany, Dresdner GrundwasserConsulting was added, a 20-person firm, specializing in water management andwastewater treatment and consolidated as of July 1, 2006. Through theacquisition of Berkeley Consulting in England — active in project management,construction management and conflict resolution — AYH was able to expand itsclient base to the public sector. Berkeley Consulting has 100 employees and isconsolidated in the company’s results as of August 1, 2006. In Belgium, theacquisition of the 60-person firm ECOLAS strengthened our position in the Europeanenvironmental market, while the acquisition of engineering company BCT with astaff of 65 expands the activities in the Walloon region of Belgium. Bothcompanies have been consolidated in the results as of October 1, 2006. Theacquisition of PinnacleOne considerably strengthens our position in project andprogram management in the United States. This 230-person company wasconsolidated as of November 1, 2006 and fits well into the *ARCADIS Worldwide Project Consulting*initiative, aimed at serving international real estate investors globally. Intotal, the gross annual revenue added by these companies is estimated at € 53million.

The total investment in acquisitions in 2006 was € 52.7 million,which resulted in goodwill of € 29.9 million. The goodwill in 2006 was assignedto our geographic segments as follows (in millions):
| The Netherlands                   |   | € | 1.9    |   |
|-----------------------------------|--------|--------|--------|--------|
| The United  States                |   | 15.6   |   |
| Europe excluding  the Netherlands |   | 11.7   |   |
| Rest of World  (1)                |   | 0.7    |   |
| Total goodwill                    |   | 29.9   |   |

 

9

----

----

(1) The geographic segment “Rest of World” includes all countriesoutside of our three primary reporting segments, the Netherlands, the UnitedStates and Europe excluding the Netherlands.

Of the € 52.7 million invested in acquisitions in 2006, up to €3.8 million will be paid after 2006. In 2006, we did not have divestments.

**Financialgoals**

We haveestablished a new operational margin target of 10%, which is calculated asoperating income excluding amortization of identifiable intangible assets (whichwe also refer to as EBITA) as a percentage of revenue, net of materials,services of third parties, and subcontractors. We increased this target fromour previous goal of 8% after that goal was achieved in 2005.

We also maintainthe following unchanged financial goals for the mid to long term:

·                              Grossrevenue: average annual growth of 10% or more, half of which is organic.

·                              Earningsper share: average annual growth of 10% or more.

·                              Returnon invested capital of 15% or more. This is net income from operations,excluding interest charges, compared to shareholders’ equity plus netinterest-bearing debt, calculated as an average over four quarters.

The goals listedabove are excluding the effects of currency exchange rate differences. Netincome from operations is before amortization and other items that we believeaffect the comparability of results, like book gains. As of 2004, all amountsare based on IFRS.

Below are theresults of previous years compared to the above financial goals, excludingcurrency effects**.**
| ** **                     | ** ** | **Goal** | ** ** | **2001** | ** ** | **2002** | ** ** | **2003** | ** ** | **2004(1)** | ** ** | **2005(1)** | ** ** | **2006(1)** | ** ** |
|--------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|-------------|------------|-------------|------------|-------------|------------|
| Gross revenue growth           |       | 10       | %          | 3        | %          | 6        | %          | 10       | %          | 9           | %(2)       | 10          | %(2)       | 23          | %          |
| ·  Organic      |       | 5        | %          | 3        | %          | 2        | %          | 1        | %          | 5           | %          | 5           | %          | 10          | %          |
| ·  Acquisitions |       | 5        | %          | 0        | %          | 4        | %          | 9        | %          | 4           | %          | 5           | %          | 13          | %          |
| Operational margin             |       | 10       | %          | 6.9      | %          | 7.4      | %          | 6.0      | %          | 6.2         | %(3)       | 8.2         | %(3)       | 9.4         | %          |
| Earnings per share             |       | 10       | %          | 10       | %          | 11       | %          | (4       | )%         | 9           | %          | 40          | %          | 50          | %          |
| Return on invested capital     |       | 15       | %          | 17.6     | %          | 18.8     | %          | 15.9     | %          | 17.2        | %          | 20.6        | %          | 20.3        | %          |

 

----

(1) Results based on IFRS.

(2) Excluding book gains on divestments.

(3) Excluding items thatimpact the comparability of results.

**B. *Business overview.***

**Developmentby Service Area**

We provideconsulting and engineering services in four principal geographic reportingsegments: the Netherlands, Europe excluding the Netherlands, the United States,and Rest of World. Our primary services areas in each of these geographicsegments are infrastructure, environment, and facilities. Below is a furtherdetailing of the activities of the company in each of these three serviceareas:

***Infrastructure***

Our infrastructureservice area is focused on designing physical living environments for living,working, and recreational activities, as well as connecting these areas throughhighways, railroads, and waterways. We are engaged in infrastructure activitiesin all of our geographic reporting segments. Water management andinfrastructure development for the energy sector are also a component of thisservice area. This service area’s share of total gross revenue was € 562million, € 528 million and € 501 million in 2006, 2005 and 2004,respectively, and accounted for 45%, 53% and 56% of our total gross revenue inthose years, respectively.

The infrastructuremarket is dominated by public sector spending. We have strong local positionsin this market. Our knowledge of local conditions and our long-term clientrelationships allow us to anticipate new developments and offer tailor-madeservices. From a broad range of multidisciplinary services, we offer integratedsolutions for complex infrastructural challenges. In a number of areas, we havespecialized expertise. Our rail infrastructure experience is based on years ofworking 

10

----

on the Dutch railwaynetwork, one of the most densely traveled and safest networks in the world. Aprime example of our expertise in bridges is the world-famous Millau Viaduct inFrance, the tallest in the world. In the area of tunneling, we have extensiveexpertise and experience, both in rocky and in soft subsurface soils.

Our principalactivities in this service area include:

·      Planning and designingroads, highway systems, bridges, tunnels, harbors, railroads, airports,industrial sites and business parks;

·      Traffic and transportationplanning and design and traffic engineering studies;

·      Pedestrian and bicyclefacilities design and parking analysis and design;

·      Surveying and geotechnicalservices for roads, railways and high-rise construction projects;

·      Consulting and mapping forcadastral purposes for utilities, facilities such as airports and industrialcomplexes, as well as for local governments;

·      Architecture;

·      Construction management,administration, supervision and physical construction services;

·      Project and programmanagement, facilities programming, master planning;

·      Assistance with thefinancial and economic aspects of heavy infrastructure construction projects;

·      Quality control andoperational assistance;

·      Feasibility studies;

·      Structural, mechanical,electrical and process engineering; and

·      Assistance with biddingprocesses and permits applications.

***Environment***

Our environmentarea is focused on the improvement and maintenance of air, soil, groundwaterand surface-water quality as well as nature and ecology projects. Also includedin this service area are projects related to climate change, productstewardship, noise abatement, solid waste disposal and health and safety. Weare engaged in environment activities in all of our geographic segments. Thisservice area’s share of total gross revenue was € 465 million, € 310million and € 243 million in 2006, 2005 and 2004, respectively, and accountedfor 38%, 31% and 27% of our total gross revenue in those years, respectively.

A considerableportion of our gross revenue in the environment service area results from soil,groundwater, and sediment remediation projects. In this area, we maintain aworld leadership position that is based on cost-effective remediationtechnologies, a solid reputation and the Guaranteed Remediation Program(GRiP®). Under GRiP®, we provide turnkey solutions for the remediation ofcontaminated properties at a guaranteed price, while covering risks withinsurance policies. In addition, we are able to serve multinational companiesin multiple countries. This is significant as a growing number of multinationalcompanies are reducing the number of consultants they use. Many of our clientsalready are multinational companies.

Our principalactivities in this service area include:

·      Investigation,identification and evaluation of sources of pollution and chemicalcontamination in groundwater, air and soil, including the velocities anddirections of contaminant migration;

11

----

·      Identification andevaluation of hydrologic factors incident to the siting and operation ofindustrial plants, mines, power generating stations, and waste-storage anddisposal facilities;

·      Formulation of remedialactions, including the design of groundwater monitoring and treatment systemsat industrial waste treatment and disposal sites, and the development andevaluation of strategies for the abatement of chemical contamination ofgroundwater from various sources;

·      Provision of technicalguidance to governmental agencies with respect to the significance ofgroundwater, and methods for abating, controlling, and monitoring groundwatercontamination;

·      Performance of feasibilitystudies, construction management, and the 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, underwater sediment remediation, wastewater treatment,stabilization/solidification, landfill caps and containment, and air qualitycontrol;

·      Life sciences servicesincluding toxicology, epidemiology, molecular biology, endocrinology, ecology,pathology, chemistry, environmental systems, modeling, and statisticalanalysis.

·      GRiP®, which include theprovision of a guaranteed maximum price for remediation of contaminatedindustrial sites, along with an insurance scheme that limits the client’s riskexposure;

·      Redevelopment, Closure,Asset and Industrial Management, or RECLAIMTM, which is an integrated approachdeveloped for company sites slated for closure.  The approach includes aremedial plan, often based on GRiP®, combined with a plan for redevelopment. The environmental remediation can then be co-funded from the sale of theredeveloped property.

·      Comprehensive assessment,containment and remediation services for both surface and subsurfacehydrocarbon releases, as well as the design, installation, operation andmaintenance of hydrocarbon remediation systems;

·      Environmental managementconsulting, including supporting clients implementing environmental policies,compliance with legal requirements and reduction of environmental risks,environmental audits, environmental management systems, waste management, andassessment of procedures, materials and products;

·      Provision of specialcontracting services for the construction and operation of remedial systems,focusing on the installation of systems and the subsequent long-term operationof the installed equipment, maintenance and sampling of the treatmentprocesses;

·      Air quality services rangingfrom investigations through design to installation and operation, includingsource evaluation investigations, such as stack testing, compliance testing,diagnostic testing, continuous omissions monitoring, trial burn testing, airtoxins testing, testing of remedial systems, ambient air sampling, and airquality consulting services, such as permitting, omissions inventories,dispersion modeling;

·      Noise reduction servicesaimed at the insulation of homes against noise from aviation, rail and roadtraffic; and

·      Other activities, includingexpert testimony, modeling, risk evaluation and risk assessment services,bioremediation services, regulatory support, preparation of environmentalstatistics, geophysics, and community relations.

***Facilities***

Our facilitiesarea is focused on buildings in which people live, work, shop, relax orotherwise spend time. Projects include office buildings, manufacturingfacilities, hotels, shopping malls, hospitals, schools and stadiums. We engagein the facilities area in all of our geographic segments. This service area’sshare of total gross revenue was € 206 million, € 162 million and € 144 millionin 2006, 2005 and 2004, respectively, and accounted for 17%, 16% and 16% of ourtotal gross revenue in 2006, 2005 and 2004, respectively.

The facilitiesmarket is strongly influenced by the level of private investment and thereforeis more cyclical. In the past three years, we have focused on transitioning tohigher added value services in an effort to improve profitability. Greater 

12

----

emphasis has been placedon expanding project and program management and facility management services.The acquisition of AYH in the United Kingdom in 2005 and PinnacleOne in theUnited States in 2006 were important steps in reaching this goal. At the sametime, we began reducing and outsourcing our detailed engineering activities. Itwas becoming increasingly difficult to offer distinguishable services to themarketplace, which negatively impacted our profitability and led to the 2005first quarter sale of detailed engineering services in the United States, aswell as the wind-down of the detailed engineering activities in Germany whichwas completed in 2006.

Our activities inthe facilities area include:

·      Project and programmanagement, including cost management and master planning;

·      Facility management,including technical maintenance of a client’s buildings, as well as security,procurement of energy and water, and catering;

·      Architectural design andarchitectural development services;

·      Civil, structural,mechanical and electrical engineering;

·      Instrumentation and controlsservices;

·      Industrial and manufacturingproject services;

·      Feasibility studies andstrategic planning;

·      Field operations;

·      Consulting services forconstruction processes, project organization, as well as design specifications;and

·      Provision of temporarytechnical staff.

**Marketingand Distribution**

Our majormarketing channels are our primary operating companies, which are ARCADISUS Inc., ARCADIS Nederland B.V., ARCADIS Deutschland GmbH, ARCADIS BelgiumN.V., ARCADIS FC International SAS, ARCADIS Logos Engenharia SA, ARCADISGeotecnica SA, PRC Holding B.V., ARCADIS Aqumen Facility Management B.V.,ARCADIS GMI Ltd., AYH PLC and ARCADIS Polska SP z o o.

Through ourmultinational client program, we have increased organic growth by expanding ourrelationships with existing multinational clients. For example, ourmultinational clients program has resulted in the execution by several existingclients of master service agreements that establish the basis for providinginternational services to these clients for extended periods.

**Competition**

We are engaged inhighly competitive markets in all of our geographic reporting segments andservice areas. We compete with many other firms, ranging from small local firmsto large national and international firms. In addition to price, we competeprimarily on the basis of quality of service, project management expertise, andability to provide integrated solutions. Another competitive factor is theapplication of state-of-the-art technology. The development of new and more efficienttechnology by our competitors may have an adverse effect on us if suchtechnology is not accessible to us or is incompatible with the services weprovide.

Another importantcompetitive factor is geographic location. To compete effectively with the manysmall and larger players in these markets, solid client relationships and athorough knowledge of local conditions are essential. That is why we strive tobelong to the top five in local markets, and in the United States to the topten. In most European countries where we are active and in Brazil and Chile, wehave a top ten position. In the United States, we are currently in the top 20.A significant portion of our revenue is generated through direct contact andnegotiations with clients resulting largely from existing relationships ratherthan through public or other bidding procedures.

13

----

In larger projectsand in sectors of the environmental and facilities markets, the competition ismore international in nature. In the environmental market, we are positioned inthe global top three, and in environmental services for private-sector firms,we are number one. The number of companies that can deliver environmentalservices for multinationals is limited. We have a similar advantage when itcomes to the facilities market for international real estate investors.Globally, we are positioned in the top ten, and in Europe, in the top three inour field.

**Effectof Government Regulation**

Of our business,approximately 45% of our revenue is derived from governmental entities. Theseclients rely on tax revenues to fund large public works projects of the typefor which we are often retained. During an economic downturn, governmentalentities collect significantly less tax revenue and often try to limitdiscretionary expenditures to balance their budgets. Government limits onspending in regard to environmental remediation, infrastructure expansion orenhancement, building projects, real estate data services or telecommunicationsinfrastructure investments, could have a material adverse effect on our abilityto attract and/or retain business.

Our business isalso affected by the implementation and modification of governmentallegislation and regulations in a number of areas, but particularly with respectto the environment. We assist private sector clients in complying with, orresponding to, new governmental legislation and regulations. Therefore, whengovernment strengthens regulation of the environment, the demand for ourservices typically increases. When regulations are weakened or enforcement ofsuch regulations seems less likely, our clients are less likely to need ourservices, which could materially and adversely affect our business. Changes inregulations and legislation may also affect certain other areas of our business,including communications, infrastructure and, to a lesser extent, facilities.

**C.  *Organizational structure.***

ARCADIS N.V. isnot directly or indirectly owned or controlled by another corporation or by anygovernment, foreign or domestic. Only our major consolidated companies arelisted below, stating the percentage of ownership by ARCADIS N.V. and thecountry in which each is domiciled.
| **Company**                                 | ** ** | **Percentage  Ownership** | ** ** | **Domicile**     | ** ** |
|---------------------------------------------|------------|---------------------------|------------|------------------|------------|
| ARCADIS US Inc.                             |       | 100                       |       | United  States   |       |
| ARCADIS  Nederland B.V.                     |       | 100                       |       | The  Netherlands |       |
| ARCADIS  Deutschland GmbH                   |       | 100                       |       | Germany          |       |
| ARCADIS  Euroconsult B.V.                   |       | 100                       |       | The  Netherlands |       |
| ARCADIS Belgium  N.V.                       |       | 100                       |       | Belgium          |       |
| ARCADIS FC  International SAS               |       | 100                       |       | France           |       |
| ARCADIS Logos  Engenharia SA                |       | 50  plus 1 share          |       | Brazil           |       |
| ARCADIS  Geotecnica SA                      |       | 100                       |       | Chile            |       |
| PRC Holding B.V.                            |       | 100                       |       | The  Netherlands |       |
| ARCADIS Aqumen  Facility Management B.V.(1) |       | 50                        |       | The  Netherlands |       |
| ARCADIS GMI Ltd.  (UK)                      |       | 100                       |       | United  Kingdom  |       |
| AYH, PLC                                    |       | 100                       |       | United  Kingdom  |       |
| ARCADIS Polska SP  z.o.o.                   |       | 100                       |       | Poland           |       |

 

----

(1)          Proportionately consolidated

**D.  *Property, plant and equipment.***

Our principalproperty and equipment consists of land, offices, operating facilities, storagegrounds, workshops, vehicles, equipment and software which, atDecember 31, 2006, represented approximately 8% of our consolidatedassets. We believe that our offices, operating facilities, vehicles andequipment are well maintained, suitable, and adequate for our currentoperations and that suitable additional or substitute space will be availableas needed to accommodate any expansion of our operations and for additionaloffices.

Our headquartersare leased and are located in Arnhem, the Netherlands. We own regional offices,workshops, storage grounds and land throughout the Netherlands. We lease approximately260 local offices throughout the Netherlands, Europe, the United States, Asia,Africa, and Latin America. During fiscal 2006, aggregate annual rental paymentson real estate leased by us approximated € 23 million.

14

----

The principalassets utilized in our consulting/engineering operations consist primarily ofcomputer equipment and software, instruments, operating equipment, workshopinventory, office inventory and reproduction equipment. Some of the computerequipment is leased. The principal assets we utilized in contracting operationsconsist primarily of operating equipment such as earth-moving equipment, frontloaders and trucks, mowers, tractors, drainage machines and office and workshopinventory as well as computer equipment. Some of the operating equipment isleased.

AtDecember 31, 2006, we were not aware of any environmental issues existingat any of our facilities that may affect the utilization of such facilities.

**ITEM 4A.  UNRESOLVED STAFF COMMENTS**

There are no unresolvedcomments from the staff of the United States Securities and Exchange Commissionthat were received more than 180 days prior to the end of fiscal year 2006.

**ITEM 5.  OPERATING AND FINANCIALREVIEW AND PROSPECTS**

**A.  *Operating results.***

**Overview**

The following is adiscussion of our consolidated financial condition and results of operationsfor the two years ended December 31, 2006 and other factors that areexpected to affect our prospective financial condition. The followingdiscussion and analysis should be read in conjunction with “Selected financialdata” and our Consolidated Financial Statements which are included elsewhere inthis annual report. Our Consolidated Financial Statements are prepared inaccordance with IFRS. IFRS differs in certain respects from U.S. GAAP. See ourreconciliation of IFRS to U.S. GAAP in Note 23 to our Consolidated FinancialStatements. Our results may fluctuate from period to period due to projectdelays, occasioned by regulatory agency approvals or client considerations,weather and the number of working days available.

We are aninternational provider of consulting and engineering services in four primarygeographic reporting segments: the Netherlands, the United States, Europeexcluding the Netherlands, and Rest of World, which includes all countries inwhich we operate outside the first three segments. We provide these services inthree principal service areas: infrastructure, environment and facilities.

2006 was another record year for ARCADIS. Grossrevenue rose 23% to € 1.2 billion. At 10%, organic growth was especiallystrong. Net income from operations (before amortization and non-operationalitems) rose 50% to € 50.0 million. Per share, this is € 2.47 against € 1.65 in2005. These results are attributable to strong growth in our service areas,continued margin improvement and a solid contribution from acquisitions. Acrossthe board, performance was good. In all three service areas, organic growth wason or above target, while margins improved. Geographically, the profit gainswere primarily strong in the Netherlands, the United States and the UnitedKingdom.

**Developmentsby Geographic Segment**

Our organizationalstructure is primarily geographic, usually with one (to two) operating companiesper country. These operating companies report directly to the Executive Board.We have grouped our operations into four geographic regions: the Netherlands,Europe excluding the Netherlands, the United States and Rest of World.

***The Netherlands***

During 2006,market conditions in the Netherlands improved faster than we previouslyexpected. After a slight decline in 2005, gross revenue in 2006 rose 12% to €323 million, or 26% of total gross revenue, compared to € 288 million in 2005.This strong growth was in part the result of the improved economy, increasedoutsourcing by government agencies and a breakthrough in public-privatepartnership initiatives. The facility management contract for DSM/Sabic alsocontributed to the growth.

From 2003 to 2005,greater emphasis was placed on core activities, and non-core activities weresold. In addition, efforts to streamline the organization were successful, anda more entrepreneurial culture was developed. As a result, our position in theNetherlands was strengthened, enabling us to profit from the market recovery.Activities in all three service 

15

----

areas grew. PRC alsoexpanded considerably, capitalizing on the increased demand for management andconsultancy services and the greater emphasis on healthcare and education.

Organic grossrevenue (gross revenue not attributable to acquisitions) in the Netherlandsincreased by 13%, and this increase was primarily attributable to the Company’sability to capitalize on the strong overall market improvement. Growth was achievedin all of our service areas.

The restructuringmeasures implemented in the Netherlands in 2004, as well as increased activityand improved billability due to higher workload, had positive effects onprofitability in 2006. As a result, operating income totaled € 14.8 million in2006 compared to € 11.5 million in 2005. In addition, operating incomeexcluding amortization of identifiable intangible assets (or EBITA) rose 39% to€ 17.4 million, compared to € 12.5 million on a recurring basis in 2005.

***Europe excluding the Netherlands***

Gross revenue inEurope excluding the Netherlands (including Belgium, the Czech Republic,France, Germany, Poland, Romania and the United Kingdom) increased 4% to € 278million in 2006, compared to € 267 million in 2005. Gross revenue from otherEuropean countries represented approximately 23% of our total gross revenue for2006. Acquisitions and divestments on balance contributed 2% to growth. Thesale of our 50% interest in the Spanish company Grupo EP in mid -2005 continuedto erode revenue but was offset by the solid contribution from acquisitions,especially AYH in the United Kingdom acquired in mid-2005.

Organic growth was2%. This relatively modest increase resulted from the reduction of detailedengineering in Germany, the delay of project starts in Poland and thetransition to subsequent phases of work in several large projects in Belgium.In France, solid growth continued. The strongest increase occurred in theUnited Kingdom, where acquisitions and organic growth led to an overallincrease in activities of 79%. In Belgium, Germany and the United Kingdom,smaller companies were acquired as valuable expansions of our existingportfolio.

Operating incomedecreased by 8% to € 17.3 million in 2006, compared to € 18.8 million in 2005,primarily due to the closure of our detailed engineering activities in Germany,project delays in Poland and the transition phase that certain larger projectsin Belgium are in at the moment. However, EBITA rose 4% to € 18.8million compared with € 18.1 million on a recurring basis in 2005. Thecontribution from acquisitions was largely offset by the 9% organic decline,which resulted from the same factors that contributed to the decline inoperating income.

***The United States***

Gross revenue forthe United States increased 49% in 2006 to € 518 million, compared to € 349million in 2005. Gross revenue from the United States represented approximately42% of our total gross revenue for 2006. Acquisitions, primarily of Greystone(in mid-2005) and BBL (in fall 2005) in the environmental market, constituted39% of this strong growth. The currency effect was a negative 2%. The combinedenvironmental and infrastructure markets saw an organic growth of 12%. Theenvironmental market saw an organic growth of 11% – the third consecutive yearabove 10%. Infrastructure experienced pressure in the land development market,but this was more than offset by the growth in the water and transportationmarkets, resulting in an organic growth of more than 15%. The Safe,Accountable, Flexible, and Efficient Transportation Equity Act of 2003(SAFETEA), which was signed into law in late 2005, resulted in a considerablenumber of new projects coming to market. The win – in early 2007 – of a 5-yearIDIQ contract, with a maximum value of $150 million for hurricane protectionfor New Orleans, positions us strongly for 2007.

Acquisitions haveserved to strengthen our position and visibility in the U.S. marketconsiderably. ARCADIS is now one of the key companies in the U.S. environmentalmarket. The positive synergy and good strategic fit of the acquisitionsresulted in revenue numbers that exceeded first-year expectations. BBL’ssuccessful client-focused business model forms the basis for the integrationand will be leveraged to further expand our activities for private-sectorclients internationally. The acquisition of PinnacleOne strengthened ourposition in the American facilities market, providing the foundation for a newgrowth segment.

Operating incomeincreased by 70% to € 31.1 million in 2006, compared to € 18.3****million in 2005. In addition, EBITA rose66%, totaling € 34.8 million, compared to € 20.9 million in 2005. Although agood deal of time was spent on the integration process, margins rose as aresult of the excellent contribution to profits from the acquisitions and anorganic income improvement of 14%.

16

----

***Rest of World***

Activities in Restof World, include activities primarily in the infrastructure and environmentservice areas in Brazil and Chile, as well as projects in developing countries,financed by international donors such as the World Bank and the European Union.Gross revenue rose by 17% to € 113 million in 2006, compared to €97 million in 2005. Divestments produced a revenue decline of 4%. Thecurrency effect was 6% as a result of the strong increase in the value of theBrazilian real. The 15% organic growth primarily came from Brazil. Chile alsosaw healthy growth. Conditions in the donor-financed market were unfavorable,resulting in a decline of 12%. Gross revenue from Rest of World representedapproximately 9% of our total gross revenue for 2006. In addition,****EBITA was € 7.8 million compared to € 5.8million in 2005 and rose 34%. Of the organic profit increase, 28% wasattributable to positive business conditions in Brazil, while Chile and thedonor-financed activities also contributed to the profit improvement.

Set forth below isa reconciliation, by geographic segment, of operating income to operatingincome excluding amortization of identifiable intangible assets to EBITA onrecurring basis.
| ** **                                                                         | ** ** | **Netherlands** | ** ** | **Europe excluding  the Netherlands** | ** ** | **The United  States** | ** ** | **Rest of World** | ** ** | **Total** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------|------------|-------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|-----------|------------|
| **In millions of euros**                                            | ** ** | **2006**        | ** ** | **2005**                                        | ** ** | **2006**                    | ** ** | **2005**                    | ** ** | **2006**  | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Operating income  as reported                                                      |       | 14.8            |       | 11.5                                            |       | 17.3                        |       | 18.8                        |       | 31.1      |       | 18.3 |   | 7.3 |   | 5.8 |   | 70.5 |   | 54.4 |   |
| Amortization of  identifiable intangible assets                                    |       | 2.6             |       | 2.0                                             |       | 1.5                         |       | 1.4                         |       | 3.7       |       | 2.6 |   | 0.5 |   | — |   | 8.3 |   | 6.0 |   |
| EBITA (Operating  income excluding amortization of identifiable intangible assets) |       | 17.4            |       | 13.5                                            |       | 18.8                        |       | 20.2                        |       | 34.8      |       | 20.9 |   | 7.8 |   | 5.8 |   | 78.8 |   | 60.4 |   |
| Book gains of  divestments                                                         |       | —          |       | 0.4                                             |       | —                      |       | 2.1                         |       | —    |       | — |   | — |   | — |   | — |   | 2.5 |   |
| Non-operational  pension gain                                                      |       | —          |       | 0.6                                             |       | —                      |       | —                      |       | —    |       | — |   | — |   | — |   | — |   | 0.6 |   |
| EBITA on recurring  basis                                                          |       | 17.4            |       | 12.5                                            |       | 18.8                        |       | 18.1                        |       | 34.8      |       | 20.9 |   | 7.8 |   | 5.8 |   | 78.8 |   | 57.3 |   |

 

**Revenuesand Expenses**

We derive ourgross revenue primarily from the provision of consulting and engineeringservices, as well as other services, generally under the categories ofcontracts described below, which in some circumstances may be combined.

·  *Fixed price contracts.* Fixed pricecontracts provide for the payment of a negotiated fee that is fixed at theinception of the contract. When we enter into these types of contracts weestimate the amount of time and the cost for us to perform the services underthe contract. We may underestimate the actual time and cost. Further, theinformation upon which the fee is based may change or may be inaccurate. As aresult, we may earn less under the contract than we anticipated or suffer aloss. Conversely, if we perform the services more efficiently than weestimated, we may earn more under the contract than anticipated. With a welldefined scope of work and schedule, we can limited the risk of underestimatingour costs.

·  *Cost-plus contracts.* Cost-plus contractsprovide for payment based on the time spent to perform the contract, applyingagreed upon rates for different categories of employees, and then addingout-of-pocket expenses. Our risk arising from this type of project is usuallylimited. Clients will choose this type of contract when it is difficult toestimate in advance how much time will be spent or when a client wishes tobring in a temporary staff to conduct certain activities under its management.

·  *Cost-plus contracts with a cap.* Cost-pluscontracts with a cap are similar to cost-plus contracts, but a maximum projectcost is agreed to that cannot be exceeded without the prior agreement of theclient. In principle, we cease work 

17

----

when the cap is reached unless a “performance agreement” has also beennegotiated. In that case, we may need to complete the additional work at noadditional cost to the client.

·  *Contracts with a building sum-related fee.*Contracts with a building sum-related fee are normally used when our activitiesare directly related to the total completion of a construction project, such asa road, building or civil engineering project. This type of project involvesproducing the design, developing the engineering, handling procurement, andsupervising construction. With this type of contract, the total fee for thevarious activities is determined by a percentage of the sum of the totalconstruction costs. The activities are budgeted on the basis of an estimate ofthe construction costs. Actual construction costs, because of overcapacity inthe market, may be lower than we estimate, and as a result our fee could belower. Conversely, if we efficiently manage the project, we can significantlyenhance our margin.

·  *Turnkey contracts.* Turnkey contracts aresimilar to the fixed price contracts described above. However, this type ofcontract also includes the engineering and construction components of the work(a design/build contract). These types of contracts require additionalpreparation for producing specifications and determining price. The advantagesfor the client are price certainty at an early stage, efficiency in thepreparation and quicker deliverability. Because we do not usually perform theconstruction (building) component of the work, the risk that the work will notbe completed is usually covered by a back-to-back contract with a contractor.In part due to size, this type of contract may be riskier for us. Risks arisefrom design and engineering miscalculations, unclear specifications of theproduct, or contractors not meeting their obligations. However, we may achievegreater profits by completing the project efficiently and under budget.

·  *GRiP® contracts.* GRiP® stands forGuaranteed Remediation Program. GRiP® contracts are a special type of turnkeycontracts that are used in the environmental market for the remediation ofcontaminated property. A remediation plan is prepared, and remediation costsare estimated based on an environmental study and a determination of the extentof contamination. The performance of the remediation plan is offered (undercertain conditions) to the client for a fixed price (turnkey). The risks ofcost overruns are largely covered by an insurance policy. We have very rigorousprocedures and policies for project estimation and determination of insurancelevels and work closely with our insurers to minimize the total risk. However,there are always some inherent project estimation risks. Remaining risks canarise as a result of disputed settlements with the insurer and associatedlitigation.

·  *Design, Build, Finance and Operate contracts (DBFO).*DBFO contracts allow us to deliver a total product, including arranging financingand operating the built product for a certain period of time. This type ofproject is normally conducted as part of a consortium, with a partnership setup specifically for the project, acting as the contract party. Ourparticipation depends on the project type, its scope, and the risk profile. Ourparticipation is often related to the capitalized development effort providedby our employees. We face risks under this type of contract when we makeadvance investment in the development of the project, have an equity interestin the partnership, as well as risks associated with obligations that areentered into for completing or operating the project. In this type of project,the operating companies are assisted by a team at corporate level, who completesthe risk analysis.

·  *Framework contracts or Master Service Agreements.*Framework contracts or Master Service Agreements are service agreements thatare negotiated for a specified period of time. In a framework contract,projects may sometimes be put out to bid to a number of providers. Returnedbids include estimates by project or project components, or maximum amounts areset. Under the pressure of competition, unfavorable terms may be agreed upon,thereby producing a negative effect on our business result for a long time.However, this type of contract provides a stable source of revenue over alonger period of time.

·  *Contracts with a success fee.* Contractswith a success fee provide that we are eligible for an agreed payment that islinked to achieving agreed upon results, whether or not within a fixed timeperiod. In theory, we can receive success-based fees for each type of contractdescribed above.

Our operatingexpenses include materials, services of third parties and subcontractors,operational costs and depreciation.

·  *Materials, services of third parties andsubcontractors*. Materials, services of third parties andsubcontractors includes project-related costs of materials and services chargedby third parties including subcontractors.

18

----

·  *Operational costs*. Operational costsincludes all costs relating to employees, as well as non-project-relatedout-of-pocket expenses.

·  *Depreciation.* Depreciation includes thedepreciation of buildings, software, furniture, and fixtures.

# **Critical accounting judgments in applying ouraccounting policies**

The preparation ofour financial statements requires us to make estimates and judgments thataffect the reported amounts of assets and liabilities, revenues and expenses,and related disclosure of contingent liabilities at the date of our financialstatements. The policies that management considers to be most important to thepresentation of our financial condition and results of operations and torequire the most significant demands on management’s judgments and estimatesabout matters that are inherently uncertain are discussed below. Managementcautions that future events often vary from forecasts and that estimatesroutinely require adjustment.

*Workin progress.*  Revenue is generally recognized asservices are rendered. Revenue from fixed fee contracts is recognized on thepercentage of completion method, measured generally by estimating the status ofcompletion of the project and recognizing the related estimated percentage ofrevenue and gross profit expected from the project. 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 on additionalservices requested by clients for which a formal change order has not beenobtained when the realization is probable and the amount can be reliablyestimated. Provisions for estimated losses on contracts are recorded whenidentified. Unbilled fees, at estimated billable amounts, represent revenuerecognized for which billings have not yet been presented to customers.

*Costs.* Contract costs include direct labor costs, subcontractor costs, other directcosts and indirect costs. Our method of revenue recognition requires us toprepare estimates of the costs to complete contracts in progress. In makingsuch estimates, judgments are required to evaluate contingencies, such aspotential variances in schedule and labor and other contract costs, liabilityclaims, contract disputes or achievement of contractual performance standards.Changes in total estimated contract costs and losses, if any, are recognized inthe period they are determined.

Advanceinvestments that can be separately identified, measured reliably and areattributable to design, build, finance and operate contracts are accounted foras contract costs only when it is probable that the contract will be obtained.Advance investments in the development of a contract that do not meet thesecriteria are expensed (IAS 11.21). We determine that it is only probable that adesign, build, finance and operate contract will be obtained upon receipt of acontract signed by the client.

When a project isperformed by a partnership, IAS 27, IAS 28 or SIC 12 guidance is followed. Theconsolidated financial statements include the Company’s proportionate share ofthe contract costs for jointly controlled entities. Non-consolidated companies,in which the Company has significant influence, but not control over thefinancial and operating management, are valued using the equity method.

Furthermore, weevaluate our investments in partnership projects for potential beneficialinterest in accordance with the guidance of SIC 12. Currently, we have nodesign, build, finance and operate partnership projects identified in which weeffectively control the partnership.

*Impairment.* The carrying amounts of the assets of ARCADIS, other than work in progress anddeferred tax assets, are reviewed at each balance sheet date to determinewhether there is any indication of impairment.

For goodwill andassets that have an indefinite useful life, the recoverable amount is estimatedat each balance sheet date.

An impairment lossis recognized whenever the carrying amount of an asset or its cash-generatingunit exceeds its recoverable amount. Impairment losses are recognized in theincome statement. Impairment losses recognized in regard to cash-generatingunits are allocated first to reduce the carrying amount of any goodwill allocatedto cash-generating units and then, to reduce the carrying amount of the otherassets in the unit on a pro rata basis.

The recoverableamount is the greater of the net selling price and value in use. In assessingthe value in use, estimated future cash flows are discounted to present valueusing a discount rate that reflects current market assessments of the timevalue of money and the risks specific to the asset.

An impairment lossof goodwill cannot be reversed. Regarding other assets, an impairment loss canbe reversed if there has been a change in the estimates used to determine therecoverable amount. An impairment loss is reversed only to the 

19

----

extent that the asset’scarrying amount does not exceed the carrying amount that would have been determined,net of depreciation or amortization, if no impairment loss had been recognized.

Under US GAAPassets and liabilities acquired in a business combination are recorded at theirestimated fair values as of their acquisition date. At December 31, 2006,we had approximately € 170 million of goodwill (U.S. GAAP amount), representingthe cost of acquisitions in excess of fair values assigned to the underlyingnet assets of acquired companies. In accordance with Statement of FinancialAccounting Standards (SFAS) No. 142, “Goodwill and other intangibleassets,” goodwill and intangible assets deemed to have indefinite lives are notamortized, but are subject to annual impairment testing. The assessment ofgoodwill involves the estimation of the fair value of our geographical assets.Management completed this assessment during the fourth quarter of 2006 based onthe best information available as of the date of assessment and determined thatno impairment existed. Future events could result in impairments of goodwill orother assets.

*Accountingfor pensions.*  Under IFRS the Company’s pension plansqualify as defined contribution plans. Under U.S. GAAP, the Dutch plans qualifyas defined benefit plans. For a further explanation of this, please refer toNotes 22 and 23 in the Consolidated Financial Statements included in Item 18 ofthis annual report. Retirement benefits represent obligations that will besettled in the future and require assumptions to project benefit obligationsand fair values of plan assets. Retirement benefit accounting is intended toreflect the recognition of future benefit costs over the employee’s approximateservice period, based on the terms of the plans and the investment and fundingdecisions we make. In accounting for these retirement benefits, management isrequired to make assumptions regarding variables such as discount rate, rate ofcompensation increase, return on assets, and mortality tables. Periodicallymanagement consults with outside actuaries regarding these assumptions. Changesin these key assumptions can have a significant impact on the projected benefitobligations, funding requirements and periodic cost incurred. Our policies andkey assumptions are included in Note 22 to our Consolidated FinancialStatements.

*Provisionsfor contingent liabilities.*  By their nature, provisionsfor contingent liabilities are dependent upon estimates and assessments ofwhether the criteria for recognition have been met, including estimates as tothe outcome and the amount of the potential cost of resolution. Contingentliabilities are recognized by a charge against income when it is probable thata liability has been incurred and the amount of such liability can bereasonably estimated. The most likely amount is accrued for costs of futureliabilities that may ultimately arise when such an amount can be determined.

Contingentliabilities and provisions for restructuring, other litigation, and taxdisputes are discussed in Note 12—Provisions and in Note 13—Taxes toour Consolidated Financial Statements. The provision for restructuring is basedon an estimate of the costs of dismissal of permanent staff, taking intoaccount legal advice and the current facts and circumstances. Provisions forother litigation and tax disputes are also based on an estimate of the costs,taking into account legal advice and information currently available.

Should the actualoutcome differ from the assumptions and estimates, revisions to the estimatedprovisions would be required, which could impact our financial position andresults of operations.

*Accountingfor income taxes.*  As part of the process of preparingour consolidated financial statements, we are required to estimate income taxesin each of the jurisdictions in which we operate. This process involvesestimating actual current tax expense and temporary differences between tax andfinancial reporting. Temporary differences result in deferred tax assets andliabilities, which are included in our consolidated balance sheet. We must thenassess the likelihood that deferred tax assets will be recovered from futuretaxable income. Deferred tax assets are recognized to the extent that it ismore likely than not that all or some portion of the deferred tax assets willbe realized.

*Allowancesfor doubtful accounts.*  Allowances for doubtful accountsare maintained for estimated losses resulting from the inability of ourcustomers to make required payments. If the financial condition of customerswere to deteriorate, resulting in an impairment of their ability to makepayments, additional allowances may be required.

A more completedescription of our significant accounting policies appears in Item 18.

**Resultsof Operations**

The table belowpresents, for the periods indicated, (1) the percentage relationship thatcertain items in our Consolidated Statements of Income bear to revenue, net ofmaterials, services of third parties, and subcontractors and (2) thepercentage increase (decrease) in Euro amounts for such items from year to yearfor the two-year period ended December 31, 2006.

20

----

 
|                                                                           | ** ** | **Percentage of Revenue, net of  materials, services of third  parties, and subcontractors** | ** ** | **Percent Change** | ** ** |
|---------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                | ** ** | **2006**                                                                                                                                  | ** ** | **2005**                | ** ** | **2005 to 2006** | ** ** |
| Gross revenue                                                             |       | 147.2                                                                                                                                     |       | 142.4                   |       | 23.2 |   |
| Materials,  services of third parties and subcontractors                  |       | 47.2                                                                                                                                      |       | 42.4                    |       | 32.8 |   |
| Revenue, net of  materials, services of third parties, and subcontractors |       | 100.0                                                                                                                                     |       | 100.0                   |       | 19.1 |   |
| Operational  costs                                                        |       | 88.5                                                                                                                                      |       | 89.3                    |       | 18.0 |   |
| Depreciation                                                              |       | 2.1                                                                                                                                       |       | 2.2                     |       | 16.6 |   |
| Amortization of  identifiables                                            |       | 1.0                                                                                                                                       |       | 0.8                     |       | 38.6 |   |
| Operating income                                                          |       | 8.4                                                                                                                                       |       | 7.7                     |       | 29.6 |   |
| Financing  income/expenses net                                            |       | (0.4                                                                                                                                      | )          | (0.3                    | )          | 89.7 |   |
| Income from  operations before taxes                                      |       | 8.0                                                                                                                                       |       | 7.5                     |       | 27.5 |   |
| Taxes                                                                     |       | 2.4                                                                                                                                       |       | 2.5                     |       | 16.0 |   |
| Income of  consolidated companies from operations after taxes             |       | 5.6                                                                                                                                       |       | 5.0                     |       | 33.1 |   |
| Income from  associates                                                   |       | (0.1                                                                                                                                      | )          | 0.2                     |       | (133.1 | ) |
| Group income  from operations after taxes                                 |       | 5.5                                                                                                                                       |       | 5.2                     |       | 26.8 |   |
| Minority  interest                                                        |       | 0.2                                                                                                                                       |       | 0.5                     |       | (53.7 | ) |
| Net income                                                                |       | 5.3                                                                                                                                       |       | 4.7                     |       | 34.5 |   |

 

***Year Ended December 31, 2006 Compared to Year EndedDecember 31, 2005***

On the whole,operational results during 2006 developed favorably. Gross revenues increasedwith 23% from 2005, while net income improved with 35% from 2005. Inparticular, the environment service area produced excellent results. You shouldread our audited Consolidated Financial Statements in conjunction with thefollowing analysis.

***Gross revenue***

Gross revenue in2006 increased by 23% to € 1.233 billion, compared to € 1.001 billion in 2005.Of the total increase, 14% was from acquisitions and divestments. Theacquisitions in 2005 of AYH in the United Kingdom and BBL in the United Statescontributed significantly, while the sale in mid-2005 of our 50% participationin a Spanish firm had the largest negative effect. The currency effect waslimited. Organic growth was at 10%, well over our 5% goal. The largestcontribution to growth came from the Netherlands, the United States and Brazil,while France and United Kingdom also saw solid growth.

As a result ofvigorous expansion through acquisitions, in 2006, 42% of the gross revenue wasgenerated in the United States compared to 35% in 2005; the Netherlands contributed26% in 2006, compared to 29% in 2005. Europe excluding the Netherlandscontributed 23% in 2006, compared to 26% in 2005, and the Rest of Worldcontributed 9% in 2006, compared to 10% in 2005. Therefore, approximately halfof the gross revenue is generated from European operations and the other halffrom operations in the United States and Rest of World.

*TheNetherlands*

During 2006, grossrevenue for the Netherlands increased 12% to € 323 million. This increase wasdue to acquisition growth ( € 1.7), and organic growth ( € 36 million).

·                  Acquisitiongrowth was 1% in 2006 because of the acquisition of In Situ technologies, anenvironmental services company with complementary technology, offset bynon-recurring a book gain on divestment in 2005.

·                  Organicgrowth was 12% in 2006 because the Company was able to capitalize on rapidmarket improvement.

·                  Therewas no currency effect as the working and reporting currency for theNetherlands are the same.

*Europeexcluding the Netherlands*

In Europeexcluding the Netherlands, gross revenue increased by € 11 million,acquisitions caused an increase of € 5 million, organic growth contributed € 5million and the currency effect was € 1 million.

·                  Acquisitiongrowth was 2% in 2006 because of the addition of three smaller companies inBelgium (two in 2005 and one in 2006), the continued effect of the acquisitionof AYH Plc. in the United Kingdom in June 2005, as well as the addition ofBerkeley Consulting in that same country to AYH in 2006, and despite thedivestment of our Spanish interest in 2005 which still impacted the first twoquarters of 2006.

·                  Organicgrowth was limited to 2% in 2006 because of project delays in Poland, a phaseshift in Belgian projects leading to temporary revenue shortfalls and thedivestment of the detailed engineering business in Germany.

21

----

*The United States*

Gross revenue for the United States increased  € 169 million driven by acquisition growth (€ 134 million), organic growth ( € 43 million) and a negative currency effect (€ 8 million).

·                  Acquisitiongrowth was 39% in 2006 because of the addition of Blasland Bouck & Lee Inc.(acquired in September 2005 and the continued effect of Greystone EnvironmentalConsultants Inc. acquired in June 2005.

·                  Organic growthwas 12% in 2006 because of continued solid growth in the environmental servicearea and the positive effect of the SAFETEA legislation on the infrastructuresegment of the business, primarily in transportation. The water business alsosaw good growth.

·                  Currency effectwas 2% negative in 2006 because the U.S. dollar weakened somewhat against theeuro.

*Rest of World*

In the rest of the world, gross revenue increasedby  € 16 million, driven by strongorganic growth of  € 14 million and astrong positive currency effect of  € 6million, partly offset by a decrease in acquisition growth of  € 4 million.

·                  Acquisitiongrowth was a negative 4% in 2006 because of the earlier divestment (in June2005) of Renardet and Sauti, two companies with activities in thedonor-financed markets.

·                  Organic growthwas 15% in 2006 because of an excellent performance with solid growth in Braziland a healthy organic growth in Chile, offset by a decline in activities indonor-financed projects.

·                  Currency effectwas 6% in 2006 because of the change in value of the Chilean peso and theBrazilian real against the Euro.

***Revenue, net ofmaterials, services of third parties, and subcontractors***

The part of sales produced by our own employees,increased 19% to € 837 million in 2006, compared to € 703 million in 2005.Excluding the currency effect, growth was 19% in 2006. The contribution fromacquisitions and divestments was 13%, and the currency effect was almost zero.Organic growth totaled 6%, which is less than the growth in gross revenue, dueto, among other things, the commencement in 2006 of the DSM/Sabic facilitymanagement contract that includes a large subcontractor component.

***Operational costs***

Operational cost (staff cost and other operationalcost) increased by 18% to € 741 million compared to € 628 million in 2005. Theeffect of acquisitions and divestments was 12.3%. Organically, the increase was5.8%. This is lower than the increase in revenue, net of materials, services ofthird parties and subcontractors of 6.3%. The difference is the result ofefficiency improvements.

Personnel cost increased by 20% to € 581 millioncompared to € 485 million in 2005, while the other operational costs increased12% to € 160 million compared to € 143 million in 2005. Costs include € 5.4million for external costs related to the Sarbanes Oxley Act compliance and forthe integration of BBL. This relates to temporary extra staff hires,consultants and auditor costs. Both activities also required a significantamount of time from our staff.

For most geographical segments, the percentage ofoperational costs related to revenue, net of materials, services of thirdparties, and subcontractors decreased.

*The Netherlands*

Operational costs increased, in absolute amounts, forthe Netherlands by  € 6 million. In 2006operational costs were 90% of revenue, net of materials, services of thirdparties, and subcontractorss, compared to 91% in 2005.

·                  Restructuringmeasures which took place from 2003 to 2005 had a positive effect on bothpersonnel costs and especially other business costs relative to revenue, net ofmaterials, services of third parties, and subcontractors.

·                  The improvementin market circumstances (see Item 5.A) had a positive effect on the utilizationof staff.

*Europe excluding the Netherlands*

In Europe excluding the Netherlands, operational costsincreased by  € 19 million. Operationalcosts as percentage of revenue, net of materials, services of third parties,and subcontractors were 90% in 2006, compared to 88% in 2005.

22

----

·                  Personnel costsincreased relative to revenue, net of materials, services of third parties, andsubcontractors in 2006. Especially in Germany, Poland and Belgium revenuedevelopments were less strong (see Item 5.A) while staffing levels were notadjusted at the same rate, since the developments are expected to be temporary.

·                  Severalacquisitions and divestments resulted in a different cost and product mix,comparing 2005 and 2006.

*The United States*

Operational costs increased, in absolute amounts, forthe United States by  € 83 million.However, in 2006, operating costs were 88% of revenue, net of materials,services of third parties, and subcontractors, compared to 89% in 2005.

·                  Due toacquisitions, we had an increase in staff, which resulted in higher personnelcosts and other business costs.

·                  The utilizationof staff increased.

*Rest of World*

The increase of operational costs in the rest of theworld was  € 6 million; however, in 2006operational costs were 85% of revenue, net of materials, services of thirdparties, and subcontractors, compared to 86% in 2005. In all operations, thedecrease in other business costs relative to revenue, net of materials,services of third parties, and subcontractors was particularly noticeable,resulting from a strong focus on cost control.

***Depreciationexpenses***

Depreciation (excluding amortization) rose 16% to €17.7 million compared to € 15.2 million in 2005, primarily the result ofexpansion through acquisitions. As a percentage of revenue, net of materials,services of third parties, and subcontractors, depreciation decreased slightlyfrom 2.2% in 2005 to 2.1% in 2006. The project management and consultancycompanies that have been acquired are less capital intensive and require evenless depreciation than the other ARCADIS operating companies, thus resulting inthe decrease in depreciation.

***Amortization ofidentifiable intangible assets***

Identifiable intangible assets related to acquisitionsmust be separated from goodwill and amortized separately. For ARCADIS, thisgenerally relates to the profit in the acquired company’s backlog. These assetsare amortized over their economic lifetime (on average one to two years) basedon specific contracts. In 2006, the amortization increased to € 8.3 millioncompared to € 6.0 million in 2005 as a result of completed acquisitions.

***Operating income***

Operating income increased 30% to € 70.5 million in2006 from 54.4 million in 2005. Of this amount, € 0.6 million is related to thesale of carbon credits in Brazil. EBITA (operating income before amortizationof identifiable intangible assets) and recurring EBITA are often used tomeasure the financial performance of operations. In 2005 and 2006, thesemeasures developed as follows:
| (In Millions of Euros)        | ** ** | **2006** | ** ** | **2005** | ** ** |
|----------------------------------------------|------------|----------|------------|----------|------------|
| Operating income as  reported                |       | 70.5     |       | 54.4     |       |
| Amortization  identifiable intangible assets |       | 8.3      |       | 6.0      |       |
| EBITA                                        |       | 78.8     |       | 60.4     |       |
| Book gains from  divestments                 |       | —   |       | 2.5      |       |
| Non-operational pension  gain                |       | —   |       | 0.6      |       |
| Recurring EBITA                              |       | 78.8     |       | 57.3     |       |

 

EBITA increased 31% in 2006. On a recurring basis, thegain was 38%, totaling € 78.8 million compared to € 57.3 million in 2005. Thecurrency effect was zero. The contribution from acquisitions and divestmentswas 24%, considerably higher than the contribution to revenue, net ofmaterials, services of third parties, and subcontractors (14%). This clearlydemonstrates the positive effect of the acquisitions and divestments on themargin. Organically, EBITA increased 14%, also more than revenue, net ofmaterials, services of third parties, and subcontractors (6%). Thus, the marginalso improved organically.

***Margins***

Market conditions resulted in an increase in margin(operating income excluding amortization of identifiable intangible assets as apercentage of revenue, net of materials, services of third parties, andsubcontractors) from 8.2% in 2005 to 9.4% in 2006.

23

----

***Net financingexpenses***

Net financing expenses increased to € 3.5 million, anincrease of € 1.7 million compared to the € 1.8 million in 2005. This increaseis mainly the result of investments in acquisitions, which are financed withloans. Using financial derivatives, currency and interest rate risks on theseloans are hedged. On balance, this effect on financing charges was a positive €1.1 million compared to a positive effect of € 1.7 million in 2005. Excludingthis effect, financing charges were € 4.6 million compared to € 3.6 million in2005. This includes a non-recurring interest gain of € 0.5 million in 2006. In2006, group financing for the majority of the operating companies wasintroduced, optimizing the financing structure. This also has a positive effecton financing expenses.

***Tax rate***

The 30.2% tax rate in 2006 was slightly lower than the32.2% rate in 2005. A reduction in the Dutch corporate tax rate that wasenacted in 2006 and became effective on January 1, 2007 has a favorable effecton the tax rate resulting in a lowering of the deferred tax reserve by € 1.0million, which was added to the 2006 net income. As a result, the deferred taxliability in respect of the pension asset recorded under US GAAP decreased by €3.1 million and this resulted in a corresponding one time tax benefit.

In the United States, we may qualify for a tax creditfor expenditures on research and development. From 1999 to 2001, a total of$5.4 million was included in the income statement. We are awaiting a finalsettlement with the U.S. tax authorities regarding activities that qualify forthis tax credit. No credits have been included in the results since 2002 andnone will be included until this issue is resolved. No change occurred in thissituation during 2006.

***Contribution ofnon-consolidated companies; minority interest***

A loss of € 0.5 million was realized from associatedcompanies in 2006. In 2005, the contribution was € 1.4 million. The decline isthe result of delays in project awards and new sales contracts for a number ofenergy projects in Brazil.

Minority interest – that part of the profit that flowsback to the co-owners of the less-than-100%-owned ARCADIS companies – declinedconsiderably to € 1.5 million from € 3.2 million in 2005. To a large extent,this was the result of developments in Brazil, where ARCADIS owns 50.01% of theshares of ARCADIS Logos. The profit from our own activities rose strongly, butthis was insufficient to offset the decline resulting from non-consolidatedenergy projects. In addition, results declined in other companies in whichARCADIS does not have a 100% ownership (e.g., in Poland and the CzechRepublic), while elsewhere interests were expanded (the United Kingdom andGermany) or divested (Spain).

***Net income***

Net income was € 44.9 million, or € 2.22 per share,against € 33.4 million, or € 1.65 per share in 2005. Net income from operations(before amortization and non-operational items) was € 50.0 million, 50% morethan the € 33.4 million in 2005. Per share, this is € 2.47 against € 1.65 in2005.

***Number ofoutstanding shares***

The number of outstanding shares at year-end 2006 was20.3 million, almost equal to the number at year-end 2005. To cover obligationsrelated to option plans, approximately 495,000 shares were repurchased, whileapproximately 530,000 shares that had been purchased earlier were used for theexercising of options by employees. No new shares were issued. The averagenumber of outstanding shares (used to calculate net income per share) was 20.2million compared to 20.3 million in 2005. For more information on the number ofoutstanding shares and on options and share purchase plans, please refer toNote 11 of Item 18 of this report.

***Dividends***

Management proposed, and on May 16, 2007 at theAnnual General Meeting of Shareholders, our shareholders will be asked toapprove a dividend of € 1.00 per share over 2006 from the € 0.66 per sharedistributed over 2005, an increase of over 50%. This equals more than 40% ofnet income from operations. ARCADIS’ dividend policy is to recommend payment ofan annual dividend ranging from 30% to 40% of net income from operations and isdesigned to provide shareholders with an attractive dividend yield, whileproviding the Company sufficient resources to finance growth through, among otherthings, acquisitions. The dividend will be paid out in cash.

24

----

**Non-GAAP Financial Measures**

As noted above, our financial results are primarilypresented in this annual report under IFRS. However, certain of the financialinformation presented are not in accordance with IFRS, which we refer to as “non-GAAP”.The reconciliation of these non-GAAP measures to IFRS measures is presented inthe table below. The following is the description of the non-GAAP measures:

ARCADIShas used the following non-GAAP measures in this Form 20-F: (1) operatingincome excluding amortization of identifiable intangible assets (which we alsorefer to as EBITA); and (2) net income from operations, for which we some timesalso exclude currency effects. Although these measures are not required orexpressly permitted by IFRS, we use them because we believe they provide auseful basis for comparison of result of operations from previous years. Wealso believe these measures promote maximum transparency with regard to thefinancial effects of our ongoing business operations. In addition, ourmanagement uses these measures when determining our strategy and setting ourfinancial goals.

ARCADISalso uses the measures revenues excluding exchange rate differences (which havethe same meanings as currency effects) and net income excluding currencyeffects because we operate internationally, and the effects of exchange ratedifferences on our revenues and net income do not necessarily reflect ourperformance.

ARCADISalso uses the measure revenue, net of materials, services of third parties, andsubcontractors, being the amount of gross revenue minus the cost of materials,services of third parties and subcontractors that are project related. Thebalance of this amount, which is called revenue, net of materials, services ofthird parties, and subcontractors, is the revenue for that part of the projectsthat is produced by the employees of ARCADIS. Revenue, net of materials,services of third parties, and subcontractors provides a useful basis forcomparison of results with previous years and can be related to the operationalcosts. When operational costs remain consistent, revenue, net of materials,services of third parties, and subcontractors is the most important determinantof ARCADIS’ net income.

Setforth below are reconciliations of these non-GAAP measures to net income underIFRS.

**Reconciliation of**

**Grossrevenue to Revenue, net of materials, services of third parties, andsubcontractors**
| **(In Thousands of Euros)**                                    | ** ** | **2006**      | ** ** | **2005**      | ** ** | **2004**    | ** ** |
|-------------------------------------------------------------------------------|------------|---------------|------------|---------------|------------|-------------|------------|
| ** **                                                                    | ** ** | ** **    | ** ** | ** **    | ** ** | ** **  | ** ** |
| **Gross  revenue**                                                            | ** ** | **1,233,043** | ** ** | **1,001,099** | ** ** | **900,781** | ** ** |
| Materials,  services of third parties and subcontractors                      |       | 395,583       |       | 297,849       |       | 268,244     |       |
|                                                                          |       |          |       |          |       |        |       |
| **Revenue, net of materials,  services of third parties, and subcontractors** | ** ** | **837,460**   | ** ** | **703,250**   | ** ** | **632,537** | ** ** |

** **

25

----

**Reconciliation of**

**RecurringOperating Income Excluding Amortization of Intangibles to Net Income**
| (In Thousands of Euros)                                           | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|----------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Net  income (Equity holders of the Company)**                                  | ** ** | **44,936** | ** ** | **33,414** | ** ** | **22,176** | ** ** |
| Minority  interest                                                               |       | 1,469      |       | 3,170      |       | 1,927      |       |
| (Income)/loss  from associates                                                   |       | 458        |       | (1,382     | )          | (2,448     | )          |
| Taxes on income                                                                  |       | 20,119     |       | 17,342     |       | 10,400     |       |
| Financing  income/(expense) net                                                  |       | 3,499      |       | 1,844      |       | 3,464      |       |
|                                                                             |       |       |       |       |       |       |       |
| Operating income                                                                 |       | 70,481     |       | 54,388     |       | 35,519     |       |
| Amortization of  identifiable intangibles                                        |       | 8,270      |       | 5,967      |       | 376        |       |
| **Operating  income excluding amortization of intangibles (or EBITA)**           | ** ** | **78,751** | ** ** | **60,355** | ** ** | **35,895** | ** ** |
| **Book  gains on divestments**                                                   | ** ** | **—** |       | 2,486      |       | —     |       |
| **Non-operational  pension gain**                                                | ** ** | **—** |       | 575        |       | —     |       |
| **Restructuring  charges**                                                       | ** ** | **—** |       | —     |       | 4,417      |       |
| **Recurring operating income  excluding amortization of intangibles (or EBITA)** | ** ** | **78,751** | ** ** | **57,294** | ** ** | **40,312** | ** ** |

 

**Reconciliation of**

**NetIncome from Operations, Excluding Currency Effects to Net Income**
| (In Thousands of Euros)                     | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                       |       |       |       |       |       |       |       |
| **Net income  (Equity holders of the Company)**            | ** ** | **44,936** | ** ** | **33,414** | ** ** | **22,176** | ** ** |
| Pensions effects  (1)                                      |       | —     |       | (394       | )          | (667       | )          |
| Effects of  financial instruments                          |       | (802       | )          | (1,213     | )          | —     |       |
| Non-recurring  income net of tax (2)                       |       | —     |       | (2,486     | )          | 1,366      |       |
| Income taxes                                               |       | —     |       | —     |       | 519        |       |
| Amortization                                               |       | 5,901      |       | 4,045      |       | 376        |       |
| **Net  income from operations**                            | ** ** | **50,035** | ** ** | **33,366** | ** ** | **23,770** | ** ** |
| Currency effects  (3)                                      |       | 346        |       | (448       | )          | 689        |       |
| **Net income from operations  excluding currency effects** | ** ** | **50,381** | ** ** | **32,918** | ** ** | **24,459** | ** ** |

 

----

(1)  Pensioneffects relate to the following: the change from defined benefit to definedcontribution plans under IFRS, changes in Dutch pension legislation, and thepledge by the Lovinklaan Foundation related to early retirement of ARCADISemployees. The amounts shown do not concern total pension amounts and costs, butthe changes related to the above mentioned items.

(2)  Non-recurringincome net of tax relate to gain on sale of investments for 2005 andrestructuring charges for 2004.

(3)  Currencyeffects are calculated by multiplying net income from operations for a fiscalyear, excluding income from acquisitions or divestments, by difference betweenthe exchanges rates of that fiscal year and the exchange rates for prior fiscalyear.

In addition to the non-GAAP financial measuresdiscussed above, we also present information in this annual report regardingincreases or decreases in gross revenues, EBITA and net income resulting fromorganic changes and from acquisitions or divestments. We also refer to organicgrowth being operational or non-operational and excluding currencyeffects.  Set forth below is a furtherexplanation of these terms and a reconciliation of these measures to the IFRSmeasures used in their calculation.

•  *Organic. ** ***Weuse the term “organic” in this annual report to refer to the internal growth ofactivities in subsidiaries that have been consolidated for more than one year.Internal growth in companies that have been consolidated for one year or lessis accounted for as “growth through acquisitions”.

26

----

•  *Currency effect. ** ***Asstated above, the term “currency effect” refers to the effect on our results ofchanges in the value of currencies against the Euro for the production andreporting of quarterly and annual results. As the costs and revenues for ouroperating companies are customarily in the same currency, the currency effectis a translation effect. Currency effects are calculated by multiplying netincome for a fiscal year, excluding income from acquisitions or divestments, bydifference between the exchanges rates of that fiscal year and the exchangerates for prior fiscal year.

•  *Acquisitions/Divestments*.  Wedescribe revenue developments from “acquisitions/divestments” to refer torevenue changes resulting from the purchase or sale of companies and theinternal growth in those companies after they have been consolidated withinARCADIS for one year or less. After that period, internal growth in these unitsis accounted for as organic growth.

•  *Non-operational*.  “Non-operational” items refer to items thatare not related to the actual operations of our business and that affect thecomparability of results. In 2005 these items included book gains and losses onthe sale of businesses, as well as the effect of additional payments in pensionplans.

•  *Net income from operations*.  “Netincome from operations” refers to net income excluding the amortization ofidentifiable intangible fixed assets and the costs related to pension effects.

**Originof Developments in Revenue and Income**
|                                                                          | ** **   | **2006**     | ** **   | **2005**     | ** **   |
|--------------------------------------------------------------------------|--------------|--------------|--------------|--------------|--------------|
| ***Gross  revenues***                                                    |         |         |         |         |         |
| Total gross revenues                                                     |         | 1,233.0      |         | 1,001.1      |         |
| Increase from preceding year                                             |         | 231.9        |         | 100.3        |         |
|                                                                     |         |         |         |         |         |
| *Breakdown  of increases*                                                |         |         |         |         |         |
| Acquisitions/divestments                                                 |         | 137.3        |         | 46.2         |         |
| Currency effect                                                          |         | (1.1         | )            | 10.5         |         |
| Book gains on sale                                                       |         | (2.5         | )            | (3.6         | )            |
|                                                                     |         |         |         |         |         |
| Organic growth                                                           |         | 98.2         |         | 47.2         |         |
|                                                                     |         |         |         |         |         |
| ***Operating  income excluding amortization of intangibles (or EBITA)*** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Total                                                                    |         | 78,751       |         | 60,355       |         |
| (Decrease)/increase from preceding year                                  |         | 18,396       |         | 24,460       |         |
|                                                                     |         |         |         |         |         |
| *Breakdown  of (decreases)/increases*                                    |         |         |         |         |         |
| Acquisitions/divestments                                                 |         | 13,590       |         | 9,326        |         |
| Currency effect                                                          |         | (1           | )            | 1,183        |         |
|                                                                     |         |         |         |         |         |
| Organic growth                                                           |         | 4,807        |         | 13,951       |         |
| Non-operational                                                          |         | (3,062       | )            | 6,278        |         |
| Operational                                                              |         | 7,869        |         | 7,673        |         |
|                                                                     |         |         |         |         |         |
| ***Net  income from operations***                                        |         |         |         |         |         |
| Net income from operations                                               |         | 50,035       |         | 33,366       |         |
| Increase/(decrease) from preceding year                                  |         | 16,669       |         | 9,596        |         |
|                                                                     |         |         |         |         |         |
| *Breakdown  of increases/(decreases)*                                    |         |         |         |         |         |
| Acquisitions/divestments                                                 |         | 7,638        |         | 3,302        |         |
| Currency effect                                                          |         | (345         | )            | 448          |         |
|                                                                     |         |         |         |         |         |
| Organic growth                                                           |         | 9,376        |         | 5,846        |         |
| Non-operational                                                          |         | (2,880       | )            | 4,246        |         |
| Operational                                                              |         | 12,256       |         | 1,600        |         |

 

27

----

**B. *Liquidityand capital resources.***

Working capital, consisting of work in progressamounting to € 151.2 million (see Note 8 to our ConsolidatedFinancial Statements) plus trade receivables amounting to € 219.7 million (seeNote 8 to our Consolidated Financial Statements) minus billing in excessof costs amounting to € 111.9 million and minus accounts payable amounting to €87.1 million (see Consolidated Balance Sheet) increased slightly by € 6million. As a percentage of gross revenue,amounting to € 1,233.0 million,(measured at the level of the fourth quarter times four), working capitaldeclined from 12.7% in 2005 to 12.5% in 2006. In the opinion of management, ourworking capital is sufficient to meet our present requirements.

Net cash provided by operating activities was € 86.4million for the year ended December 31, 2006, compared to net cashprovided by operating activities of € 66.8 million for the year endedDecember 31, 2005. The increase was primarily the result of growth inoperating income for the Company.

Net cash used in investing activities was €68.9 million for the year ended December 31, 2006, compared to netcash used in investing activities of € 85.1 million for the year endedDecember 31, 2005. The net cash flow activity related to investingactivities consisted primarily of investments in the acquisition ofconsolidated companies, investments in property, plant and equipment andinvestments in non-consolidated companies.

Net cash provided by financing activities was € 12.7million for the year ended December 31, 2006, compared to net cashprovided by financing activities of € 42.1 million for the year endedDecember 31, 2005. The net cash flow activity related to financingactivities consisted primarily of purchase of own shares and payment ofdividend, offset by new long-term debt and changes in short term borrowings.

Cash at year-end 2006 was € 101 million, comparedto € 74 million in 2005. Net debt (cash and cash equivalents minusinterest-bearing debt) at year-end 2006 was € 45 million against net debt at year-end2005 of € 52 million. As a result of favorable cash flow, net debtimproved despite the investments in new acquisitions. Interest-bearing debtalso includes the after-payment obligations to former shareholders of acquiredcompanies, totaling € 21 million.

At year-end 2006, a total of € 196 million inshort-term credit facilities was available, compared to € 182 million atyear-end 2005. As of December 31, 2006, € 22 million of thesefacilities were used. In addition, banks have pledged performance bonds andother guarantees related to projects for a total of € 41 million. Aperformance bond is a guarantee that we give to our client related to ourperformance under a contract. This secures the client with an income, in casewe do not perform according to the stipulations in the contract for which theperformance bond is issued. If, however, we fully meet all the requirements ofthe contract, the bond will be canceled. At year-end 2006, our long-term debttotaled € 119 million. See Notes 14 and 15 to our Consolidated FinancialStatements for a more detailed discussion of our long-term and short-termcredit facilities. Current liabilities rose from € 304 million in 2005 to€ 370 million in 2006. Of this increase, € 23 million was a result of shorterbilling cycles.

ARCADIShas entered into agreements with a number of banks for financing facilities.This involved the refinancing and centralization of nearly all group debt andbonding facilities in 2006. The new centralized finance structure consists ofthree components, all of which have been closed at market rates.

A term loan facility for $120 million was entered into****with a consortium of four banks, in orderto retire the bridge loan that was taken in relation to the acquisition of BBLat the end of September 2005 and to finance the acquisition of PinnacleOne inNovember 2006. Half of this loan matures after five years, the other half afterseven years.

Uncommitted multicurrency facilities of € 100 millionhave been entered into with****aconsortium of four banks****whichwill be used for financing of working capital.

An uncommitted bonding facility of € 50 million hasbeen entered into with ABN AMRO bank.

**Other Balance Sheet Items**

Our total assets grew from € 650 million atyear-end 2005 to € 736 million at year-end 2006, mainly because of theorganic growth of our business (€ 54 million), acquisitions (€ 60 million) andcurrency effects (negative € 28 million). As a result of acquisitions completedin 2006, goodwill rose to € 139 million, compared to € 116 million in 2005. Theidentifiable assets of acquisitions are capitalized separately, and at year-end2006, this totaled € 10 million. This generally relates to the value of the yetto be realized profit in the backlog of the acquired companies.

28

----

Shareholders’ equity rose by € 12.7 million to € 188.9million at year-end 2006 as follows:
| (In Millions of Euros)                          | ** ** | **Effect** | ** ** |
|----------------------------------------------------------------|------------|------------|------------|
| Net income for  2006                                           |       | €     | 44.9       |   |
| Dividend payment  for 2005                                     |       | (13.4      | )          |
| Currency  exchange rate differences                            |       | (14.1      | )          |
| Exercising of  options                                         |       | 4.6        |       |
| Temporary  purchase of shares to cover option plan obligations |       | (17.6      | )          |
| Option costs (1)                                               |       | 1.8        |       |
| Fiscal effects  related to option plans                        |       | 6.4        |       |
|                                                           |       | €     | 12.7       |   |

 

----

(1) For more informationon option costs, please refer to Note 17 in our Consolidated FinancialStatements.

Concerning our balance sheet ratios, solvencycalculated as total equity amounting to € 200.7 million as a percentage oftotal assets amounting to € 736.5 million at year-end 2006 was 27.3%,compared to 28.9% at year-end 2005. Return on average invested capital (totalequity, adjusted for depreciation of goodwill, plus net interest-bearing debt)was 20.3%, compared to 20.6% in 2005.

**Capital Expenditures**

Net investments in tangible fixed assets, excludingacquisitions, were € 18 million compared to € 15 million in 2005, equivalent tothe level of depreciation. The investments primarily relate to communicationsand computer equipment. The expansion of the company through acquisitionsrequired considerable investment for a total amount of € 53 million. Net ofcash this was € 49.1 million, including € 3.0 million that constitutes awithholding for a possible performance-based after payment to formershareholders of acquired companies. Goodwill amounted to € 30 million, whilethe value of identifiable intangible assets was € 11 million. In addition, € 7million was invested in non-consolidated companies and other financial fixedassets compared to € 5.9 million in 2005. We had no divestments of consolidatedcompanies in 2006, compared to after tax yields of € 8.5 million in 2005.

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

We have spent approximately 1% of our consolidatedgross revenue on research and development projects during each of the lastthree fiscal years. We expect that, consistent with past experience, most ofour technological advances will be made in response to specific needs andopportunities. We have benefited from our understanding of soil and waterdynamics and from technological and knowledge advances realized in connectionwith specific analysis, planning, development, construction and treatmentprojects that we have conducted for our clients.

Our research specifically has resulted in thedevelopment of several field instruments for hydrocarbon detection that we usefor soil and groundwater investigation. Research continues to improve thesequick “no-lab” analysis methods. For environmental and ecological reports, datamanagement and detailed engineering, we undertake research in implementing andadjusting computer assisted design and software for geographical informationsystems.

We also have a group of research and developmentspecialists who are involved in the performance of all remediation projects.This group of specialists continuously maintains and improves our corecompetence in the fields of separations technology and understanding ofparticle size distribution in soils, treatment of surface water andcontaminated groundwater, and biological degradation of hydrocarbons andbiowaste.

**D.  *Trend information***.

We announced positive developments for the firstquarter of 2007. Gross revenue increased 16% to € 332 million. Organic growthwas strong at 14%. All three service areas contributed to this strong growth.Most notably in environment, where the 20% organic growth underlined ARCADISposition in that market. Geographically, the United States and Brazil were themost prominent contributors to growth in the period. Favorable developmentscontinued in the Netherlands, while growth clearly increased in the remainingEuropean countries. Net income from operations was 35% higher at € 12.8million, mainly as a result of activity growth, further margin improvement andthe sale of carbon credits in Brazil.

The high level of organic growth and the furtherimprovement of margins demonstrate that our strategy to concentrate onactivities with more growth potential, higher in the value chain, is yieldingresults.

29

----

**Keyfinancial measures**
|                                                                                               | ** ** | **First quarter** | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|------------------------|------------|------------|------------|
| **(Amounts in millions of euros unless otherwise stated)** | ** ** | **2007**               | ** ** | **2006**   | ** ** | **% Change** | ** ** |
| Gross revenue                                                                                 |       | 332                    |       | 287        |       | 16 | % |
| Operating income  excluding amortization of intangibles (or EBITA) (1)                        |       | 22.6                   |       | 16.1       |       | 40 | % |
| Net income                                                                                    |       | 11.6                   |       | 9.0        |       | 28 | % |
| Net income per  share (2)                                                                     |       | 0.57                   |       | 0.45       |       | 27 | % |
| Net income from  operations (3)                                                               |       | 12.8                   |       | 9.4        |       | 35 | % |
| Net income from  operations per share (2)(3)                                                  |       | 0.63                   |       | 0.47       |       | 34 | % |

 

----

(1)          Operating incomeexcluding amortization identifiable intangible assets is calculated as follows;
|                                                                                 | ** ** | **2007** | ** ** | **2006** | ** ** |
|---------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Operating income  as reported                                                   |       | 20.8     |       | 14.5     |       |
| Amortization  identifiable intangible assets                                    |       | 1.8      |       | 1.6      |       |
| Operating income  excluding amortization identifiable intangible assets (EBITA) |       | 22.6     |       | 16.1     |       |

 

(2)          Based on 20.4 millionshares outstanding in 2007 compared to 20.2 million in 2006.

(3)          Net income fromoperations is calculated as follows:
|                                   | ** ** | **2007** | ** ** | **2006** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|
| Net income                        |       | 11.6     |       | 9.0      |       |
| Effects of  financial instruments |       | (0.0     | )          | (0.6     | )          |
| Amortization                      |       | 1.2      |       | 1.0      |       |
| Net income from  operations       |       | 12.8     |       | 9.4      |       |

 

## **Analysis**

 The gross revenue growth of 16% was negativelyimpacted by the decline of the U.S. dollar and to a lesser extent the Brazilianreal. Excluding currency effects, gross revenue rose 20%. The contribution fromacquisitions was 6%, while strong organic growth of 14% originated from allregions. The contribution from the United States was the largest with organicgrowth at a level of 15% followed by South America, where both Brazil and Chilesaw strong activity growth. In the Netherlands, organic growth continued at agood level of 7%, while in other European countries organic growth improved to9%.

EBITA rose 40%.Acquisitions contributed 14%; the currency effect was 7% negative. The organicgrowth was 33%. This growth includes a contribution of € 1.9 million from thesale of carbon credits, from the biogas plant at the Bandeirantes solid wastedump site in Brazil. Excluding this contribution, EBITA organically increasedby 21%. The margin, (EBITA as a percentage of revenue, net of materials,services of third parties, and subcontractors) improved to 8.8% (excludingcarbon credits) against 7.9% in the same period last year.

Net income fromoperations rose 35%. This is somewhat less than the increase in EBITA,particularly as a result of the associated companies and minority interest. Theassociated companies delivered a slightly negative contribution as a result ofdifficulties in several Brazilian energy projects. Minority interest rose as aresult of favorable operational results in Brazil, where ARCADIS owns slightlymore than 50%.

**Developmentsby service area**

*Thefigures mentioned below relate to gross revenue developments, and discuss thecomparison between the first three months of 2007 and the same period lastyear.*

·                  ***Infrastructure***

Gross revenue rose 11%. Acquisitions contributed 3%, the currencyeffect was negative at 3%. Organic growth amounted to 11%. In Brazil, againstrong activity growth was achieved as a result of a high level of investmentin both the public and private sectors.  Despitecurrent pressures affecting land development, organic growth in the UnitedStates was at a good

30

----

level. Gross revenue from the New Orleans contract was still limited.In the Netherlands, growth continued at slightly lower levels, while in Belgiumand France activities also increased.

·                  ***Environment***

Gross revenue increased 15%. The contribution fromacquisitions of 2% mainly came from the acquisition of Ecolas in Belgium.Because many environmental activities take place in the United States, thedecline of the dollar had a large negative effect of 8%. Organic growthamounted to more than 20%, of which 2% as a result of the sale of carboncredits. The strongest contribution came from the United States. As a result ofadvanced technology, special products such as GRiP®, synergies with BBL andservices to multinationals, the Company’s market share is increasing. AlsoBrazil and to a lesser extent Germany, the United Kingdom and Polandcontributed to the increase.

·                  ***Facilities***

Gross revenue increased by 30%, of which 20% was a result ofacquisitions. This included PinnacleOne in the United States and a number ofsmaller acquisitions in the Netherlands, Belgium and Germany. The currencyeffect was 1% positive. Organic growth of 9% mainly came from expansion inproject management and consultancy services in the Netherlands, Germany and theUnited Kingdom, partly as a result of the favorable real estate investmentclimate.

**Outlook**

The favorableeconomy, the increase of Public Private Partnerships (PPP) initiatives, thegrowing attention for integrated planning and the need to tackle trafficcongestion drives increased investment in infrastructure. As a result of theincreased attention for environment and climate change, the environmentalmarket is growing. The growing backlog as a result of our focus on key clientsand the ensuing expansion of environmental services for (international)companies offer an excellent basis for growth. In the facilities market we seea strong internationalization of real estate investment, offering excellentopportunities for project management and other high level services.

The outlook forfull year 2007 remains positive. Market conditions are favorable and offerample opportunity for growth, among other things through synergy. In addition,expansion through acquisitions is high on our agenda. The priority lies withthe United States and the United Kingdom and with activities higher in thevalue chain. Barring unforeseen circumstances we expect continued growth inrevenues and income for 2007.

**E.  *Off-balance sheet arrangements.***

Managementbelieves there are no transactions, arrangements and other relationships withunconsolidated entities that have or are reasonably likely to have a current orfuture effect on our financial condition, changes in financial condition,revenues, expenses, results of operations, liquidity, capital expenditures orcapital resources that is material to investors in our common shares.

**F.  *Tabular disclosure of contractual obligations.***

The following table setsforth, as of December 31, 2006, our commitments and contractualobligations for the following five years and thereafter. The long-term debtobligations are our cash debt service obligations. Operating lease obligationsare the future minimum rental payments required under the operating leases thathave initial or remaining non-cancelable lease terms in excess of one year asof December 31, 2006.
| ** **                                        | ** ** | ** **              | ** ** | **Payments due by period** | ** ** |
|---------------------------------------------------|------------|-------------------------|------------|-------------------------------------------|------------|
| **Contractual obligations**                  | ** ** | **Total**               | ** ** | **Less than  1 year**           | ** ** | **1-3  years** | ** ** | **3-5  years** | ** ** | **More than  5 years** | ** ** |
| ** **                                        | ** ** | **(in thousands)** | ** ** |
|                                              |       |                    |       |                                      |       |   |   |   |   |   |   |
| Operating lease  obligations                      |       | 160,505                 |       | 34,935                                    |       | 61,297 |   | 40,550 |   | 23,723 |   |
| Capital (finance) lease  obligations              |       | 780                     |       | 198                                       |       | 538 |   | 30 |   | 14 |   |
| Purchase obligations                              |       | 31,562                  |       | 10,782                                    |       | 19,907 |   | 873 |   | — |   |
| Pension plan  obligations                         |       | 109,600                 |       | 14,000                                    |       | 33,200 |   | 40,900 |   | 21,500 |   |
| Interest                                          |       | 21,697                  |       | 4,621                                     |       | 8,323 |   | 6,175 |   | 2,578 |   |
| Other long-term  liabilities reflected under IFRS |       | 99,307                  |       | 1,381                                     |       | 3,689 |   | 58,589 |   | 35,648 |   |
| **Total**                                         |       | 423,451                 |       | 65,917                                    |       | 126,954 |   | 147,117 |   | 83,463 |   |

 

In the tableabove, for purposes of estimating the amount of future funding of our pensionplan obligations, we have assumed (1) an annual growth in the salary-level of2.5%, (2) a fixed level of the total pension premium of 18.5% on total

31

----

salaries, and (3) agradual increase in the total staff covered by the pension fund, to 2,500 in2012 from 1,751 in 2007. The Total amount covers the period through December31, 2012. The pension plan obligation in the “More than 5 years” column is theobligation for 2012 only. We believe that cash generated from operations,together with our existing financing arrangements will be sufficient to meetour working capital and capital expenditure requirements for 2006.

Set forth below isa reconciliation of the amounts set forth in the contractual obligations tableabove to the amounts recorded in the balance sheet.
| Contractual obligation table  total                                                   |   | 423,451  |   |
|---------------------------------------------------------------------------------------|--------|----------|--------|
| Operating lease  obligations                                                          |   | (160,505 | )      |
| Pension plan  obligations                                                             |   | (109,600 | )      |
| Interest                                                                              |   | (21,697  | )      |
| Total amount of  contractual obligations in the balance sheet                         |   | 131,649  |   |
|                                                                                  |   |     |   |
| Long-term  portion of long-term debt                                                  |   | 119,286  |   |
| Current portion  of long-term debt (in balance sheet current liabilities)             |   | 1,580    |   |
| Total long-term  debt                                                                 |   | 120,866  |   |
| Purchase obligations  (related to acquisitions, in balance sheet current liabilities) |   | 10,783   |   |

 

**ITEM 6.  DIRECTORS, SENIORMANAGEMENT AND EMPLOYEES**

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

None of themembers of our Supervisory Board and Executive Board, Corporate Directors, andSenior Management Committee have any family relationships between and amongsteach other. Additionally, none of the following individuals have entered intoany arrangement or understanding with a third party, pursuant to which theperson was selected for his respective position.

**SupervisoryBoard**

The following tablepresents information about our Supervisory Board members following our AnnualGeneral Meeting of Shareholders, which was held on May 16, 2007:
| **Name**                             | ** ** | **Year of   Birth** | ** ** | **Years Served  In Office** | ** ** | **Year Term   Expires** | ** ** | **Position**  | ** ** |
|--------------------------------------|------------|-------------------------------|------------|---------------------------------------|------------|-----------------------------------|------------|---------------|------------|
| Rijnhard W.F. van Tets  (a), (b)     |       | 1947                          |       | 5                                     |       | 2010                              |       | Chairman      |       |
| Carlos Espinosa de los  Monteros (b) |       | 1944                          |       | 9                                     |       | 2010                              |       | Vice-Chairman |       |
| Thomas M. Cohn (a)                   |       | 1942                          |       | 3                                     |       | 2008                              |       | Member        |       |
| George R.  Nethercutt, Jr. (a)  |       | 1944                          |       | 2                                     |       | 2009                              |       | Member        |       |
| Jan Peelen (b)                       |       | 1940                          |       | 7                                     |       | 2008                              |       | Member        |       |
| Gerrit Ybema (b)                     |       | 1945                          |       | 4                                     |       | 2007                              |       | Member        |       |

 

----

(a)                                  Memberof the Audit Committee

(b)                                 Memberof the Selection and Remuneration Committee

**Jhr.Drs. Rijnhard W.F. van Tets** was appointed to ourSupervisory Board in 2002 and currently serves as our Chairman. He also servesas a member of our Supervisory Board’s Audit Committee and as chairman of theSelection and Remuneration Committee. As of April 1, 2007 Mr. Van Tetsserves as a partner of Laaken Asset Management N.V. He served as an advisor tothe Executive Board of ABN AMRO Bank till April 1, 2007, after serving as amember of the Executive Board from 1988 until 2001. He also served in a varietyof positions while at ABN AMRO Bank, including: Chairman of the InvestmentBanking Division from 1990 to 2001, Senior Executive Vice President from 1986to 1988, and Executive Vice President of the Corporate Banking Division from1983 to 1986. From 1977 until 1983, Mr. van Tets served as Vice Presidentof Corporate Finance with First Boston Corporation. He currently serves as anon-executive board member of the following entities: Euronext N.V., EuronextAmsterdam N.V., Equity Trust SARL, International Flavors & FragrancesI.F.F. (the Netherlands) Holding B.V., Wegener N.V., and Investment CommitteePension Fund Building Industry. Mr. van Tets earned a Masters in Law andBusiness Administration from the University of Leiden.

**Mr. CarlosEspinosa de los Monteros** was appointed to our SupervisoryBoard in 1998. He also serves as a member of our Supervisory Board’s Selectionand Remuneration Committee. Mr. Espinosa currently serves as Chairman andChief Executive Officer of Daimler Chrysler Espana Holding. He served asPresident of IBERIA S.A. from 1983 until 1985. From

32

----

1979 until 1983,Mr. Espinosa served President of the National Institute for Industry (INI)in Spain. Mr. Espinosa currently serves as a non-executive board member ofAcciona S.A. and as Deputy Chairman of Inditex S.A. (Zara).

**Mr. ThomasM. Cohn** was appointed to our Supervisory Board in 2004. Healso serves as chairman of our Supervisory Board’s Audit Committee. From 1994until 2003, Mr. Cohn served as Chairman of the Executive Board of SiemensNederland N.V. and Chief Executive Officer of the Siemens Group in theNetherlands. Mr. Cohn retired from the Siemens Nederland NV ExecutiveBoard in 2003. From 1987 until 1994, Mr. Cohn was the Chief FinancialOfficer and an Executive Board member of Siemens Nederland N.V. From 1967 until1987, he held various positions, such as director of Economic Affairs, withSiemens Belgium. He started his career in 1964 with Siemens AG in Germany.Mr. Cohn also serves as a non-executive board member of the followingentities: Getronics Holdings B.V., Corus Nederland B.V., KEMA NV, AdvisoryBoard Fortis Bank Rotterdam, Recontec B.V., Pereira Van Vliet &Partners (Chairman), Monitoring Board University of Technology Delft, AdvisoryBoard of Comsec Consulting group, Advisory board Oracle Nederland B.V.,Foundation Techniques and Marketing-STEM and Senior Advisor ControlGuard.

**Mr. GeorgeR. Nethercutt, Jr.** was appointed to our SupervisoryBoard in 2005. Mr. Nethercutt also serves as a member of our Audit Committee.He currently serves as a board member of the following entities: Hecla MiningCompany, The Washington Policy Center, Juvenile Diabetes FoundationInternational and Permanent Joint Board on Defense. From 1994 untilJanuary 2005, Mr. Nethercutt served as a member of the United StatesHouse of Representatives. He served on the Appropriations Committee and theDefense, Interior and Agriculture Subcommittees. From 1977 to 1994,Mr. Nethercutt practiced law in the private sector, focusing on corporate,estate and probate and adoption law.

**Drs. JanPeelen** was appointed to our Supervisory Board in 2000. Healso serves as a member of our Supervisory Board’s Selection and RemunerationCommittee. Mr. Peelen retired from employment with the Unilever group ofcompanies in 2000. From 1987 until 2000, Mr. Peelen was a member of theExecutive Board of Unilever N.V. and Unilever PLC. From 1996 till 2000 he alsoserved as a member of the Executive Committee of Unilever, as the director ofHuman Resources. Mr. Peelen has served in several international managementpositions within Unilever or its subsidiaries since 1966. Mr. Peelen alsoserves as a non-executive board member of the following entities: Albron B.V.,Royal Friesland Foods N.V., Buhrmann N.V., VVAA Group B.V. (Chairman), andNational Regie-Orgaan Genomics.

**Drs. GerritYbema** was appointed to our Supervisory Board in 2003. He alsoserves as a member of our Supervisory Board’s Selection and RemunerationCommittee. From 1998 until 2002, Mr. Ybema served as the Secretary ofState for Economic Affairs in the Netherlands. He has served in a variety ofgovernmental positions at the local and state level from 1989 until 1998,including positions with the city of Enschede and the province of Friesland. Hecurrently serves as a non-executive board member of the following entities:NUON, CORDIS Europe, Monitoring Board Zorggroep Noorderbreedte, ROC FriesePoort, Consultative Organ Frisian Language and Culture, Fair Wear Foundation,Foundation Frisian Harbour Days and Guarantee Committee Stichting CertificeringVBO Makelaars. Mr. Ybema earned an economics degree, with a specializationin economic relations from Rijksuniversiteit Groningen.

**ExecutiveBoard**

The followingtable presents information about our current Executive Board members:
| Name                 | ** ** | **Year of   Birth** | ** ** | **Years Served   In Office** | ** ** | **Position** | ** ** |
|----------------------|------------|-------------------------------|------------|---------------------------------------------|------------|--------------|------------|
| Harrie L.J. Noy      |       | 1951                          |       | 12                                          |       | Chairman     |       |
| C. Michiel Jaski     |       | 1959                          |       | 6                                           |       | Member       |       |
| Friedrich  Schneider |       | 1962                          |       | 1                                           |       | Member       |       |
| Ben A. van der Klift |       | 1959                          |       | 1                                           |       | Member       |       |

 

**HarrieL.J. Noy** was appointed to our Executive Board in 1994. Hecurrently serves as Chairman of our Executive Board and has held this positionsince 2000. He also serves as a member of the ARCADIS N.V. Priority Foundation.Prior to joining our Executive Board, Mr. Noy served as Managing Directorof Heidemij Advies B.V. from 1990 until 1994. He joined the company in 1975.Mr. Noy also serves as a non-executive board member of the followingentities: Foundation PSIB, Advisory Board Euronext, VEUO (The Dutch Associationof Listed Companies), Foundation Management Studies (SMS), VNO-NCW, High LevelGroup European Construction and Technology Platform, Supervisory BoardUniversity of Arnhem-Nijmegen, Supervisory Board NV Dutch Gas TransportServices BV and Supervisory Board Foundation Vilente.

**C.Michiel Jaski** was appointed to our Executive Board in 2000.He has responsibility for the operations in Europe and also for strengtheningthe environmental business of the company. He also serves as a member of theARCADIS N.V. Priority Foundation. Prior to joining us, he served in a varietyof positions at Polyesters Plastics Packaging Shell Chemicals Ltd.,including: Global Vice President from 1999 to 2000, Global Marketing &Sales Director from 1998 to 1999, Business Unit Manager Europa ShellChemicals Ltd. from 1992 to 1998, Sales Manager Benelux Shell NederlandChemie

33

----

from 1990 to 1992, andProduct Manager Shell Nederland Chemie from 1988 to 1990. From 1986 until 1987,Mr. Jaski served as the Project Manager of Information Technology PhilipsUK and Philips Belgium. Mr. Jaski also serves as a non-executive boardmember of the following entities: Chairman of the Foundation Delta (primaryeducation), IUCN Netherlands Committee, Leaders for Nature , Dutch-GermanChamber of Commerce, Foundation Toekomstbeeld der Techniek and University FundDelft.

**FriedrichSchneider** was appointed to our Executive Board in May 2006.He has responsibility for operations in North and South America and Asia andalso for strengthening the infrastructure business of the company. He alsoserves as a member of the ARCADIS N.V. Priority Foundation. Prior to joiningus, Mr. Schneider served on the Executive Board of Rheinhold & Mahla AG, anindustrial services company, in Munich from 2004 to 2005 and was responsiblefor their Western Europe and Technologies Divisions. From 2001 until 2004, Mr.Schneider served as a managing director of Bilfinger Berger AG, first in theInternational Division (2001-2002) and then in the Civil Division (2002-2004).Mr. Schneider has also served in various capacities at Bentec GMBH Drilling andOilfield Systems from 1999 to2001, Preussag AG from 1996 to 1999, PreussagInternational GMBH from 1993 to 1996, Metallgesellschaft Services from 1990 to1993. Mr. Schneider received a Masters of Art (Economics) at the StateUniversity of New York in Albany and a PhD in Economics from the European UniversityInstitute, Florence.

**BenA. van der Klift** was appointed to our Executive Board in May2006. He also serves as our Chief Financial Officer. Mr. Van der Klift joinedus in January 2005 as Corporate Director Finance. Prior to joining us, heserved as Financial Director of PRC Bouwcentrum BV in Bodegraven from 1997to2005. From 1991 to 1997, Mr. Van der Klift served as Controller of DHV Milieuen Infrastructuur and DHV AIB. He began his career at De Rotterdamsche DroogdokMaatschappij in Rotterdam from 1987 to 1991. Mr. Van der Klift received adegree in Social Geography at the University in Utrecht, a Master of BusinessAdministration at the Erasmus University in Rotterdam and he took courses forcorporate controllers at ‘Vrije Universiteit Amsterdam’ **.**

**CorporateDirectors**

The followingtable presents information about our current Corporate Directors:
| **Name**       | ** ** | **Year of  Birth** | ** ** | **Years Served  In Office** | ** ** | **Position**                                    | ** ** |
|----------------|------------|-------------------------|------------|---------------------------------------|------------|-------------------------------------------------|------------|
| Hans van Dord  |       | 1944                    |       | 6                                     |       | Corporate  Director of Business Development     |       |
| Tom W. Haak    |       | 1956                    |       | —                                |       | Corporate  Director of Human Resources          |       |
| Craig E. Eisen |       | 1951                    |       | 5                                     |       | Corporate Director of  Mergers and Acquisitions |       |

 

**Hansvan Dord** was appointed Corporate Director of BusinessDevelopment in 2000. Prior to that appointment he has served in various seniormanagement positions in different ARCADIS operating companies. Mr. VanDord has been with our company since 1985. Prior to joining us, Mr. VanDord worked on urban and rural planning and design projects on behalf of theDutch government from 1972 to 1985.

**Tom.W. Haak** was appointed as Corporate Director of HumanResources on October 1, 2006. He succeeded Mr. Wim G.M. Rupert who retired onJanuary 1, 2007. Since 1998, Mr. Haak was responsible for Human ResourcesManagement of Aon. In his last position he worked as Head Global TalentManagement for Aon Corporate in the Netherlands. Before joining Aon, Mr. Haakworked as manager Human Resources Development at KPMG and at Philips in severalpositions in the area of personnel and organization.

**CraigE. Eisen** was appointed as Corporate Director of Mergers andAcquisitions in 2002. Prior to joining us, he held the position of VicePresident Corporate Programs and was a member of the Executive Board of TetraTech, Inc. from 1994 to 2002. From 1981 to 1996, Mr. Eisen alsoserved in a number of positions at Hydro-Search Inc., including asPresident from 1991 to 1997, as Vice President of Operations from 1988 to 1991and as a member of the Board of Directors from 1988 to 1994. Prior professionalpositions include Principal Hydrogeologist at the Water Resources ResearchInstitute, University of Wyoming from 1979 to 1981 and Hydrogeologist/ResidentEngineer for the U.S. Agency for International Development—Kenya from 1978 to1979.

**SeniorManagement Committee**

Thefollowing table presents information about our current Senior ManagementCommittee members:
| **Name**            | ** ** | **Year of   Birth** | ** ** | **Years Served  In Office** | ** ** | **Position**                         | ** ** |
|---------------------|------------|-------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| Steven B. Blake     |       | 1956                          |       | 3.5                                   |       | CEO  ARCADIS G&M                 |       |
| Hernán Bezamat |       | 1954                          |       | 0                                     |       | CEO  ARCADIS Geotecnica              |       |
| Douwe J. Kras       |       | 1948                          |       | 3                                     |       | Managing  Director ARCADIS Nederland |       |
| Yann Leblais        |       | 1952                          |       | 7                                     |       | CEO  ARCADIS FCI                     |       |
| Antonio J.O. Rocha  |       | 1941                          |       | 8                                     |       | CEO  ARCADIS Logos                   |       |
| Ludo Smans          |       | 1947                          |       | 11                                    |       | Managing  Director ARCADIS Belgium   |       |
| Marek Adamek        |       | 1960                          |       | 3                                     |       | Managing  Director ARCADIS Polska    |       |
| Leo van der Kemp    |       | 1956                          |       | 3.5                                   |       | Managing  Director PRC               |       |
| Peter J. Vince      |       | 1958                          |       | 2                                     |       | Managing  Director of AYH;           |       |
| Robert K. Goldman   |       | 1957                          |       | 6                                     |       | CEO  Blasland, Bouck & Lee, Inc. |       |
| Ulrich Behr         |       | 1952                          |       | 2                                     |       | CEO ARCADIS Deutschland  GmbH        |       |

 

34

----

**StevenB. Blake** was appointed to our Senior Management Committee in1995. From 1999 until 2003, Mr. Blake served as a member of our ExecutiveBoard, from which he requested to step down in November 2003. Since thatdate, he serves as the Chief Executive Officer of ARCADIS US, Inc., whichcontains our U.S. operations, a position he previously held. He has served in anumber of positions at Geraghty & Miller, including: President from1994 to 1996, Vice President Programs & Strategic Operations from 1991to 1994, and Director of Hydrocarbon Services Division from 1989 to 1991.Following our acquisition of Geraghty & Miller in 1994, Mr. Blakeserved as Chief Executive Officer of ARCADIS Geraghty &Miller, Inc., from 1996 until 1999. Mr. Blake also serves as anon-executive board member of the following entities: Construction IndustryRoundtable, the U.S. National Water Well Association and the Federal RelationsCommittee (CIRT).

**HernánBezamat,** age 52, chemical engineer, was appointed as ChiefExecutive Officer of ARCADIS Geotécnica S.A. in February 2007. Prior tojoining ARCADIS he worked with Shell for 26 years and is very knowledgeableabout multinational companies, an important and growing client group forARCADIS. At Shell he was, amongst other things, responsible for the sale ofShell’s chemical and oil products to the mining industry.

**DouweJ. Kras** joined the company in May 2004, and has beenappointed CEO of ARCADIS Nederland B.V. effective as of July 2004. Until2004, Mr. Kras was CEO of PRC B.V., a consultancy firm that we acquired in 2003and that specializes in project management. He worked with PRC B.V. for25 years. Mr. Kras is member of several Supervisory and/or AdvisoryBoards: Unica Installatiegroep BV, Sint Franciscus Hospital Rotterdam, MozaïekWonen in Gouda, Blauwhoed BV, Concerthal De Doelen in Rotterdam, RegieraadBouw, and the Trustfund of the Rijksacademy Amsterdam.

**YannLeblais** was appointed to our senior Management Committee in2002. He currently serves as CEO in ARCADIS FCI and has held this positionsince 2000. He also serves as CEO of the operating company ARCADIS ESG(formerly named EEG SIMECSOL) and has held this position since 1995. He joinedSIMECSOL in 1979 and served in a number of positions, including: Executive VicePresident from 1990 to 1995 and Head of the Geotechnical & Civil Divisionfrom 1985 to 1990. Yann Leblais is currently Chairman of the Board of EFCA, theEuropean Federantion of Engineering Consultancy Associations, and also servesin key positions in both French and International Tunneling Associations.

**AntonioJoão Oliveira Rocha** was appointed to the Senior ManagementCommittee in 2000. He currently serves as Chief Executive Officer of ARCADISLogos Ltda., our holding company in Brazil, and has held the leading positionsince February 2006. Between 1999 and 2006, he served as the Chief ExecutiveOfficer of Logos Engenharia S.A., our leading engineering Brazilian company.Prior to becoming Logos’ CEO, from 1987 to 1999 Mr. Rocha served asTechnical Director, and from 1977 to 1986 he served as Project Manager atLogos. From 1986 to 1987 he worked as deputy secretary in the PlanningSecretariat of São Paulo State Government. Before joining Logos he worked atSão Paulo Metro Company and Rhodia, Brazilian subsidiary of French RhônePoulenc. Mr. Rocha worked at two Brazilian universities from 1966 until1972.

**LudoSmans** was appointed to our Senior Management Committee in1999. Founder and President of the former Gedas, which company was acquired byHeidemij Group in 1995. He has held the position of Chief Executive Officer ofARCADIS Belgium since 1995. Prior to founding Gedas in 1981, Mr. Smansserved in a number of positions at VEHA Radiators Herentals (Rijn ScheldeVerolme) from 1971, including as Administrative Director from 1976 to 1981.

**MarekAdamek** was appointed the Managing Director of ARCADIS Polskain 2005. From 1991 to 2004, he served as the Chief Executive Officer ofEkokonrem, an environmental company which he established and was acquired bythe Heidemij Group in 1994. Prior to 1991, Mr. Adamek worked in a geologicalstate-on company, as hydrogeologist and Project Manager.

**Leovan der Kemp** was appointed the CEO of PRC in 2004, He has abackground in public services. From 1985 to 1992 he was involved in the housingof Dutch Universities, University Hospitals and other educational facilities.Until 1995 he was responsible for decentralization-operations of the Dutchministry of Education and Science. From 1995 until 2004 he was director of thedivision Projectmanagement and Consultancy of PRC B.V.

35

----

**PeterJ. Vince** was appointed to the Senior Management Committee ofARCADIS in 2006. Mr. Vince is Managing Director of AYH plc, a cost and projectmanagement consultancy business that was acquired by ARCADIS in June 2005. MrVince joined AYH in 1994 and has been a director since 1999 taking over therole of managing director in 2003. Prior to AYH, Mr. Vince has undertakenemployment in both consultancy and contracting organizations spanning to date a30 year career in the construction and property industry.

**RobertK. Goldman** was appointed to the Senior Management Committeein 2006, when he joined the company with the acquisition of Blasland, Bouck& Lee, Inc. (BBL). In 2006, Mr. Goldman served as CEO and Chairman ofthe Board of BBL, and as from 1 January 2007, Mr. Goldman will serve asDirector of the Global Environmental Program for ARCADIS.  Mr. Goldmanjoined BBL in 1984, and held positions of increasing responsibilityat that firm until the firm’s acquisition by ARCADIS in 2005. Mr. Goldman isalso active in a leadership role in several community organizations in New YorkState.

**UlrichBehr** was appointed CEO of ARCADIS Germany in November 2005.Ulrich Behr is an engineer who worked as board member of HL-Technik AG, Germany’slargest engineering practice for building services until 1998. From then until2002 he was the managing director of Josef Gartner GmbH, Germany’s number onecurtain wall contractor. During this time, the company was merged withPermasteelisa spa, the world’s largest façade contractor. From 2003 to October2005 he was the CEO of Bug-Alutechnic GmbH, Austria’s most prominent façadecontractor. Ulrich Behr is a frequent lecturer at several universities inGermany.

**B.  *Compensation.***

**Descriptionof Compensation**

The aggregatecompensation, including directors’ fees and bonuses, paid or accrued to all ofthe members of our Supervisory Board and Executive Board as a group (10persons) during the fiscal year ended December 31, 2006, was € 1.5****million. The aggregate amount set aside oraccrued to provide pension, retirement and similar benefits for all of themembers of our Supervisory Board and Executive Board as a group during thefiscal year ended December 31, 2006, was € 0.15****million. The aggregate number of restricted share units andconditional stock options granted to the Executive Board in 2006 was 27,000shares and 65,000 stock options*. Please see Item 6.E for a description of ourvarious equity plans and details of the options and restricted share unitsgranted under those plans.

*Numbers based ongranting of 100% of the reference numbers, with maximum extension to 150%. (seenote 17, share-based compensation)

**SupervisoryBoard Members**

Compensation formembers of our Supervisory Board is determined by the General Meeting ofShareholders. For 2006, each of our Supervisory Board members was paid a baserate of compensation equal to € 25,000, while the Chairman’s compensation was €37,500. In addition, the members of the Supervisory Board receive annualcompensation for expenses, which for the Chairman is € 3,000, for Dutch membersis € 2,000, for the Spanish member € 10,000 and for the U.S. member $15,000 peryear. Supervisory Board members who serve on our Audit Committee and ourSelection and Remuneration Committee are paid annually € 5,000 per committee.Our Supervisory Board members are not eligible to receive ARCADIS N.V. sharesor stock options.

The followingtable details the amount of compensation paid to each of our Supervisory Boardmembers in 2006.
| Name                             | ** ** | **Compensation**        | ** ** |
|----------------------------------|------------|-------------------------|------------|
| ** **                       | ** ** | **(in thousands)** | ** ** |
| Rijnhard W.F.  van Tets          |       | €                  | 49         |   |
| Ross A. Webber*                  |       | 15                      |       |
| Thomas M. Cohn                   |       | 30                      |       |
| Carlos Espinosa  de los Monteros |       | 30                      |       |
| George R.  Nethercutt            |       | 28                      |       |
| Jan Peelen                       |       | 30                      |       |
| Gerrit Ybema                     |       | 31                      |       |
|                                  |            |                         |            |  |

 

----

* Mr. Webber stepped down on May 17, 2006.

**ExecutiveBoard**

The compensationof members of our Executive Board is determined by the Supervisory Board basedon recommendations of our Selection and Remuneration Committee. Our policy isto compensate our senior executives at market rates while considering our sizeand characteristics. The goal of our compensation scheme is to provide ourExecutive Board members with short-term and long-term incentives, so that theirinterests are aligned with those of our shareholders. A new

36

----

remuneration policy waspresented to and approved by our shareholders at the General Meeting ofShareholders on May 11, 2005. For 2006, our compensation packages includethe following components:

•  *Fixed salaries.* The fixed portion of theoverall compensation package is adjusted annually by the Supervisory Boardbased on recommendations from the Selection and Remuneration Committee. In2006, the fixed portion paid to our Executive Board members was increased by5%, which includes an annual adjustment based on general market trends andcompany-specific factors.

•  *Short term flexible remuneration.*Underour policy adopted in 2005, the annual short-term variable bonuses are linkedto the achievement of certain financial and non-financial goals. The short-termvariable bonus can very from 0% - 60% of the executives fixed salary. Thefinancial and non-financial goals are set annually by the Supervisory Board. Itis expected that financial goals will determine 75% of the bonus and 25% willbe determined by non-financial goals.

•  *Long-term flexible remuneration.*Thelong-term variable remuneration consists of performance-related rights toacquire ARCADIS shares, such as options, appreciation rights and restrictedshare units.**Executive Boardmembers will receive, on an annual basis, 12,500 to a maximum of 15,000 optionsand 5,000 to a maximum of 7,000 restricted share units. The chairman of theExecutive Board will receive 25,000 options and 10,000 restricted share units.Options and restricted share units are granted on a conditional basis and vestdepending on the achievement of certain performance measures. Members of ourExecutive Board are granted options and restricted share units by theSupervisory Board based on the recommendations of the Selection andRemuneration Committee. The aggregate number of restricted share units andstock options granted to the Executive Board in 2006 was 27,000 shares and65,000 stock options*.

*** ****All numbers ofrestricted share units and options mentioned are based on granting of 100% ofthe reference numbers. A varying number of actual shares will be earned from 0%to 150% of the target award, depending on actual performance results.

•  *Compensations and other fringe benefits.*Members of our Executive Board receive reimbursement for expenses and otherfringe benefits customary in the industry, such as a company car.

•  *Pensions.* As of January 1, 2004, ourpension plan was changed to a defined contribution plan. The premium paid forthe members of our Executive Board is based on the goal of achieving a targetpayment equal to what would have been received under our pension plan prior toits conversion to a defined contribution plan. During 2006 the company paid an amount of € 157,000 to the pension fundto match Executive Board member contributions.

The followingtable details the amount of compensation paid to each of our Executive Boardmembers in 2006. Please see Item 6.E for detailed information regarding theexercise price and expiration date of the options.
| Name                      | ** ** | **Fixed Salary*** | ** ** | **Bonus*** | ** ** | **Pension  Premium*** | ** ** | **Options  Granted**** | ** ** | **Restricted  Share  units**** | ** ** |
|---------------------------|------------|------------------------|------------|------------|------------|-----------------------|------------|------------------------|------------|--------------------------------|------------|
| Harrie L.J. Noy           |       | €                 | 356        |       | €     | 219                   |       | €                 | 76         |                           | 25,000     |   | 10,000 |   |
| C. Michiel Jaski          |       | €                 | 266        |       | €     | 159                   |       | €                 | 42         |                           | 15,000     |   | 7,000 |   |
| Friedrich M.T.  Schneider |       | €                 | 137        |       | €     | 145                   |       | €                 | 22         |                           | 12,500     |   | 5,000 |   |
| Ben A. van der Klift      |       | €                 | 168        |       | €     | 153                   |       | €                 | 17         |                           | 12,500     |   | 5,000 |   |

 

----

* in thousands

** number of options andrestricted share units mentioned are based on granting of 100% of the referencenumbers. A varying number of actual options/shares will be earned, from 0% to150% of the target award, depending on actual performance results.

***C.  Boardpractices***

Thelength of each director’s and officer’s term in office, if applicable, isdescribed above in Section A. Consistent with the Dutch Code on CorporateGovernance, the new members of the Executive Board, Messrs. Schneider and Vander Klift, have been appointed for a maximum period of four years and may bere-appointed for a term of not more than four years. Also consistent with theCode, the maximum remuneration payable to a new Executive Board members in theevent of dismissal is equal to one year’s salary. The other two members of theExecutive board Noy and Jaski that were both appointed in 2000 have employmentcontracts with an unlimited duration. These employment agreements do notprovide for benefits or other compensation upon the termination of employment.In case of a dismissal a remuneration payable will be decided, based upon thelegal position, the duration of the employment and the cause of dismissal.

37

----

**AuditCommittee**

Our SupervisoryBoard Audit Committee is responsible for reviewing and monitoring our financialstatements and internal accounting procedures, approving the scope and terms ofaudit services to be provided by our independent auditor and monitoring theservices provided by our independent auditor. Our Audit Committee reviews allperiodic financial reports and conducts separate meetings with management, andthe independent auditors to review the accuracy of such reports. OurSupervisory Board adopted our Audit Committee Charter and established the AuditCommittee in November 2002, and our Audit Committee held its first meetingin January 2003. Our Audit Committee oversaw the implementation of IFRS infiscal 2005 and SOX 404 in 2006.

For the year endedDecember 31, 2006, Mr. Cohn, Mr. van Tets, Mr. Webber andMr. Nethercutt served as members of the Audit Committee. On May 17, 2006, Mr.Nethercutt joined the Audit Committee while Mr. Webber stepped down. Eachperson who served as a member of the Audit Committee during 2006 qualified asan independent member of the Audit Committee as defined by the Nasdaq StockMarket and the U.S. Securities and Exchange Commission. Mr. Cohn served asthe Chairman of the Audit Committee during 2006 and will continue to serve asChairman during 2007. Our Audit Committee has one member, Mr. van Tets,who qualifies as an “audit committee financial expert” as defined by the U.S.Securities and Exchange Commission. In May 17, 2006, the Supervisory Board’sIntegrity Committee was integrated into the Audit Committee.

**Selectionand Remuneration Committee**

Our SupervisoryBoard Selection and Remuneration Committee is charged with selecting andnominating candidates for appointment to the Supervisory Board and theExecutive Board. In addition, this committee advises the Supervisory Board onthe following matters: the size and composition of our Supervisory Board,compensation of the members of our Executive Board, the remuneration policy ofour Senior Management Committee, our option plan policy, and the award ofoptions and shares under existing share option plans.

For the year endedDecember 31, 2006, Mr. van Tets, Mr. Espinosa, Mr. Peelen,and Mr. Ybema served as members of the Selection and RemunerationCommittee, and Mr. van Tets serves as Chairman. The Selection andRemuneration Committee has its own charter which is placed on the internetsite.

**D.  *Employees***.

As ofDecember 31, 2006, we had 10,418 employees, compared to 9,143 at the endof 2005 and 9,638 at the end of 2004.

As ofDecember 31, 2006, the geographic breakdown of our employees was asfollows:
| **Region**                        | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Netherlands                       |       | 2,587    |       | 2,389    |       | 2,346    |       |
| Europe excluding  the Netherlands |       | 3,044    |       | 2,751    |       | 4,000    |       |
| United States                     |       | 3,557    |       | 3,098    |       | 2,222    |       |
| Rest of World                     |       | 1,230    |       | 905      |       | 1,070    |       |

 

These numbersrepresent employees who are on the ARCADIS payroll. Including temporary andother staff, capacity at year-end 2006 totaled 11,533 employees compared to10,101 in 2005.

A small minorityof our employees are members of a union. The relationship between managementand the labor unions is good.

**E.  *Share ownership.***

**CapitalStock**

The followingtable discloses, as of December 31, 2006, interests held in our sharecapital by the members of our Supervisory Board and our Executive Board whoserved during 2006:

38

----

 
| Name                             | ** ** | **Number of   Shares (1)** | ** ** | **Percentage of   Outstanding   Capital** | ** ** |
|----------------------------------|------------|-------------------------------------------|------------|----------------------------------------------------------|------------|
| Rijnhard W.F.  van Tets          |       | —                                    |       | —                                                   |       |
| Ross A. Webber  **               |       | 130                                       |       |                                                     | *          |
| Th. M. (Thomas)  Cohn            |       | —                                    |       | —                                                   |       |
| Carlos Espinosa  de los Monteros |       | —                                    |       | —                                                   |       |
| J. (Jan) Peelen                  |       | —                                    |       | —                                                   |       |
| Gerrit Ybema                     |       | —                                    |       | —                                                   |       |
| George R.  Nethercutt            |       | —                                    |       | —                                                   |       |
| Harrie L.J. Noy                  |       | 37,305                                    |       |                                                     | *          |
| C. Michiel Jaski                 |       | 1,870                                     |       |                                                     | *          |
| Friedrich M.T.  Schneider        |       | —                                    |       |                                                     |       |
| Ben A. van der Klift             |       | 699                                       |       |                                                     | *          |

 

----

*                                         Lessthan 1%

**                                  Mr.Webber stepped down from his Supervisory function on May 17, 2006

The members of ourmanagement hold our common shares and have no greater rights than thoseprovided to non-management holders of our shares.

**RestrictedShare Units ***

The restrictedshare units are granted conditionally, and vest depending on the achievement ofcertain performance measures and other terms and conditions as set in advanceby the Supervisory Board. Vesting of such conditional, performance-basedrestricted share units will take place three years after the granting date. Thefollowing table discloses, as of December 31, 2006, restricted share units heldby members of our Executive Board.
| Name                      | ** ** | **December 31, 2005** | ** ** | **December 31, 2006** | ** ** |
|---------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Harrie L.J. Noy           |       | 10,000                          |       | 20,000                          |       |
| C. Michiel Jaski          |       | 7,000                           |       | 14,000                          |       |
| Ben A. van der  Klift     |       | —                          |       | 5,000                           |       |
| Friedrich M.T.  Schneider |       | —                          |       | 5,000                           |       |

 

----

* Amounts based ongranting of 100% of the reference numbers. A varying number of actual shareswill be earned, from 0% to 150% of the target award, depending on actualperformance results.

The members of ourSupervisory Board held no restricted share units as of December 31, 2006.

**StockOptions**

Theoptions are granted conditionally, and vest depending on the achievement ofcertain performance measures and other term and conditions as set in advance bythe Supervisory Board. Vesting of such conditional, performance-based optionswill take place three years after the granting date.

The followingtable discloses, as of December 31, 2006, stock options held by members ofour Executive Board:
| **Name**                  | ** ** | **Option  Plan** | ** ** | **Grant  Year** | ** ** | **Number  Granted** | ** ** | **Exercise  Price** | ** ** | **2006  Exercises** | ** ** | **Number  Outstanding** | ** ** | **Expiration  Date** | ** ** |
|---------------------------|------------|------------------|------------|-----------------|------------|---------------------|------------|---------------------|------------|---------------------|------------|-------------------------|------------|----------------------|------------|
| Harrie L.J. Noy           |       | 2001             |       | 2001            |       | 30,000              |       | €              | 9.20       |                | 30,000     |                    | 0          |                 | 05-22-2011 |   |
|                      |       |             |       | 2002            |       | 15,000              |       | €              | 10.79      |                | —     |                    | 15,000     |                 | 05-15-2012 |   |
|                      |       |             |       | 2003            |       | 17,500              |       | €              | 8.93       |                | —     |                    | 17.500     |                 | 05-13-2013 |   |
|                      |       | 2005             |       | 2005            |       | 25,000              | *          | €              | 17.94      |                | —     |                    | 25,000     |                 | 05-10-2015 |   |
|                      |       |             |       | 2006            |       | 25,000              | *          | €              | 37.13      |                |       |                    | 25,000     |                 | 05-18-2016 |   |
|                      |       |             |       |            |       |                |       |                |       |                |       |                    |       |                 |       |
| C. Michiel Jaski          |       | 2001             |       | 2002            |       | 10,000              |       | €              | 10.79      |                | 10,000     |                    | 0          |                 | 05-15-2012 |   |
|                      |       |             |       | 2003            |       | 14,000              |       | €              | 8.93       |                | —     |                    | 14,000     |                 | 05-13-2013 |   |
|                      |       | 2005             |       | 2005            |       | 15,000              | *          | €              | 17.94      |                | —     |                    | 15,000     |                 | 05-10-2015 |   |
|                      |       |             |       | 2006            |       | 15,000              | *          | €              | 37.13      |                | —     |                    | 15,000     |                 | 05-18-2016 |   |
|                      |       |             |       |            |       |                |       |                |       |                |       |                    |       |                 |       |
| Friedrich M.T.  Schneider |       | 2005             |       | 2006            |       | 12,500              | *          | €              | 37.13      |                | —     |                    | 12,500     |                 | 05-18-2016 |   |
|                      |       |             |       |            |       |                |       |                |       |                |       |                    |       |                 |       |
| Ben A. van der  Klift     |       | 2001             |       | 2003            |       | 12,285              |       | €              | 8.50       |                | 4,000      |                    | 8,285      |                 | 10-16-2013 |   |
|                      |       |             |       | 2005            |       | 9,000               |       | €              | 17.94      |                | —     |                    | 9,000      |                 | 05-10-2015 |   |
|                      |       | 2005             |       | 2006            |       | 12,500              | *          | €              | 37.13      |                | —     |                    | 12,500     |                 | 05-18-2016 |   |

 

39

----

----

* The number shown asgranted is based on granting 100% of the potential number the Executive Boardmember is eligible for under his employment arrangement.

The members of ourSupervisory Board held no stock options as of December 31, 2006.

A description of ourvarious stock option plans can be found in Note 13 of our consolidatedfinancial statements and is incorporated herein.

**ITEM 7.  MAJOR SHAREHOLDERS ANDRELATED PARTY TRANSACTIONS**

**A.  Major shareholders.**

**CommonShares**

We are not directlyor indirectly owned or controlled by another corporation or a governmentalentity. The total number of outstanding common shares as of February 28,2007 is 20,645,615. Of our total number of outstanding shares, 1,144,292are traded on the Nasdaq National Market. The number of record holders in theUnited States as of February 28, 2007, is 121.

The followingtable lists any person/entity who has notified us that he is the owner of morethan five percent of our outstanding common shares as of February 28, 2007.These shareholders do not receive any preferential voting rights.
| **Identity of Person or Group**                                 | ** ** | **Percent of  Class** | ** ** |
|-------------------------------------------------------------------------------------|------------|----------------------------|------------|
| Delta  Deelnemingen Fonds                                                           |       | 5.3                        | %          |
| Fortis N.V.                                                                         |       | 6.1                        |       |
| Koninklijke  Nederlandsche Heidemaatschappij (a)                                    |       | 5.2                        |       |
| Lovinklaan  Foundation (b)                                                          |       | 20.2                       |       |
| Members of our  Executive Board, Supervisory Board and other Executive Officers (c) |       |                       | *          |

 

----

*              Less than 1%.

(a)           Koninklijke NederlandscheHeidemaatschappij (KNHM), established in 1888 and the initial predesessor ofARCADIS N.V., is an independent non-profit association dedicated toenvironmental awareness and education. KNHM is governed by a board of trusteescomposed of 12 members. ARCADIS N.V. has the right to nominate one boardmember.

(b)           The Lovinklaan Foundation currentlyhas five directors. The directors are elected by and from our Dutch staffmembers. None of the directors are members of our Supervisory Board orExecutive Board. The Lovinklaan Foundation has agreed not to dispose of orpledge 4,000,000 shares of our common shares that it holds without the priorapproval of the holder of the ARCADIS Priority Shares (the ARCADIS N.V.Priority Foundation). Lovinklaan Foundation funds the ARCADIS N.V. 2002Employee Stock Purchase Plan, which is currently operational in theNetherlands, Belgium, Germany, France and the United States. In 2007 theARCADIS N.V. 2002 Employee Stock Purchase Plan will also be introduced toemployees in our UK subsidiaries.

(c)           Certain members of our ExecutiveBoard, our Corporate Directors and Senior Management Committee own our commonshares. The number of shares listed only reflects those shares owned directly.

In 2006, DeltaDeelnemingen Fonds reported it had acquired 5.33% of our shares. In 2006, KNHMbrought down its ownership from 6.2% to 5.19% in pursuit of portfoliodiversification. In 2006, Fortis N.V. reduced its holdings in ARCADIS from 6.6%to 6.11% at year-end In 2003, Smoorenburg B.V. reported that it had acquired a5.08% position in our outstanding stock, but it reduced its holdings to 3.1% in2005. In 2004,****First Eagle Fundsreported that it had acquired a 10.2% position in

40

----

our outstanding stock,but during 2005 it reduced its holdings in ARCADIS to 4.9%, while theLovinklaan Foundation reported that it had reduced its position to 20.2% fromour outstanding stock.

**PriorityShares**

All 200 of ourpriority shares are issued in 1987 and are held by the ARCADIS N.V. PriorityFoundation, which has 20 directors. The special statutory rights under ARCADISN.V. Articles of Association regarding these priority shares is decision makingrelated to: The issuance, acquisition and disposal of shares in the company,amendments to the Articles of Association, the dissolution of the company andthe filing for bankruptcy, the entry into or termination of long-termcooperative ventures of substantial significance, and investments for an amountequal to or more than 25% of ARCADIS N.V. shareholders equity. To take action,the affirmative vote of 12 of the directors is required. Seven of the directorsare members of our Supervisory Board, three are members of our Executive Board,and ten are ARCADIS employees who have been elected to serve as directors ofthe Bellevue Foundation (a foundation representing our international staffmembers). ARCADIS N.V. Priority Foundation has committed not to dispose of thepriority shares except in the event of dissolution, which is an event that mustbe approved by the directors.

**CumulativePreferred Shares**

In 1995 theARCADIS N.V. Preferred Stock Foundation was established. The foundation has asits objective the protection and promotion of the interests of ARCADIS and itsaffiliated companies and all parties involved, particularly to protect ARCADISfrom any hostile takeover attempts by another entity. The cumulative preferredshares will only be issued to the ARCADIS N.V. Preferred Stock Foundation inthe event that ARCADIS is threatened by a hostile takeover. In order to achievethis, the foundation has been granted the right to acquire our cumulativepreferred shares up to a maximum equal to the number of outstanding sharesissued at the date in question. Additionally, our Executive Board, under priorapproval of our Supervisory Board, has the right to issue the same number ofpreferred shares to the foundation.

The board of thisfoundation consists of four persons who all qualify as independent according toDutch regulations, to be appointed by our Executive Board. At the end of 2006no cumulative preferred shares were outstanding.

**CumulativeFinancing Preferred Shares**

Our Articles ofAssociation authorize the issuance of cumulative financing preferred stock. Asof December 31, 2006, no cumulative financing preferred stock have beenissued.

**Changein Control**

We do not know ofany arrangements, other than those referred to above, which may result in ourchange of control.

**B.  *Related party transactions and agreements with shareholders.***

There have been nomaterial transactions during our most recent fiscal year, nor are therepresently any proposed material transactions to which we or any of our subsidiariesis a party and in which any member of our Supervisory Board or Executive Boardor any relative or spouse thereof had or will have a direct or indirectmaterial interest.

Intercompanytransactions, balances and unrealized gains on transactions between groupcompanies are eliminated on consolidation and are therefore not disclosed.

In 2006, ARCADISwas not a participant in any transaction or loan with other parties who hold atleast ten percent of the shares in ARCADIS N.V.

OnDecember 30, 2002, the Foundation Pension Fund ARCADIS received a €5.0 million subordinated loan from the Lovinklaan Foundation, a 20%shareholder. The interest rate for 2006 was 3.78%. The loan was granted toprovide additional equity to the ARCADIS Pension Fund Foundation the reservesof which had decreased due to the decreased value of its investments in thestock market. The loan matures on December 30, 2007.

At the end of2005, the Lovinklaan Foundation made a capital contribution of € 6.5 million tothe company, who on in turn made a one-time donation of € 9.5 million (whichwas the effect of the € 6.5 capital contribution after taxes) to the FoundationPension Fund ARCADIS for Dutch employees to compensate employees forlegislative changes negatively impacting the early retirement plan.

41

----

The Articles ofAssociation of the Lovinklaan Foundation stipulate that it board needs priorapproval of the ARCADIS N.V. Priority Foundation for any decisions concerningthe disposal or pledge of ARCADIS N.V. shares held by the foundation, or totransfer them as a security or otherwise encumber those shares.

During our mostrecent fiscal year, there has been no, and at present there is no, outstandingindebtedness to us owed or owing by any member of our Supervisory Board orExecutive Board.

**C.  *Interests of experts and counsel***

Not Applicable.

**ITEM 8.  FINANCIAL INFORMATION**

**A.  *Consolidated Financial Statements and Other Financial Information***.

Our auditedconsolidated financial statements and audit report are included pursuant toItem 18 of this document.

**ExportSales**

Export sales donot constitute a significant portion of our total sales volume.

**Legalor Arbitration Proceedings**

From time to time,we are involved in routine litigation. We believe that the outcome of legalcases will not have a material effect on the consolidated financial conditionof ARCADIS N,V,, but could be material to the Company’s operational results inany future accounting period.

**Policyon Dividend Distribution**

Our dividendpolicy aims to provide our shareholders with an attractive and stable return ontheir investment while, at the same time, providing us with the cash necessaryto finance further growth of our business. We aim to make an annual dividendpayment ranging from 30% to 40% of our net income from operations as reportedunder IFRS, our proposed dividend for 2006 is equal to 40% of our income fromoperations. An important consideration is that the strategy of the company isfocused on growth, partly through acquisitions. The dividend policy is designedto offer shareholders an attractive dividend yield, while at the same timeleaving us sufficient resources to finance growth.

**B. *Significantchanges.***

SinceDecember 31, 2006, no significant changes in our financial condition haveoccurred.

**ITEM 9.  THE OFFER AND LISTING**

**Markets**

Our common sharesare traded on the Nasdaq National Market under the symbol “ARCAF” and aretraded on the Amsterdam Stock Exchange under the symbol “ARCAD.”

**StockPrice Information**

The followingtable sets forth the high and low closing prices for our common shares tradedon the Nasdaq National Market and on the Amsterdam Stock Exchange since 2000:
| ** ** | ** ** | **Nasdaq National Market ($)** | ** ** | **Amsterdam Stock Exchange (€)** | ** ** |
|------------|------------|-----------------------------------------------|------------|------------------------------------------------------|------------|
| **Period** | ** ** | **High**                                      | ** ** | **Low**                                              | ** ** | **High** | ** ** | **Low** | ** ** |
| ** ** |       |                                          |       |                                                 |       |   |   |   |   |
| 2001       |       | 8.88                                          |       | 7.31                                                 |       | 9.75 |   | 8.00 |   |
| 2002       |       | 10.35                                         |       | 8.00                                                 |       | 11.19 |   | 7.94 |   |
| 2003       |       | 10.75                                         |       | 6.42                                                 |       | 10.50 |   | 6.43 |   |
| 2004       |       | 18.70                                         |       | 11.65                                                |       | 13.75 |   | 9.4 |   |

 

42

----

 
| ** **           | ** ** | **Nasdaq National Market ($)** | ** ** | **Amsterdam Stock Exchange (€)** | ** ** |
|----------------------|------------|-----------------------------------------------|------------|------------------------------------------------------|------------|
| ** **           | ** ** | **High**                                      | ** ** | **Low**                                              | ** ** | **High** | ** ** | **Low** | ** ** |
| **2005**             |       |                                          |       |                                                 |       |   |   |   |   |
| 1st Quarter     |       | 21.70                                         |       | 16.78                                                |       | 16.58 |   | 13.08 |   |
| 2nd Quarter     |       | 23.87                                         |       | 19.50                                                |       | 19.50 |   | 15.40 |   |
| 3rd Quarter     |       | 27.61                                         |       | 22.50                                                |       | 22.39 |   | 19.00 |   |
| 4th Quarter     |       | 32.30                                         |       | 28.40                                                |       | 27.18 |   | 23.65 |   |
| **2006**             | ** ** | ** **                                    | ** ** | ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| 1st Quarter     |       | 45.10                                         |       | 33.00                                                |       | 37.48 |   | 26.60 |   |
| 2nd Quarter     |       | 52.63                                         |       | 39.35                                                |       | 41.00 |   | 31.35 |   |
| 3rd Quarter     |       | 48.02                                         |       | 42.74                                                |       | 37.99 |   | 34.49 |   |
| 4th Quarter     |       | 61.16                                         |       | 43.61                                                |       | 46.70 |   | 34.59 |   |
| **Last  Six Months** |       |                                          |       |                                                 |       |   |   |   |   |
| November 2006   |       | 58.06                                         |       | 48.55                                                |       | 43.70 |   | 38.31 |   |
| December 2006        |       | 61.16                                         |       | 55.18                                                |       | 46.70 |   | 42.30 |   |
| January 2007         |       | 64.00                                         |       | 58.26                                                |       | 49.05 |   | 44.67 |   |
| February 2007        |       | 68.94                                         |       | 62.80                                                |       | 53.08 |   | 47.54 |   |
| March 2007           |       | 67.01                                         |       | 61.28                                                |       | 51.10 |   | 45.97 |   |
| April 2007           |       | 69.43                                         |       | 63.77                                                |       | 51.02 |   | 46.85 |   |

 

As of February 28,2007, approximately 5.5% of our outstanding common shares were listed on theNasdaq National Market and we had 121 holders in the United States.

**ITEM 10.  ADDITIONAL INFORMATION**

**A.  *Share capital***.

Not applicable.

**B.  *Memorandum and articles of association***.

ARCADIS is apublic listed, limited liability company established under the laws of theNetherlands in accordance with Book 2 of Dutch Civil Law. Our shareholders at aSpecial General Meeting of Shareholders adopted our Articles of Association onJune 5, 2003. The following is a summary of our Articles of Association,which were filed as Exhibit 1.1 to our Annual Report on Form 20-F forthe year ended December 31, 2003 and are incorporated herein by reference,and such summary is qualified in its entirety by reference thereto.

**Purpose**

Article 2 ofour Articles of Association describes our purpose, which is to participate andotherwise acquire an interest in other companies and enterprises, of whatevernature, to conduct the management of such companies and enterprises, and tofinance third parties and to furnish security in any manner or bind ourselvesfor the obligations of third parties and, finally, to do all such things as maybe incidental or conducive to the attainment of any of the foregoing.

**Management**

ARCADIS is managedby our Executive Board under the supervision of our Supervisory Board. Themembers of our Executive Board are appointed by the holders of our commonshares. The members of our Executive Board are required to retire at the closeof the Annual General Meeting of Shareholders held in the financial year inwhich they attains the age of sixty-five years, unless the Supervisory Boardexpressly decides otherwise with respect to the member.

**Capitaland Shares**

Our authorizedshares consist of (1) 40,000,000 ordinary shares, each with a € 0.05 parvalue, (2) 50,000,000 cumulative preference shares, each with a € 0.05 parvalue, (3) 10,000,000 cumulative financing preference shares, each with a€ 0.05 par value, subdivided into four series, numbered 1 to 4, each seriesconsisting of 2,500,000 shares; and (4) 200 priority shares, each with a €0.05 par value.

43

----

The 200 priorityshares are issued in 1987 and are since that date held by the ARCADIS N.V.Priority Foundation. Major corporate decisions require prior approval from theholder of these priority shares, including the issuance, acquisition, ordisposal of shares of ARCADIS, amendments to our Articles of Association, thedissolution of ARCADIS, filing for bankruptcy, entering a joint venture of amaterial size, and material investments or acquisitions. The Board of theARCADIS N.V. Priority Foundation has 20 members, including 10 members from ourExecutive and Supervisory Boards and 10 representatives elected by and from ouremployees. In order to approve any action requiring approval of the holder ofthe priority shares, a 60% absolute majority of the board is required. Thiseffectively gives our employees the ability to veto certain major corporateevents. The board meets twice a year to discuss the strategic development of ARCADIS.

Our Articles alsopermit us to issue shares of cumulative financing preferred stock. As of April30, 2007, there are no shares of cumulative financing preferred stockoutstanding. At our Annual General Meeting of Shareholders on May 16, 2007,however, our shareholders will vote on a proposal authorizing our SupervisoryBoard to issue common shares and cumulative financing preferred shares in anamount equal to 10% of our common shares and/or equal to the amount ofcumulative financing preferred stock outstanding as of the date of theresolution adopted by the Supervisory Board to issue the shares. The amount ofshares to be issued may be increased by an additional 10% when the issuance ofshares relates to the consideration to be given in a merger or acquisition.

At our AnnualGeneral Meeting of Shareholders on May 16, 2007, our shareholders will vote ona proposal authorizing our Supervisory Board to issue shares of cumulativepreferred stock, up to a maximum amount equal to 100% of our total capitalstock issued and outstanding as of the date of the resolution adopted by theSupervisory Board to issue the shares. This stock will serve to limit anyhostile takeover attempt by another entity. These shares would only be issuedif we are threatened by a hostile takeover. In such an event, the shares wouldbe issued to the ARCADIS N.V. Preferred Stock Foundation.

**Dividends**

Our ExecutiveBoard, subject to the approval of our Supervisory Board, determines the amountof profits set aside as reserves. The Annual General Meeting of Shareholdersdetermines the amount of profit remaining which can be distributed as adividend to the holders of the common shares. The priority shares are entitled,to the extent possible, to receive 5% of the nominal amount per priority sharebefore the holders of our common shares receive any dividend payment. Thepriority shares are not entitled to any further distribution.

**Liquidation**

If there is aliquidation, the holders of the outstanding priority shares will be entitled toa distribution before the holders of the outstanding common shares.

**Repurchaseof Shares**

Our Articlesauthorize the Executive Board to repurchase shares of our capital stock ifcertain conditions are met. The Supervisory Board and our shareholders mustauthorize such a repurchase. The authorization must specify the number ofshares that may be repurchased, the manner in which they shall be acquired andthe price ranges at which they may be repurchased. Our shareholders will voteon a proposal to permit our Executive Board to repurchase shares of our capitalstock at our Annual General Meeting of Shareholders on May 16, 2007.

**Meetingsof Shareholders**

Our Articlesrequire us to have an Annual General Meeting of Shareholders before the firstof July of each year. The Dutch Civil Law also requires us to hold ameeting of our shareholders each year. Any person who is a shareholder on thedate of the annual meeting is entitled to attend and vote at the annualmeeting. Extraordinary meetings are held upon the adoption of a resolution byour Executive Board or Supervisory Board. Additionally, shareholders holding atleast 10% of our issued capital may also call extraordinary meetings ofshareholders.

**C.  *Material contracts.***

Our option andshare purchase plans are described above in Item 6.E. Otherwise, we have notentered into any material contracts, other than contracts entered into in theordinary course of business.

44

----

**D.  *Exchange controls***.

There arecurrently no Netherlands laws, decrees or regulations that restrict the exportor import of capital and there are no exchange control restrictions onremittances of dividends imposed by law on dividends, interest or otherpayments to non-resident holders of our common shares.

There arecurrently no limitations on the right of non-resident or foreign owners to holdor vote our common shares imposed by the Netherlands law or by our Articles ofAssociation or other constituent documents.

**E.  *Taxation.***

**NetherlandsTaxation**

The following is asummary of Netherlands tax consequences to an owner of our common shares who isnot, or is not deemed to be, a resident of the Netherlands or has not opted tobe treated as a resident of the Netherlands for purposes of the relevant taxcodes (a “non-resident Shareholder”). The summary does not address taxesimposed by the Netherlands and its political subdivisions, other than thetransfer tax, dividend withholding tax, individual income tax, corporate incometax, and gift and inheritance tax.

***Transfer Tax***

No value addedtax, stamp, documentary or registration duty or similar charge, will be imposedunder the laws of the Netherlands upon execution, delivery, transfer,combination or split-up of our common shares.

***Dividend Withholding Tax***

To the extent thatcash dividends are distributed by ARCADIS, such dividends would be subjectunder Netherlands tax law to withholding tax at a rate of 15%. This rate isapplicable as from January 1, 2007. Before this date the withholding tax ratewas 25%.

Dividends include:

·                  distributions incash or in kind, including deemed and constructive distributions;

·                  liquidationproceeds on redemption of our common shares in excess of the average paid-incapital as recognized for Netherlands dividend withholding tax purposes and, asa rule, the consideration for the repurchase of our common shares by us inexcess of the average paid-in capital recognized for Netherlands dividendwithholding tax purposes, unless such repurchase is (a) for temporaryinvestment or (b) exempt on the basis of the Dividend Tax Act 1965;

·                  the par value inrespect of the issue of our common shares to a holder of our common shares, oran increase in the par value of our common shares, in exchange for a lowerconsideration, except where the issue or increase is funded out of our paid-incapital as recognized for Netherlands dividend withholding tax purposes; and

·                  partialredemption of our common shares to the extent this constitutes a repayment ofcontributed capital (as understood under the Dividend Tax Act 1965), and to theextent we have net profits (as that expression is understood for Netherlandsdividend withholding tax purposes), unless our common shareholders haveresolved in a general meeting to make such repayment, and the par value of ourcommon shares concerned has been reduced by a corresponding amount by way of anamendment of the Articles of Association.

Holders of ourcommon shares residing outside the Netherlands may be entitled to a full orpartial exemption from or refund of Netherlands dividend withholding tax underan applicable double taxation convention depending on its terms and conditionsand subject to compliance by the shareholder with those terms and conditions.

For dividendsdistributed before January 1, 2007, i.e. dividends on which 25% dividendwithholding tax was due, it is of importance that holders of our common sharesresiding in the United States may be entitled to a reduction of Netherlandsdividend withholding tax, in general to a Netherlands dividend withholding taxof 15%, under the double tax convention between The Netherlands and the UnitedStates with respect to income (the “Treaty”) subject to compliance by such

45

----

shareholders with theapplicable terms and conditions of the Treaty. Generally, a holder of ourcommon shares will qualify for benefits under the Treaty (subject to compliancewith the procedures for claiming benefits) if the holder:

·                  is thebeneficial owner of the dividends paid;

·                  is resident inthe United States according to the Treaty;

·                  does not holdour common shares in connection with the conduct of business in theNetherlands; and

·                  is notrestricted in claiming the benefit of the Treaty under article 26(Limitation on Benefits).

Dividends paid in respectof our common shares to an exempt pension trust or similar organization, mayqualify for an exemption from or, as the case may be, a complete refund ofDutch dividend withholding tax under the Treaty, subject to compliance with theapplicable terms and conditions.

We expect to funddividend distributions on our common shares with dividends received from oursubsidiaries organized outside the Netherlands. Accordingly, we will in certaincircumstances be entitled under special Netherlands tax rules to reduce theamount of withholding taxes on dividends that a U.S. holder otherwise would beobliged to pay to the Dutch tax authorities by an amount that is equal to 3% ofthe dividend paid. We will in certain cases claim this reduction of withholdingtaxes in respect of dividends on our common shares.

OnNovember 23, 2004, the European Free Trade Association Court of Justice(EFTA Court) issued its decision in the so-called Fokus Bank case. The EFTACourt decided that the Norwegian tax rules, that treat outbound dividendpayments to foreign shareholders less favorably than dividend payments todomestic shareholders, constitute a forbidden restriction on the free movementof capital. The European Court of Justice (ECJ) has in the meantime ruledsimilarly in the Denkavit case (decision of December 14, 2006, C-170/05),although it appears that the ECJ does not recognize a forbidden restriction onthe free movement of capital to the extent that the less favorable treatment iscompensated in the home state of the non-resident (tax credit). The freedom ofcapital generally does not only apply to capital movements between EU MemberStates but also to capital movements to and from third countries, such as theUnited States. The application of the free movement of capital in relation withthird countries has recently been confirmed in the FII case (ECJ, December 12, 2006,C-446/04), For certain capital movements to and from third countries, agrandfathering (stand-still) provision in the EC-Treaty applies, but it isanticipated that small investments in quoted equities such as the shares ofARCADIS are not covered by this stand-still provision (reference can be made toaforementioned FII case).

Theabove-mentioned decisions may have significant implications for certainnon-resident shareholders that receive dividends that are subject toNetherlands dividend withholding tax, or that have received such dividends inthe past three years. Where US based pension funds may be eligible for anexemption from Dutch dividend withholding tax (Article 35 of the double taxtreaty between the Netherlands and the USA), in principle all other US residentinvestors suffer Netherlands dividend withholding tax. Depending on theinvestor’s specific facts/circumstances, there may be good arguments forclaiming a refund of Dutch dividend withholding tax for all categories of USinvestors provided that (i) their interest in ARCADIS is/was not held with theobjective of establishing or maintaining lasting economic links with ARCADIS(enabling the investor to participate effectively in the management of thatcompany or in its control) and (ii) the investor is not fully compensated inthe US (tax credit). In particular, there may be strong arguments for thefollowing categories of US investors:

·                  Legalentities that could have invoked the Dutch participation exemption with respectto the dividends received or would have been exempt from corporate income taxin case they would have been a resident of the Netherlands for tax purposes. Ingeneral, the Dutch participation exemption will apply in case of shareholdingsof 5% or more in ARCADIS. In case of a shareholding of less than 5% the Dutchparticipation exemption may be applicable if the shares are not held as a mereportfolio investment. Shareholdings of less than 5%, in principle, do notqualify for the Dutch participation exemption as from 2007, although specificexceptions and transitional rules exist. In case of legal entities resident inthe Netherlands, in effect no Netherlands dividend withholding tax is due withrespect to dividends on shareholdings that apply for the Dutch participation exemption.

·                  Investmentfunds.

·                  Naturalpersons where the shares do not belong to the assets of a business enterpriseor do not belong to a substantial interest. In case such a natural person wouldhave been a resident of the Netherlands, the dividend as such would not besubject to individual income tax. Instead, the individual would be taxed on adeemed income, calculated at 4% of

46

----

his net equity, whereas the dividend tax withheldwould have been credited in full against the individual income tax due (if no individualincome tax is due, a full refund is given).

Dividend paymentscan be subject to Dutch dividend-stripping rules. Under these rules, arecipient of a dividend is not considered the beneficial owner if it isplausible that:

·      the recipient paid consideration(in cash or in kind) in connection with the dividend distribution, and thepayment forms part of a sequence of transactions;

·      an individual or companybenefited, in whole or in part, directly or indirectly, from the dividend,where that individual or company is entitled to a less favorable relief fromdividend withholding tax than the recipient of the dividend distribution; and

·      the individual or companydirectly or indirectly retains or obtains a position in the shares, profitrights, or profit sharing bonds that is comparable to its position in similarshares, profit rights or profit sharing bonds before the sequence oftransactions commenced.

The legislationexplicitly states that the term “sequence of transactions” includes cases of asole acquisition of one or more dividend rights and of the establishment ofshort-term rights of enjoyment on shares, while the transferor retainsownership of the shares. The legislation states that theanti-dividend-stripping rules also apply to transactions entered into onthe public stock market.

***Individual Income Tax and Corporate Income Tax***

A shareholder thatis not a resident nor deemed to be a resident of the Netherlands forNetherlands tax purposes nor has opted to be treated as a resident of theNetherlands will not be subject to the Netherlands income tax or corporateincome tax in respect of dividends received from, or capital gains realized inrespect of a disposal of, our common shares, provided that:

•  the common shares arenot attributable to a business or part of a business of the shareholder that iscarried out through a permanent establishment or a permanent representative inthe Netherlands (“Netherlands business”);

•  the holder of thecommon shares does not have a substantial interest (a holding of at least 5% ofthe share capital) or a deemed substantial interest in us as defined in theIncome Tax Act 2001, or in the event that such holder does have such interest,it forms part of the business assets of a business, other than a Netherlands business;and

•  in the case of anindividual holder of our common shares, the dividends received from our commonshares and capital gain realized in respect of a disposal of our common sharesare not regarded, on the basis of the Income Tax Act 2001, as “taxable incomefrom one or more activities performed in the Netherlands not being activitiesthat generate taxable profit or taxable wages”.

***Gift and Inheritance Taxes***

No gift orinheritance taxes will arise in the Netherlands with respect to a gift or inheritanceof our common shares from a person who is neither a resident nor deemed to be aresident of the Netherlands, unless:

•  such holder, at thetime of the gift has, or at the time of death had, a business or an interest ina business that is or was, in whole or in part, carried out through a permanentestablishment or a permanent representative in the Netherlands and to whichbusiness or part thereof, as the case may be, the common shares are or wereattributable; or

**• **in the case of a gift ofthe common shares by an individual who at the date of the gift was neitherresident nor deemed to be resident of the Netherlands, such individual dieswithin 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 ofNetherlands gift, estate and inheritance tax, an individual who holds theNetherlands nationality will be deemed to be resident in the Netherlands if hehas been resident in the Netherlands at any time during the ten years precedingthe date of the gift or death. For purposes of Netherlands gift tax, anindividual not holding Netherlands nationality will be deemed to be resident inthe Netherlands if he has been resident in the Netherlands at any time duringthe twelve months preceding the date of the gift.

47

----

**UnitedStates Federal Income Taxation**

The followingdiscussion summarizes certain U.S. federal income tax considerations relevantto the purchase, ownership and disposition of common shares by a holder that is(i) a citizen or resident of the United States, (ii) a corporation organizedunder the laws of the United States, (iii) an estate the income of which issubject to U.S federal income tax regardless of its source, or (iv) a trustif  (a) a court within the United Statesis able to exercise primary supervision over its administration and one or moreU.S. persons have the authority to control all substantial decisions of thetrust (b) the trust has elected to be treated as a U.S. person under applicableU.S. rules (a “U.S. holder”). If a partnership holds common shares, the taxtreatment of a partner generally will depend on the status of the partner andthe activities of the partnership. If you are a partner in a partnership thatholds common shares, we urge you to consult your tax advisors regarding thepurchase, ownership, and disposition of common shares. This summary does notpurport to be a comprehensive description of all of the tax considerations thatmay be relevant to a decision to purchase common shares. In particular, thissummary deals only with U.S. holders that will hold common shares as capitalassets and does not address the tax treatment of U.S. holders that may besubject to special tax rules, such as banks, tax-exempt entities, insurancecompanies, dealers, expatriates, persons that hold common shares as part of ahedge, straddle, conversion, or other integrated investment, persons whosefunctional currency is not the U.S. dollar, and holders (including indirect andconstructive owners) of 10% or more of our voting shares. In addition, thissummary does not address any alternative minimum tax or any state, local ornon-U.S. tax consequences. This summary is based on the tax laws of the UnitedStates, including judicial and administrative interpretations, in effect on thedate hereof, which are subject to change, potentially retroactively. Except asdiscussed under “United States Taxation — *PassiveForeign Investment Company Rules*,” this discussion assumes that weare not, and will not become, a passive foreign investment company (“PFIC”)**.**

**PROSPECTIVEPURCHASERS OF OUR COMMON SHARES SHOULD CONSULT THEIR OWN ADVISORS AS TO THE TAXCONSEQUENCES OF THE PURCHASE, OWNERSHIP, AND DISPOSITION OF THE COMMON SHARESIN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING THE EFFECT OF ANYUNITED STATES FEDERAL, STATE, LOCAL, OR OTHER NON-U.S. TAX LAWS TO WHICH THEYMAY BE SUBJECT.**

***Taxation of Dividends***

Dividends(including the amounts withheld in respect of Dutch withholding tax) generallywill be subject to U.S. federal income taxation as dividend income of the U.S.holder. Dividends will not be eligible for the dividends-received deductiongenerally allowed to U.S. corporations. Dividends paid in euro will beincludable in income in a U.S. dollar amount based on the exchange rate ineffect on the date of receipt whether or not the payment is converted into U.S.dollars at that time. Any gain or loss recognized on a subsequent conversion ofthe euro for a different amount generally will be U.S. source ordinary income orloss. Distributions to U.S. holders of additional shares or rights to acquireadditional shares that are made as part of a pro rata distribution to allshareholders might not be subject to federal income tax.

Dividends receivedby non-corporate U.S. holders generally are eligible for the same preferentialrate allowed for long-term capital gains through taxable years beginning on orbefore December 31, 2010 if the U.S. holder meets certain eligibilityrequirements, including holding period, we are not a PFIC (discussed below),and either (1) we qualify for benefits under the income tax treaty between theUnited States and the Netherlands or (2) the common shares are readily tradableon an established securities market in the United States. We believe thatdividends paid on our common shares to U.S. holders meeting the eligibilityrequirements should qualify for the long-term capital gain rate; however, therecan be no assurance that dividends on our common shares will continue to soqualify.

Dividends paid onthe common shares to U.S. holders generally will be subject to Dutchwithholding tax at a rate of 15%.

Subject togenerally applicable limitations, including a minimum holding period, a U.S.holder may claim a deduction or a foreign tax credit for Dutch tax withheld atthe appropriate rate. For purposes of determining a U.S. holder’s foreign taxcredit limitation, dividends received from a Dutch corporation are generallytreated as foreign source income. However, if U.S. holders together hold atleast half (by vote or value) of our common shares and other interests treatedas equity, a percentage of the dividend income equal to the proportion of ourincome that comes from U.S. sources generally will be treated as income fromsources within the United States.

48

----

***Taxation of Sales of Common Shares***

Gains or lossesrealized by a U.S. holder on the sale or other disposition of common sharesgenerally will be treated for U.S. federal income tax purposes as capital gainsor losses and generally will be long-term gains or losses if the common shareshave been held for more than one year on the date of sale or other disposition.Long-term capital gain recognized by a non-corporate U.S. holder in a taxableyear beginning on or before December 31, 2010 generally is subject to federalincome taxation at a maximum rate of 15%. The deductibility of capital lossesis subject to limitations for U.S. federal income tax purposes. Gain, if any,realized by a U.S. holder on the sale or other disposition of common sharesgenerally will be treated as U.S. source income for U.S. foreign tax creditpurposes.

***Passive Foreign Investment Company Rules***

We believe that weare not, and will not become, a PFIC for U.S. federal income tax purposes.****We would be a PFIC if in any taxable year,taking into account the income and assets of certain subsidiaries, either(a) 75% or more of our gross income is “passive income”, which generallyincludes interest, dividends, certain gains from the sale or exchange of sharesor securities and some types of rents and royalties, or (b) 50% or more ofthe average value of our assets is attributable to assets that produce or areheld to produce passive income. Since PFIC status depends upon the compositionof a company’s income and assets and the market value of its assets from timeto time, there can be no assurance that we will not be considered a PFIC forany taxable year.

If we are treatedas a PFIC for any taxable year in which a U.S. holder owned common shares, aU.S. holder generally would be subject to additional taxes on any excessdistributions received from us and on any gain realized on a sale or otherdisposition of the common shares (regardless of whether we continued to be aPFIC). A US Holder has an excess distribution to the extent that distributionson the common shares during a taxable year exceed 125 percent of the averageamount received during the three preceding years (or, if shorter, the U.S.holder’s holding period).  To compute thetax on excess distributions or on any gain realized from the sale or otherdisposition of a common share, (i) the excess distribution or gain would beallocated ratably over the U.S. holder’s holding period for the share, (ii) theamounts allocated to the taxable year of the sale or other disposition and toany year before we became a PFIC would be taxed as ordinary income in thetaxable year of sale or other disposition, and (iii) the amount allocated toeach other taxable year would be subject to tax at the highest applicablemarginal rate in effect for individuals or corporations, as appropriate, forthat year and an interest charge would be imposed. In addition, if we weretreated as a PFIC in a taxable year in which we pay a dividend, or the yearpreceding the payment of the dividend, the preferential dividend rate discussedabove with respect to dividends paid to certain non-corporate U.S. holderswould not apply. If we are a PFIC for any taxable year during which a U.S.holder held common shares, such U.S. holder would have to file Form 8621 withthe U.S. Internal Revenue Service.

If we were tobecome a PFIC, certain elections may be available to U.S. holders that maymitigate the adverse tax consequences resulting from PFIC status.

***U.S. Backup Withholding and Information Reporting***

Dividends from thecommon shares and proceeds from the sale of the common shares may be reportedto the U.S. Internal Revenue Service (“IRS”) unless the holder (i) is acorporation, (ii) provides a properly executed IRS Form W-8BEN, or (iii)otherwise establishes a basis for exemption. Backup withholding tax may applyat the rate of 28% to amounts subject to reporting if the holder fails toprovide an accurate taxpayer identification number or otherwise establish anexemption. Any amount withheld under these rules will be creditableagainst the U.S. holder’s U.S. federal income tax liability.

**F.  *Dividend and paying agents***

Not applicable.

**G.  *Statement by experts***

Not applicable.

**H.  *Documents on display***

We will providecopies of our 2006 annual report in English or Dutch, as requested, and our2006 annual report on Form 20-F, without charge. Copies of the exhibits tothis 2006 annual report on Form 20-F are available for a duplication fee.If an exhibit is not in English, or has not been previously translated intoEnglish, a summary of such exhibit in English will be provided. To obtaincopies of these documents, please contact ARCADIS N.V, Corporate DevelopmentDepartment, P.O. Box

49

----

33, 6800 LE Arnhem, theNetherlands (tel. +31 26 377 8286), or ARCADIS N.V., Investor Relations, 88 DuryeaRoad, Melville, NY 11747, USA (tel. (631) 391-5262).

**I.  *Subsidiary information***

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.We have also filed a list of our subsidiaries as an exhibit to this annualreport on Form 20-F.

**ITEM 11.  QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

**ForeignExchange Risk**

We do asubstantial amount of business in non-Euro countries. The currencies in thesecountries may vary in value against the Euro, posing a possible risk to us.This risk is predominantly limited to a translation risk in that our revenuesand costs are usually in the same currency. Because the economic risk to thecompany is limited, this risk is not hedged. The currency-risk in the balancesheet may lead to a depreciation of the value of certain foreign assets andliabilities, but the net effect of these depreciations on our economic positionis limited.

There is only alimited risk that net cash flow, denominated in the currencies in which theoperating companies perform their purchasing and selling activities, will benegatively influenced by exchange rate changes.

Financialinstruments are used in a limited fashion to cover the risk associated with theconversion into Euros of equity and income from foreign operations andnon-consolidated companies outside the Euro-zone. Financial instruments areused to hedge the currency risk on US-dollar loans entered into for the financingof US acquisitions.

**InterestRate Risk**

We manage interestrate risks by financing fixed assets and part of current assets withshareholders’ equity, provisions and long-term debt. The remainder of currentassets is financed with short-term debt including revolving bank credits withvariable interest rates. Based on our interest risk profile, somefinancial instruments were used during 2006 to cover part of the risk. Theremaining interest risk is only applicable to the long-term debt,bank overdrafts, value of our financial instruments in our balancesheet (see our Consolidated Balance Sheets included in Item18) with floating interest rates amounting to € 101 millionat year-end 2006. A movement in interest rate by 100 basis points would, basedon our financial instruments that are subject to changes in interest rates,have a negative or positive effect on net income of less than€ 0.6 million.

**ITEM 12.  DESCRIPTION OFSECURITIES OTHER THAN EQUITY SECURITIES**

Not applicable.

50

----

**PART II**

**ITEM 13.  DEFAULTS, DIVIDEND ARREARAGESAND DELINQUENCIES**

Not applicable.

**ITEM 14.  MATERIAL MODIFICATIONSTO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**

Not applicable.

 **ITEM 15. CONTROLS AND PROCEDURES**

(a) *Disclosure Controls and Procedures.* Ourmanagement, including our Chief Executive Officer and Chief Financial Officerhas evaluated the effectiveness of our disclosure controls and procedures (asdefined in Rule 13a-15(e) of the U.S. Securities Exchange Act of1934, as amended) as of December 31, 2006, and concluded that, as of suchdate, our disclosure controls and procedures were effective.

(b) *Management’s Annual Report on Internal control overFinancial Reporting.*

As of the end of2006, the Company must comply with the requirements of Section 404 of theSarbanes-Oxley Act. Section 404 requires the Company to include in the annualreport an internal control report, containing management’s assessment on theeffectiveness of internal control over financial reporting.

Management of theCompany is responsible for establishing and maintaining adequate internalcontrol over financial reporting (as such term is defined in Exchange Act Rules13a-15(f)).

Because of itsinherent limitations, internal control over financial reporting may not preventor detect all misstatements. Projections of any evaluation of effectiveness tofuture periods are subject to the risks that controls may become inadequatebecause of changes in conditions, or that the degree of compliance withpolicies or procedures may deteriorate.

Managementassessed the effectiveness of the Company’s internal control over financialreporting as of December 31, 2006. In making this assessment, management usedthe criteria for effective internal control over financial reporting set forthby the Committee of Sponsoring Organizations of the Treadway Commission (COSO)in Internal Control-Integrated Framework. Based on this assessment, managementhas concluded that the Company’s internal control over financial reporting waseffective as of December 31, 2006

Management’sassessment of the effectiveness of the Company’s internal control overfinancial reporting as of December 31, 2006, excluded the companies acquiredafter January 1, 2006. The total assets of these acquisitions represented 3% (€21.3 million) of consolidated total assets and 1% (€ 16.9 million) ofconsolidated total revenues of the Company as of and for the year endedDecember 31, 2006. If adequately disclosed, companies are allowed to excludeacquisitions from their assessment of internal control over financial reportingduring the first year of an acquisition while integrating the acquired companyunder guidelines established by the US Securities and Exchange Commission.

KPMG AccountantsN.V., the independent registered public accounting firm that audited the financialstatements included in this annual report, has issued an attestation report onmanagement’s assessment of the Company’s internal control over financial reporting. The Accountant’s attestationreport is presented below.

(c) *Attestation Report of the Independent Rregistered PublicAccounting Firm.*

To the Executive Board,Supervisory Board and Shareholders of ARCADIS N.V.

We have auditedmanagement’s assessment, included in the accompanying Management’s AnnualReport on Internal Control Over Financial Reporting, included in Item 15(b) ofForm 20-F, that ARCADIS N.V. maintained effective internal control overfinancial reporting as of December 31, 2006, based on criteria established inInternal Control—Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO). ARCADIS N.V. management isresponsible for maintaining effective internal control over financial reportingand for its assessment of the

51

----

effectiveness of internalcontrol over financial reporting. Our responsibility is to express an opinionon management’s assessment and an opinion on the effectiveness of the Company’sinternal control over financial reporting based on our audit.

We conducted ouraudit in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan andperform the audit to obtain reasonable assurance about whether effectiveinternal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal controlover financial reporting, evaluating management’s assessment, testing andevaluating the design and operating effectiveness of internal control, andperforming such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for ouropinion.

A company’s internal control over financial reportingis a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles.  A company’s internal control over financialreporting includes those policies and procedures that (1) pertain to the maintenanceof records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directorsof the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

Because of itsinherent limitations, internal control over financial reporting may not preventor detect misstatements.  Also,projections of any evaluation of effectiveness to future periods are subject tothe risk that controls may become inadequate because of changes in conditions,or that the degree of compliance with the policies or procedures maydeteriorate.

ARCADIS N.V.acquired various companies during 2006 (together The Acquired Companies), andmanagement excluded from its assessment of the effectiveness of ARCADIS N.V.internal control over financial reporting as of December 31, 2006, The AcquiredCompanies internal control over financial reporting associated with assetsrepresenting 3% (€ 21.3 million) of consolidated assets of ARCADIS N.V. andrevenues representing 1% (€ 16.9 million) of consolidated revenues of ARCADISN.V. as of and for the year ended December 31, 2006. Our audit of internalcontrol over financial reporting of ARCADIS N.V. also excluded an evaluation ofthe internal control over financial reporting of The Acquired Companies.

In our opinion,management’s assessment that ARCADIS N.V. maintained effective internal controlover financial reporting as of December 31, 2006, is fairly stated, in allmaterial respects, based on criteria established in Internal Control—IntegratedFramework issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO). Also, in our opinion, ARCADIS N.V. maintained, in allmaterial respects, effective internal control over financial reporting as ofDecember 31, 2006, based on criteria established in Internal Control—IntegratedFramework issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO).

We also haveaudited, in accordance with the standards of the Public Company AccountingOversight Board (United States), the consolidated balance sheets of ARCADISN.V. as of December 31, 2006 and 2005, and the related consolidated statementsof income, cash flows and changes in equity for each of the years in thethree-year period ended December 31, 2006, and our report dated May 15, 2007expressed an unqualified opinion on those consolidated financial statements.

KPMG ACCOUNTANTSN.V.

Amstelveen, TheNetherlands

May 15, 2007

**ITEM 16.  [RESERVED]**

**ITEM 16A.  AUDIT COMMITTEEFINANCIAL EXPERT**

Our SupervisoryBoard has determined that Mr. van Tets, one of our Supervisory Board andAudit Committee members, qualifies as an “audit committee financial expert” asdefined by the U.S. Securities and Exchange Commission. Mr. van Tets is anindependent member of our Supervisory Board as defined by the The Nasdaq Stock Market.In making this determination, the Supervisory Board took into consideration theexperience of Mr. van Tets, which is described in his biographicalinformation found in Item 6 of this annual report.

52

----

**ITEM 16B.  CODE OF ETHICS**

We have adopted acode of ethics, which is entitled the “ARCADIS General Business Principles.”This code serves as a guideline for our business decisions and activitiesaround the world. The code applies to all of our employees, including ourprincipal executive officer, principal financial officer, and principalaccounting officer or controller. These principles highlight our commitment toconducting business with integrity, which is one of our three core values. TheARCADIS General Business Principles are available on our website located at,www.ARCADIS-global.com. We intend to disclose any amendments or waivers to ourcode of ethics that are required to be disclosed by posting such information onour website, at the address specified above. During 2006, an administrativeprocedure regarding the receivement and handling of complaints under theWhistleblower procedure has been further detailed and added to the ARCADISGeneral Business Principles.

**ITEM 16C.  PRINCIPAL ACCOUNTANTFEES AND SERVICES**

*Feesand Services.*  The following table details the aggregatefees billed by our principal accountant, KPMG Accountants N.V., for the lasttwo fiscal years for various services (in millions):
| Type of Services Provided | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------------------------|------------|----------|------------|----------|------------|
| Audit Fees (a)                           |       | €   | 2.4        |     | €     |  1.3 |   |
| Audit-Related  Fees (b)                  |       | 0.8      |       | 0.7      |       |
| Tax Fees (c)                             |       | 0.3      |       | 0.4      |       |
| All Other Fees                           |       | —   |       | —   |       |
|                                          |            |          |            |          |            |  |  |

 

----

(a) Audit fees for theyear ended December 31, 2006 include the audit of ICOFR (Internal Control overFinancial Reporting).

(b)*           Audit-relatedfees* for the years ended December 31, 2006 and 2005 consist offees for services that are traditionally performed by the independentaccountants. These services include accounting consultations, internal controlreviews on implementation of information systems,and other similar services,consultations concerning financial accounting and reporting standards(especially related to the transition to International Financial ReportingStandards), due diligence and audits in connection with acquisitions ordivestments. For the year ended December 31, 2005 the fee also consist ofservices related to the implementation of § 404 of the Sarbanes-Oxley Actof 2002 regarding management’s report over internal control over financialreporting.

(c)*           Taxfees* as of the years ended December 31, 2006 and 2005 consistof fees expensed for tax planning services and tax.

*AuditCommittee pre-approval policies and procedures.* The AuditCommittee of our Supervisory Board has adopted a charter which details theduties and responsibilities of our Audit Committee. These duties andresponsibilities include, among other things, reviewing and monitoring ourfinancial statements and internal accounting procedures, approving the scopeand terms of audit services to be provided by our independent auditor andmonitoring the services provided by our independent auditor. All non-auditservices provided by our independent auditor must be pre-approved by our AuditCommittee. The Audit Committee will consider whether the provision of suchservices by our auditor is compatible with our auditor’s independence.

**ITEM 16D.  EXEMPTIONS FROM THELISTING STANDARDS FOR AUDIT COMMITTEES.**

Not Applicable.

53

----

**ITEM 16E.  PURCHASES OF EQUITYSECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS**

**ISSUER PURCHASES OF EQUITY SECURITIES**
|                     | ** ** | **(a)**                                                                        | ** ** | **(b)**                                                              | ** ** | **(c)**                                                                                                                                               | ** ** | **(d)**                                                                                                                                                                                              | ** ** |
|---------------------|------------|--------------------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Period**          | ** ** | **Total Number of  Shares (or Units)  Purchased (1)** | ** ** | **Average Price Paid per  Share (or Unit)** | ** ** | **Total Number of  Shares (or Units)  Purchased as Part of  Publicly Announced  Plans or Programs** | ** ** | **Maximum Number (or  Approximate Dollar  Value) of Shares or  Units that May Yet Be  Purchased Under the  Plans or Programs** | ** ** |
| January 2006   |       | 62,000                                                                         |       | €                                                               | 27.12      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |
| February 2006  |       | —                                                                         |       | —                                                               |       | —                                                                                                                                                |       | —                                                                                                                                                                                               |       |
| March 2006     |       | —                                                                         |       | —                                                               |       | —                                                                                                                                                |       | —                                                                                                                                                                                               |       |
| April 2006     |       | —                                                                         |       | —                                                               |       | —                                                                                                                                                |       | —                                                                                                                                                                                               |       |
| May 2006       |       | 200,000                                                                        |       | €                                                               | 38.04      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |
| June 2006      |       | —                                                                         |       | —                                                               |       | —                                                                                                                                                |       | —                                                                                                                                                                                               |       |
|                |       |                                                                           |       | —                                                               |       | —                                                                                                                                                |       | —                                                                                                                                                                                               |       |
| July 2006      |       | 5,000                                                                          |       | $                                                                    | 46.51      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |
|                |       |                                                                           |       |                                                                 |       | —                                                                                                                                                |       | —                                                                                                                                                                                               |       |
| August 2006    |       | 10,000                                                                         |       | $                                                                    | 47.42      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |
| September 2006 |       | 142,423                                                                        |       | €                                                               | 35.76      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |
|                |       | 20,000                                                                         |       | $                                                                    | 46.08      |                                                                                                                                                  |       |                                                                                                                                                                                                 |       |   |
| October 2006   |       | 50,415                                                                         |       | €                                                               | 34.71      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |
|                |       | 5,000                                                                          |       | $                                                                    | 44.10      |                                                                                                                                                  |       |                                                                                                                                                                                                 |       |   |
| November 2006  |       | —                                                                         |       | —                                                               |       | —                                                                                                                                                |       | —                                                                                                                                                                                               |       |
| December 2006  |       | —                                                                         |       | —                                                               |       | —                                                                                                                                                |       |                                                                                                                                                                                                 |       |

 

----

(1)  All sharespurchased were purchased by ARCADIS N.V. on the open market. Our Articles ofAssociation provide that our Executive Board may acquire fully paid-up sharesof our capital stock if: (a) the amount of our shareholders’ equityreduced by the amount paid for the repurchased shares is not less than thepaid-up and issued portion of our share capital increased by the reservesmaintained pursuant to Netherlands law, and (b) the aggregate par value ofthe shares to be acquired and of the shares already held by us or any of oursubsidiaries does not exceed one-tenth (1/10th) of the issued capital.

On May 17,2006, our shareholders approved the repurchase of our shares by the ExecutiveBoard and this authorization will be valid for a term not to exceed18 months. Our Articles of Association further provide that theauthorization to repurchase shares must specify the number of shares that maybe repurchased, the manner in which they shall be acquired and the price rangesat which they may be repurchased. No authorization is required if we repurchaseour shares in order to transfer the shares to our employees, such as under ouremployee stock option plans.

The ExecutiveBoard is permitted to purchase, for a period of 18 months commencing onJuly 1, 2006, to repurchase, in the discretion of the Executive Board, anyand all of our paid-up shares of capital stock and any shares of cumulativefinancing preferred stock, up to the maximum amount authorized under applicablelaw and our Articles of Association.

We may purchaseany and all paid-up shares of our capital stock on the public markets, or byother means such as a purchase directly from a holder of our shares, at a priceper share between (a) the share’s nominal value (€ 0.05 per share)and (b) an amount equal to 10% above the average market price of suchshares on Euronext Amsterdam Stock Market. The market price shall be determinedbased on the average of the highest trading price per share of our capitalstock, as published by the Official Prijscourant of Euronext Amsterdam StockMarket, for each of the 5 trading days immediately preceding the day ofrepurchase by us.

Shares of ourcumulative financing preferred stock may be purchased at a price per sharebetween (1) the share’s nominal value (€ 0.05 per share) and(2) the amount paid-up as nominal value and premium (*agio*), increased by the amount of profitwhich would have been distributed to the holders of shares of cumulativefinancing preferred stock upon redemption of such shares, in accordance withour Articles of Association.

54

----

**PART III**

**ITEM 17.  FINANCIAL STATEMENTS**

We have elected toreport under Item 18.

55

----

## **ITEM18.  FINANCIAL STATEMENTS**

 

**INDEX TO FINANCIAL STATEMENTS**

 
|                                                                                                         | ** ** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|------------|
| Report  of Independent Registered Public Accounting Firm                                                |       |       |
| Financial  Statements:                                                                                  |       |       |
| Consolidated Balance Sheet  as per December 31, 2006 and 2005                                      |       |       |
| Consolidated Statements of  Income for the years ended December 31, 2006, 2005 and 2004            |       |       |
| Consolidated Cash Flow  Statements for the years ended December 31, 2006, 2005 and 2004            |       |       |
| Consolidated Statements of  Changes in Equity for the years ended December 31, 2006, 2005 and 2004 |       |       |
| Notes to  the Consolidated Financial Statements                                                         |       |       |

 

F-1

----

Report of IndependentRegistered Public Accounting Firm

 

The Executive Board, Supervisory Board andShareholders of ARCADIS N.V.

We have audited the accompanying consolidated balance sheets ofARCADIS N.V. and subsidiaries as of December 31, 2006 and 2005, and the relatedconsolidated statements ofincome, cash flows and changes in equity for each of the years in thethree-year period ended December 31, 2006 appearing on page F-3 through F-60.These consolidated financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our auditsin accordance with the standards of the Public Company Accounting OversightBoard (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation.  We believe thatour audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of ARCADIS N.V. andsubsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of theyears in the three-year period ended December 31, 2006, in conformity withInternational Financial Reporting Standards as adopted by the EU.

International Financial Reporting Standardsas adopted by the EU vary in certain significant respects from U.S. generallyaccepted accounting principles. Information relating to the nature and effectof such differences is presented in Note 22 and Note 23 to the consolidatedfinancial statements.

We also have audited,in accordance with the standards of the Public Company Accounting OversightBoard (United States), the effectiveness of ARCADIS N.V. internal control overfinancial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO),and our report dated May 15, 2007 expressed an unqualified opinion on management’s assessment of, and the effectiveoperation of, internal control over financial reporting.

KPMG ACCOUNTANTS N.V.

Amstelveen, The Netherlands

May 15, 2007

F-2

----

**Financial statements 2006**

**ConsolidatedBalance Sheet as per December 31**

* *

*amountsin thousands of euros unless otherwise stated*

 
| **Assets**                                                                           | ** ** | **2006**    | ** ** | **2005**    | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|
|                                                                                 |       |        |       |        |       |
| **Non-current assets**                                                               |       |        |       |        |       |
| Intangible assets (1)                                                                | ** ** | **154,170** |       | 127,861     |       |
| Property, plant &  equipment (2)                                                 | ** ** | **55,006**  |       | 55,994      |       |
| Investments in equity  accounted associates (3)                                      | ** ** | **5,227**   |       | 7,451       |       |
| Other investments (4)                                                                | ** ** | **6,202**   |       | 1,939       |       |
| Other assets (5)                                                                     | ** ** | **5,810**   |       | 10,683      |       |
| Deferred tax assets  (13)                                                            | ** ** | **8,291**   |       | 13,212      |       |
|                                                                                 |       |        |       |        |       |
| **Total non-current assets**                                                         | ** ** | **234,706** | ** ** | **217,140** | ** ** |
|                                                                                 |       |        |       |        |       |
| Current assets                                                                       |       |        |       |        |       |
| Inventories (6)                                                                      | ** ** | **451**     |       | 374         |       |
| Derivatives (7)                                                                      | ** ** | **—**  |       | 1,723       |       |
| (Un)billed receivables  (8)                                                          | ** ** | **373,428** |       | 321,013     |       |
| Other current assets  (9)                                                            | ** ** | **23,836**  |       | 31,950      |       |
| Corporate income tax  receivables                                                    | ** ** | **2,561**   |       | 4,037       |       |
| Cash and cash  equivalents (10)                                                      | ** ** | **101,488** |       | 73,884      |       |
|                                                                                 |       |        |       |        |       |
| **Total current assets**                                                             | ** ** | **501,764** | ** ** | **432,981** | ** ** |
|                                                                                 |       |        |       |        |       |
| **Total**                                                                            | ** ** | **736,470** | ** ** | **650,121** | ** ** |
|                                                                                 |       |        |       |        |       |
| **Equity and liabilities**                                                           | ** ** | ** **  | ** ** | ** **  | ** ** |
|                                                                                 |       |        |       |        |       |
| Shareholders’ equity                                                            |       |        |       |        |       |
| Share capital                                                                        | ** ** | **1,030**   |       | 1,030       |       |
| Additional paid-in  capital                                                          | ** ** | **44,153**  |       | 44,153      |       |
| Reserve exchange rate  differences                                                   | ** ** | **(7,659**  | **)**      | 6,403       |       |
| Retained earnings                                                                    | ** ** | **106,421** |       | 91,203      |       |
| Net income                                                                           | ** ** | **44,936**  |       | 33,414      |       |
|                                                                                 |       |        |       |        |       |
| **Total issued capital and  reserves attributable to equity holders of the Company** | ** ** | **188,881** | ** ** | **176,203** | ** ** |
| Minority interest                                                                    | ** ** | **11,836**  |       | 11,885      |       |
|                                                                                 |       |        |       |        |       |
| **Total equity (11)**                                                                | ** ** | **200,717** | ** ** | **188,088** | ** ** |
|                                                                                 |       |        |       |        |       |
| *Non-current liabilities*                                                            | * *   | * *    | * *   | * *    | * *   |
| Provisions (12)                                                                      | ** ** | **19,943**  |       | 15,818      |       |
| Deferred tax  liabilities (13)                                                       | ** ** | **20,444**  |       | 26,252      |       |
| Long-term debt (14)                                                                  | ** ** | **119,286** |       | 116,149     |       |
| Derivatives (7)                                                                      | ** ** | **5,829**   | ** ** | **—**  | ** ** |
| ** **                                                                           | ** ** | ** **  | ** ** | ** **  | ** ** |
| **Total non-current liabilities**                                                    | ** ** | **165,502** | ** ** | **158,219** | ** ** |
|                                                                                 |       |        |       |        |       |
| *Current liabilities*                                                                | * *   | * *    | * *   | * *    | * *   |
| Billing in excess of  cost (8)                                                       | ** ** | **111,882** |       | 89,269      |       |
| Corporate tax  liabilities                                                           | ** ** | **1,913**   |       | 8,172       |       |
| Current portion of  long-term debt                                                   | ** ** | **1,580**   |       | 2,456       |       |
| Accounts payable                                                                     | ** ** | **87,052**  |       | 72,517      |       |
| Accrued expenses                                                                     | ** ** | **24,885**  |       | 12,587      |       |
| Other current  liabilities (15)                                                      | ** ** | **142,939** |       | 118,813     |       |
| ** **                                                                           | ** ** | ** **  | ** ** | ** **  | ** ** |
| **Total current liabilities**                                                        | ** ** | **370,251** | ** ** | **303,814** | ** ** |
| ** **                                                                           | ** ** | ** **  | ** ** | ** **  | ** ** |
| **Total**                                                                            | ** ** | **736,470** | ** ** | **650,121** | ** ** |

 

*The Notes to the consolidatedfinancial statements are an integral part of these financial statements*

F-3

----

**Consolidatedstatement of income for the year ended December 31,**

*amountsin thousands of euros unless otherwise stated*

 
| ** **                                                                | ** ** | **2006**       | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|---------------------------------------------------------------------------|------------|----------------|------------|------------|------------|------------|------------|
|                                                                      |       |           |       |       |       |       |       |
| Revenues                                                                  | ** ** | **1,235,479**  |       | 999,743    |       | 894,405    |       |
| Gain on sale of  investments                                              | ** ** | **—**     |       | 2,893      |       | 6,525      |       |
| Change in work in  progress                                               | ** ** | **(2,436**     | **)**      | (1,537     | )          | (149       | )          |
|                                                                      | ** ** | ** **     |       |       |       |       |       |
| Gross revenue (16)                                                        | ** ** | **1,233,043**  |       | 1,001,099  |       | 900,781    |       |
| Materials, services of  third parties and                                 | ** ** | ** **     |       |       |       |       |       |
| subcontractors                                                            | ** ** | **395,583**    |       | 297,849    |       | 268,244    |       |
|                                                                      | ** ** | ** **     |       |       |       |       |       |
| Revenue, net of  materials, services of third parties, and subcontractors | ** ** | **837,460**    |       | 703,250    |       | 632,537    |       |
| Personnel costs (17)                                                      | ** ** | **(581,333**   | **)**      | (484,481   | )          | (448,720   | )          |
| Other operational costs  (17)                                             | ** ** | **(159,643**   | **)**      | (143,204   | )          | (132,268   | )          |
| Depreciation (1 and 2)                                                    | ** ** | **(17,733**    | **)**      | (15,210    | )          | (15,654    | )          |
| Amortization  identifiable intangible assets (1)                          | ** ** | **(8,270**     | **)**      | (5,967     | )          | (376       | )          |
|                                                                      | ** ** | ** **     |       |       |       |       |       |
| Operating income                                                          | ** ** | **70,481**     |       | 54,388     |       | 35,519     |       |
|                                                                      | ** ** | ** **     |       |       |       |       |       |
| Financial income                                                          | ** ** | **14,116**     |       | 2,784      |       | 1,603      |       |
| Financial expenses                                                        | ** ** | **(10,063**    | **)**      | (6,351)    | )          | (5,067     | )          |
| Fair value change of  derivatives (7)                                     | ** ** | **(7,552**     | **)**      | 1,723      |       | —     |       |
|                                                                      | ** ** | ** **     |       |       |       |       |       |
| Total financing items  (18)                                               | ** ** | **(3,499**     | **)**      | (1,844     | )          | (3,464     | )          |
| Income/(loss) from  associates                                            | ** ** | **(458**       | **)**      | 1,382      |       | 2,448      |       |
|                                                                      | ** ** | ** **     |       |       |       |       |       |
| Income before taxes                                                       | ** ** | **66,524**     |       | 53,926     |       | 34,503     |       |
| Income taxes (19)                                                         | ** ** | **(20,119**    | **)**      | (17,342    | )          | (10,400    | )          |
|                                                                      | ** ** | ** **     |       |       |       |       |       |
| Profit for the period                                                     | ** ** | **46,405**     |       | 36,584     |       | 24,103     |       |
|                                                                      | ** ** | ** **     |       |       |       |       |       |
| Attributable to:                                                          | ** ** | ** **     |       |       |       |       |       |
| Net income (Equity  holders of the Company)                               | ** ** | **44,936**     |       | 33,414     |       | 22,176     |       |
| Minority interest                                                         | ** ** | **1,469**      |       | 3,170      |       | 1,927      |       |
| Profit for the period                                                     | ** ** | **46,405**     |       | 36,584     |       | 24,103     |       |
| Earnings per share (in  euros)                                            | ** ** | ** **     |       |       |       |       |       |
| Basic                                                                     | ** ** | **2.22**       |       | 1.65       |       | 1.10       |       |
| Diluted                                                                   | ** ** | **2.13**       |       | 1.60       |       | 1.09       |       |
|                                                                      | ** ** | ** **     |       |       |       |       |       |
| Weighted average number  of shares used to                                | ** ** | ** **     |       |       |       |       |       |
| compute income per  share:                                                | ** ** | ** **     |       |       |       |       |       |
| Basic                                                                     | ** ** | **20,234,295** |       | 20,260,712 |       | 20,140,195 |       |
| Diluted                                                                   | ** ** | **21,074,137** |       | 20,816,777 |       | 20,417,230 |       |

 

*The Notes to the consolidatedfinancial statements are an integral part of these financial statements*

F-4

----

**Consolidated cash flow statement for the yearended December 31,**

*amountsin thousands of euros unless otherwise stated*

 
| ** **                                                               | ** ** | **2006**    | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|--------------------------------------------------------------------------|------------|-------------|------------|------------|------------|------------|------------|
| **Cash flow from operating  activities**                                 |       |        | ** ** | ** ** | ** ** | ** ** | ** ** |
| Profit for the period                                                    | ** ** | **46,405**  |       | 36,584     |       | 24,103     |       |
| Loss/(income) from  associates                                           | ** ** | **458**     |       | (1,382     | )          | (2,448     | )          |
| Taxes on income                                                          | ** ** | **20,119**  |       | 17,342     |       | 10,400     |       |
| Financing income /  expenses                                             | ** ** | **3,499**   |       | 1,844      |       | 3,464      |       |
|                                                                     | ** ** | ** **  |       |       |       |       |       |
| Operating income                                                         | ** ** | **70,481**  |       | 54,388     |       | 35,519     |       |
| Depreciation and  amortization                                           | ** ** | **26,003**  |       | 21,177     |       | 16,030     |       |
| Share-based  compensation                                                | ** ** | **1,751**   |       | 561        |       | 239        |       |
| Dividend received                                                        | ** ** | **1,532**   |       | 632        |       | 2,099      |       |
| Sale of activities, net  of cost                                         | ** ** | **—**  |       | (2,486     | )          | (3,990     | )          |
| Interest received                                                        | ** ** | **8,703**   |       | 1,996      |       | 1,063      |       |
| Interest paid                                                            | ** ** | **(12,975** | **)**      | (5,799     | )          | (3,449     | )          |
| Corporate tax paid                                                       | ** ** | **(19,634** | **)**      | (16,114    | )          | (6,779     | )          |
| Changes in inventories                                                   | ** ** | **(77**     | **)**      | 94         |       | (268       | )          |
| Changes in receivables                                                   | ** ** | **(36,850** | **)**      | (35,723    | )          | (11,550    | )          |
| Changes in deferred  taxes                                               | ** ** | **1,361**   |       | 10,533     |       | (2,029     | )          |
| Changes in provisions                                                    | ** ** | **(1,475**  | **)**      | (10,640    | )          | 2,911      |       |
| Changes in billing in  excess of costs                                   | ** ** | **25,000**  |       | 36,429     |       | —     |       |
| Changes in current  liabilities                                          | ** ** | **22,536**  |       | 11,742     |       | 14,978     |       |
|                                                                     | ** ** | ** **  |       |       |       |       |       |
| ***Net  cash provided by operating activities***                         | ** ** | **86,356**  |       | 66,790     |       | 44,774     |       |
|                                                                     |       |        |       |       |       |       |       |
| **Cash flow from investing  activities**                                 |       |        |       |       |       |       |       |
|                                                                     | ** ** | ** **  |       |       |       |       |       |
| Investments in  (in)tangible assets                                      | ** ** | **(19,292** | **)**      | (17,667    | )          | (12,470    | )          |
| Divestments of  (in)tangible assets                                      | ** ** | **870**     |       | 2,725      |       | 713        |       |
| Investments in  consolidated companies                                   | ** ** | **(46,082** | **)**      | (75,039    | )          | (14,759    | )          |
| Divestments of  consolidated companies                                   | ** ** | **(23**     | **)**      | 8,527      |       | 8,006      |       |
| Investments in equity  accounted associates and other non-current assets | ** ** | **(6,707**  | **)**      | (5,858     | )          | (2,526     | )          |
| Divestments of equity  accounted associates and other non-current assets | ** ** | **2,378**   |       | 2,198      |       | 1,308      |       |
|                                                                     | ** ** | ** **  |       |       |       |       |       |
| ***Net  cash used in investing activities***                             | ** ** | **(68,856** | **)**      | (85,114    | )          | (19,728    | )          |
|                                                                     |       |        |       |       |       |       |       |
| **Cash flow from financing  activities**                                 |       |        |       |       |       |       |       |
| Issued shares by  subsidiaries                                           | ** ** | **30**      |       | 49         |       | 1,727      |       |
| Options exercised                                                        | ** ** | **4,611**   |       | 2,624      |       | 704        |       |
| Own shares purchased                                                     | ** ** | **(17,596** | **)**      | (6,562     | )          | (158       | )          |
| New long-term debt                                                       | ** ** | **26,062**  |       | 79,931     |       | 3,018      |       |
| Repayment of long-term  debt                                             | ** ** | **(8,664**  | **)**      | (24,136    | )          | (4,034     | )          |
| Changes in short-term  borrowings                                        | ** ** | **19,639**  |       | 39         |       | 2,248      |       |
| Dividends paid                                                           | ** ** | **(13,590** | **)**      | (10,848    | )          | (10,204    | )          |
| Other changes in equity                                                  | ** ** | **2,171**   |       | 966        |       | —     |       |
|                                                                     | ** ** | ** **  |       |       |       |       |       |
| ***Net  cash provided/(used) in financing activities***                  | ** ** | **12,663**  |       | 42,063     |       | (6,699     | )          |
|                                                                     | ** ** | ** **  |       |       |       |       |       |
| Exchange rate  differences                                               | ** ** | **(2,559**  | **)**      | 1,926      |       | (1,386     | )          |
|                                                                     | ** ** | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** |
| ***Total  increase / (decrease) in cash and cash equivalents***          | ** ** | **27,604**  | ** ** | **25,665** | ** ** | **16,961** | ** ** |
| Cash and cash  equivalents at beginning of year                          | ** ** | **73,884**  | ** ** | **48,219** | ** ** | **31,258** | ** ** |
| Cash and cash equivalents at end of year                                 | ** ** | **101,488** | ** ** | **73,884** | ** ** | **48,219** | ** ** |

 

*The Notes to the consolidatedfinancial statements are an integral part of these financial statements*

F-5

----

**Consolidated statement of changesin equity**

Reconciliation of movement in capital and reserves
| **Amounts in thousand of euros unless otherwise stated** | ** ** | **Number of  Priority Shares** | ** ** | **Number of  Common  Stock** | ** ** | **Share  capital** | ** ** | **Additional  paid-in  capital** | ** ** | **Reserve  exchange  rate  differences** | ** ** | **Retained  earnings** | ** ** | **Shareholders’  equity** | ** ** | **Minority  interest** | ** ** | **Total  equity** | ** ** |
|---------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|-----------------------------------|------------|--------------------|------------|----------------------------------|------------|------------------------------------------|------------|------------------------|------------|--------------------------------|------------|------------------------|------------|-------------------|------------|
| Balance at January 1,  2004                                                                 |       | 200                                      |       | 20,430,377                        |       | 1,022              |       | 35,985                           |       | —                                   |       | 87,956                 |       | 124,963                        |       | 7,538                  |       | 132,501           |       |
|                                                                                        |       |                                     |       |                              |       |               |       |                             |       |                                     |       |                   |       |                           |       |                   |       |              |       |
| Exchange rate  differences                                                                  |       |                                     |       |                              |       |               |       |                             |       | (3,633                                   | )          |                   |       | (3,633                         | )          | 186                    |       | (3,447            | )          |
| Share-based compensation  and related taxes                                                 |       |                                     |       |                              |       |               |       |                             |       |                                     |       | 239                    |       | 239                            |       |                   |       | 239               |       |
| Income directly  recognized in equity                                                       |       |                                     |       |                              |       |               |       |                             |       | (3,633                                   | )          | 239                    |       | (3,394                         | )          | 186                    |       | (3,208            | )          |
| Profit for the period                                                                       |       |                                     |       |                              |       |               |       |                             |       |                                     |       | 22,176                 |       | 22,176                         |       | 1,927                  |       | 24,103            |       |
| Comprehensive income net  of tax                                                            |       |                                     |       |                              |       |               |       |                             |       | (3,633                                   | )          | 22,415                 |       | 18,782                         |       | 2,113                  |       | 20,895            |       |
| Dividends to  shareholders                                                                  |       |                                     |       |                              |       |               |       |                             |       |                                     |       | (9,647                 | )          | (9,647                         | )          | (557                   | )          | (10,204           | )          |
| Own shares purchased for  granted options                                                   |       |                                     |       |                              |       |               |       |                             |       |                                     |       | (158                   | )          | (158                           | )          |                   |       | (158              | )          |
| Options exercised                                                                           |       |                                     |       |                              |       |               |       |                             |       |                                     |       | 704                    |       | 704                            |       |                   |       | 704               |       |
| Expansion ownership                                                                         |       |                                     |       |                              |       |               |       |                             |       |                                     |       |                   |       |                           |       | (217                   | )          | (217              | )          |
| Issuance of shares of  common stock                                                         |       |                                     |       | 215,238                           |       | 8                  |       | 1,659                            |       |                                     |       |                   |       | 1,667                          |       |                   |       | 1,667             |       |
| Capital increase                                                                            |       |                                     |       |                              |       |               |       |                             |       |                                     |       |                   |       |                           |       | 59                     |       | 59                |       |
| Other changes                                                                               |       |                                     |       |                              |       |               |       |                             |       |                                     |       | 60                     |       | 60                             |       | 58                     |       | 118               |       |
| Balance at December 31, 2004                                                                |       | 200                                      |       | 20,645,615                        |       | 1,030              |       | 37,644                           |       | (3,633                                   | )          | 101,330                |       | 136,371                        |       | 8,994                  |       | 145,365           |       |
|                                                                                        |       |                                     |       |                              |       |               |       |                             |       |                                     |       |                   |       |                           |       |                   |       |              |       |
| Balance at January 1, 2005                                                                  |       | 200                                      |       | 20,645,615                        |       | 1,030              |       | 37,644                           |       | (3,633                                   | )          | 101,330                |       | 136,371                        |       | 8,994                  |       | 145,365           |       |
|                                                                                        |       |                                     |       |                              |       |               |       |                             |       |                                     |       |                   |       |                           |       |                   |       |              |       |
| Exchange rate differences                                                                   |       |                                     |       |                              |       |               |       |                             |       | 10,036                                   |       |                   |       | 10,036                         |       | 1,581                  |       | 11,617            |       |
| Share-based compensation and related taxes                                                  |       |                                     |       |                              |       |               |       |                             |       |                                     |       | 3,487                  |       | 3,487                          |       |                   |       | 3,487             |       |
| Income directly recognized in equity                                                        |       |                                     |       |                              |       |               |       |                             |       | 10,036                                   |       | 3,487                  |       | 13,523                         |       | 1,581                  |       | 15,104            |       |
| Profit for the period                                                                       |       |                                     |       |                              |       |               |       |                             |       |                                     |       | 33,414                 |       | 33,414                         |       | 3,170                  |       | 36,584            |       |
| Comprehensive income net of tax                                                             |       |                                     |       |                              |       |               |       |                             |       | 10,036                                   |       | 36,901                 |       | 46,937                         |       | 4,751                  |       | 51,688            |       |
| Dividends to shareholders                                                                   |       |                                     |       |                              |       |               |       |                             |       |                                     |       | (9,745)                |       | (9,745                         | )          | (1,103                 | )          | (10,848           | )          |
| Own shares purchased for granted options                                                    |       |                                     |       |                              |       |               |       |                             |       |                                     |       | (6,562)                |       | (6,562                         | )          |                   |       | (6,562            | )          |
| Options exercised                                                                           |       |                                     |       |                              |       |               |       |                             |       |                                     |       | 2,624                  |       | 2,624                          |       |                   |       | 2,624             |       |
| Expansion ownership                                                                         |       |                                     |       |                              |       |               |       |                             |       |                                     |       |                   |       |                           |       | (787                   | )          | (787              | )          |
| Capital increase                                                                            |       |                                     |       |                              |       |               |       |                             |       |                                     |       |                   |       |                           |       | 49                     |       | 49                |       |
| Additional paid-in capital                                                                  |       |                                     |       |                              |       |               |       | 6,509                            |       |                                     |       |                   |       | 6,509                          |       |                   |       | 6,509             |       |
| Other changes                                                                               |       |                                     |       |                              |       |               |       |                             |       |                                     |       | 69                     |       | 69                             |       | (19                    | )          | 50                |       |
| Balance at December 31, 2005                                                                |       | 200                                      |       | 20,645,615                        |       | 1,030              |       | 44,153                           |       | 6,403                                    |       | 124,617                |       | 176,203                        |       | 11,885                 |       | 188,088           |       |
|                                                                                        |       |                                     |       |                              |       |               |       |                             |       |                                     |       |                   |       |                           |       |                   |       |              |       |
| Balance at January 1, 2006                                                                  |       | 200                                      |       | 20,645,615                        |       | 1,030              |       | 44,153                           |       | 6,403                                    |       | 124,617                |       | 176,203                        |       | 11,885                 |       | 188,088           |       |
|                                                                                        |       |                                     |       |                              |       |               |       |                             |       |                                     |       |                   |       |                           |       |                   |       |              |       |
| Exchange rate differences                                                                   |       |                                     |       |                              |       |               |       |                             | ** ** | **(14,062**                              | **)**      |                   | ** ** | **(14,062**                    | **)**      | **(9**                 | **)**      | **(14,071**       | **)**      |
| Taxes related to share-based compensation                                                   |       |                                     |       |                              |       |               |       |                             |       |                                     | ** ** | **6,416**              | ** ** | **6,416**                      |       |                   | ** ** | **6,416**         | ** ** |
| Income directly recognized in equity                                                        |       |                                     |       |                              |       |               |       |                             | ** ** | **(14,062**                              | **)**      | **6,416**              | ** ** | **(7,646**                     | **)**      | **(9**                 | **)**      | **(7,655**        | **)**      |
| Profit for the period                                                                       |       |                                     |       |                              |       |               |       |                             |       |                                     | ** ** | **44,936**             | ** ** | **44,936**                     | ** ** | **1,469**              | ** ** | **46,405**        | ** ** |
| Comprehensive income net of tax                                                             |       |                                     |       |                              |       |               |       |                             | ** ** | **(14,062**                              | **)**      | **51,352**             | ** ** | **37,290**                     | ** ** | **1,460**              | ** ** | **38,750**        | ** ** |
| Share-based compensation                                                                    |       |                                     |       |                              |       |               |       |                             |       |                                     | ** ** | **1,751**              | ** ** | **1,751**                      | ** ** | ** **             | ** ** | **1,751**         | ** ** |
| Dividends to shareholders                                                                   |       |                                     |       |                              |       |               |       |                             |       |                                     | ** ** | **(13,378**            | **)**      | **(13,378**                    | **)**      | **(312**               | **)**      | **(13,690**       | **)**      |
| Own shares purchased for granted options                                                    |       |                                     |       |                              |       |               |       |                             |       |                                     | ** ** | **(17,596**            | **)**      | **(17,596**                    | **)**      |                   | ** ** | **(17,596**       | **)**      |
| Options exercised                                                                           |       |                                     |       |                              |       |               |       |                             |       |                                     | ** ** | **4,611**              | ** ** | **4,611**                      |       |                   | ** ** | **4,611**         | ** ** |
| Expansion ownership                                                                         |       |                                     |       |                              |       |               |       |                             |       |                                     |       |                   |       |                           | ** ** | **(910**               | **)**      | **(910**          | **)**      |
| Capital increase                                                                            |       |                                     |       |                              |       |               |       |                             |       |                                     |       |                   |       |                           | ** ** | **30**                 | ** ** | **30**            | ** ** |
| Other changes                                                                               |       |                                     |       |                              |       |               |       |                             |       |                                     |       |                   |       |                           | ** ** | **(317**               | **)**      | **(317**          | **)**      |
| Balance at December 31, 2006                                                                | ** ** | **200**                                  | ** ** | **20,645,615**                    | ** ** | **1,030**          | ** ** | **44,153**                       | ** ** | **(7,659**                               | **)**      | **151,357**            | ** ** | **188,881**                    | ** ** | **11,836**             | ** ** | **200,717**       | ** ** |

 

See Accompaying Notes to the Consolidated Financial Statements

F-6

----

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

For comparison purposesthe presentation of the financial statements 2005 and 2004 has been changed toconform with the presentation in 2006.

VALUATION PRINCIPLES

**General**

ARCADIS N.V. is apublic company organized under the laws of the Kingdom of the Netherlands. Itsprincipal office is located at: Nieuwe Stationsstraat 10, 6811 KS, Arnhem, theNetherlands. Phone: +31-26-3778911.

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

# **Statement of compliance**

The consolidated financial statements have beenprepared in accordance with International Financial Reporting Standards (IFRSs)as endorsed by the European Union and in conformity with the Dutch Civil Code,Book 2, Title 9. For ARCADIS, there are no significant differences between theIFRSs as endorsed by the European Union and IFRSs.

The IFRS FinancialStatements were authorized for issue by the Executive Board and SupervisoryBoard on May 15, 2007, and the US-GAAP reconciliation was authorized for issueby the Executive Board and Supervisory Board on May 15, 2007.

# **Basis of preparation**

The consolidated financial statements are presented ineuros, which is the Company’s functional currency. All amounts shown in thefinancial statements are in thousands of euros unless otherwise stated.

# **Use of estimates and judgments**

The preparation of financial statements requiresmanagement to make judgments, estimates and assumptions that affect theapplication of accounting policies and the reported amounts of assets,liabilities, income and expenses. Actual results may differ from theseestimates.

Estimates and underlying assumptions are reviewed onan ongoing basis. Revisions to accounting estimates are recognized in theperiod in which the estimate is revised and in any future periods affected.

**Consolidation**

The consolidatedfinancial statements include the accounts of ARCADIS N.V. and its subsidiaries.Subsidiaries are companies over which ARCADIS N.V. has control. Control existswhen the Company has the power, directly or indirectly, to govern the financialand operating policies of an entity so as to obtain benefits from itsactivities. In assessing control, potential voting rights that presently areexercisable or convertible are taken into account. Hundred percent of theoperations of subsidiaries are included with the minority interest in groupequity and group income shown separately.

The financial statementsof subsidiaries are included in the consolidated financial statements from thedate that control commences until the date control ceases.

Jointly controlledentities are those entities over whose activities the Company has jointcontrol, established by contractual agreement. The consolidated financialstatements include the Company’s proportionate share of the entities’ assets,liabilities, revenue and expenses with items of a similar nature on aline-by-line basis, from the date that joint control commences until the datethat joint control ceases.

**Transactions eliminated onconsolidation**

Intragroup balances and any unrealized gains and losses or income andexpenses arising from intragroup transactions are eliminated in preparing theconsolidated financial statements. Unrealized gains arising from

F-7

----

transactions with equityaccounted associates and jointly controlled entities are eliminated to theextent of the Company’s interest in the investee. Unrealized losses areeliminated in the same way as unrealized gains, but only to the extent thatthere is no evidence of impairment.

**Foreign currency**

**Foreign currency transactions**

For statement of incomedata, amounts in foreign currencies are converted into euros at the exchangerates at the date of the transactions. Exchange rate differences are includedin the income statement.

**Foreign operations**

The assets andliabilities of foreign operations, including goodwill and fair valueadjustments arising on acquisition, are translated to euros at exchange ratesat the reporting date.

Foreign currencydifferences are recognized directly in equity. Since January 1, 2004, theCompany’s date of transition to IFRSs, such differences have been recognized inthe reserve exchange rate differences (RERD). When a foreign operation isdisposed of, in part or in full, the relevant amount in the RERD is transferredto profit or loss.

**Derivative Financial Instruments**

Only for specificpurposes derivative financial instruments are used to hedge the Company’sexposure to foreign exchange and interest rate risks arising from operational,financing and investment activities. In accordance with its treasury policy,the Company does not hold or issue derivative financial instruments for tradingpurposes. Derivatives that do not qualify for hedge accounting under IFRS areaccounted for as trading instruments.

Derivatives arerecognized initially at fair value. The gain or loss on remeasurement to fairvalue is recognized immediately as profit or loss. The fair value of interestrate swaps is the estimated amount that the Company would receive or pay toterminate the swap at the balance sheet date, taking into account currentinterest rates and the current creditworthiness of the swap counterparties. Thefair value of forward exchange contracts is their quoted market price at thebalance sheet date, being the present value of the quoted forward price.

**Principlesof valuation of assets and liabilities**

**Intangible assets**

***Goodwill***

All acquisitions are accountedfor by applying the purchase method. Goodwill represents the excess of the costof the acquisition over the Company’s interest in the net fair value of assets,liabilities and contingent liabilities of the acquiree. When the excess isnegative (negative goodwill), it is recorded immediately in profit. Goodwillhas an indefinite useful life and is stated at cost less any accumulatedimpairment losses. Goodwill is tested annually for impairment.

***Identifiableintangible assets***

Acquired identifiable intangibleassets, mainly consisting of expected profits in the backlog of the acquiredcompanies at the moment of acquisition, are stated at cost less accumulatedamortization and impairment losses. Identifiable intangible assets have afinite useful life and are amortized over the estimated useful life, using theunit of production method. For identifiable intangible assets the useful lifevaries from 0.5 to 5 years. There are no intangible assets that could not berecognized or reliably measured.

***Software***

Software is valued atcost less accumulated depreciation and impairment losses. Software has a finitelife and is depreciated on a straight-line basis over the estimated usefullife, which is 3 to 5 years.

Depreciation methods and useful lives, as well as residual values, arereassessed annually.

F-8

----

**Property, plant & equipment**

#### ***Land and buildings***

Real estate is valued atcost less accumulated depreciation and impairment losses. Depreciation ischarged to the income statement on a straight-line basis over the estimateduseful life and generally amounts to 3% of the historical value. Land is notdepreciated.

#### ***Furniture and fixtures***

Furniture and fixturesare valued at cost. Depreciation is charged to the income statement on astraight-line basis over the estimated useful life. For furniture and fixturesthe useful life varies from 3 to 8 years; annual depreciation is 12% to 33% ofcost.

Depreciation methods anduseful lives, as well as residual values, are reassessed annually.

When portions of an itemof property, plant & equipment have different useful lives, they areaccounted for as separate items (major components) of property, plant &equipment.

***Leasedassets***

Leases in which theCompany assumes substantially all the risks and rewards of ownership areclassified as finance leases. Upon initial recognition the leased asset ismeasured at an amount equal to the lower of its fair value and the presentvalue of the minimum lease payments. Subsequent to initial recognition, theasset is accounted for in accordance with the accounting policy applicable tothat asset.

Other leases areoperating leases, and the leased assets are not recognized on the Company’sbalance sheet.

**Investments in equity accounted associates, otherinvestments and other assets**

Associates, in whichARCADIS has significant influence, but not control over the financial andoperating management, are accounted for using the equity method. Associates inwhich ARCADIS has no significant influence are valued at amortized cost lessany impairment losses. Long-term receivables are valued at amortized cost lessany impairment losses.

**Deferredtaxes**

Deferred tax assets andliabilities are recorded on the basis of the expected fiscal consequences oftemporary differences between the book value in the financial statements andthe tax reporting of all assets and liabilities. Calculation of the deferredtaxes is done using the at balance sheet date enacted or substantially enactedtax rates and tax laws that are applicable when the deferred taxes will besettled. Deferred tax assets are only recorded when it is more likely than notthat there will be future fiscal profits with which to settle these temporarydifferences or not-yet-compensated fiscal losses. Deferred taxes are notdiscounted.

**Inventories**

Goods for resale, rawmaterials, and supplies are valued at the lower of cost or net realizable valueon balance sheet date.

**(Un)billed receivables**

Unbilled receivables arestated at cost plus profit recognized to date less a provision for foreseeablelosses and less progress billings. Cost includes all expenditures relateddirectly to specific projects and an allocation of fixed and variable overheadsincurred in the Company’s contract activities based on normal operatingcapacity. Billed receivables are valued at amortized cost less any impairmentlosses. If payments received from costumers exceed the income recognized, thedifference is presented as billings in excess of cost in the balance sheet.

#### **Othercurrent assets**

Other current assets arevalued at amortized cost less any impairment losses.

F-9

----

**Cash and cash equivalents**

Cash and cash equivalentscomprise cash balances and call deposits.

**Equity**

*Repurchaseof shares*

The consideration paidfor temporary repurchased shares, which are repurchased in order to preventdilution through the share option plan, is deducted from equity at cost.

*Dividends*

Dividends are recognizedas a liability in the period in which they are declared.

**Provisions**

*General*

Provisions are recognizedwhen there is a present obligation (legal or constructive) as a result of apast event for which it is probable that an outflow of resources embodyingeconomic benefits will be required to settle the obligation, and a reliableestimate can be made of the amount of the obligation.

Provisions are stated at thenet present value, taking into account the timing of the cash outflows.

*Pensions*

In some countries minorplans are in place that qualify as defined benefit plans. For these minordefined benefit plans, a provision is created, which is based on actuarialcalculations. The net obligation with respect to these defined benefit pensionplans is calculated separately for each plan by estimating the amount of futurebenefit that employees have earned in return for their service in the currentand prior periods; that benefit is discounted to determine its present value,and any unrecognized past service costs and the fair value of any plan assetsare deducted. The discount rate is the yield at the reporting date on bondsthat have maturity dates approximating the terms of the obligations. Thecalculation is performed by a qualified actuary using the projected unit creditmethod. When the calculation results in a benefit, the recognized asset islimited to the net total of any unrecognized past service costs and the presentvalue of any future refunds from the plan or reductions in future contributionsto the plan.

When the benefits of aplan are improved, the portion of the increased benefit relating to pastservice by employees is recognized in profit or loss on a straight-line basisover the average period until the benefits become vested. To the extent thatthe benefits vest immediately, the expense is recognized immediately in profitor loss.

Obligations forcontributions to defined contribution pension plans are recognized as a cost inthe income statement as incurred.

*Otherlong-term employee benefits*

The Company’s netobligation for long-term service benefits, other than pension plans, is theamount of future benefit that employees have earned in return for their servicein the current and prior periods. The obligation is calculated using theprojected unit credit method and is discounted to its present value of anyrelated assets that are deducted. Any actuarial gains or losses are recognizedin profit or loss in the period in which they arise.

**Long-termdebt**

Interest bearing debtsare recorded against amortized cost, in which the difference between theproceeds and the final repayment amount is charged to the income statementduring the duration of the debts. The portion of the long-term debt that has tobe repaid within 1 year after balance sheet date is recorded as the currentportion of long-term debt under the current liabilities.

**Impairment**

For the treatment ofimpairment please refer to “Impairment” in the section “Critical accountingjudgments in applying ARCADIS N.V.’s accounting policies”.

F-10

----

# **Method of determination of income**

**Grossrevenue**

*Revenues*

As soon as theoutcome of a construction contract can be estimated reliably, contract revenueand expenses are recognized in profit or loss in proportion to the stage ofcompletion of the contact. Contract revenue includes the initial amount agreedin the contract plus any variations in contract work, claims and incentivepayments to the extent that it is probable that they will result in revenue andcan be measured reliably.

The stage of completionis assessed by reference to surveys of work performed. The Company uses themetric “costs incurred” compared to “total estimated costs” in determining thestage of completion. Profits on projects are recorded according the percentageof completion calculated with this metric. When the outcome of a constructioncontract cannot be estimated reliably, contract revenue is recognized only tothe extent of contract costs incurred that are likely to be recoverable. Anexpected loss on a contract is recognized immediately in profit or loss.

The balances of theprojects on which no confirmation of order has been received are charged toincome.

Advance investments thatcan be separately identified, measured reliably and that are attributable todesign, build, finance and operate contracts are accounted for as contractcosts only when it is probable that the contract will be obtained. Advanceinvestments in the development of a contract that do not meet these criteriaare expensed. It is only considered probable that a design, build, finance andoperate contract will be obtained upon receipt of a contract signed by theclient.

In case of a partnershipthe consolidated financial statements include the Company’s proportionate shareof the contract costs for jointly controlled entities. Investments in which theCompany has significant influence but not control over the financial andoperating management are valued using the equity method.

Furthermore, we evaluateour investments in partnership projects for potential beneficial interest.

*Sale of investments*

When the sale of a groupcompany classified as a continued operation, a jointly controlled entity or anassociate leads to a gain, this gain is shown separately as part of grossrevenue. A loss is recorded under other business costs.

*Change in Work in progress*

The invoicing of projectsthat are in production mostly does not equal the project costs and projectresults per balance sheet date. The difference between these amounts at yearend, compared to that amount at January 1, is shown separately as part of grossrevenue.

**Materials, services of third parties andsubcontractors**

This amount representsall project-related costs of materials and services charged by third partiesincluding the costs of subcontractors.

**Operational cost**

All costs related toemployees, as well as non-project-related out-of-pocket expenses, are takeninto account as operational cost in the year to which these items relate.

*Share-basedpayments*

The grant date fair valueof share-based incentives under the ARCADIS long-term incentive plan isrecognized as an employee expense, with a corresponding increase in equity,over the period in which the employees become unconditionally entitled to theoptions. The amount recognized as an expense is adjusted to reflect the actualnumber of share options that vest.

F-11

----

The fair value of the in2006 granted options is determined using the binominal model taking intoaccount the effect of the applications. The cost charged will be adjusted forthe actual number of share-based incentives that are cancelled. The vesting andexercise of shares may be conditional on the satisfaction of performanceconditions or on continued employment, or both, as set by the SupervisoryBoard.

**Financingitems**

Financing items compriseinterest income and expenses and are accounted for in the year to which theseitems relate using the effective interest rate method, and (unrealized) gainsor losses on financial instruments.

**Income from associates**

The proportionate sharein earnings from equity accounted associates is accounted for in the year theseearnings are recorded by those participations. For associates in which ARCADISdoes not have significant influence, only dividends received are included inincome.

**Income taxes**

Income tax on incomecomprises both current and deferred tax. Income tax is recognized in the incomestatement except to the extent that it relates to items recognized directly inequity in which case it is recognized in equity.

**Segmentreporting**

The four segments onwhich the Company reports are the geographical segments. The Company isoperated on a geographic basis and considers those geographical areas witheconomic and operating similarities to be separate primary operating segments.The Company mainly operates in a local to local market; therefore risks andrates of returns are reflected predominately by the geographical market.Management reporting systems, legal structures and consolidation are based onsolely geographic segments. The chief decision-making officer manages thebusiness and allocates resources on geographical basis only.

The differentiation inthe type of services provided by the various group companies is limited. These servicesextend in general to consulting, engineering and project management services.

## **Earningsper share**

Basic earnings per shareare computed using the weighted average number of shares outstanding during theperiod excluding the temporarily repurchased shares used to cover option plans.Diluted earnings per share are computed using the weighted average number ofshares and options outstanding during the period, as far as the exercise priceof these options is lower than the share price.

For calculating theearnings per share, following numbers of shares were used:

| Year     | ** ** | **Priority shares** | ** ** | **Shares of common stock** | ** ** | **Diluted number of  shares of common stock** | ** ** |
|----------|------------|--------------------------|------------|-------------------------------------------|------------|------------------------------------------------------------------------|------------|
| **2006** | ** ** | **200**                  | ** ** | **20,234,095**                            | ** ** | **21,073,937**                                                         | ** ** |
| 2005     |       | 200                      |       | 20,260,512                                |       | 20,816,577                                                             |       |
| 2004     |       | 200                      |       | 20,139,995                                |       | 20,417,030                                                             |       |

 

The diluted number ofshares is calculated by using the monthly number of options outstanding and themonthly average stock price on Euronext Amsterdam Stock Market and the U.S.Nasdaq Market. Only options with exercise prices below the average stock priceare taken into account.

## **Principlesof preparing the Consolidated Cash Flow Statement**

The consolidated cashflow statement compares the balance sheet at January 1 with that at December31. Changes because of conversion of foreign currencies are eliminated.Investments in and divestments of consolidated companies are presented afterthe reduction of the cash and cash equivalents of the investee or divestedcompanies.

F-12

----

## **Newstandards and interpretations not yet adopted**

A number of newstandards, amendments to standards and interpretations are not yet effectivefor the year ended December 31, 2006, and have not been applied in preparingthese consolidated financial statements. The following standards are relevantto the Company.

·                  IFRS7 *Financial Instruments: Disclosures*and the *Amendment to IAS 1 Presentation ofFinancial Statements: Capital Disclosures* require extensivedisclosures about the significance of financial instruments for an entity’sfinancial position and performance, and qualitative and quantitativedisclosures on the nature and extent of risks. IFRS 7 and amended IAS 1, whichbecome mandatory for the Company’s 2007 financial statements, will requireextensive additional disclosures with respect to Company’s financialinstruments and share capital.

·                  IFRIC10 *Interim Financial Reporting andImpairment*prohibits the reversal of an impairment loss recognizedin a previous interim period with respect to goodwill, an investment in anequity instrument or a financial asset carried at cost. IFRIC 10 will becomemandatory for the Company’s 2007 financial statements, and will apply togoodwill, investments in equity instruments, and financial assets carried atcost prospectively from the date that the Company first applied the measurementcriteria of IAS 36 and IAS 39 respectively (i.e., January 1, 2004). The impacton the financial statements of the Company of implementation of this IFRIC 10is expected to be very limited.

# **Critical accounting judgments in applying ARCADISN.V.’s accounting policies**

The preparation of ourfinancial statements requires us to make estimates and judgments that affectthe reported amounts of assets and liabilities, revenues and expenses, andrelated disclosure of contingent liabilities at the date of our financialstatements. The policies that management considers to be most important to thepresentation of our financial condition and results of operations and torequire the most significant demands on management’s judgments and estimatesabout matters that are inherently uncertain are discussed below. Managementcautions that future events often vary from forecasts and that estimatesroutinely require adjustment.

*Work inprogress*  Revenue isgenerally recognized when services are rendered. 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-plus contracts is recognized as costs are incurredplus applicable fees. Revenue from time-and-material contracts is recognized atcontract rates as work is performed and material costs are incurred. Revenue isrecognized on additional services requested by clients for which a formalchange order has not been obtained when the realization is probable and theamount can be reliably estimated. Provisions for estimated losses on contractsare recorded when identified. Unbilled fees, at estimated billable amounts,represent revenue recognized for which billings have not yet been presented tocustomers.

*Costs* Contract costs include direct labor costs, subcontractor costs, other directcosts and indirect costs. Our method of revenue recognition requires us toprepare estimates of the costs to complete contracts in progress. In makingsuch estimates, judgments are required to evaluate contingencies, such aspotential variances in schedule and labor and other contract costs,liability claims, contract disputes or achievement of contractual performancestandards. Changes in total estimated contract costs and losses, if any, arerecognized in the period they are determined.

*Impairment* The carrying amounts of the assets of ARCADIS, other than work in progress anddeferred tax assets, are reviewed at each balance sheet date to determinewhether there is any indication of impairment.

For goodwill and assetsthat have an indefinite useful life, the recoverable amount is estimated ateach balance sheet date.

An impairment loss isrecognized whenever the carrying amount of an asset or its cash-generating unitexceeds its recoverable amount. Impairment losses are recognized in the incomestatement. Impairment losses recognized with regard to cash-generating unitsare allocated first to reduce the carrying amount of any goodwill allocated tocash-generating units and then to reduce the carrying amount of the otherassets in the unit on a pro rata basis.

F-13

----

The recoverable amount isthe greater of the net selling price and value in use. In assessing the valuein use, estimated future cash flows are discounted to present value using adiscount rate that reflects current market assessments of the time value ofmoney and the risks specific to the asset.

An impairment loss ofgoodwill cannot be reversed. Regarding other assets, an impairment loss can bereversed if there has been a change in the estimates used to determine therecoverable amount. An impairment loss is reversed only to the extent that theasset’s carrying amount does not exceed the carrying amount that would havebeen determined, net of depreciation or amortization, if no impairment loss hadbeen recognized.

*Provisionsfor contingent liabilities*  By their nature, provisionsfor contingent liabilities are dependent upon estimates and assessments ofwhether the criteria for recognition have been met, including estimates as tothe outcome and the amount of the potential cost of resolution. Contingentliabilities are recognized by a charge against income when it is probable thata liability has been incurred and the amount of such liability can bereasonably estimated. The most likely amount is accrued for costs of futureliabilities that may ultimately arise when such an amount can be determined.

Contingent liabilitiesand provisions for restructuring, other litigation, and tax disputes arediscussed in Note 12—Provisions and in Note 15—Trade and otherLiabilities to our Consolidated Financial Statements. The provision forrestructuring is based on an estimate of the costs of dismissal of permanentstaff, taking into account legal advice and the current facts andcircumstances. Provisions for other litigation and tax disputes are also basedon an estimate of the costs, taking into account legal advice and informationcurrently available.

Should the actual outcomediffer from the assumptions and estimates, revisions to the estimatedprovisions would be required, which could impact our financial position andresults of operations.

*Accountingfor income taxes*  As part of the process of preparingour consolidated financial statements, we are required to estimate income taxesin each of the jurisdictions in which we operate. This process involvesestimating actual current tax expense and temporary differences between tax andfinancial reporting. Temporary differences result in deferred tax assets andliabilities, which are included in our consolidated balance sheet. We must thenassess the likelihood that deferred tax assets will be recovered from futuretaxable income. Deferred tax assets are recognized to the extent that it ismore likely than not that all or some portion of the deferred tax assets willbe realized.

*Allowancesfor doubtful accounts*  Allowances for doubtful accountsare maintained for estimated losses resulting from the inability of ourcustomers to make required payments. If the financial condition of customerswere to deteriorate, resulting in an impairment of their ability to makepayments, additional allowances may be required.

F-14

----

CONSOLIDATED INTERESTS

The main consolidatedcompanies are listed below, stating the country in which they are domiciled**,**if outside the Netherlands, and thepercentage of ownership (these percentages have not changed in 2006).

ARCADIS Nederland BV, (100%) *Arnhem*

ARCADIS Aqumen Facility Management BV, (50%) *Arnhem*

PRC Holding BV, (100%) *Bodegraven*

ARCADIS US, Inc., (100%) *Denver,Colorado, United States*

ARCADIS Belgium NV, (100%) *Deurne,Belgium*

ARCADIS Deutschland GmbH, (100%) *Darmstadt,Germany*

ARCADIS FC International SAS, (100%) *Paris,France*

AYH, PLC, (100%), *London, UnitedKingdom*

ARCADIS GMI Ltd, (100%), *Newmarket,United Kingdom*

ARCADIS Polska SP.z.o.o., (100%), *Warsaw,Poland*

ARCADIS Geotecnica ConsultoresSA, (100%) *Santiago, Chile*

ARCADIS Logos Engenharia SA, (50%+ 1 share) *São Paulo, Brazil*

ARCADIS Euroconsult BV,(100%) *Arnhem*

# **Changes in consolidated interests**

During 2006 the following companies were acquired:

In Situ Technieken BV (acquired 100% through an asset deal), *Wageningen*

Dresdner Grundwasser Consulting GmbH (100%), *Dresden, Germany*

Berkeley Consulting Partnership, (acquired 100% through an asset deal),*Surrey, United Kingdom*

ECOLAS NV, (100%), *Ghent*,*Belgium*

BCT scrl, (100%),*Luik, Belgium*

PinnacleOne, Inc.,(100%), *Phoenix, Arizona,United States*

 In total, the gross annual revenue added bythese companies is estimated at € 53 million (unaudited).

During 2005 the following companies were acquired:

SWK NV (100%), *Ghent, Belgium*

Greystone Environmental Consultants, Inc. (100%), *Denver, Colorado, United States*

AYH Plc. (100%). *London, UnitedKingdom*

Blasland, Bouck &Lee, Inc. (BBL) (100%), *Syracuse, New York,United States.*

In total, the grossannual revenue added by these companies is estimated at € 196 million(unaudited).

During 2005 the following interests have been sold:

Grupo EP SA, *Spain*

Renardet S.A. (*Switserland)*

Sauti (*Italy).*

In total, the grossannual revenue of these divestments was € 94 million.

The total investment inacquisitions in 2006 was € 52.7 million, which resulted in goodwill of € 29.9million. The total investment for acquisitions in 2005 was € 121.3 million,which resulted in goodwill of € 61.3 million. All acquisitions during 2006 and2005 were accounted for by the purchase method. The goodwill was assigned toour geographic segments as follows:
| **In millions of euros** | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------------------------|------------|----------|------------|----------|------------|
| The Netherlands                         |       | 1.9      |       | 0        |       |
| Europe excluding  the Netherlands       |       | 11.7     |       | 16.6     |       |
| The United  States                      |       | 15.6     |       | 43.8     |       |
| Rest of World                           |       | 0.7      |       | 0.9      |       |
| Total goodwill paid                     |       | 29.9     |       | 61.3     |       |

 

Of the € 52.7 million invested in acquisitions in 2006, up to € 3.8million will be paid after 2006 and is consequently recorded as a liability.

For the impact of theacquisitions and divestments of business interests on the financial statementsof ARCADIS N.V., please refer to Note 21.

F-15

----

NOTES TO THE CONSOLIDATED BALANCE SHEET

*amounts inthousands of euros*

 

**(1) Intangible assets**

 
| ** **                                         | ** ** | ** **   | ** ** | **Identifiable** | ** ** | ** **   | ** ** | ** **  | ** ** |
|----------------------------------------------------|------------|--------------|------------|------------------|------------|--------------|------------|-------------|------------|
| ** **                                         | ** ** | ** **   | ** ** | **intangible**   | ** ** | ** **   | ** ** | ** **  | ** ** |
| ** **                                         | ** ** | **Goodwill** | ** ** | **assets**       | ** ** | **Software** | ** ** | **Total**   | ** ** |
|                                               |       |         |       |             |       |         |       |        |       |
| **Purchase price**                                 | ** ** | ** **   | ** ** | ** **       | ** ** | ** **   | ** ** | ** **  | ** ** |
|                                               |       |         |       |             |       |         |       |        |       |
| Balance at January 1,  2005                        |       | 49,926       |       | 2,951            |       | 18,101       |       | 70,978      |       |
| (De)consolidations                                 |       | 1,118        |       | —           |       | (840         | )          | 278         |       |
| Investments                                        |       | 61,273       |       | 11,540           |       | 2,846        |       | 75,659      |       |
| Divestments                                        |       | —       |       | —           |       | (751         | )          | (751        | )          |
| Effect of movements in  foreign exchange           |       | 3,666        |       | 188              |       | 777          |       | 4,631       |       |
| Balance at December 31,  2005                      |       | 115,983      |       | 14,679           |       | 20,133       |       | 150,795     |       |
|                                               |       |         |       |             |       |         |       |        |       |
| Balance at January 1,  2006                        |       | 115,983      |       | 14,679           |       | 20,133       |       | 150,795     |       |
| Consolidations                                     | ** ** | **—**   | ** ** | **—**       | ** ** | **81**       | ** ** | **81**      | ** ** |
| Investments                                        | ** ** | **29,858**   | ** ** | **10,793**       | ** ** | **2,928**    | ** ** | **43,579**  | ** ** |
| Divestments                                        | ** ** | **(59**      | **)**      | **—**       | ** ** | **(1,655**   | **)**      | **(1,714**  | **)**      |
| Effect of movements in  foreign exchange           | ** ** | **(6,535**   | **)**      | **(764**         | **)**      | **(711**     | **)**      | **(8,010**  | **)**      |
| Other changes                                      | ** ** | **186**      | ** ** | **—**       | ** ** | **2,210**    | ** ** | **2,396**   | ** ** |
| Balance at December 31,  2006                      | ** ** | **139,433**  | ** ** | **24,708**       | ** ** | **22,986**   | ** ** | **187,127** | ** ** |
|                                               |       |         |       |             |       |         |       |        |       |
| **Amortization and Depreciation**                  | ** ** | ** **   | ** ** | ** **       | ** ** | ** **   | ** ** | ** **  | ** ** |
|                                               |       |         |       |             |       |         |       |        |       |
| Balance at January 1,  2005                        |       | (63          | )          | 439              |       | 15,246       |       | 15,622      |       |
| Amortization and  depreciation charge for the year |       | —       |       | 5,967            |       | 1,732        |       | 7,699       |       |
| (De)consolidations                                 |       | —       |       | —           |       | (665         | )          | (665        | )          |
| Divestments                                        |       | —       |       | —           |       | (424         | )          | (424        | )          |
| Effect of movements in  foreign exchange           |       | 7            |       | 66               |       | 629          |       | 702         |       |
| Reclassification                                   |       | 56           |       | (56              | )          |         |       | —      |       |
| Balance at December 31,  2005                      |       | —       |       | 6,416            |       | 16,518       |       | 22,934      |       |
|                                               |       |         |       |             |       |         |       |        |       |
| Balance at January 1,  2006                        |       | —       |       | 6,416            |       | 16,518       |       | 22,934      |       |
| Amortization and  depreciation charge for the year | ** ** | **—**   | ** ** | **8,270**        | ** ** | **2,302**    | ** ** | **10,572**  | ** ** |
| Divestments                                        | ** ** | **—**   | ** ** | **—**       | ** ** | **(1,586**   | **)**      | **(1,586**  | **)**      |
| Effect of movements in  foreign exchange           | ** ** | **—**   | ** ** | **(390**         | **)**      | **(580**     | **)**      | **(970**    | **)**      |
| Other changes                                      | ** ** | **—**   | ** ** | **15**           | ** ** | **1,992**    | ** ** | **2,007**   | ** ** |
| Balance at December 31, 2006                       | ** ** | **—**   | ** ** | **14,311**       | ** ** | **18,646**   | ** ** | **32,957**  | ** ** |

 

During2006 and 2005, no changes were made in the useful lives,amortization/depreciation methods and the residual values of the intangibleassets.

F-16

----

**Carrying amounts**

 
|                       | ** ** | ** **   | ** ** | **Identifiable** | ** ** | ** **   | ** ** | ** **  | ** ** |
|-----------------------|------------|--------------|------------|------------------|------------|--------------|------------|-------------|------------|
| ** **            | ** ** | ** **   | ** ** | **intangible**   | ** ** | ** **   | ** ** | ** **  | ** ** |
| ** **            | ** ** | **Goodwill** | ** ** | **assets**       | ** ** | **Software** | ** ** | **Total**   | ** ** |
|                  |       |         |       |             |       |         |       |        |       |
| At January 1,  2005   |       | 49,989       |       | 2,512            |       | 2,855        |       | 55,356      |       |
| At December 31,  2005 |       | 115,983      |       | 8,263            |       | 3,615        |       | 127,861     |       |
|                  |       |         |       |             |       |         |       |        |       |
| At January 1,  2006   |       | 115,983      |       | 8,263            |       | 3,615        |       | 127,861     |       |
| At December 31, 2006  | ** ** | **139,433**  | ** ** | **10,397**       | ** ** | **4,340**    | ** ** | **154,170** | ** ** |

 

Thetotal goodwill capitalized was assigned to our geographic segments as follows:
|                                   | ** ** | **2006**    | ** ** | **2005** | ** ** |
|-----------------------------------|------------|-------------|------------|----------|------------|
| The Netherlands                   | ** ** | **17,118**  |       | 15,223   |       |
| Europe excluding  the Netherlands | ** ** | **45,218**  |       | 32,759   |       |
| United States                     | ** ** | **71,841**  |       | 63,154   |       |
| Rest of World                     | ** ** | **5,256**   |       | 4,847    |       |
|                              |       |        |       |     |       |
| Total goodwill                    | ** ** | **139,433** |       | 115,983  |       |

 

The amortization and depreciation charge is recognized in the followingline items in the income statement:
|                                             | ** ** | **2006**  | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------------------|------------|-----------|------------|----------|------------|----------|------------|
| Amortization identifiable intangible assets | ** ** | **8,270** |       | 5,967    |       | 376      |       |
| Depreciation of  software                   | ** ** | **2,302** |       | 1,732    |       | 2,188    |       |

 

# **Impairment testing for cash-generating units**

The impairment testcompares the carrying value of the cash-generating units with the recoverableamounts. The recoverable value is determined based on a calculation of thevalue in use based on cash flow projections and furthermore compared to recentmultiples of comparable activities on the stock exchange. These cash flowprojections are based on actual operating results and the three-year strategicplan as approved by the Executive Board. Projections are extrapolated beyondthis three-year period using an appropriate perpetual growth rate that isconsistent with the long-term average market growth rate and that typicallydoes not exceed 3% (2005: 3%) in our calculations. The estimated post-tax cashflows are discounted to their present value using a post-tax weighted averagecost of capital (WACC). The post-tax WACC used is 8% (2005: 8%) and whereapplicable a surcharge is added for specific country risks.

The keyassumptions used in the predictions are:

·                  Revenuegrowth: based on actual experience and market analysis;

·                  Margindevelopment: based on actual experience and management’s long-term projections.

The impairment test forcash-generating units carried out in 2006 showed that the recoverable amountfor each cash-generating unit exceeds the carrying amount; hence the test didnot result in impairment.

F-17

----

**(2)Property, plant & equipment**

 
|                                          | ** ** | **Land and** | ** ** | **Furniture**         | ** ** | ** ** | ** ** |
|------------------------------------------|------------|-------------------|------------|-----------------------|------------|------------|------------|
| ** **                               | ** ** | **buildings**     | ** ** | **and fixtures** | ** ** | **Total**  | ** ** |
|                                     |       |              |       |                  |       |       |       |
| **Purchase  price**                      | ** ** | ** **        | ** ** | ** **            | ** ** | ** ** | ** ** |
|                                     |       |              |       |                  |       |       |       |
| Balance at  January 1, 2005              |       | 18,663            |       | 115,719               |       | 134,382    |       |
| (De)consolidations                       |       | 8,865             |       | (5,158                | )          | 3,707      |       |
| Investments                              |       | 1,218             |       | 13,649                |       | 14,867     |       |
| Divestments                              |       | (443              | )          | (20,624               | )          | (21,067    | )          |
| Effect of  movements in foreign exchange |       | 66                |       | 5,618                 |       | 5,684      |       |
| Balance at  December 31, 2005            |       | 28,369            |       | 109,204               |       | 137,573    |       |
|                                     |       |              |       |                  |       |       |       |
| Balance at January  1, 2006              |       | 28,369            |       | 109,204               |       | 137,573    |       |
| Consolidations                           |       | —            |       | 1,757                 |       | 1,757      |       |
| Investments                              |       | 950               |       | 15,414                |       | 16,364     |       |
| Divestments                              |       | (236              | )          | (13,469               | )          | (13,705    | )          |
| Effect of  movements in foreign exchange |       | (1,498            | )          | (5,436                | )          | (6,934     | )          |
| Other changes                            |       | 412               |       | (3,018                | )          | (2,606     | )          |
| Balance at  December 31, 2006            |       | 27,997            |       | 104,452               |       | 132,449    |       |
|                                     |       |              |       |                  |       |       |       |
| **Depreciation**                         | ** ** | ** **        | ** ** | ** **            | ** ** | ** ** | ** ** |
| Balance at  January 1, 2005              |       | 6,109             |       | 84,638                |       | 90,747     |       |
| Depreciation  charge for the year        |       | 1,372             |       | 12,107                |       | 13,479     |       |
| Deconsolidations                         |       | (1,256            | )          | (7,009                | )          | (8,265     | )          |
| Divestments                              |       | (164              | )          | (18,460               | )          | (18,624    | )          |
| Effect of  movements in foreign exchange |       | 13                |       | 4,229                 |       | 4,242      |       |
| Balance at  December 31, 2005            |       | 6,074             |       | 75,505                |       | 81,579     |       |
|                                     |       |              |       |                  |       |       |       |
| Balance at  January 1, 2006              |       | 6,074             |       | 75,505                |       | 81,579     |       |
| Depreciation  charge for the year        |       | 1,498             |       | 13,933                |       | 15,431     |       |
| Divestments                              |       | (212              | )          | (12,749               | )          | (12,961    | )          |
| Effect of  movements in foreign exchange |       | (367              | )          | (3,913                | )          | (4,280     | )          |
| Other changes                            |       | 758               |       | (3,084                | )          | (2,326     | )          |
| Balance at  December 31, 2006            |       | 7,751             |       | 69,692                |       | 77,443     |       |
|                                     |       |              |       |                  |       |       |       |
| **Carrying  amounts**                    | ** ** | ** **        | ** ** | ** **            | ** ** | ** ** | ** ** |
| At January 1,  2005                      |       | 12,554            |       | 31,081                |       | 43,635     |       |
| At December 31,  2005                    |       | 22,295            |       | 33,699                |       | 55,994     |       |
|                                     |       |              |       |                  |       |       |       |
| At January 1,  2006                      |       | 22,295            |       | 33,699                |       | 55,994     |       |
| At December 31, 2006                     | ** ** | **20,246**        | ** ** | **34,760**            | ** ** | **55,006** | ** ** |

 

At December 31, 2006, thebook value of tangible fixed assets, financed by financial lease, was**€**1,665 (2005: € 1,709).

During 2006 and2005 no changes were made in the useful lives, depreciation methods and theresidual values of the property, plant & equipment.

F-18

----

**(3)Investments in equity accounted associates**
| ** **                                   | ** ** | ** ** | ** ** | **2006**   | ** ** | ** ** | ** ** | **2005**  | ** ** |
|----------------------------------------------|------------|------------|------------|------------|------------|------------|------------|-----------|------------|
| ** **                                   | ** ** | ** ** |       | ** ** |       |       |       |      |       |
| **Balance at January 1**                     | ** ** | ** ** |       | **7,451**  |       |       |       | 5,597     |       |
| **Changes as a result of**                   |       |       |       |       |       |       |       |      |       |
| Equity share in  income/(loss)               | ** ** | **(505**   | **)**      |       |       | 1,382      |       |      |       |
| Investments                                  | ** ** | **156**    |       |       |       | 416        |       |      |       |
| Deconsolidations                             | ** ** | **(819**   | **)**      |       |       | (734       | )          |      |       |
| Divestments                                  | ** ** | **(13**    | **)**      |       |       | 34         |       |      |       |
| Received dividends                           | ** ** | **(1,485** | **)**      |       |       | (631       | )          |      |       |
| Other changes and  exchange rate differences | ** ** | **442**    |       |       |       | 1,387      |       |      |       |
|                                         | ** ** | ** ** | ** ** | **(2,224** | **)**      | ** ** | ** ** | **1,854** | ** ** |
| *Balance at December 31*                     | ** ** | ** ** |       | **5,227**  |       |       |       | 7,451     |       |

 

Summary of financialinformation on the main equity accounted associates — 100% in millions:
|            | ** ** | **Assets** | ** ** | **Liabilities** | ** ** | **Equity** | ** ** | **Gross  Revenue** | ** ** | **Net  income/(loss)** | ** ** |
|------------|------------|------------|------------|-----------------|------------|------------|------------|--------------------|------------|------------------------|------------|
| ** ** | ** ** | ** ** | ** ** | ** **      | ** ** | ** ** | ** ** | ** **         | ** ** | ** **             | ** ** |
| **2006**   | ** ** | **146.5**  | ** ** | **50.5**        | ** ** | **96.0**   | ** ** | **3.5**            | ** ** | **(12.6**              | **)**      |
| ** ** | ** ** | ** ** | ** ** | ** **      | ** ** | ** ** | ** ** | ** **         | ** ** | ** **             | ** ** |
| 2005       |       | 103.2      |       | 20.3            |       | 82.9       |       | 75.5               |       | 30.7                   |       |

 

The financial conditionand results of operations of the followings associates are included in the BalanceSheet Data and Income Statement Data presented above:
| Associates                     | ** ** | **% of equity** | ** ** |
|--------------------------------|------------|---------------------------|------------|
| PIE-RP Termelétrica S.A   |       | 25.0                      | %          |
| Breitener  Energética S.A |       | 5.5                       | %*         |
| VOF De  Ruyterkade             |       | 50.0                      | %          |
| VOF EMC Starc                  |       | 35.0                      | %          |
| Brainliner B.V                 |       | 33.3                      | %          |
| VOF X-pact                     |       | 12.0                      | %*         |

 

----

* These companies arevalued using the equity method, as ARCADIS has significant influence, becausethe Company is represented on the board of directors and participates in policymaking.

F-19

----

**(4) Other investments**
| ** **                                   | ** ** | ** ** | ** ** | **2006**  | ** ** | ** ** | ** ** | **2005**   | ** ** |
|----------------------------------------------|------------|------------|------------|-----------|------------|------------|------------|------------|------------|
| ** **                                   | ** ** | ** ** | ** ** |      |       |       |       | ** ** | ** ** |
| **Investments  valued at amortized cost**    | ** ** | ** ** | ** ** |      |       |       |       | ** ** | ** ** |
| ** **                                   | ** ** | ** ** | ** ** |      |       |       |       | ** ** | ** ** |
| **Balance  at January 1**                    | ** ** | ** ** |       | **501**   |       |       |       | 641        |       |
| **Changes  as a result of**                  |       |       |       |      |       |       |       |       |       |
| Dividend                                     | ** ** | **47**     |       |      |       | —     |       |       |       |
| Investments                                  | ** ** | **3,921**  |       |      |       | 499        |       |       |       |
| Deconsolidations                             | ** ** | **—** |       |      |       | (583       | )          |       |       |
| Divestments                                  | ** ** | **(85**    | **)**      |      |       | (74        | )          |       |       |
| Received dividends                           | ** ** | **(47**    | **)**      |      |       | —     |       |       |       |
| Other changes  and exchange rate differences | ** ** | **20**     |       |      |       | 18         |       |       |       |
|                                         | ** ** | ** ** |       | **3,856** |       |       |       | (140       | )          |
| *Balance at December 31*                     | ** ** | ** ** |       | **4,357** |       |       |       | 501        |       |

 
| ** **                                     | ** ** | ** ** | ** ** | **2006**  | ** ** | ** ** | ** ** | **2005**  | ** ** |
|------------------------------------------------|------------|------------|------------|-----------|------------|------------|------------|-----------|------------|
| **Long-term  receivables**                     |       |       |       |      |       |       |       |      |       |
| ** **                                     |       |       |       |      |       |       |       |      |       |
| **Balance  at January 1**                      | ** ** | ** ** |       | **1,438** |       |       |       | 456       |       |
| **Changes  as a result of**                    |       |       |       |      |       |       |       |      |       |
| New receivables                                | ** ** | **525**    |       |      |       | 1,526      |       |      |       |
| Received                                       | ** ** | **(119**   | **)**      |      |       | (593       | )          |      |       |
| Other changes  and exchange rate differences   | ** ** | **1**      |       |      |       | 49         |       |      |       |
|                                           | ** ** | ** ** |       | **407**   |       |       |       | 982       |       |
| *Balance  at December 31*                      | ** ** | ** ** |       | **1,845** |       |       |       | 1,438     |       |
|                                           |       |       |       |      |       |       |       |      |       |
| * Total other investments at December 31* | ** ** | ** ** | ** ** | **6,202** | ** ** | ** ** | ** ** | **1,939** | ** ** |

 

**(5) Otherassets**

 
| *Balance  at January 1*                      | ** ** | ** ** |   | **10,683** |   |   |   | 6,991  |   |
|----------------------------------------------|------------|------------|--------|------------|--------|--------|--------|--------|--------|
| **Changes  as a result of**                  |       |       |   |       |   |   |   |   |   |
| Consolidations                               | ** ** | **13**     |   |       |   | 1,016  |   |   |   |
| New receivables                              | ** ** | **2,137**  |   |       |   | 3,416  |   |   |   |
| Received                                     | ** ** | **(2,139** | **)**  |       |   | (1,565 |   |   | )      |
| Reclassification                             | ** ** | **—** |   |       |   | (180   |   |   | )      |
| Offsetting*                                  | ** ** | **(3,765** | **)**  |       |   | — |   |   |   |
| Other changes  and exchange rate differences | ** ** | **(1,119** | **)**  |       |   | 1,005  |   |   |   |
|                                         | ** ** | ** ** |   | **(4,873** | **)**  |   |   | 3,692  |   |
| *Balance at December 31*                     | ** ** | ** ** |   | **5,810**  |   |   |   | 10,683 |   |

 

----

* See Note 12

F-20

----

**(6) Inventories**
| ** **                  | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|
|                        |       |     |       |     |       |
| Goods for resale            | ** ** | **8**    |       | 46       |       |
| Raw materials  and supplies | ** ** | **443**  |       | 328      |       |
|                        | ** ** | **451**  |       | 374      |       |

 

**(7) Derivatives**

The Company has purchasedthree cross currency interest rate swaps to hedge the currency risk as well asthe interest rate risk on the $120 million long-term loan (2005: $90 million).These derivatives do not qualify for hedge accounting and are accounted for astrading instruments. Accordingly the swaps are recorded at their fair value andthe unrealized gain or loss on re-measurement is recognized immediately asprofit or loss.

Two of the Company’scross currency interest rate swaps were purchased in 2005 in connection withARCADIS’ acquisition of BBL. ARCADIS financed the BBL acquisition through aloan denominated in US dollars, and to hedge the currency and interest riskassociated with the loan, the company purchased the swaps. In 2005, changes inthe fair value of the swaps were included in the income statement, while thechanges in the fair value of the loan resulting from movements of the US dollarwere reported directly in equity. In 2006 ARCADIS changed the reportingcurrency of the financing entity, ARCADIS North America GP, into Euros sinceARCADIS North America GP’s sole purpose is to hold investments. Accordingly asof 2006, changes in the fair value of both the swaps and the corresponding loanare reported through the income statement. Since ARCADIS financed the BBLacquisition in the fourth quarter 2005, the impact of this change on the profitand loss 2005 was limited and comparative figures are therefore not adjusted.

The fair value of thederivatives decreased in 2006 from an asset of € 1.7 million into a liabilityof € 5.8 million. The difference of € 7.5 million is recognized as a loss fromfair value changes of derivatives under financing items. The currencytranslation adjustment of the related US-dollar loan is also recognized underfinancing items as financial income for a positive effect of € 8.7 million (seeNote 18).

**(8)(Un)billed receivables**

(Includesitems maturing within 1 year)
| ** **                   | ** ** | **2006**    | ** ** | **2005** | ** ** |
|------------------------------|------------|-------------|------------|----------|------------|
|                         |       |        |       |     |       |
| Unbilled  receivables        | ** ** | **151,238** |       | 113,721  |       |
| Trade  receivables           | ** ** | **228,385** |       | 215,474  |       |
| Provision for  bad debts     | ** ** | **(8,715**  | **)**      | (11,140  | )          |
| Receivables from  associates | ** ** | **2,520**   |       | 2,958    |       |
| Total receivables            | ** ** | **373,428** |       | 321,013  |       |

 

The provision for baddebts has developed as follows:
| ** **                    | ** ** | **2006**   | ** ** | **2005** | ** ** |
|-------------------------------|------------|------------|------------|----------|------------|
|                          |       |       |       |     |       |
| Balance at  beginning of year |       | **11,140** |       | 13,348   |       |
| Addition charged  to income   |       | **1,346**  |       | 3,438    |       |
| Exchange rate  differences    |       | **(350**   | **)**      | 527      |       |
| Deductions /  write offs      |       | **(3,738** | **)**      | (3,796   | )          |
| Acquisitions /  divestments   |       | **317**    |       | (2,377   | )          |
| Balance at end of year        |       | **8,715**  |       | 11,140   |       |

 

F-21

----

**Work in progress**

Costs andestimated earnings on uncompleted contracts are as follows:
| ** **                               | ** ** | **2006**    | ** ** | **2005** | ** ** |
|------------------------------------------|------------|-------------|------------|----------|------------|
|                                     |       |        |       |     |       |
| Costs incurred  on uncompleted contracts |       | **760,601** |       | 604,140  |       |
| Estimated  earnings                      |       | **49,247**  |       | 20,763   |       |
| Subtotal                                 |       | **809,848** |       | 624,903  |       |
| Less: Billings  to date                  |       | **770,492** |       | 600,451  |       |
| Total work in  process                   |       | **39,356**  |       | 24,452   |       |

 

All amounts areexpected to be collected within 1 year

 
| ** **                                                                          | ** ** | **2006**     | ** ** | **2005** | ** ** |
|-------------------------------------------------------------------------------------|------------|--------------|------------|----------|------------|
|                                                                                | ** ** | ** **   | ** ** |     |       |
| Costs incurred  and estimated earnings in excess of billings (unbilled receivables) | ** ** | **151,238**  | ** ** | 113,721  |       |
| Billings in excess  of costs incurred and estimated earnings                        | ** ** | **(111,882** | **)**      | (89,269  | )          |
| Total work in process                                                               | ** ** | **39,356**   | ** ** | 24,452   |       |
| Amount of advances received                                                         | ** ** | **21,149**   | ** ** | 17,675   |       |
| Amount of  retentions held by clients                                               | ** ** | **933**      | ** ** | 1,392    |       |

 

**(9) Othercurrent assets**

 
| ** **        | ** ** | **2006**   | ** ** | **2005** | ** ** |
|-------------------|------------|------------|------------|----------|------------|
| Other receivables | ** ** | **11,635** |       | 18,902   |       |
| Prepaid expenses  | ** ** | **12,201** |       | 13,048   |       |
|              | ** ** | **23,836** |       | 31,950   |       |

 

**(10) Cash and cash equivalents**

The Company’s policy isto invest cash in excess of operating requirements in highly liquid investmentswith a maturity of three months or less. Cash and cash equivalents at December31, 2006, and 2005 consisted of the following:
| ** **                                          | ** ** | **2006**    | ** ** | **2005** | ** ** |
|-----------------------------------------------------|------------|-------------|------------|----------|------------|
|                                                |       |        |       |     |       |
| Deposits                                            | ** ** | **3,540**   |       | 8,737    |       |
| Cash in banks  restricted for taxes/social premiums | ** ** | **167**     |       | 307      |       |
| Bank and cash                                       | ** ** | **97,781**  |       | 64,840   |       |
|                                                | ** ** | **101,488** |       | 73,884   |       |

 

The effective interestrates for cash at balance sheet date were 4.4% (2005: 3%).

**(11) Issued share capital**

The Company’s authorizedshare capital amounts to € 5,000,010 divided into 40,000,000 shares of commonstock, 50,000,000 shares of cumulative preferred stock, and 10,000,000 sharesof cumulative financing preferred stock (divided over four series of 2,500,000shares each) and 200 priority shares, all with a nominal value of € 0.05 each.At December 31, 2006, 20,645,615 (2005: 20,645,615) shares of common stock and200 (2005: 200) priority shares had been issued. No shares of cumulative preferred orcumulative financing preferred stock are issued or outstanding.

F-22

----

***Priority shares***

The priority shares havebeen issued since 1987 and are held by the Stichting Prioriteit ARCADIS N.V., afoundation established in Arnhem. The special statutory right under ARCADIS’Articles of Association regarding to these priority shares is decision makingrelated to:

1.       The issuance, acquisitionand disposal of shares in the Company;

2.       Amendments to the Articlesof Association;

3.       The dissolution of theCompany and the filing for bankruptcy;

4.       The entry into ortermination of long-term cooperative ventures of substantial significance; and

5.       Investments (includingentering into participations) for an amount equal to at least 25% ofshareholders’ equity.

The board of theStichting Prioriteit ARCADIS N.V. is administered by 20 board members: 7members of ARCADIS’ Supervisory Board, 3 members of ARCADIS’ Executive Board,and 10 members from the board of Foundation Bellevue (a foundation establishedin Arnhem, whose board members are appointed by and from the internationalemployees of the ARCADIS group). At balance sheet date, the board of theStichting Prioriteit ARCADIS N.V. is comprised of the following persons:

Rijnhard W.F. vanTets, Chairman

Harrie L.J. Noy,Secretary

Jürgen ChristophBoenecke, Deputy Chairman

Joao Bandeira de MelloLaterza

Thomas M. Cohn

Marc A. Elbers

Carlos Espinosa delos Monteros

Pascal P.L. Guedon

C. Michiel Jaski

Piotr Miaso

George R. Nethercutt

Jan Peelen

Marc van Put

FriedrichSchneider

Ewoud van derSluis

Marcel P. Stuart

Peter E.Yakimowich

Gerrit Ybema

Two vacancies

The Executive Board ofARCADIS N.V. and the Board of the Stichting Prioriteit ARCADIS N.V. are both ofthe opinion that, regarding the exercising of the voting right on the priorityshares by the Stichting Prioriteit ARCADIS N.V., there is full compliance withthe requirements stipulated in Section X Book II of the general regulations ofEuronext Amsterdam Stock Market.

***Cumulative Preferred Shares***

The Stichting PreferenteAandelen ARCADIS N.V. (Preferred Stock Foundation ARCADIS N.V.) established inArnhem since 1995, has as its objective the protection and promotion of theinterests of ARCADIS N.V. and its affiliated companies and all parties involved.The Foundation has been granted the right to acquire ARCADIS’ preferred(protection) shares up to a maximum equal to the number of outstanding sharesissued at the date in question. ARCADIS N.V. has been granted the right toissue the same number of preferred shares to the Foundation. Both options mayonly be exercised provided the interests of ARCADIS N.V., its affiliatedenterprises, and all parties involved were to warrant this. In the event of anunfriendly or hostile take over attempt, these shares are provided to preventany major changes in the control of the Company without due considiration ofthe interests of the Company and all those involved with it. The Board of theFoundation consists of four persons appointed by the Company’s Executive Board.

At balance sheet date,the Board of said Foundation is comprised of the following persons:

Jan A. Dekker,Chairman

Bram A. Anbeek vander Meijden, Secretary

Liesbeth E. M.Kneppers-Heijnert

Frits W. Mulder

F-23

----

The Executive Board ofARCADIS N.V. and the Board of the Stichting Preferente Aandelen ARCADIS N.V.are both of the opinion that, regarding the independence of the management,there is full compliance with the requirements stipulated in Section X Book IIof the general regulations of Euronext Amsterdam Stock Market.

 

***Cumulative Financing Preferred Shares***

Since 2002, the Articlesof Association incorporate the possibility to issue shares of cumulativefinancing preferred stock. Currently, no cumulative financing preferred stockhave been issued.

#### *Agreements with shareholders*

The Articles ofAssociation of the Stichting Lovinklaan stipulate that its board needs priorapproval of the Stichting Prioriteit ARCADIS N.V. for any decisions concerningthe disposal or pledge of the Foundation’s shares in ARCADIS N.V., or totransfer them as security or otherwise encumber them.

#  

# **Option and share purchase plans**

 

# Tostimulate the realization of long-term Company objectives and goals ARCADISN.V. has option and share plans as well as a share purchase plan. Following isan overview.

 

# *ARCADIS N.V. 1994 and 1996Incentive Plan*

At the time of the mergerwith Geraghty & Miller in 1993, ARCADIS has taken over and later in 1994and 1996 expanded the existing employee option plans. These employee stockoption plans were dedicated to employees of the American subsidiaries, andended in 2003 and 2005, respectively, so that since then, no new options can begranted under these plans. The options granted under these plans are valid fora ten-year period and generally become vested after a three-year period.

At December 31,2006, 79,787 (2005: 287,664) options were outstanding. These can be exercisedat prices ranging from $6.75 to $15.00 (2005: $6.75 and $15.00); the averageexercise price is $11.78 (2005: $10.20). During 2006, 207,877 options wereexercised (2005: 142,350) with exercise prices between $6.75 and $14.60 (2005:$6.75 and $11.50). During 2006, no options were cancelled. The closing price ofARCADIS shares on NASDAQ on December 29, 2006, was $61.16 (2005: $31.60). Oneoption entitles the holder to one share. On December 31, 2006, option holdershad the opportunity to exercise 52,012 options at prices ranging from $6.75 to$11.80.

#### *ARCADISN.V. 2001 Long-Term Incentive Share Option Plan*

 

In the General Meeting of Shareholders of May 2001, the ARCADIS 2001Long-Term Incentive Share Option Plan was introduced. Under this plan, amaximum of 2,500,000 options are expected to be granted from 2001 to 2006 tokey staff members of ARCADIS N.V. and its subsidiaries. Options under this planare conditional and can be exercised after three years of the issue date,provided the staff member is still employed by the Company. The options arevalid for a period of 10 years starting on the issue date.

 

Several times during 2004, in total 91,069 options with exercise pricesranging from $10.06 to $15.00 were granted to the Corporate Director of Mergers& Acquisitions.

 

On May 13, 2005, 210,000 options were granted under this plan with anexercise price of € 17.94. In May and June, 28,220 options with exercise pricesranging from $21.77 to $23.01 were granted to the Corporate Director of Mergers& Acquisitions. In June 2005, 49,980 options were granted to the managementand key staff of AYH related to the acquisition of the company. The exerciseprice is € 19.25.

 

At January 1, 2006, the number of outstanding options was 899,391 withexercise prices ranging from € 8.50 to € 21.77. During 2006, 322,013 optionswere exercised, while 8,806 options were cancelled. At December 31, 2006,568,572 options are outstanding with exercise prices between € 8.50 and €21.77. The average exercise price is € 13.35. On December 31, 2006, optionholders had the opportunity to exercise 336,635 options against prices varyingfrom € 8.50 to € 21.77. The closing price of ARCADIS shares on Euronext onDecember 29, 2006 was € 46.70. In May 2005, this Plan was replaced by theARCADIS N.V. Long-Term Incentive Plan.

F-24

----

#### ***ARCADISN.V. 2005 Long-Term Incentive Plan***

In May 2005, the GeneralMeeting of Shareholders agreed to a number of changes in the 2001 plan. Thesechanges are the result of the implementation of the Dutch Corporate GovernanceCode, as well as the expiration of the *ARCADIS1996 Incentive Plan*. Following are the primary changes that wereintroduced:

·                  In addition to rights to shares(option rights) other share-related incentives can be granted, such as StockAppreciation Rights, Restricted Stock (units) and Incentive shares.

·                  The granting of (rights to) sharescan be related to the goals or performance criteria as set by the ARCADIS N.V.Supervisory Board. This Committee also determines the moment at which thegranted (rights to) shares can be exercised.

·                  Thenumber of (rights to) shares totals 2,500,000; the Plan is valid until December31, 2011.

#### In its December 2005meeting, the Supervisory Board approved the revised text of the 2001 plan, nowtitled the ARCADIS N.V. 2005 Long-Term Incentive Plan.

 

On May 19, 2006, 253,200 options were granted under this plan andaccepted by 126 employees worldwide with an exercise price of € 37.13. To themembers of the Executive Board on the same date, a total of 65,000 conditionaloptions were granted and to the members of the Senior Management Committee28,800 conditional options, all with an exercise price of € 37.13. In additionon May 19, 2006, under the 2005 Plan the members of the Executive Board weregranted 27,000 conditional options, in line with the Remuneration policy forthe Executive Board as agreed on by the General Meeting of Shareholders in May2005 and 20,400 conditional options for the members of the Senior ManagementCommittee.

 

Several times during2006, in total 32,749 options with exercise prices ranging from € 34.90 to €38.20 were granted to the Corporate Director of Mergers & Acquisitions. InJuly 2006, 7,000 options were granted to the management and key staff ofBerkeley Consulting, related to the acquisition of the company. The exerciseprice is € 36.39. At October 1, 2006, 3,000 options with an exercise price of €34.59 were granted to the Director of Human Resources, while 1,000 conditionalshares were granted in relation to his employment contract. On December 31,2006, a total number of 622,033 options were outstanding under the 2005 Plan.The average exercise price is € 30.71. No options granted under the 2005 Planwere exercisable at December 31.

**Overviewof incentive shares granted**
| **Provisional (rights to)  shares granted on** | ** ** | **Granted** | ** ** | **Unconditional in** | ** ** | **Amount in € to be   expensed** | ** ** | **Expired** | ** ** |
|--------------------------------------------------------------------|------------|-------------|------------|---------------------------|------------|----------------------------------------------------------------|------------|-------------|------------|
| May 11, 2005                                                       |       | 17,000      |       | 2008                      |       | 191,000                                                        |       | —      |       |
| May 19, 2006                                                       |       | 47,400      |       | 2009                      |       | 1,105,000                                                      |       | 1,547       |       |
| October 1, 2006                                                    |       | 1,000       |       | 2009                      |       | 22,000                                                         |       | —      |       |

 

A summary of the combinedactivities under ARCADIS Stock Option Plans for each year in the three-yearperiod ended December 31, 2006 is as follows:

 

F-25

----

 
| ** **                   | ** ** | **Number of  ARCADIS  options** | ** ** | **Exercise price  range in $** | ** ** | **Number of  ARCADIS  options** | ** ** | **Exercise price range  in  €** | ** ** |
|------------------------------|------------|--------------------------------------|------------|-----------------------------------------------|------------|--------------------------------------|------------|------------------------------------------------|------------|
| Balance - January 1,  2004   |       | 607,768                              |       | 6.75 to 11.85                                 |       | 953,129                              |       | 8.50 to 10.79                                  |       |
| Grranted                     |       | 91,069                               |       | 10.06 to 15.00                                |       | —                               |       | —                                         |       |
| Exercised                    |       | (223,238                             | )          | 6.75 to 11.50                                 |       | (70,000                              | )          | 9.20                                           |       |
| Forfeitured                  |       | (21,460                              | )          | 6.75 to 11.50                                 |       | (73,327                              | )          | 8.50 to 10.79                                  |       |
| Balance - December 31,  2004 |       | 454,139                              |       | 6.75 to 15.00                                 |       | 809,802                              |       | 8.50 to 10.79                                  |       |
| Granted                      |       | 23,060                               |       | 23.00 to 23.01                                |       | 515,108                              |       | 17.94 to 21.77                                 |       |
| Exercised                    |       | (142,350                             | )          | 6.75 to 11.50                                 |       | (160,889                             | )          | 8.93 to 10.79                                  |       |
| Forfeited                    |       | (24,125                              | )          | 6.75 to 15.00                                 |       | (37,722                              | )          | 8.50 to 19.25                                  |       |
| Balance - December 31,  2005 |       | 310,724                              |       | 6.75 to 23.01                                 |       | 1,126,299                            |       | 8.50 to 21.77                                  |       |
| Granted                      |       | —                               |       | —                                        |       | 389,749                              |       | 34.59 to 38.20                                 |       |
| Exercised                    |       | (215,564)                            |       | 6.75 to 23.01                                 |       | (314,326                             | )          | 8.50 to 21.77                                  |       |
| Forfeited                    |       | —                               |       | —                                        |       | (26,490                              | )          | 8.50 to 37.13                                  |       |
| Balance - December 31, 2006  |       | 95,160                               |       | 6.75 to 23.01                                 |       | 1,175,232                            |       | 8.50 to 38.20                                  |       |

 

At December 31, 2006 and2005, options to purchase 388,647 and 315,839 shares, respectively, wereexercisable. No granted options expired in 2006.

 

Total options outstanding and exercisable at December 31, 2006 were asfollows:

** **
| ** **                            | ** ** | **Options outstanding** | ** ** | **Options exercisable**    | ** ** |
|---------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| **Option price per  share** | ** ** | **Number**                   | ** ** | **Weighted  average life** | ** ** | **Weighted  average exercise price  per share** | ** ** | **Number** | ** ** | **Weighted  average exercise price   per share** | ** ** |
| $6.75-8.50                            |       | 12,500                       |       | 4.0                             |       | $ | 7.48 |   | 12,500 |   | $ | 7.48 |   |
| $8.51-10.00                           |       | 11,862                       |       | 5.9                             |       | $ | 9.14 |   | 11,862 |   | $ | 9.14 |   |
| $10.01-11.50                          |       | 17,650                       |       | 6.0                             |       | $ | 11.50 |   | 17,650 |   | $ | 11.50 |   |
| $11.51-15.00                          |       | 37,775                       |       | 7.6                             |       | $ | 14.15 |   | 10,000 |   | $ | 11.80 |   |
| $15.01-20.00                          |       | —                       |       | —                          |       | — |   | — |   | — |   |
| $20.01-24.00                          |       | 15,373                       |       | 8.5                             |       | $ | 23.01 |   | — |   | — |   |
| Total                                 |       | 95,160                       |       |                            |       | Average  $13.59 |   | 52,012 |   | Average  $10.05 |   |
|                                  |       |                         |       |                            |       |   |   |   |   |   |   |
|  € 8.50-11.00               |       | 314,915                      |       | 6.1                             |       | € | 9.15 |   | 314,915 |   | € | 9.15 |   |
|  € 11.01-17.00              |       | —                       |       | —                          |       | — |   | — |   | — |   |
|  € 17.01-22.00              |       | 478,582                      |       | 8.5                             |       | € | 19.86 |   | 21,720 |   | € | 21.07 |   |
|  € 22.01-34.00              |       | —                       |       | —                          |       | — |   | — |   | — |   |
|  € 34.01-39.00              |       | 381.735                      |       | 9.4                             |       | € | 37.88 |   | — |   | — |   |
| Total                                 |       | 1,175,232                    |       |                            |       | Average € 22.84 |   | 336,635 |   | Average € 9.92 |   |

 

# **Issuance of shares**

The General Meeting ofShareholders decides, under the approval of the Stichting Prioriteit ARCADISN.V., about the issuance of shares. The meeting can also appoint theSupervisory Board to issue shares, and as long as this appointment stands, themeeting cannot decide to issue. Issuance of shares to someone who has anearlier right to take shares can be decided by the Executive Board and does notfall under the stipulations outlined above.

 

**Purchaseof shares**

The Executive Board can,with a mandate from the General Meeting of Shareholders and under approval fromthe Supervisory Board and the Stichting Prioriteit ARCADIS N.V., purchaseissued and paid-in shares in ARCADIS N.V.. The heretofore mentioned mandate isnot needed in case the shares are purchased to be issued to employees in linewith existing employee share or option plans.

#  

F-26

----

Regarding the ARCADISIncentive plans, the intention is to minimize dilution by purchasing (a portionof) the shares needed for these plans. In 2006, no shares were issued as aresult of options being exercised (2005: zero). The following amounts of shareswere purchased:

** **
| Year | ** ** | **Number of shares** | ** ** | **Price at time of purchase** | ** **            |
|------|------------|--------------------------------|------------|---------------------------------------------------|-----------------------|
| 2002 |       | 300,000                        |       | €                                            | 10.75                 |   |
| 2003 |       | 112,972                        |       | €                                            | 7.74 to € 8.65   |   |
| 2004 |       | 500                            |       | €                                            | 8.65                  |   |
| 2004 |       | 11,400                         |       | $                                                 | 18.40 to $18.65       |   |
| 2005 |       | 217,013                        |       | €                                            | 18.25 to € 27.24 |   |
| 2005 |       | 115,033                        |       | $                                                 | 17.00 to $30.94       |   |
| 2006 |       | 454,838                        |       | €                                            | 26.60 to € 41.51 |   |
| 2006 |       | 40,000                         |       | $                                                 | 44.10 to $47.69       |   |

 

The repurchased shares are to cover the options granted. This temporaryrepurchase has been deducted from the Retained Earnings.

 

Of the shares purchased, throughout 2006 a total number of 529,890 havebeen placed back in the market through the exercise of options. The net proceedswere € 4,611,000.

 

At December 31, 2006, the number of repurchased shares that was inpossession was 340,627.

 

Outstanding shares of common stock:

 

|      | ** ** | **January 1** | ** ** | **Issuing shares** | ** ** | **Repurchase  shares** | ** ** | **Reissuing  shares** | ** ** | **December 31** | ** ** |
|------|------------|--------------------|------------|-------------------------|------------|------------------------|------------|-----------------------|------------|----------------------|------------|
| 2004 |       | 20,017,405         |       | 215,238                 |       | 11,900                 |       | 78,000                |       | 20,298,743           |       |
| 2005 |       | 20,298,743         |       | —                  |       | 332,046                |       | 303,239               |       | 20,269,936           |       |
| 2006 |       | 20,269,936         |       | —                  |       | 494,838                |       | 529,890               |       | 20,304,988           |       |

 

# **Additional paid-in capital**

Additional paid-in capital represents the premium paid in excess of parvalue of shares at the time of issuance of new shares or exercise of stockoptions. If ARCADIS declared a distribution to shareholders of additionalpaid-in-capital, at least € 17.6 million of the additional paid-in capitalwould not be taxable under the 1964 Dutch income tax legislation.

At the end of 2005 anagreement was made with the Lovinklaan foundation, ARCADIS’ largest shareholder,that this foundation would pay ARCADIS € 6,509 to support an adjustment of theearly retirement plan for Dutch employees (see Note 17). Such payment by ashareholder is considered additional paid-in capital.

**Reserveexchange rate differences**

Reserve exchange ratedifferences (a legal reserve) comprise all foreign exchange differences arisingas of 2004 from the translation of the net assets of foreign operations outsidethe euro-zone.

**Retainedearnings**

The Executive Board isauthorized to propose to the Annual General Meeting of Shareholders, with theapproval of the Supervisory Board, which part of the profit shall be paid asdividend. That which remains shall be added to the equity of the Company. Theholder of the priority shares is entitled to a dividend of 5% of the par valueof the priority shares. For fiscal year 2006, the Executive Board with theapproval of the Supervisory Board proposes to add the amount of € 24.6 millionto the retained earnings. The remainder of € 20.3 million can be distributed asa dividend which represents a dividend of € 1.00 per outstanding share ofcommon stock. For fiscal year 2005, a dividend was proposed and acceptedamounting to € 0.66 per outstanding share of common stock. There are norestrictions on the distribution of retained earnings.

F-27

----

The earnings per sharefor the years 2006, 2005 and 2004 is calculated as follows:
|                                       | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|---------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| Average number  of issued shares      |       | 20,645,815 |       | 20,645,815 |       | 20,645,815 |       |
| Average number  of repurchased shares |       | 411,520    |       | 385,103    |       | 496,620    |       |
| Average number  of outstanding shares |       | 20,234,295 |       | 20,260,712 |       | 20,140,195 |       |
| Of which  priority shares             |       | 200        |       | 200        |       | 200        |       |
| Shares of common stock                |       | 20,234,095 |       | 20,260,512 |       | 20,139,995 |       |

 

For thecalculation of earnings per share, no distinction is made between the differentclasses of shares.
| Total earnings of ARCADIS: |       |           |   |       |   |       |   |
|----------------------------|------------|----------------|--------|------------|--------|------------|--------|
| Net income                 | ** ** | **44,936,000** |   | 33,414,000 |   | 22,176,000 |   |
|                       |       |           |   |       |   |       |   |
| Earnings per  share:       |       |           |   |       |   |       |   |
| Net income                 | ** ** | **2.22**       |   | 1.65       |   | 1.10       |   |

 

As mentionedearlier in this Note, at December 31, 2006, the number of outstanding optionsis 1,270,392 (2005: 1,437,023). At December 31, 2006 all outstanding optionswere in the money, although not all options were exercisable. Exercisingoptions may lead to dilution. This dilution is calculated on a monthly averagebasis. To avoid dilution as much as possible, ARCADIS repurchases own sharesthat are reissued at the time of option exercises.
|                                       | ** ** | **2006**       | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|---------------------------------------|------------|----------------|------------|------------|------------|------------|------------|
| Average number  of outstanding shares | ** ** | **20,234,295** |       | 20,260,712 |       | 20,140,195 |       |
| Average number  of diluting shares    | ** ** | **839,842**    |       | 556,065    |       | 277,035    |       |
| Average number  of diluted shares     | ** ** | **21,074,137** |       | 20,816,777 |       | 20,417,230 |       |
|                                  |       |           |       |       |       |       |       |
| Earnings per  diluted share:          |       |           |       |       |       |       |       |
| Net income                            | ** ** | **2.13**       |       | 1.60       |       | 1.16       |       |

 

**(12)Provisions**
| ** **                                 | ** ** | **Pension  obligations** | ** ** | **Deferred  compensation** | ** ** | **Restruc-  turing** | ** ** | **Litigation** | ** ** | **Others** | ** ** | **Total**   | ** ** |
|--------------------------------------------|------------|--------------------------|------------|----------------------------|------------|----------------------|------------|----------------|------------|------------|------------|-------------|------------|
| **Balance  at January 1, 2005**            | ** ** | **18,903**               | ** ** | **1,194**                  | ** ** | **4,460**            | ** ** | **1,403**      | ** ** | **1,459**  | ** ** | **27,419**  | ** ** |
| **Change  as a result of**                 |       |                     |       |                       |       |                 |       |           |       |       |       |        |       |
| (De)consolidations                         |       | —                   |       | —                     |       | (966                 | )          | 348            |       | (861       | )          | **(1,479**  | **)**      |
| Additions                                  |       | 1,820                    |       | 95                         |       | 2,424                |       | 2,739          |       | 234        | ** ** | **7,312**   | ** ** |
| Amounts used                               |       | (499                     | )          | (27                        | )          | (3,158               | )          | (791           | )          | (377       | )          | **(4,852**  | **)**      |
| Unused amounts  reversed during the period |       | (13,100                  | )          | —                     |       | —               |       | —         |       | —     | ** ** | **(13,100** | **)**      |
| Exchange rate  differences                 |       | 460                      |       | —                     |       | —               |       | —         |       | 58         | ** ** | **518**     | ** ** |
| *Balance  at December 31, 2005*            | ** ** | **7,584**                | ** ** | **1,262**                  | ** ** | **2,760**            | ** ** | **3,699**      | ** ** | **513**    | ** ** | **15,818**  | ** ** |
| * *                                   | * *   | * *                 | * *   | * *                   | * *   | * *             | * *   | * *       | * *   | * *   | * *   | * *    | * *   |
| **Balance  at January 1, 2006**            | ** ** | **7,584**                | ** ** | **1,262**                  | ** ** | **2,760**            | ** ** | **3,699**      | ** ** | **513**    | ** ** | **15,818**  | ** ** |
| **Change  as a result of**                 |       |                     |       |                       |       |                 |       |           |       |       |       |        |       |
| Consolidations                             | ** ** | —                   | ** ** | —                     | ** ** | —               | ** ** | —         | ** ** | **32**     | ** ** | **32**      | ** ** |
| Additions                                  | ** ** | **1,377**                | ** ** | **17**                     | ** ** | **669**              | ** ** | **1,259**      | ** ** | **344**    | ** ** | **3,666**   | ** ** |
| Amounts used                               | ** ** | **(1,265**               | **)**      | **(27**                    | **)**      | **(1,691**           | **)**      | **(1,955**     | **)**      | **(203**   | **)**      | **(5,141**  | **)**      |
| Unused amounts  reversed during the period | ** ** | —                   | ** ** | —                     | ** ** | **(25**              | **)**      | —         | ** ** | **(35**    | **)**      | **(60**     | **)**      |
| Offsetting                                 | ** ** | **(3,765**               | **)**      | —                     | ** ** | —               | ** ** | —         | ** ** | —     | ** ** | **(3,765**  | **)**      |
| Other changes                              | ** ** | —                   | ** ** | —                     | ** ** | —               | ** ** | **9,706**      | ** ** | **169**    | ** ** | **9,875**   | ** ** |
| Exchange rate  differences                 | ** ** | **(418**                 | **)**      | —                     | ** ** | **(45**              | **)**      | **(10**        | **)**      | **(9**     | **)**      | **(482**    | **)**      |
| *Balance at December 31, 2006*             | ** ** | **3,513**                | ** ** | **1,252**                  | ** ** | **1,668**            | ** ** | **12,699**     | ** ** | **811**    | ** ** | **19,943**  | ** ** |

 

F-28

----

No significant amountwill be utilized within one year. As such, all provisions are recorded asnon-current.

#### *Pension obligations*

In the German and French operating companies for limited groups of(ex)employees, pension plans are in place. For these plans, provisions havebeen made based on IAS 19. At year-end 2006 these provisions amounted to € 3.2million.

 

The United States operating company has a plan for deferredcompensation. The management of the company can elect not to have its salarypaid out, but rather invested in a fund by the company, and is offered a choiceof three different portfolio types: risk averse, neutral and risky. The risk isthe responsibility of the participants. At the end of 2005 the company owed theparticipants € 4.4 million in deferred salaries. This amount has been includedin the Pension provision. Offsetting this was a receivable on the fund equal tothe value of the portfolio of € 4.1 million and this amount has been includedin the line item other long-term receivables in the category Other assets.Further study of this special pension plan has shown that according to IAS19.128 the amounts have to be balanced. At December 31, 2006 this leads to anet amount of € 0.3 million.

 

See also Note 17.

#### *Deferred compensation*

A provision to the amount of € 1.3 million has beentaken related to an already activated early retirement plan for a formermanager of an acquired company and to a provision for future jubilee paymentsbased on the current agreements in the collective labour agreements and therelated staff levels.

#### *Provisions for restructuring*

Provisions for restructuring includes costs related tocertain compensation to staff and cost directly related to the existing plansto execute certain restructurings. A provision can only be taken if thedecision to execute said restructuring has been taken, its costs can bereasonably and fairly estimated and its intended execution has been announced.Existing plans currently include small restructurings in certain parts of thecompany which are expected to be phased in on a step-by-step basis in thecoming 24 months.

#### *Provisions for litigation*

ARCADIS has global professional liability insurancecoverage, and in addition has local insurance in a number of countries. Ingeneral these insurance policies have a self-insured retention and a maximumpay out level. The Company is working on thousands of projects each year,varying in fee level from a few thousand euros to several millions of euros. Arelative very small number of these projects result in disputes with clients.These disputes seldom lead to major cash outflows. Based on an assessment bymanagement and if necessary external advisers of all claims under discussion aprovision for the potential financial risk per claim is recorded, if necessaryand only for the part which is not insured. The total sum for the litigationprovisions is shown in the balance sheet. Other changes mainly consists of amovement from project- related loss provision recorded under (un)billedreceivables to a litigation provision and movements from provisions with ashort-term nature to a long-term nature.

#### *Other provisions*

In some cases ARCADIS may extend warranties after thecompletion of activities for which no or no adequate compensation is received.In such cases, estimates form the basis for a provision.

Because settlement in these cases generally takes place in a brief timeframe and because the amounts are relatively limited, no discounts are made.

 

F-29

----

**(13)Deferred tax assets and liabilities**
| ** **                                 | ** ** | **Deferred**        | ** ** | **Deferred**             | ** ** | ** **  | ** ** |
|--------------------------------------------|------------|---------------------|------------|--------------------------|------------|-------------|------------|
| ** **                                 | ** ** | **tax assets** | ** ** | **tax liabilities** | ** ** | **Net**     | ** ** |
| **Balance  at January 1, 2005**            | ** ** | **9,676**           | ** ** | **12,129**               | ** ** | **(2,453**  | **)**      |
| **Change  as a result of**                 |       |                |       |                     |       |        |       |
| (De)consolidations                         |       | 6,122               |       | 5,588                    | ** ** | **534**     | ** ** |
| Additions                                  |       | 4,810               |       | 7,427                    | ** ** | **(2,617**  | **)**      |
| Amounts used                               |       | (3,881              | )          | (503                     | )          | **(3,378**  | **)**      |
| Unused amounts  reversed during the period |       | (4,127              | )          | **—**               | ** ** | **(4,127**  | **)**      |
| Exchange rate  differences                 |       | 612                 |       | 1,611                    | ** ** | **(999**    | **)**      |
| *Balance  at December 31, 2005*            | ** ** | **13,212**          | ** ** | **26,252**               | ** ** | **(13,040** | **)**      |
| * *                                   | * *   | * *            | * *   | * *                 | * *   | * *    | * *   |
| **Balance  at January 1, 2006**            | ** ** | **13,212**          | ** ** | **26,252**               | ** ** | **(13,040** | **)**      |
| **Change  as a result of**                 | ** ** | ** **          | ** ** | ** **               | ** ** | ** **  | ** ** |
| (De)consolidations                         |       | 2,279               |       | 1,691                    | ** ** | **588**     | ** ** |
| Additions                                  |       | 3,626               |       | 9,666                    | ** ** | **(6,040**  | **)**      |
| Amounts used                               |       | (1,951              | )          | (6,630                   | )          | **4,679**   | ** ** |
| Exchange rate  differences                 |       | (24                 | )          | (1,684                   | )          | **1,660**   | ** ** |
| Offsetting                                 |       | (8,851              | )          | (8,851                   | )          | **—**  | ** ** |
|                                       |       |                |       |                     |       |        |       |
| *Balance at December 31, 2006*             | ** ** | **8,291**           | ** ** | **20,444**               | ** ** | **(12,153** | **)**      |

 

Deferred tax assets and liabilities are offset only when there is alegally enforceable right to set off tax assets against tax liabilities andwhen the deferred tax assets and liabilities relate to the same tax authority.

 

Approximately € 17.4 million of the deferred tax liabilities atDecember 31, 2006, will be utilized within one year.

 

The components ofdeferred taxes included in the Consolidated Balance Sheets at December 31, 2006and 2005 are as follows:

 
| ** **                        | ** ** | **Assets** | ** ** | **Liabilities** | ** ** | **Net**    | ** ** |
|-----------------------------------|------------|------------|------------|-----------------|------------|------------|------------|
| **Sources of deferral** | ** ** | **2006**   | ** ** | **2005**        | ** ** | **2006**   | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Goodwill/identifiables            |       | 2,297      |       | —          |       | 2,158      |       | 3,038 |   | 139 |   | (3,038 | ) |
| Derivatives                       |       | —     |       | —          |       | —     |       | 510 |   | — |   | (510 | ) |
| Work in progress                  |       | 745        |       | 580             |       | 23,907     |       | 18,958 |   | (23,162 | ) | (18,378 | ) |
| Accrued expenses                  |       | 281        |       | 5,482           |       | (5,486     | )          | — |   | 5,767 |   | 5,482 |   |
| Share-based  compensation         |       | 3,097      |       | 1,960           |       | —     |       | — |   | 3,097 |   | 1,960 |   |
| Deferred compensation             |       | 1,340      |       | 2,202           |       | —     |       | — |   | 1,340 |   | 2,202 |   |
| Net operating  losses             |       | 642        |       | 2,988           |       | —     |       | — |   | 642 |   | 2,988 |   |
| Cash method                       |       | —     |       | —          |       | —     |       | 3,054 |   | — |   | (3,054 | ) |
| Others                            |       | (111       | )          | —          |       | (135       | )          | 692 |   | 24 |   | (692 | ) |
| **Balance at December 31**        | ** ** | **8,291**  | ** ** | **13,212**      | ** ** | **20,444** | ** ** | **26,252** | ** ** | **(12,153** | **)** | **(13,040** | **)** |

 

The gross operating losses which might be compensated by future profitsamount to € 5,857 in 2006 and € 13,035 in 2005. For these pre-tax losses, thereis no expiration date.

 

In assessing the valuation of the deferred tax assets, managementconsiders whether it is probable that some portion or all of the deferred taxassets will be realized. The ultimate realization of the deferred tax assets is

F-30

----

dependent upon the generation of future taxable income during theperiods in which those temporary differences become deductible. Managementconsiders the scheduled reversal of deferred tax liabilities, projected futuretaxable income, and tax planning strategies in making this assessment. Theamount of the deferred tax assets considered realizable, however, could changein the near term if future estimates of projected taxable income during thecarry-forward period are revised.

 

In 2006 a deferred taxasset of € 1.9 million (2005: € 1.9 million) of net operating losses was notrecognized. The opinion of management is that these losses will not becompensated by future profits in the companies where these losses were made.

**(14) Long-term debt**

 
| ** **                                              | ** ** | **2006**    | ** ** | **2005**   | ** ** |
|---------------------------------------------------------|------------|-------------|------------|------------|------------|
|                                                    |       |        |       |       |       |
| Bank loans                                              | ** ** | **97,190**  |       | 85,691     |       |
| (interest rates between 3.2% and 18.9%)                 |       |        |       |       |       |
| Financial lease contracts                               | ** ** | **780**     |       | 1,172      |       |
| (interest rates between 3.0% and 6.8%)                  |       |        |       |       |       |
| Other long-term debt                                    | ** ** | **22,896**  |       | 31,742     |       |
| (interest rates between 3.0% and 7.0%)                  |       |        |       |       |       |
| Subtotal                                                | ** ** | **120,866** |       | 118,605    |       |
| Current portion                                         | ** ** | **1,580**   |       | 2,456      |       |
|                                                    | ** ** | **119,286** |       | 116,149    |       |
|                                                    |       |        |       |       |       |
| Aggregate  maturities of long-term debt are as follows: |       |        |       |       |       |
|                                                    |       |        |       |       |       |
| 2008                                                    | ** ** | **1,060**   | ** ** | ** ** | ** ** |
| 2009                                                    | ** ** | **23,074**  | ** ** | ** ** | ** ** |
| 2010                                                    | ** ** | **1,356**   | ** ** | ** ** | ** ** |
| 2011                                                    | ** ** | **851**     | ** ** | ** ** | ** ** |
| 2012                                                    | ** ** | **57,285**  | ** ** | ** ** | ** ** |
| after 2012                                              | ** ** | **35,660**  | ** ** | ** ** | ** ** |
|                                                    | ** ** | **119,286** | ** ** | ** ** | ** ** |

 

The weighted average interest rate for 2006 and 2005 oninterest-bearing debt (including the interest effect of the swaps) was 3.6% and3.1%, respectively.

 

Under this heading the retention for the acquisition of BBL is includedamounting to € 17.6 million. Also included are other expected after paymentsrelated to acquisitions, amounting to € 4.0 million.

 

Under the terms of the lease agreements, no contingent rents arepayable.

 

In 2006, ARCADIS finalized the refinancing of the long-term loan andshort-term debt facility. The long-term loan amounts to $120 million with USLIBOR dominated interest rate. The full amount of $120 million is swapped to aEURIBOR-dominated interest rate of which an euro equivalent of $45 million isswapped to a fixed rate of 3.18%. For the disclosure on the derivatives, pleaserefer to Note 7. The debt covenants are disclosed under Note 15.

 

F-31

----

 

 

**(15) Other current liabilities**
| ** **                                 | ** ** | **2006**    | ** ** | **2005** | ** ** |
|--------------------------------------------|------------|-------------|------------|----------|------------|
| Taxes and social  security contributions   | ** ** | **34,110**  |       | 26,845   |       |
| Payable to employees                       | ** ** | **56,686**  |       | 34,082   |       |
| Bank overdrafts and  short-term borrowings | ** ** | **22,342**  |       | 4,196    |       |
| After payments  acquisitions               | ** ** | **8,016**   |       | 2,486    |       |
| Other liabilities                          | ** ** | **21,785**  |       | 51,204   |       |
|                                       | ** ** | **142,939** |       | 118,813  |       |

 

In 2006, ARCADISfinalized the refinancing. Part of this is a centralized short-termmulti-currency debt facility totaling € 100 million with an EONIA-dominatedinterest rate, and a guarantee facility totaling € 50 million, was concludedwith a consortium of banks. The debt covenant at balance sheet date for thelong-term loan, as well as for the short-term facility is that the net debt toEBITDA ratio should not exceed 3.

Besides the centralfacility there are short-term facilities available for the amount of € 35million. For a small portion of the other available credit facilities, currentreceivables and other assets have been pledged. The total short-term debtfacilities amount to € 196.5 million.

The effective interestrates for bank overdrafts are between 2.7% and 6.0%.

**Commitments and contingentliabilities**

Banks have issued bondsup to the amount of € 41.0 million (2005: € 40.0 million).

# **Operational leases**

Future minimum paymentsfor the non-cancelable operating leases during the next five years and thereafterare as follows (in millions of €):
| Years ending December 31, | ** ** | **Amount  Operational  Lease** | ** ** |
|------------------------------------------|------------|--------------------------------|------------|
| 2007                                     | ** ** | **34.9**                       | ** ** |
| 2008                                     | ** ** | **30.8**                       | ** ** |
| 2009                                     | ** ** | **30.5**                       | ** ** |
| 2010                                     | ** ** | **19.3**                       | ** ** |
| 2011                                     | ** ** | **15.3**                       | ** ** |
| Thereafter                               | ** ** | **29.7**                       | ** ** |
|                                     | ** ** | ** **                     | ** ** |
| Total                                    | ** ** | **160.5**                      | ** ** |

 

The Company’s leasearrangements relate to contracts for leased cars and buildings.

During the year ended December 31, 2006, € 34.4 million was recognizedas an expense in the income statement with regard to operating leases (2005: €29.6; 2004:: € 32.8)),

 

**Litigation**

 

For legal and judicial proceedings and claims against the Company andits operating entities, a liability is accrued only if an adverse outcome isprobable and the amount of the loss can be reasonably estimated. If one ofthese conditions is not met, the proceeding or claim is disclosed as contingentliability, if material. The actual outcome of a proceeding or claim may differfrom the estimated liability, and consequently may affect the actual result.The prediction of the outcome and the assessment of a possible loss bymanagement is based on management’s judgments and estimates. Management usuallyconsults lawyers and other specialists for support. Management believes thatthe outcome of legal cases will not have a material effect on the consolidated

F-32

----

financial condition ofARCADIS N.V., but could be material to the Company’s operational results in anyfuture accounting period.

**Guarantees**

As a partner in a numberof partnerships, ARCADIS is liable for the contractual obligations thesecompanies enter into. The potential risk pertaining to these obligationsamounted to € 0.1 million (2005: € 0.3 million).

F-33

----

NOTES TO THE CONSOLIDATEDSTATEMENT OF INCOME

**(16) Segmentinformation**

*Amounts in millions of euros*

Presented below is thegeographical segmentation that coincides with the Company's reportingstructure.

Inter-segment pricing isdetermined on an arm’s length basis.
| ** **                                                                | ** ** | **The Netherlands** | ** ** | **Europe excluding the  Netherlands** | ** ** | **The United States** | ** ** | **Rest of World** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------------------|------------|--------------------------|------------|-------------------------------------------------|------------|---------------------------------|------------|-----------------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                | ** ** | **2006**                 | ** ** | **2005**                                        | ** ** | **2004**                        | ** ** | **2006**                    | ** ** | **2005**         | ** ** | **2004**         | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Gross revenue                                                             | ** ** | **323.3**                |       | 287.7                                           |       | 301.3                           | ** ** | **277.9**                   |       | 267.1            |       | 254.4            | ** ** | **518.4** |   | 348.9 |   | 267.3 | ** ** | **113.4** |   | 97.4 |   | 77.8 |   |   |   |   |   |   | ** ** | **1,233.0** |   | 1,001.1 |   | 900.8 |   |
| Revenue between  regions                                                  | ** ** | **2.7**                  |       | 3.0                                             |       | 3.3                             | ** ** | **4.3**                     |       | 2.6              |       | 1.2              | ** ** | **0.3** |   | 0.1 |   | 0.0 | ** ** | **0.3** |   | 0.2 |   | 0.1 | ** ** | **(7.6** | **)** | (5.9 | ) | (4.7 | ) | **—** |   | — |   | — |   |
| Total revenue  regions                                                    | ** ** | **326.0**                |       | 290.7                                           |       | 304.6                           | ** ** | **282.2**                   |       | 269.7            |       | 255.6            | ** ** | **518.7** |   | 349.0 |   | 267.3 | ** ** | **113.7** |   | 97.6 |   | 77.9 | ** ** | **(7.6** | **)** | (5.9 | ) | (4.7 | ) | **1,233.0** |   | 1,001.1 |   | 900.8 |   |
| Materials,  services of third parties and subcontractors                  | ** ** | **103.1**                |       | 78.4                                            |       | 83.2                            | ** ** | **55.4**                    |       | 60.2             |       | 70.8             | ** ** | **186.8** |   | 115.7 |   | 82.9 | ** ** | **57.9** |   | 49.4 |   | 36.0 | ** ** | **(7.6** | **)** | (5.9 | ) | (4.7 | ) | **395.6** |   | 297.8 |   | 268.2 |   |
| Revenue, net of  materials, services of third parties, and subcontractors | ** ** | **222.9**                |       | 212.3                                           |       | 221.3                           | ** ** | **226.8**                   |       | 209.4            |       | 184.8            | ** ** | **331.9** |   | 233.3 |   | 184.4 | ** ** | **55.8** |   | 48.2 |   | 42.0 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **837.4** |   | 703.3 |   | 632.5 |   |
| Operating costs  regions                                                  | ** ** | **199.9**                |       | 193.8                                           |       | 206.7                           | ** ** | **203.1**                   |       | 184.3            |       | 167.9            | ** ** | **290.7** |   | 208.1 |   | 167.3 | ** ** | **47.2** |   | 41.6 |   | 38.9 |   |   |   |   |   |   | ** ** | **740.9** |   | 627.7 |   | 581.0 |   |
| Depreciation  regions                                                     | ** ** | **5.6**                  |       | 5.0                                             |       | 6.9                             | ** ** | **4.9**                     |       | 4.9              |       | 4.3              | ** ** | **6.4** |   | 4.4 |   | 3.7 | ** ** | **0.8** |   | 0.8 |   | 0.7 |   |   |   |   |   |   | ** ** | **17.7** |   | 15.2 |   | 15.6 |   |
| EBITA                                                                     | ** ** | **17.4**                 |       | 13.5                                            |       | 7.7                             | ** ** | **18.8**                    |       | 20.2             |       | 12.5             | ** ** | **34.8** |   | 20.9 |   | 13.4 | ** ** | **7.8** |   | 5.8 |   | 2.3 |   |   |   |   |   |   | ** ** | **78.8** |   | 60.4 |   | 35.9 |   |
| Amortization  identifiable                                                | ** ** | ** **               |       |                                            |       |                            | ** ** | ** **                  | ** ** | ** **       |       |             | ** ** | ** ** |   |   |   |   | ** ** | ** ** |   |   |   |   |   |   |   |   |   |   | ** ** | ** ** |   |   |   |   |   |
| intangible assets                                                         | ** ** | **2.6**                  |       | 2.0                                             |       | 0.1                             | ** ** | **1.5**                     |       | 1.4              |       | 0.2              | ** ** | **3.7** |   | 2.6 |   | 0.1 | ** ** | **0.5** |   |   |   |   |   |   |   |   |   |   | ** ** | **8.3** |   | 6.0 |   | 0.4 |   |
| Operating income                                                          | ** ** | **14.8**                 |       | 11.5                                            |       | 7.6                             | ** ** | **17.3**                    |       | 18.8             |       | 12.3             | ** ** | **31.1** |   | 18.3 |   | 13.3 | ** ** | **7.3** |   | 5.8 |   | 2.3 |   |   |   |   |   |   | ** ** | **70.5** |   | 54.4 |   | 35.5 |   |
| Financing items                                                           | ** ** | ** **               |       |                                            |       |                            | ** ** | ** **                  | ** ** | ** **       |       |             | ** ** | ** ** |   |   |   |   | ** ** | ** ** |   |   |   |   |   |   |   |   |   |   | ** ** | **(3.5** | **)** | (1.8 | ) | (3.5 | ) |
| Income/(loss)  from associates                                            | ** ** | **0.2**                  |       | 0.2                                             |       | 0.5                             | ** ** | **—**                  |       | —           |       | —           | ** ** | **—** |   | — |   | — | ** ** | **(0.7** | **)** | 1.2 |   | 1.9 |   |   |   |   |   |   | ** ** | **(0.5** | **)** | 1.4 |   | 2.4 |   |
| Taxes                                                                     | ** ** | ** **               |       |                                            |       |                            | ** ** | ** **                  | ** ** | ** **       |       |             | ** ** | ** ** |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | ** ** | **(20.1** | **)** | (17.3 | ) | (10.4 | ) |
| Group income  after taxes                                                 | ** ** | ** **               |       |                                            |       |                            |       |                        |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | ** ** | **46.4** |   | 36.6 |   | 24.1 |   |
| Minority interest                                                         | ** ** | ** **               |       |                                            |       |                            |       |                        |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | ** ** | **(1.5** | **)** | (3.2 | ) | (1.9 | ) |
| Net income                                                                | ** ** | **11.7**                 |       | 11.4                                            |       | 7.1                             | ** ** | **10.5**                    |       | 11.1             |       | 5.7              | ** ** | **21.0** |   | 9.1 |   | 7.9 | ** ** | **1.7** |   | 1.8 |   | 1.5 |   |   |   |   |   |   | ** ** | **44.9** |   | 33.4 |   | 22.2 |   |

 

F-34

----

 
| Total assets               | ** ** | **433.9** |   | 318.6 |   | 261.7 | ** ** | **193.9** |   | 157.6 |   | 175.3 | ** ** | **284.4** |   | 268.6 |   | 110.3 | ** ** | **60.5**  |   | 59.3 |   | 33.7  | ** ** | **(236.2** | **)**      | (154.0     | )      | (138.6 | )          | **736.5**  |   | 650.1 |   | 442.3 |   |
|----------------------------|------------|-----------|--------|-------|--------|-------|------------|-----------|--------|-------|--------|-------|------------|-----------|--------|-------|--------|-------|------------|-----------|--------|------|--------|-------|------------|------------|------------|------------|--------|--------|------------|------------|--------|-------|--------|-------|--------|
| Total financial  assets    | ** ** | **1.8**   |   | 1.5   |   | (6.0  | )          | **1.3**   |   | 1.7   |   | 9.5   | ** ** | **0.9**   |   | 6.3   |   | 3.6   | ** ** | **13.2**  |   | 10.6 |   | 6.5   | ** ** | ** ** |       |       |   |   | ** ** | **17.2**   |   | 20.1  |   | 13.7  |   |
| Total liabilities          | ** ** | **247.7** |   | 142.0 |   | 125.8 | ** ** | **132.3** |   | 135.4 |   | 176.3 | ** ** | **233.1** |   | 225.5 |   | 59.5  | ** ** | **36.5**  |   | 39.5 |   | 22.0  | ** ** | **(113.8** | **)**      | (80.4      | )      | (86.7  | )          | **535.8**  |   | 462.0 |   | 297.0 |   |
| Total investments          | ** ** | **7.8**   |   | 4.0   |   | 3.1   | ** ** | **3.9**   |   | 5.8   |   | 4.4   | ** ** | **6.5**   |   | 6.2   |   | 3.8   | ** ** | **1.1**   |   | 1.6  |   | 0.5   |       |       |       |       |   |   | ** ** | **19.3**   |   | 17.7  |   | 11.8  |   |
| Total number of  employees | ** ** | **2,587** |   | 2,389 |   | 2,346 | ** ** | **3,044** |   | 2,751 |   | 4,000 | ** ** | **3,557** |   | 3,098 |   | 2,222 | ** ** | **1,230** |   | 905  |   | 1,070 |       |       | ** ** | ** ** |   |   |       | **10,418** |   | 9,143 |   | 9,638 |   |

 

F-35

----

 

**(17) Operational costs**
| ** **                                       | ** ** | **2006**    | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------------|------------|-------------|------------|----------|------------|----------|------------|
| Salaries and  wages                              | ** ** | **435,470** |       | 349,966  |       | 325,497  |       |
| Social charges                                   | ** ** | **62,749**  |       | 55,284   |       | 51,152   |       |
| Pension and  early retirement charges            | ** ** | **19,143**  |       | 15,574   |       | 16,791   |       |
| Other personnel  costs including temporary labor | ** ** | **63,971**  |       | 63,657   |       | 55,280   |       |
| Total personnel  costs                           | ** ** | **581,333** |       | 484,481  |       | 448,720  |       |
| Occupancy  expenses                              | ** ** | **50,574**  |       | 44,009   |       | 39,564   |       |
| Travel expenses                                  | ** ** | **38,749**  |       | 32,244   |       | 27,164   |       |
| Office expenses                                  | ** ** | **24,887**  |       | 22,574   |       | 19,389   |       |
| Audit and  consultants costs                     | ** ** | **18,818**  |       | 14,687   |       | 11,929   |       |
| Insurance costs                                  | ** ** | **10,144**  |       | 8,446    |       | 7,056    |       |
| Other  operational costs                         | ** ** | **16,471**  |       | 21,244   |       | 27,166   |       |
| Total other  operational costs                   | ** ** | **159,643** |       | 143,204  |       | 132,268  |       |
| Total operational costs                          | ** ** | **740,976** |       | 627,685  |       | 580,988  |       |

 

The average number of employees in 2006 was 9,685 (2005: 9,208). Theheadcount includes the total number of employees of the proportionatelyconsolidated company ARCADIS Aqumen Facility Management B.V. (228) (2005: 166).

 

# **Share-based compensation**

In accordance with IFRS 2, the Company’s stock option plans qualify asso-called equity-settled plans. As a consequence, the Company has to charge thefair value of the stock options against income (spread over the vestingperiod). The corresponding amount is directly credited to equity.

 

Under other personnel cost in 2006, an amount of € 1.5 million (2005: €0.6 million; 2004: € 0.2 million) is included for the options granted topersonnel in 2006, 2005 and 2004 under the different option plans. Incalculating the amount, the fair value of each option was estimated as of the2006 date of grant using the binominal option-pricing model with the followingweighted average assumptions:

 
|                               | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Expected  dividend yield      |       | 2.09     | %          | 3.5      | %          | 2.7      | %          |
| Risk—free  interest rate |       | 3.9      | %          | 4.0      | %          | 4.0      | %          |
| Expected  volatility          |       | 25       | %          | 35       | %          | 35       | %          |
| Expected life of  option      |       | 5 years  |       | 5 years  |       | 5 years  |       |
| Expected forfeitures          |       | 9.2      | %          | 15       | %          | 15       | %          |

 

*Incentiveshares*

On May 11, 2005,the Annual General Meeting of Shareholders approved the conditional granting of17,000 incentive shares to the members of the Executive Board. The costs ofthis grant amount to € 0.2 million. These costs are amortized over the 3-yearperiod because the grant becomes unconditional after three years. The expensesfor 2006 amount to € 0.1 million and are included in the other personnel costs.

In May 2006,47,400 incentive shares were granted to the members of the Executive Board andsenior management. The expenses for 2006 amount to € 0.2 million.

F-36

----

The followingparameters were used to calculate the costs:
| Share price at grant date  2005 |   | € | 17.94 |   |
|---------------------------------|--------|--------|-------|--------|
| Share price at  grant date 2006 |   | € | 37.13 |   |
| Expected  dividend yield        |   | 2.57   | %     |
| Risk—free  interest rate   |   | 3.30   | %     |
| Foregone  dividend              |   | 7.2    | %     |
| Performance discount            |   | 30.0   | %     |

 

Options and shares granted are conditional in nature and depend onattaining a performance measure after 3 years. The performance measure is TotalShareholder Return (TSR), defined as share price increase plus dividend. Thismeasure stimulates the creation of shareholder value in the longer term.

Each year, a 3-year cycle begins, whereby achievements are measured atthe end of the period against a peer group of companies of comparable size andbreadth. ARCADIS’ position in the peer group (10 companies including ARCADIS)determines whether the (conditional) options and shares granted earlier becomeunconditional.

The following table indicates the number of options and shares that canbecome unconditional at the end of each 3-year period depending on ARCADIS’relative position in comparison to the peer group.

 
| **Position against peer group** | ** ** | **Number of conditional options and  restricted share units that become  unconditional for management** | ** ** | **Number of conditional options that  become unconditional for key staff** | ** ** |
|------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------|------------|
| First                                          |       | 150                                                                                                                                                       | %          | 115                                                                                                                | %          |
| Second                                         |       | 133.30                                                                                                                                                    | %          | 110                                                                                                                | %          |
| Third                                          |       | 116.70                                                                                                                                                    | %          | 105                                                                                                                | %          |
| Fourth                                         |       | 100                                                                                                                                                       | %          | 100                                                                                                                | %          |
| Fifth                                          |       | 83.30                                                                                                                                                     | %          | 95                                                                                                                 | %          |
| Sixth                                          |       | 66.70                                                                                                                                                     | %          | 90                                                                                                                 | %          |
| Seventh                                        |       | 50                                                                                                                                                        | %          | 85                                                                                                                 | %          |
| Eighth                                         |       | 0                                                                                                                                                         | %          | 80                                                                                                                 | %          |
| Below eighth                                   |       | —                                                                                                                                                    |       | 0                                                                                                                  | %          |

 

**Pension costs**

 

The difference between the pension costs of 2006 compared to those of 2005is largely caused by a couple of one off amounts in the figures for 2005. Theseare related to changes in the pension plans for Dutch employees.

Per January 1, 2004, the pension plan for Dutch employees, excludingemployees of PRC, was changed into a pension plan that is classified as adefined contribution plan. This means that, except for the pension premium,this plan does not affect ARCADIS’ results and balance sheet. The introductionof new legislation on January 1, 2006 however, impact the early retirementplan. The Lovinklaan Foundation, which – as a major ARCADIS shareholder – actsin the interest of employees, pledged funding to correct this impact. Therequired one off donation of € 9.5 million to the pension fund was chargedagainst 2005 income. Thanks to the € 6.5 million capital contribution by theLovinklaan Foundation, the effect (after taxes) on ARCADIS equity was zero**.**

Due to the transition of the PRC pension plan by the end of 2005 to adefined contribution plan, a provision of € 13.1 million was released to incomein 2005. In the 2004 IFRS income statement a benefit of € 1.2 million wasrecorded regarding this plan. This is a non-recurring effect. The transition toa defined contribution plan required in 2005 a one time additional contributionto the PRC pension fund of € 2.3 million. The total effect of these was a oneoff additional pension premium of € 0.6 million.

F-37

----

 

**(18) Financial items**
|                                      | ** ** | **2006**    | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------|------------|-------------|------------|----------|------------|----------|------------|
| Financial income                     | ** ** | **14,116**  |       | 2,784    |       | 1,603    |       |
| Financial  expenses                  | ** ** | **(10,063** | **)**      | (6,351   | )          | (5,067   | )          |
| Fair value  changes of derivatives*) | ** ** | **(7,552**  | **)**      | 1,723    |       | —   |       |
|                                 | ** ** | **(3,499**  | **)**      | (1,844   | )          | (3,464   | )          |

 

----

*) In 2005, ARCADISfinanced the BBL acquisition through a US dollar loan. To hedge currency andinterest risks, cross currency swaps were purchased. In 2005, the swaps wereincluded in the income statement, while the value changes of the loan werereported directly in equity. As of 2006, value changes of both the swaps andthe corresponding loan are reported through the income statement. See also Note7.

**(19)Income taxes**

ARCADIS N.V. is forincome tax purposes the parent of the fiscal unit ARCADIS N.V., and istherefore liable for the liabilities of the fiscal unit as a whole. Theweighted average tax rate on income from operations was 30.2% (2005: 32.2%,2004:30.1%).

***Explanation effective tax rate***
| ** **                                    | ** ** | **2006**          | ** ** | **2005**   | ** ** | **2004**      | ** ** |
|-----------------------------------------------|------------|-------------------|------------|------------|------------|---------------|------------|
| ** **                                    | ** ** | **Gross  amount** | ** ** | **Taxes**  | ** ** | **In %** | ** ** | **Gross  amount** | ** ** | **Taxes** | ** ** | **In %** | ** ** | **Gross  amount** | ** ** | **Taxes** | ** ** | **In %** | ** ** |
| Income from operations                        |       | 66,982            |       | 20,119     |       | 30.0          | %          | 52,544 |   | 17,342 |   | 33.0 | % | 32,055 |   | 10,400 |   | 32.4 | % |
| Income (loss)  from associates                |       | (458              | )          | —     |       | —        |       | 1,382 |   | — |   | — |   | 2,448 |   | — |   | — |   |
|                                          |       |              | ** ** | ** ** |       |          |       |   | ** ** | ** ** |   |   |   |   |   |   |   |   |   |
| Total                                         |       | 66,524            |       | 20,119     |       | 30.2          | %          | 53,926 |   | 17,342 |   | 32.2 | % | 34,503 |   | 10,400 |   | 30.1 | % |
|                                          |       |              | ** ** | ** ** |       |          |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Nominal tax rate  in the Netherlands          |       |              |       |       |       | 29.6          | %          |   |   |   |   | 31.5 | % |   |   |   |   | 34.5 | % |
| Foreign tax rate  differences                 |       |              |       |       |       | 4.6           | %          |   |   |   |   | 2.9 | % |   |   |   |   | 0.7 | % |
| Tax losses  previously not recognized         |       |              |       |       |       | (0.1          | )%         |   |   |   |   | — |   |   |   |   |   | 0.2 | % |
| Settlements  related to previous years        |       |              |       |       |       | 0.2           | %          |   |   |   |   | (0.1 | )% |   |   |   |   | (1.0 | )% |
| Amortization                                  |       |              |       |       |       | —        |       |   |   |   |   | 0.8 | % |   |   |   |   | 0.4 | % |
| Income/ (loss)  from associates               |       |              |       |       |       | 0.2           | %          |   |   |   |   | (0.8 | )% |   |   |   |   | (2.4 | )% |
| Non taxable  amounts and others               |       |              |       |       |       | (2.9          | )%         |   |   |   |   | (1.5 | )% |   |   |   |   | (3.8 | )% |
| Change in  corporate tax rate the Netherlands |       |              |       |       |       | (1.4          | )%         |   |   |   |   | (0.6 | )% |   |   |   |   | 1.5 | % |
| Effective tax rate                            |       |              |       |       |       | 30.2          | %          |   |   |   |   | 32.2 | % |   |   |   |   | 30.1 | % |

 
| Composition of taxes  | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Current year                    |       | 20,019   |       | 6,232    |       | 12,229   |       |
| Adjustments for  previous years |       | 122      |       | 342      |       | 331      |       |
| Total current  tax              |       | 20,141   |       | 6,574    |       | 12,560   |       |
| Deferred tax                    |       | (22      | )          | 10,768   |       | (2,160   | )          |
|                            |       | 20,119   |       | 17,342   |       | 10,400   |       |

 

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.

F-38

----

The geographic breakdown of income before taxes, including incomebefore taxes from associates and long—term investments in 2006, 2005 and 2004are as follows:

 
| ** **          | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------|------------|----------|------------|----------|------------|----------|------------|
| The Netherlands     |       | 14,921   |       | 12,442   |       | 7,891    |       |
| Foreign             |       | 51,603   |       | 41,484   |       | 26,612   |       |
|                |       |     |       |     |       |     |       |
| Income before taxes |       | 66,524   |       | 53,926   |       | 34,503   |       |

 

The geographic breakdownof income taxes in the Consolidated Statements of Income is as follows:

 
| ** **      | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------|------------|----------|------------|----------|------------|----------|------------|
| Current tax     |       |     |       |     |       |     |       |
| The Netherlands |       | 2,289    |       | (5,420   | )          | 2,165    |       |
| Foreign         |       | 17,852   |       | 11,994   |       | 10,395   |       |
|            |       | 20,141   |       | 6,574    |       | 12,560   |       |
| Deferred tax    |       |     |       |     |       |     |       |
| The Netherlands |       | (130     | )          | 6,824    |       | (424     | )          |
| Foreign         |       | 108      |       | (3,944   | )          | (1,736   | )          |
|            |       | (22      | )          | 10,768   |       | (2,160   | )          |
|            |       |     |       |     |       |     |       |
| Total taxes     |       | 20,119   |       | 17,342   |       | 10,400   |       |

 

At December 31, 2006,operating loss carry-forwards for tax purposes amounted to € 5.9 million whichcan be carried forward indefinitely. Net operating losses of € 6.8 million wereutilized during 2006 and zero in 2005 and 2004.

** **

**(20) Subsequent events**

 

No events have occurred after December 31, 2006, that would havechanged the judgment and analysis by management of the financial condition ofthe Company at December 31, 2006, or the profit for the period for the year2006.

F-39

----

**(21)Effect of the acquisition and divestments of interest and other disclossures**

The acquisitions anddisposal of interests in 2006 and 2005, and for which the purchase accountingmethod was used, had the following effect on the ARCADIS’ assets and liabilities.
| ** **                                          | ** ** | **2006**         | ** ** | **2005**        | ** ** |
|-----------------------------------------------------|------------|------------------|------------|-----------------|------------|
| ** **                                          | ** ** | **Acquisitions** | ** ** | **Divestments** | ** ** | **Total** | ** ** | **Acquisitions** | ** ** | **Divestments** | ** ** | **Total** | ** ** |
|                                                |       |             |       |            |       |   |   |   |   |   |   |   |   |
| **Assets**                                          |       |             |       |            |       |   |   |   |   |   |   |   |   |
| ** **                                          |       |             |       |            |       |   |   |   |   |   |   |   |   |
| Non-current assets                                  |       |             |       |            |       |   |   |   |   |   |   |   |   |
|                                                |       |             |       |            |       |   |   |   |   |   |   |   |   |
| Intangible assets                                   |       | 10,874           |       |            |       | 10,874 |   | 14,867 |   | (2,384 | ) | 12,483 |   |
| Property, plant &  equipment                    |       | 1,757            |       |            |       | 1,757 |   | 20,495 |   | (8,523 | ) | 11,972 |   |
| Investments in equity  accounted associates         |       | 24               |       |            |       | 24 |   | (1,047 | ) | 313 |   | (734 |   |
| Other investments                                   |       | 68               |       |            |       | 68 |   | 1,515 |   | (1,082 | ) | 433 |   |
| Deferred tax assets                                 |       | 2,279            |       |            |       | 2,279 |   | 6,122 |   | — |   | 6,122 |   |
|                                                |       |             |       |            |       |   |   |   |   |   |   |   |   |
| **Total non-current assets**                        |       | 15,002           |       |            |       | 15,002 |   | 41,952 |   | (11,676 | ) | 30,276 |   |
|                                                |       |             |       |            |       |   |   |   |   |   |   |   |   |
| Current assets                                      |       |             |       |            |       |   |   |   |   |   |   |   |   |
| Inventories                                         |       | 8                |       |            |       | 8 |   | — |   | — |   | — |   |
| (Un)billed receivables                              |       | 13,045           |       | (50             | )          | 12,995 |   | 63,395 |   | (44,914 | ) | 18,481 |   |
| Corporate tax  receivable                           |       | 120              |       |            |       | 120 |   | — |   | — |   | — |   |
| Cash and cash  equivalents                          |       | 3,596            |       |            |       | 3,596 |   | 19,454 | ) | (6,461 |   | 12,993 |   |
|                                                |       |             |       |            |       |   |   |   |   |   |   |   |   |
| **Total current assets**                            |       | 16,769           |       | (50             | )          | 16,719 |   | 82,849 |   | (51,375 | ) | 31,474 |   |
|                                                |       |             |       |            |       |   |   |   |   |   |   |   |   |
| **Total assets**                                    |       | 31,771           |       | (50             | )          | 31,721 |   | 124,801 |   | (63,051 | ) | 61,750 |   |
|                                                |       |             |       |            |       |   |   |   |   |   |   |   |   |
| **Equity  and liabilities**                         |       |             |       |            |       |   |   |   |   |   |   |   |   |
| **Minority interest**                               |       | (930             | )          |            |       | (930 | ) | 302 |   | (1,090 | ) | (788 | ) |
|                                                |       |             |       |            |       |   |   |   |   |   |   |   |   |
| Provisions                                          |       | 36               |       |            |       | 36 |   | 493 |   | (1,972 | ) | (1,479 | ) |
| Deferred tax  liabilities                           |       | 1,691            |       |            |       | 1,691 |   | 5,588 |   | — |   | 5,588 |   |
| Long-term debt                                      |       | 117              |       |            |       | 117 |   | 6,142 |   | (5,678 | ) | 464 |   |
|                                                |       |             |       |            |       |   |   |   |   |   |   |   |   |
| **Total non-current liabilities**                   |       | 1,844            |       |            |       | 1,844 |   | 12,223 |   | (7,650 | ) | 4,573 |   |
|                                                |       |             |       |            |       |   |   |   |   |   |   |   |   |
| Billing in excess of  cost                          |       | 661              |       |            |       | 661 |   | 9,562 |   | (1,041 | ) | 8,521 |   |
| Corporate tax  liabilities                          |       | 507              |       |            |       | 507 |   | — |   | — |   | — |   |
| Trade and other liabilities                         |       | 6,873            |       | (73             | )          | 6,800 |   | 42,728 |   | (40,768 | ) | 1,960 |   |
|                                                |       |             |       |            |       |   |   |   |   |   |   |   |   |
| **Total current liabilities**                       |       | 8,041            |       | (73             | )          | 7,968 |   | 52,290 |   | (41,809 | ) | 10,481 |   |
|                                                |       |             |       |            |       |   |   |   |   |   |   |   |   |
| **Total equity and liabilities**                    |       | 8,955            |       | (73             | )          | 8,882 |   | 64,815 |   | (50,541 | ) | 14,266 |   |
| ** **                                          | ** ** | ** **       | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Total net value**                                 |       | 22,816           |       | 23              |       | 22,839 |   | 59,986 |   | (12,502 | ) | 47,484 |   |
|                                                |       |             |       |            |       |   |   |   |   |   |   |   |   |
| **Recorded goodwill / (Book gain)**                 |       | 29,858           |       |            |       | 29,858 |   | 61,273 |   | (2,486 | ) | 59,237 |   |
| **Consideration paid / (received)**                 |       | 52,674           |       | 23              |       | 52,697 |   | 121,259 |   | (14,988 | ) | 106,271 |   |
| ** **                                          | ** ** | ** **       | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **After payments not paid yet**                     |       | (3,845           | )          | —          |       | (3,845 | ) | (26,766 | ) | — |   | (26,766 | ) |
| **After payment paid related to  2005 acquisition** |       | 846              |       | —          |       | 846 |   |   |   |   |   |   |   |
| **Cash (acquired) / disposed**                      |       | (3,593           | )          |            |       | (3,593 | ) | (19,454 | ) | 6,461 |   | (12,993 | ) |
| **Net cash outflow / (inflow)**                     |       | 46,082           |       | 23              |       | 46,105 |   | 75,039 |   | (8,527 | ) | 66,512 |   |

 

No equity instruments were issued with respect to the 2006 and 2005acquisitions.

For 2006 the acquired interests contributed a loss (after amortizationof identifiable intangible assets of € 1.1 million net) of € 0.2 million to theconsolidated profit for the period for the year, excluding financing expensesrelated to these acquisitions. If the acquisitions had occurred on January 1,2006, the addition to ARCADIS’ revenue, net of materials, services of thirdparties, and subcontractors would have been € 49.3 million, and addition toARCADIS’ profit for the period would have been € 3.4 million, excludingfinancing expenses related to these acquisitions, and based on local GAAP.

F-40

----

For 2005 the acquiredinterests contributed a profit for the period (after amortization ofidentifiable intangible assets of € 3.6 million net) of € 2.3 million to theconsolidated profit for the period for the year, excluding financing expensesrelated to these acquisitions. If the acquisitions had occurred on January 1,2005, the addition to ARCADIS’ revenue, net of materials, services of thirdparties, and subcontractors would have been € 89 million, and addition toARCADIS’ profit for the period would have been € 3.5 million, excludingfinancing expenses related to these acquisitions, and based on local GAAP.

**Acquisition Blasland, Bouck &Lee, Inc. (BBL)**

The acquisition of 100%of the shares of BBL as of September 30, 2005 was the only material acquisitionmade in 2005 and 2006. Therefore information on this acquisition is disclosedseparately. In the above mentioned aggregated numbers over 2005, BBL is alsoincluded. BBL specializes in environmental services and soil, groundwater andsediment remediation services. BBL is active in the United States of Americaand generated in 2004 $140 million gross revenue and employs approximately 900people.
| Assets                                      | ** ** | **BBL own GAAP** | ** ** | **Purchase accounting   / IFRS entries** | ** ** | **BBL in IFRS** | ** ** |
|---------------------------------------------|------------|----------------------------|------------|--------------------------------------------------------------|------------|---------------------------|------------|
| Non-current  assets                         |       |                       |       |                                                         |       |                      |       |
| Intangible  assets                          |       |                       |       | 5,035                                                        |       | 5,035                     |       |
| Property, plant  & equipment            |       | 11,833                     |       | 3,652                                                        |       | 15,484                    |       |
| Investments in  equity accounted associates |       | 26                         |       |                                                         |       | 26                        |       |
| Other  investments                          |       | 698                        |       |                                                         |       | 698                       |       |
| Deferred tax  assets                        |       | 2,343                      |       | (880                                                         | )          | 1,463                     |       |
|                                        |       |                       |       |                                                         |       |                      |       |
| **Total  non-current assets**               |       | 14,900                     |       | 7,807                                                        |       | 22,707                    |       |
|                                        |       |                       |       |                                                         |       |                      |       |
| Current assets                              |       |                       |       |                                                         |       |                      |       |
| (Un)billed  receivables                     |       | 42,734                     |       |                                                         |       | 42,734                    |       |
| Cash and cash  equivalents                  |       | 13,222                     |       |                                                         |       | 13,222                    |       |
|                                        |       | 55,956                     |       |                                                         |       | 55,956                    |       |
| **Total  current assets**                   |       |                       |       |                                                         |       |                      |       |
|                                        |       |                       |       |                                                         |       |                      |       |
| **Total  assets**                           |       | 70,956                     |       | 7,807                                                        |       | 78,663                    |       |
|                                        |       |                       |       |                                                         |       |                      |       |
| **Equity and liabilities**                  |       |                       |       |                                                         |       |                      |       |
|                                        |       |                       |       |                                                         |       |                      |       |
| Long-term debt                              |       | 4,259                      |       |                                                         |       | 4,259                     |       |
|                                        |       |                       |       |                                                         |       |                      |       |
| **Total  non-current liabilities**          |       | 4,259                      |       |                                                         |       | 4,259                     |       |
|                                        |       |                       |       |                                                         |       |                      |       |
| Billing in  excess of cost                  |       | 8,131                      |       |                                                         |       | 8,131                     |       |
| Trade and other  liabilities                |       | 38.471                     |       | 958                                                          |       | 39.429                    |       |
|                                        |       |                       |       |                                                         |       |                      |       |
| **Total  current liabilities**              |       | 46,602                     |       | 958                                                          |       | 47,559                    |       |
|                                        |       |                       |       |                                                         |       |                      |       |
| **Total  equity and liabilities**           |       | 50,860                     |       | 958                                                          |       | 51,818                    |       |
| ** **                                  |       |                       |       |                                                         |       |                      |       |
| **Total  net value**                        |       | 19,996                     |       | 6,849                                                        |       | 26,845                    |       |
|                                        |       |                       |       |                                                         |       |                      |       |
| **Recorded  goodwill**                      |       |                       |       |                                                         |       | 41,450                    |       |
| **Consideration  paid**                     |       |                       |       |                                                         |       | 68,295                    |       |
| ** **                                  |       |                       |       |                                                         |       |                      |       |
| **After  payments not paid yet**            |       |                       |       |                                                         |       | (19,496                   | )          |
| **Cash  acquired**                          |       |                       |       |                                                         |       | (13,222                   | )          |
| **Net cash outflow**                        |       |                       |       |                                                         |       | 35,577                    |       |

 

The afterpayment is withheld to cover for possible risks relatedto known indemnity issues and tax matters. Payment is most likely to occur 36months after the closing, assuming that risks are mitigated.

Netincome from BBL from closing till the end of 2005 amounted to € 2.0 million.For BBL the nature of the intangible asset acquired was the expected profits inthe backlog. The estimated amortization period is between 2005 and 2010. Themajority of the identifiable intangible assets were amortized in 2005 and 2006.

F-41

----

# **Related party transactions**

From time to time the Company entered into related partytransactions with associates. These transactions are conducted on an arm’slength basis with terms comparable to transactions with third parties.Intercompany transactions, balances and unrealized gains on transactionsbetween group companies are eliminated on consolidation and are not disclosedin this Note. In 2006, ARCADIS was not a party to any transaction or loan withother parties who hold at least 10% of the shares in ARCADIS.

In 2005 the transaction with the Lovinklaan Foundation was theonly related party transaction (see Note 17).

In 2004, ARCADIS was not a party to any transaction or loan withother parties who hold at least 10% of the shares in ARCADIS.

**Interests in jointly controlled entities**

The group has a 50%interest in the jointly controlled entity ARCADIS Aqumen Facility Management BVand a 33.3% interest in the jointly controlled entity Biogás Energia AmbientalS.A. The financial statements of these jointly controlled entities are (inmillions of euros):
|                          | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|--------------------------|------------|------------|------------|------------|------------|
| Non-current  assets      |       | 8.6        |       | 5.6        |       |
| Current assets           |       | 28.6       |       | 13.7       |       |
| **Total  assets**        | ** ** | **37.2**   | ** ** | **19.3**   | ** ** |
| ** **               | ** ** | ** ** | ** ** | ** ** | ** ** |
| Non-current  liabilities |       | 4.4        |       | 5.5        |       |
| Current  liabilities     |       | 27.7       |       | 10.1       |       |
| Minority  interest       |       | —     |       | —     |       |
| **Total  liabilities**   | ** ** | **32.1**   | ** ** | **15.6**   | ** ** |
| ** **               | ** ** | ** ** | ** ** | ** ** | ** ** |
| Gross revenue            |       | 89.0       |       | 46.5       |       |
| Expenses                 |       | 85.1       |       | 43.5       |       |

 

F-42

----

**Remuneration of Executive Board and Supervisory Board**

Duringthe General Meeting of Shareholders in May 2006, two new members of theExecutive Board were appointed.

In2006, an amount of € 1,442,000 (2005: € 1,167,000, 2004: 1.298.000) was chargedto the Company for remuneration of Executive Board members including pensioncharges.****As flexible remuneration,27,000 performance shares and 65,000 performance options were granted. In theschedule below, the different components of the remuneration for each ExecutiveBoard member are provided. For an explanation of the remuneration policy,please refer to the remuneration report included in this report.

*amounts in thousands of euros unless otherwise stated*
| ** **                 | ** ** | ** ** | ** ** | ** **    | ** ** | ** **   | ** ** | ** **  | ** ** | **Performance  shares** | ** ** | **Performance  options** | ** ** |
|----------------------------|------------|------------|------------|---------------|------------|--------------|------------|-------------|------------|-------------------------|------------|--------------------------|------------|
| ** **                 | ** ** | **Year**   | ** ** | **Salary(1)** | ** ** | **Bonus(2)** | ** ** | **Pension** | ** ** | **Number**              | ** ** | **Amount(3)**            | ** ** | **Number** | ** ** | **Amount(3)** | ** ** |
| **Harrie  Noy**            |       | 2006       |       | 356           |       |         |       | 76          |       | 10,000                  |       | 233                      |       | 25,000 |   | 216 |   |
| ** **                 |       | 2005       |       | 339           |       | 209          |       | 79          |       | 10,000                  |       | 113                      |       | 25,000 |   | 93 |   |
| ** **                 |       | 2004       |       | 331           |       | 175          |       | 74          |       | —                  |       | —                   |       | — |   |   |   |
| **Michiel  Jaski**         |       | 2006       |       | 266           |       |         |       | 42          |       | 7,000                   |       | 163                      |       | 15,000 |   | 129 |   |
|                       |       | 2005       |       | 254           |       | 148          |       | 30          |       | 7,000                   |       | 79                       |       | 15,000 |   | 56 |   |
|                       |       | 2004       |       | 248           |       | 130          |       | 27          |       | —                  |       | —                   |       | — |   | — |   |
| **Ben van  der Klift(4)**  |       | 2006       |       | 168           |       | —       |       | 17          |       | 5,000                   |       | 117                      |       | 12,500 |   | 108 |   |
| **Friedrich Schneider(4)** |       | 2006       |       | 137           |       | —       |       | 22          |       | 5,000                   |       | 117                      |       | 12,500 |   | 108 |   |

 

----

1.          OnJuly 1, 2006 the salaries of the members of the Executive Board were raised by5% (2005: 5%, 2004: 0%).

2.          Thebonus is based on the results achieved in 2006 2005, respectively 2004. Thisbonus is paid in 2007, 2006 respectively 2005.

3.          Thisamount will be charged over a 3-year period to the Company’s profit and lossaccount.

4.          The salaries mentioned are the amounts as of the date ofappointment as members of the Executive Board (May 17, 2006).

# **Interests held by members of the Executive Board**

Theinterests held in the share capital of ARCADIS N.V. by those who in 2006 were amember of the Executive Board are noted in the table below:
|                                        | ** ** | **December 31,  2005** | ** ** | **December 31, 2006** | ** ** |
|----------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Shares ARCADIS  N.V.                   |       |                        |       |                            |       |
| Harrie L.J. Noy                        |       | 34,122                      |       | 37,305                          |       |
| C. Michiel Jaski                       |       | 1,719                       |       | 1,870                           |       |
| Ben A. van der  Klift*                 |       | —                      |       | 699                             |       |
| Friedrich M.T.  Schneider*             |       | —                      |       | —                          |       |
|                                   |       |                        |       |                            |       |
|                                   |       |                        |       |                            |       |
| **Conditional  shares ARCADIS N.V.**** |       |                        |       |                            |       |
| Harrie L.J. Noy                        |       | 10,000                      |       | 20,000                          |       |
| C. Michiel Jaski                       |       | 7,000                       |       | 14,000                          |       |
| Ben A. van der  Klift                  |       | —                      |       | 5,000                           |       |
| Friedrich M.T.  Schneider              |       | —                      |       | 5,000                           |       |

 

----

*Ben A. van der Klift and Friedrich M.T. Schneider were appointed member of theExecutive Board on May 17, 2006

** Amounts based on granting of 100%of the reference numbers, with maximal extention to 150%. Please refer to Note17.

For description of theplan, please refer to the paragraph “long-term flexible remuneration” of Item6B of this report.

F-43

----

Overview options outstanding to members of theExecutive Board at December 31, 2006

 
| ** **                | ** ** | **Option plan  from  year** | ** ** | **Granted in** | ** ** | **Granted** | ** ** | **Exercise price** | ** ** | **Exercised to date** | ** ** | **Outstanding** | ** ** | **Expiration** | ** ** |
|---------------------------|------------|----------------------------------|------------|---------------------|------------|-------------|------------|-------------------------|------------|---------------------------------|------------|-----------------|------------|----------------|------------|
| Harrie L.J. Noy           |       | 2001                             |       | 2001                |       | 30,000      |       | €                  | 9.20       |                            | 30.000     |            | —     |           | 05-22-2011 |   |
|                      |       |                             |       | 2002                |       | 15,000      |       | €                  | 10.79      |                            | —     |            | 15,000     |           | 05-15-2012 |   |
|                      |       |                             |       | 2003                |       | 17,500      |       | €                  | 8.93       |                            | —     |            | 17,500     |           | 05-13-2013 |   |
|                      |       | 2005                             |       | 2005                |       | 25,000      | *          | €                  | 17.94      |                            | —     |            | 25,000     |           | 05-10-2015 |   |
|                      |       |                             |       | 2006                |       | 25,000      | *          | €                  | 37.13      |                            | —     |            | 25,000     |           | 05-18-2016 |   |
|                      |       |                             |       |                |       |        |       |                    |       |                            |       |            |       |           |       |
| C.Michiel Jaski           |       | 2001                             |       |                |       |        |       |                    |       |                            |       |            |       |           |       |
|                      |       |                             |       | 2002                |       | 10,000      |       | €                  | 10.79      |                            | 10,000     |            | —     |           | 05-15-2012 |   |
|                      |       |                             |       | 2003                |       | 14,000      |       | €                  | 8.93       |                            | —     |            | 14,000     |           | 05-13-2013 |   |
|                      |       | 2005                             |       | 2005                |       | 15,000      | *          | €                  | 17.94      |                            | —     |            | 15,000     |           | 05-10-2015 |   |
|                      |       |                             |       | 2006                |       | 15,000      | *          | €                  | 37.13      |                            | —     |            | 15,000     |           | 05-18-2016 |   |
|                      |       |                             |       |                |       |        |       |                    |       |                            |       |            |       |           |       |
| Ben A. van der  Klift     |       | 2001                             |       | 2003                |       | 12,285      |       | €                  | 8.50       |                            | 4,000      |            | 8,285      |           | 10-16-2013 |   |
|                      |       |                             |       | 2005                |       | 9,000       |       | €                  | 17.94      |                            | —     |            | 9,000      |           | 05-10-2015 |   |
|                      |       | 2005                             |       | 2006                |       | 12,500      | *          | €                  | 37.13      |                            | —     |            | 12,500     |           | 05-18-2016 |   |
|                      |       |                             |       |                |       |        |       |                    |       |                            |       |            |       |           |       |
| Friedrich M.T.  Schneider |       | 2005                             |       | 2006                |       | 12,500      | *          | €                  | 37.13      |                            | —     |            | 12,500     |           | 05-18-2016 |   |

 

----

*Amounts based on granting of 100% of the referenced numbers, with maximalextention to 150%. Please refer to Note 17.

Currently, the Supervisory Board consists of six members. Thejoint fixed remuneration for 2006 totaled € 213,000 (2005:

€216,000), specified as follows.
| **Remuneration (in thousands of euros)** | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                         |       |     |       |     |       |
| Rijnhard W.F.  van Tets                                      |       | 49       |       | 50       |       |
| Thomas M. Cohn                                               |       | 30       |       | 30       |       |
| Carlos Espinosa  de los Monteros                             |       | 30       |       | 30       |       |
| George R.  Nethercutt (as of May 11, 2005)                   |       | 28       |       | 13       |       |
| Jan Peelen                                                   |       | 30       |       | 30       |       |
| Ross A. Webber  (until May 17, 2006)                         |       | 15       |       | 30       |       |
| Gerrit Ybema                                                 |       | 31       |       | 33       |       |

 

## ***Shares and options held by members of theSupervisory Board***

Theinterests held in the share capital of ARCADIS N.V. by those who during 2006were members of the Supervisory Board are noted in the table below:
| Shares ARCADIS N.V. | ** ** | **December 31, 2005** | ** ** | **December 31, 2006** | ** ** |
|-------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| R.A. Webber*                  |       | 1,130                           |       | 130                             |       |

 

----

## ** Mr. Webber resigned hisposition on the Supervisory Board on May 17, 2006 due to the completion of histhird term as a board member.*

Membersof the Supervisory Board hold no ARCADIS options or shares.

F-44

----

OTHERINFORMATION

**Profit allocation**

Article27 of the Articles of Association stipulates, among other things, that theExecutive Board with the approval of the Supervisory Board shall annuallypropose which part of the profit shall be allocated to the reserves. Theremaining part of the profit shall be at the disposal of the Annual GeneralMeeting of Shareholders.

TheExecutive Board with the approval of the Supervisory Board proposes to presentfor acceptance to the Annual General Meeting of Shareholders to reserve anamount of € 24.6 million and distribute a dividend amount of € 20.3 millionfrom the profits of the fiscal year 2006, amounting to € 44.9 million, whichrepresents a dividend of € 1.00 per share.

F-45

----

**(22)    PensionPlans**

Under IFRS ARCADIS has for certain employeescollective defined contribution pension plans which qualify as defined benefitplans under US GAAP. The benefits under these plans are based primarily onyears of service and employees' compensation near retirement. The fundingpolicy of the plans is consistent with local requirements. Obligations underthe defined benefit plans are met by systematically depositing funds with the trusteesor separate foundations, under insurance policies, or by financial statementaccruals. The actuarial calculations are made with use of the Projected UnitCredit Method. Expected Return is a component of the determination of thepension expense. The difference between Actual Return and Expected Return willbe amortized. The Net Gains or Losses Amortization has been included as acomponent of the annual expense for a year if, as of the beginning of the year,that cumulative net Unrecognized Gain or Loss exceeds 10% of the greater of thePlan Liability or value of Plan Assets. If amortization is required, theamortization is that excess divided by 15, being the long term expected averageremaining working lives of the employees participating in the plan.

The Net Prior Service Costs Amortizationresulting from a plan change is included as a component of the annual expensefor the year. These costs are recognized in the first year of the plan changeand every year thereafter. Prior Service Costs are recognized on astraight-line basis over the average period until the benefits become vested.If the benefits are vested immediately following the change to, a ProjectedBenefit plan, the Prior Service Cost is recognized immediately.

Pension costs included in the ConsolidatedStatements of Income as computed under IFRS for the plans that are consideredto be defined benefit pension plans under US GAAP, amounted to € 12.7 millioncharge in 2006,  € 7.4 million charge in2005 and  € 15.5 charge in 2004. Pensioncosts for these plans were computed in compliance with US GAAP in accordancewith Financial Accounting Standards Board Statement No. 87, “Employer’sAccounting for Pensions” (FAS 87). The pension costs for the years endedDecember 31, 2006, 2005 and 2004 were as follows:
| ** **                                      | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                            |       |     |       |     |       |     |       |
| Service  cost-benefit earned during the period  |       | 13,847   |       | 15,277   |       | 13,200   |       |
| Interest cost on  projected benefit obligations |       | 29,082   |       | 31,574   |       | 33,900   |       |
| Expected return  on plan assets                 |       | (40,157  | )          | (35,230  | )          | (36,600  | )          |
| Net amortization  , deferral and other          |       | 1,362    |       | 2,563    |       | 15,400   |       |
| Net pension cost                                |       | 4,134    |       | 14,184   |       | 25,900   |       |

 

Reconciliationof pension costs:
| ** **                                    | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                          |       |     |       |     |       |     |       |
| Employer contribution                         |       | 12,723   |       | 20,533   |       | 15,500   |       |
| Unused amounts of  pension provisions         |       | —   |       | (13,100  | )          | —   |       |
| Net pension cost under  IFRS                  |       | 12,723   |       | 7,433    |       | 15,500   |       |
| Net pension costs in  compliance with US GAAP |       | 4,134    |       | 14,184   |       | 25,900   |       |
| Reconciling item of  income before taxes      |       | 8,589    |       | (6,751   | )          | (10,400  | )          |

 

On September 29, 2006, Statement of Financial AccountingStandards No. 158, “Employers’ Accounting for Defined Benefit Pension Plans andOther Postretirement Plans” (FAS 158) was issued. FAS 158 requires, amongstother things, the recognition of the funded status of each defined benefitpension plan, retiree health care and other postretirement benefit plans andpost employment benefit plans on the balance sheet. Each overfunded plan isrecognized as an asset and each underfunded plan is recognized as a liability.The initial impact of the standard due to unrecognized prior service costs orcredits and net actuarial gains or losses as well as subsequent changes in thefunded status is recognized as a component of accumulated comprehensive loss inshareholders’ equity. Additional minimum pension liabilities (AML) and relatedintangible assets are also derecognized upon adoption of the new standard. FAS158 requires initial application for fiscal years ending after December 15,2006. We adopted FAS 158 as of December 31, 2006. The following tablesummarizes the incremental effect due to the initial adoption of FAS 158.

F-46

----

 
| ** **                                      | ** ** | **US GAAP  prior to  Adoption of  FAS 158** | ** ** | **Adjustment** | ** ** | **Post  Adoption of  FAS 158** | ** ** |
|-------------------------------------------------|------------|-----------------------------------------------------------------|------------|----------------|------------|------------------------------------------|------------|
|                                            |       |                                                            |       |           |       |                                     |       |
| Deferred tax  assets                            |       | (19,242                                                         | )          | 19,101         |       | (141                                     | )          |
| Prepaid benefit  costs                          |       | 89,790                                                          |       | (76,872        | )          | 12,918                                   |       |
| Accrued benefit  liability                      |       | (14,331                                                         | )          | 1,965          |       | (12,366                                  | )          |
|                                            |       |                                                            |       |           |       |                                     |       |
| Accumulated other  comprehensive income/ (loss) |       | (18,343                                                         | )          | (55,806        | )          | (74,149                                  | )          |

 

F-47

----

The funded status of these defined benefit pension plans for US GAAPpurposes was as follows:

 
|                                                          | ** ** | **2006**                                      | ** ** | **2005**                                      | ** ** |
|----------------------------------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                               | ** ** | **Assets exceed  accumulated  benefits** | ** ** | **Accumulated  benefits exceed  assets** | ** ** | **Assets exceed  accumulated  benefits** | ** ** | **Accumulated  benefits exceed  assets** | ** ** |
|                                                     |       |                                          |       |                                          |       |   |   |   |   |
| **Change in Projected Benefit  Obligation**              |       |                                          |       |                                          |       |   |   |   |   |
| Benefit Obligation at  beginning of the year             |       | 653,844                                       |       | 70,913                                        |       | 634,200 |   | 63,100 |   |
| Service cost                                             |       | 11,794                                        |       | 2,053                                         |       | 13,449 |   | 1,828 |   |
| Interest cost                                            |       | 26,173                                        |       | 2,909                                         |       | 28,632 |   | 2,942 |   |
| Plan participants’  contributions                   |       | 3,638                                         |       | 811                                           |       | 3,188 |   | 764 |   |
| Benefits paid                                            |       | (29,523                                       | )          | (2,023                                        | )          | (29,206 | ) | (2,002 | ) |
| Actuarial (gain)loss,  including changes in assumptions  |       | 35,784                                        |       | (3,480                                        | )          | 3,581 |   | 4,281 |   |
| Benefit obligation at  end of the year                   |       | 701,710                                       |       | 71,183                                        |       | 653,844 |   | 70,913 |   |
|                                                     |       |                                          |       |                                          |       |   |   |   |   |
| **Change in plan assets**                                |       |                                          |       |                                          |       |   |   |   |   |
| Fair value of plan  assets at beginning of year          |       | 677,274                                       |       | 56,173                                        |       | 596,400 |   | 46,600 |   |
| Actual return on plan  assets                            |       | 52,120                                        |       | 2,252                                         |       | 88,010 |   | 9,207 |   |
| Employer contribution                                    |       | 11,119                                        |       | 1,604                                         |       | 18,882 |   | 1,604 |   |
| Plan participants’  contributions                   |       | 3,638                                         |       | 811                                           |       | 3,188 |   | 764 |   |
| Benefits paid                                            |       | (29,523                                       | )          | (2,023                                        | )          | (29,206 | ) | (2,002 | ) |
| Fair value of plan  assets at end of year                |       | 714,628                                       |       | 58,817                                        |       | 677,274 |   | 56,173 |   |
|                                                     |       |                                          |       |                                          |       |   |   |   |   |
| Funded status at end of  year                            |       | 12,918                                        |       | (12,366                                       | )          | 23,430 |   | (14,740 | ) |
| Unrecognized actuarial  loss                             |       |                                          |       |                                          |       | 44,324 |   | 315 |   |
| Unrecognized prior  service cost                         |       |                                          |       |                                          |       | 13,138 |   | 403 |   |
| Prepaid / accrued  benefit costs                         |       |                                          |       |                                          |       | 80,892 |   | (14,022 | ) |
|                                                     |       |                                          |       |                                          |       |   |   |   |   |
| **Classification of the net  balances is as follows:**   |       |                                          |       |                                          |       |   |   |   |   |
| Prepaid benefit costs                                    |       | 12,918                                        |       | —                                        |       | 80,892 |   | — |   |
| Accrued benefit  liability                               |       | —                                        |       | (12,366                                       | )          | — |   | (13,652 | ) |
| Accumulated other  comprehensive income                  |       | —                                        |       | —                                        |       | — |   | — |   |
| Prepaid benefit costs,  net                              |       | 12,918                                        |       | (12,366                                       | )          | 80,892 |   | (13,652 | ) |
|                                                     |       |                                          |       |                                          |       |   |   |   |   |
| **Accumulated other comprehensive  income before taxes** |       |                                          |       |                                          |       |   |   |   |   |
| Unrecognized actuarial  loss (gain)                      |       | 65,045                                        |       | (2,317                                        | )          | n/a |   | n/a |   |
| Unrecognized prior service cost (income)                 |       | 11,827                                        |       | 352                                           |       | n/a |   | n/a |   |
|                                                     |       | 76,872                                        |       | (1,965                                        | )          | n/a |   | n/a |   |

 

The estimated actuarialloss and prior service cost for the defined benefit pension plans that will beamortized from accumulated other comprehensive income into net periodic benefitcost over the next fiscal year are  € 0million and  € 1.4 million, respectively.

The Accumulated Benefit Obligation (ABO) amounted to  € 668.8 million and  € 648.8 million at December 31, 2006 and2005, respectively for defined benefit pension plans where assets exceedaccumulated benefits and  € 67.3 millionand  € 69.8 million at December 31, 2006and 2005, respectively, for defined benefit pension plans where accumulatedbenefits exceed assets.

F-48

----

 
|                                 | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|---------------------------------|------------|------------|------------|------------|------------|
| ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Projected  benefit obligation   |       | 772,893    |       | 724,757    |       |
| Accumulated  benefit obligation |       | 736,135    |       | 718,673    |       |
| Fair value of plan  assets      |       | 773,445    |       | 733,447    |       |

 

The current portion of the Projected Benefit Obligation amounts to €34.0 million.

 

The pension plan assetallocation for the years 2006 and 2005, and the target allocation for 2007 forthe pension plan in the Netherlands by asset category are as follows:

 
|                     | ** ** | **Target  allocation 2007** | ** ** | **Percentage of plan  assets at December  31, 2006** | ** ** | **Percentage of plan  assets at December  31, 2005** | ** ** |
|---------------------|------------|----------------------------------|------------|-------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|
| ** **          | ** ** | ** **                       | ** ** | ** **                                                                    | ** ** | ** **                                                                    | ** ** |
| Bonds               |       |                             |       |                                                                          |       |                                                                          |       |
| - Government        |       | 17.5                             | %          | 14.3                                                                          | %          | 14.50                                                                         | %          |
| - Credits           |       | 17.5                             |       | 15.1                                                                          |       | 13.1                                                                          |       |
| - High yield        |       | 5                                |       | 4.7                                                                           |       | 4.7                                                                           |       |
| Equity securities   |       |                             |       |                                                                          |       |                                                                          |       |
| - Mature markets    |       | 30.0                             |       | 28.8                                                                          |       | 37.2                                                                          |       |
| - Emerging  markets |       | 5.0                              |       | 10.3                                                                          |       | 10.2                                                                          |       |
| Real estate         |       | 20.0                             |       | 12.1                                                                          |       | 8.6                                                                           |       |
| Hedge funds         |       | 5.0                              |       | 6.4                                                                           |       | 8.9                                                                           |       |
| Other               |       | —                           |       | 8.3                                                                           |       | 2.8                                                                           |       |
| Total               |       | 100                              | %          | 100                                                                           | %          | 100                                                                           | %          |

 

ThePension Fund hedges 100% of strategic foreign exchange risks in dollars, poundand yen against the euro. Furthermore risk has been reduced by reducing the gapbetween the duration of the liabilities and the duration of the assets.Instruments that are in use are Interest Rate Swaps and Swaptions.

In 2005 and 2006, thePension Fund evaluated the long-term investment strategy and formulated the newstrategic asset mix that has been stated in the table above. In the AssetLiability Management Study the following assumptions were made for the expectedreturns (arithmetically, not geometrically calculated):

 
| Category           | ** ** | **Percentage** | ** ** |
|--------------------|------------|----------------|------------|
|               |       |           |       |
| Bonds              |       |           |       |
| - Government       |       | 3.8            | %          |
| - Credits          |       | 4.2            |       |
| - High yield       |       | 4.8            |       |
| Equity  securities |       |           |       |
| - Mature markets   |       | 8.3            |       |
| - Emerging markets |       | 11.7           |       |
| Real estate        |       | 6.0            |       |
| Hedge funds        |       | 5.5            |       |
|               |       |           |       |
| Expected return    |       | 6.5            |       |

 

F-49

----

 

The overall expected long-term return is a weighted-average of theexpected returns from the distinguished asset categories. The returns of theasset categories are not fully correlated.

 

The expected returns on bonds are based on rates in the interest rateswap market at the end of the third quarter 2006. The returns on equities arebased on the bond return plus historical data based premium of 3% for thehigher risk on equities. The returns on real estate are based on the bondreturn plus a premium of 2%. The expected return on hedge fund is the return oncash (3.2%) plus premium of 2.0%. The Pension Fund has decided to invest in“fund-of-fund” hedge funds with a very low tracking error. The fund-of-fundhedge funds invest in non-directional strategies in order to attain adiversification that leads to an investment portfolio with a low correlation tostock markets. The fund-of-fund hedge funds in which the Pension Fund investsrealized returns that were higher than the assumed 5.2% in the Asset LiabilityManagement Study. 

 

Most of those assets were purchased and managed by investment funds ofexternal investment managers: Robeco, Russell, Delta Lloyd, ING and Fagoed.Only a small part of the assets (2%) are managed by the fund itself.

 

In the course of 2007 theactual asset allocation will change in the direction of the target allocationby investing more in private real estate funds and by reducing Emerging MarketEquities. At the beginning of 2007 the Pension Fund already increased itsinvestments in Bonds towards the target allocation level.

 

The benefits that will be paid in the next 10 years are estimated asfollows:

 
| Benefits   | ** ** | **Millions of €** | ** ** |
|------------|------------|----------------------------------|------------|
|       |       |                             |       |
| 2007       |       | 34                               |       |
| 2008       |       | 34.9                             |       |
| 2009       |       | 35.4                             |       |
| 2010       |       | 35.5                             |       |
| 2011       |       | 36.5                             |       |
| 2012- 2016 |       | 202.2                            |       |

 

In the next fiscal year (2007), the contribution to the plan isestimated at  € 12.2 million.

 

The components of net periodic benefit cost year (net of plan participantscontributions) are as follows:

 
|                                                | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Service cost-benefit earned during the period  |       | 14,215     |       | 13,847     |       |
| Interest cost on projected benefit obligations |       | 35,982     |       | 29,082     |       |
| Expected return on plan assets                 |       | (49,540    | )          | (40,157    | )          |
| Net amortization , deferral and other          |       | 1,362      |       | 1,362      |       |
| Net pension cost                               |       | 2,019      |       | 4,134      |       |

 

The obligations with respect to pension planswere determined using the following rates:

F-50

----

 
|                                                  | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|
|                                             |       |     |       |     |       |
| Discount rate                                    |       | 4.65     | %          | 4.00     | %          |
| Assumed long-term rate of compensation increase  |       | 2.25     |       | 2        |       |
| Expected long-term rate of return on plan assets |       | 6.5      |       | 5.5      |       |
| Benefit revaluation (inactives)                  |       | 2        |       | 1.09     |       |

 

Yield curves of 2006 are based upon state bonds published by the GermanNational Bank and yield credit (rating AA- and higher) spreads published byiBoxx with maturities corresponding to our benefit obligations were used todevelop discounts rates at each measurement date. Yield curves of 2005 arebased upon state bonds published by the Dutch National Bank and yield credit(rating AA- and higher) spreads published by J.P. Morgan with maturitiescorresponding to our benefit obligations were used to develop discounts ratesat each measurement date.

 

Plan assets principally consist of long-term interest earning,investments quoted and listed securities, and real estate assets.

 

Theprincipal defined benefit plans referred to above cover approximately 20% ofARCADIS employees. The remaining plans primarily represent defined contributionplans. Expenses for these plans totaled € 6.4 million in 2006 and  € 5.9million in 2005 under both IFRS and U.S. GAAP.

Due to the increase ofstock markets in 2005, the value of plan assets exceeded the accumulatedbenefit obligation for the defined benefit pension plan for Dutch employeesexcluding employees of PRC. For the defined benefit plan for the employees ofPRC the accumulated benefit obligation for the defined benefit plan exceededthe value of plan assets. As a consequence, the Company recognized in 2005additional provisions for minimum pension liabilities. This provision amountedto € 13.7 million. Before the adoption of FAS 158, this provision decreasedto  € 8.5 million. Due to the adoption ofFAS 158 as of December 31, 2006 provisions for minimum pension liabilities areno longer recognized, however is recognized in 2006 in comprehensive incomebefore adoption of FAS 158.

 

F-51

----

 

**(23) Application of Generally Accepted Accounting Principlesin the United States of America**

The International Financial Reporting Standards (IFRS) applied in thepreparation of the Consolidated Financial Statements of ARCADIS N.V. differ insome respects from those generally accepted in the United States of America(U.S. GAAP). Those differences which have a material effect on net incomeand/or shareholders’ equity are as follows:

(a) Under U.S. GAAP, the excess of the purchase priceover the fair value of identifiable net assets acquired (“goodwill”) iscapitalized. Prior to the adoption of FAS 141, “Business Combinations” andFAS 142, “Goodwill and Other Intangible Assets”, goodwill was amortizedover its estimated useful life ranging between 10 and 25 years. Since theadoption of SFAS 141, which applies to all 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’s measurement date for its annual impairment test isDecember 31, 2006. At year-end 2006, goodwill for U.S. GAAP purposes exceededthe amount capitalized under IFRS by € 30.4 million, compared to  € 33.2 million at the end of 2005. From2004 onward IFRS is applied in the preparation of the Consolidated FinancialStatements of ARCADIS N.V. and from then goodwill is no longer amortized, butan annual impairment test is performed on the remaining unamortized goodwill.

Under IFRS ARCADIS has by the end of 2006 capitalized€ 8,756 goodwill for contingent payments for acquisitions that are performancedependent. Under U.S. GAAP this goodwill would not be capitalized until thecontingency is resolved.

Thetotal amount of capitalized goodwill for the years 2006 and 2005 is as follows:
| Capitalized goodwill                                      | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|----------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| Capitalized  under IFRS                                        |       | 139,433    |       | 115,983    |       |
| Capitalized  goodwill for performance dependent after payments |       | (8,756     | )          | (7,270     | )          |
| Included in  reconciliation of Equity                          |       | 39,194     |       | 40,469     |       |
| Total capitalized  goodwill under US GAAP                      |       | 169,871    |       | 149,182    |       |

 

Theallocation of capitalized goodwill for the years 2006 and 2005 by reportablesegment is as follows:
|                                   | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|-----------------------------------|------------|------------|------------|------------|------------|
| ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** |
| The Netherlands                   |       | 32,646     |       | 30,751     |       |
| United States                     |       | 83,536     |       | 76,122     |       |
| Europe excluding  the Netherlands |       | 44,609     |       | 33,641     |       |
| Rest of world                     |       | 9,080      |       | 8,668      |       |
| Total                             |       | 169,871    |       | 149,182    |       |

 

(b) Pension costs included in the ConsolidatedStatements of Income are computed in accordance with IFRS. At December 31, 2006ARCADIS only has pension plans that qualify as Defined Contribution plans underIFRS.

F-52

----

Under U.S. GAAP certain pension plans qualify asdefined benefit plans. The service costs for the defined benefit pension plansare based on calculations using actuarial assumptions which, among others,include estimated future salary increases and estimated employee turnoverrelated to resignations, dismissals and disability, and the present value iscalculated by applying a discount rate of 4.65% for 2006, 4.00 for 2005 and4.50% for 2004. Moreover, net periodic pension costs are reduced by credits, ifany, representing amortization of overfunding of the Fund, which is calculatedby valuing plan assets at fair market value.

The difference between the pension cost determinedunder FAS 87 (U.S. GAAP) and the one determined under IFRS is shown inNote 22.

(c) Under IFRS, net deferred tax liabilities areclassified as noncurrent assets or liabilities. Under U.S. GAAP, deferred taxliabilities are classified as current or noncurrent based on the classificationof the related asset or liability for financial reporting. Deferred tax assetsrelated to carryforwards are classified according to the expected reversal dateof the carryforward.

(d) The company AAFM B.V. (Netherlands) in whichARCADIS holds a 50% interest and the company Biogás Energia Ambiental S.A.(Brasil) in which ARCADIS holds a 33.33% interest are included in theconsolidated financial statements over 2006 and 2005 on a proportional basis inconformity with IFRS. In the revenue and income of 2005, also the 50% interestin Grupo EP was included (interest was sold as per June 2005).

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. The financial statements prepared in conformitywith IFRS include the following amounts in respect of those investments:
| Pro rata summarized financial information | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|---------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Current assets                                                |       | 13,769     |       | 6,727      |       |
| Non-current  assets                                           |       | 3,050      |       | 1,898      |       |
| Total assets                                                  |       | 16,819     |       | 8,625      |       |
| Current  liabilities                                          |       | 13,533     |       | 5,012      |       |
| Non-current  liabilities                                      |       | 1,478      |       | 1,842      |       |
| Minority  interest                                            |       | —     |       | —     |       |
| Total liabilities                                             |       | 15,011     |       | 6,854      |       |
| Shareholders’ Equity                                     |       | 1,808      |       | 1,771      |       |
| Gross revenue                                                 |       | 43,649     |       | 51,351     |       |
| Group income  from operations                                 |       | 1,299      |       | 1,883      |       |

 

F-53

----

 

(e) The gross revenue, net income and basic net incomeper share of 2006, 2005 and 2004 was influenced by discontinued operations asfollows:
| **Influence of discontinued operations** | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|---------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Gross revenue of  continuing operations                 |       | 1,189,394  |       | 920,584    |       | 796,936    |       |
| Gross revenue of  discontinued operations               |       | —     |       | 5,315      |       | 18,959     |       |
| Net income of  continuing operations                    |       | 54,077     |       | 24,318     |       | 14,062     |       |
| Net income of  discontinued operations                  |       | —     |       | 3,796      |       | 979        |       |
| Basic net income per  share from continuing operations  |       | 2.67       |       | 1.2        |       | 0.7        |       |
| Basic net income per share from discontinued operations |       | —     |       | 0.19       |       | 0.05       |       |

 

(f) Under IFRS, the balance sheet item Cash and Cashequivalents includes an amount of  €0.2 million at December 31, 2006 ( € 0.3 million atDecember 31, 2005) which is restricted for payments of taxes and socialsecurities, and therefore not freely available. Restricted amounts would not beincluded in cash and cash equivalents under U.S. GAAP.

(g) Under IFRS, the balance sheet item Other long-termliabilities includes an amount € 4.0 million at December 31, 2005which under U.S. GAAP would be classified as current liabilities. Thisdifference did not exist as of December 31, 2006.

***Reconciliationof Net Income***
| ** **                                                                                              | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                                                    |       |     |       |     |       |     |       |
| Net income in  accordance with IFRS                                                                     |       | 44,936   |       | 33,414   |       | 22,176   |       |
| Adjustments:                                                                                            |       |     |       |     |       |     |       |
| Pensions (b)                                                                                            |       | 8,589    |       | (6,751   | )          | (10,400  | )          |
| Income tax effect of  above adjustments                                                                 |       | (2,542   | )          | 1,939    |       | 3,276    |       |
| Option costs (h)                                                                                        |       | —   |       | —   |       | 239      |       |
| Effect from change in  tax rate                                                                         |       | 3,094    |       | (488     | )          | (250     | )          |
| Net income in  accordance with U.S. GAAP                                                                |       | 54,077   |       | 28,114   |       | 15,041   |       |
| Basic net income per  common share in accordance with U.S. GAAP                                         |       | 2.67     |       | 1.39     |       | 0.75     |       |
| Diluted net income per  common share in accordance with U.S. GAAP                                       |       | 2.57     |       | 1.35     |       | 0.74     |       |
| Basic weighted average  number of shares of common stock in accordance with U.S. GAAP (in thousands)    |       | 20,234   |       | 20,261   |       | 20,140   |       |
| Diluted weighted  average number of shares of common stock in accordance with U.S. GAAP (in  thousands) |       | 21,074   |       | 20,817   |       | 20,417   |       |

 

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.

(h) In accordance with IFRS, IFRS 2, “Share BasedPayment”, has been applied for 2004, 2005 and 2006. As of 2005, the Company haselected to apply FAS 123R, “Share Based Payment”, as a result of which there nolonger is any material difference with IFRS 2.

F-54

----

Under IFRS 2, adeferred tax asset is calculated each period to reflect the amount of taxdeduction that the Company would receive if the stock option awards were taxdeductible in the current period based on the current market price of thestock. However, under FAS 123 R, the measurement of deferred tax asset is notadjusted for the tax deduction inherent in the current fair value of theCompany’s stock price. The increase in current market price of the Company’sstock resulted in an excess tax benefit of € 3,097 (€ 1,960 at December 31,2005) recognized in shareholders equity under IFRS at December 31, 2006, whichwas reversed under U.S. GAAP.

***Reconciliationof Shareholders’ Equity***
| ** **                                                      | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                            |       |     |       |     |       |     |       |
| Shareholders’  equity in accordance with IFRS              |       | 188,881  |       | 176,203  |       | 136,371  |       |
| Adjustments to  reported shareholders’ equity, net of tax: |       |     |       |     |       |     |       |
| Goodwill (a)                                                    |       | 39,194   |       | 40,469   |       | 38,894   |       |
| Pensions (b)                                                    |       | 552      |       | 67,239   |       | (25,055  | )          |
| Deferred tax assets related to options                          |       | (3,097   | )          | (1,960   | )          | —   |       |
| Income tax effect of above adjustments                          |       | (141     | )          | (19,902  | )          | 8,125    |       |
| Shareholders’ equity in  accordance with U.S. GAAP         |       | 225,389  |       | 262,049  |       | 158,335  |       |

 

F-55

----

***Roll forward ofShareholders’ equity in accordance with U.S. GAAP   ***
| Balance at January 1,  2004              |   | 173,299 |   |
|------------------------------------------|--------|---------|--------|
| Net income 2004                          |   | 15,041  |   |
| Dividends declared                       |   | (9,647  | )      |
| Own share purchase for  granted options  |   | (158    | )      |
| Exercises of options                     |   | 704     |   |
| Issuance of shares of  common stock      |   | 1,667   |   |
| Pensions                                 |   | (15,021 | )      |
| Foreign currency  translation adjustment |   | (7,550  | )      |
|                                     |   |    |   |
| Balance at December 31,  2004            |   | 158,335 |   |
|                                     |   |    |   |
| Net income 2005                          |   | 28,114  |   |
| Dividends declared                       |   | (9,745  | )      |
| Own share purchase for  granted options  |   | (6,562  | )      |
| Exercises of options                     |   | 2,624   |   |
| Option costs and taxes                   |   | 1,527   |   |
| Pensions                                 |   | 69,727  |   |
| Foreign currency translation  adjustment |   | 11,520  |   |
| Additional paid-in  capital              |   | 6,509   |   |
|                                     |   |    |   |
| Balance at December 31,  2005            |   | 262,049 |   |
|                                     |   |    |   |
| Net income 2006                          |   | 54,077  |   |
| Dividends declared                       |   | (13,378 | )      |
| Own share purchase for  granted options  |   | (17,596 | )      |
| Exercises of options                     |   | 4,611   |   |
| Option costs and taxes                   |   | 7,030   |   |
| Pensions                                 |   | (55,806 | )      |
| Foreign currency  translation adjustment |   | (15,598 | )      |
|                                     |   |    |   |
| Balance at December 31,  2006            |   | 225,389 |   |

 

F-56

----

**Comprehensive income**

Comprehensiveincome/(loss) encompasses all changes in shareholders’ equity (except thosearising from transactions with owners). The comprehensive income andaccumulated other comprehensive income as shown below, are presented based onU.S. GAAP numbers, and for the years ended December 31, 2006, 2005 and 2004were as follows:
| ** **                                         | ** ** | ** **                             | ** ** | **Accumulated other** | ** ** |
|----------------------------------------------------|------------|----------------------------------------|------------|----------------------------|------------|
| ** **                                         | ** ** | **comprehensive**                      | ** ** | **Comprehensive**          | ** ** |
| ** **                                         | ** ** | **Income (net of tax)** | ** ** | **income/ (loss)**    | ** ** |
| Balance -  January 1, 2004                         |       |                                   |       | (61,637                    | )          |
| Comprehensive  income                              |       | 15,041                                 |       |                       |       |
| Net income                                         |       | (14,933                                | )          | (14,933                    | )          |
| Provision for minimum pension liability            |       | (7,550                                 | )          | (7,550                     | )          |
| Foreign currency translation                       |       | 59                                     |       | 59                         |       |
| Other changes                                      |       | (7,383                                 | )          |                       |       |
| Comprehensive  income (loss)                       |       |                                   |       |                       |       |
|                                               |       |                                   |       |                       |       |
| Balance -  December 31, 2004                       |       |                                   |       | (84,061                    | )          |
| Comprehensive  income                              |       |                                   |       |                       |       |
| Net income                                         |       | 28,114                                 |       |                       |       |
| Provision for minimum pension liability            |       | 69,727                                 |       | 69,727                     |       |
| Foreign currency translation                       |       | 11,520                                 |       | 11,520                     |       |
| Other changes                                      |       | 69                                     |       | 69                         |       |
| Comprehensive  income                              |       | 109,430                                |       |                       |       |
|                                               |       |                                   |       |                       |       |
| Balance -  December 31, 2005                       |       |                                   |       | (2,745                     | )          |
| Comprehensive  income                              |       |                                   |       |                       |       |
| Net income                                         |       | 54,077                                 |       |                       |       |
| Foreign currency translation                       |       | (15,598                                | )          | (15,598                    | )          |
| Comprehensive income (loss)                        |       | 38,478                                 |       |                       |       |
|                                               |       |                                   |       |                       |       |
| The effect of  the initial application of SFAS 158 |       |                                   |       | (55,806                    | )          |
|                                               |       |                                   |       |                       |       |
| Balance - December 31,  2006                       |       |                                   |       | (74,149                    | )          |

 

Provisionfor pension liability includes tax effects charged/added directly toshareholders’ equity of € 19.1 million (added) for the year ended December 31,2006 and € 29.3 million (charged) in 2005.

Foreigncurrency translation adjustments have no tax effect.

F-57

----

**Newaccounting pronouncements**

The following newaccounting pronouncements may have an impact on the Company future adoption.Management’s current position according to these new accounting pronouncementsis that we are still evaluating the impact.

In September 2006 the FASB issued FAS 157, Fair Value Measures*,*(FAS 157). This statementenhances the guidance for using fair value to measure assets and liabilities.FAS 157 provides a single definition of fair value, together with a frameworkfor measuring it, and requires additional disclosure about the use of fairvalue to measure assets and liabilities.

In February 2007, the FASB issued FASNo. 159, “The Fair Value Option for Financial Assets and FinancialLiabilities Including and Amendment to FAS No. 115” (FAS 159). Thisstandard permits entities to measure certain financial instruments and othercertain items at fair value. The fair value option established by this standardpermits all entities to choose to measure eligible items at fair value atspecified election dates. A business entity shall report unrealized gains andlosses in income on items for which the fair values option has been elected ateach subsequent reporting period. The fair value option election isirrevocable, unless a new election date occurs. FAS No. 159 establishespresentation and disclosure requirements to help financial statement usersunderstand the effect of the entity’s election on earnings, but does noteliminate disclosure requirements of other accounting standards.

In June 2006, the FASB issued FASB interpretation No.48, “Accounting for Uncertainty inIncome taxes an interpretation of FASB Statement No. 109, Accounting for IncomeTaxes”*.* Thisinterpretation prescribes a recognition threshold and measurement attribute forthe financial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return. This interpretation also providesguidance on derecognition, classification, interest and penalties, accountingin interim periods, disclosure, and transition.

F-58

----

**(24) Disclosures about Fair Value of Financial Instruments**

In view of the short-termturnaround times involved, the book value of cash and cash equivalents,receivables and current liabilities approximates fair value.

The fair value ofARCADIS’ long term debt does not materially differ from the carrying valuebecause the outstanding long-term debt has floating interest rates.

F-59

----

**ITEM 19. EXHIBITS**
| Exhibit  No. | ** ** | **Exhibit Description**                                                                                                                                                                                                                                                   |
|--------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.1          |       | Articles of Association of ARCADIS N.V.  (Incorporated herein by reference from Exhibit 1.1 of ARCADIS N.V.’s Annual  Report on Form 20-F for the year ended December 31, 2003).                                                                                     |
|         |       |                                                                                                                                                                                                                                                                      |
| 4.1          |       | Employment Agreement, dated January 27, 1994, by and  between ARCADIS N.V. and Harrie L.J. Noy, as amended on June 19, 2000  (Incorporated herein by reference from Exhibit 4.1 of ARCADIS N.V.’s Annual  Report on Form 20-F for the year ended December 31, 2003). |
|         |       |                                                                                                                                                                                                                                                                      |
| 4.2          |       | Employment Agreement, dated January 20, 2000, by and  between ARCADIS N.V. and C. Michiel Jaski (Incorporated herein by reference  from Exhibit 4.2 of ARCADIS N.V.’s Annual Report on Form 20-F for the year  ended December 31, 2003).                             |
|         |       |                                                                                                                                                                                                                                                                      |
| 4.3          |       | The ARCADIS G&M, Inc. 2002 Officer Stock  Purchase Plan (Incorporated herein by reference from Exhibit 4.1 of ARCADIS  N.V.’s Registration Statement on Form S-8, filed on April 28, 2003).                                                                      |
|         |       |                                                                                                                                                                                                                                                                      |
| 4.4          |       | ARCADIS N.V. 2002 Employee Stock Purchase Plan  (Incorporated herein by reference from Exhibit 4.1 of ARCADIS N.V.’s  Registration Statement on Form S-8, filed on June 28, 2002).                                                                                   |
|         |       |                                                                                                                                                                                                                                                                      |
| 4.5          |       | ARCADIS N.V. 2001 Long-Term Incentive Share Option  Plan (Incorporated herein by reference to Exhibit 4.1 to ARCADIS N.V.’s  Registration Statement on Form S-8 (File No. 333-99489) filed on September 6,  2002).                                                   |
|         |       |                                                                                                                                                                                                                                                                      |
| 4.6          |       | Heidemij N.V. 1996 Incentive Plan. (Incorporated  herein by reference from Exhibit 4.1 of ARCADIS N.V.’s Registration Statement  on Form S-8, filed on January 14, 1997).                                                                                            |
|         |       |                                                                                                                                                                                                                                                                      |
| 4.7          |       | Heidemij N.V. 1994 Incentive Plan (Incorporated  herein by reference from Exhibit 4.3 of ARCADIS N.V.’s Registration Statement  on Form S-8, filed on March 11, 1994).                                                                                               |
|         |       |                                                                                                                                                                                                                                                                      |
| 4.8          |       | ARCADIS N.V. 2005 Long-Term Incentive Plan.  (Incorporated herein by reference from Exhibit 4.8 of ARCADIS N.V.’s Annual  Report on Form 20-F for the year ended December 31, 2005)                                                                                  |
|         |       |                                                                                                                                                                                                                                                                      |
| 4.9          |       | Employment Agreement, dated January 17, 2006, by and  between ARCADIS N.V. and Friedrich Schneider. (Incorporated herein by  reference from Exhibit 4.9 of ARCADIS N.V.’s Annual Report on Form 20-F for  the year ended December 31, 2005)                          |
|         |       |                                                                                                                                                                                                                                                                      |
| 4.10         |       | Employment Agreement, dated April 4, 2006, by and  between ARCADIS N.V. and Ben A. van der Klift. (Incorporated herein by  reference from Exhibit 4.10 of ARCADIS N.V.’s Annual Report on Form 20-F for  the year ended December 31, 2005)                           |
|         |       |                                                                                                                                                                                                                                                                      |
| 8.1          |       | Subsidiaries of ARCADIS N.V. as of December 31,  2006.                                                                                                                                                                                                                    |
|         |       |                                                                                                                                                                                                                                                                      |
| 11.1         |       | ARCADIS General Business Principles (Incorporated  herein by reference from Exhibit 11.1 of ARCADIS N.V.’s Annual Report on Form  20-F for the year ended December 31, 2003).                                                                                        |
|         |       |                                                                                                                                                                                                                                                                      |
| 12.1         |       | Certificate of Principal Executive Officer Pursuant  to §302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                      |
|         |       |                                                                                                                                                                                                                                                                      |
| 12.2         |       | Certification of Principal Financial Officer  Pursuant to §302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                    |
|         |       |                                                                                                                                                                                                                                                                      |
| 13.1         |       | Certificate of Principal Executive Officer Pursuant  to §906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                      |
|         |       |                                                                                                                                                                                                                                                                      |
| 13.2         |       | Certificate of Principal Financial Officer Pursuant  to §906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                      |
|         |       |                                                                                                                                                                                                                                                                      |
| 15.1         |       | Consent of Independent Registered Public Accounting  Firm.                                                                                                                                                                                                                |

 

----

**SIGNATURES**

 

Pursuant to therequirements of Section 12 of the Securities Exchange Act of 1934, theregistrant certifies that it meets all of the requirements for filing onForm 20-F and has duly caused this annual report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 
| ** **                | **ARCADIS  N.V.** |
|---------------------------|-------------------|
| ** **                |              |
| ** **                | ** **        |
| Dated: May 15,  2007 | By:               | /s/ Harrie L.J. Noy |   |
|                      |              | Harrie L.J. Noy |
|                      |              | Chairman of the  Executive Board |

 

----

**INDEX OF EXHIBITS**

 
| Exhibit No. | ** ** | **Exhibit Description**                                                                                |
|-------------|------------|--------------------------------------------------------------------------------------------------------|
| 8.1         |       | Subsidiaries of ARCADIS N.V. as of December 31,  2005.                                                 |
|        |       |                                                                                                   |
| 12.1        |       | Certificate of Principal Executive Officer Pursuant  to §302 of the Sarbanes-Oxley Act of 2002.   |
|        |       |                                                                                                   |
| 12.2        |       | Certification of Principal Financial Officer  Pursuant to §302 of the Sarbanes-Oxley Act of 2002. |
|        |       |                                                                                                   |
| 13.1        |       | Certificate of Principal Executive Officer Pursuant  to §906 of the Sarbanes-Oxley Act of 2002.   |
|        |       |                                                                                                   |
| 13.2        |       | Certificate of Principal Financial Officer Pursuant  to §906 of the Sarbanes-Oxley Act of 2002.   |
|        |       |                                                                                                   |
| 14.1        |       | Consent of Independent Registered Public Accounting  Firm.                                             |

 

----