**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 20-F**

**(Mark One)**

**o**                                 REGISTRATIONSTATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIESEXCHANGE ACT OF 1934

**OR**

**x**                              ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Forthe fiscal year ended December 31, 2005**

**OR**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**OR**

**o**                                 SHELLCOMPANY PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGEACT OF 1934

**Commissionfile number: 0-22628**

**ARCADIS N.V.**

(Exact name of Registrantas specified in its charter)

**ARCADIS N.V.**

(Translation ofRegistrant’s name into English)

**The Netherlands**

(Jurisdiction ofincorporation or organization)

**Nieuwe Stationsstraat10,  Arnhem, the Netherlands**

(Address of principalexecutive offices)

Securitiesregistered or to be registered pursuant to Section 12(b) of theAct: **None.**

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

**COMMON STOCK, € 0.05NOMINAL VALUE, PER SHARE**

(Title of Class)

Securities for whichthere is a reporting obligation pursuant to Section 15(d) of the Act:**None.**

Indicate the number ofoutstanding shares of each of the issuer’s classes of capital or common stockas of the close of the period covered by this annual report:

**20,645,615SHARES OF COMMON SHARES, € 0.05 NOMINAL VALUE**

**200 PRIORITY SHARES, € 0.05 NOMINALVALUE**

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act. Yes x    No o

If this report is anannual or transition report, indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934. Yes o    No x

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor 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 largeaccelerated filer” in Rule 12b-2 of the Exchange Act). (Check one): Large accelerated filer o         Accelerated filer x         Non-accelerated filer o

Indicate by check markwhich financial statement item the registrant has elected to follow.

o Item 17    x Item 18

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

Yes o    No x

 

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**TABLE OF CONTENTS**
| ** **                                            | ** ** | ** **                                                                        | ** ** | **Page** | ** ** |
|-------------------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|----------|------------|
| CAUTIONARY  NOTE REGARDING FORWARD-LOOKING STATEMENTS |       | ii                                                                                |       |
| PRESENTATION  OF CERTAIN INFORMATION                  |       | ii                                                                                |       |
| **PART I**                                       |       | 1                                                                                 |       |
| ITEM 1.                                               |       | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                             |       | 1        |       |
| ITEM 2.                                               |       | OFFER STATISTICS AND EXPECTED TIMETABLE                                           |       | 1        |       |
| ITEM  3.                                              |       | KEY  INFORMATION                                                                  |       | 1        |       |
|                                                  |       | A.   Selected  Financial Data                                           |       | 1        |       |
|                                                  |       | B.   Capitalization  and Indebtedness                                   |       | 3        |       |
|                                                  |       | C.   Reasons For the  Offer and Use of Proceeds                         |       | 3        |       |
|                                                  |       | D.   Risk  Factors                                                      |       | 3        |       |
| ITEM 4.                                               |       | INFORMATION ON THE COMPANY                                                        |       | 8        |       |
|                                                  |       | A.   History and  Development of the Company                            |       | 8        |       |
|                                                  |       | B.   Business  Overview                                                 |       | 12       |       |
|                                                  |       | C.   Organizational  Structure                                          |       | 16       |       |
|                                                  |       | D.   Property, Plant  and Equipment                                     |       | 16       |       |
| ITEM 4B.                                              |       | UNRESOLVED STAFF COMMENTS                                                         |       | 17       |       |
| ITEM 5.                                               |       | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                      |       | 17       |       |
|                                                  |       | A.   Operating  Results                                                 |       | 17       |       |
|                                                  |       | B.   Liquidity and  Capital Resources                                   |       | 28       |       |
|                                                  |       | C.   Research and  Development, Patents and Licenses, etc.              |       | 29       |       |
|                                                  |       | D.   Trend  Information                                                 |       | 30       |       |
|                                                  |       | E.   Off-Balance Sheet  Arrangements                                    |       | 32       |       |
|                                                  |       | F.   Tabular  Disclosure of Contractual Obligations                     |       | 32       |       |
| ITEM 6.                                               |       | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                        |       | 33       |       |
|                                                  |       | A.   Directors and  Senior Management                                   |       | 33       |       |
|                                                  |       | B.   Compensation                                                       |       | 38       |       |
|                                                  |       | C.   Board  Practices                                                   |       | 40       |       |
|                                                  |       | D.   Employees                                                          |       | 40       |       |
|                                                  |       | E.   Share  Ownership                                                   |       | 41       |       |
| ITEM 7.                                               |       | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                                 |       | 42       |       |
|                                                  |       | A.   Major  Shareholders                                                |       | 42       |       |
|                                                  |       | B.   Related Party  Transactions                                        |       | 44       |       |
|                                                  |       | C.   Interests of  Experts and Counsel                                  |       | 44       |       |
| ITEM  8.                                              |       | FINANCIAL  INFORMATION                                                            |       | 44       |       |
|                                                  |       | A.   Consolidated  Financial Statements and Other Financial Information |       | 44       |       |
|                                                  |       | B.   Significant  Changes                                               |       | 44       |       |
| ITEM  9.                                              |       | THE  OFFER AND LISTING                                                            |       | 45       |       |
| ITEM 10.                                              |       | ADDITIONAL INFORMATION                                                            |       | 45       |       |
|                                                  |       | A.   Share  Capital                                                     |       | 45       |       |
|                                                  |       | B.   Memorandum and  Articles of Association                            |       | 45       |       |
|                                                  |       | C.   Material  contracts                                                |       | 47       |       |
|                                                  |       | D.   Exchange  controls                                                 |       | 47       |       |
|                                                  |       | E.   Taxation                                                           |       | 47       |       |
|                                                  |       | F.   Dividend  and paying agents                                        |       | 52       |       |
|                                                  |       | G.   Statement  by experts                                              |       | 52       |       |
|                                                  |       | H.   Documents  on display                                              |       | 53       |       |
|                                                  |       | I.   Subsidiary  information                                            |       | 53       |       |
| ITEM 11.                                              |       | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET  RISK                       |       | 53       |       |
| ITEM 12.                                              |       | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                            |       | 53       |       |
| **PART II**                                      |       |                                                                              |       | 54       |       |
| ITEM 13.                                              |       | DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES                                  |       | 54       |       |
| ITEM 14.                                              |       | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY  HOLDERS AND USE OF PROCEEDS     |       | 54       |       |
| ITEM 15.                                              |       | CONTROLS AND PROCEDURES                                                           |       | 54       |       |
| ITEM 16.                                              |       | [RESERVED]                                                                        |       | 54       |       |
| ITEM 16A.                                             |       | AUDIT COMMITTEE FINANCIAL EXPERT                                                  |       | 54       |       |
| ITEM  16B.                                            |       | CODE  OF ETHICS                                                                   |       | 54       |       |
| ITEM 16C.                                             |       | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                            |       | 54       |       |
| ITEM 16D.                                             |       | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT  COMMITTEES                       |       | 55       |       |
| ITEM 16E.                                             |       | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND  AFFILIATED PURCHASERS           |       | 55       |       |
| **PART III**                                     |       |                                                                              |       | 56       |       |
| ITEM  17.                                             |       | FINANCIAL  STATEMENTS                                                             |       | 56       |       |
| ITEM  18.                                             |       | FINANCIAL  STATEMENTS                                                             | ** ** | F-1      | ** ** |
| SIGNATURES                                            |       |                                                                              |       |
| INDEX  OF EXHIBITS                                    |       |                                                                              |       |

 

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**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 offuture events, except as otherwise required by law. Investors are cautioned notto rely 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 biddingprocedures of our clients may put competitive pressures on the amounts we cancharge for our 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.

**PRESENTATION OFCERTAIN INFORMATION**

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

ii

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**PART 1**

**ITEM 1. IDENTITYOF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS**

Not Applicable

**ITEM 2. OFFERSTATISTICS AND EXPECTED TIMETABLE**

Not Applicable

**ITEM 3. KEYINFORMATION**

**A.**               *Selected financial data*

The selected consolidated financial data presentedbelow as of and for each of the two years during the period ended December 31,2005 have been derived from our audited Consolidated Financial Statements whichhave been prepared in accordance with International Financial ReportingStandards, or IFRS, and the interpretations of IFRS adopted by theInternational Accounting Standards Board. The fiscal year ending December 31,2005 is the first year in which ARCADIS prepared its financial statements inaccordance with IFRS. Previously, ARCADIS prepared its financial statements inaccordance with accounting principles generally accepted in the Netherlands(Dutch GAAP). The selected consolidated financial data below should be read inconjunction with our Consolidated Financial Statements and the Notes set forthin Item 18 of this annual report.

For the convenience of the reader, the amountsreflected in our selected consolidated financial data as of and for the yearending December 31, 2005 as presented in Euros have been translated intoU.S. dollars. The exchange rate used is $1.00 = € 0.84767, theexchange rate as of December 31, 2005. We do not represent that thetranslated amounts actually represent such U.S. dollar amounts or could beconverted into U.S. dollars at the rates indicated or at any other rate.

IFRS differs in certain significant respects fromaccounting principles generally accepted in the United States (U.S. GAAP). Seeour reconciliation of IFRS to U.S. GAAP in Note 18 to our ConsolidatedFinancial Statements.
| ** **                                 | ** ** | **For the years ended December 31,**        | ** ** |
|--------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                 | ** ** | **2005**                                                             | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                 | ** ** | **$ **                                                          | ** ** | **€** | ** ** | **€** | ** ** |
| ** **                                 | ** ** | **(in millions, except per share amounts)** | ** ** |
| **Consolidated Statement of  Income Data** |       |                                                                 |       |   |   |   |   |
| *Amounts in accordance with IFRS*          |       |                                                                 |       |   |   |   |   |
| Gross revenue                              |       | 1,181.0                                                              |       | 1,001.1 |   | 900.8 |   |
| Net revenue                                |       | 829.6                                                                |       | 703.3 |   | 632.5 |   |
| Operating income                           |       | 64.2                                                                 |       | 54.4 |   | 35.5 |   |
| Income from  operations before taxes       |       | 62.0                                                                 |       | 52.5 |   | 32.1 |   |
| Income from  operations after taxes        |       | 41.5                                                                 |       | 35.2 |   | 21.7 |   |
| Group income  from operations after taxes  |       | 43.2                                                                 |       | 36.6 |   | 24.1 |   |
| Net income                                 |       | 39.4                                                                 |       | 33.4 |   | 22.2 |   |
| Basic net income  per common share(d)      |       | 1.95                                                                 |       | 1.65 |   | 1.10 |   |
| Diluted net  income per common share(d)    |       | 1.89                                                                 |       | 1.60 |   | 1.09 |   |
| Average number  of shares                  |       | 20.3                                                                 |       | 20.3 |   | 20.1 |   |
| Dividend per common  share(a)              |       | 0.78                                                                 |       | 0.66 |   | 0.48 |   |

 

1

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| ** **                                 | ** ** | **For the years ended December 31,**        | ** ** |
|--------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                 | ** ** | **2005**                                                             | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                                 | ** ** | **$€**                                                          | ** ** | **€** | ** ** | **€** | ** ** | **€** | ** ** | **€** | ** ** | **€** | ** ** |
| ** **                                 | ** ** | **(in millions, except per share amounts)** | ** ** |
| **Consolidated Statement of  Income Data** | ** ** | ** **                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| *Amounts in accordance with U.S.  GAAP*    |       |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Gross revenue(b)                           |       | 1,092.3                                                              |       | 925.9 |   | 815.9 |   | 776.2 |   | 754.3 |   | 739.6 |   |
| Net revenue(b)                             |       | 801.3                                                                |       | 679.2 |   | 583.6 |   | 555.9 |   | 543.8 |   | 532.5 |   |
| Operating  income(b)                       |       | 53.0                                                                 |       | 44.9 |   | 22.1 |   | 33.7 |   | 38.4 |   | 39.7 |   |
| Income from  operations before taxes       |       | 50.8                                                                 |       | 43.1 |   | 18.6 |   | 30.9 |   | 36.1 |   | 37.9 |   |
| Income from  operations after taxes        |       | 32.1                                                                 |       | 27.2 |   | 11.2 |   | 19.1 |   | 22.6 |   | 23.2 |   |
| Net income(c)                              |       | 33.2                                                                 |       | 28.1 |   | 15.0 |   | 22.6 |   | 23.3 |   | 24.5 |   |
| Basic net income  per common share(d)      |       | 1.64                                                                 |       | 1.39 |   | 0.75 |   | 1.13 |   | 1.16 |   | 1.21 |   |
| Diluted net  income per common share(d)    |       | 1.59                                                                 |       | 1.35 |   | 0.74 |   | 1.13 |   | 1.15 |   | 1.20 |   |

 
| ** **                          | ** ** | **For the years ended December 31,**        | ** ** |
|-------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                          | ** ** | **2005**                                                             | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                          | ** ** | **$€**                                                          | ** ** | **€** | ** ** | **€** | ** ** |
| ** **                          | ** ** | **(in millions, except per share amounts)** | ** ** |
| **Consolidated Balance Sheet Data** | ** ** | ** **                                                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| *Amounts in accordance with IFRS*   |       |                                                                 |       |   |   |   |   |
| Total assets                        |       | 767.0                                                                |       | 650.1 |   | 442.3 |   |
| Long-term debt                      |       | 137.0                                                                |       | 116.1 |   | 13.0 |   |
| Common stock                        |       | 1.2                                                                  |       | 1.0 |   | 1.0 |   |
| Shareholders’ equity           |       | 207.9                                                                |       | 176.2 |   | 136.4 |   |

 
| ** **                              | ** ** | **As of December 31,** | ** ** |
|-----------------------------------------|------------|---------------------------------------|------------|
| ** **                              | ** ** | **2005**                              | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                              | ** ** | **$€**                           | ** ** | **€** | ** ** | **€** | ** ** | **€** | ** ** | **€** | ** ** | **€** | ** ** |
| ** **                              | ** ** | **(in millions)**                | ** ** |
| **Consolidated Balance Sheet Data**     | ** ** | ** **                            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| *Amounts in accordance with U.S.  GAAP* |       |                                  |       |   |   |   |   |   |   |   |   |   |   |
| Total assets                            |       | 891.1                                 |       | 755.4 |   | 441.0 |   | 348.6 |   | 365.2 |   | 396.4 |   |
| Long-term debt                          |       | 128.4                                 |       | 108.9 |   | 13.0 |   | 29.7 |   | 27.6 |   | 22.0 |   |
| Shareholders’  equity              |       | 309.1                                 |       | 262.0 |   | 158.3 |   | 173.3 |   | 162.9 |   | 228.3 |   |
|                                    |       |                                  |       |   |   |   |   |   |   |   |   |   |   |

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(a)   Dividendper common share represents the amount relating to each year in which a dividendpayment is approved and paid in the following year. The dividend per commonshare in U.S. dollars is: $0.78****in2005 and $0.63****in 2004. Thedividend payment of € 0.66 per outstanding share of common stock for the yearended December 31, 2005, was presented to and approved by our shareholdersat the Annual General Meeting of Shareholders on May 17, 2006.

(b)   Grossrevenue, net revenue and operating income as reported in accordance with U.S.GAAP are presented 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 inGrupo EP S.A. was divested.

(c)   Netincome in 2001 of € 25.1 million, includes the gain on the sale of thenon-consolidated participation in Analytico of € 4.0 million (€ 0.20 pershare) and the charge related to the restructuring of our property valuationactivities in the Netherlands of € 2.0 million (€ 0.10 per share).

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(d)   Basicnet income per common share calculated in accordance with IFRS and U.S. GAAP isbased upon the weighted average number of common shares outstanding during theperiods indicated. Diluted net income per common share calculated in accordancewith IFRS and U.S. GAAP is based upon the weighted average number of the commonshares outstanding during the periods indicated plus the dilutive effect ofpotential common shares outstanding during the periods indicated.

**ExchangeRate Information**

On June 20, 2006, the exchange rate between theEuro and U.S. dollar was € 0.79707 per $1.00. The following tables set forth,for the periods and dates indicated, information regarding the exchange ratefor the Euro expressed in Euros per $1.00. The rates used for the tables arebased on quotes from the Amsterdam Foreign Exchange.
| **Period**                         | ** ** | **High** | ** ** | **Low** | ** ** | **Average(1)** | ** ** | **End** | ** ** |
|------------------------------------|------------|----------|------------|---------|------------|----------------|------------|---------|------------|
| 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    |       |
| Year ended  December 31, 2001 |       | 1.19     |       | 1.05    |       | 1.12           |       | 1.13    |       |
|                                    |            |          |            |         |            |                |            |         |            |  |  |  |  |

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(1)   Averageof the exchange rates on the last day of each month during the year presented.
| **Period**         | ** ** | **High** | ** ** | **Low** | ** ** |
|--------------------|------------|----------|------------|---------|------------|
| May 2006      |       | €   | 0.79       |    | €     | 0.77 |   |
| April 2006    |       | 0.83     |       | 0.80    |       |
| March 2006    |       | 0.84     |       | 0.82    |       |
| February 2006 |       | 0.84     |       | 0.83    |       |
| January 2006  |       | 0.85     |       | 0.81    |       |
| December 2005 |       | 0.85     |       | 0.83    |       |
|                    |            |          |            |         |            |  |  |

 

**B.**               *Capitalization andindebtedness.*

Not applicable.

**C.**               *Reasons for the offer anduse of proceeds*.

Not applicable.

**D.**               *Risk factors*.

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

***Market Risks***

**Decreases in government tax revenues,which support large public works projects, could weaken demand for ourservices.**

Approximately 45% of our revenue is derived fromclients in the public sector. These clients rely on tax revenues to fund largepublic works projects of the type for which we are often retained. During aneconomic downturn, governmental entities collect significantly less taxrevenues and often try to limit discretionary expenditures to balance theirbudgets. Government limits on spending in regard to environmental remediation, 

3

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infrastructureexpansion or enhancement, building projects, real estate data services ortelecommunications infrastructure investments, could have a material adverseeffect on our ability to attract and/or retain business.

**A global recession could have anadverse affect on our revenues.**

Approximately 55% of our revenue is derived from ourprivate sector clients. As a result, we are exposed to general economic cycleswhich influence the willingness and ability of private sector firms to investin the types of activities that require our services. Private sector clientsexperiencing adverse economic conditions may attempt to defer or withdraw fromsigned contracts, which could have a material adverse effect on our revenues. Ourfacilities service area, where most investments are from private sectorcompanies, is the most sensitive to declines in economic activity.

**A decline in the financial marketsmay adversely affect our revenue.**

A sharp decline in the capital markets can have anegative effect on companies’ abilities to invest. In the past this happened inthe telecommunications area, where investment declined considerably in a veryshort period, resulting in a substantial decrease in our revenue in thecommunications area for a number of years.

**Changes in the political prioritiesin the countries in which we operate could adversely affect public spending onthe services that we provide.**

Changes in political priorities can considerablyinfluence public spending and, therefore, impact spending on the services weprovide. Projects for which we are well positioned may be canceled or deferred.Elections can result in shifts in political relationships leading to delays inthe awarding of new contracts. The infrastructure area is the most sensitive tothis risk.

**Changes to existing regulations andnew legislation and/or regulations, could weaken demand for our services.**

We believe that demand for our principal environmentalservices is in part related to the response of governmental authorities to thepublic’s concern for environmental issues. If, however, public concern forenvironmental issues changes, or governmental entities in countries where we operatebecome less responsive to environmental issues, there could be substantiallyless demand for our environmental services, which could have a material adverseeffect on our business. Changes in regulations and legislation may alsonegatively affect certain other areas of our business, such as theinfrastructure and facilities activities when it comes to substantial changesin building codes and/or environmental requirements related to such projects.

**Political instability in thecountries in which we operate can result in contracts being canceled or harmour employees.**

As a result of political instability, contracts may beterminated or abandoned or the security of our employees may be at risk,resulting in contract work being stopped temporarily or permanently. This riskarises particularly in the donor-financed market, which is primarily the****market for development projects, generallyfinanced by non-governmental organizations such as the World Bank or regionaldevelopment banks, in which we achieve only a limited part of our revenues.

**Changes in the bidding behavior ofour clients may result in competitive pricing pressure for our services.**

Changes in the bidding pattern of clients can have aconsiderable effect on our revenue. Due to European Union regulations, a trendis developing in a number of countries to a more open bidding process whereprice competition is more important. Centralization and strengthening of thepurchasing function in large companies may also affect our opportunities tosecure profitable revenues. Changes in behavior of our clients or our potentialclients may have a negative impact on our revenues.

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**Concentration through mergers,acquisitions or other forms of consolidation may lead to increased purchasingpower on the part of our clients.**

With the concentration of companies, clients maydisappear, and the purchasing power of customers can increase, resulting inpotential decreases in our revenue. The same phenomenon can occur with thegovernment. The combination of municipalities and water boards results infewer, but more powerful, administrative units that, in a number of cases, nowconduct activities that were formerly put out to bid.

***Operational Risks***

**The services we provide can result inconsiderable liability to us which we may not be able to insure against.**

The services we provide are associated withconsiderable liability risks. These risks can arise from errors in executingactivities such as design or calculation errors, incorrect estimates ofcontamination, not meeting agreed schedules, exceeding cost estimates andimplementing budgets, not complying with legislation and regulations, oromissions in quality guarantees that have been given. To protect against theserisks we have obtained general and professional liability insurance policies.These policies cover errors and omissions in the executing of projects andprovide insurance against possible claims that arise during the coverageperiod. If the insurance carrier does not renew coverage at the end of thepolicy term and we are unable to obtain replacement insurance with retroactivecoverage, it is possible that claims will be denied even though the claims arerelated to events or actions that occurred while coverage existed. Becauseinsurance policies contain certain exclusions and have a maximum amount perclaim, not all risks are covered. Additionally, our insurance carriers may notbe able to meet their obligations.

**We may incur losses because weunderestimate the time or the cost to complete a project.**

Depending on the type of contract, losses can occur inprojects as a result of inaccurate time and cost estimates, new techniques withundocumented cost and performance results, inexperienced staff, performancedelays, additional consulting services, the absence of information that wasassumed would be available, or other unforeseen circumstances. Although manycontracts also contain conditions regarding payment of additional costs in theevent of unforeseen circumstances, substantial project losses may occur, whichmay have a negative effect on our results of operations.

**If we underutilize our permanentemployees, our profitability may be negatively affected.**

Many of our employees are permanently employed by usto retain their talent. If we are not able to charge our clients for servicesperformed by these employees or if we are not able to charge our clients at therates we have set for their services, our profitability could be negativelyaffected.

**If our partners fail to perform theircontractual obligations on a project, we could be exposed to legal liability,loss of reputation and reduced profit 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. Approximately 30% of our gross revenue isderived from work that is not performed by our own staff, but derived from  subcontracting or other arrangements. Successon these joint projects depends in large part on whether our partners fulfilltheir contractual obligations satisfactorily. If any of our partners fails tosatisfactorily perform their contractual obligations as a result of financialor other difficulties, we may be required to make additional investments andprovide additional services in order to make up for our partner’s shortfall. Ifwe are unable to adequately address our partner’s performance issues, then ourclient could terminate the joint project, exposing us to legal liability, lossof reputation and risk of loss or reduced profit on the project.

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**The refusal or inability of ourclients to timely pay for services we provide to them could cause us to haveinsufficient liquidity.**

We usually invoice clients for our services accordingto the progress of the work. If our clients refuse or are unable to meet theircontractual payment obligations, we may not have sufficient cash to satisfy ourliabilities, and our growth rate and continued operations could be adverselyimpacted.

**If we are unable to accuratelyestimate the overall risks, revenues or costs on a contract, we may incur alower profit or loss on the contract.**

Some of the contracts we enter into with our clientshave a fixed price or a cap. Under cost-plus contracts that have a cap, we arereimbursed for allowable costs and fees, which may be fixed orperformance-based. If our costs exceed the contract cap or are not allowableunder the provisions of the contract or any applicable regulations, we may notbe able to obtain reimbursement for all such costs. Under fixed-pricecontracts, we receive a fixed price irrespective of the actual costs we incurand consequently, we will realize a profit on the fixed-price contract only ifwe can control our costs and prevent cost over-runs on the contract.

**When we enter into turnkey contractsand Design, Build, Finance and Operate (DBFO) contracts, we face risks beyondthose normally associated with our business relationships and contracts.**

Due to the nature of turnkey contracts and DBFOcontracts, we take on additional responsibilities, such as providingengineering and construction services, and arranging financing, that go beyondthe responsibilities normally associated with our business relationships andcontracts. In particular, in turnkey contracts, we face additional financialrisks because of the size of these contracts, and the fact that many of thecontracting services in these contracts are performed by third parties, who maynot complete performance on a timely basis. In DBFO contracts, we may have anequity interest in the project, which causes us to have substantially more risk.We may face substantial decreases in our revenues if we are unable to meet ourobligations under either of these types of contracts.

**If our information and communicationtechnology systems do not work properly, our operations and management may benegatively affected.**

Our operation and management are largely dependent onthe use of information and communication technology systems. Limited accessand/or the malfunctioning of these systems, including both hardware andsoftware, can negatively affect our operations and management. Our security andbackup measures may not be sufficient to protect the integrity of our systemsor to ensure that important data is not lost.

**If we are unable to productively useleased office space, our operating results may be negatively affected.**

We usually lease office space for periods from five toten years. A downturn in activities may leave us with unused office space whichwe may not be able to sublet.

**Failure to integrate acquiredbusinesses or assets successfully will prevent us from achieving theanticipated cost savings and other financial benefits from our acquisitions.**

We have completed 17 acquisitions in the past threeyears and we will continue to pursue growth through selective strategicacquisitions of businesses and assets. However, we will only achieve theefficiencies, cost reductions and other financial benefits, such asdiversification of our current portfolio of clients and services, which wewould expect to result from these acquisitions, if we successfully integratethe administrative, financial, technical and marketing organizations ofacquired businesses and assets, and implement appropriate operations, financialand management systems and controls. We may have insufficient managementresources to accomplish integrations, and even if we are able to do sosuccessfully, we may not realize the level of cost savings and other financialbenefits that we expected to achieve.

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The integration of acquired operations with our owninvolves a number of risks, including:

·              the disruption of our business andthe diversion of our management’s attention from other business concerns;

·              unanticipated expenses related tointegration;

·              the potential failure to realizeanticipated revenue opportunities associated with acquisitions;

·              the possible loss of our keyprofessional employees or those of the acquired businesses;

·              the potential failure to replicateour operating efficiencies in the acquired businesses’ operations;

·              our increased complexity anddiversity compared to our operations prior to an acquisition;

·              the possible negative reaction ofclients to any acquisitions; and

·              unanticipated problems or legalliabilities, including responsibility as a successor-in-interest forundisclosed or contingent liabilities of acquired businesses or assets.

***Financial Risks***

**Our international operations exposeus to significant currency risk.**

We do a substantial amount of business in countriesthat do not use the Euro as their functional currency. The currencies in thesecountries may fluctuate in value against the Euro over time. Declines in thevalue of these currencies as measured against the Euro could result in areduction in the value, as reflected on our balance sheet, of our assets.

**The seasonality of our business maycause our revenues and earnings to fluctuate, adversely affecting the price ofour stock.**

Our results may fluctuate seasonally and over longerperiods of time. Some of the factors that contribute to such fluctuationsinclude: (1) the number of working days available and the number of ouremployees on leave, (2) the manner in which our public sector clientsallocate tax revenues, (3) the weather, which may limit the amount of timeour professionals have in the field.

**Fluctuations in our working capitaland any substantial acquisition we may make may cause us to violate obligationsunder our short-term credit facility and other financing arrangements.**

As of December 31, 2005, we had borrowed €2.1million under our short-term credit facility and had a total of €258 millionavailable at year-end. Fluctuations in our working capital, which includes ourwork in progress and trade receivables less accounts payable, may cause us toexceed the limits of our financing arrangements. This may cause us to violatethe covenants and obligations under our short-term credit facility. Additionally,if we make any substantial acquisitions, our borrowings under the creditfacility may increase and we may violate our financing arrangements.

***Other Risks***

**The loss of our experienced employeescould adversely affect revenue and results.**

Our success is, largely, dependent on attracting andkeeping good employees. If for any reason we are not able to recruit enoughpeople with the necessary expertise and skills from the employment market, orretain them, 

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ourrevenue and result could be adversely affected. The departure of experiencedemployees to competitors or self-employment can be accompanied by the loss ofclients and lead to a loss of work for us.

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

Any damage to our reputation and name, such as bybreaches of our code of conduct by our employees, among other events, may harmour reputation. Such damage could cause us to lose business or not be eligibleto bid for business in certain industries and regions.

**ITEM 4. INFORMATIONON THE COMPANY**

**A.**               *History and development ofthe company*.

**Introduction**

We are an international company that deliversconsulting, engineering and project management services in the areas ofinfrastructure, environment and facilities. ARCADIS N.V. is a public companyorganized on August 16, 1982 under the laws of The Kingdom of theNetherlands. Our initial predecessor was incorporated in the Netherlands in1888 under the name Nederlandsche Heidemaatschappij. Most of our commercialactivities are undertaken under the trade name ARCADIS. In some countries, weoperate under different legal or commercial names for local competitivereasons.

Our principal office is located at: NieuweStationsstraat 10, 6811 KS Arnhem, the Netherlands and our telephone number atthat address is 31-26-3778911. Our principal office in the UnitedStates is located at: 630 Plaza Drive, Suite 200, Highlands Ranch,Colorado 80126-2377 and our telephone number at that address is 720-344-3500.

**Strategy and Strategic Developments**

Since mid-2000, our strategy has been focused onthe expansion of our position in our existing markets in Europe and North andSouth America. Our strategy concentrates on strengthening profitable growth inthese geographic markets. This strategy has four cornerstones:

·              Focus on activities with greateradded value and higher margins;

·              Organic growth in the existingcore activities;

·              Margin improvements; and

·              Acquisitions.

Following is a brief description of the progress madein each of these areas in 2005.

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***Focus on activitieswith greater added value and higher margins***

In 2005, we further adjusted our portfolio. Activitieswith limited added value and lower margins were sold and replaced byconsultancy and management services that generate higher added value andconsiderably higher margins. We added approximately €200 million in grossrevenues through acquisitions in 2005, compared against the sale of businesseswith €100 million in gross revenue. The most important acquisitions includeBlasland, Bouck & Lee, Inc. (BBL) in the United States and AYHplc in the United Kingdom. With BBL, we gain a leading position in theenvironmental market, while AYH fits the transition occurring in the facilitiesservice area from engineering to management services. Both companies are activein growth markets, having considerably higher margins than our average andoffer abundant opportunities for synergy. These acquisitions have changed ourprofile and serve to strengthen our strategic positioning.

***Solid organicgrowth in core activities***

Organic growth represents the growth in our grossrevenue that we are able to generate from year to year in our existing,non-acquired businesses, excluding exchange rate differences. In 2005, ourorganic growth was 5%, which was essentially the same as in 2004. We believethat we can improve our organic growth rate by better utilizing our internalknowledge base to provide opportunities, such as with respect to ourremediation and GRiP® program in the United States, our rail and watermanagement expertise in the Netherlands, our bridge and tunnel experience inFrance, as well as expanding our relations with existing multinational clients.

***Margin goalachieved***

Margin improvement is a key component of our corporatestrategy introduced in 2000. By margin, we mean operating income excludingamortization of identifiable intangible assets (which we also refer to asEBITA), as a percentage of net revenue, which is the portion of revenueproduced by our own employees. Excluding items that affect the comparability ofresults, such as the sale of non-core activities in the Netherlands and arestructuring charge in 2004, as well as a book gain on divestments includingthe sale of our 50% interest in Grupo EP in Spain and adjustments to pensionplans, the margin increased to 8.2%, compared to 6.2% in 2004. Three factorshave contributed to this improvement: acquisitions/divestments in which lessprofitable activities were replaced by higher margin activities, the positiveeffects of the restructuring in the Netherlands in 2004 and increasedutilization rates combined with favorable market conditions.

***Acquisitions***

Acquisitions remain an important cornerstone of ourstrategy. The purpose of acquisitions is to further strengthen our home marketportfolios. We have the following financial criteria for all of our acquisitions:

·              They are accretive to earnings pershare;

·              The margin is equal to or higherthan the ARCADIS margin; and

·              They produce a return oninvestment of 15% or more.

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In 2005, we acquired the following four companies, allof which met our financial criteria:
| **Name**                                        | ** ** | **Country**    | ** ** | **Employees** | ** ** | **Gross revenue(1)  (in millions)** | ** ** | **Month  consolidated** | ** ** |
|-------------------------------------------------|------------|----------------|------------|---------------|------------|-----------------------------------------------|------------|-------------------------|------------|
| ** **                                      | ** ** | ** **     | ** ** | ** **    | ** ** | ** **                                    | ** ** | ** **              | ** ** |
| SWK NV                                          |       | Belgium        |       | 50            |       | 6                                             |       | May 2005           |       |
| AYH, plc                                        |       | United Kingdom |       | 340           |       | 36                                            |       | June 2005          |       |
| Greystone  Environmental Consultants, Inc. |       | United States  |       | 130           |       | 12                                            |       | June 2005          |       |
| Blasland,  Bouck & Lee, Inc.      |       | United States  |       | 900           |       | 142                                           |       | September 2005     |       |
| **Total**                                       | ** ** | ** **     | ** ** | **1420**      | ** ** | **196**                                       |       |                    |       |

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(1)   Grossrevenue mentioned above  indicates thegross revenue of each entity for the last full fiscal year of the respectiveentity prior to its acquisition by ARCADIS.

With the acquisition of *SWK*, Belgian activities were strengthenedgeographically, as well as in heavy infrastructure. The acquisition of *AYH* in the United Kingdom, specializing inproject management, cost control and consultancy for real estate projects, fitsthe transition occurring in the facilities service area and strengthens ourposition the United Kingdom. *Greystone*is an important addition to the American environmental market, bringingexpertise particularly in permitting. *Blasland,Bouck & Lee*, specializing in environmental services andsoil remediation, considerably strengthens our position in the environmentalmarket, not only in the United States, but globally.

The total investment in acquisitions in 2005 was €121 million, which resulted in additional goodwill of € 61 million. Agoodwill amount of € 2.8 million is expected to be deductible for taxpurposes. The goodwill in 2005 was assigned to our geographic segments asfollows (in millions):

| The Netherlands           |   | €   0 |   |
|---------------------------|--------|---------------------------|--------|
| United States             |   | 44                        |   |
| Other European  Countries |   | 16                        |   |
| Rest of World(1)          |   | 1                         |   |
| Total goodwill            |   | 61                        |   |

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(1)   Thegeographic segment “Rest of World” includes all countries outside of our threeprimary reporting segments, the Netherlands, the United States and Other EuropeCountries.

Of the € 121 million invested in acquisitions in2005, up to € 27 million will be paid after 2006.

In 2005, we completed the following divestments:
| **Name**                           | ** ** | **Country**   | ** ** | **Employees** | ** ** | **Gross revenue  (in millions)** | ** ** | **Month  divested** | ** ** |
|------------------------------------|------------|---------------|------------|---------------|------------|--------------------------------------------|------------|---------------------|------------|
| Detailed  engineering in buildings |       | United States |       | 160           |       | 15                                         |       | April 2005     |       |
| 50% interest in  Grupo EP SA       |       | Spain         |       | 1,700         | (1)        | 135                                        | (1)        | June 2005      |       |
| Renardet/Sauti  SA                 |       | Donor market  | (2)        | 240           |       | 11                                         |       | June 2005      |       |
| **Total  divestments**             | ** ** | **—**    | ** ** | **2,100**     | ** ** | **94**                                     |       | —              |       |

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(1)             Based on 100%; grossrevenue was consolidated 50%, the number of employees for 100%.

(2)             The“Donor market” includes the following regions: Africa, Latin and CentralAmerica, Southeast Asia, and Eastern Europe.

In light of thetransition in the facilities service area to activities with higher addedvalue, the detailed engineering activities for buildings in the United Stateswas sold. With no prospect of gaining a majority interest, we sold our 50%interest in Grupo EP to management and employees who already owned the other50%. The company had been proportionally consolidated in our operating results,and in 2004 contributed less than 5% to our total net income from operations. However,our good relationship with Grupo EP continues through a cooperation 

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agreement. At the end of June, our interests in twosmaller companies with activities in the donor-financed market were sold.

**Revised strategy**

The biennial review of ourstrategy was completed in mid-2005. The revised strategy, titled *Choices for growth*, continues the course of profitablegrowth in home markets, which was introduced in mid-2000. The revisedstrategy introduces a strategic vision for each of the three service areas inwhich we are active. This vision is based on a portfolio analysis by servicearea in which market attractiveness and our competitive position were weighedfor each activity. In addition, an analysis of strengths and weaknesses wascompleted by service area and for ARCADIS as a whole.

Goals by service area wereformulated for the next three to five years. The goals were translated intotangible 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. Furtherdetails are provided in the following sections on service areas.

The three core elements ofthe revised strategy can be summarized as follows:

*Strengthening organic growth inthe three service areas by:*

·                              Using transnational growth platforms for specific sections;

·                              Expanding local positions in home markets; and

·                              Promoting innovations aimed at developing new products and services.

*Continually improving margin by:*

·                              Focusing on services with higher added value; and

·                              Outsourcing detailed engineering.

*Expanding through acquisitionsaimed at:*

·                              Strengthening home markets and/or adding specific expertise; and

·                              Building a position in Asia.

**Financial goals**

We maintain the followingunchanged financial goals for the mid to long term:

·                              Gross revenue: average annual growth of 10% or more, half of which isorganic.

·                              Operational margin: 8% (operating income excluding amortization ofidentifiable intangible assets (which we also refer to as EBITA) as apercentage of net revenue).

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

·                              Return on invested capital of 15% or more. This is net income fromoperations, excluding interest charges, compared to shareholders’ equity plusnet interest-bearing debt, calculated as an average over four quarters.

The goals listed above areexcluding the effects of currency exchange rate differences. Net income fromoperations is before amortization and other items that we believe affect thecomparability of results, like book gains.

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Below are the results ofprevious years compared to the above goals, excluding currency effects**.**
| ** **                  | ** ** | **Goal** | ** ** | **2000** | ** ** | **2001** | ** ** | **2002** | ** ** | **2003** | ** ** | **2004(1)** | ** ** | **2005(1)** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|-------------|------------|-------------|------------|
| Gross revenue               |       | 10       | %          | 13       | %          | 3        | %          | 6        | %          | 10       | %          | 9           | %(2)       | 10          | %(2)       |
| — Organic              |       | 5        | %          | 7        | %          | 3        | %          | 2        | %          | 1        | %          | 5           | %          | 5           | %          |
| — Acquisitions         |       | 5        | %          | 6        | %          | 0        | %          | 4        | %          | 9        | %          | 4           | %          | 5           | %          |
| Operational  margin         |       | 8        | %          | 6.4      | %          | 6.9      | %          | 7.4      | %          | 6.0      | %          | 6.2         | %(3)       | 8.2         | %(3)       |
| Earnings per  share         |       | 10       | %          | 10       | %          | 10       | %          | 11       | %          | (4)      | %          | 9           | %          | 40          | %          |
| Return on invested  capital |       | 15       | %          | 14.8     | %          | 17.6     | %          | 18.8     | %          | 15.9     | %          | 17.2        | %          | 20.6        | %          |

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(1)   Results based on IFRS.

(2)   Excluding book profit on sales.

(3)   Excluding items that impact thecomparability of results.

**B.**               *Business overview*.

**Development by Service Area**

We provide consulting and engineering services in fourprincipal geographic reporting segments: the Netherlands, the United States,other European countries, and Rest of World. Our primary services areas in eachof these geographic segments are infrastructure, environment, and facilities.Below is a further detailing of the activities of the company in each of thesethree service areas:

***Infrastructure***

Our infrastructure area is focused on designingphysical living environments for living, working, and recreational activities,as well as connecting these areas through highways, railroads, and waterways.We are engaged in infrastructure activities in all of our geographic reportingsegments. Water management, infrastructure development for the energy sectorand telecommunications activities are also a component of this service area.This service area’s share of total gross revenue was € 526 million, €501 million, and € 485 million in 2005, 2004 and 2003, respectively,and accounted for 53%, 56% and 57% of our total gross revenue in those years,respectively.

The infrastructure market isdominated by public sector spending. We have strong local positions in thismarket. 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 on the Dutch railway network, one of the most densely traveled andsafest networks in the world. A prime example of our expertise in bridges isthe world-famous Millau Viaduct in France, the tallest in the world. In thearea of tunneling, we have extensive expertise and experience, both in rockyand in soft subsurface soils.

Our principal activities 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;

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·      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 environment area is focused on the improvement andmaintenance of air, soil, and surface-water quality as well as projects relatedto noise abatement, solid waste disposal and external safety. We are engaged inenvironment activities in all of our geographic segments. This service area’sshare of total gross revenue was € 295 million, € 243 million and €223 million in 2005, 2004 and 2003, respectively, and accounted for 29%,27% and 27% of our total gross revenue in those years, respectively.

A considerable portion of ourgross revenue in the environment service area results from soil and groundwaterremediation projects. In this area, we maintain a world leadership positionthat is based on cost-effective remediation technologies, a solid reputationand the Guaranteed Remediation Program (GRiP®). Under GRiP®, we provide turnkeysolutions for the remediation of contaminated properties at a guaranteed price,while covering risks with insurance policies. In addition, we are able to servemultinational companies in multiple countries. This is significant as a growingnumber of multinational companies are reducing the number of consultants theyuse. Many of our clients already are multinational companies.

Our principal activities 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;

·      Identification and evaluationof hydrologic factors incident to the siting and operation of industrialplants, mines, power generating stations, and waste-storage and disposalfacilities;

·      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 andmaintenance of specialized remedial technologies, including bioremediation,soil vapor extraction, air sparging, hydraulic barriers, free product controland recovery, steam-enhanced soil-venting, contaminated surface and groundwaterrecovery and treatment, underwater sediment remediation,wastewater treatment,stabilization/solidification, landfill caps and containment, and air qualitycontrol;

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·      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, Assetand 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. Theenvironmental 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 operation ofthe installed equipment, maintenance and sampling of the treatment processes;

·      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 facilities area is focused on buildings in whichpeople live, work, or relax. We engage in the facilities area in all of ourgeographic segments. This service area’s share of total gross revenue was € 180million, € 144 million and € 110 million in 2005, 2004 and 2003,respectively, and accounted for 18%, 16% and 13% of our total gross revenue in2005, 2004 and 2003, respectively.

The facilities market isstrongly influenced by the level of private investment and therefore is morecyclical. In the past two years, we have focused on transitioning to higheradded value services in an effort to improve profitability. Greater emphasishas been placed on expanding project and program management and facilitymanagement services. The acquisition of AYH was an important step in reachingthis goal. At the same time, we began reducing and outsourcing our detailedengineering activities. It was becoming increasingly difficult to offerdistinguishable services to the marketplace, which negatively impacted ourprofitability and led to the 2005 first quarter sale of detailed engineeringservices in the United States.

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Our activities in the 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.

**Marketing and Distribution**

Our major marketing channels are our primary operatingcompanies, which are ARCADIS G&M Inc., Blasland, Bouck & LeeInc., Greystone Environmental Consultants, Inc., ARCADIS Nederland B.V.,ARCADIS Deutschland GmbH, ARCADIS BMB B.V., ARCADIS Euroconsult B.V., ARCADISBelgium N.V. , SWK NV, ARCADIS FC International SAS, ARCADIS Logos EngenhariaSA, Biogas SA, ARCADIS Geotecnica Consultores SA, PRC Holding B.V., ARCADISAqumen Facility Management B.V., ARCADIS Geraghty & MillerInternational Ltd., AYH Plc., ARCADIS Polska Sp. Z.o.o., and Profil Sp. Z.o.o..

Through our multinational client program, we haveincreased organic growth by expanding our relationships with existingmultinational clients. For example, our multinational clients program hasresulted in the execution by several existing clients of master serviceagreements that establish the basis for providing international services to theseclients for extended periods.

**Competition**

We are engaged in highly competitive markets in all ofour geographic reporting segments and service areas. We compete with many otherfirms, ranging from small local firms to large national and international firms.In addition to price, we compete primarily on the basis of quality of service,project management expertise, and ability to provide integrated solutions.Other competitive factors include application of state-of-the-art technology,geographic location and availability of personnel. A significant portion of ourrevenue is generated through direct contact and negotiations with clientsresulting largely from existing relationships rather than through public orother bidding procedures. The development of new and more efficient technologyby our competitors may have an adverse effect on us if such technology is notaccessible to us or is incompatible with the services we provide.

**Effect of Government Regulation**

Of our business, approximately 45% of our revenue isderived from governmental entities. These clients rely on tax revenues to fundlarge public works projects of the type for which we are often retained. Duringan economic downturn, governmental entities collect significantly less taxrevenue and often try to limit discretionary expenditures to balance theirbudgets. Government limits on spending in regard to environmental remediation, 

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infrastructureexpansion or enhancement, building projects, real estate data services ortelecommunications infrastructure investments, could have a material adverseeffect on our ability to attract and/or retain business.

Our business is also affected by the implementationand modification of governmental legislation and regulations in a number ofareas, but particularly with respect to the environment. We assist privatesector clients in complying with, or responding to, new governmentallegislation and regulations. Therefore, when government strengthens regulationof the environment, the demand for our services typically increases. Whenregulations are weakened or enforcement of such regulations seems less likely,our clients are less likely to need our services, which could materially andadversely affect our business. Changes in regulations and legislation may alsoaffect certain other areas of our business, including communications,infrastructure and, to a lesser extent, facilities.

**C.**               *Organizational structure*.

ARCADIS N.V. is not directly or indirectly owned orcontrolled by another corporation or by any government, foreign or domestic.Only our major consolidated companies are listed below, stating the percentageof ownership by ARCADIS N.V. and the country in which each is domiciled.
| **Company**                                                 | ** ** | **Percentage  Ownership** | ** ** | **Domicile**    | ** ** |
|-------------------------------------------------------------|------------|---------------------------|------------|-----------------|------------|
| ARCADIS G&M  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 Consultores SA                          |       | 100                       |       | Chile           |       |
| PRC Holding B.V.                                            |       | 100                       |       | The Netherlands |       |
| ARCADIS Aqumen  Facility Management B.V.(1)                 |       | 50                        |       | The Netherlands |       |
| ARCADIS  Geragthy & Miller International Ltd. (UK) |       | 100                       |       | United Kingdom  |       |
| AYH Plc.                                                    |       | 100                       |       | United Kingdom  |       |
| ARCADIS Polska Sp Zoo                                       |       | 100                       |       | Poland          |       |

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(1)   Proportionatelyconsolidated

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

Our principal property and equipment consists of land,offices, operating facilities, storage grounds, workshops, vehicles, equipmentand software which, at December 31, 2005, represented approximately 9% ofour consolidated assets. We believe that our offices, operating facilities,vehicles and equipment 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 headquarters are leased and are located in Arnhem,the Netherlands. We own regional offices, workshops, storage grounds and landthroughout the Netherlands. We lease approximately 260 local offices throughoutthe Netherlands, Europe, the United States, Asia, Africa, and Latin America.During fiscal 2005, aggregate annual rental payments on real estate leased byus approximated € 37 million.

The principal assets utilized in ourconsulting/engineering operations consist primarily of computer equipment andsoftware, instruments, operating equipment, workshop inventory, officeinventory and reproduction equipment. Some of the computer equipment is leased.The principal assets we utilized in contracting operations consist primarily ofoperating equipment such as earth-moving equipment, front loaders and trucks,mowers, tractors, drainage machines and office and workshop inventory as wellas computer equipment. Some of the operating equipment is leased.

At December 31, 2005, we were not aware of anyenvironmental issues existing at any of our facilities that may affect theutilization of such facilities.

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**ITEM 4B.UNRESOLVED STAFF COMMENTS**

Notapplicable.

**ITEM 5. OPERATINGAND FINANCIAL REVIEW AND PROSPECTS**

**A. *Operating results.***

**Overview**

The following is a discussion of our consolidatedfinancial condition and results of operations for the two years ended December 31,2005 and other factors that are expected to affect our prospective financialcondition. The following discussion and analysis should be read in conjunctionwith “Selected financial data” and our Consolidated Financial Statements whichare included elsewhere in this annual report. Our Consolidated FinancialStatements are prepared in accordance with IFRS. IFRS differs in certainrespects from U.S. GAAP. See our reconciliation of IFRS to U.S. GAAP in Note 18to our Consolidated Financial Statements. Our results may fluctuate from periodto period due to project delays, occasioned by regulatory agency approvals orclient considerations, weather and the number of working days available.

We are an international provider of consulting andengineering services in four primary geographic reporting segments: theNetherlands, the United States, other European countries, and Rest of World,which includes all countries in which we operate outside the first threesegments. We provide these services in three principal service areas:infrastructure, environment and facilities.

**Developments by Geographic Segment**

Our organizational structure is primarily geographic,usually with one (to two) operating companies per country. These operatingcompanies report directly to the Executive Board. We have grouped ouroperations into four geographic regions: the Netherlands, other Europeancountries, the United States and Rest of World.

***The Netherlands***

During 2005, market conditions in the Netherlandsshowed****some signs of recovery. This was theresult of low economic growth, and limited government spending. Organic grossrevenue (gross revenue not attributable to acquisitions) in the Netherlandsdeclined by 1%, and this decline only occurred in the infrastructure servicearea. In the environment and facilities service areas growth was achieved. Grossrevenue from the Netherlands represented approximately 29% of our total grossrevenue for 2005.

The restructuring measuresimplemented in the Netherlands in 2004 clearly had a positive effect onprofitability. Organically, operating income improved by € 2.2 million or 20% in 2005. Thiswas partially offset by the effect of acquisitions and divestments. As aresult, operating income totaled €11.5 million in 2005 compared to € 7.6 million in 2004.

***Other Europeancountries***

Gross revenue in other European countries (includingBelgium, the Czech Republic, France, Germany, Poland, Spain and the UnitedKingdom) increased 5% to € 267 million in 2005, compared to € 254 millionin 2004. Gross revenue from other European countries represented approximately26% of our total gross revenue for 2005. Acquisitions and divestments caused adecrease in revenues of 1%. This was the result of the sale of our 50% interestin the Spanish company, Grupo EP during 2005. The effect of this sale on grossrevenue was almost entirely offset by the contribution from acquisitionscompleted in 2004, as well as the acquisitions in 2005 of SWK in Belgium andAYH in the United Kingdom.

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Operating income grew by 53% to € 18.8 million in2005, compared to € 12.3 million in 2004. The comparability of results wasseverely affected by the increase in amortization of identifiable intangibleassets, which increased by  € 1.2 millionto € 1.4 million in 2005, compared to € 0.2 in 2004. Without the effect of theincrease in amortization of identifiable intangible assets, operating incomewould have increased by 62% in 2005. Except for Germany, all countriescontributed to this improvement. Operating income from other European countriesrepresented 34% of our total operating income for 2005.

***The United States***

Gross revenue for the United States increased 31% in2005 to € 349 million, compared to €267 million in 2004. Gross revenue from theUnited States represented approximately 35% of our total gross revenue for2005. Organic growth was 8%, while acquisitions contributed 23%. This includedtwo acquisitions completed in 2005 —  theacquisition of Greystone in June 2005and BBL in September 2005.

In the UnitedStates, activities in the environmental market developed very favorably. On theone hand this was the effect of a solid backlog in GRiP® projects, while on theother hand, regular environmental consulting work also saw healthy increases.Infrastructure activities saw growth as a result of the passage of the Safe,Accountable, Flexible, and Efficient Transportation Equity Act of 2003 (SAFETEA) by the federalgovernment. For a period of six years, this legislation will release anadditional $285 billion in federal funding into the infrastructure market. Inthe facilities service area, the influence of the shift in investment tolow-wage countries (particularly China) was noticeable, resulting in a strongdecline of activities in this area.

Operating income increased by 38% to € 18.3million in 2005, compared to € 13.3****million in2004. The comparability of these results was severely impacted by theincrease in amortization of identifiable intangible assets, which increased by €2.5 million to € 2.6 million in 2005, compared to € 0.1 in 2004. Without theeffect of the increase in amortization of identifiable intangible assets,operating income would have increased by 56% in 2005. Operating income from theUnited States represented 34% of our total operating income for 2005.

***Rest of World***

Activities in Rest of World, include activitiesprimarily in the infrastructure and environment service areas in Brazil andChile, as well as projects in developing countries, financed by internationaldonors such as the World Bank and the European Union. Gross revenue rose by 25%to €97 million in 2005, compared to € 78 million in 2004. The sale oftwo smaller companies in the donor-financed market resulted in a gross revenuedecrease of 6%. The strong increase in the value of the Brazilian real produceda positive currency effect of 12%. Organic growth was 19%, and predominatelycame from Brazil, where activities grew by 65%. Gross revenue from Rest ofWorld represented approximately 10% of our total gross revenue for 2005, andoperating income from Rest of World represented approximately 11% of our totaloperating income for the year.

**Revenues and Expenses**

We derive our gross revenue primarily from theprovision of consulting and engineering services, as well as other services,generally under the categories of contracts described below, which in somecircumstances may be combined.

·       *Fixedprice contracts.* Fixed price contracts provide for thepayment of a negotiated fee that is fixed at the inception of the contract.When we enter into these types of contracts we estimate the amount of time andthe cost for us to perform the services under the contract. We mayunderestimate the actual time and cost. Further, the information upon which thefee is based may change or may be inaccurate. As a result, we may earn lessunder the contract than we anticipated or suffer a loss. Conversely, if weperform the services more efficiently than we estimated, we may earn more underthe contract than anticipated. With a well defined scope of work and schedule,we can limited the risk of underestimating our costs.

·       *Cost-pluscontracts.* Cost-plus contracts provide for payment based onthe time spent to perform the contract, applying agreed upon rates fordifferent categories of employees, and then adding out-of-pocket 

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expenses.Our risk arising from this type of project is usually limited. Clients willchoose this type of contract when it is difficult to estimate in advance howmuch time will be spent or when a client wishes to bring in a temporary staffto conduct certain activities under its management.

·       *Cost-pluscontracts with a cap.* Cost-plus contracts with a cap aresimilar to cost-plus contracts, but a maximum project cost is agreed to thatcannot be exceeded without the prior agreement of the client. In principle, wecease work when the cap is reached unless a “performance agreement” has alsobeen negotiated. In that case, we may need to complete the additional work atno additional cost to the client.

·       *Contractswith a building sum-related fee.* Contracts with a buildingsum-related fee are normally used when our activities are directly related tothe total completion of a construction project, such as a road, building orcivil engineering project. This type of project involves producing the design,developing the engineering, handling procurement, and supervising construction.With this type of contract, the total fee for the various activities isdetermined by a percentage of the sum of the total construction costs. Theactivities are budgeted on the basis of an estimate of the construction costs.Actual construction costs, because of overcapacity in the market, may be lowerthan we estimate, and as a result our fee could be lower. Conversely, if weefficiently manage the project, we can significantly enhance our margin.

·       *Turnkeycontracts.* Turnkey contracts are similar to the fixed pricecontracts described above. However, this type of contract also includes theengineering and construction components of the work (a design/build contract).These types of contracts require additional preparation for producingspecifications and determining price. The advantages for the client are pricecertainty at an early stage, efficiency in the preparation and quickerdeliverability. Because we do not usually perform the construction (building)component of the work, the risk that the work will not be completed is usuallycovered by a back-to-back contract with a contractor. In part due to size, thistype of contract may be riskier for us. Risks arise from design and engineeringmiscalculations, unclear specifications of the product, or contractors notmeeting their obligations. However, we may achieve greater profits bycompleting the project efficiently and under budget.

·       *GRiP®contracts.* GRiP® stands for Guaranteed Remediation Program.GRiP® contracts are a special type of turnkey contracts that are used in theenvironmental market for the remediation of contaminated property. Aremediation plan is prepared, and remediation costs are estimated based on anenvironmental study and a determination of the extent of contamination. Theperformance of the remediation plan is offered (under certain conditions) tothe client for a fixed price (turnkey). The risks of cost overruns are largelycovered by an insurance policy. We have very rigorous procedures and policiesfor project estimation and determination of insurance levels and work closelywith our insurers to minimize the total risk. However, there are always someinherent project estimation risks. Remaining risks can arise as a result ofdisputed settlements with the insurer and associated litigation.

·       *Design,Build, Finance and Operate contracts (DBFO).* DBFO contractsallow us to deliver a total product, including arranging financing andoperating the built product for a certain period of time. This type of projectis normally conducted as part of a consortium, with a partnership set upspecifically for the project, acting as the contract party. Our participationdepends on the project type, its scope, and the risk profile. Our participationis often related to the capitalized development effort provided by ouremployees. We face risks under this type of contract when we make advanceinvestment in the development of the project, have an equity interest in thepartnership, as well as risks associated with obligations that are entered intofor completing or operating the project. In this type of project, the operatingcompanies are assisted by a team at corporate level, who completes the riskanalysis.

·       *Frameworkcontracts or Master Service Agreements.* Framework contractsor Master Service Agreements are service agreements that are negotiated for aspecified period of time. In a framework contract, projects may sometimes beput out to bid to a number of providers. Returned bids include estimates byproject or project components, or maximum amounts are set. Under the pressureof competition, unfavorable terms may be agreed upon, thereby producing anegative effect on our business result for a long time. However, this type ofcontract provides a stable source of revenue over a longer period of time.

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·       *Contractswith a success fee.* Contracts with a success fee provide thatwe are eligible for an agreed payment that is linked to achieving agreed uponresults, whether or not within a fixed time period. In theory, we can receivesuccess-based fees for each type of contract described above.

Our operating expenses include materials, services ofthird parties and subcontractors, operational costs and depreciation.

·       *Materials,services of third parties and subcontractors*. Materials,services of third parties and subcontractors includes project-related costs ofmaterials and services charged by third parties including subcontractors.

·       *Operationalcosts*. Operational costs includes all costs relating toemployees, as well as non-project-related out-of-pocket expenses.

·       *Depreciation.*Depreciation includes the depreciation of buildings, software, furniture, andfixtures.

**Critical Accounting Policies**

For the financial years up to and including 2004, wehave presented our financial statements on a basis consistent with accountingprinciples generally accepted in the Netherlands. In 2005, the new accounting rules underIFRS went into effect. At the end of this Item 5, we have included a summary ofthe effects that the introduction of the IFRS had on our balance sheet andstatement of income.

The preparation of our financial statements requiresus to make estimates and judgments that affect the reported amounts of assetsand liabilities, revenues and expenses, and related disclosure of contingentliabilities at the date of our financial statements. The policies thatmanagement considers to be most important to the presentation of our financialcondition and results of operations and to require the most significant demandson management’s judgments and estimates about matters that are inherentlyuncertain are discussed below. Management cautions that future events oftenvary from forecasts and that estimates routinely require adjustment.

A more complete description of our significantaccounting policies appears in Note 1 to our Consolidated FinancialStatements.

*Work in progress.*Revenueis generally recognized as 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.*Contractcosts include direct labor costs, subcontractor costs, other direct costs andindirect costs. Our method of revenue recognition requires us to prepareestimates of the costs to complete contracts in progress. In making suchestimates, judgments are required to evaluate contingencies, such as potentialvariances 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.

*Impairment.*The carrying amounts of the assets of ARCADIS, other thanwork in progress and deferred tax assets, are reviewed at each balance sheetdate to determine whether there is any indication of impairment.

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For goodwill andassets that have an indefinite useful life, the recoverable amount is estimatedat each 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 in regard to cash-generating units areallocated 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.

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 loss of goodwill cannot be reversed.Regarding other assets, an impairment loss can be reversed if there has been achange in the estimates used to determine the recoverable amount. An impairmentloss is reversed only to the extent that the asset’s carrying amount does notexceed the carrying amount that would have been determined, net of depreciationor amortization, if no impairment loss had been recognized.

Under US GAAP assets and liabilities acquired in abusiness combination are recorded at their estimated fair values as of theiracquisition date. At December 31, 2005, we had approximately € 149.2million of goodwill (U.S. GAAP amount), representing the cost of acquisitionsin excess of fair values assigned to the underlying net assets of acquiredcompanies. In accordance with Statement of Financial Accounting Standards(SFAS) No. 142, “Goodwill and other intangible assets,” goodwill andintangible assets deemed to have indefinite lives are not amortized, but aresubject to annual impairment testing. The assessment of goodwill involves theestimation of the fair value of our geographical assets. Management completedthis assessment during the fourth quarter of 2005 based on the best informationavailable as of the date of assessment and determined that no impairmentexisted. Future events could result in impairments of goodwill or other assets.

*Accounting for pensions.*UnderIFRS the Company’s pension plans qualify as defined contribution plans. UnderU.S. GAAP, the Dutch plans qualify as defined benefit plans. For a furtherexplanation of this, please refer to Notes 17 and 18 in the ConsolidatedFinancial Statements included in Item 18 of this annual report. Retirementbenefits represent obligations that will be settled in the future and requireassumptions to project benefit obligations and fair values of plan assets.Retirement benefit accounting is intended to reflect the recognition of futurebenefit costs over the employee’s approximate service period, based on theterms of the plans and the investment and funding decisions we make. Inaccounting for these retirement benefits, management is required to makeassumptions regarding variables such as discount rate, rate of compensationincrease, return on assets, and mortality tables. Periodically managementconsults with outside actuaries regarding these assumptions. Changes in thesekey assumptions can have a significant impact on the projected benefitobligations, funding requirements and periodic cost incurred. Our policies andkey assumptions are included in Note 17 to our Consolidated FinancialStatements.

*Provisions for contingentliabilities.*By their nature, provisions for contingentliabilities are dependent upon estimates and assessments of whether thecriteria for recognition have been met, including estimates as to the outcomeand the amount of the potential cost of resolution. Contingent liabilities arerecognized by a charge against income when it is probable that a liability hasbeen incurred and the amount of such liability can be reasonably estimated. Themost likely amount is accrued for costs of future liabilities that mayultimately arise when such an amount can be determined. If no amount within therange is considered more likely than any other, then the accrual is based onthe low end of the range.

Contingent liabilities and provisioning for reorganizations,other litigation, and tax disputes are discussed in Note 12—Long-TermLiabilities and in Note 13—Trade and other Liabilities to our ConsolidatedFinancial Statements. The provision for reorganizations is based on an estimateof the costs of dismissal of permanent staff, taking into account legal adviceand the current facts and circumstances. Provisions for other litigation andtax disputes are also based on an estimate of the costs, taking into accountlegal advice and information currently available.

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Should the actual outcome differ from the assumptionsand estimates, revisions to the estimated provisions would be required, whichcould impact our financial position and results of operations.

*Accounting for income taxes.*Aspart of the process of preparing our consolidated financial statements, we arerequired to estimate income taxes in each of the jurisdictions in which weoperate. This process involves estimating actual current tax expense andtemporary differences between tax and financial reporting. Temporarydifferences result in deferred tax assets and liabilities, which are includedin our consolidated balance sheet. We must then assess the likelihood thatdeferred tax assets will be recovered from future taxable income. A valuationallowance is recognized to reduce deferred tax assets if, and to the extent, itis more likely than not that all or some portion of the deferred tax assetswill not be realized.

We have recorded a valuation allowance of € 1.9million as of December 31, 2005, based on estimates of taxable income byjurisdiction in which we operate and the period over which deferred tax assetsare recoverable. In the event actual results differ from these estimates infuture periods, and depending on the tax strategies that we may be able toimplement, changes to the valuation allowance could be required, which couldimpact our financial position and results of operations.

*Allowances for doubtful accounts.*Allowancesfor doubtful accounts are maintained for estimated losses resulting from theinability of our customers to make required payments. If the financialcondition of customers were to deteriorate, resulting in an impairment of theirability to make payments, additional allowances may be required.

**Results of Operations**

The table below presents,for the periods indicated, (1) the percentage relationship that certainitems in our Consolidated Statements of Income bear to net revenue and (2) thepercentage increase (decrease) in Euro amounts for such items from year to yearfor the two-year period ended December 31, 2005.
| ** **                                                                              | ** ** | **Percentage of Net  Revenue** | ** ** | **Percent Change** | ** ** |
|-----------------------------------------------------------------------------------------|------------|------------------------------------------|------------|-------------------------|------------|
| ** **                                                                              | ** ** | **2005**                                 | ** ** | **2004**                | ** ** | **2004 to 2005** | ** ** |
| Gross revenue                                                                           |       | 142.4                                    |       | 142.4                   |       | 11.1 |   |
| Materials,  services of third parties and subcontractors                                |       | 42.4                                     |       | 42.4                    |       | 11.0 |   |
| Net revenue                                                                             |       | 100.0                                    |       | 100.0                   |       | 11.2 |   |
| Operational  costs                                                                      |       | 89.3                                     |       | 91.9                    |       | 8.0 |   |
| Depreciation                                                                            |       | 2.2                                      |       | 2.5                     |       | (2.8 | ) |
| Amortization of  identifiables                                                          |       | 0.8                                      |       | 0.1                     |       | — |   |
| Operating income                                                                        |       | 7.7                                      |       | 5.6                     |       | 53.1 |   |
| Financing  income/expenses net                                                          |       | (0.3                                     | )          | (0.5                    | )          | (46.8 | ) |
| Income from  operations before taxes                                                    |       | 7.5                                      |       | 5.1                     |       | 63.9 |   |
| Taxes                                                                                   |       | 2.5                                      |       | 1.6                     |       | 66.8 |   |
| Income of  consolidated companies from operations after taxes                           |       | 5.0                                      |       | 3.4                     |       | 62.6 |   |
| Income of  non-consolidated companies and long-term investments after taxes   |       | 0.2                                      |       | 0.4                     |       | (43.5 | ) |
| Group income  from operations after taxes                                               |       | 5.2                                      |       | 3.8                     |       | 51.8 |   |
| Minority  interest                                                                      |       | 0.5                                      |       | 0.3                     |       | 64.5 |   |
| Net income                                                                              |       | 4.7                                      |       | 3.5                     |       | 50.7 |   |

 

***Year Ended December 31,2005 Compared to Year Ended December 31, 2004***

On the whole, operational results during 2005 developedfavorably. Gross revenues increased with 11% from 2004, while net incomeimproved with 51% from 2004. In particular, the environment service areaproduced excellent results.  You shouldread our audited Consolidated Financial Statements in conjunction with thefollowing analysis.

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***Gross revenue***

Gross revenue in 2005 increased by 11% to €1 billion,compared to €901 million in 2004. Of the total increase, 1% was the effectof currency impacts. Acquisitions and divestments contributed a net of 5%, andorganic growth contributed 5%. The organic growth was primarily the result ofstrong growth in the U.S. environmental market and in Brazil, as well as thegradual recovery in the Dutch market.

As of 2005, the geographicdistribution of revenue had been altered. The activities in North and SouthAmerica were separated into two segments: the United States became its ownsegment, while South America was added to the Rest of World segment. Strongexpansion through acquisitions and relatively high organic growth are drivingthe increase in the U.S. percentage of total company sales. In 2005, 35% of thegross revenue was generated in the United States compared to 30% in 2004; theNetherlands contributed 29% in 2005, compared to 33% in 2004. Other Europeancountries contributed 26% in 2005, compared to 28% in 2004, and the Rest ofWorld contributed 10% in 2005, compared to 9% in 2004.

***Net revenue***

Our net revenue, the part of sales produced by our ownemployees, increased 11% to € 703 million in 2005, compared to € 633million in 2004. Excluding the currency effect, growth was 10% in 2005. Of thegrowth, 6% came from acquisitions and divestments. The 5% organic growth wasequal to that of gross revenue growth. Compared to 2004, there was a lower revenue inflow from the sale ofbusinesses, which resulted in a 1% decrease in net revenue.

***Operational costs***

Operational costs increased by 8% to € 628 million in2005, compared to € 581 million in 2004. Acquisitions produced a 5%increase in operational costs, while currency effects resulted in a 1%increase. The organic increase of operational costs totaled 2% in 2005, clearlylower than the increase in net revenue, mostly due to improvements in staff utilization.

***Depreciation expenses***

Depreciation (excludingamortization) decreased 3% to € 15.2 million in 2005, from € 15.6 in 2004, andtotaled 2.2% of net revenue in 2005, compared to 2.5% in 2004. The projectmanagement and consultancy companies that have been acquired are less capitalintensive and require even less depreciation than the other ARCADIS operatingcompanies, thus resulting in the decrease in depreciation.

***Amortizationof identifiable intangible assets***

Identifiable intangible assetsrelated to acquisitions must be separated from goodwill and amortizedseparately. For ARCADIS, this expense generally includes the profit in theacquired company’s backlog. These assets are amortized over their economiclifetime (on average one to two years). In 2005, the amortization increasedsharply to € 6.0 million from € 0.4 million in 2004, as a result ofacquisitions.

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***Operating income***

Operating income increased 53%to € 54.4 million in 2005, compared to € 35.5 million in 2004. Operating incomeexcluding amortization of identifiable intangible assets (which we also referto as EBITA) and excluding certain other expenses was calculated as follows:

| *(In Millions of Euros)*                                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Operating income as  reported                                                              |       | 54.4     |       | 35.5     |       |
| Amortization  identifiable intangible assets                                               |       | 6.0      |       | 0.4      |       |
| Operating income  excluding amortization of identifiable intangible assets (EBITA)         |       | 60.4     |       | 35.9     |       |
| Other items(1)                                                                             |       | 3.1      |       | (3.2     | )          |
| Operating income excluding amortization of identifiable intangible  assets and other items |       | 57.3     |       | 39.1     |       |

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(1) Other items include items that we consider tobe non-operational. In 2004, these items included the effect of the sale ofbusinesses and a restructuring in the Netherlands. In 2005 these items includedbook gains and losses on the sale of businesses, as well as the effect ofadditional payments in pension plans. 

Operating income before amortizationrose 68%, and excluding other expenses, increased by 47%. The currency effectwas 3% and was predominantly caused by the increase of the Brazilian real. Thecontribution from acquisitions and divestments on balance was 24%, considerablyhigher than the contribution to revenue growth of 5%, underscoring the positivemargin effect. Organically, operating income before amortization rose 20%, alsomarkedly more than revenue growth of 5%. Margins also improved organically, inpart as a result of the restructuring measures in the Netherlands.

***Margins***

Market conditions resulted in an increase in margin(operating income excluding amortization of identifiable intangible assets as apercentage of net revenue) from 6.2% in 2004 to 8.2% in 2005.

***Financing expenses***

Financing charges wereimpacted positively in 2005 by € 1.7 million from financial derivatives used tocover currency and interest risks. Excluding this effect, financing chargesrose to € 3.6 million in 2005, compared to € 3.5 million in 2004. The increasewas limited as a result of the gains from divested assets of € 8.5 million anda further improvement of working capital throughout the year. In 2005, initialsteps were taken to improve our financing structure in order to reduce interestcharges as much as possible.

***Tax rate***

The 33.0% tax rate in 2005 wasslightly higher than the 32.4% of 2004. In 2004, a higher tax-free book gainwas realized from the sale of activities than was realized in 2005. This offsetthe effect of a decrease in the Dutch corporate tax rates.

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.

***Contribution of non-consolidated companies; minorityinterest***

The contribution from non-consolidated companies declined from € 2.4 millionin 2004 to € 1.4 million in 2005. This was the result of the completion of anumber of energy-sector contracts in Brazil. Meanwhile, a new contract for oneof the projects was signed, contributing to 2005 fourth quarter profits.

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Minority interest rose 65% to €3.2 million. This was mainly the result of a strong profit increase in Brazil.

***Net income***

Net income totaled € 33.4million in 2005, or € 1.65 per share, against € 22.2 million, or € 1.10 pershare in 2004. Net income includes a gain of € 1.2 million from financialderivatives. This effect is not included in net income from operations. Netincome from operations (net income before amortization of intangibles and itemsthat we believe affect the comparability of results) was € 33.4 million, 40%higher than the € 23.8 million in 2004. Per share, this was € 1.65 against €1.18 in 2004.

***Number of outstanding shares***

The number of issued shares remained approximately20.3****million in 2005, almost unchangedcompared to 2004. To coverobligations related to option plans, approximately 332,000 shares wererepurchased, while approximately 303,000 shares that had been purchased earlierwere used upon the exercise of options by employees. No new shares were issued.The average number of shares outstanding (as applied to calculate income pershare) was 20.3 million compared to 20.1 million in 2004. For anoverview of options outstanding and additional information on option plans,please refer to Item 6.E. of this annual report.

***Dividends***

Management proposed, and on May 17, 2006 at theAnnual General Meeting of Shareholders, our shareholders approved a dividend of€ 0.66 per share over 2005. This equals 40% of net income from operations. ARCADIS’ dividend policy isto recommend payment of an annual dividend ranging from 30% to 40% of netincome from operations. The dividend will be paid out in cash. Thedividend for 2004 was € 0.48 per share.

**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 description of the non-GAAP measures:

ARCADIS has used the following non-GAAP measures inthis Form 20-F: (1) operating income excluding amortization ofidentifiable intangible assets (which we also refer to as EBITA) andrestructuring charges; and (2) net income from operations, for which wesome times also exclude currency effects. Although these measures are notrequired or expressly permitted by IFRS, we use them because we believe theyprovide a useful basis for comparison of result of operations from previousyears. We also believe these measures promote maximum transparency with regardto the financial effects of our ongoing business operations. In addition, ourmanagement uses these measures when determining our strategy and setting ourfinancial goals.                ARCADISexcluded restructuring charges from these non-GAAP measures because ARCADIS hasno past history of restructuring charges and has no expectation that thesecharges are likely to recur in the future.

ARCADIS also uses the measures revenues excludingexchange rate differences (which have the same meanings as currency effects)and net income excluding currency effects because we operate internationally,and the effects of exchange rate differences on our revenues and net income donot necessarily reflect our performance. As noted above, ARCADIS has alsoexcluded restructuring charges because of their non-recurring nature.

Set forth below are reconciliations of these non-GAAPmeasures to net income under IFRS.

25

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**Reconciliation of****Operating Income Excluding Amortization ofIntangibles and Restructuring Charges to Net Income**
| **(In Thousands of Euros)**                                            | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|---------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
|                                                                                  |       |       |       |       |       |
| **Net  income**                                                                       | ** ** | **33,414** | ** ** | **22,176** | ** ** |
| Minority  interest                                                                    |       | 3,170      |       | 1,927      |       |
| Income from  non-consolidated companies and long-term investments, after taxes        |       | (1,382     | )          | (2,448     | )          |
| Taxes on income                                                                       |       | 17,342     |       | 10,400     |       |
| Financing  income/(expense) net                                                       |       | 1,844      |       | 3,464      |       |
|                                                                                  |       |       |       |       |       |
| Operating income                                                                      |       | 54,388     |       | 35,519     |       |
| Amortization of  identifiable intangibles                                             |       | 5,967      |       | 376        |       |
| **Operating  income excluding amortization of intangibles (or EBITA)**                | ** ** | **60,355** | ** ** | **35,895** | ** ** |
| Restructuring  charges                                                                |       | —     |       | 4,417      |       |
| **Operating income excluding  amortization of intangibles and restructuring charges** | ** ** | **60,355** | ** ** | **40,312** | ** ** |

 

**Reconciliation of****Net Income from Operation, Excluding CurrencyEffects to Net Income**
| **(In Thousands of Euros)**                 | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|------------------------------------------------------------|------------|------------|------------|------------|------------|
|                                                       |       |       |       |       |       |
| **Net  income**                                            | ** ** | **33,414** | ** ** | **22,176** | ** ** |
| Pensions effects(1)                                        |       | (394       | )          | (667       | )          |
| Effects of  financial instruments                          |       | (1,213     | )          | —     |       |
| Non-recurring  income net of tax(2)                        |       | (2,486     | )          | 1,366      |       |
| Income taxes                                               |       | —     |       | 519        |       |
| Amortization                                               |       | 4,045      |       | 376        |       |
| **Net  income from operations**                            | ** ** | **33,366** | ** ** | **23,770** | ** ** |
| Currency  effects(3)                                       |       | (448       | )          | 689        |       |
| **Net income from operations  excluding currency effects** | ** ** | **32,918** | ** ** | **24,459** | ** ** |

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(1)  Pension effectsrelate 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,but the 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, EBITDA and net income resulting fromorganic changes and from acquisitions or divestments. We also refer to organicgrowth being operational or non-operational 

26

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andexcluding currency effects.  Set forthbelow is a further explanation of these terms and a reconciliation of thesemeasures to the IFRS measures used in their calculation.

·       *Organic.*We use the term “organic” in this annual report to refer tothe internal growth of activities in subsidiaries that have been consolidatedfor more than one year. Internal growth in companies that have beenconsolidated for one year or less is accounted for as “growth throughacquisitions”.

·       *Currencyeffect.*As stated above, theterm “currency effect” refers to the effect on our results of changes in thevalue of currencies against the Euro forthe production and reporting of quarterly and annual results. As the costs andrevenues for our operating companies are customarily in the same currency, thecurrency effect is a translation effect. Currency effects are calculated bymultiplying net income for a fiscal year, excluding income from acquisitions ordivestments, by difference between the exchanges rates of that fiscal year andthe exchange rates for prior fiscal year.

·       *Acquisitions/Divestments*.We describe 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 that are not related to the actualoperations of our business and that affect the comparability of results. Theseitems in 2004 included the effect of the sale of businesses and a restructuringof our business in the Netherlands. In 2005 these items included book gains andlosses on the sale of businesses, as well as the effect of additional paymentsin pension plans.

·       *Netincome from operations*. “Net income from operations” refersto net income excluding the amortization of identifiable intangible fixedassets and the costs related to pension effects.

**Origin ofDevelopments in Revenue and Income**
| ** **                                                               | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| ***Gross  revenues***                                                    |       |     |       |     |       |
| Total gross revenues                                                     |       | €   | 1,001.1    |     | €     | 900.8 |   |
| Increase from preceding year                                             |       | 100.3    |       |     |       |
|                                                                     |       |     |       |     |       |
| *Breakdown of increases*                                                 |       |     |       |     |       |
| Acquisitions/divestments                                                 |       | 46.2     |       |     |       |
| Currency effect                                                          |       | 10.5     |       |     |       |
| Book gains on sale                                                       |       | (3.6     | )          |     |       |
|                                                                     |       |     |       |     |       |
| Organic growth                                                           |       | 47.2     |       |     |       |
|                                                                     |       |     |       |     |       |
| ***Operating  income excluding amortization of intangibles (or EBITA)*** |       |     |       |     |       |
| Total                                                                    |       | 60,355   |       | 35,895   |       |
| (Decrease)/increase from preceding year                                  |       | 24,460   |       |     |       |
|                                                                     |       |     |       |     |       |
| *Breakdown of  (decreases)/increases*                                    |       |     |       |     |       |
| Acquisitions/divestments                                                 |       | 9,326    |       |     |       |
| Currency effect                                                          |       | 1,183    |       |     |       |
|                                                                     |       |     |       |     |       |
| Organic growth                                                           |       | 13,951   |       |     |       |
| Non-operational                                                          |       | 6,278    |       |     |       |
| Operational                                                              |       | 7,673    |       |     |       |
|                                                                     |       |     |       |     |       |
| ***Net  income from operations***                                        |       |     |       |     |       |
| Net income from operations                                               |       | 33,366   |       | 23,770   |       |
| Increase/(decrease) from preceding year                                  |       | 9,596    |       |     |       |
|                                                                     |       |     |       |     |       |
| *Breakdown of  increases/(decreases)*                                    |       |     |       |     |       |
| Acquisitions/divestments                                                 |       | 3,302    |       |     |       |
| Currency effect                                                          |       | 448      |       |     |       |
|                                                                     |       |     |       |     |       |
| Organic growth                                                           |       | 5,846    |       |     |       |
| Non-operational                                                          |       | 4,246    |       |     |       |
| Operational                                                              |       | 1,600    |       |     |       |
|                                                                          |            |          |            |          |            |  |  |

 

27

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

Working capital, consisting of work in progressamounting to € 113.7 million (see Note 7 to our ConsolidatedFinancial Statements) plus trade receivables amounting to € 204.3 million (seeNote 13 to our Consolidated Financial Statements) minus billing in excessof costs amounting to € 89.3 million and minus accounts payable amounting to €72.5 million (see Consolidated Balance Sheet) declined as a percentage of grossrevenue (amounting to € 1,001.1 million). As a percentage of gross revenue (measured at the level of the fourthquarter times four), working capital declined from 13.3% in 2004 to 12.7% in2005. In the opinion of management, our working capital is sufficient tomeet our present requirements.

Net cash provided by operating activities was € 66.8million for the year ended December 31, 2005, compared to net cashprovided by operating activities of € 44.8 million for the year ended December 31,2004. The increase was the result of growth in operating income for theCompany, as well as a reduction in the amount of working capital employed.

Net cash used in investing activities was €85.1 million for the year ended December 31, 2005, compared to netcash used in investing activities of € 19.7 million for the year ended December 31,2004. The net cash flow activity related to investing activities consistedprimarily of investments in the acquisition of consolidated companies,investments in property, plant and equipment and investments innon-consolidated companies.

Net cash provided by financing activities was € 42.1million for the year ended December 31, 2005, compared to net cash used infinancing activities of € 6.7 million for the year ended December 31,2004. The net cash flow activity related to financing activities consistedprimarily to a new long-term debt arrangement related to the acquisition of newoperations.

Cash at year-end 2005 was € 73.9 million,compared to € 48.2 million in 2004. Net debt (cash minus interest-bearingdebt) at year-end 2005 was € 52.2 million against net cash at year-end 2004 of € 5.8million.

At year-end 2005, a total of € 258 million inshort-term credit facilities was available, compared to € 172 million atyear-end 2004. As of December 31, 2005, € 2.1 million of thesefacilities were used. In addition, banks have pledged performance bonds andother guarantees related to projects for a total of € 40 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 2005, our long-term debttotaled € 116.1 million. See Notes 9 and 10 to our Consolidated Financial Statements for a more detaileddiscussion of our short-term and long-term credit facilities.

ARCADIS has reached agreement with a number of bankson new financing facilities. This involves a refinancing and centralization ofnearly all group debt and bonding facilities. The new centralized financestructure consists of three components, all of which have been closed at marketrates.

 

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A new term loanfacility for $90 million was entered into********with a consortium offour banks****in order to retire the bridge loan thatwas taken in relation to the acquisition of BBL at the end of September 2005.Half of this loan matures after five years, the other half after seven years.

****Uncommitted multicurrency facilities of € 100 million havebeen entered into with****************a consortium of fourbanks****************which****will be used for financing of working capital.

****Anuncommitted bonding facility of € 50 million has been entered into with ABNAMRO Bank.****

**Other Balance Sheet Items**

Our total assets grew from € 442.3 million atyear-end 2004 to € 650.1 million at year-end 2005, mainly because ofexpansion through acquisitions. As a result of acquisitions completed in 2005,goodwill rose to € 116.0 million. compared to € 50.0 million in 2004. Theidentifiable assets of acquisitions are capitalized separately, and at year-end2005, this totaled € 8.3 million. This generally relates to the value of theyet to be realized profit in the backlog of the acquired companies.

Shareholders’equity rose by € 39.8 million to € 176.2 million at year-end 2005 as follows:
| ***(In Millions of Euros)***                      | ** ** | **Effect** | ** ** |
|------------------------------------------------------------------|------------|------------|------------|
| Net income for  2005                                             |       | €     | 33.4       |   |
| Dividend payment  for 2004                                       |       | (9.7       | )          |
| Currency  exchange rate differences                              |       | 10.0       |       |
| Exercising of  options                                           |       | 2.6        |       |
| Temporary  purchase of shares to cover option plan obligations   |       | (6.6       | )          |
| Additional  paid-in capital by Stichting Lovirklaan for pensions |       | 6.5        |       |
| Option costs(1)                                                  |       | 0.6        |       |
| Fiscal effects  related to option plans                          |       | 3.0        |       |
|                                                             |       | €     | 39.8       |   |

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(1) Formore information on option costs, please refer to Note 15 in our ConsolidatedFinancial Statements.

Concerning our balance sheet ratios, solvencycalculated as shareholders’ equity, amounting to € 176.2 million andminority interest amounting to € 11.9 million as a percentage of total assetsamounting to € 650.1 at year-end 2005 was 28.9%, compared to 32.9% atyear-end 2004. Return on average capital invested (shareholders’ equity plusnet interest bearing debt) was 20.6%, compared to 17.2% in 2004.

**Capital Expenditures**

 Investments in tangible fixed assets, excluding acquisitions, were € 14.9million compared to € 11.8 million in 2004, equivalent to the level ofdepreciation. The investments primarily relate to communications and computerequipment. The expansion of the company through acquisitions requiredconsiderable investment for a total amount of € 121.3 million. Net of cash thiswas € 101.8 million, including € 26.8 million that constitutes a withholdingfor a possible performance-based after payment to former AYH shareholders andthe retention of part of the purchase price of BBL to cover possible BBLwarranties. Goodwill amounted to € 61.3 million, while the value ofidentifiable intangible assets was € 11.5 million. In addition, € 5.9 millionwas invested in non-consolidated companies and other financial fixed assetscompared to € 2.5 million in 2004. Divestments of consolidated companiesyielded € 15 million or € 8.5 million after taxes, compared to after tax yieldsof € 8.0 million in 2004, Of this amount in 2005, € 2.5 million represents bookgains.

**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 it has conducted for its clients.

29

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Ourresearch specifically has resulted in the development of several fieldinstruments for hydrocarbon detection that we use for soil and groundwaterinvestigation. Research continues to improve these quick “no-lab” analysis methods.For environmental and ecological reports, data management and detailedengineering, we undertake research in implementing and adjusting computerassisted design and software for geographical information systems.

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 reported strong results for the first quarter of2006. Gross revenues rose 29% to € 287 million. Excluding currencyeffects, the increase was 24%. At 9%, organic growth was well above the company’starget of 5%. Net income from operations increased 60% to € 9.4 million, as aresult of activity growth, further profit improvement in the Netherlands andgood results in from companies acquired last year. The margin (operating incomeexcluding amortization of intangibles (or EBITA) as a percentage of netrevenue) increased to 7.9% compared to 6.4% in the same period last year.

We believe our organicgrowth is the result of continued favorable developments in the environmentalmarket, the increase of services for private sector clients in the facilitiesmarket and the continuing recovery of the Dutch infrastructure market.

**Key financial measures**
| ** **                                                                                    | ** ** | **First quarter** | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|------------------------|------------|------------|------------|
| **(Amounts in millions of Euros unless otherwise stated)** | ** ** | **2006**               | ** ** | **2005**   | ** ** | **% Change** | ** ** |
| Gross revenue                                                                                 |       | 287                    |       | 223        |       | 29 | % |
| Operating income  excluding amortization of intangibles (or EBITA)(1)                         |       | 16.1                   |       | 10.4       |       | 55 | % |
| Net income                                                                                    |       | 7.7                    |       | 5.5        |       | 39 | % |
| Net income per  share(2)                                                                      |       | 0.38                   |       | 0.27       |       | 39 | % |
| Net income from  operations(3)                                                                |       | 9.4                    |       | 5.9        |       | 60 | % |
| Net income from  operations per share(2)(3)                                                   |       | 0.47                   |       | 0.29       |       | 60 | % |

----

(1)          Operating income excluding amortization of identifiableintangible assets is calculated as follows;

|                                                                         | ** ** | **2006** | ** ** | **2005** | ** ** |
|-------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Operating income  as reported                                           |       | 14.6     |       | 10.0     |       |
| Amortization  identifiable intangible assets                            |       | 1.5      |       | 0.4      |       |
| Operating income  excluding amortization identifiable intangible assets |       | 16.1     |       | 10.4     |       |

 

(2)             Basedon 20.2 million shares outstanding in 2006 compared to 20.3 million in 2005.

30

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(3)          Net income from operations is calculated asfollows:

|                                   | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|
| Net income                        |       | 7.7      |       | 5.5      |       |
| Effects of  financial instruments |       | 0.7      |       | —   |       |
| Non-recurring  income net of tax  |       | —   |       | 0.1      |       |
| Amortization                      |       | 1.0      |       | 0.3      |       |
| Net income from  operations       |       | 9.4      |       | 5.9      |       |

 

## **Analysis**

Of the 29% growthin gross revenue, 5% resulted from currency effects, caused by the higherexchange rates of the U.S. dollar and Brazilian real. Acquisitions and divestmentson balance contributed 15%. Organic growth of 9% in part resulted from improvedmarket conditions in the Netherlands, where activities grew in all serviceareas and the Netherlands experienced more than 10% growth. In addition, theUnited States, Brazil, Belgium and France contributed substantially to organicgrowth. In Poland, order intake was high, but government procedures related tothe permits for construction projects caused delays in the start-up ofprojects.

Operating incomeexcluding amortizationidentifiable intangible assets (or EBITA) rose 55%. Acquisitions anddivestments on balance contributed 35%, while the currency effect was 7%positive. The organic increase was 13%, resulting from increased activitylevels combined with margin improvement. Market recovery triggered improvedprofitability in the Netherlands.

Financing chargeswere impacted negatively by € 0.9 million related to financial instruments forhedging currency and interest risks. The resulting effect on net income was anincrease of € 0.7 million. Excluding this effect and before amortization, netincome from operations increased 60%. This is more than the increase in EBITA,primarily driven by the higher contribution of non-consolidated participationsfor energy projects in Brazil.

**Developmentsby service area**

*Thefigures mentioned below relate to gross revenue developments, and discuss thecomparison between the first three months of 2006 and the same period lastyear.*

·                  ***Infrastructure***

Gross revenue decreased slightly due to earlier divestments. Thecurrency effect was 5% positive. Organic gross revenue growth was more than 5%and came from almost all countries. The strongest growth was achieved inBrazil. In the United States growth continued at a good level. Although thepace of growth in the market for land development slowed somewhat, the marketfor roads and tunnels is expanding. In the Netherlands, recovery in themunicipal market and improvement of rail infrastructure yielded healthy organicgrowth.

·                  ***Environment***

Gross revenue in this service area doubled, mainly through theacquisitions of BBL and Greystone. The currency effect was 7% positive. Organicgrowth was 12%, thanks to continued growth in traditional consulting work andincreasing services on GRiP® projects in the U.S. with a high relative amountof subcontracting. Synergy with BBL and Greystone through exchange of specialtyexpertise and client relationships resulted in additional contracts. In SouthAmerica, investments in mining increased the demand for environmentalconsultancy. In Europe, growth was mainly achieved in the Netherlands and theUnited Kingdom.

·                  ***Facilities***

Gross revenue rose by more than 25%, mainly through the acquisition ofthe U.K.-based project management firm AYH. The currency effect was 2%positive. Organic growth was well over 10%, mainly as a result of the facility management contract with DSMand Sabic. Private sector investments resulted in growth in Belgium, France andBrazil. Because of continued poor results, the detailed engineering activitiesin Germany were sold.

31

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**Outlook**

The recovery of the Dutchinfrastructure market is expected to continue. The growing economy also createsadditional room for infrastructure investments in other European countries. Inthe United States the federal program SAFETEA is having a positive impact onthe market, while in Brazil investments from the government and the privatesector are creating a lot of work. In the environmental market, GRiP® and theexpansion of services for private sector companies, partly as a result ofsynergy with BBL, are providing an excellent basis for further growth. In thefacilities service area, growth should mainly come from expansion of managementservices as a result of outsourcing by companies, as well as providing projectmanagement services for international real estate investors.

After the first quarter,we announced that Biógas, a partnership in which ARCADIS Logos has a 33.3%stake, has sold one million carboncredits from the Biógasinstallation on the Bandeirantes landfill near São Paulo. These creditswill be supplied in 2006 and 2007, at a price to be based on the futures priceper year-end 2007. Over the period up to and including 2012, Biógas expects tohave a total yield of four million carbon credits, based on currentprojections. Our share in the profits will amount to 16.7%.

We expect to incur out of pocket expenses in 2006 of €3 to 4 million in connection with Sarbanes-Oxley compliance and in connectionwith the integration of BBL.

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

Management believes there are no transactions,arrangements and other relationships with unconsolidated entities that have orare reasonably likely to have a current or future effect on our financialcondition, changes in financial condition, revenues, expenses, results ofoperations, liquidity, capital expenditures or capital resources that ismaterial to investors in our common shares.

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

The following table sets forth, as of December 31,2005, our commitments and contractual obligations for the following five yearsand thereafter. The long-term debt obligations are our cash debt serviceobligations. Operating lease obligations are the future minimum rental paymentsrequired under the operating leases that have initial or remainingnoncancelable lease terms in excess of one year as of December 31, 2005.
| ** **                                                           | ** ** | ** **              | ** ** | **Payments due by period** | ** ** |
|----------------------------------------------------------------------|------------|-------------------------|------------|-------------------------------------------|------------|
| **Contractual obligations**                                     | ** ** | **Total**               | ** ** | **Less than  1 year**           | ** ** | **1-3  years** | ** ** | **3-5  years** | ** ** | **More than  5 years** | ** ** |
| ** **                                                           | ** ** | **(in thousands)** | ** ** |
| Long-term  debt obligations, including interest (subordinated loans) |       | 701                     |       | 206                                       |       | 257 |   | 230 |   | 8 |   |
| Operating lease  obligations                                         |       | 142,630                 |       | 34,403                                    |       | 49,492 |   | 44,500 |   | 14,235 |   |
| Capital  (finance) lease obligations                                 |       | 1,168                   |       | 606                                       |       | 562 |   | — |   | — |   |
| Purchase  obligations                                                |       | 34,653                  |       | 6,887                                     |       | 8,270 |   | — |   | 19,496 |   |
| Pension plan  obligations                                            |       | 113,224                 |       | 26,162                                    |       | 30,267 |   | 37,257 |   | 19,538 |   |
| Other long-term  liabilities reflected under IFRS                    |       | 98,532                  |       | 92,198                                    | (1)        | 4,219 |   | 1,610 |   | 505 |   |
| **Total**                                                            |       | 390,908                 |       | 160,462                                   |       | 93,067 |   | 83,597 |   | 53,782 |   |

----

(1) Refersto a bridge loan related to the acquisition of BBL, which was refinanced withlong-term debt in the beginning of 2006.

In the table above, for purposes of estimating theamount of future funding of our pension plan obligations, we have assumed (1) anannual growth in the salary-level of 2.5%, (2) a fixed level of the totalpension premium of 18.3% on total salaries, and (3) a gradual increase inthe total staff covered by the pension fund, to 2,500 in 2011 from 1,723 in2006. The Total amount covers the period through December 31, 2011. Thepension plan obligation in the “More than 5 years” column is the obligation for2011 only. We believe that cash generated from operations, together with ourexisting financing arrangements will be sufficient to meet our working capitaland capital expenditure requirements for 2005.

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

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

None of the members of our Supervisory Board andExecutive Board, Corporate Directors, and Senior Management Committee have anyfamily relationships between and amongst each other. Additionally, none of thefollowing individuals have entered into any arrangement or understanding with athird party, pursuant to which the person was selected for his respectiveposition.

**Supervisory Board**

Thefollowing table presents information about our Supervisory Board membersfollowing our Annual General Meeting of Shareholders, which was held on May 17,2006:
| **Name**                            | ** ** | **Year of   Birth** | ** ** | **Years Served  In Office** | ** ** | **Year Term   Expires** | ** ** | **Position**  | ** ** |
|-------------------------------------|------------|-------------------------------|------------|---------------------------------------|------------|-----------------------------------|------------|---------------|------------|
| Rijnhard W.F.  van Tets(a), (b)     |       | 1947                          |       | 4                                     |       | 2010                              |       | Chairman      |       |
| Carlos Espinosa  de los Monteros(b) |       | 1944                          |       | 8                                     |       | 2010                              |       | Vice-Chairman |       |
| Thomas M. Cohn(a)                   |       | 1942                          |       | 2                                     |       | 2008                              |       | Member        |       |
| George R.  Nethercutt, Jr.(a)  |       | 1944                          |       | 1                                     |       | 2009                              |       | Member        |       |
| Jan Peelen(b)                       |       | 1940                          |       | 6                                     |       | 2008                              |       | Member        |       |
| Gerrit Ybema(b)                     |       | 1945                          |       | 3                                     |       | 2007                              |       | Member        |       |

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(a)             Memberof the Audit Committee

(b)            Memberof the Selection and Remuneration Committee

**Jhr. Drs. Rijnhard W.F. vanTets,** age 59, was appointed to our Supervisory Board in 2002,and currently serves as our Chairman. He also serves as a member of ourSupervisory Board’s Audit Committee, and chairman of the Selection and RemunerationCommittee. Currently, Mr. van Tets serves as an advisor to the ExecutiveBoard of ABN AMRO Bank, after serving as a member of the Executive Board from1988 until 2001. He also served in a variety of positions while at ABN AMROBank, including: Chairman of the Investment Banking Division from 1990 to 2001,Senior Executive Vice President from 1986 to 1988, and Executive Vice Presidentof the Corporate Banking Division from 1983 to 1986. From 1977 until 1983, Mr. vanTets served as Vice President of Corporate Finance with First BostonCorporation. He currently serves as a non-executive board member of thefollowing entities: Euronext Amsterdam N.V., Equity Trust SARL, InternationalFlavors & Fragrances I.F.F. (the Netherlands) Holding B.V., Wegener N.V.,and Investment Committee Pension Fund Building Industry. Mr. van Tetsearned a Masters in Law and Business Administration from the University ofLeiden.

**Mr. Carlos Espinosa de losMonteros,** age 62, was appointed to our Supervisory Board in1998. He also serves as a member of our Supervisory Board’s Selection andRemuneration Committee. Mr. Espinosa currently serves as Chairman andChief Executive Officer of Mercedes Benz Espana S.A. and Daimler ChryslerEspana Holding. He served as President of IBERIA S.A. from 1983 until 1985.From 1979 until 1983, Mr. Espinosa served President of the NationalInstitute for Industry (INI) in Spain. Mr. Espinosa currently serves as anon-executive board member of Acciona S.A., Inditex S.A. (Zara) and GonzalezByass S.A.

**Mr. Thomas M. Cohn**,age 63, was appointed to our Supervisory Board in 2004. He also serves aschairman of our Supervisory Board’s Audit Committee. From 1994 until 2003, Mr. Cohnserved as Chairman of the Executive Board of Siemens Nederland N.V. and Chief ExecutiveOfficer of the Siemens Group in the Netherlands. Mr. Cohn retired from theSiemens Nederland NV Executive Board in 2003. From 1987 until 1994, Mr. Cohnwas the Chief Financial Officer and an Executive Board member of SiemensNederland N.V. From 1967 until 1987, he held various positions, such asdirector of Economic Affairs, with Siemens Belgium. He started his career in1964 with Siemens AG in Germany. Mr. Cohn also serves as a non-executiveboard member of the following entities: 

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GetronicsHoldings B.V., Corus Nederland B.V., KEMA NV, Advisory Board Fortis BankRotterdam, Recontec B.V., Tecosa (Spain), Pereira Van Vliet & Partners(Chairman), Monitoring Board University of Technology Delft, AdvisoryBoard  of Comsec Consulting group,Advisory board Oracle Nederland B.V., and Foundation Techniques andMarketing-STEM.

**Mr. George R. Nethercutt, Jr.**,age 61, was appointed to our Supervisory Board by the General Meeting ofshareholders held on May 11, 2005. Mr. Nethercutt also serves as amember of our Audit Committee. He currently serves as a member of the Board ofDirectors of Hecla Mining Company, The Washington Policy Center and IsothermalSystems Research. From 1994 until January 2005, Mr. Nethercutt servedas a member of the United States House of Representatives. He served on theAppropriations Committee and the Defense, Interior and AgricultureSubcommittees. From 1977 to 1994, Mr. Nethercutt practiced law in theprivate sector, focusing on corporate, estate and probate and adoption law.

**Drs. Jan Peelen**,age 66, was appointed to our Supervisory Board in 2000. He also serves as amember of our Supervisory Board’s Selection and Remuneration Committee.Mr. Peelen retired from employment with the Unilever group of companies in2000. From 1987 until 2000, Mr. Peelen was a member of the Executive Boardof Unilever N.V. and Unilever PLC, from 1996 till 2000 he also served as amember of the Executive Committee of Unilever, as the director of HumanResources. 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. Gerrit Ybema,**age 60, was appointed to our Supervisory Board in 2003. He also serves as amember of our Supervisory Board’s Selection and Remuneration Committee. From1998 until 2002, Mr. Ybema served as the Secretary of State for EconomicAffairs in the Netherlands. He has served in a variety of governmentalpositions at the local and state level from 1989 until 1998, includingpositions with the city of Enschede and the province of Friesland. He currentlyserves as a non-executive board member of the following entities: MonitoringBoard Zorggroep Noorderbreedte, ROC Friese Poort, Consultative Organ FrisianLanguage and Culture, Fair Wear Foundation, and Foundation Frisian HarbourDays. Mr. Ybema earned an economics degree, with a specialization ineconomic relations from Rijksuniversiteit Groningen.

**Executive Board**

The following table presents information about ourcurrent Executive Board members:
| **Name**             | ** ** | **Year of   Birth** | ** ** | **Years Served  In Office** | ** ** | **Position** | ** ** |
|----------------------|------------|-------------------------------|------------|---------------------------------------|------------|--------------|------------|
| Harrie L.J. Noy      |       | 1951                          |       | 11                                    |       | Chairman     |       |
| C. Michiel Jaski     |       | 1959                          |       | 5                                     |       | Member       |       |
| Friedrich  Schneider |       | 1962                          |       | —                                |       | Member       |       |
| Ben A. van der Klift |       | 1959                          |       | —                                |       | Member       |       |

 

**Harrie L.J. Noy**,age 55, was appointed to our Executive Board in 1994. He currently serves asChairman of our Executive Board and has held this position since 2000. Prior tojoining our Executive Board, Mr. Noy served as Managing Director ofHeidemij Advies B.V. from 1990 until 1994. He joined the company in 1975. Mr. Noyalso serves as a non-executive board member of the following entities:Foundation Habiforum, Foundation PSIB, Advisory Board Euronext, VEUO (The DutchAssociation of Listed Companies), Foundation Management Studies (SMS), VNO-NCW,High Level Group European Construction and Technology Platform, SupervisoryBoard University of Arnhem-Nijmegen, Supervisory Board NV Dutch Gas TransportServices BV and Supervisory Board Foundation Vilente.

**C. Michiel Jaski**,age 47, was appointed to our Executive Board in 2000. Prior to joining us, heserved in a variety of positions at Polyesters Plastics Packaging ShellChemicals Ltd., including: Global Vice President from 1999 to 2000, GlobalMarketing & Sales Director from 1998 to 1999, Business Unit ManagerEuropa Shell Chemicals Ltd. from 1992 to 1998, Sales Manager Benelux ShellNederland Chemie from 1990 to 1992, and Product Manager Shell Nederland Chemiefrom 1988 to 1990. From 1986 until 1987, Mr. Jaski served as the Project 

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Managerof Information Technology Philips UK and Philips Belgium. Mr. Jaski alsoserves as a non-executive board member of the following entities: Vice-Chairmanof the Foundation Delta (primary education), the Netherlands Committee IUCN(The World Conservation Union), Dutch-German Chamber of Commerce, FoundationToekomstbeeld der Techniek and University Fund Delft.

**Friedrich Schneider**, age 44, wasappointed to our Executive Board in May 2006. He will serve as a member ofour Executive Board with responsibilities for operations in South America andAsia and also for strengthening the infrastructure business of the company. Hewill also serve as a member of the ARCADIS N.V. Priority Foundation. Prior tojoining us, Mr. Schneider served on the Executive Board of Rheinhold &Mahla AG, an industrial services company, in Munich from 2004 to 2005 and wasresponsible for the Western Europe and Technologies Divisions. From 2001 until2004, Mr. Schneider served as a managing director of Bilfinger Berger AG,first in the International Division (2001-2002) and then in the CivilDivision (2002-2004). Mr. Schneider has also served in variouscapacities at Bentec GMBH Drilling and Oilfield Systems (1999-2001),Preussag AG 1996-1999), Preussag International GMBH (1993-1996),Metallgesellschaft Services (1990-1993). Mr. Schneider received aMasters of Art (Economics) at the State University of New York in Albany and aPhD in Economics from the European University Institute, Florence.

**Ben A.van der Klift**, age 46, was appointed to our Executive Boardin May 2006. He will serve as a member of our Executive Board and willserve as Chief Financial Officer. Mr. Van der Klift joined us in January 2005as Corporate Director Finance. Prior to joining us, he served as FinancialDirector of PRC Bouwcentrum BV in Bodegraven from 1997-2005. From 1991-1997,Mr. Van der Klift served as Controller of DHV Milieu en Infrastructuur andDHV AIB. He began his career at De Rotterdamsche Droogdok Maatschappij inRotterdam (1987-1991). Mr. Van der Klift received a degree in SocialGeography at the University in Utrecht (1981-1984), a Master of BusinessAdministration at the Erasmus University in Rotterdam (1984-1988) and hetook courses for corporate controllers at ‘Vrije Universiteit Amsterdam’ (1989-1994)**.**

** **

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**Corporate Directors**

The following table presents information about ourcurrent Corporate Directors:
| **Name**        | ** ** | **Year of  Birth** | ** ** | **Years Served  In Office** | ** ** | **Position**                                   |
|-----------------|------------|-------------------------|------------|---------------------------------------|------------|------------------------------------------------|
| Hans van Dord   |       | 1944                    |       | 5                                     |       | Corporate Director of  Business Development    |
| Wim G.M. Rupert |       | 1945                    |       | 12                                    |       | Corporate Director of  Human Resources         |
| Craig E. Eisen  |       | 1951                    |       | 4                                     |       | Corporate Director of Mergers and Acquisitions |

 

**Hans van Dord,** age61, was appointed Corporate Director of Business Development in 2000. Prior tothat appointment he has served in various senior management positions indifferent ARCADIS operating companies. Mr. Van Dord has been with our companysince 1985. Prior to joining us, Mr. Van Dord worked on urban and ruralplanning and design projects on behalf of the Dutch government from 1972 to1985.

**Wim G.M. Rupert**,age 60, was appointed as Corporate Director of Human Resources in 1994. In 1987Mr. Rupert joined us in the function of Training Manager. Prior to joiningus, he held several positions in public education in the Netherlands.

**Craig E. Eisen**, age54, was appointed as Corporate Director of Mergers and Acquisitions in 2002.Prior to joining us, he held the position of Vice President Corporate Programsand was a member of the Executive Board of Tetra Tech, Inc. from 1994 to2002. From 1981 to 1996, Mr. Eisen also served in a number of positions atHydro-Search Inc., including as President from 1991 to 1997, as VicePresident of Operations from 1988 to 1991 and as a member of the Board ofDirectors from 1988 to 1994. Prior professional positions include PrincipalHydrogeologist at the Water Resources Research Institute, University of Wyomingfrom 1979 to 1981 and Hydrogeologist/Resident Engineer for the U.S. Agency forInternational Development—Kenya from 1978 to 1979.

**Senior Management Committee**

The following table presents information about ourcurrent Senior Management Committee members:
| **Name**            | ** ** | **Year of   Birth** | ** ** | **Years Served  In Office** | ** ** | **Position**                                   |
|---------------------|------------|---------------------|------------|-----------------------------|------------|------------------------------------------------|
| Steven B. Blake     |       | 1956                |       | 2.5                         |       | CEO ARCADIS G&M                            |
| Javier Hurtado      |       | 1955                |       | 2                           |       | CEO ARCADIS Geotecnica                         |
| Douwe J. Kras       |       | 1948                |       | 2                           |       | Managing Director  ARCADIS Nederland           |
| Yann Leblais        |       | 1952                |       | 6                           |       | CEO ARCADIS FCI                                |
| Antonio J.O. Rocha  |       | 1941                |       | 7                           |       | CEO ARCADIS Logos                              |
| Kees T. Slingerland |       | 1960                |       | 4                           |       | Managing Director  ARCADIS Nederland           |
| Ludo Smans          |       | 1947                |       | 10                          |       | Managing Director  ARCADIS Belgium             |
| Marek Adamek        |       | 1960                |       | 2                           |       | Managing Director  ARCADIS Polska              |
| Leo van der Kemp    |       | 1956                |       | 2.5                         |       | Managing Director PRC                          |
| Peter J. Vince      |       | 1958                |       | 1                           |       | Managing Director of  AYH;                     |
| Robert K. Goldman   |       | 1957                |       | 5                           |       | CEO Blasland,  Bouck & Lee, Inc. |
| Ulrich Behr         |       | 1952                |       | 1                           |       | CEO ARCADIS Deutschland GmbH                   |

 

**Steven B. Blake**,age 49, was appointed to our Senior Management Committee in 1995. From 1999until 2003, Mr. Blake served as a member of our Executive Board, fromwhich he stepped down in November 2003 on his own request. Since that datehe serves (again) as the Chief Executive Officer of ARCADIS G&M, Inc.He has served in a number of positions at Geraghty & Miller,including: President from 1994 to 1996, Vice President Programs &Strategic Operations from 1991 to 1994, and Director of Hydrocarbon ServicesDivision from 1989 to 1991. Following our acquisition of Geraghty &Miller in 1994, Mr. Blake served as Chief Executive Officer of 

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ARCADISGeraghty & Miller, Inc., from 1996 until 1999. Mr. Blakealso serves as a non-executive board member of the following entities:Construction Industry Roundtable, the U.S. National Water Well Association andthe Federal Relations Committee (CIRT).

**Javier Hurtado,** age50, industrial engineer, was appointed as Chief Executive Officer of ARCADISGeotécnica in February 2004. Prior to joining ARCADIS he acted as ChiefExecutive Officer in companies from different fields of activity such as realestate, developing and managing private schools in Chile (2002-2003),developing and managing hotels and tour agencies in Croatia (2000-2002),ports (Ventanas—Chile), airports (Santiago International Airport) (1993-2000),mining companies (Cominor and ENAMI) (1992-1993), insurance (LesMutuelles du Mans Assurance—Chile)(1989-1992). Mr. Hurtado has beenmember of the board of directors in a variety of companies in a broad range ofbusinesses. He has also served as an advisor for the chamber of industries,chamber of construction and other think tanks in environmental issues, andcurrently holds the position of President of the Environmental Committee in theChilean chamber of construction.

**Douwe J. Kras**, age57, joined the company as a member of the Board of ARCADIS Nederland B.V. in May 2004,and he has been appointed Chairman of the Board of ARCADIS Nederland B.V.effective as of July 2004. Until 2004, Mr Kras was CEO of PRC B.V., aconsultancy firm that we acquired in 2003 and that specializes in projectmanagement. He worked with PRC B.V. for 25 years. Mr Kras is member ofseveral Supervisory Boards in the fields of Health Care, Social Housing andCulture.

**Yann Leblais,** age53, was appointed to our senior Management Committee in 2002. He currentlyserves as CEO in ARCADIS FCI and has held his position since 2000. He alsoserves as CEO of ARCADIS ESG (former EEG SIMECSOL before we acquired it in2002) and has held his position from 1995. He joined SIMECSOL in 1979 andserved in a number of positions, including: Executive Vice President from 1990to 1995 and Head of the Geotechnical & Civil Division from 1985 to1990. Yann Leblais is currently Chairman of the Board of SYNTEC INGENIERIE, theFrench Consulting Association, and also serves in key positions in both Frenchand International Tunneling Associations.

**Antonio João Oliveira Rocha**,age 65, was appointed to the Senior Management Committee in 2000. He currentlyserves as Chief Executive Officer of Logos Engenharia S.A., our leadingBrazilian company, and has held this position since 1999. Prior to becomingLogos’ CEO, from 1987 to 1999 Mr. Rocha served as Technical Director, andfrom 1977 to 1986 he served as Project Manager at Logos. From 1986 to 1987 heworked as deputy secretary in the Planning Secretariat of São Paulo StateGovernment. Before joining Logos he worked at São Paulo Metro Company andRhodia, Brazilian subsidiary of French Rhône Poulenc. Mr. Rocha worked attwo Brazilian universities from 1966 until 1972.

**Kees T. Slingerland,**age 46, was appointed to our Senior Management Committee in 2000. At that time,he joined us as managing director of ARCADIS Heidemij Advies B.V.; from 2002 onhe has been the managing director of ARCADIS Netherlands B.V.. Before he joinedus, Mr. Slingerland worked for the Dutch Ministry of Agriculture, from1985 to 1989, for the NEHEM Consulting Group in Hertogenbosch and in Budapestas director international development from 1989 to 1995 and as managing directorfor the Flower Auction in Bleiswijk from 1995 to 2000. Mr. Slingerlandalso serves as a non-executive board member of CUR (Civil Centre forEngineering, Research and Codes) and of NOVIB Oxfam Netherlands (internationaldeveloping aid) and as member of the advisory board Rural Developments of theInnovation Network Rural Areas and Agricultural Systems.

**Ludo Smans**, age 57,was appointed to our Senior Management Committee in 1999. Founder and Presidentof the former Gedas, which company was acquired by Heidemij Group in 1995. Hehas held the position of Chief Executive Officer of ARCADIS Belgium since 1995.Prior to founding Gedas in 1981, Mr. Smans served in a number of positionsat VEHA Radiators Herentals (Rijn Schelde Verolme) from 1971, including as AdministrativeDirector from 1976 to 1981.

**Marek Adamek**, age46, was appointed the Managing Director of ARCADIS Polska in 2005. From 1991 to2004, he served as the Chief Executive Officer of Ekokonrem, an environmentalcompany which he established and was acquired by the Heidemij Group in 1994. Priorto 1991, Mr. Adamek worked in a geological state-on company, ashydrogeologist and Project Manager.

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**Leo van der Kemp**,age 50, was appointed the managing director of PRC in 2004, He has a backgroundin public services. From 1985 to 1992 he was involved in the housing of DutchUniversities, University Hospitals and other educational facilities. Until 1995he was responsible for decentralization-operations of the Dutch ministry ofEducation and Science. From 1995 until 2004 he was director of the divisionProjectmanagement and Consultancy of PRC B.V.

**Peter J. Vince**, age 48, wasappointed to the Senior Management Committee of ARCADIS in 2006. Mr. Vinceis Managing Director of AYH plc, a cost and project management consultancybusiness that was acquired by ARCADIS in June 2005. Mr Vince joined AYH in1994 and has been a director since 1999 taking over the role of managingdirector in 2003. Prior to AYH, Mr. Vince has undertaken employment inboth consultancy and contracting organizations spanning to date a 30 yearcareer in the construction and property industry.

****Robert K. Goldman,****age 48, was appointed to the Senior ManagementCommittee in 2006, when he joined the company with the acquisition of Blasland,Bouck & Lee, Inc. (BBL). Mr. Goldman currently servesas CEO and Chairman of the Board of BBL. Mr. Goldman joined BBL in 1984,and held positions of increasing responsibility at the firm until thefirms acquisition by ARCADIS in 2005. Mr. Goldman is also active in aleadership role in several community organizations in New York State.

**Ulrich Behr,**age53, was appointed CEO of ARCADIS Germany in November 2005. Ulrich Behr isan engineer who worked as board member of HL-Technik AG, Germany’s largestengineering practice for building services until 1998. From then until 2002 hewas the managing director of Josef Gartner GmbH, Germany’s number one curtainwall contractor. During this time he merged the company with Permasteelisa spa,the world’s largest façade contractor, which is listed at the Milano stockexchange. From 2003 unto October 2005 he was the CEO of Bug-AlutechnicGmbH, Austria’s most prominent façade contractor. Ulrich Behr is alsolecturing at different universities in Germany.

**B. *Compensation.***

**Description of Compensation**

The aggregate compensation, including directors’ feesand bonuses, paid or accrued to all of the members of our Supervisory Board andExecutive Board as a group (12 persons) during the fiscal year ended December 31,2005, was €1.4****million. The aggregateamount set aside or accrued to provide pension, retirement and similar benefitsfor all of the members of our Supervisory Board and Executive Board as a groupduring the fiscal year ended December 31, 2005, was €0.1****million. Please see Item 6.E for adescription of our various stock option plans and details of the optionsgranted under those plans.

**Supervisory Board Members**

Compensation for members of our Supervisory Board isdetermined by the General Meeting of Shareholders. For 2005, each of our SupervisoryBoard members was paid a base rate of compensation equal to € 25,000, while theChairman’s compensation was €37,500. In addition, the members of theSupervisory Board receive annual compensation for expenses, which for theChairman is €3,000, for Dutch members is € 2,000, for the Spanish member is €10,000 and for the U.S. member is $15,000 per year. Supervisory Board memberswho serve on our Audit Committee and our Selection and Remuneration Committeewill be paid annually € 5,000 per committee. Our Supervisory Board members arenot eligible to receive options.

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The following table details the amount of compensationpaid to each of our Supervisory Board members in 2005.

| Name                             | ** ** | **Compensation**   | ** ** |
|----------------------------------|------------|--------------------|------------|
| ** **                       | ** ** | **(in thousands)** | ** ** |
| Rijnhard W.F. van Tets           |       | €             |  50   |   |   |
| Ross A. Webber*                  |       |  30           |       |
| Thomas M. Cohn                   |       |  30           |       |
| Carlos Espinosa de los  Monteros |       | 30                 |       |
| George R. Nethercutt**           |       |  13           |       |
| Jan Peelen                       |       |  30           |       |
| Gerrit Ybema                     |       |  33           |       |
|                                  |            |                    |            |  |  |

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*                    Mr. Webberstepped down on May 17, 2006.

**             Mr. Nethercutttook office on May 11, 2005.

**Executive Board**

The compensation of members of our Executive Board isdetermined by the Supervisory Board based on recommendations of our Selectionand Remuneration Committee. Our policy is to compensate our senior executivesat market rates while considering our size and characteristics. The goal of ourcompensation scheme is to provide our Executive Board members with short-termand long-term incentives, so that their interests are aligned with those of ourshareholders. In the fall of 2004, we engaged an external consultant to makerecommendations regarding our remuneration policy in light of the demandsimposed by the Dutch Corporate Governance Code. Our new remuneration policy waspresented to and approved by our shareholders at the General Meeting ofShareholders on May 11, 2005. For 2005, our compensation packages includethe following components:

·       *Fixedsalaries.* The fixed portion of the overall compensationpackage is adjusted annually by the Supervisory Board based on recommendationsfrom the Selection and Remuneration Committee. In 2005, the fixed portion paidto our Executive Board members was increased by 5%, which includes an annualadjustment based on general market trends and company-specific factors.

·       *Shortterm flexible remuneration.*Under our policy adopted in 2005, theannual short-term variable bonuses are linked to the achievement of certainfinancial and non-financial goals. The short-term variable bonus can very from0% - 60% of the executives fixed salary. The financial and non-financial goalsare set annually by the Supervisory Board. It is expected that financial goalswill determine 75% of the bonus and 25% will be determined by non-financialgoals.

·       *Long-termflexible remuneration.*The long-term variable remuneration consistsof performance-related rights to acquire ARCADIS shares, such as options,appreciation rights and restricted stock. Each member of our Executive Boardwill receive, on an annual basis, 15,000 options and 7,000 shares of restrictedstock. Additionally, the chairman of the Executive Board will receive anadditional 10,000 options and 3,000 shares of restricted stock. Options andrestricted stock are granted on a conditional basis and vest depending on theachievement of certain performance measures. Members of our ExecutiveBoard are granted options by the Supervisory Board based on the recommendationsof the Selection and Remuneration Committee.

·       *Compensationsand other fringe benefits.* Members of our Executive Boardreceive reimbursement for expenses and other fringe benefits customary in theindustry, such as a company car.

·       *Pensions.*As of January 1, 2004, our pension plan was changed to a definedcontribution plan. The premium paid by members of our Executive Board is basedon the goal to achieve a target payment equal to what would have been receivedunder our pension plan.

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The following tabledetails the amount of compensation paid to each of our Executive Board membersin 2005.
| **Name**         | ** ** | **Fixed Salary*** | ** ** | **Bonus*** | ** ** | **Pension  Premium*** | ** ** | **Options  Granted**** | ** ** | **Performance  Shares**** | ** ** |
|------------------|------------|------------------------|------------|------------|------------|-----------------------|------------|------------------------|------------|---------------------------|------------|
| Harrie L.J. Noy  |       | €                 | 339        |       | €     | 175                   |       | €                 | 79         |                      | 25,000     |   | 10,000 |   |
| C. Michiel Jaski |       | €                 | 254        |       | €     | 130                   |       | €                 | 30         |                      | 15,000     |   | 7,000 |   |

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*                    inthousands

**             inshares

**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 Corporate Governance, thenew members of the Executive Board, Messrs. Schneider and Van der Klift,will be appointed for a maximum period of four years and may be re-appointedfor a term of not more than four years. Also consistent with the Code, themaximum remuneration payable to a new Executive Board member in the event ofdismissal is equal to one year’s salary. All our other directors andofficers have employment contracts that have unlimited duration. The employmentagreements with our Executive Board members Noy and Jaski provide not for forbenefits or other compensation upon the termination of employment.

**Audit Committee**

Our Supervisory Board Audit Committee is responsiblefor reviewing and monitoring our financial statements and internal accountingprocedures, approving the scope and terms of audit services to be provided byour independent auditor and monitoring the services provided by our independentauditor. Our Audit Committee reviews all periodic financial reports andconducts separate meetings with management, and the independent auditors toreview the accuracy of such reports. Our Supervisory Board adopted our AuditCommittee Charter and established the Audit Committee in November 2002,and our Audit Committee held its first meeting in January 2003. Our AuditCommittee oversaw the implementation of IFRS in fiscal 2005.

For the year ended December 31, 2005, Mr. Cohn,Mr. van Tets, and Mr. Webber served as members of the AuditCommittee, and each member qualified as an independent member of the AuditCommittee as defined by the Nasdaq National Market and the U.S. Securities andExchange Commission. Mr. Cohn served as the Chairman of the AuditCommittee during 2005 and will continue to serve as Chairman during 2006. OurAudit Committee has one member, Mr. van Tets, who qualifies as an “auditcommittee financial expert” as defined by the U.S. Securities and ExchangeCommission. Beginning May 17, 2006, the Supervisory Board’s IntegrityCommittee has been integrated into the ARCADIS Audit Committee. Also from thatdate, Mr. Nethercutt joined the ARCADIS Audit Committee while Mr. Webberstepped down.

**Selection and Remuneration Committee**

Our Supervisory Board Selection and RemunerationCommittee is charged with selecting and nominating candidates for appointmentto the Supervisory Board and the Executive Board. In addition, this committeeadvises the Supervisory Board on the following matters: the size andcomposition of our Supervisory Board, compensation of the members of ourExecutive Board and our Senior Management Committee, our option plan policy,and the award of options and shares under existing share option plans.

For the year ended December 31, 2005, Mr. vanTets, Mr. Espinosa, Mr. Peelen, and Mr. Ybema served as membersof the Selection and Remuneration Committee, and Mr. van Tets serves asChairman.

**D. *Employees.***

As of December 31, 2005, we had 9,143 employees,compared to 9,638 at the end of December 31, 2004. For 2005, the averagenumber of employees was 9,208, compared to 9,419 in 2004.

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As of December 31,2005, the geographic breakdown of our employees was as follows:
| **Region**                | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------------|------------|----------|------------|----------|------------|----------|------------|
| Netherlands               |       | 2,389    |       | 2,346    |       | 2,774    |       |
| Other European  countries |       | 2,751    |       | 4,000    |       | 3,446    |       |
| United States             |       | 3,098    |       | 2,222    |       | 2,022    |       |
| Rest of World             |       | 905      |       | 1,070    |       | 1,035    |       |

 

These numbers represent employees who are on theARCADIS payroll. Including temporary and other staff, capacity at year-end 2005totaled 10,101 employees compared to 10,474 in 2004. The decline in the numberof employees was mainly the result of the sale of the 50% interest in Grupo EPin Spain with more than 1,700 employees. Because 52% of the Grupo E.P. staffhad a temporary contract, in 2005, the percentage of our employees with atemporary contract decreased from 18% on January 1, 2005 to 6% on December 31, 2005.

A small minority of our employees are members of aunion. The relationship between management and the labor unions is good.

**E. *Share ownership.***

**Capital Stock**

The following tablediscloses, as of December 31, 2005, interests held in our share capital bymembers of our Supervisory Board and our Executive Board:
| **Name**                         | ** ** | **Number of  Shares(1)** | ** ** | **Percentage of  Outstanding  Capital** | ** ** |
|----------------------------------|------------|-------------------------------|------------|----------------------------------------------|------------|
| Rijnhard W.F.  van Tets          |       | —                        |       | —                                       |       |
| Ross A. Webber                   |       | 1,130                         |       | *                                            |       |
| Th. M. (Thomas)  Cohn            |       | —                        |       | —                                       |       |
| Carlos Espinosa  de los Monteros |       | —                        |       | —                                       |       |
| J. (Jan) Peelen                  |       | —                        |       | —                                       |       |
| Gerrit Ybema                     |       | —                        |       | —                                       |       |
| George R.  Nethercutt            |       | —                        |       | —                                       |       |
| Harrie L.J. Noy                  |       | 34,122                        |       | *                                            |       |
| C. Michiel Jaski                 |       | 1,719                         |       | *                                            |       |

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*                    Lessthan 1%

The members of our management hold our common sharesand have no greater rights than those provided to non-management holders of ourshares.

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**Stock Options**

The following tablediscloses, as of December 31, 2005, stock options held by members of ourExecutive Board:
| Name             | ** ** | **Option  Plan*** | ** ** | **Grant  Year** | ** ** | **Number  Granted** | ** ** | ** ** | **Exercise  Price** | ** ** | **2005  Exercises** | ** ** | **Number  Outstanding** | ** ** | **Expiration  Date** | ** ** |
|------------------|------------|-------------------|------------|-----------------|------------|---------------------|------------|------------|---------------------|------------|---------------------|------------|-------------------------|------------|----------------------|------------|
| Harrie L.J. Noy  |       | 2001              |       | 2001            |       | 30,000              |       |       |                | €     | 9.20                |       | —                  |       | 10,000               |       | 05-22-2011 |   |
|                  |       |              |       | 2002            |       | 15,000              |       |       |                | €     | 10.79               |       | —                  |       | 15,000               |       | 05-15-2012 |   |
|                  |       |              |       | 2003            |       | 17,500              |       |       |                | €     | 8.93                |       | —                  |       | 17.000               |       | 05-13-2013 |   |
|                  |       | 2005              |       | 2005            |       | 25,000              |       | *          |                | €     | 17.94               |       | —                  |       | 25,000               |       | 05-10-2015 |   |
|             |       |              |       |            |       |                |       |       |                |       |                |       |                    |       |                 |       |   |
| C. Michiel Jaski |       | 2001              |       | 2001            |       | 17,500              |       |       |                | €     | 9.20                |       | 17,500                  |       | —               |       | 05-22-2011 |   |
|                  |       |              |       | 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 |   |

____________________

*                    Thenumber shown as granted is based on granting 100% of the potential number theExecutive Board member is eligible for under his employment arrangement.

The members of our Supervisory Board held no stockoptions as of December 31, 2005.

Adescription of our various stock option plans can be found in Note 13 of ourConsolidated Financial Statements.

**ITEM 7. MAJORSHAREHOLDERS AND RELATED PARTY TRANSACTIONS**

**A. Majorshareholders.**

**Common Shares**

We are not directly or indirectly owned or controlledby another corporation or a governmental entity. The total number ofoutstanding common shares as of March 31, 2006 is 20,285,820. Of ourtotal number of outstanding shares, 1,340,950 are traded on the Nasdaq NationalMarket. The number of record holders in the United States as of March 31,2006, is 112.

The following table lists any person/entity who hasnotified us that he is the owner of more than five percent of our outstandingcommon shares as of March 31, 2006. These shareholders do not receive anypreferential voting rights.

 
| **Identity of Person or Group**                                | ** ** | **Percent of  Class** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------|------------|
| Delta  Deelnemingen Fonds                                                          |       | 5.4                        | %          |
| Fortis N.V.                                                                        |       | 6.0                        |       |
| Koninklijke Nederlandsche  Heidemaatschappij(a)                                    |       | 6.2                        |       |
| Lovinklaan  Foundation(b)                                                          |       | 21.3                       |       |
| Members of our  Executive Board, Supervisory Board and other Executive Officers(c) |       | *                          |       |

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*                    Lessthan 1%.

(a)             KoninklijkeNederlandsche Heidemaatschappij (KNHM), established in 1888 and the initialpredesessor of ARCADIS N.V., is an independent non-profit association dedicatedto environmental awareness and education. KNHM is governed by a board oftrustees composed of 12 members. ARCADIS N.V. has the right to nominate oneboard member.

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(b)            The Lovinklaan Foundation currently hasfive directors. The directors are elected by and from our Dutch staff members.None of the directors are members of our Supervisory Board or Executive Board. TheLovinklaan Foundation has agreed not to dispose of or pledge 4,000,000 shares ofour common shares that it holds without the prior approval of the holder of theARCADIS Priority Shares (the ARCADIS N.V. Priority Foundation). LovinklaanFoundation funds the ARCADIS N.V. 2002 Employee Stock Purchase Plan, which iscurrently operational in the Netherlands, Belgium, Germany, France and theUnited States. In 2006 the ARCADIS N.V. 2002 Employee Stock Purchase Plan willalso be introduced to employees in our UK subsidiaries.

(c)             Certainmembers of our Supervisory Board, Executive Board, our Corporate Directors andSenior Management Committee own our common shares. The number of shares listedonly reflects those shares owned directly.

In 2001, Delta Deelnemingen Fonds reported it hadacquired 5.17% of our shares. In 2002, KNHM brought down its ownership from11.1% to 6.2% in pursuit of portfolio diversification. In 2002, Fortis N.V.reduced its holdings in ARCADIS from 9.89% to 6.6% at year-end, as its largerposition was the result of a merger with another fund. In 2003, SmoorenburgB.V. reported that it had acquired a 5.08% position in our outstanding stock,but it reduced its holdings to 3.1% in 2005. In 2004,****First Eagle Funds reported that it had acquired a 10.2%position in our outstanding stock, but during 2005 it reduced its holdings inARCADIS to 4.9%, while the Lovinklaan Foundation reported that it had reducedits position to 21.3% from our outstanding stock.

**Priority Shares**

All 200 of our priority shares are owned by theARCADIS N.V. Priority Foundation, which has 20 directors. To take action, theaffirmative vote of 12 of the directors is required. Seven of the directors aremembers of our Supervisory Board, three are members of our Executive Board, andten are ARCADIS employees who have been elected to serve as directors of the BellevueFoundation (a foundation representing our international staff members). ARCADISN.V. Priority Foundation has committed not to dispose of the priority sharesexcept in the event of dissolution, which is an event that must be approved bythe directors.

**Cumulative Preferred Shares**

In 1995 the ARCADIS N.V. Preferred Stock Foundationwas established. The foundation has as its objective the protection andpromotion of the interests of ARCADIS and its affiliated companies and allparties involved, particularly to protect ARCADIS from any hostile takeoverattempts by another entity. The cumulative preferred shares will only be issuedto the ARCADIS N.V. Preferred Stock Foundation in the event that ARCADIS isthreatened by a hostile takeover. In order to achieve this, the foundation hasbeen granted the right to acquire our cumulative preferred shares up to amaximum equal to the number of outstanding shares issued at the date inquestion. Additionally, our Executive Board, under prior approval of ourSupervisory Board, has the right to issue the same number of preferred sharesto the foundation.

The board of this foundation consists of four personswho all qualify as independent according to Dutch regulations, to be appointedby our Executive Board. At the end of 2005 no cumulative preferred shares wereoutstanding.

**Cumulative Financing Preferred Shares**

Our Articles of Association authorize the issuance ofcumulative financing preferred stock. As of March 31, 2006, no cumulativefinancing preferred stock have been issued.

**Change in Control**

We do not know of any arrangements, other than thosereferred to above, which may result in our change of control.

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**B. *Related party transactions.***

There have been no material transactions during ourmost recent fiscal year, nor are there presently any proposed materialtransactions to which we or any of our subsidiaries is a party and in which anymember of our Supervisory Board or Executive Board or any relative or spousethereof had or will have a direct or indirect material interest. On December 30,2002, the Foundation Pension Fund ARCADIS received a EUR 5.0 millionsubordinated loan from the Lovinklaan Foundation, a 21% shareholder. The loanwas granted to provide additional equity to the ARCADIS Pension Fund Foundationthe reserves of which had decreased due to the decreased value of itsinvestments in the stock market. The loan matures on December 30, 2007 andbears interest at a rate that is adjusted annually. The interest rate for 2005was 3.62%. At the end of 2005, the Lovinklaan Foundation pledged to make acontribution to the pension plan in the amount of € 6.5 million for Dutchemployees to compensate employees for regulatory changes related to earlyretirement.

During our most recent fiscal year, there has been no,and at present there is no, outstanding indebtedness to us owed or owing by anymember of our Supervisory Board or Executive Board.

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

Not Applicable.

**ITEM 8. FINANCIALINFORMATION**

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

Our audited consolidated financial statements andaudit report are included pursuant to Item 18 of this document.

**Export Sales**

Export sales do not constitute a significant portionof our total sales volume.

**Legal or Arbitration Proceedings**

From time to time, we are involved in routinelitigation. We believe that the outcome of current and pending litigation willnot have a material effect on our financial condition, results of operations orcash flows.

**Policy on Dividend Distribution**

Our dividend policy aims to provide our shareholderswith an attractive and stable return on their investment while, at the sametime, providing us with the cash necessary to finance further growth of ourbusiness. We aim to make an annual dividend payment ranging from 30% to 40% ofour income from operations as reported under IFRS, our dividend for 2005 isequal to 40% of our income from operations. An important consideration is thatthe strategy of the company is focused on growth, partly through acquisitions.The dividend policy is designed to offer shareholders an attractive dividendyield, while at the same time leaving us sufficient resources to financegrowth.

**B. *Significant changes.***

Since December 31, 2005, no significant changesin our financial condition have occurred. Our most recently issued interimfinancial statements were included with our First Quarter Report for 2006,which was published on May 9, 2006 and was furnished on a Form 6-Kon May 11, 2006. Since the end of our first quarter of 2006, nosignificant changes in our financial condition have occurred.

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**ITEM 9. THEOFFER AND LISTING**

**Markets**

Our common shares are traded on the Nasdaq NationalMarket under the symbol “ARCAF” and are traded on the Amsterdam Stock Exchangeunder the symbol “ARCAD.”

**Stock Price Information**

The following table sets forth the high and lowclosing prices for our common shares traded on the Nasdaq National Market andon the Amsterdam Stock Exchange since 2000:

 
| ** **           | ** ** | **Nasdaq National Market ($)** | ** ** | **Amsterdam Stock Exchange (€)** | ** ** |
|----------------------|------------|-----------------------------------------------|------------|------------------------------------------------------|------------|
| ** **           | ** ** | **High**                                      | ** ** | **Low**                                              | ** ** | **High** | ** ** | **Low** | ** ** |
| **Period**           |       |                                          |       |                                                 |       |   |   |   |   |
| 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**             |       |                                          |       |                                                 |       |   |   |   |   |
| 1st Quarter     |       | 13.00                                         |       | 11.65                                                |       | 10.44 |   | 9.40 |   |
| 2nd Quarter     |       | 14.68                                         |       | 12.10                                                |       | 12.02 |   | 10.30 |   |
| 3rd Quarter     |       | 14.90                                         |       | 13.23                                                |       | 12.00 |   | 10.92 |   |
| 4th Quarter     |       | 18.70                                         |       | 14.29                                                |       | 13.75 |   | 11.45 |   |
| **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 |   |
| **Last  Six Months** |       |                                          |       |                                                 |       |   |   |   |   |
| December 2005   |       | 32.30                                         |       | 29.75                                                |       | 27.18 |   | 25.35 |   |
| January 2006    |       | 35.64                                         |       | 33.00                                                |       | 29.15 |   | 26.60 |   |
| February 2006   |       | 37.67                                         |       | 34.29                                                |       | 31.75 |   | 28.79 |   |
| March 2006      |       | 45.10                                         |       | 37.59                                                |       | 37.48 |   | 31.75 |   |
| April 2006      |       | 48.10                                         |       | 42.76                                                |       | 38.49 |   | 34.89 |   |
| May 2006        |       | 52.63                                         |       | 43.00                                                |       | 41.00 |   | 33.57 |   |

 

As of March 31, 2006, approximately 6.5% of ouroutstanding common shares were listed on the Nasdaq National Market and we had112 holders in the United States.

**ITEM 10.ADDITIONAL INFORMATION**

**A. *Share capital.***

Not applicable.

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

ARCADIS is a public limited company established underthe laws of the Netherlands in accordance with Book 2 of Dutch Civil Law. Ourshareholders at a Special General Meeting of Shareholders adopted our Articlesof Association on June 5, 2003. The following is a summary of our Articlesof Association, which were filed as Exhibit 1.1 to our Annual Report on Form 20-Ffor the year ended December 31, 2003 and are incorporated herein byreference, and such summary is qualified in its entirety by reference thereto.

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**Purpose**

Article 2 of our Articles of Associationdescribes our purpose, which is to participate and otherwise acquire aninterest in other companies and enterprises, of whatever nature, to conduct themanagement of such companies and enterprises, and to finance third parties andto furnish security in any manner or bind ourselves for the obligations ofthird parties and, finally, to do all such things as may be incidental orconducive to the attainment of any of the foregoing.

**Management**

ARCADIS is managed by our Executive Board under thesupervision of our Supervisory Board. The members of our Executive Boardare elected by the holders of our common shares. The members of our ExecutiveBoard are required to retire at the close of the Annual General Meeting ofShareholders held in the financial year in which they attains the age ofsixty-five years, unless the Supervisory Board expressly decides otherwise withrespect to the member.

**Capital and Shares**

Our authorized shares consist of (1) 40,000,000ordinary shares, each with a € 0.05 par value, (2) 50,000,000 cumulativepreference shares, each with a € 0.05 par value, (3) 10,000,000 cumulativefinancing preference shares, each with a € 0.05 par value, subdivided into fourseries, numbered 1 to 4, each series consisting of 2,500,000 shares; and (4) 200priority shares, each with a € 0.05 par value.

The 200 priority shares are 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 the ARCADISN.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 ofARCADIS.

Our Articles also permit us to issue shares ofcumulative financing preferred stock. As of March 31, 2006, there are noshares of cumulative financing preferred stock outstanding. At our 2006 AnnualGeneral Meeting of Shareholders, however, our shareholders approved a proposalauthorizing our Supervisory Board to issue common shares and cumulativefinancing preferred shares in an amount equal to 10% of our common sharesand/or equal to the amount of cumulative financing preferred stock outstandingas of the date of the resolution adopted by the Supervisory Board to issue theshares. The amount of shares to be issued may be increased by an additional 10%when the issuance of shares relates to the consideration to be given in amerger or acquisition.

At our 2006 Annual General Meeting of Shareholders, ourshareholders approved a proposal authorizing our Supervisory Board to issueshares of cumulative preferred stock, up to a maximum amount equal to 100% ofour total capital stock issued and outstanding as of the date of the resolutionadopted by the Supervisory Board to issue the shares. This stock will serve tolimit any hostile takeover attempt by another entity. These shares would onlybe issued if we are threatened by a hostile takeover. In such an event, theshares would be issued to the ARCADIS N.V. Preferred Stock Foundation.

**Dividends**

Our Executive Board, subject to the approval of ourSupervisory Board, determines the amount of profits set aside as reserves. TheAnnual General Meeting of Shareholders determines the amount of profitremaining which can be distributed as a dividend to the holders of the commonshares. The priority shares are entitled, to the extent possible, to receive 5%of the nominal amount per priority share before the holders of our commonshares receive any dividend payment. The priority shares are not entitled toany further distribution.

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**Liquidation**

If there is a liquidation, the holders of theoutstanding priority shares will be entitled to a distribution before theholders of the outstanding common shares.

**Repurchase of Shares**

Our Articles authorize the Executive Board torepurchase shares of our capital stock if certain conditions are met. TheSupervisory Board and our shareholders must authorize such a repurchase. Theauthorization must specify the number of shares that may be repurchased, themanner in which they shall be acquired and the price ranges at which they maybe repurchased. Our shareholders approved a proposal to permit our ExecutiveBoard to repurchase shares of our capital stock at our 2006 Annual GeneralMeeting of Shareholders.

**Meetings of Shareholders**

Our Articles require us to have an Annual GeneralMeeting of Shareholders before the first of July of each year. The DutchCivil Law also requires us to hold a meeting of our shareholders each year. Anyperson who is a shareholder on the date of the annual meeting is entitled toattend and vote at the annual meeting. Extraordinary meetings are held upon theadoption of a resolution by our Executive Board or Supervisory Board.Additionally, shareholders holding at least 10% of our issued capital may alsocall extraordinary meetings of shareholders.

**C. *Material contracts.***

Our option and share purchase plans are describedabove in Item 6.E. Otherwise, we have not entered into any material contracts,other than contracts entered into in the ordinary course of business.

**D. *Exchange controls.***

There are currently no Netherlands laws, decrees orregulations that restrict the export or import of capital and there are noexchange control restrictions on remittances of dividends imposed by law ondividends, interest or other payments to non-resident holders of our commonshares.

There are currently no limitations on the right ofnon-resident or foreign owners to hold or vote our common shares imposed by theNetherlands law or by our Articles of Association or other constituentdocuments.

**E. *Taxation*.**

**Netherlands Taxation**

The following is a summary of Netherlands taxconsequences to an owner of our common shares who is not, or is not deemed tobe, a resident of The Netherlands or has not opted to be treated as a residentof The Netherlands for purposes of the relevant tax codes (a “non-residentShareholder”). The summary does not address taxes imposed by The Netherlands andits political subdivisions, other than the transfer tax, dividend withholdingtax, individual income tax, corporate income tax,  and gift and inheritance tax.

***Transfer Tax***

No value added tax, stamp, documentary or registrationduty or similar charge, will be imposed under the laws of The Netherlands uponexecution, delivery, transfer, combination or split-up of our common shares.

***DividendWithholding Tax***

To the extent that cash dividends are distributed byARCADIS, such dividends would be subject under Netherlands tax law towithholding tax at a rate of 25%.

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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 our common shares residing outside TheNetherlands may be entitled to a full or partial exemption from or refund ofNetherlands dividend withholding tax under an applicable double taxationconvention depending on its terms and conditions and subject to compliance bythe shareholder with those terms and conditions.

Holders of our common shares residing in the UnitedStates may be entitled to a reduction of Netherlands dividend withholding tax,in general to a Netherlands dividend withholding tax of 15%, under the doubletax convention between The Netherlands and the United States with respect toincome (the “Treaty”) subject to compliance by such 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 the beneficial owner of thedividends paid;

·              is resident in the United Statesaccording to the Treaty;

·              does not hold our common shares inconnection with the conduct of business in The Netherlands; and

·              is not restricted in claiming thebenefit of the Treaty under article 26 (Limitation on Benefits).

Dividends paid in respect of our common shares to anexempt pension trust or similar organization, may qualify for an exemption fromor, as the case may be, a complete refund of Dutch dividend withholding taxunder the Treaty, subject to compliance with the applicable terms andconditions.

On November 23, 2004, the European Free TradeAssociation Court of Justice (EFTA Court) issued its decision in the so-calledFokus Bank case. The EFTA Court decided that the Norwegian tax rules, thattreat outbound dividend payments to foreign shareholders less favorably thandividend payments to domestic shareholders, constitute a forbidden restrictionon the free movement of capital. It may be expected that the European Court ofJustice (ECJ) will come to an identical decision in a similar case if asked tointerpret the freedom of capital as laid down in the EC-Treaty. The freedom ofcapital generally does not only apply to capital movements between EU Member Statesbut also to capital movements to and from third countries, such as the UnitedStates.

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Although the Netherlands tax system is different fromthe Norwegian tax system, the decision of the EFTA Court may have significantimplications for certain non-resident shareholders that receive dividends thatare subject to Netherlands dividend withholding tax, or that have received suchdividends in the past three years. Especially the following non-residentshareholders may be affected and may as a result be entitled to refund ofNetherlands dividend withholding tax.

·                  Legal entitiesthat could have invoked the participation exemption with respect to thedividends received or would have been exempt from corporate income tax in casethey would have been a resident of the Netherlands for tax purposes. Ingeneral, the participation exemption applies in case of shareholdings of 5% ormore. In case of a shareholding of less than 5% the participation exemption maybe applicable if the shares are not held as a mere portfolio investment. Incase of legal entities resident in the Netherlands, in effect no Netherlandsdividend withholding tax is due with respect to dividends on shareholdings thatapply for the participation exemption.

·                  Natural personswhere the shares do not belong to the assets of a business enterprise or do notbelong to a substantial interest. In case such a natural person would have beena resident of the Netherlands, the dividend as such would not be subject toindividual income tax. Instead, the individual would be taxed on a deemedincome, calculated at 4% of his net equity, whereas the dividend tax withheldwould have been credited in full against the individual income tax due.

The freedom of capital movements to and from thirdcountries is generally subject to grandfathering (stand-still) provisions inthe EC-Treaty, but based on case law of the ECJ it may be held that theseprovisions do not apply in the specific case of claiming a refund of theNetherlands dividend withholding tax.

Dividend payments can be subject to Dutchdividend-stripping rules. Under these rules, a recipient of a dividend is notconsidered the beneficial owner if it is plausible that:

·      the recipient paidconsideration (in cash or in kind) in connection with the dividend distribution,and the payment 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 legislation explicitly states that the term “sequenceof transactions” includes cases of a sole acquisition of one or more dividendrights and of the establishment of short-term rights of enjoyment on shares,while the transferor retains ownership of the shares. The legislation statesthat the anti-dividend-stripping rules also apply to transactions enteredinto on the public stock market.

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

A shareholder that is not a resident nor deemed to bea resident of The Netherlands for Netherlands tax purposes nor has opted to betreated as a resident of the Netherlands will not be subject to The Netherlandsincome tax or corporate income tax in respect of dividends received from, orcapital gains realized in respect of a disposal of, our common shares, providedthat:

·              the common shares are notattributable 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”);

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·              the holder of the common sharesdoes not have a substantial interest (a holding of at least 5% of the sharecapital) or a deemed substantial interest in us as defined in the Income TaxAct 2001, or in the event that such holder does have such interest, it formspart of the business assets of a business, other than a Netherlands business;and

·              in the case of an individualholder of our common shares, the dividends received from our common shares andcapital gain realized in respect of a disposal of our common shares are notregarded, on the basis of the Income Tax Act 2001, as “taxable income from oneor more activities performed in The Netherlands not being activities thatgenerate taxable profit or taxable wages”.

***Gift andInheritance Taxes***

No gift or inheritance taxes will arise in TheNetherlands with respect to a gift or inheritance of our common shares from aperson who is neither a resident nor deemed to be a resident of TheNetherlands, unless:

·              such holder, at the time of thegift has, or at the time of death had, a business or an interest in a businessthat 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 of thecommon shares by an individual who at the date of the gift was neither residentnor deemed to be resident of The Netherlands, such individual dies within180 days after the date of the gift, while at the time of death beingresident or deemed to be resident of The Netherlands.

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

**United States Taxation**

The following is a summary of certain U.S. federalincome tax considerations relevant to the purchase, ownership and dispositionof common shares by a holder that is a citizen or resident of the UnitedStates, a corporation organized under the laws of the U.S. or any state thereof(or Washington, DC), an estate the income of which is subject to U.S federalincome tax regardless of its source, or a trust if a court within the U.S. isable to exercise primary supervision over its administration and one or moreU.S. persons have the authority to control all substantial decisions of thetrust (a “U.S. holder”). This summary does not purport to be a comprehensivedescription of all of the tax considerations that may be relevant to a decisionto purchase common shares. In particular, this summary deals only with U.S.holders that will hold common shares as capital assets and does not address thetax treatment of U.S. holders that may be subject to special tax rules, such asbanks, tax-exempt entities, insurance companies, securities dealers,expatriates, persons that hold common shares as part of an integratedinvestment (including a “straddle”) comprised of common shares and one or moreother positions, persons whose functional currency is not the U.S. dollar, andholders (including indirect and constructive ownership) of 10% or more of ourvoting shares. In addition, this summary does not address any alternativeminimum tax or any state, local or non-U.S. tax consequences. This summary isbased on the U.S./NL Income Tax Treaty and the tax laws of the United States,including judicial and administrative interpretations, in effect on the datehereof, 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 shares inlight of their own particular circumstances, including the effect of anyfederal, state, local or other non-U.S. tax laws to which they may be subject.

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***Taxation ofDividends***

Distributions paid out of our current or accumulatedearnings and profits (as determined under U.S. federal income tax principles)in respect of our common shares (including the amounts withheld in respect ofDutch withholding tax) generally will be subject to U.S. federal incometaxation as foreign source dividend income by the U.S. holder. Distributionswill not be eligible for the dividends received deduction generally allowed toU.S. corporations. Dividends received by non-corporate U.S. holders generallyare eligible for a 15% maximum federal income tax rate through taxable yearsbeginning on or before December 31, 2010, so long as certain holdingperiod requirements are met. Dividends received from “qualified foreigncorporations” generally qualify for the reduced rate. A non-U.S. corporation(other than a passive foreign investment company) generally will be consideredto be a qualified foreign corporation if (1) the shares of the non-U.S.corporation are readily tradable on an established securities market in theUnited States or (2) the non-U.S. corporation is eligible with respect tosubstantially all of its income for the benefits of a comprehensive income taxtreaty with the United States that contains an exchange of information program.The U.S./NL Income Tax Treaty has been identified as a qualifying treaty.Individual U.S. holders should consult their tax advisors regarding the impactof the provisions of this recent tax legislation on their particularsituations.

Subject to generally applicable limitations and thediscussion below, Dutch withholding tax imposed on dividends at the treaty ratewill be treated as a foreign income tax eligible for credit against a U.S.holder’s U.S. federal income tax liability (or, at a U.S. holder’s election,may be deducted in computing taxable income). Foreign tax credits may not beallowed for withholding taxes imposed in respect of certain short-term orhedged positions in securities or in respect of arrangements in which a U.S.holder’s expected economic profit, after non-U.S. taxes, is insubstantial.Holders should consult their own advisors concerning the implications of these rules inlight of their particular circumstances.

Foreign tax credits are determined based on income inparticular limitation categories. For these purposes, dividends we pay generallyconstitute passive income or, in the case of certain holders, financialservices income. The separate “financial services income” limitation categorywill be eliminated for taxable years beginning after December 31, 2006. Speciallimitations may apply to non-U.S. taxes on dividends subject to the maximum 15%federal income tax rate. U.S. holders should consult their tax advisorsregarding the availability of, and limitations on, any such foreign tax credit.

We expect to fund dividend distributions on our commonshares with dividends received from our subsidiaries organized outside TheNetherlands. Under special Netherlands tax rules applicable tointernational holding company structures, we will be entitled in certaincircumstances to reduce the amount of taxes that we otherwise would be obligedto pay to the Dutch tax authorities by an amount equal to 3% of the lesser ofthe dividends that we receive from our foreign subsidiaries and the netdividends that we pays to our shareholders. There is no authority directlyaddressing the implications of these special tax rules for the taxation ofdividends paid to U.S. holders. It is possible that the foreign tax creditsotherwise allowable for U.S. tax purposes in respect of Dutch withholding taxeson dividend income would be reduced by the proportion of the Dutch tax savingrealized by us that is measured by reference to those dividends. We will adviseU.S. holders if we claim the benefit of this reduction in respect of dividendson our common shares.

The amount of the dividend distribution includible inincome of a U.S. holder should be the U.S. dollar value of the foreign currency(e.g. Euro) paid, determined by the spot rate of exchange on the date received,regardless of whether the payment is in fact converted into U.S. dollars.Generally, any gain or loss resulting from currency exchange fluctuationsduring the period from the date the dividend payment is includible in income tothe date such payment is converted into U.S. dollars will be treated as ordinaryincome or loss. Such gain or loss will generally will be income from sourceswithin the United States for U.S. foreign tax credit purposes. Distributions inexcess of current accumulated earnings and profits, as determined for U.S.federal income tax purposes, will be treated as a non-taxable return of capitalto the extent of the U.S. holder’s basis in the common shares and thereafter astaxable capital gain.

51

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***Taxation of Salesof Common Shares***

Gains or losses realized by a U.S. holder on the sale orother disposition of common shares generally will be treated for U.S. federalincome tax purposes as capital gains or losses and generally will be long-termgains or losses if the common shares have been held for more than one year.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 tofederal income taxation at a maximum rate of 15%. The deductibility of capitallosses is subject to limitations for U.S. federal income tax purposes. Gain, ifany, realized by a U.S. holder on the sale or other disposition of commonshares generally will be treated as U.S.-source income for U.S. foreign taxcredit purposes.

***Passive ForeignInvestment Company Rules***

The rules governing “passive foreign investmentcompanies” (PFICs) can have significant tax effects on U.S. holders. We couldbe classified as a PFIC if, for any taxable year, either (a) 75% or moreof our gross income is “passive income”, which generally includes interest,dividends, certain gains from the sale or exchange of shares or securities andsome types of rents and royalties, or (b) on average, 50% or more of ourassets, by fair market value, or, in some cases, by adjusted tax basis, produceor are held for the production of “passive income.” We believe that we are notand have not been a PFIC for U.S. federal income tax purposes.****However, since PFIC status depends uponthe composition of a company’s income and assets and the market value of itsassets (including, among others, less than 25% owned equity investments) fromtime to time, there can be no assurance that we will not be considered a PFICfor any taxable year. If we were treated as a PFIC for any taxable year duringwhich a U.S. holder held a common share, certain adverse tax consequences couldapply to the U.S. holder.

If we are treated as a PFIC for any taxable year inwhich a U.S. holder owned common shares, gain recognized by such U.S. holder ona sale or other disposition of a common share would be allocated ratably overthe U.S. holder’s holding period for the share. The amounts allocated to thetaxable year of the sale or other disposition and to any year before we becamea PFIC would be taxed as ordinary income. The amount allocated to each other taxableyear would be subject to tax at the highest rate in effect for individuals orcorporations, as appropriate, and an interest charge would be imposed on theamount allocated to such taxable year. Further, any distribution in respect ofour common shares in excess of 125% of the average of the annual distributionson shares received by the U.S. holder during the preceding three years or theU.S. holder’s holding period, whichever is shorter, would be subject totaxation as described above. Certain elections may be available to U.S. holdersthat may mitigate the adverse tax consequences resulting from PFIC status.

In addition, if we were to be treated as a PFIC in ataxable year in which it pays a dividend or the prior taxable year, the 15%dividend rate discussed above with respect to dividends paid to certainnon-corporate U.S. holders would not apply.

***U.S. BackupWithholding and Information Reporting***

A U.S. holder may be subject to “backup withholding”at the rate of 28% with respect to payments of dividends or proceeds from asale of common shares, unless the holder (1) is a corporation or other “exemptrecipient,” and demonstrates this fact when so required, or (2) provides acorrect taxpayer identification number, certifies that it is not subject to backupwithholding, and otherwise complies with applicable requirements of the backupwithholding rules. Any amount withheld under these rules will becreditable against the U.S. holder’s U.S. federal income tax liability. Inaddition, a U.S. holder may be subject to information reporting to the IRS withrespect to payment of dividends or proceeds from a sale of common shares.

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

Not applicable.

**G. *Statement by experts***

Not applicable.

52

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**H. *Documents on display***

We will provide copies of our 2005 annual report inEnglish or Dutch, as requested, and our 2005 annual report on Form 20-F,without charge. Copies of the exhibits to this 2005 annual report on Form 20-Fare available for a duplication fee. If an exhibit is not in English, or hasnot been previously translated into English, a summary of such exhibit inEnglish will be provided. To obtain copies of these documents, please contactARCADIS N.V., Corporate Development Department, P.O. Box 33, 6800 LEArnhem, the Netherlands (tel. +31 26 377 8286), or ARCADIS N.V., InvestorRelations, 88 Duryea Road, Melville, NY 11747, USA (tel. (631) 391-5262).

**I. *Subsidiary information***

In accordance with articles 379, 392 and 414 Book 2 ofthe Dutch Civil Code, the list of subsidiaries is filed with the Chamber ofCommerce in Arnhem, the Netherlands. We have also filed a list of oursubsidiaries as an exhibit to this annual report on Form 20-F.

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

**Foreign Exchange Risk**

We do a substantial amount of business in non-Eurocountries. The currencies in these countries may vary in value against theEuro, posing a possible risk to us. This risk is predominantly limited to atranslation risk in that our revenues and costs are usually in the samecurrency. Because the economic risk to the company is limited, this risk is nothedged. The currency-risk in the balance sheet may lead to a depreciation ofthe value of certain foreign assets and liabilities, but the net effect ofthese depreciations on our economic position is limited.

There is only a limited risk that net cash flow,denominated in the currencies in which the operating companies perform theirpurchasing and selling activities, will be negatively influenced by exchangerate changes.

Financial instruments are  used in a limited fashion to cover the riskassociated with the conversion into Euros of equity and income from foreignoperations and non-consolidated companies outside the Euro-zone.

**Interest Rate Risk**

We manage interest rate risks by financing fixedassets and part of current assets with shareholders’ equity, provisions andlong-term debt. The remainder of current assets is financed with short-termdebt including revolving bank credits with variable interest rates. Based onour interest risk profile, limited financial instruments were used during 2005to cover the risk. This risk is only applicable to long-term debt and bankoverdrafts in our balance sheet (see our Consolidated Balance Sheets includedin Item 18) amounting to € 21.8 million at year-end 2005. A movementin interest rate by 100 basis points would, based on our financial instrumentsthat are subject to changes in interest rates, have a negative or positiveeffect on net income of less than € 0.2 million.

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

Not applicable.

53

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**PART II**

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

Not applicable.

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

Not applicable.

**ITEM 15.CONTROLS AND PROCEDURES**

(a) *DisclosureControls and Procedures.* Our management, including our ChiefExecutive Officer and Chief Financial Officer has evaluated the effectivenessof our disclosure controls and procedures (as defined in Rule 13a-15(e) ofthe U.S. Securities Exchange Act of 1934, as amended) as of December 31,2005, and concluded that, as of such date, our disclosure controls andprocedures were effective.

(d) *Changes in**Internal Control Over Financial Reporting.*Therewere no changes in our internal control over financial reporting that occurredduring the year ended December 31, 2005, that have materially affected, orare reasonably likely to materially affect, our internal control over financialreporting.

**ITEM 16.[RESERVED]**

**ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT**

Our Supervisory Board has determined that Mr. vanTets, one of our Supervisory Board Audit Committee members, qualifies as an “auditcommittee financial expert” as defined by the U.S. Securities and ExchangeCommission. Mr. van Tets is an independent member of our Supervisory Boardas defined by the The Nasdaq Stock Market. In making this determination, theSupervisory Board took into consideration the experience of Mr. van Tets,which is described in his biographical information found in Item 6 of thisannual report.

**ITEM 16B.CODE OF ETHICS**

We have adopted a code of ethics, which is entitledthe “ARCADIS General Business Principles.” This code serves as a guideline forour business decisions and activities around the world. The code applies to allof our employees, including our principal executive officer, principalfinancial officer, and principal accounting officer or controller. Theseprinciples highlight our commitment to conducting business with integrity,which is one of our three core values. The ARCADIS General Business Principlesare available on our website located at, www.ARCADIS-global.com. We intend todisclose any amendments or waivers to our code of ethics that are required tobe disclosed by posting such information on our website, at the addressspecified above.

**ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES**

*Fees and Services.*Thefollowing table details the aggregate fees billed by our principal accountant,KPMG Accountants N.V., for the last two fiscal years for various services (inmillions):

54

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| **Type of Services Provided** | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------------------------|------------|----------|------------|----------|------------|
| Audit Fees                                   |       | €   | 1.3        |     | €     | 1.3 |   |
| Audit-Related  Fees(a)                       |       | 0.7      |       | 0.4      |       |
| Tax Fees(b)                                  |       | 0.4      |       | 0.2      |       |
| All Other Fees                               |       | —   |       | —   |       |
|                                              |            |          |            |          |            |  |  |

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(a)             *Audit-related fees* for the years ended December 31,2005 and 2004 consist of fees for services that are traditionally performed bythe independent accountants. These services include accounting consultations,internal control reviews on implementation of information systems, servicesrelated to the implementation § 404 of the Sarbanes-Oxley Act of 2002regarding management’s report over internal control over financial reporting,and other similar services, consultations concerning financial accounting andreporting standard (especially related to the transition to InternationalFinancial Reporting Standards), due diligence and audits in connection withacquisitions or divestments.

(b)            *Tax fees* as of the years ended December 31,2005 and 2004 consist of fees expensed for tax planning services and taxadvice.

*Audit Committee Pre-ApprovalPolicies and Procedures.*The Audit Committee of ourSupervisory Board has adopted a charter which details the duties andresponsibilities of our Audit Committee. These duties and responsibilitiesinclude, among other things, reviewing and monitoring our financial statementsand internal accounting procedures, approving the scope and terms of auditservices to be provided by our independent auditor and monitoring the servicesprovided by our independent auditor. All non-audit services provided by ourindependent auditor must be pre-approved by our Audit Committee. The AuditCommittee will consider whether the provision of such services by our auditoris compatible with our auditor’s independence. The Chairman of our AuditCommittee may approve additional non-audit services in amounts up to a maximumof € 50,000, but such approval must be disclosed to the full Audit Committee atits next meeting.

**ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.**

Not Applicable.

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

**ISSUERPURCHASES 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 2005  |       | 30,600                                                                   |       | $                                                                    | 17.77      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |
| February 2005 |       | 19,000                                                                   |       | $                                                                    | 19.53      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |
| March 2005    |       | 13,350                                                                   |       | $                                                                    | 19.89      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |
| April 2005    |       | 654                                                                      |       | $                                                                    | 19.56      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |
| May 2005      |       | 1,104                                                                    |       | $                                                                    | 22.24      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |
| June 2005     |       | 168,761                                                                  |       | €                                                               | 18.66      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |
|               |       | 10,000                                                                   |       | $                                                                    | 22.35      |                                                                                                                                                  |       |                                                                                                                                                                                                 |       |   |
|               |       | 5,000                                                                    |       | €                                                               | 19.47      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |
| July 2005     |       | 5,000                                                                    |       | $                                                                    | 22.93      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | —     |   |

 

55

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| ** **          | ** ** | **(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** |   |
| August 2005    |       | —                                                                   |       | —                                                               |       | —                                                                                                                                                |       | —                                                                                                                                                                                               |   |
| September 2005 |       | —                                                                   |       | —                                                               |       | —                                                                                                                                                |       | —                                                                                                                                                                                               |   |
| October 2005   |       | 18,700                                                                   |       | $                                                                    | 30.22      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | — |   |
| November 2005  |       | 16,625                                                                   |       | $                                                                    | 30.35      |                                                                                                                                                  | —     |                                                                                                                                                                                                 | — |   |
| December 2005  |       | 43,252                                                                   |       | €                                                               | 26.33      |                                                                                                                                                  | —     |                                                                                                                                                                                                 |   |   |

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(1)             Allshares purchased were purchased by ARCARDIS N.V. on the open market. OurArticles of Association provide that our Executive Board may acquire fullypaid-up shares of our capital stock if: (a) the amount of our shareholders’equity reduced by the amount paid for the repurchased shares is not less thanthe paid-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 therepurchase of our shares by the Executive Board and this authorization will bevalid for a term not to exceed 18 months. Our Articles of Associationfurther provide that the authorization to repurchase shares must specify thenumber of shares that may be repurchased, the manner in which they shall beacquired and the price ranges at which they may be repurchased. Noauthorization is required if we repurchase our shares in order to transfer theshares to our employees, such as under our employee stock option plans.

The Executive Board is permitted to purchase, for aperiod of 18 months commencing on July 1, 2006, to repurchase, in thediscretion of the Executive Board, any and all of our paid-up shares of capitalstock and any shares of cumulative financing preferred stock, up to the maximumamount authorized under applicable law and our Articles of Association.

We may purchase any and all paid-up shares of ourcapital stock on the public markets, or by other means such as a purchasedirectly from a holder of our shares, at a price per share between (a) theshare’s nominal value (€ 0.05 per share) and (b) an amount equal to10% above the average market price of such shares on Euronext Amsterdam N.V.The market price shall be determined based on the average of the highesttrading price per share of our capital stock, as published by the OfficialPrijscourant of Euronext Amsterdam N.V., for each of the 5 trading daysimmediately preceding the day of repurchase by us.

Shares of our cumulative financing preferred stock maybe purchased at a price per share between (1) the share’s nominal value (€ 0.05per 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.

**PART III**

**ITEM 17.FINANCIAL STATEMENTS**

We have elected to report under Item 18.

56

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**ITEM 18. FINANCIALSTATEMENTS**

**INDEX TOFINANCIAL STATEMENTS**

 
|                                                                                                           | ** ** | **Page** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|----------|------------|
| Report of  Independent Registered Public Accounting Firm                                                  |       | F-2      |       |
| Financial Statements:                                                                                     |       |     |       |
| Consolidated Balance Sheets as of December 31,  2005 and 2004                                        |       | F-3      |       |
| Consolidated Statements of Income for the years  ended December 31, 2005 and 2004                    |       | F-4      |       |
| Consolidated Statements of Cash Flows for the years  ended December 31, 2005 and 2004                |       | F-5      |       |
| Consolidated Statements of Shareholders’ Equity for  the years ended December 31, 2005 and 2004 |       | F-7      |       |
| Notes to the  Consolidated Financial Statements                                                           |       | F-8      |       |

 

F-1

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Report of Independent Registered PublicAccounting Firm

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

We have audited the accompanying consolidatedbalance sheets of ARCADIS N.V. and subsidiaries as of December 31, 2005and 2004, and the related consolidated statements of income, stockholders’equity and comprehensive income, and cash flows for each of the years in thethree-year period ended December 31, 2005. These consolidated financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these consolidated financialstatements based on our audits.

We conducted our audits in accordance withthe standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financialstatements referred to above present fairly, in all material respects, thefinancial position of ARCADIS N.V. and subsidiaries as of December 31,2005 and 2004, and the results of their operations and their cash flows foreach of the years in the two-year period ended December 31, 2005, inconformity with International Financial Reporting Standards as adopted by theEU.

InternationalFinancial Reporting Standards vary in certain significant respects fromaccounting principles generally accepted in the United States of America.Information relating to the nature and effect of such differences is presentedin Note 18 to the consolidated financial statements.

KPMG Accountants N.V.Utrecht, The NetherlandsMarch 3, 2006, Except as to the subsequent events paragraph in note 1,which is as of June 12, 2006

F-2

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**ARCADISN.V.CONSOLIDATED BALANCE SHEETS(in thousands of EUR, except share amounts)**

 
| ** **                                                                                                                                                                        | ** ** | **At December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                                                                                                                                                        | ** ** | **2005**                      | ** ** | **2004** | ** ** |
| **ASSETS**                                                                                                                                                                        | ** ** | ** **                    | ** ** | ** ** | ** ** |
| Current Assets:                                                                                                                                                                   |       |                          |       |   |   |
| Cash and cash  equivalents (Note 4)                                                                                                                                               |       | 73,884                        |       | 48,219 |   |
| Corporate tax  receivables                                                                                                                                                        |       | 4,037                         |       | — |   |
| (Un)billed  receivables (Note 5)                                                                                                                                                  |       | 321,013                       |       | 250,645 |   |
| Derivatives                                                                                                                                                                       |       | 1,723                         |       | — |   |
| Inventories  (Note 6)                                                                                                                                                             |       | 374                           |       | 468 |   |
| Other current  assets                                                                                                                                                             |       | 31,950                        |       | 20,659 |   |
|                                                                                                                                                                              |       |                          |       |   |   |
| Total current  assets                                                                                                                                                             |       | 432,981                       |       | 319,991 |   |
|                                                                                                                                                                              |       |                          |       |   |   |
| Tangible assets (Note  7)                                                                                                                                                         |       | 55,994                        |       | 43,635 |   |
| Intangible assets (Note  7)                                                                                                                                                       |       | 127,861                       |       | 55,356 |   |
| Investments in  non-consolidated companies (Note 8)                                                                                                                               |       | 7,451                         |       | 5,597 |   |
| Other long-term  investments (Note 8)                                                                                                                                             |       | 1,939                         |       | 1,097 |   |
| Other assets (Note 8)                                                                                                                                                             |       | 10,683                        |       | 6,991 |   |
| Deferred tax assets                                                                                                                                                               |       | 13,212                        |       | 9,676 |   |
|                                                                                                                                                                              |       |                          |       |   |   |
| Total assets                                                                                                                                                                      |       | 650,121                       |       | 442,343 |   |
|                                                                                                                                                                              |       |                          |       |   |   |
| **LIABILITIES AND SHAREHOLDERS’  EQUITY**                                                                                                                                    |       |                          |       |   |   |
| Current Liabilities:                                                                                                                                                              |       |                          |       |   |   |
| Accounts payable                                                                                                                                                                  |       | 72,517                        |       | 76,820 |   |
| Accrued expenses                                                                                                                                                                  |       | 12,587                        |       | 5,712 |   |
| Other current  liabilities (Note 9)                                                                                                                                               |       | 118,813                       |       | 90,671 |   |
| Current portion  of long-term debt (Note 10)                                                                                                                                      |       | 2,456                         |       | 21,115 |   |
| Corporate tax  liabilities                                                                                                                                                        |       | 8,172                         |       | 9,873 |   |
| Billings in  excess of cost                                                                                                                                                       |       | 89,269                        |       | 40,273 |   |
|                                                                                                                                                                              |       |                          |       |   |   |
| Total current  liabilities                                                                                                                                                        |       | 303,814                       |       | 244,464 |   |
|                                                                                                                                                                              |       |                          |       |   |   |
| Long-term debt (Note  10)                                                                                                                                                         |       | 116,149                       |       | 12,966 |   |
| Deferred tax  liabilities (Note 11)                                                                                                                                               |       | 26,252                        |       | 12,129 |   |
| Other long-term  liabilities (Note 12)                                                                                                                                            |       | 15,818                        |       | 27,419 |   |
|                                                                                                                                                                              |       |                          |       |   |   |
| Total  liabilities                                                                                                                                                                |       | 462,033                       |       | 296,978 |   |
|                                                                                                                                                                              |       |                          |       |   |   |
| Minority Interest                                                                                                                                                                 |       | 11,885                        |       | 8,994 |   |
| Shareholders’ equity  (Note 13):                                                                                                                                             |       |                          |       |   |   |
| Priority shares  - EUR 0.05 par value — Authorized, issued and outstanding  200 shares as of December 31, 2005 and 2004, respectively.                                  |       |                          |       | — |   |
| Cumulative  Financing preferred stock - EUR 0.05 par value— 10,000,000 shares   Authorized. No shares issued or outstanding at December 31, 2005 and  2004              |       |                          |       | — |   |
| Cumulative  preferred stock - EUR 0.05 par value— 50,000,000 shares  Authorized. No shares issued or outstanding at December 31, 2005 and  2004                         |       |                          |       | — |   |
| Common stock -  EUR 0.05 par value— 40,000,000 shares  Authorized. Issued and outstanding 20,269,936 and 20,308,742  shares at December 31, 2005 and 2004, respectively |       | 1,030                         |       | 1,030 |   |
| Additional  paid-in capital                                                                                                                                                       |       | 44,153                        |       | 37,644 |   |
| Foreign currency  translation adjustment                                                                                                                                          |       | 6,403                         |       | (3,633 | ) |
| Retained  earnings                                                                                                                                                                |       | 124,617                       |       | 101,330 |   |
|                                                                                                                                                                              |       |                          |       |   |   |
| Total  shareholders’ equity                                                                                                                                                  |       | 176,203                       |       | 136,371 |   |
| Total liabilities and shareholders’ equity                                                                                                                                   |       | 650,121                       |       | 442,343 |   |

 

See AccompanyingNotes to the Consolidated Financial Statements.

F-3

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**ARCADIS N.V.CONSOLIDATED STATEMENTS OF INCOME(in thousands of EUR, except share and per share amounts)**

 
| ** **                                                                     | ** ** | **For the years ended December 31,** | ** ** |
|--------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                     | ** ** | **2005**                                                      | ** ** | **2004** | ** ** |
|                                                                           |       |                                                          |       |   |   |
| Gross revenue                                                                  |       | 1,001,099                                                     |       | 900,781 |   |
| Materials, services of  third parties and subcontractors                       |       | 297,849                                                       |       | 268,244 |   |
| Net revenue                                                                    |       | 703,250                                                       |       | 632,537 |   |
| Operational cost (Note  15)                                                    |       | 627,685                                                       |       | 580,988 |   |
| Depreciation                                                                   |       | 15,210                                                        |       | 15,654 |   |
| Amortization  identifiable intangible assets                                   |       | 5,967                                                         |       | 376 |   |
|                                                                           |       |                                                          |       |   |   |
| Operating income                                                               |       | 54,388                                                        |       | 35,519 |   |
| Financial items                                                                |       | (1,844                                                        | )          | (3,464 | ) |
|                                                                           |       |                                                          |       |   |   |
| Income before taxes                                                            |       | 52,544                                                        |       | 32,055 |   |
| Taxes (Note 16)                                                                |       | 17,342                                                        |       | 10,400 |   |
|                                                                           |       |                                                          |       |   |   |
| Income of consolidated  companies after taxes                                  |       | 35,202                                                        |       | 21,655 |   |
| Income from  non-consolidated companies and long-term investments, after taxes |       | 1,382                                                         |       | 2,448 |   |
|                                                                           |       |                                                          |       |   |   |
| Group income after  taxes                                                      |       | 36,584                                                        |       | 24,103 |   |
|                                                                           |       |                                                          |       |   |   |
| Attributable to:                                                               |       |                                                          |       |   |   |
| Net income (Equity  holders of the parent)                                     |       | 33,414                                                        |       | 22,176 |   |
| Minority interest                                                              |       | 3,170                                                         |       | 1,927 |   |
|                                                                           |       |                                                          |       |   |   |
| **Earnings per share:**                                                        | ** ** | ** **                                                    | ** ** | ** ** | ** ** |
| Basic net income per  share of common stock                                    |       | 1.65                                                          |       | 1.10 |   |
| Diluted net income per  share of common stock                                  |       | 1.60                                                          |       | 1.09 |   |
| Basic weighted average  number of shares outstanding                           |       | 20,261                                                        |       | 20,140 |   |
| Diluted weighted average number of shares outstanding                          |       | 20,817                                                        |       | 20,417 |   |

 

See AccompanyingNotes to the Consolidated Financial Statements.

F-4

----

**ARCADIS N.V.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands of EUR)**

 
| ** **                                                              | ** ** | **For the years ended December 31,** | ** ** |
|-------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                              | ** ** | **2005**                                                      | ** ** | **2004** | ** ** |
| **Cash flow from operating  activities**                                | ** ** | ** **                                                    | ** ** | ** ** | ** ** |
| Net income                                                              | ** ** | **33,414**                                                    |       | 22,176 |   |
| Minority interest                                                       | ** ** | **3,170**                                                     |       | 1,927 |   |
| Income of  non-consolidated companies and long-term investments         | ** ** | **(1,382**                                                    | **)**      | (2,448 | ) |
| Taxes on income                                                         | ** ** | **17,342**                                                    |       | 10,400 |   |
| Financial items                                                         | ** ** | **1,844**                                                     |       | 3,464 |   |
|                                                                    |       |                                                          |       |   |   |
| Operating income                                                        | ** ** | **54,388**                                                    |       | 35,519 |   |
| Depreciation and  amortization                                          | ** ** | **21,177**                                                    |       | 16,030 |   |
|                                                                    |       |                                                          |       |   |   |
| Operating cash flow  before changes in working capital and provisions   | ** ** | **75,565**                                                    |       | 51,549 |   |
| Stock-based  compensation                                               | ** ** | **561**                                                       |       | 239 |   |
| Dividend received from  non-consolidated companies                      | ** ** | **632**                                                       |       | 2,099 |   |
| Sale of activities, net  of cost                                        | ** ** | **(2,486**                                                    | **)**      | (3,990 | ) |
| Interest received                                                       | ** ** | **1,996**                                                     |       | 1,063 |   |
| Interest paid                                                           | ** ** | **(5,799**                                                    | **)**      | (3,449 | ) |
| Corporate tax paid                                                      | ** ** | **(16,114**                                                   | **)**      | (6,779 | ) |
| Changes in inventories                                                  | ** ** | **94**                                                        |       | (268 | ) |
| Changes in receivables                                                  | ** ** | **(32,525**                                                   | **)**      | (11,550 | ) |
| Changes in provisions                                                   | ** ** | **(3,305**                                                    | **)**      | 882 |   |
| Changes in billing in  excess of costs                                  | ** ** | **36,429**                                                    |       | — |   |
| Changes in current  liabilities                                         | ** ** | **11,742**                                                    |       | 14,978 |   |
|                                                                    |       |                                                          |       |   |   |
| ***Net  cash provided by operating activities***                        | ** ** | **66,790**                                                    |       | 44,774 |   |
|                                                                    |       |                                                          |       |   |   |
| **Cash flow from investing  activities**                                | ** ** | ** **                                                    | ** ** | ** ** | ** ** |
|                                                                    |       |                                                          |       |   |   |
| Investments in  (in)tangible assets                                     | ** ** | **(17,667**                                                   | **)**      | (12,470 | ) |
| Divestments of  (in)tangible assets                                     | ** ** | **2,725**                                                     |       | 713 |   |
| Investments in  consolidated companies                                  | ** ** | **(75,039**                                                   | **)**      | (14,759 | ) |
| Divestments of  consolidated companies                                  | ** ** | **8,527**                                                     |       | 8,006 |   |
| Investments in  non-consolidated companies and other non-current assets | ** ** | **(5,858**                                                    | **)**      | (2,526 | ) |
| Divestments of  non-consolidated companies and other non-current assets | ** ** | **2,198**                                                     |       | 1,308 |   |
|                                                                    |       |                                                          |       |   |   |
| ***Net  cash used in investing activities***                            | ** ** | **(85,114**                                                   | **)**      | (19,728 | ) |
|                                                                    |       |                                                          |       |   |   |
| **Cash flow from financing  activities**                                | ** ** | ** **                                                    | ** ** | ** ** | ** ** |
| Issued shares                                                           | ** ** | **49**                                                        |       | 1,727 |   |
| Options exercised                                                       | ** ** | **2,624**                                                     |       | 704 |   |
| Own shares purchased                                                    | ** ** | **(6,562**                                                    | **)**      | (158 | ) |
| New long-term debt                                                      | ** ** | **79,931**                                                    |       | 3,018 |   |

 

F-5

----

 
| Repayment of long-term  debt                 | ** ** | **(24,136** | **)**  | (4,034  | )      |
|----------------------------------------------|------------|-------------|--------|---------|--------|
| Changes in short-term  borrowings            | ** ** | **39**      |   | 2,248   |   |
| Dividends paid                               | ** ** | **(10,848** | **)**  | (10,204 | )      |
| Other changes in equity                      | ** ** | **966**     |   | —  |   |
|                                         |       |        |   |    |   |
| ***Net  cash used in financing activities*** | ** ** | **42,063**  |   | (6,699  | )      |
|                                         |       |        |   |    |   |
| Exchange rate  differences                   | ** ** | **1,926**   |   | (1,386  | )      |
| Translation differences  of income items     |       |        |   |    |   |
|                                         |       |        |   |    |   |
| ***Total  exchange rate differences***       | ** ** | **1,926**   |   | (1,386  | )      |
|                                         |       |        |   |    |   |
| ***Total  increase / (decrease)***           | ** ** | **25,665**  |   | 16,961  |   |
| At beginning of year                         | ** ** | **48,219**  |   | 31,258  |   |
| Conversion difference  January 1 amount |       |        |   |    |   |
| ***At end of year***                         | ** ** | **73,884**  |   | 48,219  |   |

 

**SeeAccompanying Notes to the Consolidated Financial Statements**

F-6

----

**ARCADIS N.V.CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY(in thousands of EUR, except per share amounts)**
| ** **                               | ** ** | **Priority  Shares** | ** ** | **Common  Shares** | ** ** | **Share  Capital** | ** ** | **Additional  Paid-in  Capital** | ** ** | **Foreign  Currency  translation  adjustment** | ** ** | **Retained  Earnings** | ** ** | **Total** | ** ** | **Minority  Interest** | ** ** | **Group  equity** | ** ** |
|------------------------------------------|------------|----------------------|------------|--------------------|------------|--------------------|------------|----------------------------------|------------|------------------------------------------------|------------|------------------------|------------|-----------|------------|------------------------|------------|-------------------|------------|
| Balance at January 1, 2004          |       | 200                  |       | 20,430,377         |       | 1,022              |       | 35,985                           |       | —                                         |       | 87,956                 |       | 124,963   |       | 7,557                  |       | 132,520           |       |
| Net income                               |       |                 |       |               |       |               |       |                             |       |                                           |       | 22,176                 |       | 22,176    |       | 1,908                  |       | 24,084            |       |
| Dividends declared (EUR 0.48 per share)  |       |                 |       |               |       |               |       |                             |       |                                           |       | (9,647                 | )          | (9,647    | )          | (557                   | )          | 10,204            | )          |
| Own share purchase for granted options   |       |                 |       |               |       |               |       |                             |       |                                           |       | (158                   | )          | (158      | )          |                   |       | (158              | )          |
| Exercises of options                     |       |                 |       |               |       |               |       |                             |       |                                           |       | 704                    |       | 704       |       |                   |       | 704               |       |
| Issuance of shares of common stock       |       |                 |       | 215,238            |       | 8                  |       | 1,659                            |       |                                           |       |                   |       | 1,667     |       |                   |       | 1,667             |       |
| Option costs and taxes                   |       |                 |       |               |       |               |       |                             |       |                                           |       | 239                    |       | 239       |       |                   |       | 239               |       |
| Foreign currency translation adjustments |       |                 |       |               |       |               |       |                             |       | (3,633                                         | )          |                   |       | (3,633    | )          | 186                    |       | (3,447            | )          |
| Expansion ownership                      |       |                 |       |               |       |               |       |                             |       |                                           |       |                   |       |      |       | (217                   | )          | (217              | )          |
| 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           |       |
| Net income                               |       |                 |       |               |       |               |       |                             |       |                                           |       | 33,414                 |       | 33,414    |       | 3,170                  |       | 36,584            |       |
| Dividends declared (EUR 0.48 per share)  |       |                 |       |               |       |               |       |                             |       |                                           |       | (9,745                 | )          | (9,745    | )          | (1,103                 | )          | (10,848           | )          |
| Own share purchase for granted options   |       |                 |       |               |       |               |       |                             |       |                                           |       | (6,652                 | )          | (6,652    | )          |                   |       | (6,652            | )          |
| Exercises of options                     |       |                 |       |               |       |               |       |                             |       |                                           |       | 2,624                  |       | 2,624     |       |                   |       | 2,624             |       |
| Option costs and taxes                   |       |                 |       |               |       |               |       |                             |       |                                           |       | 3,487                  |       | 3,487     |       |                   |       | 3,487             |       |
| Foreign currency translation adjustments |       |                 |       |               |       |               |       |                             |       | 10,036                                         |       |                   |       | 10,036    |       | 1,581                  |       | 11,617            |       |
| Additional paid-in capital               |       |                 |       |               |       |               |       | 6,509                            |       |                                           |       |                   |       | 6,509     |       |                   |       | 6,509             |       |
| Expansion ownership                      |       |                 |       |               |       |               |       |                             |       |                                           |       |                   |       |      |       | (787                   | )          | (787              | )          |
| Capital increase                         |       |                 |       |               |       |               |       |                             |       |                                           |       |                   |       |      |       | 49                     |       | 49                |       |
| 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           |       |

 

See AccompanyingNotes to the Consolidated Financial Statements.

F-7

----

 

**NOTES TO THECONSOLIDATED FINANCIAL STATEMENTS**

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

**General**

ARCADIS N.V. is a public company organized under thelaws of the Kingdom of The Netherlands. Its principal office is located at:Nieuwe Stationsstraat 10, 6811 KS, Arnhem, the Netherlands. Phone: *31-26-3778911.

ARCADIS N.V. and its consolidated subsidiaries (“ARCADIS”or the “Company”), is an international provider of comprehensiveknowledge-based consulting services in the areas of infrastructure, environmentand buildings.

The Consolidated Financial Statements of ARCADIS havebeen prepared in accordance with International Financial Reporting Standards(IFRS) and its interpretations adopted by the International AccountingStandards Board (IASB) as endorsed by the European Union. Note 18 includes asummary of the differences between IFRS and U.S. GAAP that have a materialeffect on net income and shareholders’ equity. Unless otherwise stated, andexcept for share and per share amounts, all amounts are presented in thousandsof EUR.

**Use of Estimatesin the Preparation of Financial Statements**

The preparation of financial statements in accordancewith IFRS requires management to make judgments, estimates and assumptions thataffect the application of policies and reported amounts of assets andliabilities, income and expenses. The estimates and associated assumptions arebased on historical experience and various other factors that are believed tobe reasonable under the circumstances, the result of which form the basis formaking judgments about carrying values of assets and liabilities that are notreadily apparent from other sources. Actual results may differ from theestimates.

The estimates and underlying assumptions are reviewedon an ongoing basis. Revisions to accounting estimates are recognized in theperiod in which the estimate is revised if the revision affects only thatperiod or in the period of the revision and future periods if the revisionaffects both current and future periods.

**Principles ofConsolidation**

The Consolidated Financial Statements include theaccounts of ARCADIS and the companies which ARCADIS directly and/or indirectlycontrols. All intercompany transactions have been eliminated.

In 2003, the joint venture ARCADIS Aqumen FacilityManagement B.V. was set up. This 50% participation is also accounted for on aproportionate basis under IFRS.

As from 2005, the joint venture Biogás EnergiaAmbiental SA (33.33% owned) is also accounted for on a proportionate basisunder IFRS.

**Conversion ofForeign Currencies**

Asset and liabilities denominated in foreigncurrencies are converted into EUR at rates of exchange on the respectivebalance sheet dates. For statement of income data, amounts in foreigncurrencies are converted into EUR at the average rate over the respectivereporting period. Exchange rate differences are included in income, exceptthose arising from the translation of shareholders’ equity of foreign entitiesoutside the EUR countries, which are directly added to or deducted from equity.

F-8

----

 

***Principles of Valuation of Assets and Liabilities***

**Goodwill**

All acquisitions are accounted for by applying thepurchase method. Goodwill represents the difference between the cost of theacquisition and the fair value of the net identifiable assets acquired.Goodwill has an indefinite useful life and is stated at cost less anyaccumulated impairment losses. Goodwill is tested annually for impairment.

**Identifiableintangible assets**

Acquired identifiable intangible assets are stated atcost less accumulated amortization and impairment losses. Identifiableintangible assets have a finite useful life and are amortized over theestimated useful life based on the realization of the underlying profit.

**Software**

Software is valued at cost less accumulated depreciationand impairment losses. Software has a finite life and is depreciated on astraight-line basis over the estimated useful life, which is 3 to 5 years.

Depreciation methods and useful lives, as well asresidual values, are reassessed annually.

**Tangible assets**

Real estate is valued at cost less accumulateddepreciation and impairment losses. Depreciation is charged to the incomestatement on a straight-line basis over the estimated useful life and generallyamounts to 3% of the book value at the beginning of the year. Land is notdepreciated.

Furniture and fixtures are valued at cost.Depreciation is charged to the income statement on a straight-line basis overthe estimated useful life. For furniture and fixtures the useful life variesfrom 3 to 8 years, annual depreciation is 12% to 33% of cost.

Depreciation methods and useful lives, as well asresidual values, are reassessed annually.

**Investments innon-consolidated companies**

Non-consolidated companies, in which ARCADIS hassignificant influence, but not control, over the financial and operatingmanagement, *are* valued using the equity method.Long-term receivables are valued at cost. If necessary, a deduction is made forpermanent devaluation.

**Jointly controlledentities**

Jointly controlled entities are those entities overwhose activities the Group has joint control, established by contractualagreement. The consolidated financial statements include the Group’sproportionate share of the entities’ assets, liabilities, revenue and expenseswith items of a similar nature on a line-by-line basis, from the date thatjoint control commences until the date that joint control ceases.

**Inventories**

Goods for resale, raw materials, and supplies arevalued at the lower of cost or net realizable value on balance sheet date.

**Derivatives**

Only for specific purposes derivative financialinstruments are used to hedge the Group’s exposure to foreign exchange andinterest rate risks arising from operational, financing and investmentactivities. In accordance with its treasury policy, the Group does not hold orissue derivative financial instruments for trading purposes. However,derivatives that do not qualify for hedge accounting under IFRS are accountedfor as trading instruments.

F-9

----

 

Derivatives are recognized initially at fair value.The gain or loss on remeasurement to fair value is recognized immediately asprofit or loss. The fair value of interest rate swaps is the estimated amountthat the Group would receive or pay to terminate the swap at the balance sheetdate, taking into account current interest rates and the currentcreditworthiness of the swap counterparties. The fair value of forward exchangecontracts is their quoted market price at the balance sheet date, being thepresent value of the quoted forward price.

**(Un)billed Receivables**

Unbilled receivables are stated at cost plus profitrecognized to date less a provision for foreseeable losses and less progressbillings. Cost includes all expenditures related directly to specific projectsand an allocation of fixed and variable overheads incurred in the Group’scontract activities based on normal operating capacity.

Trade and other receivables are valued at amortizedcosts.

**Cash and cashequivalents**

Cash and cash equivalentscomprise cash balances and call deposits. Bank overdrafts that are repayable ondemand and which form an integral part of the Group’s cash management areincluded as a component of cash and cash equivalents for the purpose of thestatement of cash flow.

**Equity**

*Repurchase ofshares*

The consideration paid for temporary repurchasedshares, which are repurchased in order to prevent dilution through the shareoption plan, is deducted from equity including directly attributable costs.

*Dividends*

Dividends are recognized as a liability in the periodin which they are declared.

**Provisions**

*General*

Provisions are recognized when there is a presentobligation (legal or constructive) as a result of a past event for which it isprobable that an outflow of resources embodying economic benefits will berequired to settle the obligation and a reliable estimate can be made of theamount of the obligation.

Provisions are stated atthe net present value, taking into account the timing of the cash outflows.

*Pensions*

In some countries limited plans are in place thatqualify as defined benefit plans. For these limited defined benefit plans, aprovision is created, which is based on actuarial calculations.

Obligations for contributions to defined contributionpension plans are recognized as a cost in the income statement as incurred.

*Other long-termemployee benefits*

The company’s net obligation for long-term servicebenefits, other than pension plans, is the amount of future benefit thatemployees have earned in return for their service in the current and priorperiods. The obligation is calculated using the projected unit credit methodand is discounted to its present value of any related assets that are deducted.This provision consists of a provision for jubilee payments and a provision forearly retirement.

**Long-term debt**

Interest- bearing debts are recorded against amortizedcost, in which the difference between the proceeds and the final repaymentamount is charged to the income statement during the duration of the debts. Theportion of

F-10

----

the long-term debt that has to be repaid within 1 yearafter balance sheet date is recorded as current portion of long-term debt underthe current liabilities, unless there is an intention to refinance therepayment with long-term debt.

**Impairment**

The carrying amounts of the assets of ARCADIS, otherthan work in progress and deferred tax assets, are reviewed at each balancesheet date to determine whether there is any indication of impairment.

For goodwill and assets that have an indefinite usefullife, the recoverable amount is estimated at each balance sheet date.

An impairment loss is recognized whenever the carryingamount of an asset or its cash-generating unit exceeds its recoverable amount.Impairment losses are recognized in the income statement. Impairment lossesrecognized in regard to cash-generating units are allocated first to reduce thecarrying amount of any goodwill allocated to cash-generating units and then, toreduce the carrying amount of the other assets in the unit on a pro rata basis.

The recoverable amount is the greater of the netselling price and value in use. In assessing the value in use, estimated futurecash flows are discounted to present value using a discount rate that reflectscurrent market assessments of the time value of money and the risks specific tothe asset.

An impairment loss of goodwill is not reversed.Regarding other assets, an impairment loss is reversed if there has been achange in the estimates used to determine the recoverable amount. An impairmentloss is reversed only to the extent that the asset’s carrying amount does notexceed the carrying amount that would have been determined, net of depreciationor amortization, if no impairment loss had been recognized.

**Method ofDetermination of Income**

**Gross revenue**

Net sales are the total amount charged to customers,less sales-related taxes. To provide a correct presentation of the Group’sactivities, net sales are adjusted for changes in work in progress. The changein work in progress includes the results of the current projects. Gains onsales of investments are shown separately.

Profits on projects are recorded according to thepercentage-of-completion method. Losses, calculated up to the completion of theproject, are recorded as soon as the loss situation is known. The balances ofthe projects on which no confirmation of order has been received are charged toincome.

**Materials,services of third parties, and subcontractors**

This amount represents all project- related costs ofmaterial and services charged by third parties including the costs of subcontractors.

**Operational cost**

All costs in relation to employees , as well asnon-project-related out-of-pocket expenses are taken into account asoperational cost in the year to which these items relate.

**Share-basedpayments**

The fair value of share based incentives under theARCADIS long-term incentive plan is determined at the date of grant and is proportionally charged to the incomestatement as personnel cost over the period in which they are conditional untilthe vesting date of the options.

The fair value of the granted options is determinedusing the Black Scholes model taking into account the conditions of thegranting. The cost charged will be adjusted for the actual number ofshare-based incentives that are cancelled.

F-11

----

The vesting and exerciseof shares may be conditional on the satisfaction of performance conditions oron continued employment, or both, as set by the Supervisory Board.

**Financing items**

Financing itemscomprise interest income and expenses (are accounted for in the year to whichthese items relate using the effective interest rate method) and gains orlosses on financial instruments.

**       Taxes**

       Income tax on Group income comprises bothcurrent and deferred tax. Income tax is recognized in the income statementexcept to the extent that it relates to items recognized directly in equity inwhich case it is recognized in equity.

**Deferred taxes**

Deferred taxassets and liabilities are recorded on the basis of the expected fiscalconsequences of temporary differences between the book value in the financialstatements and the tax reporting of all assets and liabilities. Calculation ofthe deferred taxes is against the at balance sheet date enacted orsubstantially enacted tax rates and tax laws that according to the expectationsare applicable when the deferred taxes will be settled. Deferred tax assets areonly recorded when it is more likely than not that there will be future fiscalprofits with which to settle these temporary differences or not-yet-compensatedfiscal losses. Deferred taxes are recorded at nominal value.

Provisions for deferredtaxes are based on the timing differences between book value and value for taxpurposes of assets and liabilities at current rates.

**       Income fromnon-consolidated companies**

       The proportionate share in earnings fromnon-consolidated participations is accounted for in the year these earnings arerecorded by those participations. For non-consolidated companies in whichARCADIS does not have significant influence, only dividends received areincluded in income.

**Segment reporting**

The four segmentson which the Company reports are the geographical segments. The differentiationin the type of services provided by the various group companies is limited.These services extend in general to consulting, engineering and projectmanagement services.

**       Earnings pershare**

       Basicearnings per share are computed using the weighted average number of ordinaryshares outstanding during the period. Diluted earnings per share are computedusing the weighted average number of ordinary shares and options outstandingduring the period, as far as the exercise price of these options is lower thanthe share price.

## **Principles of preparing the Cash FlowStatement**

The consolidatedcash flow statement compares the balance sheet at January 1 with that at December 31.Changes because of conversion of foreign currencies are eliminated. Investmentsin and divestments of consolidated companies are presented net of cash.

**Standardsissued, but not yet effective**

The company hasnot yet determined the impact of new accounting standards issued, but not yeteffective.

F-12

----

 

**Net Income Per Share of Common Stock**

Theweighted average number of shares outstanding, and the weighted average numberof diluted shares for the years presented were as follows:

 
| **Year** | ** ** | **Priority Shares** | ** ** | **Shares of Common  Stock** | ** ** | **Diluted Number of  Shares of Common  Stock** | ** ** |
|----------|------------|--------------------------|------------|---------------------------------------|------------|--------------------------------------------------------------------|------------|
| 2005     |       | 200                      |       | 20,260,512                            |       | 20,816,577                                                         |       |
| 2004     |       | 200                      |       | 20,139,995                            |       | 20,417,030                                                         |       |

 

The diluted number of shares is calculated by usingthe monthly number of options outstanding and the monthly average stock priceon the Amsterdam Stock Exchange and the Nasdaq National Market. Only optionswith exercise prices below the average stock price are taken into account.

**Subsequentevents**

No events haveoccurred after December 31, 2005, that would have changed the judgment andanalysis by management of the financial condition of the Company as per December 31,2005, or the net income for the year 2005.

**NOTE 2.  ACQUISITIONS AND DIVESTMENTS**

In 2005,the following interests in companies were acquired:

·                  SWK offersspecialist knowhow in the fields of transportation, mobility, harbors and civiland waterworks.

·                  GreystoneEnvironmental Consultants, Inc.,predominantly offers environmental consultancy services in the early phase ofprojects and serves.

·                  AYH,Plc. specializes in projectmanagement, cost control and consultancy for real estate projects for privatesector clients and governments.

·                  Blasland, Bouck & Lee, Inc.(BBL) specializes in environmental services and soil, groundwater and sedimentremediation services.

During 2005 the following interests have been sold(see note 18e):

·                      Grupo EP SA(Spain)

·                      RenardetS.A. (Switzerland)

·                      Sauti(Italy)

The total investment for acquisitions in 2005 was € 121 million,and resulted in goodwill of € 61 million. A goodwill amount of EUR2.8 million is expected to be deductible for tax purposes.

The goodwill acquired in 2005 was assigned as follows(in millions):

 
| **Geographical Area** | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|
| The Netherlands            |       | 0        |       | 1        |       |
| United States              |       | 44       |       | 7        |       |
| Europe                     |       | 16       |       | 5        |       |
| Rest of world              |       | 1        |       | 0        |       |
| Total goodwill paid        |       | 61       |       | 13       |       |

 

F-13

----

 

Of the EUR 121 million invested in acquisitions in2005, up to EUR 27 million will be paid after 2006 and is consequently recordedas a liability.

The following five companies were acquired in 2004:

·            Terence Dudley in theU.K. specializes in civil engineering and is an addition to the existingenvironmental activities in the English market.

·            With the acquisitionof the firm Profil in Poland, ARCADIS improved its position in the Polishinfrastructure market.

·            The acquisitionBessent, Hammack & Ruckman strengthens ARCADIS’ position in theFlorida infrastructure market.

·            The acquisition ofDiversity Partners adds program and construction management capabilities in theU.S, and are marketed under the names Construction Dynamics Group and Lewis &Zimmerman Associates.

·            Witpaard is an urbanplanning company, which strengthens ARCADIS’ position in the municipal marketin the Netherlands.

During 2004 thefollowing interests have been sold:

·      KAFI B.V. (The Netherlands)

·      Mandaat B.V. (TheNetherlands)

·      Involon B.V. (TheNetherlands)

All acquisitions during 2005 and 2004 were accountedfor by the purchase method. In 2004 EUR 3.1 million goodwill paid is deductiblefor tax purposes and in 2005 EUR 2.8 million, while only the goodwill paid onthe United States acquisitions is tax deductible.

F-14

----

 

The acquisitions and disposal of interestscompleted during 2005 had the following effect on the ARCADIS’ assets andliabilities.

 
| **amounts in thousands of euros unless otherwise stated** | ** ** | **Acquisitions** | ** ** | **Divestments** | ** ** | **Total**  | ** ** |
|----------------------------------------------------------------------------------------------|------------|------------------|------------|-----------------|------------|------------|------------|
|                                                                                         |       |             |       |            |       |       |       |
| **Assets**                                                                                   |       |             |       |            |       |       |       |
| **Non-current assets**                                                                       |       |             |       |            |       |       |       |
| Intangible  assets                                                                           |       | 3,327            |       | (2,384          | )          | 943        |       |
| Tangible assets                                                                              |       | 20,495           |       | (8,523          | )          | 11,972     |       |
| Investments in  non-consolidated companies                                                   |       | (1,047           | )          | 313             |       | (734       | )          |
| Other  investments                                                                           |       | 1,515            |       | (1,082          | )          | 433        |       |
| Deferred tax  assets                                                                         |       | 6,122            |       | —          |       | 6,122      |       |
|                                                                                         |       |             |       |            |       |       |       |
| **Total  non-current assets**                                                                |       | 30,412           |       | (11,676         | )          | 18,736     |       |
|                                                                                         |       |             |       |            |       |       |       |
| **Current assets**                                                                           |       |             |       |            |       |       |       |
| (Un)billed  receivables                                                                      |       | 63,395           |       | (44,914         | )          | 18,481     |       |
| Cash and cash  equivalents                                                                   |       | 19,454           |       | (6,461          | )          | 12,993     |       |
|                                                                                         |       |             |       |            |       |       |       |
| **Total  current assets**                                                                    |       | 82,849           |       | (51,375         | )          | 31,474     |       |
|                                                                                         |       |             |       |            |       |       |       |
| **Total  assets**                                                                            |       | 113,261          |       | (63,051         | )          | 50,210     |       |
|                                                                                         |       |             |       |            |       |       |       |
| **Liabilities and minority  interest**                                                       |       |             |       |            |       |       |       |
| ** **                                                                                   | ** ** | ** **       | ** ** | ** **      | ** ** | ** ** | ** ** |
| **Minority  interest**                                                                       |       | 302              |       | (1,090          | )          | (788       | )          |
|                                                                                         |       |             |       |            |       |       |       |
| Provisions                                                                                   |       | 493              |       | (1,972          | )          | (1,479     | )          |
| Deferred tax  liabilities                                                                    |       | 5,588            |       | —          |       | 5,588      |       |
| Long-term debt                                                                               |       | 6,142            |       | (5,678          | )          | 464        |       |
|                                                                                         |       |             |       |            |       |       |       |
| **Total  non-current liabilities**                                                           |       | 12,223           |       | (7,650          | )          | 4,573      |       |
|                                                                                         |       |             |       |            |       |       |       |
| Billing in  excess of cost                                                                   |       | 9,562            |       | (1,041          | )          | 8,521      |       |
| Trade and other  liabilities                                                                 |       | 42,728           |       | (40,768         | )          | 1,960      |       |
|                                                                                         |       |             |       |            |       |       |       |
| **Total  current liabilities**                                                               |       | 52,290           |       | (41,809         | )          | 10,481     |       |
|                                                                                         |       |             |       |            |       |       |       |
| **Total  liabilities and minority interest**                                                 |       | 64,815           |       | (50,549         | )          | 14,266     |       |
| ** **                                                                                   | ** ** | ** **       | ** ** | ** **      | ** ** | ** ** | ** ** |
| **Total  net value**                                                                         |       | 48,446           |       | (12,502         | )          | 35,944     |       |
|                                                                                         |       |             |       |            |       |       |       |
| **Recorded  goodwill**                                                                       |       | 61,273           |       | —          |       | 61,273     |       |
| **Book  gain**                                                                               |       | —           |       | (2,486          | )          | (2,486     | )          |
| **Identifiable  intangible assets**                                                          |       | 11,540           |       | —          |       | 11,540     |       |
| **Consideration  paid / (received)**                                                         |       | 121,259          |       | (14,988         | )          | 106,271    |       |
| ** **                                                                                   | ** ** | ** **       | ** ** | ** **      | ** ** | ** ** | ** ** |
| **After  payments not paid yet**                                                             |       | (26,766          | )          | —          |       | (26,766    | )          |
| **Cash  (acquired) / disposed**                                                              |       | (19,454          | )          | 6,461           |       | (12,993    | )          |
| **Net  cash outflow / (inflow)**                                                             |       | 75,039           |       | (8,527          | )          | 66,512     |       |
| ** **                                                                                   | ** ** | ** **       | ** ** | ** **      | ** ** | ** ** | ** ** |

 

F-15

----

 

**NOTE 3.  Segmentinformation**

**Geographical Area Information**

                Presented below is the geographical segmentation which coincides withthe Company’s reporting structure. The differentiation in the type of servicesprovided by the various group companies is limited and extends in general toconsulting, engineering and project management services. Therefore no othersegmentation information is included. The information presented belowillustrates the performance in the geographical areas in terms of grossrevenue, operating income, identifiable assets, and expenditures anddepreciation with respect to property, plant & equipment andintangible assets, and extraordinary items. Financing expenses and taxes onincome, among others, are not presented, because the Company manages itssegments on an operating income basis.

 
| ** **                                               | ** ** | **The  Netherlands** | ** ** | **United**

**States** | ** ** | **Other  European  countries** | ** ** | **Rest**

**of world** | ** ** | **Intra group** | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------|------------|----------------------|------------|------------------------|------------|--------------------------------|------------|-----------------------------|------------|----------------------|------------|------------------|------------|
|                                                     | ** ** | **2005**             | ** ** | **2004**               | ** ** | **2005**                       | ** ** | **2004**                    | ** ** | **2005**             | ** ** | **2004**         | ** ** | **2005** | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Gross revenue                                            |       | 287.7                |       | 301.3                  |       | 348.9                          |       | 267.3                       |       | 267.1                |       | 254.4            |       | 97.4 |   | 77.8 |   |   |   |   |   | 1,001.1 |   | 900.8 |   |
| Revenue between regions                             |       | 3.0                  |       | 3.3                    |       | 0.1                            |       | 0.0                         |       | 2.6                  |       | 1.2              |       | 0.2 |   | 0.1 |   | (5.9 | ) | (4.7 | ) | — |   | — |   |
| Total revenue                                            |       | 290.7                |       | 304.6                  |       | 349.0                          |       | 267.3                       |       | 269.7                |       | 255.6            |       | 97.6 |   | 77.9 |   | (5.9 | ) | (4.7 | ) | 1,001.1 |   | 900.8 |   |
| Materials, services of third parties and  subcontractors |       | 78.4                 |       | 83.2                   |       | 115.7                          |       | 82.9                        |       | 60.2                 |       | 70.8             |       | 49.4 |   | 36.0 |   | (5.9 | ) | (4.7 | ) | 297.8 |   | 268.2 |   |
| Net revenue                                              |       | 212.3                |       | 221.3                  |       | 233.3                          |       | 184.4                       |       | 209.4                |       | 184.8            |       | 48.2 |   | 42.0 |   |   |   |   |   | 703.3 |   | 632.5 |   |
| Operating costs                                          |       | 193.8                |       | 206.7                  |       | 208.1                          |       | 167.3                       |       | 184.3                |       | 167.9            |       | 41.6 |   | 38.9 |   |   |   |   |   | 627.7 |   | 581.0 |   |
| Depreciation                                             |       | 5.0                  |       | 6.9                    |       | 4.4                            |       | 3.7                         |       | 4.9                  |       | 4.3              |       | 0.8 |   | 0.7 |   |   |   |   |   | 15.2 |   | 15.6 |   |
| EBITA                                                    |       | 13.5                 |       | 7.7                    |       | 20.9                           |       | 13.4                        |       | 20.2                 |       | 12.5             |       | 5.8 |   | 2.3 |   |   |   |   |   | 60.4 |   | 35.9 |   |
| Amortization identifiable intangible assets              |       | 2.0                  |       | 0.1                    |       | 2.6                            |       | 0.1                         |       | 1.4                  |       | 0.2              |       | — |   | — |   |   |   |   |   | 6.0 |   | 0.4 |   |
| Operating income                                         |       | 11.5                 |       | 7.6                    |       | 18.3                           |       | 13.3                        |       | 18.8                 |       | 12.3             |       | 5.8 |   | 2.3 |   |   |   |   |   | 54.4 |   | 35.5 |   |
| Financing items                                          |       | (1.8                 | )          | (3.5                   | )          |                           |       |                        |       |                 |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Income of non-consolidated companies                     |       | 0.2                  |       | 0.5                    |       | —                         |       | 0.0                         |       | 0.0                  |       | 0.0              |       | 1.2 |   | 1.9 |   |   |   |   |   | 1.4 |   | 2.4 |   |
| Taxes                                                    |       | (17.3                | )          | (10.4                  | )          |                           |       |                        |       |                 |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Group income after taxes                            |       | 36.6                 |       | 24.1                   |       |                           |       |                        |       |                 |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Minority interest                                        |       | (3.2                 | )          | (1.9                   | )          |                           |       |                        |       |                 |       |             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income excluding extraordinaries                     |       | 11.4                 |       | 7.1                    |       | 9.1                            |       | 7.9                         |       | 11.1                 |       | 5.7              |       | 1.8 |   | 1.5 |   |   |   |   |   | 33.4 |   | 22.2 |   |
| EBITA on recurring basis                            |       | 12.5                 |       | 11.1                   |       | 20.9                           |       | 13.2                        |       | 18.1                 |       | 12.5             |       | 5.8 |   | 2.4 |   |   |   |   |   | 57.3 |   | 39.1 |   |
| Net income from operations                               |       | 11.4                 |       | 8.4                    |       | 9.1                            |       | 7.9                         |       | 11.1                 |       | 6.0              |       | 1.8 |   | 1.5 |   |   |   |   |   | 33.4 |   | 23.8 |   |

 

**Amounts inmillions of euros**

F-16

----

 
| ** **                | ** ** | **The  Netherlands** | ** ** | **United  States** | ** ** | **Other  European  countries** | ** ** | **Rest  of world** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|---------------------------|------------|----------------------|------------|--------------------|------------|--------------------------------|------------|-------------------------|------------|------------------|------------|------------------|------------|
| ** **                | ** ** | **2005**             | ** ** | **2004**           | ** ** | **2005**                       | ** ** | **2004**                | ** ** | **2005**         | ** ** | **2004**         | ** ** | **2005** | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Total assets              |       | 318.6                |       | 261.7              |       | 268.6                          |       | 110.3                   |       | 157.6            |       | 175.3            |       | 59.3 |   | 33.7 |   | (154.0 | ) | (138.6 | ) | 650.1 |   | 442.3 |   |
| Total financial assets    |       | 1.5                  |       | (6.0               | )          | 6.3                            |       | 3.6                     |       | 1.7              |       | 9.5              |       | 10.6 |   | 6.5 |   |   |   |   |   | 20.1 |   | 13.7 |   |
| Total liabilities         |       | 142.0                |       | 125.8              |       | 225.5                          |       | 59.5                    |       | 135.4            |       | 176.3            |       | 39.5 |   | 22.0 |   | (80.4 | ) | (86.7 | ) | 462.0 |   | 297.0 |   |
| Total investments         |       | 4.0                  |       | 3.1                |       | 6.2                            |       | 3.8                     |       | 5.8              |       | 4.4              |       | 1.6 |   | 0.5 |   |   |   |   |   | 17.7 |   | 11.8 |   |
| Total number of employees |       | 2,389                |       | 2,346              |       | 3,098                          |       | 2,222                   |       | 2,751            |       | 4,000            |       | 905 |   | 1,070 |   |   |   |   |   | 9,143 |   | 9,638 |   |

 

**Amounts inmillions of euros**

Presented below is our gross revenue by service area.We do not consider these service areas to be reportable segments. Wediscontinued our communications service area in 2004 and combined the remainingactivities with our infrastructure service area.

 

| Gross revenue by Service Area | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|
| Infrastructure                                    |       | 526      |       | 502      |       |
| Environment                                       |       | 295      |       | 243      |       |
| Facilities                                        |       | 180      |       | 144      |       |
| Communications                                    |       | —   |       | 12       |       |
|                                              |       | 1,001    |       | 901      |       |

 

**NOTE 4.  Cashand Cash Equivalents**

TheCompany’s policy is to invest cash in excess of operating requirements inhighly liquid investments with a maturity of three months or less. Cash andcash equivalents at December 31, 2005, and 2004 consisted of thefollowing:

 
| ** **                                                   | ** ** | **2005**           | ** ** | **2004**           | ** ** |
|--------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|
| Cash in banks  and on hand                                   |       | 64,856   |       | 46,549   |       |
| Cash in banks  restricted for taxes/social security premiums |       | 291                |       | 633                |       |
| Time deposits                                                |       | 8,737              |       | 1,037              |       |
| Total cash and  cash equivalents                             |       | 73,884             |       | 48,219             |       |

 

F-17

----

 

**NOTE 5.  (Un)billedreceivables**

Receivablesmaturing within one year as of December 31, 2005 and 2004 consisted of:

 
| ** **                                   | ** ** | **2005**                  | ** ** | **2004**                 | ** ** |
|----------------------------------------------|------------|---------------------------|------------|--------------------------|------------|
| Unbilled  receivables                        |       | 113,721    |       | 65,610    |       |
| Trade receivables                            |       | 215,474                   |       | 194,733                  |       |
| Provision for  bad debts                     |       | (11,140)                  |       | (13,348)                 |       |
| Receivables from  non-consolidated companies |       | 2,958                     |       | 3,650                    |       |
| Total receivables                            |       | 321,013                   |       | 250,645                  |       |

 

The provision for bad debts has developed as follows:

 
| ** **                    | ** ** | **2005**                       | ** ** | **2004**                       | ** ** |
|-------------------------------|------------|--------------------------------|------------|--------------------------------|------------|
| Balance at  beginning of year |       | 13,348     |       | 10,879     |       |
| Addition charged  to income   |       | 3,438                          |       | 4,432                          |       |
| Exchange rate  results        |       | 527                            |       | (110)                          |       |
| Deductions                    |       | (3,796)                        |       | (1,746)                        |       |
| Acquisitions /  divestments   |       | (2,377)                        |       | (107)                          |       |
| Balance at end of year        |       | 11,140                         |       | 13,348                         |       |

 

F-18

----

 

Costsand Estimated Earnings on Uncompleted Contracts are as follows:

 
| ** **                                                   | ** ** | **2005**                  | ** ** | **2004**            | ** ** |
|--------------------------------------------------------------|------------|---------------------------|------------|---------------------|------------|
| Costs incurred  on uncompleted contracts                     |       | 604,140    |       | 561,127   |       |
| Estimated  earnings                                          |       | 20,763                    |       | 20,667              |       |
| Subtotal                                                     |       | 624,903                   |       | 581,794             |       |
| Less: Billings  to date                                      |       | 600,451                   |       | 556,457             |       |
| Total work in process                                        |       | 24,452                    |       | 25,337              |       |
| All amounts are  expected to be collected within 1 year      |       |                      |       |                |       |
|                                                         | ** ** | **2005**                  | ** ** | **2004**            | ** ** |
| Costs incurred  and estimated earnings in excess of billings | ** ** | 113,721         | ** ** | 65,610    | ** ** |
| Billings in  excess of costs incurred and estimated earnings | ** ** | (89,269)                  | ** ** | (40,273)            | ** ** |
| Total work in process                                        | ** ** | 24,452                    | ** ** | 25,337              | ** ** |
| Amount of advances received                                  | ** ** | 17,675                    | ** ** | 13,543              | ** ** |
| Amount of retentions held by clients                         | ** ** | 1,392                     | ** ** | 2,801               | ** ** |
|                                                         | ** ** | ** **                | ** ** | ** **          | ** ** |

 

**NOTE 6.  Inventories**

Inventories at December 31,2005 and 2004 consisted of:

 
| ** **                  | ** ** | **2005**  | ** ** | **2004** | ** ** |
|-----------------------------|------------|-----------|------------|----------|------------|
| Raw materials  and supplies |       | 328  |       | 342      |       |
| Goods for resale            |       | 46        |       | 126      |       |
|                        |       |      |       |     |       |
| Total  inventories          |       | 374       |       | 468      |       |

 

F-19

----

 

**NOTE 7.  Tangibleassets**

Tangible assets atDecember 31, 2005 and 2004 consisted of :

 
| ** **                               | ** ** | **Land and** | ** ** | **Furniture**         | ** ** | ** ** | ** ** |
|------------------------------------------|------------|-------------------|------------|-----------------------|------------|------------|------------|
| **In thousands of euro**  | ** ** | **buildings**     | ** ** | **and fixtures** | ** ** | **Total**  | ** ** |
|                                     |       |              |       |                  |       |       |       |
| **Purchase price**                       | ** ** | ** **        | ** ** | ** **            | ** ** | ** ** | ** ** |
| Balance at  January 1, 2004         |       | 17,478            |       | 114,934               |       | 132,412    |       |
| (De)consolidations                       |       | —            |       | 880                   |       | 880        |       |
| Investments                              |       | 1,217             |       | 9,057                 |       | 10,274     |       |
| Divestments                              |       | (100              | )          | (7,269                | )          | (7,369     | )          |
| Effect of  movements in foreign exchange |       | 68                |       | (2,016                | )          | (1,948     | )          |
| Others                                   |       |              |       | 133                   |       | 133        |       |
| Balance at  December 31, 2004       |       | 18,663            |       | 115,719               |       | 134,382    |       |
|                                     |       |              |       |                  |       |       |       |
| 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    |       |
|                                     |       |              |       |                  |       |       |       |
| **Depreciation and impairment  losses**  | ** ** | ** **        | ** ** | ** **            | ** ** | ** ** | ** ** |
| Balance at  January 1, 2004         |       | 5,186             |       | 81,180                |       | 86,366     |       |
| Depreciation  charge for the year        |       | 1,049             |       | 12,411                |       | 13,460     |       |
| Deconsolidations                         |       | (136              | )          | (251                  | )          | (387       | )          |
| Divestments                              |       | (9                | )          | (6,905                | )          | (6,914     | )          |
| Effect of  movements in foreign exchange |       | 19                |       | (1,797                | )          | (1,778     | )          |
| Balance at  December 31, 2004       |       | 6,109             |       | 84,638                |       | 90,747     |       |
|                                     |       |              |       |                  |       |       |       |
| 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     |       |
|                                     |       |              |       |                  |       |       |       |
| **Carrying amounts**                     | ** ** | ** **        | ** ** | ** **            | ** ** | ** ** | ** ** |
| At  January 1, 2004                 |       | 12,292            |       | 33,754                |       | 46,046     |       |
| At  December 31, 2004               |       | 12,554            |       | 31,081                |       | 43,635     |       |
|                                     |       |              |       |                  |       |       |       |
| At  January 1, 2005                 |       | 12,554            |       | 31,081                |       | 43,635     |       |
| At  December 31, 2005               |       | 22,295            |       | 33,699                |       | 55,994     |       |
|                                     |       |              |       |                  |       |       |       |

 

At December 31, 2005, the book value of tangibleassets, financed by financial lease, was € 1,709 (2004: € 1,753).

F-20

----

 

**Intangible Assets**

Intangible assetsconsist of capitalized goodwill, identifiable intangibles and purchasedsoftware. The book value based on historical cost was as follows:

 
| ** **                               | ** ** | ** **   | ** ** | **Identifiable** | ** ** | ** **   | ** ** | ** ** | ** ** |
|------------------------------------------|------------|--------------|------------|------------------|------------|--------------|------------|------------|------------|
| ** **                               | ** ** | ** **   | ** ** | **intangible**   | ** ** | ** **   | ** ** | ** ** | ** ** |
| ** **                               | ** ** | **Goodwill** | ** ** | **assets**       | ** ** | **Software** | ** ** | **Total**  | ** ** |
|                                     |       |         |       |             |       |         |       |       |       |
| **Purchase price**                       |       |         |       |             |       |         |       |       |       |
| Balance at  January 1, 2004         |       | 38,183       |       | —           |       | 15,915       |       | 54,098     |       |
| (De)consolidations                       |       |         |       |             |       | (60          | )          | (60        | )          |
| Investments                              |       | 13,290       |       | 2,451            |       | 2,940        |       | 18,681     |       |
| Divestments                              |       |         |       |             |       | (610         | )          | (610       | )          |
| Effect of  movements in foreign exchange |       | (1,047       | )          |             |       | (164         | )          | (1,211     | )          |
| Reclassification                         |       | (500         | )          | 500              |       | —       |       | —     |       |
| Other changes                            |       |         |       |             |       | 80           |       | 80         |       |
| Balance at  December 31, 2004       |       | 49,926       |       | 2,951            |       | 18,101       |       | 70,978     |       |
|                                     |       |         |       |             |       |         |       |       |       |
| 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    |       |
|                                     |       |         |       |             |       |         |       |       |       |
| **Depreciation and impairment  losses**  | ** ** | ** **   | ** ** | ** **       | ** ** | ** **   | ** ** | ** ** | ** ** |
|                                     |       |         |       |             |       |         |       |       |       |
| Balance at  January 1, 2004         |       |         |       | —           |       | 12,707       |       | 12,707     |       |
| Depreciation  charge for the year        |       |         |       | 376              |       | 2,188        |       | 2,564      |       |
| (De)consolidations                       |       |         |       |             |       | (107         | )          | (107       | )          |
| Investments                              |       |         |       |             |       | 809          |       | 809        |       |
| Divestments                              |       |         |       |             |       | (191         | )          | (191       | )          |
| Effect of  movements in foreign exchange |       |         |       |             |       | (160         | )          | (160       | )          |
| Reclassification                         |       | (63          | )          | 63               |       |         |       | —     |       |
| Balance at  December 31, 2004       |       | (63          | )          | 439              |       | 15,246       |       | 15,622     |       |
|                                     |       |         |       |             |       |         |       |       |       |
| Balance at  January 1, 2005         |       | (63          | )          | 439              |       | 15,246       |       | 15,622     |       |
| 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     |       |
|                                     |       |         |       |             |       |         |       |       |       |
| At  January 1, 2004                 |       | 38,183       |       | —           |       | 3,208        |       | 41,391     |       |
| At  December 31, 2004               |       | 49,989       |       | 2,512            |       | 2,855        |       | 55,356     |       |
|                                     |       |         |       |             |       |         |       |       |       |
| At  January 1, 2005                 |       | 49,989       |       | 2,512            |       | 2,855        |       | 55,356     |       |
| At  December 31, 2005               |       | 115,983      |       | 8,263            |       | 3,615        |       | 127,861    |       |

F-21

----

 

The total goodwill capitalized was assigned to ourgeographic segments as follows:

 

|                           | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------|------------|----------|------------|----------|------------|
| The Netherlands           |       | 15,223   |       | 14,566   |       |
| United States             |       | 63,154   |       | 16,638   |       |
| Other European  Countries |       | 32,759   |       | 15,470   |       |
| Rest of world             |       | 4,847    |       | 3,315    |       |
| Total goodwill            |       | 115,983  |       | 49,989   |       |
|                      |       |     |       |     |       |

 

The amortization and depreciation charge is recognizedin the following line items in the income statement:

 

|                                              | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------------------------|------------|----------|------------|----------|------------|
| Amortization  identifiable intangible assets |       | 5,967    |       | 376      |       |
| Depreciation of  software                    |       | 1,732    |       | 2,188    |       |
|                                         |       |     |       |     |       |

 

The capitalized goodwill and identifiable intangibleassets were tested for impairment. This test did not result in an impairment.

F-22

----

 

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

The principal non-consolidatedinterests at December 31, 2005 were the Brazilian companies BreitenerEnergética SA (5.5% owned), PIE-RP Termelétrica SA (25.0% owned), and a numberof Dutch joint ventures.

Accounts receivable from and payables tonon-consolidated companies are included in the financial statements as currentassets and current liabilities, respectively, and amount to EUR 2,958 and EUR160, respectively.

 
| **Investments in non-consolidated companies** | *** *** | *** *** | *** *** | *** *** | *** *** |
|--------------------------------------------------------------|--------------|--------------|--------------|--------------|--------------|
| **Valued using the equity method**       | ** **   | **2005**     | ** **   | **2004**     | ** **   |
| * *                                                     | * *     | * *     | * *     | * *     | * *     |
| Balance at January 1                                    |         | 5,597        |         | 4,058        |         |
| **Changes as a result of**                                   |         |         |         |         |         |
| Equity share in  income                                      |         | 1,382        |         | 2,422        |         |
| Investments                                                  |         | 416          |         | 235          |         |
| (De)consolidations                                           |         | (734         | )            | 390          |         |
| Divestments                                                  |         | 34           |         | —       |         |
| Received  dividends                                          |         | (631         | )            | (2,073       | )            |
| Reclassification                                             |         | —       |         | (136         | )            |
| Other changes  and exchange rate differences                 |         | 1,387        |         | 701          |         |
|                                                         |         | 1,854        |         | 1,539        |         |
| *Balance at December 31*                                |         | 7,451        |         | 5,597        |         |

 

**Summarized Financial Informationof Non-Consolidated Companies**

Thefollowing tables present summarized financial information of ARCADISnon-consolidated companies in millions of EUR for fiscal years 2005 and 2004.

Summary of financial information on non-consolidatedcompanies — 100 per cent in millions:

** **
| ** ** | ** ** | **Assets** | ** ** | **Liabilities** | ** ** | **Equity** | ** ** | **Gross  Revenue** | ** ** | **Net income** | ** ** |
|------------|------------|------------|------------|-----------------|------------|------------|------------|--------------------|------------|---------------------|------------|
| 2005       |       | 108.4      |       | 26.5            |       | 81.9       |       | 86.8               |       | 29.8                |       |
| 2004       |       | 148.5      |       | 76.7            |       | 71.8       |       | 122.4              |       | 40.7                |       |

 

The financial condition and results of operations ofthe followings non-consolidated companies are included in the Balance SheetData and Income Statement Data presented above:

F-23

----

** **
| **% of Equity and Net Non-Consolidated Company Name** | ** ** | **Income** | ** ** |
|------------------------------------------------------------------------------------------|------------|------------|------------|
| PIE-RP  Termelétrica SA                                                             |       | 25.0       | %          |
| Breitener  Energética SA                                                            |       | 5.5        | %*         |
| Dynamicon B.V.                                                                           |       | 40.0       | %          |
| Ecosystems B.V.                                                                          |       | 20.0       | %          |
| Combinatie  Oost-Achterhoek B.V.                                                         |       | 20.0       | %          |
| Urbanet B.V.                                                                             |       | 25.0       | %          |
| Brainliner B.V.                                                                          |       | 33.3       | %          |
| Waterwolf  Dienstverlening Buitenruimte B.V.                                             |       | 40.0       | %          |
| Grubbenvorst VOF                                                                         |       | 33.3       | %          |
| Assetrail B.V.  i.o                                                                      |       | 20.0       | %          |
| VOF X-pact                                                                               |       | 12.0       | %*         |
| VOF Modislab                                                                             |       | 33.3       | %          |

----

*                    Thesecompanies are valued against equity value, because ARCADIS’ operationalinfluence is higher than its formal participation.

**Related partytransactions**

Besides the transaction with the LovinklaanFoundation, as mentioned in note 15, no other transactions with related partiestook place in 2005.

**Otherlong-term investments**

** **
| ** **                                             | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------------------|------------|----------|------------|----------|------------|
| Investments in  non-consolidated companies             |       | 501      |       | 641      |       |
| Long-term  receivables from non-consolidated companies |       | 1,438    |       | 456      |       |
| Total other long-term  investments                     |       | 1,939    |       | 1,097    |       |

 
| **Investments in non-consolidated companies** | *** *** | *** *** | *** *** | *** *** | *** *** |
|--------------------------------------------------------------|--------------|--------------|--------------|--------------|--------------|
| **Valued at amortized cost**                  | ** **   | **2005**     | ** **   | **2004**     | ** **   |
|                                                         |         |         |         |         |         |
| Balance at  January 1                                   |         | 641          |         | 1,223        |         |
| **Changes as a result of**                                   |         |         |         |         |         |
| Equity share in  income                                      |         | —       |         | 26           |         |
| Investments                                                  |         | 499          |         | 275          |         |
| (De)consolidations                                           |         | (583         | )            | (374         | )            |
| Divestments                                                  |         | (74          | )            | (150         | )            |
| Received  dividends                                          |         | —       |         | (26          | )            |
| Other changes  and exchange rate differences                 |         | 18           |         | (333         | )            |
|                                                         |         | (140         | )            | (582         | )            |
| *Balance at December 31*                                |         | 501          |         | 641          |         |

 

F-24

----

** **
| **Long-term receivables from non-consolidated companies** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                                          |       |     |       |     |       |
| Balance at  January 1                                                    |       | 456      |       | 1,051    |       |
| **Changes as a result of**                                                    |       |     |       |     |       |
| New receivables                                                               |       | 1,526    |       | 600      |       |
| Amortization  loans                                                           |       | —   |       | (700     | )          |
| Received                                                                      |       | (593     | )          | (407     | )          |
| Other changes  and exchange rate differences                                  |       | 49       |       | (88      | )          |
|                                                                          |       | 982      |       | (595     | )          |
| *Balance at December 31*                                                 |       | 1,438    |       | 456      |       |

 
| **Other assets**                        | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------------------------|------------|----------|------------|----------|------------|
| * *                                     | * *   | * * | * *   | * * | * *   |
| *Balance  at January 1*                 |       | 6,991    |       | 6,059    |       |
| **Changes as a result of**                   |       |     |       |     |       |
| Consolidations                               |       | 1,016    |       | 34       |       |
| New receivables                              |       | 3,416    |       | 1,416    |       |
| Received                                     |       | (1,565   | )          | (751     | )          |
| Reclassification                             |       | (180     | )          | 136      |       |
| Other changes  and exchange rate differences |       | 1,005    |       | 97       |       |
|                                         |       | 3,692    |       | 932      |       |
| *Balance at December 31*                |       | 10,683   |       | 6,991    |       |

 

**NOTE 9.   OTHER CURRENT LIABILITIES**

Othercurrent liabilities includes items maturing within one year and at December 31,2005 and 2004 consisted of:

 
| ** **                                 | ** ** | **2005**                 | ** ** | **2004**                 | ** ** |
|--------------------------------------------|------------|--------------------------|------------|--------------------------|------------|
| Taxes and social  security contributions   |       | 26,845    |       | 28,334    |       |
| Payable to  employees                      |       | 14,669                   |       | 14,172                   |       |
| Bank overdrafts  and short term borrowings |       | 4,196                    |       | 9,772                    |       |
| Other  liabilities                         |       | 73,103                   |       | 38,393                   |       |
| Total other  current liabilities           |       | 118,813                  |       | 90,671                   |       |

 

F-25

----

**NOTE 10.  LONG-TERM DEBT**

Long-termdebt at December 31, 2005 and 2004 consisted of:
| ** **                                                        | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Bank loans  (interest rates between 3.1% and 7.2%)                |       | 85,691   |       | 31,065   |       |
| Financial lease  contracts (interest rates between 3.0% and 6.8%) |       | 1,172    |       | 2,048    |       |
| Other long-term  debt (interest rates between 3.3% and 7.0%)      |       | 31,742   |       | 968      |       |
| Subtotal                                                          |       | 118,605  |       | 34,081   |       |
| Current portion                                                   |       | 2,456    |       | 21,115   |       |
| Total long-term debt                                              |       | 116,149  |       | 12,966   |       |

 

The weighted average interest rate for 2005 and 2004on interest bearing debt was 3.1%****and****4.7%, respectively.

The aggregate maturity of long-term debt as of December 31,2005 is as follows:

|                                                             | **Years ending December 31,** | ** ** | ** ** | **Amount** | ** ** |
|-------------------------------------------------------------|------------------------------------|------------|------------|------------|------------|
| 2006                                                        |                               | 76,290     | (1)        |
| 2007                                                        |                               | 16,569     |       |
| 2008                                                        |                               | 1,508      |       |
| 2009                                                        |                               | 271        |       |
| 2010                                                        |                               | 1,514      |       |
|          Thereafter |                               | 19,997     |       |
|  Total                                                 |                               | 116,149    |       |

 

----

1)                 In2006, this debt will be refinanced on a long-term basis with due date in 2011and is therefore classified long-term.

ARCADIS and its consolidated companies have short-termcredit facilities available in the amount of EUR 258 million (2004: EUR172 million) under arrangements with banks at interest rates whichapproximate the bank’s prime rates. At December 31, 2005, an amount of EUR2.1 million (2004: EUR 9.8 million) was utilized from these creditfacilities, and approximately EUR 40.0 million was used for guarantees(performance bonds), leaving approximately EUR 215.9 million available. Aperformance bond is a guarantee given by ARCADIS to the client related to theperformance to be provided by ARCADIS. This secures the client with an income,in case ARCADIS would not perform according to the stipulations in the contractfor which the performance bond is issued. If, however, ARCADIS fully meets allthe requirements, the bond will be canceled.

F-26

----

**NOTE 11.  DEFERRED TAX ASSETS AND LIABILITIES**
| ** **                                  | ** ** | **Deferred  Tax  Assets** | ** ** | **Deferred  Tax  liabilities** | ** ** | **Total** | ** ** |
|---------------------------------------------|------------|---------------------------|------------|--------------------------------|------------|-----------|------------|
| Balance at  January 1, 2004            |       | (8,702                    | )          | 14,012                         |       | 5,310     |       |
| Changes 2004 as  a result of Consolidations |       | (107                      | )          | 703                            |       | 596       |       |
| Deconsolidations                            |       | —                    |       | (268                           | )          | (268      | )          |
| Additions                                   |       | (1,246                    | )          | 317                            |       | (929      | )          |
| Amounts used                                |       | 111                       |       | (1,861                         | )          | (1,750    | )          |
| Exchange rate  differences                  |       | 268                       |       | (774                           | )          | (506      | )          |
| Balance at  December 31, 2004          |       | (9,676                    | )          | 12,129                         |       | 2,453     |       |
| Changes 2005 as  a result of 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    |       |

 

Thecomponents of deferred taxes included in the Consolidated Balance Sheets at December 31,2005 and 2004 are as follows:
| ** **                   | ** ** | **Assets**  | ** ** | **Liabilities** | ** ** | **Net**    | ** ** |
|------------------------------|------------|-------------|------------|-----------------|------------|------------|------------|
| **Sources of  deferral**     | ** ** | ** **  | ** ** | **2005**        | ** ** | **2004**   | ** ** | **2005** | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Goodwill/identifiables       |       | —      |       | —          |       | 3,038      |       | 206 |   | 3,038 |   | 206 |   |
| Derivatives                  |       | —      |       | —          |       | 510        |       | — |   | 510 |   | — |   |
| Work in progress             |       | (580        | )          | (324            | )          | 18,958     |       | 10,635 |   | 18,378 |   | 10,311 |   |
| Accrued expenses             |       | (5,482      | )          | (3,568          | )          | —     |       | — |   | (5,482 | ) | (3,568 | ) |
| Share based  payments        |       | (1,960      | )          | —          |       | —     |       | — |   | (1,960 | ) | — |   |
| Deferred  compensation       |       | (2,202      | )          | (5,784          | )          | —     |       | — |   | (2,202 | ) | (5,784 | ) |
| Cash method                  |       | —      |       | —          |       | 3,054      |       | 901 |   | 3,054 |   | 901 |   |
| Net operating  losses        |       | (4,873      | )          | (1,885          | )          | —     |       | — |   | (4,873 | ) | (1,885 | ) |
| Less valuation  allowance    |       | 1,885       |       | 1,885           |       | —     |       | — |   | 1,885 |   | 1,885 |   |
| Others                       |       | —      |       | —          |       | 692        |       | 387 |   | 692 |   | 387 |   |
| Balance at  December 31 | ** ** | **(13,212** | **)**      | **(9,676**      | **)**      | **26,252** | ** ** | **12,129** | ** ** | **13,040** | ** ** | **2,453** | ** ** |
|                              |            |             |            |                 |            |            |            |  |  |  |  |  |  |  |  |

 

The valuationallowance has been established to reserve for recognition of tax benefits onnet operating losses of certain subsidiary companies. The gross operatinglosses which might be compensated by future profits amount to EUR 13,035 in2005 and EUR 5,172 in 2004. The change in valuation allowance for fiscal 2005amounted to EUR 0.0 million and in 2004 amounted to a decrease of EUR 0.1million,.

F-27

----

**NOTE 12.  OTHERLONG-TERM LIABILITIES**
| ** **                                    | ** ** | **Pension  Obligations** | ** ** | **Deferred  Compensation** | ** ** | **Restructuring** | ** ** | **Litigation** | ** ** | **Other** | ** ** | **Total** | ** ** |
|-----------------------------------------------|------------|--------------------------|------------|----------------------------|------------|-------------------|------------|----------------|------------|-----------|------------|-----------|------------|
| Balance at  January 1, 2004         |       | 17,370                   |       | 1,207                      |       | 3,999             |       | 1,155          |       | 725       |       | 24,456    |       |
| Changes 2004 as  a result of Deconsolidations |       | —                   |       | —                     |       | (1,079            | )          | —         |       | —    |       | (1,079    | )          |
| Additions                                     |       | 1,902                    |       | —                     |       | 9,451             |       | 323            |       | 881       |       | 12,557    |       |
| Amounts used                                  |       | (205                     | )          | (13                        | )          | (7,911            | )          | (75            | )          | (147      | )          | (8,351    | )          |
| Exchange rate  differences                    |       | (164                     | )          | —                     |       | —            |       | —         |       | —    |       | (164      | )          |
| Balance at  December 31, 2004            |       | 18,903                   |       | 1,194                      |       | 4,460             |       | 1,403          |       | 1,459     |       | 27,419    |       |
| Changes 2005 as  a result of Consolidations   |       | —                   |       | —                     |       | —            |       | 493            |       | —    |       | 493       |       |
| Deconsolidations                              |       | —                   |       | —                     |       | (966              | )          | (145           | )          | (861      | )          | (1,972    | )          |
| 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    |       |

 

     Ofthe provisions, the amount of € 4.0 million is of a current nature. Non-currentis € 11.8 million.

****Pensions****

Employees of PRC,which was acquired in 2003, until recently had a pension plan that under IFRSwas classified as a defined benefitpension plan. In the transition from NL GAAP to IFRS a provision wasrecorded in the 2004 opening balance sheet, which was charged directly toequity. By the end of 2005 the defined benefit pension plan was changed into adefined contribution pension plan. The provision of € 13.1 million recorded asof December 31, 2004 for the defined benefit pension plan, was released toincome in 2005.

**Other categories of provisions**

The restructuringprovision is built for the restructuring of some parts of the Company,especially in the Netherlands. ARCADIS has received claims. As far as theseclaims are not covered by professional liability insurances, a provision forlitigation is built. Some minor provisions are taken on an aggregate levelunder the heading “Other provisions”.

F-28

----

**NOTE 13.  SHAREHOLDERS’ EQUITY**

***Share capital.**** *At December 31,2005,  ARCADIS’ authorized share capitalwas EUR 5,000,010, divided into 200 priority shares, par value EUR 0.05;50,000,000 shares of cumulative preferred stock, par value EUR 0.05; 10,000,000shares of cumulative financing preferred stock (divided over four series of2,500,000 shares each), and 40,000,000 shares of common stock, par value EUR0.05. At December 31, 2005, the number of shares issued consisted of 200priority shares, and 20,645,615 shares of common stock. No shares of preferredstock are issued or outstanding.

The priority shares are held by the “StichtingPrioriteit ARCADIS N.V.”, a non-profit foundation which currently has 20 boardmembers: seven members of the ARCADIS’ Supervisory Board, three members of theARCADIS’ Executive Board and ten members from the Board of the FoundationBellevue, a foundation established in Arnhem, who’s board members are appointedby and from ARCADIS’ international employee base of the ARCADIS group. Under theArticles of Association, certain transactions by ARCADIS must be approved byvote of at least eleven of the directors of the Stichting Prioriteit ARCADISN.V.. Actions which require approval of the Foundation are as follows:

 (1)   The issuance, acquisition and disposalof shares in the Company;

 (2)   Amendments to the Articles of Association;

 (3)   The dissolution of the Company and the filingfor bankruptcy;

 (4)   The entry into or termination of long-termcooperative ventures of substantial significance; and

 (5)  Investments (including entering into participations) for an amount equalto at least 25% of shareholders’ equity.

The Stichting Preferente Aandelen ARCADIS N.V.(Preferred Stock Foundation ARCADIS N.V.) established in Arnhem since 1995, hasas its objective the protection and promotion of the interests of ARCADIS N.V.and its affiliated companies and all parties involved. The Board of thisFoundation consists of four persons appointed by the Company’s Executive Board.The Foundation has been granted the right to acquire the ARCADIS’ preferred(protection) shares up to a maximum equal to the number of outstanding sharesissued at the date in question.   ARCADISN.V. has been granted the right to issue the same number of preferred shares tothe Foundation. Both options may only be exercised provided the interests ofARCADIS N.V., its affiliated enterprises, and all parties involved were towarrant this.

# ***ARCADIS NV 1994 and 1996Incentive Plan***

ARCADIS NV had specific employee stock options plansfor its American employees. At December 31, 2005, 287,664 (2004: 454,139)options were outstanding. These can be exercised at prices ranging from US$6.75 to US$ 15.00 (2004: US$ 6.75 and US$ 15.00); the average exercise price isUS$ 10.20  (2004: US$ 9.77). During 2005,no options were granted under these plans. During 2005, 142,350 options wereexercised (2004: 223,238) with exercise prices between US$ 6.75 and US$ 11.50(2004: US$ 6.75 and US$ 11.50), while 24,125 options with exercise pricesranging from US$ 6.75 to US$ 15.00 were cancelled. The closing price of ARCADISshares on NASDAQ on December 31, 2005, was US$ 31.60 (2004: US$ 18.42).One option entitles the holder to one share. On December 31, 2005, optionholders had the opportunity to exercise 148,639 options at prices ranging fromUS$ 6.75 to US$ 14.60. These plans expired in 2003 and in May 2005, sothat no new options may be granted under these plans. The options granted underthese plans are valid for a ten-year period and generally become vested after athree-year period.

#### ***ARCADIS NV 2001 Long Term Incentive Share Option Plan***

From 2001, a new worldwide option plan was introducedfor the senior management of the Company. On May 13, 2005, 210,000 optionswere granted under this plan with an exercise price of € 17.94. In May andJune, 28,220 options with exercise prices ranging from US$ 21.77 to US$ 23.01were granted to the Corporate Director of Mergers & Acquisitions. In June 2005,49,980 options were granted to the management and key staff of AYH related tothe acquisition of the company. The exercise price is € 19.25. On December 31,2005, a total number of 899,391 options were outstanding under the 2001 plan.The average exercise price is € 12.00. On December 31, 2005, optionholders had the opportunity to exercise 167,200 options against prices varyingfrom € 9.20 to € 10.79. The closing price of ARCADIS shares on Euronext on December 30,2005 was € 26.80.

F-29

----

#### ***ARCADIS NV 2005 Long-TermIncentive 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:

·                  Inaddition to rights to shares (option rights) other share-related incentives canbe granted, such as Stock Appreciation Rights, Restricted Stock (units) andIncentive shares.

·                  Thegranting of (rights to) shares can be related to the goals or performancecriteria as set by the ARCADIS NV Supervisory Board. This Committee alsodetermines the moment at which the granted (rights to) shares can be exercised.

·                  Thenumber of (rights to) shares totals 2,500,000. The plan has been extended to December 31,2011. In its December 2005 meeting, the Supervisory Board approved therevised text of the 2001 plan, now titled the ARCADIS NV 2005 Long-TermIncentive Plan.

On May 13, 2005, and under the conditions of this plan, 40,000conditional options ware granted to the members of the Executive Board againstan exercise price of € 17,94. In addition, under of this plan, 60,000 options(with an exercise price US$ 21.01) were granted to the Corporate Director of Mergers & Acquisitions,**and**149,968options (with an exercise price US$ 21.14) were granted to the management andkey staff of BBL related to the acquisition of that company. In May 2005under the conditions of this plan, 17,000 conditional share units were grantedto the members of the Executive Board, in line with the revised remunerationpolicy for the Executive Board as adopted by the General Meeting ofShareholders in May 2005. The administrative settlement of these optionsand shares will take place in the first quarter of 2006.

**Overviewof incentive shares granted**
| **Provisional (rights to) shares granted on** | ** ** | ** ** | ** ** | **Granted** | ** ** | **Unconditional in** | ** ** | **Amount** | ** ** | **Expired** | ** ** |
|------------------------------------------------------------------------|------------|------------|------------|-------------|------------|----------------------|------------|------------|------------|-------------|------------|
| May 11, 2005                                                      |       | 17,000     |       | 2008        |       | 191,418              |       |       |       |

 

F-30

----

 

**Overviewof options granted**
| ** **      | **Option plan  from year** | ** ** | ** ** | **Maximum** | ** ** | **Granted** | ** ** | **Exercise  price** | ** ** | **Withdrawn** | ** ** | **Exercised** | ** ** | **Outstanding** | ** ** | **Expiration**date | ** ** |
|-----------------|--------------------------------------|------------|------------|-------------|------------|-------------|------------|---------------------|------------|---------------|------------|---------------|------------|-----------------|------------|--------------------|------------|
| 1994            |                                 | 520,000    |       | *) 51,878   |       | US$9.13     |       | 35,752              |       | 16,126        |       | 0             |       | 03-26-2006      |       |
|            |                                 |       |       | 74,500      |       | US$9.13     |       | 34,442              |       | 35,058        |       | 5,000         |       | 03-26-2006      |       |
| 1996            |                                 | 850,000    |       | 99,695      |       | US$11.50    |       | 38,000              |       | 59,195        |       | 2.500         |       | 04-01-2008      |       |
|            |                                 |       |       | *)305       |       | US$11.50    |       | —              |       | 305           |       | 0             |       | 04-01-2008      |       |
|            |                                 |       |       | 82,500      |       | US$6.75     |       | 25,270              |       | 44,360        |       | 12,870        |       | 03-17-2009      |       |
|            |                                 |       |       | 122,123     |       | US$6.75     |       | 28,900              |       | 62,495        |       | 30,728        |       | 05-17-2010      |       |
|            |                                 |       |       | *)6,627     |       | US$6.75     |       | —              |       | 2,605         |       | 4,022         |       | 05-17-2010      |       |
|            |                                 |       |       | 110,937     |       | US$8.00     |       | 36,700              |       | 29,390        |       | 44,847        |       | 05-23-2011      |       |
|            |                                 |       |       | *)7,813     |       | US$8.00     |       | —              |       | 3,810         |       | 4,003         |       | 05-23-2011      |       |
|            |                                 |       |       | 31,779      |       | US$9.44     |       | —              |       | 24,717        |       | 7,062         |       | 06-14-2012      |       |
|            |                                 |       |       | *)3,221     |       | US$9.44     |       | —              |       | 2,147         |       | 1,074         |       | 06-14-2012      |       |
|            |                                 |       |       | 10,000      |       | US$10.25    |       | —              |       | —        |       | 10,000        |       | 05-09-2013      |       |
|            |                                 |       |       | 60,000      |       | US$11.50    |       | 9,600               |       | —        |       | 50,400        |       | 06-13-2013      |       |
|            |                                 |       |       | 30,000      |       | US$8.70     |       | 2,000               |       | —        |       | 28,000        |       | 08-18-2013      |       |
|            |                                 |       |       | *) 19,848   |       | US$11.85    |       | —              |       | —        |       | 19,848        |       | 06-13-2013      |       |
|            |                                 |       |       | 787         |       | US$9.86     |       | —              |       | —        |       | 787           |       | 05-09-2013      |       |
|            |                                 |       |       | *)7,865     |       | US$8.75     |       | —              |       | 5,243         |       | 2,622         |       | 08-18-2013      |       |
|            |                                 |       |       | 1,257       |       | US$9.33     |       | —              |       | —        |       | 1,257         |       | 05-07-2013      |       |
|            |                                 |       |       | *) 1,088    |       | US$10.06    |       | —              |       | —        |       | 1,088         |       | 08-08-2013      |       |
|            |                                 |       |       | *) 30,800   |       | US$10.19    |       | —              |       | 26,200        |       | 4,600         |       | 10-16-2013      |       |
|            |                                 |       |       | 2,136       |       | US$11.80    |       | —              |       | —        |       | 2,136         |       | 12-31-2013      |       |
|            |                                 |       |       | 7,864       |       | US$11.80    |       | —              |       | —        |       | 7,864         |       | 12-31-2013      |       |
|            |                                 |       |       | *) 1,456    |       | US$13.70    |       | —              |       | —        |       | 1,456         |       | 06-29-2014      |       |
|            |                                 |       |       | *) 4,525    |       | US$14.00    |       | —              |       | —        |       | 4,525         |       | 09-24-2014      |       |
|            |                                 |       |       | *) 5,200    |       | US$14.29    |       | —              |       | —        |       | 5,200         |       | 10-15-2014      |       |
|            |                                 |       |       | *) 8,000    |       | US$14.60    |       | —              |       | —        |       | 8,000         |       | 11-03-2014      |       |
|            |                                 |       |       | 30,000      |       | US$15.00    |       | 2,225               |       | —        |       | 27,775        |       | 11-03-2014      |       |
|            |                                 |       |       |        |       |        |       |                |       |          |       |          |       |            |       |
| *Subtotals*     |                                 |       | * *   | *812,204*   | * *   | * *    | * *   | *212,889*           | * *   | *311,651*     | * *   | *287,664*     | * *   | * *        | * *   |
| *1994/1996*     |                                 |       |       |        |       |        |       |                |       |          |       |          |       |            |       |
| 2001            |                                 | 2,500,000  |       | 195,000     |       | €9.20  |       | 5,000               |       | 140,000       |       | 50,000        |       | 05-22-2011      |       |
|            |                                 |       |       | 254,100     |       | €10.79 |       | 55,622              |       | 90,278        |       | 108,200       |       | 05-15-2012      |       |
|            |                                 |       |       | 9,000       |       | €8.50  |       | —              |       | —        |       | 9,000         |       | 08-28-2012      |       |
|            |                                 |       |       | 290,250     |       | €8.93  |       | 56,389              |       | 611           |       | 233,250       |       | 05-13-2013      |       |
|            |                                 |       |       | 230,779     |       | €8.50  |       | 3,682               |       | —        |       | 227,097       |       | 10-16-2013      |       |
|            |                                 |       |       | 210,000     |       | €17.94 |       | 13,500              |       | —        |       | 196,500       |       | 05-10-2015      |       |
|            |                                 |       |       | 5,160       |       | US$21.77    |       | —              |       | —        |       | 5,160         |       | 05-11-2015      |       |
|            |                                 |       |       | 18,260      |       | US$23.01    |       | —              |       | —        |       | 18,260        |       | 06-23-2015      |       |
|            |                                 |       |       | 4,800       |       | US$23.00    |       | —              |       | —        |       | 4,800         |       | 06-30-2015      |       |
|            |                                 |       |       | 49,980      |       | €19.25 |       | 2,856               |       | —        |       | 47,124        |       | 06-23-2015      |       |
| * *        |                                 |       | * *   | * *    |       |        | * *   | * *            | * *   | * *      | * *   | * *      | * *   | * *        | * *   |
| *Subtotal 2001* |                                 |       | * *   | *1,267,329* |       |        | * *   | *137,049*           | * *   | *230,889*     | * *   | *899,391*     | * *   | * *        | * *   |
| 2005            |                                 |       |       | 40,000      |       | €17.94 |       | —              |       | —        |       | 40,000        |       | 05-10-2015      |       |
|            |                                 |       |       | 60,000      |       | €21.01 |       | —              |       | —        |       | 60,000        |       | 09-30-2015      |       |
|            |                                 |       |       | 149,968     |       | US$21.14    |       | —              |       | —        |       | 149,968       |       | 09-30-2015      |       |
| * *        |                                 |       |       |        |       |        |       |                |       |          |       |          |       |            |       |
| *Subtotal 2005* |                                 |       |       | 249,968     |       |        |       | —              |       | —        |       | 249,968       |       |            |       |
| Total           |                                 |       |       | 2,329,501   |       |        |       | 349,938             |       | 542,540       |       | 1,437,023     |       |            |       |

 

*) “Unconditional”

F-31

----

 

A summary of thecombined activities under ARCADIS Stock Option Plans for each year in thetwo-year period ended December 31, 2005 is as follows:
| ** **                             | ** ** | **Number of  ARCADIS  Shares** | ** ** | **Exercise price  range in US$** | ** ** | **Number of  ARCADIS  Shares** | ** ** | **Exercise price  range in  EUR** | ** ** |
|----------------------------------------|------------|-------------------------------------|------------|-------------------------------------------------|------------|-------------------------------------|------------|---------------------------------------------|------------|
| Balance —  January 1, 2004   |       | 607,768                             |       | 6.75 to 11.85                                   |       | 953,129                             |       | 8.50 to 10.79                               |       |
| Granted                                |       | 91,069                              |       | 10.06 to 15.00                                  |       | —                              |       | —                                      |       |
| Exercised                              |       | (223,238                            | )          | 6.75 to 11.50                                   |       | (70,000                             | )          | 9.20                                        |       |
| Forfeited                              |       | (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                                |       | 28,220                              |       | 21.77 to 23.01                                  |       | 509,948                             |       | 17.94 to 21.14                              |       |
| 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 |       | 315,884                             |       | 6.75 to 23.01                                   |       | 1,121,139                           |       | 8.50 to 21.14                               |       |

 

At December 31,2005 and 2004, options to purchase 315,839 and 346,421 shares, respectively,were exercisable.

Totaloptions outstanding and exercisable at December 31, 2005 were as follows:
| ** **      | ** **                                | **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      |                                      | 96,470                       |       | 4.8                          |       | $7.38                           |   | 83,620 |   | $7.29 |   |
| $8.51-10.00     |                                      | 45,802                       |       | 6.6                          |       | 8.92                            |   | 17,802 |   | 9.26 |   |
| $10.01-11.50    |                                      | 68,588                       |       | 7.2                          |       | 11.21                           |   | 8,188 |   | 10.57 |   |
| $11.51-15.00    |                                      | 76,804                       |       | 8.3                          |       | 13.60                           |   | 39,029 |   | 13.06 |   |
| $15.01-20.00    |                                      | —                       |       | —                       |       | —                          |   | — |   | — |   |
| $20.01-24.00    |                                      | 28,220                       |       | 9.5                          |       | 22.78                           |   | — |   | — |   |
| Total           |                                      | 315,884                      |       |                         |       | Average 11.32                   |   | 148,639 |   | Average 9.22 |   |
| EUR 8.50-11.00  |                                      | 627,547                      |       | 7.0                          |       | EUR 9.11                        |   | 167,200 |   | EUR 10.19 |   |
| EUR 11.01-17.00 |                                      | —                       |       | —                       |       | —                          |   | — |   | — |   |
| EUR 17.01-22.00 |                                      | 493,592                      |       | 9.5                          |       | 19.41                           |   | — |   | — |   |
| Total           |                                      | 1,121,139                    |       |                         |       | Average 13.65                   |   | 167,200 |   | Average 10.19 |   |
|                 |                                           |                              |            |                              |            |                                 |  |  |  |  |  |  |  |  |  |  |  |

 

# **Purchase or issuance of shares**

Regarding the ARCADISIncentive plans, the intention is to minimize dilution by purchasing (a portionof) the shares needed for these plans. In 2005, no shares were issued as aresult of options being exercised (2004: 215,238). The following amounts ofshares were 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     |       | US$18.40 to US$18.65         |
| 2005     |       | 217,013    |       | € 18.25 to € 27.24 |
| 2005     |       | 115,033    |       | US$17.00 to US$30.94         |

 

F-32

----

 

In 2005, the Companyrepurchased 217,013 shares against a price ranging from € 18.25 to € 27.24, and115,033 shares against a price ranging from US $ 17.00 to US $ 30.94; theseshares are to cover the options granted. This temporary repurchase has been deductedfrom the Other Reserves.

Of the sharespurchased, a total number of 303,239 throughout 2005 have been placed back inthe market through the exercise of options. The net proceeds were € 2,624,000-.

Outstanding shares ofcommon 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           |       |

 

*Additional paid-in capital**.***Additional paid-in capital represents the premium paidin excess of par value of shares at the time of issuance of new shares orexercise of stock options. If ARCADIS declared a distribution to shareholdersof additional paid-in-capital, at least EUR 17.6 million of the additionalpaid-in capital would not be taxable under the 1964 Dutch income taxlegislation.

At the end of 2005 an agreement was made with theLovinklaan foundation, ARCADIS’ largest shareholder, that this foundation wouldpay ARCADIS € 6,509 to support an adjustment of the early retirement plan forDutch employees (see note 10). Such payment by a shareholder is consideredadditional paid-in capital.

*               **Retainedearnings.*  TheExecutive Board is authorized to propose to the Annual General Meeting ofShareholders, with the approval of the Supervisory Board, which part of theprofit shall be paid as dividend. That which remains shall be added to theequity of the Company. The holder of the priority shares is entitled to adividend of 5% of the par value of the priority shares. For fiscal year 2005,the Executive Board with the approval of the Supervisory Board proposes topresent for approval by the Annual General Meeting of Shareholders a dividendamount of EUR 13.4 million which represents a dividend of EUR 0.66 peroutstanding share of common stock. On May 17, 2006, the Annual GeneralMeeting of Shareholders of ARCADIS NV approved the 2005 dividend proposal. Forfiscal year 2004, a dividend was proposed and accepted amounting to EUR 0.48per outstanding share of common stock. There are no restrictions on thedistribution of retained earnings.

**NOTE 14.  COMMITMENTS AND CONTINGENT LIABILITIES**

   Bankshave issued guarantees (performance bonds) up to the amount of € 40.0 million(2004: € 37.7 million).

    Paymentsmade under non-cancelable operating leases during 2005 and 2004 were EUR 29.6million and EUR 32.8 million respectively. Commitments on account of rentand operational lease contracts amount to €  142.6 million (2004: € 121.6 million).Future minimum payments for these non-cancellable operating leases during thenext five years and thereafter are as follows (in millions of EUR):
| **Years ending  December 31,**                   | ** ** | **Amount**Operational  Lease |
|-------------------------------------------------------|------------|------------------------------|
|          2006 |       | 34.4                         |
|          2007 |       | 27.3                         |
|          2008 |       | 22.2                         |
|          2009 |       | 18.7                         |
|          2010 |       | 25.8                         |
| Thereafter                                            |       | 14.2                         |
|                                                  |       |                         |
|         Total      |       | 142.6                        |

 

F-33

----

 

At December 31,2005, ARCADIS had EUR 26.8 million commitments arising from acquisitions andparticipations.

**Litigation**

ARCADIS N.V. andits group companies are from time to time involved in litigation issues, all ofwhich are contested. Also based on legal advice, management believes that theoutcome of pending cases will not have a material effect on the consolidatedfinancial condition of Arcadis N.V. but could be material to the Company’soperational results in any one accounting period.

**Guarantees**

As a partner in anumber of partnerships, ARCADIS is liable for the contractual obligations thesecompanies enter into. The potential risk pertaining to these obligationsamounted to € 0.3 million (2004: € 0.4 million).

**NOTE 15. OPERATIONAL COST**

The operationalcost for the years 2005 and 2004 consist of following items:
| ** **                                       | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|
| Salaries and  wages                              |       | 349,966  |       | 325,497  |       |
| Social charges                                   |       | 55,284   |       | 51,152   |       |
| Pension and  early retirement charges            |       | 15,574   |       | 16,791   |       |
| Other personnel  costs including temporary labor |       | 63,657   |       | 55,280   |       |
| Total personnel  cost                            |       | 484,481  |       | 448,720  |       |
| Occupancy  expenses                              |       | 42,986   |       | 42,919   |       |
| Travel expenses                                  |       | 32,274   |       | 29,615   |       |
| Office expenses                                  |       | 23,308   |       | 19,659   |       |
| Other operational  cost                          |       | 44,636   |       | 40,075   |       |
|                                             |       | 627,685  |       | 580,988  |       |

 

**Option expenses**

In accordance with IFRS 2, the company’s stock optionplans qualify as so-called equity-settled plans. As a consequence, the companyhas to charge the fair value of the stock options against income (spread overthe vesting period). The amount is taken into account in equity directly.

Under other personnel cost an amount of € 0.6 millionis included for the options granted to personnel in 2005, 2004 and 2003 underthe different option plans. In calculating the amount, the fair value of eachoption was estimated as of the date of grant using the Black-Scholesoption-pricing model with the following weighted average assumptions:
| Expected  dividend yield |   | 3.5          |   |
|--------------------------|--------|--------------|--------|
| Risk-free  interest rate |   | 4.0          | %      |
| Expected  volatility     |   | 35           | %      |
| Expected life of  option |   | 5 years |   |
| Expected forfeitures     |   | 15           | %      |

 

**Incentive shares**

On May 11, 2005, the Annual General Meeting ofShareholders approved the conditional granting of 17,000 incentive shares tothe members of the Executive Board. The costs of this grant amount to EUR 0.2million. These costs are amortized over the three-year period because the grantbecomes unconditional after three years. The expenses for 2005 amount to EUR0.1 million and are included in the other personnel costs.

F-34

----

 

The following parameters were used to calculate thecosts:
| Share price at  grant date |   | € | 17.94 |   |
|----------------------------|--------|--------|-------|--------|
| Expected  dividend yield   |   | 2.57   | %     |
| Risk-free  interest rate   |   | 3.30   | %     |
| Foregone  dividend         |   | 7.2    | %     |
| Performance discount       |   | 30.0   | %     |

 

Optionsand shares granted are conditional in nature and depend on attaining aperformance measure after three years. The performance measure is *Total Shareholder Return*(TSR), defined asshare price increase plus dividend. This measure stimulates the creation ofshareholder value in the longer term.

Eachyear, a three-year cycle begins, whereby achievements are measured at the endof the period against a peer group of companies of comparable size and breadth.ARCADIS’ position in the peer group (10 companies including ARCADIS) determineswhether the (conditional) options and shares granted earlier becomeunconditional.

Thefollowing table indicates the number of options and shares that can becomeunconditional at the end of each three-year period depending on ARCADIS’relative position in comparison to the peer group.
| **Position against peer group** | ** ** | ** **                  | ** ** | **Number of conditional options and  shares that become unconditional** | ** ** | ** ** |
|---------------------------------|------------|-----------------------------|------------|-------------------------------------------------------------------------|------------|------------|
| First                           |       | 150%                        |
| Fourth                          |       | 100%                        |
| Seventh                         |       | 50%                         |
| Below seventh                   |       | 0%                          |
| Between first  and seventh      |       | Determined by interpolation |

 

**Pension costs**

Per January 1,2004, the pension plan for Dutch employees, excluding employees of PRC, waschanged into a pension plan that is classified as a defined contribution plan under IFRS. This means that, except for the pensionpremium, this plan does not affect ARCADIS’ results and balance sheet. Theintroduction of new legislation on January 1, 2006 however impact theearly retirement plan. The Lovinklaan Foundation, which — as a major ARCADISshareholder — acts in the interest of employees, pledged funding to correctthis impact. The required (non-recurring) donation of € 9.5 million to thepension fund was charged against 2005 income. Thanks to the € 6.5 millioncapital contribution by the Lovinklaan Foundation, the effect (after taxes) onARCADIS equity was zero**.**

Due to the transition ofthe PRC pension plan by the end of 2005 to a defined contribution plan underIFRS, a provision of € 13.1 million was released to income in 2005. In the 2004IFRS income statement a benefit of € 1.2 million was recorded regarding thisplan. The transition to a defined contribution plan required in 2005 a one timeadditional donation to the PRC pension fund of € 2.3 million.

F-35

----

** **

**NOTE 16.TAXES ON INCOME**

The tax effects of significant timing differences thatgive rise to year-end deferred tax assets and liabilities are offset withineach taxable entity. Deferred tax assets in excess of these amounts arerecognized if their realization is more likely than not.

The geographic breakdown of income before taxes,including income before taxes from non-consolidated companies andlong-term investments and including gross extraordinary items in 2005 and 2004are as follows:
| ** **          | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------|------------|----------|------------|----------|------------|
| The Netherlands     |       | 12,442   |       | 7,891    |       |
| Foreign             |       | 41,484   |       | 26,612   |       |
| Income before taxes |       | 53,926   |       | 34,503   |       |

 

The geographic breakdown of income taxes in theConsolidated Statements of Income is as follows:
| ** **      | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------|------------|----------|------------|----------|------------|
| Current tax     |       | (5,420   | )          | 2,165    |       |
| The Netherlands |       | 11,994   |       | 10,395   |       |
| Foreign         |       | 6,574    |       | 12,560   |       |
| Deferred tax    |       | 6,824    |       | (424     | )          |
| The Netherlands |       | 3,944    |       | (1,736   | )          |
| Foreign         |       | 10,768   |       | (2,160   | )          |
| Total taxes     |       | 17,342   |       | 10,400   |       |

 

At December 31, 2005, operating losscarry-forwards for tax purposes amounted to EUR 13.0 million****which can be carried forward indefinitely. Net operatinglosses of EUR 0.0 million were utilized during 2005 and 2004.

The following table reconciles the normal corporatetax rate in the Netherlands to the effective consolidated rates:
| ** **                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|
| Nominal tax rate  in the Netherlands            |       | 31.5     | %          | 34.5     | %          |
| Foreign tax rate  differences                   |       | 2.9      |       | 0.7      |       |
| New loss carry  forwards                        |       | —   |       | 0.2      |       |
| Settlements                                     |       | (0.1     | )          | (1.0     | )          |
| Amortization of  identifiable intangible assets |       | 0.8      |       | 0.4      |       |
| Income from  non-consolidated companies         |       | (0.8     | )          | (2.4     | )          |
| Non-taxable  profits                            |       | (1.9     | )          | (4.3     | )          |
| Non-deductible  expenses                        |       | 0.4      |       | 0.5      |       |
| Change in  corporate tax percentage Netherlands |       | (0.6     | )          | 1.5      |       |
| Effective tax rates                             |       | 32.2     | %          | 30.1     | %          |

 

F-36

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Non taxable items relate mainly to income from non-consolidatedcompanies and long-term investments, amortization of goodwill and the gain onthe sale of investments.

At December 31, 2005, approximately EUR 76.6million of retained earnings were considered to be permanently reinvested bycertain foreign subsidiaries. It is not practicable to estimate the amount ofthe unrecognized deferred tax liability for these undistributed earnings.Consequently, deferred taxes have not been provided for unremitted earnings ofthese subsidiaries.

**NOTE 17.  PENSION PLANS**

As declared in note 12 and 15 ARCADIS has under IFRSby the end of 2005 no pension plans that qualify as defined benefit pensionplans. Under IFRS ARCADIS has for certain employees collective definedcontribution pension plans which qualify as defined benefit plans under US GAAP.The benefits under these plans are based primarily on years of service andemployees’ compensation near retirement. The funding policy of the plans isconsistent with local requirements. Obligations under the defined benefit plansare met by systematically depositing funds with the trustees or separatefoundations, under insurance policies, or by financial statement accruals. Theactuarial calculations are made with use of the Projected Unit Credit Method.Expected Return is a component of the determination of the pension expense. Thedifference between Actual Return and Expected Return is recorded as anUnrecognized Net Gain or Loss on the balance sheet. The Unrecognized Net Gainsor Losses are in accordance with the corridor approach and amortized when itexceeds 10% of the larger of the beginning balance of the projected benefitobligation or the market-related value of plan assets. Amortization of theexcess unrecognized net gain or loss is included as a component of pensionexpense.

Pension costs included in the Consolidated Statementsof Income as computed under IFRS for the plans that are considered to bedefined benefit pension plans under US GAAP, amounted to EUR 7.4 million chargein 2005 and EUR 15.5 million charge in 2004.

Pension costs forthese plans computed in compliance with US GAAP in accordance with FinancialAccounting Standards Board Statement No. 87, “Employer’s Accounting forPensions” (“SFAS 87”) for the years ended December 31, 2005 and 2004 wereas follows:
| ** **                                      | ** ** | **2005** | ** ** | **2006** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|
| Service  cost-benefit earned during the period  |       | 15,277   |       | 13,200   |       |
| Interest cost on  projected benefit obligations |       | 31,574   |       | 33,900   |       |
| Expected return  on plan assets                 |       | (35,230  | )          | (36,600  | )          |
| Net amortization  , deferral and other*         |       | 2,563    |       | 15,400   |       |
| Net pension cost                                |       | 14,184   |       | 25,900   |       |

----

*                    includesfor 2004 a revision of the estimate of the net projected benefit obligation associated with PRC acquisition.

Reconciliation of pension costs:
| ** **                                    | ** ** | **2005** | ** ** | **2004** |
|-----------------------------------------------|------------|----------|------------|----------|
| Employer  contribution                        |       | 20,533   |       | 15,500   |
| Unused amounts  of pension provisions         |       | (13,100  | )          | —   |
| Net pension cost  under IFRS                  |       | 7,433    |       | 15,500   |
| Net pension  costs in compliance with US GAAP |       | 14,184   |       | 25,900   |
| Reconciling item of net  income               |       | (6,751   | )          | 10,400   |

 

F-37

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The funded status of these defined benefit pensionplans for US GAAP purposes was as follows:
| ** **                                              | ** ** | **2005**                                          | ** ** | **2004**                                          | ** ** |
|---------------------------------------------------------|------------|---------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                              | ** ** | **Assets exceed  accumulated benefits** | ** ** | **Accumulated benefits  exceed assets** | ** ** | **Accumulated benefits  exceed assets** | ** ** |
| **Change in Projected Benefit  Obligation**             | ** ** | ** **                                        | ** ** | ** **                                        |       |   |   |
| Benefit  Obligation at beginning of the year            |       | 634,200                                           |       | 63,100                                            |       | 590,200 |   |
| Addition PRC                                            |       | —                                            |       | —                                            |       | 56,800 |   |
| Service cost                                            |       | 13,449                                            |       | 1,828                                             |       | 13,200 |   |
| Interest cost                                           |       | 28,632                                            |       | 2,942                                             |       | 33,900 |   |
| Plan  participants’ contributions                  |       | 3,188                                             |       | 764                                               |       | 3,500 |   |
| Benefits paid                                           |       | (29,206                                           | )          | (2,002                                            | )          | (29,400 | ) |
| Actuarial  (gain)loss, including changes in assumptions |       | 3,581                                             |       | 4,281                                             |       | 29,100 |   |
| Benefit  obligation at end of the year                  |       | 653,844                                           |       | 70,913                                            |       | 697,300 |   |
|                                                    |       |                                              |       |                                              |       |   |   |
| **Change in plan assets**                               |       |                                              |       |                                              |       |   |   |
| Fair value of  plan assets at beginning of year         |       | 596,400                                           |       | 46,600                                            |       | 561,700 |   |
| Addition PRC                                            |       | —                                            |       | —                                            |       | 42,500 |   |
| Actual return on  plan assets                           |       | 88,010                                            |       | 9,207                                             |       | 49,200 |   |
| Employer  contribution                                  |       | 18,882                                            |       | 1,604                                             |       | 15,900 |   |
| Plan  participants’ contributions                  |       | 3,188                                             |       | 764                                               |       | 3,100 |   |
| Benefits paid                                           |       | (29,206                                           | )          | (2,002                                            | )          | (29,400 | ) |
| Fair value of  plan assets at end of year               |       | 677,274                                           |       | 56,173                                            |       | 643,000 |   |
|                                                    |       |                                              |       |                                              |       |   |   |
| **Prepaid /(accrued) benefit  costs**                   |       |                                              |       |                                              |       |   |   |
| Funded status                                           |       | 23,430                                            |       | (14,740                                           | )          | (54,300 | ) |
| (Asset) at  transition                                  |       | —                                            |       | —                                            |       | (51 | ) |
| Unrecognized  actuarial loss                            |       | 44,324                                            |       | 315                                               |       | 120,600 |   |
| Unrecognized  prior service cost                        |       | 13,138                                            |       | 403                                               |       | (5,552 | ) |
| Prepaid/accrued  benefit cost                           |       | 80,892                                            |       | (14,022                                           | )          | 60,697 |   |
| ** **                                              |       |                                              |       |                                              |       |   |   |
| **Classification of the net  balances is as follows:**  |       |                                              |       |                                              |       |   |   |
| Prepaid benefit  costs                                  |       | 80,892                                            |       | —                                            |       | — |   |
| Accrued benefit  liability                              |       | —                                            |       | (13,652                                           | )          | (38,900 | ) |
| Accumulated  other comprehensive income                 |       | —                                            |       | —                                            |       | 99,597 |   |
| Prepaid benefit costs,  net                             |       | 80,892                                            |       | (13,652                                           | )          | 60,697 |   |

 

The Accumulated Benefit Obligation (ABO) amounted toEUR  648.8 million at December 31, 2005 for defined benefit pensionplans where assets exceed accumulated benefits and EUR 69.8 million for definedbenefit pension plans where accumulated benefits exceed assets. The AccumulatedBenefit Obligation (ABO) amounted to EUR 681.9 million at December 31,2004.

F-38

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The pension planasset allocation for the years 2005 and 2004, and the target allocation for2006 for the pension plan in the Netherlands by asset category are as follows:
| ** **             | ** ** | **Target  allocation 2006** | ** ** | **Percentage of  plan assets at  December 31, 2005** | ** ** | **Percentage of  plan assets at  December 31, 2004** | ** ** |
|------------------------|------------|----------------------------------|------------|-------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|
| Bonds                  |       |                             |       |                                                                          |       |                                                                          |       |
| —Government       |       | 12.5                             | %          | 14.5                                                                          | %          | 10.1                                                                          | %          |
| —Credits          |       | 20.0                             |       | 13.1                                                                          |       | 18.7                                                                          |       |
| —High yield       |       | 7.5                              |       | 4.7                                                                           |       | 7.8                                                                           |       |
| Equity securities      |       |                             |       |                                                                          |       |                                                                          |       |
| —Mature markets   |       | 30.0                             |       | 37.2                                                                          |       | 34.9                                                                          |       |
| —Emerging markets |       | 5.0                              |       | 10.2                                                                          |       | 7.3                                                                           |       |
| Real estate            |       | 20.0                             |       | 8.6                                                                           |       | 5.5                                                                           |       |
| Hedge funds            |       | 5.0                              |       | 8.9                                                                           |       | 12.6                                                                          |       |
| Other                  |       | —                           |       | 2.8                                                                           |       | 3.1                                                                           |       |
| Total                  |       | 100                              | %          | 100                                                                           | %          | 100                                                                           | %          |

 

Furthermore risk will be reduced by reducing the gapbetween the duration of the liabilities and the duration of the assets.Instruments that will be used are Interest Rate Swaps and Swaptions.

In 2005, the Pension Fund evaluated the long-terminvestment strategy. The conclusion of the Asset Liability Management study wasthat because of new rules of the Dutch authorities the fund can no longeraccept the same risks as it accepted in the past. Therefore the board of thePension Fund decided that the new strategic asset mix will be as stated in thetable above. In the Asset liability Management Study the following assumptionswere made for the expected returns:
| **Category**           | ** ** | ** ** | ** ** | **Percentage** | ** ** |
|------------------------|------------|------------|------------|----------------|------------|
| Bonds                  |       |       |       |
| —Government       |       | 4.0        | %          |
| —Credits          |       | 4.4        |       |
| —High yield       |       | 5.1        |       |
| Equity securities      |       |       |       |
| —Mature markets   |       | 7.0        |       |
| —Emerging markets |       | 8.8        |       |
| Real estate            |       | 5.2        |       |
| Hedge funds            |       | 5.3        |       |
| Expected return        |       | 5.6        |       |

 

The overall expected long-term return is aweighted-average of the expected returns from the distinguished assetcategories.

F-39

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The expected returns on bonds are based on the marketcapital rate at the end of 2005. The returns on equities are based on the bondreturn plus historical data based premium of 3% for the higher risk onequities. The expected return on hedge fund is the return on cash (2%) pluspremium of 3.3%. The Pension Fund has decided to invest in “fund-of-fund” hedgefunds with a very low tracking error. The fund-of-fund hedge funds invest innon-directional strategies in order to attain a diversification that leads toan investment portfolio with a low correlation to stock markets. Thefund-of-fund hedge funds in which the Pension Fund invests realized returns thatwere higher than the assumed 5.3% in the Asset Liability Management study. Inorder to be prudent, with 3.3% the Pension Fund has decided for a premium thatis on the low side of the range. The returns on real estate is in range withthe maximum assumption that the Dutch authorities (De Nederlandsche Bank)allows a pension fund to use for this category.

Most of those assets were purchased and managed byinvestment funds of external investment managers: ING, Robeco, Delta Lloyd,Frank Rusell and Fagoed. Only a small part of the assets (2%) are managed bythe fund itself.

The benefits thatwill be paid in the next 10 years are estimated as follows:
| **Benefits** | ** ** | ** ** | ** ** | **Millions of EUR** | ** ** |
|--------------|------------|------------|------------|-------------------------------|------------|
| 2006         |       | 31.0       |       |
| 2007         |       | 31.1       |       |
| 2008         |       | 32.8       |       |
| 2009         |       | 34.6       |       |
| 2010         |       | 35.8       |       |
| 2011 - 2015  |       | 183.5      |       |

 

In the next fiscal year (2006), the contribution tothe plan was estimated at EUR 20.7 million.

The obligationswith respect to pension plans were determined using the following rates:
| ** **                                        | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|
| Discount rate                                     |       | 4.00     | %          | 4.50     | %          |
| Assumed long-term  rate of compensation increase  |       | 2.00     |       | 2.00     |       |
| Expected long-term rate  of return on plan assets |       | 5.50     | %          | 5.50     | %          |

 

Plan assets principally consist of long-term interestearning investments, quoted and listed securities, and real estate assets.

The principal defined benefit plans referred to abovecover approximately 22% of ARCADIS employees. The remaining plans primarilyrepresent defined contribution plans. Expenses for these plans totaled EUR 5.9million in 2005 and EUR 2.0 million in 2004 under both IFRS and U.S. GAAP.

Due to the increase of stock markets in 2005, thevalue of plan assets exceeded the accumulated benefit obligation for thedefined benefit pension plan for Dutch employees excluding employees of PRC.For the defined benefit plan for the employees of PRC the accumulated benefitobligation for the defined benefit plan exceeded the value of plan assets. As aconsequence, the Company recognized in 2005 additional provisions for minimumpension liabilities. This provision amounted to € 13.7 million.

Due to the substantial decline of stock markets inprevious years, the accumulated benefit obligation for the defined benefit planexceeded the value of plan assets. As a consequence, the Company recognized anadditional provision for minimum pension liabilities amounted to € 99.6 millionbefore taxes at December 31, 2004 and was created through a direct chargeagainst shareholders’ equity. After taxes, the amount was € 65.5 million.

F-40

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**NOTE 18.Application of Generally Accepted Accounting Principles in the United States ofAmerica**

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 purchaseprice over the fair value of identifiable net assets acquired (“goodwill”) iscapitalized. Prior to the adoption of SFAS 141 and SFAS 142, goodwillwas amortized over its estimated useful life ranging between 10 and25 years. Since the adoption of SFAS 141, which applies to allbusiness combinations completed after June 30, 2001, and the adoption ofSFAS 142, which applies to all existing goodwill since January 1,2002, goodwill is no longer amortized, but an annual impairment test isperformed on the remaining unamortized goodwill. At year-end 2005, goodwill forUS GAAP purposes exceeded the amount capitalized under IFRS by EUR33.2 million, compared to EUR 39.3 million at the end of 2004 becausethe company continued amortizing goodwill until the adoption of IFRS. TheCompany performs its annual impairment test as of the end of December eachyear. From 2004 onward IFRS is applied in the preparation of the ConsolidatedFinancial Statements of ARCADIS N.V. and from then goodwill is no longeramortized, but an annual impairment test is performed on the remainingunamortized goodwill.

Under IFRS ARCADIS has by the end of 2005 capitalizedEUR 7,270 goodwill for contingent payments for acquisitions that areperformance dependent. Under U.S. GAAP this goodwill would not be capitalizeduntil the contingency is resolved.

The total amount of capitalized goodwill for the years2005 and 2004 is as follows:

***Capitalized goodwill***
| ** **                                                     | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------------------------------------------|------------|----------|------------|----------|------------|
| Capitalized  under IFRS                                        |       | 115,983  |       | 49,926   |       |
| Capitalized  goodwill for performance dependent after payments |       | (7,270   | )          | —   |       |
| Included in  reconciliation of Equity                          |       | 40,469   |       | 38,894   |       |
| Total capitalized goodwill  under US GAAP                      |       | 149,182  |       | 88,820   |       |

 

The allocation of capitalized goodwill for the years2005 and 2004 by reportable segment is as follows:
| ** **                | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------|------------|----------|------------|----------|------------|
| The Netherlands           |       | 30,751   |       | 30,095   |       |
| United States             |       | 76,122   |       | 23,617   |       |
| Other European  Countries |       | 33,641   |       | 28,030   |       |
| Rest of world             |       | 8,668    |       | 7,078    |       |
| Total                     |       | 149,182  |       | 88,820   |       |

 

(b) Pension costs included in the ConsolidatedStatements of Income are computed in accordance with IFRS. At December 31,2005 ARCADIS only has pension plans that qualify as Defined Contribution plansunder IFRS.

F-41

----

 

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 4.00% for 2005 and 4.50% for 2004.Moreover, net periodic pension costs are reduced by credits, if any,representing amortization of overfunding of the Fund, which is calculated byvaluing plan assets at fair market value.

The difference between the pension cost determinedunder SFAS 87 (U.S. GAAP) and the one determined under IFRS is shown inNote 17.

(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) Thecompanies AAFM B.V. (Netherlands) and Grupo EP (Spain) in which ARCADIS holds a50% interest and the company Biogás Energia Ambiental S.A. (Brasil) in whichARCADIS holds a 33.33% interest are included in the consolidated financialstatements over 2005 on a proportional basis in conformity with IFRS.Furthermore over 2004 the companies Grupo EP (Spain) and AAFM B.V.(Netherlands) in which ARCADIS held a 50% interest per December 31, 2004are included in the consolidated financial statements over 2004 on aproportional basis in conformity with IFRS. Under U.S. GAAP, the investment ina joint venture should be accounted for under the equity method. This departurefrom U.S. GAAP would have no effect on shareholders’ equity and net income. Thefinancial statements prepared in conformity with IFRS include the followingamounts in respect of those investments:

***Pro rata summarized financial information***
| ** **                    | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------|------------|----------|------------|----------|------------|
| Current assets                |       | 6,727    |       | 44,126   |       |
| Non-current  assets           |       | 1,898    |       | 15,869   |       |
| Total assets                  |       | 8,625    |       | 59,995   |       |
| Current  liabilities          |       | 5,012    |       | 40,926   |       |
| Non-current  liabilities      |       | 1,842    |       | 6,101    |       |
| Minority  interest            |       | 0        |       | 1,302    |       |
| Total liabilities             |       | 6,854    |       | 48,329   |       |
| Shareholders’ Equity     |       | 1,771    |       | 11,666   |       |
| Gross revenue                 |       | 51,351   |       | 88,307   |       |
| Group income  from operations |       | 1,883    |       | 2,015    |       |

 

F-42

----

 

(e) The grossrevenue, net income and basic net income per share of 2005 and 2004 are influencedby discontinued operations as follows:

***Influence of discontinued operations***
| ** **                                               | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------------------------------------|------------|----------|------------|----------|------------|
| Gross revenue of  continuing operations                  |       | 995,784  |       | 881,822  |       |
| Gross revenue of  discontinued operations                |       | 5,315    |       | 18,959   |       |
|                                                     |       |     |       |     |       |
| Net income of  continuing operations                     |       | 29,618   |       | 21,197   |       |
| Net income of  discontinued operations                   |       | 3,796    |       | 979      |       |
|                                                     |       |     |       |     |       |
| Basic net income  per share from continuing operations   |       | 1.46     |       | 1.05     |       |
| Basic net income per  share from discontinued operations |       | 0.19     |       | 0.05     |       |

 

(f) Under IFRS, the balance sheet item Cash andCash equivalents includes an amount of EUR 0.3 million at December 31,2005 (EUR 0.6 million at December 31, 2004) which is restricted forpayments of taxes and social securities, and therefore not freely available.Restricted amounts would not be included in cash and cash equivalents underU.S. GAAP.

(g) Under IFRS, the balance sheet item Otherlong-term liabilities includes an amount of EUR 4.0 million at December 31,2005 which under U.S. GAAP would be classified as current liabilities.

***Reconciliationof Net Income***
| ** **                                                                                     | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Net income in  accordance with IFRS                                                            |       | 33,414   |       | 22,176   |       |
| Adjustments:                                                                                   |       |     |       |     |       |
| Pensions (b)                                                                                   |       | (6,751   | )          | (10,400  | )          |
| Income tax effect of above adjustments                                                         |       | 1,939    |       | 3,276    |       |
| Option costs                                                                                   |       | —   |       | 239      |       |
| Effect from  change in tax rate                                                                |       | (488     | )          | (250     | )          |
| Net income in  accordance with U.S. GAAP                                                       |       | 28,114   |       | 15,041   |       |
| Basic net income  per common share in accordance with U.S. GAAP                                |       | 1.39     |       | 0.75     |       |
| Diluted net  income per common share in accordance with U.S. GAAP                              |       | 1.35     |       | 0.74     |       |
| Weighted average number  of shares of common stock in accordance with U.S. GAAP (in thousands) |       | 20,261   |       | 20,140   |       |

 

Basic net income per common share amounts inaccordance with U.S. GAAP are based upon the weighted average number of thecommon shares outstanding during the period. Diluted net income per commonshare amounts in accordance with U.S. GAAP are based upon the weighted averagenumber of the common shares outstanding during the period plus the dilutiveeffect of potential common shares outstanding during the period.

F-43

----

 

(h) In accordance with IFRS, IFRS 2 has beenapplied for 2004 and 2005. In 2004 the company applied APB 25, whereby nocompensation costs were included in net income. A reconciling item of EUR 365pre-tax is recorded in the reconciliation of net income. As of 2005, thecompany has elected to apply SFAS 123R, as a result of which there no longer isany material difference with IFRS 2.

The company recognized a deferred tax asset under IFRSfor the estimated tax benefits to the extent that it is probable that these taxbenefits will be realized in the near future. Under FAS 123R the company mayonly recognize tax benefits to the extent that they are realized. Therefore,the deferred tax asset of EUR 1,960 is reversed in shareholders equity

***Reconciliationof Shareholders’ Equity***
| ** **                                                      | ** **   | **2005** | ** ** | **2004** | ** **   |
|-----------------------------------------------------------------|--------------|----------|------------|----------|--------------|
| Shareholders’  equity in accordance with IFRS              |         | 176,203  |       | 136,371  |         |
| Adjustments to reported  shareholders’ equity, net of tax: |         |     |       |     |         |
| Goodwill (a)                                                    |         | 40,469   |       | 38,894   |         |
| Pensions (b)                                                    |         | 67,239   |       | (25,055  | )            |
| Deferred tax assets related to options                          |         | (1,960   | )          | —   |         |
| Income tax effect of above adjustments                          |         | (19,902  | )          | 8,125    |         |
|                                                            |         |     |       |     |         |
| Shareholders’ equity in  accordance with U.S. GAAP         | *** *** | 262,049  |       | 158,335  | *** *** |

 

***Rollforward of Shareholders’ 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 |   |

 

F-44

----

 

**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, 2005 and 2004 wereas follows:
| ** **                          | ** ** | **Comprehensive  Income (net of tax)** | ** ** | **Accumulated other  comprehensive  income** | ** ** |
|-------------------------------------|------------|-------------------------------------------------------|------------|---------------------------------------------------|------------|
| Balance -  January 1, 2004     |       |                                                  |       | (61,637                                           | )          |
| Comprehensive income                |       |                                                  |       |                                              |       |
| Net income                          |       | 15,041                                                |       |                                              |       |
| Provision minimum pension liability |       | (14,933                                               | )          | (14,933                                           | )          |
| Foreign currency translation        |       | (7,550                                                | )          | (7,550                                            | )          |
| Other changes                       |       | 59                                                    |       | 59                                                |       |
| Comprehensive  income               |       | (7,383                                                | )          |                                              |       |
|                                |       |                                                  |       |                                              |       |
| Balance -  December 31, 2004   |       |                                                  |       | (84,061                                           | )          |
| Comprehensive income                |       |                                                  |       |                                              |       |
| Net income                          |       | 28,114                                                |       |                                              |       |
| Provision 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                                            | )          |

 

Pension additionalminimum liability includes tax effects charged/added directly to shareholders’equity of € 29.3 million (charged) for the year ended December 31, 2005and EUR 6.9 million (added) in 2004.

Foreigncurrency translation adjustments have no tax effect.

**NOTE 19. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS**

In view of the short-term turnaround times involved,the book value of cash and cash equivalents, receivables and currentliabilities approximates fair value.

The fair value of ARCADIS’ long term debt does notmaterially differ from the carrying value because the main part of theoutstanding long term debt is maturing in 2006.

F-45

----

**NOTE20.**Explanation of transition toIFRS

As stated in the valuation principles, these areARCADIS N.V.’s first consolidated financial statements in accordance with IFRS.

The valuation principles detailed in note 1 have beenapplied in preparing the financial statements for the year ended December 31,2005, the comparative information presented in these financial statements forthe year ended December 31 2004 and in the preparation of an opening IFRSbalance sheet at January 1,2004 (the ARCADIS N.V.’s date of transition).

In preparing its opening IFRS balance sheet, ARCADIS N.V.has adjusted amounts reported previously in financial statements prepared inaccordance with its former basis of accounting. An explanation of how thetransition from Dutch GAAP to IFRS has affected the ARCADIS N.V.’s financialposition and financial performance is detailed in the following tables and thenotes that accompany the tables.

F-46

----

Reconciliation of the consolidated balance sheet as ofDecember 31, 2004 to IFRS
| ** **                                       | ** ** | **December 31, 2004** | ** ** | ** **       | ** ** | **January 1, 2004** | ** ** |
|--------------------------------------------------|------------|---------------------------------|------------|------------------|------------|-------------------------------|------------|
| **Assets**                                       | ** ** | **Previous  GAAP**              | ** ** | **IFRS  effect** | ** ** | **IFRS**                      | ** ** | ** ** | ** ** | **Previous  GAAP** | ** ** | **IFRS  effect** | ** ** | **IFRS** | ** ** |
| ** **                                       | ** ** | ** **                      | ** ** | ** **       | ** ** | ** **                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Non-current assets**                           |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| Intangible  assets                               |       | 53,095                          |       | 2,261            |       | 55,356                        |       |   |   | 41,391 |   | — |   | 41,391 |   |
| Tangible assets                                  |       | 42,328                          |       | 1,307            |       | 43,635                        |       |   |   | 44,872 |   | 1,174 |   | 46,046 |   |
| Investments in  non-consolidated companies  |       | —                          |       | 5,597            |       | 5,597                         |       |   |   | — |   | 4,663 |   | 4,663 |   |
| Other  investments                               |       | 13,685                          |       | (5,597           | )          | 8,088                         |       |   |   | 12,391 |   | (4,663 | ) | 7,728 |   |
| Deferred tax  assets                             |       | —                          |       | 9,676            |       | 9,676                         |       |   |   | — |   | 4,036 |   | 4,036 |   |
|                                             |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| **Total  non-current assets**                    |       | 109,108                         |       | 13,244           |       | 122,352                       | ** ** | ** ** |   | 98,654 |   | 5,210 |   | 103,864 |   |
|                                             |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| **Current assets**                               |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| Inventories                                      |       | 27,715                          |       | (27,247          | )          | 468                           |       |   |   | 15,208 |   | (15,008 | ) | 200 |   |
| (Un)billed  receivables                          |       | 205,423                         |       | 65,881           |       | 271,304                       |       |   |   | 202,134 |   | 53,429 |   | 255,563 |   |
| Cash and cash  equivalents                       |       | 48,219                          |       | —           |       | 48,219                        |       |   |   | 31,258 |   | — |   | 31,258 |   |
|                                             |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| **Total  current assets**                        |       | 281,357                         |       | 38,634           |       | 319,991                       | ** ** | ** ** |   | 248,600 |   | 38,421 |   | 287,021 |   |
|                                             |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| **Total**                                        |       | 390,465                         |       | 51,878           |       | 442,343                       | ** ** | ** ** |   | 347,254 |   | 43,631 |   | 390,885 |   |
|                                             |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| **Equity and liabilities**                       |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
|                                             |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| **Shareholders’ equity**                    |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| Share capital                                    |       | 1,030                           |       | —           |       | 1,030                         |       |   |   | 1,022 |   | — |   | 1,022 |   |
| Additional  paid-in capital                      |       | 37,644                          |       | —           |       | 37,644                        |       |   |   | 35,985 |   | — |   | 35,985 |   |
| Reserve exchange  rate differences               |       | (17,342                         | )          | 13,709           |       | (3,633                        | )          |   |   | (13,709 | ) | 13,709 |   | — |   |
| Retained  earnings                               |       | 104,198                         |       | (25,044          | )          | 79,154                        |       |   |   | 113,240 |   | (25,284 | ) | 87,956 |   |
| Net income                                       |       | 20,139                          |       | 2,037            |       | 22,176                        |       |   |   |   |   |   |   |   |   |
|                                             |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| **Total  shareholders’ equity**             |       | 145,669                         |       | (9,298           | )          | 136,371                       | ** ** | ** ** |   | 136,538 |   | (11,575 | ) | 124,963 |   |
| Minority  interest                               |       | 8,975                           |       | 19               |       | 8,994                         |       |   |   | 7,557 |   | — |   | 7,557 |   |
|                                             |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| **Group  equity**                                |       | 154,644                         |       | (9,279           | )          | 145,365                       | ** ** | ** ** |   | 144,095 |   | (11,575 | ) | 132,520 |   |
|                                             |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| *Non-current liabilities*                        |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| Provisions                                       |       | 12,366                          |       | 15,053           |       | 27,419                        |       |   |   | 9,403 |   | 9,611 |   | 19,014 |   |
| Deferred tax  liabilities                        |       | 7,709                           |       | 4,420            |       | 12,129                        |       |   |   | 10,565 |   | 4,035 |   | 14,600 |   |
| Long-term debt                                   |       | 12,004                          |       | 962              |       | 12,966                        |       |   |   | 29,724 |   | 726 |   | 30,450 |   |
|                                             |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| ** **                                       |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| **Total  non-current liabilities**               |       | 32,079                          |       | 20,435           |       | 52,514                        |       |   |   | 49,692 |   | 14,372 |   | 64,064 |   |
|                                             |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| *Current liabilities*                            |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| Billings in  excess of cost                      |       | —                          |       | 40,273           |       | 40,273                        |       |   |   | — |   | 40,385 |   | 40,385 |   |
| Corporate tax  liabilities                       |       | 9,873                           |       | —           |       | 9,873                         |       |   |   | 5,456 |   | — |   | 5,456 |   |
| Trade and other  liabilities                     |       | 193,869                         |       | 449              |       | 194,318                       |       |   |   | 148,011 |   | 449 |   | 148,460 |   |
| ** **                                       |       |                            |       |             |       |                          |       |   |   |   |   |   |   |   |   |
| **Total  current liabilities**                   |       | 203,742                         |       | 40,722           |       | 244,464                       | ** ** | ** ** |   | 153,467 |   | 40,834 |   | 194,301 |   |
| ** **                                       |       |                            |       |             |       |                          | ** ** | ** ** |   |   |   |   |   |   |   |
| **Total**                                        |       | 390,465                         |       | 51,878           |       | 442,343                       | ** ** | ** ** |   | 347,254 |   | 43,631 |   | 390,885 |   |

 

*amounts in thousands of eurosunless otherwise stated*

F-47

----

 

Reconciliation of theconsolidated statement of income for the year ended December 31, 2004
| ** **                                                      | ** ** | **Previous  GAAP** | ** ** | **IFRS  effect** | ** ** | **IFRS** | ** ** |
|-----------------------------------------------------------------|------------|--------------------|------------|------------------|------------|----------|------------|
| Net sales                                                       |       | 900,930            |       | (6,525           | )          | 894,405  |       |
| Gain on sale of  investments                                    |       | —             |       | 6,525            |       | 6,525    |       |
| Change in work  in progress                                     |       | (149               | )          | —           |       | (149     | )          |
|                                                            |       |               |       |             |       |     |       |
| Gross revenue                                                   |       | 900,781            |       | —           |       | 900,781  |       |
| Materials,  services of third parties and subcontractors        |       | (268,244           | )          | —           |       | (268,244 | )          |
|                                                            |       |               |       |             |       |     |       |
| Net revenue                                                     |       | 632,537            |       | —           |       | 632,537  |       |
| Operational cost                                                |       | (581,675           | )          | 687              |       | (580,988 | )          |
| Depreciation                                                    |       | (15,648            | )          | (6               | )          | (15,654  | )          |
| Amortization  identifiable intangible assets                    |       | (2,558             | )          | 2,182            |       | (376     | )          |
|                                                            |       |               |       |             |       |     |       |
| Operating income                                                |       | 32,656             |       | 2,863            |       | 35,519   |       |
| Financial items                                                 |       | (3,464             | )          | —           |       | (3,464   | )          |
|                                                            |       |               |       |             |       |     |       |
| Income before  taxes                                            |       | 29,192             |       | 2,863            |       | 32,055   |       |
| Taxes                                                           |       | (9,593             | )          | (807             | )          | (10,400  | )          |
|                                                            |       |               |       |             |       |     |       |
| Income of  consolidated companies after taxes                   |       | 19,599             |       | 2,056            |       | 21,655   |       |
| Income of  non-consolidated companies and long-term investments |       | 2,448              |       | —           |       | 2,448    |       |
|                                                            |       |               |       |             |       |     |       |
| **Group  income after taxes**                                   |       | 22,047             |       | 2,056            |       | 24,103   |       |
|                                                            |       |               |       |             |       |     |       |
| Attributable to:                                                |       |               |       |             |       |     |       |
| Net income  (Equity holders of the parent)                      |       | 20,139             |       | 2,037            |       | 22,176   |       |
| Minority interest                                               |       | 1,908              |       | 19               |       | 1,927    |       |

 

*amounts in thousands of eurosunless otherwise stated*

There are no materialdifferences between the cash flow statement presented under IFRS and the cashflow statement presented under previous GAAP.

F-48

----

**Descriptionof adjustments resulting from the implementation of IFRS (with respect to 2004)**

**Goodwill**

Under IFRS, goodwill is no longer amortized. Insteadan annual (or more frequent if needed) impairmenttest is performed to assess if the expected cash flow still warrants the capitalizedamounts. The amounts that are paid at the time of acquisition for identifiableintangible assets are capitalized and amortized over the economic lifetime ofthe assets.

Up to and including 2004, goodwill was amortizedaccording to Dutch GAAP. The amount related to the amortization was € 2,558. Ofthis amount, € 376 has been earmarked as amortization on identifiableintangible assets. The remaining amount of € 2,182 concerns goodwillamortization. In the comparative figures for 2004, this amount has been addedto income.

**Work-in-progress**

The first change concerns the treatment of proposalcosts. Some operating companies used to treat proposal cost as work- in-progress by earmarking these costs as project related after the projectcontract had been signed. IFRS has a more stringent regimen for thecapitalization of costs. In the comparative balance sheet for year-end 2004 forwork-in-progress, this leads to a reduction by € 2,634. Of this amount, andafter subtraction of a deferred tax credit of € 830, € 1,804 has been chargedto shareholders’ equity.

A second adjustment concerns the general overhead costas a pricing component that is charged to projects. IFRS prohibits thecapitalization of general overhead cost in work-in-progress through pricing.ARCADIS used to charge projects against a full cost price, adding generalindirect cost. Because ARCADIS uses the percentage-of-completion method forproject assessment, the new valuation principle only has an effect onloss-making projects. In that case, a provision was formed in which the amountof indirect cost was too high. Application of IFRS leads to an increase in theyear-end 2004 balance sheet work-in-progress of € 618, which has been added toshareholders’ equity. After taxes, this amounts € 424.

These new valuation principles do not lead to adifferent result, only to a timing difference in result taking. The 2004 incometherefore has not been adjusted.

**Deferred compensation**

Since 2004, ARCADIS has had a pension plan thatqualifies as a defined contributionplan for its Dutch employees. For the employees of PRC, a pension plan thatqualifies as a defined benefit plan is in place. For German and Frenchcompanies limited plans that qualify as defined benefit plans are in place.IFRS (IAS 19) requires that these defined benefit plans have a € 14,960provision created and charged to shareholders’ equity in the 2004 openingbalance sheet. After tax, € 10,231 has been charged to shareholders’ equity.The 2004 net income was increased by € 668 net based on actuarial calculationsrelated to these pension plans.

A relatively small number of staff are eligible forjubilee payments. A € 1,000 provision was created on the balance sheet forthese payments, which after taxes has been charged to shareholders’ equity (€685).

**Option costs**

IFRS requires that costs for options that have beenissued after November 7, 2002 and that will become vested after January 1,2005 be included in the results, distributed over the period in which they areconditional. In the case of ARCADIS, this is three years. The cost, amountingto € 365 in 2004 (after tax € 239) has been charged to the 2004 result. BecauseARCADIS’ option plans options can only be converted into shares, this amounthas been added to shareholders’ equity.

**Provision fordoubtful debtors**

IFRS prohibits the existence of a dynamic provisionfor doubtful debtors. The total provision has therefore been evaluated anddistributed to outstanding receivables. The surplus that remained after theevaluation to the amount of € 203 was added to shareholders’ equity.

**Exchange rate differences**

The cumulative reserve for exchange rate differenceshas been balanced at January 1, 2004 with the retained earnings. Futureexchange rate differences will be registered separately.

F-49

----

**Other changes**

The investigation into the effects of the introductionof IFRS has led to small changes in income in different parts of the company,resulting in a total net income reduction of € 55.

**Change in corporatetax rate in the Netherlands**

Part of the items mentioned above relate to theDutch part of the Company. To the extent that these items caused deferredtaxes, the percentage change in corporate tax in the Netherlands as of January 1,2005 affected this deferral. This caused a negative effect to the amount of €519 on the adjusted income statement for the year ended Decembr 31, 2004.

Adjusted results 2004:

Because of the abovechanges, the results for 2004 have been adjusted as follows.

 
| ** **                      | ** ** | **2004**  | ** ** |
|---------------------------------|------------|-----------|------------|
|                            |       |      |       |
| Published net  income (NL GAAP) |       | 20,139    |       |
|                            |       |      |       |
| **IFRS Adjustments**            |       |      |       |
| Amortization of  goodwill       |       | 2,182     |       |
| Pensions                        |       | 1,082     |       |
| Option costs                    |       | (365      | )          |
| Other  adjustments              |       | (55       | )          |
| Corporate tax                   |       | (288      | )          |
| Change in tax  percentage       |       | (519      | )          |
| **Total adjustments**           | ** ** | **2,037** | ** ** |
|                            |       |      |       |
| Net income according to  IFRS   |       | 22,176    |       |

 

Adjusted shareholders’equityBased on the above, the shareholders’equity has been adjusted as follows.
| ** **                                                                | ** ** | **December 31,  2004** | ** ** | **January 1,  2004** | ** ** |
|---------------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------|------------|
|                                                                      |       |                        |       |                      |       |
| Published  shareholders’ equity                                      |       | 145,669                     |       | 136,538                   |       |
|                                                                      |       |                        |       |                      |       |
| **Adjustments**                                                           |       |                        |       |                      |       |
| Adjustment net  income 2004, excluding the effect of a change in tax rate |       | 2,556                       |       | —                    |       |
| Option costs  2004 in favor of shareholder’s equity                  |       | 239                         |       | —                    |       |
| Work in progress  net of tax                                              |       | (1,380                      | )          | (1,321                    | )          |
| Provision for pensions  net of tax                                        |       | (10,231                     | )          | (9,802                    | )          |
| Provision for  jubilee payments net of tax                                |       | (685                        | )          | (655                      | )          |
| General  provision for doubtful debtors                                   |       | 203                         |       | 203                       |       |
| **Total  adjustments**                                                    | ** ** | **(9,298**                  | **)**      | **(11,575**               | **)**      |
|                                                                      |       |                        |       |                      |       |
| Adjusted shareholder’s  equity                                       |       | 136,371                     |       | 124,963                   |       |

 

*Amountsin thousands of euros unless otherwise stated*

F-50

----

 

**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.                                                                                                                                                                                                                                                         |
|             |       |                                                                                                                                                                                                                                                                                                |
| 4.9              |       | Employment Agreement, dated January 17, 2006,  by and between ARCADIS N.V. and Friedrich Schneider.                                                                                                                                                                                            |
|             |       |                                                                                                                                                                                                                                                                                                |
| 4.10             |       | Employment Agreement, dated April 4, 2006, by  and between ARCADIS N.V. and Ben A. van der Klift.                                                                                                                                                                                              |
|             |       |                                                                                                                                                                                                                                                                                                |
| 8.1              |       | Subsidiaries of ARCADIS N.V. as of December 31,  2005.                                                                                                                                                                                                                                         |
|             |       |                                                                                                                                                                                                                                                                                                |
| 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 the requirements of Section 12 of theSecurities Exchange Act of 1934, the registrant certifies that it meets all ofthe requirements for filing on Form 20-F and has duly caused thisannual report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
|                           | **ARCADIS N.V.** |
|---------------------------|------------------|
| ** **                | ** **       | ** ** |
| Dated: June 22, 2006 | By:              | /s/ Harrie L.J. Noy |
|                      |             | Harrie L.J. Noy |
|                      |             | Chairman of the Executive Board |

 

----

 

**INDEX OFEXHIBITS**

 
| Exhibit No. | ** ** | **Exhibit Description**                                                                             |
|------------------|------------|----------------------------------------------------------------------------------------------------------|
| 4.8              |       | ARCADIS N.V. 2005 Long-Term Incentive Share Option  Plan.                                                |
|             |       |                                                                                                     |   |   |
| 4.9              |       | Employment Agreement, dated January 17, 2006,  by and between ARCADIS N.V. and Friedrich Schneider. |
|             |       |                                                                                                     |   |   |
| 4.10             |       | Employment Agreement, dated April 4, 2006, by  and between ARCADIS N.V. and Ben A. van der Klift.   |
|             |       |                                                                                                     |   |   |
| 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.     |
|             |       |                                                                                                     |   |   |
| 15.1             |       | Consent of Independent Registered Public Accounting  Firm.                                               |

 

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