##### Table of Contents

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 23, 2007



---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 20-F



(Mark One)



| ̈ |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------------

OR



|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------

For the fiscal year ended October 31, 2006

OR



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------

OR



| ̈ |  | SHELL COMPANY PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------



Date of event requiring shell company report



For the transition period
from to



Commission file number





PCL Employees Holdings Ltd.

|                                                      
|------------------------------------------------------
|(Exact name of Registrant as specified in its charter)





|                                               
|-----------------------------------------------
|(Translation of Registrants name into English)





|                                                   
|---------------------------------------------------
|Alberta                                            
|(Jurisdiction on incorporation or organization)    
|                                                   
|5410  99 Street, Edmonton, Alberta, T6E 3P4 Canada
|(Address of principal executive offices)           



Securities registered or to be registered
pursuant to Section 12(b)



|                    |  |  |  |                                          
|------------------- |  |  |  | -----------------------------------------
|Title of each class |  |  |  | Name of each exchange on which
registered
|                    |  | 
|                    |  |  |  | None                                     
|                    |  | 
|                    |  |  |  |                                          



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##### Table of Contents

Securities registered or to be registered pursuant to Section 12(g) of the Act.



Class 1 Common Shares

|                
|----------------
|(Title of Class)



Class 3 Common Shares

|                
|----------------
|(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.



None

|                
|----------------
|(Title of Class)

Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of
the close of the period covered by the annual report.



|                                
|--------------------------------
|Class 1 Common Shares: 4,543,150
|                                
|Class 3 Common Shares: 1,625,501

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.  Yes ̈No þ

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.  Yes ̈No þ

Note  Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
(Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer   þ

Indicate
by check mark which financial statement item the registrant has elected to follow.  þ Item 17 ̈Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).  Yes ̈No þ



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ii



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##### Table of Contents

TABLE OF CONTENTS



|                                                                                      |  |   
|------------------------------------------------------------------------------------- |  | --
|ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                         |  | 5 
|ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                       |  | 5 
|ITEM 3. KEY INFORMATION                                                               |  | 5 
|A. Selected Financial Data                                                            |  | 5 
|D. Risk Factors                                                                       |  | 6 
|ITEM 4. INFORMATION ON THE COMPANY                                                    |  | 9 
|A. History and Development of the Company                                             |  | 9 
|B. Business Overview                                                                  |  | 10
|C. Organizational Structure                                                           |  | 17
|D. Property, Plant and Equipment                                                      |  | 18
|ITEM 4A. UNRESOLVED STAFF COMMENTS                                                    |  | 20
|ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  |  | 20
|A. Operating Results                                                                  |  | 21
|B. Liquidity and Capital Resources                                                    |  | 26
|C. Research and Development, Patents and Licenses                                     |  | 28
|D. Trends and Uncertainties                                                           |  | 28
|E. Off-Balance Sheet Arrangements                                                     |  | 29
|F. Contractual Obligations                                                            |  | 30
|G. Forward Looking Statements                                                         |  | 30
|H. Critical Accounting Policies                                                       |  | 31
|ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    |  | 32
|A. Directors and Senior Management                                                    |  | 32
|B. Compensation                                                                       |  | 37
|C. Board Practices                                                                    |  | 37
|D. Employees                                                                          |  | 41
|E. Share Ownership                                                                    |  | 42
|ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                             |  | 45
|A. Major Shareholders                                                                 |  | 45
|B. Related Party Transactions                                                         |  | 46
|ITEM 8. FINANCIAL INFORMATION                                                         |  | 46
|A. Consolidated Statements and Other Financial Information                            |  | 46
|B. Significant Changes                                                                |  | 47
|ITEM 9. THE OFFER AND LISTING                                                         |  | 48
|A. Offer and Listing Details; Markets                                                 |  | 48
|ITEM 10. ADDITIONAL INFORMATION                                                       |  | 50
|A. Share Capital                                                                      |  | 50
|B. Memorandum of Association and Articles of Association                              |  | 50
|C. Material Contracts                                                                 |  | 50
|D. Exchange Controls                                                                  |  | 50
|E. Taxation                                                                           |  | 50
|F. Dividends and Paying Agents                                                        |  | 54
|G. Statements by Experts                                                              |  | 54
|H. Documents on Display                                                               |  | 54
|ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  | 54
|ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  | 54
|ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  | 55
|ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  | 55
|ITEM 15. CONTROLS AND PROCEDURES                                                      |  | 55
|ITEM 16. RESERVED                                                                     |  | 55
|A. Audit Committee Financial Expert                                                   |  | 55
|B. Code Of Ethics                                                                     |  | 55
|C. Principal Accounting Fees And Services                                             |  | 56
|D. Exemptions From The Listing Standards For Audit Committees                         |  | 56
|E. Purchases Of Equity Securities By The Issuer And Affiliated Purchasers             |  | 57
|ITEM 17. FINANCIAL STATEMENTS                                                         |  | 58
|ITEM 18. FINANCIAL STATEMENTS                                                         |  | 58
|ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS                                            |  | 58
|A. Financial Statements                                                               |  | 58
|B. Exhibits                                                                           |  | 58



iii



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##### Table of Contents

As used in this annual report, unless the context otherwise indicates, the terms PCL, we,
us, our or the Company refer to PCL Employees Holdings Ltd. and its consolidated subsidiaries.

EXCHANGE RATE INFORMATION

Unless otherwise indicated, all monetary references herein are denominated in Canadian dollars; references to
dollars or $ are to Canadian dollars and references to US$ or U.S. dollars are to United States dollars. As at February 16, 2007, the noon rate as quoted by the Federal Reserve Bank of New York
was $1.1638 equals US$1.00. (See Item 3  Key Information for further exchange rate information to U.S. currency.) Except as otherwise indicated, financial statements of, and information regarding, PCL Employees Holdings Ltd.
are presented in Canadian dollars.

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management,
based on information currently available to management. Forward-looking statements are those that do not relate strictly to historical or current facts, and can be identified by the use of the future tense or other forward-looking words such as
believe, expect, anticipate, intend, plan, estimate, should, may, objective, projection, forecast, management
believes, continue, strategy, position or the negative of those terms or other variations of them or by comparable terminology. In particular, statements, express or implied, concerning future operating
results or the ability to generate income or cash flow are forward-looking statements. Forward-looking statements include the information concerning possible or assumed future results of our operations set forth under Item 4 - Information
on the Company, Item 5 - Operating and Financial Review and Prospects, Item 11 - Quantitative and Qualitative Disclosures About Market Risk and elsewhere in this Annual Report on Form 20-F.

Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future
results of operations may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond managements ability to control or predict. Specific factors that could cause
actual results to vary from those in the forward-looking statements include:



| |  |  | changes in laws or regulations, third party relations and approvals, and decisions of courts, regulators and governmental bodies that may adversely affect our
business or the business of the customers we serve;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to obtain surety bonds as required by some of our customers;
| | - |  | ------------------------------------------------------------------------



| |  |  | provincial, regional and local economic, competitive and regulatory conditions and developments;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | technological developments;
| | - |  | ---------------------------



| |  |  | capital markets conditions;
| | - |  | ---------------------------



| |  |  | inflation;
| | - |  | ----------



| |  |  | foreign currency exchange rates;
| | - |  | --------------------------------



| |  |  | interest rates;
| | - |  | ---------------



| |  |  | weather conditions;
| | - |  | -------------------



| |  |  | the timing and success of business development efforts;
| | - |  | -------------------------------------------------------



| |  |  | construction commodity shortages, particularly in respect of steel and cement; and
| | - |  | ----------------------------------------------------------------------------------



| |  |  | our ability to successfully identify and acquire new businesses and assets and integrate them into our existing operations.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

Also see Risk Factors on pages 6 through 9. You are cautioned not to put undue reliance on any forward-looking statements, and we undertake no obligation to
update those statements.



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##### Table of Contents

PART I



|ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|------- | -----------------------------------------------------

Not
applicable.



|ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE
|------- | ---------------------------------------

Not applicable.



|ITEM 3. | KEY INFORMATION
|------- | ---------------

A. Selected Financial Data

The selected financial data set forth in the following table is expressed in Canadian dollars. A
history of the exchange rates for Canadian dollars in terms of US dollars follows. The financial information set forth in the following table includes the accounts of the Company and subsidiaries on a consolidated basis. This financial information
was prepared in accordance with accounting principles generally accepted in Canada, the application of which conforms in all material respects for the periods presented with accounting principles generally accepted in the United States, except to
the extent noted in Note 24 to the Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 20-F. The selected financial data should be read in conjunction with and is qualified by such Consolidated Financial Statements
and the Notes thereto. Where differences between accounting principles generally accepted in Canada and the United States exist, the financial information under U.S. GAAP has been disclosed.



|                                            |  |                                         |           |               |   |               |  |               |           |               |   |           |  |   |          
|------------------------------------------- |  | --------------------------------------- | --------- | ------------- | - | ------------- |  | ------------- | --------- | ------------- | - | --------- |  | - | ---------
|Fiscal Year Ended                           |  | Oct 31, 2006                            |           | Oct. 31, 2005 |   | Oct. 31, 2004 |  | Oct. 31, 2003 |           | Oct. 31, 2002
|                                            |  | (in thousands except per share figures)
|Contract Revenues                           |  | $                                       | 4,208,284 |               | $ | 3,295,489     |  | $             | 3,052,627 |               | $ | 2,625,186 |  | $ | 2,881,178
|Operating Profit  Canadian GAAP            |  | $                                       | 200,570   |               | $ | 108,125       |  | $             | 79,151    |               | $ | 62,372    |  | $ | 62,716   
|Operating Profit  U.S. GAAP                |  | $                                       | 197,855   |               | $ | 106,216       |  | $             | 77,987    |               | $ | 61,208    |  | $ | 61,552   
|Net Earnings  Canadian GAAP                |  | $                                       | 169,204   |               | $ | 79,804        |  | $             | 55,768    |               | $ | 55,286    |  | $ | 56,565   
|Net Earnings  U.S. GAAP                    |  | $                                       | 166,850   |               | $ | 77,200        |  | $             | 54,990    |               | $ | 54,574    |  | $ | 56,492   
|Earnings Per Share  Canadian GAAP(1)(2)(3) |  | $                                       | 10.12     |               | $ | 5.31          |  | $             | 4.03      |               | $ | 4.51      |  | $ | 5.03     
|Earnings Per Share  U.S. GAAP(1)(2)(3)     |  | $                                       | 10.19     |               | $ | 5.22          |  | $             | 3.97      |               | $ | 4.46      |  | $ | 5.03     
|Number of Outstanding Shares(3)             |  |                                         | 16,719    |               |   | 15,034        |  |               | 13,853    |               |   | 12,246    |  |   | 11,240   
|Dividends Per Share(1)                      |  | $                                       | 4.88      |               | $ | 3.03          |  | $             | 2.88      |               | $ | 3.64      |  | $ | 4.78     
|Total Assets  Canadian GAAP                |  | $                                       | 1,849,591 |               | $ | 1,483,754     |  | $             | 1,261,727 |               | $ | 1,130,913 |  | $ | 1,058,037
|Total Assets  U.S. GAAP                    |  | $                                       | 1,851,468 |               | $ | 1,484,637     |  | $             | 1,260,463 |               | $ | 1,123,584 |  |   | N/A      
|Shareholders Equity  Canadian GAAP        |  | $                                       | 493,941   |               | $ | 359,793       |  | $             | 297,299   |               | $ | 264,259   |  | $ | 236,933  
|Redeemable Common Stock  U.S. GAAP         |  | $                                       | 485,534   |               | $ | 354,123       |  | $             | 294,817   |               | $ | 255,370   |  |   | N/A      
|Share Capital  Canadian GAAP               |  | $                                       | 274,259   |               | $ | 225,836       |  | $             | 192,763   |               | $ | 161,686   |  | $ | 131,737  
|Share Capital  U.S. GAAP                   |  | $                                       | 268,190   |               | $ | 222,412       |  | $             | 192,763   |               | $ | 161,686   |  | $ | 131,737  

Notes:



|(1) | All amounts are rounded to nearest thousand, except earnings per share and dividends per share.
|--- | -----------------------------------------------------------------------------------------------



|(2) | Basic and fully diluted.
|--- | ------------------------



|(3) | Weighted average number of shares outstanding using the total of all Class 1, 2, 3 and 4 shares of the Company.
|--- | ---------------------------------------------------------------------------------------------------------------



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The following tables set forth the rate of exchange for the Canadian dollar, average rates for the end of fiscal year
2002 through fiscal year 2006, and the range of high and low rates for the period as well as for the last six months. The tables set forth the number of Canadian dollars required under that formula to buy one United States dollar based on the noon
rates of exchange as reported by the Federal Reserve Bank of New York. The average rate means the average of the exchange rates on the last day of each month during the period. As at the most recent practicable date, February 16, 2007, the noon
rate as quoted by the Federal Reserve Bank of New York was $1.1638 equals US$1.00.

Exchange Rates



|                                   |  |                                      |  |        |  |        |  |       
|---------------------------------- |  | ------------------------------------ |  | ------ |  | ------ |  | ------
|                                   |  | United States dollar/Canadian dollar
|                                   |  | Average                              |  | High   |  | Low    |  | Close 
|Fiscal Year Ended October 31, 2006 |  | 1.1329                               |  | 1.1960 |  | 1.0989 |  | 1.1227
|Fiscal Year Ended October 31, 2005 |  | 1.2134                               |  | 1.2703 |  | 1.1607 |  | 1.1796
|Fiscal Year Ended October 31, 2004 |  | 1.3147                               |  | 1.3970 |  | 1.2194 |  | 1.2209
|Fiscal Year Ended October 31, 2003 |  | 1.4379                               |  | 1.5903 |  | 1.3043 |  | 1.3195
|Fiscal Year Ended October 31, 2002 |  | 1.5718                               |  | 1.6128 |  | 1.5108 |  | 1.5610



|     |  |              |  |               |  |               |  |              |  |               |  |           
|---- |  | ------------ |  | ------------- |  | ------------- |  | ------------ |  | ------------- |  | ----------
|     |  | January 2007 |  | December 2006 |  | November 2006 |  | October 2006 |  | September2006 |  | August2006
|High |  | 1.1824       |  | 1.1652        |  | 1.1474        |  | 1.1384       |  | 1.1272        |  | 1.1312    
|Low  |  | 1.1647       |  | 1.1415        |  | 1.1275        |  | 1.1154       |  | 1.1052        |  | 1.1066    

D. Risk Factors

We work in a highly competitive marketplace.

The construction industry as a whole has historically been intensely competitive. The Company competes with other major contractors, as well as numerous mid-size and
smaller contractors, in each of our markets, and competition for work is intense, particularly during economic downturns. In addition, public sector contracts are normally required by law to be awarded to the lowest capable and responsive bidder.
Competition may result in lower profit margins and commercially unfavorable contractual terms, increasing the risk of losses to the Company as a result of unforeseen problems and unbudgeted costs.

Our fixed price contracts subject us to the risk of increased project cost.

The Company undertakes a significant number of fixed price construction contracts under which we agree to perform a project for a definite, predetermined price regardless of our actual costs. Many fixed price contracts involve large
industrial facilities and public infrastructure projects, the costs of which are particularly difficult to estimate. Fixed price contracts present the risk that our actual costs may exceed those estimated for the project, the result being a decrease
in profit margin or in extreme cases, a loss on the project.

The Company has developed and maintains procedures and controls during the bidding process to
manage the risks associated with this type of work to the greatest extent possible. However, some factors during the construction phase of projects are beyond managements direct control and are difficult to forecast, including changes in the
business environment, changes to laws and regulations, exceptionally bad weather or other unanticipated natural conditions, world shortages of material supply, labor strife, and bankruptcy of subcontractors. There can be no assurance that the
Company will be able to perform its obligations under fixed price contracts without incurring losses. If the Company was to significantly underestimate the cost of one or more fixed price contracts, the resulting losses could have a material adverse
effect on the Company.



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##### Table of Contents

As at October 31, 2006, 68% (2005  56%) of the backlog of work to be completed, measured by expected gross
revenues, was under fixed price construction contracts.

Many of our contracts subject us to the risk of damages resulting from delays.

Many construction contracts contain deadlines for completion of the project or various phases of the project and impose penalties for failing to complete the project
or phase by the required date. The Company attempts to negotiate waivers of consequential damages arising from delays, including damages for loss of use, loss of product, loss of revenue and loss of profit. However, on some contracts, PCL is
required to undertake responsibility for liquidated damages for failure to meet contract schedules. Although the Company has not incurred material penalties for liquidated damages during the past three fiscal years, we may incur such penalties in
the future. Such penalties for liquidated damages may be significant and could negatively affect our financial condition or results of operations.

An
inability to obtain bonding would have a negative impact on our operations and results.

Some of our construction contracts require us to post payment
and performance bonds written by qualified surety companies guaranteeing our completion of the project and the payment of workers, subcontractors and vendors. The cost of such bonds may be included as a project cost passed along to the client.
Although we have not been unable to obtain bonding, our inability to procure such bonds for any reason in the future would limit our ability to bid for new projects.

Claims against the Company could have a material adverse impact on our financial condition or results of operations.

Disputes arise frequently in the ordinary course of business in the construction industry. Disputes may include claims against PCL based upon alleged defects in performance under contracts or claims by PCL against customers who refuse to
pay contract amounts based on alleged breaches by PCL. Litigation often requires substantial expenditures for legal and consulting fees, and equally or more importantly, requires significant management time and energy that otherwise would be focused
on running the business. PCL incurred legal fees of $6,131,000 in fiscal 2006, $7,389,000 in fiscal 2005, and $4,908,000 in fiscal 2004, in relation to claims both for and against the Company.

We do not recognize revenue for disputed bills until payment has been made, and we attempt to adequately reserve for claims asserted against PCL in our financial
statements. A partially or completely uninsured claim, if successful and of a significant magnitude, could have a material adverse effect on our financial condition or results of operations. The total value of judgments and negotiated settlements in
claims against PCL that were not covered by insurance was $18,945,000 in fiscal 2006, $1,000,000 in fiscal 2005, and $1,830,000 in fiscal 2004.

Our
success depends on attracting and retaining qualified personnel and subcontractors in a competitive environment.

The Company is highly dependent on the
availability of experienced staff, skilled workers, and qualified subcontractors. From time to time, particularly when the level of construction activity is high in a particular area, the Company faces shortages in all of these categories. This
limits the Companys ability to take on additional work, presents challenges in completing existing projects on schedule, and also potentially increases our costs and risks, adversely affecting earnings.

Reductions in public funding could have a negative impact on our business.

A substantial portion of our billings is derived from public sector projects. In 2006, approximately 26% (2005  37%) of our billings came from contracts with federal, state, provincial and local governments. In times of worsening
economic conditions, governments and government agencies face increased budget constraints, which reduce their ability and willingness to commit funds to new construction projects. In addition, public sector contracts are generally subject to
termination for the convenience of the government. A significant reduction in our public sector work would adversely affect our business, operating results and financial condition.



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##### Table of Contents

Increases in the cost of raw materials negatively impact our business.

The cost of raw materials is a significant component of our operating expenses. Because we are often unable to pass such increases in the costs of raw materials through
to our customers, such increases represent additional costs and negatively impact our results of operations. Recently, China has emerged as a powerful global force that is affecting construction markets world-wide due to its sheer size and
increasing demand for raw materials to sustain its rapidly growing economy. The global availability of basic construction materials such as steel and cement has been impacted by Chinas massive requirements, the consequences being price
fluctuations, periodic supply shortages, and overall price escalation. These conditions have added significant risk for many vendors and subcontractors, who in some cases will not guarantee price or availability for long-term contracts. This in turn
increases the risk for general contractors, who typically are not able to pass such risks on to the customer.

We may incur liabilities under
environmental laws and regulations as a result of our operations.

Our operations are subject to compliance with the regulatory requirements of federal,
provincial, state and local agencies and authorities in the United States, Canada and the Bahamas relating to the environment, including those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste, the
handling of underground storage tanks and the cleanup of properties affected by hazardous substances. Certain environmental laws impose substantial penalties for non-compliance and others, such as the United States Comprehensive Environmental
Response, Compensation and Liability Act, impose strict, retroactive, joint and several liability upon persons responsible for releases of hazardous substances. While we have not incurred material environmental liabilities in the past, there can be
no assurance that our operations will not result in such liabilities in the future and that such liabilities will not have a material adverse effect on our business and financial condition.

The percentage-of-completion method of accounting for contract revenue may result in material adjustments, which could result in a charge against our earnings.

PCL recognizes contract revenue using the percentage of completion method. Under this method, the ratio of actual cost of work performed to date to
current estimated total contract costs is applied to the estimated net contract profit to determine the amount of profit currently recognized. Changes in job performance, job conditions and estimated profitability, including those arising from
contract penalty provisions and final contract settlements may result in revisions to cost and income and are recognized in the period in which such adjustments are determined. The Company recognizes the full amount of an estimated loss where
current estimates indicate an ultimate loss on a project. On a historical basis, PCL believes that we have made reasonably reliable estimates of the progress towards completion on its long term contracts, and, to date, percentage of completion
accounting adjustments have not materially affected PCLs financial results. However, given the uncertainties associated with these types of contracts, it is possible for actual costs to vary from estimates previously made, which may result in
reductions or reversals of previously recorded revenues and profits.

No public trading market exists for our shares.

No public trading market exists for shares of the Company. Shares of the Company are not listed on any stock exchange or other regulated market. Each of the
Companys shareholders is a party to a Unanimous Shareholder Agreement which, among other things, restricts the shareholders ability to transfer shares of the Company, restricts ownership of shares of the Company by corporations, grants
options to the Company to purchase shares of the Company under certain circumstances, establishes obligations on the Company to purchase shares of the Company under certain circumstances and grants a right of first refusal to the Company to purchase
shares of the Company that a shareholder proposes to transfer to a third party. The Unanimous Shareholder Agreement includes a formula for establishing the price at which our shares are to be purchased by the Company. For additional information,
please see Item 9  The Offer and Listing  Offer and Listing Details; MarketsandItem 10  Additional Information  Memorandum of Association and Articles of Association - Unanimous Shareholder
Agreement (previously filed in our registration on Form 20-F filed on February 8, 2006 and incorporated herein by reference).



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##### Table of Contents

Shareholders in the United States may not be able to enforce civil liabilities against PCL and its directors and
executive officers.

PCL is incorporated under the laws of the Province of Alberta, Canada, and all of PCLs directors and a majority of
PCLs executive officers are residents of Canada. Consequently, it may be difficult for United States shareholders to effect service of process within the United States upon PCL and its directors or upon those executive officers who are not
residents of the United States, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under the United States federal securities laws. In addition, a shareholder should not assume that the courts
of Canada (i) would enforce judgments of U.S. courts obtained in actions against PCL or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States, or (ii) would
enforce, in original actions, liabilities against PCL or such persons predicated upon the U.S. federal securities laws or other laws of the United States.

However, a Canadian court would generally enforce, in an original action, civil liability predicated on U.S. securities laws provided that those laws that govern the shareholders claim according to applicable Canadian law, are proven
by expert evidence, are not contrary to public policy as the term is applied by a Canadian court or are not foreign penal laws or laws that deal with taxation or the taking of property by a foreign government and provided that the action is in
compliance with Canadian procedural laws and applicable Canadian legislation regarding the limitation of actions. Also, a Canadian court would generally recognize a judgment obtained in a U.S. court except, for example, where:



|a) | no real or substantial connection can be established between the cause of action and the U.S. court where the judgment was rendered, resulting in the U.S. court having no
jurisdiction according to applicable Canadian law;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b) | the judgment was subject to ordinary remedy (appeal, judicial review and any other judicial proceeding which renders the judgment not final, conclusive or enforceable under the laws
of the applicable state);
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|c) | the judgment was obtained by fraud or in any manner contrary to natural justice or rendered in contravention of fundamental principles of procedure;
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------



|d) | a dispute between the same parties, based on the same subject matter has given rise to a judgment rendered in a Canadian court or has been decided in a third country and the
judgment meets the necessary conditions for recognition in a Canadian court;
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|e) | the outcome of the judgment of the U.S. court was inconsistent with Canadian public policy;
|-- | -------------------------------------------------------------------------------------------



|f) | the judgment enforces obligations arising from foreign penal laws or laws that deal with taxation or the taking of property by a foreign government; or
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------



|g) | there has not been compliance with applicable Canadian law dealing with the limitation of actions.
|-- | --------------------------------------------------------------------------------------------------



|ITEM 4. | INFORMATION ON THE COMPANY
|------- | --------------------------

A. History and Development of the Company

PCL Employees Holdings Ltd. was incorporated under the Companies Act (Alberta)
on April 25, 1977 and continued under the Business Corporations Act (Alberta) on June 19, 1984. Our head office is located at 5410  99 Street, Edmonton, Alberta, Canada, T6E 3P4. Our telephone and facsimile numbers are
(780) 435-9711 and (780) 436-2247, respectively. Our transfer agent is Computershare Investor Services Inc. located at 6thFloor, Western Gas Tower, 530-8thAvenue SW, Calgary, Alberta, Canada, T2P 3S8.



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Principal Capital Expenditures

During the years 2004, 2005 and 2006 the Company spent $12,150,000 net of cash acquired and purchase price adjustments, on the acquisition of companies as disclosed in Note 6 to the consolidated financial statements.
During those same years the Company spent $31,586,000; $51,867,000; and $52,003,000 respectively, on the purchase of property, plant and equipment. With the exception of the expenditure for the Centennial Learning Centre of $10,172,000 in 2005, no
individual expenditure was material. All capital expenditures have been financed through working capital.

The material capital expenditures currently in
progress are disclosed in Item 5  Contractual Obligations. These material current expenditures will take place in Canada.

B. Business Overview

General

PCL Employees Holdings Ltd. is a holding company owning 100% of the issued shares of PCL Construction Holdings Ltd. which is a holding company which in turn directly or indirectly owns 100% of the issued shares of its subsidiaries (with the
exception of GHI Holdings, Inc. in which PCL Construction Holdings Ltd. indirectly owns 95% and Nishi-Khon/PCL Constructors Limited in which PCL Construction Holdings Ltd. indirectly owns 49%). 100% of the issued shares of PCL Constructors Bahamas
Ltd. are held in trust for PCL Construction Holdings Ltd. and PCL Constructors Inc. PCL Construction Holdings Ltd. indirectly owns 100% of the issued shares of PCL Constructors Inc. The Companys operations are in the nature of construction
services. Those operations are carried out by a number of separate subsidiary companies, operating in different construction markets or geographic markets.

A number of PCLs projects can be classified as major construction, involving large quantities of materials, labour, management expertise and capital, in the general areas of (a) commercial and institutional buildings, including
construction of shopping centers, educational facilities, airports, light civil structures, hospitals, museums, sporting and entertainment facilities, hotels, light industrial facilities, multifamily condominiums and apartments, seniors
facilities, and office buildings; (b) construction, shutdown and maintenance services for manufacturing, petrochemical, oil and gas and mine processing facilities, chemical plants, offshore oil production superstructures, forestry projects and
power plants; and (c) roadways, bridges, tunnels, large diameter pipelines, water and wastewater treatment facilities, dams and mine site preparation.

PCL performs a large number of smaller or Special Projects involving tenant installations, alterations, and restorations or small stand-alone projects. PCL also performs ongoing service and maintenance contract work for certain
clients.

Contracts awarded to PCL pursuant to bid or negotiation with the owners generally provide for compensation based on: (a) lump sum price;
(b) unit prices; or (c) cost plus a fee (with or without a guaranteed maximum cost to the owner). Pursuant to each general contract awarded to it, PCL provides all general supervisory, management and administrative services, and assumes
responsibility for the execution of the entire project, performing varying portions of the work with its own forces, most of which are employed locally for the particular project. Subcontractors perform the balance of the work.

Some of the contracts PCL bids on are design/build projects. On design/build projects, contract arrangements are entered into for both the design and the construction of
a project. As the contract price is established at a very early stage in the design, PCL has additional exposure in construction costs due to the added detail contained in the final design. In addition, these contracts take on the additional risk of
design liabilities during both the construction period and the post construction period. Design/build projects normally earn higher fees commensurate with the additional risk being taken.

PCL performs a number of construction management contracts. In this type of contract, PCL acts as agent for the owner in coordinating and supervising the construction.
Under construction management, PCL usually does not perform the work with its own forces, but the work is accomplished substantially by other trade contractors. In these contracts, the owner frequently pays costs on a fully reimbursable basis, and
PCL receives a fee for its services.



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##### Table of Contents

PCL occasionally undertakes, as a member of joint ventures, responsibilities as a general contractor in association with
other construction companies or, on design-build projects, in conjunction with designers. Each joint venture arrangement customarily relates to a single contract or project. Some of the joint ventures undertaken may involve multiple projects and an
ongoing business relationship. Joint ventures serve to spread the risk among the participating companies with agreements that typically provide that the participants will supply their proportionate share of the necessary operating funds for the
project (including, for example, the cost of equipment) and will share the profits or losses in accordance with specified percentages. Each of the participants in a joint venture is usually liable to the client for completion of the entire project
in the event of default by any of the other joint venturers. One of the joint venturers customarily acts as sponsor, providing the bulk of the supervisory and administrative services for the project. PCL typically acts as the joint venture sponsor.

Principal Markets

The following tables set forth
reportable operating segment and geographic information for contract revenue for the last three fiscal years for the countries in which the Company currently operates. The Company has four reportable operating segments under Canadian GAAP.



|                 |  |                       |       |                 |   |                         |  |             |     |       |   |       |  |                            |     |                   |   |       |  |   |  |   |      
|---------------- |  | --------------------- | ----- | --------------- | - | ----------------------- |  | ----------- | --- | ----- | - | ----- |  | -------------------------- | --- | ----------------- | - | ----- |  | - |  | - | -----
|                 |  | (millions of dollars)
|Contract Revenue |  | Buildings Canada     |       | Buildings U.S. |   | HeavyIndustrial Canada |  | Heavy Civil |     | Other |   | Total |  | Consolidating Eliminations |     | ConsolidatedTotal
|2006             |  | $                     | 1,767 |                 | $ | 1,217                   |  | $           | 507 |       | $ | 431   |  | $                          | 286 |                   | $ | 4,208 |  |  |  | $ | 4,208
|2005             |  | $                     | 1,555 |                 | $ | 861                     |  | $           | 448 |       | $ | 335   |  | $                          | 96  |                   | $ | 3,295 |  |  |  | $ | 3,295
|2004             |  | $                     | 1,523 |                 | $ | 874                     |  | $           | 360 |       | $ | 212   |  | $                          | 84  |                   | $ | 3,053 |  |  |  | $ | 3,053



|                 |  |                       |       |      |   |         |  |       |    |  |   |      
|---------------- |  | --------------------- | ----- | ---- | - | ------- |  | ----- | -- |  | - | -----
|                 |  | (millions of dollars)
|Contract Revenue |  | Canada                |       | U.S. |   | Bahamas |  | Total
|2006             |  | $                     | 2,273 |      | $ | 1,907   |  | $     | 28 |  | $ | 4,208
|2005             |  | $                     | 2,003 |      | $ | 1,292   |  |       |   |  | $ | 3,295
|2004             |  | $                     | 1,884 |      | $ | 1,169   |  |       |   |  | $ | 3,053

Construction Markets

PCL is engaged in the construction services industry, performing construction services for a broad range of public and private clients in Canada, the United States and the Bahamas. Construction services are performed in the following
construction markets:



| |  |  | Commercial and institutional buildings including: shopping centers, educational facilities, airports, light civil structures, hospitals, museums, sporting and entertainment
facilities, hotels, light industrial facilities, multifamily condominiums and apartments, seniors facilities, and office buildings.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Heavy industrial construction including: manufacturing, petrochemical, oil and gas and mine processing facilities, chemical plants, offshore oil production superstructures, forestry
projects, power plants and industrial shutdown and maintenance.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Heavy civil construction including: roadways, bridges, tunnels, large diameter pipelines, water and wastewater treatment facilities, dams and mine site preparation.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Principal Operating Locations

PCL has its principal district offices and operations (*) offices at the following locations listed from east to west by country. At its principal district office, the operating company will have established a permanent location with a
full service business unit capable of running as a stand alone business. At an operations office, the operating company will share some of the services necessary to run the business with one of its fully staffed district offices.



|                                            
|--------------------------------------------
|        Halifax, Nova Scotia               
|                                            
|        Ottawa, Ontario                    
|                                            
|        Toronto, Ontario                   
|                                            
|        Winnipeg, Manitoba                 
|                                            
|        Regina, Saskatchewan               
|                                            
|        Saskatoon, Saskatchewan*           
|                                            
|        Ft. McMurray, Alberta*             
|                                            
|        Edmonton, Alberta                  
|                                            
|        Calgary, Alberta                   
|                                            
|        Yellowknife, Northwest Territories*
|                                            
|        Kelowna, British Columbia*         
|                                            
|        Surrey, British Columbia           
|                                            
|        Vancouver, British Columbia        
|                                            
|        Orlando, Florida                   
|                                            
|        Tampa, Florida                     
|                                            
|        Alpharetta, Georgia                
|                                            
|        Minneapolis, Minnesota             
|                                            
|        Denver, Colorado                   
|                                            
|        Phoenix, Arizona                   
|                                            
|        Albuquerque, New Mexico*           
|                                            
|        Las Vegas, Nevada*                 
|                                            
|        San Diego, California              
|                                            
|        Los Angeles, California            
|                                            
|        Bakersfield, California            
|                                            
|        Seattle, Washington                
|                                            
|        Honolulu, Hawaii                   
|                                            
|        Nassau, Bahamas*                   

Seasonality

Certain specializations within the construction industry are highly weather dependent, and experience dramatic seasonal swings in activity level. As a result, management of these companies must focus significant attention on cash management
and the retention of key staff during the slow periods.

However, due to its size, geographic coverage and diversity of operations, PCL has not
historically experienced major seasonal changes in activity. Supporting this statement is the following table that summarizes PCLs monthly billings for the four year period 2003  2006.



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##### Table of Contents

PCL Family of Companies

Monthly Billings

Years Ending October 31, 2003  2006

$000s (CDN$)



|        |  |         |  |         |  |         |  |         |  |         |  |         |  |         |  |         |  |         |  |         |  |         |  |        
|------- |  | ------- |  | ------- |  | ------- |  | ------- |  | ------- |  | ------- |  | ------- |  | ------- |  | ------- |  | ------- |  | ------- |  | -------
|        |  | Nov     |  | Dec     |  | Jan     |  | Feb     |  | Mar     |  | Apr     |  | May     |  | Jun     |  | Jul     |  | Aug     |  | Sep     |  | Oct    
|2003    |  | 232,202 |  | 217,390 |  | 207,358 |  | 205,570 |  | 261,991 |  | 302,980 |  | 252,932 |  | 221,827 |  | 269,368 |  | 242,977 |  | 294,690 |  | 261,824
|2004    |  | 245,637 |  | 230,925 |  | 215,310 |  | 249,197 |  | 260,375 |  | 294,135 |  | 271,869 |  | 241,300 |  | 261,577 |  | 265,853 |  | 256,590 |  | 282,650
|2005    |  | 302,795 |  | 265,525 |  | 245,316 |  | 262,717 |  | 319,425 |  | 335,763 |  | 337,336 |  | 324,673 |  | 355,622 |  | 342,330 |  | 408,836 |  | 391,964
|2006    |  | 320,793 |  | 330,957 |  | 367,513 |  | 350,391 |  | 403,708 |  | 326,122 |  | 421,413 |  | 423,999 |  | 422,930 |  | 432,796 |  | 443,048 |  | 409,716
|Average |  | 275,357 |  | 261,199 |  | 258,874 |  | 266,969 |  | 311,375 |  | 314,750 |  | 320,888 |  | 302,950 |  | 327,374 |  | 320,989 |  | 350,791 |  | 336,539

LOGO

As illustrated above, although a moderate drop in billings is typically seen for the month of January each year, the average
billings during the three-month winter season, i.e. December through February, falls within 22% of the overall annual average billings level. Seasonal fluctuation in billings is not a significant concern requiring management attention. For each
fiscal year, the U.S. billing numbers, originally billed in U.S. dollars, have been converted to Canadian dollars using the average U.S. dollar/Canadian dollar exchange rate over that fiscal year.



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##### Table of Contents

Sources and Availability of Raw Materials and Price Volatility

Periodically the construction industry experiences severe shortages in certain types of construction materials, and with these shortages there typically are dramatic
swings in pricing. In the past decade, shortages have been experienced in lumber, structural steel, alloys, reinforcing steel, Portland cement, and electrical cable.

In its role as a general contractor, PCL subcontracts out a high percentage of the work it performs, typically in the range of 75% and in certain instances as high as 100% of the work other than general supervisory,
management and administrative services. With the exception of materials such as cement, lumber, and aggregates, PCL typically is not directly responsible for the procurement of either raw materials or finished construction products, as this scope
generally is the responsibility of the subcontractors.

PCL will typically require firm lump sum or firm unit prices from its subcontractors, which will
apply for the entire duration of a project. If this is not possible, PCL will attempt to pass on to the client any material price escalation risks, and where neither of these approaches is possible, PCL may decide that its best overall commercial
strategy is to accept the risk of material cost escalation, to quantify the risk as well as it can, and deal with the risk assumed as a business opportunity or otherwise manage the risk.

In industrial construction, major plant components equipment and a significant percentage of the bulk materials required for a project are typically procured by the client, who by doing so assumes all risks tied to
price escalation and foreign currency exchange. Furthermore, certain major industrial projects undertaken by PCL are fundamentally labor contracts, with a low material and equipment content, and in which labor escalations are typically defined by
collective agreements and are passed through to the client.

PCL, as a corporate policy, does not speculate in currency risk. In addition to the
Companys practice of managing its risk against devaluation of its U.S. assets from currency exchange rate fluctuations, each PCL company typically operates inside its home country and as a consequence generally does not assume the risk of
contract payments in foreign currencies.

The evaluation of subcontractor and material pricing risks are addressed in all major bid reviews, with
significant attention from both district as well as senior management, depending upon the size of the project.

Marketing Channels and Sales Methods

Due to the diversity and breadth of PCLs operations, a wide range of marketing strategies and techniques are used which vary significantly from
region to region.

In the Canadian commercial markets, where PCL and its predecessors have operated for 100 years, the Companys reputation is
well-established. Because of the high level of brand recognition, much of the ongoing marketing effort is focused on reinforcing PCLs reputation through industry associations and community involvement.

In the Canadian heavy industrial markets, the projects are large and the client base is relatively small, dominated by Fortune 500 companies. These clients are
sophisticated buyers of construction services, and place a high value on the project management performance and safety experience of the contractors they utilize. Because of its position in this market, PCL is typically aware of most major projects
during or prior to the design phase, and discussions on construction execution are held with the client early in the bidding cycle to determine if the clients requirements and PCLs capabilities fit at that time. In certain cases there is
not a fit, and negotiations will be dropped long before a project reaches the bidding stage. Where there is a fit, PCL management will develop a project execution strategy, and at times take on joint venture partners and dedicated subcontractors if
appropriate, to offer the client a competitive proposal with a high chance of success.

In the U.S. commercial buildings market, PCL is frequently seen as
one of several large, experienced and financially capable contractors. In this market, PCL must expend a much greater effort to convince potential clients as to why PCL would be a good choice as their contractor. Thus, in these areas, the business
development function is much more critical than in Canada, and the ratio of business development costs to revenue is significantly higher.



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##### Table of Contents

In the heavy civil markets, the clients are typically government entities such as a state department of transportation, a
regional water authority, etc. Marketing in the conventional sense is minimal in these markets, as the work is traditionally awarded through the competitive bid process, to qualified bidders. While each authority will have its own prequalification
standards and procedures, the common metrics usually include financial strength, safety record, past project performance, history of lawsuits, etc.

In all
markets, however, PCLs style is consistent, and emphasizes experience, technical excellence, performance, quality, and financial strength, with a high value placed on long-term relationships and repeat business.

From time to time various media are used to focus on project announcements, project completions, and recognition for project or individual accomplishments. Radio,
television and newspaper advertisements are rarely used in PCL marketing efforts.

Dependence Upon Patents, Licenses, or New Manufacturing Processes

Although construction is a highly technical industry, general contractors typically are not directly involved in the development of, and are not
dependent upon, patents or licensing agreements. Leading contractors continually strive to develop methods and procedures that are safer, faster, and less costly. However, most of these innovations are drawn from industry experience, have typically
been in the public domain for many years, and thus are not eligible for patent protection by an individual contractor. Furthermore, the effort required to patent a construction process is significant and expensive and the
commercialization of an invention is time-consuming.

Although PCL is typically not able to secure exclusive use of its innovations, on the other hand it
does not face the risk of other contractors interfering with PCL projects by blocking the use of construction techniques through patent rights.

From time
to time, PCL may work with developer clients who have process patents, but as a general rule PCL will not assume contract risks tied to process performance. Alternatively, any process risks assumed must be clearly defined and quantified, and either
an appropriate contingency will be established or insurance will be purchased to address such risks.

Assessment of PCLs Competitive Position

In assessing a contractors competitiveness, a number of metrics can be used, including a companys ability to sustain growth while
maintaining profitability; its ranking in the industry; and recognition by the industry and the media. A review of PCLs competitive position on this basis follows.

Sustained Growth with Profitability

Over the past thirty years since its transition to employee ownership,
PCL has grown from annual consolidated revenue of $300 million to $4.2 billion, representing a compounded annual growth rate of 9.5%. Every year during that period the Company has been profitable.

Rankings

The rankings below in these industry
or business publications are each calculated on the basis of annual volume (which we believe equates to billings or revenue):



| |  | Top 40 Contractors in Canada (formerly Heavy Construction News Top 100 Contractors in Canada): Ranked #1 in November/December 2005 issue of On-Site magazine .
PCL has been ranked #1 for more than 25 years.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Top 400 Contractors Sourcebook: Ranked #10 in the United States in 2006 according to Engineering News Record. Up from #14 in 2005. PCL has ranked in the top 25 since
1995.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Venture 100 Biggest Public, Private and Crown Corporations: Ranked #20 out of 100 Canadian corporations, as per September 2006 issue of Alberta Venture.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  | Top 225 International Contractors  2005: Ranked #26 out of 225 according to Engineering News Record. Up one spot from 2004.
|- |  | ----------------------------------------------------------------------------------------------------------------------------

Recent Awards



| |  | Outstanding Corporation of the Year  2006:As recognized by the Edmonton chapter of the Association of Fundraising Professionals for excelling in dedication to the
community.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Canadas 50 Best Managed Companies  2006: Recognized for the twelfth time as one of Canadas best managed companies. This is our fourth consecutive year as a
member of the prestigious Platinum Club, reserved for participants who maintain an independently reviewed standard of excellence for six consecutive, active years in the program.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Canadas Top 40 Contractors: Ranked #1 of 40 by Canadian Commerce and Industry magazine. Weve been #1 since the list was introduced in 2000 
thats for six consecutive years.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Canadas Top 100 Employers: Weve received recognition by MediaCorp. Inc. as one of Canadas top 100 employers for the last six consecutive years.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Canadas 50 Best Employers (formerly known as Best Companies to Work for in Canada): For the 2007 year, the PCL family of companies is ranked 5th among the
top 50 companies to work for in Canada. It is our first year in the top five and our eighth year in the top fifty. This annual ranking is published in the Globe & Mails Report on Businessmagazine.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Fortune 100 Best Companies to Work for in the United States (2006-2007):Ranked #42 out of 100 (second year that PCL has made the top 100, up twenty-three spots from 2005) as
per the January 2007 issue of Fortune magazine.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | ENR Top 100 Design-Build Firms  2006: #35 out of 100. Up 19 spots from 2005.
|- |  | -----------------------------------------------------------------------------

Competition and Backlog

PCL has achieved a strong position in the construction industry in Canada and the U.S.
Competition from others on large projects is somewhat limited to the larger contractors due to financial requirements for bonding; however, on smaller or routine work, a large number of companies typically compete for the contract award. A portion
of PCLs business is dependent upon domestic governmental spending policy. Other portions depend on demand and funds available for plant expansion and other capital improvements by private companies.

As of October 31, the backlog of incomplete construction work under contract was as follows:



|                                |  |                                                      |       |      |   |       |  |   |      
|------------------------------- |  | ---------------------------------------------------- | ----- | ---- | - | ----- |  | - | -----
|                                |  | Total Incomplete at October 31 (Millions of Dollars)
|                                |  | 2006                                                 |       | 2005 |   | 2004 
|Backlog of Work to be Completed |  | $                                                    | 5,611 |      | $ | 4,900 |  | $ | 3,592
|                                |  |                                                      |       |      |   |       |  |   |      
|Breakdown By Segment            |  |                                                      |       |      |   |       |  |   |      
|Buildings  Canada              |  | $                                                    | 2,858 |      | $ | 2,441 |  | $ | 1,859
|Buildings  U.S.                |  |                                                      | 1,470 |      |   | 1,062 |  |   | 630  
|Heavy Industrial  Canada       |  |                                                      | 338   |      |   | 343   |  |   | 300  
|Heavy Civil                     |  |                                                      | 473   |      |   | 591   |  |   | 242  
|Other                           |  |                                                      | 472   |      |   | 463   |  |   | 561  
|                                |  |                                                      |       |      |   |       |  |   |      
|Total                           |  | $                                                    | 5,611 |      | $ | 4,900 |  | $ | 3,592
|                                |  |                                                      |       |      |   |       |  |   |      



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##### Table of Contents

|                     |  |                                                      |       |      |   |       |  |   |      
|-------------------- |  | ---------------------------------------------------- | ----- | ---- | - | ----- |  | - | -----
|                     |  | Total Incomplete at October 31 (Millions of Dollars)
|                     |  | 2006                                                 |       | 2005 |   | 2004 
|Breakdown By Country |  |                                                      |       |      |   |       |  |   |      
|Total Canada         |  | $                                                    | 3,196 |      | $ | 2,785 |  | $ | 2,159
|Total U.S.           |  |                                                      | 2,161 |      |   | 1,715 |  |   | 897  
|Total Bahamas        |  |                                                      | 254   |      |   | 400   |  |   | 536  
|                     |  |                                                      |       |      |   |       |  |   |      
|Total                |  | $                                                    | 5,611 |      | $ | 4,900 |  | $ | 3,592
|                     |  |                                                      |       |      |   |       |  |   |      

The total value of work awarded to the Company over the last five fiscal years is as follows:



|                            |  |                                                   |       |      |   |       |  |      |       |      |   |       |  |   |      
|--------------------------- |  | ------------------------------------------------- | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | ----- |  | - | -----
|                            |  | Total Value Of Work Awarded (Millions of Dollars)
|                            | 
|                            |  | 2006                                              |       | 2005 |   | 2004  |  | 2003 |       | 2002
|Competitively Bid           |  | $                                                 | 2,227 |      | $ | 2,577 |  | $    | 1,743 |      | $ | 1,397 |  | $ | 712  
|Negotiated                  |  |                                                   | 2,349 |      |   | 1,946 |  |      | 1,219 |      |   | 1,327 |  |   | 1,528
|Construction Management     |  |                                                   | 931   |      |   | 751   |  |      | 1,179 |      |   | 420   |  |   | 669  
|                            |  |                                                   |       |      |   |       |  |      |       |      |   |       |  |   |      
|Total Value of Work Awarded |  | $                                                 | 5,507 |      | $ | 5,274 |  | $    | 4,141 |      | $ | 3,144 |  | $ | 2,909
|                            |  |                                                   |       |      |   |       |  |      |       |      |   |       |  |   |      

Material Effects of Government Regulation

Other than in critical areas such as safety and the environment, the construction industry as a whole is not highly susceptible to the impacts of government regulation,
compared to certain other industries such as energy, mining, and forestry.

PCL complies with the laws and regulations of the jurisdictions in which it
conducts its operations, competing on a level playing field with the competition. Also, in relation to the total number of salaried staff in the Company, and the size of the equipment fleet, there are relatively few cross-border transfers of staff
or equipment that would be subject to government regulation or controls.

In general, PCL is not materially affected by government regulation.

C. Organizational Structure

PCL Employees Holdings Ltd. is an investment holding company owning 100% of the issued shares of
PCL Construction Holdings Ltd. which in turn directly or indirectly owns 100% of the issued shares of its subsidiaries (with the exception of GHI Holdings, Inc. in which PCL Construction Holdings Ltd. indirectly owns 95% and Nishi-Khon/PCL
Constructors Limited in which PCL Construction Holdings Ltd. indirectly owns 49%). 100% of the issued shares of PCL Constructors Bahamas Ltd. are held in trust for PCL Construction Holdings Ltd. and PCL Constructors Inc. PCL Construction Holdings
Ltd. indirectly owns 100% of the issued shares of PCL Constructors Inc. Below is a listing of the Companys significant subsidiaries.



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##### Table of Contents

|                                         |  |                               |  |                                     |  
|---------------------------------------- |  | ----------------------------- |  | ----------------------------------- | -
|Subsidiary Name                          |  | Jurisdiction of Incorporation |  | Percentage of Common ShareOwnership |  
|PCL Construction Group Inc.              |  | Alberta, Canada               |  | 100                                 | %
|PCL Construction Holdings Ltd.           |  | Alberta, Canada               |  | 100                                 | %
|PCL Construction Management Inc.         |  | Alberta, Canada               |  | 100                                 | %
|PCL Construction Resources Inc.          |  | Alberta, Canada               |  | 100                                 | %
|PCL Constructors Bahamas Ltd.            |  | Nassau, Bahamas               |  | 100                                 | %
|PCL Constructors Canada Inc.             |  | Alberta, Canada               |  | 100                                 | %
|PCL Constructors Inc.                    |  | Alberta, Canada               |  | 100                                 | %
|PCL Constructors Northern Inc.           |  | Alberta, Canada               |  | 100                                 | %
|PCL Constructors Westcoast Inc.          |  | Alberta, Canada               |  | 100                                 | %
|PCL Industrial Constructors Inc.         |  | Alberta, Canada               |  | 100                                 | %
|PCL Industrial Management Inc.           |  | Alberta, Canada               |  | 100                                 | %
|PCL Intracon Power Inc.                  |  | Alberta, Canada               |  | 100                                 | %
|Grand Sierra Construction Inc.           |  | Alberta, Canada               |  | 100                                 | %
|Grand Sierra Equipment Ltd.              |  | Alberta, Canada               |  | 100                                 | %
|Melloy Industrial Services Inc.          |  | Alberta, Canada               |  | 100                                 | %
|Monad Industrial Constructors Inc.       |  | Alberta, Canada               |  | 100                                 | %
|PCL Capital Inc.                         |  | British Virgin Islands        |  | 100                                 | %
|4102410 Canada Inc.                      |  | Northwest Territories, Canada |  | 100                                 | %
|GHI Holdings, Inc.                       |  | Colorado, U.S.A.              |  | 95                                  | %
|PCL Construction Enterprises, Inc.       |  | Colorado, U.S.A.              |  | 95                                  | %
|PCL Civil Constructors, Inc.             |  | Colorado, U.S.A.              |  | 95                                  | %
|PCL Construction Resources (U.S.A.) Inc. |  | Colorado, U.S.A.              |  | 95                                  | %
|PCL Construction Services, Inc.          |  | Colorado, U.S.A.              |  | 95                                  | %
|PCL Industrial Construction, Inc.        |  | Colorado, U.S.A.              |  | 95                                  | %
|PCL Industrial Services, Inc.            |  | Colorado, U.S.A.              |  | 95                                  | %
|Teton Industrial Construction, Inc.      |  | Colorado, U.S.A.              |  | 95                                  | %
|PCL Construction New Mexico, Inc.        |  | New Mexico, U.S.A.            |  | 95                                  | %
|PCL Construction, Inc.                   |  | Colorado, U.S.A.              |  | 95                                  | %

D. Property, Plant and Equipment

The Company has 52 permanent facilities located throughout Canada and the United States, 23
of which are owned facilities and 29 of which are leased facilities. The Company also leases several short term, project duration facilities. Since construction projects are inherently temporary and location-specific, the Company owns approximately
258 portable offices, shops, and transport trailers.

The Company also has a large construction equipment fleet, including approximately 604 trucks and
pickups and 114 tower and mobile cranes.

As at the end of fiscal 2006, the book value of the Companys property, plant and equipment were as follows:



|                          |  |      |        
|------------------------- |  | ---- | -------
|Book Value               
|                         
|(in thousands of dollars)
|                          | 
|                          |  | 2006
|Land & Buildings          |  | $    | 59,861 
|Construction Equipment    |  |      | 44,295 
|Vehicles                  |  |      | 9,012  
|Computers                 |  |      | 5,583  
|Office Equipment          |  |      | 2,634  
|                          |  |      |        
|                          |  | $    | 121,385
|                          |  |      |        



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##### Table of Contents

Edmonton and Area Land and Buildings

PCL Business Park, Edmonton, Alberta

The PCL Business Park consists of a 10.93 acre business park in south central
Edmonton totaling 217,846 s.f. in office and warehouse space, utilized as follows:



| |  |  | PCLs Corporate Office (56,904 s.f  office)
| | - |  | --------------------------------------------



| |  |  | Edmonton District Office (21,339 s.f.  office)
| | - |  | -----------------------------------------------



| |  |  | Heavy Industrial Main Office (30,586 s.f.  office)
| | - |  | ---------------------------------------------------



| |  |  | PCL Resources Office (10,976 s.f.  office; 4,822 s.f.  warehouse)
| | - |  | --------------------------------------------------------------------



| |  |  | Intracon Office (8,741 s.f.  office; 2,016 s.f.  warehouse)
| | - |  | -------------------------------------------------------------



| |  |  | PCL File Storage Building (7,326 s.f.  warehouse)
| | - |  | --------------------------------------------------



| |  |  | Space leased to third parties (14,073 s.f.  office; 34,345 s.f.  warehouse)
| | - |  | -----------------------------------------------------------------------------



| |  |  | Space under renovation (20,586 s.f. office)
| | - |  | --------------------------------------------



| |  |  | Vacant space (1,000 s.f.  office; 5,132 s.f.  warehouse)
| | - |  | ----------------------------------------------------------

PCL Industrial Fabrication Facility and Module Assembly Yard, Nisku, Alberta

Located approximately 24 kilometres (15 miles) south of
Edmonton, the combined facility consists of 19,080 s.f. of office space, a 125,240 s.f. state-of-the-art piping fabrication facility located on 13.32 acres, plus a nearby additional 31.26 acres for the assembly of large industrial piping and
equipment modules.

Other Canadian Land and Buildings



| |  | Resources Yard and Repair Facility; Nisku, Alberta (6,240 s.f.  office; 15,240 s.f.  shop; 8,000 s.f.  warehouse; 12.86 acres  yard; 7,500 s.f. 
ancillary buildings)
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Regina District Office; Regina, Saskatchewan (10,900 s.f.  office; 4,805 s.f.  shop; 3,200 s.f.  warehouse; 2.17 acres  yard)
|- |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  | Calgary District Office; Calgary, Alberta (34,816 s.f.  office)
|- |  | ----------------------------------------------------------------



| |  | Calgary Yard and Shop; Calgary, Alberta (1,800 s.f.  office; 6,085 s.f.  shops; 6.11 acres  yard)
|- |  | ----------------------------------------------------------------------------------------------------



| |  | Winnipeg District Office; Winnipeg, Manitoba (23,342 s.f.  office; 5.32 acres  yard)
|- |  | --------------------------------------------------------------------------------------



| |  | Ottawa District; Nepean, Ontario (22,969 s.f.  office; 700 s.f.  warehouse)
|- |  | -----------------------------------------------------------------------------



| |  | Melloy Industrial; (7,208 s.f.  office; 14,252 s.f.  shop; 5.02 acres  yard)
|- |  | -------------------------------------------------------------------------------



| |  | BC Region Office; Richmond, British Columbia (2,080 s.f.  office; 4.275 acres  yard)
|- |  | --------------------------------------------------------------------------------------



| |  | Future Module Yard Land; Nisku, Alberta (41.8 acres  raw land)
|- |  | ---------------------------------------------------------------

U.S. Land and Buildings



| |  | Minneapolis District Office; Burnsville, Minnesota (19,902 s.f.  office; 2,100 s.f.  warehouse; 5,098 s.f.  leased to a third party; 2.82 acres  yard)
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Teton Industrial District Office; Alpharetta, Georgia (13,641 s.f.  office; 5,705 s.f.  warehouse; 2.86 acres  yard)
|- |  | -----------------------------------------------------------------------------------------------------------------------



| |  | PCL Industrial Services District Office and Warehouse; Bakersfield, California (51,639 s.f.  office/warehouse; 21.37 acres  yard)
|- |  | -----------------------------------------------------------------------------------------------------------------------------------

None of the listed properties are mortgaged.

In addition to the owned
properties listed above, the Company also leases space for district and operations offices and yards in the following locations:



| |  |  | Vancouver, B.C. (24,500 s.f.  office)
| | - |  | --------------------------------------



| |  |  | Surrey, B.C. (6,248 s.f.  office; 7,504 s.f.  warehouse; 4.34 acres  yard)
| | - |  | -----------------------------------------------------------------------------



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##### Table of Contents

| |  |  | Kelowna, B.C. (7,040 s.f.  office; 1,360 s.f.  shop)
| | - |  | ------------------------------------------------------



| |  |  | Saskatoon, Saskatchewan (1,452 s.f.  office; 3,098 s.f.  shop; .37 acres  yard)
| | - |  | ----------------------------------------------------------------------------------



| |  |  | Edmonton, Alberta (12,296 s.f.  office; 23,408 s.f.  warehouse)
| | - |  | -----------------------------------------------------------------



| |  |  | Fort McMurray, Alberta (7,497 s.f.  office)
| | - |  | --------------------------------------------



| |  |  | Toronto, Ontario (26,200 s.f.  office; 2 acres  yard)
| | - |  | -------------------------------------------------------



| |  |  | Ottawa, Ontario (1.35 acres  yard)
| | - |  | -----------------------------------



| |  |  | Halifax, Nova Scotia (7,497 s.f.  office)
| | - |  | ------------------------------------------



| |  |  | Minneapolis, Minnesota (6,690 s.f.  warehouse; 69,000 s.f. warehouse)
| | - |  | ----------------------------------------------------------------------



| |  |  | Denver, Colorado (23,724 s.f.  office; 1,200 s.f. office; 1,800 s.f  warehouse; 4 acres  yard)
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Phoenix, Arizona (8,000 s.f.  office; 1,344 s.f.  office; 2 acres  yard)
| | - |  | ---------------------------------------------------------------------------



| |  |  | Tampa, Florida (13,097 s.f.  office; 11 acres  yard)
| | - |  | ------------------------------------------------------



| |  |  | Orlando, Florida (13,693 s.f.  office; 1 acres  yard)
| | - |  | -------------------------------------------------------



| |  |  | Seattle, Washington (15,000 s.f.  office; 1.25 acres  yard)
| | - |  | -------------------------------------------------------------



| |  |  | Glendale, California (17,619 s.f.  office; 1.75 acres  yard)
| | - |  | --------------------------------------------------------------



| |  |  | San Diego, California (10,942 s.f.  office)
| | - |  | --------------------------------------------



| |  |  | Honolulu, Hawaii (4,948 s.f.  office)
| | - |  | --------------------------------------



| |  |  | Las Vegas, Nevada (2.0 acres  yard)
| | - |  | ------------------------------------

The Company does not have any
significant unutilized space in any of its leased or owned premises.

The Company is not aware of any material environmental issues which may affect the
utilization of these assets.



|ITEM 4A. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



|ITEM 
5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|-------- | --------------------------------------------

The following
discussion should be read in conjunction with our consolidated financial statements which are included elsewhere in this Annual Report on Form 20-F. Our consolidated financial statements have been prepared in accordance with the provisions of
generally accepted accounting principles in Canada, which differ in certain respects from generally accepted accounting principles in the United States. See Note 24 to our consolidated financial statements for a description of the principal
differences between Canadian GAAP and U.S. GAAP as they relate to PCL.

Overview

The Company operates in the construction industry and performs construction services in Canada, the United States and the Bahamas for a wide variety of public and private clients. The Companys operations are
categorized into four industry segments: Buildings  Canada, Buildings  U.S., Heavy Industrial - Canada, and Heavy Civil. The Buildings segments performs construction services for commercial and institutional buildings, including
construction of shopping centers, educational facilities, airports, light civil structures, hospitals, museums, sporting and entertainment facilities, hotels, light industrial facilities, multifamily condominiums and apartments, seniors
facilities, and office buildings. The Heavy Industrial segment performs construction, shutdown and maintenance services for manufacturing, petrochemical, oil and gas and mine processing facilities, chemical plants, offshore oil production
superstructures, forestry projects and power plants. The Heavy Civil segment performs construction services for roadways, bridges, tunnels, large diameter pipelines, water and wastewater treatment facilities, dams and mine site preparation.

The construction industry is competitive in nature, which often results in lower gross profit on work done than in many other industries. Therefore, in
order to maximize returns, managements central focus is on cost containment. The ability to control costs allows the Company to bid work more competitively and also to complete the work more profitably. Since shareholder returns are directly
tied to the earnings of the Company, the success of the Company is dependent on the ability to perform projects profitably. The Company views both gross profit as a percentage of revenue and indirect and administrative expenses as a percentage of
revenue as key performance indicators.



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##### Table of Contents

A. Operating Results

Below is a brief summary of the Companys financial operations for the last three fiscal years ended
October 31. For more detailed information, please see the consolidated financial statements attached to this report.



|                                                     |  |                               |           |      |   |           |  |   |          
|---------------------------------------------------- |  | ----------------------------- | --------- | ---- | - | --------- |  | - | ---------
|                                                     |  | 2006                          |           | 2005 |   | 2004     
|                                                     |  | (All in thousands of dollars)
|Contract revenues                                    |  | $                             | 4,208,284 |      | $ | 3,295,489 |  | $ | 3,052,627
|Contract costs                                       |  | $                             | 3,722,821 |      | $ | 2,984,185 |  | $ | 2,799,070
|Gross profit on contracts                            |  | $                             | 485,463   |      | $ | 311,304   |  | $ | 253,557  
|Indirect and administrative expenses  Canadian GAAP |  | $                             | 287,193   |      | $ | 206,172   |  | $ | 177,218  
|Indirect and administrative expenses  U.S. GAAP     |  | $                             | 289,908   |      | $ | 208,081   |  | $ | 178,382  
|Gain on disposal of property, plant and equipment    |  | $                             | 2,300     |      | $ | 2,993     |  | $ | 2,812    
|Operating profit  Canadian GAAP                     |  | $                             | 200,570   |      | $ | 108,125   |  | $ | 79,151   
|Operating profit  U.S. GAAP                         |  | $                             | 197,855   |      | $ | 106,216   |  | $ | 77,987   
|Other income(1)                                      |  | $                             | 31,756    |      | $ | 17,525    |  | $ | 8,885    
|Earnings before income taxes  Canadian GAAP         |  | $                             | 232,326   |      | $ | 125,650   |  | $ | 88,036   
|Earnings before income taxes  U.S. GAAP             |  | $                             | 229,611   |      | $ | 123,741   |  | $ | 86,872   
|Income taxes  Canadian GAAP                         |  | $                             | 63,122    |      | $ | 45,846    |  | $ | 32,268   
|Income taxes  U.S. GAAP                             |  | $                             | 62,761    |      | $ | 45,439    |  | $ | 31,882   
|Net earnings  Canadian GAAP                         |  | $                             | 169,204   |      | $ | 79,804    |  | $ | 55,768   
|Net earnings  U.S. GAAP                             |  | $                             | 166,850   |      | $ | 77,200    |  | $ | 54,990   

Notes:



|(1) | Sources of revenue for the other category are derived mainly from investing activity and foreign exchange gains on U.S. dollar-denominated bank loans.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|                                                                    |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|------------------------------------------------------------------- |  | --------------------- | ------ | - | ---------------- | - | ------ | ------------------------ |  | - | ----------- | - |  | ----- | ---- | - | ----- | - | ---- | -------------------------- |  | - | ------------------ | - |  | - | ---- | - |  | - | ------ | -
|                                                                    |  | Reportable Segments   |        |   |                  |   |        |                          |  |   |             |   |  |       |     
|                                                                    |  | Buildings Canada     |        |   | Buildings  U.S. |   |        | Heavy Industrial Canada |  |   | Heavy Civil |   |  | Other |      |   | Total |   |      | Consolidating Eliminations |  |   | Consolidated Total |  
|                                                                    |  | (Millions of Dollars) |       
|2006                                                                |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|Contract revenues                                                   |  | $                     | 1,767  |   |                  | $ | 1,217  |                          |  | $ | 507         |   |  | $     | 431  |   |       | $ | 286  |                            |  | $ | 4,208              |   |  | $ |     |   |  | $ | 4,208  |  
|Contract costs                                                      |  |                       | (1,588 | ) |                  |   | (1,154 | )                        |  |   | (391        | ) |  |       | (395 | ) |       |   | (246 | )                          |  |   | (3,774             | ) |  |   | 51   |   |  |   | (3,723 | )
|                                                                    |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|Gross profit                                                        |  |                       | 179    |   |                  |   | 63     |                          |  |   | 116         |   |  |       | 36   |   |       |   | 40   |                            |  |   | 434                |   |  |   | 51   |   |  |   | 485    |  
|Indirect and administrative expenses and gain on disposal of PP & E |  |                       | (40    | ) |                  |   | (29    | )                        |  |   | (21         | ) |  |       | (9   | ) |       |   | (7   | )                          |  |   | (106               | ) |  |   | (182 | ) |  |   | (284   | )
|                                                                    |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|Operating profit                                                    |  | $                     | 139    |   |                  | $ | 34     |                          |  | $ | 95          |   |  | $     | 27   |   |       | $ | 33   |                            |  | $ | 328                |   |  | $ | (127 | ) |  | $ | 201    |  
|                                                                    |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|Total Assets                                                        |  | $                     | 661    |   |                  | $ | 308    |                          |  | $ | 223         |   |  | $     | 130  |   |       | $ | 98   |                            |  | $ | 1,420              |   |  | $ | 429  |   |  | $ | 1,849  |  
|                                                                    |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|2005                                                                |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|Contract revenues                                                   |  | $                     | 1,555  |   |                  | $ | 861    |                          |  | $ | 448         |   |  | $     | 335  |   |       | $ | 96   |                            |  | $ | 3,295              |   |  | $ |     |   |  | $ | 3,295  |  
|Contract costs                                                      |  |                       | (1,440 | ) |                  |   | (815   | )                        |  |   | (385        | ) |  |       | (301 | ) |       |   | (83  | )                          |  |   | (3,024             | ) |  |   | 40   |   |  |   | (2,984 | )
|                                                                    |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|Gross profit                                                        |  |                       | 115    |   |                  |   | 46     |                          |  |   | 63          |   |  |       | 34   |   |       |   | 13   |                            |  |   | 271                |   |  |   | 40   |   |  |   | 311    |  
|Indirect and administrative expenses and gain on disposal of PP & E |  |                       | (36    | ) |                  |   | (28    | )                        |  |   | (17         | ) |  |       | (8   | ) |       |   | (7   | )                          |  |   | (96                | ) |  |   | (107 | ) |  |   | (203   | )
|                                                                    |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|Operating profit                                                    |  | $                     | 79     |   |                  | $ | 18     |                          |  | $ | 46          |   |  | $     | 26   |   |       | $ | 6    |                            |  | $ | 175                |   |  | $ | (67  | ) |  | $ | 108    |  
|                                                                    |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|Total Assets                                                        |  | $                     | 585    |   |                  | $ | 266    |                          |  | $ | 203         |   |  | $     | 141  |   |       | $ | 49   |                            |  | $ | 1,244              |   |  | $ | 240  |   |  | $ | 1,484  |  
|                                                                    |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|2004                                                                |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|Contract revenues                                                   |  | $                     | 1,523  |   |                  | $ | 874    |                          |  | $ | 360         |   |  | $     | 212  |   |       | $ | 84   |                            |  | $ | 3,053              |   |  | $ |     |   |  | $ | 3,053  |  
|Contract costs                                                      |  |                       | (1,436 | ) |                  |   | (823   | )                        |  |   | (311        | ) |  |       | (187 | ) |       |   | (68  | )                          |  |   | (2,825             | ) |  |   | 26   |   |  |   | (2,799 | )
|                                                                    |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|Gross profit                                                        |  |                       | 87     |   |                  |   | 51     |                          |  |   | 49          |   |  |       | 25   |   |       |   | 16   |                            |  |   | 228                |   |  |   | 26   |   |  |   | 254    |  
|Indirect and administrative expenses and gain on disposal of PP & E |  |                       | (32    | ) |                  |   | (28    | )                        |  |   | (15         | ) |  |       | (9   | ) |       |   | (7   | )                          |  |   | (91                | ) |  |   | (84  | ) |  |   | (175   | )
|                                                                    |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|Operating profit                                                    |  | $                     | 55     |   |                  | $ | 23     |                          |  | $ | 34          |   |  | $     | 16   |   |       | $ | 9    |                            |  | $ | 137                |   |  | $ | (58  | ) |  | $ | 79     |  
|                                                                    |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  
|Total Assets                                                        |  | $                     | 549    |   |                  | $ | 209    |                          |  | $ | 170         |   |  | $     | 98   |   |       | $ | 30   |                            |  | $ | 1,056              |   |  | $ | 206  |   |  | $ | 1,262  |  
|                                                                    |  |                       |        |   |                  |   |        |                          |  |   |             |   |  |       |      |   |       |   |      |                            |  |   |                    |   |  |   |      |   |  |   |        |  



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##### Table of Contents

Information concerning principal geographic areas is as follows:



|              |  |                                         |       |      |   |       |  |   |      
|------------- |  | --------------------------------------- | ----- | ---- | - | ----- |  | - | -----
|              |  | Contract Revenues (Millions of Dollars)
|              |  | 2006                                    |       | 2005 |   | 2004 
|Canada        |  | $                                       | 2,274 |      | $ | 2,003 |  | $ | 1,884
|United States |  |                                         | 1,906 |      |   | 1,292 |  |   | 1,169
|Bahamas       |  |                                         | 28    |      |   |      |  |   |     
|              |  |                                         |       |      |   |       |  |   |      
|Total         |  | $                                       | 4,208 |      | $ | 3,295 |  | $ | 3,053
|              |  |                                         |       |      |   |       |  |   |      
|              | 
|              |  | Long-lived Assets (Millions of Dollars)
|              |  | 2006                                    |       | 2005 |   | 2004 
|Canada        |  | $                                       | 88    |      | $ | 72    |  | $ | 59   
|United States |  |                                         | 36    |      |   | 34    |  |   | 40   
|              |  |                                         |       |      |   |       |  |   |      
|Total         |  | $                                       | 124   |      | $ | 106   |  | $ | 99   
|              |  |                                         |       |      |   |       |  |   |      

Long-lived assets consist of property, plant and equipment and intangible assets.

Results of Operations: Consolidated

Contract revenues

New work securement remained very strong in 2006. The Company secured $5.5 billion in new work in 2006 and saw its
backlog at October 31, 2006 climb to a record $5.6 billion. The Company has set progressively higher new work securement records in each of the years 2004, 2005, and 2006. This has translated into higher contract revenues in each of the years
2006, 2005, and 2004. Contract revenues in 2006 increased $913 million (27.7%) as compared to 2005. Contract revenues in 2005 increased $243 million (8.0%) as compared to 2004. Revenue attributable to the Companys operations in the
United States has increased $614 million in 2006 as compared to 2005 and increased $123 million in 2005 as compared to 2004. This increase in United States contract revenue is despite improvements in the Canadian dollar against the United States
dollar in each of those years of 6.7% and 8.0%. The increase in United States contract revenues in each of 2006 and 2005 was due in large part to the Companys strong performance in the Southeast and Southwest states. Canadian contract revenues
in 2006 increased $271 million over 2005 and increased $119 million in 2005 over the same period in 2004. The Company continues to benefit from a very robust economy in Alberta and British Columbia.

Contract Costs and Gross Profit

The Company
only includes construction claims in revenue when awarded or received. As such, contract revenues and gross profits can fluctuate from year to year depending on the timing of the award or receipt of outstanding construction claims.

Gross profits have increased $174.2 million (56.0%) in 2006 and $57.7 million (22.8%) in 2005. The gross profit as a percentage of contract revenues increased
to 11.5% in 2006 from 9.4% in 2005 and from 8.3% in 2004. This increase was due primarily to the strength of the construction markets in the Buildings  Canada and Heavy Industrial  Canada segments and the increase in the proportion of
design/build work in Buildings  Canada as discussed below.



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Indirect and Administrative Expenses

Indirect and administrative expenses fluctuate with the timing of new work. Salaried project personnel are charged to projects to which they are assigned. Upon project
completion if salaried project personnel are not immediately assigned to another project they are charged to indirect and administrative expenses.

In
2006, indirect and administrative expenses increased $81.0 million. This increase was due primarily to a $59.5 million increase in bonuses paid to employees as a result of increased Company profits. Other significant increases include an increase in
amortization expense of $6.7 million due to the large net additions to plant and equipment in 2006 and 2005, as well as the $2.1 million increase in interest expense as a result of the increase in bank loans and a 1.25% increase in the Canadian
prime lending rate. Operating segment indirect and administrative expenses increased $11.6 million and is attributable to the increase in contract revenues.

Indirect and administrative expenses increased $29.0 million in 2005. Firstly, this increase was due to an increase in the amount of bonuses paid to employees ($15.4 million) as a result of increased Company profits. Secondly, there was an
increase in general corporate administrative expense ($3.9 million) as the Companys significant growth in new work has necessitated an increase in the number of corporate staff to support this increased activity. Thirdly, segment indirect and
administrative expenses increased $4.9 million due to the increase in contract revenues.

Other Income

Other income consists of interest income earned on cash and cash equivalents and short-term deposits, foreign exchange gains, gains or losses on marketable securities and
equity in earnings of limited liability companies and limited partnerships.

Interest income increased $13.2 million due to an increase in cash and cash
equivalents and short-term deposits of $172 million and increases in the Canadian and United States prime rates of 1.25% and 1.5% respectively. Interest income increased in 2005 by $1.2 million due primarily to an increase in cash and cash
equivalents and short-term deposits of $141 million. Foreign exchange gain on the Companys U.S. dollar denominated debt has changed over the past three years in direct relation to the improvement of the Canadian dollar against the United
States dollar. In 2004 the Company wrote-down to market value and sold poorly performing marketable securities realizing a loss of $7.2 million. In 2006 and 2005 the Company recognized a gain of $3.2 million and $1.9 million, respectively, on the
sale of marketable securities. In 2006 and 2005 the Company recognized $1.9 million and $2.8 million, respectively, from equity in earnings of limited liability companies and limited partnerships. As at October 31, 2006 the Company no longer
has any investments in limited liability companies and limited partnerships.

Income Taxes

The effective income tax rates for fiscal 2006 and 2005 are 27% and 36%. The effective rate for 2006 differs from the combined Federal and Provincial or State statutory
income tax rate of 34% (2005  35%) primarily as a result of the recognition of previously unrecognized temporary differences and other changes in estimates and enacted future tax rate reductions.

Results of Operations: Buildings  Canada

Contract revenues

Contract revenues increased $212 million (13.6%) in 2006 due primarily to strong markets in Western Canada.
Contract revenues in 2005 and 2004 were consistent at approximately $1.5 billion.

Contract Costs and Gross Profit

Gross profit for this segment has increased in each of the last two years up $64.5 million in 2006 and $28.4 million in 2005 due primarily to an
overall strengthening of this market and a larger proportion of design/build construction projects which is resulting in gross profit increases. As disclosed in Item 4B  Information on the Company  Business Overview
design/build projects



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normally earn higher fees commensurate with the additional risk being taken. Gross profit for the Buildings  Canada segment has averaged 7.9% of
contract revenues over the past three years. Gross profit as a percentage of contract revenues was 2.2% higher in 2006 and 0.8% higher in 2005 than the three year average. This difference was primarily due to the increase in project gross profits as
discussed.

Indirect and Administrative Expenses

Indirect and administrative expenses were 2.2% of contract revenues in 2006 and 2.3% in 2005. 2004 indirect and administrative expenses were slightly below this as the segment wasnt able get their infrastructure
in place to handle the significant contract revenues growth until late 2004/early 2005.

Results of Operations: Buildings  U.S.

Contract revenues

Contract revenues increased in 2006 by $356 million (41.4%) to approximately $1.2 billion. Contract revenues in 2005 and 2004 remained very consistent at approximately $0.9 billion. Contract revenues increased in 2006 despite a
strengthening of the Canadian dollar against the U.S. dollar of 6.7%. Contract revenues have increased primarily due to strong markets in Florida, California, and Hawaii.

Contract Costs and Gross Profit

Gross profit percentage over the last two years has remained consistent at
5.2% in 2006 and 5.3% in 2005. The gross profit percentage for 2006 and 2005 is also consistent with the 2004-2006 three year average gross profit percentage of 5.4%.

Indirect and Administrative Expenses

Indirect and administrative expenses as a percentage of contract
revenues dropped to 2.4% compared to 3.2% for fiscal 2005 and 2004. 2006 indirect and administrative expenses are lower than 2005 and 2004 as the segment was able to place unassigned project people onto projects in fiscal 2006.

Results of Operations: Heavy Industrial  Canada

Contract revenues

Contract revenues in the Heavy Industrial  Canada segment in 2006 and 2005 were up $59 million
(13.2%) and $88 million (24.6%) respectively. These increases were due primarily to significant oil sands projects in Fort McMurray and Cold Lake, Alberta.

Contract Costs and Gross Profit

Gross profit in the Heavy Industrial  Canada segment was up $52.8
million in 2006 and $13.3 million in 2005. The average gross profit percentage was 22.8% in 2006 and 14.0% in 2005. Gross profit in 2006 increased due to the completion of more lump sum and design/build contracts than in the prior two years and the
continued market strengthening in this segment with most organizations at or near capacity. As disclosed in Item 4B  Information on the Company  Business Overview design/build projects normally earn higher fees
commensurate with the additional risk being taken.

Indirect and Administrative Expenses

Indirect and administrative expenses increased $3.9 million (23.2%) in 2006. This increase was due primarily to the 13.2% increase in contract revenues. Indirect and
administrative expenses as a percentage of revenue remained consistent in 2006 and 2005 at 4.1% and 3.8% respectively.



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Results of Operations: Heavy Civil

Contract revenues

Contract revenues in the
Heavy Civil segment in 2006 increased $95.9 million or 28.6%. This increase was due primarily to a large municipal transportation project in the Pacific Northwest. Contract revenues in this segment rebounded in 2005 up $124 million or 58.3% after
falling in 2004 by $65 million or 23.5%. Contract revenues in 2005 were supported by a strong water and waste water treatment plant market in the Southwest U.S. and the resumption of a large expressway project in Florida which was halted early in
2004 due to a design error by the clients designer. The Company was awarded a project change order for remediation and completion of this project in fiscal 2005.

Contract Costs and Gross Profit

Gross profit as a percentage of contract revenue in the Heavy Civil segment
was 8.4% in 2006, 10.3% in 2005, and 12.0% in 2004. Given the nature of the construction industry, gross profit percentages can vary from year to year depending on the mix of contract types and the market weighting.

Indirect and Administrative Expenses

Indirect
and administrative expenses increased $0.8 million in 2006. This increase was due primarily to general inflation of goods and services. Indirect and administrative expenses remained relatively constant over the fiscal years 2005 and 2004 averaging
$8.6 million per year. Indirect and administrative expenses as a percentage of contract revenues were 2.1% in 2006 and 2.5%. This decrease was a result of the segment not requiring additional infrastructure to handle the growth in contract revenues.

B. Liquidity and Capital Resources

Below is a brief summary of the Companys financial position for the last two fiscal
years ending October 31. For more detailed information, please see the consolidated financial statements attached to this report.



|                                     |  |                                                        |            |      |   |           
|------------------------------------ |  | ------------------------------------------------------ | ---------- | ---- | - | ----------
|                                     |  | 2006                                                   |            | 2005
|                                     |  | (All in thousands of dollars except sharesoutstanding)
|Working capital                      |  | $                                                      | 297,433    |      | $ | 179,718   
|Long term debt  Canadian GAAP       |  | $                                                      |           |      | $ | 19        
|Long term debt  U.S. GAAP           |  | $                                                      |           |      | $ | 1,060     
|Shareholders Equity  Canadian GAAP |  | $                                                      | 493,941    |      | $ | 359,793   
|Redeemable Common Stock  U.S. GAAP  |  | $                                                      | 485,534    |      | $ | 354,123   
|Shares Outstanding as at Oct. 31(1)  |  |                                                        | 17,888,807 |      |   | 15,577,612

Notes:



|(1) | This represents the total of all Class 1, 2, 3 and 4 common shares of the Company.
|--- | ----------------------------------------------------------------------------------

Financial Condition

As at October 31, 2006, the Company held $566 million in cash and cash equivalents,
an increase of $75 million. This increase is due primarily to the net change in operating accounts of $59 million. The net change in operating accounts was due in large part to an increase in income taxes payable. Cash and cash equivalents in 2005
were $491 million, an increase of $174 million. This increase is



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due to a decrease in short-term deposits ($32.6 million) and the net change in operating accounts of $124 million. The change in operating accounts was due
in part to the collection of an $18 million receivable in early fiscal 2005 which was recorded in late fiscal 2004 as a result of the successful resolution of an outstanding claim.

Included in cash and cash equivalents is $69 million (2005  $112 million) pledged in favor of a bank for the Companys US dollar denominated bank loans. These bank loans (2006  $134 million; 2005
 $106 million) are used exclusively to minimize changes in the value of the United States operations as a result of currency exchange fluctuations, are renewed every 30 to 365 days and are covered by credit facilities with maturity dates of
November 2006 and October 2007. Interest on these loans is designed to vary with the banks United States prime rate plus 0.50% or the London Interbank Offering Rate plus 0.33% at the Companys option. During 2006, the Company
increased its borrowings under these credit facilities by $27 million to reflect the increase in net assets of the operations in the United States. There was no change in the Companys borrowings under these credit facilities in 2005.

Short-term deposits increased $97.3 million to $143.8 million in 2006 from $46.5 million in 2005. Included in short-term deposits is $72 million (2005
 $nil) pledged in favor of a bank for the Companys US dollar denominated bank loans. Due to the trend to higher prime rates in both Canada and the United States, the Company changed the mix of maturity dates in 2006 and has a higher
proportion of bank loans with maturities greater than 90 days. Correspondingly, the Company increased the maturity dates of its investments to match the bank loan maturities.

Marketable securities held by the Company increased in 2006 and 2005 by $4 million and $3 million, respectively, due to realized gains during each year.

Accounts receivable have increased to $817 million in 2006 from $692 million in 2005. Holdbacks increased by $14 million to $47.3 million in 2006 from $33.3 million in the prior year. The mix of accounts receivable
and holdback receivable vary from year to year depending on the timing of project completion. Accounts receivable and holdbacks receivable as a percentage of revenue dropped from 22% in 2005 to 20% in 2006. This decrease is primarily due to an
increase in the acceptance by owners of securities in lieu of holdbacks.

Accrued liabilities at October 31, 2006 were $181 million versus $127
million in the prior year. The increase of $54 million was entirely due to the increase in bonuses payable to employees as a result of increased Company profits.

Cash flow used by investing activities, net of short-term deposit activities, was $39 million, $29 million and $32 million in 2006, 2005 and 2004 respectively. The major use of cash flow is the purchase of property, plant and equipment.
Cash flow used to acquire property, plant and equipment in 2006 and 2005 was consistent at $52 million. This is an increase over the 2004 levels due to the increase in contract revenues the Company has experienced in 2005 and 2006.

Cash flow of $2 million was used for financing activities in 2006 versus $37 million in 2005. As discussed above, the Company increased its bank loans by $27 million in
2006. In 2005, the Company used $20 million of cash flows to repay the operating bank loans. Cash flow of $17 million was provided by financing activities in 2004. The inflow of cash in 2004 was due to additional funds acquired through the
Companys US dollar denominated bank loans and the increased borrowings on two property developments both as discussed above.

Dividends of $77
million, $43 million, and $37 million were paid in the years 2006, 2005 and 2004 respectively. These amounts are determined by the Board of Directors and are paid in February of each year.

Liquidity

The Company has access to lines of credit in the
amount of $130 million, in addition to the U.S. dollar denominated bank loans see Financial Condition section above. At October 31, 2006 the Company has utilized $67 million (2005  $59 million) of these lines of credit,
all in the form of letters of credit. Working capital as at October 31, 2006 is $297 million which represents an increase of $117 million over 2005s working capital of $180 million. These increases are due primarily to the increase in
trade receivables without a corresponding increase in trade payables and to the increase in cash and cash equivalents and short term deposits discussed in the Financial Condition section above.



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Issuance of share capital provides a significant source of cash for the Company. Shares are normally offered to eligible
salaried employees in March or April of each year. The Company repurchased all shares of employees terminated in the year and while there is no obligation to do so, generally repurchases shares of active employees at the employees request.
Cash proceeds from issuance of share capital less repurchases was $47 million, $29 million and $24 million in the years 2006, 2005 and 2004 respectively.

The Company has no material binding purchase commitments and requires cash only to meet its needs in the normal course of business. The Company believes that its current financial condition combined with funds generated from operations will
be sufficient to finance cash requirements in the foreseeable future.

C. Research and Development, Patents and Licenses

PCL generally is not involved in the development or use of ideas tied to
patents or licensing agreements. While we continually strive to improve productivity and to reduce costs by developing new techniques or new applications for existing practices, such innovations usually are not patentable, having been in the
public domain and thus are not the property of PCL. Furthermore, PCL believes that obtaining, commercializing and enforcing a patent with respect to a construction process would be prohibitively time consuming and expensive.

From time to time the Company may work with a developer using its unique patents, but as a general matter, the Company will not assume contract risks tied to process
performance. Alternatively, any process risks assumed must be clearly defined and quantified, and either an appropriate contingency will be established or insurance will be purchased to address such risks.

D. Trends and Uncertainties

Management believes that the Company is well positioned for the foreseeable future. In 2006, the
Company experienced record new work attainment of $5.5 billion (2005 - $5.3 billion), and at the end of 2006, the Company had a record backlog (which is anticipated revenue from uncompleted contracts) of $5.6 billion (2005 - $4.9 billion). These
achievements provided a strong starting point for 2006 and beyond.

The Company continues to benefit from large bonding capacity enabling it to bid on work
not accessible to many other smaller construction firms. This will continue to be a strong driver in the Companys growth and its ability to compete. Bonding of contractor performance and payment obligations is a standard practice with
construction owners and their lenders, who are contracting on a fixed price basis, to ensure that there is sufficient capital available for the contractor to fulfill its obligations. PCLs backlog of work varies significantly depending on the
economic cycles and the mix of fixed price contracts versus reimbursable contracts PCL obtains. Our equity, working capital and operating track record have enabled us to secure bonding capacity to operate with a total backlog of work exceeding $9
billion.

The Company continues to see a trend towards Public Private Partnerships (defined by The Canadian Council for Public-Private Partnerships as
A cooperative venture between the public and private sectors, built on the expertise of each partner, that best meets clearly defined public needs through the appropriate allocation of resources, risks and rewards) in Canada, where PCL
has participated as a design build contractor, and has been successful in this burgeoning market already securing projects worth approximately $800 million.

Diversity in both geographic location and construction markets continues to be essential in the global economy. Cyclical demand for construction services is typical of the industry and operations can also be adversely affected by shortages
of labor and supplies, adverse weather conditions, government spending constraints and the Companys ability to obtain bonding. In 2004, the Company experienced the effects of adverse weather conditions firsthand as several hurricanes struck
Florida. This impacted several projects resulting in delays in scheduling and increased costs.



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Since 2002, the Company has embarked on a strategic expansion plan to achieve two main objectives. First, the Company
foresees growing demand for its services in several specific regions and industries across North America. Second, the Company continues to seek to diversify its operations geographically to limit its exposure to regional economic business risks. The
following is a brief description of the significant steps taken in furtherance of this plan.

U.S. Acquisitions. The purchase of the construction
assets and operations of Fisher-Klosterman, Inc. in Bakersfield, California and Teton Industrial Group, Inc. in Alpharetta, Georgia have allowed the Company to expand its industrial construction services to the United States. The acquisition of the
construction assets and operations of Teton Industrial Group, Inc. in particular provides access to work in several states in the United States not previously available to the Company.

Canadian Acquisitions. The purchase of the shares of Grand Sierra Equipment Ltd. in Surrey, British Columbia and the construction assets and operations of Grand Sierra Construction Ltd. in Surrey, British
Columbia is in preparation for the strong demand for construction services that was foreseen for British Columbia in the next several years. The purchase of the construction assets and operations of Melloy & Associates Ltd. in Edmonton,
Alberta and Intracon Power Ltd. in Edmonton, Alberta allows the Company to be well positioned for the continuing growth in Albertas demand for servicing to the oilfield industry. This vertical integration strategy will allow the Company to
bundle industrial construction services for this industry.

New Offices. The past four years have seen new district offices opened in Honolulu,
Hawaii, Halifax, Nova Scotia and San Diego, California and an operations office in Nassau, Bahamas. Each new office provides geographic diversification and allows the Company to meet growing demand in these areas.

The Company believes that these recent expansions combined with its mature operations have positioned it well to mitigate the risk associated with the trends and
uncertainties in the marketplace.

E. Off-Balance Sheet Arrangements

For the Companys joint venture activity it is contingently liable at October 31,
2006 for $21 million (2005 - $47 million; 2004 - $62 million) for the other joint venture participants share of liabilities, net of security by way of letters of credit and cross-company guarantees, should the other joint venture participants
not be able to satisfy them.

Management believes that the contingent joint venture liabilities will not have a material adverse effect on the
Companys financial position, results of operations, or liquidity.



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F. Contractual Obligations



|                                                          |  |                                                 |         |                 |   |           |  |           |       |                  |   |       |  |   |      
|--------------------------------------------------------- |  | ----------------------------------------------- | ------- | --------------- | - | --------- |  | --------- | ----- | ---------------- | - | ----- |  | - | -----
|                                                          |  | Payment due by period (in thousands of dollars)
|Contractual Obligations(1)                                |  | Total                                           |         | Less than 1year |   | 1-3 years |  | 3-5 years |       | More than 5years
|Operating bank loans                                      |  | $                                               | 32      |                 | $ | 32        |  | $         |      |                  | $ |      |  | $ |     
|Interest commitments on operating bank loans(2)           |  | $                                               |        |                 | $ |          |  | $         |      |                  | $ |      |  | $ |     
|Bank loans                                                |  | $                                               | 133,652 |                 | $ | 133,652   |  | $         |      |                  | $ |      |  | $ |     
|Interest commitments on bank loans(3)                     |  | $                                               | 8,084   |                 | $ | 8,084     |  | $         |      |                  | $ |      |  | $ |     
|Operating Lease Obligations                               |  | $                                               | 24,992  |                 | $ | 4,506     |  | $         | 8,221 |                  | $ | 7,096 |  | $ | 5,169
|Employer contributions to defined benefit pension plan(4) |  | $                                               | 923     |                 | $ | 923       |  | $         |      |                  | $ |      |  | $ |     
|Purchase commitments(5)                                   |  | $                                               | 10,173  |                 | $ | 10,173    |  | $         |      |                  | $ |      |  | $ |     
|Total                                                     |  | $                                               | 177,856 |                 | $ | 157,370   |  | $         | 8,221 |                  | $ | 7,096 |  | $ | 5,169

Notes:



|(1) | The table above does not include contracts with subcontractors and suppliers because, in the event of termination of the prime contract for convenience by the owner, the Company
generally has the right to cancel its subcontracts and purchase orders in relation to that prime contract by paying costs or damages of the subcontractor or supplier resulting directly from the termination of the subcontract or purchase order or by
paying such amounts as the Company recovers from the owner.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Interest rates on all operating bank loans are fixed.
|--- | -----------------------------------------------------



|(3) | Interest rates on the bank loans vary with the banks U.S. prime rate plus 0.50% or the London Interbank Offering Rate (LIBOR) plus 0.33% at the Companys option. The
Company has chosen the LIBOR rate plus 0.33% on all bank loans. The Company has assumed that the LIBOR rate will be at an average of 5.72% over the remaining terms of the loans, and has prepared its estimate of interest commitments for these loans
on this basis.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | The Companys best estimate of contributions to be paid to the defined benefit pension plan during the year ending October 31, 2007 is $923. The Company is unable to
estimate what its contributions will be under the plan in years subsequent to October 31, 2007, and therefore has not included any contributions related to the plan for these years in the table above.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | The Company has an outstanding purchase commitment for 7.33 acres of undeveloped land in Edmonton, Alberta totaling $3,600 of which a deposit of $360 was in place as at
October 31, 2006. The Company plans to utilize this undeveloped land for potential future expansion of its PCL Business Park in Edmonton, Alberta. The Company is also in the process of renovating Building 4 (41,171 s.f.) in the PCL Business
Park in Edmonton, Alberta, totaling $3,779, of which $273 was incurred at October 31, 2006. In addition, the Company has an outstanding purchase commitment for four tower cranes totaling $3,375, of which a deposit of $675 was in place as at
October 31, 2006. Subsequent to October 31, 2006, the Company began the expansion and upgrade of its Melloy Industrial office and warehouse (2,000 s.f. expansion of its 7,208 s.f.  office; 14,252 s.f.  shop) in Nisku, Alberta,
with a total budget of $727.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The bank loans noted above represent U.S. dollar denominated bank loans used exclusively to minimize changes in
the value of the United States operations as a result of currency exchange fluctuations and are renewed every 30 to 365 days. Short-term deposits are held by the Company which offset these loans and are hypothecated in favor of the bank.

G. Forward Looking Statements

The information in this Annual Report on Form 20-F, including this Item 5, may contain
forward-looking statements. All statements, other than statements of historical facts, that address activities, events, outcomes and other matters that the Company plans, expects, intends, assumes, believes, budgets, predicts, forecasts,
projects, estimates or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. These forward-looking statements are based on managements current belief, based on currently available
information, as to the outcome and timing of future events.



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Forward-looking statements appear in a number of places and include statements with respect to, among other things:



| |  |  | planned capital expenditures and working capital and availability of capital resources to fund capital expenditures and working capital;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Companys future financial condition or results of operations and future revenues and expenses;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | the Companys future gross profit and net profit margins;
| | - |  | ---------------------------------------------------------



| |  |  | the Companys business strategy and other plans and objectives for future operations; and
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | fluctuations in the demand for the Companys services.
| | - |  | ------------------------------------------------------

We caution
you that these forward-looking statements are subject to all of the risks and uncertainties, many of which are beyond the Companys control. These risks include, but are not limited to, economic conditions, currency fluctuations, inflation,
regulatory changes and the other risks described under Information Regarding Forward Looking Statements and Item 3  Risk Factors.

Should one or more of the risks or uncertainties described above or elsewhere in this Annual Report on Form 20-F occur, or should underlying assumptions prove incorrect, the Companys actual results and plans
could differ materially from those expressed in any forward-looking statements.

All forward-looking statements included in this Annual Report on Form 20-F
and attributable to the Company are qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that the Company or
persons acting on its behalf might issue. The Company does not undertake any obligation to update any forward-looking statements to reflect events or circumstances after the date of filing this Annual Report on Form 20-F with the Securities and
Exchange Commission, except as required by law.

H. Critical Accounting Policies

Profit Recognition on Contracts

For financial reporting purposes, revenue on lump-sum contracts is recognized on the percentage-of-completion method, measured by the ratio of costs incurred to date to
estimated total cost. Revenue on cost plus and unit price contracts is recognized as work is performed. Under this method, the costs incurred and the related revenue are included in the consolidated statement of operations and retained earnings as
work progresses.

Contract costs include all direct material, labor, and equipment costs and those indirect costs related to contract performance such as
indirect labor, supplies, and tool costs. General and administrative costs are charged to expense as incurred.

Changes in job performance, job conditions,
and estimated profitability, including those arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which such adjustments are determined. Profit
incentives are included in revenue when their realization is reasonably assured.

On all contracts in process where current estimates indicate an ultimate
loss, the full amount of the estimated loss is recognized. Construction claims by the Company are included in revenue when awarded or received. Insurance claims are recorded when it is determined that the claim is covered under an existing insurance
policy and collection is reasonably assured.

Revisions to project forecasts are made on a periodic basis by individual project managers responsible for
each project, using actual costs to date and forecasting software developed by the Company. In addition, representatives of senior management are involved in assessing project forecasts at least annually during the year-end district review process.
In general, this combination of review procedures results in accurate forecasts of total project costs, which helps to ensure that any unforeseen project costs do not result in material impacts to forecast project profit.



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However, it is at least reasonably possible that cost and profit forecasts will be revised in the near-term by amounts
which may be material on an individual project basis.

It is the Companys experience, however, in aggregate, the overall gross profit is not
materially different than what is forecast.



|ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|------- | ------------------------------------------

A. Directors and Senior Management

Board of Directors of PCL Employees Holdings Ltd.

The following table sets forth the names and biographical information concerning our directors.



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                           |  |              
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name, Age, Place of Residence and Biographical Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | Principal Occupation                                                                                                                      |  | DirectorSince
|Joseph D. Thompson  73 Edmonton, Alberta,
Canada  Joined Poole Construction Limited (a predecessor to PCL) in 1967. During his 30+
years with PCL and its predecessor, he has progressively held positions such as chief engineer, district manager, regional manager, president and chief executive officer and chairman, before assuming his present position in 1997 as Chairman of the
Board of PCL Employees Holdings Ltd., chairman of PCL Employees Holdings Ltd. - Human Resource, Compensation and Nominating Committee and a member of the PCL Employees Holdings Ltd. Audit Committee. Mr. Thompson also currently serves as board
member of The Babel Fish Corporation, a multilingual software solution company.                                          |  | Private Investor, Chairman of the Board PCL Employees Holdings Ltd., and Chairman of the Board of PCL Construction Group Inc.             |  | 1984         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                          
|Ross A. Grieve  59 Edmonton, Alberta,
Canada  Joined Poole Construction Limited (a predecessor to PCL) in 1969 in his hometown
of Winnipeg, after completing a Bachelor of Science in Civil Engineering from the University of Manitoba. Since that time, he has worked in positions of increasing responsibility throughout the PCL family of companies before assuming his present
position as president and chief executive officer in 1997 of PCL Employees Holdings Ltd. Mr. Grieve presently serves as a director of Melcor Developments Ltd., a publicly-traded residential, commercial, and industrial property development
company, Centennial Valley Properties Inc., a residential property development company and Inn at the Forks Ltd., a hotel company. |  | President and Chief Executive Officer, PCL Employees Holdings Ltd. and PCL Construction Group Inc., Director, PCL Employees Holdings Ltd. |  | 1991         



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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                              |  |              
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name, Age, Place of Residence and Biographical Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | Principal Occupation                                                                                                                         |  | DirectorSince
|Garnet K. Wells  66 Chestermere, Alberta,
Canada  Joined the PCL family of companies in 1986 as chief financial officer. He
retired in 2001 but remains a director of PCL Employees Holdings Ltd. and a member of the PCL Employees Holdings Ltd. Audit Committee and PCL Employees Holdings Ltd. - Human Resource, Compensation and Nominating Committee. Mr. Wells also
currently serves as vice-chairman of the board of Conematic Heating Systems Inc., a heating systems manufacturing company.                                                |  | Private Investor, Director, PCL Employees Holdings Ltd. and Director, PCL Construction Group Inc.                                            |  | 1987         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                             
|Henry R. Gillespie  73 Edmonton, Alberta,
Canada  Joined Poole Construction Limited (predecessor to PCL) in 1969 as
secretary/treasurer. In 1977, he became vice president finance and administration and subsequently senior vice president and chief financial officer, a position he held until he retired in 1984. Mr. Gillespie is a director of PCL Employees
Holdings Ltd., chairman of the PCL Employees Holdings Ltd. Audit Committee and a member of PCL Employees Holdings Ltd.  Human Resource, Compensation and Nominating Committee. |  | Private Investor. Director, PCL Employees Holdings Ltd., Director, PCL Construction Holdings. Ltd. and Director, PCL Construction Group Inc. |  | 1977         



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Senior Management

The key executive officers of PCL Employees Holdings Ltd. and its principal subsidiary companies are as follows:



|                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                          |  |                                    |  |                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------- |  | ---------------------------------- |  | -----------------
|Name                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | Title                                                    |  | PCL Company                        |  | Years withCompany
|Peter E. Beaupré  56 Denver, Colorado,
USA  Joined the PCL family of companies in 1980 as a project manager. During his 26
years with PCL he has held many positions including district manager, regional vice president and president of several divisions before assuming his current position as president in 1998 and chief operating officer in 2001 of PCL Construction
Enterprises, Inc. He is responsible for all U.S. operations. |  | President and Chief Operating Officer                    |  | PCL Construction Enterprises, Inc. |  | 26               
|                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                          | 
|Alan L. Bodie  59 Edmonton, Alberta,
Canada  Joined the PCL family of companies in 1985 after completing a Bachelor of
Science in Mechanical Engineering and significant management experience in road building and heavy construction sectors. He was responsible for PCLs heavy industrial operations until 2002. His current role includes asset management,
acquisitions, and various strategic initiatives.                          |  | President, Strategic Initiatives                         |  | PCL Constructors Inc.              |  | 19               
|                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                          | 
|Paul G. Douglas  52 Edmonton, Alberta,
Canada  Joined PCL in 1985. He is president and chief operating officer of PCL
Constructors Inc., overseeing operations and administration of all Canadian building districts. He is responsible for operations support; professional development; human resources; information systems; health, safety and the environment; labour
relations; and corporate services for all of the PCL companies. |  | President and Chief Operating Officer Canadian Buildings |  | PCL Constructors Inc.              |  | 21               



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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                        |  |                                                         |  |                  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- |  | ------------------------------------------------------- |  | -----------------
|Name                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Title                                  |  | PCL Company                                             |  | Years withCompany
|Ross A. Grieve  59 Edmonton, Alberta,
Canada  Joined Poole Construction Limited (a predecessor to PCL) in 1969 in his hometown
of Winnipeg, after completing a Bachelor of Science in Civil Engineering from the University of Manitoba. Since that time, he has worked in positions of increasing responsibility throughout the PCL family of companies before assuming his present
position as president and chief executive officer in 1997 of PCL Employees Holdings Ltd.                                                                                                                                                                                                                |  | President and Chief Executive Officer  |  | PCL Employees Holdings Ltd. PCL Construction Group Inc. |  | 37               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                        | 
|Gordon D. Maron  59 Edmonton, Alberta,
Canada                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | President and Chief Financial Officer  |  | PCL Construction Holdings Ltd.                          |  | 36               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                        | 
|Joined PCL in 1971 as a junior accountant and has held progressively more senior positions such as administration manager, controller, vice-president finance and in 2001 he assumed the position
of president and chief financial officer of PCL Construction Holdings Ltd. He is responsible for all financial and accounting aspects of the corporation including specific responsibility for treasury, taxation, legal and corporate secretary duties,
and liaison and negotiation with insurance providers and bonding companies. He also ensures that the overall financial reporting, planning, control and analytical processes operate effectively at the district/subsidiary level. |  | Vice President, Secretary/Treasurer    |  | PCL Employees Holdings Ltd.                             |  |                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                        | 
|Robert M. Martz  51 Los Angeles, California,
USA  Joined PCL in 1981 as a field engineer and has held progressively more senior
positions in the Company such as district manager, vice president and regional vice president before assuming his current position as Regional Vice President Southwest USA. He is responsible for building operations in California, Arizona, and
Nevada.                                                                                                                                                                                                                                                                                                   |  | Regional Vice President, Southwest USA |  | PCL Constructions Services, Inc.                        |  | 25               



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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                               |  |                                 |  |                  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------- |  | ------------------------------- |  | -----------------
|Name                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | Title                                                         |  | PCL Company                     |  | Years withCompany
|R. Brad Nelson  53 Toronto, Ontario,
Canada  Joined PCL in 1997 and is responsible for PCLs building operations in
Manitoba, Ontario, and Atlantic Canada. He has over 29 years of construction experience in Canada and the United States. Prior to joining PCL, he was executive vice president and chief operating officer responsible for North American operations for
a large contractor.                                                                                                           |  | President, Central and Eastern Canada                         |  | PCL Constructors Canada Inc.    |  | 9                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                               | 
|Peter A. Stalenhoef  53 Edmonton, Alberta,
Canada  Joined the PCL family of companies in 1987 as a senior estimator and has held
progressively more senior positions such as chief estimator, operations manager, division manager, and president and chief operating officer responsible for all the industrial operating companies. He has over 30 years of heavy industrial
construction experience with an emphasis in petrochemical, refinery, oil and gas, power plant, and pulp and paper projects. |  | President and Chief Operating Officer, Heavy Industrial Group |  | PCL Constructors Inc.           |  | 19               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                               | 
|Douglas R. Stollery  53 Edmonton, Alberta,
Canada  Joined the PCL family of companies in 2006 as General Counsel. He practiced law
with a private law firm in Edmonton, Alberta from 1977 to 2006. He is responsible for the legal affairs of the PCL family of companies and serves as corporate secretary for the PCL family of companies.                                                                                                                                                               |  | General Counsel                                               |  | PCL Constructors Inc.           |  | Less than 1      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                               | 
|Alfred E. Troppmann  57 Denver, Colorado,
USA  Joined PCL in 1973 as a project manager and has held progressively more senior
positions such as district manager, vice president, and executive vice president before assuming his current position as president of PCL Construction Services, Inc. He is responsible for building operations in Orlando, Minneapolis, Denver, Seattle,
Hawaii, San Diego, and Los Angeles.                                                                                |  | President                                                     |  | PCL Construction Services, Inc. |  | 33               

There are no family relationships among any of the directors and officers of the Company listed above.



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B. Compensation

Total compensation paid to our directors and senior management for the fiscal year ended October 31, 2006
was $26,427,323. This amount does not include dividends paid to the directors and senior management in respect of our common shares. Directors and senior management share ratably in all dividends with other employee-shareholders.

We are not required, as a Canadian company which is not a reporting issuer under the securities legislation of any jurisdiction in Canada, to publicly disclose
individual compensation information either as a requirement under our governing statute (the Business Corporations Act (Alberta)) or under any securities legislation. We do not publicly disclose individual compensation information in Canada.

The Chief Executive Officer and Chief Financial Officer of the Company and the three chief operating officers receive a non-discretionary bonus that is a
fixed percentage of operating results for the Company, in respect of the Chief Executive Officer and Chief Financial Officer, and the units over which they have charge, as the chief operating officers. Other members of senior management
described above participate in a discretionary bonus program under which they share in a bonus pool based on operating results, as approved by the Board of Directors of the Company and as individually set by the Chief Executive Officer and senior
management.

The total amount paid by the Company to the defined contribution pension plan of our senior management for the fiscal year ended
October 31, 2006 was $148,698. The Company has not set aside or accrued any other amount to provide pension, retirement or similar benefits for senior management or directors.

The Company does not have any written employment agreements with its officers. However, under Canadian law, each Canadian employee, including an employee who is an officer of PCL, has a contractual relationship with
PCL by virtue of his or her employment, whether or not a written employment agreement exists. That contractual relationship includes an entitlement to reasonable notice of termination or compensation in lieu of reasonable notice, unless expressly
agreed to the contrary or unless the employee is terminated for cause. In addition to these contractual rights, Canadian employees, including those who are officers of PCL, have a statutory right to receive notice of termination or wages in lieu of
notice (including, in some cases, continuation of benefit plan contributions during the notice period). With respect to PCLs employees, these rights are a matter of provincial or territorial law and vary from one province or territory to
another within Canada. In general, the statutes afford employees the right to receive between zero and eight weeks notice based on the number of years of service or to payment of an amount equal to the wages (or wages and the value of
benefits) that the employee would have received during the notice period. In certain provinces and territories, where a significant number of employees are terminated within a designated time period, a longer period of notice may apply. In addition,
in the Province of Ontario, an employee is entitled in certain circumstances to severance pay calculated by multiplying the employees regular wages for a regular work week by the sum of the number of complete and partial years of employment
that the employee has completed. The maximum statutory entitlement of an employee to severance pay under Ontario law is an amount equal to the employees regular wages for a regular work week for 26 weeks. To date, the application of these laws
has never had a material impact on PCL.

C. Board Practices

The Companys Amended Articles of Continuance provide that the Board of Directors will consist of
between one (1) and twelve (12) directors. There are currently four (4) directors each of whom holds office until the next annual meeting of the shareholders of the Company and until his successor has been elected. Officers of the
Company serve at the discretion of the Board of Directors.

Directors are compensated by cash payments and participation in the share purchase plans.Directors do not serve as such under any written or unwritten agreements. Directors who are also employees serve under unwritten employment agreements.

Audit Committee

The members of the Companys audit committee are Joseph D. Thompson, Garnet K. Wells and Henry R. Gillespie. The audit
committee has a formal mandate. The audit committee consists of at least three members of the Board.



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All of the members of the Committee are persons who are independent of management and are free from any business or other
relationships that could, or could reasonably be perceived to, materially interfere with their abilities to act with a view to the best interests of the Company, other than interests and relationships arising from shareholding.

The members of the audit committee are appointed annually upon recommendation of the Chairman of the Board and approval by the Board. The Board appoints a Chairman of
the audit committee. Each member of the Committee is financially literate or must become financially literate within a reasonable period of time after appointment to the audit committee. At least one member of the audit committee must be a
financial expert as defined by applicable Securities and Exchange Commission rules.

The primary function of the audit committee is to assist
the Board of Directors in fulfilling the Boards oversight responsibilities on matters relating to:



| |  |  | the Companys financial reports and other financial information provided by the Company;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | the Companys systems of internal controls regarding financing, accounting and legal compliance;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | the Companys auditing, accounting and financial reporting processes generally;
| | - |  | -------------------------------------------------------------------------------

and such other matters as may from time to time be specifically delegated to the audit committee by the Board or as the audit committee, in its own discretion, may deem desirable in connection with its mandate.

The audit committee will also undertake such responsibilities as are required by law of an audit committee, including review of the financial statements
of the Company before they are approved by the Board of Directors.

In addition, the audit committee:



| |  |  | recommends to the Board annually, the firm to be retained as the Companys independent auditor;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | if appropriate, recommends to the Board the replacement of the Companys independent auditor;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | in connection with recommending to the Board the firm to be retained or removed as the Companys independent auditor:
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | evaluates the performance of the firms independent auditor; and
| | - |  | ----------------------------------------------------------------



| |  |  | reviews the information provided by management and the independent auditor relating to the independence of such firm, including, among other things, information related to the
non-audit services provided and expected to be provided by the independent auditor;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviews, with the independent auditor, its plans, and overall scope of its annual audit and other examinations;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | reviews, with the independent auditor, the report of its annual audit, its proposed report concerning the audit, the accompanying management letter, and any other reports of the
results of any other examinations, which may fall outside its normal audit procedures, that the independent auditor may from time to time undertake;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviews, with the independent auditor, the annual financial reports of the Company, prior to the Committee recommending the reports to the Board for approval;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviews, with the independent auditor, the impact of any new pronouncements issued by recognized organizations, agencies or other bodies that could have an effect upon the
Companys financial statements and financial reporting;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | reviews, with the independent auditor:
| | - |  | --------------------------------------



| |  |  | the quality and adequacy of the Companys accounting policies, financial controls and systems; and
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | the quality and adequacy of managements disclosure of information to the independent auditor.
| | - |  | ----------------------------------------------------------------------------------------------

The audit committee also:



| |  |  | reviews, with the appropriate officers of the Company, the annual financial reports of the Company, before the Committee recommends reports to the Board for approval.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviews, with the Companys management, its plans and reports concerning the Companys ongoing program of internal reviews of districts or offices of the Companys
subsidiaries or specific projects of the Companys subsidiaries, including approval of the specific assignments for the year and review of the completed reports.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviews, with the appropriate officers of the Company or subsidiaries of the Company:
| | - |  | -------------------------------------------------------------------------------------



| |  |  | the quality and adequacy of the Companys accounting policies, financial controls and systems; and
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | the quality and adequacy of managements disclosure of information to the independent auditor.
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | reviews, with the appropriate officers of the Company, the Companys policies and compliance procedures with respect to proper business practices.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviews Securities and Exchange Commission 20-F filings and recommends approval to the Board of Directors.
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | reviews formal filings as required by the Sarbanes-Oxley Act, including compliance with the provisions of Section 404, and recommends approval to the Board of Directors.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviews annual reports on Insurance Coverage prepared by the Companys management and forwards as information to the Board of Directors, together with any applicable
recommendations.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviews reports on Employee Pension Benefit Plans prepared by the Companys management and ensures that the necessary Trustees and Investment Committees are in place, and
forwards as information to the Board of Directors.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | requires that the Companys management disclose to the Committee the existence of any improper or illegal conduct of which management is aware and periodically review with the
Companys management the steps being taken to avoid, disclose and correct such conduct.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The audit committee meets as frequently as it
determines necessary to comply with its responsibilities. The Chairman of the audit committee, any other member of the audit committee or the independent auditor of the Company may call a meeting of the audit committee. The Chairman of the audit
committee is responsible for supervising the conduct of meetings of the audit committee and, in consultation with the other members of the audit committee, for establishing the agenda for the meetings. A majority of the members constitutes a quorum
of the Committee.

The independent auditor is entitled to receive notice of every meeting of the audit committee and, at the expense of the Company, to
attend and be heard at the meeting, if so requested by a member of the Committee, the independent auditor attends any or every meeting of the Committee held during the term of the independent auditor.



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The audit committee may request any officer or employee of the Company or any of its subsidiaries, or the Companys
outside legal counsel, or other third parties, to attend a meeting of the committee or to meet with any members of, or act as consultants to the audit committee. The audit committee may meet with management, the independent auditor or others in
private sessions to discuss any matter that the audit committee, management, the independent auditor or other such persons believe should be discussed privately.

The audit committee requires the Companys management and the independent auditor to provide the audit committee with the necessary information as required by the audit committee to fulfill its responsibilities.

The audit committee may retain, at such times and on such terms as the audit committee determines in its sole discretion and at the Companys expense, special
legal, accounting or other consultants to advise and assist it in complying with its mandate.

The audit committee reports its activities to the Board at
the Boards first regular meeting thereafter, or at such earlier time as it deems appropriate.

The audit committee reviews and reassesses the
adequacy of the audit committees mandate at least annually and recommends any proposed changes to the Board for approval.

Human Resource,
Compensation and Nominating Committee

The members of the Companys human resource, compensation and nominating committee are Joseph D. Thompson,
Garnet K. Wells and Henry R. Gillespie. The committee has a formal mandate under which it functions. The committee consists of at least three members of the Board.

All of the members of the committee are persons who are independent of management and are free from any business or other relationships that could, or could reasonably be perceived to, materially interfere with their abilities to act with a
view to the best interests of the Company, other than interests and relationships arising from shareholding.

The members of the committee are appointed
annually upon recommendation of the Chairman of the Board and approval by the Board. The Board appoints a Chairman of the committee. The human resource, compensation and nominating committees primary function is to assist the Board of
Directors in fulfilling the boards oversight responsibilities on matters relating to management and board succession and compensation. The committee:



| |  |  | sets the salary, bonus and share allocation for the President and Chief Executive Officer;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | approves the salary, bonus and share allocation for the Chief Financial Officer, President and Chief Operating Officer of Canadian Buildings, President and Chief Operating Officer
of the United States, President Heavy Industrial, and President Strategic Initiatives;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | determines succession of senior officers;
| | - |  | -----------------------------------------



| |  |  | recommends candidates for election to the Board of Directors;
| | - |  | -------------------------------------------------------------



| |  |  | recommends candidates for the board committees;
| | - |  | -----------------------------------------------



| |  |  | recommends compensation levels for the members of the Board of Directors;
| | - |  | -------------------------------------------------------------------------



| |  |  | sets the long term bonus pool for payment to employees of subsidiaries of the Company and non-employee directors of the Company;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | authorizes the payment of a long term bonus to non-employee directors of the Company;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | recommends to subsidiaries of the Company the payment of a long term bonus to their employees.
| | - |  | ----------------------------------------------------------------------------------------------



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##### Table of Contents

In order to fulfill these responsibilities, the committee relies upon the recommendations of the Chief Executive Officer
and its own analysis of compensation data.

The committee may request any officer or employee of the Company or any of its subsidiaries, or the
Companys outside legal counsel, or other third parties, to attend a meeting of the committee or to meet with any members of, or act as consultants to the committee.

The committee meets as frequently as it determines necessary to comply with its responsibilities. The Chairman of the Committee, any other member of the committee or the independent auditor of the company may call a
meeting of the committee. The Chairman of the Committee is responsible for supervising the conduct of the meetings of the committee and, in consultation with the other members of the committee, for establishing the agenda for the meetings. A
majority of the members constitutes a quorum of the committee.

The committee requires the Companys management to provide the committee with the
necessary information as required by the committee to fulfill its responsibilities.

The committee may retain, at such times and on such terms as the
committee determines in its sole discretion and at the Companys expense; special legal, accounting or other consultants to advise and assist it in complying with this mandate.

The members of the committee are entitled to receive such remuneration for acting as members of the committee as the Board of Directors may from time to time determine.

The committee reports its activities to the Board at the Boards first regular meeting thereafter, or at such earlier time as it deems appropriate.

The committee reviews and reassesses the adequacy of the committees mandate at least annually and recommends any proposed changes to the Board for approval.

D. Employees

The following chart lists the average number of salaried and hourly (unionized and non-unionized) employees by
location for each of the last three fiscal years:



|                             |  |                             |  |            |  |          
|---------------------------- |  | --------------------------- |  | ---------- |  | ---------
|                             |  | Average Number of Employees
|                             |  | 2006                        |  | 2005       |  | 2004     
|Salaried Staff               |  |                             |  |            |  |          
|Canada United States Bahamas |  | 1,42091749                  |  | 1,28278043 |  | 1,0857524
|                             |  |                             | 
|Hourly Trades                |  |                             |  |            |  |          
|Canada                       |  |                             |  |            |  |          
|Unionized Non-Unionized      |  | 1,96899                     |  | 2,04751    |  | 1,848233 
|                             |  |                             | 
|United States                |  |                             |  |            |  |          
|Unionized Non-Unionized      |  | 6271,683                    |  | 669992     |  | 242943   

Note:   Based on count as of September 2006.

All hourly trades employees are temporary employees. PCL maintains good relations with the various unions for which we have collective bargaining agreements.



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##### Table of Contents

E. Share Ownership

The following table presents information regarding the ownership of certain classes of shares by our
directors and executive officers as of January 31, 2007.



|                       |  |                                                                           |  |                                                          |  |                         |  |                              |  |                                            |  |    |  
|---------------------- |  | ------------------------------------------------------------------------- |  | -------------------------------------------------------- |  | ----------------------- |  | ---------------------------- |  | ------------------------------------------ |  | -- | -
|Name                   |  | Title                                                                     |  | PCL Company                                              |  | Number & Share Class    |  | Percentage of Class          |  | Percentage of Total Voting Shares          | 
|Peter E. Beaupré(1)    |  | President and Chief Operating Officer                                     |  | PCL Construction Enterprises, Inc.                       |  | 40018,750228,900139,550 |  | Class 1Class 2Class 3Class 4 |  | * Class 1 *
Class 2 14% Class 3 4%
Class 4 |  | 7  | %
|                       |  |                                                                           |  |                                                          |  |                        
|Alan L. Bodie(2)       |  | President, Strategic Initiatives                                          |  | PCL Constructors Inc.                                    |  | 400252,000              |  | Class 2Class 4               |  | * Class 2 8%
Class 4                       |  | 5  | %
|                       |  |                                                                           |  |                                                          |  |                        
|Paul G. Douglas(3)     |  | President and Chief Operating Officer                                     |  | PCL Constructors Inc.                                    |  | 10,400357,450           |  | Class 2Class 4               |  | * Class 2 11%
Class 4                      |  | 7  | %
|                       |  |                                                                           |  |                                                          |  |                        
|Henry R. Gillespie(4)  |  | Director                                                                  |  | PCL EmployeesHoldings Ltd.                               |  | 50,000                  |  | Class 4                      |  | 1% Class 4                                 |  | 1  | %
|                       |  |                                                                           |  |                                                          |  |                        
|Ross A. Grieve(5)      |  | Director                                                                  |  | PCL EmployeesHoldings Ltd.                               |  | 194,400556,000          |  | Class 2Class 4               |  | 2% Class 2 17%
Class 4                     |  | 11 | %
|                       |  |                                                                           |  |                                                          |  |                        
|                       |  | President & Chief Executive Officer                                       |  | PCL ConstructionGroup Inc.                               |  |                         |  |                              |  |                                            |  |    |  
|                       |  |                                                                           |  |                                                          |  |                        
|Gordon D. Maron        |  | President and Chief Financial Officer Vice President,
Secretary/Treasurer |  | PCL ConstructionHoldings Ltd. PCL
EmployeesHoldings Ltd. |  | 51,400247,570           |  | Class 2Class 4               |  | 1% Class 2 7%
Class 4                      |  | 5  | %
|                       |  |                                                                           |  |                                                          |  |                        
|Robert M. Martz(6)     |  | Regional Vice President, Southwest USA                                    |  | PCL Construction Services, Inc.                          |  | 22,500130,910           |  | Class 2Class 4               |  | * Class 2 4%
Class 4                       |  | 3  | %
|                       |  |                                                                           |  |                                                          |  |                        
|R. Brad Nelson         |  | President, Central and Eastern Canada                                     |  | PCL ConstructorsCanada Inc.                              |  | 400262,290              |  | Class 2Class 4               |  | * Class 2 8%
Class 4                       |  | 5  | %
|                       |  |                                                                           |  |                                                          |  |                        
|Peter A. Stalenhoef(7) |  | President, Heavy Industrial Group                                         |  | PCL Constructors Inc.                                    |  | 18,000238,280           |  | Class 2Class 4               |  | * Class 2 7%
Class 4                       |  | 5  | %
|                       |  |                                                                           |  |                                                          |  |                        
|Douglas R. Stollery    |  | General Counsel                                                           |  | PCL Constructors Inc.                                    |  | 50,000                  |  | Class 4                      |  | 1% Class 4                                 |  | 1  | %
|                       |  |                                                                           |  |                                                          |  |                        
|Joseph D. Thompson(8)  |  | Director                                                                  |  | PCL EmployeesHoldings Ltd.                               |  | 50,000                  |  | Class 4                      |  | 1% Class 4                                 |  | 1  | %
|                       |  |                                                                           |  |                                                          |  |                        
|Al E. Troppmann        |  | President                                                                 |  | PCL Construction Services, Inc.                          |  | 40,400252,500           |  | Class 1Class 3               |  | 1% Class 1 16%
Class 3                     |  | 5  | %
|                       |  |                                                                           |  |                                                          |  |                        
|Garnet K. Wells(9)     |  | Director                                                                  |  | PCL EmployeesHoldings Ltd.                               |  | 50,000                  |  | Class 4                      |  | 1% Class 4                                 |  | 1  | %



|Notes: | 
|------ | 



|* | Less than 1%.
|- | -------------



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##### Table of Contents

|(1) | Includes 229,300 shares held of record by Mr. Peter E. Beaupré and 158,300 shares held of record by Casalingo Productions Inc., a company beneficially owned by
Mr. Peter E. Beaupré.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes 10,400 shares held of record by Mr. Alan L. Bodie and 242,000 shares held of record by 635101 Alberta Ltd., a company beneficially owned by Mr. Alan L.
Bodie.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Shareholder of record is Dougco Holdings Limited, a company beneficially owned by Mr. Paul G. Douglas.
|--- | ------------------------------------------------------------------------------------------------------



|(4) | Shareholder of record is Cabernet Investments Ltd., a company beneficially owned by Mr. Henry R. Gillespie.
|--- | -----------------------------------------------------------------------------------------------------------



|(5) | Includes 230,200 shares held of record by Mr. Ross A. Grieve and 520,200 shares held of record by Kamandor Holdings Ltd., a company beneficially owned by
Mr. Ross A. Grieve.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Shareholder of record is Pan BC Holdings, a company beneficially owned by Mr. Robert M. Martz.
|--- | ----------------------------------------------------------------------------------------------



|(7) | Shareholder of record is 635098 Alberta Ltd., a company beneficially owned by Mr. Peter A. Stalenhoef.
|--- | ------------------------------------------------------------------------------------------------------



|(8) | Shareholder of record is Jonan Enterprises Ltd., a company beneficially owned by Mr. Joseph D. Thompson.
|--- | --------------------------------------------------------------------------------------------------------



|(9) | Shareholder of record is Garval Investments Inc., a company beneficially owned by Mr. Garnet K. Wells.
|--- | ------------------------------------------------------------------------------------------------------

Employee Share Purchase Plans

Since its inception, PCL
Employees Holdings Ltd. has been employee owned. In order to provide new employees with an opportunity to participate in ownership and to provide continuing employees with an opportunity to increase their ownership, the Board of PCL Employees
Holdings Ltd. has followed the practice of adopting annual employee share purchase plans pursuant to which shares are made available for purchase by employees. Participation in the plans is limited to salaried employees. Those plans are of two
types: (i) Universal Plans under which shares are available to all salaried employees who have been employed by PCL for a specified period of time, subject to a maximum number of shares that may be purchased by a given employee each
year and in the aggregate under all Universal Plans; and (ii) Regular Plans under which shares of stock are offered to salaried employees approved by the Board based on various criteria established by the Board annually, including
position, performance and existing share ownership.

For 2006, the Board established the following Plans:



| |  |  | Universal 2006 Class 1 Non-Voting Employee Common Share Purchase Plan.
| | - |  | ----------------------------------------------------------------------



| |  |  | Universal 2006 Class 2 Non-Voting Employee Common Share Purchase Plan.
| | - |  | ----------------------------------------------------------------------



| |  |  | Universal 2006 Class 3 Voting Employee Common Share Purchase Plan.
| | - |  | ------------------------------------------------------------------



| |  |  | Regular 2006 Class 1 Non-Voting Employee Common Share Purchase Plan.
| | - |  | --------------------------------------------------------------------



| |  |  | Regular 2006 Class 2 Non-Voting Employee Common Share Purchase Plan.
| | - |  | --------------------------------------------------------------------



| |  |  | Regular 2006 Class 3 Voting Employee Common Share Purchase Plan.
| | - |  | ----------------------------------------------------------------



| |  |  | Regular 2006 Class 4 Voting Employee Common Share Purchase Plan.
| | - |  | ----------------------------------------------------------------

The
Class designations relate to whether the shares are non-voting (Classes 1 and 2) or voting (Classes 3 and 4) and whether the shares are offered to employees in the U.S. (Classes 1 and 3) or Canada (Classes 2 and 4). The Board determined in its sole
discretion whether each employee will be offered voting or non-voting shares. Most of the shares offered under the Plans are non-voting.

Under the 2006
Universal Plans, salaried employees who have been continuously employed by PCL for at least six months as of the date that the Plans were adopted were eligible to purchase up to 100 shares in multiples of 10 shares and subject to a minimum purchase
of 50 shares. The maximum aggregate number of shares that an employee may purchase under Universal Plans in all years is 400. Once that maximum is reached, the employee is ineligible to purchase further shares under a Universal Plan. A total of
123,200 shares were available under the 2006 Universal Plans, consisting of 41,500 Class 1 shares, 73,700 Class 2 shares and 8,000 Class 3 shares.



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Under the 2006 Regular Plans, a total of 2,867,940 shares were made available for purchase, consisting of 758,140 Class 1
shares, 1,515,090 Class 2 shares, 278,560 Class 3 shares and 316,150 Class 4 shares. Approximately 2,072 salaried employees were offered the opportunity to purchase shares under the 2006 Regular Plans.

The amount of the purchase price for shares purchased under Universal Plans are loaned to the shareholder by PCL Constructors Inc. in Canada and by PCL Construction
Enterprises, Inc. in the United States and those loans are repaid by payroll deductions over a period of three years. The employee executes a promissory note for the purchase price, which becomes due upon termination of employment. In respect of the
2006 Universal Plans, the shareholder grants an option to the Company to repurchase the shares in the event of default by the shareholder under the promissory note and grants security to the lender in respect of the proceeds of sale under the
option.

The purchase price for shares purchased under the Regular Plans is payable in full at the time of purchase in Canadian funds.

The right to purchase shares under the Plans cannot be assigned. Before purchasing shares, an employee must become a party to the Unanimous Shareholder Agreement, which
greatly restricts the transferability of the shares. For a discussion of the material terms of the Unanimous Shareholder Agreement, see Item 10  Additional Information  Unanimous Shareholder Agreement (previously filed in
our registration statement on Form 20-F filed on February 8, 2006 and incorporated herein by reference).

Employees are offered the opportunity to
purchase shares under the Plans only once during the year. The Company sends a letter to each employee who is eligible to purchase shares under a Plan advising him or her of the number of shares available. That notice includes appropriate forms for
use by the employee in purchasing shares and establishes deadlines and procedures for electing to purchase shares. The Board is authorized to modify or waive compliance with such deadlines and procedures.

The foregoing description relates to the Companys historical practice with respect to employee share purchase plans and to the Plans adopted for 2006. The Company
is not required to make shares available to employees in any future year and, if it determines to do so, the terms on which such shares are offered may differ from those described above.



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|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|------- | -------------------------------------------------

A. Major Shareholders

Names and share ownership of any holders of 5% or more of any class of voting shares of the Company as
at January 31, 2007 are as follows:



|                       |  |                                                                     |  |                         |  |                           |   
|---------------------- |  | ------------------------------------------------------------------- |  | ----------------------- |  | ------------------------- | --
|Shareholder of Record  |  | Share Class                                                         |  | Number of Shares        |  | Percentage of Share Class |   
|Ross A. Grieve(1)      |  | Class 4 Voting Class 2 Non-Voting                                   |  | 556,000194,400          |  | 172                       | %%
|Paul G. Douglas(2)     |  | Class 4 Voting Class 2 Non-Voting                                   |  | 357,45010,400           |  | 11*                       | % 
|Alan L. Bodie(3)       |  | Class 4 Voting Class 2 Non-Voting                                   |  | 252,000400              |  | 8*                        | % 
|R. Brad Nelson         |  | Class 4 Voting Class 2 Non-Voting                                   |  | 262,290400              |  | 8*                        | % 
|Gordon D. Maron        |  | Class 4 Voting Class 2 Non-Voting                                   |  | 247,57051,400           |  | 71                        | %%
|Peter A. Stalenhoef(4) |  | Class 4 Voting Class 2 Non-Voting                                   |  | 238,28018,000           |  | 7*                        | % 
|Al E. Troppmann        |  | Class 3 Voting Class 1 Non-Voting                                   |  | 252,50040,400           |  | 161                       | %%
|Peter E. Beaupré(5)    |  | Class 4 Voting Class 3 Voting Class 2 Non-Voting Class 1 Non-Voting |  | 139,550228,90018,750400 |  | 414**                     | %%
|Jerry Harder           |  | Class 3 Voting Class 1 Non-Voting                                   |  | 121,80052,400           |  | 71                        | %%
|Fred Auch              |  | Class 3 Voting Class 1 Non-Voting                                   |  | 120,40024,700           |  | 71                        | %%
|Luis S. Ventoza        |  | Class 3 Voting Class 1 Non-Voting                                   |  | 92,56022,530            |  | 6*                        | % 

Notes:



|* | Less than 1%.
|- | -------------



|(1) | Includes 230,200 shares held of record by Mr. Ross A. Grieve and 520,200 shares held of record by Kamandor Holdings Ltd., a company beneficially owned by
Mr. Ross A. Grieve.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Shareholder of record is Dougco Holdings Limited, a company beneficially owned by Mr. Paul G. Douglas.
|--- | ------------------------------------------------------------------------------------------------------



|(3) | Includes 10,400 shares held of record by Mr. Alan L. Bodie and 242,000 shares held of record by 635101 Alberta Ltd., a company beneficially owned by Mr. Alan L.
Bodie.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Shareholder of record is 635098 Alberta Ltd., a company beneficially owned by Mr. Peter A. Stalenhoef.
|--- | ------------------------------------------------------------------------------------------------------



|(5) | Includes 229,300 shares held of record by Mr. Peter E. Beaupré and 158,300 shares held of record by Casalingo Productions Inc., a company beneficially owned by
Mr. Peter E. Beaupré.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There has not been a significant change in the percentage ownership of any of the shareholders listed
above during the past three years.

The major shareholders do not have different voting rights. To the best knowledge of management, the Company is not
directly or indirectly owned or controlled by a single person, a group of persons or by another corporation or by any foreign government. The Company believes that the day-to-day business operations and affairs of the Company are controlled by the
board of directors. To the best knowledge of management, there are no arrangements, the operations of which may, at a date subsequent to the date hereof result in a change of control of the Company.



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As of January 31, 2007, the Company had 1,945 registered holders of its common shares, 722 of whom were residents of
the United States, holding 100% of the Class 1 and Class 3 shares of the Corporation.

B. Related Party Transactions

Loans to Management

November 1, 2005 - October 31, 2006



|                |  |                                   |         |                                     |   |               |  |              |  |    
|--------------- |  | --------------------------------- | ------- | ----------------------------------- | - | ------------- |  | ------------ |  | ---
|Name            |  | LargestAmountOutstandingin Period |         | AmountOutstanding atOctober 31,2006 |   | Nature ofLoan |  | InterestRate
|Robert M. Martz |  | $                                 | 200,000 |                                     | $ | 200,000       |  | House        |  | Nil

The loan to Robert M. Martz was repaid in full on January 5, 2007.

See also Item 10  Additional Information  Unanimous Shareholders Agreement (previously filed in our registration statement on Form 20-F filed
on February 8, 2006 and incorporated herein by reference). for a discussion of an agreement among the Company and all of its shareholders.



|ITEM 8. | FINANCIAL INFORMATION
|------- | ---------------------

A. Consolidated Statements and Other Financial Information

See our audited consolidated financial statements attached hereto.

Legal or Arbitration Proceedings

On
August 5, 2005 PCL Civil Constructors, Inc. (Civil) commenced a civil action against a number of engineering firms, claiming negligence in design and peer review in respect of the superstructure design for the Ringling Causeway
Bridge in Sarasota, Florida. Civil is seeking damages in excess of US$15,000,000. One of the engineering firms, Earth Tech, Inc., has filed a counterclaim against Civil for an unspecified amount, believed to be estimated by Earth Tech, Inc. at
US$400,000. The matter is in the discovery stage and the Company is unable to determine the outcome of this litigation at this time. All costs associated with the project have been reflected in the operations of the Company. Recovery of claim
proceeds, if any, will be reflected in the year that the claim is resolved.

On February 2, 2006, PCL Construction Services, Inc.
(Services) commenced a civil action in the United States Court of Federal Claims arising out of a contract performed for the United States Bureau of Reclamation for the construction of a visitors center and parking structure at
Hoover Dam, commencing in April, 1994. This matter includes a claim for US$2,400,000 for additional costs as a result of changes in the scope of the contract and US$19,700,000 relating to delays and disruptions by the government. The government
recently filed a motion to dismiss this claim on the doctrine of res judicata. Arguments are being submitted in respect of this motion and no discovery has yet occurred. The Company is unable to determine the outcome of this litigation at
this time. Should this claim be successful, it may have a significant positive impact on the Companys financial position and profitability in the year that the claim is resolved.

On November 20, 2003 a suit was filed in the Superior Court of Arizona, Maricopa County by Colorado River Indian Tribes (CRIT), the Owner, against Tri-Star Theme Builders, Inc./PCL Construction
Services, Inc., a joint venture (the Joint Venture), the general contractor, in connection with a claim that arose out of the construction of the Blue Water Resort & Casino (the Project) on the CRITs
reservations near Park, Arizona. The Owner contended that the estimated cost to repair allegedly defective work exceeded US$17,000,000, and lost revenues due to business interruption during those repairs were projected by the Owner to be between
US$12,000,000 and US$21,000,000. On September 12, 2006, the parties reached settlement in the amount of US$16,000,000 which was paid by the Joint Venture. The Joint Venture recorded a gain of US$2,000,000 as it has previously accrued a
liability of US$18,000,000 for this matter.



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On January 18, 2005, a Complaint was filed against PCL/Triad Joint Venture (the Joint Venture) and the
City of Albuquerque by Shumate Constructors, Inc. (Shumate) seeking declaratory and injunctive relief in respect of the award to the Joint Venture of a contract for the construction of a water treatment plant in Albuquerque, New Mexico
(the Project). PCL Civil Constructors, Inc. (Civil) is a member of the Joint Venture. Shumate was a competitive bidder for the award of the contract for the Project and alleged that Civil was not entitled to hold a resident
contract preference certificate (the Certificate). Shumates claim for injunctive relief has been dismissed. Following the award of the contract, the Certificate was revoked and Shumate amended its Complaint to include a claim for
damages in the amount of US$369,000 for bid preparation costs and US$13,923,000 for lost profits, alleging errors made intentionally and in bad faith in Civils application for the Certificate. The Joint Venture intends to vigorously defend
itself against this claim. The litigation is currently in the discovery stage. The Company is currently unable to determine the outcome of this litigation and no reserves have been established in connection with this claim.

On October 25, 2005 a Statement of Claim was filed in the Ontario Superior Court of Justice by The Bank of Nova Scotia, Scotia Realty Limited and SPE Operations
Ltd. (collectively the Owners) against PCL Constructors Canada Inc. (PCL Canada), Sayers & Associates Limited (Sayers), WZMH Architects, The Mitchell Partnership Inc. and Quinn Dressel Associates. On
December 28, 2005, the Owners issued a Fresh Statement of Claim in the action adding PCL Constructors Eastern Inc. (PCL Eastern) and The Webb Zerafa Menkes Housden Partnership as defendants to the action. The Owners are seeking
$35,000,000 in damages plus interest and costs related to this action for alleged deficiencies in the design and construction of the water pipe systems in a 67 storey commercial high rise located in the City of Toronto known as Scotia
Plaza. PCL Canada and PCL Eastern intend to vigorously defend themselves against this claim and have asserted claims for insurance coverage and for indemnity against its co-defendants. The litigation is currently in the discovery stage. The
Company is currently unable to determine the outcome of the litigation and no reserves have been established in connection with this claim.

The Company is
party to various other pending legal proceedings in the ordinary course of business. We do not believe that any resulting liabilities for such other legal proceedings, beyond amounts reserved, will materially affect the financial position, future
results of operation, or future cash flows of the Company.

Dividend Policy

PCL Employees Holdings Ltd. plans to pay a regular dividend once a year, normally in February. The dividends actually paid in any year are determined by the Board of Directors based on a variety of factors, including
the results of operations of PCL Employees Holdings Ltd. and its need for capital resources.

B. Significant Changes

There have been no significant changes since the date of our annual financial statements, except for
the declaration of dividends in January 2007 by the Company on its common shares in the amount of $9.05 per share to shareholders of record on January 31, 2007. The dividends, totaling $161,677,046, were paid in February 2007.



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|ITEM 9. | THE OFFER AND LISTING
|------- | ---------------------

A. Offer and Listing Details; Markets

There is no market for the Companys securities and the Companys securities
are not listed on any stock exchange or other regulated market. Each of the Companys shareholders is a party to a Unanimous Shareholder Agreement, which, among other things, restricts the shareholders ability to transfer our shares and
establishes a formula for calculating the price at which our shares may be offered and sold. The Company has a right of first refusal to purchase the shares. For a further explanation of the Unanimous Shareholder Agreement and the provisions
regarding repurchase of the shares of the Company, see Item 10  Additional Information  Unanimous Shareholder Agreement (previously filed in our registration statement on Form 20-F filed on February 8, 2006 and
incorporated herein by reference).

The Board of Directors sets the price of the shares each year based on Adjusted Consolidated Book Value for the
shares. The price set by the Board of Directors remains in effect until the new price is set the next year. The calculation of Adjusted Consolidated Book Value is further described under Item 10  Additional Information 
Unanimous Shareholder Agreement  Company Rights and Obligations to Repurchase Shares (previously filed in our registration statement on Form 20-F filed on February 8, 2006 and incorporated herein by reference).

The table below lists the price set by the Board of Directors for fiscal year 2007 and in each of the last five fiscal years. To the Companys
knowledge, shares have not been offered or sold except at the price determined by the Board of Directors. All price amounts are expressed in Canadian dollars and each of Classes 1, 2, 3 and 4 of the shares have the same price.



|                  |  |             |      
|----------------- |  | ----------- | -----
|Fiscal Year Ended |  | Share Price
|October 31, 2007  |  | $           | 22.00
|October 31, 2006  |  | $           | 20.75
|October 31, 2005  |  | $           | 20.00
|October 31, 2004  |  | $           | 19.00
|October 31, 2003  |  | $           | 18.25
|October 31, 2002  |  | $           | 17.50

Prior Offerings of Common Shares

As described above under the heading Item 6  Directors, Senior Management and Employees  Share Ownership - Employee Share Purchase Plans, PCL issues shares to its employees and directors
in the United States and Canada pursuant to annual employee share purchase plans. The following table describes the shares issued to United States residents pursuant to these plans during the past three fiscal years:



|                              |  |              |  |                                                   |  |                          |                    
|----------------------------- |  | ------------ |  | ------------------------------------------------- |  | ------------------------ | -------------------
|Fiscal Year Ended
October 31, |  | Date of Sale |  | Class and Number of Shares Sold                   |  | Aggregate Offering Price
|2006                          |  | May 2006     |  | Class 1  574,720 shares Class 3  245,820
shares |  | $$                       | 11,925,4405,100,765
|2005                          |  | April 2005   |  | Class 1  445,610 shares Class 3  194,261
shares |  | $$                       | 8,912,2003,885,220 
|2004                          |  | April 2004   |  | Class 1  553,370 shares Class 3  227,070
shares |  | $$                       | 10,514,0304,314,330



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PCL believes that foregoing shares for the fiscal years ended October 31, 2004 and 2005 were offered and sold
pursuant to the exemption from registration under the Securities Act of 1933 provided by Securities and Exchange Commission Rule 701. The shares offered and sold subsequent to the fiscal year ended October 31, 2005 were pursuant to offerings
registered with the Securities and Exchange Commission.

Rule 701 exempts offers and sales of securities under a compensatory benefit plan established by
an issuer for the participation of its employees, directors, officers, or consultants and advisors. The aggregate sales price or amount of securities sold in reliance on Rule 701 during any consecutive 12-month period may not exceed the greatest of
(i) $1,000,000; (ii) 15% of the total assets of the issuer; or (iii) 15% of the outstanding amount of the class of securities being offered and sold in reliance on Rule 701. The issuer must deliver a copy of the compensatory plan to
investors, and, if the aggregate sales price or amount of securities sold during the 12-month period exceeds $5,000,000, the issuer must also deliver (a) a summary of the material terms of the plan; (b) information about the risks
associated with investment in securities sold pursuant to the plan; and (c) financial statements and, in the case of a foreign issuer, a reconciliation thereof to U.S. GAAP.

The aggregate offering price during any consecutive 12 month period did not exceed 15% of PCLs total assets. PCL had total assets of $1,849,591,000 at October 31, 2006, $1,483,754,000 at October 31,
2005 and $1,261,727,000 at October 31, 2004. Every employee who was given the opportunity to purchase shares under the share purchase plans received an information package which described PCL, the plans, the restrictions on transfer of
PCLs shares, the risks associated with investment in securities sold pursuant to the plans, and audited financial statements. In addition, each employee received a letter explaining the number and Class of shares being offered to him or her
and a copy of the plan under which those shares were offered.

In connection with PCLs acquisition of substantially all of the assets of Teton
Industrial Group, Inc., in October 2003, PCL entered into Employment Agreements with three former shareholders of Teton Industrial Group in which the shareholders were granted options to purchase an aggregate of 55,555 shares of PCLs Class 1
Common Shares for an exercise price equal to U.S. $12.00 per share, the price established pursuant to the PCL Unanimous Shareholders Agreement as in effect on the date of the Employment Agreements. The options were exercised and shares were issued
in two installments for aggregate consideration of U.S. $666,660 as follows:



|                |  |                  |  |                          |        
|--------------- |  | ---------------- |  | ------------------------ | -------
|Date of Sale    |  | Number of Shares |  | Aggregate Offering Price
|October 1, 2003 |  | 18,518           |  | U.S.$                    | 222,216
|March 31, 2004  |  | 37,037           |  | U.S.$                    | 444,444

The foregoing shares were offered and sold in reliance upon the exemption from registration under the Securities
Act provided by Rule 506 of Regulation D. Each of the former shareholders of Teton Industrial Group to whom shares were offered and sold was an accredited investor within the meaning of Rule 501(a) of Regulation D at the time of the
sale. The shares were not offered by any form of general solicitation or general advertising, and the certificates issued in the transaction bear a legend advising potential transferees that the shares are restricted securities and
cannot be resold unless registered under the Securities Act or unless an exemption from registration is available. Each of the shareholders became an employee of a subsidiary of PCL after the acquisition. In addition, the shareholders are parties to
the PCL Unanimous Shareholders Agreement and are subject to the restrictions on transfer described under Item 10. Additional Information  Unanimous Shareholders Agreement (previously filed in our registration statement on
Form 20-F filed on February 8, 2006 and incorporated herein by reference).



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|ITEM 10. | ADDITIONAL INFORMATION
|-------- | ----------------------

A. Share Capital

Not applicable.

B. Memorandum of Association and Articles of Association

See the exhibits to our registration on Form 20-F filed on
May 18, 2005, and incorporated herein by reference.

C. Material Contracts

PCL Employees Holdings operates as a general contractor. In the last two years, all material contracts
to which the Company is a party have been entered into as part of our ordinary course of business.

D. Exchange Controls

There is no law or governmental decree or regulation in Canada that restricts the export or import of
capital including the availability of cash and cash equivalents for use by the Company and its subsidiaries, or affects the remittance of dividends, interest or other payments to a non-resident holder of shares of the Company other than withholding
tax requirements.

E. Taxation

Material Canadian Federal Income Tax Consequences

The following is a summary of the material Canadian federal income tax considerations generally applicable in respect of the holding and disposition of our common shares.
The tax consequences to any particular holder of common shares will vary according to the status of that holder as an individual, trust, corporation or member of a partnership, the jurisdiction in which that holder is subject to taxation, the place
where that holder is resident and, generally, according to that holders particular circumstances.

This summary is applicable only to holders who are
resident solely in the United States, have never been resident in Canada, deal at arms length with us, hold their common shares as capital property and who will not use or hold the common shares in carrying on business in Canada.

This summary is based upon the provisions of the Income Tax Act (Canada) and the regulations thereunder (collectively, the Tax Act or
ITA) and the Canada-United States Tax Convention (the Tax Convention) as at the date hereof and the current administrative practices of the Canada Revenue Agency (CRA). This summary does not take into
account provincial income tax consequences.

This summary is not exhaustive of all possible income tax consequences. Each holder should consult his, her or
its own tax advisor with respect to the income tax consequences applicable to him in his own particular circumstances.

Dividends

In the case of any dividends paid to non-resident shareholders, Canadian taxes are withheld and remitted by the Company, resulting in only the net
amount paid to the shareholder. The rate of withholding tax is generally 25% but by virtue of Article X of the Tax Convention, the rate of tax on dividends paid to persons who are residents only of the United States for purposes of the Tax
Convention is generally limited to 15% of the gross amount of the dividend (or 5% in the case of certain corporate shareholders owning at least 10% of our voting shares).



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Dispositions

The Income Tax Act provides that a non-resident person is subject to tax in Canada on the disposition of taxable Canadian property. Common shares of PCL meet the definition of taxable Canadian
property in the Income Tax Act, and therefore would normally be subject to tax in Canada on eventual disposition. However, as PCL is not publicly traded there is no commercial market for the shares, and the company retains first right of
refusal to repurchase shares, any repurchase of common shares by PCL results in a deemed dividend rather than a capital gain.

Section 212.2 of the
Income Tax Act (Canada) deems a dividend to have been paid to a non-resident of Canada where the proceeds of the disposition of capital stock of a corporation resident in Canada are in excess of the paid up capital of the shares. As PCLs
annual issue of shares are made in series, the paid up capital of each series of shares will always be equal to, or less than, the proceeds on repurchase thereby creating a deemed dividend.

The deemed dividend on the repurchase of shares is treated by the CRA as a normal taxable dividend. As a result, the rate of withholding tax is the same as the regular
annual dividends as discussed above.

United States Federal Income Tax Consequences

The following is a discussion of material United States Federal income tax consequences generally applicable to a U.S. Holder (as defined below) of our common shares.
This discussion does not address all potentially relevant Federal income tax matters, and it does not address consequences peculiar to persons subject to special provisions of Federal income tax law, such as, for example, tax-exempt organizations,
qualified retirement plans, persons subject to alternative minimum tax, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign
corporations whose ownership of our common shares is not effectively connected with the conduct of a trade or business in the United States and shareholders who acquired their shares through the exercise of employee share options or otherwise as
compensation. In addition, this discussion only applies to common shares held by U.S. Holders as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, and does not cover any state, local or foreign
tax consequences.

The following discussion is based upon the sections of the Internal Revenue Code, Treasury Regulations, published Internal Revenue
Service rulings, published administrative positions of the Internal Revenue Service and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time.
Holders and prospective holders of our common shares should consult their own tax advisors about the federal, state, local, and foreign tax consequences of purchasing, owning and disposing of our common shares.

U.S. Holders

As used herein, a U.S.
Holder includes any person, with the exception of those subject to special provisions of Federal income tax law, who holds our common shares who is a citizen or resident of the United States, a partnership or corporation organized under the
laws of the United States, an estate, the income of which is subject to United States federal income tax without regard to its source and a trust if a United States court is able to exercise primary supervision over administration of the trust and
one or more United States persons have authority to control all substantial decisions of the trust or if the trust was in existence on August 20, 1996 and has elected to continue to be treated as a United States person, and any other person or
entity whose ownership of our common shares is effectively connected with the conduct of a trade or business in the United States.

Distributions on Our Common Shares

U.S. Holders receiving dividend distributions with respect to our common shares are required to
include in gross income for United States Federal income tax purposes the gross amount of such distributions to the extent that we have current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such
distributions (Note that PCL withholds 15% on dividends paid to US residents). Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holders United States Federal Income tax liability or, alternatively,
may be deducted in computing the U.S. Holders United States Federal taxable income by those who itemize deductions (see more detailed discussion at Foreign Tax Credit below). To the extent that



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distributions exceed our current or accumulated earnings and profits, they will be treated first as a return of capital up to the U.S. Holders adjusted
basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Preferential tax rates for long-term capital gains are applicable to a U.S. Holder, which is an individual, estate or trust. There are currently no
preferential tax rates for long-term capital gains for a U.S. Holder, which is a corporation. Dividends paid in Canadian dollars will be included in income in a U.S. dollar amount based on the exchange rate at the time of their receipt. U.S. Holders
should consult their own tax advisors regarding the treatment of any foreign currency gain or loss on any Canadian dollars received as a dividend which are converted into U.S. dollars on a date subsequent to receipt.

Dividends paid on our common shares will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United
States corporations. A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from us (unless we qualify as a foreign personal holding
company or a passive foreign investment company, as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of PCL. The availability of this deduction is subject to several complex
limitations, which are beyond the scope of this discussion.

Disposition of Our Common Shares

A U.S. Holder will recognize gain or loss upon the sale (i.e.: repurchase) of our common shares equal to the difference, if any, between (i) the amount of cash plus
the fair market value of any property received, and (ii) the shareholders tax basis in our common shares. Any gain recognized on the sale or other disposition of common shares will generally be U.S. source income. Any loss recognized on
the sale or other disposition of common shares will generally be U.S. source. However, such loss will be foreign source to the extent certain dividends were received by the U.S. Holder within the 24-month period proceeding the date on which the loss
was recognized. This gain or loss will be a capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder, which will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S.
Holder. Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year. Deductions for net capital losses are subject to significant limitations. For U.S. Holders who are
individuals, a capital loss is deductible only to the extent of capital gains, plus ordinary income of up to U.S. $3,000; any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is
thereby exhausted. For U.S. Holders which are corporations (other than corporations subject to Subchapter S of the Internal Revenue Code), any unused net capital loss may be carried back three years from the loss year and carried forward five years
from the loss year to be offset against capital gains until such net capital loss is thereby exhausted. If the amount realized on a sale or exchange is not denominated in U.S. dollars, the amount realized will be equal to the U.S. dollar value
thereof, determined at the spot rate on the date of the sale or exchange.

As discussed above, the Canadian tax treatment of dispositions results in a 15%
withholding tax. Such Canadian taxes withheld may be credited, subject to certain limitations, against the U.S. Holders United States Federal Income tax liability.

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with
respect to the ownership of our common shares may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit
reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayers income subject to tax. This election is made on an annual basis and applies to all foreign income taxes (or taxes in lieu
of income tax) paid by (or withheld from) the U.S. Holder during the year. There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the
U.S. Holder United States income tax liability that the U.S. Holders foreign source income bears to his/her or its worldwide taxable income.



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In the determination of the application of this limitation, the various items of income and deduction must be classified
into foreign and domestic sources. Complex rules govern this classification process. There are further limitations on the foreign tax credit for certain types of income such as passive income, high withholding tax interest,
financial services income, shipping income, and certain other classifications of income. In certain circumstances, recently enacted legislation and other guidance issued by the United States Treasury may deny a United States
holder foreign tax credits (and instead may allow deductions) for foreign taxes imposed on a dividend if the United States holder (i) has not held the common shares for at least 16 days in the 30-day period beginning 15 days before the
ex-dividend date, during which it is not protected from risk of loss; (ii) is obligated to make payments related to the dividends; or (iii) holds the common shares in arrangements in which the United States holders expected economic
profit, after non-U.S. taxes, is insubstantial.

The availability of the foreign tax credit and the application of the limitations on the credit are fact
specific and holders and prospective holders of our common shares should consult their own tax advisors regarding their individual circumstances.

Other Considerations

In the following three circumstances, the above sections of the discussion may not describe the United States
Federal income tax consequences resulting from the holding and disposition of our common shares. We do not believe that we are either a Foreign Personal Holding Company, a Controlled Foreign Corporation, or a Passive
Foreign Investment Company.

Foreign Personal Holding Company

If, at any time during a taxable year, more than 50% of the total combined voting power or the total value of our outstanding shares are owned, actually or
constructively, by five or fewer individuals who are citizens or residents of the United States and 60% or more of our gross income for such year was derived from certain passive sources (e.g. from dividends received from unrelated persons),
we would be treated as a foreign personal holding company or FPHC. In that event, U.S. Holders that hold our common shares would be required to include in gross income for such year their allowable portions of such foreign
personal holding company income to the extent that we do not actually distribute such income.

Controlled Foreign Corporation

If more than 50% of the voting power of all classes of shares or the total value of our shares is owned, directly or indirectly, by U.S.
shareholders, each of whom own 10% or more of our voting shares (U.S. Shareholders), we could be treated as a controlled foreign corporation (a CFC) under SubPart F of the Internal Revenue Code. If we were
classified as a CFC and as a PFIC (defined below), CFC treatment would prevail with respect to U.S. Shareholders. CFC classification would effect many complex results including the required inclusion by such U. S. shareholders in income of their pro
rata share: of SubPart F Income (as specially defined by the Internal Revenue Code) of PCL; and of our earnings invested in U.S. property. In addition, under Section 1248 of the Internal Revenue Code, gain from the sale or exchange
of our common shares by a U.S. person who is or was a U.S. shareholder (as defined in the Internal Revenue Code) at any time during the five years period ending with the sale or exchange is generally treated as ordinary dividend income to the extent
of our earnings and profits attributable to the shares sold or exchanged. Because of the complexity of SubPart F, a more detailed review of these rules is outside of the scope of this discussion.

Passive Foreign Investment Company

If PCL is a passive
foreign investment company or PFIC as defined in Section 1297 of the Code, U.S. Holders will be subject to U.S. federal income taxation under one of two alternative tax regimes at the election of each such U.S. Holder.
Section 1297 of the Code defines a PFIC as a corporation that is not formed in the United States and either (i) 75% or more of its gross income for the taxable year is passive income, which generally includes interest,
dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if PCL elects, adjusted tax basis), of its assets that produce or are held for the production of passive income is 50% or more. The
rules applicable to a FPHC take priority over the rules applicable to a PFIC, so that amounts includable in gross income under the FPHC rules will not be taxable again under the PFIC rules. PCL does not believe that it will be a PFIC for the current
fiscal year or for future years. Whether PCL is a PFIC in any year and the tax consequences relating to PFIC



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status will depend on the composition of PCLs income and assets, including cash. U.S. Holders should be aware, however, that if PCL becomes a PFIC, it
may not be able or willing to satisfy record-keeping requirements that would enable U.S. Holders to make an election to treat PCL as a qualified electing fund for purposes of one of the two alternative tax regimes applicable to a PFIC.
U.S. Holders or potential shareholders should consult their own tax advisor concerning the impact of these rules on their investment in PCL.

F. Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

H. Documents on Display

The documents referred to herein may be examined at the Companys offices at 5410  99
Street, Edmonton, Alberta T6E 3P4 Canada during normal business hours.



|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

Exchange Rate Risk

The Company currently earns revenue and incurs expenses in United States dollars and Canadian dollars. Fluctuations in
the Canadian dollar in relation to the U.S. dollar may have an adverse effect on our earnings as our consolidated financial statements are reported in Canadian dollars. The impact of a 10% strengthening, 5% strengthening, 5% weakening and a 10%
weakening of the Canadian dollar in relation to the U.S. dollar compared to the fiscal year ended October 31, 2006 average U.S. dollar/Cdn. dollar exchange rate of $1.1329 is as follows:



|                                  |  |                                  |  |                                  |  |                              |  |                              
|--------------------------------- |  | -------------------------------- |  | -------------------------------- |  | ---------------------------- |  | -----------------------------
|US$1=Cdn$1.0196 10% strengthening |  | US$1=Cdn$1.0763 5% strengthening |  | US$1=Cdn$1.1329 October 31, 2006 |  | US$1=Cdn$1.1895 5% weakening |  | US$1=Cdn$1.2462 10% weakening
|                                  |  |                                  |  |                                 
|US$1,000                          |  | US$1,000                         |  | US$1,000                         |  | US$1,000                     |  | US$1,000                     
|Cdn$1,020                         |  | Cdn$1,076                        |  | Cdn$1,133                        |  | Cdn$1,190                    |  | Cdn$1,246                    

The Company uses U.S. dollar denominated bank loans to minimize changes in the value of the United States
operations as a result of currency exchange fluctuations.

Interest Rate Risk

The Company does not believe that fluctuations in interest rates have a material impact on its financial condition or results of operations. The Company manages against increases in interest rates under its bank
loan facility by hypothecating short term deposits in excess of the bank loans in favour of the bank. These short term deposits have maturities which approximate the maturities of the bank loans and as a result any increase in interest expense
as a result of increases in interest rates is offset by a corresponding increase in investment income.



|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|-------- | ------------------------------------------------------

Not
required.



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PART II



|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|-------- | -----------------------------------------------

None.

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

None.



|ITEM 15. | CONTROLS AND PROCEDURES
|-------- | -----------------------

As at October 31, 2006, our
management, including our President and Vice President, Secretary/Treasurer, has evaluated the effectiveness of the design and operations of our disclosure controls and procedures in accordance with Rule 13a-15 under the Securities Exchange Act of
1934. Based upon and as of the date of the evaluation, our President and Vice President, Secretary/Treasurer concluded that the disclosure controls and procedures were effective to provide reasonable assurance that information required to be
disclosed in the reports we file and submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported as and when required, and that it is accumulated and communicated to our management, including our President and
Vice President, Secretary/Treasurer, as appropriate to allow timely decisions regarding required disclosure.



|ITEM 16. | RESERVED
|-------- | --------

A. Audit Committee Financial Expert

Our board of directors has determined that Henry R. Gillespie is an audit committee
financial expert, as that term is defined by Item 16A of Form 20-F and that Mr. Gillespie is independent, as that term is defined in the New York Stock Exchange listing standards.

B. Code Of Ethics

PCL is committed to maintaining the highest standards of honesty, integrity and ethical conduct and have
adopted our code of ethics to deter wrongdoing and to promote:



| | a. | honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | full, fair, accurate, timely and understandable disclosure in reports and documents filed by PCL with securities commissions and in other public communications made by PCL;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | compliance with applicable governmental laws, rules and regulations;
| | -- | --------------------------------------------------------------------



| | d. | the prompt internal reporting to the Board of Directors of violations of this code of ethics; and
| | -- | -------------------------------------------------------------------------------------------------



| | e. | accountability for adherence to this code of ethics.
| | -- | ----------------------------------------------------

Our code of ethics
entitled Ethical Conduct Reporting Policy applies to our President and Vice President, Secretary/Treasurer, among other members of management. A copy of the code of ethics has been filed with the Securities and Exchange Commission as an
exhibit to the 2005 Annual Report on Form 20-F filed on March 3, 2006, and may be accessed through the Commissions EDGAR database by visiting www.sec.gov.



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C. Principal Accounting Fees And Services

PCLs external auditors are KPMG LLP.

Audit Fees

KPMG LLP billed PCL $626,297 in 2006 and $724,588 in 2005
for audit services. Audit fees were incurred for the audit of our annual financial statements, the audits of the annual financial statements of certain of our consolidated subsidiaries, and services provided in connection with regulatory filings.

Audit Related Fees

None.

Tax Fees

KPMG LLP billed PCL $190,183 in 2006 and $218,327 in 2005
for tax compliance, tax advice, and tax planning services.

All Other Fees

KPMG LLP billed PCL $34,278 in 2006 and $406,882 in 2005 for advisory services.

Audit Committee Pre-approval Policy

On August 29, 2005, the audit committee of our board of directors adopted a pre-approval policy for the services provided by our external
auditors. According to the policy, which stipulates that the audit committee has complete authority on engagement and remuneration of our external auditors, the audit committee pre-approved the following categories of defined engagements for us and
our consolidated subsidiaries as specified below:



| |  |  | Audit services: The audit committee will pre-approve all audit services provided by the external auditors through their recommendation of the external auditors as shareholders
auditors at the companys annual meeting and through the audit committees review of the external auditors annual Audit Plan; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Audit-related, tax and other services: Annually, the audit committee will update the list of Pre-Approved Services and pre-approve services that are recurring or otherwise
reasonably expected to be provided. The audit committee will be subsequently informed annually of the services on the list for which the auditor has been actually engaged. Any additional requests for pre-approval will be addressed on a case-by-case
specific engagement basis. The chair of the audit committee is authorized to pre-approve additional services where the aggregate fees are estimated to be less than or equal to $50,000, provided that the chair reports such approvals to the committee
at its next meeting.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The policy also defines audit services, audit-related services, tax services, and other services, with reference to the
definitions of these services provided by the rules of the Canadian Securities Administrators. The policy also defines prohibited services, with reference to the Rules of Professional Conduct of the Institute of Chartered Accountants of Alberta.

Fees billed for advisory services represented 4.0% (2005  30.1%) of total fees billed by KPMG LLP of $34,278 (2005 - $406,882). The pre-approval
requirement for advisory services was waived in 2006 as the advisory services represented less than 5% of the total amount of revenues paid by the Company to KPMG LLP. Fees billed for advisory services in 2005 of $387,217 were billed prior to the
effective date of the Companys registration statement on Form 20-F. The pre-approval requirement for advisory services of $19,665 billed subsequent to the effective date of the Companys registration statement on Form 20-F was waived in
2005 as the advisory services represented less than 5% of the total amount of revenues paid by the Company to KPMG LLP.

D. Exemptions From The Listing Standards For Audit Committees

Not applicable.



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##### Table of Contents

E. Purchases Of Equity Securities By The Issuer And Affiliated Purchasers

The following table outlines the purchases of the
Companys Class 1 and Class 3 shares by the Company during each month of the fiscal year ended October 31, 2006:



|                                        |  |                                    |  |                                 |       |                                    |       |                                 |   |      
|--------------------------------------- |  | ---------------------------------- |  | ------------------------------- | ----- | ---------------------------------- | ----- | ------------------------------- | - | -----
|                                        |  | Class 1                            |  | Class 3                        
|Period                                  |  | (a) Total Numberof SharesPurchased |  | (b) Average PricePaid per Share |       | (a) Total Numberof SharesPurchased |       | (b) Average PricePaid per Share
|November 1, 2005 to November 31, 2005   |  | 200                                |  | $                               | 20.00 |                                    | 100   |                                 | $ | 20.00
|December 1, 2005 to December 31, 2005   |  | 500                                |  | $                               | 20.00 |                                    |      |                                 |   |     
|January 1, 2006 to January 31, 2006     |  | 9,470                              |  | $                               | 20.00 |                                    | 100   |                                 | $ | 20.00
|February 1, 2006 to February 28, 2006   |  |                                   |  |                                 |      |                                    |      |                                 |   |     
|March 1, 2006 to March 31, 2006         |  | 2,770                              |  | $                               | 20.75 |                                    |      |                                 |   |     
|April 1, 2006 to April 30, 2006         |  | 4,900                              |  | $                               | 20.39 |                                    | 2,210 |                                 | $ | 20.75
|May 1, 2006 to May 31, 2006             |  | 17,290                             |  | $                               | 20.75 |                                    |      |                                 |   |     
|June 1, 2006 to June 30, 2006           |  | 2,880                              |  | $                               | 20.75 |                                    | 200   |                                 | $ | 20.75
|July 1, 2006 to July 31, 2006           |  | 4,100                              |  | $                               | 20.75 |                                    |      |                                 |   |     
|August 1, 2006 to August 31, 2006       |  | 2,560                              |  | $                               | 20.75 |                                    |      |                                 |   |     
|September 1, 2006 to September 30, 2006 |  | 4,890                              |  | $                               | 20.75 |                                    |      |                                 |   |     
|October 1, 2006 to October 31, 2006     |  | 3,210                              |  | $                               | 20.75 |                                    |      |                                 |   |     
|                                        |  |                                    |  |                                 |       |                                    |       |                                 |   |      
|TOTAL                                   |  | 52,770                             |  | $                               | 20.57 |                                    | 2,610 |                                 | $ | 20.70
|                                        |  |                                    |  |                                 |       |                                    |       |                                 |   |      

Note: The terms of the share repurchases by the Company, including the number of shares to be repurchased and the
determination of the price to be paid upon repurchase, are determined in accordance with the Companys Unanimous Shareholder Agreement, as described in Item 10  Additional Information  Unanimous Shareholder Agreement 
Company Rights and Obligations to Repurchase Shares (previously filed in our registration statement on Form 20-F filed on February 8, 2006 and incorporated herein by reference).



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PART III



|ITEM 17. | FINANCIAL STATEMENTS
|-------- | --------------------

The Auditors Report and Financial
Statements for the Company are attached hereto as itemized under Item 19(a) and are incorporated herein by reference. Such Financial Statements have been prepared on the basis of Canadian GAAP. A reconciliation to United States GAAP appears in
Note 24 thereto.

ITEM 18. FINANCIAL STATEMENTS

Not applicable. The Company has elected to provide Financial Statements pursuant to
Item 17.

ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS

A. Financial Statements



|    |  |                                                           
|--- |  | ----------------------------------------------------------
|F-1 |  | Report of Independent Registered Public Accounting Firm;  
|F-2 |  | Consolidated Balance Sheets;                              
|F-3 |  | Consolidated Statements of Earnings and Retained Earnings;
|F-4 |  | Consolidated Statements of Cash Flows; and                
|F-5 |  | Notes to Consolidated Financial Statements.               

B. Exhibits



|     |  |                                                                                                            
|---- |  | -----------------------------------------------------------------------------------------------------------
|1.1  |  | Certificate of Amendment and Registration of Restated Articles dated March 3, 2006**                       
|     | 
|1.2  |  | By-Laws of the Company*                                                                                    
|     | 
|2.1  |  | Unanimous Shareholder Agreement dated effective May 1, 1988, as amended*                                   
|     | 
|4.1  |  | 2006 Class 1 Regular Employee Stock Purchase Plan***                                                       
|     | 
|4.2  |  | 2006 Class 1 Universal Employee Stock Purchase Plan***                                                     
|     | 
|4.3  |  | 2006 Class 2 Regular Employee Stock Purchase Plan****                                                      
|     | 
|4.4  |  | 2006 Class 2 Universal Employee Stock Purchase Plan****                                                    
|     | 
|4.5  |  | 2006 Class 3 Regular Employee Stock Purchase Plan***                                                       
|     | 
|4.6  |  | 2006 Class 3 Universal Employee Stock Purchase Plan***                                                     
|     | 
|4.7  |  | 2006 Class 4 Regular Employee Stock Purchase Plan****                                                      
|     | 
|8.1  |  | List of subsidiaries, including their jurisdiction of incorporation and names under which they do business*
|     | 
|11.1 |  | Ethical Conduct Reporting Policy**                                                                         
|     | 
|12.1 |  | Section 13a-14(a)/15d-14(a) Certification of Principal Executive Officer****                               



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##### Table of Contents

|     |  |                                                                                              
|---- |  | ---------------------------------------------------------------------------------------------
|12.2 |  | Section 13a-14(a)/15d-14(a) Certification of Principal Financial Officer****                 
|     | 
|13.1 |  | Section 1350 Certification of Principal Executive Officer and Principal Financial Officer****



|* | Previously filed as an exhibit to our registration on Form 20-F filed on May 18, 2005, and incorporated herein by reference.
|- | ----------------------------------------------------------------------------------------------------------------------------



|** | Previously filed as an exhibit to our annual report on Form 20-F filed on March 3, 2006, and incorporated herein be reference.
|-- | ------------------------------------------------------------------------------------------------------------------------------



|*** | Previously filed as an exhibit to our registration on Form S-8 filed on April 6, 2006, and incorporated herein be reference.
|--- | ----------------------------------------------------------------------------------------------------------------------------



|**** | Filed herewith.
|---- | ---------------

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this
Annual Report on its behalf.



PCL EMPLOYEES HOLDINGS LTD.By:

/s/ GORDON D. MARONGordon D. Maron Vice President,
Secretary/Treasurer


Date: February 23, 2007



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##### Table of Contents

LOGO



| |  |                       |  |           |  |               
| |  | --------------------- |  | --------- |  | --------------
| |  | KPMG LLP              |  | Telephone |  | (780) 429-7300
| |  | Chartered Accountants |  | Fax       |  | (780) 429-7379
| |  | 10125  102 Street    |  | Internet  |  | www.kpmg.ca   
| |  | Edmonton AB T5J 3V8   |  |           |  |               
| |  | Canada                |  |           |  |               

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Directors of PCL Employees Holdings Ltd.

We have audited the accompanying consolidated balance sheets of PCL Employees Holdings Ltd. as of October 31, 2006, and 2005 and the consolidated statements of
earnings and retained earnings and cash flows for each of the years in the three-year period ended October 31, 2006. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of PCL Employees Holdings Ltd. as of October 31, 2006 and 2005 and the results of its operations and its cash flows for each of the years in the three-year period ended
October 31, 2006 in conformity with Canadian generally accepted accounting principles.

Canadian generally accepted accounting principles vary in
certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in note 24 to the consolidated financial statements.



|                                                                                                               
|---------------------------------------------------------------------------------------------------------------
|                                                                                                               
|LOGO                                                                                                           
|Chartered Accountants Edmonton, Canada January 24, 2007, except as to note 22, which is as of February 23, 2007

KPMG LLP, a Canadian limited liability partnership is the

Canadian member firm of KPMG International, a Swiss

cooperative.



F - 1



---

##### Table of Contents

PCL EMPLOYEES HOLDINGS LTD.

Consolidated Balance Sheets

As at October 31

(In thousands of Canadian dollars)



|                                                                             |  |      |           |   |      |   |           |  
|---------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                                             |  | 2006 |           |   | 2005 |  
|ASSETS                                                                       |  |      |           |   |      |   |           |  
|Current Assets                                                               |  |      |           |   |      |   |           |  
|Cash and cash equivalents - Note 10                                          |  | $    | 566,204   |   |      | $ | 491,068   |  
|Short-term deposits - Notes 2 and 10                                         |  |      | 143,813   |   |      |   | 46,546    |  
|Accounts receivable - Note 3                                                 |  |      | 817,033   |   |      |   | 692,312   |  
|Costs and estimated earnings in excess of billings - Note 4                  |  |      | 48,229    |   |      |   | 38,777    |  
|Investment in limited liability companies and limited partnerships - Note 23 |  |      |          |   |      |   | 858       |  
|Loans receivable - Note 5                                                    |  |      | 1,123     |   |      |   | 1,181     |  
|Future income taxes - Note 12(c)                                             |  |      | 42,204    |   |      |   | 16,922    |  
|                                                                             |  |      |           |   |      |   |           |  
|                                                                             |  |      | 1,618,606 |   |      |   | 1,287,664 |  
|Investments in marketable securities - Note 20                               |  |      | 46,014    |   |      |   | 41,792    |  
|Holdbacks receivable - Note 3                                                |  |      | 47,285    |   |      |   | 33,330    |  
|Intangible assets - Note 6                                                   |  |      | 2,636     |   |      |   | 4,486     |  
|Property, plant and equipment - Note 7                                       |  |      | 121,385   |   |      |   | 101,341   |  
|Investment in limited liability companies and limited partnerships - Note 23 |  |      |          |   |      |   | 7,087     |  
|Future income taxes - Note 12(c)                                             |  |      | 9,105     |   |      |   | 4,238     |  
|Accrued benefit asset - Note 19                                              |  |      | 4,560     |   |      |   | 3,816     |  
|                                                                             |  |      |           |   |      |   |           |  
|                                                                             |  | $    | 1,849,591 |   |      | $ | 1,483,754 |  
|                                                                             |  |      |           |   |      |   |           |  
|LIABILITIES                                                                  |  |      |           |   |      |   |           |  
|Current Liabilities                                                          |  |      |           |   |      |   |           |  
|Accounts payable - Note 8                                                    |  | $    | 600,087   |   |      | $ | 516,542   |  
|Accrued liabilities - Note 9                                                 |  |      | 180,868   |   |      |   | 126,506   |  
|Unearned revenue - Note 4                                                    |  |      | 327,281   |   |      |   | 315,074   |  
|Income taxes payable                                                         |  |      | 60,891    |   |      |   | 21,424    |  
|Bank loans - Note 10                                                         |  |      | 133,652   |   |      |   | 106,356   |  
|Operating bank loans - Note 11                                               |  |      | 32        |   |      |   | 414       |  
|Future income taxes - Note 12(c)                                             |  |      | 18,362    |   |      |   | 21,630    |  
|                                                                             |  |      |           |   |      |   |           |  
|                                                                             |  |      | 1,321,173 |   |      |   | 1,107,946 |  
|Holdbacks payable - Note 8                                                   |  |      | 34,477    |   |      |   | 15,996    |  
|Operating bank loans - Note 11                                               |  |      |          |   |      |   | 19        |  
|                                                                             |  |      |           |   |      |   |           |  
|                                                                             |  |      | 1,355,650 |   |      |   | 1,123,961 |  
|                                                                             |  |      |           |   |      |   |           |  
|SHAREHOLDERS EQUITY                                                         |  |      |           |   |      |   |           |  
|Share capital - Note 13                                                      |  |      | 274,259   |   |      |   | 225,836   |  
|Retained earnings                                                            |  |      | 258,631   |   |      |   | 166,185   |  
|Cumulative translation account - Note 14                                     |  |      | (38,949   | ) |      |   | (32,228   | )
|                                                                             |  |      |           |   |      |   |           |  
|                                                                             |  |      | 493,941   |   |      |   | 359,793   |  
|Commitments and contingencies - Notes 6, 15, 22 and 23                       |  |      |           |   |      |   |           |  
|                                                                             |  |      |           |   |      |   |           |  
|                                                                             |  | $    | 1,849,591 |   |      | $ | 1,483,754 |  
|                                                                             |  |      |           |   |      |   |           |  

See Notes to Consolidated Financial Statements



|                                               |  |  |  |                                                
|---------------------------------------------- |  |  |  | -----------------------------------------------
|On behalf of the Board:                        |  |  |  |                                                
|                                               |  | 
|/s/ J.D. Thompson                              |  |  |  | /s/ H.R. Gillespie                             
|J.D. Thompson                         DIRECTOR |  |  |  | H.R. Gillespie                         DIRECTOR



| |  |       |  |     
| |  | ----- |  | ----
| |  | F - 2 |  | LOGO



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PCL EMPLOYEES HOLDINGS LTD.

Consolidated Statements of Earnings and Retained Earnings

Years ended October 31

(In thousands of Canadian dollars,
except share data)



|                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|----------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                  |  | 2006 |            |   | 2005 |   |            | 2004 | 
|Contract revenues                                                 |  | $    | 4,208,284  |   |      | $ | 3,295,489  |      |  | $ | 3,052,627  |  
|Contract costs                                                    |  |      | (3,722,821 | ) |      |   | (2,984,185 | )    |  |   | (2,799,070 | )
|                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Gross profit                                                      |  |      | 485,463    |   |      |   | 311,304    |      |  |   | 253,557    |  
|Indirect and administrative expenses                              |  |      | (287,193   | ) |      |   | (206,172   | )    |  |   | (177,218   | )
|Gain on disposal of property, plant and equipment                 |  |      | 2,300      |   |      |   | 2,993      |      |  |   | 2,812      |  
|                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Operating profit                                                  |  |      | 200,570    |   |      |   | 108,125    |      |  |   | 79,151     |  
|Other income - Note 16                                            |  |      | 31,756     |   |      |   | 17,525     |      |  |   | 8,885      |  
|                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Earnings before income taxes                                      |  |      | 232,326    |   |      |   | 125,650    |      |  |   | 88,036     |  
|Income taxes - Note 12(a)                                         |  |      | (63,122    | ) |      |   | (45,846    | )    |  |   | (32,268    | )
|                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Net earnings                                                      |  |      | 169,204    |   |      |   | 79,804     |      |  |   | 55,768     |  
|Retained earnings at beginning of year                            |  |      | 166,185    |   |      |   | 132,879    |      |  |   | 121,649    |  
|                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|                                                                  |  |      | 335,389    |   |      |   | 212,683    |      |  |   | 177,417    |  
|Dividends                                                         |  |      | (75,736    | ) |      |   | (42,716    | )    |  |   | (37,000    | )
|Premium on repurchase of share capital                            |  |      | (1,022     | ) |      |   | (3,782     | )    |  |   | (7,538     | )
|                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Retained earnings at end of year                                  |  | $    | 258,631    |   |      | $ | 166,185    |      |  | $ | 132,879    |  
|                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Earnings per share (basic and diluted)                            |  | $    | 10.12      |   |      | $ | 5.31       |      |  | $ | 4.03       |  
|Weighted average number of shares outstanding (basic and diluted) |  |      | 16,719,446 |   |      |   | 15,034,324 |      |  |   | 13,852,591 |  
|                                                                  |  |      |            |   |      |   |            |      |  |   |            |  

See Notes to Consolidated Financial Statements



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PCL EMPLOYEES HOLDINGS LTD.

Consolidated Statements of Cash Flows

Years ended October 31

(In thousands of Canadian dollars)



|                                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|----------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                          |  | 2006 |          |   | 2005 |   |          | 2004 | 
|CASH PROVIDED BY (USED FOR):                                                              |  |      |          |   |      |   |          |      |  |   |          |  
|OPERATIONS (Note 17):                                                                     |  |      |          |   |      |   |          |      |  |   |          |  
|Net earnings                                                                              |  | $    | 169,204  |   |      | $ | 79,804   |      |  | $ | 55,768   |  
|Items not involving cash:                                                                 |  |      |          |   |      |   |          |      |  |   |          |  
|Depreciation and amortization                                                             |  |      | 28,403   |   |      |   | 21,729   |      |  |   | 18,725   |  
|Gain on disposal of property, plant and equipment                                         |  |      | (2,300   | ) |      |   | (2,993   | )    |  |   | (2,812   | )
|Loss (gain) on disposal of marketable securities                                          |  |      | (3,164   | ) |      |   | (1,870   | )    |  |   | 3,604    |  
|Write-down of marketable securities                                                       |  |      |         |   |      |   |         |      |  |   | 3,600    |  
|Future income taxes - Note 12(a)                                                          |  |      | (34,356  | ) |      |   | (10,465  | )    |  |   | (15,774  | )
|Net change in operating accounts - Note 18                                                |  |      | 59,432   |   |      |   | 124,166  |      |  |   | (32,417  | )
|                                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|                                                                                          |  |      | 217,219  |   |      |   | 210,371  |      |  |   | 30,694   |  
|                                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|INVESTING:                                                                                |  |      |          |   |      |   |          |      |  |   |          |  
|Investment in marketable securities                                                       |  |      | (16,384  | ) |      |   | (29,235  | )    |  |   | (17,481  | )
|Proceeds on disposal of marketable securities                                             |  |      | 15,312   |   |      |   | 28,223   |      |  |   | 16,878   |  
|Decrease (increase) in short-term deposits, other than investments held in escrow         |  |      | (97,622  | ) |      |   | 48,064   |      |  |   | (28,491  | )
|Decrease (increase) in investments held in escrow                                         |  |      | 355      |   |      |   | (15,456  | )    |  |   | (9,672   | )
|Purchase of property, plant and equipment                                                 |  |      | (52,003  | ) |      |   | (51,867  | )    |  |   | (31,586  | )
|Proceeds on disposal of property, plant and equipment                                     |  |      | 5,865    |   |      |   | 24,698   |      |  |   | 4,622    |  
|Proceeds from (increase in) loans receivable                                              |  |      | 58       |   |      |   | 37       |      |  |   | 8,012    |  
|Decrease (increase) in investment in limited liability companies and limited partnerships |  |      | 7,945    |   |      |   | (1,181   | )    |  |   |         |  
|Increase in intangible assets - Note 6                                                    |  |      | (3       | ) |      |   | (107     | )    |  |   |         |  
|Acquisition of operations, net of cash acquired - Note 6                                  |  |      |         |   |      |   |         |      |  |   | (13,137  | )
|Proceeds from purchase price adjustment - Note 6                                          |  |      |         |   |      |   |         |      |  |   | 987      |  
|                                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|                                                                                          |  |      | (136,477 | ) |      |   | 3,176    |      |  |   | (69,868  | )
|                                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|FINANCING:                                                                                |  |      |          |   |      |   |          |      |  |   |          |  
|Proceeds from operating bank loans                                                        |  |      |         |   |      |   |         |      |  |   | 12,389   |  
|Repayment of operating bank loans                                                         |  |      | (401     | ) |      |   | (19,743  | )    |  |   | (2,343   | )
|Proceeds from bank loans                                                                  |  |      | 683,948  |   |      |   | 699,158  |      |  |   | 349,233  |  
|Repayments of bank loans                                                                  |  |      | (657,322 | ) |      |   | (703,031 | )    |  |   | (329,158 | )
|Issuance of share capital                                                                 |  |      | 53,621   |   |      |   | 39,724   |      |  |   | 42,123   |  
|Repurchase of share capital                                                               |  |      | (6,220   | ) |      |   | (10,433  | )    |  |   | (18,584  | )
|Dividends paid                                                                            |  |      | (75,736  | ) |      |   | (42,716  | )    |  |   | (37,000  | )
|                                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|                                                                                          |  |      | (2,110   | ) |      |   | (37,041  | )    |  |   | 16,660   |  
|Unrealized foreign exchange gain                                                          |  |      | (3,496   | ) |      |   | (2,476   | )    |  |   | (12,189  | )
|                                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|Net increase (decrease) in cash and cash equivalents                                      |  |      | 75,136   |   |      |   | 174,030  |      |  |   | (34,703  | )
|Cash and cash equivalents at beginning of year                                            |  |      | 491,068  |   |      |   | 317,038  |      |  |   | 351,741  |  
|                                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|Cash and cash equivalents at end of year                                                  |  | $    | 566,204  |   |      | $ | 491,068  |      |  | $ | 317,038  |  
|                                                                                          |  |      |          |   |      |   |          |      |  |   |          |  

See Notes to Consolidated Financial Statements



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PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|1. | SIGNIFICANT ACCOUNTING POLICIES
|-- | -------------------------------



| | (a) | Nature of Operations
| | --- | --------------------

The Company operates in the
construction industry. The Company performs construction services in Canada, the United States and the Bahamas as a general contractor, on either a negotiated or competitive bid basis, as a construction manager, or as a design build service provider
in the following construction markets: (a) commercial and institutional buildings, including construction of shopping centers, educational facilities, airports, light civil structures, hospitals, museums, sporting and entertainment facilities,
hotels, light industrial facilities, multifamily condominiums and apartments, seniors facilities, and office buildings; (b) construction, shutdown and maintenance services for manufacturing, petrochemical, oil and gas and mine processing
facilities, chemical plants, offshore oil production superstructures, forestry projects and power plants; and (c) roadways, bridges, tunnels, large diameter pipelines, water and wastewater treatment facilities, dams and mine site preparation.
The Companys customers are private and governmental entities.

The length of the Companys contracts varies, but is typically
between one and three years. Contracts generally provide for progress payments, net of holdbacks, to be made as work progresses. Holdbacks, ranging from zero to ten percent, are paid upon substantial completion. In some instances, the Company is
able to substitute short-term deposits held in escrow by a financial institution or bank letters of credit in lieu of holdbacks.



| | (b) | Basis of Accounting
| | --- | -------------------

These consolidated financial
statements include the accounts of PCL Employees Holdings Ltd. and its subsidiaries and are prepared using generally accepted accounting principles in Canada and reconciled to generally accepted accounting principles in the United States in Note 24.
All intercompany transactions and balances are eliminated on consolidation.

Investments in joint ventures are accounted for using the
proportionate consolidation method whereby the Companys share of the assets, liabilities, revenues and expenses is consolidated as outlined in Note 23.



| | (c) | Profit Recognition on Contracts
| | --- | -------------------------------

For financial
reporting purposes, revenue on lump-sum contracts is recognized on the percentage-of-completion method, measured by the ratio of costs incurred to date to estimated total cost. Revenue on cost plus and unit price contracts is recognized as work is
performed. Under this method, the costs incurred and the related revenue are included in the consolidated statement of earnings and retained earnings as work progresses.

Contract costs include all direct material, labor, and equipment costs and those indirect costs related to contract performance such as indirect labor, supplies, and tool costs. General and administrative costs are
charged to expense as incurred.

Changes in job performance, job conditions, and estimated profitability, including those arising from
contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which such adjustments are determined. Profit incentives are included in revenue when their realization is
reasonably assured.

On all contracts in process where current estimates indicate an ultimate loss, the full amount of the estimated loss is
recognized. Construction claims are included in revenue when resolved or collected. Insurance claims are recorded when it is determined that the claim is covered under an existing insurance policy and collection is reasonably assured.



| | (d) | Cash and Cash Equivalents
| | --- | -------------------------

The Company considers
all highly liquid investments with original maturities of three months or less to be cash and cash equivalents.



| | (e) | Investments in Marketable Securities
| | --- | ------------------------------------

Marketable
securities are recorded at cost. When there has been a loss in value of an investment that is other than a temporary decline, the investment is written down to recognize the loss.



| | (f) | Intangible Assets
| | --- | -----------------

Intangible assets representing
primarily customer lists and relationships, employment contracts and workforce and non-competition arrangements are recorded at cost less accumulated amortization as outlined in Note 6. Intangible assets are being amortized on a straight-line basis
over periods ranging from one to five years.



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PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|1. | SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | -------------------------------------------



| | (g) | Property, Plant and Equipment
| | --- | -----------------------------

Property, plant and
equipment is recorded at cost. Depreciation is recorded using the following methods and annual rates which are designed to depreciate the cost of the assets over their estimated useful lives:



|                                |  |                                             
|------------------------------- |  | --------------------------------------------
|Contractors moveable equipment |  | - 20% to 30% declining balance              
|                                | 
|Buildings - frame               |  | - 10% declining balance                     
|- brick                         |  | - 4% to 5% declining balance                
|                                | 
|Automobiles and trucks          |  | - 30% declining balance                     
|                                | 
|Computer hardware               |  | - 30% to 45% declining balance              
|                                | 
|Leasehold improvements          |  | - Straight-line over the terms of the leases
|                                | 
|                                |  | which vary up to five years                 
|                                | 
|Office furniture and fixtures   |  | - 20% declining balance                     
|                                | 
|Land improvements               |  | - Straight-line over five years             
|                                | 
|Computer software               |  | - 100% annually                             



| | (h) | Long-Lived Assets
| | --- | -----------------

Long-lived assets subject to
depreciation are reviewed for impairment upon the occurrence of events or changes in circumstances indicating that the carrying value of the assets may not be recoverable. If such events or change in circumstances exist, the carrying value of the
assets are compared to estimated future cash flows expected to be generated over the remaining useful life of the asset. If the carrying value of these assets exceed the estimated future cash flows, impairments are recognized for the excess of the
carrying value over the fair value of the assets.



| | (i) | Income Taxes
| | --- | ------------

The Company uses the asset and
liability method of accounting for income taxes. Under the asset and liability method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the date of enactment or substantive enactment.



| | (j) | Translation of Foreign Currency
| | --- | -------------------------------

The monetary
assets and liabilities of the Company which are denominated in foreign currencies are translated at year end exchange rates. Revenues and expenses are translated at rates of exchange prevailing on the transaction dates. All exchange gains or losses
are recognized currently in earnings.

The Companys foreign operations are translated using the current rate method, whereby assets
and liabilities are translated at year-end exchange rates. Revenues and expenses are translated at the average rate of exchange over the fiscal period. The resulting unrealized exchange gains and losses are deferred and recorded as a separate
component of shareholders equity.



| | (k) | Employee Future Benefits
| | --- | ------------------------

The Company has a defined
benefit pension plan covering certain salaried employees. The Company has adopted the following policies:



| | (i) | The cost of the accrued benefit obligations for pensions earned by employees is actuarially determined using the projected benefit method prorated on service and managements
best estimate of expected plan investment performance, salary escalation, retirement ages and other actuarial factors.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | For the purpose of calculating expected return on plan assets, those assets are valued at fair value.
| | ---- | -----------------------------------------------------------------------------------------------------



| | (iii) | Past service costs from plan amendments are deferred and amortized on a straight-line basis over the average remaining service period of employees active at the date of the
amendment.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|1. | SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | -------------------------------------------



| | (k) | Employee Future Benefits (continued)
| | --- | ------------------------------------



| | (iv) | Actuarial gains (losses) on plan assets arise from the difference between the actual return on plan assets for a period and the expected return on plan assets for that period.
Actuarial gains (losses) on the accrued benefit obligation arise from differences between actual and expected experience and from changes in the actuarial assumptions used to determine the accrued benefit obligation. The excess of the net
accumulated actuarial gains (losses) over 10 percent of the greater of the accrued benefit obligation and the fair value of plan assets is amortized over the average remaining service period of active employees. The average remaining service period
of the active employees covered by the pension plans is 3 years (2005 - 4 years; 2004 - 4 years).
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | On November 1, 2000, the Company adopted the new accounting standard on employee future benefits using the prospective application method. The Company is amortizing the
transitional pension asset on a straight-line basis over 6 years, which was the average remaining service period of the active employees expected to receive benefits under the pension benefit plan as of November 1, 2000.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | When a restructuring of a benefit plan gives rise to both a curtailment and a settlement of obligations, the curtailment is accounted for prior to the settlement.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company also has a Canadian and a United States defined contribution plan providing pension benefits for the remainder of
its salaried employees. The cost of the defined contribution plan is recognized based on the contributions required to be made during each period. The Company has no obligations for employee non-pension future benefits.



| | (l) | Use of Estimates
| | --- | ----------------

The preparation of financial
statements in conformity with generally accepted accounting principles in Canada requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The Company estimates
the total contract cost and the extent of progress toward completion of contracts and recognizes a loss if the total estimated costs exceed the contract value. The actual costs to complete the contract and the ultimate amount of revenue to be
recognized could differ from those estimates.

The Company believes that an allowance for doubtful accounts is not required at
October 31, 2006 or October 31, 2005. This belief is based on the credit worthiness of the Companys customers and a prior history of minimal write-offs.



| | (m) | Variable-interest Entities
| | --- | --------------------------

The Company
consolidates variable-interest entities (VIE) when it is the primary beneficiary, as described in the Canadian Institute of Chartered Accountants (CICA) Accounting Guideline 15 Consolidation of Variable-Interest
Entities and the CICA Emerging Issues Committee Abstract No. 157, Implicit Variable Interests under AcG-15.



| | (n) | Recently Adopted Canadian Accounting Pronouncements
| | --- | ---------------------------------------------------

Effective January 1, 2006, the Company adopted the requirements of CICA Handbook Section 3831, Non-monetary Transactions. The adoption of this standard did not have a material impact on the Companys consolidated
financial statements.



| | (o) | Recent Canadian Accounting Pronouncements Not Yet Adopted
| | --- | ---------------------------------------------------------

In January 2005, the CICA issued Handbook Section 3855, Financial Instruments  Recognition and Measurement, and Handbook Section 1530, Comprehensive Income. The new standards will apply to the
Companys consolidated financial statements for the year ending October 31, 2007. The new standards will require presentation of a separate statement of comprehensive income under specific circumstances. Foreign exchange gains and losses
on the translation of the financial statements of self-sustaining subsidiaries previously recorded in the cumulative translation account will be presented in comprehensive income. The Company is currently assessing the impact of the new standards.



|2. | SHORT-TERM DEPOSITS
|-- | -------------------

Short-term deposits of
$38,414 (2005 -$38,769) are held in escrow by a financial institution and are assigned to certain customers in lieu of holdback on contract accounts receivable. These deposits are typically released upon project completion.



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PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|3. | ACCOUNTS RECEIVABLE
|-- | -------------------



|                                     |  |      |         |      |   |        
|------------------------------------ |  | ---- | ------- | ---- | - | -------
|                                     |  | 2006 |         | 2005
|Trade accounts receivable            |  | $    | 621,176 |      | $ | 511,826
|Holdbacks receivable within one year |  |      | 195,857 |      |   | 180,486
|                                     |  |      |         |      |   |        
|                                     |  |      | 817,033 |      |   | 692,312
|Holdbacks receivable beyond one year |  |      | 47,285  |      |   | 33,330 
|                                     |  |      |         |      |   |        
|                                     |  | $    | 864,318 |      | $ | 725,642
|                                     |  |      |         |      |   |        



|4. | COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
|-- | -----------------------------------------------------



|                                                                                       |  |      |           |   |      |   |           |  
|-------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                                                       |  | 2006 |           |   | 2005 |  
|Costs incurred on uncompleted contracts                                                |  | $    | 6,675,210 |   |      | $ | 6,083,867 |  
|Estimated earnings                                                                     |  |      | 430,330   |   |      |   | 295,214   |  
|                                                                                       |  |      |           |   |      |   |           |  
|                                                                                       |  |      | 7,105,540 |   |      |   | 6,379,081 |  
|Less billings to date                                                                  |  |      | 7,384,592 |   |      |   | 6,655,378 |  
|                                                                                       |  |      |           |   |      |   |           |  
|                                                                                       |  | $    | (279,052  | ) |      | $ | (276,297  | )
|                                                                                       |  |      |           |   |      |   |           |  
|Included in the accompanying consolidated balance sheets under the following captions: |  |      |           |   |      |   |           |  
|Costs and estimated earnings in excess of billings                                     |  | $    | 48,229    |   |      | $ | 38,777    |  
|Unearned revenue                                                                       |  |      | (327,281  | ) |      |   | (315,074  | )
|                                                                                       |  |      |           |   |      |   |           |  
|                                                                                       |  | $    | (279,052  | ) |      | $ | (276,297  | )
|                                                                                       |  |      |           |   |      |   |           |  



|5. | LOANS RECEIVABLE
|-- | ----------------



|                                                                                                                                                                                                                                                                     |  |      |       |      |   |      
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- | - | -----
|                                                                                                                                                                                                                                                                     |  | 2006 |       | 2005
|Loan receivable from an unrelated company, in the amount of U.S. $1,000, interest at prime plus 3% per annum, due no later than April 15,
2006, secured by a second mortgage on land held by the unrelated company. The Company expects the loan to be paid in full. |  | $    | 1,123 |      | $ | 1,181



|6. | INTANGIBLE ASSETS
|-- | -----------------



| | (a) | The intangible assets balance consists of the following:
| | --- | --------------------------------------------------------



|                          |  |      |       |      |   |      
|------------------------- |  | ---- | ----- | ---- | - | -----
|                          |  | 2006 |       | 2005
|Intangible assets at cost |  | $    | 8,149 |      | $ | 8,331
|Accumulated amortization  |  |      | 5,513 |      |   | 3,845
|                          |  |      |       |      |   |      
|Net                       |  | $    | 2,636 |      | $ | 4,486
|                          |  |      |       |      |   |      

Amortization expense in the amount of $1,785 (2005 - $1,787; 2004 - $1,606) has been included in
indirect and administrative expenses in the consolidated statements of earnings and retained earnings.



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PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|6. | INTANGIBLE ASSETS (continued)
|-- | -----------------------------



| | (b) | On January 1, 2004, the Company acquired the assets and operations of Melloy & Associates Ltd.s industrial services business in Edmonton, Alberta.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------

The Company may pay additional contingent consideration if the subsidiarys earnings exceed certain annual amounts. This
additional consideration period ends December 31, 2006 and is limited to an aggregate maximum amount payable of $4,000. In 2006, additional consideration of $3 (2005 - $107) was recorded as an increase to intangible assets.



| | (c) | On October 1, 2003, the Company acquired the assets and operations of Teton Industrial Group, Inc.s industrial construction business in Atlanta, Georgia. In 2004,
pursuant to the price adjustment clause in the purchase agreement, the Company received proceeds of $987 (US$810) which was applied against the carrying costs of the intangible assets.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company may pay additional contingent consideration if the subsidiarys earnings exceed certain annual amounts. This additional consideration
period ends October 31, 2008 with a U.S. $3,000 aggregate maximum amount payable. No additional consideration was required for 2005 or 2006.



|7. | PROPERTY, PLANT AND EQUIPMENT
|-- | -----------------------------



|                                |  |      |         |                         |   |               |  |   |        
|------------------------------- |  | ---- | ------- | ----------------------- | - | ------------- |  | - | -------
|October 31, 2006                |  | Cost |         | AccumulatedDepreciation |   | Net BookValue
|Contractors moveable equipment |  | $    | 116,928 |                         | $ | 72,633        |  | $ | 44,295 
|Buildings                       |  |      | 47,496  |                         |   | 12,165        |  |   | 35,331 
|Automobiles and trucks          |  |      | 19,085  |                         |   | 10,073        |  |   | 9,012  
|Computer hardware               |  |      | 12,796  |                         |   | 7,469         |  |   | 5,327  
|Leasehold improvements          |  |      | 17,973  |                         |   | 7,661         |  |   | 10,312 
|Office furniture and fixtures   |  |      | 4,881   |                         |   | 2,247         |  |   | 2,634  
|Land improvements               |  |      | 3,044   |                         |   | 1,816         |  |   | 1,228  
|Computer software               |  |      | 4,142   |                         |   | 3,886         |  |   | 256    
|                                |  |      |         |                         |   |               |  |   |        
|                                |  |      | 226,345 |                         |   | 117,950       |  |   | 108,395
|Land                            |  |      | 12,990  |                         |   |              |  |   | 12,990 
|                                |  |      |         |                         |   |               |  |   |        
|                                |  | $    | 239,335 |                         | $ | 117,950       |  | $ | 121,385
|                                |  |      |         |                         |   |               |  |   |        
|                                |  |      |        
|October 31, 2005                |  | Cost |         | AccumulatedDepreciation |   | Net BookValue
|Contractors moveable equipment |  | $    | 105,524 |                         | $ | 65,056        |  | $ | 40,468 
|Buildings                       |  |      | 34,278  |                         |   | 10,769        |  |   | 23,509 
|Automobiles and trucks          |  |      | 16,569  |                         |   | 7,948         |  |   | 8,621  
|Computer hardware               |  |      | 11,452  |                         |   | 6,297         |  |   | 5,155  
|Leasehold improvements          |  |      | 8,123   |                         |   | 5,748         |  |   | 2,375  
|Office furniture and fixtures   |  |      | 3,011   |                         |   | 1,822         |  |   | 1,189  
|Land improvements               |  |      | 2,676   |                         |   | 1,497         |  |   | 1,179  
|Computer software               |  |      | 3,281   |                         |   | 3,100         |  |   | 181    
|                                |  |      |         |                         |   |               |  |   |        
|                                |  |      | 184,914 |                         |   | 102,237       |  |   | 82,677 
|Land                            |  |      | 8,492   |                         |   |              |  |   | 8,492  
|Building under construction     |  |      | 10,172  |                         |   |              |  |   | 10,172 
|                                |  |      |         |                         |   |               |  |   |        
|                                |  | $    | 203,578 |                         | $ | 102,237       |  | $ | 101,341
|                                |  |      |         |                         |   |               |  |   |        

Depreciation expense in the amount of $26,618 (2005 - $19,942; 2004 - $17,119) has been included
in indirect and administrative expenses in the consolidated statements of earnings and retained earnings.



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PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|8. | ACCOUNTS PAYABLE
|-- | ----------------



|                                  |  |      |         |      |   |        
|--------------------------------- |  | ---- | ------- | ---- | - | -------
|                                  |  | 2006 |         | 2005
|Trade accounts payable            |  | $    | 434,147 |      | $ | 362,944
|Holdbacks payable within one year |  |      | 165,940 |      |   | 153,598
|                                  |  |      |         |      |   |        
|                                  |  | $    | 600,087 |      | $ | 516,542
|Holdbacks payable beyond one year |  |      | 34,477  |      |   | 15,996 
|                                  |  |      |         |      |   |        
|                                  |  | $    | 634,564 |      | $ | 532,538
|                                  |  |      |         |      |   |        



|9. | ACCRUED LIABILITIES
|-- | -------------------



|                            |  |      |         |      |   |        
|--------------------------- |  | ---- | ------- | ---- | - | -------
|                            |  | 2006 |         | 2005
|Accrued payroll liabilities |  | $    | 44,799  |      | $ | 40,151 
|Bonus provision             |  |      | 120,274 |      |   | 61,790 
|Other                       |  |      | 15,795  |      |   | 24,565 
|                            |  |      |         |      |   |        
|                            |  | $    | 180,868 |      | $ | 126,506
|                            |  |      |         |      |   |        



|10. | BANK LOANS
|--- | ----------

The U.S. $119,003 (2005 -
$90,041) bank loans have maturity dates ranging from 30 to 365 days and are covered by credit facilities with maturity dates of November 2006 and October 2007. Interest on these loans is designed to vary with the banks United States prime
rate plus .50% or the London Interbank Offering Rate plus .33% at the Companys option. Cash equivalents of $69,390 (2005 - $111,750) and short-term deposits of $71,795 (2005 - $nil) are hypothecated in favour of the bank under the
terms of the credit facilities. Interest expense of $6,268 (2005 - $3,609; 2004 - $1,578) is included in indirect and administrative expenses.

In addition to these bank loans, the Company has access to lines of credit in the amount of $129,985. As at October 31, 2006, the Company has utilized $66,985 of these lines of credit, all in the form of letters of credit.

At October 31, 2006, the Canadian dollar equivalent to these U.S. dollar denominated bank loans is $133,652 (2005 - $106,356).



|11. | OPERATING BANK LOANS
|--- | --------------------



|                                                                     |  |      |     |   |      |   |      |  
|-------------------------------------------------------------------- |  | ---- | --- | - | ---- | - | ---- | -
|                                                                     |  | 2006 |     |   | 2005 |  
|Operating bank loan, due May 2006, interest at 8.25%, unsecured      |  | $    |    |   |      | $ | 264  |  
|Operating bank loan, due November 2006, interest at 6.38%, unsecured |  |      | 12  |   |      |   | 139  |  
|Vehicle loan, due April 2008, non-interest bearing, unsecured        |  |      | 20  |   |      |   | 30   |  
|                                                                     |  |      |     |   |      |   |      |  
|                                                                     |  |      | 32  |   |      |   | 433  |  
|Less current portion                                                 |  |      | (32 | ) |      |   | (414 | )
|                                                                     |  |      |     |   |      |   |      |  
|                                                                     |  | $    |    |   |      | $ | 19   |  
|                                                                     |  |      |     |   |      |   |      |  



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##### Table of Contents

PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|12. | INCOME TAXES
|--- | ------------



| | (a) | Components of income tax expense (benefit) are as follows:
| | --- | ----------------------------------------------------------



|                      |  |      |         |   |      |   |         |      |  |   |         |  
|--------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                      |  | 2006 |         |   | 2005 |   |         | 2004 | 
|Current income taxes: |  |      |         |   |      |   |         |      |  |   |         |  
|Canadian Federal      |  | $    | 57,089  |   |      | $ | 24,876  |      |  | $ | 29,283  |  
|Canadian Provincial   |  |      | 25,741  |   |      |   | 12,808  |      |  |   | 11,422  |  
|U.S. Federal          |  |      | 13,146  |   |      |   | 16,717  |      |  |   | 5,616   |  
|U.S. State            |  |      | 1,502   |   |      |   | 1,910   |      |  |   | 1,721   |  
|                      |  |      |         |   |      |   |         |      |  |   |         |  
|                      |  |      | 97,478  |   |      |   | 56,311  |      |  |   | 48,042  |  
|                      |  |      |         |   |      |   |         |      |  |   |         |  
|Future income taxes:  |  |      |         |   |      |   |         |      |  |   |         |  
|Canadian Federal      |  | $    | (14,286 | ) |      | $ | (2,326  | )    |  | $ | (8,986  | )
|Canadian Provincial   |  |      | (6,880  | ) |      |   | (1,054  | )    |  |   | (6,788  | )
|U.S. Federal          |  |      | (11,837 | ) |      |   | (6,358  | )    |  |   |        |  
|U.S. State            |  |      | (1,353  | ) |      |   | (727    | )    |  |   |        |  
|                      |  |      |         |   |      |   |         |      |  |   |         |  
|                      |  |      | (34,356 | ) |      |   | (10,465 | )    |  |   | (15,774 | )
|                      |  |      |         |   |      |   |         |      |  |   |         |  
|                      |  | $    | 63,122  |   |      | $ | 45,846  |      |  | $ | 32,268  |  
|                      |  |      |         |   |      |   |         |      |  |   |         |  



| | (b) | Income tax expense differs from the amount that would be computed by applying the combined Federal and Provincial or State income tax rates of 34% (2005 - 35%; 2004 - 35%) to
earnings before income taxes. The reasons for the differences are as follows:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                            |  |        |         |   |                   |       |   |        |   |        |                   |  |       |        |  |   |                   |   |  |       |  
|------------------------------------------------------------------------------------------- |  | ------ | ------- | - | ----------------- | ----- | - | ------ | - | ------ | ----------------- |  | ----- | ------ |  | - | ----------------- | - |  | ----- | -
|                                                                                            |  | 2006   |         |   | 2005              |       |   | 2004   |  
|                                                                                            |  | Amount |         |   | % ofPre-taxIncome |       |   | Amount |   |        | % ofPre-taxIncome |  |       | Amount |  |   | % ofPre-taxIncome |  
|Income tax at statutory rate                                                                |  | $      | 78,874  |   |                   | 33.95 |   |        | $ | 43,978 |                   |  | 35.00 |        |  | $ | 30,813            |   |  | 35.00 |  
|Non-taxable capital gains                                                                   |  |        | (295    | ) |                   | (0.13 | ) |        |   | (2,260 | )                 |  | (1.80 | )      |  |   | (853              | ) |  | (0.97 | )
|Effect of enacted future tax rates                                                          |  |        | (2,564  | ) |                   | (1.10 | ) |        |   | 472    |                   |  | 0.38  |        |  |   | (249              | ) |  | (0.28 | )
|Recognition of previously unrecognized temporary differences and other changes in estimates |  |        | (12,442 | ) |                   | (5.36 | ) |        |   | 2,848  |                   |  | 2.27  |        |  |   | 2,586             |   |  | 2.94  |  
|Manufacturing and processing tax deduction                                                  |  |        |        |   |                   |      |   |        |   |       |                   |  |      |        |  |   | (222              | ) |  | (0.25 | )
|Large corporation tax, refundable tax, permanent differences and other                      |  |        | (451    | ) |                   | (0.19 | ) |        |   | 808    |                   |  | 0.64  |        |  |   | 193               |   |  | 0.21  |  
|                                                                                            |  |        |         |   |                   |       |   |        |   |        |                   |  |       |        |  |   |                   |   |  |       |  
|                                                                                            |  | $      | 63,122  |   |                   | 27.17 |   |        | $ | 45,846 |                   |  | 36.49 |        |  | $ | 32,268            |   |  | 36.65 |  
|                                                                                            |  |        |         |   |                   |       |   |        |   |        |                   |  |       |        |  |   |                   |   |  |       |  



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PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|12. | INCOME TAXES (continued)
|--- | ------------------------



| | (c) | The tax effects that give rise to significant portions of the future tax assets and future tax liabilities at October 31, 2006 and 2005 are presented below:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                  |  |      |         |   |      |   |         |  
|------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                                                  |  | 2006 |         |   | 2005 |  
|Future tax assets:                                                                                |  |      |         |   |      |   |         |  
|Unearned revenue                                                                                  |  | $    | 49,626  |   |      | $ | 38,869  |  
|Accounts payable, principally due to holdbacks payable                                            |  |      | 38,012  |   |      |   | 37,769  |  
|Accrued liabilities not claimed for tax                                                           |  |      | 36,662  |   |      |   | 21,774  |  
|Property, plant and equipment - differences between net book value and undepreciated capital cost |  |      | 2,433   |   |      |   | 1,176   |  
|Losses carried forward for tax purposes                                                           |  |      | 1,741   |   |      |   | 3,508   |  
|Other                                                                                             |  |      | 4,604   |   |      |   | 3,817   |  
|                                                                                                  |  |      |         |   |      |   |         |  
|                                                                                                  |  |      | 133,078 |   |      |   | 106,913 |  
|Less valuation allowance                                                                          |  |      | (1,185  | ) |      |   | (2,082  | )
|                                                                                                  |  |      |         |   |      |   |         |  
|                                                                                                  |  |      | 131,893 |   |      |   | 104,831 |  
|                                                                                                  |  |      |         |   |      |   |         |  
|Future tax liabilities:                                                                           |  |      |         |   |      |   |         |  
|Accounts receivable, principally due to holdbacks receivable and uncertified progress billings    |  |      | 92,636  |   |      |   | 99,628  |  
|Other                                                                                             |  |      | 6,310   |   |      |   | 5,673   |  
|                                                                                                  |  |      |         |   |      |   |         |  
|                                                                                                  |  |      | 98,946  |   |      |   | 105,301 |  
|                                                                                                  |  |      |         |   |      |   |         |  
|Net future tax asset (liability)                                                                  |  | $    | 32,947  |   |      | $ | (470    | )
|                                                                                                  |  |      |         |   |      |   |         |  
|The net future tax liability is presented in the consolidated balance sheets as follows:          |  |      |         |   |      |   |         |  
|Current assets                                                                                    |  | $    | 42,204  |   |      | $ | 16,922  |  
|Non-current assets                                                                                |  |      | 9,105   |   |      |   | 4,238   |  
|Current liabilities                                                                               |  |      | (18,362 | ) |      |   | (21,630 | )
|                                                                                                  |  |      |         |   |      |   |         |  
|Net future tax asset (liability)                                                                  |  | $    | 32,947  |   |      | $ | (470    | )
|                                                                                                  |  |      |         |   |      |   |         |  



| | (d) | Losses carried forward:
| | --- | -----------------------

Non-capital losses

Non-capital losses carried forward for tax purposes will expire as follows:



|                        |  |   |      
|----------------------- |  | - | -----
|Year ending October 31: |  |  
|2007                    |  | $ |     
|2008                    |  |   |     
|2009                    |  |   |     
|2010                    |  |   | 266  
|2011                    |  |   | 1,182
|2012                    |  |   | 183  
|2013                    |  |   |     
|                        |  |   |      
|                        |  | $ | 1,631
|                        |  |   |      

Capital losses

The Company has net capital losses carried forward for tax purposes of $7,377 (2005 - $10,545; 2004 -$8,744) that do not expire.



| | (e) | Certain taxes paid by the Company on investment income are refundable at the rate of $1 for every $3 of taxable dividends paid. Such tax and its recovery are charged to retained
earnings. At October 31, 2006 $2,593 of refundable taxes have been fully recovered (2005 - $1,746; 2004 - $1,630).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|13. | SHARE CAPITAL
|--- | -------------



| | (a) | Authorized:
| | --- | -----------

The Company is authorized to
issue unlimited numbers of Class 1, 2, 3 and 4 common shares in each series. Class 1 and 2 shares are non-voting shares and Class 3 and 4 shares have voting rights. Each year a new series of shares is issued and the series number assigned
corresponds to the year of issue.

The Unanimous Shareholder Agreement provides that the Company can only issue shares to employees and
directors (and their personal corporations) of PCL Employees Holdings Ltd. and its subsidiaries and affiliates. No shareholder (or related group of shareholders) may own more than 11% of the outstanding voting shares. The Company has the option or
right (subject to applicable laws) to repurchase shares of the Company in certain situations. The Company has the option to purchase the shares of a shareholder (i) who ceases to be an employee for any reason other than death or disability,
including dismissal or resignation, (ii) whose shares are seized or transferred pursuant to court order or who becomes bankrupt, (iii) who breaches certain provisions of the Unanimous Shareholder Agreement, or (iv) if that shareholder
is a corporation, it ceases to be controlled by an employee or director of the Company or its subsidiaries and affiliates. It also provides that the Company is obligated (subject to applicable laws) to repurchase the shares of an employee in a
limited number of situations, being the employee having reached the age of 64 while still an employee, or the death or disability (as defined in the Unanimous Shareholder Agreement) of the employee. The purchase price for any shares that the Company
has the obligation or option to purchase is the Adjusted Consolidated Book Value of the shares, as determined by the Board.



| | (b) | Issued:
| | --- | -------



|                               |  |         |           |   |         |   |           |         |  |   |           |   |  |       |           |   |  |   |            |  
|------------------------------ |  | ------- | --------- | - | ------- | - | --------- | ------- |  | - | --------- | - |  | ----- | --------- | - |  | - | ---------- | -
|                               |  | Class 1 |           |   | Class 2 |   |           | Class 3 |  |   | Class 4   |   |  | Total |          
|Number of shares (all series): |  |         |           |   |         |   |           |         |  |   |           |   |  |       |           |   |  |   |            |  
|Outstanding, October 31, 2003  |  |         | 3,242,743 |   |         |   | 5,466,326 |         |  |   | 1,148,630 |   |  |       | 3,004,490 |   |  |   | 12,862,189 |  
|Issued during the year         |  |         | 590,407   |   |         |   | 1,197,015 |         |  |   | 227,070   |   |  |       | 214,710   |   |  |   | 2,229,202  |  
|Repurchased during the year    |  |         | (105,950  | ) |         |   | (310,930  | )       |  |   | (187,690  | ) |  |       | (374,120  | ) |  |   | (978,690   | )
|Realigned shares               |  |         | (65,590   | ) |         |   | 65,590    |         |  |   | 3,830     |   |  |       | (3,830    | ) |  |   |           |  
|                               |  |         |           |   |         |   |           |         |  |   |           |   |  |       |           |   |  |   |            |  
|Outstanding, October 31, 2004  |  |         | 3,661,610 |   |         |   | 6,418,001 |         |  |   | 1,191,840 |   |  |       | 2,841,250 |   |  |   | 14,112,701 |  
|Issued during the year         |  |         | 467,610   |   |         |   | 1,154,035 |         |  |   | 198,161   |   |  |       | 167,390   |   |  |   | 1,987,196  |  
|Repurchased during the year    |  |         | (119,350  | ) |         |   | (343,395  | )       |  |   | (14,010   | ) |  |       | (45,530   | ) |  |   | (522,285   | )
|                               |  |         |           |   |         |   |           |         |  |   |           |   |  |       |           |   |  |   |            |  
|Outstanding, October 31, 2005  |  |         | 4,009,870 |   |         |   | 7,228,641 |         |  |   | 1,375,991 |   |  |       | 2,963,110 |   |  |   | 15,577,612 |  
|Issued during the year         |  |         | 605,670   |   |         |   | 1,377,315 |         |  |   | 252,120   |   |  |       | 377,770   |   |  |   | 2,612,875  |  
|Repurchased during the year    |  |         | (52,770   | ) |         |   | (246,300  | )       |  |   | (2,610    | ) |  |       |          |   |  |   | (301,680   | )
|Realigned shares               |  |         | (19,620   | ) |         |   | 19,620    |         |  |   |          |   |  |       |          |   |  |   |           |  
|                               |  |         |           |   |         |   |           |         |  |   |           |   |  |       |           |   |  |   |            |  
|Outstanding, October 31, 2006  |  |         | 4,543,150 |   |         |   | 8,379,276 |         |  |   | 1,625,501 |   |  |       | 3,340,880 |   |  |   | 17,888,807 |  
|                               |  |         |           |   |         |   |           |         |  |   |           |   |  |       |           |   |  |   |            |  
|Stated capital (all series):   |  |         |           |   |         |   |           |         |  |   |           |   |  |       |           |   |  |   |            |  
|Outstanding, October 31, 2003  |  | $       | 40,082    |   |         | $ | 72,542    |         |  | $ | 15,477    |   |  | $     | 35,133    |   |  | $ | 163,234    |  
|Issued during the year         |  |         | 11,218    |   |         |   | 22,743    |         |  |   | 4,314     |   |  |       | 4,080     |   |  |   | 42,355     |  
|Repurchased during the year    |  |         | (1,269    | ) |         |   | (3,122    | )       |  |   | (2,395    | ) |  |       | (4,260    | ) |  |   | (11,046    | )
|Realigned shares               |  |         | (633      | ) |         |   | 633       |         |  |   | 58        |   |  |       | (58       | ) |  |   |           |  
|                               |  |         |           |   |         |   |           |         |  |   |           |   |  |       |           |   |  |   |            |  
|Outstanding, October 31, 2004  |  | $       | 49,398    |   |         | $ | 92,796    |         |  | $ | 17,454    |   |  | $     | 34,895    |   |  | $ | 194,543    |  
|Issued during the year         |  |         | 9,352     |   |         |   | 23,081    |         |  |   | 3,963     |   |  |       | 3,348     |   |  |   | 39,744     |  
|Repurchased during the year    |  |         | (1,839    | ) |         |   | (3,813    | )       |  |   | (261      | ) |  |       | (738      | ) |  |   | (6,651     | )
|                               |  |         |           |   |         |   |           |         |  |   |           |   |  |       |           |   |  |   |            |  
|Outstanding, October 31, 2005  |  | $       | 56,911    |   |         | $ | 112,064   |         |  | $ | 21,156    |   |  | $     | 37,505    |   |  | $ | 227,636    |  
|Issued during the year         |  |         | 12,568    |   |         |   | 28,579    |         |  |   | 5,231     |   |  |       | 7,839     |   |  |   | 54,217     |  
|Repurchased during the year    |  |         | (985      | ) |         |   | (4,162    | )       |  |   | (51       | ) |  |       |          |   |  |   | (5,198     | )
|Realigned shares               |  |         | (329      | ) |         |   | 329       |         |  |   |          |   |  |       |          |   |  |   |           |  
|                               |  |         |           |   |         |   |           |         |  |   |           |   |  |       |           |   |  |   |            |  
|Outstanding, October 31, 2006  |  | $       | 68,165    |   |         | $ | 136,810   |         |  | $ | 26,336    |   |  | $     | 45,344    |   |  | $ | 276,655    |  
|                               |  |         |           |   |         |   |           |         |  |   |           |   |  |       |           |   |  |   |            |  



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##### Table of Contents

PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|13. | SHARE CAPITAL (continued)
|--- | -------------------------



|                 |  |                         |         |                    |        |   |                                                    |   |        
|---------------- |  | ----------------------- | ------- | ------------------ | ------ | - | -------------------------------------------------- | - | -------
|                 |  | Sharecapitaloutstanding |         | Sharepurchaseloans |        |   | Share capitaloutstanding netof sharepurchase loans
|October 31, 2005 |  | $                       | 227,636 |                    | (1,800 | ) |                                                    | $ | 225,836
|October 31, 2006 |  | $                       | 276,655 |                    | (2,396 | ) |                                                    | $ | 274,259
|                 |  |                         |         |                    |        |   |                                                    |   |        

Share purchase loans are non-interest bearing and are repaid by payroll deductions over a period of
three years. The employee shareholder grants an option to the Company to repurchase the shares in the event of default by the shareholder under the promissory note and grants security in respect of the proceeds of sale under the option.



|14. | CUMULATIVE TRANSLATION ACCOUNT
|--- | ------------------------------

Exchange
gains and losses arising from the translation of the financial statements of the Companys self-sustaining foreign operations are deferred and included in the cumulative translation account. When there is a reduction in the Companys net
investment in a self-sustaining foreign operation, a proportionate amount of the cumulative translation account is included in the determination of consolidated net earnings.

Significant changes in the cumulative translation account are as follows:



|                                                |  |      |         |   |      |   |         |  
|----------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                |  | 2006 |         |   | 2005 |  
|Balance, beginning of year                      |  | $    | (32,228 | ) |      | $ | (28,343 | )
|Effect of exchange rate changes during the year |  |      | (6,721  | ) |      |   | (3,885  | )
|                                                |  |      |         |   |      |   |         |  
|Balance, end of year                            |  | $    | (38,949 | ) |      | $ | (32,228 | )
|                                                |  |      |         |   |      |   |         |  



|15. | LEASE COMMITMENTS
|--- | -----------------

Future minimum lease
payments for non-cancelable operating leases with initial or remaining terms of one year or more are as follows:



|                        |  |   |       
|----------------------- |  | - | ------
|Year ending October 31: |  |  
|2007                    |  | $ | 4,506 
|2008                    |  |   | 4,166 
|2009                    |  |   | 4,055 
|2010                    |  |   | 4,035 
|2011                    |  |   | 3,061 
|2012 and thereafter     |  |   | 5,169 
|                        |  |   |       
|                        |  | $ | 24,992
|                        |  |   |       



|16. | OTHER INCOME
|--- | ------------



|                                                                           |  |      |        |      |   |        |  |   |        |  
|-------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------ | -
|                                                                           |  | 2006 |        | 2005 |   | 2004   | 
|Interest income                                                            |  | $    | 23,220 |      | $ | 9,978  |  | $ | 8,762  |  
|Foreign exchange gain                                                      |  |      | 3,440  |      |   | 2,897  |  |   | 7,327  |  
|Equity in earnings of limited liability companies and limited partnerships |  |      | 1,932  |      |   | 2,780  |  |   |       |  
|Gain (loss) on disposal of marketable securities                           |  |      | 3,164  |      |   | 1,870  |  |   | (3,604 | )
|Write-down of marketable securities                                        |  |      |       |      |   |       |  |   | (3,600 | )
|                                                                           |  |      |        |      |   |        |  |   |        |  
|                                                                           |  | $    | 31,756 |      | $ | 17,525 |  | $ | 8,885  |  
|                                                                           |  |      |        |      |   |        |  |   |        |  



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##### Table of Contents

PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|17. | SUPPLEMENTAL CASH FLOW INFORMATION
|--- | ----------------------------------



|                  |  |      |        |      |   |        |  |   |       
|----------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|                  |  | 2006 |        | 2005 |   | 2004  
|Interest paid     |  | $    | 6,855  |      | $ | 4,632  |  | $ | 1,996 
|Interest received |  |      | 24,394 |      |   | 10,467 |  |   | 8,507 
|Income taxes paid |  |      | 58,011 |      |   | 69,929 |  |   | 20,209
|                  |  |      |        |      |   |        |  |   |       



|18. | NET CHANGE IN OPERATING ACCOUNTS
|--- | --------------------------------



|                                                     |  |      |          |   |      |   |         |      |  |   |         |  
|---------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                     |  | 2006 |          |   | 2005 |   |         | 2004 | 
|Accounts receivable                                  |  | $    | (124,721 | ) |      | $ | (70,765 | )    |  | $ | (87,002 | )
|Holdbacks receivable                                 |  |      | (13,955  | ) |      |   | (3,031  | )    |  |   | (4,393  | )
|Accrued benefit asset                                |  |      | (744     | ) |      |   | (352    | )    |  |   | 229     |  
|Accounts payable                                     |  |      | 83,545   |   |      |   | 57,406  |      |  |   | (5,326  | )
|Accrued liabilities                                  |  |      | 54,362   |   |      |   | 28,945  |      |  |   | 11,451  |  
|Holdbacks payable                                    |  |      | 18,481   |   |      |   | (2,168  | )    |  |   | 5,069   |  
|Unearned revenue, net of costs in excess of billings |  |      | 2,997    |   |      |   | 127,749 |      |  |   | 19,722  |  
|Income taxes payable                                 |  |      | 39,467   |   |      |   | (13,618 | )    |  |   | 27,833  |  
|                                                     |  |      |          |   |      |   |         |      |  |   |         |  
|                                                     |  | $    | 59,432   |   |      | $ | 124,166 |      |  | $ | (32,417 | )
|                                                     |  |      |          |   |      |   |         |      |  |   |         |  



|19. | EMPLOYEE BENEFIT PLANS
|--- | ----------------------

Canada

The Company has a defined benefit pension plan which includes a defined contribution pension plan for its resident Canadian
employees. Under the defined contribution portion, the employees contributions of up to 5% of their gross salary are matched by the Company. Contributions are required only for employees current services. The combined contributions are
invested by the individual employees, at their discretion, in any of several mutual funds offered by the plan.

The defined benefit portion
provides a benefit based on a percentage of final average earnings and years of service. Independent consultants prepared an actuarial valuation for funding purposes at December 31, 2005 which has been extrapolated to October 31, 2006 and
an actuarial valuation for funding purposes at December 31, 2002 which had been extrapolated to October 31, 2005. The next required valuation is December 31, 2008.

The reconciliation of the funded status of the defined benefit plan to the amounts recorded in the financial statements is as follows:



|                              |  |      |        |   |      |   |        |  
|----------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                              |  | 2006 |        |   | 2005 |  
|Accrued benefit obligation:   |  |      |        |   |      |   |        |  
|Balance, beginning of year    |  | $    | 21,582 |   |      | $ | 19,867 |  
|Current service cost          |  |      | 212    |   |      |   | 173    |  
|Interest cost                 |  |      | 1,103  |   |      |   | 1,141  |  
|Benefits paid                 |  |      | (1,554 | ) |      |   | (1,456 | )
|Actuarial loss                |  |      | 317    |   |      |   | 797    |  
|Transfers in                  |  |      |       |   |      |   | 1,060  |  
|                              |  |      |        |   |      |   |        |  
|Balance, end of year          |  | $    | 21,660 |   |      | $ | 21,582 |  
|Plan assets:                  |  |      |        |   |      |   |        |  
|Fair value, beginning of year |  | $    | 20,117 |   |      | $ | 18,277 |  
|Actual return on plan assets  |  |      | 2,243  |   |      |   | 1,670  |  
|Employer contributions        |  |      | 889    |   |      |   | 611    |  
|Employees contributions      |  |      | 49     |   |      |   | 53     |  
|Benefits paid                 |  |      | (1,554 | ) |      |   | (1,456 | )
|Transfers in                  |  |      |       |   |      |   | 962    |  
|                              |  |      |        |   |      |   |        |  
|Fair value, end of year       |  | $    | 21,744 |   |      | $ | 20,117 |  
|                              |  |      |        |   |      |   |        |  



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##### Table of Contents

PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|19. | EMPLOYEE BENEFIT PLANS (continued)
|--- | ----------------------------------



|                               |  |      |       |      |   |        |  
|------------------------------ |  | ---- | ----- | ---- | - | ------ | -
|                               |  | 2006 |       | 2005 |  
|Accrued benefit asset:         |  |      |       |      |   |        |  
|Funded status                  |  | $    | 84    |      | $ | (1,465 | )
|Unamortized net actuarial loss |  |      | 4,476 |      |   | 6,444  |  
|Unamortized transitional asset |  |      |      |      |   | (1,163 | )
|                               |  |      |       |      |   |        |  
|Accrued benefit asset          |  | $    | 4,560 |      | $ | 3,816  |  
|                               |  |      |       |      |   |        |  

During the year, benefits paid out of the defined benefit plan were $1,554 (2005 - $1,456; 2004 -
$1,402). The percentage of the fair value of plan assets by major category is as follows:



|                |  |       |   |  |       |  
|--------------- |  | ----- | - |  | ----- | -
|                |  | 2006  |   |  | 2005  |  
|Equities        |  | 55.6  | % |  | 54.4  | %
|Debt securities |  | 31.9  | % |  | 31.9  | %
|Cash and other  |  | 12.5  | % |  | 13.7  | %
|                |  |       |   |  |       |  
|                |  | 100.0 | % |  | 100.0 | %
|                |  |       |   |  |       |  

Significant actuarial assumptions used to determine both the accrued benefit obligation and the
benefit cost are as follows (weighted average):



|                                                 |  |      |   |  |      |  
|------------------------------------------------ |  | ---- | - |  | ---- | -
|                                                 |  | 2006 |   |  | 2005 |  
|Discount rate                                    |  | 5.25 | % |  | 5.25 | %
|Expected long-term rate of return on plan assets |  | 6.50 | % |  | 7.00 | %
|Rate of compensation increase                    |  | 2.75 | % |  | 2.75 | %
|                                                 |  |      |   |  |      |  

Total cash amounts recognized as paid or payable by the Company to both the defined contribution
and defined benefit portions of the pension plan for 2006 were $5,195 (2005 - $4,352; 2004 - $3,859).

The elements of the Companys
defined benefit plan costs recognized in the year are as follows:



|                                        |  |      |        |   |      |   |        |      |  |   |        |  
|--------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                        |  | 2006 |        |   | 2005 |   |        | 2004 | 
|Current service cost (employer portion) |  | $    | 163    |   |      | $ | 120    |      |  | $ | 193    |  
|Interest cost                           |  |      | 1,103  |   |      |   | 1,141  |      |  |   | 1,141  |  
|Expected return on plan assets          |  |      | (1,387 | ) |      |   | (1,285 | )    |  |   | (1,190 | )
|Transfers                               |  |      |       |   |      |   | 98     |      |  |   |       |  
|Amortization of transitional asset      |  |      | (1,163 | ) |      |   | (1,164 | )    |  |   | (1,164 | )
|Amortization of net actuarial loss      |  |      | 1,429  |   |      |   | 1,349  |      |  |   | 1,948  |  
|                                        |  |      |        |   |      |   |        |      |  |   |        |  
|Net benefit plan cost (income)          |  | $    | 145    |   |      | $ | 259    |      |  | $ | 928    |  
|                                        |  |      |        |   |      |   |        |      |  |   |        |  

The Companys best estimate of contributions to be paid to the defined benefit pension plan
during the year ending October 31, 2007 is $923.

The benefits expected to be paid under the defined benefit pension plan are as
follows:



|                        |  |   |       
|----------------------- |  | - | ------
|Year ending October 31: |  |  
|2007                    |  | $ | 1,687 
|2008                    |  |   | 1,743 
|2009                    |  |   | 1,748 
|2010                    |  |   | 1,818 
|2011                    |  |   | 1,811 
|2012 - 2017             |  |   | 10,198
|                        |  |   |       
|                        |  | $ | 19,005
|                        |  |   |       

United States

The Company has a qualified defined contribution 401(k) plan which covers substantially all resident United States salaried employees. Eligible
participants may contribute a portion of their annual salary, subject to certain limitations. The Company matches 50% of the first 8% that a participant contributes of compensation. The participants contributions are 100% vested and
non-forfeitable. The Companys matching contributions vest over a seven-year period. The Companys contributions totalled $2,123 (2005 - $1,999; 2004 - $1,808).



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##### Table of Contents

PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|20. | RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
|--- | -----------------------------------------

(a) Risk Management Activities

The Company operates primarily in the commercial construction, civil construction and
industrial construction sectors through operating subsidiaries in Canada and the United States. The Company manages the associated business risks set out below to the extent possible.

Foreign Exchange Risk

The Company
uses the U.S. dollar bank loans as outlined in Note 10, to manage its exposure to foreign exchange risk on its United States dollar denominated assets and liabilities. The total loan balance is maintained at a level approximating the Companys
U.S. dollar net assets.

Credit Risk

The Company is exposed to financial risk arising from changes in the credit quality of its customers which could affect the Companys earnings. The Company does not have a significant exposure of credit risk to
any individual customer. The Company mitigates its exposure to credit risk in marketable securities by investing in high grade commercial paper.

(b) Fair Value of Financial Instruments

The fair value of the Companys cash and cash equivalents, short-term
deposits, accounts receivable, holdbacks, loans receivable, accounts payable, certain accrued liabilities, bank loans and operating bank loans approximate their carrying amounts.

The market value of the marketable securities is $52,381 (2005 - $45,719).



|21. | SEGMENT INFORMATION
|--- | -------------------

The Company operates in
the construction industry and performs construction services in Canada, the United States and the Bahamas for a wide variety of public and private clients. The Companys operations are categorized into four industry segments: Buildings 
Canada, Buildings  U.S., Heavy Industrial  Canada, and Heavy Civil. The Buildings segments performs construction services for commercial and institutional buildings, including construction of shopping centers, educational facilities,
airports, light civil structures, hospitals, museums, sporting and entertainment facilities, hotels, light industrial facilities, multifamily condominiums and apartments, seniors facilities, and office buildings. The Heavy Industrial segment
performs construction, shutdown and maintenance services for manufacturing, petrochemical, oil and gas and mine processing facilities, chemical plants, offshore oil production superstructures, forestry projects and power plants. The Heavy Civil
segment performs construction services for roadways, bridges, tunnels, large diameter pipelines, water and wastewater treatment facilities, dams and mine site preparation.

Transactions between segments are recorded at the exchange amount. The accounting policies for the reportable operating segments are those outlined in Note 1, Significant Accounting Policies.



|                                                  |  |                     |            |   |                 |   |            |                         |  |   |             |   |  |           |          |   |       |   |          |                           |  |   |                   |   |  |   |          |       |  |   |            |  
|------------------------------------------------- |  | ------------------- | ---------- | - | --------------- | - | ---------- | ----------------------- |  | - | ----------- | - |  | --------- | -------- | - | ----- | - | -------- | ------------------------- |  | - | ----------------- | - |  | - | -------- | ----- |  | - | ---------- | -
|                                                  |  | Reportable Segments |            |   |                 |   |            |                         |  |   |             |   |  |           |         
|October 31, 2006                                  |  | Buildings -Canada   |            |   | Buildings -U.S. |   |            | HeavyIndustrial -Canada |  |   | Heavy Civil |   |  | Other (a) |          |   | Total |   |          | ConsolidatingEliminations |  |   | ConsolidatedTotal |  
|Contract revenues                                 |  | $                   | 1,766,924  |   |                 | $ | 1,217,473  |                         |  | $ | 506,677     |   |  | $         | 431,380  |   |       | $ | 285,830  |                           |  | $ | 4,208,284         |   |  | $ |         |       |  | $ | 4,208,284  |  
|Contract costs                                    |  |                     | (1,587,456 | ) |                 |   | (1,153,989 | )                       |  |   | (391,289    | ) |  |           | (395,045 | ) |       |   | (246,133 | )                         |  |   | (3,773,912        | ) |  |   | 51,091   | (b)   |  |   | (3,722,821 | )
|                                                  |  |                     |            |   |                 |   |            |                         |  |   |             |   |  |           |          |   |       |   |          |                           |  |   |                   |   |  |   |          |       |  |   |            |  
|Gross profit                                      |  |                     | 179,468    |   |                 |   | 63,484     |                         |  |   | 115,388     |   |  |           | 36,335   |   |       |   | 39,697   |                           |  |   | 434,372           |   |  |   | 51,091   |       |  |   | 485,463    |  
|Indirect and administrative expenses              |  |                     | (40,386    | ) |                 |   | (29,238    | )                       |  |   | (20,854     | ) |  |           | (9,229   | ) |       |   | (7,660   | )                         |  |   | (107,367          | ) |  |   | (179,826 | ) (c) |  |   | (287,193   | )
|Gain on disposal of property, plant and equipment |  |                     |           |   |                 |   |           |                         |  |   |            |   |  |           |         |   |       |   |         |                           |  |   |                  |   |  |   | 2,300    |       |  |   | 2,300      |  
|                                                  |  |                     |            |   |                 |   |            |                         |  |   |             |   |  |           |          |   |       |   |          |                           |  |   |                   |   |  |   |          |       |  |   |            |  
|Operating profit (loss)                           |  | $                   | 139,082    |   |                 | $ | 34,246     |                         |  | $ | 94,534      |   |  | $         | 27,106   |   |       | $ | 32,037   |                           |  | $ | 327,005           |   |  | $ | (126,435 | )     |  | $ | 200,570    |  
|                                                  |  |                     |            |   |                 |   |            |                         |  |   |             |   |  |           |          |   |       |   |          |                           |  |   |                   |   |  |   |          |       |  |   |            |  
|Total assets                                      |  | $                   | 661,421    |   |                 | $ | 307,978    |                         |  | $ | 222,912     |   |  | $         | 130,149  |   |       | $ | 97,984   |                           |  | $ | 1,420,444         |   |  | $ | 429,147  | (d)   |  | $ | 1,849,591  |  
|                                                  |  |                     |            |   |                 |   |            |                         |  |   |             |   |  |           |          |   |       |   |          |                           |  |   |                   |   |  |   |          |       |  |   |            |  



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PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|21. | SEGMENT INFORMATION (continued)
|--- | -------------------------------



|                                                  |  |                     |            |   |                 |   |          |                         |  |   |             |   |  |           |          |   |       |   |         |                           |  |   |                   |   |  |   |          |       |  |   |            |  
|------------------------------------------------- |  | ------------------- | ---------- | - | --------------- | - | -------- | ----------------------- |  | - | ----------- | - |  | --------- | -------- | - | ----- | - | ------- | ------------------------- |  | - | ----------------- | - |  | - | -------- | ----- |  | - | ---------- | -
|                                                  |  | Reportable Segments |            |   |                 |   |          |                         |  |   |             |   |  |           |         
|October 31, 2005                                  |  | Buildings -Canada   |            |   | Buildings -U.S. |   |          | HeavyIndustrial -Canada |  |   | Heavy Civil |   |  | Other (a) |          |   | Total |   |         | ConsolidatingEliminations |  |   | ConsolidatedTotal |  
|Contract revenues                                 |  | $                   | 1,555,032  |   |                 | $ | 861,079  |                         |  | $ | 447,803     |   |  | $         | 335,437  |   |       | $ | 96,043  |                           |  | $ | 3,295,394         |   |  | $ | 95       |       |  | $ | 3,295,489  |  
|Contract costs                                    |  |                     | (1,440,056 | ) |                 |   | (815,483 | )                       |  |   | (385,256    | ) |  |           | (300,747 | ) |       |   | (83,226 | )                         |  |   | (3,024,768        | ) |  |   | 40,583   | (b)   |  |   | (2,984,185 | )
|                                                  |  |                     |            |   |                 |   |          |                         |  |   |             |   |  |           |          |   |       |   |         |                           |  |   |                   |   |  |   |          |       |  |   |            |  
|Gross profit                                      |  |                     | 114,976    |   |                 |   | 45,596   |                         |  |   | 62,547      |   |  |           | 34,690   |   |       |   | 12,817  |                           |  |   | 270,626           |   |  |   | 40,678   |       |  |   | 311,304    |  
|Indirect and administrative expenses              |  |                     | (35,679    | ) |                 |   | (27,790  | )                       |  |   | (16,924     | ) |  |           | (8,467   | ) |       |   | (6,929  | )                         |  |   | (95,789           | ) |  |   | (110,383 | ) (c) |  |   | (206,172   | )
|Gain on disposal of property, plant and equipment |  |                     |           |   |                 |   |         |                         |  |   |            |   |  |           |         |   |       |   |        |                           |  |   |                  |   |  |   | 2,993    |       |  |   | 2,993      |  
|                                                  |  |                     |            |   |                 |   |          |                         |  |   |             |   |  |           |          |   |       |   |         |                           |  |   |                   |   |  |   |          |       |  |   |            |  
|Operating profit (loss)                           |  | $                   | 79,297     |   |                 | $ | 17,806   |                         |  | $ | 45,623      |   |  | $         | 26,223   |   |       | $ | 5,888   |                           |  | $ | 174,837           |   |  | $ | (66,712  | )     |  | $ | 108,125    |  
|                                                  |  |                     |            |   |                 |   |          |                         |  |   |             |   |  |           |          |   |       |   |         |                           |  |   |                   |   |  |   |          |       |  |   |            |  
|Total assets                                      |  | $                   | 584,240    |   |                 | $ | 266,278  |                         |  | $ | 203,242     |   |  | $         | 141,403  |   |       | $ | 49,180  |                           |  | $ | 1,244,343         |   |  | $ | 239,411  | (d)   |  | $ | 1,483,754  |  
|                                                  |  |                     |            |   |                 |   |          |                         |  |   |             |   |  |           |          |   |       |   |         |                           |  |   |                   |   |  |   |          |       |  |   |            |  
|                                                  |  |                     |            |   |                
|                                                  |  | Reportable Segments |            |   |                 |   |          |                         |  |   |             |   |  |           |         
|October 31, 2004                                  |  | Buildings -Canada   |            |   | Buildings -U.S. |   |          | HeavyIndustrial -Canada |  |   | Heavy Civil |   |  | Other (a) |          |   | Total |   |         | ConsolidatingEliminations |  |   | ConsolidatedTotal |  
|Contract revenues                                 |  | $                   | 1,523,165  |   |                 | $ | 873,940  |                         |  | $ | 359,518     |   |  | $         | 211,909  |   |       | $ | 84,095  |                           |  | $ | 3,052,627         |   |  | $ |         |       |  | $ | 3,052,627  |  
|Contract costs                                    |  |                     | (1,436,558 | ) |                 |   | (823,172 | )                       |  |   | (310,283    | ) |  |           | (186,475 | ) |       |   | (68,620 | )                         |  |   | (2,825,108        | ) |  |   | 26,038   | (b)   |  |   | (2,799,070 | )
|                                                  |  |                     |            |   |                 |   |          |                         |  |   |             |   |  |           |          |   |       |   |         |                           |  |   |                   |   |  |   |          |       |  |   |            |  
|Gross profit                                      |  |                     | 86,607     |   |                 |   | 50,768   |                         |  |   | 49,235      |   |  |           | 25,434   |   |       |   | 15,475  |                           |  |   | 227,519           |   |  |   | 26,038   |       |  |   | 253,557    |  
|Indirect and administrative expenses              |  |                     | (31,955    | ) |                 |   | (28,078  | )                       |  |   | (15,267     | ) |  |           | (8,686   | ) |       |   | (7,347  | )                         |  |   | (91,333           | ) |  |   | (85,885  | ) (c) |  |   | (177,218   | )
|Gain on disposal of property, plant and equipment |  |                     |           |   |                 |   |         |                         |  |   |            |   |  |           |         |   |       |   |        |                           |  |   |                  |   |  |   | 2,812    |       |  |   | 2,812      |  
|                                                  |  |                     |            |   |                 |   |          |                         |  |   |             |   |  |           |          |   |       |   |         |                           |  |   |                   |   |  |   |          |       |  |   |            |  
|Operating profit (loss)                           |  | $                   | 54,652     |   |                 | $ | 22,690   |                         |  | $ | 33,968      |   |  | $         | 16,748   |   |       | $ | 8,128   |                           |  | $ | 136,186           |   |  | $ | (57,035  | )     |  | $ | 79,151     |  
|                                                  |  |                     |            |   |                 |   |          |                         |  |   |             |   |  |           |          |   |       |   |         |                           |  |   |                   |   |  |   |          |       |  |   |            |  
|Total assets                                      |  | $                   | 548,666    |   |                 | $ | 209,324  |                         |  | $ | 170,298     |   |  | $         | 97,491   |   |       | $ | 30,049  |                           |  | $ | 1,055,828         |   |  | $ | 205,899  | (d)   |  | $ | 1,261,727  |  
|                                                  |  |                     |            |   |                 |   |          |                         |  |   |             |   |  |           |          |   |       |   |         |                           |  |   |                   |   |  |   |          |       |  |   |            |  



|(a) | In all years, consist of those operating segments not meeting the quantitative thresholds to qualify as a reportable operating segment. The sources of contract revenues are from the
Companys heavy industrial operations in the United States and buildings operations in the Bahamas.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | In all years, consolidating eliminations for intersegment transactions.
|--- | -----------------------------------------------------------------------



|(c) | In all years, consist of corporate general and administrative expenses, depreciation, and bonuses not allocated to reportable segments for internal reporting purposes.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | In all years, corporate assets consist principally of cash and cash equivalents, short term deposits, accounts receivable, investment in marketable securities and property, plant
and equipment. Capital expenditures are not allocated to reportable segments for internal reporting purposes.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Information
concerning principal geographic areas is as follows:



|                      |  |      |           |      |   |           |  |   |          
|--------------------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                      |  | 2006 |           | 2005 |   | 2004     
|Contract Revenues     |  |      |           |      |   |           |  |   |          
|Canada                |  | $    | 2,273,601 |      | $ | 2,002,928 |  | $ | 1,883,475
|United States         |  |      | 1,906,803 |      |   | 1,292,372 |  |   | 1,169,152
|Bahamas               |  |      | 27,880    |      |   | 189       |  |   |         
|                      |  |      |           |      |   |           |  |   |          
|                      |  | $    | 4,208,284 |      | $ | 3,295,489 |  | $ | 3,052,627
|                      |  |      |           |      |   |           |  |   |          
|Long-Lived Assets (i) |  |      |           |      |   |           |  |   |          
|Canada                |  | $    | 87,614    |      | $ | 71,687    |  | $ | 58,786   
|United States         |  |      | 36,407    |      |   | 34,140    |  |   | 39,944   
|                      |  |      |           |      |   |           |  |   |          
|                      |  | $    | 124,021   |      | $ | 105,827   |  | $ | 98,730   
|                      |  |      |           |      |   |           |  |   |          



|(i) | Long-lived assets consist of property, plant and equipment and intangible assets.
|--- | ---------------------------------------------------------------------------------



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##### Table of Contents

PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|22. | OTHER MATTERS
|--- | -------------



| | (a) | Legal or Arbitration Proceedings
| | --- | --------------------------------

On August 5,
2005 PCL Civil Constructors, Inc. (Civil) commenced a civil action against a number of engineering firms, claiming negligence in design and peer review in respect of the superstructure design for the Ringling Causeway Bridge in Sarasota,
Florida. Civil is seeking damages in excess of US$15,000. One of the engineering firms, Earth Tech, Inc., has filed a counterclaim against Civil for an unspecified amount, believed to be estimated by Earth Tech, Inc. at US$400. The matter is in the
discovery stage and the Company is unable to determine the outcome of this litigation at this time. All costs associated with the project have been reflected in the operations of the Company. Recovery of claim proceeds, if any, will be reflected in
the year that the claim is resolved.

On February 2, 2006, PCL Construction Services, Inc. (Services) commenced a civil
action in the United States Court of Federal Claims arising out of a contract performed for the United States Bureau of Reclamation for the construction of a visitors center and parking structure at Hoover Dam, commencing in April, 1994. This
matter includes a claim for US$2,400 for additional costs as a result of changes in the scope of the contract and US$19,700 relating to delays and disruptions by the government. The government recently filed a motion to dismiss this claim on the
doctrine of res judicata. Arguments are being submitted in respect of this motion and no discovery has yet occurred. The Company is unable to determine the outcome of this litigation at this time. Should this claim be successful, it may have a
significant positive impact on the Companys financial position and profitability in the year that the claim is resolved.

On
November 20, 2003, a suit was filed in the Superior Court of Arizona, Maricopa County by Colorado River Indian Tribes (CRIT), the Owner, against Tri-Star Theme Builders, Inc./PCL Construction Services, Inc., a joint venture (the
Joint Venture), the general contractor, in connection with a claim that arose out of the construction of the Blue Water Resort & Casino (the Project) on the CRITs reservations near Park, Arizona. The Owner
contended that the estimated cost to repair allegedly defective work exceeded US$17,000, and lost revenues due to business interruption during those repairs were projected by the Owner to be between US$12,000 and US$21,000. On September 12,
2006, the parties reached settlement in the amount of US$16,000 which was paid by the Joint Venture. The Joint Venture recorded a gain of US$2,000 as it had previously accrued a liability of US$18,000 for this matter.

On January 18, 2005, a Complaint was filed against PCL/Triad Joint Venture (the Joint Venture) and the City of Albuquerque by Shumate
Constructors, Inc. (Shumate) seeking declaratory and injunctive relief in respect of the award to the Joint Venture of a contract for the construction of a water treatment plant in Albuquerque, New Mexico (the Project). PCL
Civil Constructors, Inc. (Civil) is a member of the Joint Venture. Shumate was a competitive bidder for the award of the contract for the Project and alleged that Civil was not entitled to hold a resident contract preference certificate
(the Certificate). Shumates claim for injunctive relief has been dismissed. Following the award of the contract, the Certificate was revoked and Shumate amended its Complaint to include a claim for damages in the amount of US$369
for bid preparation costs and US$13,923 for lost profits, alleging errors made intentionally and in bad faith in Civils application for the Certificate. The Joint Venture intends to vigorously defend itself against this claim. The litigation
is currently in the discovery stage. The Company is currently unable to determine the outcome of this litigation and no reserves have been established in connection with this claim.

On October 25, 2005 a Statement of Claim was filed in the Ontario Superior Court of Justice by The Bank of Nova Scotia, Scotia Realty Limited and SPE
Operations Ltd. (collectively the Owners) against PCL Constructors Canada Inc. (PCL Canada), Sayers & Associates Limited (Sayers), WZMH Architects, The Mitchell Partnership Inc. and Quinn Dressel
Associates. On December 28, 2005, the Owners issued a Fresh Statement of Claim in the action adding PCL Constructors Eastern Inc. (PCL Eastern) and The Webb Zerafa Menkes Housden Partnership as defendants to the action. The Owners
are seeking $35,000 in damages plus interest and costs related to this action for alleged deficiencies in the design and construction of the water pipe systems in a 67 storey commercial high rise located in the City of Toronto known as Scotia
Plaza. PCL Canada and PCL Eastern intend to vigorously defend themselves against this claim and have asserted claims for insurance coverage and for indemnity against its co-defendants. The litigation is currently in the discovery stage. The
Company is currently unable to determine the outcome of the litigation and no reserves have been established in connection with this claim.



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##### Table of Contents

PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|22. | OTHER MATTERS (continued)
|--- | -------------------------

The Company is
party to various negotiations and legal proceedings regarding contractual disputes and injury and other claims on its construction projects in the normal course of business. The Company is also contingently liable for commitments and performance
guarantees arising from its construction contracts. Management believes that the outcome of such negotiations and legal proceedings, as well as commitments and performance guarantees, will not have a material adverse effect on the Companys
financial position, results of operations, or liquidity.

During the year ended October 31, 2006, the Company recognized additional
contract revenues of $3,461 (2005 - $11,014; 2004 - $4,159) resulting from construction claims awarded or received on construction projects.



| | (b) | Subsequent Event
| | --- | ----------------

In January 2007, the Company
declared dividends on its common shares in the amount of $9.05 per share to shareholders of record on January 31, 2007. The dividends, totaling $161,677, were paid in February 2007.



|23. | INVESTMENT IN JOINT VENTURES, LIMITED LIABILITY COMPANIES AND LIMITED PARTNERSHIPS
|--- | ----------------------------------------------------------------------------------



| | (a) | Investment in Limited Liability Companies and Limited Partnerships
| | --- | ------------------------------------------------------------------

At October 31, 2006, the Company had investments of $nil (2005 - $7,945) in limited liability companies and limited partnerships in which the Company does not have an undivided interest in the assets,
liabilities, revenue and expenses. The investments related to two property developments in the United States. The first property development related to a US$38,000 condominium building with 113 residential units and 9,634 square feet of retail space
in San Diego, California. The Company had US$nil (2005 -US$727) invested in this property development. The second property development related to a US$30,000 renovation of a historic hotel in Savannah, Georgia. The Company had US$nil (2005 -
US$6,000) invested in this property development. The investments were recorded under the equity method of accounting. During 2006, the Company recorded income of $1,932 (2005 - $2,780) on these United States investments. The Companys
maximum exposure to loss as a result of its involvement with these property developments was the carrying amount of its investments.



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PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|23. | INVESTMENT IN JOINT VENTURES, LIMITED LIABILITY COMPANIES AND LIMITED PARTNERSHIPS (continued)
|--- | ----------------------------------------------------------------------------------------------



| | (b) | Investment in Joint Ventures
| | --- | ----------------------------

The Companys
proportionate share of the assets, liabilities, revenues and expenses of joint ventures included in the consolidated financial statements is as follows:



|                                                                    |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                    |  |      |         |   | 2006 |   |         | 2005 | 
|ASSETS                                                              |  |      |         |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents                                           |  |      |         |   |      | $ | 28,555  |      |  | $ | 59,938  |  
|Accounts receivable (including holdbacks of $5,565; 2005 - $ 5,921) |  |      |         |   |      |   | 35,186  |      |  |   | 27,254  |  
|Costs and estimated earnings in excess of billings                  |  |      |         |   |      |   | 969     |      |  |   | 125     |  
|                                                                    |  |      |         |   |      |   |         |      |  |   |         |  
|                                                                    |  |      |         |   |      | $ | 64,710  |      |  | $ | 87,317  |  
|                                                                    |  |      |         |   |      |   |         |      |  |   |         |  
|LIABILITIES AND EQUITY                                              |  |      |         |   |      |   |         |      |  |   |         |  
|Accounts payable (including holdbacks of $5,218 (2005 - $ 6,636)    |  |      |         |   |      | $ | 30,118  |      |  | $ | 25,520  |  
|Unearned revenue                                                    |  |      |         |   |      |   | 11,889  |      |  |   | 38,449  |  
|Equity and advances                                                 |  |      |         |   |      |   | 22,703  |      |  |   | 23,348  |  
|                                                                    |  |      |         |   |      |   |         |      |  |   |         |  
|                                                                    |  |      |         |   |      | $ | 64,710  |      |  | $ | 87,317  |  
|                                                                    |  |      |         |   |      |   |         |      |  |   |         |  
|                                                                    |  |      |        
|                                                                    |  | 2006 |         |   | 2005 |   |         | 2004 | 
|EARNINGS                                                            |  |      |         |   |      |   |         |      |  |   |         |  
|Contract revenues                                                   |  | $    | 210,101 |   |      | $ | 186,763 |      |  | $ | 250,872 |  
|Expenses                                                            |  |      | 187,480 |   |      |   | 168,501 |      |  |   | 243,363 |  
|                                                                    |  |      |         |   |      |   |         |      |  |   |         |  
|Earnings before income taxes                                        |  | $    | 22,621  |   |      | $ | 18,262  |      |  | $ | 7,509   |  
|                                                                    |  |      |         |   |      |   |         |      |  |   |         |  
|                                                                    |  |      |        
|                                                                    |  | 2006 |         |   | 2005 |   |         | 2004 | 
|CASH FLOWS PROVIDED BY (USED IN)                                    |  |      |         |   |      |   |         |      |  |   |         |  
|Operating activities                                                |  | $    | (8,117  | ) |      | $ | 26,208  |      |  | $ | 33,879  |  
|Investing activities                                                |  |      |        |   |      |   | 11,444  |      |  |   | (9,373  | )
|Financing activities                                                |  |      | (23,266 | ) |      |   | (6,593  | )    |  |   | (4,129  | )
|                                                                    |  |      |         |   |      |   |         |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                |  | $    | (31,383 | ) |      | $ | 31,059  |      |  | $ | 20,377  |  
|                                                                    |  |      |         |   |      |   |         |      |  |   |         |  

The Company is contingently liable at October 31, 2006 for $20,941 (2005 -
$47,067) being the other joint venture participants share of liabilities, net of securing letters of credit and cross-company guarantees, should they not be able to satisfy them.

Throughout the year, the Company makes cash contributions, receives distributions, and records its proportionate share of income or losses in joint
ventures. A summary of the joint venture transactions for the years ended October 31, 2006 and 2005 is as follows:



|                                                |  |      |         |   |      |   |         |  
|----------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                |  | 2006 |         |   | 2005 |  
|Investment in joint ventures, beginning of year |  | $    | 23,348  |   |      | $ | 18,080  |  
|Share of net income                             |  |      | 22,621  |   |      |   | 18,262  |  
|Unrealized foreign exchange loss                |  |      | (619    | ) |      |   | (1,132  | )
|Contributions                                   |  |      | 2,229   |   |      |   | 147     |  
|Distributions                                   |  |      | (24,876 | ) |      |   | (12,009 | )
|                                                |  |      |         |   |      |   |         |  
|                                                |  | $    | 22,703  |   |      | $ | 23,348  |  
|                                                |  |      |         |   |      |   |         |  



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##### Table of Contents

PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|24. | SUMMARY OF MATERIAL DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) IN CANADA AND THE UNITED STATES
|--- | -----------------------------------------------------------------------------------------------------------------------

The Companys consolidated financial statements have been prepared in accordance with Canadian GAAP which differs in certain respects from United
States GAAP. The effects of these differences on the Companys consolidated financial statements are as follows:

If United States GAAP
were employed, net earnings would be adjusted as follows:



|                                                                                                                   |  |      |         |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                   |  | 2006 |         |   | 2005 |   |        | 2004 | 
|Net earnings based on Canadian GAAP                                                                                |  | $    | 169,204 |   |      | $ | 79,804 |      |  | $ | 55,768 |  
|Additional pension expense due to the elimination of amortization of the transitional asset(1)                     |  |      | (1,163  | ) |      |   | (1,164 | )    |  |   | (1,164 | )
|Change in fair value of mandatorily redeemable shares(3)                                                           |  |      | (207    | ) |      |   | (185   | )    |  |   |       |  
|Dividends on mandatorily redeemable shares(3)                                                                      |  |      | (1,345  | ) |      |   | (560   | )    |  |   |       |  
|Tax impact of reconciling items                                                                                    |  |      | 361     |   |      |   | 407    |      |  |   | 386    |  
|                                                                                                                   |  |      |         |   |      |   |        |      |  |   |        |  
|Net earnings based on U.S. GAAP before cumulative effect of a change in accounting principle                       |  |      | 166,850 |   |      |   | 78,302 |      |  |   | 54,990 |  
|Cumulative effect of a change in accounting principle in relation to mandatorily redeemable shares (3)             |  |      |        |   |      |   | (1,102 | )    |  |   |       |  
|                                                                                                                   |  |      |         |   |      |   |        |      |  |   |        |  
|Net earnings based on U.S. GAAP                                                                                    |  | $    | 166,850 |   |      | $ | 77,200 |      |  | $ | 54,990 |  
|                                                                                                                   |  |      |         |   |      |   |        |      |  |   |        |  
|Earnings per share based on U.S. GAAP net earnings before cumulative effect of a change in accounting principle(3) |  | $    | 10.19   |   |      | $ | 5.29   |      |  | $ | 3.97   |  
|                                                                                                                   |  |      |         |   |      |   |        |      |  |   |        |  
|Earnings per share based on U.S. GAAP net earnings (3)                                                             |  | $    | 10.19   |   |      | $ | 5.22   |      |  | $ | 3.97   |  
|                                                                                                                   |  |      |         |   |      |   |        |      |  |   |        |  
|                                                                                                                   |  |      |        
|Comprehensive income under United States GAAP is as follows:                                                       |  |      |         |   |      |   |        |      |  |   |        |  
|                                                                                                                   |  |      |        
|                                                                                                                   |  | 2006 |         |   | 2005 |   |        | 2004 | 
|Net earnings based on U.S. GAAP                                                                                    |  | $    | 166,850 |   |      | $ | 77,200 |      |  | $ | 54,990 |  
|Change in minimum pension liability(1)                                                                             |  |      | 1,460   |   |      |   | 989    |      |  |   | 1,735  |  
|(Gain) loss on disposal of marketable securities(2)                                                                |  |      | (3,164  | ) |      |   | (1,870 | )    |  |   | 3,604  |  
|Write-down on marketable securities(2)                                                                             |  |      |        |   |      |   |       |      |  |   | 3,600  |  
|Unrealized gain on investment in marketable securities(2)                                                          |  |      | 5,604   |   |      |   | 5,062  |      |  |   | 956    |  
|Effect of exchange rate changes during the year(5)                                                                 |  |      | (6,721  | ) |      |   | (3,885 | )    |  |   | (9,267 | )
|Tax impact of reconciling items                                                                                    |  |      | (1,064  | ) |      |   | (1,100 | )    |  |   | (2,710 | )
|                                                                                                                   |  |      |         |   |      |   |        |      |  |   |        |  
|Comprehensive income under U.S. GAAP                                                                               |  | $    | 162,965 |   |      | $ | 76,396 |      |  | $ | 52,908 |  
|                                                                                                                   |  |      |         |   |      |   |        |      |  |   |        |  



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##### Table of Contents

PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|24. | SUMMARY OF MATERIAL DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) IN CANADA AND THE UNITED STATES (continued)
|--- | -----------------------------------------------------------------------------------------------------------------------------------

The following tables reconcile the consolidated balance sheets as reported under Canadian GAAP and those that would have been reported under United States
GAAP:



|                                                    |  |               |         |   |           |   |         |  
|--------------------------------------------------- |  | ------------- | ------- | - | --------- | - | ------- | -
|2006                                                |  | Canadian GAAP |         |   | U.S. GAAP |  
|Balance Sheet                                       |  |               |         |   |           |   |         |  
|Investments in marketable securities(2)             |  | $             | 46,014  |   |           | $ | 52,381  |  
|Deferred income tax asset(4)                        |  |               | 9,105   |   |           |   | 9,175   |  
|Accrued benefit asset(1)                            |  |               | 4,560   |   |           |   |        |  
|Mandatorily redeemable shares liability(3)          |  |               |        |   |           |   | 10,284  |  
|Share capital(3)                                    |  |               | 274,259 |   |           |   | 268,190 |  
|Retained earnings(1) (3) (4)                        |  |               | 258,631 |   |           |   | 251,640 |  
|Cumulative translation account(5)                   |  |               | (38,949 | ) |           |   |        |  
|Accumulated other comprehensive loss(1) (2) (4)
(5) |  |               |        |   |           |   | (34,296 | )
|                                                    |  |               |         |   |           |   |         |  
|                                                    |  |              
|2005                                                |  | Canadian GAAP |         |   | U.S. GAAP |  
|Balance Sheet                                       |  |               |         |   |           |   |         |  
|Investments in marketable securities(2)             |  | $             | 41,792  |   |           | $ | 45,719  |  
|Deferred income tax asset(4)                        |  |               | 4,238   |   |           |   | 5,010   |  
|Accrued benefit asset(1)                            |  |               | 3,816   |   |           |   |        |  
|Minimum pension liability(1)                        |  |               |        |   |           |   | 1,041   |  
|Mandatorily redeemable shares liability(3)          |  |               |        |   |           |   | 5,512   |  
|Share capital(3)                                    |  |               | 225,836 |   |           |   | 222,412 |  
|Retained earnings(1) (3) (4)                        |  |               | 166,185 |   |           |   | 162,122 |  
|Cumulative translation account(5)                   |  |               | (32,228 | ) |           |   |        |  
|Accumulated other comprehensive loss(1) (2) (4)
(5) |  |               |        |   |           |   | (30,411 | )
|                                                    |  |               |         |   |           |   |         |  

Accumulated other comprehensive loss under United States GAAP is as follows:



|                                                                              |  |      |         |   |      |   |         |  
|----------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                              |  | 2006 |         |   | 2005 |  
|Accumulated change in minimum pension liability(1)                            |  | $    | (359    | ) |      | $ | (1,819  | )
|Accumulated unrealized gain on investments in marketable securities(2)        |  |      | 6,367   |   |      |   | 3,927   |  
|Accumulated foreign exchange losses on translation of self-sustaining foreign |  |      | (38,949 | ) |      |   | (32,228 | )
|operations(5)                                                                 |  |      |         |   |      |   |         |  
|Accumulated tax impact of reconciling items                                   |  |      | (1,355  | ) |      |   | (291    | )
|                                                                              |  |      |         |   |      |   |         |  
|Accumulated other comprehensive loss(1) (2) (4)
(5)                           |  | $    | (34,296 | ) |      | $ | (30,411 | )
|                                                                              |  |      |         |   |      |   |         |  

There are no material differences between cash flows reported in the statement of cash flows
prepared in accordance with Canadian GAAP and the cash flows that would be reported in a statement of cash flows prepared in accordance with United States GAAP.

SEC Accounting Series Release No. 268 (ASR 268) prohibits the combination of all equity securities under the general heading Shareholders Equity where the redemption of equity is outside the
control of the issuer resulting in the Companys common stock, retained earnings and accumulated other comprehensive loss being presented as Redeemable Common Stock outside of Shareholders Equity. ASR 268 applies to the Company as there
are a limited number of situations where the Company is obligated to repurchase the shares of an employee after a triggering event. The aggregate redemption value of those shares which the Company was obligated to repurchase at October 31, 2006
was $10,284 (2005 - $5,512). The redemption value per share established on January 26, 2006 is $20.75. The aggregate redemption value of those shares which the Company was obligated to repurchase at October 31, 2006 is reclassified as a
liability in accordance with SFAS No. 150, Accounting For Certain Financial Instruments with Characteristics of Both Liabilities and Equity.



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PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|24. | SUMMARY OF MATERIAL DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) IN CANADA AND THE UNITED STATES (continued)
|--- | -----------------------------------------------------------------------------------------------------------------------------------

Canadian GAAP requires proportionate consolidation of interests in joint ventures. Proportionate consolidation is not permitted for the Companys
interests in joint ventures under United States GAAP and these interests would be accounted for under the equity method. However, as allowed by the Securities and Exchange Commission (SEC), reclassification is not required in this
reconciliation when specified criteria are met and the information is disclosed. These criteria have been met and the information is disclosed in Note 23. Although adoption of proportionate consolidation has no impact on net earnings or redeemable
common stock, it does increase assets, liabilities, revenues and expenses and changes the classification of cash flows otherwise reported under United States GAAP.

Notes:



| | (1) | Under Canadian GAAP, the Company adopted Section 3461, Employee Future Benefits effective November 1, 2000. Section 3461 contains similar measurement
principles to United States GAAP for measuring obligations and plan assets under its pension plan. On adoption of Section 3461, the difference between the fair value of plan assets and the accrued benefit obligation (projected benefit
obligation) of $6,983 (the transitional asset) is being amortized over six years.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For United States GAAP purposes, the
Company is utilizing transition guidance provided by the SEC as it was not feasibleto apply SFAS No. 87 Employers Accounting for Pensions on the effective date of the standard. As a result of applying this guidance, the
difference between the fair value of plan assets and the projected benefit obligation of $3,262 was recorded as a prepaid pension asset as at November 1, 2001. Net periodic pension cost under United States GAAP for 2006, 2005 and 2004 is
$1,308, $1,423 and $2,092, respectively as the amortization of the transitional asset under Canadian GAAP is not permitted under United States GAAP. The resulting prepaid pension asset under United States GAAP prior to the recognition of the minimum
pension liability for 2006 and 2005 is $359 and $778, respectively.

In addition, Canadian GAAP does not require the recognition of an
additional minimum pension liability as required by SFAS No. 87. For United States GAAP purposes, the Company has recognized an additional minimum pension liability by recording a cumulative pre-tax adjustment to accumulated other comprehensive
loss of $359, $1,819 and $2,808 at the end of 2006, 2005 and 2004, respectively, resulting in a minimum pension liability of $nil, $1,041 and $1,218 at the end of 2006, 2005 and 2004 respectively.



| | (2) | Under United States GAAP, the Companys investments in marketable securities are considered available-for-sale securities and are reported at fair value, with unrealized gains
and losses reported, net of tax, in other comprehensive income for the period.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Under United States GAAP, certain of the Companys common shares must be reclassified as a liability, as they become mandatorily redeemable after the occurrence of certain
triggering events, as defined by SFAS No. 150. Upon reclassification the liability is initially measured at fair value, with a reduction to redeemable common stock by the amount of that initial measure, recognizing no gain or loss.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The fair value on the initial measurement of the liability upon the reclassification of the Companys mandatorily
redeemable shares on November 1, 2004 was $3,512 under United States GAAP, with a corresponding reduction in redeemable common stock, consisting of a decrease in share capital of $2,410, and a decrease in net earnings under United States GAAP
of $1,102, which was the cumulative effect of the change in accounting principle on the adoption of SFAS No. 150.

SFAS No. 150
requires that subsequent changes in the fair value of these shares are recognized in earnings. In 2006, the subsequent change in fair value was as a result of an increase in the share price of $0.75 per share (2005 - $1.00 per share). This resulted
in a change in fair value of these shares of $207 (2005 - $185), which is recognized in net earnings under United States GAAP.

In addition,
dividends were declared during 2006 of $4.88 per share. In 2006, dividends on mandatorily redeemable shares were $1,345 (2005 - $560), which is recognized in net earnings under United States GAAP.

During 2006 and 2005, certain of the Companys common shares became mandatorily redeemable after the occurrence of certain triggering events. As a
result, these mandatorily redeemable shares were reclassified as a liability at their fair value of $4,766 (2005 - $1,915), with a corresponding reduction in redeemable common stock, consisting of a decrease in share capital of $2,610 (2005 -
$1,014), and a decrease in retained earnings under United States GAAP of $2,156 (2005 - $901).

During 2006, mandatorily redeemable shares
with a fair value of $202 (2005 - $100) were repurchased by the Company.



| | (4) | Under United States GAAP, future income tax assets and liabilities are referred to as deferred income tax assets and liabilities. The adjustment above relates to the tax effect of
items (1) and (2) above.
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PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|24. | SUMMARY OF MATERIAL DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) IN CANADA AND THE UNITED STATES (continued)
|--- | -----------------------------------------------------------------------------------------------------------------------------------



| | (5) | Under United States GAAP, exchange gains and losses arising from the translation of the financial statements of the Companys self-sustaining foreign operations are deferred
and included in accumulated other comprehensive loss.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recently Adopted United States Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. In December 2003 FASB issued Interpretation No. 46R (FIN 46R) which supersedes FIN 46. FIN 46R address consolidation of variable interest entities (VIEs) where the
equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support or the equity investors lack one or more of the essential characteristics of a controlling financial interest or the
equity investors have voting rights that are not proportionate to their economic interests. FIN 46R provides guidance on which entities are VIEs and which entity, if any, should consolidate the VIE. FIN 46R also requires disclosure of non
consolidated VIEs. FIN 46R was applicable to all variable interest entities created since December 31, 2003 and no such entities have been created that require consolidation or disclosure in these consolidated financial statements. FIN
46R applies to all other VIEs by the beginning of the first annual period beginning after December 15, 2004, which for the Company was its consolidated financial statements for the fiscal year ended October 31, 2006. The Company has
assessed the impact that FIN 46R has had on variable interest entities created prior to December 31, 2003, and has determined that there is no difference between the Canadian GAAP standard on variable interest entities, CICA Accounting
Guideline 15, Consolidation of Variable-Interest Entities, which was adopted November 1, 2004, as described in Note 1 of these financial statements. The Company adopted FIN 46R effective November 1, 2004 for these entities for
United States GAAP purposes.

In March 2005, the FASB issued Staff Position FIN 46R-5, Implicit Variable Interests under FASB
Interpretation No. 46(R), Consolidation of Variable Interest Entities, to address whether a company has an implicit variable interest in a VIE or potential VIE when specific conditions exist. This guidance was adopted in 2006 and did not
have a material impact on the Companys consolidated financial statements.

Statement of Financial Accounting Standards No. 153,
Exchanges of Non-monetary Assets  an Amendment of APB Opinion 29 (SFAS No. 153), was issued in December 2004. Accounting Principles Board (APB) Opinion 29 is based on the principle that exchanges of
non-monetary assets should be measured based on the fair value of assets exchanged. SFAS No. 153 amends APB Opinion 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception
for exchanges of non-monetary assets that do not have commercial substance. The standard is effective for non-monetary asset exchanges that occur after November 1, 2005 for the Company. The adoption of this standard did not have a material
impact on the Companys financial statements.

Recent United States Accounting Pronouncements Not Yet Adopted

In December 2003, FASB issued SFAS No. 123 (Revised), Share-Based Payment. This statement requires entities to
recognize in the statement of net earnings the cost of employee services received in exchange for equity based compensation at fair value. SFAS No. 123 (Revised) will apply to the Companys consolidated financial statements for the fiscal
year ending October 31, 2007. The Company is currently reviewing the impact that SFAS No. 123 (Revised) will have on its consolidated financial statements.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections (SFAS No. 154) which replaces Accounting Principles Board
Opinions No. 20 Accounting Changes. SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as
the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS No. 154 will apply to the Companys consolidated financial statements for the fiscal year ending October 31, 2007.
The Company is currently reviewing the impact that SFAS No. 154 will have on its consolidated financial statements.

In June 2006, the
FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109 (FIN 48) which clarifies the accounting for uncertainty in income taxes recognized in
an enterprises financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, disclosure, and transition requirements. FIN 48 will apply to the
Companys consolidated financial statements for the fiscal year ending October 31, 2008. The Company is currently reviewing the impact of this Interpretation.



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PCL EMPLOYEES HOLDINGS LTD.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars except share data)



|24. | SUMMARY OF MATERIAL DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) IN CANADA AND THE UNITED STATES (continued)
|--- | -----------------------------------------------------------------------------------------------------------------------------------

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurement (SFAS
No. 157). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. SFAS No. 157 also expands disclosures about the extent to which companies measure assets and liabilities at fair value, the
information used to measure fair value, and the effect of fair value measurement on earnings disclosures made by the Company in its fiscal year ending October 31, 2009. The Company is currently reviewing the impact of this statement.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R) (SFAS No. 158). SFAS No. 158 requires an employer to recognize the overfunded or underfunded status of a
defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS No. 158 will apply to
the Companys consolidated financial statements for the fiscal year ending October 31, 2007. The Company is currently reviewing the impact of this statement.

In September 2006, the U.S. Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements (SAB 108). SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. SAB 108 will apply
to the Companys consolidated financial statements for the fiscal year ending October 31, 2007. The Company is currently reviewing the impact of this pronouncement.

Valuation and Qualifying Accounts



|                                           |  |                            |       |                                      |       |                                     |      |   |                       |   |      
|------------------------------------------ |  | -------------------------- | ----- | ------------------------------------ | ----- | ----------------------------------- | ---- | - | --------------------- | - | -----
|                                           |  | Balance atbeginningof year |       | Additionscharged tocosts andexpenses |       | Deductionsreducingcosts andexpenses |      |   | Balance atend of year
|Year ended October 31, 2006:               |  |                            |       |                                      |       |                                     |      |   |                       |   |      
|Valuation allowance on deferred tax assets |  | $                          | 2,082 |                                      |      |                                     | (897 | ) |                       | $ | 1,185
|Year ended October 31, 2005:               |  |                            |       |                                      |       |                                     |      |   |                       |   |      
|Valuation allowance on deferred tax assets |  | $                          | 2,075 |                                      | 612   |                                     | (605 | ) |                       | $ | 2,082
|Year ended October 31, 2004:               |  |                            |       |                                      |       |                                     |      |   |                       |   |      
|Valuation allowance on deferred tax assets |  | $                          | 833   |                                      | 1,242 |                                     |     |   |                       | $ | 2,075
|                                           |  |                            |       |                                      |       |                                     |      |   |                       |   |      



|25. | COMPARATIVE FIGURES
|--- | -------------------

Certain figures
presented for comparative purposes have been reclassified to conform to the current years presentation.



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