Early 2011, both the remuneration of the Executive Board and of the Supervisory Board were reviewed. This was in line with the policy to do this every three years. In its meeting on 18 May 2011, the General Meeting of Shareholders (GMS) adopted the revised remuneration policy for the Executive Board and the revised remuneration for the members of the Supervisory Board. Within the framework of the policy as adopted by the GMS, compensation of the Executive Board members is determined by the Supervisory Board, based on advice of the Selection and Remuneration Committee.

REMUNERATION EXECUTIVE BOARD
The review of the remuneration policy for the Executive Board was done by the Selection and Remuneration Committee, based on a benchmark analysis performed by an external advisor. It was concluded that the labor market reference group needed to be adjusted, to reflect the changed size and positioning of ARCADIS, but that the remuneration structure could be maintained.

Remuneration policy
Compensation in line with median level of reference group
The remuneration policy is aimed at attracting, motivating and retaining qualified management for an international company of ARCADIS’ size and complexity. The remuneration for Executive Board members consists of a fixed base salary, a short-term variable remuneration (cash bonus), a long-term variable remuneration (shares and options) and a pension plan and other fringe benefits. Variable remuneration is an important part of the total package and is based on performance criteria that incentivize value creation in the short and longer term.
The remuneration policy aims at compensation in line with the median level of primarily the Dutch part of a selected labor market reference group.

Labor market reference group
The adjusted labor market reference group consists of Dutch companies, as well as a number of European industry peers, both of comparable size and complexity. It includes: CSM (NL), Nutreco (NL), Aalberts (NL), USG People (NL), Heymans (NL), Imtech (NL), Draka (NL), Fugro (NL), Boskalis (NL), Grontmij (NL), Atkins (UK), Pöyry (Fin), WSP (U.K.), RPS (U.K.) and Sweco (S).

Fixed base salary
The benchmark analysis showed that the fixed annual base salary of the members of the Executive Board was clearly below the median level of the Dutch part of the reference group.
The Supervisory Board therefore proposed to increase the fixed annual salary to the median level as of 1 July 2011, which was approved by the GMS. Although the use of a reference group may inflate the remuneration of directors in general, the Supervisory Board considered the raise justified as ARCADIS had become much bigger and more international. Moreover, in filling vacancies in the Executive Board, it became apparent that raises were necessary in order to attract candidates with the required qualifications. This resulted in the following annual base salaries as of 1 July 2011.

Short-term variable remuneration: bonus
Bonuses may vary from 0% to 60% of fixed base salary, with 40% being applicable when targets are achieved. The financial targets, which determine 75% of the bonus, are related to earnings per share (EPS, based on net income from operations, excluding currency impacts), and return on invested capital (ROIC, as defined by the financial goals, described here). For members of the Executive Board responsible for a geographic area, the EBITA of that area can be added as a criterion. The non-financial, discretionary targets determine 25% of the bonus and are set for each Executive Board member individually. Until 2011, the non-financial targets could not be overachieved, which resulted in a maximum bonus contribution from these targets of 10% of base salary. As of 2012, this has been changed, allowing for rewarding excellent results on these targets, with a maximum bonus contribution up to 15% of base salary, without exceeding the maximum bonus percentage of 60%. Targets are preset annually by the Supervisory Board based on plan and budget for the respective year. As of 2012 the bonus percentage is determined using the following table:

The discretionary criteria give sufficient possibilities to include sustainability or other elements of corporate social responsibility as important targets into the bonus program, particularly now the influence of these criteria will increase as of 2012.
The bonuses granted in March 2012 for performance in 2011, were still determined using the following table:

For the Executive Board member from the United States, the level of EBITA generated by the US operations is added, with the following adjusted weights: EPS 30%; ROIC 20%; EBITA US 25%; Discretionary criteria 25%.
Targets for 2011 and performance against these targets were as follows:
• The EPS target was based on 2011 budget. Minimum and maximum are achieved at -10% and +10% compared to target. With 2011 EPS at €1.23 the target was overachieved by 1.9%, resulting in 20.2% of base salary for this target.
• The ROIC target is in principle 15% but is annually reviewed based on the budget. For 2011 the target was set at 15%, with minimum being achieved at 11%, maximum at 19%. As 2011 ROIC was at 13.6%, 7.8% of base salary was achieved for this target.
• Non-financial targets are tuned to the specific responsibilities of individual Executive Board members. Based on performance, the bonus varied from 5.6% to 10% of base salary for these targets.
• The EBITA target for the Executive Board member from the United States was overachieved and the maximum percentage of base salary on that item was granted.
This resulted in bonuses varying between 34% and 45% of base salary.

Long-term variable remuneration: shares and options
The remuneration policy includes the granting each year of performance-based shares and options. These vest and become unconditional after three years dependent on ARCADIS’ relative performance against a peer group of comparable, listed companies. Performance is measured as Total Shareholder Return (TSR), defined as share price increase, including reinvested dividends. This stimulates creating shareholder value on the longer term. As outcome of the remuneration review, as from 2011 the peer group has been adjusted, while the numbers of shares and options to be granted has been reset.

Peer group and vesting
At the end of each three-year cycle, ARCADIS’ performance is measured against the companies in the peer group. ARCADIS’ ranking determines whether and to what extent the originally granted options and shares vest and become unconditional. The tables below show the old and adjusted peer group as well as the old and adjusted vesting scheme.

¹⁾ The years mentioned refer to the years of granting of conditional shares and options.

¹⁾ The years mentioned refer to the years of granting of conditional shares and options.
²⁾ Expected vesting percentage, assuming each position having equal chance.

Performance measurement
For the shares and options granted as of 2008, performance is based on the average TSR over the three-year period. This prevents incidents such as temporary sentiments or take-over rumors related to specific companies having a strong impact on relative performance.

Number of shares and options
In 2011, the numbers of conditional shares and options to be granted has been reset again to bring the value of the long-term incentive in line with the percentage of base salary that is aimed for. This is 50% for the CEO and 40% for the other Executive Board members. The value was calculated using the average ARCADIS share price in the first quarter of 2011 of €17.24 and an expected vesting percentage of 58.3% (equal chance for each position in ranking after three years). The numbers of conditional shares and options to be granted annually were fixed for three years (2011-2013) and approved by the GMS in 2011. They are as follows:

The exercise price for options granted is the closing price of the ARCADIS shares on the first trading day after the GMS on which the shares are quoted ex-dividend. Options are valid for a 10-year period. Except for paying income tax on vested shares, shares must be retained for a period of at least two years after vesting or at least until termination of employment when this is shorter.

Vested shares and options
In May 2011, the shares and options that were granted in May 2008 became unconditional at 100% of the originally granted numbers. This was due to ARCADIS’ performance in the period 2007-2010 resulting in the fourth place among the peer group.
Over the period 2008-2011 ARCADIS ended in the first place among the peer group, showing the relative strong performance in that period. Therefore the shares and options that were granted in May 2009 will become unconditional in May 2012 at 150% of the originally granted numbers. Please refer to the table in the Remuneration Overview for more information on shares and options.

Policy in case of a take over
In the event of a takeover of ARCADIS, the treatment of shares and options granted to the Executive Board (and other senior staff) will be determined by the Supervisory Board, upon advice by the Selection and Remuneration Committee, taking into account the share price in the period preceding the disclosure of an offer, as well as all other relevant circumstances at that moment. This means that the exercise price of outstanding options and the number of unvested conditional shares can be adjusted to correct for (part of) the increase in share price caused by the offer. Unvested shares and options will vest proportionally to the number of months of the three-year vesting period that elapsed since the grant date. At this moment Dutch legislation is in preparation that – once being effective – might overrule this policy.

Pensions, other benefits, contracts
Pensions
Executive Board members (excluding Mr. Blake) participate in the ARCADIS Netherlands pension plan. This is a collective defined contribution plan with the premium based on the ambition of a pension payment that, under certain conditions, is comparable to an average pay scheme with a retirement age of 63 years. The contribution from the participants is 6% of the pension basis. Mr. Schneider, who is a German citizen, receives compensation for the limited tax deductibility of his own contribution to the pension fund. Mr. Blake, who operates from the United States, participates in the 401k plan of ARCADIS US.

Other benefits
Executive Board members receive a fixed allowance for expenses, as well as other customary fringe benefits, including the use of a company car. They may also participate in the Employee Stock Purchase Plan to purchase up to a maximum of €400 per month of ARCADIS shares from the Lovinklaan Foundation at a discount.

Employment contracts and severance pay
Mr. Noy has been appointed for an indefinite period. His contract does not contain severance pay provisions. With Mr. Schneider, reappointed to the Executive Board in 2010, with Mr. Vree, appointed in 2010, and with Mr. McArthur, appointed in 2011, a four-year term and a maximum severance pay of one year’s base salary has been agreed. Due to his long tenure with the company, the maximum severance pay for Mr. Blake, who was appointed to the Executive Board as per January 1, 2010 until the General Meeting of Shareholders in 2013, was set at 18 months. Contracts of Executive Board members do not contain provisions for the event of the termination of employment resulting from a change in control.

Other elements of the remuneration policy
In December 2009, a revised Code on Corporate Governance became effective which contains additional best practices regarding executive remuneration. Based upon advice of the Selection and Remuneration Committee, the Supervisory Board has evaluated these additional best practices, resulting in the following conclusions:
• The remuneration policy as described before is aligned with the strategy and the financial goals of the company and its related risks. It includes a good balance between fixed and variable and between short and long-term remuneration and is (relatively) simple and understandable. In 2005, the maximum short-term cash bonus was adjusted downward from 200% to 150% of the target bonus, while at the same time the long-term incentive was upgraded to also include performance shares.
• The remuneration for Executive Board members is in reasonable proportion to that for the next level in the organization. ARCADIS’ Senior Management Committee members and other operating company directors, have a remuneration structure comparable to the Executive Board.
• A scenario analysis that was made with respect to the potential outcomes of the variable remuneration gave no cause to adjust the remuneration policy.
• The Supervisory Board recognizes that conditionally awarded variable remuneration components could produce unfair results due to extraordinary circumstances during the period in which the predetermined performance criteria have been or should have been achieved. In such case the Supervisory Board will use its judgment to make adjustments (downwards or upwards) to the value of these variable remuneration components, taking into account the relevant circumstances. This ultimum remedium clause has been included in the long term incentive plan.
• The Supervisory Board will use its best efforts – taking into account the relevant circumstances – to recover from the Executive Board members any variable remuneration awarded on the basis of incorrect financial or other data. This claw back clause has been included in the bonus program and in the long term incentive plan.

REMUNERATION OVERVIEW
For more information on remuneration and share and option ownership of Executive Board members, please refer to the Remuneration Overview.

ESPP
Members of the Executive Board may participate in the Employee Stock Purchase Plan administered by the Lovinklaan Foundation. Each member may - as may each participating employee - purchase up to a maximum of € 400 (or a similar amount in the applicable currency) per month of ARCADIS shares from the Lovinklaan Foundation, at a pre-determined discount.

REMUNERATION SUPERVISORY BOARD
The GMS determines the remuneration of Supervisory Board members. As mentioned before, the remuneration was reviewed in 2011, based on benchmark analysis by an external advisor, of remuneration at companies that are part of the Amsterdam Midkap Index (AMX). In view of the outcome of this analysis and the increased responsibilities of Supervisory Board Members, the GMS approved in May, 2011, the following remuneration as per July 1, 2011:

In addition, non-Dutch members receive an attendance fee per physical meeting of €2,000 for European members and US$4,000 for members from the United States. Remuneration is not dependent on company results. Supervisory Board members are not eligible to receive shares or options as part of their remuneration package. Possible share ownership of ARCADIS shares by a Supervisory Board member is meant as a long-term investment.
For more information on remuneration and share ownership of Supervisory Board members, please refer to the Remuneration Overview.

Other information
The company has not granted any loans, advances or guarantees to Executive or Supervisory Board members. In 2005, ARCADIS NV provided Executive Board members an indemnification for all costs and expenses from and against any claim, action or lawsuit related to actions and/or omissions in their function as Executive Board members. As approved by the GMS in 2005, a similar indemnification was provided to Supervisory Board members.