DATED 24 SEPTEMBER 2011 CH2M HILL COMPANIES, LTD - and - HALCROW HOLDINGS LIMITED IMPLEMENTATION AGREEMENT H5139/00026 Ref: C1NE/FTG/2476223.16 Hogan Lovells International LLP, Atlantic House, Holborn Viaduct, London EC1A 2FG

Exhibit 2.1

DATED 24 SEPTEMBER 2011

CH2M HILL COMPANIES, LTD

- and -

HALCROW HOLDINGS LIMITED

IMPLEMENTATION AGREEMENT

H5139/00026
Ref: C1NE/FTG/2476223.16

Xxxxx Lovells International LLP, Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxx, Xxxxxx XX0X 0XX

CONTENTS

CLAUSE		PAGE

1.	DEFINITIONS AND INTERPRETATION	1

2.	IMPLEMENTATION OF THE PROPOSAL BY WAY OF THE SCHEME	8

3.	DOCUMENTATION	11

4.	REVISIONS TO THE PROPOSAL	12

5.	RECOMMENDATION	12

6.	CONDITIONS	13

7.	COMPETITION REGULATION	14

8.	CONDUCT OF THE TARGET AND ITS BUSINESS	14

9.	WARRANTIES AND UNDERTAKINGS	18

10.	COMPETING OFFERS	21

11.	CONDITIONALITY OF BUYER’S OBLIGATIONS	22

12.	TERMINATION	22

13.	NOTICES	23

14.	ANNOUNCEMENTS	25

15.	EXCLUSIVITY	25

16.	CONFIDENTIALITY AGREEMENT	26

17.	FURTHER ASSURANCE	26

18.	ENTIRE AGREEMENT	26

19.	REMEDIES	27

20.	WAIVER	27

21.	INVALIDITY	27

22.	NO PARTNERSHIP	27

23.	THIRD PARTY RIGHTS	27

24.	VARIATION	28

25.	ASSIGNMENT	28

26.	COSTS AND EXPENSES	28

27.	COUNTERPARTS	28

28.	GOVERNING LAW AND JURISDICTION	28

29.	INCENTIVE ARRANGEMENTS	29

SCHEDULES		30

1.	SCHEME DOCUMENT	30

2.	INDICATIVE TIMETABLE FOR THE SCHEME	31

3.	CONDITIONS TO THE SCHEME	32

4.	WARRANTIES	33

5.	TARGET’S KNOWLEDGE	48

6.	TARGET SHARE PLANS	49

	APPENDIX 1 - FORM OF TARGET DIRECTORS’ IRREVOCABLE UNDERTAKINGS	50

	APPENDIX 2 - FORM OF HALCROW TRUST’S IRREVOCABLE UNDERTAKING	51

	APPENDIX 3 - COMPLIANCE PROCESSES	52

THIS AGREEMENT is made on 24 September 2011

PARTIES

(1) CH2M Hill Companies, Ltd, a Delaware corporation whose principal office is at 0000 X. Xxxxxxx Xx., Xxxxxxxxx, XX 00000-0000, XX Xxx 00000, Xxxxxx, XX (the “Buyer”); and

(2) Halcrow Holdings Limited, a company incorporated in England and Wales (registered number 1674044) whose registered office is at Xxxx Xxxxx, 00 Xxxxx Xxxxx, Xxxxxx, X0 0XX (the “Target”).

PREAMBLE

(A) The Buyer and the Target intend to announce the recommended acquisition, by the Buyer or a member of the Buyer’s Group, of the entire issued and to be issued ordinary share capital of the Target by means of a scheme of arrangement under Part 26 of the Companies Xxx 0000.

(B) The entire issued and to be issued preference share capital of the Target is owned by the Halcrow Trust which has, by separate agreement, agreed to sell all of the Preference Shares to the Buyer or a member of the Buyer’s Group.

(C) The parties are entering into this Agreement to set out certain obligations and mutual commitments in respect of the implementation of the Proposal and to regulate the conduct of the business of the Target’s Group during the period between the date of this Agreement and the Effective Date.

OPERATIVE TERMS

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

In this Agreement (but not in the Scheme Document):

“Act” means the Companies Xxx 0000;

“Articles of Association” means the articles of association of the Target in effect on the date of this Agreement;

“Authority” means any government or governmental, supranational, state, court or regulatory body;

“Business Day” means a day (except a Saturday or Sunday) on which banks are generally open for business in London, England and Denver, Colorado, United States;

“Buyer’s Group” means the Buyer, the Buyer’s subsidiaries and subsidiary undertakings, the Buyer’s holding company or parent undertaking and all other subsidiaries and subsidiary undertakings of that holding company or parent undertaking but excluding any member of the Target’s Group;

“Buyer’s Solicitors” means Xxxxx Lovells International LLP of Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxx, Xxxxxx XX0X 0XX;

“CH2M Hill Acquireco” means CH2M Hill Europe Limited, a company incorporated in England and Wales with registered number 7262036, being an indirect wholly owned subsidiary of the Buyer;

“Code” means the City Code on Takeovers and Mergers;

“Competing Proposal” means a proposal:

(a) made by a third party, which is not acting in concert with the Buyer, of an intention to make an offer or possible offer for the Target;

(b) which involves either a change of control of the Target (other than the acquisition of control by the Buyer or a member of the Buyer’s Group and/or a person acting in concert with the Buyer) or the disposal of any interest in a material part of the business or assets of the Target (save for disposals undertaken with the prior written consent of the Buyer); or

(c) of any other transaction which would be inconsistent with or would be reasonably likely to preclude, impede or delay the completion of, the Proposal,

in each case, whether or not such proposal is subject to any preconditions;

“Competition Authority” means any anti-trust or competition regulatory authority;

“Conditions” means the conditions to the implementation of the Scheme, set out in Schedule 3 and to be set out in the Scheme Document, subject to any changes agreed between the parties;

“Confidentiality Agreement” means the confidentiality agreement dated 20 June 2011 between the Buyer and the Target;

“Court” means the High Court of Justice in England and Wales;

“Court Hearings” means the First Court Hearing and the Second Court Hearing;

“Court Meeting” means the meeting to be convened pursuant to an order of the Court under Part 26 of the Act for the purposes of considering and, if thought fit, approving the Scheme (with or without amendment), together with any meeting held as a result of an adjournment by the Target in accordance with this Agreement or the Court reconvening the meeting;

“Court Order” means (as appropriate) the Scheme Order or the Reduction Order;

“Data Room” means the documents available for viewing by the Buyer and its advisers in the online data room hosted by the Target through a data room facility at xxxxx://xxxxxxxxxxx.xx/ relating to the Target and the Target’s Group at 5.00 p.m. on 9 September 2011, plus the following documents so available at 5.00 p.m. on 21 September 2011:

(a) the Material Contracts (including amendments of the type referred to in paragraph 13.1(a) of Schedule 4) contained in sections 4.4.01 and 4.1.02 of that data room; and

(b) the constitutional documents of certain members of the Target’s Group referred to in paragraph 2.7 of Schedule 4;

“Disclosed” means fairly disclosed in or pursuant to the Disclosure Letter;

“Disclosure Letter” means the letter from the Target to the Buyer dated the date of this Agreement and delivered to the Buyer immediately before the signature of this Agreement

“DRIP Scheme” means the dividend reinvestment plan implemented by the Target under which shareholders of the Target may mandate the Target to immediately reinvest any dividends paid on the shares held by such shareholder or interest in shares held by such participant into a new issue of shares in the Target at the price set by the last internal

valuation of the ordinary shares of the Target in accordance with its articles of association;

“Effective Date” means the date upon which the Scheme becomes effective in accordance with its terms;

“First Court Hearing” means the hearing by the Court to sanction the Scheme under Part 26 of the Act;

“Group” means, in relation to the Buyer, the Buyer’s Group and, in relation to the Target, the Target’s Group;

“Halcrow Approved CSOP” means the Halcrow Holdings Limited Company Share Option Scheme;

“Halcrow Option Plans” means the Halcrow Approved CSOP, the Halcrow Unapproved CSOP and the Xxxxxxx XXXX Plan;

“Xxxxxxx XXXX Plan” means the Halcrow Holdings Limited Savings-Related Share Option Scheme;

“Halcrow SIP” means the Halcrow Holdings Limited Employee Share Incentive Plan;

“Halcrow Trust” means the Halcrow trust, established by a trust deed dated 5 November 1990;

“Halcrow Unapproved CSOP” means the Halcrow Holdings Limited Company Unapproved Share Option Scheme;

“HMRC” means HM Revenue and Customs;

“Liability” means any demand, claim, action, proceeding, damage, payment fine, penalty, loss, cost (including reasonable legal costs), expense (including Tax), disbursement or other liability of any nature, whether actual or contingent;

“Longstop Date” has the meaning given in clause 6.2;

“Material Adverse Effect” means:

(a) the commencement of any investigation, enquiry, prosecution or other enforcement action by any governmental, administrative or regulatory body against any member of the Target’s Group or, in their capacity as representing a member of the Target’s Group, any member of their respective senior management teams or someone working in the business development function pursuant to the Foreign Corrupt Practices Act of the USA or the Xxxxxxx Xxx 0000 of the UK or in respect of corporate responsibility for death (including manslaughter) where such investigation, enquiry, prosecution or other enforcement action respectively has resulted in or would reasonably be expected to have a material adverse effect on the business or operations of the Buyer or the Wider Target Group;

(b) any member of the Target’s Group being legally prohibited or debarred from working for the UK, Australian, UAE, Canadian or US governments or governmental bodies where such prohibition or debarment is material to the Target’s Group or has a material impact on the ability of the Buyer or the Target’s Group as a whole to bid on or perform work for such governments or governmental bodies;

(c) formal criminal charges being brought against an individual representing a member of the Target’s Group in the UK, Australia, the UAE, Canada or the US in respect of fraud where such determination has resulted in or would reasonably be expected to have a material adverse effect on the business or operations of the Buyer or the Wider Target Group;

(d) loss of one or more projects or anticipated project revenues which, when aggregated with gains under new projects, are so serious as to be material to the Target’s Group meeting its 2011 business plan or its projections for the 2012 business plan as presented by the Target to the Buyer prior to the date of this Agreement, caused directly or indirectly by a member of the Target’s Group where any such events have resulted or would reasonably be expected to result in a diminution of not less than £10 million pre-tax profit for the financial year ending 31 December 2011 or 31 December 2012; or

(e) serious injury, death or other industrial accident occurring on a project caused directly or indirectly by a member of the Target’s Group where such event has resulted in or would reasonably be expected to result in a material adverse effect on the business or operations of the Buyer or the Wider Target Group;

(f) the payment of any cash bonus or incentivisation payments to any shareholder or employee of the Target’s Group the principal amount of which (including any related taxation or social contribution payments) in aggregate exceed £1 million;

(g) save as contemplated by the Scheme, the Target having allotted or issued, or agreed to allot or issue, any share capital or any instrument or security convertible or exchangeable into share capital or any options or awards under any share plans (except (i) to satisfy the valid vesting of any options or awards under the Target Share Plans granted before the date of this Agreement (including, for the avoidance of doubt, any dividend shares awarded under the Halcrow SIP following the annual general meeting of the Target scheduled for 30 September 2011) and (ii) 15,316 Ordinary Shares at a price per share of 396p under the DRIP Scheme in respect of any dividend declared at the annual general meeting of the Target scheduled for 30 September 2011, on or as soon as reasonably practicable after the payment date for that dividend and in any event by no later than the 6.00 pm on the Business Day immediately preceding the Notification Date);

(h) the payment of any dividends by any member of the Target’s Group to any shareholder of the Target’s Group (apart from other members of the Target’s Group) which in aggregate exceed £1 million; and

(i) amending any existing borrowing facility, arranging and drawing under new (from the date of this Agreement) third party overdraft and committed borrowing facilities by any member of the Target’s Group in respect of an amount of more than £10 million,

provided that any such events, circumstances, occurrences, changes or effects resulting from any of the following shall not be considered when determining whether a Material Adverse Effect has occurred:

(j) changes in general economic or political conditions or the securities markets in general (whether as a result of acts of terrorism, war (whether or not declared), armed conflicts or otherwise) (other than any such matter disproportionately affecting the Target’s Group when compared to other similar professional services businesses generally);

(k) any change resulting from announcement of the transactions under, or the performance of obligations under, this Agreement or the proposal, including any such change relating to the identity of, or facts and circumstances relating to, the Buyer and including any actions by customers resulting from this sub-paragraph (k); and

(l) any hurricane, flood, tornado, earthquake or other natural disaster or any other force majeure event (other than any such matter disproportionately affecting the Target’s Group when compared to other similar professional services businesses generally).

“Notice” has the meaning given in clause 13.1;

“Notification Date” has the meaning given in clause 6.4;

“Offer” means if the Buyer elects to implement the Proposal by way of a contractual offer in accordance with the terms of this Agreement (instead of by way of the Scheme), the offer to be made by the Buyer or a member of the Buyer’s Group to acquire the issued and to be issued ordinary and preference shares capital in the Target, and including, where the context so requires, any subsequent revision, variation, extension or renewal of that offer;

“Ordinary Shares” means ordinary shares of £1.00 each in the capital of the Target;

“Preference Shares” means the 10,000 issued preference shares of £1.00 each in the capital of the Target;

“Proposal” means the proposed recommended acquisition by a member of the Buyer’s Group of the entire issued and to be issued (i) Ordinary Shares, substantially on the terms and subject to the conditions set out in the Scheme Document; and (ii) preference share capital in the Target from the Halcrow Trust;

“Reduction” means the reduction of the share capital of the Target under section 648 of the Act as provided for by the Scheme;

“Reduction Minute” means the minute evidencing the resolution of the Company in respect of the Reduction as approved by the Court as required by section 649 of the Act;

“Reduction Order” means the order of the Court confirming the Reduction;

“Registrar” means the Registrar of Companies for England and Wales;

“Reorganisation Record Time” means the time and date specified as such in the Scheme Document, expected to be 6.00 pm on the Business Day immediately preceding the Second Court Hearing;

“Revised Proposal” means any proposed scheme of arrangement under Part 26 of the Act between the Target and the relevant Target shareholders or Offer made subsequent to the Buyer receiving Notice from the Target of a Competing Proposal, with or subject to any modification, addition or condition approved or imposed by the Court and agreed by the Buyer;

“Scheme” means the scheme of arrangement between the Target and the relevant Target shareholders under Part 26 of the Act proposed to effect the Proposal relating to the acquisition of the Ordinary Shares, the full terms of which will be set out in the Scheme Document, subject to any modification, addition or condition approved or imposed by the Court and agreed in writing by the Buyer;

“Scheme Document” means the document substantially in the form set out in Schedule 1 to be despatched to (amongst others) the Target Shareholders (and holders of any other securities in the capital of the Target to which the Scheme relates) setting out the full terms of the Scheme together with any form of proxy, election, notice, application, affidavit, court document or other document required in connection with the Scheme;

“Scheme Order” means the order of the Court sanctioning the Scheme under Part 26 of the Act;

“Scheme Recommendation” has the meaning given in clause 5.1(a);

“Second Court Hearing” means the hearing by the Court to confirm the Reduction;

“Target Directors” means all the directors on the board of directors of the Target from time to time, with each such director being a “Target Director”;

“Target General Meeting” means the general meeting of the Target’s shareholders to be convened in connection with the Scheme, together with any meeting held as a result of an adjournment or a reconvening of that meeting in accordance with this Agreement;

“Target Resolution” means the resolution to be proposed at the Target General Meeting for the purposes of, amongst other things, approving and implementing the Scheme, the Reduction, such amendments to the Articles of Association as the Buyer and the Target agree and such other matters as may be agreed between the Target and the Buyer and which will form part of the Scheme Document;

“Target Shareholders” means the registered holders of Ordinary Shares from time to time;

“Target Share Plans” means the Halcrow Approved CSOP, the Xxxxxxx XXXX Plan, the Halcrow SIP and the Halcrow Unapproved CSOP;

“Target’s Financial Adviser” means N M Rothschild & Sons Ltd of New Court, St Xxxxxxx’x Xxxx, Xxxxxx, XX0X 0XX;

“Target’s Group” means the Target and each of its subsidiaries and subsidiary undertakings from time to time;

“Target’s Solicitors” means Ashurst LLP of Xxxxxxxxx Xxxxx, 0 Xxxxxx Xxxxxx, Xxxxxx XX0X 0XX;

“Tax” means:

(a) all forms of tax, levy, impost, contribution, duty, liability and charge in the nature of taxation and all related withholdings or deductions of any nature (including, for the avoidance of doubt, National Insurance contribution liabilities in the United Kingdom and corresponding obligations elsewhere); and

(b) all related fines, penalties, charges and interest,

imposed by a Tax Authority;

“Tax Authority” means a taxing or other governmental (local or central), state or municipal authority (whether within or outside the United Kingdom) competent to impose a liability for or to collect Tax;

“Timetable” means the indicative timetable for the Proposal set out in Schedule 2 as it may be reasonably amended from time to time as agreed in writing between the Buyer and the Target;

“Transaction Documents” means the Scheme Document any supplement to it and any other document required for the implementation of the Proposal, including any circulars, forms, notices or announcements that are, or may be, required by the Act or any applicable laws or regulations;

“Trustees” means the trustees of the Halcrow Trust from time to time;

“VAT” means in relation to any jurisdiction within the European Union, the value added tax imposed by the Council Directive of the European Union (2006/112/EC) and any national legislation implementing that directive or its predecessor directives and, in relation to any other jurisdiction, the equivalent value added tax, federal, state or local sales tax or similar tax (if any) in that jurisdiction; and

“Warranty” means a statement set out in Schedule 4 and “Warranties” mean all those statements;

1.2 Interpretation

In this Agreement (but not in the Scheme Document):

(a) any word or expression defined in the Act and not expressly defined in this Agreement has the meaning given in the Act;

(b) a reference to any other document referred to in this Agreement is a reference to that other document as amended, revised, varied, novated or supplemented at any time;

(c) when used in this Agreement, the expressions “acting in concert”, “control” and “offer” shall be construed in accordance with the Code;

(d) a reference to a clause, paragraph or schedule is, unless stated otherwise, a reference to a clause or paragraph of, or schedule to, this Agreement;

(e) a reference in a schedule to a paragraph is, unless otherwise stated, a reference to a paragraph in that schedule or, where that schedule is split into parts, a reference to a paragraph in that part of that schedule;

(f) a reference to any statute or statutory provision is a reference to that statute or statutory provision as re-enacted, re-numbered, amended or extended before the date of this Agreement and includes reference to any subordinate legislation (as re-enacted, amended or extended) made under it before the date of this Agreement;

(g) a reference to a “person” includes any individual, company, corporation, firm, partnership, joint venture, association, state, state agency, institution or trust (whether or not having a separate legal personality);

(h) a reference to a document being in the “agreed form” is a reference to a document in the form and terms approved as an agreed form by or on behalf of each party;

(i) a reference to one gender is a reference to all or any genders;

(j) a reference to a particular time of day is, unless stated otherwise, a reference to that time in London, England;

(k) the expression “connected” with reference to a person or group of persons has the meaning given to it in sections 1122 and 1123 of the Corporation Tax Xxx 0000;

(l) a reference to “including” or “includes” does not limit the scope of the meaning of the words which follow it; and

(m) the expressions “subsidiary undertaking” and “parent undertaking” have the meanings given to them by the Act.

2. IMPLEMENTATION OF THE PROPOSAL BY WAY OF THE SCHEME

2.1 Posting of the Scheme Document

The parties shall procure that, subject to the instructions of the Court and subject to the satisfaction of the conditions set out in clause 11, the Scheme Document is posted to each Target Shareholder other than the Excluded Overseas Shareholders as soon as practical after the date of the first directions hearing or such other time and date as may be agreed in writing by the parties.

2.2 The Buyer’s responsibilities

Except as otherwise provided in this Agreement and subject to the terms of clause 10, the Buyer shall:

(a) promptly provide comments on each draft and revised draft of the Scheme Document provided to it by the Target in accordance with the terms of this Agreement;

(b) procure (so far as it is legally able to do so) that its directors take responsibility for all the information in the Scheme Document relating to the Buyer, the Buyer’s Group, their respective directors, information on the Buyer’s future plans for the Target’s Group, its management and employees, any acquisition financing relating to the Buyer or the Buyer’s Group and form of consideration offered;

(c) undertake to consent to the Scheme and to undertake to the Court to be bound by the terms of the Scheme to the extent that it relates to the Buyer (including the discharge of the consideration due to the shareholders of the Target under the Scheme);

(d) promptly publish and/or post such documents and information as the Court may approve or require from time to time in connection with the proper implementation of the Scheme;

(e) promptly prepare and file any document that is required in order to comply with the requirements of laws in the United States in relation to the issue of securities;

(f) do or procure to be done all such further acts and things and execute or procure the execution of all such other documents as the Target may from time to time reasonably require for the purpose of giving effect to the Scheme or the Proposal; and

(g) where an obligation under this Agreement can only be properly performed by CH2M Hill Acquireco or another member of the Buyer’s Group, the Buyer shall additionally procure that such entity shall effect such performance.

2.3 The Target’s responsibilities

(a) The Target shall only despatch the Scheme Document to its shareholders when:

(i) the irrevocable undertakings referred to in clause 11 have been signed and dated in a form acceptable to the Buyer and have been delivered to the Buyer; and

(ii) the Scheme Document is in a form which is satisfactory to the Buyer and has been approved for release in writing (including confirmation by email) by the Buyer’s Solicitors on behalf of the Buyer (such approval not to be unreasonably withheld (and, for the avoidance of doubt, it will not be reasonable for the Buyer to withhold such approval solely on account of the Cash Consideration being stated to be £5.64 per Scheme Share) or delayed, with a view to ensuring despatch of the Scheme Document in accordance with the Timetable).

(b) Except as otherwise provided in this Agreement, the Target shall, and shall procure (so far as it is legally able) that the other members of the Target’s Group, its relevant professional advisers and the Target Directors assist it to, prepare all such documents and take all such steps as are necessary or desirable to implement the Proposal, subject to the Conditions, in accordance with the Timetable and the terms of the Scheme Document. In particular, but without limitation, the Target shall:

(i) promptly provide comments on each draft and revised draft of the Scheme Document provided to it by the Buyer in accordance with the terms of this Agreement;

(ii) in accordance with the timing agreed between the Buyer and the Target, issue a Part 8 claim form seeking the Court’s permission to convene the Court Meeting and file and settle with the Court such documents as may be necessary in connection with it;

(iii) subject to:

(1) the necessary documents being settled with the Court;

(2) the Court making the order necessary to convene the Court Meeting, and

(3) clause 2.3(a),

in accordance with the Timetable (or as soon as reasonably practicable thereafter) publish and/or post (in the agreed form) the Scheme Document and all other documents that are required to implement the Scheme to the shareholders of the Target and afterwards in a timely manner publish and/or post such other documents and information and advertisements (in each case in the agreed form) as the Court may approve or require, or as may be required by the Act or other applicable laws and regulations, from time to time in connection with the proper implementation of the Scheme;

(iv) convene the Court Meeting and the Target General Meeting to be held immediately after the Court Meeting and, save as set out in clause 4.2, hold the Court Meeting and the Target General Meeting at the time and date for which they have been convened and propose the resolutions in the form and manner set out in, or appended to, the Scheme Document;

(v) keep the Buyer informed, on a regular basis of:

(1) the number of proxy votes received in respect of the resolutions to be proposed at the Court Meeting and at the Target General Meeting;

(2) the identity of the relevant shareholders entitled to vote at the Court Meeting and the Target General Meeting; and

(3) the elections being made by Target Shareholders for shares and/or loan notes in each case made available as consideration pursuant to the Scheme,

and provide the Buyer with such reasonable assistance as it may request to appoint a proxy solicitation agent to facilitate proxy voting by the Target’s shareholders at these meetings (provided that the Buyer has first consulted with the Target in relation to such appointment and taken into account the Target’s reasonable requirements in relation to the same);

(vi) procure that the First Court Hearing takes place in accordance with the Timetable (or as soon as reasonably practicable thereafter and in any case as soon as reasonably practicable after the necessary resolutions have been properly passed at the Court Meeting and the Target General Meeting);

(vii) subject to:

(1) satisfaction or waiver of all Conditions (apart from those set out in paragraph 1 of Schedule 3) before the First Court Hearing, as confirmed by the Buyer under clause 6.4; and

(2) the resolutions to be proposed at the Court Meeting and the Target General Meeting being properly passed,

in accordance with the Timetable (or as soon as practicable thereafter) seek the sanction of the Court to the Scheme at the First Court Hearing and the Reduction at the Second Court Hearing, give such undertakings as may reasonably be required by the Court in connection with the Scheme and take all other action necessary or desirable to make the Scheme effective in accordance with its terms;

(viii) if required by the Court, or if it is necessary to implement the Scheme, reconvene the Court Meeting, the Target General Meeting and/or any other necessary shareholder meetings;

(ix) subject to the Buyer having complied with its obligations under clause 6.2, cause office copies of the Court Orders and Reduction Minute to be filed with the Registrar and, in the case of the Reduction Order, registered by him, with the Registrar as soon as reasonably practicable, and in any event no later than 9.00 am on the Business Day after the day on which the Court confirms the Reduction; and

(x) do or procure to be done all such further acts and things and execute or procure the execution of all such other documents as the Buyer may from time to time reasonably require for the purpose of giving effect to the Proposal.

(i) the Scheme or the Scheme Document;

(ii) the terms of the Proposal;

(iii) the Timetable;

(iv) the resolutions to be proposed at the Court Meeting as set out in the Scheme Document; or

(v) the Target Resolution,

or any arrangements relating to any of them without the prior written consent of the Buyer.

(d) The Target will not be prevented from making an amendment prohibited by clause 2.3(c), if such amendment is required by law or an order or direction of the Court.

(e) The Target must consult the Buyer before it appoints counsel other than Xxxxxx Xxxxxxxx to advise in connection with the Scheme (including the Court Hearings). Save in respect to any matter on which the interests of the Target and the Buyer are in conflict or in relation to matters which are purely procedural in nature, the Target must permit the Buyer and its advisers to attend all conferences and discussions with counsel in relation to the Scheme and any issue arising in connection with it and to communicate directly with the Target’s counsel (with the Target’s advisers present) in respect of the implementation of the Scheme.

(f) The Target shall procure (so far as it is legally able) that the Target Directors accept responsibility for all of the information in the Scheme Document except as the case may be for the information for which the Buyer accepts responsibility pursuant to clause 2.2.

(g) The Target and the Buyer agree to the proposals set out at Schedule 6 in relation to outstanding rights under the Halcrow Option Plans and the Halcrow SIP.

(h) The Target and the Buyer agree that the articles of association of the Target will be amended so that any Ordinary Shares issued after the Reorganisation Record Time pursuant to the exercise or vesting of options or awards under the Target Share Plans will be acquired by the Buyer (or another member of the Buyer’s group) on the same terms as were available to other Target shareholders under the Scheme.

(i) If requested by the Buyer for the purposes of implementing the Scheme, the Target shall issue one Ordinary Share at par to any person nominated by the Buyer at the time requested by the Buyer.

3. DOCUMENTATION

3.1 Obligations relating to documentation

Each of the Buyer and the Target undertakes to:

(a) keep the other informed, and consult with the other, as to the progress being made on preparation of any documents and the implementation of the Proposal; and

(b) offer and afford all reasonable co-operation, information and other assistance as may be requested by the other in respect of the preparation of all Transaction Documents, including providing the other party with all information about itself, its Group and its directors as the other party may reasonably request and which is required for inclusion in such documents,

in each case, in a timely manner in order that the Proposal can be implemented in accordance with the Timetable and the terms of the Scheme Document, so far as is reasonably practical.

3.2 Accuracy and quality of information

The Target and the Buyer undertake to each other that the Transaction Documents will be prepared to the highest standards of care and accuracy and to use all reasonable endeavours to ensure that all information contained in such documents is adequately and fairly presented.

3.3 Copies of Target documentation

Subject to applicable legal and regulatory requirements, and to the terms of clause 14, the Target shall promptly provide the Buyer with a copy of any document, circular, form, notice, announcement or communication made or issued by it or on its behalf with or to Target shareholders or any class of them, participants in the Target Share Plans or any class of them, the Court and any other regulatory body.

4. REVISIONS TO THE PROPOSAL

4.1 Amendments or revisions to the Proposal

The Buyer and the Target shall take all steps that are reasonably necessary to implement any revision or amendment made in accordance with the terms of the Agreement to the Proposal (whether implemented by way of scheme of arrangement, offer or otherwise).

4.2 Postponement of shareholder meetings or Court Hearings

In the event that the Buyer and the Target agree that as a result of a legal or regulatory requirement (as evidenced by independent legal advice) or in order not to prejudice the likelihood of the Scheme being sanctioned by the Court, it is necessary or desirable to postpone or adjourn the Court Meeting, the Target General Meeting or a Court Hearing, then the parties will together use all reasonable endeavours to postpone or adjourn the relevant event to a date agreed between them or, failing such agreement, to the twentieth Business Day after the scheduled date (or in each case the closest date to such dates permitted or granted by the Court).

4.3 Buyer may elect to proceed by way of Offer

The Buyer reserves the right and may elect at any time, with the prior written consent of the Target, to implement the Proposal by way of an Offer, whether or not the Scheme Document has been despatched, provided that the Offer is made on terms that the Buyer reasonably considers are at least as financially favourable to the shareholders and the option holders of the Target as the terms of the Scheme and is otherwise on terms to which the Target has consented.

4.4 Effect of election to proceed by way of Offer

If the Buyer elects to implement the Proposal by way of an Offer, clause 2 (except clause 2.2(a)) will cease to apply, and the other provisions of this Agreement, to the extent applicable to the implementation of the Offer, will apply mutatis mutandis to such Offer.

5. RECOMMENDATION

5.1 The Scheme Recommendation

Subject to clause 5.2:

(a) the Target warrants to the Buyer that the Target Directors have resolved that they will unanimously and without qualification recommend to the shareholders of the Target to vote in favour of the Target Resolution and any resolutions required to

approve and implement the Scheme at the Court Meeting (together the “Scheme Recommendations”); and

(b) the Target shall procure that the Target Directors will give the Scheme Recommendation and will not at any time withdraw, modify or adversely qualify or amend the Scheme Recommendations.

5.2 Clause 5.1 not to apply in certain circumstances

(a) The Target’s obligations under clause 5.1 will cease to apply if the Target Directors take legal advice in relation to their fiduciary duties which states that to give such Scheme Recommendations or to fail to withdraw, modify or adversely qualify either or both of them would be a breach of their fiduciary duties to the Target.

(b) The obligations of the Target under clause 5.1 are without prejudice to its obligations under clause 10.

5.3 Target’s obligations in the event of withdrawal or modification of Scheme Recommendation

Save for its obligations under clause 5.1, all of the obligations of the Target under this Agreement will continue after the Target Directors withdraw or modify the Scheme Recommendations and until such time as this Agreement is terminated in accordance with clause 12.

6. CONDITIONS

6.1 Particular Conditions

The references to the Condition in this clause 6 are to the Condition set out in paragraph 2 of Schedule 3 and not, for the avoidance of doubt, the Conditions set out in paragraph 1 of Schedule 3.

6.2 Scheme is conditional upon the Condition being satisfied or waived by the Buyer

The Scheme is conditional upon the Condition being satisfied or waived by the Buyer, by no later than 31 December 2011 or such later date (if any) as the Buyer and the Target may agree and (if required) the Court may approve (the “Longstop Date”). If the Condition is not satisfied or waived by the Buyer by the Longstop Date, the Scheme shall lapse and shall be terminated. The Target shall only seek the sanction of the Scheme by the Court if the Buyer provides (or is deemed to provide pursuant to clause 6.4) written confirmation to the Target that the Condition where capable of satisfaction is satisfied or waived by the Buyer.

6.3 The Buyer and the Target to keep each other informed

The Buyer and the Target shall keep each other promptly informed of developments which are material to the satisfaction of the Condition. For this purpose, the knowledge of the Target shall be deemed to be the actual knowledge of the persons listed in schedule 5.

6.4 Notification of satisfaction or waiver of Condition

The Buyer shall, before 6:00 p.m. on the Business Day prior to the scheduled date of the First Court Hearing (the “Notification Date”), confirm to the Target that it has waived or treated as satisfied or, subject to clause 6.5, invoked or treated as incapable of satisfaction the Condition. If the Buyer fails to provide such confirmation before 6.00 p.m.

on the Notification Date, the Buyer shall be deemed to have waived or treated as satisfied the Condition.

6.5 Parties to notify one another when the Condition may be invoked

If either the Buyer or the Target becomes aware of any fact, matter or circumstance indicating that the Condition may be invoked it must promptly notify the other. If the Buyer and the Target agree that it would be appropriate to postpone the First Court Hearing and, if reasonably considered necessary, the Second Court Hearing then the Buyer and the Target must use their reasonable endeavours to procure that the First Court Hearing and, if reasonably considered necessary, the Second Court Hearing are postponed for such period as the Buyer and the Target may reasonably agree to allow for the investigation and/or resolution of such fact, matter or circumstance. Following the conclusion of such investigation and/or resolution, the Buyer shall either confirm to the Target that the Condition has been satisfied or waived or invoke the Condition.

6.6 Provision of information

Nothing in this clause or this Agreement shall require any party to disclose any information which would result in it or another member of its Group breaching any law, regulation or court order.

7. COMPETITION REGULATION

Nothing in this Agreement will require the Target to take any action that would or could reasonably be regarded as a breach of any law or regulation, including any competition law or regulation.

8. CONDUCT OF THE TARGET AND ITS BUSINESS

Conduct of the Target’s business

8.1 Before the earlier of the Effective Date and termination of this Agreement in accordance with its terms, the Target shall not, and shall procure that no member of the Target’s Group will, without the prior written consent of the Buyer:

(a) carry on its business other than in the ordinary and usual course as conducted prior to the date of this Agreement and in all material respects consistent with past practice;

(b) unless in accordance with the terms of any existing arrangements entered into prior to the date of this Agreement and Disclosed to the Buyer, commence any negotiations or enter into any binding commitments in connection with the acquisition or disposal of its business or any asset with a book value of £500,000 or more, or which encumbers any such asset;

(c) merge or consolidate with, purchase an equity interest in or a portion of the assets of, or acquire by any other manner, any business, body corporate, partnership interest, association or other business organisation or division thereof which, in each case, might reasonably be regarded as material in the context of the Target’s Group;

(d) increase net total borrowing facilities or enter into any new loan agreement or amend the terms of any existing loan facility;

(e) enter into any new guarantees with any bank or other financial institution save under existing arrangements at the date of this Agreement;

(f) amend the terms of any existing borrowing facilities or existing security agreement or arrangement or grant any security or cancel any facilities available to it or them, in each case other than in the ordinary course of business;

(g) save as may be required in connection with the Proposal or the 4p per ordinary share dividend to be proposed by the Target’s board at the annual general meeting on 30 September 2011 on all ordinary shares provided that the Trustees waive their right to such dividend on their ordinary shares, recommend, declare, pay or make any proposal for the recommendation, declaration or payment of any dividend, bonus or other distribution (whether in cash, shares or other property) to its shareholders;

(h) allot or issue, or agree to allot or issue, any share capital or any instrument or security convertible or exchangeable into share capital (except (i) to satisfy the valid vesting of any options or awards under the Target Share Plans granted before the date of this Agreement (including, for the avoidance of doubt, any dividend shares awarded under the Halcrow SIP following the annual general meeting of the Target scheduled for 30 September 2011) and (ii) 15,316 Ordinary Shares at a price per share of 396p under the DRIP Scheme in respect of any dividend declared at the annual general meeting of the Target scheduled for 30 September 2011, on or as soon as reasonably practicable after the payment date for that dividend and in any event by no later than the 6.00 pm on the Business Day immediately preceding the Notification Date);

(i) issue or grant any options or awards under any employee share plans or adopt or amend any of its employee share plans or any other employee benefit, bonus, profit sharing or incentive or retention scheme;

(j) save for payments to certain individual employees in an amount not more than £100,000 (exclusive of any tax and national insurance contributions payable on such amounts) plus such amounts as may be required in order to reimburse Target Directors for the P11 D charge individually incurred in respect of the legal fees of Xxxxxxx Xxxxx LLP in connection with the advice provided to Target Directors with respect to the Target Directors’ irrevocable undertakings and this Agreement, not make any bonus, incentive or retention payments other than: (i) in the ordinary course and in a manner consistent with past practice; or (ii) as required pursuant to contractual arrangements in place at the date of this Agreement and, in each case, as Disclosed to the Buyer;

(k) enter into any arrangements with the trustees of any pension scheme, in which it participates, or pay employer contributions to such scheme other than those employer contributions agreed with the trustees before the date of this Agreement and Disclosed to the Buyer, except as required by law or regulation or the rules of any such scheme;

(l) repay, redeem or repurchase any of the share capital in the Target or any member of the Target’s Group whether in connection with any existing share buy-back scheme or otherwise, save as is required as part of the Proposal or the Scheme (including in particular a court sanctioned reduction of share capital);

(m) pay fees of more than £3,300,000 (exclusive of VAT) in aggregate to its advisers and those of the Target Directors in connection with the implementation of the Proposal;

(n) amend the memorandum or articles of association of any member of the Target’s Group other than such changes as are customary in connection with a scheme of arrangement involving a company which has outstanding share options or may be

reasonably required in connection with the implementation of the Proposal or the Scheme;

(o) undertake any material commitment or enter into any contract or arrangement in each case outside the ordinary course of business and which is inconsistent with past practice, provided that no consent shall be required if any such material commitment is being entered into in competition with the Buyer or any member of the Buyer’s Group;

(p) terminate any Material Contract or take any step that the Target should reasonably be aware may entitle or may otherwise lead to another party terminating any Material Contract (as defined in Schedule 4);

(q) transfer any asset to, or assume, indemnify or incur any liability for, the benefit of any Target Shareholder, save in relation to any arrangements existing at the date of this Agreement between the Target or any member of the Target’s Group and the Trustees and then only as agreed between the Target and the Buyer;

(r) waive any sum payable by, or liability of, any Target Shareholder either wholly or partially, save to the extent that such liability or sum is required as part of the Proposal or the Scheme;

(s) undertake any transactions between any Target Shareholder and any member of the Target’s Group at an undervalue or otherwise other than on arm’s length terms save as agreed between the Buyer and the Target in connection with any transactions between the Target’s Group and the Trustees; or

(t) publicly announce or announce to a third party an intention to agree to, or do, any of the above.

8.2 Conduct of the Target

The Target:

(a) shall, and shall procure that any member of the Target’s Group will, co-operate with and assist the Buyer (at the Buyer’s request) to approach and negotiate with any party to an agreement or arrangement with the Target or any member of the Target’s Group if:

(i) such party alleges that it will or is likely to be prejudiced by the Proposal or its implementation; or

(ii) the Proposal or the implementation of the Proposal will result in a breach of, or give such party a right to terminate, modify or accelerate payment or repayment under, such agreement or arrangement,

and shall, and shall procure that any member of the Target’s Group shall, take all reasonable steps to assist the Buyer to address any such issues insofar as they relate to the conduct of business following the implementation of the Proposal;

(b) shall (subject to law and regulation (including that imposed or declared by any Authority)) consult with the Buyer (provided that the Buyer shall provide any views promptly and shall act reasonably in terms of any suggestions made) and keep the Buyer informed with regard to all developments specifically relating to the Target’s Group which have a material impact on the business of the Target’s Group as a whole and which are outside the ordinary course of business including, without limitation:

(i) commencing any negotiations or enter into any binding commitments in connection with any capital expenditure in excess of £250,000 per item and £500,000 in aggregate, in each case exclusive of VAT; and

(ii) settling or instituting any material legal, regulatory or arbitral proceedings, claims or disputes, save where effecting such consultation or providing such information would in the view of the Target (having taken legal advice) risk compromising legal privilege;

(c) shall, and shall procure that each member of the Target’s Group will, comply in all material respects with any applicable legislation or regulations of any jurisdiction in which it operates;

(d) shall, and shall procure that any member of the Target’s Group will:

(i) to the extent that such terms are readily available in the market for insurance, maintain in force insurance policies that have limits of indemnity at least equal to, and on terms which are no less favourable than, the insurance policies maintained by it at the date of this Agreement; and

(ii) pay all premiums in respect of the insurance policies of the Target’s Group;

(e) shall promptly notify the Buyer as soon as reasonably practicable if it becomes aware:

(i) of any fact, matter, circumstance or event that would or may be likely to constitute a material breach of a Warranty; and

(ii) of any fact, matter, circumstance or event that would or maybe likely to constitute a breach of this Agreement including any Condition;

(f) shall, if it or any member of the Target’s Group or their respective advisers has any formal communication with or from any Authority in respect of any matter of which any Target Director is actually aware and which could have a material adverse impact on the Proposal, or a material adverse impact on the business or future operations of the Target’s Group taken as a whole, as soon as reasonably practicable after such communication and subject to law, regulation and any confidentiality restrictions imposed by such Authority, inform the Buyer of such communication and provide copies of any written documents and/or correspondence;

(g) shall, as soon as reasonably practicable, inform the Buyer if it or any member of the Target’s Group has been served a notice of resignation by any director or employee who has a basic salary in excess of £150,000;

(h) save as may be required under any contractual obligations on a member of the Target’s Group as at the date of this Agreement and as Disclosed to the Buyer, shall not, and shall procure that no member of the Target’s Group will, significantly expand its operations in, or enter into any agreement or arrangement that will require it to operate in Burma (Myanmar), Belarus, Democratic Republic of Congo, Cuba, Iran, Iraq, Ivory Coast (Cote d’Ivoire), Liberia, Libya, North Korea, Somalia, Sudan, Syria or Zimbabwe;

(i) shall provide the Buyer and its directors, employees, advisors, agents and representatives with such information as is reasonably requested in relation to the Target and the Target’s Group and access to, and the assistance of, such of the

Target’s management and professional advisers is reasonable and proportionate given the subject matter requiring access, subject in each case to appropriate safeguards being put in place to protect competitively sensitive information but in any case only provided that: (i) the Buyer has given reasonable notice to the Target of any request for information or access, (ii) that any access is only at times between 9 am and 5 pm on a Business Day in London or such other times as may be agreed between the Target and the Buyer acting reasonably, and (iii) the Buyer has evidenced to the Target that any nominees of the Buyer who are to be given access to Target’s Group information or management are fully briefed of the confidential nature of any information or discussions, the potential for breach of anti-trust laws should certain information be shared between the parties (even accidentally) and have agreed to comply with any rules governing the behaviour of visitors on the property of the Target’s Group; and

(j) shall as soon as practicable and in any event prior to the Effective Date provide the Buyer with copies of amendments to the Material Contracts where such amendment would have an impact on the revenue of that project of £500,000 or more;

(k) shall not, and shall procure that no member of the Target’s Group will, take any action or omit to take any action which would or could reasonably be expected to frustrate or delay the Scheme or otherwise have the effect of preventing shareholders of the Target from deciding on the Proposal or the Scheme on its merits.

8.3 Compliance process

The Target shall ensure, and shall ensure that each relevant member of the Target’s Group ensures, that the processes for monitoring and ensuring compliance with the requirements imposed on the Target’s Group by this clause 8, identifying any breach of the Warranties and monitoring the occurrence of an event or circumstance which could cause the Condition not to be satisfied set out in Appendix 3 are implemented and complied with in accordance with the terms set out in Appendix 3 until the Notification Date.

9. TARGET’S WARRANTIES AND UNDERTAKINGS

9.1 Buyer’s and Target’s warranties

Each of the parties warrants to the other that, as at the date of this Agreement:

(a) it is properly incorporated and validly existing under the laws of the jurisdiction of its incorporation and it has the requisite power and authority to enter into and perform this Agreement;

(b) this Agreement will, when entered into, constitute its valid, binding and enforceable obligations in accordance with its terms; and

(c) the execution and delivery of, and performance of its obligations under, this Agreement, the Proposal and the Scheme will not result in a breach of or constitute a default under (i) any order, judgment or decree of any court or governmental agency to which it is a party or by which it is bound; (ii) any of its constitutional documents; or (iii) any agreement by which it is bound other than a breach or default which would not affect its ability to comply with its obligations under this Agreement.

9.2 Target’s Warranties

Subject to and on the basis of the provisions of clauses 9.5 and 9.6, the Target warrants to the Buyer in the terms of the Warranties as at the date of this Agreement.

9.3 Buyer’s Undertakings

(a) The Buyer undertakes to procure that CH2M Hill Acquireco (or another member of the Buyer’s Group, if appropriate) shall be put in sufficient immediately available and cleared funds in order to comply with its obligations to fund cash consideration following the Effective Date in accordance with the terms of the Scheme and on the basis described in the Scheme Document.

(b) The Buyer undertakes that it shall take all such action as is necessary in order to ensure that loan notes and the ordinary shares in the capital of the Buyer shall be issued in accordance with the terms of the Scheme and on the basis described in the Scheme Document.

9.4 Warranties are separate statements

Each Warranty is a separate and independent statement and (except as expressly provided by this Agreement) is not limited or otherwise affected by any other Warranty or by any other provision of this Agreement.

9.5 Warranties qualified by disclosure

The Warranties are qualified by each matter that is Disclosed.

9.6 Target’s knowledge

Where a Warranty is qualified by the expression “so far as the Target is aware” or “to the best of the Target’s knowledge, information or belief” or a similar expression, the Target is deemed to have knowledge of the actual knowledge of the persons listed in schedule 5, having made due and careful enquiries of each other.

9.7 Release of liability and indemnity

(a) For the purpose of this clause 9.7:

(i) “Claims” means all claims and potential claims of whatever kind, whether arising in contract, tort, restitution, equity, statute or otherwise, present or future, whether or not presently known or contemplated and even if the availability of the claims arises from or is affected by any change in the law or other change of circumstance of any sort;

(ii) “Losses” means all losses, damage, penalties, sums payable, liabilities, charges, interest and reasonable costs and expenses (including, without limitation, all legal fees and disbursements) properly incurred;

(iii) “Released Parties” means any and all of the Target Directors, any shareholder (including the Halcrow Trust), option holder, manager or employee of any member of the Target’s Group and “Released Party” shall be construed accordingly;

(iv) “Released Party Claims” means all Claims against any Released Party arising out of, or relating to this Agreement or any aspect of the Proposal (or Revised Proposal, as the case may be);

(v) “Target Group Claims” means all Claims from the date of this Agreement until the Effective Date only for recovery of Warranty Losses against any member of the Target’s Group; and

(vi) “Warranty Losses” means all Losses to any member of the Buyer’s Group arising from the Buyer’s reliance on the Warranties, any breach of the Warranties, or for the preparation or content of the disclosures (whether general or specific and whether in writing or otherwise) made against any Warranty.

(b) Subject to clause 9.7(d), the Buyer hereby agrees:

(i) to a full and final waiver and release of all Released Party Claims and all Target Group Claims by any member of the Buyer’s Group;

(ii) that the members of the Buyer’s Group shall not commence any legal or other proceeding of any nature in any jurisdiction in respect of any Released Party Claims or Target Group Claims;

(iii) to indemnify and keep indemnified:

(1) each of the Released Parties in respect of any and all Losses which he, she or it suffers or incurs in any jurisdiction arising directly or indirectly out of, or in respect of, any Released Party Claims or any breach of clause 9.7(b)(iv) by:

(a) any member of the Buyer’s Group (including, without limitation, any new parent or subsidiary undertakings which come into existence after the date of this Agreement) and any of their respective officers, employees, directors and agents; and/or

(b) any insurer pursuant to the terms of any warranty and indemnity protection insurance purchased by the Buyer in relation to this Agreement or any other aspect of the Proposal (or Revised Proposal, as the case may be); and

(2) each member of the Target’s Group in respect of any and all Losses which it suffers or incurs in any jurisdiction arising directly or indirectly out of, or in respect of, any Target Group Claims; and

(iv) to procure that each member of the Buyer’s Group (including, without limitation, any new parent or subsidiary undertakings which come into existence after the date of this Agreement) and each of their respective officers, employees, directors and agents, shall at all times comply with the provisions of this clause 9.7(b).

(i) to a full and final waiver and release of all Released Party Claims;

(ii) that it shall not commence any legal or other proceeding of any nature in any jurisdiction in respect of any Released Party Claims;

(iii) to indemnify and keep indemnified each of the Released Parties in respect of any and all Losses which he, she or it suffers or incurs in any jurisdiction arising directly or indirectly out of, or in respect of, any Released Party Claim or any breach of clause 9.7(c)(iv) by any member of the Target’s Group (including, without limitation, any new parent or

subsidiary undertakings which come into existence after the date of this Agreement) or any of their respective officers, employees, directors and agents; and

(iv) to procure that each member of the Target’s Group (including, without limitation, any new parent or subsidiary undertakings which come into existence after the date of this Agreement) and each of their respective officers, employees, directors and agents, shall at all times comply with the provisions of this clause 9.7(c).

(d) Nothing in this clause 9.7 shall exclude any liability:

(i) for fraud or fraudulent misrepresentation;

(ii) for breach of any fiduciary duties owed by the Released Parties to any member of the Target’s Group or where this would otherwise be contrary to the Act;

(iii) of the Released Parties in relation to the responsibility statements or irrevocable undertakings they sign in relation to the Proposal, the information contained in the Scheme Document for which they are responsible or the statement set out in paragraph 1 of Part 10 of the Scheme Document; or

(iv) where the relevant conduct of the Released Parties occurs after the Effective Date.

(e) Nothing in clause 9.7(c) shall affect any rights which any member of the Target’s Group may have against a Released Party pursuant to or in connection with any service contract, letter of appointment or contract for services between that Released Party and a member of the Target’s Group.

(f) Notwithstanding anything to the contrary in this Agreement, each of the provisions in this clause 9.7 shall be given irrevocably and unconditionally and on the basis that they shall survive the termination of this Agreement.

10. COMPETING OFFERS

10.1 Target’s obligations in event of a Competing Proposal

If the Target is approached by any person(s) who might reasonably be expected to make a Competing Proposal, the Target shall promptly give notice of that fact to the Buyer. Such notice shall include the identity of the person(s) involved and, if different, on whose behalf it has been made, the material terms and conditions being, or expected to be, offered, the nature of the consideration and the price, price range or total consideration being offered. The Target will notify the Buyer of any changes to the above matters in relation to any Competing Proposal details of which have previously been notified to the Buyer.

10.2 Revised Proposal

If the Buyer states that it is its intention to improve the terms of the Proposal:

(a) to provide for a cash price per Target Share which is equal to or in excess of the price per Target Share under the relevant Competing Proposal; or

(b) so that such terms, in the reasonable opinion of the Target’s Financial Advisers, otherwise provide financial value to the Target’s shareholders which is equal to or in excess of the value of the Competing Proposal,

the Target shall procure that the Target Directors unanimously and without qualification recommend such Revised Proposal.

10.3 Information disclosure

Any information given to any person who might be reasonably expected to make a Competing Proposal shall be given equally and promptly to the Buyer.

11. CONDITIONALITY OF BUYER’S OBLIGATIONS

The Buyer’s obligations under this Agreement (except clause 9.7) are conditional upon the following:

(a) the Buyer receiving signed and dated irrevocable undertakings in the form set out in Appendix 1 to this Agreement from each of the Target Directors and (with the modifications agreed between the parties) Xxx Xxxx;

(b) the Buyer receiving an irrevocable undertaking from a Target Director including an irrevocable commitment to elect for more than one share in the common stock of the Buyer;

(c) the Buyer receiving a signed and dated irrevocable undertaking in the form set out in Appendix 2 to this Agreement from the Halcrow Trust; and

(d) the Trustees entering into an agreement in the agreed form to sell all of the Preference Shares to the Buyer for an aggregate consideration of £10,000.

12. TERMINATION

12.1 Events that terminate this Agreement

This Agreement will terminate with immediate effect on the earliest to occur of the following:

(a) agreement in writing between the Buyer and the Target at any time;

(b) the irrevocable undertakings and Trustees’ agreement required by clause 11 not being received by the Buyer in accordance with that clause on the date of this Agreement;

(d) the Target’s shareholders failing to pass the resolution to approve the Scheme proposed at the Target Court Meeting and/or the Target Resolution at the Target General Meeting;

(e) the Court Order not being granted;

(f) the Buyer giving notice to the Target of its intention to terminate as a result of:

(i) any Condition becoming incapable of satisfaction by no later than the Longstop Date or being invoked so as to cause the Scheme not to proceed and the Buyer not waiving such Condition; or

(ii) a withdrawal, modification of or adverse qualification to the Scheme Recommendation by the Target Directors or a determination by the Target not to proceed with the Scheme; or

(iii) the Court Meeting, the Target General Meeting or a Court Hearing being postponed or adjourned under the provisions of clause 4.2, and the

relevant Court Meeting, Target General Meeting or Court Hearing not being in accordance with the provisions of that clause; or

(g) the Scheme lapsing or being withdrawn or otherwise ceasing to be capable of becoming effective or the Scheme becoming effective.

12.2 Effect of termination

On termination of this Agreement in accordance with clause 12.1, the parties will immediately be released from their respective obligations under this Agreement, except that:

(a) on and after termination of this Agreement, each party shall continue to comply with clauses 9.7, 14 and 18 to 28 inclusive, and each provision of this Agreement necessary for a party (or the Released Parties, in the case of clause 9.7) to enforce those clauses;

(b) termination of this Agreement will not affect a party’s right to claim for a breach of the other party’s obligations in relation to this Agreement if that breach occurred before termination and each party shall continue to comply with each provision of this Agreement necessary for a party to enforce such a right.

13. NOTICES

13.1 Method of giving a notice or other communication

A notice, permission or other communication under or in connection with this Agreement (a “Notice”) shall be:

(a) in writing;

(b) in English;

(d) delivered by hand or sent by recorded delivery post or by fax to the relevant party to the contact, address and fax number set out in clause 13.3 (or if otherwise notified by the relevant person under clause 13.7 to such other contact, address or fax number as has been so notified).

13.2 Notice not properly given unless copy also given

In the case of Notices only, a copy of any Notice sent to a party under or in connection with this Agreement shall be delivered by hand or sent by recorded delivery post or by fax to the person (“copy recipient”) indicated in clause 13.3, to the contact, address and fax number set out in clause 13.3 (or if otherwise notified by the relevant person under clause 13.7 to such other copy recipient or such other contact, address or fax number as has been so notified). A Notice given to a party is not duly given until both the notice and the copy is given in accordance with this clause 13.

13.3 Addresses

The contact, address and fax number for each party and copy recipient is (unless otherwise notified under clause 13.7):

(a) in the case of the Target, as follows:

Address: Xxxx Xxxxx, 00 Xxxxx Xxxxx, Xxxxxx, X0 0XX

Fax: + 00 (0)00 0000 0000

Attention: Xxxx Xxxxxx and Xxxxxxx Xxxx,

with, in the case of Notices only, a copy to the Target’s Solicitors, as follows:

Address: Xxxxxxxxx Xxxxx, 0 Xxxxxx Xxxxxx, Xxxxxx XX0X 0XX

Fax: x00 (0)00 0000 0000

Attention: Xxxxxxx Xxxxx; and,

(b) in the case of the Buyer, as follows:

Address: 0000 X.Xxxxxxx Xxxxxx, Xxxxxxxxx, XX 00000, X X Xxx 00000,

Xxxxxx, XX 00000-0000, XXX

Fax: + 0000 000 0000

Attention: Xxxxxxxx XxXxxx and Xxxxx Xxxxx

with, in the case of Notices only, a copy to the Buyer’s Solicitors, as follows:

Address: Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxx, Xxxxxx, XX0X 0XX

Fax: x00 000 000 0000

Attention: Xxxxxx Xxxxx

13.4 Time that notice or communication is deemed given

Unless there is evidence that it was received earlier, and except as set out in the final sentence of clause 13.2, a Notice or other communication that complies with clause 13.1 and 13.2 is deemed given:

(a) if delivered by hand, at the time of delivery, except as provided in clause 13.5;

(b) if sent by recorded delivery post, at 9.00 am on the second Business Day after the day of posting;

13.5 Effect of delivery by hand or fax after 6.00 pm or on a non-Business Day

(a) If deemed delivery under clause 13.4 of a Notice or other communication delivered by hand or sent by fax occurs before 9.00 am on a Business Day, the Notice or other communication is deemed delivered at 9.00 am on that day.

(b) If deemed delivery under clause 13.4 of a Notice or other communication delivered by hand or sent by fax occurs after 6.00 pm on a Business Day or on a day which is not a Business Day, the Notice or communication is deemed to have been given at 9.00 am on the next Business Day.

13.6 Relevant time of day

In this clause, a reference to time is to local time in the country in which the recipient of the notice or communication is located.

13.7 Notification of change in notice details

A party may notify the other party of a change to any of the details for it or its copy recipient referred to in clause 13.2. The Notice shall comply with the terms of clause 13.1

and 13.2 and shall state the date on which the change is to occur. That date shall be on or after the fifth Business Day after the date on which the Notice is delivered.

14. ANNOUNCEMENTS

14.1 Prohibition on making announcements

Subject to clauses 14.2 to 14.5, neither party may:

(a) make or send; or

(b) permit another person to make or send on its behalf,

a public announcement, statement or circular regarding the Proposal including for the avoidance of doubt any such announcement or statement to the employees of the Target’s Group, unless it has first obtained the other party’s permission (not to be unreasonably withheld or delayed).

14.2 The Scheme Document

Clause 14.1 does not apply to the Scheme Document provided that the requirements of clause 11 have been satisfied and the Buyer’s Solicitors have given their written consent on behalf of the Buyer to publication of the Scheme Document as required by clause 2.3(a).

14.3 Circumstances in which permission of other party is not required

Clause 14.1 does not apply to an announcement or circular which is required by:

(a) applicable law, a court of competent jurisdiction or a competent judicial, governmental, supervisory or regulatory body; or

(b) a rule of a stock exchange or listing authority on which the shares or other securities of a party are listed or traded.

14.4 Consultation where permission of other party is not required

If either party is required to make or send an announcement or circular in the circumstances contemplated by clause 14.3 that party shall, before making or sending the announcement or circular, consult with the other and take into account the other’s requirements as to the timing, content and manner of making the announcement or circular to the extent it is permitted to do so by applicable law or regulation and to the extent it is reasonably practicable to do so.

14.5 Effect of Competing Proposal

The obligations of the parties under clauses 14.1 to 14.4 cease to apply to the Buyer if there is a Competing Proposal.

15. EXCLUSIVITY

The Target agrees (subject to the relevant provisions of this Agreement) for a period from and including the date of this Agreement to and 11.59 p.m. (London time) on 31 December 2011:

(a) not to enter into or continue any discussions or negotiations with any other party relating to the possible purchase of shares in or businesses or assets of any member of the Target’s Group other than in the ordinary course of business or other than pursuant to arrangements Disclosed to the Buyer at the date of this Agreement;

(b) not to solicit either directly or indirectly, and to procure that its directors, employees, agents and advisers and any other member of the Target shall not so solicit, interest from any other party in relation to the sale of any such shares or business or assets of any member of the Target’s Group other than in the ordinary course of business or other than pursuant to arrangements Disclosed to the Buyer at the date of this Agreement;

(c) not to issue or permit the issue of shares or other securities in any member of the Target’s Group to any other party except pursuant to the exercise of options under the Target Share Plans;

(d) not to grant any other party an option or pre-emption right over the shares, business or assets of any member of the Target’s Group except pursuant to the grant of options in the ordinary course under the Target Share Plans; and

(e) not to provide information to anyone except the Buyer (or as required by law or regulation or to the Target’s shareholders, advisers, representatives, employee benefit trusts or pension trustees in the ordinary course or in relation to the Proposal by the Buyer) relating to the possible purchase of shares in or businesses or assets of any member of the Target’s Group other than in the ordinary course of business or other than pursuant to arrangements disclosed to the Buyer at the date of this Agreement.

16. CONFIDENTIALITY AGREEMENT

The terms of the Confidentiality Agreement remain in force in accordance with its terms (as varied or amended by this Agreement). In the event of any inconsistency between the terms and obligations of this Agreement and the Confidentiality Agreement, the terms and obligations of this Agreement will prevail.

17. FURTHER ASSURANCE

The Target shall, and shall ensure that any necessary third party will, execute all documents and do all acts and things as the Buyer reasonably requires for the purpose of giving the Buyer the full benefit of all the provisions of this Agreement.

18. ENTIRE AGREEMENT

18.1 Entire agreement

The Confidentiality Agreement and this Agreement together set out the entire agreement between the Target and the Buyer in respect of the Proposal and supersede any previous agreement or arrangement between the Target and the Buyer relating to the subject matter of the Proposal. The provisions of clause 9.7 set out the entire agreement between the Buyer and each of the Released Parties (as defined in clause 9.7(a)) in respect of the subject matter set out in that clause and supersede any previous agreement or arrangement between the Buyer or any member of the Target’s Group with each Released Party relating to the subject matter of clause 9.7, including without limitation any such provisions contained within any employment contract or service agreement between any Released Party who is a director, manager, employee or consultant and any member of the Target’s Group.

18.2 No reliance on a statement outside this Agreement

Each party agrees and that it has not relied on or been induced to enter into this Agreement or any document referred to in it by a warranty, statement, representation or undertaking which is not expressly included in this Agreement or the relevant document.

18.3 No remedy for a statement outside this Agreement

Neither party has any claim or remedy in respect of a warranty, statement, misrepresentation (whether negligent or innocent) or undertaking made to it by or on behalf of the other party in connection with or relating to the Proposal which is not expressly included in this Agreement or a document referred to in it.

18.4 Clause does not apply in the event of fraud

Nothing in this clause 18 limits or excludes liability arising as a result of fraud, fraudulent or wilful concealment or wilful misconduct.

19. REMEDIES

(a) Without prejudice to any other rights and remedies which any party may have, each party acknowledges and agrees that damages would not be an adequate remedy for any breach by any party of the provisions of this Agreement and any party will be entitled to seek the remedies of injunction, specific performance and other equitable relief (and the parties will not contest the appropriateness or availability thereof), for any threatened or actual breach of any such provision of this Agreement by any party and no proof of special damages will be necessary for the enforcement by any party of the rights under this Agreement.

(b) The rights and remedies provided by this Agreement are cumulative and do not exclude any rights and remedies provided by law.

(c) Notwithstanding the remainder of this clause 19 and provided that all remedies shall be available in the case of fraud, fraudulent or wilful concealment, the Buyer agrees that it shall not exercise any right of rescission or similar right or otherwise terminate this Agreement for repudiatory breach, save in accordance with clause 12.

20. WAIVER

Failure to exercise, or a delay in exercising, a right or remedy provided by this Agreement or by law does not constitute a waiver of the right or remedy or a waiver of other rights or remedies. No single or partial exercise of a right or remedy provided by this Agreement or by law prevents the further exercise of the right or remedy or the exercise of another right or remedy. A waiver of a breach of this Agreement does not constitute a waiver of a subsequent or prior breach of this Agreement.

21. INVALIDITY

If a provision of this Agreement is found to be illegal, invalid or unenforceable, then to the extent it is illegal, invalid or unenforceable, that provision will be given no effect and will be treated as though it were not included in this Agreement, but the validity or enforceability of the remaining provisions of this Agreement will not be affected.

22. NO PARTNERSHIP

Nothing in this Agreement and no action taken by the parties under this Agreement will constitute a partnership, association, joint venture or other co-operative entity between either of the parties.

23. THIRD PARTY RIGHTS

(a) Any person (other than the parties to this agreement and their permitted successors or assignees) who is given any rights or benefits under clause 9.7 (a

“Third Party”) shall be entitled to enforce those rights or benefits against the parties in accordance with the Contracts (Rights of Third Parties) Xxx 0000.

(b) Save as provided in clause 23.1 above the operation of the Contracts (Rights of Third Parties) Xxx 0000 is hereby excluded.

(c) No Released Party (as defined in clause 9.7(a)) shall assign, transfer, charge or declare a trust of any such rights or benefits whatsoever and any such purported assignment shall be void.

(d) The parties may not without the prior written consent of the Released Parties amend or vary the terms of clause 9.7. Any other term of this agreement may be amended, varied or terminated without the consent of any person other than the parties.

24. VARIATION

A variation of this Agreement is valid only if it is in writing and signed by each party or signed on its behalf by its authorised representative (and, if it amends or varies the terms of clause 9.7, by or on behalf of each Released Party).

25. ASSIGNMENT

Neither party is permitted to assign, charge or otherwise dispose of any of its rights or benefits under this Agreement or grant or create any third party interest in such rights or benefits (including holding an interest on trust for another) without the prior permission of the other.

26. COSTS AND EXPENSES

Each party shall pay its own costs incurred in connection with the negotiation, preparation, execution and implementation of this Agreement and each document referred to in it.

27. COUNTERPARTS

This Agreement may be entered into in any number of counterparts and any party may enter into this Agreement by executing any counterpart. A counterpart constitutes an original of this Agreement and all executed counterparts together have the same effect as if each party had executed the same document.

28. GOVERNING LAW AND JURISDICTION

28.1 Governing law

This Agreement, the jurisdiction clause contained in it, all the documents referred to in it which are not expressed to be governed by another law, and all non-contractual obligations arising in any way whatsoever out of or in connection with this Agreement or any such documents are governed by, take effect and shall be construed in accordance with English law.

28.2 Jurisdiction

The courts of England have exclusive jurisdiction to settle any claim, dispute or matter of difference which may arise in any way whatsoever out of or in connection with this Agreement (including claims for set off or counterclaim) or the legal relationships established by this Agreement.

29. INCENTIVE ARRANGEMENTS

The Buyer intends, following the Effective Date, to establish an incentivisation scheme aimed at key managers of the Target’s Group which will, subject to applicable legal and regulatory requirements, provide for the allocation of common stock of the Buyer, cash or a combination of both up to a total cost to the Buyer of £7,000,000 (including operational costs such as employer-related social tax costs). The scheme participants will be selected by the Buyer to participate in the scheme in its absolute discretion. Potential payments from the scheme will be conditional upon achievement of performance targets which will be identified by the Buyer.

IN WITNESS whereof this Agreement has been duly executed and delivered as a deed on the date at the beginning.

Executed as a deed by			)

CH2M Hill Companies, Ltd			)

acting by:			)

Name:	/s/ Xxxxxxxxxx X. Xxxx

Capacity: Authorized Signatory

In the presence of:

signature of witness:		/s/ Xxxxxx Xxxxx

name of witness: Xxxxxx Xxxxx

address of witness:


Executed as a deed by			)

Halcrow Holdings Limited			)

acting by:			)

Name:	/s/ Xxxxx Xxxxxx

Capacity: Director

In the presence of:

signature of witness:		/s/ Xxxx Xxxxxx

name of witness: Xxxx Xxxxxx

address of witness:

SCHEDULE 1

Scheme Document

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PART 2 OF THIS DOCUMENT COMPRISES AN EXPLANATORY STATEMENT IN COMPLIANCE WITH SECTION 897 OF THE COMPANIES XXX 0000. If you are in any doubt about the Acquisition or the contents of this document or what action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser duly authorised under the Financial Services and Markets Act 2000 (as amended) if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser in the relevant jurisdiction.

If you have any questions in relation to this document or the completion and return of your Forms of Proxy and/or Form of Election, or if you need additional copies of any document, including the Form W-8BEN, please telephone Capita Registrars’ helpline between 8.30 a.m. and 5.30 p.m. (London times) Monday to Friday on 0871 664 0321 (if calling from within the UK) (calls cost 10p per minute plus network extras) or on x00 00 0000 0000 (if calling from outside the UK) (calls will be charged at international rates). Different charges may apply from mobile telephones. Please note that calls to these numbers may be monitored and/or recorded. Capita Registrars will not provide personal, legal, tax or financial advice or comment on the merits of the Acquisition or the relative merits of the forms of consideration being offered for Scheme Shares.

The enclosed Forms of Proxy, Form of Election and reply paid envelope are personalised. If you have recently purchased or been transferred Scheme Shares and receive the Forms of Proxy, Form of Election and/or reply paid envelope from the transferor of such shares, you should contact Capita Registrars, Halcrow’s Registrar, on the telephone numbers set out above to obtain replacements of these documents.

Recommended acquisition of

Halcrow Holdings Limited

CH2M HILL Europe Limited

(an indirect wholly-owned subsidiary of CH2M HILL Companies, Ltd)

to be effected by means of a

scheme of arrangement under Part 26 of

the Companies Xxx 0000

Shareholders should read carefully the whole of this document and any documents incorporated into it by reference together with the accompanying Forms of Proxy and Form of Election. Your attention is drawn to the letter from the Chairman of Halcrow in Part 1 of this document, which contains the unanimous recommendation of the Halcrow Directors that you vote in favour of the Scheme at the Court Meeting and in favour of the Resolution to be proposed at the General Meeting. A letter from Rothschild explaining the Scheme in greater detail is set out in Part 2 (Explanatory Statement) of this document.

Notices convening the Court Meeting and the General Meeting, both of which are to be held at the offices of Ashurst LLP, Xxxxxxxxx Xxxxx, 0 Xxxxxx Xxxxxx, Xxxxxx XX0X 0XX on 18 October 2011, are set out at the end of this document. The Court Meeting will start at 11.00 a.m. (London time) and the General Meeting will start at 11.15 a.m. (London time) (or as soon thereafter as the Court Meeting has been concluded or adjourned).

Whether or not you intend to be present at the Court Meeting and/or the General Meeting, please complete and sign both Forms of Proxy accompanying this document, in accordance with the instructions printed on them and return them (in the reply paid envelope for use in the UK) to Halcrow’s Registrars, Capita Registrars at Corporate Actions, The Registry, 00 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxxx XX0 0XX as soon as possible, and in any event so as to be received no later than 11.00 a.m. (London time) on 16 October 2011 in the case of the Court Meeting (BLUE form) and by no later than 11.15 a.m. (London time) on 16 October 2011 in the case of the General Meeting (WHITE form) (or, in the case of any adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting). If you wish to submit your Forms of Proxy online you may do so through the share portal at xxx.xxxxxxxxxxxxxxxxx.xxx. Submissions must be received by the deadlines specified above. To vote online you will need to log into your share portal account, or register for the share portal if you have not already done so. To register for the share portal, you will need your investor code that is set out on any documentation issued by Capita Registrars. Once registered, you will immediately be able to vote. Alternatively, the BLUE Form of Proxy for the Court Meeting may be handed to Capita Registrars on behalf of the chairman of the Court Meeting at the commencement of that meeting. However, in the case of the General Meeting, unless the WHITE Form of Proxy is lodged so as to be received by the time mentioned above, it will be invalid.

Returning the Forms of Proxy will enable your votes to be counted at the Shareholder Meetings in the event of your absence. The return of a completed Form of Proxy will not prevent you from attending the Court Meeting and/or the General Meeting, or any adjournments thereof, and voting in person if you so wish and if you are entitled to do so. Each Halcrow Shareholder is entitled to appoint one or more proxies (provided each proxy is appointed to exercise the rights attached to a different share or shares held by the Halcrow Shareholder) to attend and to vote instead of him or her. A proxy need not be a shareholder of the Company.

A space has been included in the Forms of Proxy to allow Halcrow Shareholders to specify the number of Scheme Shares in respect of which that proxy is appointed. Shareholders who return a Form of Proxy duly executed but leave this space blank will be deemed to have appointed a proxy in respect of all of their Scheme Shares.

Scheme Shareholders (other than Excluded Overseas Shareholders and Restricted Overseas Shareholders) will also find enclosed with this document a PINK Form of Election which relates to the CH2M HILL Share Alternative and the Loan Note Alternative. Halcrow Shareholders who wish to make an election to receive New CH2M HILL Shares and/or Loan Notes instead of some or all of the Cash Consideration to which they would otherwise be entitled are requested to complete the PINK Form of Election and, if electing for Loan Notes, the Form W-8BEN in accordance with the instructions printed thereon and return these (in the reply paid envelope for use in the UK) to Capita Registrars at the address specified above to be received by no later than 1.00 p.m. on 1 November 2010.

Neither the New CH2M HILL Shares nor the Loan Notes that are to be issued as described herein will be listed on any stock exchange. The New CH2M HILL Shares and the Loan Notes have not been, and will not be, registered under the US Securities Act or under any relevant securities laws of any state or jurisdiction and no regulatory clearances in respect of the New CH2M HILL Shares or Loan Notes have been, or will be, applied for in any jurisdiction. No regulatory authority or securities commission has reviewed, approved or disapproved of the Scheme or any part of the Acquisition.

N M Rothschild & Sons Limited, which is authorised and regulated in the UK by the FSA, is acting as financial adviser to Halcrow and no one else in connection with the matters set out in this document and will not be responsible to anyone other than Halcrow for providing the protections afforded to clients of N M Rothschild & Sons Limited, nor for providing advice in relation to any matter referred to herein.

IMPORTANT NOTICE

The distribution of this document and the accompanying documents in jurisdictions other than the UK and the US may be restricted by law and therefore persons into whose possession this document comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, such documents should not be distributed in, forwarded to or transmitted in or into any jurisdiction where offering the New CH2M HILL Shares or the Loan Notes, or making them available for subscription or purchase would breach any applicable law. To the fullest extent permitted by applicable law, Halcrow and CH2M HILL disclaim any responsibility or liability for the violation of any applicable restrictions by any person. This document and the accompanying documents do not constitute an offer or invitation to purchase or subscribe for any securities or a solicitation of an offer to buy any securities pursuant to this document or otherwise in any jurisdiction in which such offer or solicitation is unlawful. This document and the accompanying documents have been prepared for the purposes of complying with English law, the information disclosed may not be the same as that which would have been disclosed if this document and the accompanying documents had been prepared in accordance with the laws of jurisdictions outside England and Wales. Nothing in this document or the accompanying documents should be relied on for any other purpose.

The statements contained in this document are made as at the date of this document, unless some other time is specified in relation to them, and service of this document shall not give rise to any implication that there has been no change in the facts set out in this document since such date. Nothing contained in this document shall be deemed to be a forecast, projection or estimate of the future financial performance of Halcrow or CH2M HILL except where otherwise expressly stated.

INFORMATION FOR US AND OTHER OVERSEAS PERSONS

The New CH2M HILL Shares and the Loan Notes to be issued under the Scheme, will be issued in reliance upon the exemption from the registration requirements of the United States Securities Act of 1933, as amended (the “US Securities Act”), provided by section 3(a)(10) thereof and, as a consequence, the issuance of New CH2M HILL Shares and the Loan Notes will not be registered under the US Securities Act or under the securities laws of any state or other jurisdiction of the United States. For the purpose of qualifying for this exemption from the registration requirements of the US Securities Act, the Company will advise the Court that its sanctioning of the Scheme will be relied upon by Halcrow and CH2M HILL as an approval of the Scheme following a hearing on its fairness to Halcrow Shareholders at which hearing all such shareholders are entitled to attend in person or through counsel to support or oppose the sanctioning of the Scheme and with respect to which notification has been given to all such shareholders. Accordingly, (i) the New CH2M HILL Shares are not being offered in, and may not be transferred into, any Excluded Jurisdiction, Restricted Jurisdiction or any other jurisdiction where the sale, issue or transfer of the CH2M HILL Shares would be a contravention of applicable law or in the event that CH2M HILL regards the sale, issue or transfer restrictions as unduly onerous, (ii) the Loan Notes are not being offered in, and may not be transferred into, any Excluded Jurisdiction, Restricted Jurisdiction, Partially Restricted Jurisdiction or any other jurisdiction where the sale, issue or transfer of the Loan Notes would be a contravention of applicable law or in the event that CH2M HILL regards the sale, issue or transfer restrictions as unduly onerous, and (iii) the attention of Overseas Shareholders or other recipients of this document who are residents or citizens of, or located in, any country other than the UK is drawn to paragraph 17 of Part 2 of this document. Neither the SEC nor any US state securities commission has reviewed or approved this document, the Scheme, the New CH2M HILL Shares or the Loan Notes, or passed upon the adequacy or accuracy of this document, and any representation to the contrary is a criminal offence in the United States.

No person should construe the contents of this document as legal, financial or tax advice but should consult their own advisers in connection with the matter contained herein.

The Acquisition relates to the acquisition of shares in an English private limited company and is proposed to be made by a scheme of arrangement under English company law. Accordingly, the Scheme is subject to the disclosure requirements, rules and practices applicable to English schemes of arrangement and the information in this document is not the same as that which would have been disclosed if this document had been prepared for the purposes of complying with the registration requirement of the US Securities Act or in accordance with the laws or regulations of any other jurisdiction. Financial information regarding Halcrow referred to in this document has been or will have been prepared in accordance with UK accounting standards that may not be comparable to the accounting standards applicable to financial statements of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the US.

It may be difficult for US Scheme Shareholders to enforce their rights and claims arising out of US federal securities laws against officers and directors of Halcrow who are residents of countries other than the US, and it may not be possible to xxx Xxxxxxx in a non-US court for violations of US securities laws.

WARNING FOR HONG KONG HALCROW SHAREHOLDERS

The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice.

警告

本文件的內容未經在香港的規管當局審核。你應就有關要約謹慎行事。如你對本文件的任何內容有任何疑問，你應尋求獨立專業

意見。

INFORMATION FOR QATAR HALCROW SHAREHOLDERS

This document does not, and is not intended to, constitute an invitation or offer of securities in the State of Qatar and accordingly should not be construed as such. This document is being issued to a limited number Scheme Shareholders (i) upon their request and confirmation that they understand that the Company has not been approved or licensed by or registered with the Qatar Central Bank, the Qatar Financial Markets Authority, the Qatar Financial Centre Regulatory Authority or any other applicable licensing authorities or governmental agencies in the State of Qatar; and (ii) on the condition that it will not be provided to any person other than the original recipient, is not for general circulation and may not be reproduced or used for any other purpose. Persons into whose possession this document comes are advised to consult with their own legal advisors with respect to any applicable laws that may restrict the distribution of this document. Neither this document nor any part of it shall be relied upon in any way in connection with any contract for the acquisition of the New CH2M HILL Shares and/or Loan Notes nor shall its issue be taken as any form of commitment on the part of CH2M HILL to proceed with any transaction. In making an investment decision regarding the offering of the New CH2M HILL Shares and/or the Loan Notes, investors must rely on their own examination of the terms of the offering, including without limitation the merits and the risks involved.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document (including information incorporated by reference in this document), oral statements made regarding the Acquisition, and other information published by CH2M HILL and Halcrow contain statements that are or may be deemed to be “forward-looking statements”, including for the purposes of the US Private Securities Litigation Reform Act of 1995. These statements are prospective in nature and are not based on historical facts, but rather on the current expectations of the management of CH2M HILL and Halcrow about future events and are naturally subject to uncertainty and changes in circumstances which could cause actual events to differ materially from the future events expected or implied by the forward-looking statements. The forward-looking statements contained herein include statements about the expected effects of the Acquisition on Halcrow, CH2M HILL, the expected timing and scope of the Acquisition, synergies, other strategic options and all other statements in this document other than historical facts. Forward-looking statements may (but will not always) include, without limitation, statements typically containing words such as “targets”, “plans”, “aims”, “intends”, “expects”, “anticipates”, “believes”, “estimates”, “will”, “may”, “budget”, “forecasts” and “should” and words of similar import. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. These forward-looking statements are not guarantees of future performance and have not been reviewed by the auditors of CH2M HILL or Halcrow. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements, many of which are beyond the control of Halcrow and CH2M HILL. These factors include, but are not limited to, the satisfaction of the Conditions to the Acquisition, as well as additional factors, such as changes in economic conditions, changes in the level of capital investment, success of business and operating initiatives and restructuring objectives, customers’ strategies and stability, changes in the regulatory environment, fluctuations in interest and exchange rates, the outcome of litigation, government actions and natural phenomena such as floods, earthquakes and hurricanes. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. Halcrow Shareholders should not place undue reliance on any forward-looking statements and neither CH2M HILL nor Halcrow, nor any of their respective advisors, associates, directors or officers undertakes any obligation to update publicly, express by disclaim or revise forward looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required or provides any representation, assurance or guarantee that the occurrence of events expressed or implied in any forward-looking statement in this document will actually occur.

TABLE OF CONTENTS

		Page

EXPECTED TIMETABLE OF PRINCIPAL EVENTS		1
ACTION TO BE TAKEN		2
PART 1	LETTER FROM THE CHAIRMAN OF HALCROW	4
PART 2	EXPLANATORY STATEMENT	11
PART 3	CONDITIONS TO, AND FURTHER TERMS OF, THE SCHEME	30
PART 4	FINANCIAL INFORMATION CONCERNING THE HALCROW GROUP	33
PART 5	FINANCIAL INFORMATION CONCERNING THE CH2M HILL GROUP	123
PART 0	XXX XX0X XXXX SECURITIES ALTERNATIVE	223
PART 7	TERMS AND CONDITIONS OF THE LOAN NOTES	227
PART 8	RISK FACTORS IN RELATION TO XX0X XXXX XXX XXX XX0X XXXX SECURITIES	231
PART 9	BACKGROUND INFORMATION ON CH2M HILL AND DETAILS OF CH2M HILL SHARES	242
PART 10	ADDITIONAL INFORMATION	252
PART 11	DEFINITIONS	267
PART 12	THE SCHEME OF ARRANGEMENT	273
PART 13	NOTICE OF COURT MEETING	286
PART 14	NOTICE OF GENERAL MEETING	288

iii

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Event	Time/date(1)
Latest time for lodging BLUE Form of Proxy for the Court Meeting	11.00 a.m. on 16 October 2011	(2)
Latest time for lodging WHITE Form of Proxy for the General Meeting	11.15 a.m. on 16 October 2011	(3)
Voting Record Time for the Court Meeting and General Meeting	6.00 p.m. on 16 October 2011	(4)
Court Meeting	11.00 a.m. on 18 October 2011
General Meeting	11.15 a.m. on 18 October 2011	(5)
Latest time for lodging PINK Form of Election and the Form W-8BEN	1.00 p.m. on 1 November 2011
Scheme Court Hearing	7 November 2011
Reorganisation Effective Date	8 November 2011
Last time for registration of transfers of Scheme Shares	5.00 p.m. on 8 November 2011
Reorganisation Record Time	5.00 p.m. on 8 November 2011
Scheme Record Time	6.00 p.m. on 8 November 0000
Xxxxxxxxx Xxxxx Hearing	9 November 2011
Effective Date	10 November 2011
Latest date for posting of cheques and despatch of CH2M HILL Share certificates and Loan Note certificates in respect of consideration due under the Scheme	24 November 2011

The Court Meeting and the General Meeting will both be held at the offices of Ashurst LLP, Xxxxxxxxx Xxxxx, 0 Xxxxxx Xxxxxx, Xxxxxx XX0X 0XX on 18 October 2011. The Court Meeting will start at 11.00 a.m. and the General Meeting will start at 11.15 a.m. (or as soon thereafter as the Court Meeting has been concluded or adjourned).

(1)		These times and dates are indicative only and will depend, among other things, on the date upon which the Court sanctions the Scheme and confirms the Reduction of Capital and the date on which the Conditions are satisfied or, if capable of waiver, waived. If there are any revisions to this timetable, CH2M HILL will make an appropriate announcement as soon as practicable. All times referred to are London times, unless otherwise stated.

(2)		It is requested that BLUE Forms of Proxy for the Court Meeting be lodged at least 48 hours prior to the time appointed for the Court Meeting. However, BLUE Forms of Proxy for the Court Meeting not returned by this time may be handed to the Chairman of the Court Meeting at that meeting.

(3)		WHITE Forms of Proxy for the General Meeting must be lodged at least 48 hours prior to the time appointed for the General Meeting. WHITE Forms of Proxy may not be handed to the Chairman of the General Meeting at that meeting.

(4)		If either of the Shareholder Meetings is adjourned, then the Voting Record Time for the relevant reconvened meeting will be 6.00 p.m. on the date two days prior to the date set for the adjourned meeting.

(5)		Or as soon thereafter as the Court Meeting has been concluded or adjourned.

ACTION TO BE TAKEN

The Court Meeting and the General Meeting will be held at the offices of Ashurst LLP, Xxxxxxxxx Xxxxx, 0 Xxxxxx Xxxxxx, Xxxxxx XX0X 0XX on 18 October 2011 at 11.00 a.m. (London time) and 11.15 a.m. (London time), respectively (or, in the case of the General Meeting, as soon thereafter as the Court Meeting has been concluded or adjourned). The Scheme requires approval at both of these meetings.

Please check you have received the following with this document:

1.		a BLUE Form of Proxy for use in respect of the Court Meeting on 18 October 2011;

2.		a WHITE Form of Proxy for use in respect of the General Meeting on 18 October 2011;

3.		a PINK Form of Election for use in relation to the CH2M HILL Securities Alternative (only for Scheme Shareholders who are not Excluded Overseas Shareholders or Restricted Overseas Shareholders);

4.		a Form W-8BEN for use in respect of an election for the Loan Note Alternative by Scheme Shareholders who are not Excluded Overseas Shareholders, Partially Restricted Overseas Shareholders or Restricted Overseas Shareholders; and

5.		a reply paid envelope (for use in the United Kingdom only).

If you have not received all these documents, please contact Capita Registrars on the number indicated below. A copy of this document can also be viewed on Halcrow’s intranet, Halnet.

Whether or not you intend to be present at the Court Meeting and/or the General Meeting, please complete and sign both Forms of Proxy accompanying this document in accordance with the instructions printed on them and return them (in the reply paid envelope for use in the UK) to Halcrow’s Registrars, PXS, 00 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxxx XX0 0XX as soon as possible, and in any event so as to be received no later than 11.00 a.m. (London time) on 16 October 2011 in the case of the Court Meeting (BLUE form) and by no later than 11.15 a.m. (London time) on 16 October 2011 in the case of the General Meeting (WHITE form) or, in the case of any adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting. If you wish to submit your Forms of Proxy online you may do so through the share portal at xxx.xxxxxxxxxxxxxxxxx.xxx. Submissions must be received by the deadlines specified above. To vote online you will need to log into your share portal account, or register for the share portal if you have not already done so. To register for the share portal, you will need your investor code that is set out on any documentation issued by Capita Registrars. Once registered, you will immediately be able to vote.Alternatively the BLUE Form of Proxy for the Court Meeting may be handed to Capita Registrars on behalf of the chairman of the Court Meeting at the commencement of that meeting. However, in the case of the General Meeting, unless the WHITE Form of Proxy is lodged so as to be received by the time mentioned above, it will be invalid.

Returning the Forms of Proxy will enable your votes to be counted at the Shareholder Meetings in the event of your absence. The return of a completed Form of Proxy will not prevent you from attending the Court Meeting and/or the General Meeting, or any adjournments thereof, and voting in person if you so wish and if you are entitled to do so. Each Scheme Shareholder is entitled to appoint one or more proxies (provided each proxy is appointed to exercise the rights attached to a different share or shares held by the Scheme Shareholder) to attend and to vote instead of him or her. A proxy need not be a shareholder of the Company.

A space has been included in the Forms of Proxy to allow Scheme Shareholders to specify the number of Scheme Shares in respect of which that proxy is appointed. Scheme Shareholders who return a Form of Proxy duly executed but leave this space blank will be deemed to have appointed a proxy in respect of all of their Scheme Shares.

It is important that, for the Court Meeting, as many votes as possible are cast so that the Court may be satisfied that there is a fair and reasonable representation of opinion of Scheme Shareholders. You are therefore strongly urged to complete, sign and return your Forms of Proxy, for both the Court Meeting and the General Meeting.

For further instructions on how to complete the Form of Election please see Part 0 (Xxx XX0X XXXX Securities Alternative) of this document.

Halcrow Shareholder helpline

Neither the Halcrow Directors nor Rothschild have performed or obtained a valuation of the CH2M HILL Securities. The Halcrow Directors cannot and do not give any advice or recommendation to Scheme Shareholders as to whether, or to what extent, they should elect for the CH2M HILL Securities Alternative in connection with the Scheme. Whether to elect for the CH2M HILL Securities Alternative is a matter for each Scheme Shareholder to decide and will be influenced by their individual financial and tax circumstances. The Halcrow Directors strongly advise that Scheme Shareholders seek their own independent financial or tax advice.

PART 1: LETTER FROM THE CHAIRMAN OF HALCROW

Directors:	Registered office:

Xxxxxxx Xxxxx CBE (Chairman) Xxxxx Xxxxxx (Chief Executive Officer) Xxxx Xxxxxx (Finance Director) Xxxxx Xxxxx (Director) Xxxxxxxx Xxxxxx (Director) Xxxxx Xxxx (Director) Xxxx Xxxxxxxxx (Non-executive Director)	Xxxx Xxxxx 00 Xxxxx Xxxxx Xxxxxx X0 0XX Registered in England and Wales, Company number 01674044

	30 September 2011

To: Halcrow Shareholders and, for information only, participants in the Halcrow Share Plans

Dear Shareholder

RECOMMENDED ACQUISITION OF HALCROW HOLDINGS LIMITED

BY CH2M HILL EUROPE LIMITED

1. INTRODUCTION

I am writing to you on behalf of the Halcrow Board to explain the background to, and reasons for, the Acquisition and to describe the action you should now take. For the reasons set out below, the Halcrow Board supports the Acquisition and unanimously recommends that you vote in favour of the resolutions required to implement the Scheme at the Court Meeting and at the General Meeting, as all the Halcrow Directors have undertaken to do in respect of their entire beneficial holdings of Halcrow Shares totalling 247,012 Ordinary Shares, representing in aggregate approximately 1.19 per cent. of Halcrow’s existing issued ordinary share capital.

Further information in relation to the Court Meeting and the General Meeting is contained in paragraph 8 of this Part 1 and in paragraph 11 of Part 2 of this document.

2. SUMMARY OF THE TERMS OF THE ACQUISITION

The Acquisition of the Scheme Shares is to be effected by way of a scheme of arrangement under Part 26 of the Act which requires the approval of Halcrow Shareholders and the sanction of the Court. The Acquisition extends to all holders of Halcrow Shares who are on the Register of Members at the Scheme Record Time. CH2M HILL has also agreed to acquire the entire preference share capital of Halcrow from the Trustees pursuant to the Sale Agreement. The Acquisition values the entire issued and to be issued share capital of Halcrow at approximately £123 million, representing a price per Scheme Share of 564p.

In consideration for your Scheme Shares, Scheme Shareholders will be entitled to receive Cash Consideration. Instead of receiving Cash Consideration under the Scheme, Scheme Shareholders may elect to receive New CH2M HILL Shares (provided you are not classed as an Excluded Overseas Shareholder or a Restricted Overseas Shareholder) and/or Loan Notes (provided you are not classed as an Excluded Overseas Shareholder, a Partially Restricted Overseas Shareholder or a Restricted Overseas Shareholder), in consideration for some or all of your Scheme Shares, in any combination. For further details, please see paragraphs 2.1 and 2.2 below. Following the Acquisition, CH2M HILL Europe, an indirect wholly owned subsidiary of CH2M HILL will own the entire issued share capital of Halcrow.

Halcrow Shareholders who were on the Register of Members as at close of business on 24 May 2011 will be entitled to receive a dividend of 4 xxxxx per Ordinary Share in respect of the year ended 31 December 2010, assuming that the resolution proposing that dividend is passed at this year’s annual general meeting to be held on Friday 30 September 2011.

As a result of the Acquisition, Halcrow’s internal share market is suspended with effect from 28 September 2011 until further notice. All Ordinary Share sale and purchase transactions already in progress as at that date will be processed by Halcrow in the usual way.

2.1 Cash Consideration

Under the terms of the Acquisition which is subject to the Conditions (as set out in Part 3), if the Scheme becomes Effective, those holders of Scheme Shares on the Register of Members at the Scheme Record Time will receive:

for each Scheme Share 564 xxxxx in cash

2.2 CH2M HILL Securities Alternative

As alternatives to the Cash Consideration, pursuant to the CH2M HILL Securities Alternative each eligible Scheme Shareholder may, in respect of some or all of his Scheme Shares and in any combination, elect to receive:

· New CH2M HILL Shares on the following basis:

and/or

· Loan Notes, each having a nominal value of £0.01, on the following basis:

per Scheme Share: 564 Loan Notes.

A CH2M HILL Share Election may result in you holding a fraction of a New CH2M HILL Share (which will be rounded up to three decimal places).

A summary of certain tax consequences for certain Scheme Shareholders who validly elect for the CH2M HILL Securities Alternative is contained in paragraph 18 of this Part 2. The summary is intended as a general guide only and, if you are in any doubt as to your tax position, you should consult an appropriate independent professional adviser.

Part 9 of this document contains further information about CH2M HILL and the New CH2M HILL Shares and full details of the Loan Notes are set out in Part 7 of this document.

Scheme Shareholders should note that neither the Halcrow Directors nor Rothschild have performed or obtained a valuation of the CH2M HILL Securities. The Halcrow Directors cannot and do not give any advice or recommendation to Halcrow Shareholders as to whether, or to what extent, they should elect for the CH2M HILL Securities Alternative in connection with the Scheme. Whether to elect for the CH2M HILL Securities Alternative is a matter for each Scheme Shareholder to decide and will be influenced by their individual financial and tax circumstances. The Halcrow Directors strongly advise that Scheme Shareholders seek their own independent financial and/or tax advice.

Your attention is drawn to Part 8 of this document entitled “Risk Factors in Relation to CH2M HILL and CH2M HILL Securities”. When deciding whether to make a CH2M HILL Securities Alternative Election, please consider the risk factors set out in Part 8 of this document. In particular, the Halcrow Directors believe that in deciding whether to elect for CH2M HILL Securities, Scheme Shareholders should also take into account the following factors:

· like Halcrow Shares, the New CH2M HILL Shares will not be listed on any stock exchange and are traded on CH2M HILL’s internal market which is maintained by an independent broker engaged by CH2M HILL;

· the share price of CH2M HILL Shares is determined quarterly by the CH2M HILL Board and the next meeting of the CH2M HILL Board is set to take place on 11 November 2011, and the share price may change at that date;

· the Loan Notes will not be listed on any stock exchange and will only be transferable in limited circumstances. It is not the current intention of the CH2M HILL Board to offer any trading facility for the Loan Notes;

· unless CH2M HILL otherwise determines in respect of Loan Notes which have been in issue for more than 6 months, the Loan Notes will not be repayable except on the following dates: (i) the date which

is 6 months and one day after the Loan Note Issue Date and/or (ii) the date which is 18 months after the Loan Note Issue Date, and/or (iii) the date which is 36 months after the Loan Note Issue Date, at the principal amount together with accrued interest (subject to any requirement by law to deduct or withhold tax) up to but excluding the date of repayment, as further described in Part 7 to this document; and

· the rate of interest on the Loan Notes will be 10 basis points per annum of the principal amount of the Loan Notes outstanding from time to time.

CH2M HILL Share Alternative

The CH2M HILL Share Alternative is being made available to Scheme Shareholders (other than Excluded Overseas Shareholders and Restricted Overseas Shareholders) enabling them to acquire New CH2M HILL Shares instead of all or part of the Cash Consideration to which they would otherwise be entitled under the Acquisition.

The CH2M HILL Share Alternative enables each eligible Scheme Shareholder to elect, in respect of some or all of his Scheme Shares, to receive New CH2M HILL Shares on the following basis:

As stated in Part 9 of this document, the CH2M HILL’s share price is determined quarterly by the CH2M HILL Board pursuant to the valuation methodology outlined in paragraph 1.4 of Part 9 of this document. The share price of CH2M HILL Shares, as set at the last Trade Date, is $54.35. The next meeting of the CH2M HILL Board is scheduled to take place on 11 November 2011 and the CH2M HILL share price may change at that time. Historical information about CH2M HILL share price can be found in CH2M HILL’s 8Ks filed with the US Securities and Exchange Commission and available at xxx.xxx.xxx. Past performance is not indicative of future results.

Like Halcrow Shares, the CH2M HILL Shares are not listed on any stock exchange. However, they are traded through CH2M HILL’s internal market which is maintained by an independent broker engaged by CH2M HILL, enabling eligible CH2M HILL Shareholders and holders of awards under certain employee share incentive arrangements to deal in CH2M HILL Shares up to four times each year on pre-determined days. CH2M HILL Shares are bought and sold through the internal market at a price determined by the CH2M HILL Board based upon the valuation methodology described in Part 9 of this document. CH2M HILL may purchase or sell CH2M HILL Shares on the internal market to balance the supply and demand, but is not obliged to do so. Further details on CH2M HILL Shares are set out in Part 9 of this document.

Scheme Shareholders who elect to receive New CH2M HILL Shares through participation in the CH2M HILL Securities Alternative may receive, in the long term, either a greater amount or a lesser amount for their Scheme Shares than they would have received if they had not made an election for the New CH2M HILL Shares and instead received the Cash Consideration or Loan Notes pursuant to the Loan Note Alternative. Whether Scheme Shareholders who elect for the New CH2M HILL Shares ultimately receive a greater amount or a lesser amount for their Scheme Shares will depend upon a range of factors, the most important being the future performance of CH2M HILL Group’s business and general market conditions.

The CH2M HILL Share Alternative is not being made available to any Excluded Overseas Shareholder or any Restricted Overseas Shareholder, as a consequence of the requirements of certain legislation in the relevant jurisdictions. Such Scheme Shareholders cannot elect for the CH2M HILL Share Alternative and will not be issued New CH2M HILL Shares. Any such Scheme Shareholder purporting to elect for the CH2M HILL Share Alternative will instead receive Cash Consideration in respect of his holding of Scheme Shares.

Loan Note Alternative

The Loan Note Alternative is being made available to Scheme Shareholders (other than Excluded Overseas Shareholders, Restricted Overseas Shareholders and Partially Restricted Overseas Shareholders) enabling them to take Loan Notes instead of all or part of the Cash Consideration to which they would otherwise be entitled. Under the Loan Note Alternative a Scheme Shareholder can elect to receive for each Scheme Share, 564 Loan Notes each having a nominal value of £0.01. The issue of the Loan Notes is

subject to eligible Scheme Shareholders electing to receive in aggregate at least £10 million in nominal value of Loan Notes. Further details on the terms of the Loan Notes are set out in Part 7 of this document.

The Loan Note Alternative is not being made available to any Excluded Overseas Shareholders, Partially Restricted Overseas Shareholders or Restricted Overseas Shareholders as a consequence of the requirements of certain legislation in the relevant jurisdictions. Such Scheme Shareholders cannot elect for the Loan Note Alternative and will not be issued Loan Notes. Any such Scheme Shareholder purporting to elect for the Loan Note Alternative will instead receive cash consideration in respect of his holding of Scheme Shares. Scheme Shareholders electing to receive Loan Notes will be required to certify that they are not US Persons and are not located in the US by completing the enclosed Form W-8BEN.

3. BACKGROUND TO AND REASONS FOR RECOMMENDING THE ACQUISITION

The Halcrow Board is recommending a combination with CH2M HILL because it believes it will create a global leader in the engineering consultancy sector with sufficient scale and diversity to compete at the highest level. The Halcrow Board believes that there is a strong strategic rationale for joining with CH2M HILL and that the companies enjoy a comparable ownership structure, similar values and benefit from a significant degree of complementary technical and geographic fit.

CH2M HILL has emphasized to Halcrow the importance it places on the skills and experience of the management and employees of Halcrow. The Halcrow Board believes that the combination will create a global infrastructure player which will provide employees of both Halcrow and CH2M HILL with enhanced international career opportunities and an excellent environment in which to fulfil their potential.

In recent years, there has been a degree of consolidation within the global engineering consultancy sector and the Halcrow Board believes that the increased size and geographical coverage in a number of sectors of their international peers has increased competition for Halcrow in the sector. Major project opportunities are being packaged into larger contracts and programmes and mid-sized consultancies will increasingly have to partner to win large projects.

After a number of years of steadily improving trading performance for Halcrow, the global recession has increased competition in the markets in which Halcrow operates and trading has been affected in a number of sectors in the core markets. In order to adapt to the economic downturn, Halcrow had to take some tough decisions in 2010 about the future shape of the Company and made a number of redundancies. Halcrow also launched in 2010, a reorganisation programme aimed at enabling the group to be more client and market focused and efficient in tune with its long term strategy ( the “Delta Programme”).

Given the difficult economic and trading environment and the market developments referred to above, in early 2011 the Halcrow Board concluded that achieving its “Strategy 2018” supporting the Halcrow Group’s major projects programme and investing in growing markets had become highly challenging as an independent business. Consequently, the Halcrow Board decided to explore the possibility of combining with another company to support Halcrow’s position as a leading designer of major infrastructure projects and to help the Halcrow Group achieve its growth and strategic ambitions as part of a larger group. For the reasons set out above, the Halcrow Board believes CH2M HILL would be an excellent partner for the Halcrow Group.

The Acquisition provides Scheme Shareholders with the opportunity to receive cash, Loan Notes or New CH2M HILL Shares. This not only provides such shareholders with the certainty of cash or Loan Notes but also gives such shareholders the ability to participate in the equity of the enlarged CH2M HILL Group and share in the CH2M HILL Group’s prospects going forward.

4. UNDERTAKINGS TO VOTE IN FAVOUR OF THE SCHEME

Halcrow Directors who hold Scheme Shares have irrevocably undertaken to vote their respective holdings of Scheme Shares (in aggregate, 247,012 Scheme Shares, representing approximately 1.19 per cent. of the existing issued ordinary share capital of Halcrow) in favour of the resolutions at the Court Meeting and at the General Meeting. The Trustees, who hold 15,349,154 Scheme Shares (representing approximately 73.93 per cent. of the existing issued ordinary share capital of Halcrow) have also irrevocably undertaken to vote their Scheme Shares in favour of the resolutions at the Court Meeting and at the General Meeting.

In addition, Xxxxxx Xxxx, who has recently retired from the Halcrow Board, has irrevocably undertaken to vote his holding of Scheme Shares (being 138,106 Scheme Shares representing approximately 0.665 per cent. of the existing ordinary share capital of Halcrow) in favour of the resolutions at the Court Meeting and at the General Meeting.

Accordingly, as at 28 September 2011 (being the last practicable date prior to the publication of this document), CH2M HILL has received irrevocable undertakings on the terms set out above in respect of Scheme Shares representing, in aggregate, approximately 75.79 per cent. of Halcrow’s existing issued ordinary share capital.

Further details of these irrevocable undertakings are set out in paragraph 5 of Part 10 of this document.

5. MANAGEMENT, EMPLOYEES AND LOCATIONS

CH2M HILL has stated that it attaches great importance to the skills and experience of the existing management and employees of Halcrow and that both management and the employees of Halcrow will play an important role in moving the business of the CH2M HILL Group forward following the Acquisition. CH2M HILL and the Halcrow Directors believe that the employees of the Halcrow Group will benefit significantly from the opportunities available to them following completion of the Acquisition.

The Halcrow Directors are pleased to note that CH2M HILL has confirmed that, on the Scheme becoming Effective, the existing contractual and statutory employment rights, including pension rights, of all Halcrow Group employees will be fully safeguarded.

All the Halcrow Directors will resign as directors of Halcrow following the Acquisition. However, Xxxxxxx Xxxxx will be retained in a part time capacity to assist CH2M HILL as it requires; Xxxx Xxxxxxxxx will remain in his capacity as one of the Trustees; and Xxxxx Xxxxxx, in accordance with his agreement earlier this year with Halcrow, will retire from the Company following the Acquisition but will be retained on a part time basis to assist with the integration process and will also be appointed as an independent trustee of the Halcrow Trust.

Following the Effective Date, CH2M HILL will appoint a new board of directors of Halcrow. The trading name of Halcrow will be retained, as will its website and email addresses. CH2M HILL intends to ask the remaining current employee directors and Xxxxxxx Xxxxx to become directors of Halcrow. CH2M HILL will add three employees to the board, being Xxxxxx Xxxx, who will be named as chairman, and two additional representatives. CH2M HILL will appoint a new CEO for Halcrow to be located in London at Elms House. Xxxxxxxx Xxxxxx will be appointed COO of Halcrow and deputy to the new CEO. Directors will report to the new CEO and all other current reporting lines within Halcrow will remain in place reporting through to the new COO. Current plans by CH2M HILL include the appointment of one or more Halcrow employees to the CH2M HILL corporate management team, called the Operating Committee.

A joint integration/implementation team will be created, based in the UK, to carry out such exercises as client servicing, regional and other geographic reporting, operating strategy, branding, market expansion and corporate services integration. It is planned that results from this team will be actioned in 2012. Until then, Halcrow will continue to operate as currently structured and organised.

CH2M HILL has confirmed it currently has no intention to change the location of Halcrow’s places of business across the globe. This, however, could be subject to review as part of CH2M HILL’s integration plan for the two businesses.

6. CURRENT TRADING OF THE HALCROW GROUP

The year 2011 to date has been a challenging one for the Company. The Halcrow Board has seen a tightening in the trading environment across all of its trading regions and, in particular, in certain parts of the UK public sector portfolio, the Middle East and North America. The decline in economic activity across a number of our business segments and markets has adversely impacted on Halcrow’s financial performance. The Halcrow Group has had particular difficulties in its Middle East business in the aftermath of the 2008 credit crunch and the political turmoil following the “Arab Spring”.

In the autumn of 2010, the Halcrow Board announced a significant reorganisation programme (the “Delta Programme”) to enable the group to be more client and market focused and efficient in line with its long term strategy. While much of the planning was undertaken in 2010, short term reorganisational change costs have impacted 2011 results. The benefits of this programme are starting to accrue though it is anticipated that the full benefit will not be felt until 2012 and beyond.

and include costs relating to matters such as time spent by staff and the cost of change consultants together with costs of severance packages.

EBITDA for the 6-month period is £8.0 million after adding pension deficit payments of £3.8 million and exceptional one-off costs of £2.3 million.

Trading in the period since 30 June 2011 has been below management’s expectations due to delays in projects in a number of sectors and economic conditions in our end markets which have been tighter than expected.

On the basis of the results for the year to date, the Halcrow Board expects the Halcrow Group operating profit in 2011 to be below that achieved in 2010.

Halcrow’s net bank borrowings as at 31 August 2011 were £41.8 million against total available facilities of £54.7 million.

7. HALCROW SHARE PLANS

Information about the effect of the Scheme on options and awards under the Halcrow Share Plans is set out in paragraph 15 of Part 2 of this document. Participants in the Halcrow Share Plans will be contacted separately about the choices available to them in respect of their options and awards.

8. THE SCHEME AND THE SHAREHOLDER MEETINGS

It is intended that the Acquisition of the Scheme Shares will be effected by means of a scheme of arrangement between Halcrow and its shareholders under Part 26 of the Act.

To become Effective, the Scheme requires, among other things, the approval of a majority in number of the Scheme Shareholders present and voting (either in person or by proxy) at the Court Meeting representing not less than 75 per cent. in value of the voted Scheme Shares and the passing of a special resolution necessary to implement the Scheme at the General Meeting. The Scheme must also be sanctioned by the Court and the associated Reduction of Capital must be confirmed by the Court, in each case at the relevant Court Hearing. Following this, the Scheme Shares will be cancelled and, in consideration for this, Scheme Shareholders will receive Cash Consideration and/or CH2M HILL Securities, according to their Elections. Once the Scheme becomes Effective, it will be binding on all Scheme Shareholders, including those who did not vote to approve the Scheme.

It is important that, for the Court Meeting in particular, as many votes as possible are cast so that the Court may be satisfied that there is a fair and reasonable representation of Scheme Shareholder’s opinion. You are therefore strongly urged to complete and return your Forms of Proxy, for both the Court Meeting and the General Meeting, as soon as possible.

Further details of the Scheme and the Shareholder Meetings and how to complete the Forms of Proxy, Form of Election and Form W-8BEN are set out in Part 2 of this document.

9. THE EFFECT OF THE SCHEME ON THE HALCROW DIRECTORS’ INTERESTS

As set out in paragraph 10 of Part 2 of this document, the Halcrow Directors have irrevocably undertaken to vote in favour of the Scheme at the Shareholder Meetings in respect of their own beneficial holdings of Halcrow Shares. Details of the effects of the Scheme on their interests are set out in paragraph 13 of Part 2 of this document.

10. IMPLEMENTATION AGREEMENT

As part of the negotiations in relation to the Acquisition, CH2M HILL and Halcrow entered into an implementation agreement on 24 September 2011. Further details of the Implementation Agreement are set out in paragraph 6.3 of Part 10 of this document.

11. OVERSEAS SHAREHOLDERS

Persons resident in, or citizens of, jurisdictions outside the UK should refer to paragraph 17 of Part 2 of this document.

12. UK TAXATION

Your attention is drawn to paragraph 18 of Part 2 of this document. If you are in any doubt about your tax position, you should consult an appropriately qualified independent professional adviser immediately.

13. ACTION TO BE TAKEN

Notices convening the Court Meeting and the General Meeting are set out at the end of this document. You will find enclosed with this document a BLUE Form of Proxy for use at the Court Meeting and a WHITE Form of Proxy for use at the General Meeting.

Whether or not you intend to be present at either meeting, you are requested to complete and return both the enclosed Forms of Proxy for the Court Meeting (BLUE) and for the General Meeting (WHITE) in accordance with the instructions printed on the forms.

You will also find enclosed with this document a PINK Form of Election for use by Scheme Shareholders (other than Excluded Overseas Shareholders and Restricted Overseas Shareholders) in relation to the CH2M HILL Securities Alternative. Scheme Shareholders who wish to elect for the Loan Note Alternative should also complete and return (together with the PINK form of Election) the Form W-8BEN. Full instructions on completing the Form of Election (and the Form W-8BEN, in order to elect for the Loan Note Alternative) are set out in Part 6 of this document.

14. FURTHER INFORMATION

Please read carefully the remainder of this document as the information contained in this letter is in summary form only and is not a substitute for reading the remainder of this document. Your attention is drawn to the letter from Rothschild set out in Part 2 of this document, which gives further details about the Acquisition, and also to the terms of the Scheme that are set out in full at Part 3 of this document. In addition, you will find detailed information relating to CH2M HILL, the CH2M HILL Securities and risk factors associated with making a CH2M HILL Securities Alternative Election in Parts 6 to 8 (inclusive) of this document.

15. RECOMMENDATION

The Halcrow Directors, who have been so advised by Rothschild, consider the Acquisition to be fair and reasonable. In providing its financial advice, Rothschild has taken into account the commercial assessments of the Halcrow Directors.

In addition, the Halcrow Directors believe that the Acquisition is in the best interests of Halcrow Shareholders as a whole and recommend unanimously that Scheme Shareholders vote in favour of the resolutions to be proposed at the Shareholder Meetings, as they have irrevocably undertaken to do in respect of their entire beneficial holdings of Scheme Shares totalling 247,012 Halcrow Shares, representing in aggregate approximately 1.19 per cent. of Halcrow’s existing ordinary issued share capital.

	Yours faithfully

	Xxxxxxx Xxxxx CBE
	Chairman

PART 2: EXPLANATORY STATEMENT

(IN COMPLIANCE WITH SECTION 897 OF THE COMPANIES ACT 2006)


	N M Rothschild & Sons Ltd
	New Court
	St Xxxxxxx’x Xxxx
	London EC4N 8AL

	30 September 2011

To: Halcrow Shareholders and, for information only, participants in the Halcrow Share Plans

Dear Shareholder

RECOMMENDED ACQUISITION OF HALCROW HOLDINGS LIMITED

BY CH2M HILL EUROPE LIMITED

1. INTRODUCTION

On 26 September 2011, the Halcrow Board and the CH2M HILL Board announced that they had agreed the terms of a recommended acquisition of Halcrow by CH2M HILL Europe, an indirect wholly owned subsidiary of CH2M HILL. The Acquisition of the Scheme Shares is to be effected by means of a scheme of arrangement of Halcrow under Part 26 of the Act which requires the approval of Scheme Shareholders and the sanction of the Court. The Reduction of Capital involved in the Scheme requires the approval of Scheme Shareholders by special resolution at the General Meeting and the subsequent confirmation of the Court. The Acquisition of the Preference Shares from the Trustees is to be effected by way of the Sale Agreement.

The Halcrow Board has been advised by Rothschild in connection with the Acquisition. Rothschild has been authorised by the Halcrow Board to write to you to explain the terms of the Acquisition and to provide you with other relevant information.

Your attention is drawn to the letter from the Chairman of Halcrow set out in Part 1 of this document, which forms part of this Explanatory Statement. That letter contains, among other things, information on the background to and reasons for the Acquisition and the unanimous recommendation by the Halcrow Board to Scheme Shareholders to vote in favour of the resolutions to approve and implement the Acquisition to be proposed at the Shareholder Meetings.

Your attention is also drawn to Part 3 (“Conditions to and further terms of the Acquisition”), Part 4 (“Financial information concerning the Halcrow Group”), Part 5 (“Financial information concerning the CH2M HILL Group”), Part 8 (“Risk factors in relation to CH2M HILL and the CH2M HILL Securities”), Part 9 (“Background information on CH2M HILL and details of CH2M HILL Shares”) and Part 10 (“Additional information”) of this document. The Scheme is set out in full at Part 12 of this document.

2. BACKGROUND TO AND REASONS FOR THE ACQUISITION

opportunities are being packaged into larger contracts and programmes and mid-sized consultancies will increasingly have to partner to win large projects.

3. SUMMARY OF THE TERMS OF THE ACQUISITION

The Acquisition of the Scheme Shares is to be effected by way of a scheme of arrangement under Part 26 of the Act, which requires the approval of Scheme Shareholders and the sanction of the Court. The Acquisition of the Preference Shares from the Trustees is to be effected by way of the Sale Agreement. The Acquisition will only complete if all of the Conditions have been satisfied or, if permitted, waived.

Following the Acquisition, CH2M HILL Europe, an indirect wholly-owned subsidiary of CH2M XXXX, xxxx own the entire issued share capital of Halcrow.

Halcrow Shareholders who were on the Register of Members as at close of business on 24 May 2011 will be entitled to receive a dividend of 4 xxxxx per Ordinary Share in respect of the year ended 2010, assuming that the resolution proposing that dividend is passed at this year’s annual general meeting to be held on Friday 30 September 2011.

Cash Consideration

Under the terms of the Acquisition, which will be subject to the Conditions (as set out in Part 3 of this document), if the Scheme becomes Effective, those holders of Scheme Shares on the Register of Members at the Scheme Record Time who do not make a valid CH2M HILL Securities Alternative Election will have their Scheme Shares cancelled and will receive:

for each Scheme Share 564 xxxxx in cash

CH2M HILL Securities Alternative

· New CH2M HILL Shares on the following basis:

and/or

· Loan Notes, each having a nominal value of £0.01, on the following basis:

per Scheme Share: 564 Loan Notes.

A CH2M HILL Share Election may result in you holding a fraction of a New CH2M HILL Share (which will be rounded up to three decimal places).

Part 6 of this document contains further information about XX0X XXXX xxx Xxx XX0X XXXX Shares and full details of the Loan Notes are set out in Part 7 of this document.

Please note that neither the Halcrow Directors nor Rothschild have performed or obtained a valuation of the CH2M HILL Securities. The Halcrow Directors cannot and do not give any advice or recommendation to Scheme Shareholders as to whether, or to what extent, they should elect for the CH2M HILL Securities Alternative in connection with the Scheme. Whether to elect for the CH2M HILL Securities Alternative is a matter for each Scheme Shareholder to decide and will be influenced by their individual financial and tax circumstances. The Halcrow Directors strongly advise that Scheme Shareholders seek their own independent financial or tax advice.

Your attention is drawn to Part 8 of this document entitled “Risk Factors in Relation to CH2M HILL and the CH2M HILL Securities”. When deciding whether to make a CH2M HILL Securities Alternative Election, please consider the risk factors set out in Part 8 of this document. In particular, the Halcrow Directors believe that in deciding whether to elect for CH2M HILL Securities, Scheme Shareholders should also take into account the following factors:

· unless CH2M HILL otherwise determines in respect of Loan Notes which have been in issue for more than 6 months, the Loan Notes will not be repayable except on the following dates (i) the date which is 6 months and one day after the Loan Note Issue Date, and/or (ii) the date which is 18 months after the Loan Note Issue Date, and/or (iii) the date which is 36 months after the Loan Note Issue Date at the principal amount together with the accrued interest (subject to any requirement by law to deduct or withhold tax) up to but excluding the date of repayment, as further described in Part 7 to this document; and

· the rate of interest on the Loan Notes will be 10 basis points per annum of the principal amount of the Loan Notes outstanding from time to time.

Neither the New CH2M HILL Shares nor the Loan Notes are being offered in or to, or for the account or benefit of, and may not be transferred into any jurisdiction where, the sale, issue or transfer of the New CH2M HILL Shares and/or the Loan Notes would be a contravention of applicable law.

Accordingly:

· the CH2M HILL Share Alternative is not being made available to Excluded Overseas Shareholders or Restricted Overseas Shareholders; and

· the Loan Note Alternative is not being made available to Excluded Overseas Shareholders, Restricted Overseas Shareholders or Partially Restricted Overseas Shareholders.

Any purported Election for either New CH2M HILL Shares and/or Loan Notes by Excluded Overseas Shareholders, Partially Restricted Overseas Shareholders or Restricted Overseas Shareholders, as relevant, will be treated as invalid by CH2M HILL and such shareholders will receive Cash Consideration in respect of their entire holdings of Scheme Shares.

CH2M HILL Share Alternative

The CH2M HILL Share Alternative is being made available to Scheme Shareholders (other than Excluded Overseas Shareholders or Restricted Overseas Shareholders) enabling them to acquire New CH2M HILL Shares instead of all or part of the Cash Consideration to which they would otherwise be entitled under the Acquisition.

The CH2M HILL Share Alternative enables each eligible Scheme Shareholder to elect, in respect of some or all of his Scheme Shares, to receive New CH2M HILL Shares on the following basis:

New CH2M HILL Shares will be issued pursuant to the Scheme credited as fully paid and will rank pari passu in all respects with the existing CH2M HILL Shares.

The CH2M HILL Shares are traded through CH2M HILL’s internal market which is maintained by an independent broker engaged by CH2M HILL, enabling eligible shareholders and certain benefit plans to deal in CH2M HILL Shares up to four times each year on pre-determined days. CH2M HILL Shares are bought and sold through the internal market at a price determined by the CH2M HILL Board based upon the valuation methodology described in Part 9 of this document. CH2M HILL may purchase or sell CH2M HILL Shares on the internal market to balance the supply and demand, but is not obligated to do so.

Loan Note Alternative

The Loan Note Alternative is being made available to Scheme Shareholders (other than Excluded Overseas Shareholders, Restricted Overseas Shareholders and Partially Restricted Overseas Shareholders) enabling them to take Loan Notes instead of all or part of the Cash Consideration to which they would otherwise be entitled. The Loan Note Alternative is being made available on the basis that each Scheme Shareholder can elect to receive for each Scheme Share, 564 Loan Notes each having a nominal value of £0.01.

It is expected that, shortly following the Effective Date, CH2M HILL will substitute in its place as principal debtor under the Loan Notes, a company which is not a member of the CH2M HILL Group. Such substitution shall take place in accordance with the terms of the Loan Notes as described in paragraph 10 of Part 7 of this document and does not require the consent of the holders of such Loan Notes.

The Loan Notes will be governed by English law and will be issued, credited as fully paid, in integral multiples of £0.01 nominal value. The Loan Notes will not be transferable other than to certain permitted transferees (that is, relatives or family trusts or, in relation to the Trustees, to a beneficiary of the Halcrow Trust) and no application will be made for them to be listed or dealt in on any stock exchange. The Loan

Notes will not be qualifying corporate bonds for United Kingdom taxation purposes for Scheme Shareholders who are not corporates.

Unless CH2M HILL decides otherwise, no Loan Notes will be issued unless, on or before the Election Return Time, the aggregate nominal value of all Loan Notes to be issued as a result of valid Elections by Scheme Shareholders electing for the Loan Note Alternative exceeds £10 million. If such aggregate nominal amount is less than £10 million, any such Election shall, unless CH2M HILL decides otherwise, be void and the relevant Scheme Shareholders will receive the cash they would otherwise be entitled to if they had not made an Election under the Loan Note Alternative.

The Halcrow Directors strongly advise Scheme Shareholders to seek their own independent financial, tax and legal advice before electing for the CH2M HILL Securities Alternative.

4. INFORMATION ON THE HALCROW GROUP

Founded in 1868, Halcrow is a leading employee-owned consulting engineering firm delivering planning, design and management services for developing infrastructure and buildings worldwide. Halcrow is headquartered in the United Kingdom and has approximately 6,000 employees worldwide, working in approximately 100 countries. Halcrow’s clients include local and national governments, government agencies and private sector clients. Halcrow’s private sector clients are from a range of industries including transportation, construction and energy.

Following a recent company reorganisation, Halcrow provides its services to its clients through three practice areas: (i) natural resources; (ii) transportation; and (iii) development. Halcrow is organised into four geographic regions: (i) Europe; (ii) the Americas; (iii) Asia and Australasia; and (iv) the Middle East and Africa. Halcrow provides services to clients in a variety of ways, such as principal project leader, subcontractor and through joint ventures or in consortia with other service providers. The demand for services provided by Halcrow is generally determined by local and national government and private client capital spending decisions.

Halcrow Shares are owned by employees and directors of Halcrow and also the Halcrow Trust. Other than the Halcrow Trust, no one shareholder owns more than one per cent. of Halcrow.

For the year ended 31 December 2010, Halcrow achieved revenues of £465.5m (excluding the share of joint ventures’ turnover) and generated an operating profit of £12.9m. In excess of 50 per cent. of revenues are derived from outside Halcrow’s core UK markets.

5. CURRENT TRADING OF THE HALCROW GROUP

Based on unaudited management accounts, turnover and loss before tax for the 6-month period to 30 June 2011 were £209.1 million and £4.0 million respectively. One-off costs of £2.3 million incurred in the period included exceptional items associated with the Delta Programme and other re-organisation programmes and include costs relating to matters such as time spent by staff and the cost of change consultants together with costs of severance packages.

EBITDA for the 6-month period is £8.0 million after adding pension deficit payments of £3.8 million and exceptional one-off costs of £2.3 million.

On the basis of the results for the year to date, the Halcrow Board expects the Halcrow Group operating profit in 2011 to be below that achieved in 2010.

Halcrow’s net bank borrowings as at 31 August 2011 were £41.8 million against total available facilities of £54.7 million.

6. MANAGEMENT, EMPLOYEES AND LOCATIONS OF THE HALCROW GROUP

7. INFORMATION ON XX0X XXXX XXXXXX

XX0X HILL Europe is an indirect wholly-owned subsidiary of CH2M HILL and its sole purpose is to act as the vehicle which will acquire the Halcrow Shares. Following the Acquisition it will be the direct holding company of Halcrow. CH2M HILL Europe has not traded since its date of incorporation, nor has it entered into any obligations, other than in connection with the implementation of the Acquisition. No financial information has been published in respect of CH2M HILL Europe.

CH2M HILL Europe is a limited liability company incorporated under the laws of England and Wales. The directors of CH2M HILL Europe are Xxxxxx Xxxx, Xxxx Xxxxx and Xxxxxxxx XxXxxx.

Following the Scheme becoming Effective, those Scheme Shareholders who do not make a valid CH2M HILL Securities Alternative Election will be paid the Cash Consideration by or on behalf of CH2M HILL Europe. Those eligible Halcrow Shareholders who do make an election under the CH2M HILL Securities Alternative will receive either New CH2M HILL Shares and/or Loan Notes in respect of all or part of their holding of Scheme Shares, in each case subject to the terms and conditions of the CH2M HILL Securities Alternative Election, full details of which are set out in Part 6 of this document.

8. INFORMATION ON XX0X XXXX

XX0X XXXX was founded in 1946 and was incorporated under the laws of the State of Delaware on 1 July 2011. CH2M HILL is a leading global employee-owned professional engineering services firm, providing engineering, construction, consulting, design, design-build, procurement, operations and maintenance, program management and technical services. CH2M HILL is headquartered in the United States and has approximately 23,000 employees worldwide, working in over 80 countries. CH2M HILL’s clients include national and US federal governments, state, local and provincial governments, government agencies and private sector clients worldwide. CH2M HILL’s private sector clients are from a diverse spectrum of fields including major oil and gas companies, automotive, food and beverage and pharmaceuticals companies.

CH2M HILL provides its services to its clients through three operating segments: (i) government, environment and nuclear; (ii) facilities and infrastructure; and (iii) energy and water. CH2M HILL performs its services as the prime contractor, as subcontractor or through joint ventures or partnership agreements with other service providers. The demand for CH2M HILL’s services generally comes from budgeting and capital spending decisions made by its clients.

As of 9 September 2011, there were 8,134 holders on record of CH2M HILL Shares, all owned by current and retired employees, directors, eligible consultants and CH2M HILL’s various employee benefit plans.

CH2M HILL’s revenue for 2010 was US$5,422,800,000, with approximately 37% of that deriving from contracts with the US federal government.

Your attention is drawn to Part 5 (“Financial information concerning the CH2M HILL Group”), Part 8 (“Risk factors in relation to CH2M HILL and the CH2M HILL Shares”) and Part 9 (“Background information on CH2M HILL and details of CH2M HILL Shares”) respectively of this document.

9. FINANCING THE ACQUISITION

If the Scheme becomes Effective the total amount payable in cash to Scheme Shareholders (assuming there are no valid elections under the CH2M HILL Share Alternative or the Loan Note Alternative) will be approximately £123 million. The Cash Consideration will be financed either with funds available under CH2M HILL’s existing $600 million revolving credit facility (the “Credit Facility”) entered into on 6 December 2010 or from other sources. The agent for the Credit Facility is Xxxxx Fargo Bank. The Credit Facility is unsecured. The Facility is guaranteed by a number of wholly owned US subsidiaries of CH2M HILL. Further details of the Credit Facility are set out in paragraph 6.2 of Part 10 of this document.

10. UNDERTAKINGS TO VOTE IN FAVOUR OF THE SCHEME

Further details of these irrevocable undertakings are set out in paragraph 5 of Part 10 of this document.

11. STRUCTURE OF THE SCHEME

(a) The Scheme

The Acquisition will be implemented by way of a Court sanctioned scheme of arrangement between Halcrow and the Scheme Shareholders under Part 26 of the Act. The terms of the Scheme are set out in Part 12 of this document.

The purpose of the Scheme is to provide for CH2M HILL Europe to become the holder of the entire issued and to be issued share capital of Halcrow. This is to be achieved by the cancellation of the Scheme Shares held by Scheme Shareholders and the application of the reserve arising from such cancellation in paying up in full such number of New Halcrow Shares as is equal to the number of Scheme Shares cancelled and issuing the same to CH2M HILL Europe. In consideration, Scheme Shareholders who are on the Register of Members at the Scheme Record Time will receive the Cash Consideration from CH2M HILL Europe and/or, if they have made a valid Election, New CH2M HILL Shares and/or Loan Notes in each case from CH2M HILL on the basis described in Part 6 of this document.

The Scheme requires the sanction of the Court as well as satisfaction or waiver of the other Conditions set out in Part 3 of this document. Upon the Scheme becoming Effective, it will be binding on all Halcrow Shareholders, irrespective of whether or not they attend, or vote at, the Court Meeting or the General Meeting.

The Acquisition of Halcrow will be undertaken by CH2M HILL Europe, an indirect wholly-owned subsidiary of CH2M HILL. The Scheme will result in Scheme Shareholders receiving Cash Consideration from CH2M HILL Europe and/or, where they made a valid Election, New CH2M HILL Shares and/or Loan Notes in each case from CH2M HILL. This is to be achieved by the Scheme providing for the following:

(i)		the cancellation of the Scheme Shares (as reclassified—see further paragraph 11(c) of this Part 2) in accordance with the Scheme and the subsequent issue of New Halcrow Shares by Halcrow to CH2M HILL Europe in accordance with the Scheme;

(ii)		the payment of the Cash Consideration by CH2M HILL Europe to the Scheme Shareholders in consideration for the issue of New Halcrow Shares by Halcrow to CH2M HILL Europe and the issue of one New CH2M HILL Europe Share by CH2M HILL Europe to CHIL;

(iii)		the issue of one New CHIL Share by CHIL to CH2M HILL in consideration for the issue of the aforementioned New CH2M HILL Europe Share by CH2M HILL Europe to CHIL; and

(iv)		the issue of New CH2M HILL Shares and Loan Notes by CH2M HILL to those Scheme Shareholders who have made valid CH2M HILL Securities Alternative Elections in consideration for the issue of the New CHIL Share by CHIL to CH2M HILL.

(b)

Halcrow Shareholder approvals

Before the Court’s approval can be sought to sanction the Scheme, the Scheme will require approval by Scheme Shareholders at the Court Meeting (being the approval of a majority in number of Scheme Shareholders who are present and vote either in person or by proxy at the Court Meeting and who represent 75 per cent. or more in value of all Scheme Shares voted by such Scheme Shareholders) and the passing of the Resolution at the General Meeting.

Notices of the Court Meeting and the General Meeting are set out in Part 13 (Notice of Court Meeting) and Part 14 (Notice of General Meeting) of this document respectively. All holders of Scheme Shares whose names appear on the register of members of Halcrow at the Voting Record Time shall be entitled to attend and vote at the Shareholder Meetings in respect of the number of Scheme Shares registered in their name at the relevant time.

It is important that, for the Court Meeting in particular, as many votes as possible are cast so that the Court may be satisfied that there is a fair and reasonable representation of Scheme Shareholder opinion. You are therefore encouraged to complete and return your BLUE and WHITE Forms of Proxy for both the Court Meeting and the General Meeting as soon as possible.

The Court Meeting

The Court Meeting, which has been convened for 11.00 a.m. on 18 September 2011, is being held at the direction of the Court to seek the approval of Scheme Shareholders for the Scheme. Scheme Shareholders have the right to raise any objections they may have to the Scheme at the Court Meeting. At the Court Meeting, voting will be by way of poll and each Scheme Shareholder present in person or by proxy will be entitled to one vote for each Scheme Share held. In order for the resolution to be passed, it must be approved by a majority in number of those Scheme Shareholders, present and voting, either in person or by proxy, representing 75 per cent. or more in value of all Scheme Shares voted by such Scheme Shareholders.

The General Meeting

The General Meeting has been convened for 11.15 a.m. on 18 October 2011, or as soon thereafter as the Court Meeting has concluded or been adjourned, to consider and, if thought fit, pass the Resolution (which requires votes in favour representing at least 75 per cent. of the votes cast) to:

(i)		authorise the Halcrow Directors to take all actions necessary to give effect to the Scheme;

(ii)		approve the reclassification of the Scheme Shares into A Shares, B Shares and C Shares as set out in clause 1 of the Scheme contained in Part 12 of this document;

(iii)		approve the cancellation of the Scheme Shares (as reclassified) in accordance with the Scheme, representing a reduction of Halcrow share capital equal to the aggregate nominal value of such shares;

(iv)		issue New Halcrow Shares to CH2M HILL Europe in accordance with the Scheme;

(v)		authorise the Halcrow Directors to allot securities in Halcrow pursuant to section 551 of the Act; and

(vi)		approve certain amendments to the Halcrow Articles to allow for, inter alia, the reclassification to take effect and for the compulsory acquisition of shares issued pursuant to options under any employee share option plan which are exercised after the Reorganisation Record Time, each as described below.

The reclassification referred to above is proposed in order to facilitate the Scheme and is described further in sub paragraph (c) below.

Voting at the General Meeting will be on a show of hands, unless a poll is demanded, in which case those present in person or by proxy will be entitled to one vote for each Scheme Share held by them.

The Notice of General Meeting is set out at Part 14 of this document. The quorum for the General Meeting will be two or more Scheme Shareholders present in person or by proxy.

Amendments to Halcrow Articles to allow compulsory acquisition

It is proposed, as part of the Resolution giving effect to the Scheme, to amend the Halcrow Articles to ensure that any Ordinary Shares issued under the Halcrow Option Plans or otherwise between the Voting Record Time and the Reorganisation Record Time will be subject to the Scheme. The proposed amendment would also ensure that any Ordinary Shares issued by Halcrow to any person other than CH2M HILL Europe or its nominee after the Reorganisation Record Time will automatically be acquired by CH2M HILL Europe in consideration for cash on the same terms as under the Scheme. These amendments are designed to avoid any person other than a member of the CH2M HILL Group being left with Halcrow Shares.

The proposed amendments to the Halcrow Articles referred to above are set out in the Resolution in the Notice of General Meeting set out at Part 14 of this document.

Entitlement to vote at the Shareholder Meetings

Each holder of Scheme Shares who is entered in the Register of Members at the Voting Record Time will be entitled to attend and vote at the Court Meeting and the General Meeting. Neither CH2M HILL nor members of the CH2M HILL Group will be entitled to vote on any of the resolutions proposed at the Shareholder Meetings. If either Shareholder Meeting is adjourned, only those Halcrow Shareholders on the Register of Members on the day which is two days before the adjourned meeting will be entitled to attend and vote.

Whether or not you intend to be present at the Court Meeting and/or the General Meeting please complete and sign both Forms of Proxy accompanying this document, in accordance with the instructions printed on them and return them (in the reply paid envelope for use in the UK) to Halcrow’s Registrars, Capita Registrars Limited, at Corporate Actions, The Registry, 00 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxxx XX0 0XX as soon as possible, and in any event so as to be received no later than 11.00 a.m. (London time) on 16 October 2011 in the case of the Court Meeting (BLUE form) and by no later than 11.15 a.m. (London time) on 16 October 2011 in the case of the General Meeting (WHITE form) (or, in the case of any adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting). If you wish to submit your Forms of Proxy online you may do so through the share portal at xxx.xxxxxxxxxxxxxxxxx.xxx. Submissions must be received by the deadlines specified above. To vote online you will need to log into your share portal account, or register for the share portal if you have not already done so. To register for the share portal, you will need your investor code that is set out on any

documentation issued by Capita Registrars. Once registered, you will immediately be able to vote. Alternatively, the BLUE Form of Proxy for the Court Meeting may be handed to Capita Registrars on behalf of the Chairman of the Court Meeting at the commencement of that meeting. However, in the case of the General Meeting, unless the WHITE Form of Proxy is lodged so as to be received by the time mentioned above, it will be invalid.

A space has been included in the Forms of Proxy to allow Shareholders to specify the number of Scheme Shares in respect of which that proxy is appointed. Shareholders who return a Form of Proxy duly executed but leave this space blank will be deemed to have appointed a proxy in respect of all of their Scheme Shares.

The Scheme provides, as an initial step, that the Ordinary Shares in issue at the Reorganisation Record Time, will, in accordance with the terms of the Scheme, be reclassified into A Shares, B Shares and C Shares. This is being done to ensure that certain UK resident Scheme Shareholders who elect for the CH2M HILL Securities Alternative will be able to rollover any chargeable gains that may arise as a result of the Acquisition. Scheme Shares reclassified into A Shares will carry the right to receive the Cash Consideration, Scheme Shares reclassified into B Shares will carry the right to receive New CH2M HILL Shares and Scheme Shares reclassified into C Shares will carry the right to receive Loan Notes upon the Effective Date in each case. To the extent that Scheme Shareholders validly elect for New CH2M HILL Shares under the CH2M HILL Share Alternative and/or Loan Notes under the Loan Note Alternative, the number of A Shares to which they would otherwise be entitled will be reduced and they will instead become entitled to an appropriate number of B Shares if they have made a valid CH2M HILL Share Election and/or C Shares if they have been made a valid Loan Note Election. When the Reduction of Capital that forms part of the Scheme becomes effective, the A Shares, B Shares and C Shares will be cancelled and Scheme Shareholders will be paid cash, issued with New CH2M HILL Shares and/or issued with Loan Notes in proportion to their holdings of A Shares, B Shares and C Shares, respectively.

As explained in subparagraphs (c) and (e) of paragraph 18 of this Part 2, UK rollover relief (for the purposes of taxation of chargeable gains) will be available to an eligible Scheme Shareholder to the extent that such Scheme Shares are reclassified as B Shares and/or C Shares and are cancelled in exchange for New CH2M HILL Shares and/or Loan Notes. If you are in any doubt as to your tax position you should consult an appropriate independent professional adviser.

No temporary documents of title will be issued to Scheme Shareholders in respect of the A Shares, B Shares or C Shares. If for any reason the Reduction of Capital comprised in the Scheme does not become effective within five Business Days of the Reorganisation Record Time, or such later date as Halcrow and CH2M HILL may agree and the Court may allow, the share capital reorganisation described above will be reversed and Scheme Shareholders will hold such number of Scheme Shares as they held immediately prior to the Reorganisation Record Time.

The terms of the reorganisation of the share capital of Halcrow are set out in clause 1 of the Scheme contained in Part 12 of this document.

(d) Sanction of the Scheme by the Court

Pursuant to the Act, the Scheme and Reduction of Capital require the approval of the Court. The Scheme Court Hearing to sanction the Scheme is expected to take place on 7 November 2011. All Halcrow Shareholders are entitled to attend the Scheme Court Hearing in person or through counsel to support or oppose the sanctioning of the Scheme. The Reduction Court Hearing to confirm the Reduction of Capital is expected to take place on 9 November 2011. The period between the two Court Hearings is included to allow the registration of Scheme Shares issued to participants in the Halcrow Option Plans and the reorganisation of the Company’s share capital referred to above to be implemented.

Following the Court Meeting and the General Meeting, the Scheme must be sanctioned, and the Reduction of Capital confirmed, by the Court. Part 1 of the Scheme, which effects the reorganisation of the Company’s share capital will become operative on the Reorganisation Record Time. Part 2 of the Scheme and the Reduction of Capital will become operative as soon as an office copy of the Reduction Court Order has been delivered to the Registrar of Companies.

If the Scheme becomes Effective, it will be binding on all Scheme Shareholders, including any Scheme Shareholders who do not vote to approve the Scheme or who vote against the Scheme at the Court Meeting. If the Scheme does not become Effective by 31 December 2011 (or such later date (if any) as CH2M HILL and Halcrow may agree and (if required) the Court may allow), the Scheme will not be implemented and the Acquisition will not proceed.

(e) Modifications to the Scheme

The Scheme contains a provision for Halcrow, CH2M HILL and CH2M HILL Europe to consent on behalf of all persons concerned to any modification of, or addition to, the Scheme or to any condition approved or imposed by the Court. The Court would be unlikely to approve any modification of, or additions to the Scheme, or impose a condition to the Scheme which might be material to the interests of the Scheme Shareholders unless Scheme Shareholders were informed of such modification, addition or condition. It would be a matter for the Court to decide, in its discretion, whether or not a further meeting of Scheme Shareholders should be held in these circumstances.

(f) Conditions

The Acquisition is conditional upon the Conditions being satisfied or, where permitted, waived and the Scheme becoming Effective, by not later than 31 December 2011 or such later date (if any) as CH2M HILL and Halcrow may agree and (if required) the Court may approve.

The Scheme is subject to the Conditions, including, among other things:

· approval of the Scheme and related resolution by the requisite majorities of Scheme Shareholders at the Court Meeting and the General Meeting;

· the sanction of the Scheme and confirmation of the associated Reduction of Capital by the Court at the Court Hearings; and

· a Material Adverse Effect not having occurred after the date of the Implementation Agreement.

The Conditions are set out in full in Part 3 of this document.

(g) Suspension of transfers of Scheme Shares

The last day for Scheme Shareholders to make transfers of Scheme Shares will be the Reorganisation Effective Date. No transfers of Scheme Shares will be registered after 5.00 p.m. on that day (being the Reorganisation Record Time). With effect from and including the Reorganisation Record Time, existing certificates representing holdings of Scheme Shares shall cease to be valid as documents of title to the shares represented thereby and each Scheme Shareholder shall be bound, at the request of the Company, to deliver up the same to the Company or to any person appointed by the Company to receive the same for cancellation, or to destroy such share certificates. However, Scheme Shareholders who make an Election are required to return their share certificates with their Form of Election.

12. IMPLEMENTATION AGREEMENT

13. HALCROW DIRECTORS AND THE EFFECT OF THE SCHEME ON THEIR INTERESTS

Details of the interests of the Halcrow Directors in Halcrow Shares are set out in paragraph 3 of Part 10 of this document.

The Halcrow Directors have irrevocably undertaken to vote in favour of the Scheme and the Resolution as described in paragraph 10 of this Part 2.

In common with other participants in the Halcrow Share Plans, the Halcrow Directors will have awards which vest and/or will be able to exercise their awards as described in further detail in paragraph 15 of this Part 2.

Save as aforesaid, the effect of the Scheme on the interest of the Halcrow Directors does not differ from the effect on the interests of other Scheme Shareholders.

14. HALCROW TRUST

The Halcrow Trust was established on 5 November 1990. The Trustees are Xxx Xxxx, Xxxx Xxxxxxxxx and Xxxxxxx Staff and Services (the directors of which are Xxxxx Xxxxxx (also a director of Halcrow), Xxxx van Emst and Xxxxxx XxXxxxxx).

The Halcrow Trust currently holds 73.88 per cent. of the Halcrow issued ordinary share capital and 10,000 Preference Shares. The shares held by the Trustees are not committed or encumbered in any way.

The Halcrow Trust is a discretionary trust. The Trustees may in their absolute discretion make distributions out of the trust fund to anyone who qualifies as a beneficiary of the Halcrow Trust. After the Effective Date the Trustees will consider to which beneficiaries they will distribute cash and/or Loan Notes. The Halcrow Trust does not expect to distribute to such beneficiaries any Loan Notes it may elect to receive pursuant to the Scheme until at least six months following the Effective Date.

15. HALCROW SHARE PLANS

General

Halcrow operates four employee share plans: the Xxxxxxx XXXX Plan, the Halcrow Approved CSOP, the Halcrow Unapproved CSOP and the Halcrow SIP. The Xxxxxxx XXXX Plan, the Halcrow Approved CSOP and the Halcrow Unapproved CSOP are option plans.

Options granted under the Halcrow Option Plans which are not already exercisable will become exercisable under the rules of these plans on the date on which the Court sanctions the Scheme. Letters will be sent to the participants under the Halcrow Share Plans explaining the effect of the Scheme on their options and, where applicable, their right to exercise options or to receive Shares.

Participants in the Halcrow SIP will participate in the Scheme in the same way as other Scheme Shareholders.

The Scheme will extend to Halcrow Shares issued pursuant to the Halcrow Share Plans on or before the Reorganisation Record Time, but the Scheme will not extend to any Halcrow Shares acquired by participants under the Halcrow Share Plans after the Reorganisation Record Time. Therefore, as described in paragraph 11 of Part 2, an amendment to the Halcrow Articles is being proposed to ensure that any Halcrow Shares issued following the exercise of options after the Reorganisation Record Time will automatically be acquired by CH2M HILL Europe in return for cash.

Xxxxxxx XXXX Plan

Options granted under the Xxxxxxx XXXX Plan which are not already exercisable will become exercisable on the date on which the Court sanctions the Scheme. After the Reorganisation Record Time, Halcrow Shares will, under the relevant tax legislation, cease to be qualifying shares capable of use under the Xxxxxxx XXXX Plan and, as such, options will not be capable of exercise following the Reorganisation Record Time. Options will lapse six months following the date on which the Court sanctions the Scheme. Participants may only exercise their options over the number of Halcrow Shares which can be bought with the proceeds of their related savings contracts at the time of exercise.

Halcrow Approved CSOP

Options granted under the Halcrow Approved CSOP which are not already exercisable will become exercisable on the date on which the Court sanctions the Scheme. After the Reorganisation Record Time,

Halcrow Shares will, under the relevant tax legislation, cease to be qualifying shares capable of use under the Approved CSOP and, as such, options will not be capable of exercise following the Reorganisation Record Time. Options will lapse six months following the date on which the Court sanctions the Scheme.

Unapproved CSOP

Options granted under the Halcrow Unapproved CSOP which are not already exercisable will be exercisable for six months from the date on which the Court sanctions the Scheme, after which they will lapse.

Halcrow SIP

The trustee of the Halcrow SIP holds Halcrow Shares on behalf of participants in the Halcrow SIP. Participants in the Halcrow SIP will participate in the Scheme in the same way as other Scheme Shareholders by giving directions to the trustee of the Halcrow SIP to elect for consideration under the Scheme for their SIP Shares.

Directors’ arrangements

Halcrow Directors will participate in the arrangements set out above in respect of any options or awards they hold under the Halcrow Share Plans (as detailed in paragraph 3 of Part 10 of this document) on the same terms as other participants in the Halcrow Share Plans.

16. SETTLEMENT

Subject to the Scheme becoming Effective, settlement of the Cash Consideration and/or the issuing of the certificates in respect of CH2M HILL Securities to which any Scheme Shareholder is entitled under the Scheme will be effected in the manner set out in this paragraph 16.

On the Effective Date, Scheme Shares will be cancelled and share certificates for such Scheme Shares will cease to be valid and should be destroyed.

(a) Cash Consideration

(i) Within 14 days of the Effective Date, each relevant Scheme Shareholder shall receive the Cash Consideration to which each relevant Scheme Shareholder is entitled. All cheques shall be in pounds sterling drawn on a branch of a UK clearing bank. Delivery of cheques required to be made pursuant to this paragraph will be effected by posting of the same by first class post or airmail in pre-paid envelopes addressed to the persons entitled thereto at their respective addresses as appear in the Register of Members at the Scheme Record Time. Payments made by cheque shall be payable to the Scheme Shareholder concerned or to such other person(s) (if any) as such person may direct in writing. The encashment of any such cheque as is referred to in this paragraph shall be a complete discharge for the monies represented thereby.

(ii) Any Cash Consideration payable in respect of Scheme Shares that have been issued pursuant to the exercise of options under the Halcrow Share Plans shall (unless the Company agrees with CH2M HILL Europe that clause 4(a)(i) of the Scheme shall apply) be paid by CH2M HILL Europe to the Company by electronic transfer in time for onward transmission by the Company to the relevant Scheme Shareholder, less applicable deductions, not more than 14 days after the Effective Date. The Company may effect payment by the issue or despatch or by procuring the issue or the despatch of cheques to the relevant Scheme Shareholders in accordance with clause 4(a)(i) of the Scheme.

(b) CH2M HILL Securities Alternative

Certificates for New CH2M HILL Shares and Loan Notes will be despatched to the relevant Scheme Shareholders by Capita Registrars no later than 14 days after the Effective Date by first-class post or airmail in pre-paid envelopes addressed to the persons entitled thereto at their respective addresses as appear in the Register of Members at the Scheme Record Time.

All elections to receive the CH2M HILL Securities Alternative must be made on the Form of Election so as to be received by Capita Registrars by no later than 1.00 p.m. on 1 November 2011.

The CH2M HILL Share Alternative is not being made available to any Excluded Overseas Shareholders or Restricted Overseas Shareholders and CH2M HILL Shares will not be issued to such shareholders and any purported election for CH2M HILL Shares will be deemed invalid and such persons will receive cash.

In addition, the Loan Note Alternative is not being made available to any Excluded Overseas Shareholders, Restricted Overseas Shareholders or Partially Restricted Overseas Shareholders. Such shareholders cannot elect for the Loan Note Alternative and will not be issued Loan Notes. Any purported election for Loan Note Alternative by such Excluded Overseas Shareholders, Restricted Overseas Shareholders or Partially Restricted Overseas Shareholders will be deemed to be an election for Cash Consideration.

Overseas Shareholders should refer to paragraph 17 of this Part 2 for further information. All documents sent to Halcrow Shareholders are sent at their own risk.

17. OVERSEAS SHAREHOLDERS

If you are an Overseas Shareholder and you are in any doubt about your position, you should consult your professional adviser in the relevant jurisdiction without delay.

The implications of the Acquisition for persons resident in, or citizens of, jurisdictions outside the UK may be affected by the laws of the relevant jurisdictions. Overseas Shareholders should inform themselves about and observe any applicable legal requirements. It is the responsibility of each Overseas Shareholder to satisfy itself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental, exchange control or other consents which may be required, or the compliance with other necessary formalities which are required to be observed and the payment of any issue, transfer or other taxes due in such jurisdiction.

Excluded Overseas Shareholders will not receive copies of this document, the Form of Election, or any other accompanying documents. Neither the New CH2M HILL Shares nor the Loan Notes may be offered, sold, delivered or transferred, directly or indirectly, in or into any Excluded Jurisdiction to or for the account or benefit of any national, resident or citizen of any Excluded Jurisdiction. The Excluded Overseas Shareholders will instead receive the Cash Consideration due.

Neither the New CH2M HILL Shares nor the Loan Notes may be offered, sold, delivered or transferred, directly or indirectly, in or into any Restricted Jurisdiction and, in the case of the Loan Notes, any Partially Restricted Jurisdiction or to or for the account or benefit of any national, resident or citizen of any Restricted Jurisdiction and, in the case of the Loan Notes any national resident or citizen of any Partially Restricted Jurisdiction. As a result the Restricted Overseas Shareholders will not receive the Form of Election or the Form W-8BEN and will receive the Cash Consideration due. Partially Restricted Overseas Shareholders will not receive the Form W-8BEN.

This document has been prepared for the purposes of complying with English law and the information disclosed may not be the same as that which would have been disclosed if this document had been prepared in accordance with the laws of jurisdictions outside the UK. Overseas Shareholders should consult their own legal and tax advisers with regard to the legal and tax consequences of the Scheme to their particular circumstances.

US Shareholders

The delivery of New CH2M HILL Shares to Scheme Shareholders under the Scheme has not and will not be registered under the US Securities Act in reliance upon the exemption from the registration requirements of the US Securities Act provided by section 3(a)(10). Such New CH2M HILL Shares should not be treated as “restricted securities” within the meaning of Rule 144(a)(3) under the US Securities Act and may be resold by former holders of Halcrow Shares (other than certain affiliates as described below) without restriction under the US Securities Act (but subject to the restrictions described in paragraph 1.3 of Part 9 of this document).

For the purpose of establishing the exemption from registration requirements of the US Securities Act provided by Section 3(a)(10) thereof, Halcrow will advise the Court at the Court Hearings that its sanctioning of the Scheme will be relied upon by CH2M HILL for such purpose as an approval of the Scheme following a hearing on the fairness of the terms and conditions of the Scheme to Halcrow Shareholders, at which hearing all such holders are entitled to attend in person or through counsel to support or oppose the sanctioning of the Scheme and with respect to which adequate notification has been given to all such holders.

Under US federal securities laws, a Scheme Shareholder who is an affiliate of CH2M HILL (i) within 90 days prior to, or (ii) following the Effective Date will be subject to certain US transfer restrictions relating to New CH2M HILL Shares received under the Scheme. These New CH2M HILL Shares held by

such affiliates may not be sold without registration under the US Securities Act, except pursuant to the applicable resale provisions of Rule 144 under the US Securities Act or in a transaction not subject to such requirements. Whether a person is an affiliate of a company for such purposes depends upon the circumstances, but affiliates of a company can include certain officers and directors and significant shareholders. A Scheme Shareholder who believes that he or she may be an affiliate of CH2M HILL should consult his or her own legal advisers prior to any sales of any New CH2M HILL Shares.

Pursuant to US Treasury Regulations Section 1.338-2(e)(4), CH2M HILL hereby advises Scheme Shareholders that it may cause CH2M HILL Europe to elect to treat the Acquisition as a deemed asset purchase for US tax purposes. However, any US tax resident that is a Scheme Shareholder must notify CH2M HILL of such US tax status in order to be assured of receiving necessary tax information relating to that election.

18. UNITED KINGDOM TAXATION

This paragraph 18 summarises the UK tax treatment of Scheme Shareholders under the Scheme. They are based on current UK legislation and an understanding of current HM Revenue and Customs practice as at the date of this document.

This paragraph 18 is intended as a general guide to apply to Scheme Shareholders who are resident and, if individuals, ordinarily resident in the UK for tax purposes. They relate only to Scheme Shareholders who hold their Scheme Shares directly as an investment (other than under an individual savings account) and who are absolute beneficial owners of those Scheme Shares. These paragraphs do not deal with certain types of shareholders, such as persons holding or acquiring shares in the course of trade or by reason of employment, collective investment schemes or insurance companies.

If you are in any doubt as to your taxation position or if you are resident or otherwise subject to taxation in any jurisdiction other than the UK, you should consult an appropriate professional adviser immediately.

Tax on chargeable gains

Liability to UK tax on chargeable gains will depend on the individual circumstances of Scheme Shareholders and on the form of consideration received for their Scheme Shares.

(a) Reclassification of Scheme Shares

The reclassification of the share capital of Halcrow, whereby the Scheme Shares will be reclassified into A Shares, B Shares and C Shares, should be regarded as a reorganisation of Halcrow’s share capital. Accordingly, Scheme Shareholders should not be treated as having disposed of their original Scheme Shares and no liability to UK tax on chargeable gains should arise in respect of this reclassification. The A Shares, B Shares and C Shares should be treated as acquired for the same amount and at the same time as the original Scheme Shares were acquired.

(b) Receipt of cash

To the extent that a Scheme Shareholder receives cash under the Scheme, this should be treated as a disposal of the relevant Scheme Shares (specifically, the Scheme Shareholder’s A Shares) which may, depending on the Scheme Shareholder’s individual circumstances (including the availability of exemptions or allowable losses), give rise to a liability to UK tax on chargeable gains.

Where such a disposal is of only part of a Scheme Shareholder’s holding of Scheme Shares, any chargeable gain should be computed on the basis of an apportionment of the allowable cost of the Scheme Shareholder’s entire holding by reference to the market value of such holding at the time of the disposal.

To the extent that a Scheme Shareholder, who alone or together with persons connected with him does not hold more than five per cent of, or any class of shares in, Halcrow as at the Scheme Record Time, receives New CH2M HILL Shares in exchange for Scheme Shares (specifically, in exchange for B Shares) pursuant to a CH2M HILL Share Election, the Scheme Shareholder should not be treated as having made a disposal of such Scheme Shares. Instead, the New CH2M HILL Shares should be treated as the same asset as those Scheme Shares acquired at the same time and for the same consideration as those Scheme Shares.

HM Revenue and Customs under section 138 of the Taxation of Chargeable Gains Xxx 0000 in respect of the Scheme. Accordingly, any such Scheme Shareholder should be treated in the manner described in the previous paragraph.

(d) Subsequent disposal of CH2M HILL Shares

A subsequent disposal of CH2M HILL Shares may, depending on individual circumstances (including the availability of exemptions and allowable losses), give rise to a liability to UK tax on chargeable gains. An individual Scheme Shareholder who is resident but not domiciled or ordinarily resident in the UK and who has claimed to be taxed on the remittance basis will be subject to the capital gains tax in respect of the proceeds of such disposal to the extent that such proceeds are remitted or deemed to be remitted to the UK.

Any chargeable gain or allowable loss on a subsequent disposal of any CH2M HILL Shares should be calculated taking into account a proportion of the allowable cost to the Scheme Shareholder of acquiring its original Scheme Shares based on an apportionment of such allowable cost by reference to the market value of the Scheme Shareholder’s CH2M HILL Shares and, if relevant, Loan Notes at the time of the disposal (subject to the following sentence). However, corporate Scheme Shareholders receiving both New CH2M HILL Shares and Loan Notes in exchange for their Scheme Shares should apportion the allowable cost of acquiring their original Scheme Shares by reference to the market value of their CH2M HILL Shares and Loan Notes at the date of the exchange, rather than at the date of the subsequent disposal of CH2M HILL Shares or Loan Notes. Corporate Scheme Shareholders should also take into account any indexation allowance on that proportion of the allowable cost in calculating a chargeable gain on a disposal of CH2M HILL Shares or Loan Notes, but not in calculating an allowable loss.

(e) Receipt of Loan Notes

To the extent that a Scheme Shareholder, who alone or together with persons connected with him, does not hold more than five per cent of, or any class of shares in, Halcrow as at the Scheme Record Time receives Loan Notes in exchange for Scheme Shares (specifically, in exchange for C Shares) pursuant to a Loan Note Alternative Election, the Scheme Shareholder should not be treated as having made a disposal of such Scheme Shares. For non-corporate Scheme Shareholders, the Loan Notes should be treated as the same asset as those Scheme Shares acquired at the same time and for the same consideration as those Scheme Shares. For corporate Scheme Shareholders, the Loan Notes will be qualifying corporate bonds and therefore the tax consequences set out in paragraph (f)(ii) below will apply.

Any Scheme Shareholder who holds (either alone or together with persons connected with him) more than five per cent. of, or of any class of, shares in Halcrow is advised that clearance has been obtained from HM Revenue and Customs under section 138 of the Taxation of Chargeable Gains Xxx 0000 in respect of the Scheme. Accordingly any such Scheme Shareholder should be treated in the manner described in the previous paragraph.

(f) Subsequent disposal of Loan Notes

(i) Non-corporate Scheme Shareholders

The Loan Notes should constitute non-qualifying corporate bonds for the purposes of United Kingdom taxation of chargeable gains for individual holders of Scheme Shares. A subsequent disposal of Loan Notes (including redemption) by non-corporate Scheme Shareholders may, depending on individual circumstances (including the availability of exemptions and allowable losses), give rise to a liability to UK taxation on chargeable gains. Any chargeable gain or allowable loss on a subsequent disposal (including redemption) of Loan Notes should be calculated taking into account a proportion of the allowable cost to the Scheme Shareholder of acquiring its original Scheme Shares based on an apportionment of such allowable cost by reference to the market value of the Scheme Shareholder’s Loan Notes and, if relevant, CH2M HILL Shares at the time of the disposal.

An individual Scheme Shareholder who is resident but not domiciled or ordinarily resident in the UK and who has claimed to be taxed on the remittance basis will be subject to the capital gains tax in respect of the proceeds of such disposal to the extent that such proceeds are remitted or deemed to be remitted to the UK.

(ii) Corporate Scheme Shareholders

For a Scheme Shareholder within the charge to UK corporation tax, the Loan Notes will be qualifying corporate bonds for the purposes of UK taxation on chargeable gains. Accordingly, the whole of any gain or loss which would have arisen on a disposal of Scheme Shares (specifically, C Shares) at market value immediately prior to the exchange of such Scheme Shares for the Loan Notes will be “held over” and deemed to accrue on a subsequent disposal or part disposal (including redemption) of the Loan Notes. No further indexation allowance will be available to a corporate Scheme Shareholder for the period during which any gain is “held over” in this way.

Any gain or loss accruing to such a corporate Scheme Shareholder in respect of a Loan Note on a subsequent disposal (including redemption) thereof (other than the “held over” gain which will be dealt with as referred to above) will not give rise to a chargeable gain or, as the case may be, an allowable loss for the purpose of UK taxation of chargeable gains, but will be taxed or relieved as income under the UK loan relationship rules.

Tax on income

(g) CH2M HILL Shares

An individual Scheme Shareholder who becomes a holder of CH2M HILL Shares under the Scheme and is resident in the UK for tax purposes or who is not resident in the UK for tax purposes but who is carrying on a trade, profession or vocation in the UK through a branch or agency in connection with which the CH2M HILL Shares are held will generally be subject to UK income tax (at the rate of 10 per cent. in the case of a basic rate taxpayer, 32.5 per cent in the case of a higher rate taxpayer and 42.5 per cent in the case of an additional rate taxpayer) on any dividends paid by CH2M HILL (before deduction of any applicable US withholding tax). UK resident Scheme Shareholders and certain eligible non-UK resident Scheme Shareholders should generally be entitled to a tax credit which may be set off against their income tax liability on the dividend. The tax credit will be equal to one-ninth of the value of the dividend (before deduction of any applicable US withholding tax).

An individual Scheme Shareholder who is resident, but not domiciled or ordinarily resident, in the UK and who has claimed to be taxed on the remittance basis will be subject to UK income tax in respect of dividends paid by CH2M HILL only to the extent that such dividends are remitted or deemed to be remitted to the UK.

Corporate Scheme Shareholders should generally not be subject to UK corporation tax in respect of dividends paid by CH2M HILL provided that the conditions of the dividend exemption in Part 9A of the Corporation Tax Xxx 0000 are satisfied.

UK resident Scheme Shareholders may be able to apply for a reduced rate of US withholding tax (if applicable) under the UK/US double tax treaty in respect of dividend payments from CH2M HILL. US withholding tax withheld from such a dividend payment and not recoverable from the US tax authorities should generally be available as a credit against any UK income tax or corporation tax payable by the relevant Scheme Shareholder in respect of the dividend.

(h) Loan Notes

An individual Scheme Shareholder who becomes a holder of Loan Notes under the Scheme and is resident in the UK for tax purposes or who is not resident in the UK for tax purposes but who is carrying on a trade, profession or vocation in the UK through a branch or agency in connection with which the Loan Notes are held will generally be subject to UK income tax (at the rate of 20 per cent. in the case of a basic rate taxpayer, 40 per cent. in the case of a higher rate taxpayer and 50 per cent. in the case of an additional rate taxpayer) on any interest paid by CH2M HILL (before deduction of any applicable US withholding tax).

An individual Scheme Shareholder who is resident, but not domiciled or ordinarily resident, in the UK and who has claimed to be taxed on the remittance basis will be subject to UK income tax in respect of interest paid by CH2M HILL only to the extent that such interest is remitted or deemed to be remitted to the UK.

A corporate Scheme Shareholder who becomes a holder of Loan Notes under the Scheme and is resident in the UK for tax purposes or which is not resident in the UK for tax purposes but which is carrying on a trade in the UK through a permanent establishment in connection with which the Loan Notes are held will generally be subject to UK corporation tax in respect of interest on, and any accounting profits and gains arising from, the Loan Notes in accordance with the UK loan relationship rules. Any substitution of a

debtor pursuant to the terms and the Loan Notes will have no tax consequences for the UK resident Scheme Shareholders.

UK resident Scheme Shareholders may be able to apply for exemption from US withholding tax (if applicable) under the UK/US double tax treaty in respect of interest payments from CH2M HILL. US withholding tax withheld from such an interest payment and not recoverable from the US tax authorities should generally be available as a credit against the UK income tax or corporation tax payable by the relevant Scheme Shareholder in respect of the interest.

(i) Stamp duty and stamp duty reserve tax (“SDRT”)

No UK stamp duty or SDRT should be payable by Scheme Shareholders as a result of any part of the Scheme.

No UK stamp duty should be payable on any written instrument transferring CH2M HILL Shares or Loan Notes, provided that such instrument is not executed in the UK, and the transfer does not relate to any property situated, or to any matter or thing done or to be done, in the UK.

No SDRT should be payable on any agreement to transfer CH2M HILL Shares provided that there is no register of CH2M HILL Shares kept in the UK by or on behalf of CH2M HILL. No SDRT should be payable on any agreement to transfer Loan Notes provided that there is no register of Loan Notes kept in the UK by or on behalf of CH2M HILL.

(j) Inheritance tax

No inheritance tax will arise in the UK on a gift of CH2M HILL Shares by, or on the death of a person who is not domiciled or deemed to be domiciled in the UK.

19. ACTION TO BE TAKEN

(a) Forms of Proxy

Halcrow Shareholders will find enclosed with this document a BLUE Form of Proxy to be used in connection with the Court Meeting and a WHITE Form of Proxy to be used in connection with the General Meeting.

Whether or not you intend to be present at the Court Meeting and/or the General Meeting, please complete and sign both Forms of Proxy accompanying this document, in accordance with the instructions printed on them and return them (in the reply paid envelope for use in the UK) to Halcrow’s Registrars, Capita Registrars at Corporate Actions, The Registry, 00 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxxx XX0 0XX as soon as possible, and in any event so as to be received no later than 11.00 a.m. (London time) on 16 October 2011 in the case of the Court Meeting (BLUE form) and by no later than 11.15 a.m. (London time) on 16 October 2011 in the case of the General Meeting (WHITE form) (or, in the case of any adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting). If you wish to submit your Forms of Proxy online you may do so through the share portal at xxx.xxxxxxxxxxxxxxxxx.xxx. Submissions must be received by the deadlines specified above. To vote online you will need to log into your share portal account, or register for the share portal if you have not already done so. To register for the share portal, you will need your investor code that is set out on any documentation issued by Capita Registrars. Once registered, you will immediately be able to vote. Alternatively, the BLUE Form of Proxy for the Court Meeting may be handed to Capita Registrars on behalf of the Chairman of the Court Meeting at the commencement of that meeting. However, in the case of the General Meeting, unless the WHITE Form of Proxy is lodged so as to be received by the time mentioned above, it will be invalid.

Returning the Forms of Proxy will enable your votes to be counted at the Shareholder Meetings in the event of your absence. The return of a completed Form of Proxy will not prevent you from attending the Court Meeting and/or the General Meeting, or any adjournments thereof, and voting in person if you so wish and if you are entitled to do so. Each Scheme Shareholder is entitled to appoint one or more proxies (provided each proxy is appointed to exercise the rights attached to a different share or shares held by the Scheme Shareholder) to attend and to vote instead of him or her. A proxy need not be a shareholder of the Company.

A space has been included in the Forms of Proxy to allow Scheme Shareholders to specify the number of Scheme Shares in respect of which that proxy is appointed. Shareholders who return a Form of Proxy duly

executed but leave this space blank will be deemed to have appointed a proxy in respect of all of their Scheme Shares.

You are therefore encouraged to complete and return your BLUE and WHITE Forms of Proxy as soon as possible.

(b) Forms of Election

If you only wish to receive the Cash Consideration in consideration for your Scheme Shares you should not complete a Form of Election. If no Form of Election is received by Capita Registrars by the Election Return Time, you will receive the Cash Consideration only. If you wish to receive New CH2M HILL Shares, and/or Loan Notes and Balancing Cash Consideration for your Scheme Shares, you are required to complete a PINK Form of Election. For detailed information on completing the Form of Election, please refer to Part 6 of this document. If you wish to receive Loan Notes for your Scheme Shares, you should also complete the Form W-8BEN in accordance with the instructions attached to such form and return it by post or by hand (during normal business hours only) together with your Form of Election in the reply paid envelope provided to Capita Registrars at Corporate Actions, The Registry, 00 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxxx XX0 0XX as soon as possible but in any event, so as to be received by no later than 1.00 p.m. on 1 November 2011.

Please note that neither Rothschild nor the Halcrow Directors have performed or obtained a valuation of the CH2M HILL Securities and do not give any advice or recommendation to Scheme Shareholders as to whether, or to what extent, they should elect for the CH2M HILL Securities Alternative in connection with the Scheme. Whether to elect for the CH2M HILL Securities Alternative is a matter for each Scheme Shareholder to decide and will be influenced by their individual financial and tax circumstances. You are strongly advised to seek independent financial and/or tax advice.

20. FURTHER INFORMATION

The terms of the Scheme and the Reduction of Capital are set out in full in Part 12 of this document. Your attention is drawn to the further information contained in this document and, in particular, to the Conditions to, and further terms of, the Scheme in Part 3 of this document, the financial information concerning the Halcrow Group in Part 4 of this document and the financial information concerning the CH2M HILL Group in Part 5 of this document.

Yours faithfully

Xxxx Xxxxxxx

Managing Director

for and on behalf

of N M Rothschild & Sons Ltd

PART 3: CONDITIONS TO, AND FURTHER TERMS OF, THE SCHEME

1. The Scheme is conditional upon:

(a) the approval of the Scheme by a majority in number of the registered holders of Scheme Shares present and voting, either in person or by proxy, at the Court Meeting (or at any adjournment thereof) representing 75 per cent. or more in value of the Scheme Shares voted by such holders;

(b) the special resolution(s) required to approve and implement the Scheme, to be set out in the notice of the General Meeting, being duly passed by the requisite majority at the General Meeting (or at any adjournment thereof);

(c) the sanction of the Scheme and the confirmation of the reduction of capital by the Court (in each case without modification or, if agreed by CH2M HILL, with modification); and

(d) an office copy of the Court Orders and the Statement of Capital being delivered to the Registrar of Companies, and, if the Court so orders for the Reduction of Capital to become effective, the registration by the Registrar of Companies of the Reduction Court Order and the Statement of Capital.

2. In addition, CH2M HILL and the Company have agreed that, application to the Court to sanction the Scheme is conditional on the following matter and, accordingly, the necessary actions to make the Scheme effective will not be taken unless the following Condition (as amended, if appropriate) has been satisfied or waived by CH2M HILL:

no Material Adverse Effect having occurred after the date of the Implementation Agreement.

For the purposes of the Condition in paragraph 2, “Material Adverse Effect” means:

(a) the commencement of any investigation, enquiry, prosecution or other enforcement action by any governmental, administrative or regulatory body against any member of the Halcrow Group or, in their capacity as representing a member of the Halcrow Group, any member of their respective senior management teams or someone working in the business development function pursuant to the Foreign Corrupt Practices Act of the USA or the Xxxxxxx Xxx 0000 of the UK or in respect of corporate responsibility for death (including manslaughter) where such investigation, enquiry, prosecution or other enforcement action respectively has resulted in or would reasonably be expected to have a material adverse effect on the business or operations of CH2M HILL or the Wider Halcrow Group;

(b) any member of the Halcrow Group being legally prohibited or debarred from working for the UK, Australian, UAE, Canadian or US governments or governmental bodies where such prohibition or debarment is material to the Halcrow Group or has a material impact on the ability of CH2M HILL or the Halcrow Group as a whole to bid on or perform work for such governments or governmental bodies;

(c) formal criminal charges being brought against an individual representing a member of the Halcrow Group in the UK, Australia, the UAE, Canada or the US in respect of fraud where such determination has resulted in or would reasonably be expected to have a material adverse effect on the business or operations of CH2M HILL or the Wider Halcrow Group;

(d) loss of one or more projects or anticipated project revenues which, when aggregated with gains under new projects, are so serious as to be material to the Halcrow Group meeting its 2011 business plan or its projections for the 2012 business plan as presented by the Company to CH2M HILL prior to the date of the Implementation Agreement, caused directly or indirectly by a member of the Halcrow Group where any such events have resulted or would reasonably be expected to result in a diminution of not less than £10 million pre-tax profit for the financial year ending 31 December 2011 or 31 December 2012; or

(e) serious injury, death or other industrial accident occurring on a project caused directly or indirectly by a member of the Halcrow Group where such event has resulted in or would reasonably be expected to result in a material adverse effect on the business or operations of CH2M HILL or the Wider Halcrow Group;

(f) the payment of any cash bonus or incentivisation payments to any shareholder or employee of the Halcrow Group the principal amount of which (including any related taxation or social contribution payments) in aggregate exceed £1 million;

(g) save as contemplated by the Scheme, the Company having allotted or issued, or agreed to allot or issue, any share capital or any instrument or security convertible or exchangeable into share capital or any options or awards under any share plans, except to satisfy the valid vesting of any options or awards under the Halcrow Option Plans and/or Halcrow SIP granted before the date of the Implementation Agreement (including, for the avoidance of doubt, any dividend shares awarded under the Halcrow SIP following the annual general meeting of Halcrow scheduled for 30 September 2011) and 15,316 Ordinary Shares at a price per share of 396 xxxxx under the DRIP Scheme in respect of any dividend declared at the annual general meeting of Halcrow scheduled for 30 September 2011, on or as soon as reasonably practicable after the payment date for that dividend and in any event by no later than 6.00 p.m. on the Business Day immediately proceeding the date of the first Court Hearing;

(h) the payment of any dividends by any member of the Halcrow Group to any shareholder of the Halcrow Group (apart from other members of the Halcrow Group) which in aggregate exceed £1 million; and

(i) amending any existing borrowing facility, arranging and drawing under new (from the date of the Implementation Agreement) third party overdraft and committed borrowing facilities by any member of the Halcrow Group in respect of an amount of more than £10 million,

(a) changes in general economic or political conditions or the securities markets in general (whether as a result of acts of terrorism, war (whether or not declared), armed conflicts or otherwise) (other than any such matter disproportionately affecting the Halcrow Group when compared to other similar professional services businesses generally);

(b) any change resulting from announcement of the transactions under, or the performance of obligations under, the Implementation Agreement or the proposal, including any such change relating to the identity of, or facts and circumstances relating to, CH2M HILL and including any actions by customers resulting from this sub-paragraph (b); and

(c) any hurricane, flood, tornado, earthquake or other natural disaster or any other force majeure event (other than any such matter disproportionately affecting the Halcrow Group when compared to other similar professional services businesses generally).

Certain further terms of the Acquisition

1. Condition 2 must be satisfied or waived by CH2M HILL by no later than 31 December 2011 on the date immediately preceding the date of the Scheme Court Hearing, failing which the Scheme will lapse.

2. CH2M HILL reserves the right in its sole discretion to waive the Condition in paragraph 2, in whole or in part.

3. Save to the extent cancelled pursuant to the Scheme, the Halcrow Shares will be acquired by CH2M HILL fully paid and free from all liens, equitable interests, charges, encumbrances and other third party rights of any nature whatsoever and together with all rights attaching to them, including the right to receive and retain all dividends and distributions (if any) declared, made or payable after the Effective Date.

4. The New CH2M HILL Shares will be issued credited as fully paid and will rank pari passu in all respects with the CH2M HILL Shares in issue at the time the New CH2M HILL Shares are allotted, including the right to receive and retain dividends and other distributions (if any) paid by reference to a record date after the Effective Date.

5. The Acquisition and the Scheme, Forms of Proxy and Form of Election will be governed by English law and will be subject to the jurisdiction of the English courts.

6. The availability of the Acquisition to persons not resident in the UK may be affected by the laws of the relevant jurisdictions. Persons who are not resident in the UK should inform themselves about and observe any applicable requirements.

7. Each of the Conditions shall be regarded as a separate Condition and shall not be limited by reference to any other Condition.

PART 4: FINANCIAL INFORMATION CONCERNING THE HALCROW GROUP

PART A: HALCROW GROUP FINANCIAL INFORMATION

FOR THE YEAR ENDED 31 DECEMBER 2010

HALCROW HOLDINGS LIMITED

CONSOLIDATED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 DECEMBER 2010

	Notes	2010		2009
		£000		£000
Turnover: Group and share of joint ventures		468,193		508,055
Less share of joint ventures’ turnover		(2,712	)	(1,489	)
Group turnover	3	465,481		506,566
Cost of sales		(297,766	)	(298,070	)
Gross profit		167,715		208,496
Administrative expenses		(154,779	)	(187,385	)
Operating profit before redundancy and other related costs and before working capital provision		20,851		28,182
Exceptional redundancy and other related costs		(3,919	)	(7,071	)
Exceptional working capital provision		(3,996	)	—
Operating profit	4	12,936		21,111
Share of profit of joint ventures		192		106
Interest receivable and similar income	5	46		334
Interest payable and similar charges	6	(4,358	)	(5,206	)
Profit on ordinary activities before taxation		8,816		16,345
Tax on profit on ordinary activities	9	(1,734	)	(4,102	)
Profit for the year after taxation		7,082		12,243

All results are derived from continuing operations.

HALCROW HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEET

31 DECEMBER 2010

	Notes	2010		2009
		£000		£000
FIXED ASSETS
Intangible assets
Goodwill	11	19,810		19,963
Tangible assets	12	22,113		18,946
Investments in joint ventures
Share of gross assets		868		818
Share of gross liabilities		(325	)	(347	)
	13	543		471
Trade investments	14	7		7
		42,473		39,387
CURRENT ASSETS
Debtors	16	169,401		166,529
Cash at bank and in hand		8,816		13,688
		178,217		180,217
CREDITORS—AMOUNTS FALLING DUE WITHIN ONE YEAR (including convertible debentures)	17	(124,236	)	(129,851	)
NET CURRENT ASSETS		53,981		50,366
TOTAL ASSETS LESS CURRENT LIABILITIES		96,454		89,753
CREDITORS—AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR	18	(2,722	)	(503	)
PROVISIONS FOR LIABILITIES AND CHARGES	19	(12,113	)	(11,509	)
NET ASSETS (excluding pension liability)		81,619		77,741
NET PENSION LIABILITY	33	(65,213	)	(72,816	)
NET ASSETS (including pension liability)		16,406		4,925
CAPITAL AND RESERVES
Called up share capital	20	20,605		20,156
Share premium account	21	4,821		4,097
Profit and loss account	23	(18,513	)	(27,746	)
Translation reserve	24	9,493		8,418
Total shareholders’ funds	25	16,406		4,925

The financial statements for Halcrow Holdings Limited, registered number 01674044, were approved by the board of directors and authorised for issue on 27 June 2011. They were signed on its behalf by:

X X Xxxxxx
Director

A Xxxxxx
Director

HALCROW HOLDINGS LIMITED

COMPANY BALANCE SHEET

31 DECEMBER 2010

	Notes	2010		2009
		£000		£000
FIXED ASSETS
Investments in subsidiary undertakings	15	10,200		10,200
CURRENT ASSETS
Debtors	16	31,674		23,700
Cash		0		200
		31,674		23,900
CREDITORS—AMOUNTS FALLING DUE WITHIN ONE YEAR (including convertible debentures)	17	(7,292	)	(18	)
NET CURRENT ASSETS		24,382		23,882
TOTAL ASSETS LESS CURRENT LIABILITIES		34,582		34,082
Provision for liabilities and charges	19	(6,301	)	(6,719	)
NET ASSETS		28,281		27,363
CAPITAL AND RESERVES
Called up share capital	20	20,605		20,156
Share premium account	21	4,821		4,097
Profit and loss account	23	2,855		3,110
Total shareholders’ funds	25	28,281		27,363

The financial statements for Halcrow Holdings Limited, registered number 01674044, were approved by the board of directors and authorised for issue on 27 June 2011. They were signed on its behalf by:

X X Xxxxxx
Director

A Xxxxxx
Director

HALCROW HOLDINGS LIMITED

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

	Notes	2010		2009
		£000		£000
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES	26	(14,162	)	21,883
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received		46		334
Interest paid		(1,951	)	(1,855	)
Interest element of finance lease payments		(25	)	(84	)
Net cash outflow from returns on investment and servicing of finance		(1,930	)	(1,605	)
TAXATION
United Kingdom corporation tax paid		(1,009	)	(2,600	)
Overseas tax paid		(913	)	(3,579	)
Total cash outflow from taxation		(1,922	)	(6,179	)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets		(9,898	)	(4,476	)
Net cash outflow for capital expenditure and financial investment		(9,898	)	(4,476	)
ACQUISITIONS AND DISPOSALS
Deferred consideration paid—Halcrow Consulting Inc.		—		(98	)
Deferred consideration paid—Halcrow Consulting Services Pty Ltd.		(336	)	(805	)
Net cash outflow for acquisitions and disposals		(336	)	(903	)
DIVIDENDS PAID		(1,334	)	(1,950	)
CASH (OUTFLOW)/INFLOW BEFORE FINANCING		(29,582	)	6,770
FINANCING
Net capital element of finance lease drawdowns/(payments)		2,596		(94	)
Repayment of bank loan		—		(5,861	)
Issue of ordinary share capital		1,173		1,264
Repayment of debentures		(18	)	(11	)
Net cash outflow from financing		3,751		(4,702	)
(DECREASE)/INCREASE IN CASH IN THE YEAR	27, 28	(25,831	)	2,068

HALCROW HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

31 DECEMBER 2010

	Notes	2010		2009
		£000		£000
Profit after taxation		7,082		12,243
Actuarial gain/(loss) relating to the pension scheme	33	6,015		(28,555	)
Movement on related deferred tax		(2,635	)	7,995
Movement on translation reserve		1,075		(4,940	)
Share based payment charge		(105	)	(114	)
Total gains (and losses) recognised since last annual report and financial statements		11,432		(13,371	)

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

31 DECEMBER 2010

1 PRINCIPAL ACCOUNTING POLICIES

(a) Basis of accounting

The financial statements have been prepared under the historical convention in accordance with applicable United Kingdom accounting standards. The particular accounting policies adopted are described below. They have all been applied consistently throughout the current and preceding year.

(b) Going concern

The group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the chairman’s and chief executive’s statements.

On 17 December 2009, the Group entered into a binding agreement with a consortium of banks to provide committed lines of credit, sufficient to meet the needs of the business. The 3 year commitment period, inter alia, is subject to satisfying certain covenant conditions. The Facilities agreement includes a £50 million multi-currency revolving credit facility together with bonding and other credit lines.

The current economic conditions create uncertainty particularly over (a) the level of demand for the group’s products; (b) the exchange rate between sterling and principally the US dollar and US dollar-pegged currencies and the euro; and (c) a slowdown in payment patterns from recent experience with a consequent impact on working capital.

The group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level of its current facilities.

The directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the forseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.

(c) Consolidation

The consolidated financial statements comprise the financial statements of the company and all its subsidiary undertakings, joint ventures and associated undertakings. Any subsidiary undertakings and joint ventures and associates sold or acquired during the year are included up to, or from, the date of sale or acquisition.

Intra-group sales and profits are eliminated fully on consolidation. On acquisition of a business, all of the assets and liabilities that exist at the date of acquisition are recorded at their provisional fair values, reflecting their condition at that date. All changes to those assets and liabilities, and the resulting gains and losses, that arise after the group has gained control of the business are charged to the post-acquisition profit and loss account.

The group has taken advantage of the exemption under FRS 8 “Related Party Disclosures” not to disclose transactions and balances between group companies which are eliminated on consolidation.

Joint ventures are entities in which the group holds long-term interests and which are jointly controlled by the group and one or more other ventures under a contractual arrangement. The results of joint ventures are accounted for using the gross equity method of accounting.

Associated undertakings are entities in which the group has a participating interest and over whose operating and financial policies it exercises a significant influence. The results of associated undertakings are accounted for using the net equity method.

(d) Turnover and recognition of profit

Turnover represents amounts earned for professional services and items procured for clients, adjusted, where necessary, for the stage of completion on individual contracts. It excludes value added and similar taxes.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

1 PRINCIPAL ACCOUNTING POLICIES (Continued)

Profit is recognised on long-term contracts, if the final outcome can be assessed with reasonable certainty, by including in the profit and loss account turnover and related costs as contract activity progresses. Turnover is calculated by reference to the value of work performed to date as a proportion of the total contract value.

(e) Amounts recoverable on contracts

Amounts recoverable on contracts represent turnover and supply of services which has not yet been invoiced to clients. Such amounts are separately disclosed within debtors.

The valuation of amounts recoverable on fixed-price contracts is adjusted to recognise profit earned to date or foreseeable losses in accordance with the accounting policy for turnover and recognition of profits.

Cost comprises:

· amounts recoverable valued at the cost of salaries and associated payroll expenses of employees engaged on projects.

· unbilled expenses incurred and equipment purchased for clients in connection with specific contracts.

Where amounts invoiced to clients exceed the book value of work done, the excess is included in creditors as payments on account.

(f) Goodwill

Goodwill represents the difference between the cost of acquisition and the fair value of identifiable net assets acquired. Goodwill arising on acquisitions is capitalised in accordance with FRS 10 “Goodwill and Intangible Assets”. Where these assets are regarded as having limited useful lives, they are amortised on a straight line basis over these lives, which range from 5 to 20 years. No goodwill balance has previously been eliminated against reserves in the year of acquisition.

Goodwill which is held in foreign currencies is retranslated to the closing exchange rate.

Impairment provisions are determined by comparing the carrying value of the asset with its recoverable amount, being the value in use of expected future cashflows.

(g) Fixed assets

Fixed assets are stated at cost less depreciation and impairment provisions. Impairment provisions are determined by comparing the carrying value of the asset with its recoverable amount. The recoverable amount is the higher of the amount that can be obtained from selling the asset or the value of expected discounted cash flows arising from owning the asset.

(h) Depreciation of tangible fixed assets

Depreciation of tangible fixed assets is by equal annual instalments calculated to write off the cost less estimated residual value of each asset over its anticipated useful life.

The annual rate of depreciation applied to each class of tangible fixed asset is as follows:

Short leasehold property		Period of lease
Freehold land		Nil
Freehold property		1%
Motor vehicles		25%
Furniture and equipment:
Computers		25%–33%
Others		20%

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

1 PRINCIPAL ACCOUNTING POLICIES (Continued)

(i) Finance costs

Finance costs of financial liabilities are recognised in the profit and loss account over the term of such instruments at a constant rate on the carrying amount.

(j) Investments

Fixed asset investments are stated at cost less provision for impairment. Impairment provisions are determined by comparing the carrying value of the investment with its recoverable amount. The recoverable amount is the higher of the amount that can be obtained from selling the investment or the value of expected discounted cash flows arising from owning the investment.

(k) Foreign exchange

Transactions in foreign currencies are recorded at the rate of exchange at the date of transaction or, if hedged, at the forward contract rate. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date or, if appropriate, at the forward contract rate.

The results of overseas operations are translated at the average rates of exchange during the period and their balance sheets at the rates ruling at the balance sheet date. Exchange differences arising on translation of the opening net assets and results of overseas operations and on foreign currency borrowings, to the extent that they hedge the Group’s investment in such operations, are reported in the statement of total recognised gains and losses. All other exchange differences are included in the profit and loss account.

(l) Taxation

Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise, based on current tax rates and law. Deferred tax is measured on a non-discounted basis. Timing differences arise from the inclusion of items in income and expenditure in taxation computations in periods different from those in which they are included in financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.

(m) Pensions

Benefits are funded by payments to administered funds.

The main scheme is the Halcrow Pension Scheme, which provides benefits calculated in relation to final salary.

For defined benefit schemes the amounts charged to operating profit are the current service costs and gains and losses on settlements and curtailments. They are included as part of staff costs. Past service costs are recognised immediately in the profit and loss account if the benefits have vested. If the benefits have not vested immediately, the costs are recognised over the period until vesting occurs. The interest cost and the expected return on assets are shown as a net amount of other finance costs or credits adjacent to interest. Actuarial gains and losses are recognised immediately in the statement of total recognised gains and losses.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

1 PRINCIPAL ACCOUNTING POLICIES (Continued)

current rate of return on a high quality corporate bond of equivalent currency and term to the scheme liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The resulting defined benefit asset or liability, net of the related deferred tax, is presented separately after other net assets on the face of the balance sheet.

For defined contribution schemes the amount charged to the profit and loss account in respect of pension costs and other post-retirement benefits is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.

(n) Leases

Assets held under finance leases and other similar contracts, which confer rights and obligations similar to those attached to owned assets, are capitalised as tangible fixed assets and are depreciated over the shorter of the lease terms and their useful lives. The capital elements of future lease obligations are recorded as liabilities, while the interest elements are charged to the profit and loss account over the period of the leases to produce a constant rate of charge on the balance of capital repayments outstanding. Hire purchase transactions are dealt with similarly, except that assets are depreciated over their useful lives.

Rentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such a basis. Benefits received and receivable as incentive to sign an operating lease are similarly spread on a straight-line basis over the lease term, except where the period to the review date on which the rent is first expected to be adjusted to the prevailing market rate is shorter than the full lease term, in which case the shorter period is used.

(o) Derivative financial instruments

The Group uses derivative financial instruments to reduce exposure to foreign exchange risk and interest rate movements. The Group does not hold or issue derivative financial instruments for speculative purposes.

(p) Provisions for liabilities and charges

Property dilapidations—the group makes provision for the expected amount of payments to be made to landlords of properties leased by the group at their termination.

Excesses on insured claims—the group makes provision where claims have been made against the group, which fall within the excess of the group’s professional indemnity insurance policy, to the extent that it is considered probable that an obligation will arise.

Contract losses—the group makes provision for contracts where expected contribution does not include a reasonable allocation of overheads.

Guarantee liability—the group makes provision for liabilities under guarantees entered into by the group, to the extent that it is considered probable that an obligation will arise.

2 PROFIT OF PARENT COMPANY

In accordance with the exemption allowed by S408 of the Companies Xxx 0000, the profit and loss account of the parent has not been presented. Of the profit for the period attributable to the shareholders, a profit of £1,079,000 (2009: loss of £636,000) has been dealt with in the accounts of the parent. This profit is before dividends paid of £1,334,000 (2009: £1,950,000).

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

3 SEGMENTAL INFORMATION

The directors consider there to be one class of business, being consulting engineers. Geographical analyses of turnover, profit on ordinary activities before taxation and net assets/(liabilities) are set out below:

	2010	2009
	£000	£000
Turnover
United Kingdom & Ireland	212,154	231,221
East Asia	26,546	18,379
North America	43,463	49,532
Latin America	15,728	11,019
Middle East	113,538	148,229
Europe (excluding United Kingdom & Ireland)	16,729	15,145
South Asia	8,311	8,910
Africa	3,072	3,519
Australia	25,940	20,612
	465,481	506,566

Geographical segmentation of turnover by destination is not materially different from turnover by origin.

	2010		2009
	£000		£000
Profit/(loss) on ordinary activities before taxation
United Kingdom & Ireland	16,112		20,689
East Asia	972		(44	)
North America	(6,102	)	(364	)
Latin America	(2,257	)	(484	)
Middle East	860		13,420
Europe (excluding United Kingdom & Ireland)	(73	)	(652	)
South Asia	998		(930	)
Africa	480		(147	)
Australia	2,365		(3,552	)
	13,355		27,936
Net interest excluding exchange (loss)/gain on foreign currency borrowings	(4,312	)	(4,872	)
Common costs	(227	)	(6,719	)
	8,816		16,345

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

3 SEGMENTAL INFORMATION (Continued)

	2010		2009
	£000		£000
Net assets/(liabilities)
United Kingdom & Ireland	(13,901	)	1,710
East Asia	6,041		3,705
North America	32,598		31,592
Latin America	4,561		2,157
Middle East	47,149		37,821
Europe (excluding United Kingdom & Ireland)	3,377		2,104
South Asia	4,568		1,987
Africa	206		000
Xxxxxxxxx	3,321		2,935
	87,920		84,460
Unallocated net liabilities	(71,514	)	(79,535	)
	16,406		4,925

Common costs relate to the provision made for a guarantee liability as described in note 19.

Unallocated net liabilities consist of the pension scheme liabilities as described in note 33 and the provision for a guarantee liability as described in note 19.

4 OPERATING PROFIT

			2010		2009
			£000		£000
Operating profit is stated after charging/(crediting):
Auditors’ remuneration for audit	—	group	181		177
Auditors’ remuneration for other services	—	group	98		27
Depreciation of tangible fixed assets	—	owned	7,194		6,836
	—	leased	211		94
Amortisation of goodwill			1,684		1,699
Increase in bad debt provisions			1,060		10,337
Exceptional working capital provision			3,996		—
Exceptional redundancy and other related costs			3,919		7,071
Guarantee provision			227		6,719
Loss on sale of tangible fixed assets			89		153
Exchange (gains)/losses			(4,045	)	5,175
Operating leases:
Plant and machinery			1,055		1,141
Other			13,729		12,855

The group audit fee includes £10,000 (2009: £10,000) in respect of the company. Non-audit fees comprise tax services of £21,000 (2009: £13,000) and other services of £77,000 (2009: £14,000).

Exceptional redundancy and other related costs were incurred following a number of redundancies in regions where the economic retrenchment has been felt most strongly.

An exceptional working capital provision has been made against project and related exposures in limited parts of the Middle East given concerns as to recoverability.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

5 INTEREST RECEIVABLE AND SIMILAR INCOME

	2010	2009
	£000	£000
Interest receivable on:
Short term bank deposits	42	83
Other Loans	—	169
Other Interest	4	29
Exchange gain on foreign currency borrowings	—	53
	46	334

6 INTEREST PAYABLE AND SIMILAR CHARGES

	2010	2009
	£000	£000
Interest payable on:
Bank loans and overdrafts	2,023	793
Finance leases	25	84
Debentures	—	1
Net interest charge on pension schemes	2,265	3,267
Other Loans	45	1,061
	4,358	5,206

7 EMPLOYEE INFORMATION

	2010	2009
	Number	Number
(a) The average number of persons, including directors, employed by the group during the year was:
Professional and technical	5,253	5,714
Administrative	1,054	1,128
	6,307	6,842

	2010	2009
	£000	£000
(b) Staff costs during the year were:
Wages and salaries	250,867	269,673
Social security costs	16,740	16,835
Other pension costs	15,632	11,937
Share based payments	105	114
Redundancy costs	3,919	6,747

8 DIRECTORS’ EMOLUMENTS

	2010	2009
	£000	£000
Staff costs include the following emoluments of directors of Halcrow Holdings Limited:
Aggregate emoluments	1,385	1,239
Contributions to money purchase pension arrangement	133	99
	1,518	1,338

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

8 DIRECTORS’ EMOLUMENTS (Continued)

	Number	Number
The number of directors who:
Are members of a defined benefit pension scheme	—	—
Are members of a money purchase pension scheme	6	5

	2010	2009
	£000	£000
Aggregate emoluments include amounts paid to the highest paid director:
Emoluments	243	290
Contributions to money-purchase pension arrangements	35	27

	2010	2009
	£000	£000
The highest paid director had benefits under the Halcrow Pension Scheme as follows:
Accrued annual pension at end of year	88	95

Four directors, including the highest paid director, exercised share options during the year (2009: none). The gain on exercise was £49,000.

9 TAX ON PROFIT ON ORDINARY ACTIVITIES

	2010		2009
	£000		£000
United Kingdom corporation tax at 28%:
Current year	405		2,648
Adjustment in respect of prior periods	(828	)	(856	)
	(423	)	1,792
Less: Double taxation relief	(709	)	—
	(1,132	)	1,792
Overseas taxation:
Current year	542		(1,556	)
Adjustment in respect of prior periods	—		2,500
Share of joint ventures’ tax charge	64		36
Total current tax	(526	)	2,772
Deferred taxation, origination and reversal of timing differences	698		(541	)
Deferred taxation, pension liability	1,562		1,871
Tax on profits on ordinary activities	1,734		4,102

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

9 TAX ON PROFIT ON ORDINARY ACTIVITIES (Continued)

The standard rate of tax for the year, based on the UK standard rate of corporation tax, is 28% (2009: 28%). The actual tax charge for the current and the previous year varies from the standard rate for the reasons set out in the following reconciliation.

	2010		2009
	£000		£000
Profit on ordinary activities before tax	8,816		16,345
Tax on profit on ordinary activities at standard rate	2,468		4,577
Factors affecting charge for the period:
Expenses not deductible for tax purposes	(4,047	)	(3,089	)
Pension provision	(43	)	(2,774	)
Capital allowances (in excess of)/less than depreciation	(226	)	430
Losses not provided	2,685		2,230
Short term timing differences	185		(686	)
Foreign tax charged at higher rates than UK standard rate	763		440
Adjustments in respect of prior periods:
United Kingdom corporation tax	(828	)	(856	)
Overseas taxation	(1,547	)	2,500
Other	64		—
Total current tax	(526	)	2,772

10 ORDINARY DIVIDENDS

	2010	2009
	£000	£000
Interim paid: 8.0p (2009: 13.05p) per ordinary share	654	910
Final paid: 10.0p (2009: 14.45p) per ordinary share	680	1,040
	1,334	1,950

The Halcrow Trust waived its rights to dividends payable on its holdings of both ordinary and preference shares in respect of both the year ended 31 December 2010 and the year ended 31 December 2009.

The directors recommend a final dividend payment of 4.0p (2009: 0.0p) per ordinary share payable to those members on the register at the close of business on 24 May 2011. This, together with the interim dividend paid in January 2011 of 8.0p (2009: 10.0p) per ordinary share, gives a total dividend for the year of 12.0p compared with 20.0p for the year ended 31 December 2009.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

11 INTANGIBLE ASSETS—GOODWILL

	Goodwill	Negative goodwill
	£000	£000
GROUP
Cost
At 1 January 2010	31,512	(375	)
Exchange movements	1,914	—
At 31 December 2010	33,426	(375	)
Amortisation
At 1 January 2010	11,549	(375	)
Exchange movements	383	—
Charge for the year	1,684	—
At 31 December 2010	13,616	(375	)
Net book value
At 31 December 2010	19,810	—
At 31 December 2009	19,963	—

Goodwill is being amortised on a straight-line basis over periods of between 5 and 20 years. These are the periods over which the directors estimate that the values of the underlying businesses acquired are expected to exceed the value of the underlying assets.

COMPANY

The company has no intangible assets.

12 TANGIBLE FIXED ASSETS

							Furniture
	Land and buildings				Motor		and
	Freehold		Leases		vehicles		equipment		Total
	£000		£000		£000		£000		£000
GROUP
Cost
At 1 January 2010	8,208		6,323		1,246		47,222		62,999
Exchange movement	—		170		12		1,172		1,354
Additions	—		436		437		9,025		9,898
Disposals	—		(115	)	(237	)	(6,975	)	(7,327	)
Transfer/adjustment	(55	)	1,375		28		(1,334	)	14
At 31 December 2010	8,153		8,189		1,486		49,110		66,938
Depreciation
At 1 January 2010	4,164		4,230		834		34,825		44,053
Exchange movement	—		47		12		532		591
Charge for the year	159		730		345		6,171		7,405
Disposals	—		(104	)	(198	)	(6,936	)	(7,238	)
Transfer/adjustment	(55	)	333		51		(315	)	14
At 31 December 2010	4,268		5,236		1,044		34,277		44,825
Net Book Value
At 31 December 2010	3,885		2,953		442		14,833		22,113
At 31 December 2009	4,044		2,093		412		12,397		18,946

The directors believe that the value of tangible fixed assets is not materially different to its fair value.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

12 TANGIBLE FIXED ASSETS (Continued)

Tangible fixed assets shown above include fixed assets held under finance leases as follows:

	2010	2009
	£000	£000
Net book value at end of year:
Furniture and equipment	3,974	187
Depreciation charge for the year:
Furniture and equipment	211	94

Freehold property

The group’s freehold property at Burderop Park, Swindon, Wiltshire, is included in the balance sheet at its purchase price plus the cost of additions. Its purchase price was equal to a valuation by Xxxx & Xxxxxx, chartered surveyors, on an open-market basis as at 30 April 1990. The latest valuation carried out by Strutt & Xxxxxx as at 16 April 2009 gave a value of £4,207,000 and the cost of the property was impaired to this value in the 2008 financial statements.

COMPANY

The company has no tangible fixed assets.

13 INVESTMENTS IN JOINT VENTURES AND ASSOCIATED UNDERTAKINGS

	£000
GROUP
Joint Ventures:
Cost plus share of retained profit
At 1 January 2010	471
Share of retained profits in the year	83
Exchange movements	(11	)
At 31 December 2010	543

14 TRADE INVESTMENTS

		£000
GROUP
Cost
At 1 January 2010 and 31 December 2010		7

The directors consider the market value of the trade investments at 31 December 2010 to be not less than their carrying value.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

15 INVESTMENTS IN SUBSIDIARY UNDERTAKINGS

		£000
COMPANY
Shares in subsidiary undertakings
Cost
At 1 January 2010 and 31 December 2010		11,319
Provisions
At 1 January 2010 and 31 December 2010		1,119
Net book value
At 31 December 2009 and 31 December 2010		10,200

The principal subsidiary undertakings are listed in note 36 of the financial statements.

16 DEBTORS

	Group		Company
Amounts falling due within one year	2010	2009	2010	2009
	£000	£000	£000	£000
Trade debtors	108,411	93,934	—	—
Amounts recoverable on contracts	44,097	48,656	—	—
Amounts owed by subsidiary undertakings	—	—	31,399	23,435
United Kingdom corporation tax	673	—	—	265
Other debtors	13,045	13,878	275	—
Prepayments and accrued income	2,563	8,757	—	—
Amounts falling due in more than one year	168,789	165,225	31,674	23,700
Deferred taxation:
Depreciation in excess of capital allowances	165	740	—	—
Losses	9	59	—	—
Other timing differences	125	154	—	—
Pension	307	351	—	—
	606	1,304	—	—
Other debtors	6	—	—	—
	612	1,304	—	—
Deferred taxation	169,401	166,529	31,674	23,700

The movement in the total deferred tax asset during the year reconciles as follows:

	£000
Balance at 1 January 2010	1,304
Charge to profit and loss account	(698	)
Balance at 31 December 2010	606

A deferred tax asset has not been recognised in respect of timing differences relating to tax losses as there is insufficient evidence that the losses will be utilised in the foreseeable future. The amount of the asset not recognised is £5,389,000 (2009: £4,230,000). The asset would be recovered if sufficient future taxable profits were to be made in the appropriate jurisdictions.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

17 CREDITORS—AMOUNTS FALLING DUE WITHIN ONE YEAR

	Group		Company
	2010	2009	2010	2009
	£000	£000	£000	£000
Bank loans and overdrafts—secured	39,965	19,518	7,097	—
Payments on account	37,937	48,723	—	—
Trade creditors	12,167	5,596	—	—
Obligations under finance leases	47	84	—	—
Amounts owed to associated undertakings	290	1,988	—	—
United Kingdom corporation tax	—	780	155	—
Other taxation and social security	6,009	11,929	—	—
Debentures—unsecured	—	18	—	18
Deferred consideration	480	408	—	—
Other creditors	2,665	12,967	12	—
Accruals and deferred income	24,676	27,840	28	—
	124,236	129,851	7,292	18

Bank loans and overdrafts

Bank loans and overdrafts are secured by fixed and floating charges over the group’s assets. Interest is charged on a sliding scale dependent on the amount of facilities drawndown. The interest rate charged since agreement of the facilities on 17 December 2009 is LIBOR plus a 2.75% margin.

Debentures

The debentures were issued to the vendors of Xxxxxx Xxxx Xxxxxxxx Limited as part of the purchase consideration. They bear interest at 7% per annum and are repayable in half-yearly instalments to each holder after he ceases to be employed by the group. The debentures are fully repaid at 31 December 2010.

	Group and Company
	2010		2009
	£000		£000
The movements on debentures were as follows:
Balance at beginning of the year	18		29
Redemptions	(18	)	(11	)
Balance at end of the year	—		18

18 CREDITORS—AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

	Group		Company
	2010	2009	2010	2009
	£000	£000	£000	£000
Obligations under finance leases	2,722	89	—	—
Deferred consideration	—	408	—	—
Accruals and deferred income	—	6	—	—
	2,722	503	—	—

Obligations under finance leases

Amounts shown above as obligations under finance leases falling due after more than one year are due between the second and fifth years inclusive and are secured on the related leased assets.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

18 CREDITORS—AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (Continued)

Maturity of financial liabilities

	Group		Company
	2010	2009	2010	2009
	£000	£000	£000	£000
Less than one year	40,012	19,602	—	—
Between two and five years	2,722	89	—	—
	42,734	19,691	—	—

19 PROVISIONS FOR LIABILITIES AND CHARGES

	At 1 January 2010	Charged/ (credited) to profit & loss account		Other		At 31 December 2010
	£000	£000		£000		£000
*Group*
Property dilapidation	3,065	281		—		3,346
Excesses on insured claims	568	1,000		(118	)	1,450
Contract losses	1,157	(141	)	—		1,016
Guarantee liability	6,719	227		(645	)	6,301
	11,509	1,367		(763	)	12,113
*Company*
Guarantee liability	6,719	227		(645	)	6,301
	6,719	227		(645	)	6,301

Details of group provisions are as follows:

Property dilapidation

Provision is made for the expected amount of payments to be made to landlords of properties leased by the group at their termination. The relevant leases expire between 2010 and 2021.

Excesses on insured claims

When claims have been made against the group, provision is made for the amount that falls within the excess of the group’s professional indemnity insurance policy. The provision will be utilised over the period of the related claim.

Contract losses

Provision is made in accordance with SSAP 9 for contracts whose expected contribution does not include a reasonable allocation of overheads. The provision will be utilised over the period of the related contracts.

Guarantee liability

Provision is made for a lease obligation arising under a guarantee issued by Halcrow Holdings Limited on 11 September 1987. On 20 April 2010 the company was served a section 17 Landlord and Tenant (Covenants) Xxx 0000 notice, notifying it of a potential liability as guarantor. The provision is expected to be utilised between 2011 and 2013.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

20 SHARE CAPITAL

Group and company	2010	2009
	£000	£000
Authorised:
25,000,000 ordinary shares of £1 each	25,000	25,000
10,000 non-redeemable preference shares of £1 each	10	10
	25,010	25,010

	2010	2009
	£000	£000
Allotted and fully paid:
20,594,648 (2009: 20,145,755) ordinary shares of £1 each	20,595	20,146
10,000 non-redeemable preference shares of £1 each	10	10
	20,605	20,156

During the year, 268,094 ordinary shares of £1 each were issued in relation to the exercise of the share incentive plan (see note 22). The total cash consideration received was £566,916. Additionally, 93,776 ordinary shares were issued for total consideration of £361,975 as part of the Share Incentive Plan; 70,308 ordinary shares were issed for total consideration of £179,988 for the Company Share Option Plan and 16,715 ordinary shares were issed for total consideration of £64,520 for the Dividend Reinvestment Plan.

The preference shares of £1 each are non-redeemable. The holders have no voting rights but have the right, as a class, to appoint two directors. They have a non-cumulative right to receive a dividend of 1p per share prior to any distribution to holders of the ordinary shares. In the event of a winding up, they have the right to a return of assets to the value of £1 per share before any payment to the holders of ordinary shares.

21 SHARE PREMIUM ACCOUNT

Group and company	2010	2009
	£000	£000
At the beginning of the year	4,097	3,273
On shares issued during the year	724	824
At the end of the year	4,821	4,097

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

22 OPTIONS

Options in respect of 1,249,866 ordinary shares of £1 each were outstanding at 31 December 2010 (2009: 1,491,188) under the group’s savings-related share option scheme. These may be exercised as follows:

Option Price	Exercisable	At 1 January 2010	Granted	Exercised	Lapsed	At 31 December 2010
		Number	Number	Number	Number	Number
195p	2010	170,963		125,577	1,175	44,211
205p	2009	60,223		45,619	14,604	—
205p	2011	83,612		5,890	8,407	69,315
220p	2010	143,485		99,861	3,679	39,945
220p	2012	78,766		2,286	7,598	68,882
315p	2011	343,388		7,449	48,359	287,580
315p	2013	489,138		2,013	16,591	470,534
315p	2015	121,613		4,717	21,125	95,771
386p	2013	—	47,489	—	—	47,489
386p	2015	—	97,478	—	788	96,690
386p	2017	—	29,449		—	29,449
		1,491,188	174,416	293,412	122,326	1,249,866

In some circumstances, including the redundancy or death of the holder, options may be exercised at earlier dates than those shown above.

The weighted average share price during the year was 395.2p.

The weighted average life of the options outstanding at 31 December 2010 was 967 days.

174,416 options were granted during 2010 and the group’s share-based payments charge for 2010 is £105,000 (2009: £113,000). The fair values were determined using the Black Scholes valuation model which included the following significant inputs:

Risk-free interest rate	5	%
Dividend yield	10	%
Expected share price volatility	26	%

The share price volatility is based on similar UK businesses operating in the same sector.

23 PROFIT AND LOSS ACCOUNT RESERVE

	Group		Company
	2010		2010
	£000		£000
At the beginning of the year	(27,746	)	3,110
Retained profit for the year	7,082		1,079
Ordinary dividends	(1,334	)	(1,334	)
Actuarial loss on pension scheme (net of deferred tax)	3,380		—
Share based payments	105		—
At the end of the year	(18,513	)	2,855

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

24 TRANSLATION RESERVE

	Group	Company
	2010	2010
	£000	£000
At the beginning of the year	8,418	—
Movement on reserve in the year	1,075	—
At the end of the year	9,493	—

25 TOTAL SHAREHOLDERS’ FUNDS

	Group				Company
	2010		2009		2010		2009
	£000		£000		£000		£000
At the beginning of the year	4,925		18,754		27,363		28,685
Profit/(loss) for the year after taxation	7,082		12,243		1,079		(637	)
Ordinary dividends	(1,334	)	(1,950	)	(1,334	)	(1,949	)
Allotment of ordinary shares	1,173		1,264		1,173		1,264
Actuarial gain/(loss) on pension scheme (net of deferred tax)	3,380		(20,560	)	—		—
Movement on translation reserve	1,075		(4,940	)	—		—
Share based payments	105		114		—		—
At the end of the year	16,406		4,925		28,281		27,363

26 NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES

	2010		2009
	£000		£000
Operating profit	12,936		21,111
Depreciation of tangible fixed assets	7,405		6,930
Impairment of fixed assets	—		—
Amortisation of goodwill	1,684		1,699
Profit on sale of fixed assets	89		153
Increase/(Decrease) in debtors	542		(9,939	)
(Decrease)/Increase in creditors	(29,464	)	6,633
Increase in provisions	591		5,132
Adjustment for pension funding	(8,050	)	(9,950	)
Adjustment for foreign exchange differences	—		—
Adjustment for share based payments	105		114
	(14,162	)	21,883

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

27 RECONCILIATION OF CASHFLOW TO MOVEMENT IN NET DEBT

	2010		2009
	£000		£000
(Decrease)/increase in cash in the year	(25,831	)	2,068
Capital element of finance lease payments	84		94
Repayment of bank loans	—		5,861
Repayment of debenture loans	18		11
Movement in net debt resulting from cash flows	(25,729	)	8,034
New finance leases	(2,680	)	—
Exchange movements	512		163
	(27,897	)	8,197
Net debt at the beginning of the year	(6,021	)	(14,218	)
Net debt at the end of the year	(33,918	)	(6,021	)

28 ANALYSIS OF NET DEBT

	2009		Cash Flow		Other Non-Cash Changes		2010
	£000						£000
Cash at bank and in hand	13,688		(5,384	)	512		8,816
Bank loans and overdrafts
amounts falling due within one year	(19,518	)	(20,447	)	—		(39,965	)
	(5,830	)	(25,831	)	512		(31,149	)
Bank loans and overdrafts
amounts falling due after one year	—		—		—		—
Obligations under finance leases
amounts falling due within one year	(84	)	(2,596	)	2,633		(47	)
amounts falling due after more than one year	(89	)	—		(2,633	)	(2,722	)
Debentures
amounts falling due within one year	(18	)	18		—		—
	(6,021	)	(28,409	)	512		(33,918	)

The non-cash movement results from the retranslation of loans denominated in foreign currencies at closing exchange rates.

29 CAPITAL COMMITMENTS

	Group		Company
	2010	2009	2010	2009
	£000	£000	£000	£000
Contracted but not provided for in the financial statements	256	7,600	—	—

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

30 DERIVATIVES NOT INCLUDED AT FAIR VALUE

The Group has derivatives which are not included at fair value in the accounts:

		Group Fair value
	Principal	2010		2009
	£000	£000		£000
Forward foreign exchange contracts	65,546	(376	)	(265	)
Interest rate swap contracts	1,887	(46	)	(128	)
	67,433	(422	)	(393	)

The Group uses the derivatives to hedge its exposures to changes in foreign currency exchange rates and to manage its exposure to interest rate movements on its bank borrowings. The fair values are based on market values of equivalent instruments at the balance sheet date.

The Group has an interest rate swap with a nominal value of US$2,954,000 at 31 December 2010 (2009: US$5,064,000). The Group pays a fixed interest of 4.25 per cent and receives interest at US LIBOR. The nominal value of the interest rate swap amortises to a final value of US$738,500 and matures on 30 November 2011.

31 CONTINGENT LIABILITIES

	Group		Company
	2010	2009	2010	2009
	£000	£000	£000	£000
Performance and advance payment bonds provided by banks	32,075	32,456	—	—
Borrowings of subsidiary undertakings for which guarantees have been given	—	—	39,965	19,518
	32,075	32,456	39,965	19,518

Where contract values are denominated in foreign currencies, the group in some cases enters into forward exchange contracts to protect the sterling value of its future earnings.

The company has also provided guarantees on behalf of subsidiary undertakings in respect of property leases entered into in the ordinary course of business and has agreed to continue to support certain of its subsidiary undertakings.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

32 LEASE COMMITMENTS

At 31 December 2010 the group was committed to making the following payments during the next year in respect of operating leases:

	Group
	2010	2009
	£000	£000
Land and buildings
Leases which expire:
Within one year	1,849	2,504
In second to fifth years	5,493	4,917
After more than five years	4,636	4,636
	11,978	12,057
Other
Leases which expire:
Within one year	166	141
In second to fifth years	681	841
	847	982

The company had no operating lease commitments.

33 PENSION COMMITMENTS

The group operates various pension schemes for eligible employees. The assets of all schemes are held separately from those of the group and are invested by independent investment managers.

The main scheme is the Halcrow Pension Scheme which is a defined benefit scheme. The Group also sponsors the Pension & Life Assurance Plan of Halcrow Fox & Associates Limited and contributes to the Halcrow Rail section of the Railways Pension Scheme, both of which are also defined benefit arrangements. Contributions are paid to the schemes as agreed with the trustees of those schemes.

All defined benefit schemes have been closed to new entrants for a number of years. The schemes were closed to future accrual with effect from 31 December 2007, with the exception of the Railways Pension Scheme and those members covered by the TUPE provisions. For those members affected, their defined- benefit pensions will remain linked to their pensionable salary (with certain restrictions) for a period of five years from 1 January 2008. Since this date, such members have had the right to earn current service benefits in the Halcrow Money Purchase Plan (HMPP).

Over the year to 31 December 2010, contributions by the group of £7.5m were made to the main scheme (2009: £9,600,000). Contributions have recently been reviewed as part of the full actuarial valuation of the main scheme with an effective date of 31 December 2008. Under the new schedule of contributions, contributions of £7.5m would be payable in 2011. Additional contributions dependent on Company performance may also be paid. Total contributions of 29.1% of pensionable salaries are being paid in respect of any members who continue to accrue benefits (payable in aggregate by the members and the employer). Contributions of £750,000 (2009: £750,000) were made to the Halcrow Fox scheme. In agreement with the Trustees, the group has agreed to pay contributions of £600,000 per year for six years from 2011. Contributions of £1,000,000 (2009: £935,000) were made to the Railways Scheme. Further contributions were made to other smaller arrangements.

The group contributed £12,900,000 (2009: £13,285,000) to the HMPP, which is a defined contribution arrangement.

Calculations based on a full actuarial valuation of the main scheme as at 31 December 2008 have been updated to the accounting date by an independent qualified actuary in accordance with FRS 17. As

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

33 PENSION COMMITMENTS (Continued)

required by FRS 17, the value of the defined benefit liabilities has been measured using the projected unit method.

The following tables set out the key FRS 17 assumptions used for the schemes. The tables below also set out as at 31 December 2009 and 31 December 2010 the fair value of assets, a breakdown of the assets into the main asset classes, the present value of the FRS 17 liabilities and the deficit of assets below the FRS 17 liabilities.

The Halcrow Pension scheme

Assumptions	2010	2009
Price inflation	3.4% p.a.	3.5% p.a.
Discount rate	5.6% p.a.	5.9% p.a.
Pension increases (fixed)	5.0% p.a.	5.0% p.a.
Pension increases (5% LPI)	3.3% p.a.	3.4% p.a.
Salary growth (on average)	4.4% p.a.	4.5% p.a.

The Halcrow Fox scheme and the Railways scheme

Assumptions	2010	2009
Price inflation	3.4% p.a.	3.5% p.a.
Discount rate	5.6% p.a.	5.8% p.a.
Pension increases (fixed)	5.0% p.a.	5.0% p.a.
Pension increases (5% LPI)	3.3% p.a.	3.4% p.a.
Salary Growth (on average)	4.4% p.a.	4.5% p.a.

On the basis of the assumptions used for life expectancy, a male pensioner currently aged 60 would be expected to live for a further 25.0 years (2009: 24.9 years). Allowance is made for future improvements in life expectancy, so a pensioner reaching the age of 60 in 2030 would be expected to live for a further 27.1 years.

Expected return on assets

The Halcrow Pension scheme

Components	2010	2009
Equities	9.0% p.a.	9.0% p.a.
Bonds	5.0% p.a.	5.0% p.a.
Property	6.7% p.a.	6.7% p.a.
Actively managed currency fund	8.4% p.a.	8.4% p.a.
Other	2.2% p.a.	2.2% p.a.
Overall returns expected over the accounting year	6.7% p.a.	6.7% p.a.

The Halcrow Fox scheme and the Railways scheme

Components	2010	2009
Equities	9.0% p.a.	8.4% p.a.
Bonds	5.0% p.a.	5.0% p.a.
Property	6.7% p.a.	6.1% p.a.
Actively managed currency fund	8.4% p.a.	7.8% p.a.
Other	2.2% p.a.	2.0% p.a.
Overall returns expected over the accounting year	6.7% p.a.	6.7% p.a.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

33 PENSION COMMITMENTS (Continued)

start of each accounting year. The overall rate is the weighted average of the individual rates. The actual return on scheme assets over 2010 was a gain of £45,262,000 (2009: gain of £43,700,000).

	31 December 2010
Components	Fair Value (schemes in deficit)		Fair Value (scheme in surplus)	Total
	£000		£000	£000
Equities	190,409		—	190,409
Bonds	179,527		—	179,527
Property	19,300		—	19,300
Actively managed currency fund	4,307		—	4,307
Balance Sheet
Total fair value of assets	393,543		—	393,543
Present value of liabilities	(482,876	)	—	(482,876	)
Deficit in the schemes	(89,333	)	—	(89,333	)
Related deferred tax	24,120		—	24,120
Net pension liabilities	(65,213	)	—	(65,213	)

	31 December 2009
Components	Fair Value (schemes in deficit)		Fair Value (scheme in surplus)	Total
	£000		£000	£000
Equities	156,707		—	156,707
Bonds	166,712		—	166,712
Property	14,400		—	14,400
Actively managed currency fund	10,100		—	10,100
Other	7,742		—	7,742
Balance Sheet
Total fair value of assets	355,661		—	355,661
Present value of liabilities	(456,794	)	—	(456,794	)
Deficit in the schemes	(101,133	)	—	(101,133	)
Related deferred tax	28,317		—	28,317
Net pension liabilities	(72,816	)	—	(72,816	)

Under FRS 17, the schemes are represented on the balance sheet as net pension liabilities of £65,213,000 (2009: £72,816,000).

The scheme liabilities under FRS 17 moved over the period as follows:

	2010		2009
	£000		£000
Scheme liabilities at the beginning of the year	(456,794	)	(396,602	)
Current service cost	(1,200	)	(1,100	)
Interest on post-retirement liabilities	(26,776	)	(24,175	)
Actuarial loss	(14,736	)	(51,347	)
Benefits paid	16,630		16,430
Scheme liabilities at the end of the year	(482,876	)	(456,794	)

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

33 PENSION COMMITMENTS (Continued)

The value of pension scheme assets moved over the period as follows:

	2010		2009
	£000		£000
Scheme assets at the beginning of the year	355,661		317,341
Expected return on plan assets	24,511		20,908
Contributions including those of employees	9,250		11,050
Actuarial gain	20,751		22,792
Benefits paid	(16,630	)	(16,430	)
Scheme assets at the end of the year	393,543		355,661

The following amounts have been included within operating profit under FRS 17 in relation to the defined benefit schemes:

	2010		2009
	£000		£000
Current service cost	1,200		1,100
Employee contributions	(1,482	)	(1,387	)
Total operating charge	(282	)	(287	)

The following amounts have been included as net finance (costs)/income under FRS 17:

	2010	2009
	£000	£000
Expected return on pension scheme assets	24,511	20,908

The history of assets, liabilities and deficits over the last 5 years is:

	31 December 2010		31 December 2009		31 December 2008		31 December 2007
	£000		£000		£000		£000
Total fair value of assets	393,543		355,661		317,341		364,192
Present value of liabilities	(482,876	)	(456,794	)	(396,602	)	(436,539	)
Deficit in the schemes	(89,333	)	(101,133	)	(79,261	)	(72,347	)

The history of experience gains and losses over the last 5 years is:

	2010		2009		2008		2007
Actual return less expected return on scheme assets (£000)	20,751		22,792		(66,995	)	(3,190	)
Percentage of scheme assets	5.27	%	6.41	%	(21.11	)%	(0.99	)%
Experience gains and (losses) arising on schemes’ liabilities (£000)	5,626		(21,900	)	(8	)	152
Percentage of the value of the schemes’ liabilities	1.17	%	(4.79	)%	0.00	%	0.04	%
Total amount recognised in the STRGL (£000)	6,015		(28,555	)	(16,406	)	8,379
Percentage of the value of the schemes’ liabilities	(7.65	)%	(6.14	)%	(4.14	)%	2.12	%

The cumulative actuarial losses recognised in the STRGL since 1 January 2002 are £110,445,000 (2009: a cumulative loss of £113,825,000).

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

33 PENSION COMMITMENTS (Continued)

The effect of retirement benefits on operating profit calculated in accordance with FRS 17 as set out in the financial statements is as follows:

	2010	2009
	£000	£000
Funded defined benefit schemes	325	1,220
Defined contribution schemes	15,307	10,717
Charge per note 7b	15,632	11,937

34 ASSETS PLEDGED

The group has granted fixed and floating charges over all its assets as security for banking facilities.

35 RELATED PARTY TRANSACTIONS

Joint ventures

There were no transactions with, or amounts due to or by, Halcrow (Shanghai) Engineering Consulting Corporation Limited at 31 December 2010 (2009: nil).

The Halcrow Trust

During the year the group received £5,000 in interest from the Halcrow Trust (2009: £169,000) and paid £45,000 in interest to the Halcrow Trust (2009: £1,061,000). An amount of £1,008,000 was due to the group from the Halcrow Trust at 31 December 2010 (2009: £4,242,000 due from the group to the Halcrow Trust).

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2010

36 PRINCIPAL SUBSIDIARY AND ASSOCIATED UNDERTAKINGS AND JOINT VENTURES

	Percentage owned		Country of registration	Principal country/area of operation
Subsidiary undertakings:
Halcrow Group Limited	100	%	England	Worldwide
Halcrow Rural Management Limited	100	%	England	Worldwide
Asia Halcrow Inc.	100	%	Philippines	East Asia
Burderop Investments Limited*	100	%	England	Great Britain
Halcrow (Consulting Engineers & Architects) Limited	100	%	England	Middle East
Halcrow (Thailand) Limited	100	%	Thailand	East Asia
Halcrow Asia Limited	100	%	England	East Asia
Halcrow Asia Partnership Limited	100	%	England	East Asia
Halcrow Bangladesh Limited	100	%	Bangladesh	South Asia
Halcrow Canada Inc.	100	%	Canada	North America
Halcrow Canada Limited	100	%	England	Great Britain
Halcrow China Limited	100	%	Hong Kong	East Asia
Halcrow Consulting India Private Limited	100	%	India	South Asia
Halcrow Consultants Sdn Bhd	100	%	Malaysia	East Asia
Halcrow Consulting (Shenzhen) Co. Limited	100	%	China	East Asia
Halcrow Consulting Inc.	100	%	Canada	North America
Halcrow Consulting Limited*	100	%	England	Great Britain
Halcrow Consulting Services Pty Ltd.	100	%	Australia	Australia
Halcrow do Brasil Ltda	100	%	Brazil	Latin America
Halcrow Group (Thailand) Limited	100	%	Thailand	East Asia
Halcrow Group Ireland Limited	100	%	Republic of Ireland	Europe
Halcrow Inc.	100	%	USA	North America
Halcrow International Limited	100	%	England	Great Britain
Halcrow International Partnership	100	%	England	Middle East
Halcrow Jurutera Perunding Sdn Bhd	100	%	Malaysia	East Asia
Halcrow Management Sciences Limited	100	%	England	Great Britain
Halcrow Middle East LLC	100	%	Oman	Middle East
Halcrow Pacific Pty Limited	100	%	Australia	Australia
Halcrow Pakistan (Pvt) Limited	100	%	Pakistan	Pakistan
Halcrow Panama SA	100	%	Panama	Latin America
Halcrow Rail Approvals Limited	100	%	England	Great Britain
Halcrow Romania SRL	100	%	Romania	Europe
Halcrow Group (Trinidad & Tobago) Limited	100	%	Trinidad & Tobago	Trinidad & Tobago
Halcrow Water Services Limited	100	%	England	Great Britain
Xxx Xxxxxxx Xxxxxxx & Partners (Malaysia) Limited	100	%	England	East Asia
Xxx Xxxxxxx Xxxxxxx & Partners Limited	100	%	England	Latin America
Xxxxxx Partnership Inc.	100	%	Canada	North America
Xxxxxx Partnership Limited	100	%	England	Great Britain
Joint ventures:
Halcrow (Shanghai) Engineering Company Limited	50	%	China	East Asia
Xxxxxxx Xxxxx Limited	50	%	Republic of Ireland	Europe

All holdings are of ordinary shares.

* Indicates that the shares are not held by an intermediate holding company.

The principal activity of all the above undertakings is the supply of services as consulting engineers, except for Burderop Investments Limited whose principal activity is property investment.

PART B: HALCROW GROUP FINANCIAL INFORMATION

FOR THE YEAR ENDED 31 DECEMBER 2009

HALCROW HOLDINGS LIMITED

CONSOLIDATED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 DECEMBER 2009

	Notes	2009		2008
		£000		£000
Turnover: including group share of joint ventures		508,055		468,184
Less share of joint ventures’ turnover		(1,489	)	(845	)
Group turnover	3	506,566		467,339
Cost of sales		(298,070	)	(285,428	)
Gross profit		208,496		181,911
Administrative expenses		(187,385	)	(169,518	)
Operating profit before redundancy and other related costs		28,182		12,685
Redundancy and other related costs		(7,071	)	(292	)
Operating profit	4	21,111		12,393
Share of operating profit of joint ventures		106		48
Interest receivable and similar income	5	334		544
Interest payable and similar charges	6	(5,206	)	(616	)
Profit on ordinary activities before taxation		16,345		12,369
Tax on profit on ordinary activities	9	(4,102	)	(3,401	)
Profit for the year after taxation	23	12,243		8,968

All results are derived from continuing operations.

HALCROW HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEET

31 DECEMBER 2009

	Notes	2009		2008
		£000		£000
FIXED ASSETS
Intangible assets
Goodwill	11	19,963		21,593
Tangible assets	12	18,946		21,625
Investments in joint ventures
Share of gross assets		818		628
Share of gross liabilities		(347	)	(183	)
	13	471		445
Trade investments	14	7		7
		39,387		43,670
CURRENT ASSETS
Debtors	16	166,529		163,348
Cash at bank and in hand		13,688		4,117
		180,217		167,465
CREDITORS—AMOUNTS FALLING DUE WITHIN ONE YEAR (including convertible debentures)	17	(129,851	)	(121,776	)
NET CURRENT ASSETS		50,366		45,689
TOTAL ASSETS LESS CURRENT LIABILITIES		89,753		89,359
CREDITORS—AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR	18	(503	)	(7,148	)
PROVISIONS FOR LIABILITIES AND CHARGES	19	(11,509	)	(6,389	)
NET ASSETS (excluding pension liability)		77,741		75,822
NET PENSION LIABILITY	32	(72,816	)	(57,068	)
NET ASSETS (including pension liability)		4,925		18,754
CAPITAL AND RESERVES
Called up share capital	20	20,156		19,716
Share premium account	21	4,097		3,273
Profit and loss account	23	(27,746	)	(17,593	)
Translation reserve	24	8,418		13,358
Total shareholders’ funds	25	4,925		18,754

The financial statements for Halcrow Holdings Limited, registered number 01674044, were approved by the board of directors on 27 June 2010 and signed on its behalf by:

X X Xxxxxx		A Xxxxxx
Director		Director

HALCROW HOLDINGS LIMITED

COMPANY BALANCE SHEET

31 DECEMBER 2009

	Notes	2009		2008
		£000		£000
FIXED ASSETS
Investments in subsidiary undertakings	15	10,200		10,200
CURRENT ASSETS
Debtors	16	23,700		18,514
Cash at bank and in hand		200		—
		23,900		18,514
CREDITORS—AMOUNTS FALLING DUE WITHIN ONE YEAR (including convertible debentures)	17	(18	)	(29	)
NET CURRENT ASSETS		23,882		18,485
TOTAL ASSETS LESS CURRENT LIABILITIES		34,082		28,685
PROVISIONS FOR LIABILITIES AND CHARGES	19	(6,719	)	—
NET ASSETS		27,363		28,685
CAPITAL AND RESERVES
Called up share capital	20	20,156		19,716
Share premium account	21	4,097		3,273
Profit and loss account	23	3,110		5,696
Total shareholders’ funds	25	27,363		28,685

The financial statements for Halcrow Holdings Limited, registered number 01674044, were approved by the board of directors on 27 June 2010 and signed on its behalf by:

X X Xxxxxx		A Xxxxxx
Director		Director

HALCROW HOLDINGS LIMITED

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2009

	Notes	2009		2008
		£000		£000
NET CASH INFLOW FROM OPERATING ACTIVITIES	26	21,883		8,403
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received		334		544
Interest paid		(1,855	)	(507	)
Interest element of finance lease payments		(84	)	(3	)
Net cash (outflow)/inflow from returns on investment and servicing of finance		(1,605	)	34
TAXATION
United Kingdom corporation tax paid		(2,600	)	(3,272	)
Overseas tax paid		(3,579	)	(321	)
Total cash outflow from taxation		(6,179	)	(3,593	)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets		(4,476	)	(10,616	)
Disposal of tangible fixed assets		—		240
Disposal of fixed asset investments		—		28
Net cash outflow for capital expenditure and financial investment		(4,476	)	(10,348	)
ACQUISITIONS AND DISPOSALS
Subsidiary undertaking acquired—River Ports Group:
—Cash consideration including expenses		—		(534	)
Subsidiary undertaking acquired—Hill International:
—Cash consideration including expenses		—		(138	)
Subsidiary undertaking acquired—Halcrow Consulting Services Pty Ltd (formerly known as Xxxxxx Xxxxxx Twiney Ltd):
—Cash consideration including expenses		—		(1,016	)
—Overdraft acquired		—		525
Deferred consideration paid—Halcrow Consulting Inc.		(98	)	(81	)
Deferred consideration paid—Halcrow Consulting Services Pty Ltd.		(805	)	—
Net cash outflow for acquisitions and disposals		(903	)	(1,244	)
DIVIDENDS PAID		(1,950	)	(1,615	)
CASH INFLOW/(OUTFLOW) BEFORE FINANCING		6,770		(8,363	)
FINANCING
Capital element of finance lease payments		(94	)	(140	)
Repayment of bank loan		(5,861	)	(2,328	)
Issue of ordinary share capital		1,264		1,343
Repayment of debentures		(11	)	(19	)
Net cash outflow from financing		(4,702	)	(1,144	)
INCREASE/(DECREASE) IN CASH IN THE YEAR	27, 28	2,068		(9,507	)

HALCROW HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

31 DECEMBER 2009

	Notes	2009		2008
		£000		£000
Profit after taxation		12,243		8,968
Actuarial loss relating to the pension scheme	33	(28,555	)	(16,406	)
Movement on related deferred tax		7,995		4,596
Movement on translation reserve	24	(4,940	)	13,358
Share based payments charge		(114	)	(44	)
Total gains and losses recognised since last annual report and financial statements		(13,371	)	10,472

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

31 DECEMBER 2009

1 PRINCIPAL ACCOUNTING POLICIES

(a) Accounting convention

The financial statements are prepared in accordance with applicable United Kingdom accounting standards. The particular accounting policies adopted are described below. They have all been applied consistently throughout the current and preceding year.

(b) Going concern

The group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the chairman’s and chief executive’s statements.

During 2009, the group met its day to day working capital requirements through overdraft facilities totalling £26 million and a medium term loan of £6 million as disclosed in note 28.

(c) Consolidation

The group has taken advantage of the exemption under FRS 8 “Related Party Disclosures” not to disclose transactions and balances between group companies which are eliminated on consolidation.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

1 PRINCIPAL ACCOUNTING POLICIES (Continued)

(d) Turnover and recognition of profit

(e) Amounts recoverable on contracts

Amounts recoverable on contracts represent turnover and supply of services which has not yet been invoiced to clients. Such amounts are separately disclosed within debtors.

Cost comprises:

· amounts recoverable valued at the cost of salaries and associated payroll expenses of employees engaged on projects.

· unbilled expenses incurred and equipment purchased for clients in connection with specific contracts.

Where amounts invoiced to clients exceed the book value of work done, the excess is included in creditors as payments on account.

(f) Goodwill

Goodwill which is held in foreign currencies is retranslated to the closing exchange rate.

Impairment provisions are determined by comparing the carrying value of the asset with its recoverable amount, being the value in use of expected future cashflows.

(g) Fixed assets

(h) Depreciation of tangible fixed assets

Depreciation of tangible fixed assets is by equal annual instalments calculated to write off the cost less estimated residual value of each asset over its anticipated useful life.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

1 PRINCIPAL ACCOUNTING POLICIES (Continued)

The annual rate of depreciation applied to each class of tangible fixed asset is as follows:

Short leasehold property		Period of lease
Freehold land		Nil
Freehold property		1%
Motor vehicles		25%
Furniture and equipment:
Computers		25%–33%
Others		20%

(i) Finance costs

Finance costs of financial liabilities are recognised in the profit and loss account over the term of such instruments at a constant rate on the carrying amount.

(j) Investments

(k) Foreign exchange

(l) Taxation

UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted by the balance sheet date.

Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise, based on current tax rates and law. Deferred tax is measured on a non-discounted basis. Timing differences arise from the inclusion of items in income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.

(m) Pensions

Benefits are funded by payments to administered funds.

The main scheme is the Halcrow Pension Scheme, which provides benefits calculated in relation to final salary.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

1 PRINCIPAL ACCOUNTING POLICIES (Continued)

The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The resulting defined benefit asset or liability, net of the related deferred tax, is presented separately after other net assets on the face of the balance sheet.

(n) Leases

Payments under operating leases are charged to the profit and loss account on an accruals basis. Assets funded by finance leases are included in tangible fixed assets at their provisional fair value. The excess of lease payments over the recorded lease obligations is treated as a finance charge which is amortised over the term of each lease to give a constant rate of charge in the profit and loss account over the remaining period of the obligations.

(o) Derivative financial instruments

(p) Provisions for liabilities and charges

Property dilapidations—the group makes provision for the expected amount of payments to be made to landlords of properties leased by the group at their termination.

Contract losses—the group makes provision for contracts where expected contribution does not include a reasonable allocation of overheads.

Guarantee liability—the group makes provision for liabilities under guarantees entered inot by the group, to the extent that it is considered probable that an obligation will arise.

2 PROFIT OF PARENT COMPANY

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

2 PROFIT OF PARENT COMPANY (Continued)

£636,000 (2008: profit £4,466) has been dealt with in the accounts of the parent. This loss is before dividends paid of £1,950,000 (2008: £1,615,000).

3 SEGMENTAL INFORMATION

	2009	2008
	£000	£000
Turnover
United Kingdom	224,834	230,951
East Asia	18,379	13,976
North America	49,532	52,093
Central and South America	11,019	8,661
Middle East	148,229	121,825
Europe (excluding United Kingdom)	21,532	18,785
South Asia	8,910	5,525
Africa	3,519	2,606
Australia	20,612	12,917
	506,566	467,339

Geographical segmentation of turnover by destination is not materially different from turnover by origin.

	2009		2008
	£000		£000
Profit on ordinary activities before taxation
United Kingdom	21,481		23,691
East Asia	(44	)	000
Xxxxx Xxxxxxx	(364	)	(5,372
Central and South America	(484	)	000
Xxxxxx Xxxx	13,420		(4,027
Europe (excluding United Kingdom)	(1,444	)	922
South Asia	(930	)	56
Africa	(147	)	000
Xxxxxxxxx	(3,552	)	(3,985	)
	27,936		12,441
Net interest excluding exchange loss on foreign currency borrowings	(4,872	)	(72
Common costs	(6,719	)	—
	16,345		12,369

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

3 SEGMENTAL INFORMATION (Continued)

	2009		2008
	£000		£000 Restated*
Net assets
United Kingdom	50		327
East Asia	3,705		4,482
North America	31,592		30,605
Central and South America	2,157		2,285
Middle East	37,821		30,181
Europe (excluding United Kingdom)	3,764		1,800
South Asia	1,987		1,394
Africa	449		000
Xxxxxxxxx	2,935		4,245
	84,460		75,822
Unallocated net assets	(79,535	)	(57,068	)
	4,925		18,754

* Restated to correctly reflect the allocation of net assets.

Common costs relate to the provision made for a guarantee liability as described in note 19.

Unallocated net assets consist of the pension scheme liabilities as described in note 33 and the provision for a guarantee liability as described in note 19.

4 OPERATING PROFIT

		2009	2008
		£000	£000
Operating profit is stated after charging/(crediting):
Auditors’ remuneration for audit	— group	177	177
Auditors’ remuneration for other services	— group	27	164
Depreciation of tangible fixed assets	— owned	6,836	7,754
	— leased	94	94
Amortisation of goodwill		1,699	1,392
Increase in bad debt provisions		10,337	12,061
Redundancy and other related costs		7,071	292
Guarantee provision		6,719	—
Loss on sale of tangible fixed assets		153	221
Exchange losses/(gains)		5,175	(3,652	)
Operating leases:
Plant and machinery		1,141	1,061
Other		12,855	5,493

The group audit fee includes £10,000 (2008: £10,000) in respect of the company. Non-audit fees comprise tax services of £13,000 (2008: £110,000) and other services of £14,000 (2008: £54,000)

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

5 INTEREST RECEIVABLE AND SIMILAR INCOME

	2009	2008
	£000	£000
Interest receivable on:
Short term bank deposits	83	544
Other Loans	169	—
Other Interest	29	—
Exchange gain on foreign currency borrowings	53	—
	334	544

6 INTEREST PAYABLE AND SIMILAR CHARGES

	2009	2008
	£000	£000
Interest payable on:
Bank loans and overdrafts	793	504
Finance leases	84	3
Debentures	1	3
Net interest charge on pension schemes	3,267	17
Other Loans	1,061	89
	5,206	616

7 EMPLOYEE INFORMATION

	2009	2008
	Number	Number
(a) The average number of persons, including directors, employed by the group during the year was:
Professional and technical	5,982	6,241
Administrative	1,125	1,175
	7,107	7,416

	2009	2008
	£000	£000
(b) Staff costs during the year were:
Wages and salaries	251,643	226,514
Social security costs	16,835	13,556
Other pension costs	16,892	14,994
Share based payments	114	44
Redundancy costs	6,747	292
	292,231	255,400

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

8 DIRECTORS’ EMOLUMENTS

	2009	2008
	£000	£000
Staff costs include the following emoluments of directors of Halcrow Holdings Limited:
Aggregate emoluments	1,239	1,373
Contributions to money purchase pension arrangement	99	87
	1,338	1,460

Aggregate emoluments include amounts paid to:

	2009	2008
	£000	£000
The highest paid director
Emoluments	290	304
Contributions to money purchase pension arrangement	27	17

The highest paid director had benefits under the Halcrow Pension Scheme as follows:

	2009	2008
	£000	£000
Accrued annual pension at end of year	95	90

No directors exercised share options during the year (2008: one). The gain on exercise in 2008 was £10,000.

9 TAX ON PROFIT ON ORDINARY ACTIVITIES

	2009		2008
	£000		£000
United Kingdom corporation tax at 28% (2008: 28.5%)
Current year	2,648		2,544
Adjustment in respect of prior periods	(856	)	(1,795	)
	1,792		749
Overseas taxation
Current year	(1,556	)	(30	)
Adjustment in respect of prior periods	2,500		—
Share of joint ventures’ tax charge	36		26
Total current tax	2,772		745
Deferred taxation, origination and reversal of timing differences	(541	)	2,656
Deferred taxation, pension liability	1,871		—
Tax on profits on ordinary activities	4,102		3,401

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

9 TAX ON PROFIT ON ORDINARY ACTIVITIES (Continued)

The standard rate of tax for the year, based on the UK standard rate of corporation tax, is 28% (2008: 28.5%). The actual tax charge for the current and the previous year varies from the standard rate for the reasons set out in the following reconciliation.

	2009		2008
	£000		£000
Profit on ordinary activities before tax	16,345		12,369
Tax on profit on ordinary activities at standard rate	4,577		3,525
Factors affecting charge for the period:
Income not taxable for tax purposes	(3,089	)	(1,147	)
Pension provision	(2,774	)	(3,868	)
Capital allowances less than depreciation	430		656
Losses not provided	2,230		2,555
Short term timing differences	(686	)	—
Foreign tax charged at higher rates than UK standard rate	440		819
Adjustments in respect of prior periods
United Kingdom corporation tax	(856	)	(1,795	)
Overseas taxation	2,500		—
Total current tax	2,772		745

10 ORDINARY DIVIDENDS

	2009	2008
	£000	£000
Interim paid: 13.05p (2008:13.05p) per ordinary share	910	752
Final paid: 14.45p (2008: 14.45p) per ordinary share	1,040	863
	1,950	1,615

The Halcrow Trust waived its rights to dividends payable on its holdings of both ordinary and preference shares in respect of both the year ended 31 December 2009 and the year ended 31 December 2008.

The directors recommend a final dividend payment of 10.0p (2008:14.45p) per ordinary share payable to those members on the register at the close of business on 24 May 2010. This, together with the interim dividend paid in January 2010 of 10.0p (2008:13.05p) per ordinary share, gives a total dividend for the year of 20.0p compared with 27.5p for the year ended 31 December 2008.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

11 INTANGIBLE ASSETS—GOODWILL

	Goodwill		Negative goodwill
	£000		£000
GROUP
Cost
At 1 January 2009	31,493		(375
Exchange movements	19		—
At 31 December 2009	31,512		(375	)
Amortisation
At 1 January 2009	9,900		(375	)
Exchange movements	(50	)	—
Charge for the year	1,699		—
At 31 December 2009	11,549		(375	)
Net book value
At 31 December 2009	19,963		—
At 31 December 2008	21,593		—

COMPANY

The company has no intangible assets.

12 TANGIBLE FIXED ASSETS

	Land and buildings			Motor		Furniture and
	Freehold	Short lease		vehicles		equipment		Total
	£000	£000		£000		£000		£000
GROUP
Cost
At 1 January 2009	8,208	5,971		1,017		44,149		59,345
Additions	—	349		244		3,883		4,476
Disposals	—	(7	)	(52	)	(527	)	(586	)
Exchange movement	—	10		37		(283	)	(236	)
At 31 December 2009	8,208	6,323		1,246		47,222		62,999
Depreciation
At 1 January 2009	4,001	3,479		666		29,574		37,720
Charge for the year	163	753		153		5,861		6,930
Disposals	—	(5	)	(16	)	(412	)	(433	)
Exchange movement	—	3		31		(198	)	(164	)
At 31 December 2009	4,164	4,230		834		34,825		44,053
Net Book Value
At 31 December 2009	4,044	2,093		412		12,397		18,946
At 31 December 2008	4,207	2,492		351		14,575		21,625

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

12 TANGIBLE FIXED ASSETS (Continued)

Tangible fixed assets shown above include fixed assets held under finance leases as follows:

	2009	2008
	£000	£000
Net book value at end of year
Furniture and equipment	187	281

	2009	2008
	£000	£000
Depreciation charge for the year
Furniture and equipment	94	94

Freehold property

The group’s freehold property at Burderop Park, Swindon, Wiltshire, is included in the balance sheet at its purchase price plus the cost of additions less provisions for impairment. Its purchase price was equal to a valuation by Xxxx & Xxxxxx, chartered surveyors, on an open-market basis as at 30 April 1990. The latest valuation carried out by Strutt & Xxxxxx as at 16 April 2009 gave a value of £4,207,000 and the cost of the property was impaired to this value in the 2008 financial statements.

COMPANY

The company has no tangible fixed assets.

13 INVESTMENTS IN JOINT VENTURES AND ASSOCIATED UNDERTAKINGS

	£000
Group
Joint Ventures:
Cost plus share of retained profit
At 1 January 2009	445
Share of retained profits in the year	39
Exchange movements	(13	)
At 31 December 2009	471

14 TRADE INVESTMENTS

		£000
Group
Cost
At 1 January 2009 and 31 December 2009		7

The directors consider the market value of the trade investments at 31 December 2009 to be not less than their carrying value.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

15 INVESTMENTS IN SUBSIDIARY UNDERTAKINGS

		£000
Company
Shares in subsidiary undertakings
Cost
At 1 January 2009 and 31 December 2009		11,319
Provisions
At 1 January 2009 and 31 December 2009		1,119
Net book value
At 31 December 2009		10,200
At 31 December 2008		10,200

The principal subsidiary undertakings are listed in note 36 of the financial statements.

16 DEBTORS

Amounts falling due within one year

	Group		Company
	2009	2008	2009	2008
	£000	£000	£000	£000
Trade debtors	93,934	94,968	—	—
Amounts recoverable on contracts	48,656	46,520	—	—
Amounts owed by subsidiary
Undertakings	—	—	23,435	18,513
United Kingdom corporation tax	—	—	265	—
Other debtors	13,878	14,483	—	—
Prepayments and accrued income	8,757	6,614	—	1
	165,225	162,585	23,700	18,514
Amounts falling due in more than one year
Deferred taxation:
Depreciation in excess of capital allowances	740	763	—	—
Losses	59	—	—	—
Other timing differences	154	—	—	—
Pension	351	—	—	—
	166,529	163,348	23,700	18,514

Deferred taxation

The movement in the total deferred tax asset during the year reconciles as follows:

		£000
Balance at 1 January 2009		763
Debit to profit and loss account		541

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

17 CREDITORS—AMOUNTS FALLING DUE WITHIN ONE YEAR

	Group		Company
	2009	2008	2009	2008
	£000	£000	£000	£000
Bank loans and overdrafts—secured	19,518	11,777	—	—
Payments on account	48,723	50,570	—	—
Trade creditors	5,596	8,427	—	—
Obligations under finance leases	84	93	—	—
Amounts owed to associated undertakings	1,988	184	—	—
United Kingdom corporation tax	780	1,587	—	—
Other taxation and social security	11,929	10,168	—	—
Debentures—unsecured	18	29	18	29
Deferred consideration	408	1,006	—	—
Other creditors	12,967	10,297	—	—
Accruals and deferred income	27,840	27,638	—	—
	129,851	121,776	18	29

Bank loans and overdrafts

Debentures

£16,506 of the debentures may be converted to ordinary shares at the option of the holders at any time. The price of an ordinary share to be used as the basis for calculating the number of ordinary shares to be allotted will be equal to net assets per share calculated from the figure for shareholders’ funds disclosed in the company’s financial statements at the date of conversion.

	Group and Company
	2009		2008
	£000		£000
The movements on debentures were as follows:
Balance at beginning of the year	29		48
Redemptions	(11	)	(19	)
Balance at end of the year	18		29

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

18 CREDITORS—AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

	Group		Company
	2009	2008	2009	2008
	£000	£000	£000	£000
Bank loans
Repayable between two and five years	—	6,261	—	—
Obligations under finance leases	89	174	—	—
Deferred consideration	408	713	—	—
Accruals and deferred income	6	—	—	—
	503	7,148	—	—

Bank loans

The bank loans in 2008 were repayable under fixed instalments. Interest is charged at 1.25% above base rate and the loans are secured by fixed and floating charges over the group’s assets.

Obligations under finance leases

Amounts shown above as obligations under finance leases falling due after more than one year are due between the second and fifth years inclusive and are secured on the related leased assets.

Maturity of financial liabilities

	Group		Company
	2009	2008	2009	2008
	£000	£000	£000	£000
Less than one year	19,602	11,870	—	—
Between two and five years	89	6,435	—	—
	19,691	18,305	—	—

19 PROVISIONS FOR LIABILITIES AND CHARGES

Group	At 1 Jan 2009	Charged to profit & loss account	Paid in year		At 31 Dec 2009
	£000	£000	£000		£000
Property dilapidation	2,555	510	—		3,065
Excesses on insured claims	3,141	550	(3,123	)	568
Contract losses	693	464	—		1,157
Guarantee liability	—	6,719	—		6,719
	6,389	8,243	(3,123	)	11,509

Company	At 1 Jan 2009	Charged to profit & loss account	Paid in year	At 31 Dec 2009
	£000	£000	£000	£000
Guarantee liability	—	6,719	—	6,719
	—	6,719	—	6,719

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

19 PROVISIONS FOR LIABILITIES AND CHARGES (Continued)

Details of provisions are as follows:

Property dilapidation

Provision is made for the expected amount of payments to be made to landlords of properties leased by the group at their termination. The relevant leases expire between 2010 and 2021.

Excesses on insured claims

Contract losses

Guarantee liability

20 SHARE CAPITAL

Group and company

	2009		2008
	£000		£000
Authorised:	£	000	£	000
25,000,000 ordinary shares of £1 each	25,000		25,000
10,000 non-redeemable preference shares of £1 each	10		10
	25,010		25,010

	2009	2008
	£000	£000
Allotted and fully paid:
20,145,755 (2008: 19,706,176) ordinary shares of £1 each	20,146	19,706
10,000 non-redeemable preference shares of £1 each	10	10
	20,156	19,716

During the year, 274,287 ordinary shares of £1 each were issued in relation to the exercise of the share incentive plan (see note 22). The total cash consideration received was £922,916. Additionally, 165,292 ordinary shares were issued for total consideration of £340,345 as part of the sharesave maturities.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

21 SHARE PREMIUM ACCOUNT

Group and company

	2009	2008
	£000	£000
At the beginning of the year	3,273	2,383
On shares issued during the year	824	890
At the end of the year	4,097	3,273

22 OPTIONS

Options in respect of 1,491,188 ordinary shares of £1 each were outstanding at 31 December 2009 (2008: 1,849,032) under the group’s savings-related share option scheme. These may be exercised as follows:

Option Price	Exercisable	At 1 Jan 2009	Exercised	Lapsed	At 31 Dec 2009
		Number	Number	Number	Number
195p	2008	73,401	69,339	4,062	—
195p	2010	174,231	2,291	977	170,963
205p	2009	209,569	140,159	9,187	60,223
205p	2011	98,257	8,525	6,120	83,612
220p	2008	21,012	15,317	5,695	—
220p	2010	151,679	—	8,194	143,485
220p	2012	82,247	2,371	1,110	78,766
315p	2011	388,664	—	45,276	343,388
315p	2013	516,823	193	27,492	489,138
315p	2015	133,149	1,126	10,410	121,613
		1,849,032	239,321	118,523	1,491,188

In some circumstances, including the redundancy or death of the holder, options may be exercised at earlier dates than those shown above.

The weighted average share price during the year was 374.9p.

The weighted average life of the options outstanding at 31 December 2009 was 972 days.

No options were granted during 2009 and the group’s share-based payments charge for 2009 is £113,000 (2008: £44,500). The fair values were determined using the Black Scholes valuation model which included the following significant inputs:

Risk-free interest rate	5	%
Dividend yield	10	%
Expected share price volatility	26	%

The share price volatility is based on similar UK businesses operating in the same sector.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

23 PROFIT AND LOSS ACCOUNT RESERVE

	Group 2009		Company 2009
	£000		£000
At the beginning of the year	(17,593	)	5,696
Retained profit for the year	12,243		(636	)
Ordinary dividends	(1,950	)	(1,950	)
Actuarial loss on pension scheme (net of deferred tax)	(20,560	)	—
Share based payments	114		—
At the end of the year	(27,746	)	3,110

24 TRANSLATION RESERVE

	Group 2009			Company 2009
	£000			£000
	£	000		£	000
At the beginning of the year	13,358			—
Movement on reserve in the year	(4,940		)	—
At the end of the year	8,418			—

25 TOTAL SHAREHOLDERS’ FUNDS

	Group				Company
	2009		2008		2009		2008
	£000		£000		£000		£000
At the beginning of the year	18,754		8,466		28,685		28,953
Profit/(loss) for the year after taxation	12,243		8,968		(637	)	4
Ordinary dividends	(1,950	)	(1,615	)	(1,949	)	(1,615	)
Allotment of ordinary shares	1,264		1,343		1,264		1,343
Actuarial gain on pension scheme (net of deferred tax)	(20,560	)	(11,810	)	—		—
Movement on translation reserve	(4,940	)	13,358		—		—
Share based payments	114		44		—		—
At the end of the year	4,925		18,754		27,363		28,685

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

26 NET CASH INFLOW FROM OPERATING ACTIVITIES

	2009		2008
	£000		£000 Restated*
Operating profit	21,111		12,393
Depreciation of tangible fixed assets	6,930		7,848
Impairment of fixed assets	—		2,453
Amortisation of goodwill	1,699		1,392
(Loss)/profit on sale of fixed assets	153		221
Increase in debtors	(9,939	)	(13,638	)
Increase in creditors	6,633		3,942
Increase in provisions	5,132		3,257
Adjustment for pension funding	(9,950	)	(9,509	)
Adjustment for share based payments	114		44
	21,883		8,403

* Restated to allocate adjustment for foreign exchange differences.

27 RECONCILIATION OF CASHFLOW TO MOVEMENT IN NET DEBT

	2009		2008
	£000		£000
Increase/(decrease) in cash in the year	2,068		(9,507	)
Capital element of finance lease payments	94		140
Repayment of bank loans	5,861		2,328
Repayment of debenture loans	11		19
Movement in net debt resulting from cash flows	8,034		(7,020	)
Exchange movement on long-term loans	163		(89	)
	8,197		(7,109	)
Net debt at the beginning of the year	(14,218	)	(7,109	)
Net debt at the end of the year	(6,021	)	(14,218	)

28 ANALYSIS OF NET DEBT

	2008		Cash Flow		Other Non-Cash Changes		2009
	£000						£000
Cash at bank and in hand	4,116		9,809		(237	)	13,688
Bank loans and overdrafts
amounts falling due within one year	(11,777	)	(7,741	)	—		(19,518	)
	(7,661	)	2,068		(237	)	(5,830	)
Bank loans and overdrafts
amounts falling due after one year	(6,261	)	5,861		400		—
Obligations under finance leases
amounts falling due within one year	(93	)	94		(85	)	(84	)
amounts falling due after more than one year	(174	)	—		85		(89	)
Debentures
amounts falling due within one year	(29	)	11		—		(18	)
	(14,218	)	8,034		163		(6,021	)

The non-cash movement results from the retranslation of loans denominated in foreign currencies at closing exchange rates.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

29 CAPITAL COMMITMENTS

	Group		Company
	2009	2008	2009	2008
	£000	£000	£000	£000
Contracted but not provided for in the financial statements	7,600	71	—	—

30 DERIVATIVES NOT INCLUDED AT FAIR VALUE

The Group has derivatives which are not included at fair value in the accounts:

	Group
	Principal	Fair value
	2009	2009		2008
	£000	£000		£000
Forward foreign exchange contracts	26,389	(265	)	(1,968	)
Borrowings of subsidiary undertakings for which guarantees have been given	3,136	(128	)	(232	)
	29,525	(393	)	(2,200	)

The Group has an interest rate swap with a nominal value of US$5,064,000 at 31 December 2009. The Group pays a fixed interest of 4.25 per cent and receives interest at US LIBOR. The nominal value of the interest rate swap amortises to a final value of US$738,500 and matures on 30 November 2011.

31 CONTINGENT LIABILITIES

	Group		Company
	2009	2008	2009	2008
	£000	£000	£000	£000
Performance and advance payment bonds provided by banks	32,456	26,389	—	—
Borrowings of subsidiary undertakings for which guarantees have been given	—	—	19,518	11,777
	32,456	26,389	19,518	11,777

Where contract values are denominated in foreign currencies, the group in some cases enters into forward exchange contracts to protect the sterling value of its future earnings.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

32 LEASE COMMITMENTS

At 31 December 2009 the group was committed to making the following payments during the next year in respect of operating leases:

	Group
	2009	2008
	£000	£000
Land and buildings
Leases which expire:
Within one year	2,504	650
In second to fifth years	4,917	1,770
After more than five years	4,636	2,643
	12,057	5,063
Other
Leases which expire:
Within one year	141	115
In second to fifth years	841	945
	982	1,060

The company had no operating lease commitments.

33 PENSION COMMITMENTS

The group operates various pension schemes for eligible employees. The assets of all schemes are held separately from those of the group and are invested by independent investment managers.

All defined benefit schemes have been closed to new entrants for a number of years. The schemes were closed to future accrual with effect from 31st December 2007, with the exception of the Railways Pension Scheme and those members covered by the TUPE provisions. For those members affected, their defined-benefit pensions will remain linked to their pensionable salary (with certain restrictions) for a period of five years from 1st January 2008. From this date, such members have the right to earn current service benefits in the Halcrow Money Purchase Plan (HMPP).

Over the year to 31st December 2009, contributions by the group of £9,600,000 were made to the main scheme (2008: £8,990,000). Contributions are currently being reviewed as part of the full actuarial valuation of the main scheme which is taking place with an effective date of 31st December 2008. Under the current schedule of contributions, contributions of £7,000,000 would be payable in 2010. Additional contributions dependent on Company performance may also be paid. Total contributions of 26% of pensionable salaries are being paid in respect of any members who continue to accrue benefits (payable in aggregate by the members and the employer). Contribution of £750,000 (2008: £1,000,0000) were made to the Halcrow Fox scheme. In agreement with the Trustees, the group has agreed to pay contributions of £750,000 next year followed by £600,000 per year for six years thereafter. Contributions of £935,000 (2008: £890,000) were made to the Railways Scheme. Further contributions were made to other smaller arrangements.

The group contributed £13,285,000 (2008: £11,864,000) to the HMPP, which is a defined contribution arrangement.

Calculations based on a full actuarial valuation of the main scheme as at 31st December 2008 have been updated to the accounting date by an independent qualified actuary in accordance with FRS 17. As

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

33 PENSION COMMITMENTS (Continued)

required by FRS 17, the value of the defined benefit liabilities has been measured using the projected unit method.

The following tables set out the key FRS 17 assumptions used for the schemes. The tables below also set out as at, 31 December 2008 and 31 December 2009 the fair value of assets, a breakdown of the assets into the main asset classes, the present value of the FRS 17 liabilities and the deficit of assets below the FRS 17 liabilities.

The Halcrow Pension scheme

Assumptions	2009	2008
Price inflation	3.5% p.a.	2.8% p.a.
Discount rate	5.9% p.a.	6.2% p.a.
Pension increases (fixed)	5.0% p.a.	5.0% p.a.
Pension increases (5% LPI)	3.4% p.a.	2.8% p.a.
Salary Growth (on average)	4.5% p.a.	3.8% p.a.

The Halcrow Fox scheme and the Railways scheme

Assumptions	2009	2008
Price inflation	3.5% p.a.	2.8% p.a.
Discount rate	5.8% p.a.	6.2% p.a.
Pension increases (fixed)	5.0% p.a.	5.0% p.a.
Pension increases (5% LPI)	3.4% p.a.	2.8% p.a.
Salary Growth (on average)	4.5% p.a.	3.8% p.a.

On the basis of the assumptions used for life expectancy, a male pensioner currently aged 60 would be expected to live for a further 24.9 years (2008: 24.8 years). Allowance is made for future improvements in life expectancy, so a pensioner reaching the age of 60 in 2029 would be expected to live for a further 26.0 years.

Expected return on assets

The Halcrow Pension scheme

Components	2009	2008
Equities	9.0% p.a.	8.1% p.a.
Bonds	5.0% p.a.	5.0% p.a.
Property	6.7% p.a.	6.4% p.a.
Actively managed currency fund	8.4% p.a.	7.4% p.a.
Other	2.2% p.a.	4.4% p.a.
Overall returns expected over the accounting year	6.7% p.a.	6.7% p.a.

The Halcrow Fox scheme and the Railways scheme

Components	2009	2008
Equities	8.4% p.a.	8.1% p.a.
Bonds	5.0% p.a.	5.0% p.a.
Property	6.1% p.a.	6.4% p.a.
Actively managed currency fund	7.8% p.a.	7.4% p.a.
Other	2.0% p.a.	4.4% p.a.
Overall returns expected over the accounting year	6.7% p.a.	6.7% p.a.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

33 PENSION COMMITMENTS (Continued)

The above expected rates of return are used to calculate the expected return figures stated below. The rates are set to reflect long term expectations of the returns on each asset class held in the schemes at the start of each accounting year. The overall rate is the weighted average of the individual rates. The actual return on scheme assets over 2009 was a gain of £43,700,000 (2008: loss of £42,521,000).

	31 December 2009
Components	Fair Value (schemes in deficit)		Fair Value (scheme in surplus)	Total
	£000		£000	£000
Equities	156,707		—	156,707
Bonds	166,712		—	166,712
Property	14,400		—	14,400
Actively managed currency fund	10,100		—	10,100
Other	7,742		—	7,742
Balance Sheet
Total fair value of assets	355,661		—	355,661
Present value of liabilities	(456,794	)	—	(456,794	)
Deficit in the schemes	(101,133	)	—	(101,133	)
Related deferred tax	28,317		—	28,317
Net pension liabilities	(72,816	)	—	(72,816	)

	31 December 2008
Components	Fair value (schemes in deficit)	Fair value (schemes in surplus)	Total
	£000	£000	£000
Equities	132,300	—	132,300
Bonds	152,943	—	152,943
Property	15,700	—	15,700
Actively managed currency fund	15,800	—	15,800
Other	598	—	598

Balance Sheet

Under FRS 17, the schemes are represented on the balance sheet as net pension liabilities of £72,816,000 (2008: £57,068,000).

The scheme liabilities under FRS 17 moved over the period as follows:

	2009		2008
	£000		£000
Scheme liabilities at the beginning of the year	(396,602	)	(436,539	)
Current service cost	(1,100	)	(1,402	)
Interest on post-retirement liabilities	(24,175	)	(24,491	)
Actuarial (loss)/gain	(51,347	)	50,589
Benefits paid	16,430		15,241
Scheme liabilities at the end of the year	(456,794	)	(396,602	)

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

33 PENSION COMMITMENTS (Continued)

The value of pension scheme assets moved over the period as follows:

	2009		2008
	£000		£000
Scheme assets at the beginning of the year	317,341		364,192
Expected return on plan assets	20,908		24,474
Contributions including those of employees	11,050		10,911
Actuarial gain/(loss)	22,792		(66,995	)
Benefits paid	(16,430	)	(15,241	)
Scheme assets at the end of the year	355,661		317,341

The following amounts have been included within operating profit under FRS 17 in relation to the defined benefit schemes:

	2009		2008
	£000		£000
Current service cost	1,100		1,402
Employee contributions	(1,387	)	(1,919	)
Total operating charge	(287	)	(517	)

The following amounts have been included as net finance (costs)/income under FRS 17:

	2009		2008
	£000		£000
Expected return on pension scheme assets	20,908		24,474
Interest on post-retirement liabilities	(24,175	)	(24,491	)
Net expense to finance income	(3,267	)	(17	)

The history of experience gains and losses over the last 5 years is:

	2009		2008		2007		2006		2005
Actual return less expected return on scheme assets (£000)	22,792		(66,995	)	(3,190	)	8,668		32,793
Percentage of scheme assets	6.41	%	(21.11	)%	(0.99	)%	2.54	%	10.61	%
Experience gains and (losses) arising on schemes’ liabilities (£000)	(21,900	)	(8	)	152		(1,090	)	(1,432	)
Percentage of the value of the schemes’ liabilities	(4.79	)%	0.00	%	0.04	%	(0.25	)%	(0.35	)%
Total amount recognised in the STRGL (£000)	(28,555	)	(16,406	)	8,379		6,806		(28,605	)
Percentage of the value of the schemes’ liabilities	(6.14	)%	(4.14	)%	2.12	%	10.44	%	(6.90	)%

The cumulative actuarial losses recognised in the STRGL since 1st January 2002 are £113,825,000 (2008: a cumulative loss of £93,265,000).

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

33 PENSION COMMITMENTS (Continued)

The effect of retirement benefits on operating profit calculated in accordance with FRS 17 as set out in the financial statements is as follows:

	2009	2008
	£000	£000
Funded defined benefit schemes	1,220	1,900
Defined contribution schemes	15,672	13,094
Charge per note 7b	16,892	14,994

34 ASSETS PLEDGED

The group has granted fixed and floating charges over all its assets as security for banking facilities.

35 RELATED PARTY TRANSACTIONS

Joint ventures

There were no transactions with, or amounts due to or by, Halcrow (Shanghai) Engineering Consulting Corporation Limited at 31 December 2009 (2008: nil).

The Halcrow Trust

During the year the group received £169,000 in interest from the Halcrow Trust (2008: £nil), and paid £1,061,000 in interest to the Halcrow Trust (2008: £nil). An amount of £4,242,000 was owed by the group to the Halcrow Trust at 31 December 2009 (2008: £6,990,000).

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

36 PRINCIPAL SUBSIDIARY AND ASSOCIATED UNDERTAKINGS AND JOINT VENTURES

Subsidiary undertakings	Percentage owned:-
Halcrow Group Limited	100	%
Halcrow Canada Inc.	100	%
Halcrow Consulting Limited *	100	%
Halcrow Asia Partnership Limited	100	%
Halcrow Asia Limited	100	%
Halcrow China Limited	100	%
Halcrow International Limited	100	%
Halcrow International Partnership	100	%
Halcrow Group Ireland Limited	100	%
Halcrow Management Sciences Limited	100	%
Halcrow Pacific Pty Limited	100	%
Halcrow Rural Management Limited	100	%
Halcrow Inc.	100	%
Xxx Xxxxxxx Xxxxxxx & Partners (Malaysia) Limited	100	%
Xxxxxx Partnership Inc.	100	%
Xxxxxx Partnership Limited	100	%
Halcrow (Thailand) Limited	100	%
Halcrow (Shanghai) Engineering Consulting Corporation Limited	100	%
Burderop Investments Limited *	100	%
Halcrow Water Services Limited	100	%
Halcrow Consulting Services Pty Ltd (formerly known as Xxxxxx Xxxxxx Twiney Ltd)	100	%
Joint ventures:-
Halcrow (Shanghai) Engineering Consulting Corporation Limited	50	%
Xxxxxxx Xxxxx Limited	50	%

All holdings are of ordinary shares.

* indicates that the shares are not held by an intermediate holding company.

All these undertakings are registered in England except:

		Country of registration
Halcrow Pacific Pty Limited		Australia
Halcrow China Limited		Hong Kong
Halcrow Canada Inc.		Canada
Halcrow Inc.		USA
Xxxxxx Partnership Inc.		Canada
Halcrow (Thailand) Limited		Thailand
Halcrow (Shanghai) Engineering Consulting Corporation Limited		China
Halcrow Group Ireland Limited		Republic of Ireland
Xxxxxxx Xxxxx Limited		Republic of Ireland
Halcrow Consulting Services Pty Ltd (formerly known as Xxxxxx Xxxxxx Twiney Ltd)*		Australia

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

36 PRINCIPAL SUBSIDIARY AND ASSOCIATED UNDERTAKINGS AND JOINT VENTURES (Continued)

The principal country of operation of all these undertakings is Great Britain except the following undertakings which operate in the areas indicated:

Halcrow Asia Partnership Limited		East Asia
Halcrow Asia Limited		East Asia
Halcrow International Partnership		Middle East
Halcrow Group Ireland Limited		Republic of Ireland
Xxxxxxx Xxxxx Limited		Republic of Ireland
Halcrow Pacific Pty Limited		Australia
Halcrow Consulting Services Pty Ltd (formerly known as Xxxxxx Xxxxxx Twiney Ltd)*		Australia
Halcrow Rural Management Limited		Worldwide
HPA Inc.		USA
Xxx Xxxxxxx Xxxxxxx & Partners (Malaysia) Limited		East Asia
Halcrow China Limited		East Asia
Pyramid Development International Corporation Limited		East Asia
Halcrow (Shanghai) Engineering Consulting Corporation Limited		East Asia

The principal activity of all the above undertakings is the supply of services as consulting engineers, except for Burderop Investments Limited whose principal activity is property investment.

To avoid a statement of excessive length only principal subsidiaries are listed above.

PART C: HALCROW GROUP FINANCIAL INFORMATION

FOR THE YEAR ENDED 31 DECEMBER 2008

HALCROW HOLDINGS LIMITED

CONSOLIDATED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 DECEMBER 2008

	Notes	2008		2007
		£000		£000
Turnover: including group share share of joint ventures		468,184		388,141
Less share of joint ventures’ turnover		(845	)	—
Group turnover	3	467,339		388,141
Cost of sales		(285,428	)	(236,230	)
Gross profit		181,911		151,911
Administrative expenses		(169,518	)	(123,486	)
Operating profit	4	12,393		28,425
Share of operating profit/(loss) of joint ventures		48		(65	)
Interest receivable and similar income	5	544		2,189
Interest payable and similar charges	6	(616	)	(1,658	)
Profit on ordinary activities before taxation		12,369		28,891
Tax on profit on ordinary activities	9	(3,401	)	(8,691	)
Profit for the year after taxation	23,24	8,968		20,200

HALCROW HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEET

31 DECEMBER 2008

	Notes	2008		2007
		£000		£000
Fixed Assets
Intangible assets
Goodwill	11	21,593		16,834
Tangible assets	12	21,625		21,360
Investments in joint ventures
Share of gross assets		628		456
Share of gross liabilities		(183	)	(124	)
	13	445		332
Investments in associated undertakings	13	—		239
Trade investments	14	7		17
		43,670		38,782
Current Assets
Debtors	16	163,348		132,490
Cash at bank and in hand		4,117		8,398
		167,465		140,888
Creditors—amounts falling due within one year	17	(121,776	)	(107,212	)
Net current assets		45,689		33,676
Total assets less current liabilities		89,359		72,458
Creditors—amounts falling due after more than one year	18	(7,148	)	(8,770	)
Provisions for liabilities and charges	19	(6,389	)	(3,132	)
Net assets (excluding pension liability)		75,822		60,556
Net Pension liability	31	(57,068	)	(52,090	)
Net Assets (including pension liability)		18,754		8,466
Capital and reserves
Called up share capital	20	19,716		19,263
Share premium account	21	3,273		2,383
Profit and loss account	23	(17,593	)	(13,180	)
Translation reserve		13,358		—
Total shareholders’ funds	24	18,754		8,466

The financial statements were approved by the board of directors on 18 June 2009 and signed on its behalf by:

X X Xxxxxx
Director

A Xxxxxx
Director

HALCROW HOLDINGS LIMITED

COMPANY BALANCE SHEET

31 DECEMBER 2008

	Notes	2008		2007
		£000		£000
FIXED ASSETS
Investments in subsidiary undertakings	15	10,200		10,200
CURRENT ASSETS
Debtors	16	18,514		18,801
Creditors—amounts falling due within one year (including convertible debentures)	17	(29	)	(48	)
Net current assets		18,485		18,753
Net assets		28,685		28,953
Capital and reserves
Called up share capital	20	19,716		19,263
Share premium account	21	3,273		2,383
Profit and loss account	23	5,696		7,307
Total shareholders’ funds	24	28,685		28,953

The financial statements were approved by the board of directors on 18 June 2009 and signed on its behalf by:

X X Xxxxxx
Director

A Xxxxxx
Director

HALCROW HOLDINGS LIMITED

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2008

	Notes	2008		2007
		£000		£000
Net Cash inflow from operating activities	25	8,403		27,795
Returns on investment and servicing of finance
Interest received		544		207
Interest paid		(507	)	(1,140	)
Interest element of finance lease payments		(3	)	(2	)
Net cash inflow/(outflow) from returns on investment and servicing of finance		34		(935	)
Taxation
United Kingdom corporation tax paid		(3,272	)	(1,483	)
Overseas tax paid		(321	)	(1,585	)
Total cash outflow from taxation		(3,593	)	(3,068	)
Capital expenditure and financial investment
Purchase of tangible fixed assets		(10,616	)	(7,297	)
Disposal of tangible fixed assets		240		40
Purchase of fixed asset investments		—		(10	)
Disposal of fixed asset investments		28		193
Net cash outflow for capital expenditure and financial investment		(10,348	)	(7,074	)
Acquisitions and disposals
Subsidiary undertaking acquired—River Ports Group Cash consideration including expenses		(534	)	—
Subsidiary undertaking acquired—Hill International Cash consideration including expenses		(138	)	—
Subsidiary undertaking acquired—Halcrow Consulting Services Pty Ltd (formerly known as Xxxxxx Xxxxxx Twiney Ltd) Cash consideration including expenses		(1,016	)	—
Cash acquired		525		—
Deferred consideration paid—Halcrow Consulting Inc.		(81	)	(4,210	)
Net cash outflow for acquisitions and disposals		(1,244	)	(4,210	)
Dividends paid		(1,615	)	(1,044	)
Cash (outflow)/inflow before financing Financing		(8,363	)	11,464
Capital element of finance lease payments		(140	)	(143	)
Repayment of bank loan		(2,328	)	(1,797	)
Issue of ordinary share capital		1,343		976
Repayment of debentures		(19	)	(14	)
Net cash outflow from financing		(1,144	)	(978	)
(Decrease)/increase in cash in the year	26, 27	(9,507	)	10,486

HALCROW HOLDINGS LIMITED

CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

31 DECEMBER 2008

	Notes	2008		2007
	£000	£000
Profit after taxation		8,968		20,200
Actuarial (loss)/gain relating to the pension scheme	31	(16,406	)	8,379
Movement on related deferred tax		4,596		(2,346	)
Movement on deferred tax due to change in tax rate		—		(1,862	)
Total gains and losses recognised since last annual report and financial statements		(2,842	)	24,371

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS

31 DECEMBER 2008

1 PRINCIPAL ACCOUNTING POLICIES

(a) Accounting convention

(b) Going concern

The group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the chairman’s and chief executive’s statements on pages 1 to 2 and 3 to 11, respectively(1).

During 2008, the group met its day to day working capital requirements through overdraft facilities totalling £19 million and ma medium term loanof £9 million as disclosed in note 27. On 27th March 2009, an additional committed borrowing facility of £ 7 million was put in place. All facilities, except for the medium term loan, are due for renewal over the next twelve month period. The current economic conditions create uncertainity particularly over (a)the level of demand for the group’s products; (b) the exchange rate between sterling and principally the US dollar and US dollar-pegged currencies and the euro; (c) a slowdown in payment patterns from recent experience with a consequent impact on working capital; and (d) the availability of bank finance in the foreseeable future.

The group’s forecast and projections, taking account of reasonably changes in trading performance, show that the group should be able to operate within the level of its current facilities. The group will open renewal negotiations with its banks prior to expiry of the current facilities and has at the stage not sought any written confirmation that the facilities will be renewed. However, the group has held discussions with its bankers about its future borrowing needs and no matters have been drawn to its attention to suggest that renewal may not be forthcoming on acceptable terms.

After making enquiries, the directors have a reasonable expectation that the company and group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

(c) Consolidation

The group has taken advantage of the exemption under FRS 8 “Related Party Disclosures” not to disclose transactions and balances between group companies which are eliminated on consolidation.

(1) These references are to information in the annual report and accounts of Halcrow in which this financial information was originally published; this information is not included in this document.

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2008

1 PRINCIPAL ACCOUNTING POLICIES (Continued)

(d) Turnover and recognition of profit

Turnover and profit on contracts for the supply of professional services at pre-determined rates is taken as and when the work is carried out, irrespective of the duration of the contract.

(e) Amounts recoverable on contracts

Amounts recoverable on contracts represent turnover for the supply of services which has not yet been invoiced to clients. Such amounts are separately disclosed within debtors.

The valuation of amounts recoverable on contracts is adjusted to recognise profits earned to date or foreseeable losses in accordance with the accounting policy for turnover and the recognition of profits.

Cost comprises:

· amounts recoverable valued at the cost of salaries and associated payroll expenses of employees engaged on projects.

· unbilled expenses incurred and equipment purchased for clients in connection with specific contracts.

Where amounts invoiced to clients exceed the book value of work done, the excess is included in creditors as payments on account.

(f) Goodwill

Goodwill which is held in foreign currencies is retranslated to the closing exchange rate.

Impairment provisions are determined by comparing the carrying value of the asset with its recoverable amount, being the value in use of expected future cash flows.

(g) Fixed assets

(h) Depreciation of tangible fixed assets

Depreciation of tangible fixed assets is by equal annual instalments calculated to write off the cost less estimated residual value of each asset over its anticipated useful life.

100

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2008

1 PRINCIPAL ACCOUNTING POLICIES (Continued)

The annual rate of depreciation applied to each class of tangible fixed asset is as follows:

Short leasehold property	Period of lease
Freehold land	Nil
Freehold property	1	%
Motor vehicles	25	%
Furniture and equipment:
Computers	33	%
Others	20	%

(i) Finance costs

Finance costs of financial liabilities are recognised in the profit and loss account over the term of such instruments at a constant rate on the carrying amount.

(j) Investments

(k) Taxation

UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted by the balance sheet date.

(l) Foreign exchange

Transactions in foreign currencies are recorded at the rate of exchange rate at the date of transaction or, if hedged, at the forward contract rate. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date or, if appropriate, at the forward contract rate.

The results of overseas operations are translated at the average rates of exchange during the period and their balance sheets at the rates ruling at the balance sheet date. For overseas operations that meet the criteria of “closing rate” method as defined by SSAP20 “Foreign Currency Translation”,exchange differences arising on translation of the opening net assets and results of overseas operations and on foreign currency borrrowings are reported in the statement of total recognised gains and losses. All other exchange differences are included in the profit and loss account.

(m) Pensions

Benefits are funded by payments to administered funds.

The main scheme is the Halcrow Pension Scheme, which provides benefits calculated in relation to final salary.

101

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2008

1 PRINCIPAL ACCOUNTING POLICIES (Continued)

Defined benefit schemes are funded, with the assets of the scheme held separately from those of the group, in separate trustee administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and term to the scheme liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The resulting defined benefit asset or liability, net of the related deferred tax, is presented separately after other net assets on the face of the balance sheet.

For defined contribution schemes the amount charged to the profit and loss account in respect of pension costs and other post- retirement benefits is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.

(n) Leases

2 PROFIT OF PARENT COMPANY

In accordance with the exemption allowed by S230 of the Companies Xxx 0000, the profit and loss account of the parent has not been presented. Of the profit for the period attributable to the shareholders, a profit of £4,000 (2007: loss £23,000) has been dealt with in the accounts of the parent. This profit is before dividends paid of £1,615,000 (2007: £1,044,000).

3 SEGMENTAL INFORMATION

The directors consider there to be one class of business. Geographical analyses of turnover, profit on ordinary activities before taxation and net assets / (liabilities) are set out below:

Turnover	2008	2007
	£000	£000
United Kingdom	230,951	208,415
Europe (excluding United Kingdom)	18,785	15,958
East Asia	13,976	14,500
North America	52,093	44,142
Central and South America	8,661	6,153
Middle East	121,825	82,698
South Asia	5,525	5,160
Africa	2,606	3,757
Australia	12,917	7,358
	467,339	388,141

102

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2008

3 SEGMENTAL INFORMATION (Continued)

Geographical segmentation of turnover by destination is not materially different from turnover by origin.

Profit / (loss) on ordinary activities before taxation	2008		2007
	£000		£000
United Kingdom	23,691		23,012
Europe (excluding United Kingdom)	922		531
East Asia	101		(594	)
North America	(5,372	)	4,086
Central and South America	719		(502	)
Middle East	(4,027	)	1,295
South Asia	56		(941	)
Africa	336		(150	)
Australia	(3,985	)	1,623
	12,441		28,360
Net interest excluding exchange (loss) / gain on foreign currency borrowings	(72	)	531
	12,369		28,891

Net Assets	2008	2007
	£000	£000
United Kingdom	1,330	1,098
Europe (excluding United Kingdom)	445	244
East Asia	1,109	000
Xxxxx Xxxxxxx	7,570	3,401
Central and South America	565	24
Middle East	6,216	2,640
South Asia	345	168
Africa	124	57
Australia	1,050	245
	18,754	8,466

4 OPERATING PROFIT

Operating profit is stated after charging/(crediting):	2008		2007
	£000		£000
Auditors’ remuneration for audit—group	177		177
Auditors’ remuneration for other services—group	164		67
Depreciation of tangible fixed assets—owned	7,754		6,184
—leased	94		189
Amortisation of goodwill	1,392		1,145
Increase in bad debt provisions	12,061		1,418
Property Impairment	2,453		—
Pension curtailment gain	—		(5,119
Profit on sale of tangible fixed assets	221		(15	)
Exchange losses/(gains)	(3,652	)	(1,177	)
Operating leases
Plant and machinery	1,061		1,060
Other	5,493		5,462

The group audit fee includes £10,000 (2007: £10,000) in respect of the company. Non-audit fees comprise tax services of £110,000 (2007: £59,000) and other services of £54,000 (2007: £8,000) Underlying profit of

103

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2008

4 OPERATING PROFIT (Continued)

£26.9m(2007:£24.7m) is defined as operating profit before the pension curtailment gain(2007),increase in bad debt provisions and property impairment.

The group’s gains included in the profit and loss account in relation to financial instruments held at fair value analysed by financial instrument category are as follows:

	2008	2007
	£000	£000
Interest rate derivatives	—	40
	—	40

5 INTEREST RECEIVABLE AND SIMILAR INCOME

	2008	2007
	£000	£000
Interest receivable on:
Short term bank deposits	544	207
Net interest credit on pension schemes	—	1,982
	544	2,189

6 INTEREST PAYABLE AND SIMILAR CHARGES

	2008	2007
	£000	£000
Interest payable on:
Bank loans and overdrafts	504	1,144
Finance leases	3	2
Debentures	3	4
Net interest charge on pension schemes	17	—
Exchange loss on foreign currency borrowings	89	508
	616	1,658

7 EMPLOYEE INFORMATION

(a) The average number of persons, including directors, employed by the group during the year was:

	2008	2007
	Number	Number
Professional and technical	6,134	5,040
Administrative	1,175	981
	7,309	6,021

104

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2008

7 EMPLOYEE INFORMATION (Continued)

(b) Staff costs during the year were:

	2008	2007
	£000	£000
Wages and salaries	226,806	206,312
Social security costs	13,556	11,991
Other pension costs	14,994	12,793
Share based payments	44	59
	255,400	231,155

8 DIRECTORS’ EMOLUMENTS

	2008	2007
	£000	£000
Staff costs include the following emoluments of directors of Halcrow Holdings Limited:
Aggregate emoluments	1,373	1,197
Contributions to money purchase pension arrangement	87	13
	1,460	1,210

Aggregate emoluments include amounts paid to:

The highest-paid director

	2008	2007
	£000	£000
Emoluments	304	226

The highest paid director had benefits under the Halcrow Pension Scheme as follows:

	2008	2007
	£000	£000
Accrued annual pension at end of year	—	86

One director exercised share options during the year (2007: four). The gain on the exercise was £10,000.

9 TAX ON PROFIT ON ORDINARY ACTIVITIES

	2008		2007
	£000		£000
United Kingdom corporation tax at 28.5%
Current year	2,544		4,855
Adjustment in respect of prior periods	(1,795	)	(91	)
	749		4,764
Overseas taxation	(31	)	1,100
Share of joint ventures’ tax charge	26		19
Total current tax	744		5,883
Deferred taxation, origination and reversal of timing differences	(2	)	(657	)
Deferred taxation, pension liability	2,659		3,465
Tax on profits on ordinary activities	3,401		8,691

105

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2008

9 TAX ON PROFIT ON ORDINARY ACTIVITIES (Continued)

The standard rate of tax for the year, based on the UK standard rate of corporation tax, is 28.5% (2007: 30%). The actual tax charge for the current and the previous year varies from the standard rate for the reasons set out in the following reconciliation.

	2008		2007
	£000		£000
Profit on ordinary activities before tax	12,369		28,891
Tax on profit on ordinary activities at standard rate	3,525		8,667
Factors affecting charge for the period:
Expenses not deductible for tax purposes	1,333		85
Pension provision	(3,867	)	(3,385	)
Capital allowances less than depreciation	656		8
Other timing differences	—		4
Goodwill amortisation	73		77
Foreign tax charged at higher rates than UK standard rate	819		518
Adjustments in respect of prior periods	(1,795	)	(91	)
Total current tax	744		5,883

10 ORDINARY DIVIDENDS

	2008	2007
	£000	£000
Interim paid: 13.05p (2007:12.25p) per ordinary share	752	552
Final paid: 14.45p (2007: 10.00p) per ordinary share	863	492
	1,615	1,044

The Halcrow Trust waived its rights to dividends payable on its holdings of both ordinary and preference shares in respect of both the year ended 31 December 2008 and the year ended 31 December 2007.

The directors recommend a final dividend payment of 14.45p (2007:14.45p) per ordinary share payable to those members on the register at the close of business on 27 May 2009. This, together with the interim dividend paid in January 2009 of 13.05p (2007:13.05p) per ordinary share, gives a total dividend for the year of 27.5p compared with 27.5p for the year ended 31 December 2007.

106

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2008

11 INTANGIBLE ASSETS—GOODWILL

GROUP

	Goodwill	Negative goodwill
	£000	£000
Cost
At 1 January 2008	24,839	(375	)
Additions	3,032	—
Exchange movements	3,622	—
At 31 December 2008	31,493	(375	)
Amortisation
At 1 January 2008	8,005	(375	)
Exchange movements	503	—
Charge for the year	1,392	—
At 31 December 2008	9,900	(375	)
Net book value
At 31 December 2008	21,593	—
At 31 December 2007	16,834	—

Goodwill is being amortised on a straight-line basis over periods of between five and 20 years. These are the periods over which the directors estimate that the values of the underlying businesses acquired are expected to exceed the value of the underlying assets.

COMPANY

The company has no intangible assets.

Acquistion of subsidiary undertaking

	Book Value		Accounting Policy Adjustment		Provisional fair value
	£’000		£’000		£’000
Tangible fixed assets	190		—		190
Debtors	876		345		1,221
Cash	525		—		525
	1591		345		1,936
Current liabilities	(1,153	)	(177	)	(1,330	)
Net assets	438		168		606
Goodwill capitalised					2,360
					2,966
Consideration
Share issues					450
Cash paid					922
Deferred consideration					1,500
Acquistion costs					94
					2,966

On 7 September 2008,the group acquired 100% of the issued share capital of Xxxxxx Xxxxxx Twiney Limited,a company incorporated in Australia,for consideration comprising the issue of 450,126 ordinary shares of £1 each in Halcrow Holdings Limited,cash paid of A$2,048,000 and deferred considerationof

107

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2008

11 INTANGIBLE ASSETS—GOODWILL (Continued)

A$3,332,000. The group incurred A$208,450 in professional fees as part of this acquisition. Accounting policy adjustments relate to alignment with group accounting policies in respect of revenue recognition. Additional goodwill of £534,000 and £138,000 arose on the acquisition of trade and assets of River Ports Group and Hill International respectively. The fair value of the total consideration was A$2,965,633 . The acquisition has been accounted for under the acquisition method. The table sets out the book value of the identifiable assets and liabilities acquired and their provisional fair value to the group.

The provisional assessment of goodwill arising on the acquisition is being amortised over 20 years, as this is the period over which the directors estimate that the underlying business acquired is expected to exceed the value of the underlying assets. A charge has been made to to the profit and loss account of £42,523 for 2008.

12 TANGIBLE FIXED ASSETS

GROUP

	Land and buildings		Motor		Furniture and
	Freehold	Short lease	vehicles		equipment		Total
	£000	£000	£000		£000		£000
Cost
At 1 January 2008	8,208	4,764	702		38,393		52,067
Additions	—	1,207	326		9,273		10,806
Disposals	—	—	(11	)	(3,517	)	(3,528	)
At 31 December 2008	8,208	5,971	1,017		44,149		59,345
Depreciation
At 1 January 2008	1,370	2,801	510		26,026		30,707
Charge for the year	178	678	156		6,836		7,848
Disposals	—	—	—		(3,288	)	(3,288	)
Impairment loss	2,453	—	—		—		2,453

Tangible fixed assets shown above include fixed assets held under finance leases as follows:

	2008	2007
	£000	£000
Net book value at end of year
Furniture and equipment	281	436

	2008	2007
	£000	£000
Depreciation charge for the year
Furniture and equipment	94	189

Freehold property

The group’s freehold property at Burderop Park, Swindon, Wiltshire,UK, is included in the balance sheet at its purchase price plus the cost of additions. Its purchase price was equal to a valuation by Xxxx & Xxxxxx, chartered surveyors, on an open-market basis as at 30 April 1990. The latest valuation carried out by Strutt & Xxxxxx as at 16 April 2009 gave a value of £4,207,000. The impairment loss of £2,453,000 has been recognised in the year.

COMPANY

The company has no tangible fixed assets.

108

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2008

13 INVESTMENTS IN JOINT VENTURES AND ASSOCIATED UNDERTAKINGS

Group

Joint Ventures:		£000
Cost plus share of retained profit
At 1 January 2008		332
Share of retained profits in the year		22
Exchange movements		91
At 31 December 2008		445

16 DEBTORS

Amounts falling due within one year

	Group		Company
	2008	2007	2008	2007
	£000	£000	£000	£000
Trade debtors	94,968	84,300	—	—
Amounts recoverable on contracts	46,520	33,255	—	—
Amounts owed by subsidiary undertakings	—	—	18,513	18,801
Other debtors	14,140	7,505	—	—
Prepayments and accrued income	6,614	6,326	1	—
	162,242	131,386	18,514	18,801

Amounts falling due in more than one year

Deferred taxation:
Depreciation in excess of capital allowances	1,106	1,104	—	—
	163,348	132,490	18,514	18,801

Deferred taxation

		£000
The movement in the total deferred tax asset during the year reconciles as follows:
Balance at 1 January 2008		1,104
Credit to profit and loss account		2
Balance at 31 December 2008		1,106

A deferred tax asset has not been recognised in respect of timing differences relating to tax losses as there is insufficient evidence that the losses will be utilised in the foreseeable future. The amount of the asset not recognised is £2,077,000 (2007: £1,874,000). The asset would be recovered if sufficient future taxable profits were to be made in the appropriate jurisdictions.

109

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2008

17 CREDITORS—AMOUNTS FALLING DUE WITHIN ONE YEAR

	Group		Company
	2008	2007	2008	2007
	£000	£000	£000	£000
Bank loans and overdrafts—secured	11,777	6,552	—	—
Payments on account	50,570	45,803	—	—
Trade creditors	8,427	6,664	—	—
Obligations under finance leases	93	137	—	—
Amounts owed to associated undertakings	184	185	—	—
United Kingdom corporation tax	1,587	3,767	—	—
Other taxation and social security	10,168	11,872	—	—
Debentures—unsecured	29	48	29	48
Deferred consideration	1,006	179	—	—
Other creditors	10,297	6,919	—	—
Accruals and deferred income	27,638	25,086	—	—
	121,776	107,212	29	48

Bank loans and overdrafts are secured by fixed and floating charges over the group’s assets.

Debentures

	Group and Company
The movements on debentures were as follows:	2008		2007
	£000		£000
Balance at beginning of the year	48		62
Redemptions	(19	)	(14	)
Balance at end of the year	29		48

18 CREDITORS—AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

	Group		Company
	2008	2007	2008	2007
	£000	£000	£000	£000
Bank loans
Repayable between two and five years	6,261	8,500	—	—
Obligations under finance leases	174	270	—	—
Deferred consideration	713	—	—	—
	7,148	8,770	—	—

Bank loans

The bank loans are repayable under fixed instalments. Interest is charged at 1.25 per cent above LIBOR (London Interbank Offered Rate) and the loans are secured by fixed and floating charges over the group’s assets.

110

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2008

18 CREDITORS—AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (Continued)

Obligations under finance leases

Amounts shown above as obligations under finance leases falling due after more than one year are due between the second and fifth years inclusive and are secured on the related leased assets.

Maturity of financial liabilities

	Group		Company
	2008	2007	2008	2007
	£000	£000	£000	£000
Less than one year	11,870	6,689	—	—
Between two and five years	6,435	8,770	—	—
	18,305	15,459	—	—

19 PROVISIONS FOR LIABILITIES AND CHARGES

	At 1 Jan 2008	Charged to profit & loss account	Paid in year		At 31 Dec 2008
	£000	£000	£000		£000
Group
Property dilapidation	2,218	337	—		2,555
Excesses on insured claims	413	3,326	(598	)	3,141
Contract losses	501	192	—		693
	3,132	3,855	(598	)	6,389

Details of group provisions are as follows:

Property dilapidation

Provision is made for the expected amount of payments to be made to landlords of properties leased by the group at their termination. The relevant leases expire between 2008 and 2021.

Excesses on insured claims

Contract losses

Company

The company has no provisions.

111

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

20 SHARE CAPITAL

Group and company

	2008	2007
	£000	£000
Authorised:
25,000,000 ordinary shares of £1 each	25,000	25,000
10,000 non-redeemable preference shares of £1 each	10	10
	25,010	25,010

	2008	2007
	£000	£000
Allotted and fully paid:
19,706,176 (2007: 19,252,769) ordinary shares of £1 each	19,706	19,253
10,000 non-redeemable preference shares of £1 each	10	10
	19,716	19,263

During the year, 304,499 ordinary shares of £1 each were issued in relation to the exercise of the share incentive plan (see note 22). The total cash consideration received was £893,000. Additionally, 148,908 ordinary shares were issued for consideration of £450,000 as part of the Xxxxxx Xxxxxx Twiney Pty Limited acquisition.

21 SHARE PREMIUM ACCOUNT

Group and company

	2008	2007
	£000	£000
At the beginning of the year	2,383	1,788
On shares issued during the year	890	595
At the end of the year	3,273	2,383

112

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

22 OPTIONS

Options in respect of 1,849,032 ordinary shares of £1 each were outstanding at 31 December 2008 (2007: 1,332,368) under the group’s savings-related share option scheme. These may be exercised as follows:

Option Price	Exercisable	2008	2007
		Number	Number
189p	2007	—	68,932
195p	2008	73,401	369,916
195p	2010	174,231	179,391
205p	2007	—	31,582
205p	2009	209,569	218,757
205p	2011	98,257	98,605
220p	2008	21,012	119,493
220p	2010	151,679	163,445
220p	2012	82,247	82,247
315p	2011	388,664	—
315p	2013	516,823	—
315p	2015	133,149	—
		1,849,032	1,332,368

In some circumstances, including the redundancy or death of the holder, options may be exercised at earlier dates than those shown above. The weighted average share price during the year was 310.8p.

The weighted average life of the options outstanding at 31 December 2008 was 1,189 days, and the weighted average exercise price was 267.5p

1,043,809 options were granted during 2008 with a fair value of £399,800, and the group’s share-based payments charge for 2008 is £44,500 (2007: £59,000). The fair values were determined using a valuation model which included the following significant inputs:

Risk-free interest rate	5	%
Dividend yield	10	%
Expected share price volatility	26	%

The share price volatility is based on similar UK businesses operating in similar sectors.

23 PROFIT AND LOSS ACCOUNT RESERVE

	Group 2008		Company 2008
	£000		£000
At the beginning of the year	(13,180	)	7,307
Retained profit for the year	8,968		4
Ordinary dividends	(1,615	)	(1,615	)
Actuarial gain on pension scheme (net of deferred tax)	(11,810	)	—
Share based payments	44		—
At the end of the year	(17,593	)	5,696

113

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

24 TOTAL SHAREHOLDERS’ FUNDS

	Group				Company
	2008		2007		2008		2007
	£000		£000		£000		£000
At the beginning of the year	8,466		(15,896	)	28,953		29,044
Profit/(loss) for the year after taxation	8,968		20,200		4		(23	)
Ordinary dividends	(1,615	)	(1,044	)	(1,615	)	(1,044	)
Allotment of ordinary shares	1,343		976		1,343		976
Actuarial gain on pension scheme (net of deferred tax)	(11,810	)	6,033		—		—
Movement on deferred tax due to change in rate	—		(1,862	)	—		—
Movement on translation reserve	13,358		—		—		—
Share based payments	44		59		—		—
At the end of the year	18,754		8,466		28,685		28,953

The movement in the translation reserve has occurred due ti the application of the “closing rate” method as detailed in Note 1(l)

25 NET CASH INFLOW FROM OPERATING ACTIVITIES

	2008		2007
	£000		£000
Operating profit	12,393		28,425
Depreciation of tangible fixed assets	7,848		6,373
Impairment of fixed assets	2,453		—
Amortisation of goodwill	1,392		1,145
(Loss)/profit on sale of fixed assets	221		(15	)
(Decrease)/Increase in debtors	(29,290	)	818
Increase in creditors	9,775		2,115
Increase in provisions	3,257		674
Adjustment for pension funding	(9,509	)	(10,393	)
Adjustment for foreign exchange differences	9,819		(1,406	)
Adjustment for share based payments	44		59
	8,403		27,795

26 RECONCILIATION OF CASHFLOW TO MOVEMENT IN NET DEBT

	2008		2007
	£000		£000
(Decrease)/increase in cash in the year	(9,507	)	10,486
Capital element of finance lease payments	140		143
Repayment of bank loans	2,328		1,797
Repayment of debenture loans	19		14
Movement in net debt resulting from cash flows	(7,020	)	12,440
New finance leases	—		—
Exchange movement on long-term loans	(89	)	(508	)
	(7,109	)	11,932
Net debt at the beginning of the year	(7,109	)	(19,041	)
Net debt at the end of the year	(14,218	)	(7,109	)

114

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

27 ANALYSIS OF NET DEBT

	2007		Cash Flow		Other Non-Cash Changes		2008
	£000						£000
Cash at bank and in hand	8,398		(4,282	)	—		4,116
Bank loans and overdrafts
amounts falling due within one year	(6,552	)	(5,225	)	—		(11,777	)
	1,846		(9,507	)	—		(7,661	)
Bank loans and overdrafts
amounts falling due after one year	(8,500	)	2,328		(89	)	(6,261	)
Obligations under finance leases
amounts falling due within one year	(137	)	140		(96	)	(93	)
amounts falling due after more than one year	(270	)	—		96		(174	)
Debentures
amounts falling due within one year	(48	)	19		—		(29	)
	(7,109	)	(7,020	)	(89	)	(14,218	)

The non-cash movement results from the retranslation of loans denominated in foreign currencies at closing exchange rates.

28 CAPITAL COMMITMENTS

	Group		Company
	2008	2007	2008	2007
	£000	£000	£000	£000
Contracted but not provided for in the financial statements	71	96	—	—

29 CONTINGENT LIABILITIES

	Group		Company
	2008	2007	2008	2007
	£000	£000	£000	£000
Performance and advance payment bonds provided by banks	26,389	20,440	—	—
Borrowings of subsidiary undertakings for which guarantees have been given	—	—	11,777	6,552
	26,389	20,440	11,777	6,552

Where contract values are denominated in foreign currencies, the group in some cases enters into forward exchange contracts to protect the sterling value of its future earnings.

115

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

30 LEASE COMMITMENTS

At 31 December 2008 the group was committed to making the following payments during the next year in respect of operating leases:

	Group
	2008	2007
	£000	£000
Land and buildings
Leases which expire:
Within one year	650	282
In second to fifth years	1,770	1,673
After more than five years	2,643	3,550
	5,063	5,505
Other
Leases which expire:
Within one year	115	72
In second to fifth years	945	900
After more than five years	—	—
	1,060	972

The company had no operating lease commitments.

31 PENSION COMMITMENTS

The group operates various pension schemes for eligible employees. The assets of all schemes are held separately from those of the group and are invested by independent investment managers.

All defined benefit schemes have been closed to new entrants for a number of years. During 2007, the Company consulted with staff regarding changes to the schemes. Following the consultation, the decision was taken to close the schemes to future accrual with effect from 31 December 2007, with the exception of the Railways Pension Scheme and those members covered by the TUPE provisions. For those members affected, their defined-benefit pensions will remain linked to their pensionable salary (with certain restrictions) for a period of five years from 1st January 2008. After this date, such members have the right to earn current service benefits in the Halcrow Money Purchase Plan (HMPP).

Over the year to 31 December 2008, contributions by the group of £8,990,000 were made to the main scheme (2007: £10,930,000). Following the 2005 actuarial valuation and subsequent benefit changes, the group agreed a schedule of contributions which will result in the payment of £8,900,000 in 2009. Additional contributions dependent on Company performance may also be paid. Total contributions of 26% of pensionable salaries will be paid in respect of any members who continue to accrue benefits (payable in aggregate by the members and the employer). Contributions will be reviewed following a full actuarial valuation of the scheme which is taking place with an effective date of 31 December 2008. Contributions of £1,000,000 (2007: £771,000) were made to the Halcrow Fox scheme. In agreement with the trustees, the group has agreed to pay contributions of £750,000 per year for the next 2 years followed by £600,000 per year for 6 years thereafter. Contributions of £890,000 (2007: £860,000) were made to the Railways Scheme. Further contributions were made to other smaller arrangements.

116

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

31 PENSION COMMITMENTS (Continued)

The group contributed £11,864,000 (2007: £4,574,000) to the Halcrow Money Purchase Plan (“HMPP”), which is a defined contribution arrangement. The figure for 2008 is significantly higher than 2007, as the majority of former members of the defined benefit schemes now earn benefits in HMPP.

Calculations based on a full actuarial valuation of the main scheme as at 31st December 2005 have been updated to the accounting date by an independent qualified actuary in accordance with FRS 17. As required by FRS 17, the value of the defined benefit liabilities has been measured using the projected unit method.

The following table sets out the key FRS 17 assumptions used for the schemes. The tables below also set out as at, 31 December 2007 and 31 December 2008 the fair value of assets, a breakdown of the assets into the main asset classes, the present value of the FRS 17 liabilities and the deficit of assets below the FRS 17 liabilities.

Assumptions	2008	2007
Price inflation	2.8% p.a.	3.4% p.a.
Discount rate	6.2% p.a.	5.7% p.a.
Pension increases (fixed)	5.0% p.a.	5.0% p.a.
Pension increases (5% LPI)	2.8% p.a.	3.3% p.a.
Salary Growth (on average)	3.8% p.a.	4.4% p.a.

On the basis of the assumptions used for life expectancy, a male pensioner currently aged 60 would be expected to live for a further 24.8 years (2007: 24.7 years). Allowance is made for future improvements in life expectancy, so a pensioner reaching the age of 60 in 2028 would be expected to live for a further 25.9 years.

Expected return on assets

Components	2008	2007
Equities	8.1% p.a.	8.0% p.a.
Bonds	5.0% p.a.	5.1% p.a.
Property	6.4% p.a.	6.3% p.a.
Actively managed currency fund	7.4% p.a.	n/a
Other	4.4% p.a.	5.2% p.a.
Overall returns expected over the accounting year	6.7% p.a.	7.2% p.a.

117

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

31 PENSION COMMITMENTS (Continued)

start of each accounting year. The overall rate is the weighted average of the individual rates. The actual return on scheme assets over 2008 was a loss of £42,521,000 (2007: gain of £20,315,000).

	31 December 2008
Components	Fair Value (schemes in deficit)	Fair Value (scheme in surplus)	Total
	£000	£000	£000
Equities	132,300	—	132,300

	31 December 2007
Components	Fair value (schemes in deficit)		Fair value (schemes in surplus)		Total
	£000		£000		£000
Equities	144,917		31,600		176,517
Bonds	138,596		6,200		144,796
Property	17,300		4,000		21,300
Actively managed currency fund	19,579		100		19,679
Other	1,900		—		1,900
Balance Sheet
Total fair value of assets	322,292		41,900		364,192
Present value of liabilities	(395,739	)	(40,800	)	(436,539	)
(Deficit)/surplus in the schemes	(73,447	)	1,100		(72,347	)
Related deferred tax	20,565		(308	)	20,257
Net pension (liabilities)/assets	(52,882	)	792		(52,090	)

Under FRS 17, the schemes are represented on the balance sheet as net pension liabilities of £57,068,000 (2007: £52,090,000).

The scheme liabilities under FRS 17 moved over the period as follows:

	2008		2007
	£000		£000
Scheme liabilities at the beginning of the year	(436,539	)	(434,791	)
Current service cost	(1,402	)	(8,426	)
Interest on post-retirement liabilities	(24,491	)	(21,523	)
Actuarial gain/(loss)	50,589		11,569
Effects of curtailment	—		5,119
Benefits paid	15,241		11,513
Scheme liabilities at the end of the year	(396,602	)	(436,539	)

The value of pension scheme assets moved over the period as follows:

	2008		2007
	£000		£000
Scheme assets at the beginning of the year	364,192		341,690
Expected return on plan assets	24,474		23,505
Contributions including those of employees	10,911		13,700
Actuarial loss	(66,995	)	(3,190	)
Benefits paid	(15,241	)	(11,513	)
Scheme assets at the end of the year	317,341		364,192

118

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

31 PENSION COMMITMENTS (Continued)

The following amounts have been included within operating profit under FRS 17 in relation to the defined benefit schemes:

	2008	2007
	£000	£000
Current service cost	1,402	8,426
Curtailment gain	—	(5,119	)
Employee contributions	—	(1,200	)
Total operating charge	1,402	2,107

The following amounts have been included as net finance (costs)/income under FRS 17:

	2008		2007
	£000		£000
Expected return on pension scheme assets	24,474		23,505
Interest on post-retirement liabilities	(24,491	)	(21,523	)
Net (expense)/credit to finance income	(17	)	1,982

The history of experience gains and losses is:

	2008		2007		2006		2005		2004
Actual return less expected return on scheme assets (£000)	(66,995	)	(3,190	)	8,668		32,793		7,110
Percentage of scheme assets	(21.11	)%	(0.99	)%	2.54	%	10.61	%	2.78	%
Experience gains and (losses) arising on schemes’ liabilities (£000)	(8	)	152		(1,090	)	(1,432	)	200
Percentage of the value of the schemes’ liabilities	0.00	%	0.04	%	(0.25	)%	(0.35	)%	(0.06	)%
Total amount recognised in the STRGL (£000)	(16,406	)	8,379		6,806		(28,605	)	(13,553	)
Percentage of the value of the schemes’ liabilities	(4.14	)%	2.12	%	10.44	%	(6.90	)%	(4.02	)%

The cumulative actuarial losses recognised in the STRGL (statement of recognised gains and losses) since 1st January 2002 are £93,265,000.

The above percentages show the STRGL components as a percentage of the end of year schemes’ asset or liability value, as appropriate.

The effect of retirement benefits on operating profit calculated in accordance with FRS 17 as set out in the financial statements is as follows:

	2008	2007
	£000	£000
Funded defined benefit schemes	1,900	7,288
Defined contribution schemes	13,094	5,505
Charge per note 7b	14,994	12,793

32 ASSETS PLEDGED

The group has granted fixed and floating charges over all its assets as security for banking facilities.

119

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

33 RELATED PARTY TRANSACTIONS

Joint ventures

There were no transactions with, or amounts due to or by, Halcrow (Shanghai) Engineering Consulting Corporation Limited,or Xxxxxxx Xxxxx Limited at 31 December 2008 (2007: nil).

The Halcrow Trust

An amount of £6,990,000 was owed by the group to the Halcrow Trust at 31 December 2008 (2007: £4,966,000).

34 PRINCIPAL SUBSIDIARY AND ASSOCIATED UNDERTAKINGS AND JOINT VENTURES

Subsidiary undertakings	Percentage owned:
Halcrow Group Limited *	100	%
Halcrow Canada Inc.*	100	%
Halcrow Consulting Limited	100	%
Halcrow Asia Partnership Limited*	100	%
Halcrow Asia Limited*	100	%
Halcrow China Limited*	100	%
Halcrow International Limited*	100	%
Halcrow International Partnership*	100	%
Halcrow Group Ireland Limited*	100	%
Halcrow Management Sciences Limited*	100	%
Halcrow Pacific Pty Limited*	100	%
Halcrow Rural Management Limited*	100	%
Xxx Xxxxxxx Xxxxxxx & Partners (Malaysia) Limited*	100	%
Xxxxxx Partnership Inc.*	100	%
Xxxxxx Partnership Limited*	100	%
Burderop Investments Limited	100	%
Halcrow Water Services Limited*	100	%
Halcrow Consulting Services Pty Ltd (formerly known as Xxxxxx Xxxxxx Twiney Ltd)*	100	%
Asia halcrow Inc.*	100	%
Halcrow (Consulting Engineers & Architects) Limited*	100	%
Halcrow Bangladesh Limited*	100	%
Halcrow Consultants Sdn Bhd*	100	%
Halcrow Consulting India Private Limited*	100	%
Halcrow do Brasil Ltda*	65	%
Halcrow Foundation*	100	%
Halcrow Middle East LLC*	100	%
Halcrow Pakistan (Pvt) Limited*	100	%
Halcrow Panama S.A.*	100	%
Halcrow Romania S.R.L.*	100	%
Halcrow,Inc.*	100	%
International Engineers Limited*	100	%
Joint ventures:-
Halcrow (Shanghai) Engineering Consulting Corporation Limited*	50	%
Xxxxxxx Xxxxx Limited*	50	%

All holdings are of ordinary shares.

* indicates that the shares are held by an intermediate holding company.

120

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

34 PRINCIPAL SUBSIDIARY AND ASSOCIATED UNDERTAKINGS AND JOINT VENTURES (Continued)

All these undertakings are registered in England except:

		Country of registration
Halcrow Pacific Pty Limited		Australia
Halcrow China Limited		Hong Kong
Halcrow Canada Inc.		Canada
Xxxxxx Partnership Inc.		Canada
Halcrow PDI Limited		Thailand
Halcrow (Shanghai) Engineering Consulting Corporation Limited		China
Halcrow Group Ireland Limited		Republic of Ireland
Xxxxxxx Xxxxx Limited		Republic of Ireland
Asia Halcrow Inc.		Philippines
Halcrow Bangladesh Limited		Bangladesh
Halcrow Consultants Sdn Bhd		Malaysia
Halcrow Consulting India Private Limited		India
Halcrow Consulting Services Pty Ltd (formerly known as Xxxxxx Xxxxxx Twiney Ltd)*		Australia
Halcrow do Brasil Ltda		Brazil
Halcrow Middle East LLC		Oman
Halcrow Pakistan (Pvt) Limited		Pakistan
Halcrow Panama S.A.		Panama
Halcrow Romania S.R.L.		Romania
Halcrow,Inc.		USA
International Engineers Limited		Cayman Islands
Semper Consultants Inc.		Philippines

121

HALCROW HOLDINGS LIMITED

NOTES TO THE FINANCIAL STATEMENTS (Continued)

31 DECEMBER 2009

34 PRINCIPAL SUBSIDIARY AND ASSOCIATED UNDERTAKINGS AND JOINT VENTURES (Continued)

The principal country of operation of all these undertakings is Great Britain except the following undertakings which operate in the areas indicated:

Halcrow (Consulting Engineers and Arcgitects) Limited		Worldwide
Halcrow Asia Partnership Limited		East Asia
Halcrow Asia Limited		East Asia
Halcrow International Partnership		Middle East
Halcrow Group Ireland Limited		Republic of Ireland
Xxxxxxx Xxxxx Limited		Republic of Ireland
Halcrow Pacific Pty Limited		Australia
Halcrow Consulting Services Pty Ltd (formerly known as Xxxxxx Xxxxxx Twiney Ltd)*		Australia
Halcrow Rural Management Limited		Worldwide
Xxx Xxxxxxx Xxxxxxx & Partners (Malaysia) Limited		East Asia
Halcrow China Limited		East Asia
Halcrow PDI Limited		East Asia
Halcrow (Shanghai) Engineering Consulting Corporation Limited		East Asia
Asia Halcrow Inc.		East Asia
Halcrow Bangladesh Limited		Bangladesh
Halcrow Consultants Sdn Bhd		East Asia
Halcrow Consulting India Private Limited		India
Halcrow do Brasil Ltda		South America
Halcrow Middle East LLC		Middle East
Halcrow Pakistan (Pvt) Limited		Pakistan
Halcrow Panama S.A.		South America
Halcrow Romania S.R.L.		Europe
Halcrow,Inc.		USA
International Engineers Limited		Cayman Islands
Semper Consultants Inc.		East Asia

The principal activity of all the above undertakings is the supply of services as consulting engineers, except for Burderop Investments Limited whose principal activity is property investment.

122

PART 5: FINANCIAL INFORMATION CONCERNING THE CH2M HILL GROUP

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

CH2M HILL Companies, Ltd.:

We have audited the accompanying consolidated balance sheets of CH2M HILL Companies, Ltd. and subsidiaries (the Company) as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2010. 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 the audit to obtain reasonable assurance about 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 opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CH2M HILL Companies, Ltd. and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

As discussed in note 1 to the accompanying consolidated financial statements, the Company adopted new accounting standards relating to variable interest entities on January 1, 2010 and to noncontrolling interests in consolidated financial statements on January 1, 2009.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), CH2M HILL Companies, Ltd. and subsidiaries’ internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Xxxxxxxx Commission (COSO), and our report dated March 1, 2011 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

	KPMG LLP
Denver, Colorado March 1, 2011

123

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

CH2M HILL Companies, Ltd.:

We have audited CH2M HILL Companies, Ltd. and subsidiaries (the Company) internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Xxxxxxxx Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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

In our opinion, CH2M HILL Companies Ltd. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of CH2M HILL Companies, Ltd. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2010, and our report dated March 1, 2011 expressed an unqualified opinion on those consolidated financial statements.

	KPMG LLP
Denver, Colorado March 1, 2011

124

CH2M HILL COMPANIES, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	December 31, 2010			December 31, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	290,405		$	169,717
Available-for-sale securities	2,412			1,966
Receivables, net—
Client accounts	558,734			611,634
Unbilled revenue	389,353			416,927
Other	21,264			20,882
Deferred income taxes	62,007			47,964
Prepaid expenses and other current assets	44,498			64,510
Total current assets	1,368,673			1,333,600
Investments in unconsolidated affiliates	82,982			78,053
Property, plant and equipment, net	169,261			197,152
Goodwill	130,354			130,354
Intangible assets, net	51,048			61,275
Deferred income taxes	112,919			109,438
Employee benefit plan assets and other	51,843			38,150
Total assets	$	1,967,080		$	1,948,022
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	13,934		$	14,396
Accounts payable and accrued subcontractor costs	407,694			407,222
Xxxxxxxx in excess of revenue	237,053			292,280
Accrued payroll and employee related liabilities	291,713			259,798
Income tax payable	20,010			—
Other accrued liabilities	163,396			134,763
Total current liabilities	1,133,800			1,108,459
Long-term employee related liabilities and other	255,425			276,811
Long-term debt	23,687			37,943
Total liabilities	1,412,912			1,423,213
Commitments and contingencies (Note 17)
Shareholders’ equity:
Preferred stock, Class A $0.02 par value, 50,000,000 shares authorized; none issued	—			—
Common stock, $0.01 par value, 100,000,000 shares authorized; 30,527,473 and 31,373,955 issued and outstanding at December 31, 2010 and 2009, respectively	305			314
Additional paid-in capital	—			12,803
Retained earnings	563,343			531,796
Accumulated other comprehensive loss	(18,768		)	(32,743		)
Total CH2M HILL common shareholders’ equity	544,880			512,170
Noncontrolling interests	9,288			12,639
Total equity	554,168			524,809
Total liabilities and shareholders’ equity	$	1,967,080		$	1,948,022

The accompanying notes are an integral part of these consolidated financial statements.

000

XX0X XXXX COMPANIES, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands except per share amounts)

	For The Years Ended
	December 31, 2010			December 31, 2009			December 31, 2008
Gross revenue	$	5,422,801		$	5,499,318		$	5,589,906
Equity in earnings of joint ventures and affiliated companies	68,513			65,539			34,232
Operating expenses:
Direct cost of services and overhead	(4,426,352		)	(4,478,884		)	(4,507,738		)
General and administrative	(890,199		)	(969,677		)	(1,027,225		)
Gain on sale of operating assets	—			58,235			—
Operating income	174,763			174,531			89,175
Other income (expense):
Interest income	1,372			1,474			2,405
Interest expense	(4,616		)	(7,487		)	(15,833		)
Income before provision for income taxes	171,519			168,518			75,747
Provision for income taxes	(53,804		)	(46,420		)	(27,497		)
Net income	117,715			122,098			48,250
Less: Income attributable to noncontrolling interests	(24,020		)	(18,356		)	(16,194		)
Net income attributable to CH2M HILL	$	93,695		$	103,742		$	32,056
Net income per common share:
Basic	$	2.98		$	3.25		$	0.96
Diluted	$	2.91		$	3.18		$	0.93
Weighted average number of common shares:
Basic	31,458,126			31,907,861			33,486,512
Diluted	32,163,093			32,598,509			34,376,259

The accompanying notes are an integral part of these consolidated financial statements.

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XX0X XXXX COMPANIES, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

AND COMPREHENSIVE INCOME

(Dollars in thousands)

	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive			Noncontrolling			Total Shareholders’
	Shares		Amount			Capital			Earnings			Loss			Interest			Equity
Balance at December 31, 2007	33,158,068		$	332		$	70,596		$	395,998		$	(3,393	)	$	964		$	464,497
Net income			—			—			32,056			—			16,194			48,250
Other comprehensive loss:
Foreign currency translation adjustments			—			—			—			(17,269		)	(923		)	(18,192		)
Benefit plan adjustments			—			—			—			(32,125		)	—			(32,125		)
Unrealized loss on equity investments			—			—			—			(1,299		)	—			(1,299		)
Comprehensive loss																		(3,366		)
Distributions to affiliates, net			—			—			—			—			(13,717		)	(13,717		)
Shares issued in connection with stock based compensation and employee benefit plans	1,512,164		15			31,520			—			—			—			31,535
Shares purchased and retired	(3,065,896	)	(31		)	(92,169		)	—			—			—			(92,200		)
Balance at December 31, 2008	31,604,336		316			9,947			428,054			(54,086		)	2,518			386,749
Net income			—			—			103,742			—			18,356			122,098
Other comprehensive income:
Foreign currency translation adjustments			—			—			—			16,426			1,145			17,571
Benefit plan adjustments			—			—			—			3,925			—			3,925
Unrealized gain on equity investments			—			—			—			992			—			992
Comprehensive income																		144,586
Distributions to affiliates, net			—			—			—			—			(9,380		)	(9,380		)
Shares issued in connection with stock based compensation and employee benefit plans	1,973,413		20			81,564			—			—			—			81,584
Shares purchased and retired	(2,203,794	)	(22		)	(78,708		)	—			—			—			(78,730		)
Balance at December 31, 2009	31,373,955		314			12,803			531,796			(32,743		)	12,639			524,809
Net income									93,695						24,020			117,715
Other comprehensive income:
Foreign currency translation adjustments	—		—			—			—			3,831			347			4,178
Benefit plan adjustments	—		—			—			—			9,869						9,869
Unrealized gain on equity investments	—		—			—			—			275			—			275
Comprehensive income	—		—			—			—			—			—			132,037
Distributions to affiliates, net	—		—			—			—			—			(31,806		)	(31,806		)
Impact of adoption of ASC 810	—		—			—			—			—			4,088			4,088
Shares issued in connection with stock based compensation and employee benefit plans	1,857,418		18			43,776			—			—			—			43,794
Shares purchased and retired	(2,703,900	)	(27		)	(56,579		)	(62,148		)	—			—			(118,754		)
Balance at December 31, 2010	30,527,473		$	305		$	—		$	563,343		$	(18,768	)	$	9,288		$	554,168

The accompanying notes are an integral part of these consolidated financial statements.

000

XX0X XXXX COMPANIES, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	For The Years Ended
	December 31, 2010			December 31, 2009			December 31, 2008
Cash flows from operating activities:
Net income	$	117,715		$	122,098		$	48,250
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	62,311			80,889			92,022
Gain on sale of operating assets	—			(58,235		)	—
Stock-based employee compensation	50,603			67,738			43,654
Loss on disposal of property, plant and equipment	1,266			3,570			249
Allowance for uncollectible accounts	3,521			11,115			2,172
Deferred income taxes	(24,699		)	(29,289		)	(24,789		)
Gain on sale of investments	(6,495		)	—			—
Undistributed earnings from unconsolidated affiliates	(68,513		)	(65,539		)	(34,232		)
Distributions of income from unconsolidated affiliates	71,181			52,808			55,407
Changes in current assets and liabilities, net of businesses acquired:
Receivables and unbilled revenue	72,921			40,748			18,783
Prepaid expenses and other	(2,465		)	13,510			22,376
Accounts payable and accrued subcontractor costs	(16,558		)	(29,470		)	3,670
Xxxxxxxx in excess of revenues	(61,950		)	9,331			24,613
Accrued payroll and employee related liabilities	29,517			3,631			4,447
Other accrued liabilities	32,530			8,089			(4,860		)
Current income taxes receivable (payable)	41,486			(10,268		)	(83		)
Long-term employee related liabilities and other	(15,802		)	19,755			7,817
Net cash provided by operating activities	286,569			240,481			259,496
Cash flows from investing activities:
Capital expenditures	(26,884		)	(37,663		)	(50,622		)
Acquisitions and earnout payments, net of cash acquired	—			(1,186		)	(24,570		)
Investments in unconsolidated affiliates	(49,133		)	(68,366		)	(78,632		)
Distributions of capital from unconsolidated affiliates	35,601			41,597			54,858
Consolidation of previously unconsolidated variable interest entities	32,651			—			—
Proceeds from sale of operating assets	—			70,971			—
Purchases of investments	(37,079		)	—			(6,975		)
Proceeds from sale of investments	43,573			10,741			8,032
Other	2,961			65			1,124
Net cash provided by (used in) investing activities	1,690			16,159			(96,785		)
Cash flows from financing activities:
Borrowings on long-term debt	404,827			747,349			1,072,318
Payments on long-term debt	(419,056		)	(870,885		)	(1,101,998		)
Repurchases and retirements of common stock	(137,208		)	(91,253		)	(109,395		)
Excess tax benefits from stock-based compensation	14,968			6,431			6,881
Net distributions to noncontrolling interests	(31,806		)	(9,379		)	(13,717		)
Net cash used in financing activities	(168,275		)	(217,737		)	(145,911		)
Effect of exchange rate changes on cash	704			16,532			(26,623		)
Increase (decrease) in cash and cash equivalents	120,688			55,435			(9,823		)
Cash and cash equivalents, beginning of year	169,717			114,282			124,105
Cash and cash equivalents, end of year	$	290,405		$	169,717		$	114,282
Supplemental disclosures:
Cash paid for interest	$	4,708		$	7,793		$	14,860
Cash paid for income taxes	$	43,714		$	50,910		$	48,295

The accompanying notes are an integral part of these consolidated financial statements.

000

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Business and Significant Accounting Policies

Summary of Business

CH2M HILL Companies, Ltd. and subsidiaries (CH2M HILL) is a project delivery firm founded in 1946. CH2M HILL provides engineering, consulting, design, construction, procurement, operations and maintenance, and program management services to U.S. federal government agencies, state, municipal and local government entities and foreign government agencies, as well as private industry, in the U.S. and internationally. CH2M HILL is an employee owned corporation. A substantial portion of CH2M HILL’s professional fees are derived from projects that are funded directly or indirectly by government entities.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of CH2M HILL and all of its wholly owned subsidiaries after elimination of all intercompany accounts and transactions. Partially owned affiliates and joint ventures are evaluated for consolidation. The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Certain amounts in prior years’ consolidated financial statements have been reclassified to conform to the current year presentation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments, and assumptions. CH2M HILL believes that the estimates, judgments and assumptions made when accounting for items and matters such as, but not limited to, revenue recognition, self insurance accruals, employee benefits, legal and tax reserves, allowance for doubtful accounts, depreciation, amortization, asset valuations and contingencies are reasonable, based on information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. See Note 17—Commitments and Contingencies. Actual results could differ from our estimates.

Capital Structure

CH2M HILL has authorized 100,000,000 shares of common stock, par value $0.01 per share, and 50,000,000 shares of Class A preferred stock, par value $0.02 per share. CH2M HILL’s Restated Bylaws and Articles of Incorporation provide for the imposition of certain restrictions on the stock including, but not limited to, the right but not the obligation to repurchase shares upon termination of employment or affiliation, the right of first refusal and ownership limits.

Foreign Currency Translation

All assets and liabilities of CH2M HILL’s foreign subsidiaries are translated into U.S. dollars as of each balance sheet date. Translation gains and losses related to permanent investments in foreign subsidiaries are reflected in shareholders’ equity as part of accumulated other comprehensive loss. Revenues and expenses are translated at the average exchange rate for the period and included in the consolidated statements of income. Foreign currency transaction gains and losses are recognized as incurred in the consolidated statements of income.

Subsequent Events

CH2M HILL has evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through the day the financial statements were issued.

Revenue Recognition

CH2M HILL earns its revenue from different types of contracts, including cost-plus, fixed-price and time-and-materials. CH2M HILL evaluates contractual arrangements to determine how to recognize revenue. CH2M HILL primarily performs engineering and construction related services and recognizes

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Summary of Business and Significant Accounting Policies (Continued)

revenue for these contracts on the percentage-of-completion method where progress towards completion is measured by relating the actual cost of work performed to date to the current estimated total cost of the respective contracts. In making such estimates, judgments are required to evaluate potential variances in schedule, the cost of materials and labor, productivity, liability claims, contract disputes, or achievement of contract performance standards.

Change orders are included in total estimated contract revenue when it is probable that the change order will result in an addition to contract value and can be estimated. Management evaluates when a change order is probable based upon its experience in negotiating change orders, the customer’s written approval of such changes or separate documentation of change order costs that are identifiable. Losses on construction and engineering contracts in process are recognized in their entirety when the loss becomes evident and the amount of loss can be reasonably estimated.

CH2M HILL also performs operations and maintenance services. Revenue is recognized on operations and maintenance contracts on a straight-line basis over the life of the contract once CH2M HILL has an arrangement, delivery has occurred, the price is fixed or determinable and collectability is reasonably assured.

Unbilled Revenue and Xxxxxxxx in Excess of Revenue

Unbilled revenue represents the excess of contract revenue recognized over xxxxxxxx to date on contracts in process. These amounts become billable according to the contract terms, which usually consider the passage of time, achievement of certain milestones or completion of the project.

Xxxxxxxx in excess of revenue represent the excess of xxxxxxxx to date, per the contract terms, over revenue recognized on contracts in process.

Allowance for Uncollectible Accounts Receivable

CH2M HILL reduces accounts receivable by estimating an allowance for amounts that may become uncollectible in the future. Management determines the estimated allowance for uncollectible amounts based on their judgments in evaluating the aging of the receivables and the financial condition of CH2M HILL’s clients, which may be dependent on the type of client and the client’s current economic conditions.

Fair Value Measurements

Fair value represents the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. CH2M HILL uses a three-tier valuation hierarchy based upon observable and non-observable inputs. The three levels are as follows: Xxxxx 0, xxxxxxxxxx quoted prices that are available in active markets for the identical assets or liabilities at the measurement date; Xxxxx 0, significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly; and Xxxxx 0, significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment.

Income Taxes

CH2M HILL accounts for income taxes utilizing an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax effects of events that have been recognized in the financial statements or tax returns. In estimating future tax consequences, CH2M HILL generally considers all expected future events other than enactment of changes in the tax laws or rates. Deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their reported amounts using enacted tax rates in effect for the year in which differences are expected to reverse. Xxxxxxxx, XX0X HILL determines the amount of undistributed foreign earnings invested indefinitely in its foreign operations. Deferred taxes are not provided on those earnings. In

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Summary of Business and Significant Accounting Policies (Continued)

addition, the calculation of tax assets and liabilities involves uncertainties in the application of complex tax regulations. For income tax benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

Cash and Cash Equivalents

CH2M HILL maintains a cash management system which provides for cash in the bank sufficient to pay checks as they are submitted for payment and invests cash in excess of this amount in interest bearing short-term investments such as certificates of deposit and commercial paper. Investments with original short-term maturities of less than three months are considered cash equivalents in the consolidated balance sheets and statements of cash flows. In addition, cash and cash equivalents on our consolidated balance sheets include cash held within our consolidated joint venture entities which is used for operating activities of those joint ventures. As of December 31, 2010 and 2009, cash and cash equivalents held in our consolidated joint ventures and reflected on the consolidated balance sheets totaled $60.3 million and $43.7 million, respectively.

Available-for-Sale Securities

Available-for-sale securities are carried at fair value, with unrecognized gains and losses reported in accumulated other comprehensive loss, net of taxes. Losses on available-for-sale securities are recognized when a loss is determined to be other than temporary or when realized. Fair values are estimated based on market prices, where available, or dealer quotes.

Property, Plant and Equipment

All additions, including betterments to existing facilities, are recorded at cost. Maintenance and repairs are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost of the assets and the related accumulated depreciation are removed from the accounts. Any gain or loss on retirements is reflected in operating income in the year of disposition.

Depreciation for owned property is based on the estimated useful lives of the assets using the straight-line method for financial statement purposes. Useful lives for buildings range from 12 to 20 years. Furniture, fixtures and equipment are depreciated over their useful lives from 2 to 10 years. Leasehold improvements are depreciated over the shorter of their estimated useful life or the remaining term of the associated lease up to 12 years.

Other Long-Lived Assets

CH2M HILL may acquire goodwill or other intangible assets in business combinations. Intangible assets are stated at fair value as of the date acquired in a business combination. CH2M HILL amortizes intangible assets with finite lives on a straight-line basis over their expected useful lives, currently up to seven years. Where there are no legal, regulatory, contractual or other factors that would reasonably limit the useful life of the intangible asset, such as goodwill or tradenames, management has determined that those intangible assets have an indefinite life and therefore are not amortized.

CH2M HILL reviews its finite-lived intangibles and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Assets which are held and used in operations are considered impaired if the undiscounted future cash flows from the asset do not exceed the net book value. If impaired, the assets are written down to their estimated fair value. CH2M HILL generally measures fair value by considering sale prices for similar assets or by discounting estimated future cash flows from the asset group using an appropriate discount rate.

Goodwill and intangible assets with indefinite lives are tested for impairment on an annual basis, or on an interim basis if events or circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment charge is recognized for any amount by which the carrying amount of goodwill

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(1) Summary of Business and Significant Accounting Policies (Continued)

or intangible assets with indefinite lives exceeds their fair value. Management performs its impairment tests of goodwill at the reporting unit level, which is one level below the operating segments. Management’s review of goodwill and the tradename indicated that there was no impairment during the years ended December 31, 2010, 2009 and 2008.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of foreign currency translation adjustments, benefit plan adjustments, and unrealized gains/losses on equity investments. These components are included in the consolidated statements of shareholders’ equity and comprehensive income. Taxes are not provided on the foreign currency translation gains and losses as deferred taxes are not provided on the unremitted earnings of the foreign subsidiaries to which they relate.

The composition of accumulated other comprehensive loss consists of the following at December 31:

($ in thousands)	2010			2009
Foreign currency translation adjustments	$	13,449		$	9,618
Benefit plan adjustments, net of tax	(33,239		)	(43,108		)
Unrealized gain on equity investments, net of tax	1,022			747
	$	(18,768	)	$	(32,743	)

Concentrations of Credit Risk

Financial instruments which potentially subject CH2M HILL to concentrations of credit risk consist principally of cash and cash equivalents, short term investments and trade receivables. CH2M HILL’s cash and cash equivalents and short term investments are maintained in accounts held primarily in the U.S. with some accounts held by major banks and financial institutions located in Europe, Canada and Asia. Concentrations of credit risk relative to trade receivables are limited due to our diverse client base, which includes the U.S. federal government, various states and municipalities, foreign government agencies, and a variety of U.S. and foreign corporations operating in a broad range of industries and geographic areas.

Contracts with the U.S. federal government and its prime contractors usually contain standard provisions for permitting the government to modify, curtail or terminate the contract for convenience of the government or such prime contractors if program requirements or budgetary constraints change. Upon such a termination, CH2M HILL is generally entitled to recover costs incurred, settlement expenses and profit on work completed prior to termination.

Recently Adopted Accounting Standards

In June 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-17, Consolidations (Topic 810)—Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, revising the existing guidance on the consolidation and disclosures of variable interest entities (VIEs) which was codified in Accounting Standards Codification (ASC) 810-10. Specifically, it changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting rights should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance. The guidance also requires additional disclosures about a company’s involvement with VIEs and requires an entity to continually assess any significant changes in risk exposure as well as an entity’s assessment of the primary beneficiary of the entity. ASC 810-10 became effective for CH2M HILL beginning January 1, 2010. For further discussion of the effect of the adoption, see Note 3.

In January 2010, the FASB issued ASU No. 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about Fair Value Measurements. ASU 2010-06 requires expanded fair value disclosures about transfers into and out of Levels 1 and 2 fair value measurements and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Summary of Business and Significant Accounting Policies (Continued)

clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. ASU 2010-06 is effective for CH2M HILL beginning January 1, 2010. The adoption of this accounting standard update did not have a material impact on CH2M HILL’s financial position, results of operations, cash flows or disclosures.

(2) Receivables, net

Receivables are stated at net realizable values and consist of receivables billed to clients as well as receivables for which revenue has been earned but has not yet been billed. The U.S. federal government accounted for approximately 20% and 13% of CH2M HILL’s net receivables at December 31, 2010 and 2009, respectively. No other customers exceeded 10% of total receivables at December 31, 2010 or 2009.

The change in the allowance for uncollectible accounts consists of the following for the years ended December 31:

($ in thousands)	2010			2009			2008
Balance at beginning of year	$	13,190		$	4,183		$	6,963
Provision charged to expense	3,521			11,115			2,172
Accounts written off	(3,614		)	(2,049		)	(4,344		)
Other	(1,021		)	(59		)	(608		)
Balance at end of year	$	12,076		$	13,190		$	4,183

(3) Variable Interest Entities and Equity Method Investments

CH2M HILL routinely enters into teaming arrangements to perform projects for its clients. Such arrangements are customary in the engineering and construction industry and generally are project specific. The arrangements facilitate the completion of contracts that are jointly contracted with CH2M HILL’s partners. These arrangements are formed to leverage the skills of the respective partners and include consulting, construction, design, program management and operations and maintenance contracts. CH2M HILL’s risk of loss on these arrangements is usually shared with CH2M HILLs’ partners. The liability of each partner is usually joint and several, which means that each partner may become liable for the entire risk of loss on the project.

CH2M HILL performs a qualitative assessment to determine whether CH2M HILL is the primary beneficiary once an entity is identified as a VIE. A qualitative assessment begins with an understanding of the nature of the risks in the entity as well as the nature of the entity’s activities including terms of the contracts entered into by the entity, ownership interests issued by the entity and how they were marketed, and the parties involved in the design of the entity. All of the variable interests held by parties involved with the VIE are identified and a determination of which activities are most significant to the economic performance of the entity and which variable interest holder has the power to direct those activities is made. Most of the VIEs with which the Company is involved have relatively few variable interests and are primarily related to our equity investment, subordinated financial support, and subcontracting arrangements. CH2M HILL consolidates those VIEs in which it has both the power to direct the activities of the VIE that most significantly impact the VIEs economic performance and the obligation to absorb losses or the right to receive the benefits from the VIE that could potentially be significant to the VIE.

Upon adoption of ASC 810-10, CH2M HILL consolidated certain VIEs that were previously unconsolidated. It was determined that CH2M HILL is the primary beneficiary due to the ability to control the activities that most significantly impact the economic performance of the entity. These variable interest entities were previously not consolidated because no party absorbed the majority of the expected losses. Upon consolidation of these joint ventures, consolidated current assets increased by $35.8 million, primarily related to cash and cash equivalents and accounts receivable. Current liabilities increased by $27.6 million primarily related to accounts payable, accrued subcontractor costs and xxxxxxxx in excess of

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(3) Variable Interest Entities and Equity Method Investments (Continued)

revenue. As of December 31, 2010, total assets of VIEs that were consolidated were $108.7 million and liabilities were $70.1 million.

CH2M HILL recorded investments in unconsolidated affiliates of $83.0 million and $78.1 million for the years ended December 31, 2010 and 2009, respectively. CH2M HILL’s proportionate share of net income or loss is included as equity in earnings of joint ventures and affiliated companies in the consolidated statements of income. In general, the equity investment in our unconsolidated affiliates is equal to our current equity investment plus those entities’ undistributed earnings. CH2M HILL provides certain services, including engineering, construction management and computer and telecommunications support, to these unconsolidated entities. These services are billed to the joint ventures in accordance with the provisions of the agreements.

As of December 31, 2010, the total assets of VIEs that were not consolidated were $388.7 million and total liabilities were $292.5 million. The maximum exposure to losses is limited to the funding of any future losses incurred by those entities under their respective contracts with the project company.

Summarized financial information for CH2M HILL’s unconsolidated VIEs and equity method investments as of and for the years ended December 31 is as follows:

($ in thousands)	2010		2009
FINANCIAL POSITION:
Current assets	$	677,638	$	665,068
Noncurrent assets	84,042		82,408
Total assets	$	761,680	$	747,476
Current liabilities	$	497,338	$	480,668
Noncurrent liabilities	26,486		31,711
Partners’/Owners’ equity	237,856		235,097
Total liabilities and equity	$	761,680	$	747,476
CH2M HILL’s share of equity	$	82,982	$	78,053

($ in thousands)	2010		2009		2008
RESULTS OF OPERATIONS:
Revenue	$	2,814,824	$	2,426,505	$	2,370,361
Direct costs	2,598,872		2,250,752		2,273,332
Gross margin	215,952		175,753		97,029
General and administrative expenses	13,603		3,228		5,901
Operating income	202,349		172,525		91,128
Other income, net	458		479		2,790
Net income	$	202,807	$	173,004	$	93,918
CH2M HILL’s share of net income	$	68,513	$	65,539	$	34,232

000

XX0X XXXX COMPANIES, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(3) Variable Interest Entities and Equity Method Investments (Continued)

CH2M HILL has the following significant investments in affiliated unconsolidated companies:

	% Ownership
Domestic:
AGVIQ—CH2M HILL Joint Venture II	49.0	%
AGVIQ—CH2M HILL Joint Venture III	49.0	%
Americas Gateway Builders	40.0	%
CH2M HILL/URS Team, a Joint Venture	50.0	%
CH2M—WG Idaho, LLC	50.5	%
Xxxxx-Xxxxxx/CH2M XXXX—Norfolk	50.0	%
Coastal Estuary Services	49.9	%
Connecting Idaho Partners	49.0	%
XXXX, Inc.	100.0	%
IAP-Hill, LLC	25.0	%
Xxxxxx-Xxxx Company, LLC	50.0	%
National Security Technologies, LLC	10.0	%
OMI/Thames Water Stockton, Inc.	50.0	%
Xxxxxxx CH2M XXXX Program Management Consultants, Joint Venture	47.5	%
Savannah River Remediation LLC	15.0	%
TIC/CH2M Xxxxxxxxxx Unit #1 Joint Venture	25.0	%
Washington Closure, LLC	30.0	%
Foreign:
XX0X XXXX XXXX, Ltd.	50.0	%
CH2M HILL—Kunwon PMC	54.0	%
CHBM Water Joint Venture	50.0	%
CH2M Olayan	49.0	%
CLM Delivery Partner, Limited	37.5	%
Coniisa	33.3	%
CPG Consultants—CH2M HILL NIP Joint Venture	50.0	%
ECC-VECO, LLC	50.0	%
Golden Crossing Constructors Joint Venture	33.3	%
HWC Treatment Program Alliance Joint Venture	50.0	%
Luggage Point Alliance	50.0	%
OMI BECA, Ltd.	50.0	%
SMNM/VECO Joint Venture	50.0	%
Transcend Partners, Ltd.	40.0	%

(4) Property, Plant and Equipment

Property, plant and equipment consists of the following as of December 31:

($ in thousands)	2010			2009
Land	$	27,337		$	26,516
Building and land improvements	80,183			72,280
Furniture, fixtures and equipment	199,199			196,511
Leasehold improvements	67,690			65,023
	374,409			360,330
Less: Accumulated depreciation	(205,148		)	(163,178		)
Net property, plant and equipment	$	169,261		$	197,152

The depreciation expense is reflected in the consolidated statements of income in direct costs and general and administrative costs depending on the intended use of the asset and totaled $52.1 million, $53.5 million and $55.2 million for the years ended December 31, 2010, 2009 and 2008, respectively.

000

XX0X XXXX COMPANIES, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(5) Employee Benefit Plan Assets

CH2M HILL has investments that support deferred compensation arrangements and other employee benefit plans. These assets are recorded at fair market value primarily using Level 2 inputs. As of December 31, 2010 and 2009, the fair market value of these assets was $47.0 million and $36.2 million, respectively.

(6) Acquisitions

On September 7, 2007, CH2M HILL purchased all of the outstanding stock of VECO and substantially all of VECO’s operating businesses as part of a strategic initiative to expand operations into the energy industry. In connection with the acquisition of VECO, the purchase agreement established a holdback contingency of $70.0 million for tax indemnifications and the potential future payment of certain contingencies that may arise within three years after the date of acquisition. Any amounts remaining after payments for these indemnifications and contingencies are payable to the sellers of VECO. Since the date of acquisition, CH2M HILL has made distributions to the sellers of VECO and paid expenses on their behalf which were deemed distributions of the holdback contingency. At December 31, 2010 and 2009, the outstanding balance payable under the holdback contingency was $46.7 million and $49.1 million, respectively. Amounts outstanding under the holdback contingency as of December 31, 2010 represent disputed contingent claims and tax indemnifications which have not been resolved. Upon resolution of the outstanding items, CH2M HILL will likely incur costs which will be paid out of the holdback funds with any remaining amounts being remitted to the sellers.

(7) Sale of Operating Assets

In September 0000, XX0X XXXX completed the sale of certain assets and liabilities of its Enterprise Management Solutions (EMS) business. The selling price was $86.6 million, net of amounts due for estimated working capital adjustments of $13.5 million. CH2M HILL recorded a pre-tax gain of $58.2 million during 2009. As part of the EMS sale, CH2M HILL and the purchasers entered into a preferred provider agreement whereby CH2M HILL guaranteed an annual volume of revenues of $42.5 million to be provided to the purchasers for each of the five years through September 2014. To the extent CH2M HILL does not reach this volume of revenues, it must compensate the purchasers. As of the first anniversary date of the sale, CH2M HILL met its annual guaranteed level of revenues and thus no compensation was required to be paid to the purchasers.

The results of operations for EMS prior to disposition were recorded in the Facilities and Infrastructure operating segment.

(8) Goodwill and Intangible Assets

Goodwill and the tradename as of December 31 consist of the following:

($ in thousands)	2010		2009
Goodwill	$	130,354	$	130,354
Tradename	20,326		20,326
	$	150,680	$	150,680

000

XX0X XXXX COMPANIES, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(8) Goodwill and Intangible Assets (Continued)

Intangible assets with finite lives consist of the following:

($ in thousands)	Cost		Accumulated Amortization			Net finite- lived intangible assets
December 31, 2010
Contracted backlog	$	58,871	$	(58,871	)	$	—
Customer relationships	57,922		(27,200		)	30,722
Non-compete agreements and other	902		(902		)	—
Total finite-lived intangible assets	$	117,695	$	(86,973	)	$	30,722
December 31, 2009
Contracted backlog	$	58,871	$	(56,946	)	$	1,925
Customer relationships	57,922		(18,926		)	38,996
Non-compete agreements and other	902		(874		)	28
Total finite-lived intangible assets	$	117,695	$	(76,746	)	$	40,949

All intangible assets are being amortized over their expected lives up to seven years. The amortization expense reflected in the consolidated statements of income totaled $10.2 million, $27.4 million and $36.8 million for the years ended December 31, 2010, 2009 and 2008, respectively. These intangible assets are expected to be fully amortized in 2014. At December 31, 2010, the future estimated amortization expense related to these intangible assets is (in thousands):

Year Ending:
2011	$	8,275
2012	8,275
2013	8,275
2014	5,897
	$	30,722

(9) Fair Value of Financial Instruments

Cash and cash equivalents, receivables, unbilled revenue, accounts payable and xxxxxxxx in excess of revenue are carried at cost, which approximates fair value due to their short maturities. Fair value of long-term debt, including the current portion, is estimated based on Level 2 inputs. Fair value is determined by discounting future cash flows using interest rates available for issues with similar terms and average maturities.

Fair value of marketable securities classified as available-for-sale, which totaled $2.4 million and $2.0 million at December 31, 2010 and December 31, 2009, respectively, were valued based on Level 1 inputs whereby a readily determinable market value exists for the specific asset. There were no transfers between fair value hierarchy levels during the years ended December 31, 2010 and 2009. The estimated fair values of CH2M HILL’s financial instruments where carrying values do not approximate fair value are as follows:

	2010				2009
($ in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Mortgage notes payable	$	15,253	$	12,403	$	16,672	$	13,627
Equipment financing	$	22,227	$	21,439	$	35,572	$	33,951
Shareholder notes payable	$	141	$	98	$	95	$	61

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(10) Line of Credit and Long-term Debt

On December 6, 2010, CH2M HILL entered into a Credit Agreement (the “Credit Agreement”) providing for an unsecured revolving credit facility in an amount of up to $600.0 million. Subject to certain conditions, at any time prior to the date that is thirty days before the maturity date of the Credit Agreement, CH2M HILL will be able to invite existing and new lenders to increase the size of the revolving credit facility by up to $100.0 million, for a maximum aggregate revolving credit facility of $700.0 million. The revolving credit facility has a subfacility for the issuance of standby letters of credit in a face amount up to $300.0 million, a subfacility of up to $300.0 million for multicurrency borrowings and a subfacility of up to $20.0 million for swingline loans. Revolving loans under the Credit Agreement bear interest, at CH2M HILL’s option, at a rate equal to either (i) the base rate plus a margin based on the ratio of CH2M HILL’s consolidated leverage ratio or (ii) the LIBOR rate, based on interest periods of one, two, three or six months, plus a margin based on the ratio of CH2M HILL’s consolidated leverage ratio. The base rate is equal to the greater of (i) the Federal Funds Rate, as published from time to time by the Federal Reserve Bank of New York, plus 0.5%, (ii) the swingline lender’s prime rate in effect from time to time, or (iii) the one-month LIBOR rate in effect from time to time, plus 1.0%. CH2M HILL’s consolidated leverage ratio on any date is the ratio of CH2M HILL’s consolidated total funded debt to its consolidated earnings before interest, taxes, depreciation and amortization for the preceding four fiscal quarters. There were no outstanding borrowings on the Credit Agreement as of December 31, 2010 or December 31, 2009. If CH2M HILL had borrowed under the Credit Agreement on December 31, 2010 the rate of interest charged on that balance would have been 1.76%.

Prior to entering into the Credit Agreement, CH2M HILL was party to a credit agreement which provided for a $500.0 million revolving credit facility with an option to increase the initial borrowing capacity by up to an additional $250.0 million. It also provided that up to $250.0 million be available for the issuance of letters of credit to support various trade activities. At December 31, 2010, issued and outstanding letters of credit of $89.4 million were reserved against the borrowing base of the Credit Agreement, compared to $78.4 million at December 31, 2009.

The Credit Agreement contains customary representations and warranties and conditions to borrowing. The Credit Agreement also includes customary affirmative and negative covenants, including covenants that limit or restrict CH2M HILL’s and its subsidiaries’ ability to incur indebtedness and other obligations, grant liens to secure their obligations, make investments, merge or consolidate, dispose of assets outside the ordinary course of business, enter into transactions with affiliates, and make certain kinds of payments, in each case subject to customary exceptions for a credit facility of this size and type. CH2M HILL is also required to comply with a minimum consolidated fixed charge coverage ratio and a maximum consolidated leverage ratio. As of December 31, 2010, CH2M HILL was in compliance with the covenants required by the Credit Agreement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(10) Line of Credit and Long-term Debt (Continued)

CH2M HILL’s nonrecourse and other long-term debt, as of December 31 consist of the following:

($ in thousands)	2010		2009
Nonrecourse:
Mortgage payable in monthly installments to July 2020, secured by real estate, rents and leases. The note bears interest at 5.35%	$	12,430	$	13,379
Mortgage payable in monthly installments to December 2015, secured by real estate. The note bears interest at 6.59%	2,823

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DATED 24 SEPTEMBER 2011 CH2M HILL COMPANIES, LTD - and - HALCROW HOLDINGS LIMITED IMPLEMENTATION AGREEMENT H5139/00026 Ref: C1NE/FTG/2476223.16 Hogan Lovells International LLP, Atlantic House, Holborn Viaduct, London EC1A 2FG

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