The Directors of Carillion plc present their report to the Company and confirm that at the date of this Report, and as far as they are individually aware, the Company’s auditors are aware of all relevant audit information and each Director has taken all reasonable steps to make himself or herself aware of relevant audit information and to establish that the Company’s auditors are aware of that information.

The Directors’ report should be read in conjunction with the Chairman’s statement, the Group Chief Executive’s review, the Operating and financial review, the Corporate Governance report and the Remuneration report which are incorporated by reference in (and shall be deemed to form part of) this report.

Principal activities and business review

Carillion is one of the UK’s largest support services companies, with a substantial portfolio of Public Private Partnership projects and extensive construction capabilities. The Group has operations in the UK, the Middle East and in Canada and the Caribbean.

A review of the Group’s businesses, financial performance and future developments is contained in the Chairman’s statement, Group Chief Executive’s review and the Operating and financial review.

The following specific issues are discussed in the sections shown in brackets

• achievements in respect of the Group’s Key Performance Indicators (KPI) in 2009 and the KPIs set for 2010 (Group Chief Executive’s review)
• financial performance in 2009 (Operating and financial review)
• principal operational risks and risk management (Group Chief Executive’s review)
• treasury policy and financial risk management (Operating and financial review)
• social, community and environmental issues (Sustainability review)
• resources and employees (Group Chief Executive’s review and Report of the Directors).

Analysis of turnover and net assets by business segment and geographical location are given in Note 2 to the financial statements.

Share capital

Carillion has only one class of shares, with one vote for every share.

Profits and dividends

Profit before tax was £147.7 million (2008: £115.9 million), as shown in the the consolidated income statement.

A 2009 interim dividend of 4.6 pence per ordinary share (2008: 4.1 pence) was paid in November 2009. It is proposed to pay a final dividend of 10.0 pence per ordinary share (2008: 8.9 pence) on 18 June 2010 to shareholders on the register at the close of business on 23 April 2010. The payment of these 2009 interim and final dividends amounts to £57.9 million (2008: £51.4 million).

A dividend reinvestment plan (DRIP) will also be offered allowing shareholders a convenient means of reinvesting their dividends in the Company by buying further shares. A DRIP application form is available from the share registrar, Equiniti (see Shareholder information for contact details).

Directors

The Directors of the Company who served during 2009 are shown in the Remuneration report. Biographical details for each Director at 31 December 2009 are given in the Board of Directors.

Richard Howson was appointed a Director on 10 December 2009 and will hold office until the Annual General Meeting on 5 May 2010 at which, being eligible, he offers himself for election. Richard Howson has a contract of service which is subject to one year’s notice of termination by the Company.

In accordance with the Articles of Association, Richard Adam, Don Kenny, John McDonough and Steve Mogford retire by rotation and, being eligible, offer themselves for re-election at the Annual General Meeting on 5 May 2010. Richard Adam, Don Kenny and John McDonough have contracts of service all of which are subject to one year’s notice of termination by the Company.

Roger Robinson served as an executive director until he stood down from the Board in May 2009. Roger was appointed to the Board of Carillion plc in May 1999 and had groupwide responsibility for Carillion’s UK infrastructure and international businesses in the Middle East and Canada and the Caribbean. He was also the Board member responsible for Group Health and Safety matters.

David Hurcomb served as an executive director until he stood down from the Board in December 2009 having been appointed to the Board on 1 January 2008. David had responsibility for Carillion’s UK Building and PFI businesses.

The interests of the Directors and their families in the share capital of the Company are shown in Directors’ share interests, within this report.

Indemnity

To the extent permitted by the Companies Acts, the Company may indemnify any Director, Secretary or other officer of the Company against any liability and may purchase and maintain insurance against any liability. The Company purchased and maintained throughout 2009, Directors’ and Officers’ liability insurance.

Conflicts of interest

The Company’s Articles of Association permit the Board to consider and, if it sees fit, to authorise situations where a Director has an interest that conflicts, or may possibly conflict, with the interests of the Company. The Board considers that the procedures it has in place for reporting and considering conflicts of interest are effective.

Key contractual arrangements

There are no persons with whom the Group or Company has contractual or other arrangements, who are deemed to be essential to the business of the Group or Company.

Employees

Information relating to employee numbers and remuneration is given in Note 7 of the consolidated financial statements.

Employees are key to achieving Carillion’s business strategy and the Group is committed to improving their skills through training and development and through nurturing a culture in which employees feel valued for the contributions they make to the Company and motivated to achieve their full potential.

Carillion’s core values of openness, collaboration, mutual dependency, sustainable profitable growth, professional delivery and innovation help to differentiate Carillion from its competitors by creating a culture in which everyone in Carillion is encouraged to understand the needs of their customers and to work in partnership with customers and suppliers to deliver high-quality, value-for-money services.

It is Carillion’s aim to foster a working environment in which all employees are treated with courtesy, dignity and respect. Carillion strives continually to eliminate all bias and unlawful discrimination in relation to job applicants, employees, business partners and members of the public.

The objectives of Carillion’s Equal Opportunity and Diversity Policy are to

• have a workforce that represents and responds to the diversity of customers and today’s society
• improve safety and quality delivered through a balanced and productive workforce
• develop the Group’s public image and market reputation and to improve links with the communities in which it operates
• adhere to legal requirements
• reduce employee turnover, absenteeism and sickness levels and thereby reduce costs and improve efficiency
• provide a fair working environment in which discrimination is not tolerated
• create a working environment free from discrimination, harassment, victimisation and bullying
• work towards finding ways in which under-represented groups can fully realise their potential within the Group and to take reasonable steps to help such groups
• ensure that all employees are aware of the Group Equal Opportunities and Diversity Policy and to provide any necessary ongoing training to enable them to comply with it
• be an organisation that understands and values employee diversity and recognises the merits of having a workforce that reflects the diverse backgrounds and skills available within the total population and accordingly provides all employees with opportunities to develop and reach their full potential.

Carillion places great importance on open and regular communication with employees through both formal and informal processes. As part of this commitment, a Group newspaper, ‘Spectrum’, is produced on a regular basis for all employees.

The views of employees on matters affecting their interests and the success of Carillion are also sought through ‘The Great Debate’, ‘People Forums’, ‘Team Talks’, and one-to-one meetings between employees and their line managers.

The ‘Great Debate’ is a major exercise, which has been undertaken by the Group in each of the last six years, involving a wide range of employees that forms a statistically significant sample. In 2009, around 3,900 UK employees took part in ‘The Great Debate’. The results of each Great Debate are used to inform and guide the development of work related initiatives as part of Carillion’s strategy to become an employer of choice.

‘The Great Debate’ forms part of the Group’s ongoing programme to

• engage with employees to improve motivation and morale
• empower employees to contribute to the Group’s development both as an employer and as a business
• demonstrate Carillion’s commitment to listening to, and responding to, the views of its employees.

Carillion also involves, engages and consults with employees through ‘People Forums’, which give employees an opportunity to express their views on business issues. The main objectives of the ‘People Forums’ are to

• improve employee information and consultation
• help employees feel more involved and valued
• support the continued education and development of employees
• improve business performance by improving the awareness of employees to the business climate in which they operate
• help employees to be responsive and better prepared for change.

‘Team Talks’, which are held monthly, provide Carillion employees with a face-to-face communication with their line managers and facilitates two-way communication, discussion and feedback. It focuses on local issues and key corporate messages and information.

One-to-one meetings between individual employees and their line managers are also held to discuss performance and progress in order to help all employees to develop and reach their full potential.

Employees can also exchange best practice information via a Business Exchange Forum on the Group intranet.

Carillion seeks to involve all employees in its leading-edge programmes to integrate safety into every aspect of the Group’s operations and to improve its environmental performance, including the understanding and application of the principles of sustainability. Further information on Health and Safety is given in the Group Chief Executive’s review and on Sustainability in the Sustainability review.

Employees with disabilities

Carillion is committed to providing equal opportunities to all employees and is supportive of the employment and advancement of disabled and disadvantaged persons. Employees who become disabled are, wherever possible, retrained or provided with equipment so that they can continue their employment.

Share Capital and Shareholders

As at 31 December 2009, the issued share capital of the Company comprised a single class of ordinary shares of 50 pence each. The authorised share capital of the Company is £350 million, comprising 700 million ordinary shares of 50 pence each. Details of shares issued during the year and outstanding options are given in Notes 23 and 25 to the consolidated financial statements which form part of this report. Details of the share schemes in place are also provided in the Remuneration report.

On a show of hands at a general meeting of the Company, every holder of ordinary shares present in person or by proxy and entitled to vote shall have one vote and, on a poll, every holder of ordinary shares present in person or by proxy and entitled to vote, shall have one vote for every ordinary share held.

The notice of Annual General Meeting specifies deadlines for exercising voting rights and appointing a proxy or proxies to vote in relation to resolutions to be put to the Annual General Meeting. All proxy votes are counted and the numbers for, against or withheld in relation to each resolution are announced and published on the Company’s website after the meeting.

There are no restrictions on the transfer of ordinary shares in the Company other than in relation to certain restrictions that are imposed from time to time by laws and regulations (for example insider trading laws). In addition, pursuant to the Listing Rules of the Financial Services Authority, Directors and certain officers and employees of the Group require the approval of the Company to deal in ordinary shares of the Company.

The Company is not aware of any agreements between shareholders that restrict the transfer of shares or voting rights attached to the shares.

At 3 March 2010, the Company had received formal notification under the Disclosure and Transparency Rules, of the following material holdings in its shares:

	Number of shares held	Percentage
Schroders plc	59,520,743	14.98
Standard Life Investments Ltd	32,079,188	8.07
F&C Asset Management plc	19,246,558	4.84
Legal & General Group Plc	15,783,867	3.97
HBOS plc	14,036,048	3.53
UBS Investment Bank	13,424,716	3.38

Policy for payment of suppliers

The Group’s policy is that its individual businesses should agree terms and conditions for transactions with its suppliers and for payment to be made on these terms providing suppliers meet their obligations to the businesses’ satisfaction. The Group as a whole does not apply a general payment policy as this would not be practicable or appropriate, given the diverse nature of the transactions undertaken by its business units. The Company does not have any trade creditors.

The number of days credit outstanding for the Group averaged 58 days at 31 December 2009 (65 days at 31 December 2008).

Change of control

A number of agreements take effect, alter or terminate upon a change of control of the Company following a takeover bid, such as bank loan agreements and employee share plans.

Carillion’s main credit facilities, including the £590 million Syndicated Multicurrency Revolving Credit Facility dated 4 September 2007, contain a provision such that in the event of a change of control any lender may, within a limited time period and if it so requires, notify the Company that it wishes to cancel its commitment. Any such cancellation of commitment and the repayment of any outstanding borrowings will occur on the date falling 30 days after the date of the change of control.

Charitable and political contributions

Payments for charitable purposes made by the Group during the year ended 31 December 2009 amounted to £200,000 (2008: £129,000). The primary beneficiaries of these charitable donations were The Transformation Trust, The Wildlife Trust, the British Occupational Health Research Foundation, Business in the Community, CRASH, RedR and The Prince’s Trust.

The Carillion Group also contributes more than one per cent of profits per annum in cash or in-kind (staff time on community projects) to community activities and is a corporate member of Business in the Community.

The Company and its subsidiaries made no political donations during the period under review.

Financial Instruments

Information on the Carillion Group’s use of financial instruments, financial risk management objectives and policies and exposure is given in Note 27 of the consolidated financial statements.

Directors’ share interests

Ordinary shares
The beneficial interests of the Directors and their immediate families in the ordinary share capital of the Company as at 31 December 2009 are shown below.

Fully paid 50p ordinary shares owned:	As at 1 January 2009 Number	As at 31 December 2009 Number
Executive Director
Richard Adam	15,647	16,419
Richard Howson	2,331	2,435
Don Kenny	88,153	92,505
John McDonough	794,083	992,211
Non-Executive Directors
David Garman	14,300	14,300
David Maloney	10,000	10,000
Steve Mogford	–	–
Vanda Murray	12,300	12,300
Philip Rogerson	39,630	39,630

There has been no change in Directors’ interests in the period 1 January 2010 to 3 March 2010.

Additional information for shareholders

With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association, the Combined Code on Corporate Governance and the Companies Act 2006 and related legislation. The Articles of Association themselves may be amended by special resolution of the shareholders. The powers of the Board are detailed within the Corporate Governance report.

The Directors were authorised at the 2009 AGM to purchase the Company’s own shares within certain limits. Although no such purchases were made during the financial year, the Directors will seek approval to renew this authority at the 2010 AGM (see below).

In September 2009 the Office of Fair Trading (OFT) imposed a penalty of £5.4m on Carillion JM Limited (formerly Mowlem) following the conclusion of the OFT’s investigation of cover pricing in the construction industry (under the Competition Act 1998). The penalty relates to Carillion JM Limited’s construction business and relates entirely to the period prior to Carillion JM Limited’s acquisition by Carillion. No other member of the Group was subject to the investigation.

Annual General Meeting

The Annual General Meeting will be held at 12 noon on Wednesday 5 May 2010 at Austin Court, 80 Cambridge Street, Birmingham B1 2NP. The notice of the Annual General Meeting accompanies this Annual Report and Accounts.

Included in the AGM business are the following proposals

(i)	to renew the authority for the Company to purchase its own shares. (As at 31 December 2009, the Company had authority from shareholders for the purchase of 39,571,417 of its own shares)
(ii)	to adopt new Articles of Association that fully comply with the provisions of the Companies Act 2006.

Auditor

Resolutions to re-appoint KPMG Audit Plc as auditor and to authorise the Directors to determine its remuneration will be proposed at the Annual General Meeting.

Approved by order of the Board.

R F Tapp
Secretary
3 March 2010