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The board of directors¹

Responsibilities and powers of the Board of Directors

The Board of Directors is the central body within the Corporate Governance system of Saipem SpA and the Saipem Group. Article 20 of the Articles of Association states that the management of the Company is exclusively the responsibility of the Board of Directors.
Article 2365 of the Italian Civil Code and Article 20 of the Articles of Association grant the Board the power, normally the responsibility of the Extraordinary Shareholders’ Meeting, to resolve on motions concerning:
- mergers by incorporation of companies whose shares or stakes are owned entirely by the Company, pursuant to Article 2505 of the Italian Civil Code;
- merger by incorporation of companies whose shares or stakes are at least 90% (ninety per cent) owned by the Company, pursuant to Article 2505-bis of the Italian Civil Code;
- the proportional de-merger of companies whose shares or stakes are entirely or at least 90% (ninety per cent) owned by the Company, pursuant to Article 2506-ter of the Italian Civil Code;
- transfer of the Company’s headquarters within Italy;
- incorporation, transfer and closure of secondary offices;
- share capital reductions in case of Shareholder’s withdrawals;
- the issue of corporate bonds and other debentures, barring the
issue of bonds convertible into Company’s shares;
- the adoption of modifications to the Articles of Association to comply with the provisions of law.

In addition to the powers granted by Article 2381 of the Italian Civil Code, the Board of Directors is responsible for:
- setting a corporate governance system and regulations for the Company and the Group. Specifically, subject to the approval of the Internal Audit Committee, it implements procedures to ensure that the following operations are carried out in a transparent and correct manner, both in terms of procedure and substance: operations with related parties and operations where a Director has an interest, either directly or through a third party. The Board also adopts procedures for the management and release of Company information in general, and sensitive information in particular;
- establishing internal corporate Committees with consultative and advisory functions, appointing their members, defining their responsibilities and approving their regulations;
- granting and revoking powers to Board Directors, setting their limitations and methods of exercise; having reviewed the proposals put forward by the Compensation Committee and following consultation with the Board of Statutory Auditors, setting the compensation commensurate with the powers granted. The Board has the power to issue directives to delegated bodies and carry out operations within its remit;
- setting the guidelines for the organisational, administrative and accounting structure of the Company and main Group subsidiaries;
- annual evaluation of the adequacy of the organisational, administrative and accounting model, placing particular emphasis on the internal control system and the management of conflicts of interests, based on the reports/information received by the CFO, the Officer in charge of the internal control system, the Audit Committee and the Internal Audit department;
- defining, based on indications provided by the Internal Audit Committee, guidelines for the internal control system, ensuring that main business risks for the Company and its subsidiaries are identified, measured, monitored and properly managed. It ascertains annually the adequacy, effectiveness and operation of the internal control system;
- defining strategies and objectives for the Company and the Group, including sustainability policies. The Board reviews and approves industrial and financial strategic plans for the Company and the Group, as well as all the Company’s strategic agreements;
- reviewing and approving the preliminary financial statements, the budget, interim and six-monthly reports, and preliminary results for the Company and the Group. The Board reviews and approves the sustainability report;
- receiving information from Directors with executive powers at Board Meetings, at least quarterly, regarding: activities within their responsibility, Group activities and major operations carried out by the Company or its subsidiaries;
- approving, having received a reasoned opinion from the Audit Committee, transactions of greater importance with related parties, in compliance with the procedure ‘Transactions involving interests held by Board Directors and Statutory Auditors and transactions with related parties’; it receives at least quarterly from the Deputy Chairman - CEO a report detailing transactions of greater and lesser importance, in line with the provisions of the aforementioned procedure;
- reviewing and granting preliminary approval to transactions that involve interests held by Board Directors and Statutory Auditors, pursuant to Article 2391 of the Italian Civil Code and the provisions of the aforementioned procedure ‘Transactions involving interests held by Board Directors and Statutory Auditors and transactions with related parties’;
- approving possible join venture agreements, following the due diligence report on potential partners having been obtained by the Anti-corruption Legal Support Unit;
- receiving information from internal corporate Committees every six months;
- evaluating the general management and performance of the Company and the Group, based on the information received from Directors with executive powers, comparing actual interim and yearly results against budget forecasts;
- resolving on the most significant and strategic economic and/or financial Company operations, reviewing the most relevant Group industrial and financial operations.
The following are considered to be significant operations:
a) acquisition, disposal or transfer of holdings exceeding € 25,000,000;
b) capital expenditure on technical assets differing from previous ones exceeding € 300 million, or of a lower amount but of strategic importance or posing a particular risk;
c) purchase or sale or goods and services other than investments, exceeding € 1 billion and those whose duration is greater than 20 years;
d) acquisition or transfer of company holdings or branches exceeding € 25,000,000;
e) acquisition, sale or financial leasing of land and/or buildings exceeding € 2,500,000;
f) financing of entities other than subsidiary companies: (i) for amounts exceeding 950 million; or (ii) of any amount, to companies where the share held is not a controlling stake and the loan is not proportional to the share of the holding;
g) issue of personal or other guarantees to entities other than subsidiary companies: (i) for amounts exceeding € 200 million in favour of subsidiary companies; or (ii) of any amount, to companies where the share held is not a controlling stake and the loan is not proportional to the share of the holding;
h) incorporation of subsidiaries or company branches;
- appointment and dismissal of General Managers, granting them the relevant powers;
- appointment and dismissal, having consulted the opinion of the Board of Statutory Auditors, of the Senior Manager charged with preparing the company’s financial reports, granting him adequate powers;
- appointment and dismissal, having consulted the opinion of the Audit Committee, of a manager in charge of the internal control system;
- appointing the Compliance Committee, pursuant to Law 231/2001;
- ensuring the appointment of managers in charge of the departments responsible for dealing with Shareholders and investors;
- setting the remuneration of Directors with executive powers, having reviewed the proposals put forward by the relevant Committee and having heard the opinion of the Board of Statutory Auditors;
- having heard the proposals of the Compensation Committee, setting the criteria for the remuneration of the management of the Company and the Group; implementing incentive plans based on stock or other financial instruments approved by the Shareholders’ Meeting;
- approving the proposals to be submitted for approval to the Shareholders’ Meetings;
- reviewing and resolving on all other matters that Directors with executive powers deem appropriate for the Board to assess, due to their sensitivity and/or importance;
- approving and entering into agency agreements; approving all donations.
The Shareholders’ Meeting endorsed the competition ban provided for in Article 2390 of the Italian Civil Code.
Pursuant to Article 2391 of the Italian Civil Code, Directors shall inform the other Directors and the Statutory Auditors of interests they may have, on their own behalf and on behalf of third parties, in any specific Company operation.
At Board Meetings, the Chairman reminds the Board of Directors that, pursuant to Article 2391 of the Italian Civil Code, Board Directors must voice any interests they may have, directly or through a third party, related to any items on the Agenda before they are discussed. Directors have to state the nature, origin and relevance of these interests, if any.
The Chairman organises the activities of the Board of Directors and ensures that the Directors and Statutory Auditors are provided with the necessary documentation and information in a timely manner to enable them to make decisions. To improve the Board’s knowledge of the Company’s operations and dynamics, the Board of Directors’ meetings where financial reports are approved are attended by the managers of the various Business Units, who illustrate the most significant projects, strategies and market conditions in their respective areas.

Board review

The Board of Directors, in compliance with the provisions of the Corporate Governance Code, carried out, as in previous years, its annual review of its size, composition, level of operation and efficiency of the Board itself and its Committees.
The Board utilised a qualified external consultant, Egon Zehnder International, to ensure maximum objectivity in the proceedings. The review was based on a questionnaire prepared by the consultant and individual interviews with all Directors. Results of
the review were presented to the Board and discussed at their meeting of March 8, 2011.
This year’s questionnaire favoured an empirical approach, centred on the analysis of specific topics encountered by the Board of Directors.
The review confirmed that Saipem’s Board of Directors had received adequate and timely supporting information to carry out in-depth discussions on the various topics.
Generally, the review found that the Board operates in full compliance with the recommendation of the Corporate Governance Code.
The following have been identified as specific areas of excellence:
- the clear separation of roles between Saipem’s Chairman and CEO, which integrate harmoniously;
- positive internal climate that allows all Directors to participate constructively in discussions and share in the Company’s strategy;
- increased knowledge by the Directors of the Company’s operations, gained from presentations given by the COOs of the BUs at Board meetings and visits to operational sites;
- in-depth and transparent documentation provided in advance of Board meetings;
- particular attention paid to ‘safety’ and ‘risk management’ issues.
Moreover, the benchmark of Saipem’s Board effectiveness with other international Boards reported very positive results.
The work carried out by the Committees was deemed to be both fruitful and accurate.

Composition

The Board of Directors, comprising nine members, was appointed by the Shareholders’ Meeting on April 28, 2008 for a three-year period, its mandate expiring at the Shareholders’ Meeting called to approve the Financial Statements at December 31, 2010. The appointment of Directors occurs pursuant to Article 19 of Articles of Association, through voting from lists, so as to allow the  appointment of minority interest representatives. Lists are filed at the Company’s registered headquarters at least twenty-five days prior to the Shareholders’ Meeting (first call) and are published in
compliance with current legislation and Consob regulations.
Voting lists include professional résumés for all candidates, their declaration accepting the nomination, stating that there are no grounds for ineligibility and/or incompatibility, and that they meet the integrity and/or independence requirements. Lists can be presented by Shareholders, who, individually or with others, hold voting shares representing at least 1% of the share capital, as per Consob Resolution No. 17633 of January 26, 2011. Seven tenths of Directors are appointed from the list that has obtained the majority of votes (rounded down if necessary). The remaining Directors will be selected from the other lists, provided they are not in any way, not even indirectly, linked with the shareholders who have presented or voted for the list that has obtained the majority of votes; therefore, votes obtained for each list will be successively divided by one, two, three and so on, until the number of remaining Directors to be appointed has been reached.
The ratios obtained will be progressively attributed to candidates of each list, in the order attributed to each candidate within that list. Candidates will be classified in decreasing order according to their respective ratios, and those who have received the higher ratios will be appointed. In the event that more than one candidate obtains the same ratio, the candidate on the list with no Director yet appointed or on the list with the lowest number of Directors appointed will be elected. If these lists have yet to elect a Director, or if they have already appointed an equal number of Directors, the candidate on the list with the highest number of votes will be appointed. In case the vote is still tied, the Shareholders’ Meeting
will vote again, but only amongst the candidates under ballot, and the candidate who receives the majority of votes will be elected.
Should this procedure fail to appoint the minimum number of independent Directors required by the Articles of Association, the ratio of votes is calculated for each candidate from said lists, in compliance with the aforementioned system; candidates who meet the independence requirement and who have obtained the highest ratios will be selected; their number will depend on the regulations set forth in the Articles of Association. These take the place of non-independent Directors who have obtained the lowest ratios. Should the minimum number of independent Directors not be reached, the Shareholders’ Meeting resolves through majority vote, as per legal requirements, the replacement of candidates
who do not fulfil the independence requirement and have obtained the lowest ratios.
Directors shall meet the integrity requirements prescribed by regulations, possess the professional expertise and experience to carry out their mandate efficiently and effectively and be able to dedicate sufficient time and resources to their office. Pursuant to Article 1, paragraph 2 of the Code, information regarding offices of Directors or Auditors held by members of the Board of listed companies, financial or insurance companies or companies of considerable size is provided below under ‘Cumulation of offices’.
The Board comprises the Chairman Marco Mangiagalli, the Deputy Chairman - CEO Pietro Franco Tali, the Managing Director Hugh James O’Donnell and the Directors Luca Anderlini, Anna Maria Artoni, Pierantonio Nebuloni, Salvatore Sardo, Umberto Vergine and Ian Wybrew-Bond. The list put forward by Eni at the Shareholders’ meeting of April 28, 2008 had obtained 52.74% of  voting shares.
Luca Anderlini, Anna Maria Artoni and Pierantonio Nebuloni have been nominated from the list put forward by institutional investors coordinated by ARCA SGR SpA, and had obtained 16.75% of voting shares.
Umberto Vergine was co-opted at the Board of Directors’ meeting of October 27, 2010, at the proposal of the shareholder Eni, replacing Jacques Yves Léost, who had resigned on August 18, 2010.
Marco Mangiagalli, Pietro Franco Tali, Hugh James O’Donnell, Salvatore Sardo, Umberto Vergine and Ian Wybrew-Bond have been put forward by Eni.
Article 27 of Articles of Association has been adjusted to comply with new Article 37, paragraph 1 of Regulations on Market, whereby the Board of Directors of a listed subsidiary subject to management and coordination by another listed company shall comprise of a majority of independent Directors, identified as such in compliance with the law and current regulations. This amendment will take effect from the appointments made by the
next Shareholders’ Meeting.

Cumulation of offices

Pursuant to items 1.c.2 and 1.c.3 of the Corporate Governance Code, to ensure that Directors can devote enough time to their office, the Board of Directors on March 28, 2007 expressed the following guideline on the number of offices Directors may hold:
- an executive Director shall not hold: (i) the office of executive Director in other listed companies, either in Italy or abroad, in financial companies, banks, insurance companies or companies with net equity in excess of 91 billion; and (ii) the office of non-executive Director or Statutory Auditor (or member of other control body) in more than three aforementioned companies;
- besides the appointment at this Company, a non-executive Director shall not hold: (i) the office of executive Director in more than one of the aforementioned companies and the office of non-executive Director or Statutory Auditor (or member of other control body) in more than three aforementioned companies; and/or (ii) the office of non-executive Director or Statutory Auditor in more than six of the aforementioned companies.

Offices held at companies of the same Group are excluded from the limit of cumulation.
Should the aforementioned limits be exceeded, Directors shall immediately inform the Board of Directors, who, after assessing the position and, in light of the Company’s interests, shall invite the Director to take the relevant decisions.
The Code recommends that public companies set up a Committee for appointment proposals comprising a majority of non-executive Directors, ‘specifically when the Board of Directors notices that Shareholders are finding it difficult to put forward appointment
proposals’. This Committee has never been implemented in view of the nature of the Company’s shareholding structure and the fact that the Articles of Association provide that Directors be appointed by the Shareholders’ Meeting from lists put forward by the Shareholders.
Based on the information received, we list hereunder additional directorships or auditor posts held by Saipem’s Board Directors in other companies.

Marco Mangiagalli
Board Director of Luxottica Group SpA (listed company); Member of the Watch Board of Intesa San Paolo SpA (listed company).

Anna Maria Artoni
Vice President and Managing Director of Artoni Group SpA; Vice President of Artoni Trasporti SpA and Artoni Logistica Srl; Chairman of Artleasing SpA and A.B. Logistica Srl; Board Director of Carraro SpA (listed company), Cassa di Risparmio di Parma e Piacenza
(Crédit Agricole Group), Alemea Technology Srl, Alemea Consulting Srl and Linkiesta SpA.

Pierantonio Nebuloni
Board Director of Polynt SpA; Vice President of In Business Consulting SA; Board Director of Socotherm SpA. Salvatore Sardo Chairman of Eni Corporate University; Chairman of Snam Rete Gas SpA (listed company).

Board of Directors’ Meetings

The Company’s Articles of Association do not specify how often the Board should meet, although Article 21 states it has to occur at least quarterly as follows: ‘The Directors inform the Board of Directors and the Board of Statutory Auditors promptly or at least every
quarter on Company activities, major economic and financial transactions involving the Company or its subsidiaries; in particular they report those operations in which they have an interest, on behalf of themselves or third parties, or those operations that are
subject to the influence of the controlling party’.
In 2010, the Board of Directors met on eight occasions, their meetings lasting three hours on average; three meetings have been scheduled to take place in the first half of 2011, two of which have already been held as of March 8, 2011. The general public is informed of the dates of Board Meetings when periodical statements and reports, required by current legislation, are to be approved.
The Board of Directors sets down the formalities pertaining to the calling of Board Meetings; in particular, meetings are convened by the Chairman, who also prepares the agenda for the meeting, through notices sent by mail, fax or e-mail at least five days prior
to the date of the meeting; in exceptional circumstances, notice is sent at least 24 hours prior to the time of the meeting. The Articles of Association allow for meetings to be held via video-conference link. Directors and Statutory Auditors are provided in advance with
documents pertaining to items to be discussed and/or resolved on at the meeting.
In 2010, an average of 90% of Board Directors and 88% of independent Directors attended Board Meetings. Saipem’s COOs also attended Board of Directors’ meetings on a regular basis to report on the status of operations and the strategic prospects for the various business units, in addition to other senior managers involved in specific matters.

Executive Directors

Consistent with international best practices, which recommend avoiding the concentration of duties in one person, the Board of Directors resolved, at their meeting of July 29, 2008, to separate the roles of Chairman and Chief Executive Officer (CEO), the latter being the administrator who, by virtue of powers granted and their actual exercise, is the principal person responsible for the management of the Company.
The Corporate Governance Committee of Borsa Italiana believes that the separation of the aforementioned roles can strengthen the characteristics of impartiality and balance required of a Chairman of the Board, to whom the law and procedure entrust the tasks of organising the work of the Board as well as acting as a link between executive and non-executive Directors. The separation of the roles of Chairman and Chief Executive
Officer (CEO) makes the appointment of a lead independent Director unnecessary.
The Board of Directors resolved to appoint Marco Mangiagalli Chairman and Pietro Franco Tali Deputy Chairman - CEO.
On May 25, 2009, the Board of Directors appointed Hugh James O’Donnell Deputy CEO and Managing Director for Business Support and Transversal Activities, and granted him the powers commensurate with his position.
Pietro Franco Tali and Hugh James O’Donnell are executive Directors.
The Board vested the Deputy Chairman - CEO with all ordinary and extraordinary powers to manage the Company, except for the undelegable powers and those of the Board itself. The Chairman is a non-executive Director and is vested with all powers granted to
him by law and the Company’s Articles of Association The Deputy Chairman - CEO, whom the COOs (Chief Operating Officers) of the Business Units report to, in addition to the CFO,
the Internal Audit, Human Resources and Legal Affairs managers, is ultimately responsible for the management of the Company, with all the relevant powers barring those of the Board itself. The Chairman chairs the Shareholders’ Meeting, convenes and chairs Board of Directors’ meetings and ensures the implementation of resolutions carried by the Board itself.

Independent Directors

Law 58 of February 24, 1998 provides that a minimum of two Directors meet the independence criteria required from Statutory Auditors of listed companies, if the Board comprises more than seven members.
Article 19 of Articles of Association provides that a minimum of three Directors meet the aforementioned independence requirements if the Board comprises more than five members, boosting the number of independent Directors on the Board.
Should a Director declare that he fails to meet the independence and integrity requirements, or should the Board not reach the minimum number of independent Directors as set in the Articles of Association, the Board of Directors shall declare the
appointment of said Director void and provide for their replacement.
Consob Resolution No. 17221 of March 12, 2010 (adoption of ‘Related Parties’’ Regulations) amended through Resolution No. 17389 of June 23, 2010, had amended Article 37, paragraph 1, letter d), of Market Regulations, providing that the shares of a
subsidiary subject to management and coordination by another company may only be admitted to trading if its committees are composed of independent directors. For companies subject to management and coordination by another listed company, the
Board of Directors shall also be composed of a majority of independent members.
On December 13, 2010, the Board of Directors amended Article 19 of the Articles of Association, providing that the majority of Directors shall meet the independence requirements set by Consob for Directors of companies subject to management and
coordination by another listed company.
The aforementioned Consob Resolution No. 17221 also provides that this provision be enforced within 30 days from the first Shareholders’ Meeting called after October 1, 2010 to appoint a new Board.
The composition of the Board of Directors shall be adjusted following the Shareholders’ Meeting called to approve the 2010 Financial Statements, which will also reappoint the management and control bodies.
The Board of Directors, pursuant to the provisions of the Code and the provisions of Article 147-ter and Article 148, paragraph 3, of Law 58/1998, ascertains annually that the Directors comply with the independence and integrity requirements.
Specifically, declarations by the interested parties confirmed as independent four non-executive Directors (Luca Anderlini, Anna Maria Artoni, Pierantonio Nebuloni and Ian Wybrew-Bond). They are considered independent following the evaluation carried out
by the Board based on the parameters contained in Article 3 of the Corporate Governance Code and Article 148, paragraph 3, of Law 58/1998.

Directors who do not comply with the independence requirement are executive Directors Pietro Franco Tali and Hugh James O’Donnell, and non-executive Directors Marco Mangiagalli, Salvatore Sardo and Umberto Vergine.
The Board of Statutory Auditors has assessed the application of criteria and procedures adopted by the Board of Directors to ascertain the independence of its members and found them to be correct. Independent Directors have not deemed it necessary to meet without the other Directors in view of the fact that they take an active part in Committee meetings.

Remuneration report

Directors’ remuneration is approved by the Shareholders’ Meeting; the remuneration of the Chairman, the Deputy Chairman - CEO, and the Managing Director for Business Support and Transversal Activities - Deputy CEO is set, pursuant to Article 2389, paragraph 3 of the Italian Civil Code, by the Board of Directors at the proposal of the Compensation Committee, having previously conferred with the Statutory Auditors. Pursuant to Consob regulations, the Directors’ Report in the Financial Statements, i.e. the Notes to the Financial Statements, contain the following: (i) amounts paid to the Directors, Statutory Auditors and senior managers with strategic responsibilities; (ii) number of stock grants and stock options allocated to the Deputy Chairman - CEO, and the Managing Director for Business Support and Transversal Activities - Deputy CEO and senior managers with strategic responsibilities; (iii) number of shares held by the Directors, Statutory Auditors
and senior managers with strategic responsibilities of Saipem and its controlled companies; (iv) long-term incentives granted to Board Directors and senior management with strategic responsibilities.
The Shareholders’ Meeting of April 28, 2008 set at 940,000 the remuneration for each Director for every year of office, in addition to reimbursement of expenses incurred.
The remuneration of the Deputy Chairman - CEO, and the Managing Director for Business Support and Transversal Activities - Deputy CEO, as well as that of senior managers with strategic responsibilities comprises a fixed component and an annual variable component, in addition to two long-term incentives (a deferred monetary incentive and a long-term incentive plan).
The fixed remuneration of the Deputy Chairman - CEO, and the Managing Director for Business Support and Transversal Activities - Deputy CEO is commensurate with the powers vested in them.
The fixed remuneration of senior managers with strategic responsibilities is based on their position and strategic responsibilities, in line with comparable positions in the market of
large national and international companies, with annual adjustments based on merit (continuity of individual performance) or promotion (progression of position/responsibilities).
The variable remuneration is paid annually in cash and is linked to the achievement of specific economic, operational and/or strategic objectives and individual targets (for the single business units or departments) set the previous year.
The variable part of the Deputy Chairman - CEO’s, and the Managing Director for Business Support and Transversal Activities - Deputy CEO’s remuneration is linked to the achievement of Company objectives. The variable remuneration paid in 2010 was
based on Saipem’s targets for the year 2009, comprising new contracts, investments, backlog, adjusted EBITDAi and sustainability (further subdivided into LTI rate and zero injury policy), approved by the Board of Directors at the proposal of the Compensation Committee.
The remuneration of non-executive Directors is not linked to the results achieved. Non-executive Directors do not participate in the Company’s incentive schemes.
The remuneration paid to Board Directors and senior managers with strategic responsibilities are detailed in the annual Financial Statements.
In 2010, the Board of Directors approved the 2010 allocation of the 2009-2011 long-term incentive plan (deferred monetary incentive) implemented by the Board of Directors in 2009 in order to continue promoting the achievement of the Company’s targets over the long-term.
The deferred monetary incentive granted in 2010 will be paid after a three-year vesting period depending on the achievement of annual EBITDA targets (actual vs. budget results) in the years 2010-2012.
After every three-year vesting period, the results of long-term incentive plans will be reviewed by the Compensation Committee and approved by the Board of Directors.
In 2010, the Board of Directors has also approved, at the proposal of the Compensation Committee, a new long-term monetary incentive plan for senior managers directly responsible for Saipem Group results. This new incentive, which has replaced the Stock Option plan, aims at ensuring the long-term competitiveness of their global remuneration structure.
The deferred monetary incentive granted in 2010 is payable after a three-year vesting period and the amount depends on the average position achieved by Saipem in terms of profitability (adjusted net profit + depreciation and amortisation) over the vesting period versus 2009, against a panel of peer competitors identified by the Board of Directors.

In 2010 the remuneration structure of the Chairman, the Deputy Chairman - CEO, the Deputy CEO and senior management with strategic responsibilities was the following:

  Chairman 
CEO Deputy CEO   Senior managers
with strategic responsibilities
Fixed remuneration
 100%    36%    49%    50%  
Variable remuneration (linked to targets)  -   26%    22%    21%  
Long-term incentives (linked to results) (*)    -   38%    29%    29%  
Total
 100%    100%
 100%    100%  
(*) Value of long-term incentives (actualised) if target are achieved.