REMUNERATION REPORT The first part of this report outlines the remuneration policy REMUNERATION POLICY for the Board of Management as it has been adopted over The main objective of Fugro’s remuneration policy is to time, while the second part contains details of the attract, motivate and retain qualified management that is remuneration in 2015 of the members of the Board of needed for a global company of the size and complexity of Management and of the Supervisory Board. Fugro. The members of the Board of Management are More information on remuneration and on option and share rewarded accordingly. Variable remuneration is an important ownership of members of the Board of Management is part of the total package. The remuneration policy aims at available in note 5.64.2 of the financial statements in this compensation in line with the median of the labour market annual report. This remuneration report is also available reference group. The current remuneration policy was on Fugro’s website. adopted by the AGM on 6 May 2014 and took effect retroactively as from 1 January 2014. As mentioned above, This report has been prepared by the remuneration the policy was amended in the AGM on 30 April 2015. Within committee of the Supervisory Board. The main function of the framework of the remuneration policy, compensation for this committee is to prepare the decision-making of the the Board of Management is determined by the Supervisory Supervisory Board regarding the remuneration policy for the Board on the advice of the remuneration committee. Board of Management and the application of this policy to the remuneration of the individual members of the Board of Labour market reference group Management. The remuneration policy will be reviewed In preparing the remuneration policy, the remuneration every three years to verify its market conformity. committee used external benchmark information to assess market comparability of the remuneration. The labour market The current members of the remuneration committee are reference group used in preparing the current remuneration Harrie Noy, Antonio Campo and Anja Montijn. Harrie Noy policy consisted of 14 Dutch listed companies of acts as chairman ad interim of the committee. He took over comparable scope with highly international/global business the chairmanship, following the resignation from the activities. These are: Aalberts Industries, Aperam, Arcadis, Supervisory Board of the former chairman of the committee ASM International, Boskalis, Brunel, Imtech, Nutreco, SBM at the end of October 2014. Offshore, Ten Cate, TKH Group, TNT Express, Vopak, and Wolters Kluwer. In addition, an international reference group In 2015, the committee met four times, mostly in the has been used to assess market competitiveness within the presence of the CEO and the global HR director. Discussed sector. When the remuneration policy will be reviewed, this were, amongst others, the short-term incentive (STI) with will start with a review of the labour market reference group. respect to 2014; the STI targets for the Board of Management for 2015; the STI programme for senior Analyses management; the grant and allocation of options and shares In the design of the remuneration policy and in determining under the long-term incentive (LTI) plans; and the pension the remuneration of the members of the Board of contributions for the Board of Management members in Management, the Supervisory Board has taken into account view of the changed Dutch legislation. The committee also possible outcomes of the variable remuneration elements evaluated the remuneration policy. As already set out in the and how they may affect the remuneration of the members previous remuneration report, it was decided to propose to of the Board of Management. The level and structure of the the AGM to amend the remuneration policy by discarding remuneration are designed by taking into account these ‘revenue growth’ as performance measure for the LTI and scenario analyses, internal pay differentials and the focusing long-term performance measurement fully on total performance indicators relevant to the long-term objectives shareholder return and return on capital employed (each of the company, as included in the strategic agenda. with a weight of 50%). This amendment was approved by The remuneration structure and elements do not encourage the AGM on 30 April 2015. risk taking that is not in line with the risk profile of the company. In line with Dutch legislation, the application of the remuneration policy will be put on the agenda for discussion Share ownership guidelines as a separate agenda item at the AGM of 29 April 2016. The Supervisory Board encourages the Board of Management to hold shares in Fugro to emphasise their confidence in Fugro and its strategy. As of 2014 minimum 1 Remuneration report share ownership guidelines are applicable. For the CEO this Fixed base salary amounts to 250% of fixed base salary and for the other Fixed base salaries of the members of the Board of members of the Board of Management this amounts to Management are set in line with the median of the labour 125% of fixed base salary. The build-up period equals 5 market reference group mentioned on page 84. years. Short-term incentive (annual bonus) Adjustment of variable remuneration/claw-back/ Each member of the Board of Management is eligible for an ultimum remedium/change-of-control annual bonus. The bonus may vary from 0% to 100% of As of January 2014, new legislation has entered into force fixed base salary, with 67% being applicable when targets regarding the adjustment and claw-back of bonuses and are achieved. profit-sharing arrangements of board members of Dutch listed companies. Part of this new legislation was already Targets are set yearly by the Supervisory Board, based on covered in comparable rules of the Dutch corporate the budget and taking into account the strategy aspirations. governance code and consequently already included in the Financial targets determine 75% of the bonus, non-financial management services agreements of the members of the or personal targets determine the remaining 25%. For each Board of Management. The Supervisory Board has the of the financial targets, a performance zone is set, with no possibility and discretionary authority (i) to adjust the value bonus below the threshold level and the maximum bonus upwards or downwards of a variable remuneration when performance exceeds the upper end of the component if it would produce an unreasonable and unfair performance zone. There will be no overshoot possibility for result, and (ii) to recover (claw-back) any variable personal targets. The maximum multiplier for financial remuneration awarded on the basis of incorrect financial or targets is therefore 1.67. The Supervisory Board ensures that other data. In addition, it is enacted that in case of a change- the targets are challenging, realistic and consistent with of-control event a related increase in value of securities that Fugro’s strategy. have been granted to a member of the Board of Management as part of his remuneration, will be deducted The measures used and their relative weight are as follows: from the remuneration to be paid to the board member at the time of selling these securities or when his board Financial Targets: Earnings per share (EPS) 35% membership ends. EBIT margin 20% Working capital 20% Non-financial (personal) targets 25% REMUNERATION DESIGN The remuneration of the Board of Management consists of The non-financial targets give the possibility to include health the following four elements: and safety, corporate social responsibility, personal ■ Fixed base salary. development goals, etc. as targets into the bonus ■ Short-term incentive (STI), consisting of an annual cash programme. bonus opportunity. ■ Long-term incentive (LTI), consisting of conditional Long-term incentive (conditional performance shares performance shares and conditional performance and options) options. To strengthen the alignment with shareholder’s interests, ■ Pension and other benefits. the long-term incentive plan includes the annual grant of conditional performance shares and conditional The conditional shares and options are performance related performance options. Vesting is subject to continuous and vest after three years, depending on the achievement of employment and performance testing after three years. predetermined criteria, which are focused on long term value creation. The number of conditionally granted shares/options is set for a period of three years. This was done for the first time per The principles of the remuneration policy are cascaded to 31 December 2014, based on the average share price of the the next senior management level. Fugro shares in the last quarter of 2014. The principle being that the expected value equals 100% of the fixed base salary 2 Remuneration report of the members of the Board of Management. The ratio of The conditional shares will vest three years after granting, the number of shares versus options at grant is 1 to 2. based on the criteria mentioned above. Vested shares have The second grant took place per 31 December 2015. a holding (lock-up) period of 2 years and may be partly sold only to meet tax requirements at vesting. The holders of The number of shares/ options that vest after three years is conditional shares are not entitled to shareholders’ rights, dependent on the achievement of certain targets. including the right to dividends during the period between The maximum number of shares and options that can vest granting and vesting. The option exercise price is equal to equals 175% of the conditionally granted number of shares the price of the Fugro shares at the closing of the stock and options (only in the case that maximum performance is exchange on the day of granting. The vesting period is three achieved on all criteria). The criteria to be used for vesting years starting at the first day following the grant date.