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Related party transactions

Related parties have been identified in accordance with the provisions of the international accounting standards and of the relevant CONSOB (the Italian Commission for Listed Companies and the Stock Exchange) regulations.

The transactions, which are carried out and regulated at arm’s length, relate to business (disposals and purchases of goods and services in the course of the Group’s usual operations), financial (ordinary financing granted/obtained and the charging of related interest income or expense) and other relationships (including all residual activities, as well as contractually-governed transactions of a tax nature, for those companies participating in the national tax consolidation scheme).

It should be noted that in 2010 Leonardo issued a specific “Procedure for Related Parties Transactions” (hereinafter referred to as the “Procedure”), which was mostly recently updated on 20 December 2016, pursuant to CONSOB Regulation no. 17221 of 12 March 2010, as amended and supplemented, containing provisions on “related party transactions” (hereinafter referred to as the “Regulation”), as well as in implementation of Article 2391-bis of the Italian Civil Code. The abovementioned Procedure is available on the Company’s website (www.leonardocompany.com, under Corporate Governance section, Related Parties area).

Pursuant to Article 5.8 of the Regulation, the 2016 financial year saw the completion, within the scope of the implementation of the Group’s New Organisational and Operational Model, of the partial demergers of the wholly-owned companies Alenia Aermacchi S.p.A., AgustaWestland S.p.A. and Selex ES S.p.A. in favour of Leonardo S.p.A., which became effective (including in accounting and tax terms) from 1 January 2016, as illustrated in more details in the Report on Operations for the 2016 financial year. These operations were classified as transactions of greater importance, as defined by Article 4.1.a) of the abovementioned Regulation and benefitted – as they were carried out with subsidiaries – from the exemption provided for in Article 14.2 of the Regulation, as well as from Article 11.2 e) of the abovementioned Procedure. Finally, it should be noted that these transactions had no impact on the consolidated financial position and the consolidated results for the period under consideration and that no changes or developments took place in relation to the related party transactions described in the 2015 Report on Operations.

CONSOB - Market Regulation, Article 36

In accordance with CONSOB provisions contained in the Market Regulation and specifically Article 36 of Resolution 16191/2007, Leonardo performed the verifications on the Group subsidiaries that were incorporated and are governed under the laws of non-EU Member States and that, as a result, were deemed “material” based on the requirements under Article 151 of the Issuers’ Regulations adopted with CONSOB Resolution 11971/1999, as finally amended by CONSOB Resolution no. 18214/2012. As regards the non-EU foreign subsidiaries (DRS Technologies Inc., Meccanica Holdings USA Inc., AgustaWestland Philadelphia Co) identified based on the above regulations and in compliance with the provisions of local laws, these verifications revealed the existence of an adequate administrative and accounting system and the additional requirements envisaged in said Article 36. Therefore, it is not necessary to prepare an adaptation plan pursuant to the abovementioned article.

Information pursuant to Articles 70 and 71 of Issuers' Regulations 

By resolution of the Board of Directors on 23 January 2013, the Company adopted the simplification regime under Articles 70/8 and 71/1-bis of the Issuers’ Regulations, adopted with CONSOB Resolution 11971/1999, as subsequently amended and supplemented. By this resolution, the Company chose the option to make exceptions to the obligation to issue the documents required by the law when transactions of greater importance (such as mergers, spin-offs, capital increases by means of the contribution of assets in kind, acquisitions or disposals) occur.