Report of the Supervisory Board I Remuneration Report continued
For threshold, target and maximum performance the following STV payout as a per cent of target applies:
Threshold performance - 50 per cent of target
Target performance -100 per cent of target
Maximum performance - 200 per cent of target.
The payout percentage for performance between these performance levels is on a straight-line basis.
The CEO and CFO are obliged to invest at least 25 per cent of their STV payout in Fleineken N.V. shares (investment shares),
to be delivered by the Company; the maximum they can invest in Fleineken N.V. shares is 50 per cent of their STV payout
(to their discretion). These investment shares will then be blocked for five calendar years, regardless of whether they stay in
service of Fleineken N.V., to link the value of the investment shares to long-term Company performance. After the blocking
period the Company will match the investment shares 1:1i.e. one matching share is granted for each investment share.
Matching entitlements will be forfeited in case of dismissal by the Company for an urgent reason ('dringende reden') within
the meaning of the law, or in case of dismissal for cause ('gegronde reden') whereby the cause for dismissal concerns
unsatisfactory functioning of the Executive Board member. With this 'deferral-and-matching' proposition a significant
share ownership by the Executive Board is ensured, creating an increased alignment of interest with shareholders.
The Supervisory Board may, at its sole discretion in determining the final payout, adjust the STV amount that would have
been payable under the plan rules downwards or upwards if the payout based on plan rules would produce an unfair result
due to extraordinary circumstances. The Supervisory Board can also recover from the Executive Board any STV payment
in cash, investment shares or matching shares made on the basis of incorrect financial or other data (clawback provision).
Long-term variable award
The long-term variable award (LTV) is designed to drive and reward sound business decisions for the long-term health
ofHEINEKEN and to align the Executive Board and shareholder interest.
The target LTV opportunities for both 2011 and 2012 are 150 per cent of base salary for the CEO and 125 per cent of base
salary for the CFO. Each year, a target number of performance shares is conditionally awarded, the vesting of which is, since
the award of 2010, contingent on FHEINEKEN's performance on four key fundamental financial performance measures.
Organic Gross Profit beia Growth - a measure to drive top-line growth - the key measure of Company strength
Organic EBIT beia Growth - a measure to drive operational efficiency
Earnings Per Share (EPS) beia Growth - a measure of overall long-term Company performance
Free Operating Cash Flow - a measure to drive focus on cash.
These four performance measures have equal weights to minimise the risk that participants over-emphasize one
performance measure to the detriment of others. At the beginning of each performance period, the Supervisory Board
establishes the corresponding targets on these performance measures based on FHEINEKEN's business priorities. The targets
are considered to be commercially sensitive and are not disclosed at that moment. At the end of the performance period,
the Supervisory Board reviews the Company's performance against the pre-set measures and targets, and approves the
LTV vesting based on the performance achieved. The performance on each of the measures is reported in the Annual
Report after the end of the performance period.
For each performance measure, a threshold, target and maximum performance level is set with the corresponding
performance share vesting schedule:
Threshold performance - 50 per cent of performance shares vest
Target performance -100 per cent of performance shares vest, and
Maximum performance - 200 per cent of performance shares vest.
Vesting between these performance levels is on a straight-line basis.
Heineken N.V. Annual Report 2011