Report of the
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At the end of the year, the Supervisory Board reviews the Company's and individual performance against the pre-set targets, and approves the STV
pay-out levels based on the performance achieved. The performance on each of the measures is reported in qualitative terms in the Remuneration
Report after the end of the performance period (cf. Part II).
For threshold, target and maximum performance the following STV pay-out, as a percentage of target pay-out, applies:
Threshold performance - 50 per cent of target
Target performance -100 per cent of target
Maximum performance - 200 per cent of target
Pay-out in-between these performance levels is on a straight-line basis. Below threshold performance pay-out is zero, whereas beyond maximum
performance it is capped to 200 per cent of pay-out at target.
The CEO and CFO are obliged to invest at least 25 per cent of their STV pay-out in Heineken N.V. shares (investment shares), to be delivered by the
Company; the maximum they can invest in Heineken N.V. shares is 50 per cent of their STV pay-out (to their discretion). These investment shares will
then be blocked and cannot be sold under any circumstance, including resignation, for five calendar years 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 within the meaning of the
law ('dringende reden'), 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 interests with shareholders.
The Supervisory Board may, at its sole discretion in determining the final pay-out, adjust the STV amount, downwards or upwards, that would have been
payable under the plan rules if the pay-out 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 pay-out 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 HEINEKEN's long-term health and to align the Executive
Board and shareholder interests.
The Remuneration Committee's review in 2012 reconfirmed that the CEO's LTV opportunities are significantly below peer group median. At the time in
2011 when the current peer group was introduced and the Executive Board's remuneration was adjusted accordingly, it was felt that a full alignment of
the CEO's LTV opportunities with peer group median needed to be postponed to a later stage to maintain a certain gradation in the progression of
remuneration over time. It has now been decided to further postpone full alignment of the CEO's LTV opportunities with peer group median. The CFO's
LTV opportunities are still well aligned with peer group median. As a result, the target LTV opportunities for 2012 are, and for 2013 remain, 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 granted based on the aforementioned target LTV opportunity percentage and the
closing share price of 31 December of the preceding year; the vesting of these performance shares is, since the grant of 2010, contingent on H EINEKEN's
performance on four 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-emphasise 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 HEINEKEN's business priorities. These targets are not reported in the Remuneration Report as they are considered to be commercially sensitive.
Heineken N.V. Annual Report 2012