Remuneration Report continued
Report of the
Report of the
Financial
Other
Contents
Overview
Executive Board
Supervisory Board
statements
information
The CEO and CFO are obliged to invest at least 25 percent of their STV payout 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 percent of their STV payout (at their discretion). These investment
shares are then 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 is completed, the Company will match the investment
shares 1:1, i.e. one matching share is granted for each investment share. According to plan rules, 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 has the power to revise the amount of the STV payout to an appropriate amount if the STV payout that would have
been payable in accordance with the agreed payment schedule would be unacceptable according to standards of reasonableness and
fairness. The Supervisory Board is entitled to claw back all or part of the STV payout (in cash, investment shares or matching shares) insofar
as it has been made based on incorrect information about achieving the performance conditions.
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 target LTV opportunities for 2014 are, and for 2015 remain, 150 per cent of base salary for the CEO and 125 percent 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
of the current year, the base salary of the current year, and the closing share price of 31 December of the preceding year. The vesting of these
performance shares is, since the conditional grant in 2011, contingent on HEINEKEN's performance over a period of three years on four
fundamental financial performance measures.
Organic Revenue Growth (as of 2014) Organic Gross Profit beia Growth (until and including 2013) - a measure to drive top-line growth
Organic EBIT beia Growth - a measure to drive operational efficiency
Earnings Per Share (EPS) beia Growth-a measure to drive overall long-term Company performance
Free Operating Cash Flow-a measure to drive focus on cash
These four performance measures have egual 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 for 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.
At the end of the performance period, the Supervisory Board reviews the Company's performance against the pre-set targets, and approves
the LTV vesting based on the performance achieved. The performance on each of the measures is reported in gualitative terms in the
Remuneration Report after the performance period has been completed (cf. Part II).
For each performance measure, a threshold, target and maximum performance level is set with the following performance share
vesting schedule:
Threshold performance-50 per cent of performance shares vest
Target performance -100 per cent of performance shares vest
Maximum performance - 200 per cent of performance shares vest
Vesting in between these performance levels is on a straight-line basis. Below threshold performance the vesting is zero, whereas beyond
maximum performance it is capped at 200 per cent of vesting at target.
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Heineken N.V. Annual Report 2014