108
Notes to the Consolidated Financial Statements (continued)
27. Share-based payments - Long-Term Variable Award
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Heineken NV.
Report of the
Report of the
Financial
Sustainability
Other
Annual Report 2016
Introduction
Executive Board
Supervisory Board
Statements
Review
Information
HEINEKEN has a performance-based share plan (Long-Term Variable award (LTV)) for the Executive Board and senior management. Under this LTV
plan, share rights are conditionally awarded to incumbents on an annual basis. The vesting of these rights is subject to the performance of Heineken
NV on specific internal performance conditions and continued service over a three-year period.
The performance conditions for LTV 2014-2016, LTV 2015-2017 and LTV 2016-2018 are the same for the Executive Board and senior management
and comprise solely of internal financial measures, being Organic Revenue Growth, Organic EBIT beia growth, Earnings Per Share (EPS) beia growth
and Free Operating Cash Flow.
At target performance, 100% of the awarded share rights vest. At threshold performance, 50% of the awarded share rights vest. At maximum
performance, 200% of the awarded share rights vest for the Executive Board as well as senior managers contracted by the US, Mexico, Brazil
and Singapore, and 175% vest for all other senior managers.
The performance period for the aforementioned plans are:
LTV Performance period start Performance period end
2014-2016
1 January 2014
31 December 2016
2015-2017
1 January 2015
31 December 2017
2016-2018
1 January 2016
31 December 2018
The vesting date for the Executive Board is shortly after the publication of the annual results of 2016, 2017 and 2018 respectively and for senior
management on 1 April 2017, 2018 and 2019 respectively.
As HEINEKEN will withhold the tax related to vesting on behalf of the individual employees, the number of Heineken NV shares to be received will
be a net number. The share rights are not dividend-bearing during the performance period. The fair value has been adjusted for expected dividends
by applying a discount based on the dividend policy and historical dividend payouts, during the vesting period.
The terms and conditions of the share rights granted are as follows:
Based on share
Grant date/employees entitled Number* price
Share rights granted to Executive Board in 2014
51,702
49.08
Share rights granted to senior management in 2014
597,744
49.08
Share rights granted to Executive Board in 2015
54,903
58.95
Share rights granted to senior management in 2015
534,298
58.95
Share rights granted to Executive Board in 2016
34,278
78.77
Share rights granted to senior management in 2016
398,850
78.77
The number of shares is based on at target payout performance (100%).
Under the LTV 2013-2015, a total of 58,447 (gross) shares vested for the Executive Board and 726,789 (gross) shares vested for senior management.
The number of shares vested for the Executive Board relates to Mr. Jean-Frangois van Boxmeer, as Mr. René Hooft Graafland was no longer member
of the Executive Board at vesting and Ms. Laurence Debroux received LTI as per LTIP 2015-2017.
Based on the performance conditions, it is expected that approximately 786,093 shares of the LTV 2014-2016 will vest in 2017 for senior
management and the Executive Board.
The number, as corrected for the expected performance for the various awards, and weighted average share price per share under the LTV of senior
management and Executive Board are as follows:
Weighted
average share
price 2016
Number of share
rights 2016
Weighted average
share price 2015
Number of share
rights 2015
Outstanding as at 1 January
52.26
1,854,782
44.42
2,401,418
Granted during the year
78.77
433,128
58.95
589,201
Forfeited during the year
58.33
(121,026)
50.95
(235,289)
Vested during the year
50.47
(785,236)
35.89
(891,409)
Performance adjustment
491,699
(9,139)
Outstanding as at 31 December
60.40
1,873,347
52.26
1,854,782