53 Remuneration Report (continued) Long-term variable award Pay mix Heineken NV. Report of the Report of the Financial Sustainability Other Annual Report 2016 Introduction Executive Board Supervisory Board Statements Review Information 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 with shareholder interests. The target LTV opportunities for both 2016 and 2017 are 150% of base salary for the CEO and 125% 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 that year, the base salary of that year, and the closing share price of 31 December of the preceding year. The vesting of these performance shares is contingent on HEINEKEN's performance over a period of three years on four fundamental financial performance measures: Organic Revenue Growth - to drive top-line growth Organic EBIT beia Growth - to drive profitability and operational efficiency Earnings Per Share (EPS) beia Growth - to drive overall long-term Company performance Free Operating Cash Flow - 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 numerical targets for these performance measures based on HEINEKEN's business priorities. These targets are not disclosed upfront as they are considered to be commercially sensitive. In the first weeks after 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 qualitative 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% of performance shares vests Target performance - 100% of performance shares vests Maximum performance - 200% of performance shares vests. For each measure, 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% of vesting at target. The Supervisory Board has the power to revise the amount of performance shares that will vest to an appropriate number if the number of performance shares that would have vested under the agreed vesting schedule would be unacceptable according to standards of reasonableness and fairness. The Supervisory Board is entitled to claw back all or part of the shares transferred to the Executive Board members upon vesting (or the value thereof) insofar as vesting occurred on the basis of incorrect information about achieving the performance conditions. The vested performance shares that remain after withholding tax are subject to an additional holding restriction of two years, to arrive at a five-year holding restriction after the date of the conditional performance grant. As from the 2017 grant, the performance measure 'Organic EBIT beia Growth' is replaced by 'Organic Operating Profit beia Growth', pending approval by the Annual General Meeting of Shareholders on 20 April 2017 (cf. Part III). The mix between fixed pay and variable pay for various levels of performance is illustrated below. In these charts, fixed pay refers to base salary only, excluding pensions and other emoluments, and variable pay consists of the aforementioned short-term variable pay and long-term variable award opportunities, including the 'deferral-and-matching' proposition. Share price movements during performance and holding periods are hereby not included since these are unknown in the context of target remuneration.

Jaarverslagen en Personeelsbladen Heineken

Jaarverslagen | 2016 | | pagina 54