56
Remuneration Report (continued)
Actual remuneration paid to former members of the Executive Board
Pay Ratio
Part III - Adjustments to the Executive Board remuneration policy and implementation for 2018
Policy changes
Implementation changes
Report of the
Report of the
Financial
Sustainability
Other
Introduction
Executive Board
Supervisory Board
Statements
Review
Information
Heineken N.V. Annual Report 2017
The resignation per 1 May 2015 of the former CFO Mr. Hooft Graafland has been considered a retirement underthe LTV Plan Rules. Existing
agreements from 2005 for a specific group of senior managers (including the Executive Board members at the time) to compensate forthe negative
effects of a structural change in their variable pay plan designs, implied that unvested LTV awards as of his retirement date would continue to be
subject to vesting at their regular vesting dates, insofar and to the extent that the predetermined performance conditions are met. Shares that may
vest under these plans will be subject to a holding period of two years in accordance with the LTV Plan Rules, to arrive at a five-year holding restriction
after the date of the conditional performance grant. For Mr. Hooft Graafland this involved the three Long-term variable award plans over performance
years 2013-2015,2014-2016 and 2015-2017 respectively. In the previous two years the remuneration related to the vesting oftheformertwo
plans has been disclosed. Following year-end 2017 the 2015-2017 plan has vested with a performance of 163% as mentioned under'ad (3)' above,
implying a vesting of 22,467 shares for Mr. Hooft Graafland and, given an end-of-year share price of €86.93, a value of €1,953,056. This concludes all
remuneration to Mr. Hooft Graafland following his retirement.
2015-2017 Long-term variable award
Value of
No. of performance
performance shares vesting
shares vesting in€
Hooft Graafland
22,467 1,953,056
In the Netherlands a revised corporate governance code has come into effect as of financial year 2017. This revised code requires Dutch stock-listed
companies to consider pay ratios between Executive Board members and other employees within the Company when formulating the remuneration
policy forthe Executive Board, and to disclose these ratios in the Remuneration Report every year.
As is commonly understood, such ratios are specific to the company's industry, geographical footprint and organisational model. HEINEKEN has a
truly wide geographical footprint, with the majority of its business and employees in emerging markets with widely different pay levels and structures
compared to the Netherlands and Europe. In addition, HEINEKEN has a large number of breweries and sales forces in-house worldwide, which adds
to the variety of pay within the Company. For other companies in other industries this will be different. Finally, pay ratios can also be quite volatile over
time, as they can vary with exchange rate movements and can be very dependent on the Company's annual performance since that performance
impacts the remuneration of the Executive Board much more than of all other employees.
The 2017 pay ratios for HEINEKEN are 215 forthe CEO and 100 forthe CFO. These ratios are obtained by dividing the 2017 total remuneration for
the CEO and CFO by the 2017 average total remuneration of all other employees worldwide. The common denominator of these ratios is derived
from note 10 on page 87 by dividing the 2017 total personnel expense (after subtracting the expense for contractors and forthe Executive Board's
remuneration), by the reported FTE (minus two; excluding contractors), leading to an amount of €42,074. The total remuneration forthe CEO and
CFO is retrieved from note 33 on page 119. The reason why the Executive Board's remuneration is obtained from note 33 ratherthan from this
Remuneration Report is explained by the fact that the personnel expense in note 10 is based on IFRS valuation standards, which implies that the
Executive Board's remuneration also needs to be based on these standards for reasons of comparability.
The Supervisory Board reviewed the remuneration policy and decided not to submit any changes for approval to the 2018 Annual General Meeting
of Shareholders.
The Supervisory Board also reviewed the remuneration policy versus its implementation and decided to implement the following changes as from
2018 onwards.
- The Executive Board base salaries will be increased from €1,200,000 to €1,250,000 forthe CEO and from €720,000 to €735,000 forthe CFO, to
realign these base salaries with the aspired policy levels following from the medians of the Labour market peer group.
-The relative weights of the financial and operational measures within the Short-term variable pay plan will change from 25% to 35% for Organic
Revenue Growth, to further increase focus on top line growth, and from 25% to 15% for Organic Net Profit beia Growth; the relative weights for Free
Operating Cash flow and the Individual leadership objectives will remain the same at 25% each.
-The name of the 2017 Organic Revenue Growth performance measure within the Short-term and Long-term variable pay plans will be changed
into Organic Net Revenue Growth, since IFRS has changed the definition of'Revenue' to include certain types of excise duties whereas we wish to
maintain the performance measure net of excise duties and thus unchanged in its content
Supervisory Board Heineken N.V.
Amsterdam, 9 February 2018
