Notes 26-30

27. Share-based payments – Long-Term Incentive Plan

As from 1 January 2005 Heineken established a performance-based share plan (Long-Term Incentive Plan; LTIP) for the Executive Board. As from 1 January 2006 a similar LTIP was established for senior management.

The Long-Term Incentive Plan for the Executive Board includes share rights, which are conditionally awarded to the Executive Board each year and are subject to Heineken’s Relative Total Shareholder Return (RTSR) performance in comparison with the TSR performance of a selected peer group. The LTIP share rights conditionally awarded to senior management each year are for 25 per cent subject to Heineken’s RTSR performance and for 75 per cent subject to internal performance conditions. At target performance, 100 per cent of the shares will vest. At maximum performance 150 per cent of the shares will vest.

The performance period for share rights granted in 2006 was from 1 January 2006 to 31 December 2008. The performance period for share rights granted in 2007 is from 1 January 2007 to 31 December 2009. The performance period for share rights granted in 2008 is from 1 January 2008 to 31 December 2010.

The vesting date for the Executive Board is within five business days, and for senior management the latest of 1 April and 20 business days, after the publication of the annual results of 2008, 2009 and 2010 respectively.

As Heineken N.V. will fulfil the tax payment obligations related to vesting on behalf of the individual employees, the amount of Heineken N.V. shares to be received by the Executive Board and senior management will be a net amount.

The terms and conditions of the share rights granted are as follows:

Grant date/employees entitled Number* Based on
share price		 Vesting conditions Contractual
life of rights
Share rights granted to
Executive Board in 2006		 40,049 26.78 Continued service and
RTSR performance		 3 years
Share rights granted to
senior management in 2006		 352,098 26.78 Continued service, 75% internal
performance conditions and
25% RTSR performance		 3 years
Share rights granted to
Executive Board in 2007		 32,265 36.03 Continued service and
RTSR performance		 3 years
Share rights granted to senior
management in 2007		 281,400 36.03 Continued service, 75% internal
performance conditions and
25% RTSR performance		 3 years
Share rights granted to Executive
Board in 2008		 26,288 44.22 Continued service and
RTSR performance		 3 years
Share rights granted to senior
management in 2008		 263,958 44.22 Continued service, 75% internal
performance conditions and
25% RTSR performance		 3 years
996,058  
*
The number of shares is based on target performance.

Based on RTSR and internal performance, it is expected that approximately 409,000 shares will vest. The expenses relating to these expected additional grants are recognised in the income statement during the performance period.

The number and weighted average share price per share is as follows:

  Weighted
average share
price 2008		 Number of
share rights
2008		 Weighted
average share
price 2007		 Number of
share rights
2007
Outstanding as at 1 January 30.10 696,616 26.55 435,871
Granted during the year 44.22 290,246 36.03 313,665
Forfeited during the year – (40,581) – (52,920)
Vested during the year – (40,744) – –
Outstanding as at 31 December 37.48 905,537 30.10 696,616

The 40,744 (gross) shares vested in 2008 are related to the 2005-2007 LTIP of the Executive Board. J.F.M.L. van Boxmeer received net 9,244 shares and D.R. Hooft Graafland received net 6,544 shares. The remaining shares were provided to a former board member. The shares have a two-year holding period.

The fair value of services received in return for share rights granted is based on the fair value of shares granted, measured using the Monte Carlo model, with following inputs:

In EUR Executive
Board 2008		 Executive
Board 2007		 Senior
management
2008		 Senior
management
Senior 2007
Fair value at grant date 411,670 486,879 7,409,515 9,524,037
Expected volatility 18.4% 20.1% 18.4% 20.1%
Expected dividends 1.7% 1.2% 1.7% 1.2%

Personnel expenses

In millions of EUR Note 2008 2007
Share rights granted in 2006 3 3
Share rights granted in 2007 4 4
Share rights granted in 2008 4 –
Total expense recognised as personnel expenses 10 11 7