Netherlands, Amsterdam: Heineken N.V. announced on March 25 that it proposes to implement a new Executive Board remuneration policy, in line with common remuneration practice. The proposed policy consists of three components: base salary, an annual short-term bonus plan and a share-based Long-Term Incentive Plan.

Base salary accounts for 45% of the total remuneration package on target performance. The remaining 55% is divided equally between the two variable plans – the annual short-term bonus and the Long-Term Incentive Plan. This will ensure a balanced focus on both short-term and long-term performance. The short-term bonus is based on organic net profit growth. The proposed Long-Term Incentive Plan will reward Executive Board members with Heineken N.V. shares.

Under the terms of the Long-Term Incentive Plan, a number of shares will be conditionally awarded after three years, subject to meeting a predefined stretching performance target. The performance criteria will be total shareholder return, measured over a three-year period and relative to a performance peer group.

For the members of the Executive Board, the remuneration policy envisages a base salary that is at the median level of the labour market peer group. The base salary for the Chairman will be set 30% above the base salary for the members of the Executive Board. The Supervisory Board intends to adjust base salaries towards policy levels in 2006, i.e. for the Executive Board members to €525,000 and for the Chairman to €680,000. In 2005, the base salary levels will be adjusted by 16.7% in line with the Consumer Price Index (CBS) since 1999 to €418,000 for the Executive Board Members and to €634,000 for the Chairman.

A new short-term incentive will be introduced. At target level, the short-term incentive level for the Chairman will be €422,500 and for the members of the Executive Board €325,000. The maximum pay-out will not exceed 1.4 times the target bonus level. The emphasis of the short-term incentive will be on annual operational performance.

A new long-term incentive for the Executive Board will be presented for shareholder approval. It will be a performance based share plan and a similar plan will also be implemented for senior management in 2006. Each year, a number of shares will be conditionally awarded, subject to meeting a stretching performance target after three years. The value of shares that will be conditionally awarded equals €325,000 for the members of the Executive Board and €422,500 for the Chairman. Based on the share price as per 31 December 2004 (€24.53), this corresponds to 13,250 shares for the members of the Executive Board and 17,225 shares for the Chairman. When conditionally awarded, the value of one share is not discounted for the performance linkage.

The proposed policy is consistent with Heineken’s strategic aim of fairly and competitively aligning the performance of its senior executives with the interests of shareholders and with the objectives of the business. The remuneration policy and the Long-Term Incentive Plan are subject to approval of shareholders at the Annual General Meeting of Shareholders on 20 April 2005. A share-based plan will also be introduced for senior executives with effect from 1 January 2006. Heineken aims at a consistency in the structure of the remuneration packages of both Executive Board members and senior executives.

The remuneration of the members of the Executive Board consists of a base salary, an annual profit-sharing bonus and a long-term bonus. The Supervisory Board determined the level and structure of the remuneration package for the last time in 1999. For the Executive Board, at target level of performance, fixed salary accounts on average for 42% of the total remuneration package. This is in line with the policy to focus on variable, performance related remuneration.

The base salary was determined in 1999 on the basis of internal pay ratios and market data. There have been no subsequent adjustments. The 2004 annual base salary for the Chairman is €543,000 and for the members of the Executive Board €358,000. The annual bonus is related to the dividend distribution, expressed as a percentage of the nominal value of the shares. A basic sum, €32,521 for the Chairman and €19,781 for each member of the Executive Board, is multiplied by the number of percentage points by which the dividend exceeds 6%. Based on the performance over 2004, the bonuses payable to the Executive Board will be €617,899 for the Chairman and €375,839 for the members of the Executive Board.

The long-term bonus is paid whenever Heineken N.V. makes an issue of bonus shares or undertakes a share split, which in the past has averaged once every three years. It is calculated on the same basic sums as for the annual bonus but, instead of the dividend distribution, it is related to the actual net profit in the period to which the bonus refers (in the past, therefore, generally three years). One-third of the net profit is expressed as a percentage of the nominal share capital (share splits being treated as recapitalisations) and the basic sum is multiplied by the number of percentage points by which this exceeds 6%. The annual bonuses paid in the period concerned are deducted from the figure calculated on this basis. In 2004, the payment for the period 2001-2003 amounted to €897,412 for the Chairman and €534,087 for the members of the Executive Board.

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