49. Long-term incentive for executives

METRO AG has been implementing long-term incentive programmes since 1999 to enable senior executives to participate in the company’s value development and reward their contribution to the sustained success of METRO GROUP compared with its competitors. The members of the Management Board and senior executives of METRO AG as well as managing directors and senior executives of the other operating METRO GROUP companies are eligible.

Sustainable performance plan 2013/14–2015/16

After the last tranche of the performance share plan was paid in the short financial year 2013, the first tranche of a long-term performance-based remuneration scheme initially limited to three tranches was issued for financial year 2013/14.

A target value in euros is set for the eligible managers. 75 per cent of this amount will be based on the so-called TSR component (total shareholder return), a metric that will be determined on the basis of the METRO ordinary share’s performance relative to a defined reference index during a performance period. The remaining 25 per cent will be based on a socalled sustainability component that considers the ranking that METRO AG achieves during the performance period as part of the Corporate Sustainability Assessment conducted by the independent agency RobecoSAM AG. In case of employment termination, separate rules for the payout of the tranches have been agreed upon.

To calculate the TSR component, the Xetra closing prices of the METRO ordinary share will be recorded over a period of 40 trading days that directly follow the Annual General Meeting of METRO AG. The arithmetic mean calculated from these prices will then be used as the starting share price. The performance period for the respective tranche will begin on the 41st trading day following the Annual General Meeting. In the next step, that will also cover a period of 40 trading days directly following the Annual General Meeting held three years after the determination of the starting share price and the issuance of the respective tranche, the Xetra closing prices of METRO’s ordinary share will be recorded. The arithmetic mean calculated from these prices will then be used as the final share price. The TSR percentage value will be determined on the basis of the change in the METRO share price and the total amount of reinvested dividends throughout the performance period in relation to the starting and ending share prices.

The METRO TSR calculated in this manner will be compared with the TSR of the Dow Jones STOXX Europe 600 Retail Index (index TSR) during the performance period, and the factor for computing the TSR component will be determined in this way:

  • If METRO’s TSR is identical to the index TSR, the factor for the TSR component will be one.
  • If METRO’s TSR is 30 percentage points or more below the index TSR, the factor for the TSR component will be zero.
  • If METRO’s TSR is 30 percentage points above the index TSR, the factor for the TSR component will be two.
  • If METRO’s TSR is 60 percentage points or more above the index TSR, the factor for the TSR component will be a maximum of three (cap).
  • Outside these values, the TSR factor for the sustainable performance plan will be determined using the linear interpolation method and calculated to the hundredth place value.

If the TSR factor is zero, no payment will be made and the TSR component will be closed. If the TSR factor is positive, the following additional condition will apply: a payment of 75 per cent of the target amount multiplied by the TSR factor will be made only if the calculated final price of the METRO share does not fall below the starting share price. Should this condition not be met, the calculated amount will not be paid initially. In this case, an entitlement to payment will exist only if the Xetra closing price of the METRO ordinary share is higher than or equivalent to the starting share price for 40 consecutive trading days within a three-year period after the completion of the performance period, or oxer period. Should this condition not be met within the three years after the performance period ends, no payment of the TSR component of the tranche will be made.

To determine the factor of the sustainability component, METRO AG takes part in the Corporate Sustainability Assessment conducted by the independent agency RobecoSAM AG during each year of the three-year performance period of the sustainable performance plan. RobecoSAM AG uses this assessment to determine the ranking of METRO AG within the industry group “Food and Staples Retailing” that is defined in accordance with the Global Industry Classification Standard (GICS). S&P Dow Jones Indices uses this ranking as the basis for decisions regarding a company’s inclusion in the Dow Jones Sustainability Indices (DJSI). METRO AG is informed each year by RobecoSAM AG about its new ranking. The company’s average ranking – rounded to whole numbers – is determined on the basis of the three rankings communicated by RobecoSAM AG during the performance period. The factor for the sustainability component is determined on the basis of the average ranking during the performance period. The following additional condition will also apply: a payment of 25 per cent of the target amount multiplied by the sustainability factor will be made only if the ranking of METRO AG does not fall by more than two places below the last announced ranking before the issuance of the tranche in any year of the performance period. Otherwise, the factor for the sustainability component will be zero. The payment cap for the sustainability component amounts to three times the target amount.

The value of the tranches allotted in financial year 2013/14 as part of the sustainable performance plan amounted to €6 million at the time of allotment (previous year performance share plan 9M 2013: €23 million) and was calculated by external experts using recognised financial-mathematical methods.

Sustainable performance plan (tranches 2013/14–2015/16)

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Tranche

End of the performance period

Starting price for the TSR component

Target amount as of 30/9/2014

2013/14

41st trading day following the Annual General Meeting three years after the issuance of the tranche

€29.73

€8,315,000

Performance share plan and share ownership guidelines (2009–2013)

In 2009, METRO AG introduced a performance share plan for a period of five years for which the last tranche was issued in the short financial year 2013.

Under this scheme, eligible managers were given an individual target amount for the performance share plan (target value) in accordance with the significance of their responsibilities. The target number of performance shares was calculated by dividing this target value by the share price upon allotment, based on the average price of the METRO share during the three months up to the allotment date. The key metric in this calculation was the three-month average price of the METRO share before allotment. A performance share entitles its holder to a cash payment in euros matching the price of the METRO share on the payment date. The key metric in this calculation was also the three-month average price of the METRO share before the payment date.

Based on the relative performance of the METRO share compared to the mean of the DAX 30 and Dow Jones Euro STOXX Retail indices – total return – the final number of payable performance shares is determined after the end of a performance period of at least three and at most 4.25 years. It corresponds to the target number of shares when an equal performance with said stock indices is achieved. Up to an outperformance of 60 per cent, the number increases on a straight-line basis to a maximum of 200 per cent of the target amount. Up to an underperformance of 30 per cent, the number is accordingly reduced to a minimum of 50 per cent. In the case of an underperformance of more than 30 per cent, the number is reduced to zero.

Payment can be made at six possible times that are set in advance. The earliest payment date is three years after allotment of the performance shares. From this time, payment can be made every three months. The eligible managers can choose the date upon which they want to exercise performance shares. A distribution over several payment dates is not permitted. The payment cap amounts to five times the target value.

METRO GROUP introduced so-called share ownership guidelines along with its performance share plan: as a precondition for payments of performance shares, eligible executives are obliged to undertake a continuous self-financed investment in METRO shares up to the end of the three-year vesting period. This ensures that, as shareholders, they will directly participate in share price gains as well as potential losses of the METRO share. The required investment volume generally amounts to approximately 50 per cent of the individual target value.

Performance share plan (tranches 2009–2013)

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Tranche

End of the blocking period

Three-month average price before allotment

Number of performance shares as of 30/9/2014

2009

August 2012

€36.67

Expired

2010

August 2013

€42.91

263,777

2011

August 2014

€41.73

301,975

2012

April 2015

€29.18

553,165

2013

April 2016

€22.84

801,652

The blocking period for the 2010 and 2011 tranches ended in August 2013 and August 2014, respectively. No payouts from these tranches were made to members of the Management Board in financial year 2013/14.

The current tranches of share-based payment programmes resulted in expenses of €3 million (12M 2012/13: €6 million; 9M 2013: €7 million).

The related provisions as of 30 September 2014 amount to €15 million (30/9/2013: €12 million). Of this total, the 2010 tranche accounts for €0 million (30/9/2013: €0 million), the 2011 tranche for €0 million (30/9/2013: €2 million), the 2012 tranche for €3 million (30/9/2013: €5 million), the 2013 tranche for €11 million (30/9/2013: €5 million) and the 2014 tranche for €1 million.