The remuneration system for members of the Management Board

Management Board remuneration consists of a fixed salary and two variable components: performance-based compensation (short-term incentive) and a long-term incentive. The company also offers pension provisions and supplemental benefits.

Total remuneration and the individual compensation components are geared appropriately to the responsibilities of each individual member of the Board, his or her personal performance and the company’s economic situation, and fulfil legal stipulations regarding customary remuneration. The incentives serve as an inducement for the Management Board to increase the company’s value and are designed to generate sustainable, long-term company growth. In the short financial year 2013, the individual components of Management Board remuneration were as follows:

Fixed salary

The fixed salary is contractually set and is paid in monthly instalments.

Performance-based compensation (short-term incentive)

The Annual General Meeting of 23 May 2012 changed the financial year of METRO AG to run from 1 October to 30 September. For this reason, a short nine-month financial year (1 January 2013 to 30 September 2013) was created in 2013. The performance-based remuneration system, however, was designed on the basis of a twelve-month financial year that represents a full annual cycle in the retail business, including the Christmas season. In light of this, the Management Board already decided in 2012 to offer a transitional arrangement to executives and employees of METRO AG. In this arrangement, the calculation of performance-based remuneration during the short financial year will be based on a full annual cycle (1 January 2013 to 31 December 2013). The payments calculated on this basis will be proportionally reduced to the short nine-month financial year. The Supervisory Board followed the recommendation of its Personnel Committee and also concluded a transitional agreement with the members of the Management Board. The Supervisory Board believes this arrangement has ensured an appropriate transfer of the current bonus system to the new financial year. In addition, it provides for a consistent remuneration approach for members of the Management Board and METRO AG employees.

The short-term incentive for members of the Management Board is determined mainly by the development of return on capital employed (RoCE) and net earnings. The use of the key ratio net earnings combined with RoCE rewards profitable growth of METRO GROUP. EBIT is divided by capital employed to determine RoCE. Net earnings principally amount to profit for the period. The Supervisory Board may resolve an adjustment for special items. To ensure the individual performance orientation of Management Board remuneration, the Supervisory Board of METRO AG now also reserves the general right to reduce or increase the weight of the individual short-term incentive by up to 30 per cent, respectively, at its discretion.

Members of the Management Board receive between €500 and €833 per 0.01 percentage point of RoCE above 7 per cent. For each additional €1 million in net earnings, they receive an additional €304 to €506 (all figures on a twelve-month basis). The amounts are set by the Supervisory Board of METRO AG based on the company’s strategy and medium-term targets, are regularly reviewed and are adjusted if necessary. The payout of the performance-based compensation granted for RoCE and net earnings is capped each year. The following individual values were determined as the basis for Management Board remuneration in the short financial year 2013:

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€ p. a.

Amount per 0.01 percentage point of RoCE above 7 per cent1

Amount per €1 million in net earnings1

Payout cap for the short financial year 20132

1

Twelve-month figures

2

Nine-month figures

3

Member of the Management Board since 1 April 2013

4

Member of the Management Board until 31 March 2013

Olaf Koch

833

506

2,925,000

Mark Frese

500

304

1,560,000

Pieter Haas3

500

304

1,560,000

Heiko Hutmacher

500

304

1,560,000

Frans W. H. Muller4

625

380

1,950,000

The performance-based compensation of members of the Management Board is generally paid out four months after the end of a financial year. For the short financial year 2013, payments are made in April 2014 as performance-based compensation is calculated on the basis of a full twelve-month cycle which is then shortened pro rata to arrive at the nine-month period of the short financial year. Mr Muller, who left the Management Board on 31 March 2013, received performance-based compensation in April 2013 for the period of 1 January 2013 to 31 March 2013. The payout was determined on the basis of estimates.

Share-based compensation (long-term incentive)

The long-term incentive is a compensation component with long-term incentive effect. It is designed to achieve sustainable growth in the company’s value and applies a multi-year assessment basis.

Performance share plan 2009–2013

By resolution of the Personnel Committee of the Supervisory Board and with the approval of the Supervisory Board, METRO AG introduced a five-year performance share plan in 2009. A target value in euros is set for each member of the Management Board. The target number of performance shares is 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. A performance share entitles its holder to a cash payment in euro matching the price of the METRO share on the payment date, based on the average price of the METRO share during the three months up to the payment date.

Based on the relative performance of the METRO share compared to the median 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 market 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 members of the Management Board can choose the date upon which they want to exercise performance shares. A distribution over several payment dates is not permitted. The payment cap in euros 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 the payout of performance shares, the members of the Management Board are obliged to undertake a significant continuous self-financed investment in METRO shares up to the end of the three-year blocking period. This ensures that, as shareholders, they will directly participate in share price gains as well as potential losses of the METRO share. Their investment in company shares promotes the long-term structure and orientation towards sustainable development of the remuneration system and results in a healthy balance of the various remuneration elements. The self-financed investment applies to the entire term of the performance share plan.

Pension provisions

In 2009, company pension provisions were introduced for members of the Management Board. These provisions consist of direct benefits with a defined contribution component and a performance-based component.

The defined contribution component is financed by the Management Board and the company based on an apportionment of “7 + 7 + 7”. When a member of the Management Board makes a contribution of 7 per cent of his or her defined basis for assessment, the company will contribute the same amount. Depending on the economic situation, the company will pay the same amount again. In view of the macroeconomic environment, the additional amount was again suspended in the reporting year. The performance-based component is congruently reinsured by Hamburger Pensionsrückdeckungskasse VVaG (HPR). The interest rate for the contributions is paid in accordance with the profit-sharing system of the HPR with a guarantee applying to the paid-in contribution. When a member of the Management Board leaves the company before retirement age, the contributions retain the level they have reached.

An entitlement to pension benefits exists

  • if the working relationship ends with or after the reaching of standard retirement age as it applies to the German state pension scheme,
  • as early retirement benefits, if the working relationship ends at the age of 60 or afterwards and before the standard retirement age,
  • as disability benefits, if the working relationship ends before the standard retirement age is reached and preconditions have been fulfilled,
  • as surviving dependants’ benefits, if the working relationship is ended by the person’s death.

Payment can be made in the form of capital, instalments or a life-long pension. A minimum benefit is granted in the case of invalidity or death. In such instances, the total amount of contributions that would have been credited to the member of the Management Board for every calendar year up to a credit period of ten years, but limited to the point when the individual turns 60, will be added to the benefits balance. This performance-based component is not reinsured, but will be provided directly by the company when the benefit case occurs.

Further benefits in case of an end to employment

The active members of the Management Board receive no additional benefits beyond the described pension provisions should their employment end. In particular, no retirement payments will be granted. In the event of the death of a member of the Management Board during active service, his or her surviving dependants will be paid the fixed salary for the month in which the death occurred as well as for an additional six months.

Supplemental benefits

The supplemental benefits granted to members of the Management Board include non-cash benefits and expense allowances (for example, company cars).

Other

The members of the Management Board of METRO AG are not entitled to additional remuneration or special benefits as a result of a change of control.

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Remuneration of the Management Board in the short financial year 2013
(1 January to 30 September 2013)1

 

 

 

 

 

 

Long-term incentive

 

 

€ 1,000

Financial year 2012 Short financial year 2013

Fixed salary

Supplemental benefits

Short-term incentive2

Value of granted tranches3

(Payout from tranches granted in the past)

Total4

(Effective salary5)

1

Statements pursuant to §285 Sentence 1 No. 9 a and § 314 Section 1 No. 6 a of the German Commercial Code (HGB) (excluding pension provisions)

2

No data for the short financial year 2013 as the short-term incentive was calculated on the basis of the 2013 calendar year and, according to German Accounting Standard 17 (GAS 17), may only be shown upon full entitlement

3

Shown here is the fair value at the time of granting the tranche

4

Total of columns fixed salary, supplemental benefits, short-term incentive and value of granted tranches

5

Total of columns fixed salary, supplemental benefits, short-term incentive and payouts from tranches granted in the past

6

Member of the Management Board since 1 April 2013

7

Member of the Management Board until 31 March 2013; short-term incentive based on an estimate in accordance with the contract termination agreement

8

Reported figures for 2012 relate to active members of the Management Board in the short financial year 2013

Olaf Koch

2012

1,200

63

75

1,522

(0)

2,860

(1,338)

2013

900

52

0

1,573

(0)

2,525

(952)

Mark Frese

2012

720

142

38

913

(0)

1,813

(900)

2013

540

17

0

944

(0)

1,501

(557)

Pieter Haas6

2012

0

0

0

0

(0)

0

(0)

2013

360

7

0

944

(0)

1,311

(367)

Heiko Hutmacher

2012

720

186

31

913

(0)

1,850

(937)

2013

540

86

0

944

(0)

1,570

(626)

Frans W. H. Muller7

2012

900

124

39

1,142

(0)

2,205

(1,063)

2013

225

55

188

1,180

(0)

1,648

(468)

Total8

2012

3,540

515

183

4,490

(0)

8,728

(4,238)

2013

2,565

217

188

5,585

(0)

8,555

(2,970)

Long-term incentives in the short financial year 2013

The target value for the 2013 tranche is €1.6 million for Mr Koch and €0.96 million each for Mr Frese, Mr Haas and Mr Hutmacher. Under conditions laid out by the performance share plan, Mr Koch received 70,053 performance shares and Mr Frese, Mr Haas and Mr Hutmacher each received 42,032 performance shares. At the time of granting, a share unit was valued at €22.84. The performance shares that were distributed do not represent a fixed number of rights in the sense of §§ 285 Sentence 1 No. 9 a Sentence 4 of the German Commercial Code (HGB) or of § 314 Section 1 No. 6 a Sentence 4 of the German Commercial Code (HGB). Rather, they were a target amount. Under the conditions of the performance share plan, entitlements cannot be described with a particular fixed number at the time of granting. The value of the performance shares distributed in the short financial year 2013 was calculated by external experts using recognised financial-mathematical methods (Monte Carlo simulation). The specified self-financed investment amounted to €0.5 million for Mr Koch and €0.32 million each for Mr Frese, Mr Haas and Mr Hutmacher.

In addition to the tranche from the performance share plan distributed in the short financial year 2013, the active members of the Management Board possess rights from the following tranches: Messrs Koch and Muller possess rights from the tranches from 2010, 2011 and 2012; Mr Muller also possesses rights from the tranche from 2009. In addition to his rights from the 2012 tranche, Mr Frese possesses rights from the tranches from 2009, 2010 and 2011 as a result of his previous service within METRO GROUP prior to his appointment to the Management Board. Mr Hutmacher possesses rights from the tranche from 2012.

Additional information on the trance from 2013 is provided in the section “Services after the end of employment in the short financial year 2013”.

Performance share plan (tranches 2009–2013)

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Tranche

End of the blocking period

Three-month average price before allotment

Number of Management Board performance shares as of 30/9/2013

2009

August 2012

€36.67

18,407

2010

August 2013

€42.91

27,382

2011

August 2014

€41.73

44,932

2012

April 2015

€29.18

161,754

2013

April 2016

€22.84

248,688

The blocking period for the 2009 and 2010 tranches ended in August 2012 and August 2013 respectively. No payouts from this tranches were made to members of the Management Board in the short financial year 2013.

In the short financial year 2013, value changes resulted from the current tranches of share-based remuneration programmes. The company’s expenses amounted to €0.644 million for Mr Koch, €0.391 million for Mr Frese, €0.221 million for Mr Haas, €0.398 million for Mr Hutmacher and €0.523 million for Mr Muller.

Services after the end of employment in the short financial year 2013 (including pension provisions)

In the short financial year 2013, a total of €4.6 million (12M 2012: €5.1 million) was used for remuneration of the active members of the Management Board of METRO AG for benefits to be provided after the end of their employment. Of this total, approximately €0.127 million was allotted to Mr Koch for pension provisions. Mr Frese was allotted approximately €0.098 million, Mr Haas approximately €0.063 million, Mr Hutmacher approximately €0.101 million and Mr Muller approximately €0.032 million.

According to the German Commercial Code, approximately €0.123 million was allotted to Mr Koch for pension provisions. Mr Frese was allotted approximately €0.090 million, Mr Haas approximately €0.084 million, Mr Hutmacher approximately €0.092 million and Mr Muller approximately €0.032 million.

During the short financial year 2013, an agreement was concluded to prematurely terminate the employment contract of Mr Muller, who left the Management Board by mutual agreement as of the close of business on 31 March 2013. A severance package agreement valued at €3.85 million was concluded with Mr Muller for the remainder of his employment contract (1 April 2013 to 31 July 2014). It covers entitlements of Mr Muller and makes allowance for the development of performance- and share-based payment drawing from conservative estimates. In addition, Mr Muller received supplemental benefits totalling €0.29 million for services, expenses in connection with the conclusion of the termination agreement and company pensions. In addition, Mr Muller was granted the tranche from 2013 of the performance share plan with a target value of €1.2 million and a resulting allotment of 52,539 performance shares; the required self-funded investment amounts to €0.4 million. Depending on the company's commercial success, the variable components for the short-term incentive from 1 January 2013 to 31 July 2014 included in the severance payment and the long-term-incentive tranches from 2009 to 2013 may lead to additional compensation: Mr Muller may claim the potential difference between these compensation components, which he would have received as a member of the Management Board, and the severance payment.

Total compensation of former members of the Management Board in the short financial year 2013

Former members of the Management Boards of METRO AG and the companies that were merged into METRO AG as well as their surviving dependants received €7.0 million (12M 2012: €8.3 million). The described benefits for Mr Muller after the end of employment in the short financial year 2013 are included in this figure.

The cash value of provisions for current pensions and pension entitlements amounts to €54.1 million (31/12/2012: €55.1 million).

The corresponding cash value of provisions for current pensions and pension entitlements according to the German Commercial Code amounts to €46.6 million (31/12/2012: €46.7 million).