Long-term incentive plan: performance shares

These are shares which are granted by the Supervisory Board without financial consideration and which constitute the long-term incentive plan designed for members of the Executive Board.

During the vesting period, the costs of these shares determined according to IFRS are recognised in the profit and loss account as personnel costs.

The actual number of performance shares received by the Executive Board (‘vesting’) depends on the Total Shareholders’ Return (TSR) performance over a prior specified period compared to the TSR performance of a selected peer group. TSR measures the returns received by a shareholder and captures both the change in the Nutreco share price and the value of dividend income and possible share capital reimbursements, based on the assumption that dividends are reinvested in Nutreco shares at the date the shares go ex-dividend or the share capital reimbursement is effectively paid out. Performance shares should be held for a specified (2 years) minimum period from the vesting date or till the end of employment of the member of the Executive Board concerned, whichever is the shortest. The current performance shares plan rules are posted on the Company’s website.

Long-term incentive plan 2007 and following

At the Annual General Meeting of Shareholders of 26 April 2007, a long-term incentive plan for the year 2007 and beyond was approved. The long-term incentive plan is designed to enhance the binding between the Executive Board’s remuneration and the implementation of the Company’s strategy over the longer term. The plan regulations were posted on the Company’s website. The key terms of the approved LTI Plan applying as from 2007 are the following:

1. On an annual basis, performance shares will be granted conditionally. The conditional grant will vest after a three-year performance period.
2. The annualised economic value at the moment of granting represents 85% (2008: 85%) of the base salary of the chairman of the Executive Board, 80% (2008: 80%) of the base salary of the CFO (in 2009 also the COO received this amount) and 50% (2008: n.a.) of the base salary of the Executive Vice-Presidents, members of the Executive Board.
3. The conditional grant will vest after a three-year performance period, subject to whether the Company achieves a preset level of the Total Shareholders’ Return (TSR) relative to a peer group which was proposed to and approved by the General Meeting of Shareholders as consisting of all companies listed on the NYSE Euronext Amsterdam AEX, AMX and AScX segments.
4. No vesting takes place if the TSR achieved during the three-year vesting period is below the median position of the peer group. Vesting of 50% of the grant takes place when the Company’s TSR is at the median position, linearly up to a maximum of 150% of the grant if the Company achieves the number one position within the peer group.
5. A lockup will be effective for a period of two years after vesting, with an allowance to sell shares as from vesting to satisfy taxes due.
6. Participants of the plan are entitled to dividends each year on the number of shares granted but these are only paid out in case of vesting.

In 2009 the number of performance shares conditionally awarded to the Executive Board amounted to 103,900 (2008: 50,000), of which shares granted to the CEO amounted to 32,000 (2008: 21,000), to the CFO and COO to 22,000 (2008: 14,500) and to the Executive Vice-Presidents to 9,300 (2008: n.a.). In addition, a total of 112,400 (2008: 85,700) performance shares were awarded to a number of executives and senior staff of the Company. These performance shares were subject to similar terms and conditions as those applying to the Executive Board, with the exception of the two-year lockup period after vesting which was decided not to apply to non-Executive Board participants. For the 2007 and 2008 performance shares a different method of calculating the Total Shareholder Return for the peer group for participants other than the Executive Board members will be used. As from 2009 for other participants the same method will apply as for Executive Board members. For the 2007 Performance Share Plan, which runs from 1 January 2007 until 31 December 2009, the Total Shareholders Return has resulted in a 22nd position within the ranking of the peer companies. Therefore this ranking will result in a vesting of 82.26% of the initial grant for the members of the Executive Board and of 91.67% for the other participants. Vesting date will be 2 April 2010.

Scenario analysis
The Remuneration Committee, with the assistance of its specialist remuneration consultant, carried out an analysis of the value of the performance shares granted to the members of the Executive Board under different scenarios.

Change of control
It was decided that in case of a change of control situation the Supervisory Board can decide to accelerate the vesting of all granted shares on pro-rata basis and whereby for the calculation of the vesting conditions the last share price that is included will be the closing price of the Nutreco shares at the day before the announcement of a takeover bid.

Clawback
It was decided that, having regard to the precedence of the law over this regulation, the Supervisory Board will have the authority to claim back any variable pay elements that have been paid out on the basis of incorrect financial statements over a time period including a full financial year prior to the financial year in which the cause for this claim presented itself.

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