Fortis and the Tabaksblat Code

We have amended Fortis’s existing internal regulations on insider trading – which also extend to Fortis directors – in response to statutory requirements and best practices in Belgium and the Netherlands. In line with Best Practice provision II.2.6, the Fortis Governance Statement includes a Policy Statement summarising the principles and guidelines on the use of inside information and private investments to be adhered to by all Board members, senior managers, officers and employees worldwide. Detailed internal regulations have been, or are being, developed to ensure compliance with prevailing legislation, regulations and business best practices. As these regulations are numerous and tailored to highly specific local or business requirements, they are not published on the company website.

Bearing in mind the points expressed above, we hereby declare that Fortis has complied with the principles and best practice provisions of the Tabaksblat Code, subject to the qualifications and exceptions mentioned hereafter.

Qualifications

Our aim at Fortis is to comply with the Tabaksblat Code to the maximum possible extent. We cannot, however, meet all of the Code’s provisions. Some of them conflict with the internal coherence of our governance structure, which has been carefully developed over the years to meet the challenges facing a binational group. What’s more, our single-tier board structure creates a specific framework that is not customary in the Netherlands and which did not function as the primary frame of reference for the drafting of the Tabaksblat Code.

When applying the Code, therefore, we have been obliged to translate the various provisions to fit our single-tier structure. Provisions aimed at the Supervisory Board or the Management Board have thus been applied to Fortis’s Board of Directors, while provisions for individual members of the Supervisory Board have been applied to our non-executive directors and provisions for individual members of the Management Board to Fortis’s CEO.

A number of provisions could not, however, be translated to the Fortis context. These include the rules regarding a ‘delegated supervisory board member’ and a ‘supervisory board member who temporarily takes on the management of the company’ (III.6.6 and III.6.7 of the Tabaksblat Code respectively): these provisions are geared specifically to supervisory board members and the supervisory tasks they have to perform, and so cannot be reconciled with the singletier board model.

Similarly, the provision that the Chairman of the Board shall not have held an executive position within the company (III.8.1) is an anomaly in the context of a single-tier Board model, as the essence of that system is precisely to combine the expertise of executives and non-executives in one and the same decision-making body. Fortis’s Chairman and co-founder, Maurice Lippens, was co-chairman of the Board and of the Executive Committee until 2000. Since 2000, he has been a non-executive Board member and Chairman of the Board.

Several provisions of the Tabaksblat Code do not, moreover, apply to Fortis. This is the case with the following sections: II.2.1 (share options as a conditional remuneration component for management board members – Fortis does not offer such options), III.2.1 (all supervisory board members, with the exception of not more than one person, shall be independent – III.8.4 sets out the rule as it applies to Fortis), IV.1.2 (voting right on financing preference shares – Fortis does not have this type of preference share) and IV.2–IV.2.8 (depositary receipts for shares – Fortis does not issue this type of depositary receipt). The aforementioned provisions have not, therefore, been taken into consideration.

Regarding section III.3.5, the view has been taken that Fortis’s rule to the effect that a person may not serve as a director for more than twelve years, with each individual term not exceeding four years, does not materially deviate from the Code’s requirement of a maximum of three terms of four years each.

Finally, the provisions regarding the ‘remuneration committee’ and the ‘selection and appointment committee’ have been interpreted as applying to our Nomination and Remuneration Committee, since this body brings together the strongly interrelated selection, appointment and remuneration functions at Fortis.

Exceptions

(‘BP’ refers to the ‘Best Practice’ sections of the Tabaksblat Code)

• BP II.I.6: The management board shall ensure that employees have the possibility of reporting alleged irregularities of a general, operational and financial nature in the company to the chairman of the management board or to an official designated by him, without jeopardising their legal position. Alleged irregularities concerning the functioning of management board members shall be reported to the chairman of the supervisory board.
• Fortis has introduced a whistleblower procedure (Fortis Internal Alert System), but this has not been published on the website. The procedure is intended solely for Fortis employees; external publication would not enhance its effectiveness, but could have undesirable repercussions in countries where procedures of this nature run up against legal and/or cultural objections.
  
• BP II.2.3: Shares granted to management board members without financial consideration shall be retained for a period of at least five years or until at least the end of the employment, if this period is shorter.
• Under the long-term incentive plan, shares can be awarded only to the CEO. He may sell up to 50% of the shares in order to pay the tax incurred on them. The remaining shares may not be sold until six months after his relationship with Fortis has terminated.
  
• BP III.1.7: The supervisory board shall discuss at least once a year on its own, i.e. without the management board being present, both its own functioning and that of its individual members.
• Fortis’s Board of Directors regularly reviews its own performance in an appropriate manner, but not necessarily on an annual basis. The Nomination and Remuneration Committee evaluates the individual board members.
  
• BP III.5.11: The remuneration committee shall not be chaired by the chairman of the supervisory board or by a former member of the management board of the company, or by a supervisory board member who is a member of the management board of another listed company.
• The Chairman of the Board of Directors at Fortis is responsible for the proper functioning of the Board and for initiating all processes relating to this. These include ensuring a Board line-up that is geared to the needs of the organisation and also entails a leading role within the Nomination and Remuneration Committee.