Since 2004, listed companies incorporated under Dutch law have been legally required to declare in their annual reports that they have adhered to the Tabaksblat Code, or to explain any instances in which they have deviated from it. Accordingly, Fortis stated in its Annual Reports for 2004, 2005 and 2006 that the principles and best practice provisions of the Tabaksblat Code had been met in those financial years, with certain substantiated exceptions. Fortis’s respective statements were discussed at the Annual General Meetings of Shareholders in May 2005, May 2006 and May 2007.

By re-electing Baron Piet Van Waeyenberge non-executive Board Member for a period of one year (i.e.until the close of the Annual General Meetings of Shareholders in 2008), the Annual General Meetings of Shareholders of May 2007 endorsed the view of the Board of Directors that the re-election of Piet Van Waeyenberge was in Fortis’s interest. The Annual General Meetings of Shareholders thus resolved not to abide by the maximum term of directorship (twelve years) generally recommended by the Tabaksblat Code (Best Practice provision III.3.5). The Annual General Meetings of Shareholders in May 2006 had taken a similar position with regard to the re-election of Klaas Westdijk as non-executive Board Member for a period of three years (i.e. until the close of the Annual General Meetings of Shareholders in 2009).

By electing Herman Verwilst executive Board Member as proposed by the Board of Directors, the Annual General Meetings of Shareholders of May 2007 acknowledged the position taken by the Board that this election would have no effect on the contract concluded (in Belgium) in 1999 between Fortis and Herman Verwilst in his capacity as Executive Manager. This includes the contractual termination indemnity equal to a maximum of three years’ cash compensation (base salary and target annual incentive) in the absence of gross negligence or wilful misconduct, as specified in the proposal to the Annual General Meetings of Shareholders. This termination indemnity exceeds the maximum set by Best Practice provision II.2.7 of the Tabaksblat Code.²

Bearing in mind the points expressed above, we hereby declare that Fortis complied with the principles and best practice provisions of the Tabaksblat Code in 2007 – subject to the following qualifications and exceptions which have remained unchanged since the financial year 2006.

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 bi-national group. What is more, our single-tier board structure creates a specific framework that is not customary in the Netherlands and which did not act as the primary frame of reference when the Tabaksblat Code was drafted.

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 and Deputy CEO.

Some provisions could not, however, be translated into 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’ (respectively III.6.6 and III.6.7 of the Tabaksblat Code). These provisions are geared specifically to supervisory board members and the supervisory tasks they perform, and so cannot be reconciled with the single-tier board model.

Similarly, the provision that the Chairman of the Board should not have held an executive position at the company (III.8.1) is an anomaly in the context of a single-tier board model, the essence of which 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 both the Board and Executive Committee until 2000. Since 2000, he has been a non-executive Board Member and Chairman of the Board. By re-electing Maurice Lippens, the Annual General Meetings of Shareholders in May 2005 endorsed the view of the Board of Directors that the re-election of Fortis Chairman Maurice Lippens for a period of three years (i.e. until the close of the 2008 Annual General Meetings of Shareholders) would be in Fortis’s interest, notwithstanding the maximum term of appointment (twelve years) generally recommended by the Tabaksblat Code (Best Practice provision III.3.5).

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 one person only, must 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). These provisions have not, therefore, been taken into consideration.

With regard to section III.3.5, the view has been taken that Fortis’s rule that nobody may serve as a director for more than twelve years, with no individual term exceeding four years, does not materially deviate from the Code’s requirement of a maximum of three terms of four years each. Lastly, 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 combines the strongly interrelated selection, appointment and remuneration functions at Fortis.

Exceptions ³
BP II.1.6: 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 disclosure 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 executive Board members. They 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 termination of their relationship with Fortis.

BP II.2.6: The Supervisory Board will draw up regulations concerning ownership of and transactions in securities by management board members, other than securities issued by their own company. The regulations are published on the website. The Compliance Officer is notified at least quarterly of private investments in securities of Dutch listed companies.

• As explained to the Annual General Meetings of Shareholders in May 2006, Fortis has drawn up and issued the required regulations on insider trading but contrary to Best Practice II.2.6 these regulations are not published on the Fortis website, since these regulations are numerous and tailored to highly specific local and/or business requirements. In line with the objectives set by the Tabaksblat Code, the Fortis Governance Statement contains a Policy Statement summarising principles and guidelines on the use of inside information and private investments to be adhered to by all Board Members, other senior managers, officers and employees worldwide.

BP III.1.7: The supervisory board shall discuss at least oncea 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 membership that is geared to the needs of the organisation and therefore also entail a leading role in the Nomination and Remuneration Committee.

² Maximum of one year fixed cash, or two years fixed cash if deemed reasonable for Board Members during their first term of appointment.
³ ‘BP’ refers to the ‘Best Practice’ sections of the Tabaksblat Code