Corporate Governance

Deviations from the Corporate Governance Code

The reasons why we decided not to adopt certain principles and best-practice provisions in the Corporate Governance Code are explained below.

Board of Management

II.2.1 to II.2.5. TenneT does not operate a system of remuneration in the form of share options because the State of the Netherlands is our sole shareholder.

II.2.6 and III.7.3. TenneT has adopted revised Insider Trader Regulations. Members of the Board of Management and Supervisory Board are not permitted to engage in security transactions involving listed energy companies with which TenneT maintains an active relationship. A set of regulations and a list of excluded companies have been posted on the company's Intranet.

II.2.14. TenneT does not issue share options to its staff.

Supervisory Board

III.2.2. Three of the dependence criteria have not been adopted by TenneT. Two of these criteria concern Supervisory Board members with shareholdings in TenneT (this does not apply to TenneT). The third deals with a Supervisory Board member who has temporarily been charged with managing the company in the event of the Board of Management being unavailable or incapacitated. It is not necessarily the case that such a Supervisory Board member would no longer be independent.

III.4.3. TenneT has decided not to appoint a designated company secretary. Our Legal Affairs department has been entrusted with the responsibilities of such an officer within the meaning of the best-practice provisions for monitoring compliance with the correct procedures and acting in accordance with laws and regulations.

III.5. The Supervisory Board has established an Audit Committee and a Remuneration and Appointments Committee, both made up of Supervisory Board members. Contrary to best-practice provision III.5.11, the Chairman of the Supervisory Board is also Chairman of the Remuneration and Appointments Committee. The Supervisory Board considers this desirable in view of the importance of the Committee.

III.6.4. All shares in TenneT are held by the State of the Netherlands. Consequently, this provision does not apply to TenneT.

III.6.6. No delegated Supervisory Board member is in office at TenneT.

III.6.7. A Supervisory Board member who temporarily takes charge of the company in the event of the unavailability or incapacity of the Board of Management will in principle step down temporarily from the Supervisory Board. On completion of the supervisory director's managerial duties the Supervisory Board and the General Meeting of Shareholders will decide whether he can rejoin the Supervisory Board. The duration of the director's managerial duties may be one of their considerations.

III.7.1 and III.7.2. These provisions deal with shareholdings of Supervisory Board members and do not apply to TenneT.

III.8.1 to III.8.4. These provisions concern single-tier management and do not apply to TenneT as we fall under a statutory two-tier ('structure') regime.

General Meeting of Shareholders

Many of the best-practice provisions pertaining to the General Meeting of Shareholders do not apply to TenneT as it has just one shareholder, has 'structured company' status and is not listed on any stock exchange.

The provisions in question are as follows:

IV.1.1. Non-structure-regime company

IV.1.2. Voting rights in respect of finance preference shares

IV.1.3. Public disclosure of a bid

IV.1.7. Registration date of voting rights

IV.2.1 to IV.2.8. Depositary receipts for shares

IV.3.1 to IV.3.4. Dealings with analysts, financial press and institutional investors

IV.3.7. Shareholder circular

IV.3.9. Protective mechanisms

IV.4.1 to IV.4.3. Responsibility of institutional investors

External auditor

V.3.1. TenneT has decided not to set up a complete internal audit department. However, TenneT does recognise the importance of adequate internal controls and monitoring of processes and procedures. These tasks are partly carried out by an internal audit function as part of the risk management system.

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