CORPORATE GOVERNANCE REPORT 2019 CUSTOMER EXCELLENCE CREATING VALUE ADNOC Distribution 2019 Corporate Governance Report | 1 INTRODUCTION At ADNOC Distribution (the Company), we believe that by having a high quality corporate governance framework and complete information transparency, we are better able to promote the long-term sustainable success of ADNOC Distribution, generate value for all stakeholders and contribute to the wider community. Accordingly, we have adopted and implemented a complete corporate governance framework that fulfils all applicable laws and regulations while also being in line with international best practice. This corporate governance framework is designed to ensure that our Company has a culture of consistency, responsibility, accountability and transparency of the highest standards at all levels. Ensuring that our governance processes and procedures are undertaken properly helps to contribute to our long-term sustainable success. Accordingly, we are taking this opportunity to remind you of the comprehensive corporate governance framework that we have adopted and under which we operate. In this report, we will provide you with an overview of our corporate governance processes and report on how these processes have been implemented by us. Dr. Sultan Ahmed Al Jaber Chairman of the Board of Directors CONTENTS 25 March 2020 1 Introduction 2 Our Corporate Governance Overview 4 Share Dealings 5 ADNOC Distribution’s Board of Directors 11 Executive Management 15 Transactions with Related Parties 19 External Auditor Mr. Khaled Salmeen Mr. Jassim Alseddiqi Mr. David-Emmanuel Mr. Ben Hennessy Chairman of the Executive Chairman of the General Counsel* 20 Audit Committee Beau Committee Nomination and Chairman of the Audit 21 Nomination and Remuneration Committee Remuneration Committee Committee 22 Executive Committee 23 Insider Dealing Committee 24 Internal Control System 26 Corporate Social Responsibility 29 General Information * The General Counsel is responsible for and oversees the Company’s internal control function 2 2019 Corporate Governance Report | 3 OUR CORPORATE GOVERNANCE OVERVIEW We are committed to having a corporate governance framework that is compliant WE ARE with all corporate governance requirements that are applicable to public joint stock RESPONSIBLE RESPECTFUL companies in the UAE and that are consistent with international best practices. Below is a brief summary of some of PROGRESSIVE COLLABORATIVE EFFICIENT the key policies that we have implemented and under which we operate. Corporate Governance Dividend Policy Related Party Insider Dealing Policy Compliance avoidance of situations that merely Policy Transactions Policy Investigations Policy have the appearance of a conflict of Our Dividend Policy sets out the clear The requirement to have fair and interest. Under this policy, conflicts of Our Corporate Governance Policy and transparent criteria and method Our Related Party Transaction Policy is transparent dealings in our securities Our commitment to operating with interest must be promptly disclosed provides clear guidance on: (a) the for the distribution of our profits such designed to ensure that: (a) transactions is of paramount importance to us and integrity includes investigating, so that the appropriate course of Company’s corporate governance that the distribution of our profits with related parties are conducted we take a zero tolerance approach where necessary, allegations of action can be taken in order to protect structure and the interface between serves the interests of both ADNOC on arm’s length terms; (b) the Board to any activities which would prevent ethical misconduct. Our Compliance ADNOC Distribution’s interests. the Company and its stakeholders; Distribution and our shareholders. of Directors and senior management this requirement from being properly Investigations Policy and supporting (b) the authorities and decision- are aware of the steps required to implemented.Accordingly, we have procedures set forth our approach making mechanisms within The payment of dividends is subject approve transactions with related implemented an Insider Dealing to investigations relating to alleged Whistleblowing Policy the Company and between its to consideration of: (a) the cash parties; and (c) a legitimate business Policy to ensure that the obligations violations: (a) ethical business practices; stakeholders; and (c) the role and management requirements of the case is present and which supports and responsibilities of our employees, (b) integrity in our interactions and Having an open, honest and responsibilities of the Company’s Company for operating expenses, the relevant related party transactions, officers and directors with respect arrangements with third parties; and (c) transparent culture supports corporate governance function. interest expense, and anticipated including their arm’s length nature. In to dealings in our securities are applicable laws, regulations, policies our commitment to integrity. Our capital expenditures; and (b) market accordance with this policy, we may not clearly defined. In accordance with and procedures relating to ethical Whistleblowing Policy encourages our conditions, the then current operating enter into a related party transaction the Insider Dealing Policy, we have business practices and integrity. This employees to report concerns about Code of Conduct environment in our markets, and unless it has been approved by: (i) established an Insider Dealing policy requires all of our personnel to unethical behavior in connection the outlook for the business of the our Board of Directors, where the Committee to oversee the ongoing cooperate fully and truthfully with all with our business by assuring Our Code of Conduct demonstrates Company. In addition, any level or transaction’s value does not exceed implementation of this policy. investigations and to avoid engaging confidentiality and by protecting good ADNOC Distribution’s commitment payment of dividends will depend on, 5% of the value of our share capital; in certain activities that may hinder or faith whistle-blowers from retaliation, to compliance and ethical behavior in among other things, future profits and or (ii) our shareholders at a General interfere with an investigation. even if they are mistaken. all that it does. Our Code of Conduct the business plan of the Company, at Assembly, where the transaction’s value Anti-Bribery and (a) sets out the minimum standard of the discretion of the Board of Directors. exceeds 5% of our share capital. The Corruption Policy conduct that we expect from anyone foregoing requirements do not apply to Conflicts of Interest working for or on behalf of ADNOC Under our Dividend Policy, the transactions with ADNOC and with other We are committed to doing business Policy Distribution; and (b) provides a set Company may distribute quarterly, ADNOC group companies. lawfully, ethically and with integrity, of basic rules and standards that are semi-annual and/or annual dividends and we expect all of our employees We understand that our employees, designed to ensure that our business to shareholders from operating profits However, for so long as ADNOC owns and representatives to act accordingly. officers and directors will engage is conducted in an ethical and and/or accumulated profits of the more than 50% of our shares, we may Consistent with this commitment, in legitimate social, financial and compliant manner and in accordance Company. The Company currently not enter into transactions with ADNOC we take a zero tolerance approach business activities outside the scope with our core values. intends to pay a dividend twice each or other ADNOC group companies to fraud, bribery and all other forms of their work for us. Our Conflicts fiscal year, with an initial interim unless such transactions have been of corruption. Our Anti-Bribery and of Interest Policy sets forth our payment in October of that year and approved by our Board of Directors, Corruption Policy sets forth our requirements for the avoidance a second payment in April of the including a majority of the independent requirements to ensure that none of and management of conflicts of following year. members of the Board of Directors. our employees or representatives interest that may arise as a result of engage in any of these activities. these other activities, including the 4 2019 Corporate Governance Report | 5 SHARE ADNOC DISTRIBUTION’S DEALINGS BOARD OF DIRECTORS Purchases and sales of our It is the policy of ADNOC Distribution that apply to inside information and shares and other transactions that inside information must not be dealings in ADNOC Distribution’s involving our securities by used by any of our employees, officers securities. or directors for personal gain. ADNOC employees, officers and Distribution expects that all of its The following table sets forth the directors are governed by our people, as well as the other persons details of all purchases and sales Insider Dealing Policy. with whom ADNOC Distribution of our shares undertaken by our transacts, abide by this policy, and in Directors, their spouses and their doing so adhere to applicable laws children in 2019: Our Board of Directors comprises seven Directors. All Directors are non-executive Shares held as at Total Sale Total Purchase Director Position 31 December 2019 Transactions Transactions directors, with three of our Directors being independent within the meaning of Resolution No. (7/R.M) of 2016 of the Securities and Commodities