Corporate Governance Framework

Table of content

Introduction p.31.Guidelines p.42.Approachtovoting p.43.Engagement p.64.Shareholderlitigation p.65.Cooperation p.66.Engagementwiththepolicy-makingprocess p.67.Transparency&disclosure Annex1:APGResponsibleInvestmentPolicy p.7 Annex2:APGVotingPolicy p.8 A. Introduction p.9 B. Agendaitemswhicharevotedupon p.10 B1.Board-relatedagendaitems p.11 B2.Audit-relatedagendaitems p.15 B3.Capital-relatedagendaitems p.16 B4.AgendaitemsrelatedtotheStatutesorlegalstructure p.17 B5.Implementingdefencemechanisms p.17 B6.Shareholderproposals p.18 C. Limitationsconcerningtheexerciseofvotingrights p.18 D. Disclosure p.19

APG Corporate Governance Framework 3

Introduction

APGisactiveinthefieldofcorporategovernancebecauseitrecognisesitsrightsandresponsibilitiesasashareholderand(co-)ownerofcompaniesandtheconnectionbetweengoodgovernanceandrisk-adjustedreturns.

APG’sstatementofInvestmentPrinciplesdefineshowitinvests.Ouraimistoenablethepensionfunds,onwhosebehalfweinvest,toprovideaninflation-proofpensionatanaffordablepremium.Ourvisionisexpressedinsixinvestmentprinciplesoneofwhichstates:Weachieveourreturnsinaresponsiblemannerthroughafocusonenvironment,socialpolicyandgoodgovernance.Moreover,byincludingnon-financialfactorsintotheinvestmentprocess,theriskandreturnprofileofourportfoliocanbeimproved.

InthisdocumentwesetoutAPG’sapproachtocorporategovernance.Westartbysettingouttheframeworkforresponsibleownership(Guidelines)andhowthistranslatesintoourownpolicyanditsimplementation(ApproachtoVoting).Fromthisfollowsabriefdiscussionofouractivedialoguewithcompanies(Engagement)andhowweincorporatecorporategovernancewithindamagerecovery(ShareholderLitigation).

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Therighttovoteisanessentialpartofawell-functioningcorporategovernancesystemandAPGthereforeexercisesthisright,whereverpossible,atallcompaniesinwhichitinvests.Votingdecisionsareprimarilybasedoninvestmentconsiderations.

APG’sportfolioisglobalanddiversified.Weinvestinca4000companiesworldwide.Whendecidinghowtovote,APGtakesintoaccountthespecificcontextandmarketinwhichthecompanyisdomiciled.

Theunderlyingprinciplesofthevotingpolicyare:1. Optimisereturnsforshareholders–Themostimportantgoalofacompany,andthereforeofitsdirectors,shouldbetooptimisereturnsforshareholdersinthelongterm,whiletakingdueaccountoftheinterestsofotherstakeholders.2. Accountability–Thedirectorsofacompanymustbeaccountabletoitsshareholders,andalsomakethemselvesavailablefordialoguewithshareholders.3. Transparency–Shareholdersdemandfullandtransparentdisclosurefromcompaniestoenablethemtomakewell-informedinvestmentdecisions,andtoeffectivelyexercisetheirrightsandresponsibilitiesaspartofthecompany’ssystemofchecksandbalances.Companiesmustdiscloseoperational,financialandgovernanceinformationinatimely,completeandcomprehensiblemanner,andinaccordancewithInternationalFinancialReportingStandards(IFRS).Thisalsoappliestoimportantinformationregardingenvironmental,socialandethicalissuesthatareofstrategicrelevancetothecompanybecausetheycouldhaveamaterialimpactonthecompany’slong-termperformance.4. Oneshare,onevote–APGsupportstheprincipleof‘oneshare,onevote’,whichaccordsequalrightstoallshareholders.Whereacompany,forfinancialorlegalreasons,issuesshareswithdifferingrights,thecompanymustdefinetheserightstransparentlyandclearlyexplainwhyrightsarenotequal.5. Informedvotes–Weexpectcompaniestomakeavailabletoshareholderscompletematerialsforgeneral

APG’sresponsibleinvestmentpolicy(seeAnnex1)isbasedontheOECDGuidelinesforMultinationalcompaniesandtheGlobalCorporateGovernancePrinciples(Revised2009)oftheInternationalCorporateGovernanceNetwork(ICGN).WeexpectcompaniestocomplywiththetenPrinciplesoftheUNGlobalCompact.

ThemaingoalsofAPG’sresponsibleinvestmentpolicyare:• tocontributetorisk-adjustedfinancialreturn;• todemonstratesocialresponsibility;• tocontributetotheintegrityoffinancialmarkets

ThroughitscorporategovernanceactivitiesAPGseekstocontributetothesethreegoals,andtoachievethishasdevelopedadedicatedvotingpolicy.

APG’sdedicatedGovernance&SustainabilityTeamcentrallycontrolstheexerciseofallvotingrights.

1. Guidelines 2. Approach to voting

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meetingssufficientlyinadvanceofthemeeting.Thisenablesshareholderstomakewell-informedvotingdecisions.Companiesshouldenableelectronicvoting,andtakeaccountofallvotes,whethercastelectronicallyorinperson,intheirformalvotingresults.Suchrecordsshouldbepublishedindetailonthecompanywebsite.APG’sdetailedvotingpolicy(Annex2)willbereviewedregularlytotakeaccountofchangesinlawsandregulations,marketdevelopmentsandexperiencesgainedduringtheshareholderseason.

APGmakesuseoftheelectronicvotingplatformofaproxyvotingserviceprovider,andalsoprocuresproxyresearchfromdifferentresearchfirmstoinformourownanalysesandvotingdecisions.

APGtakesafocussedapproachtovoting.Themajorityofagendaitemsareroutineanddonotrequirespecialattention.ThereforeweareworkingwithourproxyresearchprovidertoimplementAPG’sdetailedvotingpolicyforthemajorityofcompanymeetings.ThispolicyisbasedonAPG’sgeneralvotingpolicyandtailor-madesothatthevotesarealwaysinlinewithAPG’sownpolicy.Wecanalwaysvotemanuallyandoverrideavoterecommendation.

Forthosecompanieswhichareontheso-calledFullVotingListeachvoteismanuallysubmittedandtheGovernance&Sustainabilityteamconsultswithportfoliomanagers,thecompanyandotherinvestorswhereappropriate.

APGfocusesonaselectnumberofcompanies:

• AllDutchcompanies,and• thosewhereweholdasignificantstake,and/or• haveasignificanteconomicexposure,and/or• requirespecialattentionforotherreasons.

Manycompaniesareheldinmorethanonefundwithinourportfolio.Wehavecentralisedvotingactivitiesin-housetoensurethatvotesareconsistent

acrossallfundsinordertosendonesinglemessagetocompanies.APGactivelyseeksinputfromexternalmanagerswhenvotinginmarketswheretheyhavespecialistexpertise.

Itisunrealistictoattendallshareholdermeetingsworldwide,butelectronicvotingallowsustoexerciseourvotingrightswhereverweinvest.Inmarketswhereelectronicvotingisnotproperlyfacilitatedweactivelyencouragecompaniesandpolicymakerstorectifythis.IntheNetherlandsAPGmayattendgeneralmeetingsofcompanieseitherinpersonorbyproxyinco-operationwithEumedion,theDutchCorporateGovernanceOrganisation,anditsinvestormembers.

Impediments to voting Thereareimpedimentstoexercisingourvotingrightswhichweactivelyseektoaddress.Thisincludesthepracticeofshareblockingincertainmarketswherebyonecannottradeincompanyshareswhenvoting,orcumbersomesharere-registrationprocedures.APGhasbeenengagingwithcompanies,investorsandpolicymakersaliketochangethisandasaresultwefacethisissuelessfrequently.

Theproxyvotingchaincanbeoptimisedfurther.Todatewecannotalwaysbesurethatourvotereachesthecompanycorrectlyorindeedatall.APGisactivelyworkingwithcustodians,companiesandinvestors,aswellaspolicymakers,toaddresstheseshortcomings.

Stocklending Stocklendingcanbeimportanttoensuresufficientmarketliquidity.ForthecompaniesonourFullVotingListwewillalwaysvoteallsharesthatweownandrecallanythathavebeenlentout.Forallothercompanieswewillhaveatleast20%ofthesharesheldavailableforvoting.WewillalsorecallsharesformeetingsnotcoveredbytheFullVotingListifcircumstancessorequire.APGsupportsthepolicyoftheICGNregardingsharelending.

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concerne.g.fraud,deceit,misrepresentation,disregardofdisclosureobligationsandbreachoffiduciaryduties.IncaseswhereAPGhassufferedandhasaclaimthatrepresentsacertainvalue,andifwithinitspowers,APGwilltakereasonablestepstopursueandrealizesuchaclaimandthusrecoverdamagessuffered.

Wherepossibleandappropriate,APGwillseektointroducecorporategovernancereforms,andundercertaincircumstancesmaytakeanactiveroleinasecuritiescaseasameanstoimprovecorporategovernanceatacompanyinvolvedinlitigation.Corporategovernancereformscanthusbemadepartofasettlement.

5. Cooperation

APGispartofvariousinvestornetworkssuchastheInternationalCorporateGovernanceNetwork(ICGN),theGlobalInternationalGovernanceNetwork(GIGN),EumedionandtheUNPrinciplesforResponsibleInvestment(UNPRI).Wetakeanactiveroleinthesenetworks,forexamplebyservingonvariouscommittees.Whereappropriatewecooperatewithotherinvestorsindialogueswithcompaniesandregulators.

6. Engagement with the policy-making process

Throughourmembershiporganisationsandalsoinourowncapacity,APGcontributestothedevelopmentofthepolicyandregulatoryframework.Improvingtheintegrityoffinancialmarketsisoneofthestatedgoalsofourresponsibleinvestmentpolicy,becausebroadmarketorregulatoryfailurescanhaveasignificantimpactonourassetallocationandinvestments.

APGbelievesinthevaluethatanactivedialoguewithinvesteecompaniescanbringtotheinvestmentprocess.Ourengagementwithcompaniesencompassesenvironmental,socialandgovernance(ESG)issues.Companiesneedtobeabletodemonstratethattheyhaveappropriatecorporategovernancepoliciesandsystemsinplacethatalsocapturestrategicallyrelevantsustainabilityrisksandopportunities.Engagementwithcompaniescanbetriggeredbyvotingdecisionsandrelatedmatters,oritcanbepartofanongoingdialogueinordertocloselymonitorourinvestments.InlinewithourresponsibleinvestmentpolicywemaydecidetoexcludecompaniesthatareinbreachoftheUNGlobalCompactprinciplesanddonotimprovefollowingengagement.

APGprocuresgovernanceresearchthatisnotrelatedtogeneralmeetingsbutprovidesinsightonthegeneralgovernanceofacompany.Thiscanbeusefulforinvestment-relatedresearchandengagement.Corporategovernanceengagementwithcompaniesfocusesprimarilyonminorityshareholderrights,boardcompositionandremuneration,aswellasriskmanagement.

Inmarketswherelegalprovisionsareinplaceforinvestorstoproposeaslateofboardcandidates(e.g.Italy)ortakeaseatontheboardnominationcommittee(e.g.Sweden),wemakeactiveuseofthisrightwhereappropriate.

Insider knowledge APGtriestopreventreceivinginsiderinformationbyallmeans,unlessinrarecaseswhereonehasspecificallyagreedtobeingmadeaninsider.OurCodeofConductclearlystatethatemployeesmustnotmakeuseofinsiderknowledgeordisseminatethisinformationfurther,andmustreportanypotentialcaseofinsiderinformationimmediatelytocompliance.Employeesarenotallowedtotradebasedoninsiderinformation.

Globally,lawsuitsmaybefiledagainstcompaniesforallegedviolationsofsecuritieslaws.Theselawsuitsmay

3. Engagement 4. Shareholder litigation

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APGiscommittedtobeingtransparentandaccountable.Wepublishthisvotingpolicyandhowwehavevotedatallcompaniesonourwebsiteassoonaspossibleafterthegeneralmeeting.OnanannualbasiswereportaboutourdetailedcorporategovernanceandsustainabilityactivitiesinourResponsibleInvestmentReport.

Annex 1

APG Responsible Investment Policy

1. ResponsibleinvestmentisintegratedintoAPG’s investmentprocess.

Wetakeaccountofshareholderrightsandenvironmentalandsocialissuesinourinvestmentdecisions.Ourresearchonsustainabilityorcorporategovernancecanformthebasisfordecisionsnottomakeaninvestment,tosellaninvestment,ortoreduceorincreasethesizeofaninvestment.

2. APGengageswithcompaniestopromotesustainabilityandgoodcorporategovernance.

Inourdialoguewithcompanieswemakeclearwhatstandardsweexpectinrelationtosustainabilityandshareholderrights.Toincreaseourinfluenceweoftenworkwithotherinvestors.

3. APGexpectscompaniestooperateinaccordancewiththeUNGlobalCompactandwilldivestfromcompaniesifengagementdoesnotleadtoimprovement.APGdoesnotinvestinproductsthatareprohibitedunderDutchorinternationallaw.

Thismeanswedonotinvestincompaniesthataredirectlyinvolvedintheproductionoflandmines,clustermunitionsorlaunchsystemsfortheseweapons,orofchemicalorbiologicalweapons.WealsoexcludecompaniesinvolvedinproductsorservicesthataregenerallyconsideredintheNetherlandstobeobjectionable.TheUNGlobalCompactsetsout

aminimumframeworkofstandardsforcorporatepracticeonhumanrights,labourrights,theenvironmentandthepreventionofcorruption.

4. APGdoesnotinvestinsovereignbondsissuedbycountriesthataresubjecttoanarmsembargobytheUNSecurityCouncil.

Theseembargoesareenforcementmeasurestocondemnviolationsofinternationallaworhumanrights.

5.APGmakesactiveuseofitsrightsasashareholder.

Wevoteatthemeetingsofcompaniesinwhichweinvest.Wepublishourvotingrecordandexplainourvotingdecisions.

6.APGworksintheNetherlandsandinternationallytoadvocatepolicyandlegislationthatsupportsustainabilityandgoodcorporategovernance.

Weregularlydiscusssustainabilityandshareholderrightswithpolicy-makers.Wealsocontributetothedevelopmentofstandardstopromotethelong-termintegrityoffinancialmarkets.

7.APGseeksoutattractiveinvestmentsthatpromotesustainability.

APGinvestsinrenewableenergy,cleantechnologyandmicrofinanceandisconstantlyalerttonewopportunitiestomakeinvestmentsthatcontributetosustainability.

8.APGpromotesitsresponsibleinvestmentapproachactivelyinordertoencouragesustainabilityandgoodcorporategovernance.

Weworkwithotherinvestmentmanagersandpensionfundsthroughouttheworldinordertoincreasetheimpactofourresponsibleinvestmentpolicyonbehalfofourclients.WeplayanactivepartinnumerousinvestornetworksintheNetherlandsandinternationally.Wecommunicateextensivelyaboutourwork.

7. Transparency & disclosure

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Theobjectiveofcompaniesistogeneratesustainableshareholdervalueoverthelongterm.Sustainabilityimpliesthatthecompanymustmanageeffectivelythegovernance,socialandenvironmentalaspectsofitsactivitiesaswellasthefinancial.Eachcompanyneedsovertimetogenerateareturnonthecapitalinvestedinitoverandabovethecostofthatcapital.[...]

Shareholdersshouldactinaresponsiblewayalignedwiththecompany’sobjectiveoflong-termvaluecreation.Institutionalshareholdersmustrecognisetheirresponsibilitytogeneratelongtermvalueonbehalfoftheirbeneficiaries,thesaversandpensionersforwhomtheyareultimatelyworking.

ICGN Global Corporate Governance Principles: Revised (2009)

Annex 2

APG Voting Policy

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A. Introduction

ThisvotingpolicyshouldbereadinconjunctionwiththeAPGCorporateGovernanceFrameworkandtheAPGResponsibleInvestmentPolicywhichsettheframeworkforthisvotingpolicy.Thispolicyappliestolistedequities.APGalsovotesrelevantnoteholdermeetings.Corporategovernancepertainstothewayacompanyisrun.APGregardsgoodcorporategovernanceasbeneficialtothecompanyingeneratingvalueforitsshareholdersinasustainableway,alsotakingdueaccountoftheinterestsofotherstakeholders.Therighttovoteisanessentialpartofawell-functioningcorporategovernancesystemandAPGthereforeexercisesthisright,wherepossible,atcompaniesinwhichitinvests.ThisdocumentdescribestheframeworkthatAPGuseswhenexercisingitsvotingrightsatshareholdermeetingsworldwide.WhendecidinghowtovoteAPGtakesintoaccountthespecificcontextandmarketinwhichthecompanyoperates,suchastheprovisionsassetoutinnationalcorporategovernancecodesaswellaslocallawsandregulations.APGexpectscompaniestooperateinaccordancewiththebestpracticeprovisionsandrecommendationsoftheOrganisationforEconomicCooperationandDevelopment(OECD)formultinationalcompanies,theGlobalCorporateGovernancePrinciplesRevised(2009)oftheInternationalCorporateGovernanceNetwork(ICGN)andthetenprinciplesoftheUnitedNationsGlobalCompact.Votingdecisionsareprimarilybasedoninvestmentconsiderations,inconsultationwithcompanies,internalandexternalportfoliomanagersandotherinstitutionalinvestorstoinformourvotingdecisions.Wealsousetheservicesofspecialistproxyvotingfirmstosupportthevotingprocess.APG’svotingpolicywillbereviewedregularlyonthebasisofchangesinlawsandregulations,marketdevelopmentsandexperiencegainedduringtheshareholderseason.

Underlying principles of the voting policy

1. Optimisingreturnsforshareholders–Themostimportantgoalofacompanyandthereforeofitsdirectorsshouldbetooptimisereturnsforshareholdersinthelongterm,whiletakingdueaccountoftheinterestsofotherstakeholders.2. Accountability–Thedirectorsofacompanymustbeaccountabletoitsshareholders,andalsomakethemselvesavailablefordialoguewithshareholders.3. Transparency–Shareholdersdemandfullandtransparentdisclosurefromcompaniestoenablethemtomakewell-informedinvestmentdecisions,andtoexerciseeffectivelytheirrightsandresponsibilitiesaspartofthecompany’ssystemofchecksandbalances.Companiesmustdiscloseoperational,financialandgovernanceinformationinatimely,completeandcomprehensiblemanner,andinaccordancewithInternationalFinancialReportingStandards(IFRS).Thisalsoappliestoimportantinformationregardingenvironmental,socialandethicalissuesthatareofstrategicrelevancetothecompanybecausetheycouldhaveamaterialimpactonthecompany’slong-termperformance.4. Oneshare,onevote–APGsupportstheprincipleof‘oneshare,onevote’,whichaccordsequalrightstoallshareholders.Whereacompanyforfinancialorlegalreasonsissuesshareswithdifferingrights,thecompanymustdefinetheserightstransparentlyandclearlyexplainwhyrightsarenotequal.5. Informedvotes–Weexpectcompaniestomakeavailabletoshareholderscompletematerialsforgeneralmeetingssufficientlyinadvanceofthemeeting.Thisenablesshareholderstomakewell-informedvotingdecisions.Companiesshouldenableelectronicvoting,andtakeaccountofallvotes,whethercastelectronicallyorinperson,intheirformalvotingresults.Suchrecordsshouldbepublishedindetailonthecompanywebsite.

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Thevotingpolicysetoutinthisdocumentservesasaframeworkforexercisingvotingrightsatshareholdermeetings.Theproposalsonthemeetingagendaareassessedonacase-by-casebasis,takingtheprincipleslaidoutaboveasastartingpoint.WhereAPGhasseriousconcernsoverthesustainabilityperformanceofacompanyitmayexpressitsdiscontentbynotsupportingroutineagendaitems,suchastheAnnualReport&Accountsortheelectionofdirectors.

ThisdocumentdescribestheAPGvotingpolicyregardingthemostcommonlyoccurringagendaitems,asfollows:

1. Board-relatedagendaitems2. Audit-relatedagendaitems3. Capital-relatedagendaitems4. Agendaitemsrelatingtothestatutesandlegal structureofthecompany5. Anti-takeoverdefencemechanisms6. Proposalsbyshareholders

B. Agenda items which are voted upon

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Director Election Weexpectdirectorstoreceiveregulartrainingandtostandforre-electionatregularintervalsandatleasteveryfouryears.Independentdirectorswhohaveservedformorethan12yearsshouldpreferablystandforannualre-election.

Cumulativevotingallowsshareholderstocastalltheirvotesforonedirector.Wemaymakeuseofthispracticeinordertoaddminority,dissidentornewindependentvoicestotheboardwherewebelievethistobeintheinterestofthecompanyanditsshareholders.Inprinciplewefavourmajorityvoting.

Independence of directorsThepositionsofchairmanandchiefexecutiveshouldbeseparatetoavoidaconcentrationofpowerandbecausetherolesrequiredifferentskills.

Thechairmanshouldbeindependentatthetimeofappointment.

Aformerexecutivedirectorshouldnot,intheopinionofAPG,beallowedtobecomechairmanofthesupervisoryboard,exceptinexceptionalcircumstances.

TheunitaryBoardshouldbemainlycomposedofnon-executivedirectors,andamajorityofthenon-executivedirectorsshouldbeindependent.Thesupervisoryboardofacompanywithtwogoverningbodiesshouldbecomposedofnon-executivedirectorsonly,ofwhichthemajorityshouldbeindependent.

Ifthecompanyhasamajorityshareholder,themajorityofnon-executivedirectorsshouldbeindependentofthemajorityshareholder(s)inordertoprotecttheinterestsofminorityshareholders.

APGusestheguidelinessetoutinarticle2.4.3.oftheICGNGlobalCorporateGovernancePrinciplesRevised(2009)asastartingpointtoassesstheindependenceofanon-executivedirector.

1.1 Appointment of executive and non-executive directors

Indifferentjurisdictionsdifferentboardstructuresareprevalent.Theprincipalonesaretheunitaryboardcomposedofbothexecutiveandnon-executivedirectors,andthetwo-tierboardstructurecomprisinganon-executivesupervisoryboardandanexecutivemanagementboard.Thefollowingprinciplesapplyregardlessofthestructureinplace:welookforawell-balancedboardthatcanrunthecompanyeffectivelyinthelong-terminterestofitsshareholdersandtakedueaccountoftheinterestsofotherstakeholders.Weexpecttheboardtohaveanappropriatebalancebetweenexecutivesandnon-executives,andwhileweexpectthatamajorityofnon-executivesbeindependent,werecognisethatconnectedexecutivescanbringvaluetotheboard.However,weexpectacompanytoprovideappropriatejustificationswherenon-independentdirectorsconstituteamajority.

The(supervisory)boardisresponsibleforsettingcompanystrategy,withinputfromtheexecutives,andtheCEOisresponsibleforimplementingitwithhis/herexecutiveteam.Thenon-executivedirectorsshouldexerciseoversightovertheexecutivesandbringafreshexternalperspectivetotheboard’sdiscussiononcompanystrategy.

Composition of the boardItisessentialthatindividualdirectorsandtheboardasawholehavetheskills,expertiseandcompetenciesthatareneededtocreatevalueforthecompanyandshareholdersinasustainableway,i.e.alsoaddressingstrategicenvironmentalandsocialissues.Theboardshouldrecruitfromthegreatestpooloftalentandstrivefordiversityinordertobeabletofulfilitsrolestrategically.Theboardshouldregularlyevaluateitsownperformancetoidentifyareasforpotentialimprovement.Somecompaniesfinditusefultoinvolveexternaladvisorsinthisprocessatregularintervals.

B1. Board-related agenda items

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• Isthereafamilyrelationshipbetweenthenon- executivedirectorandoneormoremembersofthe seniormanagementofthecompany?• Isthereanexistingbusinessand/orfinancial relationshipbetweenthecompanyandthenon- executivedirectorwhichcouldinfluencethelatter’s independence?• Doesthetermofofficeofanindependentnon- executivedirectorexceedthemaximumtermsetout intherespectivecorporategovernancecodeor12 years?• Aretheredirectbusinesstiesbetweenacompany anditsdirectors?Ifthereisasubstantialbusiness relationshipbetweenacompanyandoneofitsnon- executivedirectors,wedonotregardthisdirectoras independent;• Isthenon-executiveentitledtoperformance-related pay?• Arethereanypotentialconflictsofinterestthrough cross-directorshipsordirectorshipsincloselyrelated industries?• Isaproposedsupervisoryboardmemberaformer employeeofthesamecompany?Wewould normallyexpectthatacertainperiodoftimehas elapsedbetweenapersonresigningfroman executiveroleandjoiningthesupervisoryboardof thesamecompany.

Board committeesWeexpecttheunitaryboard,orthesupervisoryboardinthetwo-tierstructure,tosetupremuneration,nominationandauditcommitteescomposedideallyofindependentdirectorsonly.Thesecommitteesshouldaidthefullboardbymakingrecommendationsonissueswithintheirremit.Whencomposingtheauditcommittee,careshouldbetakenthatatleastoneormorememberspossessrecentandrelevantfinancialexpertiseandknowledgeregardingriskmanagement.

Atlargercompaniesandthoseinhighimpactsectorsinparticular,weexpectthatresponsibilitybeallocatedatboardlevelforrelevantsustainabilityissues.Thiscould

forexamplebeintheformofadedicatedboardmemberoraboardcommittee.

Voting policyAPGwillusuallyvoteinfavouroftheappointmentofcandidateswhoareproposedbythecompanytakingintoaccountthefollowingconsiderations:• Ontheunitaryboard,amajorityofthenon- executivedirectorsshouldbeindependent.Where thisisnotthecase,wemayvoteagainstthere-/ appointmentofanon-independentdirector.• Wherethepositionsofchairmanandchief executivearecombined,wemayvoteagainst there-/appointmentofthechairofthenomination committee,orwheres/heisnotupforelection, againstanothernon-independentdirector.We recognisethatforatransitionperiodtheremaybe goodreasonswhytherolesarecombined,butexpect aclearjustificationwhythisisthecase.• Directorsareexpectedtoattendallboardmeetings inordertoensuretheboardfunctionseffectively. Ifadirectorattendsfewerthan75%ofrelevant meetingsandnoexplanationisgivenforthis absenceintheannualreport,APGwillnotsupport there-/appointment.• Companiesshouldpublishthenamesand curriculavitaeofcandidatesinatimelyfashionso thatshareholderscanmakeaconsidered andinformedvotingdecision,alsowhenvoting electronically.Ifinsufficientornoinformationis availableatthetimeofvoting,APGwillnotsupport theproposedcandidates.• Ifanomineehasbeenconvictedofacrime,APG willvoteagainsthis/herre-/appointment.Iflegal proceedingsaretakenagainstadirectorof acompany,wemaynotsupporthis/herre-/ appointmentasadirectoratthisand/oranother company.• Inprinciple,wetakeintoaccounthis/her performanceatthisand/orothercompanieswhen decidingonthere-/electionofadirector.• Companiesmustaimforcompletetransparency

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regardingthesponsorshipoftheirdirectors’ extracurricularactivities,forexamplethrough charitableorpoliticaldonations.Whereacompany regularlysponsorstheactivitiesofadirector,and/ ordoesnotpublishtheamountsinvolved,APGis concernedthattheindependenceofthedirectorin questionmaybeaffected.Onthesegrounds,APG couldconsidernotsupportingthere-/appointment ofthedirector.• Restatementsoftheannualreportandaccounts raisedoubtsaboutsupervisionandrisk management.Ifamaterialrestatementofthefigures occursthatsuggestsafailureofinternal controls,APGwillvoteagainsttheappointment orre-appointmentofthedirectorsontheaudit committee.Inaddition,weexpectthecompanyto explainthereasonsfortherestatementand,incase ofmajorarestatement,whytheindividualdirectors andthesupervisoryboardasawholedidnotfulfil theiroversightdutiesproperly.• Incountrieswhereshareholdersdonothavethe opportunitytovoteontheremunerationreport andAPGisdissatisfiedwiththeremuneration policy,wemayconsidervotingagainstthe appointmentorre-appointmentofthechairmanof theremunerationcommittee.Ifconcernsregarding thecompany’sremunerationpolicypersistfor severalyears,APGmayalsoconsidervotingagainst theappointmentorre-appointmentoftheother membersoftheremunerationcommittee.

1.2 Granting discharge to directors

Grantingdischargedoesnotnecessarilymeanthatshareholdersapprovethestrategydevisedandimplementedbydirectors.ThelegalimplicationsofgrantingdischargetodirectorsvarybyjurisdictionthroughoutEurope.Ifgrantingdischargewouldhavefar-reachingimplicationsforthelegalpositionofAPGandtherearedoubtsaboutthecompany’sstrategy,APGwillrefrainfromvoting.

Related Party TransactionsTheexistenceofafullyindependentauditcommitteeisofparticularimportancewherecompaniesareinvolvedinrelatedpartytransactionsthatrepresentsignificantriskstominorityshareholders.Suchtransactionsshouldalwaysbecarriedoutatarm’slength,preferablyaftershareholdershavehadtheopportunitytoapprovethem,andbefullydisclosed.

Voting PolicyIftheannualaccountsarenotyetfinal,itisunlikelythatdischargewillbegrantedtothesupervisoryboardmembersandotherdirectors.Wemayalsorefrainfromgrantingdischargeinordertoexpressourdissatisfactionwithaspectsofthecompany’sstrategy.Thisdoesnotnecessarilymeanwedonothavefaithinthemanagementorthesupervisoryboard.

Whendecidingongrantingdischargetosupervisoryboardmembersandotherdirectors,APGalsotakesthefollowingcriteriaintoaccount:• Arethereanylegalproceedingsagainstthecompany oranyofitsdirectors?• Hastheboardadequatelycommunicatedand executedthestrategyforthepreviousfinancialyear, andsetfuturestrategy?• Hastheboardbeenresponsivetoshareholder dialogue?• Hasthecompanybeeninvolvedinrelatedparty transactionstothe(significant)detrimentof minorityshareholders?

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1.3 Remuneration of directors

Remunerationisoneofthetoolstoensurethatmanagementdeliversagainstcompanystrategybydefiningspecifictargets.Theremunerationpolicyshouldbestructuredinawaythatitalignsmanagementandshareholderinterests,reflectstherisksacompanyistakingandstimulatessuperiorperformance.Itshouldcontainfixedandvariableelements,andthelattershouldbebasedonclearperformancetargets.Whenvariableremunerationisawarded,wepreferdirectorstoreceivesharesratherthanoptions.Weexpectthattheboardconsiderswhetheritisappropriatetoincludeotherfactorsthatcanhaveanimpactonlong-termcompanyvalue,suchassustainabilitymatters,andexplainstheconclusionthatithasreached.Allcriteriathatarepartoftheremunerationpolicymustbemeasurable,relevanttothecompanyandtransparent.APGdoesnotsupporttargetslinkedtorankingsinsustainabilityindexes.Weexpectcompaniestohaveclawbackprovisionsinplace.

Theexecutiveremunerationpolicymustbeinlinewiththegeneralremunerationpolicyforallemployeesofthecompany.Thismeans,amongstotherthings,thatifacompanyisforcedbyeconomiccircumstancestofreezeemployeesalaries,thedevelopmentofseniormanagementremunerationshouldshowasimilartrend.

Thecompanyshouldsetoutclearlyinitsannualreportitsapproachtoremuneration,coveringthepolicyanditsstructure,detailsoftargetsandperformanceagainstthosewhenmakingawards.

Voting policyAPGwillgenerallyvoteinfavourofacompany’sremunerationpolicy.Reasonsfornotsupportingtheremunerationpolicyinclude,butarenotlimitedto:• Thecompanydoesnotdiscloseitsremuneration policyinatimelyfashion.• Thepolicydoesnotcontainagoodbalancebetween fixedandvariablecomponents,andbetweenshort

andlong-termincentives;• Thecompanyhasnotsetoutcleartargetsfor determiningthevariablecomponents;• Inmanycases,theremunerationcommitteehas discretionarypowerindeterminingshortand long-termbonuses.Wherediscretionaryjudgment isapplied,thismustbejustifiedinthecompany’s annualreport.Ifwefindthejustification insufficientand/orunconvincing,wemaynot supporttheremunerationpolicy;• Bonuspaymentsappearnottobeinlinewith companyperformance;• Thecompanyrepricesshareoptions;• Severancepayexceedsonetimeannualpay.

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2.1. Annual accounts and the auditor’s report

Theannualreportandaccountsarethemostimportantsourceofinformationforinvestorstogainaclearpictureofacompany’sfinancialperformance.Investorsandshareholdersmustbeabletorelyontheauditor’sreportregardingtheaccuracyandcompletenessofthesereports.

Itisvitalthatinvestorsbeinformedaboutallfactorswhichmaypotentiallyaffectthemanagement,riskprofileandriskmanagementofthecompany.Companiesmustinteraliaprovideclearinsightintocurrentandfuturestrategy;howstrategic,operational,financialandcompliancerisksaremanaged;andhowcompaniesaddresskeysocial,environmentalandethicalissues.Westronglyencouragecompaniestoprovideaninterlinkedaccountofacompany’sfinancial,social,environmentalandgovernanceperformancetargetedatinvestorsandregulators.Inadditionweexpectcompaniestopublishfurtherinformationtosatisfytheneedsofcivilsocietystakeholders.

Companiesshouldavoidmakingdonationstopoliticalpartiesororganisationscloselyassociatedwithpoliticalparties.Inmarketswherethisiscommonpracticeweexpectcompaniestodisclosetheirpolicyandtheamountsinvolved.Charitabledonationscanhelpbuildstakeholderrelationships,butacompanyshouldhaveaclearpolicyinplacetoavoidpotentialconflictsofinterestsandpublishitsdonationrecord.

Voting policyAPGwillusuallyvoteinfavouroftheannualreportandaccountsunless:• Theannualreportandaccountsandtheauditor’s reportarenotavailableatthetimeofvoting;• Theexternalauditordoesnotissueanunqualified auditopinionontheannualresultsortherelevant auditprocedures;• Thereisamaterialrestatementofaccounts.

2.2. Appointment of the auditors

Theauditorsplayanimportantroleinguaranteeingtheintegrityandtransparencyofthefinancialinformationacompanyprovides.Theappointmentoftheauditorsandtheproposalbytheboardtoapprovetheirremunerationarestandarditemsontheagenda.

Voting policyAPGwillgenerallyvoteinfavouroftheappointmentofauditorsandtheproposalthattheboard/supervisoryboarddeterminetheirremunerationunless:

• Thereisseriousdoubtastotheindependence andqualityoftheauditorselectionprocedurebythe supervisoryboard;• Thereis,inthetwo-tierstructure,astrong impressionthatthesupervisoryboardhasleftthe actualselectionofandagreementswiththeauditors tothemanagementboardanditsmembers;• Thereisreasontobelievethattheexplicitwishesof theshareholdersasexpressedtotheaudit committeeregardingtheselectionprocessandthe contentsoftheengagementletterhavebeenignored withoutgoodreason;• Thereisseriousdoubtabouttheveracityofthe financialdatapresentedand/orthequalityofthe auditworkthathasbeenorwillbeperformed;• Thenon-auditrelatedworkbythesameauditfirm costsmorethantheauditfees,whichraises questionsabouttheindependenceoftheauditors andpossibleconflictsofinterests;• Therearedoubtsastothequalityandintegrityof theauditorwhohasbeenengaged(forexampledue toconcernsexpressedbytheregulator);• Theappointmentcarriesexcessiverestrictions regardingthelegalliabilityoftheauditor.

B2. Audit-related agenda items

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3.1 Issuing new shares

Companiesissuenewsharesinordertoraisefreshcapitalfrominvestors.Thismaybeinordertofinancepossibleacquisitionsortoreduceitsdebtposition.Acompanycanissueshareswithorwithoutpreemptionrights.Pre-emptionrightsensurethatthestakesofexistingshareholdersarenotdiluted.

Voting PolicyAPGwillconsiderthefollowingcriteriawhendecidingwhethertoapproveashareissue:

• Authorityanddelegation–APGexpectsanexplanationoftherequesttoissuenewshares.Inaddition,thecompanyshouldexplaintheconditionsandcircumstancesunderwhichthisdelegatedauthoritywillbeexercised.Thisexplanationmustatleastincludethemaximumnumberofsharestobeissued,thedurationoftheauthority,andhowtheexercisepricewillbedetermined.Companiesmustrequestseparateauthoritiesfortheissuanceofdifferentshareclasses.

• Themaximumnumberofsharestobeissuedandthedurationoftheauthority–Permissiontoissueshareswithpre-emptionrightsmayonlybegrantedforupto20%oftheplacedsharecapital.Iftherequestedissueexceeds20%,thecompanymustgiveajustification.Althoughweareawarethatlocallawsandregulationsmaypermitalargerissuance,weexpectcompaniestolimittheirrequests.Thisalsoappliestothetimeperiodforwhichauthorityisrequested.Preferablythisauthorityshouldnotexceed18months,andasamaximum24months.

• Pre-emptionrights–Wherepre-emptionrightsaredisapplied,theauthoritytoissuesharesshouldbelimitedtoamaximumof10%oftheissuedsharecapitalofthecompany.

3.2 Share buybacks

AlthoughAPGisawarethatlocallegislationandregulationmayvary,APGwillnotnormallysupportbuybackprogrammesthatrequestauthoritytopurchasemorethan10%ofissuedshares.

Ifcompaniesrepurchaseshares,theymustensurethatallshareholdersreceiveequalfinancialtreatment.

B3. Capital-related agenda items

APG Corporate Governance Framework 17

Wewillnormallyvoteagainstamendmentsofthestatutesthataimtolimitexistingshareholders’rights.Asarule,weexpecteachamendmenttobesubmittedtoaseparatevote.Wewillinprinciplenotsupportcombinedproposalsifanyoftheindividualamendmentswouldnegativelyaffectourpositionasshareholder(minorityshareholderorotherwise).

Ingeneral,APGwillrejectacompany’srequesttoimplementdefencemechanismsaimedatblockingpossiblechangestothecontrolstructureofthecompany.APGacknowledgesthatadefencemechanismcanbebeneficialforacompanyanditsshareholderswhereitgivesmanagementsometimetoassessdifferentoptions.

Implementingdefencemechanismsmustnotcausetheboardtoneglectthewishesofthemajorityofshareholdersforanunlimitedperiodoftime.Wewillassesseverycaseindividuallyandwillnormallyonlysupportdefencemechanismswherethetimelimit(lessthansixmonths)andthecircumstancesunderwhichadefencemechanismcanbetriggeredareclearlydefined.

Voting PolicyAPGwillingeneralonlyconsenttotheissueofdefensivepreferencesharesiftheyareissued:• Asatemporary,necessaryandproportionate protectionagainstaconcretethreattothecontinuity ofthecompanyoritsstrategy,oraconcretethreat totheinterestsofthecompany,itsshareholders, employeesandotherstakeholdersofthecompany, andaftercarefulconsiderationoftheseinterests;• Toalegalentitywhosemanagementisindependent ofthecompany;• Uptoamaximumnotexceeding100%ofthe nominalamountofalreadyissuedshares;• Withtheaimofgivingtheboardthetimetoenter intoconstructivenegotiationswiththebidder, toexplorepossiblealternatives,toinformthe company’sshareholdersortoprotectthecontinuity ofthecompanyorcompanystrategyandthe interestsmentionedinthefirstpointabove.

B4. Agenda items related to the statutes or legal structure

B5. Implementing defence mechanisms

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APGactivelyvotesonshareholderproposals.Wecarefullyconsidereveryproposalandsupportproposalswebelieveareintheinterestofthecompanyanditsshareholders.

APGsupportsproposalsifwebelievethattheyhelpaddresssignificantsocialandenvironmentalissuesthatcanbematerialtoacompany.APG’sresponsibleinvestmentpolicystipulatesthatweexpectcompaniestoabidebytheprovisionsoftheUnitedNationsGlobalCompactandtheOECDGuidelinesforMultinationalEnterprises.Therefore,APGwillsupportshareholderproposalsaimedatensuringcompaniesoperateinaccordancewiththeseguidelines.Ingeneral,APGsupportsresolutionsthatseektogenerategreatertransparencyandaccountabilityabouthowcompaniesaddresskeyenvironmentalandsocialissues,and/orbringcorporategovernanceintolinewithbestpractices.

B6. Shareholder proposals C. Limitations concerning the exercise of voting rights

Investmentdecisionsandcorporategovernanceinvolveabalancebetweenliquidityandcontrol.

APGstrivestovoteatallgeneralshareholdermeetingsofcompaniesinwhichitownsshares.Thisdoesnotmeanthatwecanalwaysexercisethevotingrightsattachedtoallthesharesweowninacompany.

1. Blocking of sharesIngeneral,APGdoesnotvoteatshareholdermeetingsincountrieswheresharesareblockedduringaperiodoftimearoundthegeneralshareholdersmeeting,exceptforkeylargeholdings.Thisistoavoidliquidityconstraints.APGopposestheblockingofsharesandactivelyengageswithsupervisoryauthoritiesandotherinstitutionalinvestorsintheireffortstoendthepracticeofblockingshares.Webelieveblockingofsharesisdetrimentaltoaneffectiveandliquidmarket.

2. National barriersIncertaincountries,itisdifficultforforeigninvestorstovoteasaresultofproxyvotingrulesorrequirements(ofcompanies)thatsharesberegisteredinordertobeallowedtovote.Insomemarketsitisuncertainwhetherproxyvoteswillbecountedattheshareholdersmeeting.

3. Share lendingAspartofregularbusinessoperations,somesharesmaybelentout.Ifnecessary,wewillrecallthesesharestoexerciseourfullvotingrights.APGalwaysretainsatleast20%ofthetotalholdinginaspecificcompanyforvotingpurposes.APGsupportsthepolicyoftheICGNregardingsharelending.Isthisstilltrue?

APG Corporate Governance Framework 19

APGstrivestobeastransparentaspossibleinitsvotingbehaviour.APGdisclosesallitsholdingsworldwideonaquarterlybasis.AllAPGvotescastatshareholdermeetingsarepublishedonourwebsiteassoonaspossibleaftereachmeeting.InourannualResponsibleInvestmentReportwediscussourvotingandengagementactivitieswithcompaniesandregulatorsinmoredetail.

D. Disclosure

25.16

13.11

A

APG2011

Furtherinformation:APGcorporatecommunicationTel.+31455798100concern.communicatie@apg.nl