Rights of Shareholders

The rights of shareholders is of paramount importance in the Company’s By-Laws, Code of Ethics and Manual.  The goal is to ensure the protection of shareholder interest and concerns through the free exercise of shareholder rights.  Among the rights of these shareholders, regardless of the number of shares they own, are to receive notices of and to attend shareholders’ meetings, to participate and vote on the basis of the one-share, one-vote policy, nominate and elect Board members (including cumulative voting), inspect corporate books and records, vote in person or in absentia through proxy, receive dividends, and ratify corporate actions.

The Company believes that the rights and interests of minority shareholders are aligned to those of the controlling shareholders, not only in terms of returns on their investments, but also in the sustainability of the Group’s businesses.  The Company ensures timely disclosures to shareholders regarding their respective businesses, and that shareholders receive dividends in accordance with established dividend policies.

The Board Secretariat has adopted certified Board protocols and procedures under the ISO 9001:2015 Management Board and System to ensure the effectiveness of Board and shareholders’ commitments.  This includes coordination with stock transfer agents to ensure appropriate responses to and timely resolution of shareholders’ queries and requests.

Basic Shareholders’ Rights

The Company promotes basic shareholders’ rights by adopting clear and transparent policies which may be found in the Company’s Manual.

Right to Receive Dividends      

During the regular board meeting of the Company held on November 28, 2012, the Board approved a revised dividend policy consisting of an annual cash dividend payment ratio of 50% of its consolidated net income from the previous fiscal year based on the audited financial statements of the Company. The policy changed the previous cash dividend payment ratio of 33% of previous year’s net profits. The Company’s current dividend policy has been in effect since 2013. There are no restrictions that limit the payment of dividends on common shares to stockholders of records as of March 21, 2019.

This is disclosed in the Operational and Financial Information section of the  Annual Report, the Definitive Information Statement, Report of the CFO, and disclosures on the Company website.

The Company pays annual dividends to its shareholders in an equitable and timely manner.  All shareholders are treated equally, receiving an amount of dividends per share that is proportionate to their shareholdings.  The period for payment of dividends is based on the disclosure and trading requirements of the SEC and PSE.

All acts of the board of Directors, corporate officers and management in the previous year up to the date of ASM is duly disclosed with the SEC, the PSE and PDEX, including the declaration of the annual cash dividend.  These acts are submitted to the shareholders for ratification in the interest of transparency and as a matter of customary practice or procedure, undertaken at every annual meeting of the shareholders.

The Company has paid dividends in the following amounts for the last five years within 30 business days from its declaration date pursuant to existing best practices:

Right to Participate in Fundamental Corporate Changes

The Company recognizes and upholds the importance of a genuine exercise of shareholders’ rights in decisions concerning fundamental corporate changes as required for by existing law and regulation and by tis corporate covenants under its Articles of Incorporation, By-Laws, and the Company’s Manual.

Foremost among corporate governance principles established by the Company is its assurance that shareholders enjoy all the rights granted by the Corporation Code of the Philippines.  The Board and management team ensures the promotion of these rights and have been mandated to institute remedial measures to swiftly address any violation or transgressions.

Effective Participation in Shareholders’ Meetings          

The Company strives to maintain a transparent and fair conduct of its Annual and Special Shareholders’ Meetings and ensures that accurate and timely information are available to the shareholders to enable them to make a sound judgment on    all matters brought to their attention for consideration or approval. The Definitive Information Statement and the Aboitiz Integrated Annual Report, distributed prior to and during the ASM, include the highlights and summary of the financial condition of the Company. The Definitive Information Statement filed with the PSE, PDEx and SEC

is prepared with the objective of providing full and accurate information enabling stakeholders to make informed decisions. Shareholders are provided with individual profiles of new and returning directors, as well as a summary of the Board meeting attendance and performance record of its directors. Agenda items are included in the notices with a corresponding rationale.

Approval of Directors’ Remuneration and Per Diem       

The Company has a policy on transparency of compensation for its Directors and key executives, in accordance with SEC rules. Information on the basis of Board remuneration is readily accessible through the Company’s Annual Report, Annual Corporate Governance Report, Board Corporate Governance Committee minutes and its Company website.

The Board Corporate Governance Committee ensures that the Directors’ and executives’ remuneration are consistent with the Company culture, strategy and business policies at a level sufficient to attract and retain Directors and officers who are needed to run the Company successfully. The Company rewards its individual Directors and Officers based on ability to execute their duties and responsibilities. It is the Company’s philosophy to reward officers and employees based on individual performance measured through established Human Resources management metrics.

The Company ensures that it pays its directors and officers competitively by comparing rates with other Philippine-based companies through market salary surveys. Changes in Board compensation, if any, are recommended by the Board Corporate Governance Committee, approved by the Board and affirmed or voted on by the shareholders in a regular shareholders’ meeting.

All proposed changes in Board remuneration are approved by the shareholders and disclosed to the public in a timely manner through PSE and SEC disclosures and in the  Company’s Annual Report. The Company reviews Board remuneration by benchmarking against other Philippine PLCs. It participates in market surveys for benchmark of board remuneration.

Nominations of Board of Directors and the Right to Elect Directors Individually

The Board has a formal and transparent board nomination and election policy. All shareholders have the right to nominate individually the members of the Board. Nominations for the position of a director are received by the Corporate Secretary in accordance with the Company’s By- Laws and the Guidelines for the Nomination and Election of Independent Directors.

Process Followed in Appointing New Directors

The process of nomination is clearly set out in the Company’s Guidelines for the Constitution of the Nomination Committee and the Nomination and Election of Independent Directors, and Manual.  These are available in the Company’s website at https://aboitizpower.com/wp-content/uploads/AboitizPower-Guidelines-for-the-Nomination-and-Election-of-Independent-Directors__.pdf

The Company also discloses the process of electing regular and independent directors in the Definitive Information Statement, copies of which are distributed to the shareholders and uploaded in the Company’s website at https://aboitizpower.com/wp-content/uploads/AP-SEC-Form-2018-20-IS-Definitive-Information-Statement-for-website.pdf The gist of the nominations guidelines is also broadcast to the shareholders every ASM.

Re-Election of Directors

All directors are elected every year. A Board director holds office for one year until his successor is elected at the next ASM in accordance with the Corporation Code of the Philippines, the Company’s By- Laws and the SEC guidelines. Shareholders may nominate board members individually through the nominations process. At the ASM, and in accordance with the Corporation Code of the Philippines, the Company follows the rule of One-Share, One-Vote. Under this rule, any minority shareholder can influence the board composition by individual nomination and by the power of cumulative voting rights. The right to cumulative voting is a statutory right granted by the Corporation Code of the Philippines.

Directors Selection Database

The Company uses professional search firms, external sources of candidates including director

databases, professional organizations  (whether Philippines or offshore) when searching for candidates for nomination of independent directors. The Company uses all available professional databases and information resources for the selection,  whether through professional search firms or other external sources of candidates.

Disclosure of the ASM Results

Shareholder’s resolutions approved during the ASM are disclosed and made publicly available in the Company’s website on the next working day after the ASM.  

Disclosure of ASM Voting Results and Tabulation Procedures   

The exercise of a shareholder’s voting right is encouraged by the Company to ensure meaningful participation in all shareholders’ meetings.  The Board is committed to removing costs and other administrative or practical impediments to a shareholder’s right to vote.

The counting of the shareholders’ votes is done in accordance with the general provisions of the Corporation Code and the Company’s internal procedures.  The Office of the Corporate Secretary supervises the counting of votes through an electronic platform and through the appointed third party vote canvasser/validator.

Voting methods and vote-counting systems employed by the Company are clearly explained by the Corporate Secretary during the shareholders’ meeting to ensure the effective exercise of shareholders’ right to vote. The Company follows the system of cumulative voting for the election of directors, to allow shareholders an opportunity to elect each member of the Board of Directors individually. The Company adheres to the one-share, one-vote policy for the same class of shares.

The voting methods and vote-counting systems employed by the Company during every shareholders meeting are disclosed in the Definitive Information Statements and clearly explained by the Corporate Secretary to shareholders in attendance to ensure the intelligent exercise of the shareholders’ right to vote.

The Company follows the system of cumulative voting for the election of directors, to allow shareholders an opportunity to elect each member of the Board of Directors individually. Other matters are also decided through voting by shares of stock. The Company adheres to the One-Share, One-Vote policy for the same class of shares. Proxy voting is allowed at all meetings and is facilitated through proxy voting forms. In its regular board meeting last November 12, 2010, the Board of Directors of the Company approved the deletion of the notarization requirement of proxy forms to be used in all shareholders’ meetings of the Company. This is to facilitate easy voting by shareholders, in line with the Company’s efforts to promote shareholder engagement and to improve corporate governance practices. The Company makes the results of the votes publicly available the next working day. The minutes can be accessed at  

https://aboitizpower.com/wp-content/uploads/AP-Minutes-2018-05.21.18-Annual-Stockholders-Meeting-1.pdf

Opportunity to Ask Questions, Questions and Answers Raised During the ASM as Documented in the Minutes of the Meeting

The Office of the Corporate Secretary ensures that all minutes of annual and special meetings of shareholders clearly and satisfactorily reflect all matters taken up during these meetings. All shareholders are encouraged and given the right to participate in the meetings. The opportunity to ask questions or raise issues, the questions, answers, issues and motions raised, the agreements and resolutions arrived at, the corporate acts approved or disapproved, and the voting results are reported in the minutes. The Company also discloses to PSE, PDEx and the SEC all the items approved

at the shareholders’ meeting no later than the next business day. The voting results including quorum and summary of resolutions approved are made publicly available by the next working day through the Company’s website under Investor Relations’ page.

At every ASM, the Company ensures the effective exercise of the rights of its shareholders. There are no barriers or impediments preventing shareholders from consulting or communicating with one another, with the Directors and with the Corporate Secretary. Questions raised during the shareholders’ meeting by the shareholders are minuted or documented.

Attendance of the Board of Directors, Management and Committee Members During the ASM

The Chairman and members of the Board of Directors, the President and Chief Executive Officer, Executive Vice President and Chief Operating Officer, the Chairman of the various Board Committees particularly the Board Audit Committee, and the Company Corporate Secretary all attend the ASM of the Company to answer any questions which shareholders may have concerning the Company. Likewise, the Chairman and all members of the Board of Directors, other key officers and the Company’s auditors are present at the shareholders’ meeting to give shareholders the opportunity to interact with the Board and top management on the current state of the Company’s  business and affairs and to ask any questions from the Directors and Corporate Officers. Shareholders and investors are encouraged to ask the CEO or any officer of the Company any questions they may want clarified.

The minutes of the ASM available in the Company’s website also documents the attendance and participation of the Board of Directors, Management and the members of the different Board committees.

Agenda for the Shareholders’ Meeting Rationale and Explanation of Each Agenda Item

The Company provides at least 28 days prior notice of the meeting and information on all proposed resolutions and rationale thereof with corresponding explanation for each agenda item requiring shareholders’ approval in the notices of the ASM. The Company also publishes notices of the shareholders’ meetings in national newspapers of general circulation.

Each resolution relates to only one agenda item, and a brief rationale or explanation for its inclusion in the ASM is provided. The Company does not include any additional and unannounced agenda item in the ASM if not disclosed prior to the ASM.

Voting by Proxy / Voting in Absentia    

The Shareholders may vote in person or by proxy.  Arrangements for proxy voting or voting in absentia are in line with existing rules and regulations.  The Company provides shareholders with a copy of the Proxy form through the following: (1) printed copy enclosed in the Information Statement; (2) digital copy inserted in the CD kit containing the soft files of the Information Statement; and (3) downloadable form the Company’s website.

Voting by Poll

Voting during the ASM is done by poll, under the supervision of the Company’s Corporate Secretary and Stock and Transfer Agent, and validated by the Proxy Validation Committee and an independent third party inspector of votes engaged specifically for that purpose.  The Secretariat also uses an electronic platform to record the votes.

Appointment of Independent Party Inspector to Validate Vote at the ASM       

During the ASM, the Company engages an independent third part to assist with the validation of proxy and counting of the votes.  For the 2018 ASM, Luis Canete & Co., provided the proxy and vote validation functions.

Appointment of Independent Party in cases of Mergers, Acquisitions or Takeovers        

The Board delegates to Management the power and discretion to engage independent parties to evaluate the fairness of the transaction price for the acquisition or disposal of assets, which will depend on the size of the transaction, the jurisdiction(s) involved, and the availability and capacity of expertise in-house. Depending on the factors mentioned, Management then decides whether to engage an independent party to evaluate the fairness of the transaction price.

The Company has a deep bench of competent investment and finance experts who are capable of evaluating the fairness of the transaction price. The Chief Strategy Officer of the Company has a wealth of experience in management, investment banking, and private equity investing, including almost 38 years of experience in energy markets.

Taking into account the size of the transaction and its overall effect on the Company’s businesses and positions, the entire transaction, including the transaction price, is presented to the Board for approval.

Policies and Practices to Encourage Effective Exercise of Ownership Rights         

The Company strives to maintain a transparent and fair conduct of its annual and special shareholders’ meetings and ensures that accurate and timely information should be made available to the shareholders to enable them to make a sound judgment on all matters brought to their attention for consideration or approval. The Definitive Information Statement and the Aboitiz Integrated Annual Report, distributed prior to and during the ASM and available in the Company’s website, include the highlights and summary of the financial condition of the Company. The Definitive Information Statement filed with the PSE, PDEx and SEC is prepared with the objective of providing full and accurate and truthful information enabling stakeholders to make informed decisions. Shareholders are provided with individual profiles of new and returning directors, as well as a summary of the Board meeting attendance and performance record of its Directors. Agenda items are included in the notices and includes a rationale for each agenda item.

The Company continues to exert efforts to extend the communication channels between the Company and the institutional shareholders through its Investor Relations Office and to the nominee registered shareholders through the PCD Nominee Corporation. The Governance and Compliance team reach  out and provide copies of the notice and agenda of the ASM, sample proxy forms, and the Definitive Information Statement prior to the shareholders’ meeting for dissemination to the brokers to ensure that institutional investors are properly represented during the shareholders’ meeting.

As a matter of policy, the Company does not solicit proxies.