Digital Transformation of Corporate GovernanceShareholder Voting and Communication Trends

Increasing Use of Technology

Chris NixonDirector, New Product and Business DevelopmentBroadridge Financial Solutions Internationalp +1-631-254-1899 | Twitter: @NixonProxy

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Questions or comments?

During the presentation please feel free to send questions/comments to:

Chris.Nixon@Broadridge.com

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Global Themes

The world of investor communications is changing faster than ever

CG, ESG and transparency are drivers

Investors recognize the benefits

Shareholder Voting and Communication Trends

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Market Trends

New entrants and increased competition

Proxy processing becoming as important as other corporate actions

Regulation providing opportunities and challenges

Innovative new technology

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Regulatory and Infrastructure Trends

European regulations dominated by SRD 2

APAC adopting best practice regulations from the UK / EMEA

Core capital market infrastructure

investment

Exchange and index dialogue on

governance criteria

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Corporate Governance Trends

Growing demand for proxy services in various markets (EU,

Taiwan, Japan, Australia)

Mid sized asset managers turning away from a passive stewardship

approach

Service providers across the value chain reviewing their

stewardship and governance product portfolios

Increasing Use of Technology

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Framing the Future

Established Ecosystem

Participant

Differentiation

Technological Development

Widespread Adoption

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Artificial Intelligence (AI) and Robotic Process Automation (RPA)

Blockchain/Distributed Ledger Technology (DLT)

Cloud Computing

21 3

Data & Analytics

4

Technological Development

Technological

Innovation

AI/RPA

DLT

Cloud

Data

Virtual Shareholder Meetings

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Overview

• Distinctions and Requirements

– Similar to earnings calls

– Authentication required

– Participation required

– Voting required

• Best practices for VSMs

– Ensure equal access for all participants

– Establish reasonable time guidelines for shareholder questions

– Establish rules for when questions are out of order

– Establish rules to promote transparency

– Post questions received online during the meeting

– Ensure shareholders have access to board members

– Have a technical support line available

– Archive virtual shareholder meetings for future viewing

• Process

Notification

Dialogue

Authentication

Access

Interaction

Voting

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US State of Incorporation Requirements

8 states prohibit any

type of virtual meeting

• Includes New York

42 states allow virtual meetings

• Includes Delaware

• 30 states allow virtual only, 12 additional states allow a hybrid meeting

• ~75% of companies are covered by the states that allow virtual/hybrid meetings

+

-

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over

95%

2017 virtual meetings

approximately

90%

2017 virtual meetings

wereVirtual Only

VSM Usage Trends

Meeting Format

Audio is streamed live over the internet– Generally conducted via phone line– Very similar to an earnings webcast

Video

Audio

Live video streaming– Requires production capabilities including cameras

(Broadridge can supply)

Meeting Types

Stand alone virtual meeting

– All shareholders are directed to a website to attend the meeting

Hybrid

Virtual Only

A combined physical and virtual meeting

– Shareholders can attend in person or online

wereAudio

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VSM Adoption: Overall and Virtual-Only vs. Hybrid

18 1826

3550

86

149

205190

1

1 31

1

3

4

6

7

5

25 10

19 2435 39

2820 161

4

87

75 5

44

4

2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 *2018 *2018Virtual Audio Virtual Video

*2018 Data – January 1 – June 30, 2018

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How It Works – Meeting Set-Up

Virtualshareholdermeeting.com

Today a company publishes their meeting date and time in their proxy statement which is delivered or made available to all shareholders

• The company can substitute a website for a physical address as the meeting location

– A unique control number is provided to each shareholder to use to log into the virtual meeting

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How It Works – Shareholder Login Page

• Broadridge offers an easy single step login process

• Shareholders log in to the virtual meeting using their control number

• Guests can also access the meeting if the company chooses

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How It Works – Shareholder Meeting Page

• Side by side presentation and video

• Easily submit a question

• Easy access to related materials

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How It Works – Meeting Page with Voting

• Shareholders can experience the convenience and ease of real-time voting during a virtual meeting through the VSM platform.

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How It Works – Optimized for all Devices

No matter where your shareholders are, or what device they use, they can easily access your meeting

• View video and list to audio commentary

• Cast votes

• Ask questions

• Access meeting materials

• Whether on a phone, tablet, or personal computer, shareholders, virtual meetings are convenient for shareholders

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How It Works – Administrative Panel

Insight into votes cast in real-time

• Monitor questions as they come in

• Provides attendee profile information

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How It Works – Shareholder Information Display

Post Meeting Reports

• Vote Reports

• Attendee Reports

• List of questions

Distributed Ledger Technology (DLT)

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Current Reconciliation Processes

Current Process vs Blockchain

Cryptographically Immutable Records

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Terminology

Blockchain: a digitized, decentralized, public ledger of related transactions

Distributed Ledger: a type of database spread across multiple sites, regions, or participants; DLT and blockchain are used interchangeably

Bitcoin: a type of cryptocurrency

Public blockchain: a completely open network that anyone can join and participate in

Private/permissioned blockchain: a restricted access network that requires a validated invitation

Cryptographic key: a string of data that is used to lock or unlock cryptographic functions, including authentication, authorization and encryption

Mining: generally the process by which transactions are verified and added to public blockchains

Smart contracts: a computer protocol intended to facilitate, verify, or enforce the negotiation or performance of a contract., they render transactions traceable, transparent, and irreversible.

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Blockchain to the rescue?

Distributed record keeping

Crowd-based (mined) verification

No reconciliation required

No intermediaries

No “double spending”

Full transparency

No business logic

Infrastructure support

Smart contract support

Blockchain required for participation

Processing speeds

Limited demand

Pros Cons

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Blockchain for the Financial Services Industry

Transparency Security/ Privacy Risk Mitigation Cost Reductions

Increased Speed Reach / Ubiquity Ease of Use Auditability

Key Benefits for Financial Services Industry

Key Concerns for Financial Services Industry

Regulatory Environment

Interoperability StandardizationData

Management

Broadridge’s Global Proxy DLT Strategy

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Broadridge DLT-Focused Efforts

Invest in Leading Block Chain Start-ups

Internally Invest Across Numerous Prototypes

Co-innovating with Clients in Specific Areas

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Global Proxy DLT Solution Overview

Participation by All

• Meeting Announcement

• Agenda Distribution

• Entitlement Capture

• Vote Collection

• Vote Execution

• Vote Confirmation

• Meeting Results Distribution

Full Functionality

• Issuers

• Transfer agents/registrars

• Global banks and brokers

• Local subcustodians

• Institutional investors

• Registered shareholders

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Shareholder Rights Directive• Process ‘without delay’• Shareholder identification

Allows regulators to view, audit, and confirm records Stewardship Codes and Access to Data

Record date/entitlement calculation reconciliation Voting Period Extended Blocking/re-registration process facilitated via reconciliation Power of Attorney eliminated

Golden agenda – “Single source of truth” End-to-end confirmation

• Clear entitlement calculation and trackingQuorum tracking and Live Meeting ManagementAuditabilityData

• Point in time access through voting period

Eligibility certainty• Clear entitlement calculation and tracking

Direct voting Single System and Technology

Market Conditions

Regulatory Change

Transparency

Operational Efficiencies

Global Proxy on DLT: Benefits

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Global Proxy DLT SolutionAnnual Meeting Dashboard, Live Voting Tracking, and Investor Voting Platform Screens

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Participants View Data at Authorized Level

Broadridge - Private & Confidential

Participant Level of Detail

Issuer Data is presented at the aggregated job level; No custodian, investor or local account level information is shared.

Issuer Agent/Registrar Data is presented at the local account level; No custodian or investor account level information is shared.

Custodian Data is presented at the custodian level. All records provided by the custodian to Broadridge are available for viewing; this also includes investor activity.

Investor Data is presented at the investor level. All records provided by the custodian and investor activity is available for viewing.

Sub Custodian Data is presented at the local account level. Beneficial owner information is only available in the markets that require disclosure.

Broadridge Data is accessible at the aggregate and detailed level for each of the participants. Broadridge does not have detailed view of data loaded to the DLT that is not part of the Broadridge solution.

Data access is controlled through rules-based Ownership Logs and Smart Contracts that exist within

the DLT. Access is restricted to existing levels of access within the legal chain of intermediaries.

Use Case

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Global Proxy Blockchain Journey

Shadow 1 AGM

April 2017

Banco Santander AGM 2017

Test Meeting

Nov 2017

Repsol AGM 2017 Test

Shadow 2 AGM

Mar 2018

Banco Santander AGM 2018

ICJ Proxy Processing POC

Q2 2018

• DLT rules-based

environment and

front-end application

developed

• Demonstrated

process efficiency

through DLT;

improved

timeliness and

access to data

• DLT connectivity with

read/write capability,

Vote Confirmation

and user reporting

functionality added to

DLT

• Transparency

achieved through

DLT; both voting

and access to point

in time data

• Shadow processing

for complete process

with full participation

• Full market

participation of end-

to-end DLT proxy

process

Our blockchain Proof of Concepts (POC) have evolved over time to shadow processing for the complete proxy vote process with participation from issuer agent, custodian, sub-custodian and institutional investor.

• Shadow processing

to replicate/enhance

ICJ proxy process

model

• Demonstrate

benefits of DLT to

Japan proxy

processing

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Banco Santander AGM POC – March 2018

ObjectivesRun shadow processing of proxy processes for Banco Santander’s live AGM in March in Broadridge’s Global Proxy blockchain environment

Scope

• Distributed Ledger setup

• Smart contract with market specific rule engine

• User Interface for participants to review, edit, confirm details

• Meeting/agenda set up functionality for Issuer Agent

• Shareholder entitlements processing

• Vote processing

• Vote reports and trends

• Vote confirmations

Participants

Issuer Agent

• Santander

Institutional Investor

• Investment Managers

Global Custodians

• JP Morgan

• Northern Trust

• Another two separate Global Custodian Banks

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Banco Santander AGM POC – March 2018

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We continue to drive the innovation roadmap across the industry to help our clients get ahead

of today’s challenges and capitalize on tomorrow’s opportunities

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