Link StreamThe Changing AGM Landscape

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Setting the scene: A time of change

Industry change - CAMAC, the Commonwealth’s corporate law advisory body, asked for submissions from key stakeholders in 2012 regarding the Annual General Meeting (AGM) and securityholder engagement

Technology change - Rapidly changing technology and the increased use of mobile devices is likely to impact the format of AGMs and voting channels

Changing roles - The growing role of the proxy advisor and its impact on voting outcomes is likely to impact corporate IR strategy

A look back in time…

2000

2001

2004

2005

2006

2007

2011

2012Direct voting first considered by Companies and Securities Advisory Committee

ASX ‘Listing Rules Box’ introduced

Electronic proxy voting under CLERP 9 reforms

Mobile voting sites introduced and legislation amended for Chairman’s open votes

2 Strikes Rule and KMP voting exclusion

Direct Voting first offered at an AGM

Direct Voting option with constitutional changes

Electronic handset voting introduced

Key Interest Areas

AGM Hot Topics

The AGM landscape continues to evolve with new trends and increased change in the following areas.

Two Strikes RuleTechnology

Changing Role of Proxy

Advisor

AGM Hot Topics 2012

Remuneration of Directors

Long Term Incentives

Performance and Financials

Board Size and Diversity

Political Donations

Corporate Social Responsibility

The Australian Shareholders Association (ASA) regularly

raised the issue of what constitutes a Long Term

Incentive, arguing this should be re-tested and that directors should be required to hold

vested securities post a vesting event.

At one meeting a pre-recorded presentation from a Director joining the Board was played in their

absence.

AGM 2012 Observations

Remuneration Issues dominated discussion and proceedings Committee Chairmen were frequently asked to address the

meeting and respond to specific questions from the floor

Directors commonly addressed the meeting when standing for election/re-election

Issuers were divided on whether to conduct a “vote by show of hands” first where resolutions were to be decided by poll

Polls were moved from the floor at two meetings

Key Interest Areas

AGM Hot Topics

Two Strikes RuleTechnology

Changing Role of Proxy

Advisor

TechnologyTechnology developments in the following three areas are continuing to make the most significant impact on AGMs.

Voting Practices

Communication Practices

Virtual Meetings

Mobile Devices – Customised smartphone / tablet voting sites

Express ID – Email with a secure personalised hyperlink to vote online

Institutional Voting Site – Dedicated secure site for Nominees & Custodians to lodge votes online

Electronic Handset - Enabling securityholders to participate in electronic poll voting at the meeting

Technology & Voting PracticesVoting technologies continue to evolve

0%

20%

40%

60%

80%

100%

Voted Issued CapitalProxy Forms Lodged

85% of Voted Issued Capital is lodged in the 7 days prior to proxy close Institutional holders vote late in period and represent majority of votes Retail holders vote early in large volumes but represent minority of votes 26% drop in proxy forms lodged per meeting since 2010

Last 7 days

Mid-PointFirst 14 days

Technology & Voting PracticesVoting Timeline Trends

S&P/ASX 100 S&P/ASX 101-200 S&P/ASX 201+0%

10%

20%

30%

40%

50%

60%

70%

201020112012

Technology & Voting Practices% Issued Capital Voted by

S&P/ASX Index

60% of issued capital continues to be voted in the S&P/ASX 200 Issued capital voted outside the S&P/ASX 200 has dropped below

45%

12

2010 2011 20125%

6%

7%

8%

9%

10%

All ClientsS&P/ASX 100S&P/ASX 101-200S&P/ASX 200+

Se

curi

tyh

old

ers

Vo

ting

Technology & Voting PracticesSecurityholder Voting Trends

Overall securityholder voting volumes dropped by 13% since 2010 S&P/ASX100 shows the least decline, dropping only 8.9% since

2010

13

S&P/ASX 100 S&P/ASX 101-200 S&P/ASX 200+ All AGMs0%

20%

40%

60%

80%

100%

201020112012

Technology & Voting PracticesOnline Voting Trends by

S&P/ASX Index

Online Voting was used by 87% of AGMs managed by Link in 2012 Online voting take-up has increased by 16% since 2010

2010 2011 20120.00

0.05

0.10

0.15

0.20

% S

ecu

rityh

old

ers

Technology & Voting PracticesSecurityholder AGM Attendance

AGM attendance has declined by 5% per year on average since 2010 Attendance is commonly 25-50% lower for Issuers who hold their

AGM’s interstate

58%

23%19%

All Resolutions1 ResolutionNo Polls

Technology & Voting PracticesPoll Voting in 2012

81% of S&P/ASX 100 Issuers conducted voting by poll in 2012 Polling provides definitive results essential for remuneration resolutions

16

Technology & CommunicationCustomised Mobile Device Voting

The first customised mobile device voting sites were launched in 2012 Positive feedback received on voting experience by securityholders

17

Extends the reach of your AGM to: Securityholders unable to attend meeting Prospective securityholders Media

Facilitates transparent governance

Ensures an accurate record of proceedings

Can be viewed at any time and any location

Technology & CommunicationWebcasting

Hybrid meetings are gaining popularity overseas where the meeting is ‘live’ and includes a virtual online component

The first meeting to include a virtual component was held by Intel Corporation in the United States in 2009

Regulatory Reform Bill in New Zealand was passed in 2012, allowing entities to facilitate interactive meetings online

Interactive meeting technology is not currently used in Australia but this is expected to change in the future

Technology & Virtual Meetings

Key Interest Areas

AGM Hot Topics

19

Two Strikes RuleTechnology

Changing Role of Proxy

Advisor

Batter Up! Two Strikes Rule

60% decrease in Issuers receiving their first strike in 2012 4 second strikes were received in 2012, resulting in 2 spill

meetings Spills avoided - both spill meetings resulted in the re-election

of nominated Board members Legislation amendments clarified the Chairman’s ability to

vote undirected proxies in favour of the Remuneration Report

Season 2 Results

Batter Safe! Two Strikes Rule

Proxy Solicitation Campaigns to identify and track underlying securityholder voting intentions and ensure votes are recorded

Targeted Outbound Call Campaigns to retail securityholders to clarify voting intentions

Chairman’s Letter outlining remuneration policy changes and addressing any perceived or reported securityholder concerns

Strategies to avoid a Strike

Key Interest Areas

AGM Hot Topics

22

Two Strikes RulesTechnology

Changing Role of Proxy

Advisor

The major Proxy Advisors are Glass Lewis & Co. and Institutional Shareholder Services (ISS)

Proxy Advisors provide critical voting recommendations to institutional securityholders

Ownership Matters is the research provider to the Australian Council of Super Investors (ACSI) so have an indirect influence on super fund members

Proxy AdvisorsWho are the key players?

24

Superannuation funds own a greater portion of public entities than ever before

Voting by underlying super funds has increased in recent years

Institutional holders increasingly follow Proxy Advisor voting recommendations

Asset managers are often bound to vote in line with Advisor recommendations

Investment Managers are increasingly influenced by super advisors such as ACSI and Ownership Matters

Extended reach via media may serve to further influence securityholder sentiment

Proxy AdvisorsThe influencing factor

For further information please contact your Client Relationship Manager or visit www.linkmarketservices.com.au

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