BlackRock Investment Stewardship 2018 Annual Report August 30, 2018 The Investment Stewardship Annual Report reviews BlackRock’s approach to corporate governance and stewardship in support of long- Contents term value creation for our clients. In this report we Annual Report provide practical examples of the Investment Stewardship team’s work over the year, distilling Our global and local focus 1 some of the trends and company-specific Our mission in context: situations reported in our regional quarterly 2017-2018 highlights 2 reports. We emphasize the outcome of our Our achievements over the past year 3 engagements with companies, including some which have spanned several years. We also Our principles, priorities and engagement commentaries 5 provide examples of where we have contributed to the public discourse on corporate governance and Engagement and voting case studies 7 investment stewardship. Engagement and voting statistics 20 Investor perspective and public policy 21 Appendix List of companies engaged 25 Our Annual Report reporting period is July 1, 2017 to June 30, 2018, representing the Securities and Exchange Commission’s (SEC) 12-month reporting period for U.S. mutual funds, including iShares. Our global and local focus BlackRock’s number one focus, as a fiduciary investor, is on generating the long-term sustainable financial returns on which our clients depend to meet their financial goals. Investment Stewardship is focused on assessing the quality of management, board leadership and standards of operational excellence – in aggregate, corporate governance – at the public companies in which we invest on behalf of our clients. We see this responsibility as part of our fiduciary duty, through which we contribute to BlackRock’s mission to create a better financial future for our clients. BlackRock has had an investment stewardship function for over two decades. Our practices have evolved over the years, in line with changing client and company expectations. A more recent, and significant, change is the scrutiny of asset managers’ investment stewardship activities. Not only has client interest increased, we have seen far greater interest from regulators, the media and academics, amongst others. Accordingly, we recently published a ViewPoint entitled The Investment Stewardship Ecosystem in which we set out the roles of the different participants in determining investment stewardship outcomes. Some commentators have conflated the roles and responsibilities of asset owners, asset managers, index providers and proxy research firms, which has created misperceptions about where accountabilities lie. In addition, some have overstated the role that investors can play in influencing companies’ governance practices. We emphasize in the ViewPoint that investment stewardship is a feedback mechanism through which BlackRock, as a long-term investor on behalf of our clients, can help build mutual understanding with companies. One misperception related to voting at shareholder meetings equates ‘good stewardship’ with voting against management. Yet the vast majority of items that go to a vote are routine. Even the more controversial items are much more complex than a binary ‘for’ or ‘against’ vote decision. In our view, engagement with companies is more productive, as it allows us to explain our perspective on issues and how, in our assessment, they are relevant to investment decision-making, including stewardship. The public debate is often polarized. But, in our experience, practitioners tend to take a more nuanced and pragmatic approach focused on encouraging business and governance practices aligned with long-term shareholder value creation. Measuring success in stewardship needs to focus on change over the long-term as meaningful changes in business and governance practices don’t happen in a single quarter, and maybe not even in one year. We use our voice as an investor to provide feedback and encourage what we consider to be good governance. Company boards and management determine the strategic and operational priorities that in their judgment will best serve the interests of all the investors in their company. Market-level change requires hundreds of companies to change and thus takes time. Each region has its own examples of that kind of market-level change. As this report illustrates for the 2017/18 year, Investment Stewardship has been active in encouraging changes that we consider important to long-term value. Looking forward, we will continue to contribute to the dialogue at the company- and market-level to enhance business, governance and stewardship practices that are aligned with the long-term economic interests of our clients. Barbara Novick Michelle Edkins Vice Chairman Global Head of Investment Stewardship BLACKROCK INVESTMENT STEWARDSHIP 2018 ANNUAL REPORT 1 Our mission in context: 2017-2018 highlights BlackRock seeks to create a better financial future for our clients. As we pursue that mission, we're guided by our focus on generating long-term sustainable performance for our clients. Investment Stewardship contributes to this objective by engaging with companies on governance and other business practices impacting their long-term financial performance and by voting at shareholder meetings. Our team and its work has continuously evolved in response to changing developments and expectations. But one thing has remained constant: our focus on protecting and enhancing the long-term value of our clients’ assets. That focus has led to numerous tangible outcomes which we detail in the following pages of this report. Our team’s key responsibilities are to: Protect and enhance the value Encourage governance and Provide specialist insight of clients' assets through business practices that in on governance engagement with companies, our experience support considerations including including proxy voting, in companies to deliver environmental and clients’ best long-term sustainable long-term social factors to economic interests financial performance BlackRock’s investors OVER 2,000 RELEASED UPDATED COMMITTED TO ENGAGEMENTS 2018 ENGAGEMENT DOUBLING TEAM THIS PAST YEAR PRIORITIES SIZE BY 2020 CONTINUED OUR PARTICIPATED PARTICIPATION IN IN OVER OVER 30 GOVERNANCE 275 CLIENT ORGANIZATIONS MEETINGS GLOBALLY Engage clients to build an Participate in market-level understanding of their dialogue to understand and expectations and areas of contribute to the development of focus and how our policies and practices that work aligns support long-term investing and value creation BLACKROCK INVESTMENT STEWARDSHIP 2018 ANNUAL REPORT 2 Our achievements over the past year BlackRock has maintained an in-house team dedicated to investment stewardship since the late 1980s. A lot has changed since then. If you compare today’s governance norms to those of ten years ago, you see a significant shift both in terms of the breadth of engagement topics and the increased number of shareholder meetings at which votes are cast. Engagement is particularly important for index managers, where we cannot sell a company’s shares to express a view on its long-term outlook if it remains in an index in which our clients choose to invest. Expanding the team’s capabilities In 2008 (the year BlackRock became a UN Principles for Responsible Investment signatory), our team consisted of 13 full-time employees voting at approximately 8,500 meetings. Our team has nearly tripled and now has 36 regional specialists located in seven offices who vote at more than twice the number of meetings (over 17,000 this past reporting period) than we did a decade ago. The Investment Stewardship team has expanded in the past year, adding team members in Singapore, Australia, and New York. Increasing client expectations around stewardship means that we must continue to invest in technology and human capital. We believe these initiatives will lead to deeper and more robust engagements with companies. Stewardship partners with BlackRock’s Global Public Policy Group (GPPG) Increasingly, public policy issues are intersecting with stewardship, as policy makers and other stakeholders recognize the importance of the role that institutional investors – both asset owners and asset managers – can play in corporate governance and shareholder engagement. There is significant overlap and both contribute to BlackRock’s key objective: to represent the interests of the millions of savers and pensioners who entrust us with their capital to help them achieve a better financial future. For this reason, we have brought the stewardship and public policy teams closer together this year under the leadership of Vice Chairman Barbara Novick. The intersection of public policy with stewardship revolves around topics like the regulation of public companies and their disclosures, capital formation, the complex operating environment for proxy voting, the appropriateness of dual class structures, and regional stewardship codes, among many others. In Section VII – Investor perspective and public policy, we detail some of this work including our stance on dual class shares and our efforts around the EU Shareholder Rights Directive II. Director Dialogue 2018 In March 2018, we hosted our first US Director Dialogue in New York, an event attended by nearly 60 representatives over half of which were company directors from 27 companies with whom we had not previously engaged on stewardship. The event provided an opportunity to introduce our team and its function within BlackRock and to meet independent directors in person