Briefing Materials

S H A R E H O L D E R A C T I V I S M I N E U R O P E

S E P T E M B E R 2 0 1 7C O N F I D E N T I A L

This document has been prepared by Lazard Frères (“Lazard”) on the basis of information publicly available, disclosed by the relevant company(ies) or by third parties, none of which has

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Disclaimer

B R I E F I N G M A T E R I A L SC O N F I D E N T I A L

Table of Contents

B R I E F I N G M A T E R I A L SC O N F I D E N T I A L

I WHAT IS SHAREHOLDER ACTIVISM? 1

II EUROPEAN SHAREHOLDER ACTIVISM BY THE NUMBERS 6

APPENDIX

L A Z A R D S H A R E H O L D E R

A D V I S O R Y

C O N F I D E N T I A L

I What is Shareholder Activism?

B R I E F I N G M A T E R I A L S

Who Are the Main Players in Europe?

I W H A T I S S H A R E H O L D E R A C T I V I S M ?B R I E F I N G M A T E R I A L S

EUROPEAN SHAREHOLDER ACTIVISM LANDSCAPE (SELECTED PLAYERS)

NEW EUROPEAN

ACTIVISTS

Inflow of new money including from long-standing activists

Specific geographic coverage

Combine methods of US activist hedge funds with Europe-wide and/or

local specifics

LONGSTANDING

EUROPEAN

ACTIVISTS

Long-standing track record

Developed proven expertise towards the European corporate

landscape

U.S. ACTIVISTS

Opportunistic approach to Europe

« Fittest » funds expected to increase focus on Europe

Presence in Europe also depends on performance in the U.S.

VOCAL

INSTITUTIONAL

INVESTORS

Focus on private engagement to drive change but may be vocal as a

last resort

Under pressure to be more active due to industry evolution (rise of

passive management and consolidation in active management)

1

Index Funds Rise of index funds creating new class of power brokers deploying

“permanent capital”

Record levels of ownership concentration

Passive assets under management reached €8tn in 2017

Significant resources allocated to proxy voting, corporate governance and

issuer engagement

Activist Hedge Funds Bifurcation of activist playing field into group of influential, established activists

and ever-expanding group of up-and-coming players

Heightened level of sophistication and sector and market-cap specialization

No standard activist playbook

Current Dynamics in Shareholder Landscape

I W H A T I S S H A R E H O L D E R A C T I V I S M ?B R I E F I N G M A T E R I A L S

Key Takeaways

Crucial to be attuned to areas of

vulnerability and current shareholder

sentiment at all times

IR must be viewed as strategic function to

address increasingly complex shareholder

environment

Role of Director involvement in shareholder

engagement continues to evolve and

expand

Proactive Board refreshment and attention

to composition are vital elements of being

prepared

Active Managers Battle for “alpha” intensifying following successive years of fund outflows and

pressure from low-cost passive strategies

Increasing openness to behaving in activist-like ways towards portfolio

companies

2

What Has Changed? Increased Focus on Europe

What Is Driving Greater European Activism?

Advent of major European activists and emergence of new players

Activists looking beyond “low hanging fruit” and contemplating large-cap and blue-chip targets

Activists have become more mainstream

Supportive market conditions

B R I E F I N G M A T E R I A L S I W H A T I S S H A R E H O L D E R A C T I V I S M ?

Evolution of investor landscape towardsincreased institutional ownership and rise of index funds

Europe is 10 years behind the US in the degree of shareholder

activism and in how directors respond. Demand for returns to meet

pension obligations will make shareholders inherently more active in

Europe.

BILL ACKMAN (PERSHING SQUARE)

Sclerotic companies abound in Europe […]

I believe demergers and the destruction of European conglomerates

are the next major trend in the M&A market […]

We are probably in a period where we will have more activism in

Europe. Frankly, in an environment where passive index funds have

taken such big market share, it is welcome for capitalism.

CHRISTER GARDELL (CEVIAN)

We are seeing more opportunities in Europe because of strong and

improving economic data, a trend that will likely continue now that the

French elections have passed without incident.

DAN LOEB (THIRD POINT)

3

Development of an Activist Campaign

I W H A T I S S H A R E H O L D E R A C T I V I S M ?B R I E F I N G M A T E R I A L S

Approach

In Europe, absent a catalyst, activists have typically found more success in waging a "constructivist" campaign working

alongside management as opposed to taking a more confrontational position

Initial approach is therefore likely to be private, and could be aimed at gathering additional information ahead of seeking

audience with management to outline thesis

However, this does not preclude an activist from becoming more aggressive throughout the campaign

Building Positions

Increasingly active use of derivatives and options to “hide tracks” and avoid triggering disclosure obligations or detection by

stock surveillance services

Use of derivatives may also shield hedge funds from “stamp tax” obligations applicable to foreign purchasers of equities

Disclosure of position likely to be a calculated tactic to escalate discussions

Recent rise in creative fundraising through use of special purpose and single purpose vehicles (e.g., Third Point at Nestlé and

Corvex at Clariant)

Escalation

Activist may privately engage with influential shareholders to garner support for investment thesis and pressure management

Public agitation may result in the release of a “White Paper’ or the formation of a “Wolf Pack”

Increasing hostility may result in the call for special meeting to remove directors and senior management as well as the

nomination of dissident slate and submission of shareholder proposals

Range of public escalation tactics has broadened with new media becoming an increasingly common part of campaign

strategy to complement traditional financial media and institutional shareholder outreach

4

Index Funds: The New Power Brokers

I W H A T I S S H A R E H O L D E R A C T I V I S M ?

With their ownership of public companies significant and expanding, index funds are taking their investment stewardship efforts increasingly

seriously, including by being assertive in certain situations

Source: Shareholder websites, public information

2014 2016

14 31

12 20

4 10

B R I E F I N G M A T E R I A L S

Governance groups have generally doubled in size over

the last three years

Teams have added sophistication and bandwidth to

support an enhanced role in the investor community

driven by their dominant ownership position

The rise of sophisticated in-house voting processes has

been accompanied by declining role of proxy advisors

(ISS and Glass Lewis)

Proxy advisor recommendations are no longer

viewed as determinative, but are instead treated like

a single data point to be considered as part of

bespoke voting processes

However, smaller funds without adequate resources

continue to rely on proxy advisor recommendations

5

L A Z A R D S H A R E H O L D E R

A D V I S O R Y

C O N F I D E N T I A L

II European Shareholder Activism by the Numbers

B R I E F I N G M A T E R I A L S

Market cap. breakdown of targets Total activist campaigns in Europe

Key campaign objectivesIndustry breakdown of targets

32

1316

8

40

1316 1820

813

7

€100m-€2bn €2bn-€5bn €5bn-€20bn €20bn+

2015 2016 1H 2017# of companies

European Trends in Activist Campaigns Launched and Companies Targeted

I I E U R O P E A N S H A R E H O L D E R A C T I V I S M B Y T H E N U M B E R SB R I E F I N G M A T E R I A L S

European activist campaigns are increasing since 2015. Most popular campaign objectives were Board representation, M&A, capital allocation and

strategy

74

92

48

2015 2016 1H 2017

# of activist campaigns

22%

43%35%

7% 9%13%

55%

29%

10% 9%2%

54%

29%

5%10%

Activist Short Boardrepresentation/

governancechanges

M&A Capital structure/allocation

Strategy

2015 2016 1H 2017% of campaigns

15%18% 20%

46% 19%23%

12%46%

85

74

15

710

5 4 4

8 710

8

18

7

14

4 5 66 75

7 8

1

5 41

4

Con

sum

er

Ret

ail

Fin

anci

alIn

stitu

tions PE

I

Indu

stria

ls

Hea

lthca

re

Tec

hnol

ogy

Tel

ecom

Rea

l Est

ate

Med

ia

2015 2016 1H 2017

Companies targeted

42% 17% 27% 14%

Source: Activist Insight and FactSet

Note: All data is for activist campaigns targeting Europe-listed companies with market cap. greater than €100 million at time of campaign announcement

6

Success rate of campaigns for Board seats

2028

10

6

12

6

26

40

16

2015 2016 1H 2017

Board seats won

Manner of Board seats obtainedNumber of Board seats won

European Trends in Activist Board Representation

I I E U R O P E A N S H A R E H O L D E R A C T I V I S M B Y T H E N U M B E R SB R I E F I N G M A T E R I A L S

Activists have won more Board seats in 2016 vs 2015, through a higher number of campaigns

96

14

16

6 51

7

1 2

Oneseat granted

Twoseats granted

Threeseats granted

Four +seats granted

2015 2016 1H 2017

# of Companies

57%

21% 18%

17 189

25 29

15

4247

24

2015 2016 1H 2017

# of Board seats won

4%

Activist employees

as % of total40% 38% 77% 70%

# of Board campaigns

20%5%30%45%

20% 21%

4 61

1622

9

20

28

10

2015 2016 1H 2017

# of Board representation campaigns

63%38%

78%

10%

10% 20%

Source: Activist Insight and FactSet

Note: All data is for activist campaigns targeting Europe-listed companies with market cap. greater than €100 million at time of campaign announcement

Successful Board campaigns

Success rate

as % of total

Settlements

as % of total

Campaigns settled

Activist employees appointed

7

Top 5 European regions targeted (2015-1H17)

European Shareholder Activism League Tables

UK – 61 Campaigns (17,31,13)

FRANCE – 28 Campaigns (10,11,7)

NORDICS – 25 Campaigns (10,9,6)

GERMANY– 23 Campaigns (5,13,5)

1

3

4

5

2 ITALY – 29 Campaigns (8,11,10)

B R I E F I N G M A T E R I A L S I I E U R O P E A N S H A R E H O L D E R A C T I V I S M B Y T H E N U M B E R S

Source: Activist Insight, FactSet and public filings

Note: All data is for activist campaigns targeting Europe-listed companies with market cap. greater than €100 million at time of campaign announcement

Top 10 Activist Investors – Most campaigns initiated (2015-1H17)

# of Campaigns Avg. Mkt Cap. of Targets

€3.2bn

€8.6bn

€24.6bn

€1.2bn

€1.4bn

€1.3bn

€30.0bn+

€8.5bn

€59.0bn

€27.5bn

5

7

1

2

1

2

2

1

9

7

2

2

2

1

3

1

1

3

6

3

4

1

2

1

1

20

17

7

5

5

4

3

3

3

3

2015 2016 H1 2017

Denmark, Norway, Sweden and Finland together are a major playing field for activists in Europe

8

B R I E F I N G M A T E R I A L S I I E U R O P E A N S H A R E H O L D E R A C T I V I S M B Y T H E N U M B E R S

Source: Activist Insight and FactSet

Note: Campaigns refer to public actions by shareholders, towards a holding, to influence its strategy, governance, capital structure or reporting

Stakes and market capitalizations are as of start date of activist campaign

Selected Examples of Recent Nordic Countries Campaigns

5.0% DKK72bn

Operations / Board Representation

In 2013, Cevian demanded that

Danske Bank resolve the issues in

its investment strategy that was

driving its share price down

Cevian obtained a seat on the

board after it doubled its stake in

Danske Bank

5.0% DKK5.8bn

Oppose M&A transaction

In 2011, Elliott led the opposition to

Dupont’s original offer to acquire

Danisco

After reducing the acceptance

threshold and increasing the bid

price, the merger went through

5.6% €23.3bn

Operations / Board Representation

In 2016, Cevian obtained a seat on

Ericsson’s nomination committee

after publicly supporting the CEO’s

cost-cutting plan

Ericsson’s Chairman resigned

10.1% €700m

Governance / Special Dividend

In 2017, Elliott demanded a special

dividend payment and the creation

of a clearance committee

However, none of the proposals put

forward by Elliott gathered the

necessary votes at the AGM

5.0% €31.0bn

Divest Assets / Board

Representation

Volvo spun-off its IT services

division in 2016

Cevian gained a board seat in 2014

In 2017, Cevian called for the split

of Volvo into three distinct entities

n.a. €17.4bn

Push for merger

In 2016, Cevian said it would not

invest in Telia as it considered it

substantially overvalued

It suggested Telia should merge

with Telenor to form a major actor in

the telecommunications sector

7.5% €2.4bn

Oppose M&A transaction / Special

Dividend

In 2015, Elliott increased its stake to

10% and tried to push Canon to

submit a higher bid for Axis

Elliott managed to pressure Axis

into paying a special dividend twice

Capital return

In 2013, Third Point acquired a

stake in Nokia after it announced

the sale of its devices and services

division to Microsoft

In 2014, Third Point convinced

Nokia to implement a $1.7bn share

buyback

n.a. €17.1bn

Prominent activists have initiated campaigns in the region…

10.1% €980m

Special Dividend

In 2016, Elliott demanded the

payment of a minority dividend

The Board of IFS deemed the

demand justifiable and the

shareholders resolved to implement

the dividend at the AGM

9

B R I E F I N G M A T E R I A L S I I E U R O P E A N S H A R E H O L D E R A C T I V I S M B Y T H E N U M B E R S

Source: Activist Insight and FactSet

Note: Campaigns refer to public actions by shareholders, towards a holding, to influence its strategy, governance, capital structure or reporting

Stakes and market capitalizations are as of start date of activist campaign

Selected Examples of Recent Nordic Countries Campaigns (cont’d)

30.0% €1.7bn

Board Representation / Governance

In 2015, Makuria, Teleios and

Constructive Capital joined forces to

overhaul Kongsberg’s board

After the company added a director

put forward by the activists and

changed its CEO, it gained their

support to improve the results

n.a. €13m

Strategy / Push for sale

In 2013, Nanes Balkany heavily

criticized Petrogrand’s management

and called for a strategy review

In 2014, Balkany supported a

takeover by Shelton after the group

revised its initial offer

Board Representation

In 2015, following an agreement

with Cramo, Zeres acquired a

10.6% stake in the company and

gained two seats at the nomination

and compensation committee

10.6% €630m

…However, the activism of smaller and more discrete funds is also on the rise

7.0% €90m

Board Representation

In 2016, Accendo increased its

stake in Hexatronic to 13.7% and

became its largest shareholder

It translated a few days later into

Accendo obtaining a board and

nomination committee seat

11.6% €120m

Board Representation

Accendo Capital first invested in

Doro in 2009

In 2015, Accendo increased its

stake which resulted in the gain of a

board seat as well as a seat at the

nomination committee

10.5% €120m

Board Representation

In 2015, Zeres built a sizable stake

in Eltel after the company

completed its IPO

Subsequently, Zeres gained a seat

on Eltel’s nomination committee

and two board seats

n.a. €310m

Governance

In 2017, AB Trovata, claiming an

entity disseminated negative

information about the company,

requested the board to sue for

damages

The proposal was rejected at the

company’s AGM

AB Trovata

n.a. €1.8bn

Board Representation

In 2014, Noreco failed to convince

shareholders to allow it to convert

its debt to equity, forcing it to put

forward a modified proposal

In 2015, Nanes Balkany gained a

board seat at Noreco

3.1% €80m

Board Representation / Governance

In 2014, having built a stake in

Panoro, Julien Balkany joined the

board after accepting an offer to

avoid a proxy contest

In 2015, Julien Balkany was

appointed chairman of the board

Nanes Balkany

Nanes Balkany

Nanes Balkany

10

L A Z A R D S H A R E H O L D E R

A D V I S O R Y

C O N F I D E N T I A L

Appendix

B R I E F I N G M A T E R I A L S

Lazard’s Shareholder Advisory Team in Europe

François F. BrentanoManaging DirectorEuropean General Counsel

Core Team

Gilles MentréManaging DirectorEuropean Head of Shareholder Advisory 15 years of experience in the Public

sector, finance and diplomacy

Former Deputy Head of Staff of

French Minister of Economy and

Finance, François Baroin

Antonin DeslandesAssociateShareholder Advisory 5 years of experience

as a capital markets /

corporate lawyer

Formerly an attorney

at White & Case

Ivan GavagnachAssociateShareholder Advisory 3 years of

experience in

investment banking

Specializes in

equity advisory

Adrien RamesanAnalystShareholder Advisory 2 years of

experience in

investment banking

Jad FaresAnalystShareholder Advisory Joined Lazard in

2017

Country Support

Pablo ChichonVice PresidentShareholder Advisory

Pedro PasquinManaging DirectorHead of Madrid Office

Charlie ForemanManaging DirectorEquity Capital Markets

Marco SamajaManaging DirectorHead of Milan Office

Rolf BachmanManaging DirectorHead of Zurich Office

Gustaf SlettengrenManaging DirectorHead of Nordics

Jacques DeegeDirectorLazard Legal

Hubert ZhangVice PresidentLazard Legal

Eric FellhauerManaging DirectorHead of Frankfurt Office

John KynigopoulosSenior Advisor

B R I E F I N G M A T E R I A L S A P P E N D I X

Nick FowlerManaging DirectorEquity Capital Markets

11

What Lazard Shareholder Advisory Does for its Clients?

A P P E N D I XB R I E F I N G M A T E R I A L S

12

CORPORATE PREPAREDNESS “LIVE” SITUATIONS

Understand vulnerabilities, identify potential attack angles

(White Paper simulation) and prepare rebuttals / response strategyFormulate engagement strategy with activist

and tactics for potential escalation

Shareholder engagement / IR policy

Advise on negotiations and potential settlement

Ongoing advice on shareholder engagement, investor relations

and corporate governance matters

Communication strategy

Legal / Governance

Organize internal and external core team

Provide insight on activist’s profile, investment approach

and precedents / previous campaigns

In-depth review (operations, performance, governance, etc.) and rebuttal

strategy (in response to formulated criticisms / potential White Paper)

Identify and assess strategic options

Shareholding structure assessment

Communication strategy

Organize internal and external core team

18