ISS PROXY ADVISORY SERVICES Vivendi · Vivendi Meeting Key Takeaways P. Schoenfeld Asset Management...

ISS PROXY ADVISORY SERVICES

Report Contents Financial Highlights 7 Vote Results 12 Corporate Governance Profile 8 Meeting Agenda and Proposals 14 Board Profile 10 Equity Ownership Profile 39 Governance QuickScore 12 Additional Information 39

© 2015 Institutional Shareholder Services Inc. All Rights Reserved.

Vivendi

Key Takeaways

P. Schoenfeld Asset Management LP (PSAM), a 0.55-percent shareholder, submitted two proposals for an alternative dividend distribution and an exceptional distribution for which support is not recommended (Items B and C).

In response, Vivendi sent a letter to PSAM “formally reminding” PSAM that, under French Law “no more than 20 percent of the share capital of a company which is in possession of a license to provide French-language television services may be held, directly or indirectly, by Foreign nationals outside the European Union." The same day, PSAM published a letter expressing disappointment in Vivendi's response and reminding the company of the "sole purpose" of the two resolutions, to allow Vivendi shareholders to "individually decide what they consider to be in the best interest of the Company." PSAM wrote" we have received a letter whose purpose seems to be to intimidate us… [and] to intimidate other shareholders who are willing to support our resolutions (see details under the "Voting Rights" section below and Items B and C).

Management does not give shareholders the opportunity to opt-out of the automatic acquisition of double-voting rights for registered shares held for two years provided for by the French law modified in March 2014 (Florange Act). Shareholders are however allowed to express their discontent with double-voting rights to the extent that PhiTrust Active Investors, with eight other institutional shareholders, filed a resolution to maintain the one-share, one-vote principle in company's bylaws (Item A).

The company does not propose to opt-out of the Florange Act's provision on the end of the board's neutrality principle during a takeover period as it does not explicitly mention in the share repurchase program and share issuance resolutions the exclusion of any use during such a period (Items 13, 15, 16, and 19).

Company's practice and disclosure in connection with the new management board chairman, the retired management board chairman, and a management board who resigned in 2014 raise issues triggering an against vote recommendation on the related say-on-pays (Items 6, 9, and 10).

The former management board chairman retired on June 30, 2014. His defined benefit pension scheme raises issues triggering an against vote recommendation on the auditors' special report on related-party transactions (Item 3).

Agenda & Recommendations Policy: Europe

Incorporated: France

Item Code Proposal Board Rec. ISS Rec.

ORDINARY BUSINESS

1 M0105 Approve Financial Statements and Statutory Reports FOR FOR

2 M0104 Approve Consolidated Financial Statements and Statutory Reports FOR FOR

3 M0123 Approve Auditors' Special Report on Related-Party Transactions FOR AGAINST

4 M0152 Approve Allocation of Income and Dividends of EUR 1 per Share FOR FOR

5 M0565 Approve Severance Payment Agreement with Arnaud de Puyfontaine FOR AGAINST

6 M0550 Advisory Vote on Compensation of Arnaud de Puyfontaine, Chairman of the Management Board since Jun. 24, 2014

FOR AGAINST

ISS QuickScore

GOVERNANCE

7

Scores indicate decile rank relative to index

or region. A decile score of 1 indicates

lower governance risk, while a 10 indicates

higher governance risk.

Meeting Type: Annual/Special Meeting Date: 17 April 2015 Record Date: 14 April 2015 Meeting ID: 948437 NYSE Euronext Paris: VIV Index: CAC 40 Sector: Movies & Entertainment GICS: 25401030 Primary Contacts Orsolya d'Alboy Nelson Seraci Eva Chauvet [email protected]

mailto:[email protected]

Vivendi (VIV) Meeting Date: 17 April 2015 POLICY: Europe Meeting ID: 948437

ISS PROXY ADVISORY SERVICES Publication Date: 1 April 2015

7 M0550 Advisory Vote on Compensation of Herve Philippe, Member of the Management Board since Jun. 24, 2014

FOR FOR

8 M0550 Advisory Vote on Compensation of Stephane Roussel, Member of the Management Board since Jun. 24, 2014

FOR FOR

9 M0550 Advisory Vote on Compensation of Jean Francois Dubos, Chairman of the Management Board until Jun. 24, 2014

FOR AGAINST

10 M0550 Advisory Vote on Compensation of Jean Yves Charlier, Member of the Management Board until Jun. 24, 2014

FOR AGAINST

11 M0250 Elect Tarak Ben Ammar as Supervisory Board Member FOR FOR

12 M0250 Elect Dominique Delport as Supervisory Board Member FOR FOR

13 M0318 Authorize Repurchase of Up to 10 Percent of Issued Share Capital FOR AGAINST

EXTRAORDINARY BUSINESS

14 M0374 Authorize Decrease in Share Capital via Cancellation of Repurchased Shares

FOR FOR

15 M0329 Authorize Issuance of Equity or Equity-Linked Securities with Preemptive Rights up to Aggregate Nominal Amount of EUR 750 Million

FOR AGAINST

16 M0337 Authorize Capital Increase of up to 10 Percent of Issued Capital for Contributions in Kind

FOR AGAINST

17 M0510 Authorize Capital Issuances for Use in Employee Stock Purchase Plans FOR FOR

18 M0510 Authorize Capital Issuances for Use in Employee Stock Purchase Plans Reserved for Employees of International Subsidiaries

FOR FOR

19 M0326 Authorize Capitalization of Reserves of Up to EUR 375 Million for Bonus Issue or Increase in Par Value

FOR AGAINST

20 M0116 Authorize Filing of Required Documents/Other Formalities FOR FOR

SHAREHOLDER PROPOSAL SUBMITTED BY PHITRUST

A S0126 Amend Article 17 of Bylaws Re: Absence of Double Voting Rights AGAINST FOR

SHAREHOLDER PROPOSALS SUBMITTED BY SCHOENFELD ASSET MANAGEMENT

B S0152 Amend Item 4 as Follows: Approve Allocation of Income and Dividends of EUR 2.11 per Share

AGAINST AGAINST

C S0152 Approve Transfer from Issuance Premium Account to Shareholders for an Amount of EUR 4.54 per Share

AGAINST AGAINST

Shading indicates that ISS recommendation differs from Board recommendation Items deserving attention due to contentious issues or controversy

ISS-Company Dialogue

Dates Topic(s) Initiated By Notes Outcome

27 March 2015

Dividend/Share Buyback, Proxy Contest/Dissident Campaign

ISS (with Issuer) Conference call. Explanation of Company Practice/ Rationale



27 March 2015

Dividend/Share Buyback, Proxy Contest/Dissident Campaign

ISS (with Dissident/ Shareholder Proponent)

Conference call. Explanation of Shareholder Proponent Position/ Rationale

27 March 2015

Draft Review ISS (with Issuer) The company requested to review a draft of this analysis. However, according to ISS engagement policy "no draft will be sent if the resolutions submitted to the general meeting concern merger and acquisitions, proxy fights or either resolution analyzed by ISS as contentious."

Explanation of ISS Policy

Note: ISS engages in ongoing dialogue with issuers in order to ask for additional information or clarification, but not to engage on behalf of its clients. Any draft review which may occur as part of this process is done for purposes of data verification only. All ISS recommendations are based solely upon publicly disclosed information.



Material Company Updates

Exchange rate on Jan. 2, 2015: EUR 1 = USD 1.21002 = GBP 0.77673

Remuneration Profile

Components of Pay

(due, in EUR 000s)

CEO

Other Executives

Jean-François Dubos

Arnaud de Puyfontaine (2)


Jean-François Dubos (3)

Hervé Philippe, Stéphane

Roussel, and Jean-Yves

Charlier (4)

Chairman of the management board

(until June 24, 2014)

Chairman of the management board

(from June 24, 2014)

and

Management board member since Jan. 1,

2014

Chairman of the

management board

Chairman of the management

board

Members of the management

board

2014 2014 Change 2013 2012 2014

Base salary 450

900 28,6%

700 300

1,175

In-kind Benefits (5) 5

51 50,9%

34 3

48

Pension Not disclosed (1) - - - - -

All other compensation - - - - - N/D (8)

Cash bonus 540

1 283 25,2% 1

024 294

1,445

Deferred/Share bonus - - - - - -

Total short-term incentives

540 1 283 25,2%

1 024

294

1,445

Other Long-term - - - - - -

Restricted stock 0

1 713 (7) -24,1% 2

257 745 0

Option grant (6) -

- -

- - -

Total long-term incentives

0 1 713 -24,1%

2 257

745 0

Total compensation

995

(pension rights excluded)

3,946 -1,7%

4,015 1,342

2,668

% of Net Income 0.02% 0,08% 0,20% 0,82% 0,06%

% of Revenue <0.01% 0,04% 0,02% 0,00% 0,03%



Notes:

(1): Jean-François Dubos retired on June 30, 2014. The company only indicates the annual valuation of his defined benefit scheme (i.e., EUR 411, 611) without indicating the amount he actually received in 2014.

(2): Arnaud de Puyfontaine has been chairman of the management board since June 24, 2014. He was member of the management board between Jan. 1, 2014 and June 24, 2014. The amounts above correspond to those due in connection with the full FY 2014. The company does not make a distinction between the amounts linked to his membership and those linked to his chairmanship.

(3): Jean-François Dubos became chairman of the management board on June 28, 2012. As provided by the company upon engagement, he also received for the first six months of FY2012 EUR 195,000 for base salary and EUR 191,000 for bonus as board's general secretary.

(4): Jean-Yves Charlier was management board member from Jan. 1, 2014 to June 24, 2014.

(5): Including use of a company car without driver, profit sharing and paid leave.

(6): Since FY2013, the company has not set up stock option plans.

(7): Arnaud de Puyfontaine waived the benefit of his employment contract at the time he was appointed chairman of the management board on June 24, 2014, to comply with the recommendations of the AFEP-MEDEF Code. He was granted 100,000 performance shares in order to "partially offset the loss suffered as a result of his resignation from his former external positions".

(8): Jean-Yves Charlier resigned from his corporate officer mandate and left the group. The company indicates that he did not receive any severance payments due to this mandate, but does not provide any information on any severance payments linked to the end of his employment agreement within the group.

CEO PAY DEVELOPMENT (EUR)

COMPANY PERFORMANCE (EUR)

2012 2013 2014

Non-Performance-basedPay

303 734 951

Performance-based Pay 1,039 3,281 2,996

Total Pay 1,342 4,015 3,946

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

CEO

Pay

, in

th

ou

san

ds

Non-Performance-based Pay Performance-based Pay Total Pay



ONGOING REGULATED AGREEMENTS WITH EXECUTIVES:

Executive Officer Severance Agreement

Additional Pension Schemes

Non-Compete Agreement

Consulting Services Liability Coverage

Arnaud de Puyfontaine1

Chairman of the management board since June 24, 2014

Yes (in title of corporate

mandate, no employment

contract)

Yes (Defined benefit scheme)

No No No

Hervé Philippe

Member of the management board since June 24, 2014

Yes (in title of employment

contract only)


No No No

Stéphane Roussel

Member of the management board since June 24, 2014

Yes (in title of employment

contract only)


No No No


Chairman of the management board until June 24, 2014

No


-Retired on June 30, 2014-

No No No

Jean-Yves Charlier

Member of the management board until June 24, 2014

No (in title of his corporate mandate)

but no information concerning any

severance agreement

provided for by his employment

contract)

N/A -Resigned-

No No No

FY End2011

2012 2013 2014

Revenue, in millions 28,994 22,135 10,089

Net income, in millions 164 1,967 4,744

Indexed TSR 100 111 134 153

-

20

40

60

80

100

120

140

160

180

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Revenue, in millions Net income, in millions Indexed TSR



Financial Highlights

Company Description: Vivendi Societe Anonyme engages in the content and media businesses primarily in France and rest of Europe, the United States, and internationally. The company operates through Canal+ Group, Universal Music Group, and Vivendi Village segments.

STOCK PRICE PERFORMANCE

TOTAL SHAREHOLDER RETURNS 1 Yr 3 Yr 5 Yr

Company TSR (%) 13.95 15.11 7.56

GICS 2540 TSR (%) 4.54 9.08 6.99

Index TSR (%) 9.89 17.34 11.03

Source: Compustat. As of last day of company FY end month: 12/31/2014

COMPANY SNAPSHOT

Market Cap (M)

Closing Price 22.16

Annual Dividend 1.00

52-Week High 22.21

52-Week Low 17.26

Shares Outstanding (M) 1353.08

Average daily trading volume (prior mo)* 6,248.41

As of March 20, 2015 (All currency in EUR) * Trading Volume in thousands of shares

FINANCIAL & OPERATIONAL PERFORMANCE Historical Performance (FY ending)

All currency in EUR 12/2010 12/2011 12/2012 12/2013 12/2014

Earnings

Revenue (M) 28,878 28,813 28,994 22,135 10,089

Net Income (M) 2,198 2,681 164 -1,964 -290

EBITDA (M) 7,706 8,066 7,705 4,544 1,043

EPS (EUR) 1.72 2.08 0.12 -1.47 -0.21

EPS Y/Y Growth (%) 163 21 -94 85

Profitability

Net Margin (%) 16 18 7 -7 -1

EBITDA Margin (%) 27 28 27 21 10

Return on Equity (%) 9 14 1 -11 -1

Return on Assets (%) 4 5 0 -4 -1

ROIC (%) 6 8 1 -7 -1

Leverage

Debt/Assets 20 28 30 25 7

Debt/Equity 50 81 96 70 10

Cash Flows

Operating (M) 6,966 6,862 7,106 5,240 3,593

Investing (M) -2,534 807 -6,042 -1,187 14,292

Financing (M) -4,761 -7,661 -427 -6,418 -11,884

Net Change (M) -36 -6 590 -2,853 5,804

Valuation & Performance

Price/Earnings 11.40 7.90 136.70

Annual TSR (%) 4.98 -10.11 11.48 20.08 13.95

Source: Compustat. *Note: Compustat standardizes financial data and fiscal year designations to allow for accurate comparison across companies and industries. Compustat data may differ from companies' disclosed financials. See www.issgovernance.com/policy-gateway/company-financials-faq/ for more information.

-100%

-50%

0%

50%

100%

150%

200%

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

Vivendi MSCI ACWI: Media (GICS: 254010) CAC 40 Index

http://www.issgovernance.com/policy-gateway/company-financials-faq/



Corporate Governance Profile

BOARD & COMMITTEE SUMMARY

Independence Members Meetings

Full Board 71% 14 10

Audit 75% 4 6

Compensation & Nominating

83%* 6* 4

*Without taking into account the membership of Claude Bebear, censor and member of the compensation & nominating committee.

Chairman classification Non-Independent

Separate chair/CEO Yes

Independent lead director N/A

Total director ownership (000 shares) 69*

Total director ownership (%) <0.01%

Number of directors attending < 75% of meetings

N/D

Number of directors on excessive number of outside boards

2

Average director age 52 years

Percentage of women on board 36%

AUDIT FEES (2014) Accountants Ernst & Young et autres KPMG

Auditor Tenure (in years) 15 22

Audit Fees EUR 6,200,000 EUR 4,700,000

Audit-Related Fees EUR 800,000 EUR 600,000

Other Fees EUR 300,000 EUR 400,000

% of total fees attributable to non-audit ("other") fees 4.11% 7.02%

VOTING RIGHTS

Double voting rights None

Voting rights ceiling None

Holding ceiling None

Implied Threats of Legal Action

On March 27, 2015, the company released a letter it sent to Peter Schoenfeld Asset Management (hereinafter "PSAM"), a U.S.-based hedge fund which holds less than 1 percent of outstanding shares and which filed two resolutions not supported by the management board at this AGM (Items B and C below), to remind it that "under Article 40 of French Law No. 86-1067 of Sept. 30, 1986, “no more than 20 percent of the share capital of a company which is in possession of a license to provide French-language television services may be held, directly or indirectly, by Foreign nationals outside the European Union".

The letter also indicates that “In so far as it would appear that your direct or indirect share ownership, together with that of third parties with whom you might join forces, could surpass the 20 percent threshold, this could be seriously prejudicial to the company”. In such case, the fund considers that it “would be forced to promptly bring legal action against you to seek joint and several damages” which, “according to a preliminary analysis of our expert consultant... could amount to between EUR 5 billion and EUR 9 billion”. The letter concludes by noting, without any further clarification, that “If your actions are being organized or carried out together with any third parties interested in buying any of our assets, it is your responsibility to inform them of the financial implications they could be facing if they participate in the above-referenced offense”.



PSAM made public its response to the company’s letter the same day, stating that it was “very disappointed to have received this letter at a time when we are exercising our rights as shareholders… in accordance with French law”. It also underlines that it complied with all regulatory disclosure requirements as it accumulated shares, but that "we did not receive any warning from you at that time", PSAM questioned whether "Now, as a result of our decision to propose two resolutions to shareholders, we have received a letter whose purpose seems to be to intimidate us… [and] to intimidate other shareholders who are willing to support our resolutions". and as a result of your lack of diligence to ensure compliance with French law 86-1067 dated Sept. 30, 1986, on a timely

Without quantifying the magnitude of the potential damages, PSAM also reserved its "right to claim damages, both as a result of your interference in our proposal of additional resolutions to shareholders basis". Particularly, it reminds that the "sole purpose" of the PSAM resolutions at the upcoming AGM is to allow Vivendi shareholders to "individually decide what they consider to be in the best interest of the Company". PSAM concluded that "going forward, we hope you will revert to more appropriate behavior in dealing with our requests".

OPT-OUTS OF FLORANGE LAW

On double voting rights No (Item A, filed by shareholders and not

supported by the management board, is proposing such opt-out)

On antitakeover measures No

SHAREHOLDING DISCLOSURE REQUIREMENTS

Legal thresholds 5%, 10%, 15%, 20%, 25%, 30%, 33.33%, 50%, 66.67%, 90%, and 95% of issued capital or voting rights, alone or in concert

Additional statutory thresholds

0.5% and any multiple thereof, of capital or voting rights, incl. via instruments giving access to shares, alone or in concert

Number of days to inform the company

- Legal thresholds: 4 trading days of exceeding or falling below each threshold - Statutory thresholds: 15 calendar days of exceeding or falling below each threshold

Possible sanction - Legal thresholds: 2-year cancellation of voting rights in excess of the threshold - Statutory thresholds: 2-year cancellation of voting rights in excess of the threshold if required by shareholder(s) with

at least 0.5% of the share capital

COMPLIANCE WITH LOCAL CORPORATE GOVERNANCE CODE

The company refers to the AFEP-MEDEF Code amended in June 2013.

Notable deviations from the local corporate governance code as reported by the company

The company states that it complies with all AFEP-MEDEF Recommendations.

Notable issues

The company does not provide any compelling explanation to this constant significant increase in Jean-François Dubos'

remuneration since he has become management board chairman in 2012, (which corresponds to three year prior to his

retirement.

Arnaud de Puyfontaine may benefit from his severance payment in case of termination of his functions at the initiative of

the company, except in the case of gross negligence. This triggering event cannot be considered as an imposed departure

resulting from a change in control or in strategy. Such practice is not in line with the AFEP-MEDEF Code which clearly refers

to "a constraint departure resulting from a change in control or in strategy. The company does not provide any explanation

to its non-compliance with the code on this topic.



Board Profile

Director Independence & Affiliations

NON-EXECUTIVE DIRECTORS On

Ballot Name Affiliation Independence

Classification Atten-dance

Gen-der

Age Tenure Term Ends

Outside Key Committees

Company ISS Boards CEO Audit Rem & Nom

Vincent Bollore Significant

Shareholder, Chair

Non-Independent

Non-Independent

N/D M 62 3 2017 2

Tarak Ben Ammar

Independent Independent N/D M 65 NEW 2019 2

Philippe Benacin

Independent Independent N/D M 56 1 2018 1

C

Nathalie Bricault

Employee Shareholder

Representative

Employee Shareholder

Representative

N/D F 50 2 2017 0

F

Pascal Cagni


F

Daniel Camus


C F

Yseulys Costes

Independent Independent N/D F 42 2 2017 3

Alexandre de Juniac

Independent Independent N/D M 52 2 2017 1 F

Dominique Delport

Board Attestation of

Affiliation

Non-Independent

Non-Independent

N/D M 47 NEW 2019 0

Philippe Donnet


M

Aliza Jabes


M

Katie Jacobs Stanton


M

Virginie Morgon


M

Paulo Cardoso

Employee Representative

Employee Representative N/D M 41 1 2017 0

M

Claude Bebear Censor M 79 12 2016 0 M

M = Member | C = Chair | F = Financial Expert *Indicates director not previously submitted to shareholders for election. Note: The numbers of outside boards may be adjusted based on market-specific calculation rules. The full lists of outside boards are provided under the Director Employment, Compensation & Ownership table below.

Director Notes Vincent Bollore Was appointed supervisory board member on Dec. 13, 2012, and chairman on June 24, 2014. He also is the

Chairman and CEO of Bollore which holds more than 10 percent of Vivendi's share capital and voting rights.

Pascal Cagni Has been censor of the board since Dec. 13, 2012, and is a board member since 2013.

Claude Bebear Was board member from April 17, 2003 to April 19, 2012, and he has been censor since April 19, 2012.



Director Employment, Compensation & Ownership Name Primary Employment Outside Boards Total Compensation* Shares Held

Vincent Bollore CEO, Chairman - Bollore Bollore, Socfin; Companies belonging to Socfin group: Societe des Caoutchoucs de Grand Bereby, Socfinaf, Socfinasia; Companies belonging to Bollore group: Financiere de l'Odet (chair), Blue Solutions (chair), Financiere Moncey, Societe industrielle et financiere de l'Artois, Compagnie du Cambodge, Plantations des Terres Rouges

41,429 6 000

Tarak Ben Ammar Prof Director Mediobanca SPA, Telecom Italia Spa

N/A N/D

Philippe Benacin CEO - Interparfums Interparfums, Inter Parfums, Inc. (parent company of Interparfums)

56,071 14 100

Nathalie Bricault Employee - Vivendi 110,000 7 719

Pascal Cagni Other Kingfisher plc 81,429 12 200

Daniel Camus Consultant SGL Carbon SE, Cameco Corporation, Valeo

110,000 8 782

Yseulys Costes CEO, Chairman - 1000Mercis Kering, 1000Mercis, Seb SA 75,000 3 500

Alexandre de Juniac CEO, Chairman - Air France KLM

Air France KLM 48,096 1 000

Dominique Delport Executive Committee Member - Havas

N/A N/D

Philippe Donnet Executive Director - Banca Generali S.p.a.

Banca Generali S.p.a. 28,214 5 166

Aliza Jabes Chairman - Nuxe Group (unlisted)

83,333 7 833

Katie Jacobs Stanton Vice President of Global Media - Twitter, Inc.

48,571 1 000

Virginie Morgon CEO - Eurazeo Accor, L Oreal, Moncler SpA, Elis SA (chair)

48,571 2 000

Paulo Cardoso Employee - Vivendi 10,000 0

Claude Bebear Censor - Vivendi, Honorary Chairman - Axa

80,000 5,879

*Local market currency

Additional Notes

The company has not disclosed who will replace Henri Lachmann and Pierre Rodocanachi as audit committee members as they shall leave the board after this general meeting.



ISS QuickScore As of April 1, 2015 ISS GOVERNANCE QUICKSCORE PILLARS

Board 3 Remuneration 9 ISS Governance QuickScore is derived from publicly disclosed data on the company's governance practices. Scores indicate decile rank relevant to index or region. While company practices that raise concerns in ISS Governance QuickScore are in many cases factors that weigh against the company in analyzing certain proposals, ISS recommendations are based on situational proposals and the related qualitative aspects of our review at a point in time

Scores on the proxy research report are “As of” the date indicated. QuickScore data and scores are dynamic and updated on a daily basis and available year round. Scores are calculated at each pillar by summing the factor scores in that pillar. Not all factors and not all subcategories have equal weight, and not all factors or subcategories apply to all markets. For more information on ISS Governance QuickScore, visit http://www.issgovernance.com/governance-solutions/investment-tools-data/quickscore/. For questions, please contact: [email protected].

Subcategory & Impact: Subcategory & Impact:

Board Composition Pay For Performance

Composition of Committees Use Of Equity

Board Practices Equity Pay Risk Mitigation

Board Policies Non-Executive Pay

Communications & Disclosure

Termination

Controversies

Shareholder Rights 8 Audit 1

Subcategory & Impact: Subcategory & Impact:

One Share - One Vote External Auditor

Takeover Defenses Audit & Accounting Controversies

Other Issues

The total number of points in this subcategory is at the top of the possible range.

The total number of points in this subcategory is at the bottom of the possible range. No Star or Flag: The total number of points in this subcategory is in the middle of the possible range.

Vote Results for Annual General Meeting 24 June 2014

Proposal Mgmt Rec ISS Rec Disclosed Result

% For % Against % Abstain*

1 Approve Financial Statements and Statutory Reports For For Pass 99.8 0.1 0.1

2 Approve Consolidated Financial Statements and Statutory Reports

For For Pass 99.8 0.1 0.0

3 Approve Auditors' Special Report on Related-Party Transactions


4 Approve Treatment of Losses and Dividends of EUR 1.00 per Share


5 Advisory Vote on Compensation of Jean-Francois Dubos, Chairman of the Management Board

For For Pass 89.8 10.2 0.0

6 Advisory Vote on Compensation of Philippe Capron, Member of the Management Board up to Dec. 31, 2013


7 Reelect Aliza Jabes as Supervisory Board Member For For Pass 99.6 0.3 0.0

8 Reelect Daniel Camus as Supervisory Board Member For For Pass 97.7 2.2 0.1

9 Elect Katie Jacobs Stanton as Supervisory Board Member For For Pass 99.6 0.3 0.0

http://www.issgovernance.com/governance-solutions/investment-tools-data/quickscore/

http://www.issgovernance.com/governance-solutions/investment-tools-data/quickscore/




Proposal Mgmt Rec ISS Rec Disclosed Result

% For % Against % Abstain*

10 Elect Virginie Morgon as Supervisory Board Member For For Pass 94.6 5.3 0.1

11 Elect Philippe Benacin as Supervisory Board Member For For Pass 99.6 0.3 0.0

12 Authorize Repurchase of Up to 10 Percent of Issued Share Capital


13 Authorize Decrease in Share Capital via Cancellation of Repurchased Shares


14 Authorize up to 1 Percent of Issued Capital for Use in Restricted Stock Plans


15 Authorize Capital Issuances for Use in Employee Stock Purchase Plans


16 Approve Stock Purchase Plan Reserved for International Employees


17 Amend Article 8 of Bylaws Re: Appointment of Employee Representatives


18 Authorize Filing of Required Documents/Other Formalities


*Abstentions are counted together with against votes on a particular item.



Meeting Agenda & Proposals

Ordinary Business

Items 1 and 2. Approve Financial Statements and Statutory Reports and Approve Consolidated Financial Statements and Statutory Reports

FOR

VOTE RECOMMENDATION

Votes FOR these proposals are warranted, given the unqualified opinion and the lack of controversy.

Discussion

This is the company's routine submission of its financial statements for the fiscal year ended on Dec. 31, 2014, as well as the board’s and auditors’ reports thereon.

Analysis

The auditors’ reports included in the annual report are unqualified. Therefore, in the opinion of the auditors, the company's annual and consolidated financial statements are fairly presented in accordance with French accounting principles and IFRS rules.

Based on the information available, ISS is not aware of any particular concern or exception with respect to the company or its auditors.

Item 3. Approve Auditors' Special Report on Related-Party Transactions AGAINST

VOTE RECOMMENDATION

A vote AGAINST this proposal is warranted as the additional pension scheme benefiting Jean-François Dubos, former management board chairman, cannot be considered in line with the recommended guidelines and market best practice, in view of concerns on a key feature (unexplained late changes in the compensation structure triggering increased benefits).

BACKGROUND INFORMATION

Policies: Approve Special Auditors' Report Regarding Related-Party Transactions

Discussion

Under this item, shareholders are requested to approve the auditors' special report on related-party transactions.

The table below summarizes all transactions authorized during fiscal year 2014, or authorized during preceding fiscal years but carried out during the last fiscal year:

https://www.governanceexchange.com/index2.php?x=mtx&i=3210



Type (# of transactions)

Subject Concerned party

New (1) Counter-guarantee related to Maroc Telecom

SFR (former subsidiary)

New (1) Offers of Altice and Numericable-SFR to purchase the 20% stake in Numericable-SFR

SFR (former subsidiary)

New (1)* Severance package Arnaud de Puyfontaine (current chairman of the management board)

Ongoing, executed in 2014 (1)

Additional Pension scheme Jean-François Dubos (chairman of the management board until June 24, 2014)

Ongoing (1) Assistance services provided by Vivendi SFR (former subsidiary)

*Submitted in a separate item below (Item 5)

The auditors' special report also contains notable ongoing transactions relating to executive compensation, authorized during preceding fiscal years but not carried out during the last fiscal year. For further details, refer to "Ongoing regulated agreements with executives" in Company Update section above.

ISS POLICY

When reviewing auditors' reports on related-party transactions, ISS screens for and evaluates agreements with respect to the following issues: director remuneration (including severance packages and pension benefits), consulting services, liability coverage, and certain business transactions.

In particular, ISS will oppose agreements providing a severance payment and/or a non-compete agreement to a company executive for an amount representing more than twice his/her last annual cash remuneration (fixed salary and bonus, and including any additional payment due from a collective bargaining agreement), as such amounts would be deemed excessive in light of ISS standards and of French best practices. ISS also analyzes whether the attached performance criteria (required by law) are stringent enough to avoid any pay for failure. However, when such an agreement was already approved by shareholders at a previous general meeting and did not yet have any effect, ISS will typically flag the concerned agenda item without issuing a negative recommendation.

Analysis

Additional pension scheme for Jean-François Dubos

Jean-François Dubos, chairman of the management board until June 24, 2014, is entitled to receive benefits resulting from an additional pension scheme whose characteristics are presented below. He retired on June 24, 2014.

Approval by AGM: First approved by the April 20, 2006 GM

Since then, as part of the auditors' special report on related-party transactions

Date of authorization of the agreement:

Not disclosed

Approval of the board: No information on approval rate

This particular topic has been addressed by the AFEP-MEDEF Recommendations since October 2008 and by the AFG Recommendations since January 2009.

AFEP-MEDEF recommendations Plan Features

Beneficiaries: The group of beneficiaries must be broader than

executive corporate officers Senior executives, including current

Management Board members



Conditions for eligibility:

Beneficiaries must have a significant seniority within the group (2 years minimum)

3 years

Dubos' seniority: 23 years

Be a director or employee of the company when retiring

Yes

Expected benefits:

Reference period for the calculation of the benefits must cover several years

Average of the 3 years before retirement (fixed + variable)

Yearly increases in rights representing a limited percentage of the compensation (5% maximum)

2.5%-increase per year, progressively reduced to 1%;

capped at 60 times the Social Security Ceiling* compensation;

acquisition of rights subject to an upper limit of 30% of benchmark

salary

Annual rights capped at 45% of the reference remuneration (i.e., basic salaries and bonuses

due in title of the reference period) Yes (30% of reference remuneration)

Estimate annual benefit (as of 12/31/2013)

Estimate annual benefit (as of 12/31/2014)

EUR 300,000*

EUR 411,611

No late artificial change in the compensation structure to increase benefits

Yes in 2014 (see below)

*Specified by the company upon engagement in 2014.

Prior to being appointed management board chairman on June 28, 2012, Jean-François Dubos was board's general secretary. He retired on June 24, 2014, with a 23-year seniority within the group.

The increase in Dubos' annual compensation prior to his retirement must be assessed on a multiyear period. In 2014, Jean-François Dubos' basic salary has been raised by 28.6 percent in comparison with 2013. In addition, it has also been increased by 50 percent in 2012 since he became management board chairman.

In parallel, there have been repeated increases both in his target bonus and cap bonus since his election as chairman in 2012:

His target bonus represented 70 percent, 100 percent, and 120 percent of his basic salary in 2012, in 2013 in 2014, respectively, representing a42.9-percent increase in 2013 vs. 2012 and a 20-percent increase in 2014 vs. 2013).

His cap bonus represented 140 percent, percent 180 percent, and 200 percent of his basic salary in 2012, in 2013 in 2014, respectively, representing a 28.6-percent in 2013 vs. 2012 and 11-percent increase in 2014 vs. 2013.

The actual amounts of the bonus due to him represented 98 percent, 146.3 percent, and 120 percent of his basic salary in 2012, in 2013 and in 2014, respectively, meaning that, if the successive caps were never reached, targets were always reached. The increase in Dubos' remuneration in the course of FY 2012 is fully linked to his change in functions and is not deemed problematic. On the contrary, the company only provides unspecific and vague explanations for the following increases. As reported in the company's 2012 registration report, changes in 2013 vs. 2012 were decided "after examining market trends and specific events". Increases occurred in 2014 vs. 2013 were justified "in view of his extended and extraordinary term, which was intended only to be interim, and in recognition of his contributions and commitment during a major business turning point.

The materiality of these changes is also directly reflected in the annual benefit which was estimated by the company at EUR 300,000 at the end of FY 2013 (information provided by the company upon engagement last year) while it reached EUR 411,611 at the end of FY 2014, which represents an increase of 37.20 percent.



The company points out that this annuity represents 20.79 percent of the amount of the last target compensation of Jean-François Dubos and 30 percent of his reference salary. It also takes into consideration his seniority of 23 years with Vivendi SA.

However, as the company does not provide any compelling explanation to this constant trend, which furthermore contravenes ISS European executive compensation guidelines stating that any significant pay increases shall be explained by a detailed and compelling disclosure, it is impossible to ascertain that these changes in Dubos' compensation structure, decided just before his retirement, were justified.

Given the above-mentioned concerns, ISS considers that the additional pension scheme benefiting Jean-François Dubos significantly deviates from the AFEP-MEDEF recommendations and is not in line with the recommended guidelines.

All other related-party transactions (new or ongoing carried out during the last fiscal year)

Those transactions are deemed not contentious.

Item 4. Approve Allocation of Income and Dividends of EUR 1 per Share FOR

VOTE RECOMMENDATION

A vote FOR this income allocation proposal is warranted, despite the low payout ratio, based on the company's dividend allocation policy.


Policies: Approve Allocation of Income and Dividends

Discussion

Shareholders are asked to approve the board's proposed allocation of income (or loss) for the mother company for the fiscal year just ended.

The board is proposing a dividend of EUR 1 per share (excluding tax credits).

Consolidated Net Profit, Group Share: EUR 4,744,000,000

Total Dividend Distribution: EUR 1,351,600,638

Analysis

ISS analyzes net income’s allocation by examining the payout ratio (on a consolidated basis) and its past allocations.

(in EUR, as reported) 2014 (proposed) Variation 2013 2012

Dividend per share: 1 0.00% 1 1

EPS (Group Share): 3.52 137.83% 1.48 0.13

Payout Ratio: 28.41 67.57 769.23

__

ISS uses a minimum payout ratio of 30 percent and a maximum of 100 percent as benchmarks to trigger further analysis.

In this case, the payout ratio does not fall within this range.




The company provides the following explanation:

"The objective is to maintain this distribution level for the fiscal years 2015 and 2016, representing an additional return to shareholders of EUR 2 billion.

In addition to this distribution, a share repurchase program is planned to be launched, within the legal limit of 10% of the share capital, for approximately EUR 2.7 billion in accordance with the market regulations on share repurchases. The program will run over a period of 18 months.

In total, the return to shareholders could reach approximately EUR 5.7 billion by mid-2017 in addition to the EUR 1.3 billion paid in 2014".

Given the company's explanation, this proposal merits shareholder support.

However, ISS will be monitoring the company's practices closely with regard to the board’s capital allocation and next years' cash allocation as well as the disclosure on the related strategy. ISS may consider a negative recommendation in the future notably in light of concerns raised by the dissident shareholders under Items B and C below.

Item 5. Approve Severance Payment Agreement with Arnaud de Puyfontaine AGAINST

VOTE RECOMMENDATION

A vote AGAINST this proposal is warranted as the management board chairman may:

Receive a severance arrangement which is not deemed in line with market practices, in view of the concerns on triggering events; and

Continue to benefit from unvested stock options after his departure from the company, which is not in line with market practices and shareholders' interest.

Discussion

Under this item, shareholders are requested to approve a related party transaction. Its main features are as follows:

Type Subject Concerned party

New Severance package Arnaud de Puyfontaine (current Chairman of the management board)

Analysis

Severance package

Under the terms and conditions of this transaction, Arnaud de Puyfontaine (current chairman of the management board), could benefit from a severance payment. As required by French law, the payment of the severance payment is subject to the achievement of performance criteria.

Approval by AGM: Proposed this year

Date of authorization of the agreement:

Feb. 27, 2015

Approval of the board: No information on approval rate

Triggering events: Upon termination of his functions at the initiative of the company, except

in the case of gross negligence

Performance criteria: Payment conditional upon fulfillment of two criteria: no payment if



the Group's financial results (adjusted net income and cash flow from operations) were less than 80 percent of the budget over the two years prior to departure and

Vivendi's stock performance was less than 80 percent of the average performance of a composite index (CAC 40 (50%) and Euro STOXX® Media (50%)) over the last two

years

Maximum amount of the severance payment:

Capped at:

Two years of remuneration actually paid (in case that the bonus actually paid the year preceding departure is below the target bonus), and in case it could not,

and

18 months of the target remuneration (in case that the bonus actually paid the year preceding departure exceeds the target bonus)

Non-compete agreement: No

Total amount of the package: Capped at 18 months of the target remuneration (as described above)

Combination with additional pension scheme:

No

Post-mandate exercise of unvested stock-based awards

Yes, subject to the satisfaction of the related performance conditions

AMOUNT OF SEVERANCE PAYMENT

The total amount of the severance payment that may be granted to Arnaud de Puyfontaine would not exceed twice his last annual cash remuneration, and thus is in line with the applied guidelines. Nonetheless, the terms of the agreement do not provide for any downwards adjustment of the amount due were de Puyfontaine to be terminated in the short run.

PERFORMANCE CONDITIONS

The annual objectives attached to the performance condition based on Group's financial results are not disclosed. In this respect, and considering the minimum hurdle for this objective (80 percent of budget), it is impossible to assess if this performance condition is acceptable.

Moreover, setting the performance condition based on the share performance at 80 percent of the average performance of the peer indexes shall not be viewed as stretching enough. As a consequence, it is impossible to

confirm if these two performance conditions are set in a manner to avoid a guaranteed payment of the severance.

TRIGGERING EVENTS

Arnaud de Puyfontaine may benefit from his severance payment in case of termination of his functions at the initiative of the company, except in the case of gross negligence. This triggering event cannot be considered as an imposed departure resulting from a change in control or in strategy. Such practice is not in line with the AFEP-MEDEF Code which clearly refers to "a constraint departure resulting from a change in control or in strategy".

POST-MANDATE EXERCISE OF UNVESTED STOCK-BASED AWARDS

Arnaud de Puyfontaine would keep the right to exercise his stock-based awards, regardless of whether they are vested, after his departure.

Such transaction benefiting an executive corporate officer is not market best practice and is not in shareholders’ interest.



Items 6-10. Advisory Vote on Compensation of Management Board Members and Chairmen SPLIT

VOTE RECOMMENDATION

Votes FOR Items 7 and 8 are warranted because the terms and conditions of the remuneration do not contravene good market executive remuneration practice.

Vote AGAINST Items 6, 9, and 10 are warranted as the proposed remunerations are below par in terms of disclosure and practice.

Discussion

Under these resolutions, the company proposes advisory votes on the compensation granted for the fiscal year in review to

Arnaud de Puyfontaine: member of the management board from Jan. 1, 2014, to June 23, 2014, chairman of the management board since June 24, 2014;

Hervé Philippe: member of the management board since June 24, 2014;

Stéphane Roussel: member of the management board since June 24, 2014;

Jean-François Dubos: chairman of the management board until June 24, 2014;

Jean-Yves Charlier: member of the management board from Jan. 1, 2014, to June 24, 2014.

MARKET CONTEXT

In May 2013, the French government opted not to introduce a law on say-on-pay votes, and instead tasked issuers' associations with implementing the framework of such votes.

Following this decision, the new version of the AFEP-MEDEF Code published in June 2013 recommends, among other significant changes, an annual advisory vote on the compensation received and due with respect to the fiscal year under review by executive corporate officers. This requirement applies to all companies referencing the AFEP-MEDEF Code.

COMPANY PRACTICE

Non-Performance-based Pay Elements

Basic salary

Arnaud de Puyfontaine: EUR 900,000 (annual basis) (new member, thus no change since last year)

Hervé Philippe: EUR 350,000 (prorata temporis) (new member, thus no change since last year)

Stéphane Roussel: EUR 350,000 (prorata temporis) (new member, thus no change since last year)

Jean-François Dubos: EUR 450,000 (paid in connection with the first 6 months of 2014) (last year: EUR 700,000, i.e., +28% on an annual basis)

Jean-Yves Charlier: EUR 475,000 ((paid in connection with the first 6 months of 2014) (new member, thus no change since last year)

Key perquisites

Arnaud de Puyfontaine: EUR 50,973 (Company car without driver and paid leave)

Hervé Philippe: EUR 3,788 (Company car without driver)

Stéphane Roussel: EUR 23,554 (Company car without driver and profit sharing)

Jean-François Dubos: EUR 4,951 (Company car without driver)

Jean-Yves Charlier: EUR 21,316 (Company car without driver and profit sharing)

Pension

Arnaud de Puyfontaine: o Yes, no payment in 2014 o Estimate annual benefits as of Dec. 31, 2014: N/D

Hervé Philippe:



o Yes, no payment in 2014 o Estimate annual benefits as of Dec. 31, 2014: N/D

Stéphane Roussel: o Yes, no payment in 2014 o Estimate annual benefits as of Dec. 31, 2014: N/D

Jean-François Dubos: o Yes, set up as from June 30, 2014, as he retired. o Estimate annual benefits as of Dec. 31, 2014: EUR 411,611, corresponds to 20.79

percent of his last target remuneration and 30 percent of his reference remuneration

Jean-Yves Charlier: o No, due to his resignation as of June 24, 2014, he lost the benefit of his pension

scheme. o Estimate annual benefits as of Dec. 31, 2014: N/A

Key points of defined-benefit scheme:

Beneficiaries: Vivendi SA’s executives,

Three years’ seniority (minimum) with the company; Progressive maximum acquisition of seniority rights, limited to 20 years, which, according

to a sliding scale, is not to exceed 2.5% per year and is progressively reduced to 1% o Arnaud de Puyfontaine: 2.5% per year o Hervé Philippe: 2.5% per year o Stéphane Roussel: 1.25% per year o Jean-François Dubos: pension activated in 2014 as retirement on June 24, 2014 o Jean-Yves Charlier: lost his pension scheme's benefit as resignation

Benchmark salary for calculating retirement payments: an average of the past three years of fixed and variable compensation, if this average exceeds 13 maximum annual social security payments;

“Double ceiling”: benchmark salary and a maximum of 60 times the social security maximum;

Acquisition of rights capped at 30% of benchmark salary;

60-percent reversion to in the event of death.

Performance-based Pay Elements

SHORT-TERM INCENTIVES

Award level

For all management board members

Cap: o Arnaud de Puyfontaine:

As management board member (until June 24, 2014): 200% of basic salary (new member, thus no change since last year)

As chairman of management board member: 150% of basic salary (new member, thus no change since last year)

o Hervé Philippe: 150% of basic salary since June 24, 2014 (new member, thus no change

since last year) o Stéphane Roussel:

150% of basic salary since June 24, 2014 (new member, thus no change since last year)

o Jean-François Dubos: 200% of basic salary (last year: 180% of basic salary, i.e., +11%)

o Jean-Yves Charlier: 200% of basic salary (new member, thus no change since last year)

On-target:



o Arnaud de Puyfontaine: As management board member (until June 24, 2014): 120% of basic salary

(new member, thus no change since last year) As chairman of management board member (since June 24, 2014: 100% of

basic salary (new member, thus no change since last year) o Hervé Philippe:

100% of basic salary (new member, thus no change since last year) o Stéphane Roussel:

100% of basic salary (new member, thus no change since last year) o Jean-François Dubos:

120% of basic salary (last year: 100% of basic salary for former management board members, i.e., +20%)

o Jean-Yves Charlier: 120% of basic salary (new member, thus no change since last year)

Comprising cash/deferred All in cash

Performance criteria

Quantitative criteria (weight: 50% of on-target bonus): adjusted net income of the Group (weight: 30% of on-target bonus) Operating cash flow (weight: 20% of on-target bonus)

Qualitative criteria (weight: 50% of on-target bonus): Based on a series of priority actions assigned to the corporate management. These priority actions are defined as a function of strategy at Group level and the action plans approved for each business unit. These criteria allow assessment of the capacity of officers to implement and complete planned sales or acquisitions, undertake the necessary strategic realignments in an increasingly competitive environment, and identify new directions with regard to offerings of content and services. For 2014, and for Vivendi SA’s corporate management, the priority actions were as follows:

Finalize the separation of SFR from the Vivendi group under the best possible conditions (weight: N/D);

Prepare the governance and management of each entity (weight: N/D);

Contribute to the collaboration between Vivendi’s subsidiaries and (weight: N/D);

Develop and seek certification for action taken on the group ’s societal challenges (weight: N/D);

Group ’s commitments to corporate social responsibility (CSR) (CSR activities are certified by an independent specialized agency): promoting cultural diversity, knowledge sharing, protecting and empowering young people, and the protection of personal data (weight: 5%).

Bonus earned

Arnaud de Puyfontaine: EUR 1,282,500 (annual basis) (new member, thus no change since last year), 142.5% of basic salary

Hervé Philippe: EUR 437,500 (prorata temporis) (new member, thus no change since last year), 125 percent of base salary

Stéphane Roussel: EUR 437,500 (prorata temporis) (new member, thus no change since last year), 125% of basic salary

Jean-François Dubos: EUR 540,000 (paid in connection with the first 6 months of 2014) (last year: EUR 1,024,000, i.e., +5.47% on an annual basis), 120% of basic salary

Jean-Yves Charlier: EUR 570,000 (paid in connection with the first 6 months of 2014) (new member, thus no change since last year), 120% of basic salary

Additional information

Level of achievement of performance criteria: Arnaud de Puyfontaine:

Global level of achievement: 151%, limited to 142.5% of the amount of his base salary o Quantitative criteria: 78% of basic salary o Qualitative criteria: 73% of basic salary

Hervé Philippe: Global level of achievement: 134%, limited to 125% of the amount of his base salary

o Quantitative criteria: 69% of basic salary o Qualitative criteria: 65% of basic salary

Stéphane Roussel:



Global level of achievement: 134%, limited to 125% of the amount of his base salary o Quantitative criteria: 69% o Qualitative criteria: 65%

Jean-François Dubos:

Global level of achievement: N/A – Award of on-target bonus (on a prorata temporis basis) decided on Aug. 28, 2014

o Quantitative criteria: N/A o Qualitative criteria: N/A

Jean-Yves Charlier:

Global level of achievement: N/A - Award of on-target bonus (on a prorata temporis basis) decided on Aug. 28, 2014

o Quantitative criteria: N/A o Qualitative criteria: N/A

LONG-TERM INCENTIVES

Award level (in the policy for the fiscal year under review)

No policy publicly disclosed by the company regarding the proportion or valuation of annual grants in comparison with basic salary or cash compensation

Award type(s) (granting during the fiscal year under review)

Performance shares

Performance criteria (granting during the fiscal year under review)

100% of the award(s) with performance criteria attached

Performance period: 2 years

Nature (and objectives when disclosed): o Group EBITDA margin (weight: 70%) o Price performance vs. STOXX Europe 600 Media (weight: 19.5%) and STOXX

Europe 600 Telecommunications (weight: 10.5%) indexes (total weight: 30%)

Awards granted during the fiscal year under review

100,000 valued at EUR 1,713,000 (new member, thus no change since last year)

Hervé Philippe: No awards in 2014 (new member, thus no change since last year)

Stéphane Roussel: No awards in 2014 (new member, thus no change since last year)

Jean-François Dubos: No awards in 2014 (last year: 106,384 performance shares, valued at EUR 2,257,367)

Jean-Yves Charlier: No awards in 2014 (new member, thus no change since last year)

Awards vested/lapsed during the fiscal year under review

Vested/Lapsed:

Stock options: None

Performance shares: None

Level of achievement of performance criteria for awards vested/lapsed during the fiscal year under review

N/A

Severance/Change-in-Control Arrangements

Severance arrangements

Arnaud de Puyfontaine: o up to 18 months (base salary + bonus target) in title of his corporate office

(proposed under item 5 above) o no severance payment in title of employment contract (what he waived when he

became chairman of the management board) o no non-compete clause

Hervé Philippe: o up to 18 months (base salary + bonus target) in title of his employment contract o no severance payment in title of his corporate office



o no non-compete clause

Stéphane Roussel: o up to 18 months (base salary + bonus target) in title of his employment contract o no severance payment in title of his corporate office o no non-compete clause

Jean-François Dubos: o no severance payment in title of his corporate office or employment contract o no non-compete clause

No termination payments were made during the period under review

Jean-Yves Charlier o no information on severance payment due in title of his employment contract o no severance payment in title of his corporate office o no non-compete clause

No public information is disclosed whether any termination payment was done for the benefit of Jean-Yves Charlier in application of his employment contract

Change-in-Control arrangements

None

Remuneration Committee Composition & Communication

Committee Composition

Composition in line with best practice recommendations

Yes, according to the company and ISS (83% independent (without taking into account the censor) and 71% (with the censor) vs 50% recommended by the AFEP-MEDEF Code

Risk Mitigators

Clawback policy No

Stock ownership guidelines Not disclosed Current holding: Not disclosed

Stock holding requirements

Yes Members of the Management Board must hold, until the end of their term of office, and in a registered account, a number of shares received from the exercise of stock options and performance shares granted since the implementation of the 2007 plan that is equal to at least 20% of the net capital gain on acquisition recognized each year, if any, from the date of exercise of the stock options or sale of the performance shares Since Feb. 27, 2015

Chairman and members of the management board must retain a number of shares corresponding to one year of their fixed gross compensation and target bonus in a registered account until they leave their positions; and

Members of management board and the executives of each of the operational subsidiaries must retain a number of shares corresponding to six months of their fixed gross compensation and target bonus in a registered account until they leave their positions.

The Corporate Officers and executives concerned must achieve these objectives within a maximum of five years after they assume their positions.

Additional information Level of approval of SOP proposed at the 2014 AGM concerning Jean-François Dubos: 89.8%



ISS POLICY

Seeking shareholder approval for past remuneration is a positive corporate governance provision. It allows shareholders to express their support or displeasure over how the company pays and provides incentive to its senior management in the most direct way possible.

ISS may recommend a vote against compensation-related resolutions in cases where boards have failed to demonstrate good stewardship of investors' interests regarding executive compensation practices.

The assessment of compensation follows the ISS Global Principles on Executive and Director Compensation which are detailed below. These principles take into account global corporate governance best practice.

The ISS Global Principles on Compensation underlie market-specific policies in all markets:

1. Provide shareholders with clear, comprehensive compensation disclosures;

2. Maintain appropriate pay-for-performance alignment with emphasis on long-term shareholder value;

3. Avoid arrangements that risk “pay for failure;”

4. Maintain an independent and effective compensation committee;

5. Avoid inappropriate pay to non-executive directors.

In line with European Commission Recommendation 2004/913/EC, ISS believes that seeking annual shareholder approval for a company's compensation policy is a positive corporate governance provision.

ISS ANALYSIS

Overview of the remuneration policies and practices of Vivendi

EUROPEAN MARKET STANDARDS DOES VIVENDI COMPLY?

Disclosure

There should be adequate disclosure on the company's policies and practices in relation to the remuneration of executives and directors.

No

Executive remuneration

Any short-term compensation component should include a maximum award limit. Yes

Performance metrics attached to the short-term compensation component should be disclosed.

Quantitative metrics

Yes

Qualitative metrics

Yes (not retrospectively)

The compensation policy should notably avoid guaranteed or discretionary compensation.

No

Executives should not be entitled to termination benefits in excess of 24 months' pay. Yes

Vesting schedule

Vesting of long-term incentive grants must not occur less than three years from date of grant.

No

Performance criteria

Performance metrics attached to the long-term compensation component should be disclosed.

Yes

Non-executive director remuneration

Non-executive directors should not receive options, or similarly structured equity-based compensation.

N/A



There should not be an existing retirement benefit scheme for non-executive directors. N/A

Remuneration committee

No executive director, including the CEO, should be a member of the remuneration committee.

Yes

ISS COMMENTS

Background

The management board has been significantly restructured: Jean-François Dubos, former chairman of the management board, and Jean-Yves Charlier, former management board member, retired and resigned, respectively, at the close of the June 24, 2014, AGM. Jean-Yves Charlier and Arnaud de Puyfontaine joined the management board on Jan. 1, 2014, and the latter became chairman of the management board on June 24, 2014. At the same date, two new management board members, Hervé Philippe and Stéphane Roussel, were appointed. In this context, bonus' target and cap due to new management board members are both below those due to former management board members. The basic salary of the new management board chairman is the same as the one due to his predecessor (EUR 900,000).

Disclosure

The weight of quantitative vs. qualitative components is 50 percent-50 percent of on-target bonus, which is relatively high and leaves room for discretion for the board, but still remains acceptable.

However, the company does not specify the proportion of quantitative criteria vs. qualitative criteria in respect of the bonus cap. It appears from the actual level of achievement of the objectives in 2014 that the weight of both qualitative and quantitative criteria exceeded the weight of 50 percent. In absence of any information on this remuneration policy's element, it is not clear in what proportion the overachievement of one or several of the performance criteria can counterbalance the underperformance of other one(s).

There is consequently a lack of full transparency on the terms and conditions of the bonus policy. However, in practice, the company discloses the breakdown of the level of achievement between quantitative criteria and qualitative criteria for Puyfontaine, Philippe, and Roussel, allowing shareholders to notice that these quantitative criteria and qualitative criteria have been overachieved during the fiscal year under review.

Arnaud de Puyfontaine

The setting of Arnaud de Puyfontaine's basic salary in connection with the fiscal year 2014 is not clear and exhaustive as the company does not make the distinction between his basic salary as management board member and his basic salary as management board chairman. The amount of his annual basic salary as management board member (position he held between Jan. 1, 2014, and June 24, 2014) is not disclosed, whereas the company is transparent concerning his basic salary as management board chairman (his position as from June 24, 2014) which amounts to EUR 900,000 per year. In the tables presenting his remuneration for the full year under review, the amount of EUR 900,000 is presented as his basic salary on an annual basis (with no distinction between the periods when he was member and chairman). In the same way, the company does not distinguish the part of his bonus linked to his management board membership and the part linked to his chairmanship. The amount of EUR 1.28 million is presented as his bonus due in connection with the fiscal year under review, without any further details provided. Neither does the company disclose the respective levels of achievement of the performance conditions attached to the bonus due as management board member for the first six months and of those attached to the bonus due as management board chairman for the remaining months of the fiscal year under review.

Jean-François Dubos and Jean-Yves Charlier

The supervisory board held on Aug. 28, 2014, granted Jean-François Dubos and Jean-Yves Charlier (who were management board members until June 24, 2014) their on-target bonuses (on a prorata temporis basis). This



practice means that their bonuses were actually granted without any assessment of the performance conditions initially attached. Such practice corresponds to guaranteed payments, which contravenes ISS European executive compensation guidelines stating that there shall be a clear link between the company's performance and variable awards.

Moreover, in 2013, Jean-François Dubos received 106,384 performance shares (including an additional grant of 70,000 shares in Dec. 13, 2013 - to be vested on Dec. 14, 2015 - while Dubos had already announced that he would retire in 2014) valued at EUR 2,257,367. Although he retired on June 24, 2014, the 2014 annual report does not specify whether these grants were (fully or partially) cancelled due to his departure. We draw shareholders' attention to the fact that executives of the company historically benefit from the right to exercise their stock-based awards, regardless of whether they are vested or not, after their departure (it was the case of the former chairman of the management board, Jean-Bernard Lévy, and similar benefit is also granted to the new chairman, Arnaud de Puyfontaine (refer to Item 5 above)). Such transaction benefiting to an executive corporate officer is not market best practice and is not in shareholders’ interest.

The company indicates the basic salary amount actually paid from January to June 2014. On an annual basis, Jean-Yves Charlier was likely to receive a basic salary EUR 950,000. The company does not provide any information on the magnitude of this amount, which exceeded the management board chairman's basic salary.

Increase in basic salary and in bonus' cap and target of Jean-François Dubos

Although his basic salary remained below the EUR 1,000,000 received by his predecessor, Jean-Bernard Lévy, the increase in Dubos' annual compensation prior to his retirement, must be assessed on a multi-year period. In 2014, Jean-François Dubos' basic salary has been raised by 28.6 percent in comparison with 2013, while it has also increased by 50 percent since 2012 when he became management board chairman.

In parallel, there have been repeated increases both in his target bonus and cap bonus since his election as chairman in 2012:

His target bonus represented 70 percent, 100 percent, and 120 percent of his basic salary in 2012, in 2013 in 2014, respectively, representing a42.9-percent increase in 2013 vs. 2012 and a 20-percent increase in 2014 vs. 2013).

His cap bonus represented 140 percent, percent 180 percent, and 200 percent of his basic salary in 2012, in 2013 in 2014, respectively, representing a 28.6-percent in 2013 vs. 2012 and 11-percent increase in 2014 vs. 2013.

The increase in Dubos' remuneration in the course of FY 2012 is fully linked to his change in functions and is not deemed problematic. On the contrary, the company provides unspecific and vague explanations for the increases which were decided after 2012. As reported in the company's 2012 registration report, changes in 2013 vs. 2012 were decided "after examining market trends and specific events". Increases occurred in 2014 vs. 2013 were justified "in view of his extended and extraordinary term, which was intended only to be interim, and in recognition of his contributions and commitment during a major business turning point.

CONCLUSION

The proposed remuneration to Jean-François Dubos is below par in relation to market standards, particularly with regard to guaranteed bonus, unexplained increase in basic salary and short term bonus caps, as well as a potential post-mandate exercise of non-vested awards while a significant grant was awarded six months before his retirement (and at a time when this retirement was already announced).

The proposed remuneration to Jean-Yves Charlier is below par in relation to market standards, particularly with regard to guaranteed bonus.

The proposed remuneration to Arnaud de Puyfontaine is below par considering the overall lack of disclosure on his basic salary as member and chairman of the management board and the corresponding bonus attached to.

Say-on-pays concerning Hervé Philippe and Stéphane Roussel are not problematic.



Items 11 and 12. Elect Directors FOR

VOTE RECOMMENDATION

Votes FOR these proposals are warranted given the satisfactory level of board independence of 71 percent (taking into consideration employee representative) and 77 percent (excluding employee representative) and the absence of specific concern about the proposed nominees.

Discussion

CANDIDATES

The company proposes the following (re)elections:

Type of election Nominees

New supervisory board members to be elected: Tarak Ben Ammar and Dominique Delport

Terms

4-year term: Tarak Ben Ammar and Dominique Delport

INFORMATION ON THE NEW NOMINEES

The company provided the following information on the new nominees:

Tarak Ben Ammar

"Tarak Ben Ammar was born on June 12, 1949 in Tunis. He is a cultural entrepreneur, working in audiovisual media both in Europe and worldwide.

He began his career in 1974 by convincing a number of American producers to produce parts of their movies in Tunisia. He participated in the production of a number of international films, including the blockbusters Star Wars (George Lucas) and Raiders of the Lost Ark (Steven Spielberg). He has produced or co-produced more than 70 movies, including the prestigious La Traviata (Franco Zeffi relli), Pirates (Roman Polanski), The Passion of Christ (Mel Gibson) and L’Or Noir (Jean-Jacques Annaud).

Concomitantly, he developed a group presence in several countries, including France, Italy, North Africa, and the United States:

in France, through his company Quinta Communications, he participated with the Caisse des Dépôts et Consignations in the recovery and development of a leading post-production group, based on the restructuring of Les Laboratoires Eclair, an emblematic company in the French film industry. He also partnered with Luc Besson to develop the Cité du Cinéma project;

in Italy, his subsidiary Prima TV has rapidly established its position as the fourth largest multimedia group, behind Mediaset, RAI and Sky, primarily through Société Eagle, the largest independent distributor in the country. In 2013, the telecommunications group Nabil Sawiris purchased a stake in Prima;

in North Africa, he founded and developed the TV channel Nessma, which has become the leading channel in Tunisia, Algeria, and Libya and the second biggest channel in Morocco. Through its democratic positioning and independence, this channel played a central role in the Arab Spring. He is also a shareholder in the Egyptian TV channel ONTV; and

in the United States, with the Weinstein brothers and Goldman Sachs, he co-founded the independent studio “The Weinstein Company”, which has produced, among other fi lms, The King’s Speech and The Artist.

Tarak Ben Ammar is a corporate Director of several companies, including The Weinstein Company in the United States and Mediobanca in Italy where he serves as an independent corporate Director.

He graduated from Georgetown University in Washington, D.C., with a degree in international economics".



Dominique Delport

"Dominique Delport was born on November 21, 1967. He is a graduate of the EM Lyon (Ecole Supérieure de Commerce de Lyon) and a winner of the MBA Moot Corp International Challenge hosted by the University of Texas, Austin, and also the recipient of an Emmy Award.

He has had three distinct professional careers: television journalist, Internet entrepreneur, and head of a media agency, which gives him expertise in content, digital and media at the international level.

Delport began his career as Deputy Chief Editor for the television channel M6 Lyon, and then became Chief Editor at M6 Lille. In 1996, he was appointed Chief Editor at M6, the second largest private television channel in France.

From 1996 to 2000, he directed the news program “6 Minutes” (4 million daily viewers) and news reports (including “Zone Interdite” and “Capital”).

In April 2000, he gave up his career in television to move into the world of start-ups, forming the young streaming multimedia company “Streampower”, where he served as Chairman-CEO. In October 2001, Streampower became a 75% subsidiary of the Rivaud Media group (Bolloré Group).

In 2003, Dominique Delport launched a daily program on Canal+, “Merci pour l’info”, and in 2004 he created and produced for France 5 the program “C.U.L.T.”, an interactive televised broadcast on urban cultures featuring live videos from bloggers.

After participating in the launch of Direct 8 (TNT), Dominique Delport hosted the weekly show titled “8-Fi”, a live broadcast devoted to new media and technologies.

Dominique Delport joined Media Planning Group (MPG) on February 1, 2006 as Chief Executive Officer, while retaining his position as Chairman-CEO at Streampower. He was appointed Chief Executive of MPG France in June 2006 and then, in February 2007, Chief Executive Offi cer of Havas Media France.

In February 2008, he was promoted to the position of Chairman-Chief Executive Officer of Havas Media France. In February 2009, he was elected to a two-year term as President of the Union of Media Consulting and Purchasing (UDECAM), the organization for all French media agencies. Following the success of the integrated organization of Havas Media France, he was named CEO of the Havas Media Group global network. As a member of the Executive Committee of Havas Media Group, today, he supervises all brands, customers, commercial activities, research and the economic watch for the Group’s 126 markets, under the direction of Yannick Bolloré, Chairman-CEO of Havas. In November 2013, he was given direct responsibility for Havas Media Group in the United Kingdom as Chairman.

He is also a member of the Facebook Client Council.

“Campaign” magazine ranked him in the “Top 3 UK Media Suit” in 2013, and according to the barometer TweetBosses he is one of the most followed Chairman-CEOs on social media in France".

ISS POLICY

For the French market, ISS analyzes supervisory board elections by examining several aspects of the proposal itself (bundled proposal, length of term, disclosure of the nominee's name), as well the level of independence of the company's (supervisory) board (minimum requirements of 50 percent for directors elected by shareholders and one-third for the whole board in non-controlled companies, and at least one-third at controlled companies). ISS also monitors the nominee's qualification under ISS classification, his/her attendance at board and committee meetings, and the number of outside mandates.

Under extraordinary circumstances, ISS could issue a negative recommendation due to (i) material failures of governance, stewardship, or fiduciary responsibilities, at the company, (ii) failure to replace management as appropriate, or (iii) egregious actions related to the director's service on other boards. ISS also advocates that supervisory board members align their interests with those of shareholders by investing in the company.



Analysis

For companies with no majority shareholder, ISS accepts a minimum of 50 percent of independent supervisory board members. For companies with no majority shareholder, ISS recommends a minimum of 33 percent of independence within the entire board and a minimum of 50 percent of independence within board members elected by shareholders (meaning that board members not elected by shareholders in accordance with local law(s) are excluded from this second threshold).

With the proposed composition, the level of independents of Vivendi's board would reach 71 percent (taking into consideration employee representative) and 77 percent independent (excluding employee representative), which is considered satisfactory. There is no specific concern with the proposed nominees.

Item 13. Authorize Repurchase of Up to 10 Percent of Issued Share Capital AGAINST

VOTE RECOMMENDATION

This resolution warrants a vote AGAINST as the share repurchase program can be continued during a takeover period.


Policies: Authorize Share Repurchase Program

Discussion

The board is seeking approval to conduct a share buyback with the following provisions:

Number of shares 135,308,252 10% of the capital

Duration of authority 18 months

Maximum purchase price EUR 20 100% of market price

Current share price EUR 22.90

Repurchase cap EUR 2.71 billion

Can authority be used during takeover bid? See below

Analysis

For CAC40 Index companies, and until Jan. 31, 2016, ISS will generally recommend shareholders vote against any repurchase share program if the resolution does not specify clearly that it will not be possible to continue this program during a takeover period.

For other companies, ISS will recommend shareholders vote for the share repurchase program unless the resolution specifies clearly that it will be possible to continue this program during a takeover period.

IMPACT OF "FLORANGE ACT"

In this case, although the resolution is silent on this matter, shareholder's attention is drawn to the fact that pursuant to recent changes in French legislation ("Florange Act" dated March 2014), the use of such authorizations by the board of directors during a takeover period no longer requires prior shareholder approval.

As a consequence, actual use of this share buyback authority during a takeover bid cannot be fully excluded. For this reason, this resolution warrants opposition.




Extraordinary Business

Item 14. Authorize Decrease in Share Capital via Cancellation of Repurchased Shares FOR

VOTE RECOMMENDATION

A vote FOR this item is warranted as such share capital reductions are favorable to shareholders.


Policies: Approve Reduction in Share Capital

Discussion

This item would enable the company to cancel shares repurchased in connection with an earlier buyback authorization and reduce its capital by a corresponding amount. The amount of capital that may be cancelled is limited to 10 percent.

The cancellation would be achieved by simple bookkeeping entries, where the board of directors is being empowered by this meeting to make the entries and to amend the company's articles of association accordingly. The amount of the reduction will be allocated to a reserve to be utilized in accordance with a decision by the general meeting.

The amount of capital that may be cancelled is limited to 10 percent in any 24-month period.

Analysis

Share buybacks benefit shareholders by boosting the trading price and returning surplus capital. Additionally, repurchases usually improve the efficiency of the balance sheet, which may also enhance returns over the long term.

Items 15 and 16. Authorize Issuance of Equity AGAINST

VOTE RECOMMENDATION

These resolutions warrant votes AGAINST as they could be used during a takeover period.

Discussion

With these items, shareholders would allow the company to issue new shares and various equity-linked instruments (e.g., warrants, convertible bonds, bonds with warrants, redeemable bonds, or exchangeable bonds) with and without preemptive rights.

Item Nature Amount (EUR) vs outst. capital Max.

Discount Binding

priority right During

Takeover

15 With preemptive rights 750 million 10.08% No info ― Yes*

16 Contributions in kind

10% n/a ― Yes*

15 Total limit 750 million 10.08%




*Pursuant to recent changes in the French legislation ("Florange Act" dated March 2014), use of such authorizations by the management board during a takeover period no longer requires prior shareholder approval.

The company has specified that the proposed authorities would be valid for 26 months and would replace any past authorities with the same purpose.

Analysis

Currently, the par value of the company's outstanding share capital is EUR 7,441,953,871.

ISS policy on general issuance authorities of stock-related instruments accepts maxima of:

50 percent over the currently issued capital for issuance requests with preemptive rights (or without preemptive rights but with a binding “priority right");

10 percent over the currently issued capital for issuance requests without preemptive rights;

5-percent discount against the market price at the time of issuance; and

For CAC40 Index companies, and until Jan. 31, 2016, generally vote against any general share issuance authorities (with or without preemptive rights) if they can be used for antitakeover purposes without shareholders' approval.

All proposed authorizations are in line with these guidelines in terms of volume and discount.


Although the resolution is silent on this matter, shareholder's attention is drawn to the fact that pursuant to recent changes in French legislation ("Florange Act" dated March 2014), the use of such authorizations by the board of directors during a takeover period no longer requires prior shareholder approval.

As a consequence, actual use of these authorities during a takeover bid cannot be excluded. For this reason, these resolutions warrant opposition.

Items 17-18. Authorize Capital Issuances for Use in Employee Stock Purchase Plans FOR

VOTE RECOMMENDATION

A vote FOR is warranted because the plans could increase employee participation to a level of ownership that would remain acceptable for savings-related share purchase plans.

Discussion

The company is seeking shareholder approval for an authorization to issue shares reserved for the company's savings-related share plans (Item 17) and international savings-related share plans (Item 18), to the benefit of its employees. Shareholders would have no preemptive rights. These authorization14 would be valid for 26 months. Details are as follows:

Shares Available: Up to 1.00% of the company's issued capital (basic)

Up to 4.08% under all stock purchase plans (post operation)

Eligibility: All employees participating in the company's savings plan

Issue Terms: The issue price must be equal to at least 80% of the trading price

Administration: Full board



French law requires issuers to submit a capital increase reserved for employees participating in a savings-related share purchase plan at shareholder meetings when the employees control less than 3 percent of the company's issued capital, regardless of whether a company maintains such a plan.

Analysis

ISS supports the use of share plans for employees as a general matter, as they help align employees' interests with those of shareholders. While ISS generally opposes plans granting discounted options or shares to management, ISS makes allowances for plans that include all employees, such as savings-related share plans. Allowing regular employees to subscribe discounted options or shares promotes employee participation in ownership and focuses employees at all levels on improving company performance and on increasing share value.

Currently, the company's employees control 3.12 percent of issued capital in terms of share purchase plans. Approval of this proposal could increase employee participation to approximately 4.08 percent.

The potential dilution falls within ISS' guidelines for savings-related share purchase plans.

Item 19. Authorize Capitalization of Reserves of Up to EUR 375 Million for Bonus Issue or Increase in Par Value AGAINST

VOTE RECOMMENDATION

This resolution warrants a vote AGAINST as it could be used during a takeover period.


Policies: Authorize Capitalization of Reserves for Bonus Issue or Increase in Par Value

Discussion

This asks shareholders to permit the board to increase issued capital by a maximum nominal value of EUR 375 million by capitalizing various reserves or retained profits. The board would then also be authorized to either increase the share's nominal value or to carry out a bonus issue.

Analysis

This request represents a potential increase of 5.04 percent over the company's issued share capital, which amounts to EUR 7,441,953,871. Shareholders would receive new shares or a boost in the par value of their shares at no cost.

Dilution is not a problem when capital is increased using these scenarios, as this would merely transfer wealth to shareholders.


Although the resolution is silent on this matter, shareholder's attention is drawn to the fact that pursuant to recent changes in French legislation ("Florange Act" dated March 2014), the use of such authorizations by the board of directors during a takeover period no longer requires prior shareholder approval.

As a consequence, actual use of this authority during a takeover bid cannot be excluded. For this reason, the resolution warrants opposition.




Item 20. Authorize Filing of Required Documents/Other Formalities FOR

VOTE RECOMMENDATION

This routine item merits a vote FOR.

Discussion & Analysis

Approval of this item would authorize the holder of a copy of the minutes of the general assembly to accomplish any formalities required by French law.

This is a routine item in France.

Shareholder Proposal Submitted by PhiTrust Active Investors

Item A. Amend Article 17 of Bylaws Re: Absence of Double Voting Rights FOR

VOTE RECOMMENDATION

A vote FOR this item is warranted as it would maintain the one-share, one-vote principle in the company's bylaws.

Discussion

Under this item, PhiTrust Active Investors with eight other institutional shareholders (Railways Pension Trustee Company Ltd (UK), PGMM Investment (The Netherlands), AMUNDI Group on behalf of AMUNDI AM and CPR AM (France), CalPERS (USA), Edmond de Rothschild Asset Management (France), OFI Asset Management, OFI Gestion Privée, Aviva Investors, DNCA Finance, and Proxinvest) propose to amend article 17.3 of the company's bylaws.

This amendment is described in the table below:

Item Subject Bylaws before amendment Bylaws after amendment

A Absence of double-voting rights

Art. 17.3

One share entitles to one vote

Art. 17.3

One share would entitle to one vote, notwithstanding the provisions of Article L225-123 al. 3 of the French Commercial code

= positive impact = neutral impact = negative impact

ISS POLICY

Under the Florange Act, registered shares held for two years will automatically acquire double-voting rights, thereby breaching the widely subscribed-to one-share, one-vote principle. Prior to this act, French companies were allowed to grant double-voting rights to registered shareholders after a minimum of two years only when they had a bylaw provision specifically allowing for it.

2015 is the last full year when French listed companies, whose bylaws are silent regarding this provision of Florange Act, can amend them to retain the one-share, one-vote principle, before the automatic introduction of



double voting rights. For these companies, action is necessary to preclude the automatic grant of double voting rights by a shareholder-approved bylaw amendment.

ISS would recommend supporting any bylaws' amendment aimed at maintaining the one-share, one-vote principle, regardless of whether it is proposed by the company or by shareholders.

Analysis

Shareholders are requested to opt-out of the application of the Florange Act's provision concerning the automatic grant of double voting rights to long-term registered shareholders.

Pursuant to the French Commercial Code, the responsibility to file a resolution in the AGM's agenda belongs to the board. At Vivendi, management board members (directly elected by the supervisory board members) chose not to file a resolution giving shareholders the opportunity to decide on the merits of double voting rights. In compliance with the French Commercial Code, which also enables the filing of a resolution by shareholder(s) owning a significant shareholding, Phitrust, grouped with eight other shareholders, filed this item to give shareholders the opportunity to opt-out of the automatic acquisition of double-voting rights. The proposed provision is considered positive as it prevents from any deviation from the one-share, one-vote principle.

The management is not supporting this proposal considering that "it contravenes a law that was designed by the public authorities to help groups like Vivendi, whose activities are regularized, to stabilize their capital and encourage their ownership".

However, the rationale provided by Vivendi's management is not compelling. The new legal framework concerning automatic grant of double-voting rights to long-term registered shares (article L. 225-123 of the Commercial Code) also provides for the opportunity to opt-out of this passive acquisition via bylaws' amendment.

This amendment, proposed in compliance with the French legal framework, is in shareholder's interest as it prevents any deviation from the one-share, one-vote principle.

Shareholder Proposals Submitted by Schoenfeld Asset Management

Items B-C. Approve Alternative Allocation of Income and Exceptional Distribution AGAINST

VOTE RECOMMENDATION

Votes AGAINST the PSAM dividend proposals are warranted as at this time the company has demonstrated sufficiently prudent regard for shareholder assets.

Discussion

These items were submitted by P. Schoenfeld Asset Management LP, shareholder controlling 0.55 percent of the company's share capital:

Item B: proposal of a distribution of dividend of EUR 2.11 per share for a total amount equal to EUR 2,857,546,032.35 from distributable profit for the year ended Dec. 31, 2014;

Item C: Exceptional distribution of EUR 6,142,453,967.65, by allocation of share issue premium, merger premium, contribution premium.

These resolutions are not supported by the management



Background

Vivendi SA was until recently a French telecom and media conglomerate. More than two years ago the company announced a strategic repositioning involving EUR 35 billion in disposals of telecom subsidiaries and a refocus on media and content. The company already had a longstanding presence in these industries through two businesses: pay TV and TV production company Canal+ and the world’s largest record label, Universal Music. Given that the disposals were made mostly in cash, the company will have more than EUR 12 billion in net cash by mid-2015 when all transactions close.

P. Schoenfeld Asset Management (PSAM), a hedge fund with approximately USD 3 billion under management, began buying Vivendi shares in July 2012 and now owns 0.8 percent of the company. PSAM began attempting to communicate with the company in December 2013, but asserts that Vivendi was unwilling to engage in discussions. The fund has filed two resolutions at the April 17 AGM which collectively propose an increase in the total dividend to be paid in 2015 to EUR 9.0 billion, instead of the company’s proposed EUR 1.3 billion.

Shares in Vivendi increased by 2.9 percent on significant volume upon the announcement.

Proponent’s Argument

PSAM argues that Vivendi’s current capital return plans are disappointing to investors. Vivendi has been opaque about its capital allocation and acquisition plans and investors assign a valuation discount to Vivendi’s EUR 18 billion stockpile of excess cash and investments and will continue to do so until appropriate action is taken to distribute Vivendi’s cash hoard.

PSAM believes that Vivendi has effectively become a Special Purpose Acquisition Company (SPAC).

PSAM estimates Vivendi will be holding EUR 14.7 billion of gross cash and EUR 12.4 billion of net cash after it receives proceeds from the sales of GVT, Numericable and TVN. In addition, Vivendi will also hold almost EUR 3 billion of ownership interest in listed companies Activision and Vivo. Vivendi is only proposing to return approximately EUR 1 billion as a special dividend this year and an additional EUR 2 billion over the next two years. PSAM believes that the total planned distribution of approximately EUR 3 billion, as proposed by the company for the next three years, is too small relative to Vivendi’s stockpile of cash and equity interests.

PSAM calculates that over 40 percent of Vivendi’s market value will be held as unproductive net cash reserves once Vivendi receives all proceeds from disposals. No other large capitalization public company in the United States or Europe, PSAM contends, carries this much net cash as a percentage of market value.

PSAM believes that Vivendi should distribute an aggregate of EUR 9 billion in order to close the valuation discount. As such, is proposing two resolutions:

A dividend of EUR 2,857,546,032.35 from distributable profit for the year ended Dec. 31, 2014 (which would replace the company’s proposal for a EUR 1.3 billion dividend); and

A dividend of EUR 6,142,453,967.65 from share issue premium, merger premium and contribution premium. Both dividends would be paid in September 2015.

PSAM believes that if the two resolutions are adopted and Vivendi returns EUR 9 billion to shareholders, it will be left with EUR 5 billion of excess cash which can be used towards implementing the group’s strategy and making acquisitions. Deploying EUR 5 billion towards acquisitions should still be sufficient to expand Vivendi’s scope of operations by approximately 40 percent.

The fund is also recommending (though not filing shareholder proposals) that Vivendi take certain other actions, including:

A distribution of its interests in Activision and Telefonica Brasil (Vivo) to shareholders;

A consistent annual dividend policy of 50 percent of free cash flow;

A spinoff of Universal Music Group, a business with far different opportunities and challenges than Canal+; and



Establish a best practices corporate governance philosophy.

Management’s Response

Vivendi announced in December 2013 that it was going to become “an international media group, with very strong brands in the production and distribution of original content.”

In April 2014, the company announced the intention to return approximately EUR 3.5 billion to shareholders through 2015. The company has now increased that amount to EUR 5.7 billion, including EUR 3 billion in dividends (for 2015, 2016 and 2017) and an 18 month, EUR 2.7 billion share buyback program to be executed at prices below EUR 20 per share. (Note that the EUR 1 billion in dividends per year refers to special dividends coming from asset sales, while there will be an extra EUR 300 million per year coming from operating cash flow—which management didn’t include in the announcement).

Vivendi’s CEO has argued in its recent Feb. 27, 2015 earnings conference call that acquisitions will take time (“Rome wasn’t built in one day”, “Give us another 12 to 18 months to be able to bring evidence” and “asset prices are rich now”). He reassured investors that the company would adhere to strict financial discipline in executing any M&A strategy, and that he will consider more returns if the company can’t make acquisitions “in some years.”

Implied Threats of Legal Action

On March 27, 2015, the company made public a letter “formally reminding” PSAM that, under Article 40 of French Law No. 86-1067 of Sept. 30, 1986, “no more than 20 percent of the share capital of a company which is in possession of a license to provide French-language television services may be held, directly or indirectly, by Foreign nationals outside the European Union".

PSAM is a US-based hedge fund, but holds less than 1 percent of outstanding shares.

Nonetheless, the letter continued, “In so far as it would appear that your direct or indirect share ownership, together with that of third parties with whom you might join forces, could surpass the 20 percent threshold, this could be seriously prejudicial to the company” which “would be forced to promptly bring legal action against you to seek joint and several damages” which, “according to a preliminary analysis of our expert consultant... could amount to between EUR 5 billion and EUR 9 billion”.

The letter concluded by noting, without any further clarification, that “If your actions are being organized or carried out together with any third parties interested in buying any of our assets, it is your responsibility to inform them of the financial implications they could be facing if they participate in the above-referenced offense”.

PSAM made public its response to the company’s letter the same day, expressing itself “very disappointed to have received this letter at a time when we are exercising our rights as shareholders… in accordance with French law”.

Noting that the fund had applied with all regulatory disclosure requirements as it accumulated shares, but that "we did not receive any warning from you at that time", PSAM questioned whether "Now, as a result of our decision to propose two resolutions to shareholders, we have received a letter whose purpose seems to be to intimidate us… [and] to intimidate other shareholders who are willing to support our resolutions".

Without quantifying how large it believed damages might be, PSAM also reserved "our right to claim damages, both as a result of your interference in our proposal of additional resolutions to shareholders and as a result of your lack of diligence to ensure compliance with French law 86-1067 dated Sept. 30, 1986, on a timely basis". Particularly as the "sole purpose" of the PSAM resolutions at the upcoming AGM was to allow Vivendi shareholders to "individually decide what they consider to be in the best interest of the Company," PSAM concluded that "going forward, we hope you will revert to more appropriate behavior in dealing with our requests".

Analysis

The question of prudence in capital allocation at Vivendi is significant because the amount of cash on the balance sheet, even with the company’s current dividend and buyback commitments, appears unusually large relative to



the company’s market cap of EUR 31 billion, and has been accumulating at a remarkable rate recently. Vivendi had EUR 11.1 billion in net debt in December 2013, EUR 4.6 billion in net cash in December 2014, and should have approximately EUR 12.4 billion in net cash by mid-2015 when all transactions close—or EUR 14.7 billion in gross cash, plus EUR 3.8 billion in minority stakes in listed companies it could sell (as they do not seem to be core in the new strategy). In an extreme case and with the full buyback executed, the company could be left with close to EUR 8 billion by late 2016.

On the other hand, PSAM proposes EUR 9.0 billion in dividends to be paid in September 2015. This would leave approximately EUR 3.8 billion in net cash by the end of this year, though it should be considered that gross cash is EUR 2.7 billion higher than the net cash number, and that Vivendi appears to have some open debt capacity.

Shareholders may want to focus on what will be set in stone, which is what shareholders will vote at the upcoming AGM. The share buyback will be written in stone, but its implementation will not be. At the maximum (if the company doesn’t buy back shares), PSAM leaves Vivendi with EUR 3.8 billion in net cash by the end of this year, a huge difference from the management plan of EUR 11.5 billion in late 2015 (excluding buybacks).

The transformation process at Vivendi has not caught investors by surprise—and if the company’s track record in reallocating capital has not been as clean as they might like, it does appear that Bollore’s track record is better, and his involvement on the board may help drive a more compelling track record in the future. Over the past five years before PSAM filed its proposals, Vivendi underperformed the Euro Stoxx 600 Media Index (of which it is part) by 78 percentage points, and the Euro Stoxx 600 Telecom index by 30 percentage points (the company uses both to set executive compensation). In the past three years (the period of its latest transformation), it underperformed the Media index—an industry on which it intends to focus—by 16 percentage points but outperformed the telecom index—the industry it intends to exit—by 24 percentage points.

But good governance is not about writing blank checks to corporate strategy visionaries. Bollore is not everyone’s cup of tea, as reflected by the 25 percent opposition to his election to the Vivendi board in 2013. Bollore SA’s governance and disclosure practices, moreover, are below market standards; while some may argue that this is not unusual for a controlled company, the same was true to a lesser extent at Havas, a company where Bollore controlled a 30 percent stake until he launched an exchange offer in late 2014 and achieved control.

Bollore has gradually increased control in several of his investments. Double voting rights, to be implemented at Vivendi unless shareholders support a separate shareholder proposing to opt out of the Florange Act, would immediately increase his voting power to approximately 15 percent because he acquired his first 5.4 percent of Vivendi more than two years ago. Corporate governance works best when it allows for shareholder monitoring—and not only by significant shareholders who are already sitting in the boardroom.

We note that the non-discretionary portion of Vivendi’s management performance pay is related to EBITDA margin and relative TSR (vs. the Stoxx Media and Telecom Indices). Management is not directly penalized for holding excessive cash for too long, but the discretionary portion seems to include criteria related to M&A, among others. The company has not held on to cash for a long period of time, moreover—the cash balance is still building as the divestures close, so that the current approximately EUR 6.0 in balance sheet cash is expected to become EUR 12.4 billion by mid-2015.

Conclusion

In this case, the board does appear to have acted opportunistically and yet with discipline in its strategic pivot, divesting assets when valuations are at five-year highs yet declining to make acquisitions at a time when, valuations on potential targets are generally not attractive for buyers.

On balance, PSAM’s combined proposals appear to give too little credit to this recent performance, or to Vivendi’s new management and directors in terms of capital allocation. Though shareholders will want to continue monitoring the board’s capital allocation closely, given the size of the cash balance and the concomitant risk if the board’s diligence falters, at this time the company has demonstrated sufficiently prudent regard for shareholder assets in that the PSAM dividend proposals do not warrant support.



Equity Ownership Profile Type Votes per share Issued Common Equity 1.00 1,351,600,638

All stock ownership information comes from the 2014 annual report and is as of Dec. 31, 2014, except the information regarding the holdings of Groupe Bollore which is from the AMF website and is as of March 27, 2015.

Ownership - Common Equity Number of Shares % of Class Groupe Bollore 137,832,839 10.20 BlackRock Inc. 66,612,364 4.93 CDC/ Bpifrance participations (ex FSI) 46,636,819 3.45 Amundi 46,527,497 3.44 Employees 41,998,171 3.11 Other, Annual Report as of: 27 Mar 2015

Additional Information

Meeting Location Olympia, 28 boulevard des Capucines, 75009 Paris

Meeting Time 10:00

Security IDs F43281363(CINS), F43281371(CINS), F97982106(CINS)



ISS’ experienced research team provides comprehensive proxy analyses and complete vote recommendations for more than 34,000 meetings annually in over 115 markets worldwide. With a team of more than 165 analysts and 100 data professionals, fluent in 25 languages, ISS covers every holding within a client’s portfolio in both developed and emerging markets.

Our Research Analysts are located in financial centers worldwide, offering local insight and global breadth. Research office locations include Brussels, London, Manila, Paris, San Francisco, Sydney, Singapore, Tokyo, Toronto, and Rockville, Maryland.

ISS has long been committed to engagement and transparency. There are several long-established channels for engaging with ISS, outlined at http://www.issgovernance.com/contact/faqs-engagement-on-proxy-research/. In addition to these long-established channels, investors and issuers and other market constituents can submit comments, concerns and feedback to the ISS Feedback Review Board through www.issgovernance.com/frb.

The issuer that is the subject of this analysis may have purchased self-assessment tools and publications from ISS Corporate Solutions, Inc. (formerly known as ISS Corporate Services, Inc. and referred to as "ICS"), a wholly-owned subsidiary of ISS, or ICS may have provided advisory or analytical services to the issuer in connection with the proxies described in this report. These tools and services may have utilized preliminary peer groups generated by ISS’ institutional research group. No employee of ICS played a role in the preparation of this report. If you are an ISS institutional client, you may inquire about any issuer's use of products and services from ICS by emailing [email protected].

This proxy analysis and vote recommendation has not been submitted to, nor received approval from, the United States Securities and Exchange

Commission or any other regulatory body. While ISS exercised due care in compiling this analysis, it makes no warranty, express or implied, regarding the accuracy, completeness or usefulness of this information and assumes no liability with respect to the consequences of relying on this information for investment or other purposes. In particular, the research and voting recommendations provided are not intended to constitute an offer, solicitation or advice to buy or sell securities nor are they intended to solicit votes or proxies.

ISS is an independent company owned by entities affiliated with Vestar Capital Partners (“Vestar”). ISS and Vestar have established policies and procedures to restrict the involvement of Vestar and any of Vestar’s employees in the content of ISS' analyses. Neither Vestar nor their employees are informed of the contents of any of ISS' analyses or recommendations prior to their publication or dissemination.

The issuer that is the subject of this proxy analysis may be a client of ISS or ICS, or the parent of, or affiliated with, a client of ISS or ICS.

One or more of the proponents of a shareholder proposal at an upcoming meeting may be a client of ISS or ICS, or the parent of, or affiliated with, a client of ISS or ICS. None of the sponsors of any shareholder proposal(s) played a role in preparing this report.

ISS may in some circumstances afford issuers, whether or not they are clients of ICS, the right to review draft research analyses so that factual inaccuracies may be corrected before the report and recommendations are finalized. Control of research analyses and voting recommendations remains, at all times, with ISS.

ISS makes its proxy voting policy formation process and summary proxy voting policies readily available to issuers, investors and others on its public website: http://www.issgovernance.com/policy.

Copyright © 2015 Institutional Shareholder Services Inc. All Rights Reserved. This proxy analysis and the information herein may not be reproduced or disseminated in whole or in part without prior written permission from ISS.

http://www.issgovernance.com/contact/faqs-engagement-on-proxy-research/

http://www.issgovernance.com/frb


http://www.issgovernance.com/policy

ISS PROXY ADVISORY SERVICES Vivendi · Vivendi Meeting Key Takeaways P. Schoenfeld Asset Management...

Documents

Transcript of ISS PROXY ADVISORY SERVICES Vivendi · Vivendi Meeting Key Takeaways P. Schoenfeld Asset Management...