2019 Review of Shareholder Activism

CONFIDENTIAL JANUARY 2020

LAZARD'S SHAREHOLDER ADVISORY GROUP 2019 Review of Shareholder Activism

Lazard has prepared the information herein based upon publicly available information and for general informational purposes only. The information is not intended to be, and should not be construed as, financial, legal or other advice, and Lazard shall have no duties or obligations to you in respect of the information. 2019 REVIEW OF SHAREHOLDER ACTIVISM

Key Observations on the Activist Environment in 2019

Activist Activity  187 companies targeted by activists, down 17% from 2018’s record but in line with multi-year average levels 1 Returns to  Aggregate capital deployed by activists (~$42bn) reflected a similar dip relative to the ~$60bn+ level of 2017/2018 Multi-Year Trend  A record 147 investors launched new campaigns in 2019, including 43 “first timers” with no prior activism history After Record 2018  Elliott and Starboard remained the leading activists, accounting for more than 10% of global campaign activity  Activism against non-U.S. targets accounted for ~40% of 2019 activity, up from ~30% in 2015  Multi-year shift driven both by a decline in U.S. targets and an uptick in activity in Japan and Europe Activism’s  For the first time, Japan was the most-targeted non-U.S. jurisdiction, with 19 campaigns and $4.5bn in capital deployed in 2019 2 Continued Influence (both local records) Outside the U.S.  Overall European activity decreased in 2019 (48 campaigns, down from a record 57 in 2018), driven primarily by 10 fewer campaigns in the U.K.  Expanded activity in continental Europe – particularly France, Germany and Switzerland – partially offset this decline  A record 99 campaigns with an M&A-related thesis (accounting for ~47% of all 2019 activity, up from ~35% in prior years) were launched in 2019 Record Number of  As in prior years, there were numerous prominent examples of activists pushing a sale (HP, Caesars) or break-up (Marathon, M&A-Related 3 Sony) or opposing an announced transaction (Occidental, Bristol-Myers Squibb) Campaigns  The $24.1bn of capital deployed in M&A-related campaigns in 2019 represented ~60% of total capital deployed  The technology sector alone saw $7.0bn put to use in M&A related campaigns  122 Board seats were won by activists in 2019, in line with the multi-year average1  Consistent with recent trends, the majority of Board seats were secured via negotiated settlements (~85% of Board seats) Activist Influence on 2 4 Boards Continues  20% of activist Board seats went to female directors, compared to a rate of 46% for all new S&P 500 director appointees  Activists nominated a record 20 “long slates” seeking to replace a majority of directors in 2019, securing seats in two-thirds (67%) of the situations that have been resolved Outflow Pressure on  Actively managed funds saw ~$176bn in net outflows through Q3 2019, compared to ~$105bn in 2018 over the same period 5 Active Managers  The “Big 3” index funds (BlackRock, Vanguard and State Street) continue to be the primary beneficiaries of passive inflows, Intensifies collectively owning ~19% of the S&P 500 – up from ~16% in 2014  ESG focus continues to grow: over the past two years, the AUM represented by signatories to the UN’s Principles for Responsible Investment increased ~26% to ~$86tn, and the number of assets in ESG-related ETFs increased ~300% Other Noteworthy The Business Roundtable’s “Statement on the Purpose of the Corporation” emphasized the importance of companies 6 Observations  incorporating the interests of all stakeholders, not just shareholders, into their decision-making processes  The SEC’s guidance on proxy advisors sought to increase accountability and oversight standards in their company evaluations

Source: FactSet, ETFLogic, UN PRI, Simfund, press reports and public filings as of 12/31/2019. Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement. 1 1 Represents Board seats won by activists in the respective year, regardless of the year in which the campaign was initiated. 2 According to Spencer Stuart’s 2019 Board Index. 2019 REVIEW OF SHAREHOLDER ACTIVISM

1 Campaign Activity and Capital Deployment ($ in billions)

Annual Campaign Activity Companies Targeted Annually by Region

1 1 # of Companies Targeted1 # of Campaigns Initiated # of Companies Targeted 226 248 Campaigns in line 205 212 209 with historical 5 20 188 6 188 187 187 226 activity but below 168 6 30 8 188 187 2018’s record pace 12 23 Mean: 193 188 27 39 15 54 U.S. targets account 168 36 49 44 for ~60% of companies targeted, compared to ~70% in 2015 131 111 111 122 108

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Rest of World APAC Europe U.S.

Capital Deployment in New Campaigns Capital Deployment by Sector in 2019

Aggregate Value of New Activist Positions2 Aggregate Value of New Activist Positions2 $66.4 Lower capital $63.8 deployed following 23% $57.7 heightened activity in 22% 7.8 13.5 2017 and 2018 11.4 16% 18.7 8.7 $42.2 12% 17.6 6.1 11% $30.5 19.0 11.5 6.0 20.9 4% 3% 3% 13.2 3% 3% $1.1 12.8 13.0 $1.1 $9.9 $9.3 $6.7 $5.1 $4.8 $1.7 $1.5 $1.1 25.3 6.0 16.5 15.4 11.7

5.7

Retail

Media

Telecom

Financial Industrials

2015 2016 2017 2018 2019 Consumer

Institutions

Healthcare

Power,

Real Estate Real Technology

Q1 Q2 Q3 Q4 Infra. & Energy Above/Below 2015-18 Avg.3 Source: FactSet, press reports and public filings as of 12/31/2019. 2 Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement. 1 Companies spun off as part of campaign process counted separately. 2 Calculated as of campaign announcement date. Does not include derivative positions. 3 4-year average based on aggregate value of activist positions. 2019 REVIEW OF SHAREHOLDER ACTIVISM

1 Notable 2019 Public Campaign Launches and Developments—U.S. ($ in billions) Launch Company / Launch Company / Date Market Cap Activist Highlights Date Market Cap Activist Highlights

 Icahn disclosed a stake in HP and urged the Company to merge with Xerox, citing cost  In October, Aramark announced a settlement synergies with Mantle Ridge, appointing six new 11/19 $29.8 5/19 Directors, including a new CEO, while also  HP rejected the takeover proposal, criticizing $8.6 agreeing to lower its threshold to call a special Xerox’s “hostile” actions, but noted it saw meeting potential in a deal $8.4

 D.E. Shaw released a white paper criticizing Emerson’s cost structure and organization,  In August, Occidental completed its acquisition urging an independent strategic review of Anadarko 9/19  Emerson reached an informal settlement with 5/19  In November, Icahn signaled its intent to D.E. Shaw in November, appointing an nominate a slate of 14 Directors to replace $39.5 independent Director and agreeing to review its $44.0 Occidental’s Board compensation program

 Following Elliott’s demand for Marathon to  Starboard and Wellington separately came out break itself up, the Company announced that it against the Company’s planned $74bn would spin off its Speedway unit acquisition of Celgene, citing pipeline risks, 9/19  In December, Marathon announced a 2/19 with Starboard also nominating Directors settlement with Elliott, agreeing to replace an $39.6 $81.4  Starboard withdrew its campaign after ISS and outgoing Director with one approved by Elliott; Glass Lewis recommended in favor of the deal Marathon also agreed to declassify its Board

 Following Elliott’s initial letter, AT&T sold off  Elliott and Starboard separately pushed eBay several assets in pre-planned transactions to divest non-core assets like StubHub and its  In late October, AT&T announced long-term Classifieds business, with each settling 9/19 financial targets, the addition of new 1/19 separately for Board representation $268.8 independent Directors and a delay in its CEO $31.7  The Company’s CEO resigned in September succession, which Elliott issued a press after disagreements with the Board, and eBay release in support of later sold StubHub for ~$4bn

 Starboard sent a letter to AECOM in June  In December, ValueAct and Citi extended their 2019, urging it to launch a full strategic review information sharing agreement through 2021, and sell its Construction Services business with ValueAct complimenting Citi’s leadership 6/19  In November, Starboard and AECOM settled, 5/18  ValueAct and Citi had first entered into an information sharing agreement in January $5.8 with AECOM adding three new independent $173.2 Directors, including a Starboard Partner, to its following the disclosure of ValueAct’s position Board and splitting the Chairman / CEO roles in May 2018

Source: FactSet, press reports and public filings as of 12/31/2019. 3 2019 REVIEW OF SHAREHOLDER ACTIVISM

1 Notable 2019 Public Campaign Launches and Developments—Rest of World ($ in billions) Launch Company / Launch Company / Date Market Cap Activist Highlights Date Market Cap Activist Highlights

 Following months in which Elliott said that it  Oasis sent a letter to Seven & i in September would not tender its shares in Capgemini’s and demanded the divestment of non-core 11/19 7/19 buyout of Altran, Elliott released a presentation $34.1 units, improved governance and greater capital $4.2 in November detailing its opposition to the deal return and urged Capgemini to increase its offer price

 In October, Prosus announced a separate bid for Just Eat beyond Takeaway.com’s existing offer, which had received opposition from  In September, Ferguson announced that it Eminence but support from Cat Rock would spin off its U.K. operations in order to 9/19 6/19 $6.2  Just Eat rejected Prosus’ offer, saying it $16.5 create two separately listed companies, undervalued its business following pressure from Trian  Post-12/31 update: Just Eat’s offer was successful

 Following reports that Third Point had built a • In October, Sony announced record Q2 stake, the activist disclosed in its Q3 investor operating profit, citing the performance of its letter that it had met with Company executives image sensors business, which Third Point 8/19 $63.7 4/19 and urged it to improve governance and $54.8 had requested the Company divest accelerate the integration of Essilor and • Sony had earlier dismissed Third Point’s Luxottica request for divestitures

 Elliott disclosed a stake in SAP in April,  Following calls from Elliott to divest its supporting a recently announced AutoScout24 business, Scout24 announced comprehensive review 8/19 $6.2 the sale of the unit to Hellman & Friedman in 4/19 $157.7  In October, SAP’s CEO retired; the Company December later announced a share buyback plan and  Elliott cuts its stake in Scout24 shortly after additional details of its strategic plan at a Special Capital Markets Day

 In October, following Unizo’s rejection of initial offers from Fortress and Blackstone, Elliott  Elliott nominated Directors to Hyundai’s Board and made several governance-related issued a public letter asking the Company to 4/18 $30.9 proposals at Hyundai’s 2019 AGM 8/19 $1.1 explain its reasons for rejecting the offers  All Elliott proposals and Director nominees  As of the end of 2019, there were several were defeated at the March AGM competing tender offers outstanding

Source: FactSet, press reports and public filings as of 12/31/2019. 4 2019 REVIEW OF SHAREHOLDER ACTIVISM

1 Largest Activist Targets in 2019—U.S. and Rest of World ($ in billions)

U.S. Rest of World

Company Activist Position Market Cap Company Country Activist Position Market Cap

1.2%3 $268.8 0.8%3 $157.7

2 1 -- 99.6 / 1.2%3 / -- 63.7

0.4% 81.4 2.7%3 54.8

4.0% 44.0 -- 53.8

<0.1% 41.5 <1% 34.1

2.5% 39.6 2.6% 30.9

1.0% 39.5 -- 28.4

0.6% 36.5 3.0% 24.8

1 / 4.0% / 0.5% 31.7 2.0% 19.2

4.2% 29.8 5.2% 19.0

1 / 0.6% / -- 23.5 -- 18.8

1.7% 23.3 6.0%3 16.5

1.2% 20.4 3.0% 15.8

-- 18.4 3.0% 15.0

6.2% 15.2 <1% 11.5

Cumulative Market Cap of Top 15: $813.4 Cumulative Market Cap of Top 15: $564.0

Source: FactSet, press reports and public filings as of 12/31/2019. 5 1 Multiple campaigns. 2 Part of an activist group that included: Comgest, Edmond de Rothschild Asset Management, Guardcap, Phitrust, Sycomore Asset Management. 3 Estimated based on reported value of investment. 2019 REVIEW OF SHAREHOLDER ACTIVISM

1 The Broadening Activist Landscape in 2019 ($ in billions) While Elliott and Starboard remain the most active players, the record number of investors launching campaigns demonstrates activism’s broad adoption Activist Activity by Campaigns Launched, 20191 Activist Activity by Capital Deployed, 2019 14 13 $8.4 Elliott and Starboard alone account for more 80% of Elliott’s 2019 capital deployed than 10% of global campaign activity was concentrated in four campaigns (AT&T, SAP, eBay and Marathon)

6 $3.8 5 4 4 4 $2.4 $2.3 3 3 3 $1.7 $1.2 $1.1

$1.0 $0.7 $0.7

CIAM

Value

Mgmt.

Icahn

Corvex

Capital

Legion

Value

Icahn

Partners

Starboard

Eminence

Investors

Associates Point Third

Starboard

Silchester

D.E. Shaw D.E.

Sachem

Associates Mgmt. Inv. Point Third

ElliottMgmt.

International

Praesidium

Asset Mgmt. Asset

Mantle Ridge Mantle

Southeastern

ElliottMgmt.

Head Capital Head

Trian Partners Trian Cevian Capital Cevian Investors Launching Campaigns Instances of Activism/Vocalism by Traditional Long-Only Investors Date Shareholder Company Action “First Timers” The number of investors engaging in Criticized proposed merger with Banco 8/19 activism continues to grow Sabadell, suggested new deal 147 Issued press release stating voting support 7/19 131 for dissident Rice Group slate Withheld vote for Company Board in 103 109 4/19 100 response to Anadarko acquisition 104 Group nominated Directors to Company 91 4/19 Board; incumbents re-elected 77 73 86 Nominated Directors and publicly criticized 4/19 Company; later settled 40 43 Nominated Directors following capex 23 30 23 3/19 disagreement 2015 2016 2017 2018 2019 Filed first 13D in opposition of Celgene % of 2/19 Campaigns by acquisition; deal later approved 23% 29% 21% 31% 29% Reached Board refreshment settlement “First Timers” 1/19 with Company amid activist campaign Source: FactSet, press reports and public filings as of 12/31/2019. 6 Note: All data is for campaigns conducted globally at companies with market capitalizations greater than $500 million at time of campaign announcement. 1 Ranked secondarily on capital deployed in the event of a tie on campaigns launched. 2019 REVIEW OF SHAREHOLDER ACTIVISM

2 Activism is a Global Phenomenon

As in prior years, international activity accounted for ~40% of both campaigns and capital deployed

Capital Deployed1 Campaigns

Rest of the World Rest of the World <1% 1%

APAC APAC 14% 13%

U.S. Europe Europe U.S. 60% 23% 22% 60%

Canada Canada 4% 3% Total Capital Deployed: $42.2bn Total Campaigns: 209

Source: FactSet, press reports and public filings as of 12/31/2019. 7 Note: All data is for campaigns conducted globally at companies with market capitalizations greater than $500 million at time of campaign announcement. APAC includes all of Asia and Australia and New Zealand. 1 Capital deployed is calculated as of the announcement date. 2019 REVIEW OF SHAREHOLDER ACTIVISM

2 2019 International Shareholder Activism ($ in billions)

Activism Against European Companies Activism Against APAC Companies

52 Although there was record activity in 48 Q3, 2019 was down from 2018 peak levels; the 16% decrease was in line with the decline in global activity 42 40

30 28 26

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 % of Global % of Global Campaigns 20% 21% 25% 23% 23% Campaigns 6% 9% 12% 12% 13% Launched Launched

Source: FactSet, press reports and public filings as of 12/31/2019. 8 Note: All data is for campaigns conducted at companies with market capitalizations greater than $500 million at time of campaign announcement. APAC includes all of Asia and Australia and New Zealand. 2019 REVIEW OF SHAREHOLDER ACTIVISM

2 European Pullback: U.K. Activity and U.S. Agitators Driving Slowdown

European Activism Decrease Driven by U.K. Activity Decline U.S. Activists Slowing New Campaign Activity

2% 1 57 47% 51% 2018 57 27 29

48 ~30% reduction 26 16 58% 42% 2019 48 28 20

European Activists Others U.S. Activists

Most Prolific European Activists 31 32 2018 2019

Activists # Campaigns Activists # Campaigns

3 6

3 2

2 2 2018 2019 Europe excluding U.K. U.K. 2 2

 U.K. continues to be the #1 target in Europe but has declined from 46% of  Despite the success of many U.S. activists, Europe has continued to attract European campaigns in 2018 to 33% in 2019 more local agitators  Given the number of non-U.K. campaigns remained stable year-over-year,  Several players became more vocal and visible in the European landscape, the decrease in U.K. activity had a significant impact on overall European competing with global players activity

Source: FactSet, press reports and public filings as of 12/31/2019. 9 Note: All data is for campaigns conducted at companies with market capitalizations greater than $500 million at time of campaign announcement. 2019 REVIEW OF SHAREHOLDER ACTIVISM

2 European Target Diversification Anticipated to Continue

2019 saw a move away from the traditional focus on activism in the U.K., with increased activity in France, Germany and Switzerland. There is potential for activists to target other high-performing jurisdictions in the coming year

 Activism in Europe has now broadened across the European landscape and activists are targeting all countries in their search to unlock value and to capture alpha – leaving no stone unturned

Country Market Size – Companies >$500m (in $bn)1 # of Activist Campaigns

3,258 16

2,719 7 Campaigns in large continental equity markets increased 56% 2,222 8 over 2017-18 levels as activists sought deep markets to deploy significant capital

1,790 6 Top European Equity Markets Equity European Top

868 1

727 2

402 3

287 1

249 1

94 2

44 1 # Campaigns 2019 Av. # Campaigns 2017-18

Source: FactSet, press reports and public filings as of 12/31/2019. 10 Note: All data is for campaigns conducted at companies with market capitalizations greater than $500 million at time of campaign announcement. 1 Market size is aggregate market capitalization represented by companies with above $500m market capitalization in each country. 2019 REVIEW OF SHAREHOLDER ACTIVISM

2 Sharp Focus on Ongoing M&A and Mid-Cap Sweet Spot in Europe

Activism Value Creation Objectives 2019 Campaigns by Market Cap and Target Performance vs. Index1

29% 28% 28% 28% 6

19% $20.0bn 16% 13% 12% 12% 17 10% 9% 7% $1.5bn

12 M&A - Scuttle / Sweeten M&A - Other Operations Capital Structure

2017 2018 2019 (50%) (40%) (30%) (20%) (10%) 0% 10% 20% LTM TSR 2 # Number of campaigns

 After difficult activist fund returns in 2018, in 2019 activists shifted to  2019 activism demonstrated a clear divergence in strategy by target size less risky campaigns with a shorter timeframe  Targeting of the $1.5-20bn “sweet spot” represented ~49% of 2019  Scuttle/Sweeten campaigns with limited downside and clearer timeline campaigns, excluding campaigns to scuttle/sweeten announced transactions were the most common  Activists targeted high performing larger companies to accelerate  Objectives requiring a longer runway to execution such as operational existing plans, and smaller companies with weaker performance where changes were more limited options to “fix” or redefine strategy are more effective

Source: FactSet, press reports and public filings as of 12/31/2019. 11 Note: All data is for campaigns conducted at companies with market capitalizations greater than $500 million at time of campaign announcement. 1 Excludes campaigns with scuttle/sweeten deal focus. 2 TSR adjusted for the performance of the local index during the LTM before the announcement of the campaign. 2019 REVIEW OF SHAREHOLDER ACTIVISM

2 Shareholder Activism in Japan ($ in billions)

For the first time, Japan was the busiest non-U.S. jurisdiction with record highs in both capital deployed and campaigns launched

Non-U.S. Activism, 2019 Campaigns Against Japanese Companies By Number of Campaigns 19

16 Japan 23%

Rest of World 11 32%

United Kingdom 19% 4 4 France 8% Canada Germany 8% 10% 2015 2016 2017 2018 2019

By Capital Deployed Capital Deployed in Japanese Campaigns

$4.5 Rest of World Japan Capital deployed increased 20% 27% ~$2bn y-o-y, owing largely to Third Point’s campaign at Sony France 5% $2.5 Canada $1.7 9% Germany 20% $1.2 United Kingdom 19% $0.3

2015 2016 2017 2018 2019

Source: FactSet, press reports and public filings as of 12/31/2019. 12 2019 REVIEW OF SHAREHOLDER ACTIVISM

3 The Activist Role in M&A in 2019 Scuttle or Sweeten Sell the Company Break-Up / Divestiture Existing Deals Agitate for sale of target or encourage Agitation for a divestiture of a non-core Entry into a live M&A situation to improve deal terms industry consolidation business line or company breakup or block an ill-perceived deal from proceeding 35% 33% 32% Target / Activist M&A Thesis Target / Activist M&A Thesis Target / Activist M&A Thesis

Icahn pushed for HP to After months of saying it accept a takeover offer from Following Elliott’s call to break would not tender its shares in Xerox due to potential cost the Company up, Marathon Capgemini’s offer for Altran, 11/19 savings of $2bn; after HP 9/19 announced it would spin off its 7/19 Elliott launched a public rejected the offer, Icahn sent Speedway unit and launched critique of the deal but said it a letter to shareholders a comprehensive review might sell its stake if pushing for their support Capgemini sweetened its offer

Mantle Ridge reportedly After Elliott urged divestitures, CIAM came out against the pushed for a sale of Aramark, AT&T announced a new, proposed merger between also considering forming its long-term strategic plan, Renault and Fiat Chrysler, 5/19 own consortium to make a 9/19 including divestitures, but did 6/19 saying that the deal would takeover bid; Mantle Ridge not commit to divesting benefit Fiat Chrysler more later settled for Board DirecTV as Elliott had initially than Renault representation requested

Icahn criticized the Anadarko Icahn pushed for a strategic Following AbbVie’s acquisition deal and the financing review, eventually settling with of Allergan, it was reported Occidental arranged so it Caesars for three Board 1/19 6/19 that Elliott had privately 5/19 could avoid a shareholder seats; Eldorado Resorts later pushed for the break-up of vote; Icahn planned to purchased Caesars for Allergan nominate a slate to replace $17.3bn Occidental’s Board

Elliott disclosed a stake in In a letter to shareholders, Starboard and Wellington QEP and submitted a Sony said its Board had separately came out against takeover offer; in August, the rejected Third Point’s call to the Company’s planned 1/19 two parties settled, with QEP 4/19 divest its imaging sensors 2/19 $74bn acquisition of Celgene; adding two Directors and business, defending its Starboard withdrew after ISS forming a new operations conglomerate structure after and GL backed the deal committee Third Point’s white paper

Source: FactSet, press reports and public filings as of 12/31/2019. 13 Note: All data is for campaigns conducted globally at companies with market capitalizations greater than $500 million at time of campaign announcement. 2019 REVIEW OF SHAREHOLDER ACTIVISM

3 Sustained Prominence of M&A-Related Campaigns 47% of campaigns launched in 2019 were M&A-driven, demonstrating the persistence of M&A as a campaign theme

M&A Campaigns M&A Campaign Objective Prevalence

M&A Campaigns (% of All Campaigns) Surpasses 2018’s record Scuttle or Sweeten Exisiting Deal Break-Up / Divestiture Sell the Company number of M&A campaigns

Number of M&A Campaigns 79 59 76 82 99

47% 39% 36% 32% 33% 30% Mean: 35% 33% 35% 40% 41%

2015 2016 2017 2018 2019 22% 38% 23% 33% Capital Deployed in M&A Campaigns by Sector 29% $9.9 $9.3 Capital Deployed in M&A Campaigns

Aggregate $24.1bn of capital $6.7 deployed in M&A-related campaigns represents ~60% of all $5.1 $4.8 capital deployed 45% 37% 32% 30% 32% $1.7 $1.5 $1.1 $1.1 $1.1 $2.6 $0.5

$4.2 $7.0 $3.8 $3.8 $0.3 $0.8 $0.1 $1.0

Retail Media

Infra. 2015 2016 2017 2018 2019

Power,

Telecom

Energy & Energy

Financial

Industrials

Consumer

Institutions

Healthcare

Technology Estate Real Source: FactSet, press reports and public filings as of 12/31/2019. 14 2019 REVIEW OF SHAREHOLDER ACTIVISM

4 Board Seats Won

Board Seats Won1 Non-Activist Employees vs. Activist Employees Appointed as Directors

1 Non-Activist Fund Employees Appointed Board Seats Won1 # of Companies Targeted for Board Seats Board Seats Won Activist Fund Employees Appointed Board seat activity in line 161 with long-term trends 145 79 133 68 67 65 122 53 837 seats have 103 145 changed hands 161 since 2013 125 Mean: 136 133 94 106 122 94 75 103

39 39 28 36 28

2015 2016 2017 2018 2019 Activist Employees 29% 27% 27% 22% 23% 2015 2016 2017 2018 2019 as % of Total

Settlements vs. Proxy Contests Proxy Stage of Board Seat Wins, 2019

Board Seats Won1 Board Seats Won through Settlements Board Seats Won1 Board Seats Won through Proxy Fights 20 161 17 145 133 122 18 103 126 122 127 112 102 89 67

35 21 18 14 20 2015 2016 2017 2018 2019 Won through Outside Proxy Proxy Process After Proxy Final Vote Total Seats Proxy Contest 16% 12% 14% 22% 16% Process Initiated Filing Won as % of Total

Source: FactSet, press reports and public filings as of 12/31/2019. 15 Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement. 1 Represents Board seats won by activists in respective year, regardless of the year in which the campaign was initiated. 2019 REVIEW OF SHAREHOLDER ACTIVISM

4 Profile of 2019 Activist Director Appointments Activists consistently enlist experienced individuals with senior public company experience for their Director nominees; however, the gender diversity of these nominees continues to fall short relative to newly appointed Directors in the S&P 500

Public Company CEO or CFO Experience Public Company Director Experience No Public Company CEO/CFO Experience 161 161 No Public Company Director Experience Public Company CEO/CFO Experience Public Company Director Experience 122 31% 122

22% 73% In line with incidence 72% of public company director experience 69% among new 2019 S&P 77% 500 directors

27% 28%

2018 2019 2018 2019

Activist Fund Affiliation of Activist-Sponsored Directors Gender Diversity of Activist-Sponsored Directors

161 Other Male Activist Employee 161 Female

122 122

78% 83% According to Spencer 77% 80% Stuart, women comprised 46% of all new independent Directors appointed to S&P 500 22% 23% companies in 2019 17% 20%

2018 2019 2018 2019

Source: FactSet, BoardEx, Spencer Stuart’s 2019 Board Index, press reports and public filings as of 12/31/2019. 16 Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement.. 2019 REVIEW OF SHAREHOLDER ACTIVISM

4 Long Slate Nominations and Proxy Fights

Contested Proxy Votes, 2015-2019 Long Slate Nominations, 2017-2019

Board Seats A record 20 long slates were nominated in 2019, though total Board seats won in long Won Via Proxy 21 18 14 35 20 Board Seats Initially Demanded 1 slate fights was lower than in 2018 Vote Ongoing 144 U.S. Proxy Votes Non-U.S. Proxy Votes Board Seats Won 23 102

European proxy votes eclipsed U.S. proxy votes for the first time in 2019, 6 continuing the long-term trend 39 12 45 34 16 11 2017 2018 2019 Total Long 14 14 2 13 20 Slates Long Slate Results, 2019

10 7 12 17 Result: 5 7 13 Settled2 7 Proxy Win The seven settlements accounted for 18 Board seats, Proxy Loss while the three proxy wins Withdrawn accounted for 16 2 7 Other3 4 Ongoing 3 2 3 1 1 2015 2016 2017 2018 2019

Source: FactSet, press reports and public filings as of 12/31/2019. Note: Long slates defined as instances where an activist nominated Directors to replace 50%-plus of the incumbent Board. 1 Reflects Board seats “in play” at the end of Q4 2019. 17 2 Includes the appointment of David Martin, an original nominee on Coast Capital’s long slate, as Chairman of FirstGroup in August 2019 following the defeat of Coast’s slate. 3 Includes: Velan Capital’s successful withhold campaign against two Progenics Pharmaceutical Directors following the declaration of its long slate nomination as invalid, and the acquisition of Cincinnati Bell by Brookfield Infrastructure Partners. 2019 REVIEW OF SHAREHOLDER ACTIVISM

5 The Growing Influence of Passive Managers ($ in billions) Cumulative Flows and Net Share Issuance1 S&P 500 Top 10 Shareholders # Shareholder Ownership Stake and Cumulative Holdings 1,800 Fund Flows $1,683 1 Vanguard 8.2% 1,600 Style Since 2007 20192 1,400 ETF +$1,068 +$56 2 BlackRock 6.6% 14.8% Index +$615 +$38 1,200 Active ($1,782) ($176) 3 State Street 4.4% 19.2% 1,000 800 4 Capital Group 3.1% 22.3%

600 5 Fidelity 2.2% Top 5 24.4% 400 6 T. Rowe Price 1.8% 26.3% 200

0 7 Geode Holdings 1.4% 27.6% (200) 8 Northern Trust 1.2% 28.9% (400) (600) 9 Wellington Management 1.1% 30.0% (800) 10 BNY Mellon 1.0% Top 10 31.0% (1,000) Q3 2019 S&P 500 Top 10 Shareholder Concentration by Sector6 (1,200) S&P 500 Average (48%) (1,400) 56% 51% 49% 48% 48% 47% (1,600) 46% 46% 46% 46% 44% (1,800) ($1,782) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3 Index Domestic Equity ETFs 4 Index Domestic Equity Mutual Funds 5 Actively Managed Domestic Equity Mutual Funds Real Telecom Consumer Energy Industrials Health Materials IT Financials Consumer Utilities Source: FactSet, P&I and Simfund. Estate Services Disc. Care Staples 1 Equity mutual fund flows include net new cash flow and reinvested dividends. Data excludes mutual funds that invest primarily in other mutual funds. 2 Through Q3 2019. 3 ETF distribution channel. 18 4 All mutual index funds (excludes ETFs). 5 All mutual funds that are not index funds. 6 Includes institutional and insider ownership. 2019 REVIEW OF SHAREHOLDER ACTIVISM

6 Rapid Growth in ESG Investing

Asset managers continue to commit to incorporating ESG principles into their investment processes, and asset classes related to ESG are seeing strong growth; however, the trend is attracting growing scrutiny over the use of the ESG label and whether the label could be misleading investors

Investors Increasing Commitment to ESG Growing Scrutiny of the ESG Label

AUM of PRI Signatories $86 The UN Principles for Responsible ($ in trillions) $82 The Securities and Exchange Commission has sent Investment (PRI) $68 examination letters to firms as record amounts of $59 $62 money flow into ESG funds. These funds broadly market themselves as trying to invest in companies that pursue  Established in 2006, the UN PRI is $45 strategies to address environmental, social or governance a pledge from investors to $32 $34 challenges, such as climate change and corporate diversity. incorporate ESG considerations $21 $24 . . . into the investment process “This is a relatively new area,” said Betty Moy Huber, co- head of law firm Davis Polk & Wardwell LLP’s environmental, social and corporate governance group.

 In the past two years, ~660 “Now the SEC is saying, ‘Wait, how do you know these

2011 2012 2013 2014 2015 2016 2017 2018 2019 additional asset managers have 2010 are ESG products and that you don’t have a fossil fuel signed the PRI, bringing the total company with known, poor ESG performance in ESG ETF Asset Growth there?’” number of signatories to nearly ($ in billions) 2,400, representing ~$86tn in AUM - Wall Street Journal, “ESG Funds Draw SEC Scrutiny,” $16 December 2019 (emphasis added) 14 Assets in ESG ETFs 12 “Thus we arrive at the next problem with using ESG factors:  Further indication of growing ESG 10 there are no clear standards. . . . In many instances, ESG interest can be seen in the growth 8 reporting has been presented as though it were comparable to financial reporting, but it is not. While of related ETF assets; while still a 6 financial reporting benefits from uniform standards small part of the asset management 4 developed over centuries, many ESG factors rely on industry, assets in ESG-related research that is far from settled.” 2 ETFs have quadrupled since the - Hester Peirce, SEC Commissioner, Remarks at the start of 2018 University of California Fullerton, September 2018

(emphasis added)

Jul 2018 Jul 2019 Jul

Oct 2018 Oct

Apr 2018 Apr 2019 Apr

Jan Jan 2018 Jan 2019

Sep2019 2019 Dec

Source: ETFLogic, UN PRI, and press reports. 19 2019 REVIEW OF SHAREHOLDER ACTIVISM

6 New Statements and Regulations Reshaping Stakeholder Power

The Business Roundtable “Statement on the Purpose of a Corporation” and the SEC’s proxy advisor guidance were two high-profile moves intended to redefine the consideration of various stakeholders in corporate decision-making

“Statement on the Purpose of a Corporation,” August 2019 SEC Proxy Advisor Guidance, November 2019

 The Business Roundtable’s statement was the first since 1997 that  The SEC’s guidance clarified that proxy advisors are subject to anti- did not endorse the concept of “shareholder primacy” in corporate fraud rules and should disclose the sources of information they use in decision-making arriving at their voting recommendations  The statement was signed by 181 CEOs  The guidance also allows for a review and feedback period for  The statement has not been accompanied by any legislative or companies to respond to proxy advisor reports and recommendations regulatory action that would affect the fiduciary duties of Directors  In November 2019, ISS announced that it was suing the SEC over its process in arriving at the guidance; ISS claimed that the guidance was We commit to: issued without the required notice-and-comment period - Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations. - Investing in our employees. This starts with compensating them fairly We must recognize that there is a myriad of investor interests and and providing important benefits. It also includes supporting them preferences. Many of these interests overlap substantially, such as through training and education that help develop new skills for a rapidly the thirst for information material to an investment decision. But changing world. We foster diversity and inclusion, dignity and respect. there are many others that do not and may be in direct conflict, such as - Dealing fairly and ethically with our suppliers. We are dedicated to a desire for a company to sell or buy a particular business or undertake serving as good partners to the other companies, large and small, that a particular study or course of action. . . . Accordingly, our proxy help us meet our missions. process, in its components and as a whole, necessarily reflect the need for a rich exchange of information and the need to balance - Supporting the communities in which we work. We respect the the interests of proponents of shareholder proposals with the people in our communities and protect the environment by embracing interests of their fellow shareholders. sustainable practices across our businesses. - Jay Clayton, “Statement of Chairman Jay Clayton on Proposals to - Generating long-term value for shareholders, who provide the Enhance the Accuracy, Transparency and Effectiveness of Our Proxy capital that allows companies to invest, grow and innovate. We are Voting System” (emphasis added) committed to transparency and effective engagement with shareholders. - The Business Roundtable (emphasis added)

Source: Press reports and public filings. 20 2019 REVIEW OF SHAREHOLDER ACTIVISM

Key Questions for Activism in 2020 and Beyond

Will activity rebound to Will 2020 see more 2018 levels or remain in line Will the distinction AT&T-esque with the long-term trend? between private equity “settlements” without and activism continue formal agreements? to blur in 2020?

How will activist fundraising in 2020 How will increasing impact new campaigns investor activism and aggressive public ? around M&A shape tactics? 2020’s largest deals?

As ESG standards Will regulators and proliferate, how will politicians propose plans shareholders and relating to shareholder companies prioritize which concentration? ones to adhere to?

21 2019 REVIEW OF SHAREHOLDER ACTIVISM

Shareholder Advisory Group—Key Contacts

Managing Director and Jim Rossman (212) 632-6088 [email protected] Head of Shareholder Advisory

Mary Ann Deignan Managing Director (212) 632-6938 [email protected]

Andrew T. Whittaker Managing Director (212) 632-6869 [email protected]

Managing Director and Rich Thomas +33 1 44 13 03 83 [email protected] Head of European Shareholder Advisory

Dennis K. Berman Managing Director (212) 632-6624 [email protected]

Christopher Couvelier Director (212) 632-6177 [email protected]

Kathryn Night Director (212) 632-1385 [email protected]

Todd Meadow Director (212) 632-2644 [email protected]