INTEGRATED REPORT 2017

Unlocking THE tal nts IN OUR SMEs 2017 HUMAN CAPITAL FINANCIAL CAPITAL INDUSTRIAL CAPITAL INTELLECTUAL CAPITAL ENVIRONMENTAL CAPITAL HIGHLIGHTS PME III Acquisition of 4 new talents In’Tech Medical 3 new digital AROUND €3 M in the Eurazeo €658 M projects at in avoided costs were raised for the Eurazeo PME team PME III fund: €408 million from Redspher The portfolio companies are Eurazeo and €250 million from stepping up the roll-out of their The 3 digital projects Alexis, Florent and Charles third parties, including €20 million CSR strategies rolled out in 2017 enabled have joined the investment from private investors that chose Redspher to generate team and Margaux has French additional revenues joined the corporate of €7 million team. In 2018, Anne will boost our competencies in management & organization Sale of Colisée Group 15 57% deals Eurazeo PME became a 57% shareholder completed SOCIAL & RELATIONSHIP 2.5x of In’Tech Medical, 2 acquisitions multiple achieved on the sale of at Eurazeo PME III CAPITAL 500 Colisée Group to IK Investment leader in the (Smile, In’Tech Medical) hirings at Smile Partner for €236 million, three manufacture of years after the acquisition 11 build-ups orthopedic surgical over the next EF Express (Redspher Group), €3 instruments. Jacques Boulard BILLION 4 years (Odealim Group), The ambition we shared Upela (Redspher Group), in socio- P.12 (Colisée Group), Following the 2017 acquisition with management is Netwave (Orolia) economic of Smile, a French Open to develop the product Touvet (Odealim Group), Source leader, Eurazeo PME offering and expand its Schwerdtfeger impacts approved the Open Arrow (Redspher Group), 2021 strategic plan with an worldwide coverage Envie de Fraise In 2017, we analyzed for the objective to attract more (MK Direct Group), first time the socio-economic than 500 talents in 4 years Pyxidis (In’Tech Medical) footprint of Eurazeo PME and its Insor (Odealim Group) investments worldwide Virtua (Smile)

2 disposals Colisée Group, Fondis Bioritech eurazeo PME ¢ INTEGRATED REPORT 2017

CONTENTS Eurazeo PME has embarked on a new sustainable 01 EURAZEO PME growth cycle 2017 Highlights combining 01 Editorial 02 Business model innovation and 04 Joint interview talent development. Virginie Morgon/ Olivier Millet

02 WORKING IN CONCERT 09 Ecosystem 10 Material topics 12 Team and organization 16 Governance 18 Portfolio of SMEs 2017, mary of the study available on our partner last year, we are delighted a thrilling year! website. to welcome Anne Dousset as Se- In addition to the successful launch Other new features this year: we nior Advisor in Management & Or- 03 ACCELERATING INNOVATION 03 of the Eurazeo PME III fund, we car- have promoted for a digital version ganization in 2018. 21 Strategic ambition ried out two major acquisitions - Smile for our integrated report (www. At the same time, we wish to boost 22 Growth drivers and In’Tech Medical -, sold Colisée rapport-integre-eurazeo-pme. our international coverage in the 24 Risk management and completed 11 external growth com/2017), and completed our next few years in Germany, Spain transactions and 2 refinancings. The materiality analysis by consulting and Italy to better identify and results, in line with our goal (16% NAV our main stakeholders. Many of analyze potential acquisitions. growth on a comparable scope ba- you took the time to respond to our In the same vein as Eurazeo PME II, BE A COMMITTED PLAYER sis), and the Colisée sale price reflect survey and we would like to thank the €658 million raised will enable us 04 the outstanding contributions of our you. 27 Responsible commitment to support the growth of about ten teams and those of our investments. French SMEs over the next 5 years. 28 Socio-economic footprint French SMEs/SMIs are awakening; Eurazeo PME footprint: 89,000 Talent innovation and we are ready to support them! jobs and €3 billion per year acceleration are crucial to the transformation process FINANCIAL AND NON- For the first time, we measured the Convinced that our added value Olivier Millet FINANCIAL INFORMATION socio-economic footprint of our lies above all in our ability to inno- Chairman of the Eurazeo PME Executive Board 05 activities. With our co-investors, we and Member of the Eurazeo Executive Board 33 Financial information vate and accelerate the sustai- support over 89,000 jobs worldwide 34 Non-financial information nable transformation of our com- and generated nearly €3 billion in panies, we continue to expand our economic impacts in 2016. This in- internal expertise. Following the ar- tegrated report* contains a sum- rival of Patrice Henry as Operating

* For further information on the integrated reporting approach: www.integratedreporting.org

01 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

OUR BUSINESS MODEL ur growth over these past 10 years illustrates the robustness of Oour business model. SPEED UP THE GROWTH OF In addition to injecting capital, we pool together talents to ensure sustainable and shared growth. FRENCH SMEs

EURAZEO PME RESOURCES*

HUMAN EMPLOYEES Within 3 teams 19 Executive Board and investment team Operational support Corporate functions with the support of the Eurazeo teams

FINANCIAL €658M €550M 16% 84% €277M Invested capital 84% 16% Available capital BUSINESS MODEL IMPACTS ON OUR ECOSYSTEM EZ PME I EZ PME II EZ PME III HUMAN FINANCIAL INTELLECTUAL For the 7 companies sold: DEALS acquisitions, build-ups, disposals - have 6,109 the average investment strengthened recognized know-how since 2006 2.3x 68 JOBS multiple on divestment in portfolio companies SOCIAL & RELATIONSHIP in 2017 23% average annual PARTNERS return over the transformation banks, legal firms, consulting firms, 01 02 03 04 period (IRR) 80 communication agencies, etc WIN THE DETECT ACT AS A MONETIZE CONFI‑ HIGH‑ MAJORITY AND SHARE MANUFACTURING INTELLECTUAL LABOR & SOCIETAL DENCE OF GROWTH SHAREHOL‑ THE VALUE DER M INVESTED FRENCH COMPANIES CREATED since 2006, including €121M in 2017 AND INTER‑ €8.3M €753M €785 in purchases that contributed to NATIONAL devoted by the companies to research & development economic activity and job growth INVESTORS ENVIRONMENTAL programs in 2017 in 2017 tons of CO2 eq.* MANUFACTURING emitted in 2017. A carbon ENVIRONMENTAL 10 footprint mainly generated by Eurazeo PME offices and travel €238M *Scope 1 and 2 7,500 INVESTED tons of CO2 eq.* the total by the companies for their emissions from all companies in 2017 development in 2017 *Scope 1 and 2

* Excluding portfolio companies

02 03 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

OUR VISION “WE WORK TO TRANSFORM TRANSFORM OUR COMPANIES AND, TO A GREATER Olivier Millet EXTENT, Chairman of the Eurazeo PME OUR COMPANIES SOCIETY ITSELF.” Executive Board and Member of the Eurazeo Executive Board WITH PASSION Olivier Millet AND ENTHUSIASM

INTERVIEW VIRGINIE MORGON & OLIVIER MILLET Chairwoman of Chairman of the Eurazeo PME the Eurazeo PME Supervisory Board Executive Board

With the change in its midcap champions. The successful O. M. } Our exceptional growth governance, Eurazeo has Eurazeo PME III fundraising has en- has not changed our DNA, which redefined its strategic abled us to further our substantial is based on 4 fundamental beliefs: priorities. How does Eurazeo growth and boost our socio-eco- strict investment discipline, patience PME fit into your strategy? nomic impact, while remaining to support the long-term vision in very selective in terms of our invest- our companies, cutting-edge ex- Virginie Morgon } Eurazeo has radi- ments. We have already invested pertise, and close relations with our cally transformed itself over the past in 2 companies in 2017: Smile and stakeholders. few years based on three primary In’Tech Medical, two high-potential •/•• thrusts: internationalization, business investments with committed mana- diversification and third-party fund gement teams. management. Eurazeo PME, which V. M. } Eurazeo PME, which now dovetails perfectly with these strate- comprises 19 professionals, is still the gic priorities, is a major division for best illustration of what we hope to the Group, as its creation was the achieve when we transform a com- first phase in our business expansion. pany. In 8 years, it has grown sixfold, Olivier Millet } Within Eurazeo, Eu- the team has completed over 58 razeo PME’s role is to ramp up the high added-value deals, and it has transformation of French SMEs/ been a pioneer in third-party fund SMIs to turn them into international management.

04 05 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

“WE ARE ETHICAL AND COMMITTED, AND WE EXPECT THE SAME HIGH STANDARDS FROM THE MANAGEMENT OF OUR COMPANIES AS WE DO FROM OURSELVES.” Virginie Morgon

Virginie Morgon Chairwoman of the Eurazeo PME Supervisory Board and of the Eurazeo Executive Board

Beyond your skills as issue for our companies. We have that we also fill our companies and an investor, isn’t it the to anticipate and manage disrup- partners with enthusiasm. Many of ability to offer experts to tions caused by Big Data, artificial the companies in which we invested, support companies in their intelligence or the omnichannel chose us because they were keen transformation that makes all approach. to join the Eurazeo Group. This is the difference? the greatest symbol of Eurazeo’s In an increasingly competitive success! V. M. } We do not simply provide private equity industry, how do capital. We are entrepreneurs who, Eurazeo and Eurazeo PME stand on behalf of our shareholders or out from other investment commissioning agents, are com- companies? mitted to management teams over the long term. Our common goal: V. M. } We are ethical and com- develop the necessary human and mitted, and we expect the same financial resources to transform our high standards from the manage- companies and seize investment ment of our companies as we do opportunities to support their future from ourselves. For us, setting an growth. Our expanded internatio- example is essential to establishing nal reach, and more specifically our our credibility with the investors and New York office, contribute fully to companies that join the Eurazeo achieving this goal. Group.

O. M. } This is a crucial time. France O.M. } We work in complete trust. is awakening and rediscovering its Based on this trust, we can obtain managerial and technological ta- more capital and forge an ambi- lents. The key challenge is to provi- tious project over the long term with de companies with human, logisti- the management of our compa- cal, financial, international and CSR nies. support as well as an equity stake. For example, digitization is a pivotal V.M. } And, finally, I’d like to add

06 07 2 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

OUR ECOSYSTEM WORKING WITHIN A TRUSTWORTHY NETWORK

aintaining an ongoing dialogue and understanding our Mstakeholders’ expectations are decisive in our activities, whether it be to better anticipate new social trends, create an 1,500 atmosphere of trust within our ecosystem or boost our appeal. STAKEHOLDERS CONSULTED

Between September and November 2017, we contacted 1,500 SOCIAL stakeholders as part of PORTFOLIO INFLUENCERS EURAZEO our materiality analysis. COMPANIES (NGOs, MEDIA, ETC.) A broad range of respondents confirmed their engagement. What they expect from us is innovation and support for sustainable INTERNAL growth using a hands-on approach. PROFESSIONAL STAKEHOLDERS Working ORGANIZATIONS EURAZEO PME & CERTIFICATION EMPLOYEES BODIES EXTERNAL IN STAKEHOLDERS

GOVERNMENTS/ ECONOMIC THIRD-PARTY REGULATORY PARTNERS1 INVESTORS concBecause nobody succeeds until we all dort AUTHORITIES

1 Employees of portfolio companies, business providers,banks and lenders

09 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

OUR MATERIAL TOPICS COMMIT TO INCLUSIVE GROWTH FOCUS OUR INITIATIVES ON OBJECTIVES 13 MATERIAL TOPICS

pioneer in its CSR approach, Eurazeo PME signed the Principles for Responsible At the same time, to improve our understanding of key online survey in the second half of 2017. challenges and manage them using our strategy, we These challenges are prioritized according to their po- Investment (PRI) in 2009, thereby confirming its aim to incorporate non-financial A conducted a materiality analysis. It was developed tential impact on our activity and their importance for criteria in its investment strategy, the coordination of its activity and the monitoring of its with several inputs: an analysis of available documen- the surveyed stakeholders. companies. tation on private equity, internal workshops and an

ADAPTATION TO SOCIAL CHALLENGES

SUSTAINED GROWTH OF SMEs We are fully aware of the vital BUSINESS ETHICS

need to protect the planet and BUSINESS MODEL PERFORMANCE HIGH eradicate poverty. Our business plan includes specific measures STRATEGIC LONG-TERM VISION aligned with 8 of the 17 Sus- DIVERSITY & EQUALITY tainable Development Goals (SDGs) adopted by the United CONSTRUCTIVE SOCIAL ATTRACTION AND RETENTION Nations in 2015. DIALOGUE OF TALENT

FAIR ALLOCATION OF VALUE EXEMPLARY GOVERNANCE

RESEARCH AND INNOVATION RESPONSIBLE INVESTMENT

REPORTING TRANSPARENCY RISK MANAGEMENT STAKEHOLDER EXPECTATIONS STAKEHOLDER

PRIVATE EQUITY GROWTH

LOCAL DEVELOPMENT IMAGE AND REPUTATION FIGHT AGAINST CLIMATE CHANGE MODERATE MODERATE

MODERATE HIGH IMPACTS ON EURAZEO PME BUSINESS MODEL

All these measures confirm our determination to make a positive Internal stakeholders contribution to the socio-economic development of our ecosystem, Investors and business partners while making sure that any negative impacts on the environment  Governments, social influencers and are controlled. professional organizations

Our actions and impacts are described on pages 26 to 31

10 11 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

16 8 10 4 6 9 13 14 19 1 3 7 15 20 18 11 12 2 5 17

1 Nicolas Becque 2 Alexis Bisson Accel rating 3 Véronique Dubois 4 Patrice Henry 5 Sophie Botzke 6 Clara Chatillon 7 Emmanuel Laillier 8 Mathieu Betrancourt 9 Pierre Meignen 10 Joanne Dubail 11 Elisabeth Auclair 12 Olivier Millet 13 Clément Morin 14 Anne Dousset 15 Erwann Le Ligné 16 Florent Thiry 17 Rafaelle Faibis 18 Amélie Jaran 19 Margaux Pinon 20 Charles Cornevin

12 13 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

OUR TEAM AND ORGANIZATION ith the operational support of the Eurazeo corporate teams, we combine all Wcompetencies to unlock the potential of companies. DRAWING ON THE DIVERSITY Eurazeo PME is of one of Eurazeo’s 5 competency clusters: Eurazeo Capital, Eurazeo PME, Eurazeo Croissance, Eurazeo Patrimoine and Eurazeo Brands. OF OUR TALENTS

ts en m st ve T TEAMS in EN f TM zeo croissance o S eura E e• eo brand h V m euraz s t N o p e • w I ze oin ra im ro u tr e pa g l • a o e it ze h p ra t a u c e o G p e u z R ra O d u e e W e

p T e S H u r a z S e

o P

d E



i é

n

i

n  L

v v

e t

O e

e

e g I

l

s

r o A

a

n

t R

p

o

a

l

We develop their competencies

L p urazeo PME has assembled a team of 19 professionals r a

l

P

r

e a I

e

by offering them a passionate vi- S m

a u p

boasting complementary state-of-the-art expertise, O

d i T o e

E sion of the world we seek to build, r s i n

r t S R ,

with in-depth knowledge of the French SME environment t

t i a  while continually promoting a res- n n A g n and extensive management and private equity know-how. a d

ponsible investment culture. a n T r c n i s E d i k a In 2017, we continued to roll out r m l e c S a la o a series of programs designed to n K t n io a t r a encourage knowledge sharing I n g o e l ic L s , r , m C between the investment teams. L H e R e S S , n R m Two main issues were digitization t , A s sa , a t c h e and digital disruption. fe re c rt i a o t ty s u o i . u n N ry ti o n Our team and our investments , ng e u , z E t ra IS r benefit from the active support of eu o 11 MEN 8 WOMEN • T Eurazeo’s corporate skills. zil R p ra E p o B P o raze t e • eu EX n urazeo China L e A m ION st 36 INTERNAT ve Average age of in ize Eurazeo PME employees Se

14 15 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

OUR GOVERNANCE FOSTER DIVERSITY IN OUR DECISION- ALIGN GOVERNANCE WITH MAKING BODIES THE MOST STRINGENT STANDARDS

ORGANIZATION OF THE GOVERNANCE BODIES

n 2017, to maintain the professional nature overnance is a means of en- bodies, gender equality, director of our governance bodies, 2 associate di- suring investor confidence independence criteria, and the SUPERVISORY BOARD rectors were promoted members of the and corporate integrity. 5 MEMBERS AND 2 NON-VOTING MEMBERS role of the committees with the IExecutive Board and 6 additional employees GAbove all, it is set up to anticipate most stringent international stan- joined the governance bodies. risks and make informed and fully dards. 78% independent decisions. OF COMPANIES This new organization bolsters our current It sets up an Audit Committee and TO HAVE AN AUDIT governance, which comprises an Executive Within Eurazeo PME, we believe a Compensation Committee in COMMITTEE AND Board with operational functions and a Super- that it is crucial, in our role as ma- each investment. visory Board with control functions. jority shareholder, to provide our A COMPENSATION investments with robust and exem- COMMITTEE The aim is to maintain efficient, independent plary decision-making bodies, to and balanced decision-making, with a combi- ensure enhanced long-term mana- nation of risk management and entrepreneu- Investment Advisory Audit Committee gement. rial boldness. 3 meetings Committee 6 meetings This initiative is reflected in the 67% Compensation Our objective: attendance rate 70% “CSR progress plan” that we roll Committee attendance rate have 30% independent directors and 40% women directors 1 meeting out jointly with the management in all our companies by 2020. 100% teams of the companies. It aligns attendance rate the composition of the governing

EXECUTIVE BOARD 5 MEMBERS

4 Valuation CSR Committee Committee NEW COMMITTEES: OPERATIONAL Detection Resources THE REGULATIONS GOVERNING A PORTFOLIO MANAGEMENT COMPANY COMMITTEE, Committee Committee AUTHORIZED BY THE AMF DETECTION COMMITTEE, Eurazeo PME has the status of a portfolio management company; it manages the OFIPEC I, OFIPEC II, Eurazeo PME II-A, Eurazeo PME II-B, Eurazeo PME II co-invest, Eurazeo PME III-A and Eurazeo PME III-B. Under the AMF’s authorization, it pledges Operational Finance RESOURCES COMMITTEE to comply with a certain number of management standards and is bound to respect the rules of good conduct. The internal Committee Committee AND FINANCE control and ethics principles are precisely worded and regularly verified. Specifically, prior to any investment or divestment COMMITTEE exceeding €0.5 million, Eurazeo PME must consult its five-member Investment Advisory Committee.

16 17 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

OUR PORTFOLIO OF SMEs 10 COMPANIES WITH STRONG POTENTIAL

A leading integrator and outsourcer Odealim1 is a joint ownership insu- European leader in lighting and signa- European leader in on-demand pre- of open source solutions, Smile has rance broker based in France, and a ling for industrial vehicles, Vignal Ligh- mium freight, the Redspher Group2 posted a 10% annual growth rate pioneer of highly specialized property ting Group is pursuing its digital and operates in 18 countries and relies on since 2007. ownership services. industrial transformation. its innovative digital platform. n 2017, the Eurazeo PME portfolio comprised 10 companies that are being 2017 Investment 2017 Investment 2017 Investment 2017 Investment I revenue date revenue date revenue date revenue date transformed into global, integrated and responsible intermediate-sized businesses. €83M 2017 €27M 2016 €107M 2014 €246M 2015 2017 % under 2017 % under 2017 % under 2017 % under Employees management ** Employees management ** Employees management ** Employees management ** 1,095 66% 117 47% 411 77% 473 43% 1The Odealim Group is the result of a merger between 2 Formerly Flash Group AssurCopro, InterAssurances, INSOR and Jacques Boulard.

Serving its clients for over 100 years, With around 1,600 salons in 47 coun- A leading manufacturer of orthope- World specialist in reliable GPS-type With its three brands, Linvosges, Specializing in medical equipment, Léon de Bruxelles offers mussels and tries, DESSANGE International bases its dic surgical instruments, In’Tech Me- signals, Orolia has consolidated its co- Françoise Saget and Envie de Fraise, Péters Surgical distributes more than chips and Belgian cuisine in its 81 growth on the DESSANGE, Camille Al- dical has 2 sites in France and pro- verage in the United States. the MK Direct Group is speeding up its 4,000 products in 90 countries. restaurants. bane, Fantastic Sams and Phytodess duction facilities in the United States cross-channel distribution strategy. brands. and Malaysia.

2017 Investment 2017 Investment 2017 Investment 2017 Investment 2017 Investment 2017 Investment revenue date revenue date revenue date revenue date revenue date revenue date €120M 2008 €99M 2008 €61M 2017 €101M 2016 €202M 2016 €64M 2013

2017 % under 2017 % under 2017 % under 2017 % under 2017 % under 2017 % under Employees management ** Employees management ** Employees management ** Employees management ** Employees management ** Employees management ** 1,424 60% 599 76% 529 57% 411 52% 461 55% 589 87% * Intermediate-sized businesses ** Held by Eurazeo PME and managed funds

18 19 3 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

OUR AMBITION STAY ONE STEP AHEAD

urazeo PME relies on 4 ambitious strategic levers Eto always stay one step ahead.

A selective A local presence in Europe, Asia, investment the United States and Brazil strategy Our responsiveness and flexibility in our In a competitive market companies’ primary markets are key to their growth. with rising business Over the next 3 years, we therefore expect to hire valuations, Eurazeo teams in Germany, Spain and Italy, in order to PME invests more and better identify and analyze the local specificities of more selectively in potential acquisitions. We will also continue to draw companies that have on Eurazeo’s resources in the United States, China and a solid positioning. We Brazil to support the international development of our target companies with investments. 1top-notch management that 2 share our values and the same economic, social and societal goals.

Anticipating a new Operational societal era competencies Societal transformation Supporting our concerns all economic Accel rating investments is a players and once cornerstone of our again raises the business plan and a question of the role major driver of added that companies should value within Eurazeo. play. Pioneers since innovation Adding to the support 2008, we are convinced provided by the Eurazeo that companies can 4 A team of multi-talents dedicated to our companies Corporate team, we will have a positive societal boost Organization & impact while delivering Management and IT excellent financial in 2018. 3 performances. 21 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

OUR GROWTH DRIVERS was a pivotal year that enabled us to prepare 2017 for the future while materializing the potential FINANCE AND SUPPORT AMBITIOUS growth of our companies. Our talents pooled all their expertise at each stage of our value AND RESPONSIBLE ENTREPRENEURS creation process.

01 02 03 04 Attract capital Detect high-potential Act as a majority Monetize and share Within Eurazeo PME, we unite investors companies shareholder the value created based on a common goal: finance and In 2017, we were both very active and selective, with Our investments are launching a digital As responsible shareholders, we ensure that our com- support the sustainable and digital trans- 11 external growth transactions and 2 acquisitions: transformation of their culture, processes panies remain attractive for new investors and that formation of French SMEs with solid funda- In’Tech Medical and Smile. For each project, an and tools. Using technology in order to the value created is fairly distributed between our mentals that are seeking to expand inter- extensive due diligence was carried out to obtain a stimulate innovation and productivity, we investors, management and company personnel, as nationally. comprehensive view of the companies’ challenges, assist them while mitigating risks, boosting well as the investment team. In 2017, we successfully concluded our risks and opportunities. their competitiveness and incorporating In June, we sold Colisée Group, a key player in the rd 3 fundraising for €658 million, including To this end, the CSR criteria we analyzed arise from over the long term the new disruptive mo- global health care and old-age dependency sector, €250 million raised from third-party investors. a cross-analysis between several recognized French dels of the digital world. to IK Investment Partners. This deal was closed only Four years after the success of Eurazeo and international frameworks, including the 10 prin- Last year, we assisted several of our com- 3 years after our initial investment. PME II (€520 million), this fund will support ciples of the UN Global Compact, the work of the ESG panies with their digital transformation In 3 years, with our help, management doubled our investment strategy. It involves long- Commission of France Invest, the Responsible Invest- through investments in start-ups such as the company’s size, carried out 29 acquisitions and term shareholding (5 to 10 years) in some ment Principles, the subjects covered by Article 225 Orolia and in Satelles (US) and Quasar DB openings, integrated Idéal Résidences, signed a JV ten companies, thereby providing the pro- of the Grenelle II law, or the Sustainability Accounting (FR), or acquisitions such as MKD with Envie agreement in China, opened facilities in Italy and di- jects and management with the flexibility Standards Board’s Materiality Map which Eurazeo de Fraise and Redspher with Upela. versified the homecare offering. needed to fulfill our common goal. PME has used since the end of 2016 to identify the industry-based material issues of investment targets.

22 23 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

OUR RISK MANAGEMENT ith increasingly rapid and widespread disruptions, robust risk and opportunity W analysis is essential. Our approach is holistic, which is to say it includes material financial and non-financial risks that impact Eurazeo PME, the portfolio companies and STAY AHEAD OF THE GAME the investors.

> Have exemplary governance and act as a responsible investor > Optimize the detection and selection of growth investments

Risk description Transformation into an opportunity Monitoring indicators Results Risk description Transformation into an opportunity Monitoring indicators Results

Non-compliance of Eurazeo PME or one Structuring of decision-making processes in the Development of non-standard financing Sourcing of opportunities by partners of its investments regarding the strict investments sources without intermediation • Promotion of the specific expertise offered by • Percentage of opportunities 76% rules enacted by the AMF governing • Dedicated human resources (CFO, Audit • Percentage of portfolio 100% () and access to low-rate the majority shareholder in the company’s analyzed by the team oversight of the activity (fraud, anti- Committee, etc.) companies with an audit debt transformation money laundering and terrorist financing, committee etc.) Decrease in the value of the businesses Financial and operational requirement • Governance and stringent risk control processes • Number of Eurazeo PME audit 3 in the event of an economic decline over the long term (multi-party review of fund flows, procedure and committee meetings due diligence, etc.) Poor assessment of the company’s • Extensive due diligence, based on a clear • Percentage of build-ups subject 100% growth potential and stable investment strategy: international to an extensive due diligence Failure of the transformation project in Association of managerial potential, experienced management, considerable procedure the event of key personnel departure(s) and shareholder talent competitive edge, entry barriers from the companies or the investment • Increase in collaborative and collegial • Percentage of portfolio 100% • Loss of control over company roadmaps • Percentage of companies 20% team work within investment management teams companies with a collegial below the forecast budget after 2 years executive committee • Employee involvement in the management of • Creation of 3 management EFFECTIVE Insufficient liquidity to finance Ongoing ability to reinvest in the Eurazeo PME Eurazeo PME committees coordinated by investment opportunities (refinancing III fund employees of investments + external growth • Validation of the reinvestment strategy with • Percentage of funds dedicated 30% transactions) investors to build-ups Poor interpretation of information Robust management processes and organization • Timetable of growth transactions validated with that was nevertheless communicated • Dedicated resources to produce reliable financial • Resources within the Eurazeo 4 FTEs company management teams by Eurazeo PME for the sake of and non-financial reporting PME financial department transparency • Audited financial statements • Validation of the financial EFFECTIVE statements by auditors > Materialize the transformation expected from each investment then Optimize the timetable and terms and conditions of investment disposals • Ongoing dialogue with stakeholders • % of active stakeholders in the 80% dialogue process Risk description Transformation into an opportunity Monitoring indicators Results

Reputation risks relating to incidents or Identification of non-financial value creation Market turnaround at the time of sale: Long-term combined business plan bad practices resulting in controversies levers business cycles, new market players with • Identification of the right moment to monetize • Investment multiple on 2.5x FOR and a deterioration in Eurazeo PME’s • Due diligence processes including CSR criteria • Percentage of due diligence 100% disruptive innovations value while allowing the business to develop divestment COLISÉE image processes that include CSR criteria sustainably over the long term • CSR roadmap in the portfolio companies • Percentage of companies with 67% • Divestment project shared with management • Percentage of divestments 100% a CSR roadmap upstream carried out in agreement with the company’s management > Have the necessary financial resources to develop our portfolio and accelerate company transformations > Be a company that is responsible for employees and attractive for candidates Risk description Transformation into an opportunity Monitoring indicators Results Risk description Transformation into an opportunity Monitoring indicators Results Default of an Eurazeo’s continued support and preliminary curbing the ability to invest in the analysis of investors Loss of competencies in the event of the Forecast management of competencies and departure of a key employee or executive resources companies • Payment of calls for funds according • Number of late payment 0 impairing the deal flow to the schedule days for calls for funds • Continuous employee training • Number of annual training 50 (days * number of investors) hours per employee HOURS • Resource dedicated to fund management • Dedicated FTEs 1.2 FTE • Monitoring of investments by two people in the • Percentage of files managed by 100% (Eurazeo PME I, II and III) investment team a two-person team

24 25 4 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

OUR RESPONSIBLE COMMITMENT MINIMIZE OUR CSR IMPACTS

*** A proactive CSR Measured policy quickly leads indicators to financial profits Geographi- 2 countries, i.e. 2 countries, i.e. 2 countries, i.e. Social and environmental cal scopes i.e. 92% of i.e. 44% of i.e. 100% of activity in activity in 33% of activity activity* in 92% of activity** 97% of activity initiatives also help to reduce 2016 2017 in 2017 2017 in 2017 in 2017 costs within our investments. Year of 2015 2011 2016 2009/2011* 2014 2014 Gauged for the first time in reference 2016, these measures helped to avoid costs of €486,000 * For Léon de Bruxelles, the year of reference is 2009 for employee indicators, and this year. 2011 for environmental indicators. ** For Péters surgical, the scope was limited to France for employee indicators. This year, the scope was ex- *** Sold in June 2017. tended to include Redspher, (formerly Flash Group). + €7.7M For greater readability, we IN SAVINGS have retained the same in- dicators: three covering the BE A environment (water, energy, fuel) and one covering em- ployees (absenteeism). Measurement of expenditure avoided

Reduction in 136,852 i.e. the equivalent of absenteeism hours of around 77 full-time Absenteeism and workplace €4,779,000 committed absence employees accidents avoided

i.e. the equivalent 74,399 m3 Reduction in water consumption of Water consumption of water around 914 EU €217,000 avoided inhabitants

29,108 i.e. the equivalent Reduction in energy consumption of Energy play r consumption MWH of around 1,137 EU €2,643,000 3,676 energy avoided residents A company’s Corporate Social Responsibility (CSR) i.e. around 29 TONS OF CO2 Reduction in fuel 114,674 times the earth’s Fuel liters of fuel policy is a vital sustainable growth driver EQUIVALENT consumption circumference €104,000 avoided AVOIDED traveled by car TOTAL IMPACTS €7,743,000

The breakdown of analyses is available on the Eurazeo PME website: http://www.eurazeo-pme.com

27 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

First-ever socio- economic study in the French private equity industry OUR SOCIO-ECONOMIC FOOTPRINT LEVERAGE THE SOCIO-ECONOMIC KEY FINDINGS FROM 4.6x IMPACT OF OUR ACTIVITY THE STUDY MULTIPLIER COEFFICIENT OF OUR SOCIO-ECONOMIC his study, unique in the private equity industry, CONTRIBUTION In 2017, we decided to measure for the first time the socio-economic footprint of our Trevealed that Eurazeo PME and its co-investors injected team and investments. Using the methodology developed by UTOPIES, we measured our over €1,457 million into the global economy in 2016. impacts in terms of jobs and creation of economic wealth across the entire value chain.

EURAZEO PME PORTFOLIO GENERATED INDIRECT DIRECT DIRECT INDIRECT GENERATED

Wages Wages Household Household consumption consumption €911M €431M €115M Supplier chain Supplier chain Purchases made in Gross compensation Taxation with Purchases Purchases 2016 employer contributions THE STUDY WILL Government Government = BE GRADUALLY authorities Taxation Taxation authorities EXPANDED AND €1,457M IMPROVED Using 2016 accounting data for all our investments Indirect flows cover the economic impacts generated Despite the study’s robust and Eurazeo PME, 3 main direct financial flows were by purchases or company depreciation and amortiza- methodology, the results ob- analyzed: tion charges. Each euro spent enables suppliers to pay tained must be analyzed ac- Wages paid to employees wages and purchase goods and services themselves. cording to certain limits and (total payroll or gross wages) The generated flows aggregate the consumption of assumptions inherent to the employees or government authorities. model. Indirect economic im- Taxes paid to government authorities pacts were allocated accor- (all taxes and duties paid by the company, including The study then used the LOCAL ding to the company’s primary employer contributions) FOOTPRINT® model which calculates business sector without making Purchases of goods and services, rents and other the monetary impacts for more any distinction between its ac- tivities. Furthermore, the 2016 expenses paid to suppliers than 380 business sectors and in 186 FOR 1 DIRECT year-end accounting data countries. JOB, used did not take into account yearly inflation which can be 3.6 89,000 €3Bn considerable in certain coun- ADDITIONAL JOBS in economic tries. impacts We wish to tweak the metho- For example, in a Léon de Bruxelles restaurant, sustained by worldwide dology to improve data ac- JOBS Eurazeo PME Waiter wages and food purchases are direct expenses, are sustained curacy while maintaining an Mussel farmer expenses (fuel for boats, crates to transport mussels, etc.) and its analytical rationale. worldwide investments are indirect, The daily expenses of waiters or mussel farmers (food, clothing, vehicle, etc.) are generated.

28 29 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

CONTRIBUTE TO ECONOMIC GROWTH France 25,081 jobs IN ALL REGIONS WORLDWIDE €1,396M in GDP

North America Europe (excluding China Southeast Asia France) The activity 11,367 jobs 5,939 jobs 5,821 jobs €519M in GDP 15,940 jobs €54M in GDP €52M in GDP of Eurazeo PME €722M in GDP and its investments sustain more than 89,000 jobs worldwide, 28% 47% of which 12% 17% 18% 24% 25,000 in France, and Rest of Asia generated a and Oceania worldwide 4,171 jobs €93M in GDP GDP of around €3 billion in 2016, India 10,840 jobs of which €34M in GDP 47% in France.

South America Africa Middle East 1,321 jobs 7,439 jobs 1,113 jobs €26M in GDP €38M in GDP €34M in GDP Percentage of jobs Percentage of GDP

30 31 5 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017 Financial and FINANCIAL INFORMATION NET ASSET VALUE

The managed portfolio value was €540 million (of which non-financial €158 million for third parties), compared with €599 million 121 -274 as of December 31, 2016. The increase is related to the appreciation of the investments in the amount of €94 mil- 94 lion (partly related to the profits generated by the sale of Colisée Group), scope additions (Smile and In’Tech Me- 599 dical acquisitions, build-up financing and Colisée Group 540 information Value creation Repayment and sale) and the early repayments to Eurazeo PME following the DESSANGE International and Péters Surgical Group re- other Acquisitions, build-ups, disposals financing for a net total of €153 million. Growth on a com- 12/31/2016 12/31/2017 parable scope basis stood at +16% for the year. Change in NAV (€M) NAV breakdown as of 12/31/2017 1,191 IFRS CONSOLIDATED BALANCE SHEET (EXTRACT) 1,024

965 € million 12/31/2017 12/31/2016 € million 12/31/2017 12/31/2016 Goodwill 619 388 Equity attributable to owners 277 207 of the parent Other intangible assets 465 542 653 M Minority interests 257 227 €540 Property, plant and equipment 121 174 Portfolio valuation Net Total equity 533 434 482 Asset Value (NAV)

427 Other non-current assets 56 90 404 Long-term borrowings 697 621 361 339 Other non-current liabilities 126 183 151 127 130 Non-current assets 1,262 1,195 Non-current liabilities 823 804 94 57 58 75 66 68 Inventories and receivables 375 347 Short-term borrowings 89 147 Cash and cash equivalents 112 155 Other current liabilities 303 312 2010 2011 2012 2013 2014 2015 2016 2016* 2017 DESSANGE International 10% Current assets 487 502 Current liabilities 392 459 IFRS consolidated revenue IFRS consolidated EBITDA Léon de Bruxelles 6% Assets held for sale 1 1 Liabilities held for sale 1 1 in €M of investments in €M Péters Surgical 10% TOTAL ASSETS 1,749 1,698 TOTAL EQUITY AND LIABILITIES 1,749 1,698 Vignal Lighting Group 11% Redspher 12% Equity attributable to owners of the parent amounted to mainly due to scope changes during the year. As a remin- 6,109 permanent employees • Activity in Odealim 12% €277 million as of December 31, 2017, compared to €207 der, these debts are without possible recourse to Eurazeo Smile 9% million as of December 31, 2016. PME Capital, as it does not act as guarantor, nor any other portfolio company. As of December 31, 2017, the consoli- 100 countries • 136,700 m3 of water In’Tech Medical 11% This increase was primarily attributable to the net income for the year (€86 million). Minority interests essentially com- dated net financial debt of investments stood at €640 mil- MK Direct 11% lion, representing a senior leverage of 3.9x their EBITDA over consumed • tons of CO equivalent prise the share of managers and other co-investors in the 7,500 2 Orolia 8% holdings. 12 months. All portfolio companies complied with the cove- nants governing their bank and mezzanine debts. Consolidated net debt increased from €614 million as of De- cember 31, 2016 to €674 million as of December 31, 2017,

* Pro forma

33 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

NON-FINANCIAL INFORMATION

IFRS CONSOLIDATED INCOME STATEMENT (EXTRACT) GOALS 2020 OBJECTIVES 2017

100% of due diligence in the advanced study phase of acquisitions to € million 12/31/2017 12/31/2016 12/31/2016 INVEST RESPONSIBLY 100% Integrate CSR at all stages of incorporate a CSR section (1) the investment cycle Pro forma* 1 100% of portfolio companies to perform CSR reporting 100% Revenue from operations 1,191.5 965.3 1,024.2 100% of divestment operations to incorporate CSR information 0% Current operating EBITDA 137.5 117.4 120.7 ESTABLISH EXEMPLARY 100% of companies to have at least 40% women directors on the Board (2) 11% GOVERNANCE 100% of controlled companies to have at least 30% independent directors on of which EBITDA of investments 151.1 126.9 130.1 Ensure that all companies 33% 2 the Board (2) have exemplary governance % of revenue of the investments 12.7% 13.1% 12.7% bodies 100% of companies to have an Audit Committee and a Compensation Committee 78% Depreciation, amortization and provisions excluding intangible assets -27.2 -23.5 CREATE SUSTAINABLE 100% of portfolio companies to have deployed Eurazeo’s “CSR essentials” (3) 67% VALUE The 7 “CSR essentials” EBIT 110.3 93.9 3 Ensure that all companies have a CSR progress plan Depreciation, amortization and provisions including • Appoint a CSR manager 89% intangible assets -11.7 -5.7 • Establish annual CSR reporting 100% Other operating income and expenses 45.9 -19.8 • Create an operational CSR committee 78%

Operating income 144.5 68.3 • Include CSR issues on the agenda of Board meetings at least once a year 89%

Finance cost -55.9 -41.3 • Conduct an environmental and/or greenhouse gas assessment every three years 56% Income tax -2.7 -13.9 • Carry out a social barometer every three years 44% NET INCOME 86.0 13.1 • Conduct CSR audits of priority suppliers 11% Net income attributable to owners of the parent 79.1 4.6 • 100% of portfolio companies to have quantified CSR progress targets 33% Minority interests 6.9 8.5 • 100% of portfolio companies to be involved in at least one CSR acceleration program (4) 100% (*) adjusted for changes arising from the acquisition of Orolia, MK Direct Group and Odealim Group in 2016 and Smile and In’Tech Medical in 2017, and the sale of Colisée Group in 2017. 100% of portfolio companies to improve the protection and well-being of ACT AS A VECTOR FOR 89% SOCIAL PROGRESS employees 4 Ensure that all companies 100% of portfolio companies to share value created or company profits with In 2017, the Group carried out two acquisitions and This improvement was due to the commendable per- improve their societal employees 78% eleven build-ups. formances of all Group companies, particularly Vignal footprint 100% of portfolio companies to reduce their environmental impact* 75% Group consolidated revenue stood at €1,191million Lighting Group and Redspher Group which posted subs- *Data on Odealim Group, acquired in 2016, are not relevant for this indicator for the year ended December 31, 2017, up +23% on a tantial growth. reported basis, +16% on a constant Eurazeo PME scope Other operating income and expenses primarily com- (1) Due diligence is deemed to be in the advanced study phase when a firm offer has been made. The indicator covers all basis, and +8% adjusted for external growth transactions prise the capital gain generated by the sale of Colisée companies reviewed, including those that were not ultimately acquired. carried out by the holdings in 2016 and 2017. Group, less costs for studies and financial arrangements (2) On Supervisory Boards (SB) or Boards of Directors (BD). covering acquisitions and build-ups of the various Group Consolidated EBITDA of the investments stood at (3) The result is expressed as an average percentage of actions undertaken by the companies. €151 million, up +19% compared to December 31, companies. (4) Eurazeo PME has three CSR acceleration programs: environmental footprint, gender equality and responsible purchasing. 2016 on a reported basis, and +16% on a constant After consideration of the cost of net financial debt An environmental footprint (or Life Cycle Analysis) measures energy consumption, the use of raw materials and environmen- Eurazeo PME scope basis*. Restated for the build-ups (€56 million) and corporate income tax, net income tal emissions, as well as potential environmental impacts associated with a product, a process or a service, over the entire and on a constant Eurazeo scope basis, the item rose for the year ended December 31, 2017 amounted to life cycle (based on the ISO 14040 definition). by +11%. €86 million, while net income attributable to owners of Companies included: Odealim Group, DESSANGE International, Eurazeo PME, Redspher Group, Léon de Bruxelles, MK Direct the parent stood at €79.1 million. Group, Orolia, Péters Surgical and Vignal Lighting Group.

Full methodology available on the Eurazeo PME website: http://www.eurazeo-pme.com

34 35 eurazeo PME ¢ INTEGRATED REPORT 2017 eurazeo PME ¢ INTEGRATED REPORT 2017

CREDITS AND ACKNOWLEDGEMENTS

LABOR ENVIRONMENT WORKFORCE Eurazeo Eurazeo PME ENERGY CONSUMPTION Eurazeo Eurazeo PME (permanent workforce, number of employees) (1) PME & investments EXCLUDING FUEL (in MWh) PME & investments Number of employees 18 3,573 Electricity 74 37,010

Percentage of women 44% 51% Steam 0 3 Design: Percentage of permanent Renewable energies 11 160 Sophie Botzke and Erwann Le Ligné of Eurazeo PME 95% 92% employment contracts (2) Natural gas (in MWh NCV) 22 12,340 Consultant on integrated reporting: Nick Landrot – Consultland The coverage rate for Eurazeo PME and its investments was 100%. Heavy fuel and heating fuel 0 1,006 HIRES Eurazeo Eurazeo PME Editing: Coal (in MWh NCV) 0 0 (permanent workforce, number of employees) PME & investments Consultland & Vanessa Caffin Other energies Total hires 3 1,011 0 0 www.consultland.fr (other gases, urban networks) The coverage rate for Eurazeo PME and its investments was 100%. Total energy consumption 107 50,519 TRAINING Eurazeo Eurazeo PME Amount spent on energy Creation and production: (permanent and non-permanent workforce) PME & investments 9 4,546 (In € thousands) O’communication Total number of training hours 555 36,760 www.o-communication.com The coverage rate for Eurazeo PME was 100%; for Eurazeo PME and its investments, Training expenses it was 95%-100%. 82 1,620 (In € thousands) (1) WATER CONSUMPTION Eurazeo Eurazeo PME Photo credits: The coverage rate for Eurazeo PME was 100%; for Eurazeo PME and its (in m3) PME & investments investments, it was 96%. Peter Allan and William Beaucardet Water consumption 135 136,718 www.peterallan.fr Amount spent on water 0,6 899 www.williambeaucardet.com SOCIETA L consumption (in € thousands) SPONSORSHIP - FINANCIAL Eurazeo Eurazeo PME The coverage rate for Eurazeo PME was 100%; for Eurazeo PME and its investments, SUPPORT PME & investments it was 91-93%. (4) (In € thousands) CO2 DISCHARGE Eurazeo Eurazeo PME Amount allocated to associations (in tons of CO2 equivalent) PME & investments 7 292 and NGOs Scope 1 (5) 7 3,799 The coverage rate for Eurazeo PME and its investments was 100%. Scope 2 (6) 3 3,699 Total (Scope 1 and 2) 10 7,498 Scope 3 (7) 516 525,963 Printing: (1) The permanent workforce corresponds to all employees Total (Scope 1, 2 and 3) 526 533,461 this document was printed under open-ended contracts. The coverage rate for Eurazeo PME was 100%; for Eurazeo PME and its investments, on FSC* certified paper (2) The total workforce combines total permanent and tempo- it was 95-100%. rary employees (under open-ended or fixed-term contracts). (3) Training expenditure does not include employee costs. Any comment on this integrated report can be sent to the following e-mail address: (4) Emission factors used to convert the activity data: 2006 In- tergovernmental Panel on Climate Change (combustibles [email protected] (6) and fuel) and the International Energy Agency (electricity Scope 2 emissions are emissions caused by the generation For further information on the integrated reporting approach: www.integratedreporting.org consumption) following the methodology of the Green- of electricity, steam, heating or cooling bought and consu- house Gas Protocol. med. Eurazeo PME (5) Scope 1 emissions are emissions from fuel consumption on (7) Scope 3 emissions relate to other indirect emissions. The full 1, rue Georges Berger 75017 site (gas, oil, etc.), fuel consumption in vehicles and leakage Scope 3 of the portfolio companies was measured for the of refrigerant substances. first time in 2017. www.eurazeo-pme.com

36