Prsentation PowerPoint

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Initiatives for Responsible Investors
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OVERVIEW

• PhiTrust Active Investors
• Methodology, achievements and lessons learned
• Main European governance issues
• Our products
• Annexes
• Achievements and past initiatives

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Who are we?

• PhiTrust Active Investors is an independent asset
  management company under the French AMF Regulator
  (July 99) and is owned by its management team.
• PhiTrust Active Investors has a unique approach
  to responsible initiatives and shareholder
  engagement in France and Europe, through
  dedicated investment products and overlay
  mandates with an aim to improve corporate
  governance practices on behalf of its
  institutional investors.
• PhiTrust Active Investors is also very active in
  social and community investing through its
  foundation and social venture fund.

under Branics name and Phitrust Finance in 2003
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Our mission statement

• EXCELLENCE financial performance is our
  objective.
• TRANSPARENCY we act in coordination with
  targeted companies.
• LONG TERM our investments are long term.
• DIALOGUE we do not engage in litigation cases
  with companies.
• INDEPENDANCE we remain independent of our
  external advisors and partners.

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OVERVIEW

• PhiTrust Active Investors
• Methodology, achievements and lessons learned
• Main European governance issues
• Our products
• Annexes
• Achievements and past initiatives

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PhiTrust Active Investors scope of engagement

• In line with the analysis of Proxinvest / ECGS on
  the quality of corporate governance of its
  underlying holdings, PhiTrust Active Investors
  proposes initiatives to improve corporate
  governance through regular meetings with company
  chairmen.
• PhiTrust Active Investors actively participates
  in each AGM of its underlying holdings by
  preparing oral and written questions and filing
  resolutions.
• PhiTrust Active Investors has established its
  voting policy in line with its institutional
  investor base.
• Our public initiatives have been widely supported
  by French, European, US and Australian investors.

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Methodology of active ownership
The Technical Committee relies on ECGS analysis
of company corporate governance practices

• Target identification final approval by the
  technical committee

Company Analysis
Governance Diagnosis
Choice of targets
2. Proposal agreed by PhiTrust Active Investors
and implemented by the Technical Committee
Written request to the Chairman
Interviews for a constructive dialogue with the
Chairman/ Managing Board
Amendments or new resolution filings
3. Communication to investors and to the wider
public
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A proven experience in shareholder initiatives

• In 2007, PhiTrust Active Investors initiated over
  50 one-to-one meetings with Chairmen and CEOs of
  two thirds of the CAC 40 corporate list.
•  private  initiatives 143 in 2004, 162 in
  2005, 169 in 2006, 292 in 2007, 427 in 2008.
• PhiTrust Active Investors engagement team
  attended 57 AGMs in 2006 and 62 in 2007.
• 3 resolutions filed at AGMs in 2005, 1 in 2006
  and 5 in 2007 with the support of numerous
  international and French investors.

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PhiTrusts key initiatives since 2005
Removal of voting right limitations
Shareholder right to present resolutions
Board structure changes
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OVERVIEW

• PhiTrust Active Investors
• Methodology, achievements and lessons learned
• Main European governance issues
• Our products
• Annexes
• Achievements and past initiatives

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European companies still face governance issues

• Shareholder democracy remains weak
• Unfair access to AGMs (Italy)?
• Unequal voting rights, voting right limitations,
   stichting  in the Netherlands,  poison
  pills 
• Corporate controls remain inefficient
• Inadequate separation of powers
• Independence of Board Members and Board
  Committees is not always respected
• Shareholder role remains limited during AGMs.
• Some company practices are really  surprising 
• Unfair transactions in favor of partners to the
  detriment of minority shareholders
• Insufficient and misleading communication
• Attribution of advantages by the board which not
  controlled by the shareholders (compensation,
  options, retirement plans)?

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The European Commission is slowly moving towards
greater uniformity

• Shareholder principle One Share, One vote
• European commissioner Mc Greevy publicly
  expressed that they will not propose it,
• Mainly because it seems impossible to reach any
  agreement among European countries.
• Voting practices are far from unified
• Custodians should facilitate trans-voting by the
  end of 2008,
• Local regulations are still very different,
• Procedures are far from being uniform,
• An internet solution ?
• The introduction of OMNIBUS accounts may lead to
  less transparency
• European regulator has pushed towards OMNIBUS
  accounts,
• Though US experience shows it is not good for
  investors, and boards ...

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A growing protectionism in Continental Europe

• Governments fear International investors taking
  control of their companies
• Fear of Sovereign funds,
• Fear of LBO funds,
• Fear of Emerging markets tycoons or fast growing
  emerging market companies ...
• Boards fear being bought by competitors/funds
  where...
• They do not know their investor base,
• They have few contacts with institutional
  investors,
• They are obliged to develop short-term financial
  strategies if they are to be considered by
  analysts...
• Even long-term investors are too often perceived
  as  short-term  investors
• They seek short-term financial performance and
  rarely take in account underlying social,
  environmental costs,
• They lend their stocks and consider themselves
  shareholders while they are not ...
• For tax reasons, they often prefer stock lending
  to voting at AGMs...

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Shareholders do not protect their interests

• They are active to promote better governance, but
  
• They vote for resolutions at AGMs which are
  clearly against their interest,
• They vote to renew board members who have proved
  to be incompetent !
• They support company strategies which are clearly
  not in their best interest,
• They often elect a majority of non independent
  directors ....
• They often do not vote at an AGM which  is not
  important 
• Boards do not feel they are supported by their
  shareholders,
• Investors do not believe voting is a priority,
• Boards and shareholders must have a relationship
  built on mutual trust,
• They do not vote if they are invested in indexed
  or structured products
• Indexed funds are very large shareholders,
• Structured products can be designed with voting
  policies.

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2008 key governance issues

• Voting right caps
• Still maintained five CAC40 companies Danone,
  Schneider Electric, Lafarge, Total, Soc Gen.
• Double voting rights
• See the case of Saint Gobain with Wendel
  Investissement (17,8 of the capital),
• SOCIETE GENERALE
• The outcomes of the Kerviel affair or the Soc
  Gen affair?
• Managing Board independence Total, Soc Gen,
  Alcatel-Lucent.

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Our focus is shareholder engagement

• PhiTrust has two strategic partnerships
• With PROXINVEST in France and the ECGS in Europe
  for company analysis,
• With ETHOS in Switzerland to conduct Engagement
  initiatives in Europe.
• Phitrust Active Investors has an extensive and
  reliable network of contacts among all CEOs and
  Board members from French corporations.
• PhiTrust Active Investors aims at being a
  constructive shareholder, developing strong
  relationships with company directors and creating
  long-term partnerships.

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OVERVIEW

• PhiTrust Active Investors
• Methodology, achievements and lessons learned
• Main European governance issues
• Our products
• Annexes
• Achievements and past initiatives

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Our products

• PhiTrust offers its investors two shareholder
  advocacy strategies
• A  Governance Overlay  Program,
• Two European investment funds
• A French indexed SICAV invested on Cac40
• An active French fund invested in European
  companies.

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Our  Governance Overlay  program

• On behalf of their institutional investors,
  PhiTrust Active Investors offers discretionary
  mandates for corporate governance initiatives to
  manage and follow-up
• Voting policy
• Implement voting policy,
• Manage voting instructions,
• Follow up with custodians,
• Engagement
• Analyse corporate governance practices of the
  underlying investment portfolio
• Decide on possible initiatives to be undertaken
• Contact and discuss with company leaders
• Represent investors at AGMs
• Manage and follow-up on resolutions and oral
  questions

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Shareholder engagement our primary business
Two distinct investment strategies to improve
Corporate Governance
Euro Active Investors Bottom up
strategy European LARGE and MID CAPS Corporate
goverance initiatives on selected stocks in the
portfolio
Proxy Active Investors Passive index
strategy French LARGE CAPS Corporate governance
engagement on all stocks in the portfolio
Goal Replicate the CAC 40 index
Goal A positive regular return
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OVERVIEW

• PhiTrust Active Investors
• Methodology, achievements and lessons learned
• Main European governance issues
• Our products
• Annexes
• Achievements and past initiatives

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Phitrusts achievements in 2007
LAFARGE the resolution filed by the Sicav to
limit the 5 voting right limitation until 2011
reached 54 of the vote. DANONE, SCHNEIDER
ELECTRIC and TOTAL 4 resolutions were filed by
the Sicav and reached 29, 34 and 54
respectively. ALCATEL LUCENT the resolutions
to remove the voting right limitation provision
filed by the Sicav reached 71 of the votes. This
provison was consequently removed from company
by-laws
Removal of voting right limitations
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Past initiatives
ARCELOR, STMICROELECTRONICS, EADS these
companies do not authorize their shareholders to
present resolutions at AGMs. PhiTrust has
actively urged these three companies to introduce
this provision in their by-laws or articles of
associations. ARCELOR the Chairman of the
Board is willing to introduce modifications to
the by-laws, i.e a shareholder with a 1 stake
can file a resolution. PhiTrust has been
discussing this issue with them since 2003.
STMICROELECTRONICS any external resolution has
to be agreed by a preliminary Board approval.
STM, has formally accepted to inform its
shareholders in the event the Board refuses a
draft resolution.
Shareholder right to file resolution
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Past initiatives

• MICHELIN the company is a partnership with
  double voting rights for its European
  shareholders. The Advisory Board is composed of
  only 5 members.
• Thanks to PhiTrusts initiative, the company
  introduced two statutory modifications in 2005
• Removal of the geographical clause regarding
  double voting rights.
• Extension of the Advisory Board to 7 members.

Board structure changes
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Contacts
Denis Branche Luis de Lozada
denis.branche_at_phitrust.com luis.delozada_at_phitr
ust.com Martina von Richter Olivier de
Guerre martina.vonrichter_at_phitrust.com olivier.
deguerre_at_phitrust.com Past performances do
not guarantee future performances and they are
not constant over time. Fund performances are net
of fees. Fund performances are expressed dividend
included, while the reference index excludes
dividends. The value of an investment can fall or
rise as a result of market fluctuations and
investors may not get back the amount originally
invested. This document is not contractual, it is
strictly limited to the private use of its
addressee. The information about the fund
provided on this page does not constitute an
offer. It should be used for information purposes
only and it must not be interpreted as being a
sales offer or a share purchase offer. The
information supplied in this document is not
exhaustive and its accuracy cannot be guaranteed.
The assessments formulated in this document
reflect Phitrust Active Investors' opinion at the
date of publication and may be revised at any
time. PHITRUST ACTIVE INVESTORS Tel 33 (0) 1
55 35 07 55 www.phitrust.com