Invitation to the Annual General Meeting of Lundin Petroleum AB
04 April 2017
The shareholders of Lundin Petroleum AB (publ) are hereby given notice of the Annual General Meeting of Shareholders to be held on Thursday 4 May 2017 at 1 p.m. (Swedish time). Location: Vinterträdgården at Grand Hôtel, Södra Blasieholmshamnen 8, in Stockholm. The Annual General Meeting will be translated from Swedish to English and from English to Swedish.
Attendance at the Annual General Meeting
Shareholders wishing to attend the Annual General Meeting shall:
– be recorded in the share register maintained by Euroclear Sweden AB on Thursday 27 April 2017; and
– notify Lundin Petroleum of their intention to attend the Annual General Meeting no later than Thursday 27 April 2017 through the website www.lundin-petroleum.com (only applicable to individuals) or by mail to Computershare AB, “Lundin Petroleum AB’s AGM”, P.O. Box 610, SE – 182 16 Danderyd, Sweden, by telephone Int +46-8-518 01 554 or by e-mail email@example.com.
Shareholders whose shares are registered in the name of a nominee must temporarily register, through the nominee, the shares in their own names in order to be entitled to attend the Annual General Meeting. Such registration must be effected by Thursday 27 April 2017.
Shareholders may attend the Annual General Meeting through a proxy. A shareholder shall in such a case issue a written and dated proxy signed by the shareholder. Proof of authorisation (through a certificate of registration or similar) shall be attached to proxies issued by legal entities. A proxy form is available on www.lundin-petroleum.com and will be sent to shareholders upon request. To facilitate registration at the Annual General Meeting, proxy forms, certificates of registration and other documents of authority should be submitted to the Company at the address above in good time prior to the Meeting.
1. Opening of the Annual General Meeting.
2. Election of Chairman of the Annual General Meeting.
3. Preparation and approval of the voting register.
4. Approval of the agenda.
5. Election of one or two persons to approve the minutes.
6. Determination as to whether the Annual General Meeting has been duly convened.
7. Speech by the Chief Executive Officer.
8. Presentation of the annual report and the auditor’s report, the consolidated financial statements and the auditor’s Group report.
9. Resolution in respect of adoption of the income statement and the balance sheet and the consolidated income statement and consolidated balance sheet.
10. Resolution in respect of appropriation of the Company’s result according to the adopted balance sheet.
11. Resolution in respect of discharge from liability of the members of the Board of Directors and the Chief Executive Officer.
12. Presentation by the Nomination Committee:
• Proposal for the number of members of the Board.
• Proposal for election of Chairman of the Board and other members of the Board.
• Proposal for remuneration of the Chairman and other members of the Board.
• Proposal for election of auditor.
• Proposal for remuneration of the auditor.
13. Resolution in respect of the number of members of the Board.
14. Resolutions in respect of Board members:
a) Re-election of Peggy Bruzelius as a Board member;
b) re-election of C. Ashley Heppenstall as a Board member;
c) re-election of Ian H. Lundin as a Board member;
d) re-election of Lukas H. Lundin as a Board member;
e) re-election of Grace Reksten Skaugen as a Board member;
f re-election of Alex Schneiter as a Board member;
g) re-election of Cecilia Vieweg as a Board member;
h) election of Jakob Thomasen as a Board member; and
i) re-election of Ian H. Lundin as the Chairman of the Board.
15. Resolution in respect of remuneration of the Chairman and other members of the Board.
16. Election of auditor.
17. Resolution in respect of remuneration of the auditor.
18. Resolution in respect of the 2017 Policy on Remuneration for Group Management.
19. Resolution in respect of the 2017 Long-term, Performance-based Incentive Plan.
20. Resolution to authorise the Board to resolve on new issue of shares and convertible debentures.
21. Resolution to authorise the Board to resolve on repurchase and sale of shares.
22. Shareholder proposal in relation to the Company’s past operations.
23. Closing of the Annual General Meeting.
Proposals for resolutions to be presented at the Annual General Meeting of Lundin Petroleum AB on Thursday 4 May 2017 in Stockholm
Resolution in respect of appropriation of the Company’s result (item 10)
The Board proposes that no dividend is declared for the financial year 2016.
Resolutions in respect of Chairman of the Annual General Meeting, number of Board members, election of Chairman of the Board and of other members of the Board, fees payable to the Chairman of the Board and other members of the Board, election of auditor and fees payable to the auditor (items 2 and 13-17)
Lundin Petroleum AB’s Nomination Committee for the 2017 Annual General Meeting, consisting of Ian H. Lundin (Nemesia Sàrl and Landor Participations Inc., as well as Chairman of the Board), Magnus Unger (member of the Board and Chairman of the Nomination Committee), Åsa Nisell (Swedbank Robur fonder) and Hans Ek (SEB Investment Management), appointed by shareholders jointly holding approximately 31.5 percent of the voting rights for all the shares in Lundin Petroleum AB as per 1 August 2016, proposes the following:
• Advokat Klaes Edhall to be appointed as Chairman of the Annual General Meeting.
• Eight members of the Board to be appointed without deputy members.
• Re-election of Peggy Bruzelius, C. Ashley Heppenstall, Ian H. Lundin, Lukas H. Lundin, Grace Reksten Skaugen, Alex Schneiter and Cecilia Vieweg as members of the Board and election of Jakob Thomasen as a new member of the Board for a period until the end of the 2018 Annual General Meeting. Magnus Unger has declined re-election. Jakob Thomasen was born in 1962 and is a Danish citizen. Mr. Thomasen was formerly the Chief Executive Officer of Maersk Oil and a Member of the Executive Board of the Maersk Group from 2009 until 2016. Mr. Thomasen is currently the Chairman of the DHI Group, a world leader in the management of sustainable water environments. Mr. Thomasen is a graduate of the University of Copenhagen, Denmark, where he obtained a masters degree in Geoscience. He also completed the Advanced Strategic Management programme at IMD, Switzerland.
• Re-election of Ian H. Lundin as Chairman of the Board for a period until the end of the 2018 Annual General Meeting.
• Remuneration of the members of the Board and the Chairman of the Board, including in respect of Committee membership, to be as follows: (i) annual fees of the members of the Board of SEK 525,000 (excluding the Chairman of the Board and the Chief Executive Officer); (ii) annual fees of the Chairman of the Board of SEK 1,100,000; (iii) annual fees for Committee members of SEK 110,000 per Committee assignment (excluding the Committee Chairmen); and (iv) annual fees for Committee Chairmen of SEK 165,000; with the total fees for Committee work, including Committee Chairmen fees, not to exceed SEK 1,000,000.
• Re-election of the registered accounting firm PricewaterhouseCoopers AB as the auditor of the Company, which intends to appoint authorised public accountant Johan Rippe as the auditor in charge, for a period until the end of the 2018 Annual General Meeting.
• The auditor’s fees shall be payable upon approval of their invoice.
Resolution in respect of the 2017 Policy on Remuneration for Group Management (item 18)
The Board’s proposal for the 2017 Policy on Remuneration for Lundin Petroleum’s Group Management, which consists of the President and Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and Vice President level employees, entails that it is the aim of Lundin Petroleum to recruit, motivate and retain high calibre executives capable of achieving the objectives of the Group, and to encourage and appropriately reward performance that enhances shareholder value. Accordingly, the Group operates a Policy on Remuneration which ensures that there is a clear link to business strategy and a close alignment with shareholder interests and current best practice, and aims to ensure that Group Management is rewarded fairly for its contribution to the Group’s performance.
There are four key elements to the remuneration package of Group Management: a) Base salary; b) Yearly variable salary; c) Long-term Incentive Plan (LTIP); and d) Other benefits.
The 2017 Policy on Remuneration also provides for mutual notice periods on termination of employment and for severance arrangements in the event of termination of employment due to a change of control of the Company, where employment is terminated by the Company without cause, or otherwise in circumstances at the discretion of the Board.
In addition, remuneration as per prevailing market conditions may be paid to members of the Board of Directors for work performed outside the directorship.
The proposed 2017 Policy on Remuneration for Group Management is available on www.lundin-petroleum.com.
Resolution for the 2017 Long-term, Performance-based Incentive Plan (item 19)
The Board of Directors proposes that the Annual General Meeting resolve to establish a long-term, performance-based incentive plan (“LTIP 2017”) in respect of Group Management and a number of key employees of Lundin Petroleum, which follows the same principles as the long-term, performance-based incentive plan (“LTI”) approved by the 2014 – 2016 Annual General Meetings and which is based on the guidelines and the principal terms and conditions set out below.
The primary reason for establishing LTIP 2017 is to align the interests of Group Management and other key employees with the interests of the shareholders, and to provide market appropriate reward reflecting performance and commitment.
In order to be eligible to participate in future LTI plans, each participant needs to build towards a meaningful shareholding in Lundin Petroleum, meaning that a certain portion of any allotted shares pursuant to LTIP 2017 (and any future LTI plans) shall be retained until the required level of shareholding has been met.
Awards under LTIP 2017 are proposed to be made to approximately 12 permanent employees of the Lundin Petroleum Group (the “Participants”), comprising the Chief Executive Officer and other members of Group Management as well as certain other key employees within the Lundin Petroleum Group. The Board of Directors may, within the total number of shares available under LTIP 2017, invite a limited number of additional Participants in LTIP 2017 following recruitment to the Lundin Petroleum Group.
LTIP 2017 gives the Participants the possibility to receive shares in Lundin Petroleum subject to uninterrupted employment and to the fulfilment of a performance condition over a three year performance period normally commencing on 1 July 2017 and expiring on 30 June 2020 (the “Performance Period”). The performance condition (the “Performance Condition”) is based on the share price growth and dividends (“Total Shareholder Return”) of the Lundin Petroleum share compared to the total shareholder return of a peer group of companies (the “Peer Group”). At the beginning of the Performance Period, the Participants will, free of charge be granted awards (“LTIP Awards”) which, provided that i.a. the Performance Condition is met, entitle the Participant to be allotted, also free of charge, shares in Lundin Petroleum (“Performance Shares”) as soon as reasonably practicable following the end of the Performance Period.
The LTIP Award (i.e. the number of Performance Shares that a Participant may be allotted following the expiration of the Performance Period, provided that i.a. the Performance Condition is met) to be awarded to each Participant shall be calculated as follows:
LTIP Award = A multiplied by B divided by C, where
A is the Participant’s monthly gross base salary applicable as at the date of grant of the LTIP Award;
B is a number of months as determined by the Board of Directors in respect of each Participant, taking into account such factors as industry benchmarking and the Participant’s position within the Lundin Petroleum Group (but in any case, not exceeding 36 months); and
C being the average closing price of the Lundin Petroleum share on NASDAQ Stockholm for the three month period immediately prior to the Performance Period (the “Initial Share Price”).
Fractions of Performance Shares shall be rounded-off to the immediate lower whole number.
Assuming a share price of the Lundin Petroleum share as of 30 March 2017 of SEK 184.10, the total number of Performance Shares that may be allotted under LTIP 2017 as at the date of award (assuming 100 per cent vesting) is approximately 330,000, corresponding to approximately 0.1 per cent of the current total number of shares and votes in Lundin Petroleum. Since LTIP Awards are intended to be awarded in July 2017 and the share price of the Lundin Petroleum share may fluctuate until the Initial Share Price is determined, and considering additional Participants following recruitment, the total number of Performance Shares under LTIP 2017 as at the date of award may not exceed 465,000.
Allotment of Performance Shares will be determined by the Board of Directors after the expiration of the Performance Period on the basis of LTIP Awards made and is conditional on (i) the Participant retaining his or her uninterrupted employment in the Lundin Petroleum Group until the expiry of the Performance Period and (ii) the Performance Condition having been met. The Board of Directors may reduce (including reduce to zero) allotment of Performance Shares at its discretion, should it consider the underlying performance not to be reflected in the outcome of the Performance Condition, for example, in light of operating cash flow, reserves, and health and safety performance.
A minimum and a maximum level for the Performance Condition to be fulfilled have been established by the Board of Directors. In order for the LTIP Awards to give entitlement to the maximum number of Performance Shares, the maximum level for the Performance Condition must have been fulfilled. Where the level of fulfilment is between the minimum and maximum levels, allotment will occur on a linear basis.
The Participants will not be entitled to transfer, pledge or dispose of the LTIP Award or any rights or obligations under LTIP 2017, or exercise any shareholders’ rights regarding the LTIP Awards during the Performance Period.
Recalculation of the Performance Condition and the LTIP Awards, including the number of Performance Shares allotted, shall take place in the event of an intervening dividend in kind, bonus issue, split, preferential rights issue and/or other similar corporate events.
The Board of Directors will be entitled to adopt different terms and conditions for LTIP 2017 regarding, among other things, the Performance Period and allotment of Performance Shares in the event of commencement or termination of employment during the Performance Period, e.g. due to new recruitments, illness, disability, death, redundancy, contractual retirement and other exceptional circumstances determined by the Board of Directors.
The LTIP Awards entitle Participants to acquire already existing Lundin Petroleum shares. The Board of Directors will consider means to secure the Company’s expected financial exposure related to LTIP 2017. One method would be to enter into an equity swap agreement with a third party on terms in accordance with market practice, whereby the third party in its own name shall be entitled to acquire and transfer shares in Lundin Petroleum to the Participants.
The maximum cost for granting LTIP Awards under LTIP 2017 (assuming 100 per cent vesting), excluding costs related to delivery of the Performance Shares, is approximately USD 6.9 million (approximately SEK 60.8 million), excluding social security charges. The maximum cost for social security charges is estimated to be approximately USD 0.9 million (approximately SEK 8.2 million) assuming 100 per cent vesting and an annual share price increase of 10 per cent during the Performance Period.
The Board of Directors proposes that the Annual General Meeting resolves in accordance with the Board of Directors proposal to establish LTIP 2017. A valid resolution requires a simple majority of the votes cast.
A more detailed description of the Board’s proposal for the 2017 LTIP is available on www.lundin-petroleum.com.
Resolution to authorise the Board to resolve on new issue of shares and convertible debentures (item 20)
The Board proposes that the Board is authorised to decide, at one or more occasions until the next Annual General Meeting:
(i) to issue no more than 34,000,000 new shares with consideration in cash or in kind or by set-off or otherwise with conditions and thereby be able to resolve to disapply the share¬holders pre-emption rights. To the extent the new shares are issued with disappli¬cation of the shareholders pre-emption rights they shall be issued at a subscription price that closely corresponds to the market price of the shares at the time of the issue; and
(ii) to issue convertible debentures with consideration in cash or in kind or by set-off or otherwise with conditions and thereby be able to resolve to disapply the share¬holders pre-emption rights, where the number of shares that may be issued after conversion must not exceed 34,000,000. To the extent the convertible debentures are issued with disappli¬cation of the shareholders pre-emption rights they shall be issued at a subscription price that closely corresponds to market value based on the market price of the shares at the time of the issue of the convertible debentures.
The reason for disapplying the shareholders’ pre-emption rights is to enable Lundin Petroleum to make business acquisitions or other major investments. The total number of shares that can be issued based on the proposed authorisations under (i) and (ii) may not together exceed 34,000,000. If the authorisation is exercised in full, the newly issued shares would constitute approximately ten percent of the share capital after the issue.
This proposal requires the affirmative support of shareholders holding at least two thirds of the votes given for this resolution and of the shares represented at the Annual General Meeting.
Resolution to authorise the Board to resolve on repurchase and sale of shares (item 21)
The Board proposes that the Board is authorised, during the period until the next Annual General Meeting, to decide on repurchases and sales of Lundin Petroleum shares on NASDAQ Stockholm (the “Exchange”). The maximum number of shares repurchased shall be such that shares held in treasury from time to time do not exceed ten percent of all shares of the Company. The maximum number of shares that may be sold is the number of shares that the Company at such time holds in treasury. Repurchase and sale of shares on the Exchange may take place only at a price within the spread between the highest bid price and lowest ask price as registered from time to time on the Exchange. The repurchases and sales shall be made in accordance with the provisions concerning the purchase and sale of a company’s own shares under applicable stock exchange rules and other applicable rules and regulations.
The purpose of the authorisation is to provide the Board with an instrument to optimise Lundin Petroleum’s capital structure and thereby create added value for the shareholders, to secure Lundin Petroleum’s obligations under its incentive plans and to cover costs, including social security charges, that may arise as a result of the LTIP programs of the Company.
This proposal requires the affirmative support of shareholders holding at least two thirds of the votes given for this resolution and of the shares represented at the Annual General Meeting.
Shareholder proposal in relation to the Company’s past operations (item 22)
The Company has received a shareholder proposal in relation to its past operations in Sudan. The proposal requests that the Annual General Meeting call on the Board to allocate money to a remedy mechanism and to request the Swedish Government to design such a remedy mechanism. Similar shareholder proposal were brought by the same shareholder to the 2012 and 2013 Annual General Meetings, where they were rejected by the shareholders. The Board of Directors finds this proposal not in the best interests of the Company and its shareholders, and recommends voting against the proposal. The complete proposal, as well as the Board of Directors’ recommendation to vote against the proposal and the reasons for the recommendation, are available on Lundin Petroleum’s website www.lundin-petroleum.com.
Lundin Petroleum AB’s share capital amounts to SEK 3,478,713.38, represented by 340,386,445 shares. Each share carries one vote. Lundin Petroleum AB holds, as per 4 April 2017, no own shares. The Company’s Articles of Association are available on www.lundin-petroleum.com.
The Board and the Chief Executive Officer shall, if a shareholder so request and the Board considers that it may do so without significant damage to the Company, give information at the Annual General Meeting regarding circumstances that could affect the assessment of an item on the agenda and circumstances that could affect the assessment of the Company’s or a subsidiary’s financial situation. The duty to give information also applies to the Company’s relationship with another Group company and the consolidated financial statements.
The Chief Executive Officer’s speech will be available on www.lundin-petroleum.com after the Annual General Meeting.
Members of Lundin Petroleum’s Group Management will be available before and after the Annual General Meeting to discuss the business and operations of the Company and to answer questions from shareholders.
The following documentation is further available at Lundin Petroleum’s office (Hovslagargatan 5 in Stockholm) and on www.lundin-petroleum.com:
• The Nomination Committee’s complete proposal regarding items 2 and 13-17, including a reasoned statement regarding the proposal for the Board.
• Lundin Petroleum AB’s annual report, which includes the financial statements and the audit report.
• The statement of the auditor regarding the application of guidelines for remuneration as per the Swedish Companies Act Chapter 8, Section 54.
• The Board’s report on the evaluation of remuneration of Group Management in 2016.
• The Board’s proposal for the 2017 Policy on Remuneration for Group Management.
• The Board’s proposal for the 2017 LTIP.
• The Board’s statement pursuant to the Swedish Companies Act Chapter 19, Section 22 in respect of the authorisation to purchase and sell own shares.
• A shareholder proposal in relation to the Company’s past operations.
• The Board’s recommendation to vote against the shareholder proposal.
• A proxy form.
All documents will be sent to shareholders free of charge upon request if their postal address is provided.
Stockholm in April 2017
LUNDIN PETROLEUM AB (publ)
The Board of Directors