EUR 1000.00 For Business Accounts Only

Volvo - AGM 31 March 2021

We note that as a result of the Covid-19 pandemic the AGM will be held as an electronic meeting only. Consequently, it will not be possible to attend the AGM in person.

Under ITEM 8 the board of directors proposes to distribute an aggregate dividend of SEK 15.00 per share. The proposed dividend is NOT covered by EPS and FCF. Alternatively, we also note that Volvo has a limited amount of net debt (SEK 7.6 million) and corresponding healthy net debt to EBITDA ratio (0.2x). In addition, we note that dividends distributed for (at least) the past 5 years were (amply) covered by EPS and/or FCF. We furthermore note that Volvo received government grants in connection with the Covid-19 pandemic in the year under review. In aggregate, these grants amounted to SEK 2,248 million, which corresponds to 0.66% of revenues, and were mainly received from the authorities in Sweden, France and Canada. Given the limited amount of governmental support and the Company’s current solid financial position, we are willing to tolerate a dividend in excess of EPS as it currently does not jeopardize the Company’s financial position. As already mentioned above, Volvo decided to refrain from dividend payments in 2020, and therefore the (proposed) extraordinary dividend should be viewed as a way to pay back shareholders. When we control the dividend level as a % of combined net income and FCF over the FY’s 2019 and 2020, the (proposed) dividend (in aggregate) corresponds to 55% of EPS (SEK 27.14) and 69% of FCF (approx. SEK 21.69), respectively, which appears to be reasonable. Notwithstanding the above, we will continue to monitor the situation with utmost interest and reserve the right to oppose to this resolution next year if the Company’s (financial) results have not been significantly improved and/or the board of directors refuses to cut the dividend. Accordingly, we recommend to vote FOR.

Under ITEMS 12.1-12.12.11 the nomination committee seeks approval of the (re-)election of the board of directors. In view of concerns over aggregate time commitments we recommend to vote OPPOSE to the (re-)election of: Mmes. Kathryn V. Marinello (ITEM 12.7) and Martina Merz (ITEM 12.8).

Under ITEM 15 approval of the Company's first remuneration report is sought. As a matter of principle, we believe that performance criteria for the STI and LTI should be set and recorded at the beginning of the performance period. Companies may consider and should disclose any exceptional circumstances in which performance measures may be adjusted, including the process and timing of disclosure of these actions. However, performance measures should never be adjusted after the performance period has passed. As already mentioned above, the board of directors decided to award executive management with a revised STI and LTI pay-out for the full year based on adjusted operating income margin and operating cash flow for the Industrial Operation part of the Group as a threshold. Although we endorse that there have been extraordinary circumstances in the year under review (relating to the Covid-19 pandemic), this does NOT justify an award of nearly 75% of the maximum (100%) for the STI as well as LTI in our view. Certainly not when taking the (much) deteriorated company performance into consideration. Accordingly, we recommend to vote OPPOSE.

Under ITEM 16 approval of the Company's executive remuneration policy is sought. First of all, we consider the (proposed) changes a (marginal) improvement in comparison with the previous remuneration policy. That having been said, we still have various concerns regarding said policy. There are multiple metrics in place, however there is a considerable overlap between the metrics used in the STI and LTI arrangements. The LTI consist of performance cash of which the net amount has to be invested in company shares and the performance period is 1 year. We do NOT consider a performance period of only 1 year to be sufficiently long enough. Consequently, we are missing an actual LT component (with a performance period of at least 3 years) under the Company’s executive remuneration policy. In addition, we are not in favour of sole ‘cash-based’ LTIs and prefer an appropriate mix of cash and/or equity and equity-like tools in this respect. In view of the above concerns, we recommend to vote OPPOSE.

Finally, we note that, unlike best practice, the voting results of the AGM 2020 are not disclosed. We urge the Company to do so next year.