Aderly 2013 Results and 2014 Prospects

www.investinlyon.com Crédits photos : fred bourcier / b.stofleth - * accro à lyon Florian Kemmerich, from Germany Company manager in Lyon (France) Lyon became his town. Aderly 2013 Results and 2014 Prospects Press Release Wednesday January 29, 2014 1

Editorial by Jacques de Chilly, Executive Director of the Agency In 2014, the Lyon Area Economic Development Agency (ADERLY) is celebrating its 40th anniversary. A pioneer in economic development agencies in France, ADERLY has naturally seen its role and scope grow over the past four decades. Although its principals remain the founding members of the agency, specifically, the Lyon Chamber of Commerce and Industry, Rhône County, Greater Lyon and the MEDEF employers confederation of Lyon-Rhône, its scope of action has adapted to the changing economic context of the local area. ADERLY s prospecting thus began incorporating the periphery of the urban community from an early stage (for example, Nord-Isère and Plaine de l Ain), thereby adding to the local offering and prefiguring the current metropolitan area. Furthermore, it has focused increasingly on international companies and sectors of excellence, in accordance with the local area s economic strategy. Finally, it has transformed its skills, on the one hand with more sales-oriented staff with greater specialization and international experience, and on the other hand through stricter efficiency criteria. Indeed, getting a good return on the investment of public funds and in terms of the workforce has become a key requirement at ADERLY. These changes have enabled the Agency to cope with the new global challenges it has faced in a deteriorated economic situation and amidst increasingly fierce competition between local areas to attract international investment. Although its role is still to promote the Lyon area, seek out and foster new investment, which create value and jobs, ADERLY adapts constantly, by building its expertise across key sectors, strengthening its international strategy and mastering new tools for the international promotion of the local area, such as the ONLYLYON program and the World Trade Center Lyon. 2

And these changes have kept pace with transformations in the local area whose economy it promotes. More than ever, Lyon and its region are in a dynamic process of economic and urban growth and international expansion. It is clear that the combined momentum of the local area and of the Agency has led to above-average attractiveness results in France, and even in Europe. 2013 was no exception, as ADERLY s results exceeded both the Agency s annual objectives and the excellent results of 2012, even though the type of projects had changed somewhat. These results stimulate the Agency for 2014 because, although Lyon has what it takes to succeed, the diminished attractiveness of France as a whole remains a real concern for the future. This is evidenced by the 50 foreign companies in France that sounded the alarm at the end of December 2013, saying: For the past few years, it has been harder and harder for us to convince our parent companies to invest and create jobs in France. 1 ADERLY: key figures 31 employees 4 sector-based Business Units (Services, Environmental Technologies and Industry, Life Sciences, Projects and Local Areas) and one dedicated to support functions (General Resources and Communication) 15 prospectors including Japanese, Chinese and German employees. A partnership with the national employment agency for recruitment A portfolio of 300 business development initiatives 4 principals and 60 constituent members A stable budget since 2005 of 4.7 million from three main sources: The Lyon Chamber of Commerce and Industry for 1.8 M e Greater Lyon for 1.5 M e Rhône County for 1M e 1- Article in Les Echos (December 2013) 50 entreprises étrangères installées en France tirent la sonnette d alarme 3

A deteriorating climate for national attractiveness Overall, 2013 confirmed the trend diminishing international attractiveness for France. In 2013, it fell far behind the two powerful leaders, the UK and Germany. And certain rankings even put it behind Spain and Russia (Financial Times FDI Markets) 2 in terms of the number of projects attracted. The December 2013 report by INSEAD business school 3 summarizes the situation in this way: A sharp contraction of most of the flow indicators to do with foreign investment in France has been observed since the peaks reached in 2006-2007. FDI flows have thus been reduced by more than half, according to the UNCTAD, 4 the value of physical investment projects decreased significantly, and the number of new jobs fell by nearly 40% between 2006 and 2012, according to the AFII. 5 Unfortunately, this reality is confirmed by the perception international investors have of France, leading Ernst & Young to title its annual survey on the attractiveness of France in 2013 Last Call. 6 This report stresses the fact that France has been left behind by the UK and Germany, the preferred destinations of emerging investors and manufacturers. The burden of labor cost and unpredictable rules are often cited by investors as France s major disadvantages, not to mention the fiscal dumping that goes on within the European Union itself, enabling countries such as the Netherlands and Ireland to negotiate favorable conditions for foreign investors, on a case-by-case basis. Only the research tax credit is now touted by foreign investors to explain France s relatively superior results in this area. We hope that the recent measures announced by the French President will be capable of reversing this ongoing deterioration of the image that foreign investors have of France. The report notes that the main driver of the recovery in France will still be at the local level and in cities in particular, which are flexible enough to innovate, differentiate themselves and remain attractive compared with their European rivals. Marc Lhermitte writes in the conclusion of his report that by investing in digital and logistical infrastructure, 4

renovated universities and business areas adapted to the needs of companies, the major urban areas have managed to integrate, at local level, this extramuros principle that is needed for France to make a recovery. This observation is in line with the reality of the major cities, where attractiveness is growing and whose development agencies boast positive results, even though the attractiveness of France as a whole is waning and the international economy remains fragile. This paradox is not all that surprising, but it still has not been fully grasped in a country still characterized by centralizing strategies, far removed from the reality of the international economic environment. This is why the agencies of the major French metropolises joined forces in 2013 in a club called Invest in French Metropolises, designed to be an independent tool of joint promotion aiming to increase their influence at European and international level. French cities intend to have a direct impact on their futures and development. Moreover, this approach should be facilitated through a bill on the future of metropolises passed by the French Parliament in late 2013. 2-2013 ranking by the Financial Times FDI Markets 3- France : Pourquoi la bataille de l attractivité est loin d être perdue, December 18, 2013 4- Report on global investment, June 2013, UNCTAD 5-2012 report on foreign investment that creates jobs in France, 2013 6- Attractiveness of France survey, June 2013, Ernst and Young 5

2013 results In this particularly difficult international and national context, Lyon stands out as an exception once again by achieving an excellent performance, against the tide. The city s results for 2013 were in fact the best in ten years, with 77 new projects. Faced with decreasing American investment in Europe and especially in France, ADERLY has invested more extensively in areas closer to home (France and Europe). This strategy has enabled the Agency to continue to produce exceptional results. Quantitative analysis ADERLY s results for 2013 are even better than the previous year, which had already exceeded the Agency s annual objectives, set at 60 business start-up and relocation projects for 1,800 jobs in the next three years. Indeed, in 2013, ADERLY helped 77 new companies set up or develop in the Lyon region, representing 1,825 new jobs in the next three years. This is the best result in terms of the number of business set-up and relocation projects in the past eight years and the second-best result in terms of job creation (slightly down from the previous year, which saw the creation of 1,859 jobs). Finally, these business development initiatives enabled a total surface area of 13,047 square meters to be occupied, vs. a targeted occupancy of 10,000 sq. m. NUMBER OF COMPANIES SET UP PER YEAR AND NUMBER OF JOBS IN THE NEXT 3 YEARS 997 53 2006 1157 59 1606 69 650 56 Number of companies set up per year Number of jobs in the next 3 years 1424 66 1345 60 1859 71 1825 77 2007 2008 2009 2010 2011 2012 2013 6

Qualitative analysis Several indicators show the type and quality of business start-up and relocation projects in relation to the objectives of ADERLY and of the local area: 1. Projects according to origin of the capital In 2013, 55% of business start-up and relocation projects were backed by foreign capital. This proportion was slightly lower than in previous years, as the share of foreign companies in the results of ADERLY is generally between 60% and 65%. The trend was reinforced by a rise in capital investments not only of national origin (see part 3), but also a more significant share of investment from bordering countries such as Switzerland, Belgium and Germany, off-setting the decrease in American investment (with 5 projects) and stagnation in Asian projects (with 5 projects as well). GEOGRAPHIC ORIGIN OF PROJECTS France 35 This trend toward Europe-centered investment is not specific to Lyon. Rather, it is a consequence of the uncertain economic situation that has led companies to rationalize their international strategies, often in favor of local development with a faster return on investment. According to the report by the UNCTAD in June 2013 on global investment, the economic situation has led transnational corporations (TNCs) of developed countries to use a wait-and-see strategy with respect to new investments, or to sell off foreign interests, rather than undertaking major development internationally. In 2012, 22 developed countries out of 38 saw their DFI decrease, by a total of 23%. However, amongst the novelties of 2013, we can highlight the first Russian project and the first project from the United Arab Emirates (Emirates Airline). United Arab Emirates 1 United-States 5 Asia 5 4 Japan 1 China Russia 1 Europe 30 8 Germany 8 Belgium 4 Switzerland 3 spain 3 Italy 2 Austria 2 Portugal 7

2013 Results 2. Business sectors In 2013, the services sector generated nearly half of all business start-up and relocation projects with 27 services companies and 9 NICT firms, i.e. 36 projects and 962 new jobs. However, the environmental technology and industry sector was confirmed as a priority. The increased resources that were focused on this sector paid off, since it is in second place, with 30 business start-ups and relocations and 710 new jobs. Finally, the life sciences, another sector of excellence, are also well represented with 11 companies generating 153 jobs. However, these business sectors correspond to different realities. For example, 80% of business set-ups and relocations in the industry/environmental technology sector were of foreign origin, vs. an average of 55% of all ADERLY projects. Likewise, it is a sector with highly diversified segments. In 2013, out of 30 business set-up and relocation projects, more than a third of the companies were from industry (13 companies) and 7 were from the energy sector. DISTRIBUTION OF COMPANY START-UPS RELOCATIONS BY SECTOR Environmental Technologies and Industry 30 Life sciences 11 Services Sector 36 8

3. Breakdown of projects by function Lyon continues to assert itself in France as an alternative to Paris and a major European metropolis for decision centers. Indeed, 27 of 77 business set-ups and relocations were decision centers. Another aspect to emphasize this year: the number of R&D centers, which is one of the Agency s quality objectives. There were 10 such centers this year, representing an increase from previous years, thereby proving the attraction of the Lyon area for its human and scientific skills. R&D centers 10 BREAKDOWN OF PROJECTS BY FUNCTION Regional Headquarters Logistics hubs 2 5 Services 5 Sales offices 25 Production centers 3 Decision centers 27 9

2013 Results 4. Origin of the projects More than ever, the business start-up and relocation projects completed by ADERLY came from three sources: prospecting, partners and opinion leaders. The prospecting carried out by the teams at ADERLY in 2013 generated half of the business start-up and relocation projects, a proportion significantly higher than last year (48 projects contributed in 2013 vs. 26 in 2012). ORIGIN OF THE PROJECTS Prospecting 62% Opinion leaders 20% Another major source of projects: the prospecting partners, with 14 projects contributed in 2013 (AFII: 11 and ERAI: 3) vs. 13 last year. The share of projects generated by opinion leaders remained stable in relation to the previous year. 5. Size of the projects An important short-term economic indicator is the average size of projects. In 2013, although the results were higher than in previous years, paradoxically, the ratio of jobs per project was lower than in the past. With 1,825 jobs for 77 projects, this represents projects with an average size of 23 jobs. The projects were thus more numerous but smaller in size. This is a major tendency across Europe that affects Lyon as well and the city did not boast a major, emblematic project the way it has in the past. Partners 18% 10

6. Key business start-ups and relocations Amongst the companies that chose Lyon in 2013, some of the most notable projects and brands included: A Japanese company specializing in cell therapy and manufacturing a range of peptide biomaterials, set up for business in the 3rd district of Lyon. 20 jobs in the next 3 years. Founded in 1992 and the leader on the Russian market, Neurosoft develops and markets neurophysiological systems. The firm opened a decision center in Bron. 5 jobs in the next 3 years. An extension of the video game studio Arkane (American Zénimax Group), moved to the Sucrière into premises with an area of 1,200 sq. m. 50 new jobs. Dutch company (parent company, Priceline.com, based in USA), specializing in online hotel reservation. Installation in new premises in the Part-Dieu area (500 m²). 50 jobs in the next 3 years. Using an innovative transmedia storytelling concept, this company produces animated feature films paired with video games that take place in the same context. 400 sq. m in Villeurbanne, 60 jobs in the next 3 years. St Genis Laval. 50 jobs in the next 3 years. The FORTIL Group, engineering and project management consultants, has decided to create a new facility in Caluire. 200 sq. m; 100 jobs in the next 3 years. The Austrian group, the technological leader in the global market for battery chargers, welding techniques and solar electronics, set up a regional division in Saint-Vulbas. 12 jobs in the next 3 years. Conctruction of a new production unit and storage (building of 7,000m ²) in Communay. 100 new jobs in the next 3 years. A new production facility was set up by the American automotive supplier in Décines (expansion of existing site). 60 jobs. This internationally renowned German company in the dental sector set up an R&D center in Villeurbanne. 17 jobs in the next 3 years. This Belgian group designs, integrates and maintains industrial equipment for the energy, defense and metallurgy sectors. It opened a regional division in 11

Prospects for Lyon and ADERLY in 2014 Lyon s position in the European Top 10 has been confirmed. Marc Lhermitte, of Ernst & Young Advisory and the author of the France Survey 2013, which ranks Lyon in 9th place in Europe, stresses that: Lyon has weathered the crisis hitting France and many areas. It has managed to break free of national strategies and assert itself on the European stage in the eyes of investors, as a strong, credible metropolis. 1. If Lyon has managed to maintain its attractiveness, it is chiefly due to four fundamentals: The choice of specialization By focusing its investments on two sectors, the life sciences and green chemistry, which are the pillars of its industrial dynamic and boast two world-class competitive clusters, Lyon has managed not only to build momentum within these two sectors, but also to raise their visibility and enhance their attractiveness among foreign players. Excellence across sectors The attractiveness of LYON Reputation Major urban projects Major urban projects not only signal a city s ambition and its ability to carry out this type of project successfully, they also act as testing grounds for projects such as the smart neighborhood developed with funding from the Japanese New Energy and Industrial Technology Development Organization. Location Major urban projects 12

Location This remains one of Lyon s key advantages. At the crossroads of the wealthiest European consumer market (Germany, Switzerland, Northern Italy), Lyon is valued by companies that want to use France as a base to serve a vast zone, reaching in certain cases as far as North Africa. Improving Lyon s image and status on the international scene For over six years now, through the ONLYLYON brand, the local area has implemented a marketing policy unparalleled in Europe, with the exception of I am Amsterdam. This proactive campaign has produced an image of a dynamic, entrepreneurial, attractive city that used to be considered austere or dull and that was often associated exclusively with its gastronomic heritage. These four components of Lyon s attractiveness are augmented by the ability to work together (ONLYLYON being the most visible sign of this) and the unique tool represented by ADERLY (Invest in LYON) which, for 40 years, has constantly adapted its services and commercial policy to attract an increasing number of international companies. 2. Furthermore, although the recession did not spare Lyon, given that industrial leaders such as Kem One and Fagor have been endangered, other companies continue to develop and invest in Lyon nevertheless, especially in the services sector. Indeed, the year saw major real-estate transactions, with the number of square meters of office space occupied in Lyon during the third quarter already higher than all of 2012, which was 185,000 sq. m. 2013 also saw an increased presence of major corporations that are doing so well in Lyon that they are developing new activities and investing in new spaces here: SANOFI, a world leader in the vaccine industry, and the biggest private employer in the Lyon urban area (4,000 employees), has its global headquarters in Lyon. Plans for 2015: new global headquarters with a surface area of 18,000 sq. m, to pool its resources and bring all its support functions together in Lyon-Gerland, with an estimated 600 employees on the site. Another construction project is scheduled, in Gerland as well: a new building that will house the global headquarters of Sanofi Pasteur and Mérial. Sanofi has invested very heavily in Lyon because the ecosystem suits us and it s a business-friendly city, says Alain Mérieux, CEO of the Mérieux Institute. 13

Prospects for Lyon and ADERLY in 2014 MANITOWOC, an American company specializing in the manufacture of lifting equipment for the construction industry, will move into its new headquarters (7,200 sq. m) in Dardilly in 2014. Previously located in Ecully, the company decided to move so as to consolidate other activities that are currently separated, such as a global training center that can accommodate between 300 and 400 people a year. A new location might be developed in eastern Lyon to consolidate other sites as well, stated Philippe Cohet. ALSTOM, a company specializing in transportation and power generation. Predicting strong growth, the group has decided to set up a new building project with a surface area of 36,600 sq. m to house the company s tertiary activities, with a price tag of 100 million. Alstom will be the sole tenant of this building, with a renewable 12-year lease. Construction is slated to be completed in 2015. Ultimately, 1,700 Alstom employees will work at this facility. There are currently 750. NORBERT DENTRESSANGLE, a transportation and logistics company, left the Drôme to set up its new headquarters in the 6th district of Lyon so as to align the group s legal organization with its managerial structure. You can be a global corporation and still love your country and be proud of your roots, said the prefect of the Rhône, Jean-François Carenco, about Norbert Dentressangle.. 3. ADERLY has had to adapt its prospecting and the offering of the local area in response to the specific context of the global recession and the limited demand of companies. These parameters have been incorporated into the Agency s strategy for 2014, because the economic and macroeconomic indicators do not foresee a return to normal this year. The origin of the projects has changed over the past year. Overall, business movements are increasingly Europecentered, and Lyon is no exception to this strong trend. This means that ADERLY must continue assisting the international companies already located in the local area so as to secure their presence, which could be jeopardized by France s attractiveness problems. But it also means that ADERLY must diversify its prospecting process, so as to maintain a satisfactory level of economic development in the local area, thanks to the structural advantages to be found here. This involves prospecting in France for companies in the services sector likely to be interested in transferring their headquarters, together with increased monitoring in certain nearby countries that provide financing such as Switzerland, in addition to the remaining priority prospecting areas, such as the United States and the sectors of excellence. 14

The size of projects: This is symptomatic of strained economic conditions. Once more this year, Lyon, like other major European cities, did not see major business start-up, relocation and site-construction projects, even by major international corporations. The size of the projects is smaller, even if the long-term plan that companies have is to wait until the context is more favorable and then expand the sites created in Lyon, in terms of jobs, technological content and investment. Industry: Whereas Europe worries about the pace of deindustrialization, it is clear that, once more, Lyon is experiencing a slightly different reality in this sector. Lyon remains a first-rate industrial capital, with nearly 45% of all jobs in industry and industry services, vs. 40% on average elsewhere in France. This means that Lyon has succeeded in protecting this base by implementing the strategy of specialization (in the life sciences and chemicals) by facilitating links between industry and research and promoting the advantages of its location. Furthermore, this is a position that Lyon intends to strengthen, for example in the agribusiness sector and in the chemical and environmental technology industries, where Lyon has genuine advantages that set it apart. This is why ADERLY continues to seek out industrial projects, which always generate a lot of jobs. To distinguish itself from other major European cities, Lyon s industrial identity gives it a real competitive edge! 15

Press relations Emmanuelle SYSOYEV +33 (0)6 28 83 83 39 sysoyev@onlylyon.com