By iolite Partners

Dear Investors, Friends and Subscribers,


I am happy to report the portfolio recovered strongly in July and August, as most of my investment theses continued to play out nicely and most holdings reported strong results. Even a commodity-related Australian holding that was delisted after a sharp selloff on December 31, 2015 reported very healthy cash generation. The portfolio’s rebound confirms that it pays off to have patience and focus on intrinsic value rather than pursue short-term outcomes.


As I had stated in my H1 2016 letter, the portfolio’s weak performance during the period was mostly driven by one investment: Perion Network (NASDAQ:PERI). To quote: “The financially most painful investment decision in my life to date has been an investment in Perion Network. This is an investment in what was once Israel’s largest IT start-up, after it had fallen on hard times and looked cheap in the aftermath. Unfortunately, there are serious issues with current management: a lack of credibility, a track record of horrendous capital allocation, and an overhead structure that no longer fits the size of the business. Many of these issues only revealed themselves over time and only became obvious earlier this year. It took me too long to spot them and to act accordingly.”


As it turns out, I am not alone in my assessment. Significant shareholder and serial entrepreneur Ronen Shilo (the founder of PERI’s largest legacy business) just called an extraordinary shareholders meeting with an open letter to the Board, stating:


  • This deterioration results from lack of proper management and leadership.Perion’s executive management lacks vision and strategy. The Shareholder has requested several times that the Board replace the management, primarily the CEO, Mr. Joseph Mandelbaum. However, despite promising otherwise, the Board has not implemented these changes.
  • Faulty “staggered” Board structure under Articles is a primary reason for the Board’s complacency in not effecting management changes.Under the “staggered” Board structure, Perion’s directors are entrenched for three-year terms and do not face annual elections. Consequently, certain directors feel too comfortable with the status quo to lead these changes.
  • “Staggered” Board structure prevents shareholders from replacing complacent directors annuallywith new nominees who will better protect shareholders’ interests. Instead, certain directors, together with management, continue to direct Perion without proper reflection of shareholders’ interests.


I couldn’t agree more.


I believe the company is vastly undervalued based on how profitable it could be. However, to realize the company’s potential, one has to replace the CEO – and this apparently requires the replacement of certain Board members as well. The upcoming meeting is the opportunity for shareholders to speak up, re-gain control, and initiate a much-needed change in management.


If you know fellow shareholders of PERI, please spread the word. I hope to see many of them in Israel on September 26. Let me know if you have any questions.

Perion Network Ltd (PERI)

Currently, we are not aware of any other matters that will come before the Meeting. Any shareholder of the Company who intends to present a proposal at the Extraordinary General Meeting of Shareholders must satisfy the requirements of the Israeli Companies Law 5759-1999 ( the ” Companies Law “) . Under the Companies Law, only shareholders who hold at least 1% of the Company’s outstanding voting rights are entitled to request that the Board of Directors include a proposal in a shareholders meeting, provided that such proposal is appropriate for consideration by shareholders at such meeting. Such shareholders may present proposals for consideration at the Meeting by submitting their proposals in writing to our Corporate Secretary and General Counsel at the following address: 1 Azrieli Center, Building A, 4th Floor, 26 HaRokmim Street, Holon, Israel 5885849, Attention: Corporate Secretary and General Counsel, or by facsimile to +972-3-644-5502. For a shareholder proposal to be considered for inclusion in the Meeting, our Corporate Secretary and General Counsel must receive the written proposal no later than August 29, 2016.

Throughout this Notice of Extraordinary General Meeting of Shareholders and the enclosed Proxy Statement, we use terms such as the ” Company “, ” Perion”, ” we “, ” us “, ” our ” and ” our company ” to refer to Perion Network Ltd. and terms such as ” shareholders “, ” you ” and ” your ” to refer to our shareholders.

Shareholders Entitled to Vote

Only shareholders of record at the close of business on August 29, 2016 (the ” Record Date “), will be entitled to notice of, to participate in, and to vote at, the Meeting.


Shareholders may vote their shares by personally attending the Meeting or by appointing “proxies” to vote on their behalf at the Meeting. Whether or not you intend to attend the Meeting in person, please take the time to vote your shares by completing, signing and promptly mailing the enclosed proxy card to the Company’s transfer agent, in the enclosed, postage-paid envelope. A duly executed proxy card must be received by the Company not later than the close of business on September 25, 2016 in order to be counted in the vote to be held in the Meeting. You may also present the proxy card to the chairperson at the Meeting. Shareholders may revoke their proxy at any time before the effective exercise thereof by filing with the Company’s transfer agent a written notice of revocation or a duly executed proxy card bearing a later date, delivered to the Company’s transfer agent no later than the close of business on September 25, 2016, or by presenting a later dated proxy card to the chairperson at the Meeting or by voting in person at the Meeting if you are the record holder of the shares. If you attend the Meeting and you are the record holder of the shares, you may vote in person, whether or not you have already executed and returned your proxy card. If your shares are held in “street name”, meaning in the name of a bank, broker or other record holder, you must either direct the record holder of your shares on how to vote your shares or obtain a legal proxy from the record holder to vote the shares at the Meeting on behalf of the record holder as well as a statement from such record holder that it did not vote such shares.

If your shares are held through a member of the Tel Aviv Stock Exchange (” TASE member “), and you intend to vote your shares at the Meeting in
person or by proxy, you must deliver to us, via messenger or registered mail, a confirmation of ownership ( ishur baalut ) issued by the applicable TASE member, confirming your ownership of our Ordinary Shares as of the Record Date, as required by the Israeli Companies Regulations (Proof of Ownership of Shares for Voting at General Meeting), 5760-2000. Alternatively, you may vote electronically via the electronic voting system of the Israel Securities Authority (“ISA”), up to six hours before the time fixed for the Meeting. You should receive instructions about electronic voting from the TASE member through which you hold your shares.

Joint holders of shares should note that, pursuant to our Articles of Association, the vote of the senior of joint holders of any share who votes such

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