notice of annual general meeting 2016 - open briefing spotless group holdings limited abn 27 154 229...

Spotless Group Holdings Limited ABN 27 154 229 562 549 St Kilda Rd, Melbourne VIC 3004 Australia www.spotless.com of 1

20 September 2016

Notice of Annual General Meeting 2016

Attached is the Notice of Spotless’ 2016 Annual General Meeting which is being mailed to shareholders today. Spotless’ 2016 Annual General Meeting will be held on Thursday, 20 October 2016 at the Melbourne Town Hall, 90-120 Swanston Street, Melbourne, Victoria.

Investor and analyst contact: Media contact: Geoff Bryant Julian Murphy General Manager, Investor Relations Corporate Communications Manager T +61 2 9816 9281 T + 61 7 3908 6347 M +61 419 684 900 M + 61 418 970 778

ASX Announcement

Annual General Meeting

2016

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Notice of Annual General Meeting 2016

Spotless Group Holdings LimitedABN 27 154 229 562

Notice is given that the Annual General Meeting of Spotless Group Holdings Limited (the Company) will be held at the Melbourne Town Hall, 90–120 Swanston Street, Melbourne, Victoria on Thursday, 20 October 2016, at 2.00pm.

Items of Business

Ordinary Business

1. Financial Report, Directors’ Report and Auditor’s Report

To receive and consider the Financial Report, Directors’ Report and Auditor’s Report for the year ended 30 June 2016.

2. Election of Directors

To consider and, if thought fit, pass the following resolutions:

(a) “That Ms Diane Grady AM, who retires in accordance with rule 6.1(f) of the Company’s Constitution, being eligible and offering herself for re-election, is re-elected as a Director.”

(b) “That the Hon. Nick Sherry, who retires in accordance with rule 6.1(f) of the Company’s Constitution, being eligible and offering himself for re-election, is re-elected as a Director.”

(c) “That Ms Julie Coates, a Director appointed by the Board since the last Annual General Meeting of the Company, who retires in accordance with rule 6.1(e) of the Company’s Constitution, being eligible and offering herself for election, is elected as a Director.”

Details of the Directors seeking election are set out in the Explanatory Notes to this Notice of Meeting.

Each election will be open for discussion as a separate item of business and voted on as a separate ordinary resolution.

3. Adoption of Remuneration Report

To consider, and if thought fit, pass the following resolution:

“To adopt the Remuneration Report for the year ended 30 June 2016.”

The Remuneration Report is set out in the 2016 Annual Report.

The vote on this resolution is advisory only and does not bind the Directors or the Company. A voting exclusion statement applies to this resolution.

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Special Business

4. Approval of the grant of options and share rights to the Managing Director/CEO under the Long Term Incentive Plan

To consider, and if thought fit, pass the following resolution:

“That approval is given for the purposes of the ASX Listing Rules (including ASX Listing Rule 10.14) and for all other purposes for:

(a) the grant of 3,288,142 options to acquire ordinary shares in the Company; and

(b) 1,258,470 rights to acquire ordinary shares in the Company,

to the Managing Director and Chief Executive Officer of the Company, Mr Martin Sheppard, in accordance with the Company’s Long Term Incentive Plan as the long term incentive component of his remuneration for the financial years ended 30 June 2016 and ending 30 June 2017 on the basis described in the Explanatory Notes to this Notice of Meeting.”

This resolution will be voted on as an ordinary resolution. A voting exclusion statement applies to this resolution. If approval is given under ASX Listing Rule 10.14 by passing this resolution, approval is not required under ASX Listing Rule 7.1.

By order of the Board

Paul Morris Company Secretary

Dated 20 September 2016

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Important Notes

Entitlement to vote

The Board has determined that, for the purposes of the meeting, a person will be recognised as a member and the holder of shares if that person is registered as a holder of shares at 7.00pm (Melbourne time) on Tuesday, 18 October 2016. Accordingly, share transfers registered after that time will be disregarded in determining entitlements to attend and vote at the meeting.

How to vote

Shareholders may vote by either:

• attending the meeting and voting in person or by attorney or, in the case of corporate shareholders, by appointing a corporate representative to attend and vote; or

• appointing a proxy to attend and vote on their behalf using the proxy form accompanying this Notice of Meeting and by submitting their proxy appointment and voting instructions electronically, in person, by post or by facsimile.

Voting in person (or by attorney)

Shareholders, or their attorneys, who plan to attend the meeting are asked to arrive at the venue 15 minutes prior to the time designated for the meeting, if possible, so that their holding may be checked against the Company’s share register and their attendance recorded. In the case of persons attending the meeting as an attorney of a shareholder, the original power of attorney appointing the person as the shareholder’s attorney (or a certified copy of the power of attorney) must be received by the Company in the same manner and by the same time outlined for proxy forms below.

If your shares are held jointly, please note that if you and another joint holder both wish to vote at the meeting, only the vote of the holder named first in the register will be accepted, to the exclusion of the other holder(s).

Voting by a corporation

A shareholder or proxy that is a corporation may appoint a body corporate representative to attend and vote for the shareholder or proxy at the meeting. The appointment must comply with the requirements of section 250D of the Corporations Act 2001 (Cth) (Corporations Act). The representative should bring to the meeting evidence of his or her appointment, including any authority under which it is signed, unless it has been previously provided to Company’s Share Registry.

Voting by proxy

A shareholder entitled to attend and vote at this meeting is entitled to appoint not more than two proxies to attend and vote instead of the shareholder. A proxy form is included with this Notice of Meeting and an additional proxy form (if two proxies are to be appointed) can be obtained from the Company’s Share Registry. A proxy need not be a shareholder of the Company.

Where two proxies are appointed, each proxy may be appointed to represent a specific proportion of the member’s voting rights on a poll. If the appointment does not specify the proportion or number of votes, each proxy may exercise half of the votes (any fraction of votes will be disregarded). Neither proxy is entitled to vote on a show of hands if more than one proxy attends.

If you appoint a proxy, the Company encourages you to consider directing them how to vote by marking the appropriate box on the proxy form for each of the proposed resolutions. If your proxy chooses to vote, he/she must vote in accordance with your directions. If you have directed your proxy to vote, and they fail to attend the meeting or they choose to not vote, then, on a poll, the Chairman of the meeting will vote your proxies as directed by you.

If you appoint the Chairman of the meeting as your proxy (or the Chairman becomes your proxy by default) and you do not direct your proxy how to vote on a resolution, you will be expressly authorising the Chairman to vote as she decides on the relevant resolution. This includes resolutions 3 and 4 even though these resolutions are connected with the remuneration of members of the Company’s Key Management Personnel. Where the Chairman of the meeting is not directed how to vote, she intends to vote, as your proxy, in favour of each of the proposed resolutions (where permissible).

If you do not want the Chairman of the meeting to vote as your proxy in favour of any resolution, you need to direct your proxy to vote against, or to abstain from voting on, the relevant resolution by marking the appropriate box on the proxy form.

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If you appoint a Director (other than the Chairman of the meeting) or another member of the Key Management Personnel (or a Closely Related Party of any such Director or member) as your proxy, you should direct them how to vote on resolutions 3 and 4 by marking the appropriate box. If you do not do so, your proxy will not be able to vote on your behalf on resolutions 3 and 4.

Key Management Personnel of the Company are the Directors of the Company and those other persons having authority and responsibility for planning, directing and controlling the activities of the Company. The Remuneration Report identifies the Key Management Personnel for the financial year ended 30 June 2016.

Closely Related Party, in relation to a member of the Key Management Personnel, means the member’s spouse, child or dependent (or a child or dependant of the member’s spouse), anyone else in the member’s family who may be expected to influence, or be influenced by, the member in the member’s dealings with the Company and/or the Spotless Group, and any company that the member controls.

The proxy form (and the power of attorney or other authority, if any, under which a proxy form is signed, or a certified copy of the power or other authority) must be completed and returned no later than 2.00pm (Melbourne time) on Tuesday, 18 October 2016.

Proxies (and, if applicable, powers of attorney or other authorities) may be returned:

Online at www.linkmarketservices.com.au

Choose Spotless Group Holdings Limited from the drop down menu, enter the holding details as shown on the proxy form, and follow the instructions provided to appoint a proxy.

By mail

Link Market Services Limited Locked Bag A14 Sydney South NSW 1235

By hand

Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000

By facsimile

+61 2 9287 0309

Any proxy form received after that time will not be valid for the scheduled meeting.

The proxy form must be signed by the shareholder or the shareholder’s attorney or, if the shareholder is a corporation, in a manner permitted by the Corporations Act. A proxy given by a foreign corporation must be executed in accordance with the laws of that corporation’s place of incorporation. Where two or more persons are registered as a member, each person must sign.

Shareholder questions

For shareholders who have elected to receive this Notice by post, a question form has been included with this Notice for shareholders to submit written questions. Questions can also be submitted online at www.linkmarketservices.com.au.

Questions must be received by the Company’s Share Registry by 5.00pm (Melbourne time) on Thursday, 13 October 2016.

The Company will respond to as many of the more frequently asked questions as possible at the meeting. Please note that individual responses will not be sent.

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Explanatory Notes to Shareholders

These Explanatory Notes accompany and form part of the Notice of Meeting.

Resolution 1 —Financial Report, Directors’ Report and Auditor’s Report

The Corporations Act requires the Financial Report (which includes financial statements, notes to the financial statements and directors’ declaration), the Directors’ Report and the Auditor’s Report for the year ended 30 June 2016 to be laid before the Annual General Meeting. A copy of the 2016 Annual Report (which includes the Financial Report, Directors’ Report and Auditor’s Report) is available from the Company’s website at www.spotless.com. A printed copy of the 2016 Annual Report has been sent to those shareholders who have elected to receive a printed copy. To receive a printed copy of the 2016 Annual Report, free of charge, please contact the Company’s Share Registry on 1300 554 474.

There is no requirement for a formal resolution on this matter. Accordingly, there will be no formal resolution on this matter put to the meeting.

Shareholders will be given a reasonable opportunity at the meeting to raise questions about, and to make comments on, the 2016 Annual Report and the business, operations and management of the Company during discussion on this item.

Shareholders will also be given a reasonable opportunity to ask a representative of the Company’s auditor, Ernst & Young, questions relevant to the conduct of the audit, the preparation and content of the Auditor’s Report, the accounting policies adopted by the Company in relation to the preparation of the financial statements, and the independence of the auditor in relation to the conduct of the audit.

The Chairman of the meeting will also allow a reasonable opportunity for the auditor or their representative to answer written questions submitted to the auditor under section 250PA of the Corporations Act. Please note that all written questions to the auditor must be received by no later than Thursday, 13 October 2016.

Resolution 2—Election of Directors

In accordance with rule 6.1(f) of the Company’s Constitution, Ms Diane Grady AM and the Hon Nick Sherry will retire from the Board by way of rotation and, being eligible, offer themselves for re-election as Directors.

Ms Julie Coates was appointed as a Director by the Board in January 2016. Ms Coates will retire from the Board in accordance with rule 6.1(e) of the Company’s Constitution and being eligible, offers herself for election as a Director.

Profiles of the candidates for election as Directors are set out below.

Diane Grady AM

Ms Grady was appointed as Non-Executive Director of the Company in March 2014 and has acted as Chairman of the People and Remuneration Committee since that date.

She is also a Director of Macquarie Bank and Tennis Australia, a senior adviser to McKinsey & Company, Chair of Ascham School, and Chair of The Hunger Project Australia. She is also on the Advisory Board of the Centre for Ethical Leadership (Ormond College), and the NSW Innovation and Productivity Council. Ms Grady has 20 years’ experience on major public company and not-for-profit boards.

Ms Grady has also served as a Director of Woolworths Limited, Lend Lease Group, Goodman Group, BlueScope Steel Limited; as a Trustee of the Sydney Opera House; and as President of Chief Executive Women.

Before beginning her career as a full-time Company Director, Ms Grady was a Partner of McKinsey & Company where she was a leader of the firm’s global Organisation and Change Management group and headed the Consumer Goods, Retailing and Marketing Practice in Australia.

Following the consideration of the Nomination Committee and their recommendation in favour of the re-election, the Board (not including Ms Grady) unanimously recommends shareholders vote in favour of the re-election of Ms Grady as a Director.

The Hon Nick Sherry

Mr Sherry was appointed a Non-Executive Director of the Company in March 2014.

Mr Sherry is Chairman of FNZ APAC and also advises in a range of countries on all aspects of the reform of Pension Systems, including working with the OECD and World Economic Forum. He is a member of the UNSW Risk—Actuarial Studies Advisory Board and the Business Advisory Panel of Insurance Ireland’s Public Policy Council and is Chairman of the Board of Governance of Youth, Family and Community Connections.

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Mr Sherry also served as a Senator for Tasmania from 1990–2012. He served as Minister for Superannuation and Corporate Law from 2007–2009, Assistant Treasurer in 2009 and 2010 and Small Business Minister in 2010 and 2011.

He is a member of the Audit, Business Risk and Compliance Committee and the People and Remuneration Committee.

Following the consideration of the Nomination Committee and their recommendation in favour of the re-election, the Board (not including Mr Sherry) unanimously recommends shareholders vote in favour of the re-election of Mr Sherry as a Director.

Julie Coates

Ms Coates was appointed a Non-Executive Director of the Company in January 2016.

Ms Coates is currently the Managing Director of Goodman Fielder Australia.

Ms Coates has also held a number of senior roles at Woolworths from 2002–2014, including Managing Director of Big W, Chief Logistics Officer and Human Resources Director. Previously she held executive roles at David Jones and Coles Myer.

Over the past 25 years she has led large scale workforces and complex logistics operations across multiple sites.

Following the consideration of the Nomination Committee and their recommendation in favour of the election, the Board (not including Ms Coates) unanimously recommends shareholders vote in favour of the election of Ms Coates as a Director.

Resolution 3—Remuneration Report (non-binding advisory vote)

Shareholders are asked to adopt, by way of an ordinary resolution, the Company’s Remuneration Report for the year ended 30 June 2016. The Remuneration Report is set out in the Directors’ Report of the 2016 Annual Report and is also available on the Company’s website at www.spotless.com.

The Corporations Act requires that shareholders consider a resolution that the Remuneration Report be adopted. The vote on this item is advisory only and will not bind the Directors or the Company. However, the Board will take into account the discussion on this resolution and the outcome of the vote when considering the future remuneration arrangements of the Company.

Voting exclusion statement

A voting exclusion applies to resolution 3.

A vote must not be cast (in any capacity) on resolution 3 by or on behalf of a member of the Company’s Key Management Personnel or a Closely Related Party of any member of the Key Management Personnel.

However, a vote may be cast on resolution 3 by Key Management Personnel as a proxy, or a Key Management Personnel’s Closely Related Party as a proxy, if the vote is not cast on behalf of the Key Management Personnel or the Closely Related Party and:

• the proxy appointment specifies how the proxy is to vote on resolution 3; or

• the proxy is the Chairman of the meeting, and:

− the appointment does not specify the way the proxy is to vote on resolution 3; and

− the appointment expressly authorises the Chairman to exercise the proxy even if resolution 3 is connected directly or indirectly with the remuneration of the Company’s Key Management Personnel.

If you appoint the Chairman of the meeting as your proxy, and you do not direct your proxy how to vote on resolution 3 on the proxy form, you will be expressly authorising the Chairman of the meeting to exercise your proxy even if the resolution is connected directly or indirectly with the remuneration of a member of the Key Management Personnel, which includes the Chairman of the meeting.

The Chairman of the meeting intends to vote undirected proxies in favour of resolution 3.

Shareholders are urged to carefully read the proxy form and provide a direction to the proxy on how to vote on this resolution.

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Resolution 4—Approval of the grant of options and share rights to the Managing Director/CEO under the Long Term Incentive Plan

Introduction

This proposal the subject of this resolution was explained in detail in the Company’s 2016 Remuneration Report.

As stated by the Chairman in the Remuneration Report, this has been a year of significant change and transition for the Company. During the financial year the Company recruited a new Chief Executive Officer Mr Martin Sheppard; recruited a new Chief Financial Officer, Mr Nigel Chadwick; and promoted Ms Dana Nelson, a long-serving member of the Spotless team to the role of Chief Operating Officer.

It is the Board’s objective to ensure Key Management Personnel (KMP) remuneration is aligned with sustainable shareholder value creation. Supporting, retaining and appropriately remunerating KMP is an absolute priority as the Board leads the business forward.

However, the Company faced a particular challenge in this regard during the 2016 financial year. On 2 December 2015, the Company issued a trading update to the market. The Company experienced significant share price volatility following this update, necessitating a careful review of KMP incentives agreed prior to 2 December 2015.

In conducting this review, the Board (advised by the People and Remuneration Committee) considered:

• direct feedback from shareholders, which we greatly appreciate;

• the views of proxy advisors and governance experts;

• best practice among comparable companies; and

• advice from two independent advisors—Ernst & Young and Egan Associates.

One of the outcomes of this review was the Board endorsement of a new initial Long Term Incentive award (LTI) for Mr Sheppard. The Board chose not to implement the initial LTI approved by shareholders at the 2015 Annual General Meeting given the significant change in the Company’s circumstances. Had the Board decided to implement the allocation methodology underpinning shareholders’ approval at the 2015 Annual General Meeting, the issue of options post trading update at the time of Mr Sheppard joining the Company would have resulted in:

• an excessive number of options with a materially dilutive effect being awarded; and

• a significant misalignment between the terms and conditions of Mr Sheppard’s award and that of the incoming CFO despite both joining the Company as KMPs at a similar time.

Instead, the new initial LTI structure has been modelled specifically to take account of the Company’s share price volatility and is presented to shareholders for approval at this meeting.

Background

Mr Sheppard’s contracted employment arrangements for 2016 have been set on the basis of the Company’s executive remuneration structure which has three components:

(a) Fixed Annual Remuneration (base pay and benefits, including superannuation) (FAR) of $1,300,000.

(b) Short Term Incentive awards (STIs) through participation in the Group’s Short Term Incentive Plan (STI Plan), which includes a compulsory 12 month deferred component in the form of restricted shares. Mr Sheppard had a target STI of 60% of his FAR with the potential to earn up to a maximum STI of 90% of his FAR. In respect of the financial year ended 30 June 2016, Mr Sheppard was awarded an STI of 65% of his maximum STI, with adjustment made for his start date of 23 November 2015. 30% of the total STI payable will be deferred for 12 months in the form of restricted shares acquired on-market and held on trust until vesting conditions are met.

(c) Long Term Incentive awards (LTIs) through participation in the Group’s Long Term Incentive Plan (LTI Plan). Mr Sheppard’s annual LTI opportunity comprises 100% of his FAR.

As an additional incentive measure, subject to approval by shareholders, Mr Sheppard’s first two years’ LTI opportunity (equivalent to 200% of his FAR) was to be awarded upfront at the commencement of his appointment during FY16 (Initial LTI Award).

Shareholders approved the Initial LTI Award in the form of options at the Company’s Annual General Meeting on 22 October 2015. The terms of the shareholder approval included that:

• the exercise price will be set as the five trading day volume weighted average price (VWAP) of the Company’s shares before the commencement of Mr Sheppard’s appointment, and that the number of instruments would be determined in accordance with a specific formula following his commencement;

• 50% of the options granted under the Initial LTI Award would be subject to a three-year performance period and the remaining 50% of the options would be subject to a four-year performance period.

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However, after the approval of the Initial LTI award, the Company was faced with a number of challenges resulting in the trading update to the market on 2 December 2015. Following this update, the price of the Company’s shares fell by more than 50% (closed at $1.10 on 9 December 2015 and fell to low closing price of $0.91 on 10 February 2016).

These circumstances presented particular challenges for the Board insofar as their impact on Mr Sheppard’s LTI arrangements and have led to the Board’s decision to not proceed to issue options on the specific terms approved at the Company’s 2015 Annual General Meeting. To do so would have produced an outcome not reflective of the original objectives and unsatisfactory for both shareholders and Mr Sheppard. The Company will therefore not be relying on that approval to issue options or rights to Mr Sheppard.

Mr Sheppard commenced with the Company on 23 November 2015. Based on this start date, the five trading day VWAP of the Company’s shares before the commencement of Mr Sheppard’s appointment was calculated to be $2.15. This would have been the exercise price for any options issued to Mr Sheppard pursuant to the terms approved by shareholders at the 2015 Annual General Meeting. Using the approved allocation methodology (i.e. Black Scholes valuation using the approved exercise price of $2.15) based on the post trading update share price would have resulted in a significantly excessive number of options. Using the approved allocation methodology, approximately 120 million options would have been issued, which the Board considered unacceptable and not in the interests of either shareholders or Mr Sheppard.

Following independent advice from both Egan Associates and Ernst & Young and after considering feedback from shareholders and proxy advisers, the Board has determined terms for a revised proposed Initial LTI Award to Mr Sheppard (Revised LTI Award), which it believes appropriately and reasonably balances the interests of shareholders and Mr Sheppard.

The Revised LTI Award maintains key core elements of the Initial LTI Award approved by shareholders but modified to address the issues referred to above and also seeking to align with the changes to the Company’s LTI policy going forward, including the move to share rights, as was outlined in the Company’s 2016 Remuneration Report.

The Revised LTI Award is subject to the revocation of the Initial LTI Award.

The Revised LTI Award will be granted in two tranches as follows:

• Tranche 1 Award—50% of the award, in respect of the financial year ended 30 June 2016, will be in the form of unquoted options to acquire ordinary shares in the Company;

• Tranche 2 Award—50% of the award, in respect of the financial year ending 30 June 2017, will be in the form of rights to acquire ordinary shares in the Company, reflecting the Company’s change to share rights in relation to its LTI policy going forward.

Tranche 1 Award

Under the Tranche 1 Award, 3,288,142 options will be granted for nil consideration, which will be subject to a 2.5-year performance period, commencing 1 January 2016, taking account of Mr Sheppard’s start date as CEO and the circumstances leading to the trading update issued in December 2015, and ending 30 June 2018. The number of options granted under the Tranche 1 Award has been determined by dividing the dollar value of the Tranche 1 Award (being $1,300,000) by the value of the options at the date of their notional grant, being 1 January 2016, based on a Black Scholes valuation.

On the applicable performance hurdles being met and the options vesting, the options will be exercisable at an exercise price set of $1.033 per option, being the VWAP of the Company’s shares for the ten trading day period either side of 1 January 2016.

Each option, on applicable performance hurdles being met, confers the entitlement to acquire one fully-paid ordinary share in the Company (subject to the terms relating to bonus issues, pro-rata issues and capital reorganisations of the Company).

Options are granted under the LTI Plan at no cost and do not carry voting rights or the right to participate in new issues of shares (such as rights issues), but these rights will attach to any shares acquired by the holder if the options are exercised.

Tranche 2 Award

Under the Tranche 2 Award, 1,258,470 share rights will be granted for nil consideration, which will be subject to a 3-year performance period, commencing 1 July 2016, in alignment with the grants to executives under the Company’s LTI Plan for FY17, and ending 30 June 2019. The number of share rights granted under the Tranche 2 Award has been determined by dividing the dollar value of the Tranche 2 Award (being $1,300,000) by $1.033, being the ten day VWAP for the Company’s shares for the ten trading day period either side of 1 January 2016.

Each share right, on applicable performance hurdles being met, confers the entitlement to acquire one fully-paid ordinary share in the Company (subject to the terms relating to bonus issues, pro-rata issues and capital reorganisations of the Company).

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Share rights are granted under the LTI Plan at no cost and do not carry voting rights or the right to participate in new issues of shares (such as rights issues), but these rights will attach to any shares acquired by the holder if the share rights vest.

Performance hurdles

Under the LTI Plan, and subject to the LTI Plan Rules, the grants under the Revised LTI Award will only vest subject to the achievement of specific performance hurdles based on absolute earnings per share (EPS) performance, and relative Total Shareholder Return (TSR) performance.

The performance hurdles set by the Board for the Revised LTI Award proposed to be granted to Mr Sheppard under the Revised LTI Award are as follows:

• for 50% of the Revised LTI Award, an EPS performance hurdle (EPS Tested Awards); and

• for 50% of the Revised LTI Award, a TSR performance hurdle (TSR Tested Awards).

Table 1. Performance hurdles

TSR Tested Awards (50%) EPS Tested Awards (50%)

The Company’s TSR is assessed against the relative performance over the relevant vesting period as measured against a comparator group comprising the S&P/ASX 200, excluding the Financials and Resources sectors. This comparator group was chosen to ensure that the Company’s performance is measured against a group of similar Australian industrial companies.

The EPS performance hurdle is assessed by reference to The Company’s compound annual EPS growth during the relevant vesting period (adjusted to take into account one-off items, if necessary).

In each case, satisfaction of the performance hurdle is subject to the following vesting scale, measured over the relevant performance period:

Table 2. Vesting scale

The relative TSR performance hurdles and corresponding percentages of the maximum number of TSR Tested Awards that would vest are as follows:

The EPS performance hurdle and corresponding percentages of the maximum number of EPS Tested Awards that would vest are as follows:

Company’s TSR relative to the TSR of the comparator group over the relevant performance period

Percentage of TSR Tested Awards Vesting

Company’s compound annual EPS growth over the performance period

Percentage of EPS Tested Awards Vesting

Below the 51st percentile Nil Less than 6% Nil

51st percentile 50% 6% 50%

Greater than the 51st percentile but less than the 75th percentile

Pro-rata straight-line between 50% and 100%

Greater than 6% but less than 12%

Pro-rata straight-line between 50% and 100%

Equal to or greater than the 75th percentile

100% Equal to or greater than 12% 100%

TSR performance is monitored by an independent external adviser at 30 June each year.

The Board retains discretion to adjust the EPS performance hurdles to reflect appropriate changes in circumstances (e.g. acquisitions or divestments).

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The LTI Plan Rules contain provisions concerning the treatment of unvested LTI awards in the event that a participant ceases employment which provide for the forfeiture of unvested LTI awards if the participant ceases employment (except in certain circumstances where their employment is terminated without cause, including due to redundancy, disability or death, which would enable the participant to retain a pro-rata amount of their unvested LTI awards).

In the Board’s view, the performance hurdles that must be satisfied before the Revised LTI Award vests appropriately link the long term incentive component of Mr Sheppard’s remuneration to the growth of the Company’s earnings and shareholder returns.

The Board retains discretion to adjust the performance hurdles as required to ensure that Mr Sheppard (and all other LTI Plan participants) are neither advantaged nor disadvantaged by matters outside management’s control that affect achievement of the hurdles (for example, by excluding one-off non-recurrent items or the impact of significant acquisitions or disposals).

Comparison of Revised LTI Award against Initial LTI Award

Set out below is a table summarising the proposed changes to Mr Sheppard’s LTI award and the rationale for those changes.

Table 3. CEO’s LTI award

Initial LTI Award Revised LTI Award Rationale

Amount of Award 200% of FAR 200% of FAR No change

Form of grant Tranche 1 (50% of award): Options.

Tranche 2 (50% of award): Options.

Tranche 1 (50% of award): Options.

Tranche 2 (50% of award): Share rights.

Reflects Company’s change to share rights and aligns CEO with rest of executive team.

Quantum Should the Board have adopted the approved allocation methodology and retained an exercise price of the options at $2.15 and issued options at the end of the 4th quarter in the 2015 calendar year at the time of the CEO’s appointment, the aggregate grant of options for Tranches 1 and 2 with performance hurdles based on the prevailing share price at the time of the AGM in 2015 and with an exercise premium more than twice the prevailing share price, the number of securities required to be allocated would have exceeded 120 million and accordingly have had a significant dilutive impact and doubtful motivational value.

Tranche 1 — 3,288,142 options

Tranche 2 — 1,258,470 rights

At the time of determining the CEO’s LTI grant and recognising the complex market issues facing the Company while in parallel negotiating an LTI for an incoming CFO, the Board formed a view on advice that an alternate grant strategy had significant merit. The alternate strategy embraced issuing options in respect of Tranche 1 at the prevailing share price with a comparable exercise price, adopting the market volatility which had arisen in the final quarter of 2015 which had a significant dampening impact on the number of options to be awarded and as a consequence avoiding the implausible outcome that may have otherwise arisen.

In parallel with these considerations the Board also formed the view that in respect of the 2016 calendar year grant to the leadership team of the Company it would no longer issue options as had been a prior tradition, but rather issue rights which in aggregate have a far less dilutive impact on shareholders.

In adopting this approach the recently appointed Key Management Personnel and the longer serving leadership team members would, in respect of rights to be issued in FY17, be subject to the same performance conditions. The performance period in relation to Tranche 2 of the CEO’s LTI award would be modified to ensure that alignment.

In adopting this strategy, the Board would be issuing around 5 million securities as distinct from more than 120 million, would be creating appropriate alignment internally and establishing the right alignment with shareholders.

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Initial LTI Award Revised LTI Award Rationale

Performance hurdles

EPS & TSR – as per hurdles in tables 1 and 2

EPS & TSR — as per hurdles in tables 1 and 2

No change. The TSR and EPS performance hurdles were approved by the shareholders at the 2015 AGM and are unchanged.

Vesting date Tranche 1: Following independent confirmation of performance hurdles after 1 July 2018

Tranche 2: Following independent confirmation of performance hurdles after 1 July 2019



No change

Performance period

Tranche 1 — 3 year period ending 30 June 2018

Tranche 2 — 4 year period ending 30 June 2019

Tranche 1 – 2.5 year period ending 30 June 2018

Tranche 2 – 3 year period ending 30 June 2019

1 January 2016 commencement for Tranche 1 takes account of the CEO start date and the circumstances leading to the trading update issued in December 2015, which were beyond the CEO’s control.

1 July 2016 commencement for Tranche 2 aligns with the CFO and executive team for the FY17 LTI issue and represents the start of the first full year since the CEO’s commencement.

Exercise price Tranches 1 and 2 — $2.15 per option (based on the market price (five day VWAP) for the Company’s shares before the commencement of the CEO appointment.

Tranche 1 — $1.033 per option (based on the market price (the ten day VWAP)) for the Company’s shares for the ten day trading period either side of 1 January 2016.

Tranche 2 — not applicable

Takes account of the CEO’s start date and circumstances of the December 2015 trading update.

Following the trading update, the market was fully informed of the challenges facing the Company on 1 January 2016.

EPS testing Tranches 1 and 2 EPS baseline: FY15 EPS

Tranche 1 EPS: 2.5 year period, commencing 1 January 2016, but with baseline equating to FY16 EPS (excluding material one-off items).

Tranche 2 EPS: 3 year period with baseline of FY16 EPS (excluding material one-off items).

FY16 EPS (excluding material one-off items) is in the Board’s view the most appropriate baseline taking account of all circumstances. The FY16 results are the first full year results since the CEO’s commencement and the grant date. The intent of excluding material one-off items is to ensure that the measurement base reflects the ongoing performance of the Company.

As stated in Table 1, exclusion of one-off items where necessary is also a key component of the Company’s overall EPS measurement policy.

TSR testing Tranche 1 and 2 TSR: tested from grant date (following commencement).

Tranche 1 TSR: Tested from 1 July 2016 based on the VWAP for the Company’s shares for the ten day trading period either side of 30 June 2016 (being $1.14).

Tranche 2 TSR: Tested adopting the prevailing VWAP share price at the time of the announcement of FY16 results.

TSR testing from 1 July 2016 considered by the Board as the most appropriate date following extensive analysis of FY16 share price history.

Proposed Tranche 2 baseline provides alignment of the CEO to other senior executives and provides a much clearer and more consistent methodology for testing the TSR.

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General information on resolution 4

ASX Listing Rule 10.14 prevents the acquisition of new shares by a director or an associate of a director under an employee incentive scheme without shareholder approval. It aims to minimise the dilution of shareholders and to protect them against related party transactions.

ASX Listing Rule 10.14 does not apply to transfers of the Company’s shares which are acquired on-market for the director where the terms of the employee incentive scheme permit such acquisitions. This exclusion also applies to the grant of options or rights to acquire shares but only where the shares to be acquired on exercise of the options or satisfaction of the rights are required by the terms of the scheme to be purchased on-market.

The Company plans to acquire the Company’s shares on-market if the options and share rights granted under the LTI Plan vest. However, because the LTI Plan does not expressly require the shares to be acquired on-market (so that the relevant shares can be either transferred or issued as the Company determines), and in the interests of good corporate governance, shareholder engagement and transparency, shareholders are being asked to vote on the Revised LTI Award to Mr Sheppard under the Company’s LTI Plan.

Other information relating to resolution 4

• No director other than Mr Sheppard (or associate of a director) is currently eligible, or will be eligible during the 2017 financial year, to participate in the grant of options, rights or shares under the LTI Plan.

• No director or associate of a director has received options, rights or shares under the LTI Plan since the last approval of shareholders at the Company’s 2015 Annual General Meeting.

• No loan will be provided by the Company in relation to the grant or exercise of the options or share rights under the Revised LTI Award.

• Options and share rights under the Revised LTI Award will be granted to Mr Sheppard on a date determined by the Company which is no later than 12 months after the passing of resolution 4.

• If approval is given under ASX Listing Rule 10.14 by passing this resolution, approval is not required under ASX Listing Rule 7.1.

Voting exclusion statement

A voting exclusion applies to the resolution 4.

In accordance with ASX Listing Rule 14.11, the Company will disregard any votes cast by Mr Sheppard or any of his associates on resolution 4. The term ‘associate’ has the meaning given to it in sections 12 and 16 of the Corporations Act as if section 12(1) of the Act included a reference to these Explanatory Notes and the Company was the designated body.

In accordance with the Corporations Act, the Company will disregard any votes cast as a proxy on resolution 4 by any member of the Key Management Personnel or a Closely Related Party of any member of the Key Management Personnel if the appointment does not specify the way the proxy is to vote on resolution 4. However, a vote may be cast on resolution 4 by:

• a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

• the Chairman of the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

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SPOT0063

Spotless Group Holdings Limited ABN 27 154 229 562

549 St Kilda Road Melbourne VIC 3004

T: +61 3 9269 7600

www.spotless.com

*X99999999999*X99999999999

SPO PRX1601C

*SPO PRX1601C*

I/We being a member(s) of Spotless Group Holdings Limited and entitled to attend and vote hereby appoint:PROXY FORM

STEP

1

or failing the person or body corporate named, or if no person or body corporate is named, the Chairman of the Meeting, as my/our proxy to act on my/our behalf (including to vote in accordance with the following directions or, if no directions have been given and to the extent permitted by the law, as the proxy sees fit) at the Annual General Meeting of the Company to be held at 2:00pm (Melbourne time) on Thursday, 20 October 2016 at the Melbourne Town Hall, 90-120 Swanston Street, Melbourne, Victoria (the Meeting) and at any postponement or adjournment of the Meeting.Important for Resolutions 3 and 4: If the Chairman of the Meeting is your proxy, either by appointment or by default, and you have not indicated your voting intention below, you expressly authorise the Chairman of the Meeting to exercise the proxy in respect of Resolutions 3 and 4, even though the Resolutions are connected directly or indirectly with the remuneration of a member of the Company’s Key Management Personnel (KMP).The Chairman of the Meeting intends to vote undirected proxies in favour of each item of business.

the Chairman of the Meeting (mark box)

OR if you are NOT appointing the Chairman of the Meeting as your proxy, please write the name of the person or body corporate you are appointing as your proxy

APPOINT A PROXY

STEP

3

This form should be signed by the shareholder. If a joint holding, all shareholders must sign. If signed by the shareholder’s attorney, the power of attorney must have been previously noted by the registry or a certified copy attached to this form. If executed by a company, the form must be executed in accordance with the company’s constitution and the Corporations Act 2001 (Cth).

Shareholder 1 (Individual) Joint Shareholder 2 (Individual) Joint Shareholder 3 (Individual)

Sole Director and Sole Company Secretary Director/Company Secretary (Delete one) Director

SIGNATURE OF SHAREHOLDERS – THIS MUST BE COMPLETED

LODGE YOUR VOTE

ONLINEwww.linkmarketservices.com.au

BY MAILSpotless Group Holdings LimitedC/- Link Market Services LimitedLocked Bag A14Sydney South NSW 1235 Australia

BY FAX+61 2 9287 0309

BY HANDLink Market Services Limited Level 12, 680 George Street, Sydney NSW 2000

ALL ENQUIRIES TO Telephone: +61 1300 554 474

STEP

2

Proxies will only be valid and accepted by the Company if they are signed and received no later than 48 hours before the Meeting.Please read the voting instructions overleaf before marking any boxes with an T

* If you mark the Abstain box for a particular Item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

2a Re-election of Ms Diane Grady AM as a Director

4 Approval of the grant of options and share rights to the MD/CEO under the Long Term Incentive Plan

2b Re-election of the Hon. Nick Sherry as a Director

2c Election of Ms Julie Coates as a Director

3 Adoption of Remuneration Report (non-binding advisory vote)

Resolutions

VOTING DIRECTIONS

For ForAgainst AgainstAbstain* Abstain*


HOW TO COMPLETE THIS SHAREHOLDER PROXY FORM

YOUR NAME AND ADDRESSThis is your name and address as it appears on the Company’s share register. If this information is incorrect, please make the correction on the form. Shareholders sponsored by a broker should advise their broker of any changes. Please note: you cannot change ownership of your shares using this form.

APPOINTMENT OF PROXYIf you wish to appoint the Chairman of the Meeting as your proxy, mark the box in Step 1. If you wish to appoint someone other than the Chairman of the Meeting as your proxy, please write the name of that individual or body corporate in Step 1. A proxy need not be a shareholder of the Company.

DEFAULT TO CHAIRMAN OF THE MEETINGAny directed proxies that are not voted on a poll at the Meeting will default to the Chairman of the Meeting, who is required to vote those proxies as directed. Any undirected proxies that default to the Chairman of the Meeting will be voted according to the instructions set out in this Proxy Form, including where the Resolutions are connected directly or indirectly with the remuneration of KMP.

VOTES ON ITEMS OF BUSINESS – PROXY APPOINTMENTYou may direct your proxy how to vote by placing a mark in one of the boxes opposite each item of business. All your shares will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage or number of shares you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on the items of business, your proxy may vote as he or she chooses. If you mark more than one box on an item your vote on that item will be invalid.

APPOINTMENT OF A SECOND PROXYYou are entitled to appoint up to two persons as proxies to attend the Meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the Company’s share registry or you may copy this form and return them both together.

To appoint a second proxy you must:

(a) on each of the first Proxy Form and the second Proxy Form state the percentage of your voting rights or number of shares applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded; and

(b) return both forms together.

SIGNING INSTRUCTIONSYou must sign this form as follows in the spaces provided:

Individual: where the holding is in one name, the holder must sign.

Joint Holding: where the holding is in more than one name, all shareholders must sign.

Power of Attorney: to sign under Power of Attorney, you must lodge the Power of Attorney with the registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

CORPORATE REPRESENTATIVESIf a representative of the corporation is to attend the Meeting the appropriate “Certificate of Appointment of Corporate Representative” should be produced prior to admission in accordance with the Notice of Meeting. A form of the certificate may be obtained from the Company’s share registry or online at www.linkmarketservices.com.au.

LODGEMENT OF A PROXY FORMThis Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below by 2:00pm (Melbourne time) on Tuesday, 18 October 2016, being not later than 48 hours before the commencement of the Meeting. Any Proxy Form received after that time will not be valid for the scheduled Meeting.

Proxy Forms may be lodged using the reply paid envelope or:


Login to the Link website using the holding details as shown on the Proxy Form. Select ‘Voting’ and follow the prompts to lodge your vote. To use the online lodgement facility, shareholders will need their “Holder Identifier” (Securityholder Reference Number (SRN) or Holder Identification Number (HIN) as shown on the front of the Proxy Form).

BY MAILSpotless Group Holdings LimitedC/- Link Market Services LimitedLocked Bag A14Sydney South NSW 1235Australia

BY FAX +61 2 9287 0309

BY HANDdelivering it to Link Market Services Limited* Level 12680 George StreetSydney NSW 2000

* During business hours (Monday to Friday, 9:00am–5:00pm)

IF YOU WOULD LIKE TO ATTEND AND VOTE AT THE ANNUAL GENERAL MEETING, PLEASE BRING THIS FORM WITH YOU. THIS WILL ASSIST IN REGISTERING YOUR ATTENDANCE.

*X99999999999*X99999999999

Please use this form to submit any questions about Spotless Group Holdings Limited (“the Company”) that you would like us to respond to at the Company’s 2016 Annual General Meeting. Your questions should relate to matters that are relevant to the business of the meeting, as outlined in the accompanying Notice of Meeting and Explanatory Notes.

This form must be received by the Company’s share registrar, Link Market Services Limited, by Thursday, 13 October 2016.

Questions will be collated. During the course of the Annual General Meeting, the Chairman of the Meeting will endeavour to address as many of the more frequently raised shareholder topics as possible. However, there may not be sufficient time available at the meeting to address all topics raised. Please note that individual responses will not be sent to shareholders.

QUES

TION

S

My question relates to (please mark the most appropriate box)

LODGE YOUR QUESTIONS


BY MAILSpotless Group Holdings LimitedC/- Link Market Services LimitedLocked Bag A14Sydney South NSW 1235 Australia

BY FAX+61 2 9287 0309

BY HANDLink Market Services Limited Level 12, 680 George Street, Sydney NSW 2000

ALL ENQUIRIES TO Telephone: +61 1300 554 474

Performance or the financial report A resolution being put to the AGM General suggestion

Remuneration Report Sustainability Other

Future direction

Performance or the financial report A resolution being put to the AGM General suggestion

Remuneration Report Sustainability Other

Future direction


notice of annual general meeting 2016 - open briefing spotless group holdings limited abn 27 154 229...

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