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1 16 November 2012 DuluxGroup Limited ABN Registered Office: 1956 Dandenong Road Clayton Victoria Australia Dear Shareholder ANNUAL GENERAL MEETING On behalf of the Board of Directors, it is my pleasure to invite you to attend our Annual General Meeting to be held at 10.30am (Melbourne time) on Tuesday 18 December 2012 at DuluxGroup s Head Office, 1956 Dandenong Road, Clayton, Victoria. Enclosed with this letter is a Notice of Meeting which sets out the business to be dealt with at the meeting and directions to attend the meeting. If you are unable to attend, but wish to vote on any of the resolutions to be put to the meeting, a personalised proxy form is enclosed. You can lodge your proxy on-line at Alternatively, you can complete the enclosed proxy form and return it using the business reply envelope or by facsimile on (within Australia) or (outside Australia). You can access and download a copy of the DuluxGroup 2012 Annual Report from If you elected not to receive a printed copy of our Annual Report and would like to now receive one, please call our Share Registry on DIVIDEND REINVESTMENT PLAN On 14 November 2012, DuluxGroup announced that it will pay a fully franked final dividend of 8.0 cents per share in respect of the financial year ended 30 September 2012 (Dividend). DuluxGroup s Dividend Reinvestment Plan (DRP) will operate in relation to the Dividend. Shareholders who participate in the DRP will receive DuluxGroup shares at a 2.5% discount to the volume weighted average price of DuluxGroup shares sold on the ASX over the five trading days commencing 4 December The DRP is an easy and cost-effective way to increase your shareholding in DuluxGroup. Shares allocated under the DRP are free of brokerage and other transaction costs. If you do not currently participate in the DRP and would like to take advantage of this discount, you may register by completing the enclosed DRP Election Form and returning it using the business reply envelope. Alternatively, you can make your election online at Your election must be received by our Share Registry by no later than 5.00pm on 30 November We look forward to seeing you at the Annual General Meeting and welcome you to join us afterwards for light refreshments. Yours sincerely, Peter Kirby Chairman

2 DuluxGroup Limited ABN Registered Office: 1956 Dandenong Road Clayton Victoria Australia Notice of Annual General Meeting Notice is hereby given that the Annual General Meeting of DuluxGroup Limited ( the Company ) will be held at 10.30am (Melbourne time) on Tuesday, 18 December 2012 at DuluxGroup s Head Office, 1956 Dandenong Road, Clayton, Victoria, Australia. 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 September Re-election of Directors To consider and, if thought fit, pass the following resolutions as ordinary resolutions: 2.1. That Mr Stuart Boxer, who retires in accordance with Rule 8.1(d) of the Company s Constitution, and being eligible, offers himself for re-election, be re-elected as a Director That Mr Garry Hounsell, who retires in accordance with Rule 8.1(d) of the Company s Constitution, and being eligible, offers himself for re-election, be re-elected as a Director. Details of the persons seeking re-election are set out in the Explanatory Notes to this Notice of Meeting. 3. Adoption of Remuneration Report To consider, and if thought fit, pass the following resolution as a non-binding resolution: To adopt the Remuneration Report for the year ended 30 September The Remuneration Report is set out in the Annual Report. 1

3 Voting exclusion statement: The Corporations Act 2001 (Cth) (Corporations Act) prohibits any votes being cast on resolution 3 by or on behalf of any member of the Company s key management personnel (as disclosed in the Remuneration Report) and their closely related parties. However, the restrictions will not apply where the vote is cast by: (a) (b) a person as proxy for a person who is permitted to vote, in accordance with the directions on the proxy form; or a person chairing the meeting as a proxy for a person who is permitted to vote, and the appointment expressly authorises the Chairman to exercise the undirected proxies. 4. Issue of shares to Patrick Houlihan, Managing Director and Chief Executive Officer, under the Long Term Equity Incentive Plan 2012 offer To consider, and if thought fit, pass the following resolution as an ordinary resolution: That approval be given to the issue of shares in DuluxGroup Limited to the Managing Director and Chief Executive Officer, Mr Patrick Houlihan, up to a maximum value of $2,264,477 under the Company s Long Term Equity Incentive Plan 2012 offer, on the terms summarised in the Explanatory Notes to this Notice of Meeting. 5. Issue of shares to Stuart Boxer, Chief Financial Officer and Executive Director, under the Long Term Equity Incentive Plan 2012 offer To consider, and if thought fit, pass the following resolution as an ordinary resolution: That approval be given to the issue of shares in DuluxGroup Limited to the Chief Financial Officer and Executive Director, Mr Stuart Boxer, up to a maximum value of $572,000 under the Company s Long Term Equity Incentive Plan 2012 offer, on the terms summarised in the Explanatory Notes to this Notice of Meeting. Voting exclusion statements (applicable to resolutions 4 and 5): In accordance with the ASX Listing Rules, the Company will disregard any votes cast on resolutions 4 and 5 by Mr Houlihan and Mr Boxer or any of their associates. In addition, the Corporations Act provides that a member of the Company s key management personnel (as disclosed in the Remuneration Report) and their closely related parties are not permitted to cast a vote as a proxy on these resolutions. However, these restrictions will not apply where the vote is cast by: (a) (b) a person as proxy for a person who is permitted to vote, in accordance with the directions on the proxy form; or a person chairing the meeting as a proxy for a person who is permitted to vote, and the appointment expressly authorises the Chairman to exercise the undirected proxies. 2

4 6. Renewal of proportional takeover provisions To consider, and if thought fit, pass the following resolution as a special resolution: That the proportional takeover provisions contained in Rule 6 of the Company s constitution be renewed for a further 3 years with effect from 18 December Financial assistance To consider and, if thought fit, to pass the following resolution as a special resolution: That, for the purposes of section 260B(2) of the Corporations Act (and all other purposes), approval is given for the provision of financial assistance proposed to be given by the Acquired Companies (as defined in the explanatory notes to this Notice of Annual General Meeting) from time to time in connection with the proposed acquisition of Alesco Corporation Limited, as described in the explanatory notes to this Notice of Annual General Meeting. By order of the Board Simon Black General Counsel & Company Secretary 16 November

5 Notes 1. For the purpose of determining a person's entitlement to vote at 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 10.30am (Melbourne time) on Sunday, 16 December 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 Computershare Investor Services Pty Limited. A proxy need not be a shareholder of the Company. 3. 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. 4. 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. 5. The proxy form (and the power of attorney or other authority, if any, under which a proxy form is signed) must be completed and returned to the Company no later than 10.30am (Melbourne time) on Sunday, 16 December 2012 by: (a) lodging electronically via and then inputting the shareholder's secure access information or; (b) for Intermediary Online subscribers only (custodians) (c) lodging it with Computershare Investor Services Pty Limited (452 Johnston Street, Abbotsford, Vic 3067) or the Company at its registered office (1956 Dandenong Road, Clayton, Victoria); (d) posting it in the reply paid envelope to Computershare Investor Services Pty Limited (GPO Box 242, Melbourne, Vic 3001); or (e) faxing it to Computershare Investor Services Pty Limited facsimile (within Australia) , (outside Australia) Any proxy form received after that time will not be valid for the scheduled meeting. 6. The proxy form must be signed by the member or his/her attorney duly authorised in writing or, if the member 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 last of that corporation's place of incorporation. 4

6 Explanatory Notes to Shareholders Item 1 Financial 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 to be laid before the Annual General Meeting. There is no requirement for a formal resolution on this matter. Accordingly, there will be no formal resolution put to the meeting. Shareholders will be given a reasonable opportunity at the meeting to raise questions on these reports and to make comments on the business, operations and management of the Company. Item 2 Re-election of Directors The Board has considered the performance of each of the retiring directors standing for re-election as well as the skills, knowledge and experience they bring to the Board and their contribution to Board discussions. The Board (with Mr Boxer and Mr Hounsell abstaining in respect of their own reelection) recommends to shareholders the re-election of Mr Stuart Boxer and Mr Garry Hounsell. Profiles of the candidates for election as Directors are set out below: Stuart Boxer Chief Financial Officer and Executive Director since July Member of the Company s special committee in respect of the Alesco Corporation Limited takeover bid. Mr Boxer was the former CFO and General Manager Strategy of Orica Limited s DuluxGroup division, and also the CFO of Southern Cross Broadcasting (Australia) Limited. Mr Boxer has also held various senior strategy and finance roles at Village Roadshow Limited and LEK Consulting. Garry Hounsell Non-executive Director since July Chair of the Audit and Risk Committee, member of the Remuneration and Nominations Committee and member of the Company s special committee in respect of the Alesco Corporation Limited takeover bid. Mr Hounsell is currently the Chairman of PanAust Limited, and a director of Qantas Airways Limited, Treasury Wine Estates Limited and Orica Limited. He was also previously a director of Nufarm Limited and Mitchell Communication Group Limited, a Senior Partner of Ernst & Young and the Chief Executive Officer and Country Managing Partner of Arthur Andersen. Mr Hounsell has extensive experience across a range of areas relating to management and corporate finance, and has worked with some of Australia s leading companies in consulting and audit roles, with a particular emphasis in the manufacturing sector. 5

7 Mr Hounsell is a consistently strong contributor to the Board and has shown a high level of commitment to the Company over his period in office, and especially over the past year in light of the Alesco Corporation Limited takeover (during which time he has attended and contributed to 48 out of 49 Board and committee meetings held). The Board considers Mr Hounsell to be an independent director. Item 3 Remuneration Report (non-binding advisory vote) Shareholders are asked to adopt, by way of a non-binding resolution, the Company s Remuneration Report for the year ended 30 September The Remuneration Report is set out in the Directors Report of the 2012 Annual Report. In particular, the Remuneration Report discusses the: remuneration policy adopted by the Board; links between the Board s policy and the Company s performance; remuneration details of each Director and certain members of the Group Executive team; and the performance conditions that must be met prior to Executives deriving any value from the at risk components of their remuneration. Shareholders will be given the opportunity to comment on and ask questions about the Remuneration Report. 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. Furthermore, as a result of the provisions in the Corporations Act known generally as the two strikes rule, shareholders should note that the result of the vote on this item may affect the conduct of next year s Annual General Meeting. If 25% or more of the votes are cast against the adoption of the Remuneration Report at the 2012 and 2013 Annual General Meeting, the Corporations Act requires a resolution on whether to hold a further meeting to spill the Board to be put to the 2013 Annual General Meeting. The Directors therefore encourage shareholders to apply the same level of diligence as for the binding resolutions when casting their vote on resolution 3. The Board recommends that shareholders vote in favour of this non-binding resolution. Items 4 and 5 Issue of shares to Patrick Houlihan and Stuart Boxer under the 2012 LTEIP offer The Company operates a long term equity incentive plan (LTEIP) as part of its long term executive remuneration strategy. Under the LTEIP, eligible executives are provided with a non-recourse loan for the sole purpose of acquiring shares in the Company. 6

8 The LTEIP is designed to facilitate immediate share ownership by executives, thereby aligning their interests with those of shareholders, and linking a significant portion of executive remuneration to the Company s share price and returns generated for shareholders. Under ASX Listing Rule 10.14, shareholder approval is required in order for a director to be issued securities under an employee incentive scheme. Accordingly, shareholders are asked to approve the issue of shares under the 2012 LTEIP offer up to a maximum value of $2,264,477 to Mr Houlihan and $572,000 to Mr Boxer as part of their long term incentive arrangements on the terms set out in these Explanatory Notes. A brief overview of the LTEIP offer is set out below. Further details of Mr Houlihan s and Mr Boxer s remuneration packages, and the LTEIP, are set out in the Remuneration Report on pages 41 to 58 of the Annual Report. Entitlement under 2012 LTEIP offer If shareholder approval is obtained, Mr Houlihan and Mr Boxer will be granted an LTEIP loan of $2,264,477 and $572,000, respectively, under the 2012 LTEIP offer. The amount of the LTEIP loan is calculated based on the relevant long term incentive component target amount of their remuneration multiplied by an externally determined value (calculated using an adjusted Black-Scholes option pricing valuation model) of the LTEIP loan. Key terms of the loan The LTEIP loan is a non-recourse loan from the Company for the sole purpose of acquiring shares in the Company. There is no annual interest charge to the executive on the loan; however, an interest component is taken into account in determining the level of performance based debt forgiveness benefit that may be awarded. Any dividends paid on the shares while the shares are restricted are applied (on a notional after-tax basis) towards repaying the loan. The balance of the dividend is paid directly to the executives to fund their tax liability on the dividends received. Following the end of the three year performance period, if the gateway is met, the LTEIP shares will vest and the executives must repay the LTEIP loan, either directly or by applying the proceeds from the sale of some or all of their shares to repay the loan. In order to reward superior performance, part of the loan (up to a maximum of 30%) may be forgiven at the end of the performance period if the performance condition is achieved. As this is a non-recourse loan, if the value of the shares is less than the outstanding loan balance at the end of the performance period, the shares will be surrendered and forfeited in full settlement of the loan balance and no benefit accrues to the executive. 7

9 Number and price of LTEIP shares Performance period The number of DuluxGroup Limited shares to be allocated to Mr Houlihan and Mr Boxer will be determined by dividing the value of their respective LTEIP loans by the volume weighted average price of DuluxGroup Limited shares sold on the ASX during the period of 5 trading days up to and including 17 December If shareholder approval is obtained, it is expected that DuluxGroup Limited shares will be issued to Mr Houlihan and Mr Boxer on 19 December 2012, but in any event no later than 30 days after the AGM. The Board believes that an equity-based long term incentive is important to ensure an appropriate part of the executive s reward is linked to generating long term returns for shareholders. However, if shareholders do not approve the issue of shares as part of Mr Houlihan or Mr Boxer s long term incentive arrangements, the proposed issue of shares to Mr Houlihan and Mr Boxer will not proceed. In that event, there may be issues associated with the competitiveness of their overall remuneration package, alignment of rewards with other senior executives and the Company s contractual obligations to Mr Houlihan and Mr Boxer. In these circumstances, the Board would need to consider alternative remuneration arrangements for Mr Houlihan and Mr Boxer which are consistent with DuluxGroup s remuneration principles, including providing Mr Houlihan and Mr Boxer with an equivalent long term cash incentive subject to the same performance conditions and performance period as described below. The performance period is three years. The performance condition is only tested once at the end of the performance period. Gateway condition The Company must achieve a minimum level of acceptable performance before any awards will vest under the LTEIP for the 2012 grant, compound annual growth in the Company s earnings per share (EPS) over the vesting period from 30 September 2012 to 30 September 2015 must equal or exceed 4% per annum. EPS is calculated by dividing the Company s net profit after tax by the weighted average number of ordinary shares on issue during the relevant period. The Board has retained discretion to adjust EPS for individually material items on a case by case basis when determining whether the EPS performance gateway condition has been met. Where the gateway is met at the end of the performance period, there is potentially value to the executive if the value of the LTEIP shares is greater than the outstanding LTEIP loan balance that must be repaid. 8

10 Performance hurdle (for loan forgiveness) Relative total shareholder return (TSR) is used to determine the level of loan forgiveness under the plan ( the forgiveness amount ). There is no loan forgiveness if the Company s relative TSR is below the 51st percentile against a comparator group of peer companies in the ASX200, excluding those companies which operate in very different markets (such as mining, financial services and listed property trusts). If the Company s relative TSR is greater than or equal to the 51st percentile, a proportion of the initial loan balance is forgiven on a sliding scale as shown below (up to a maximum of 30%). Relative TSR ranking Loan forgiveness Less than 51st percentile 0% 51st percentile 10% Between 51st percentile and 75th percentile Percentage of loan forgiveness increases on a straight line basis between 10% and 30% 75th percentile or above 30% Trading restrictions The shares are restricted until the end of the vesting / performance period and while the loan remains outstanding. Cessation of employment In general, all shares are forfeited and surrendered if a participant ceases employment prior to the end of the performance period. However, the Board has discretion to determine that some or all of a participant s LTEIP shares may vest and some or all of the loan forgiveness amount is granted in appropriate circumstances. Other required information ASX Listing Rules Mr Houlihan and Mr Boxer are the only directors entitled to participate in the LTEIP scheme. In accordance with the approval received from shareholders at the 2011 Annual General Meeting, during the 2012 financial year, the Company has allocated 708,743 and 179,026 shares to Mr Houlihan and Mr Boxer, respectively, at a price of $2.90 per share. The Board (other than Mr Houlihan and Mr Boxer who have an interest in resolutions 4 and 5, respectively) recommends that shareholders vote in favour of resolutions 4 and 5. Item 6 Renewal of proportional takeover provisions Rule 6 of the Company s constitution provides that the Company can refuse to register shares acquired under a proportional takeover bid unless a resolution is passed by shareholders in general meeting approving the offer. 9

11 In accordance with the Corporations Act and the Company s constitution, Rule 6 will cease to have effect on 8 July 2013 (being three years from when the constitution was adopted) unless renewed by a special resolution of shareholders. Accordingly, the Directors request that shareholders approve the renewal of the proportional takeover provisions as set out in Rule 6 for a further 3 years with effect from the date of this meeting. Proportional takeover bid A proportional takeover bid is a takeover offer sent to each shareholder, but only for a specified proportion of the shares (ie less than 100%) held by the shareholder. Therefore, shareholders who accept such a proportional takeover offer in full will only dispose of that specified proportion and retain the balance of their shares. This may allow control of the Company to pass without shareholders having the chance to sell all of their shares, and assist a bidder to take control of the Company without paying an adequate control premium. Effect of the proportional takeover provisions The effect of Rule 6 is that in the event a proportional takeover bid is made, the Directors must ensure that a general meeting is held at least 14 days before the last day of the bid period, where shareholders will consider a resolution to approve the takeover bid. Each shareholder will have one vote for each fully paid share held, with the vote to be decided on a simple majority. The bidder and its associates are not allowed to vote at this meeting. If, at the meeting: the resolution is not passed, no transfer will be registered and the offer will be taken to have been withdrawn; the resolution is not voted on, the bid will be taken to have been approved; or the bid is approved (or taken to have been approved), all valid transfers must be registered. The proportional takeover provisions only apply for 3 years from the date of their renewal (after that, the provisions may again be renewed by a special resolution of shareholders). The provisions do not apply to full takeover bids. Potential advantages and disadvantages for Directors and shareholders The Directors consider that the proportional takeover provisions have no potential advantages for them. The potential advantages of Rule 6 for shareholders include the following: the right for shareholders to meet and decide, by majority vote, whether to accept a proportional takeover bid; it may help shareholders to avoid being locked in holding residual shares as a minority and may prevent a bidder acquiring control of the Company without paying an adequate control premium (ie paying for all of their shares); 10

12 it increases shareholders bargaining power and may help ensure that any bid is adequately priced; and knowing the view of the majority of shareholders may help each individual shareholder to decide whether to accept or reject the offer. While the existing proportional takeover provisions have been in effect, there have been no proportional takeover bids for the Company against which the advantages or disadvantages of the provisions may be assessed. The Directors recognise that Rule 6 may potentially discourage proportional takeover bids being made for shares in the Company or reduce the likelihood of a proportional takeover succeeding, which may result in shareholders losing an opportunity to sell some of their shares at a premium. However, the Directors consider that the potential advantages for shareholders of the proportional takeover provisions operating for a further three years outweigh the potential disadvantages. Knowledge of Takeover Bids As at the date of this Notice of Meeting, no Director is aware of any proposal to acquire or to increase the extent of a substantial interest in the Company. Reasons for renewing the provision The Directors consider it in the interests of shareholders to continue to have the proportional takeover provisions in the constitution, thereby giving shareholders the opportunity to vote on any proposed proportional takeover bid. The renewal of Rule 6 gives shareholders the collective opportunity to decide whether a proportional takeover bid is acceptable and should be permitted to proceed. If this resolution is approved, Rule 6 will be renewed for a further 3 years with effect from 18 December The Board recommends that shareholders vote in favour of the renewal of the proportional takeover provisions. Item 7 Financial assistance The proposed resolution Resolution 7 seeks the approval of the Company s shareholders, pursuant to section 260B(2) of the Corporations Act, for financial assistance which is proposed to be provided by Alesco Corporation Limited (Alesco) and its subsidiaries (together the Acquired Companies). Under the Company s finance arrangements (described below), some or all of the Acquired Companies will be required to accede to the Company s group guarantee dated 20 May 2010 (and amended and restated on 8 November 2011) in favour of the lenders under those finance arrangements (Group Guarantee). Approval is sought by special resolution which requires at least 75% of the votes that are cast on the resolution to be in favour of the resolution. Background On 25 May 2012, DuluxGroup s wholly owned subsidiary, DuluxGroup (Nominees) Pty Ltd (DuluxGroup Bidco) made a takeover offer for all of the shares in Alesco that it did not already own by dispatching a bidder s statement and offers to Alesco 11

13 shareholders. Subject to all of the conditions as set out in section 9.7 of the bidder s statement being satisfied or waived, DuluxGroup Bidco will acquire the shares in Alesco held by Alesco shareholders who have accepted the takeover offer. On DuluxGroup Bidco obtaining a relevant interest in 90% of the shares in Alesco, DuluxGroup Bidco may compulsorily acquire all Alesco shares not accepted into the takeover offers under chapter 6A of the Corporations Act. The acquisition of all shares in Alesco pursuant to the takeover offers and compulsory acquisition is defined as the Acquisition in this notice of meeting. In order to assist in funding the purchase price for the Acquisition, the Company and DuluxGroup (Finance) Pty Ltd (Borrower) entered into a syndicated facility agreement (the 2012 Facility Agreement) dated 30 April 2012 with, among others, Westpac Banking Corporation (Westpac) as agent (Agent) and also as lender. There are also a number of other syndicated lenders participating in the 2012 Facility Agreement. In addition, the Company and the Borrower were already party to an existing syndicated facility agreement dated 7 November 2011 (the 2011 Facility Agreement) with BOS International (Australia) Ltd as agent and a number of other syndicated lenders also participating from time to time to assist with the Company s ongoing working capital requirements. Each of the agents and the syndicated lenders under the facility agreements (the Facilities) is referred to in this notice as a Financial Institution and together they are the Financial Institutions. Under the terms of the 2012 Facility Agreement and the Group Guarantee, if DuluxGroup Bidco acquires 100% of Alesco (that is it becomes entitled to, and completes, compulsory acquisition of outstanding shares) the Company will be required to ensure that certain of the Acquired Companies accede to the Group Guarantee and give a guarantee and indemnity (the Guarantee) in favour of the Financial Institutions guaranteeing, amongst other amounts, all amounts owing under or in relation to the Facilities and the Transaction Documents (defined below). Under the terms of the 2012 Facility Agreement and the Group Guarantee, some or all of the following Acquired Companies may need to give the Guarantee and may need to undertake the actions detailed in (a) to (e) below: Alesco Corporation Limited Alesco No.2 Pty Ltd Alesco Finance Pty Ltd Alesco Holdings Pty Ltd Automatic Technology (Australia) Pty Ltd B&D Australia Pty Ltd Concrete Technologies Pty Ltd Lincoln Sentry Group Pty Ltd Parchem Construction Supplies Pty Ltd Pargone Pty Ltd Alesco New Zealand Limited Alesco NZ Trustee Limited B&D Doors (NZ) Limited Concrete Plus Limited 12

14 The Guarantee will only need to be given if the takeover bid becomes or has been declared unconditional and DuluxGroup Bidco completes compulsory acquisition processes under chapter 6A of the Corporations Act. If these things do not happen, then the Guarantee and financial assistance will not be given by the Acquired Companies and the approval sought in this resolution will not be acted upon by the Company or any of the Acquired Companies. In addition to providing the Guarantee, each Acquired Company may be required under the terms of the Group Guarantee and the Facilities to: (a) (b) (c) (d) (e) execute, or accede or consent to, any instrument referred to in, or incidental or related to, the Transaction Documents (as defined in each of the Facilities) (the Transaction Documents); subordinate its intercompany claims; transfer assets to, or assume other liabilities of, the Company or other subsidiaries of the Company (the Company and its subsidiaries together the Group); make available directly or indirectly its cash flows or other resources in order to enable other members of the Group to comply with their obligations under the Transaction Documents; and provide additional support (which may include incurring additional obligations, giving new guarantees or new security interests) in connection with the Transaction Documents, including in connection with any refinancing of amounts owing under or in respect of the Transaction Documents. Providing the Guarantee and undertaking any of the other matters listed or contemplated above (together, the Financial Assistance) will result in each relevant Acquired Company financially assisting in the acquisition of their own shares for the purposes of the Corporations Act. Why shareholder approval is required Under section 260A(1) of the Corporations Act, a company may financially assist a person to acquire shares in it or its holding company only in certain limited circumstances, including where the assistance is approved by shareholders under section 260B. In addition, under the 2012 Facility Agreement, the Company is obliged to seek the shareholder approval now sought. In this case, if on or after the date of the Company s Annual General Meeting the DuluxGroup offer for Alesco has become or been declared unconditional and DuluxGroup Bidco has completed compulsory acquisition processes under chapter 6A of the Corporations Act, then the Acquired Companies will be required to provide Guarantees and such other assistance referred to above. Under section 260B(1) of the Corporations Act, shareholder approval must be given by the shareholders of the company at a general meeting by either: (a) (b) a special resolution, with no votes being cast in favour of the resolution by the person acquiring the shares (or units of shares) or by their associates; or a resolution agreed to, at a general meeting, by all ordinary shareholders. 13

15 In addition, because the Acquired Companies will become subsidiaries of a listed holding corporation (being the Company, DuluxGroup Limited) immediately after the acquisition of shares pursuant to the takeover offers, the financial assistance must also be approved by a special resolution passed at a general meeting of the Company under section 260B(2) of the Corporations Act. The giving of the Financial Assistance has been, or will be, approved by a unanimous resolution of each of the Acquired Companies in accordance with section 260B(1) of the Corporations Act. Accordingly, it is proposed that the Financial Assistance now be approved by special resolution of the shareholders of the Company. Effect of the Financial Assistance The Company, as a guarantor under the Guarantee, is already itself liable for amounts payable under the Transaction Documents to the beneficiaries of the Guarantee (under the terms of the existing guarantee), so the giving of the Financial Assistance is unlikely to adversely affect the Company or the Acquired Companies, except that the operations of the Acquired Companies may be restricted by the representations and undertakings given by them in connection with the Guarantee. The Guarantee to be given by the Acquired Companies will be on substantially the same terms as the existing guarantee given by, among others, the Company and the Borrower. The key effect of the Financial Assistance on the Acquired Companies will be that each of the relevant Acquired Companies will have guaranteed the amounts payable under the Transaction Documents. The principal advantage to the Company (and, indirectly, the Acquired Companies) is to ensure that the Company and its subsidiaries continue to have the benefit of, and meet their obligations under, the Facilities. Other advantages to the Acquired Companies include that they: (a) (b) (c) may benefit from any working capital facilities provided under the Transaction Documents; may benefit from repayment of their existing indebtedness from funds drawn under the Facilities; and will be able to draw on the capital resources and management expertise of the Group, while retaining existing expertise and knowledge in the industry in which they operate. On the other hand, the disadvantages of the Financial Assistance for the Acquired Companies include that: (a) (b) they will become liable for all amounts outstanding under the Transaction Documents; if, for example, an event of a default was to occur under any of the Facilities, the Acquired Companies may be required to immediately repay all amounts outstanding under the Transaction Documents or otherwise the subject of the Guarantee. This may result in a winding up, which could result in a lower return than could have been achieved had those assets been sold in the ordinary course of business; and 14

16 (c) their operations and ability to independently obtain finance from other sources may be restricted by the giving of the Guarantee and the undertakings, representations and warranties given under the Transaction Documents. The directors of the Company have considered the giving of the Financial Assistance and are of the opinion that there are reasonable grounds to believe that it is in the best interests and for the commercial benefit of the Company and each Acquired Company. Directors recommendation The directors of the Company consider that these Explanatory Notes contain all information known to the Company that would be material to the decision of the Company's shareholders on how to vote on the financial assistance resolution set out in Resolution 7, other than information which would be unreasonable to include because it had previously been disclosed to shareholders. The directors of the Company unanimously recommend that the shareholders of the Company vote in favour of Resolution 7. A copy of this Notice of Annual General Meeting was lodged with the Australian Securities & Investments Commission before being sent to the shareholders of the Company, as required by section 260B(5) of the Corporations Act. 15

17 Location of Annual General Meeting DuluxGroup Head Office Transport Options Trains Westall Station on the Pakenham Line or Syndal Station on the Glen Waverley Line. Bus transfers will depart both Westall Station and Syndal Station to the meeting venue at 9.45am. Return bus transfers to both Westall Station and Syndal Station will also be available departing approximately 30 minutes after the meeting concludes. If you intend to travel by train and require a bus transfer to and from the meeting venue, please register by calling DuluxGroup Reception on (03) by no later than 5.00pm on 11 December Buses Bus route 631 (operating between Southland Shopping Centre and Waverley Gardens Shopping Centre) or bus route 800 (operating between Dandenong Station and Chadstone Shopping Centre). Car Parking Car parking is available on site. Entry to the site is via McNaughton Road if travelling from Centre Road, Blackburn Road or Dandenong Road (from the city). Entry to the site is via Dandenong Road if travelling from Westall Road or Dandenong Road (from Dandenong). 16