THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

Transcription

1 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in doubt about the action to be taken, you should consult your stockbroker, bank manager, solicitor, accountant or other independent financial adviser duly authorised under the Financial Services and Markets Act 2000 immediately. If you have sold or otherwise transferred all your shares in HomeServe plc ( the Company ) you should send this document but not the accompanying proxy form to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. PROPOSED SPECIAL DIVIDEND of 30 pence per existing ordinary share and SHARE CONSOLIDATION of 13 New Ordinary Shares for every 14 Existing Ordinary Shares and NOTICE OF THE ANNUAL GENERAL MEETING TO BE HELD ON 17 JULY 2015 Notice of the Annual General Meeting to be held on 17 July 2015 is set out at the end of this circular. Proxy forms for use at this meeting should be completed and returned as soon as possible and to be valid must arrive no later than 10.00am on 15 July Application will be made to the UK Listing Authority for the Official List to be amended to reflect the New Ordinary Shares arising from the proposed consolidation and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the London Stock Exchange s market for listed securities. It is expected that dealings in existing ordinary shares will continue until 4.30pm on 17 July 2015 and that admission of the New Ordinary Shares will become effective and dealings for normal settlement will commence at 8.00am on 20 July

2 CONTENTS AND EXPECTED TIMETABLE Part Heading Page Part I Letter from Chairman 3 Part II Additional Information about the Special Dividend and Share Consolidation 15 Part III Notice of Annual General Meeting 21 Expected Timetable 2015 Existing ordinary shares marked ex-entitlement to the final dividend of 7.87 pence per existing ordinary share Thursday 2 July Record date for entitlement to the final dividend Latest time and date for receipt of Forms of Proxy from shareholders Annual General Meeting Friday 3 July (5.00pm) Wednesday 15 July (10.00am) Friday 17 July Record date for entitlement to the special dividend of 30 pence per existing ordinary share and the share consolidation Existing ordinary shares marked ex-entitlement to the special dividend Effective time and date of the share consolidation and the date CREST accounts credited with New Ordinary Shares Commencement of dealings in New Ordinary Shares Despatch (where applicable) of certificates for New Ordinary Shares Payment (where applicable) of fractional entitlements by cheque or CREST Payment of special dividend by cheque or BACS Payment of final dividend by cheque or BACS Friday 17 July (5.00pm) Monday 20 July Monday 20 July (8.00am) Monday 20 July (8.00am) Thursday 23 July Friday 24 July Friday 24 July Monday 3 August Notes: (1) References to times in this Circular are to London time unless otherwise stated. (2) If any of the above times or dates should change, the revised times and/or dates will be notified to shareholders by an announcement on a Regulatory Information Service. (3) All events in the above timetable scheduled to take place after the Annual General Meeting in respect of the special dividend and the share consolidation are conditional on approval by shareholders of resolution 15 as proposed. The dispatch of certificates for New Ordinary Shares (where applicable) and the payment of fractional entitlements (where applicable) are conditional upon an amendment to the Official List of the UK Listing Authority and on the New Ordinary Shares being admitted to trading on the London Stock Exchange. If you have any questions on any matters detailed in this Notice please contact the Shareholder Helpline at (or +44(0) if calling from outside of the United Kingdom) between 8.30 a.m. and 5.30 p.m. on any Business Day. Calls from landline providers typically cost up to 12 pence per minute. From mobile networks calls cost between 5 pence and 40 pence per minute. Calls from outside the UK are chargeable at applicable international rates. Calls may be recorded and randomly monitored for security and training purposes. Lines are open from 8.30 a.m. until 5.30 p.m. (London time) Monday to Friday (excluding UK public holidays). Please note that the Shareholder Helpline cannot provide comments on the merits of the proposed special dividend and consolidation, or legal, financial or taxation advice. 2

3 PART I LETTER FROM THE CHAIRMAN HomeServe plc (Registered in England Number ) Registered Office: Cable Drive Walsall WS2 7BN 15 June 2015 Dear Shareholder This Circular accompanies the Annual Report and Accounts of the Company for the year ended 31 March The purpose of this Circular is to explain our proposed special dividend and share consolidation and certain other elements of the business which will be considered at the Annual General Meeting of the Company to be held on 17 July ANNUAL REPORT AND ACCOUNTS Resolution 1 deals with the approval of the Report and Accounts for the year ended 31 March REMUNERATION MATTERS Resolution 2 deals with the approval of the Annual Report on Remuneration for the year ended 31 March The Company obtained shareholder approval for the Directors Remuneration Policy Report in July 2014, and the Directors Remuneration Policy Report remains unchanged since then. The approval obtained in July 2014 lasts for a maximum of three years and it is therefore expected that the Company will seek approval of the Directors Remuneration Policy Report at the 2017 Annual General Meeting. DIVIDEND Resolution 3 deals with the declaration of the final dividend of 7.87p per ordinary share proposed to be paid on 3 August 2015 (subject to shareholder approval) to shareholders on the Register of Members at 6.00pm on 3 July DIRECTORS All of the Directors will be offering themselves for annual re-election. Resolutions 4 to 10 deal with this. Biographical details in respect of the Directors are included in Appendix 1 to this letter. As Chairman, I confirm on behalf of the Board that, following a continuous process of evaluation, each Non-Executive Director standing for election continues to perform their role effectively and makes a valuable contribution to the Board s deliberations and that each continues to demonstrate commitment to the role. The Board supports and recommends the proposed appointments. 3

4 AUDITOR Resolution 11 deals with the reappointment of Deloitte LLP as auditor, and resolution 12 authorises the Directors to determine their remuneration. INTRODUCTION OF NEW UK SHARE INCENTIVE PLAN AND GLOBAL SHARE INCENTIVE PLAN Resolutions 13 and 14 are seeking approval for the implementation of two new all-employee share plans - the UK Share Incentive Plan ( UK SIP ) and the Global Share Incentive Plan ( Global SIP ). The UK SIP is a tax-advantaged plan which is open to all UK employees of HomeServe who are eligible to participate. Under the UK SIP, up to 3,600 of free shares may be awarded to each eligible employee. In addition, up to 1,800 of shares may be purchased by each eligible employee and this may then be matched by the Company, with up to two matching shares for each one purchased. The Company may choose which of these elements is operated in any year and to what level and, in addition, may require or permit dividends on shares received or acquired under the UK SIP to be reinvested in further shares. The Global SIP is non-tax advantaged and is intended to be used for non-uk employees to receive or acquire shares on similar terms to UK employees. Further detail on the key terms of the new plans is set out in Appendix 2 to this letter. The Directors consider that the new plans will provide a valuable incentive and benefit to employees, and will encourage wider employee share ownership and engagement across the HomeServe Group. SPECIAL DIVIDEND AND SHARE CONSOLIDATION Resolution 15 is seeking approval for the proposal recommended by the Directors for payment of a special dividend and share consolidation. The proposed return of cash will be structured as a special dividend of 30p per existing ordinary share and an associated consolidation of existing ordinary shares on the basis of 13 new ordinary shares (the New Ordinary Shares ) for every 14 existing ordinary shares. If shareholders approve the special dividend, it will be paid on 24 July 2015 to those shareholders on the register of members at 6.00pm on 17 July 2015, with an ex-dividend date of 20 July As is common when an amount representing a significant proportion of the market capitalisation of a company is returned to shareholders, the Board recommends that the special dividend is combined with a share consolidation. The share consolidation is intended, so far as possible, to maintain the comparability of the Company s share price before and after the special dividend. The total amount of the special dividend is equivalent to approximately 7% of the market capitalisation of the Company as at 5 June 2015 (being the last practicable date prior to the publication of this Circular). 4

5 The effect of the share consolidation will be to reduce the number of ordinary shares by approximately the same percentage. It is anticipated, therefore, that the market price of each ordinary share should remain at a broadly similar level following the special dividend and the share consolidation. Shareholders will still hold the same proportion of the Company s ordinary share capital as before the share consolidation (subject to any fractional entitlements). Although the New Ordinary Shares will have a different nominal value, they will carry equivalent rights under the Articles of Association to the existing ordinary shares currently in issue. The payment of any fractional amounts arising from the share consolidation will be made separately on 24 July 2015 to the relevant shareholders. If resolution 15 is not passed, the special dividend will not be paid and the share consolidation will not take place. Further detail on the special dividend and the share consolidation is set out in Part II of this Circular. ALLOTMENT OF SHARES AND PRE-EMPTION RIGHTS Resolutions 16 and 17 are seeking to renew the Directors general authority to allot shares up to a maximum nominal amount ( the Allotment Amount ) and the Directors authority to issue shares for cash without applying the statutory pre-emption rights up to a maximum nominal amount ( the Disapplication Amount ). These authorities will lapse on the date of the Annual General Meeting of the Company to be held in 2016 or on 17 October 2016, whichever is the earlier. The Allotment Amount is equivalent to approximately one third of the Company s issued ordinary share capital as at 5 June 2015 (being the latest practicable date prior to publication of the Notice of Annual General Meeting). The Directors have no present intention of allotting any new shares under this authority. The Disapplication Amount represents 10% of the Company s issued ordinary share capital as at 5 June 2015 (being the latest practicable date prior to publication of the Notice of Annual General Meeting). The Board confirms that it will not allot shares for cash on a non pre-emptive basis pursuant to the authority in resolution 17: (i) (ii) representing more than 5% of the Company s issued ordinary share capital (excluding treasury shares); or representing more than 7.5% of the issued ordinary share capital of the Company (excluding treasury shares) during any rolling three year period without consultation with the Company s shareholders, 5

6 in each case other than in connection with an acquisition or specified capital investment (within the meaning given in the Pre-Emption Group s Statement of Principles, as updated in March 2015) which is announced contemporaneously with the allotment, or which has taken place in the preceding six-month period and is disclosed in the announcement of the allotment. In addition to the Disapplication Amount, in certain circumstances, the Directors will have authority to allot shares for cash, otherwise than in accordance with statutory pre-emption rights. As the Allotment Amount and Disapplication Amount are set by reference to the nominal value of the Company s issued ordinary share capital as at the latest practicable date prior to publication of the Notice of Annual General Meeting, these amounts will not be affected by the proposed share consolidation (subject to its approval under resolution 15). AUTHORITY TO PURCHASE OWN SHARES Resolution 18 is seeking approval to renew the existing authority to make market purchases of the Company s own ordinary shares. The Board has no current intention that the Company should make purchases of its own shares if the renewal becomes effective, but would like to be able to act quickly if circumstances arise in which such a purchase would be desirable. Purchases will only be made on the London Stock Exchange and only in circumstances where the Board believes that they are in the best interests of shareholders generally. Furthermore, purchases will only be made if the Board believes that they would result in an increase in earnings per share. The proposed authority will be limited by the terms of the special resolution to the purchase of ordinary shares representing 10% of the Company s issued ordinary share capital immediately after the share consolidation or, if resolution 15 is not passed, 10% of the Company s issued ordinary share capital as at 5 June 2015 (being the latest practicable date prior to publication of the Notice of Annual General Meeting). The minimum price per ordinary share payable by the Company (exclusive of expenses) will be the nominal value of the ordinary shares acquired. The maximum price to be paid will be the higher of (i) an amount not more than 5% above the average of the middle market quotations for ordinary shares of the Company as derived from The London Stock Exchange Daily Official List for the five business days immediately preceding the date of each purchase and (ii) the higher of the price of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried out at the relevant time. The maximum number of shares and the permitted price range are stated in order to comply with statutory and UK Listing Authority requirements and should not be taken as representative of the number of shares (if any) which may be purchased or of the terms of such a purchase. The authority will lapse on the date of the Annual General Meeting of the Company in 2016 or on 17 October 2016, whichever is the earlier. In order to maintain the Board s flexibility of action, it is envisaged that the authority will continue to be renewed at future Annual General Meetings. Any shares purchased are likely to be cancelled. 6

7 NOTICE OF GENERAL MEETINGS Resolution 19 is seeking to allow the Company to hold general meetings (other than annual general meetings) on 14 clear days notice. Changes made to the Companies Act 2006 by the Shareholders Rights Regulations increase the notice period required for general meetings of the Company to 21 days unless shareholders approve a shorter notice period, which cannot however be less than 14 clear days. Annual general meetings will continue to be held on at least 21 clear days notice. Before the coming into force of the Shareholders Rights Regulations the Company was able to call general meetings (other than an annual general meeting) on 14 clear days notice without obtaining such shareholder approval. The approval, if passed, will be effective until the Company s next Annual General Meeting, when it is intended that a similar resolution will be proposed. The Company will only convene general meetings on less than 21 days notice if the proposals to be considered are believed by the Directors to be time sensitive and clearly to the advantage of shareholders as a whole. NOTICE OF ANNUAL GENERAL MEETING The notice of the Annual General Meeting is set out at the end of this document. Resolutions 1 to 16 will be proposed as ordinary resolutions, meaning that for each resolution to be passed more than half of the votes cast must be in favour of the resolution. The remaining resolutions will be proposed as special resolutions, meaning that for each resolution to be passed at least 75% of the votes cast must be in favour of the resolution. RECOMMENDATION The Directors consider that all the resolutions to be put to the meeting are in the best interests of the Company and its shareholders as a whole. The Directors will be voting in favour of them and unanimously recommend that you do so as well. Yours faithfully JM Barry Gibson Chairman 7

8 Appendix 1 Directors Biographical Details Details in respect of the directors offering themselves for re-election are as follows: JM Barry Gibson (63) Appointed to the Board in April 2004 and appointed as Chairman on 1 April 2010 following a year as Senior Non-Executive Director. Also Senior Independent Director of bwin.party digital entertainment plc. Previously Group Retailing Director at BAA plc, Group Chief Executive of Littlewoods plc and Non-Executive Director of Somerfield plc, National Express plc, William Hill plc, SSP Group Ltd and Non-Executive Chairman of Harding Brothers Holdings Ltd. Richard Harpin (50) Founder and Chief Executive Officer of HomeServe which was set up in 1993 as a joint venture with South Staffordshire Group. Appointed to the Board in May Previously a brand manager with Procter & Gamble, followed by management consultancy with Deloitte and his own company. Martin Bennett (46) Appointed as Chief Executive Officer of the UK business in January 2014, following two years as Group Chief Operating Officer and three years as Group Chief Financial Officer. Previously Finance Director of the UK business, having been Finance Director of the Warranties business and Commercial Director. Prior to joining HomeServe in 2003, he spent three years as Group Finance Director of Clarity Group and ten years at Arthur Andersen where he qualified as a Chartered Accountant. Johnathan Ford (45) Appointed as Chief Financial Officer in September Also a Non-Executive Director of Lakehouse plc where he chairs the Audit Committee. Previously the Group Finance Director of NWF Group plc, an AIM listed specialist agricultural and distribution group. Prior to joining NWF in March 2009, he spent four years at HomeServe, firstly as Group Commercial Director and later as Finance Director of the Emergency Services Division. Before joining HomeServe he was Head of Corporate Finance at Kidde plc. Stella David (52) Appointed to the Board in November Currently Chief Executive Officer of William Grant & Sons having joined them in 2009 following more than fifteen years with Bacardi Ltd where she undertook a number of roles culminating in four years as Global Chief Marketing Officer. Currently a Non-Executive Director of C&J Clark Limited, she also spent seven years as a Non-Executive Director at Nationwide Building Society. Ben Mingay (50) Appointed to the Board in January Currently Managing Partner of Smith Square Partners, an independent corporate finance advisory firm. He has more than twenty years experience as a corporate finance adviser and, prior to co-founding Smith Square Partners, he was a Managing Director of Hawkpoint Partners Ltd and Credit Suisse First Boston (Europe). He is also a Non-Executive Director of AIM-listed Alternative Networks plc. 8

9 Mark Morris (55) Appointed to the Board in February 2009 and as Senior Independent Director on 1 April Previously in audit, business advisory and corporate finance with Price Waterhouse before joining Sytner Group plc as Finance Director, later becoming Managing Director. Currently a Non-Executive Director of LSL Property Services plc and Chairman of Motorpoint Ltd. Key: 1 Non-Executive 2 Audit Committee (Chairman: Mark Morris) 3 Nomination Committee (Chairman: Barry Gibson) 4 Remuneration Committee (Chairman: Stella David) 9

10 Appendix 2 Summary of the principal terms of the UK Share Incentive Plan and the Global Share Incentive Plan The principal terms of the UK Share Incentive Plan ( UK SIP ) and the Global Share Incentive Plan ( Global SIP ) (together, the Plans ) are substantially the same, except as set out below. OPERATION The board of directors of the Company (the Board ) will supervise the operation of the Plans. It is intended that the UK SIP will meet the requirements of Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003 ( Schedule 2 ) and will provide tax advantages to participating UK tax resident employees. The Global SIP will operate alongside the UK SIP, but will not afford tax advantages to its participants. It is currently intended that the Global SIP will be offered to employees in France, Germany, Italy, Spain and the US. The UK SIP will operate in conjunction with a UK resident trust, and the Global SIP will operate in conjunction with a non-uk resident employee benefit trust established by the Company or a member of the group and/or a third party administrator appointed by the Board ( Plan Trustee ). ELIGIBILITY AND INVITATIONS Employees (including executive directors) of the Company and any designated participating subsidiary who are UK resident taxpayers will be eligible to participate in the UK SIP. The Board may also allow non-uk resident taxpayers to participate in the UK SIP. All eligible employees must be invited to participate in the UK SIP. Participation in the Global SIP will be by invitation only. Employees (including executive directors) of the Company and any designated subsidiary of the Company are eligible to participate in the Global SIP at the discretion of the Board. The Board currently intends to operate the Global SIP on an all-employee basis. Participation in the Global SIP shall broadly be extended on similar terms to all or most employees of the participating companies except that the terms of participation may differ between jurisdictions (for example, to take account of securities and tax laws, exchange controls or overseas administrative issues). The Board may require employees to have completed a qualifying period of employment of up to 18 months in order to be eligible to participate in the Plans. 10

11 AWARDS UNDER THE PLANS The Plans comprise the following three elements [or elements] and the Board may decide which element to offer to eligible employees: (a) Free Shares : these are free ordinary shares in the Company ( Shares ) which may be allocated to an employee. The market value of Free Shares allocated to any employee in any tax year may not exceed: in relation to the UK SIP, 3,600 (or such other limit as may be permitted by Schedule 2); or in relation to the Global SIP, the local currency equivalent value of 3,600 (or such other limit as determined by the Board from time to time). Free Shares may be allocated to employees equally or on the basis of salary, length of service or hours worked, or on the basis of performance (as permitted by Schedule 2 in relation to the UK SIP) or on such terms determined by the Board from time to time under the Global SIP. Under the Global SIP, Free Shares may be awarded and structured as conditional shares.the Board may also decide to grant cash-based Free Share awards of an equivalent value to Free Share awards or to satisfy Free Share awards in cash, although it does not currently intend to do so. When the Free Shares vest, the Plan Trustee of the Global SIP will automatically arrange the sale of sufficient shares on behalf of each employee to satisfy any immediate obligation they have to pay income tax, social security or similar taxes. (b) Partnership Shares : these are Shares that an employee may purchase out of his earnings. In accordance with Schedule 2, the funds used to purchase Partnership Shares under the UK SIP will be deducted from the employee s pre-tax salary. However, under the Global SIP, Partnership Shares will be purchased from post-tax earnings. The market value of Partnership Shares which an employee can agree to purchase in any tax year may not exceed: in relation to the UK SIP, 1,800 or, if lower, 10% of the employee s salary (or such other limit as may be permitted by Schedule 2); or in relation to the Global SIP, the local currency equivalent value of 1,800 (or such other limit as determined by the Board from time to time). Under the Plans, salary deductions may be accumulated over a period of up to 12 months and then used to buy Shares. 11

12 (c) Matching Shares : these are free Shares which may be allocated to an employee who purchases Partnership Shares. The Board may allocate Matching Shares to an employee who purchases Partnership Shares up to a maximum of two Matching Shares for every one Partnership Share purchased (or such other maximum ratio as may be permitted by Schedule 2 in relation to the UK SIP, or as determined by the Board from time to time under the Global SIP). The same Matching Share ratio will apply to all employees who purchase Partnership Shares under the Plans on the same occasion. Under the Global SIP, Matching Shares may be awarded and structured as conditional shares. The Board may also decide to grant cash-based Matching Share awards of an equivalent value to Matching Share awards or to satisfy Matching Share awards in cash, although it does not currently intend to do so. When the Matching Shares vest, the Plan Trustee of the Global SIP will automatically arrange the sale of sufficient shares for each employee to satisfy any immediate obligation they have to pay income tax, social security or similar taxes. An award of Shares may not be made later than ten years after shareholder approval of the Plans. RETENTION AND FORFEITURE OF SHARES The Plan Trustee will award Free Shares and Matching Shares to employees and hold those Shares on behalf of the participants. Free Shares and Matching Shares must usually be retained by the Plan Trustee for a period of three years (or such other period specified by the Board) after award ( Holding Period ). The Plan Trustee will acquire Partnership Shares on behalf of participants and hold those Shares on behalf of the participants. Employees can withdraw Partnership Shares from the relevant Plan trust at any time. The Board may decide that Free Shares and/or Matching Shares will be forfeited if a participant ceases to be employed by a company in the Company s group during the Holding Period unless they leave by reason of death, injury, disability, redundancy, retirement, the sale or transfer of their employing company or business to a person who is not a member of the Company s group or, in the case of the Global SIP only, in any other circumstances at the discretion of the Grantor (these are known as the good leaver reasons). In any of those cases: the participants will be required to withdraw their Shares; and the Free Shares and/or Matching Shares awarded under the Global SIP will vest on the date of cessation. If an employee ceases to be employed by the Company s group at any time, he will be required to withdraw his Shares from the relevant Plan trust if they are not forfeit. 12

13 CORPORATE EVENTS Under the UK SIP, in the event of a general offer being made to shareholders, participating employees will be able to direct the relevant Plan Trustee how to act in relation to their Shares. In the event of a corporate reconstruction, any Shares held for participating employees may be replaced by equivalent shares in a new holding company. Under the Global SIP, Free Shares and/or Matching Shares may vest early and on such basis determined by the Board in the event of a takeover or winding up of the Company. In the event of an internal corporate reorganisation, Free Shares will be replaced by equivalent new free share awards over shares in a new holding company unless the Board decides that those Free Shares should vest on the basis which would apply in the case of a takeover. In the event of a corporate reconstruction, any unvested Matching Share awards shall continue under the Plan. DIVIDENDS ON SHARES HELD BY THE PLAN TRUSTEE Under the UK SIP, any dividends paid on Shares held by the relevant Plan Trustee on behalf of participants will either be distributed to participants or be used to purchase additional shares for the participant. No cash dividends will be paid on unvested Free Shares or Matching Shares awarded under the Global SIP. Instead, the Board may decide that participants will receive a payment (in cash and/or Shares) on or shortly following the vesting of their awards, of an amount equivalent to the dividends that would have been paid on those Shares between the time when the awards were granted and the time when they vest. This amount may assume the reinvestment of dividends. Alternatively, participants may have their awards increased as if dividends were paid on the Shares subject to their award and then reinvested in further Shares. Following the vesting of the Free Shares or Matching Shares, any dividends paid on those Shares will either be distributed to participants or be used to purchase additional shares for the participant. RIGHTS ATTACHING TO SHARES An employee will be treated as the beneficial owner of Shares held on his behalf by the relevant Plan Trustee. Any Shares allotted under the Plans will rank equally with Shares then in issue except for rights attaching to such Shares by reference to a record date prior to their allotment. Under the Global SIP, the Free Share and/or Matching Share awards will not confer any shareholder rights until the relevant award has vested and the participant has acquired Shares. 13

14 OVERALL PLAN LIMITS The Plans may operate over new issue Shares, treasury Shares or Shares purchased in the market. In respect of each of the Plans, the following limit applies: in any ten calendar year period, the Company may not issue (or grant rights to issue) more than 10 per cent. of the issued ordinary share capital of the Company under the Plan and any other employees share plan adopted by the Company. Treasury Shares will count as new issue Shares for the purposes of this limit unless institutional investors specify that they need not count. VARIATION OF CAPITAL Under the UK SIP, in the case of a variation of share capital of the Company, Shares held in the relevant Plan will be treated in the same way as other shares. In the event of a rights issue, participants will be able to direct the relevant Plan Trustee how to act on their behalf. Under the Global SIP, in the event of a variation of the Company s share capital or in the event of a demerger, payment of a special dividend or similar event which materially affects the market price of the Shares, the Board may make such adjustments as it considers appropriate to the number of Shares subject to a Free Share and/or Matching Share award. ALTERATIONS TO THE PLANS The Board may, at any time, amend the Plans in any respect, provided that the prior approval of shareholders is obtained for any amendments that are to the advantage of participants in respect of the rules governing eligibility, limits on participation, the overall limits on the issue of Shares or the transfer of treasury Shares, the basis for determining a participant s entitlement to, and the terms of, Shares to be acquired and the adjustment of awards. The requirement to obtain prior shareholder approval will not, however, apply to any minor alteration to benefit the administration of the Plans, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control, or regulatory treatment for any participant or any company in the Company s group. GENERAL Awards made under the Plans are not transferable other than to the participant s personal representatives in the event of his death. Benefits received under the Plans will not be pensionable. OVERSEAS PLANS The shareholder resolutions to approve the Plans will allow the Board, without further shareholder approval, to establish further schedules or plans for overseas territories, any such plan to be similar to the relevant Plan, but modified to take account of local tax, exchange control or securities laws, provided that any Shares made available under such further schedules or plans are treated as counting against the limits on individual and overall participation in the relevant Plan. 14

15 PART II ADDITIONAL INFORMATION ABOUT THE SPECIAL DIVIDEND AND SHARE CONSOLIDATION 1. SPECIAL DIVIDEND HomeServe is committed to maintaining an efficient capital structure, good risk management and growing the business both organically and by acquisition. To balance these objectives, the Board wishes to adjust the Group s capital structure to achieve year end leverage broadly in the range of x Adjusted EBITDA, measured at 31 March each year. Accordingly, the Board is recommending a special dividend to shareholders of 30p per existing ordinary share, in addition to the final dividend of 7.87p. Payment of the special dividend is conditional on shareholder approval of resolution 15, as set out in the Notice of Annual General Meeting. The special dividend is payable to shareholders who are on the register of members at 6.00pm on 17 July 2015 and is expected to be paid to shareholders (including CREST shareholders) on 24 July SHARE CONSOLIDATION The total amount of the special dividend is equivalent to approximately 7% of the market capitalisation of the Company at the close of business on 5 June 2015 (being the latest practicable date prior to the publication of this Circular). The effect of the share consolidation will be to reduce the number of ordinary shares in issue by approximately the same percentage, with the result that shareholders will receive 13 New Ordinary Shares for every existing 14 ordinary shares held at the special dividend record date. The purpose of the share consolidation is to seek, as far as possible, to ensure that the market price of each ordinary share is maintained at a broadly similar level following the special dividend and the share consolidation. It is common UK practice for the payment of a special dividend by a company to be combined with a share consolidation. Accordingly, shareholders are being asked to approve the special dividend and the share consolidation by way of a single combined ordinary resolution as set out in resolution 15 of the Notice of Annual General Meeting. Although following the share consolidation each shareholder will hold fewer New Ordinary Shares than the number of existing ordinary shares held before, each shareholder s shareholding as a proportion of the total number of New Ordinary Shares in the capital of the Company in issue will be the same before and immediately after the share consolidation, save in respect of fractional entitlements. Although the New Ordinary Shares will have a different nominal value, they will carry the same rights as currently attach to existing ordinary shares under the Articles of Association of the Company. Existing dividend mandates to bank or building society accounts given in relation to dividends paid in respect of existing ordinary shares will continue to apply to the New Ordinary Shares. 15

16 The share consolidation will replace every 14 existing ordinary shares of 2.5p each with 13 New Ordinary Shares of 2 9 /13p each. If an individual shareholding is not exactly divisible by 14, the share consolidation will generate an entitlement to a fraction of a New Ordinary Share. Fractions of New Ordinary Shares will not be allotted to shareholders; instead the shares representing the fractions of New Ordinary Shares will be aggregated and sold for the best price reasonably obtainable on behalf of the shareholders entitled to the fractions as soon as practicable after the share consolidation. The net proceeds of the sale, after the deduction of the expenses of the sale, will be distributed in due proportion among the relevant shareholders, except that any individual entitlements of less than 3.00 will be retained by the Company and donated to Marie Curie Cancer Care, the Company s charity partner in the UK. Only shareholders with a holding of existing ordinary shares that are not exactly divisible by 14 will be left with an entitlement to a fraction of a new ordinary share. Payment of fractional entitlements (where applicable) is expected to be despatched on 24 July 2015 by CREST payment or by cheque. CREST shareholders will receive their fractional entitlement payment via their CREST accounts. Non-CREST shareholders, regardless of whether they have an existing mandate to a bank or building society account, will receive a cheque for their fractional entitlement (where applicable). Shareholders who hold fewer than 14 existing ordinary shares will still have their shareholding consolidated, and their shareholding will be dealt with in accordance with the procedure for fractional entitlements to New Ordinary Shares described above. To effect the share consolidation, each ordinary share of 2.5p each in the capital of the Company will first be sub-divided into 13 ordinary shares of 0.192p each (the Intermediate Ordinary Shares ). This will be immediately followed by a consolidation of every 14 Intermediate Ordinary Shares into one New Ordinary Share of 2 9 /13p. It may be necessary to issue such minimum number of additional ordinary shares so that the number of the Company s ordinary shares is exactly divisible by 14. These shares will represent a fraction of a New Ordinary Share and will be dealt with in accordance with the procedure for fractional entitlements to New Ordinary Shares. For purely illustrative purposes, examples of the effect of the share consolidation and the special dividend are set out below: No. of existing ordinary shares No. of New Ordinary Shares Fractional entitlement* Special dividend ( ) , * The fractional entitlement represents the fraction of a New Ordinary Share which will be sold on behalf of shareholders as soon as practicable after the share consolidation. The net proceeds of the sale will be despatched to shareholders thereafter or, in the case of individual entitlements of less than 3.00 donated to Marie Curie Cancer Care. 16

17 Following the share consolidation and assuming no further shares are issued between the date of this Circular and the share consolidation becoming effective (save for the minimum number of shares to ensure division by 14, as described above), the Company s issued ordinary share capital will comprise 307,656,986 New Ordinary Shares. No change in the total aggregate nominal value of the Company s issued share capital will occur, it will still be approximately 8.2m. If the share consolidation is approved pursuant to resolution 15, the Company will send holders of certificated existing ordinary shares new share certificates in respect of the New Ordinary Shares. The new share certificates will be sent on 24 July 2015 by pre-paid first class post, at the risk of the relevant holder of ordinary shares, to the registered address of that holder or, in the case of joint holders, to the holder whose name appears first in the register of members. Share certificates for existing ordinary shares will no longer be valid and should be destroyed once the new certificate is received. Shareholders who hold their entitlement in uncertificated form through CREST will have their CREST accounts adjusted to reflect their entitlement to New Ordinary Shares. The existing ISIN (GB00B587FC42) (SEDOL B587FC4) will be disabled as at 4.30pm on 17 July 2015 with trading in the New Ordinary Shares of 2 9 /13p under ISIN (GB00BYYTFB60) (SEDOL BYYTFB6) commencing at 8.00am on 20 July If the share consolidation is approved pursuant to resolution 15, trading in New Ordinary Shares on the London Stock Exchange is expected to commence on an ex-dividend and post-consolidation basis at 8.00 am on 20 July If shareholders do not approve resolution 15, including the share consolidation, then the special dividend will not be paid. The Board considers that the special dividend should be accompanied by the share consolidation in order to seek, so far as possible, to ensure that the market price of each ordinary share will remain at a broadly similar level following the special dividend and share consolidation. The Board has therefore approved payment of the special dividend subject to approval of the share consolidation. The share consolidation is conditional on the New Ordinary Shares being admitted to the Official List of the UK Listing Authority and being admitted to trading on the London Stock Exchange. However, subject to the passing of resolution 3, the final dividend of 7.87p per existing ordinary share will still be paid even if the special dividend and the share consolidation are not approved. 17

18 3. HOMESERVE EMPLOYEE SHARE SCHEMES HomeServe plc Long-Term Incentive Plan ( LTIP ) Participants in the LTIP are not entitled to receive either the final dividend or the special dividend, unless their award vests and they acquire shares prior to the record date for entitlement to the final dividend or special dividend respectively, and they still hold any resulting ordinary shares on such date. However, participants in the LTIP will receive a dividend equivalent in respect of the final dividend (but not the special dividend) to the extent provided for in the rules of the LTIP. Unvested awards will not be adjusted as a result of the share consolidation. HomeServe SAYE Scheme ( SAYE ) Participants in the SAYE are not entitled to receive either the final dividend or the special dividend, unless their options have been exercised and they still hold any resulting ordinary shares on the relevant record date. Unvested options will not be adjusted as a result of the share consolidation. 4. TAXATION The following summary sets out advice received by the Company and is intended as a general guide only. It is based on current UK tax law and HM Revenue and Customs practice as at the date of this Circular, both of which are subject to change at any time, possibly with retrospective effect. It relates only to certain aspects of the UK taxation treatment of the special dividend and the share consolidation, for shareholders who are resident solely in the UK for UK tax purposes, who are the absolute beneficial owners of their ordinary shares and who hold them as investments. The comments contained in the summary may not apply to certain shareholders, such as dealers in securities, pension funds, insurance companies, collective investment schemes and shareholders who have acquired (or are deemed to have acquired) their shares by reason of an employment. Shareholders who are in any doubt about their tax position, or who are or may be subject to tax in a jurisdiction other than the UK should take appropriate independent advice without delay. SPECIAL DIVIDEND Individual shareholders within the charge to UK income tax An individual shareholder who is resident in the UK for UK tax purposes should generally be entitled to a tax credit in respect of the special dividend. The dividend received plus the related tax credit (the gross dividend ) will be part of the individual shareholder s total income for UK income tax purposes and will be regarded as the top slice of that income. However, in calculating the individual shareholder s liability to income tax in respect of the gross dividend, the tax credit (which equates to 10% of the gross dividend) is set off against the tax chargeable on the gross dividend. 18

19 Basic rate taxpayers A shareholder who is liable to income tax at the basic rate will be subject to tax on the gross dividend at the rate of 10%. The tax credit will therefore satisfy in full the shareholder s liability to income tax on the gross dividend. Higher rate taxpayers To the extent that the gross dividend falls above the threshold for the higher rate (currently 40%) of income tax but below the threshold for the additional rate (currently 45%) of income tax, the shareholder will be subject to tax on the gross dividend at the rate of 32.5%. This means that the tax credit will satisfy only part of the shareholder s liability to income tax on the gross dividend and the shareholder will have to account for income tax equal to 22.5% of the gross dividend (which equates to 25% of the dividend received). Additional rate taxpayers To the extent that the gross dividend falls above the threshold for the additional rate of income tax, the shareholder will be subject to tax on the gross dividend at the rate of 37.5%. This means that the tax credit will satisfy only part of the shareholder s liability to income tax on the gross dividend and the shareholder will have to account for income tax equal to 27.5% of the gross dividend (which equates to approximately 30.6% of the dividend received). Corporate shareholders within the charge to UK corporation tax Shareholders within the charge to UK corporation tax which are small companies (for the purposes of UK tax of dividends) will not generally be subject to tax on the special dividend. Other shareholders within the charge to UK corporation tax will not be subject to tax on the special dividend so long as it falls within an exempt class (and certain conditions are met). A dividend paid to a UK corporate shareholder holding less than 10% of the issued share capital of the payer (or any class of that share capital in respect of which the dividend is paid) is an example of a dividend that should fall within an exempt class. No payment of tax credit A shareholder (whether an individual or a corporate) who is not liable to tax on the special dividend will not be entitled to claim payment of the tax credit in respect of it. No withholding There is no UK withholding tax on dividends. 19

20 Share consolidation It is expected that for the purposes of UK taxation on chargeable gains, the share consolidation will be treated as follows: (a) (b) (c) The New Ordinary Shares arising from the share consolidation should be regarded as a reorganisation of the share capital of the Company. Accordingly, to the extent that a shareholder receives New Ordinary Shares, the shareholder should not generally be treated as making a disposal of his or her holding of existing ordinary shares by reason of the share consolidation being implemented, and the New Ordinary Shares which replace a shareholder s holding of existing ordinary shares as a result of the share consolidation (the new holding ) should be treated as the same asset, acquired at the same time and for the same consideration as the shareholder s holding of existing ordinary shares. To the extent that a shareholder receives cash by virtue of a sale on his or her behalf of any New Ordinary Shares to which he or she has a fractional entitlement, the shareholder should not normally be treated as making a part disposal of his or her holding of existing ordinary shares, assuming that the cash received does not exceed the shareholder s base cost in his or her holding. Instead, that base cost is reduced by an amount equal to the cash receipt. A subsequent disposal of the whole or part of the New Ordinary Shares comprised in the new holding may give rise to a chargeable gain or an allowable loss for the purposes of UK taxation on chargeable gains, depending on the shareholder s circumstances and subject to any available exemption or relief. Stamp duty and stamp duty reserve tax No stamp duty or stamp duty reserve tax will be payable by shareholders in relation to the special dividend or share consolidation. Questions If you have any questions on any matters detailed in this Notice please contact the Shareholder Helpline at (or +44(0) if calling from outside of the United Kingdom) between 8.30am and 5.30pm on any Business Day. Calls from landline providers typically cost up to 12 pence per minute. From mobile networks calls cost between 5 pence and 40 pence per minute. Calls from outside the UK are chargeable at applicable international rates. Calls may be recorded and randomly monitored for security and training purposes. Lines are open from 8.30am until 5.30pm (London time) Monday to Friday (excluding UK public holidays). Please note that the Shareholder Helpline cannot provide comments on the merits of the proposed special dividend and consolidation, or legal, financial or taxation advice. 20

21 PART III - NOTICE OF ANNUAL GENERAL MEETING Notice is hereby given that the Annual General Meeting of HomeServe plc will be held at The Hyatt Regency, 2 Bridge Street, Birmingham B1 2JZ on Friday 17 July 2015 at 10.00am for the following purposes: 1. To receive the Company s Annual Report and Accounts for the year ended 31 March 2015 and the Reports of the Directors and the Auditor therein. 2. To approve the Annual Statement by the Chairman of the Remuneration Committee and the Annual Report on Directors Remuneration for the year ended 31 March 2015 (other than the part containing the Directors Remuneration Policy Report). 3. To declare the final dividend of 7.87p per ordinary share. 4. To re-elect Mr J M Barry Gibson as a Director. 5. To re-elect Mr Richard Harpin as a Director. 6. To re-elect Mr Martin Bennett as a Director. 7. To re-elect Mr Johnathan Ford as a Director. 8. To re-elect Mrs Stella David as a Director. 9. To re-elect Mr Ben Mingay as a Director. 10. To re-elect Mr Mark Morris as a Director. 11. To reappoint Deloitte LLP as Auditor of the Company. 12. To authorise the Directors to determine the remuneration of the Auditor. 13. To consider, and if thought fit, pass the following Ordinary Resolution: THAT the rules of the UK Share Incentive Plan (the UK SIP ), the principal terms of which are summarised in Appendix 2 to the the letter from the Chairman be approved and the Directors be authorised to: (i) (ii) make such modifications to the UK SIP as they may consider appropriate to take account of the requirements of HMRC, best practice and for the implementation of the UK SIP and to adopt the UK SIP as so modified and to do all such other acts and things as they may consider appropriate to implement the UK SIP; and establish further schedules or plans based on the UK SIP but modified to take account of local tax, exchange control or securities laws in overseas territories, provided that any shares made available under such further schedules or plans are treated as counting against the limits on individual or overall participation in the UK SIP. 21