Hills : 2016 NoM and Proxy Form

2016 Annual General Meeting

Friday, 4 November 2016

2:30pm (Adelaide time)

ABN 35 007 573 417

Letter from the Chairman

Dear Shareholder,

I am pleased to invite you to attend the 2016 Annual General Meeting (AGM or Meeting) of Hills Limited (Hills or the Company).

The AGM will be held on Friday, 4 November 2016 at 2:30pm at:

Flinders University Building 1284 South Road

Clovelly Park SA 5042

A map with directions to the venue appears on page 10 of this booklet.

The following pages contain details on the items of business that you have the opportunity to vote on, as well as explanatory notes and voting procedures.

At this year's AGM the following items will be voted on:

• the re-election of Ms Fiona Bennet as a Director of the Company;

• the election of Mr Ken Dwyer as a Director of the Company; and

• the proposed amendment of the Company's Constitution relating to the inclusion of proportional takeover provisions which are detailed in the enclosed Notice of Meeting.

You will also be asked to cast a non-binding vote in respect of the adoption of the Remuneration Report as set out in pages 15 to 31 of the 2016 Annual Report.

All resolutions are explained in more detail in the Notice of Meeting and Explanatory Notes.

At the Extraordinary General Meeting of Shareholders on 19 April 2013, Shareholders voted to approve the insertion of proportional takeover provisions in the Company's Constitution. Such provisions benefit Shareholders as

it means bidders cannot seize control of your Company without an ordinary resolution being passed by Shareholders to approve the bid. Under the Corporations Act, these provisions ceased to apply on 19 April 2016.

The Board unanimously recommends that Shareholders vote for the insertion of proportional takeover provisions to ensure that:

1. existing Shareholders do not become minority Shareholders without their approval in the event of a proportional takeover; or

2. enable control of the Company to be acquired by a party holding less than a majority position without Shareholders having the opportunity to dispose of all or their shares.

All resolutions are explained in more detail in the Notice of Meeting and Explanatory Notes.

We encourage you to submit questions for the Company (or the Company's external auditor) in advance of the AGM. We request that you use the enclosed question sheet to submit any questions that you would like answered at the 2016 AGM. Please return this question sheet in the reply paid envelope or email it to info@hills.com.au by 2.30pm (Sydney time) Thursday

20 October 2016.

If you are unable to attend the AGM in person, you may vote directly or appoint a proxy to act on your behalf. You may register voting instructions electronically at www.linkmarketservices.com.au or complete and return the enclosed voting form by facsimile or by using the reply paid envelope provided.

Yours sincerely

We look forward to welcoming you to the 2016 AGM.

Jennifer Hill-Ling Chairman

2 Hills Limited 2016 Annual General Meeting

Notice of meeting

Notice is hereby given that the 59th Annual General Meeting (2016 AGM) of Shareholders (Shareholders) of Hills Limited (ABN 35 007 573 417) (Hills or the Company) will be held at Flinders University Building, 1284 South Road, Clovelly Park SA 5062 on Friday, 4 November 2016, commencing at 2:30pm, to conduct the following items of business:

1. Receipt of Financial Statements and Reports

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

2. Re-election of Ms Fiona Bennett as a Director of the Company

   Resolution 1: To consider and, if thought fit, pass the following as an ordinary resolution:

   "that, Ms Fiona Bennett, being a Director of the Company who retires by rotation in accordance with Rule 10.3 of the Constitution and, being eligible for re-election, is

   re-elected as a Director of the Company".

3. Election of Mr Ken Dwyer as a Director of the Company

   Resolution 2: To consider and, if thought fit, pass the following as an ordinary resolution:

   "that, Mr Ken Dwyer, being a Director of the Company who was appointed by the Directors as an additional Director of the Company, being eligible for election, is elected as a Director of the Company".

4. Adoption of Remuneration Report

Resolution 3: To consider and, if thought fit, pass the following resolution as an ordinary resolution:

"that the Remuneration Report contained within the Annual Report of the Company, for the year ended 30 June 2016, be adopted."

Voting Exclusion Statement

In accordance with sections 250R and 250BD of the Corporations Act:

1. Subject to paragraph 2, a vote must not be cast (in any capacity) on this Resolution 3 by or on behalf of the Company's key management personnel (KMP) (including the Directors), details of whose remuneration are included in the Remuneration Report, or their closely related parties, whether as a Shareholder or as a proxy. However, a vote may be

   cast on this Resolution 3 by a KMP, or a closely related party of a KMP, if:

2. the vote is cast as a proxy appointed in writing that specifies how the proxy is to vote on this Resolution 3; and

3. the vote is not cast on behalf of a KMP or a closely related party of a KMP.

4. If you appoint the Chairman of the 2016 AGM as your proxy, and you do not direct your proxy how to vote on this Resolution 3 on the proxy form and the proxy appointment expressly authorises the Chairman

5. of the 2016 AGM to exercise your proxy even if Resolution 3 is connected directly or indirectly with the remuneration of a member of the KMP, which includes the Chairman of the 2016 AGM.

   The Chairman of the 2016 AGM intends to vote undirected proxies in favour of Resolution 3.

   Special Business 5. Approval of Proportional Takeover Provisions

   Resolution 4: To consider and, if thought fit, pass the following resolution as a special resolution:

   "That, from the close of the Meeting, the proportional takeover provisions set out in Annexure A to the Explanatory Statement be inserted into the Constitution as Rules 6.9 to 6.14."

   Please refer to the Explanatory Statement for further information on the items of business. The Explanatory Statement forms part of this Notice of Meeting.

   By Order of the Board

   Gai Stephens Company Secretary 27 September 2016

   Hills Limited 2016 Annual General Meeting 3

   Notice of meeting

   VOTING AND PROXY INSTRUCTIONS

6. Shareholders, who are unable to attend and vote at the 2016 AGM or any adjournment thereof, are entitled to appoint a proxy. Shareholders can appoint a body corporate or an individual as their proxy.

7. A Shareholder who is entitled to cast at least two or more votes at the 2016 AGM is entitled to appoint one or two proxies. Where a Shareholder is entitled to, and does, appoint more than one proxy, each proxy must be appointed to represent a specified portion of the Shareholder's voting rights. If a Shareholder appoints two proxies but does not specify how many votes each proxy may exercise, each proxy may exercise half the votes. A proxy need not be a Shareholder of the Company.

8. Should a Shareholder desire to direct the proxy how to vote, the Shareholder should place a mark in the appropriate box, otherwise the proxy form will be deemed to constitute a direction to vote as the proxy decides.

9. Proxies will only be valid and accepted by the Company if they are received by the Share Registry of the Company by electronic lodgement by visiting www.linkmarketservices.com.au or by forwarding a hard copy to c/- Link Market Services, Locked Bag A14, Sydney South NSW 1235 Australia or by fax +61 2 9287 0309 or by Hand to 1A Homebush Bay Drive, Rhodes, NSW 2138 or Level 12, 680 George Street,

   Sydney NSW 2000 so as to be received not later than 48 hours before the 2016 AGM.

10. If the proxy form is signed by an attorney, the original power of attorney under which the proxy form was signed (or a certified copy) must also be received by the Share Registry of the Company not less than 48 hours before the time of the 2016 AGM or at the time of any adjourned meeting, unless it has previously been provided to the Company's Share Registry.

11. If you appoint a proxy, you may still attend the 2016 AGM. However, your proxy's right to speak and vote are suspended while you are present. Accordingly, you will be asked to revoke your proxy if you register at the 2016 AGM.

12. If a representative of a corporation is to attend the 2016 AGM, an appropriate document appointing the representative should be produced prior to admission.

13. The Company has determined in accordance with regulation 7.11.37 of the Corporations Regulations 2001 and ASX Settlement and Operating Rule 5.6.1 that for the purpose of voting at the 2016 AGM, shares of the Company will be taken to be held by the persons who appear on the Company's share register as holding them at 7.00pm (Sydney time) on Wednesday, 2 November 2016.

EXPLANATORY NOTES

The following Explanatory Notes explain the items of business to be considered at Hills 2016 AGM and form part of the Notice of Meeting. The Explanatory Notes are set out in the order of items in the Notice of Meeting and should be read with the notice.

ORDINARY BUSINESS
1. Consideration of Reports

   Section 317(1) of the Corporations Act 2001 (Cth) (Corporations Act) requires a public company to lay before its Annual General Meeting the financial report, the Directors' report and the Auditor's report for the financial year that ended before the Annual General Meeting.

   Shareholders may access a copy of the Annual Report, which includes the financial report, the Directors' report and the Auditor's report, on the Company's website at http://www.corporate.hills.com.au/investors.

   Shareholders will be given a reasonable opportunity to consider, comment on and ask questions of the Directors and the Auditor of the Company about the management of the Company, the conduct of the audit and the preparation and content of the financial statements and reports for the financial year ended 30 June 2016.

   There is no vote on this item.

2. Re-election of Ms Fiona Bennett as a Director of the Company

Under the provisions in the Company's Constitution for the rotation of Directors, Ms Fiona Bennett will retire at the 2016 AGM and offers herself for re-election.

Ms Fiona Bennett was appointed as a Director in May 2010 and was last re-elected as a Director of the Company at its 2013 Annual General Meeting of the Company. She is the Chair of the Audit, Risk and Compliance Committee.

Ms Bennett is a Chartered Accountant with over 30 years' experience in business and financial management, corporate governance, risk management and audit. She has previously held senior executive positions at BHP Billiton Limited and Coles Group Limited and has been

a Chief Financial Officer at several organisations in the health sector. She is also currently a Director of Beach Energy Limited and Chairman of the Victorian Legal Services Board.

Further details of Ms Bennett's experience is outlined on page 12 of the 2016 Annual Report.

4 Hills Limited Annual Report for the year ended 30 June 2016