Reject Shop : Notice of Meeting and Proxy Form

The Annual General Meeting ("AGM") of The Reject Shop Limited ("Company") will be held at Bridge Room No.2, Crowne Plaza, 1-5 Spencer Street, Melbourne, at 3.30pm (Melbourne time) Wednesday 18 October 2017.

ORDINARY BUSINESS

1. Financial Statements and Reports

   To receive and consider the Directors' Report, Financial Statements and Independent Audit Report of the Company for the financial period ended 2 July 2017.

   Note: There is no requirement for shareholders to approve these reports.

2. Adoption of Remuneration Report

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

   "That the Remuneration Report of the Company for the financial period ended 2 July 2017 be adopted".

   Note: The vote on this resolution is advisory only and does not bind the directors or the Company.

3. Re-election of a Director - Mr William Stevens

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

   "That Mr William Stevens, who will retire at the close of the meeting in accordance with article 9.3 of the Company's Constitution and being eligible, be re-elected as a director of the Company."

4. Re-election of a Director - Ms Michele Teague

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

   "That Ms Michele Teague, who will retire at the close of the meeting in accordance with article 9.8 of the Company's Constitution and being eligible, be re-elected as a director of the Company."

   SPECIAL BUSINESS

5. Approval of the Grant of Performance Rights to Managing Director

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

   "That, for the purposes of ASX Listing Rule 10.14 and for all other purposes, approval is given to grant performance rights to Mr Ross Sudano, a director of the Company, to subscribe for up to 109,000 shares in the Company for an aggregate exercise price of $1 pursuant to and in accordance with the terms and conditions summarised in the Explanatory Notes and that approval be given to Mr. Sudano exercising these performance rights in accordance with the terms and conditions summarised in the Explanatory Notes."

   OTHER BUSINESS

   To deal with any other business that may be brought in accordance with the Constitution and the Corporations Act 2001 (Cth).

   By Order of the Board

   Darren Briggs Company Secretary 15 September, 2017

   EXPLANATORY NOTES

   Item 1 Financial Statements and Reports

   The Directors' Report, Financial Statements and Independent Audit Report for the financial period ended 2 July 2017 will be laid before the AGM.

   During this item of business, there will be an opportunity for shareholders to ask questions and comment on the Directors' Report, Financial Statements and Independent Audit Report for the financial period ended 2 July 2017.

   Shareholders will also be provided a reasonable opportunity to ask questions about the Company generally.

   Item 2 Adoption of Remuneration Report

   Section 250R(2) of the Corporations Act requires the Company to put a resolution to the AGM for adoption of its Remuneration Report.

   The vote on the resolution will be advisory only and will not bind either the directors or the Company. However, if 25% or more of votes that are cast are voted against the adoption of the Remuneration Report at two consecutive AGMs, shareholders will be required to vote at the second of those AGMs on a resolution (a "spill resolution") that another meeting be held within 90 days of the AGM (a "spill meeting") at which all of the Company's directors (other than the Managing Director) cease to hold office immediately before the end of the spill meeting and resolutions to appoint persons to the vacated offices will be put to vote at the spill meeting.

   The Remuneration Report is set out on pages 32 to 42 of The Reject Shop Limited 2017 Annual Report. The Remuneration Report:

   • Explains the Board's policies in relation to the nature and level of remuneration paid to directors, secretary, and executives;

   • Provides a summary of performance conditions;

   • Sets out remuneration details for each director and for the key management personnel and other officers of the Company;

   • Makes clear that the basis for remunerating non-executive directors is distinct from the basis for remunerating executives, including executive directors.

     A reasonable opportunity will be provided for discussion of the Remuneration Report at the AGM. The Board unanimously recommends that shareholders vote in favour of Item 2.

     Voting Exclusion Statement

     A vote must not be cast (in any capacity) on Item 2 by or on behalf of a member of the Company's key management personnel (including the Directors and the Chairman, where applicable) ("KMP"), details of whose remuneration are included in the Remuneration Report, and their closely related parties.

     However, a vote may be cast on Item 2 by a KMP, or a closely related party of a KMP, if:

   • the vote is cast as a proxy;

   • the appointment is in writing and specifies how the proxy is to vote on Item 2; and

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

     In addition, a vote may be cast on Item 2 by the Chairman of the meeting if:

   • the vote is cast as a proxy;

   • the appointment is in writing and the shareholder expressly authorises the Chairman to exercise the proxy, even if the resolution is connected directly or indirectly with the remuneration of a KMP; and

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

Mr Stevens retires by rotation in accordance with the Constitution and, being eligible, offers himself for re-election.

Mr Stevens has provided the following information in support of his re-election:

Mr William Stevens is an independent, non-executive director, Chairman of the Board and also a member of the Audit and Risk, and Remuneration Committees. Mr Stevens is a Fellow of the Institute of Chartered Accountants in Australia with an extensive career with KPMG (and Touche Ross) for 37 years. During his career with KPMG he was the client service partner for major clients including BHP Billiton, Santos, Pacific Dunlop / Ansell and Pacific Brands. More recently he was CEO of the Pacific Edge Group. He is also a director of International Healthcare Investments Ltd and a number of private company groups.

Mr Stevens joined the Board of The Reject Shop in August 2008 and was appointed Chairman in July 2010.

The board unanimously recommends that shareholders vote in favour of this Item 3 for the re-election of Mr Stevens.

Ms Teague having been appointed as a director in September 2017 prior to this annual general meeting is required to retire at the close of this meeting in accordance with the Constitution and, being eligible, offers herself for re-election.

Ms Teague has provided the following information in support of her re-election:

Ms Michele Teague is an independent, non-executive director, and also a member of the Audit and Risk Committee. Ms Teague recently retired from her role as General Manager Marketing for Kmart Australia. This role has followed an extensive operational career in Australia and New Zealand with and for consumer facing organisations in a range of sectors; but significantly in the retail and FMCG sector. Her previous Marketing roles with Metcash, and with Restaurant Brands, Pacific Retail and Woolworths in New Zealand, as well as her engagements in the advertising sector, brings an additional commercial perspective of contemporary retail issues. Ms Teague has a deep understanding of the challenges of 'meeting the market', as well as driving operational efficiency and implementing new concepts in the retail space. Although a full-time executive until now, Ms Teague has also served as a non-executive member of Industry Associations, and prior to her move to Australia was a Non- Executive Director of the New Zealand Rugby League.

The Board unanimously recommends that shareholders vote in favour of this Item 4 for the re-election of Ms Teague.

Under ASX Listing Rule 10.14, a director of the Company may only participate in an employee share or option incentive scheme where such participation is approved by a resolution of the Company in general meeting. Accordingly, shareholder approval is sought for the grant to Mr Sudano of 109,000 performance rights over 109,000 shares in the Company.

It is proposed to grant the performance rights to Mr Ross Sudano, who is the Managing Director of the Company, pursuant to The Reject Shop Performance Rights Plan ("TRS Plan"). Under the TRS Plan, subject to the vesting conditions, Mr Sudano will be entitled to subscribe for up to 109,000 shares in the Company. This represents the long term incentive component of Mr Sudano's remuneration package.

There has been no other performance rights granted to directors under the TRS Plan since the Company's prior year annual general meeting and non-executive directors are not entitled to participate in the TRS Plan or any other employee incentive scheme of the Company. Mr Sudano, as an executive director, is entitled to participate in the TRS Plan (along with other relevant employees of the Company).

The performance rights will be granted to Mr Sudano pursuant and subject to the TRS Plan. Under the TRS Plan, the key terms of the performance rights granted to Mr Sudano are summarized as follows:

1. The exercise price for the performance rights to be granted is $1 (in aggregate); irrespective of the number of fully paid ordinary shares that may ultimately be issued.

2. There are no loans applicable to the granting of these performance rights.

3. If shareholders approve Item 5, the performance rights will be granted no later than 12 months after the meeting, and as soon as practicable after the meeting.

4. The maximum number of shares that may be acquired by Mr Sudano as a result of exercise of the proposed grant of 109,000 performance rights is 109,000 fully paid shares in the Company. Achievement of specified performance hurdles detailed in (vi) below will only result in 50%, or 54,500, of these rights being awarded. The remaining balance of 54,500 performance rights will only be awarded if performance hurdles are materially over achieved, based on the absolute discretion of the Board.

5. In addition to the performance hurdles set out in point (vi) below, Mr. Sudano must remain employed by the Company until 1 July 2020 before he is entitled to exercise any performance rights proposed to be granted under this resolution.

6. The financial hurdles established for this grant which apply over a three year vesting period are as follows:

   • Earnings Per Share (EPS) Growth of a compound 10% per annum on FY17 underlying EPS (42.8cps) (50% Weighting);

   • Improved Earnings Before Income Tax, Depreciation and Amortisation ("EBITDA") to Sales ratio of at least 0.15% per annum (25% Weighting); and

   • Return on Average Capital Employed of at least 20% (25% Weighting).

7. The Board retains the right to assess all aspects of the vesting conditions for the performance rights granted in light of any unforeseen material changes in circumstances.

Voting Exclusion Statement

Pursuant to ASX Listing Rule 14.11.1, the Company will disregard any votes cast on this resolution by Mr Sudano and any of his associates.

However, the Company need not disregard a vote if:

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