NANOSONICS LIMITED — AGM Information 2015

Oct 6, 2015

Nanosonics Limited

Nanosonics Limited ABN 11 095 076 896 14 Mars Road Lane Cove NSW 2066 Australia

T: +61 2 8063 1600 F: +61 2 9418 3743

E: info@nanosonics.com.au

www.nanosonics.com.au

6 October 2015

Dear Shareholder

On behalf of the Nanosonics Limited (Nanosonics or the Company) Board of Directors, I have pleasure in providing notice of the Company’s Annual General Meeting (AGM or the Meeting) to be held at the Brisbane Room, Sofitel Sydney Wentworth Hotel, 61-101 Phillip Street, Sydney NSW Australia on Friday, 6 November 2015, commencing at 11:00am.

I encourage you to attend the Meeting. If you are able to attend, please bring with you the attached Proxy Form, as this will facilitate easy registration of Shareholders. Registration commences at 10:45am on 6 November 2015.

A person intending to vote shares held in the name of a company must bring an authority from that company, signed by it in favour of the person attending.

If you are unable to attend the Meeting, I encourage you to vote, either by using the enclosed Proxy Form or by lodging your vote online at www.investorvote.com.au.

You are welcome to submit questions to the Company and its Auditor in advance of the Meeting. A form for this purpose is enclosed and should be made available to the Company on or before Friday, 30 October 2015 at the address provided at the end of the form.

I look forward to seeing you at the Meeting, and I invite you to join the Directors and Senior Managers for refreshments at the conclusion of the Meeting.

The Nanosonics 2015 Annual Report and subsequent Company announcements are available from the investor section of the Nanosonics website at www.nanosonics.com.au or may be requested from the Company Secretary. Shareholders who have elected to receive a printed copy of the Annual Report should have received it in the post. Shareholders who have elected to receive share registry communications electronically should have already received an emailed link to the Annual Report.

Yours sincerely Nanosonics Limited

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Maurie Stang

Non-Executive Chairman

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NOTICE OF THE 2015 ANNUAL GENERAL MEETING

The 2015 Annual General Meeting (AGM or the Meeting) of shareholders of Nanosonics Limited (Nanosonics or the Company) will be held:

• on Friday, 6 November 2015 commencing at 11:00am

• at the Brisbane Room, Sofitel Sydney Wentworth Hotel, 61-101 Phillip Street, Sydney NSW Australia.

The business to be considered at the Meeting is set out below. This Notice of Meeting should be read in conjunction with the accompanying Explanatory Notes. A Proxy Form also accompanies this Notice of Meeting.

ORDINARY BUSINESS

2015 Reports

To receive and consider the Company’s Reports of the Directors and Auditor, and the Financial Report for the year ended 30 June 2015.

Resolution 1 – Election of a Director – Mr Richard England

To consider and, if thought fit, to pass the following ordinary Resolution:

That Mr Richard England, who retires as a Director pursuant to the Company’s Constitution and, being eligible, offers himself for re-election, be elected a Director.

Resolution 2 – Remuneration Report

To consider and, if thought fit, to pass the following non-binding Resolution:

That the Remuneration Report for the financial year ended 30 June 2015 be adopted.

SPECIAL BUSINESS

Resolution 3 – Issue of 206,882 Performance Rights to the Chief Executive Officer and President, Mr Michael Kavanagh, under the 2015 Long-Term Incentive Scheme Invitation (2015 LTIS)

To consider and, if thought fit, to pass the following ordinary Resolution:

That approval be given for all purposes under the Corporations Act 2001 (Cth) and the Listing Rules of ASX Limited:

• a) for the issue of 206,882 Performance Rights to Mr Michael Kavanagh under the Nanosonics Employee Share Option Plan (ESOP) in respect of the 2015 LTIS; and

• b) in consequence of the vesting of those Performance Rights, fully paid ordinary shares in the Company on the terms set out in the Explanatory Notes accompanying this Notice of Meeting and in accordance with the Rules of the Nanosonics ESOP (as amended from time-to-time).

Resolution 4 – Issue of 70,992 Performance Rights to the President Technology Development / Commercialisation, Dr Ronald Weinberger, under the 2015 Long-Term Incentive Scheme Invitation (2015 LTIS)

To consider and, if thought fit, to pass the following ordinary Resolution:

That approval be given for all purposes under the Corporations Act 2001 (Cth) and the Listing Rules of ASX Limited:

• a) for the issue of 70,992 Performance Rights to Dr Ronald Weinberger under the Nanosonics Employee Share Option Plan (ESOP) in respect of the 2015 LTIS; and

• b) in consequence of the vesting of those Performance Rights, fully paid ordinary shares in the Company on the terms set out in the Explanatory Notes accompanying this Notice of Meeting and in accordance with the Rules of the Nanosonics ESOP (as amended from time-to-time).

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Voting Exclusion Statement

The Company will disregard any votes cast on Resolutions 3 and 4 by the two Directors who are eligible to participate in the ESOP being:

• Mr Michael Kavanagh and Dr Ronald Weinberger; and

• any of their associates.

However, the Company need not disregard a vote if 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 it is cast by the person chairing the Meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form, to vote as the proxy decides.

GENERAL BUSINESS

To transact any other business brought forward in accordance with the Company's Constitution.

Further information in relation to each of these Resolutions is set out in the Explanatory Notes.

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QUORUM

The Company’s Constitution provides that two registered Company shareholders present personally, or by representative, attorney or proxy shall be a quorum for a general meeting of the Company.

VOTING ENTITLEMENTS

For the purpose of the Corporations Act 2001 (Cth), the Company has determined that the holders of the Company’s ordinary shares for the purpose of the 2015 AGM will be the holders registered as at 4:15pm (AEST) on Wednesday, 4 November 2015. Shareholders so registered are entitled to attend and vote at the AGM (and any adjournment of the Meeting that takes place within 28 days).

PROXIES

Proxies must be deposited, transmitted or lodged electronically at least 48 hours prior to the Meeting (or adjourned meeting) as to how the individual named on the Proxy Form proposes to vote.

Electronic proxies must be registered by 11:00am (AEST) on Wednesday, 4 November 2015 at the Share Registry website at www.investorvote.com.au or, by Intermediary Online subscribers only, at www.intermediaryonline.com.

A completed Proxy Form, or a copy or facsimile that appears on its face to be an authentic copy of the Proxy Form (and the Power of Attorney or other authority under which the Proxy Form is signed), must be deposited at, or sent by facsimile transmission to, the Company’s Share Registry by:

 Mail: Computershare Investor Services Pty Limited

GPO Box 242, Melbourne VIC 3001, Australia; or

 Facsimile: 1800 783 447 (from within Australia) or +61 (3) 9473 2555 (from outside Australia)

or sent to the Company’s registered office by:

 Mail or Hand Delivery: 14 Mars Road, Lane Cove, NSW 2066, Australia; or  Facsimile: +61 (2) 9418 3743.

To lodge a proxy online, the holder identification number (HIN) or security holder reference number (SRN) is required. The HIN or SRN appears at the top of the Proxy Form attached.

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A member entitled to attend and vote at the Company’s AGM is entitled to appoint not more than two persons as his / her proxy to attend and vote instead of the member. A proxy need not be a member of the Company. If more than one proxy is appointed, each proxy must be appointed to represent a specified proportion of the member’s voting rights. Unless executed under a Power of Attorney, a Proxy Form by a corporation should be executed in accordance with section 127(1) of the Corporations Act 2001 (Cth).

ORDINARY RESOLUTIONS

In accordance with the Corporations Act 2001 (Cth) and the Company’s Constitution, in order for all Resolutions to be effective each must be passed as an ordinary Resolution. This means that each of the Resolutions must be passed by Shareholders who are the registered holders of more than 50% of the shares, and who attend the Meeting (either in person or by proxy) and are entitled to vote on them.

Dated in Sydney this 6th day of October 2015.

BY ORDER OF THE BOARD

McGregor Grant Company Secretary

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EXPLANATORY NOTES

These Explanatory Notes are an explanation of, and contain information about, the Resolutions to be considered at the Nanosonics Limited (Nanosonics or the Company) Annual General Meeting (AGM or the Meeting) to be held on Friday, 6 November 2015 and are to assist Shareholders to determine how they wish to vote on the Resolutions. It forms part of the accompanying Notice of AGM and should be read in conjunction with it.

ORDINARY BUSINESS

The following item of business and Resolutions will be considered at the AGM.

Item of Business – Financial Report

This item of business relates to the consideration of the Company’s Financial Report, including the Directors’ and Auditor’s Reports, for the year ended 30 June 2015, and gives the members the opportunity to ask questions or make comments concerning these Reports during the Meeting. A copy of the 2015 Annual Report is available on the Company’s website at www.nanosonics.com.au or may be requested from the Company Secretary. There is no requirement for a formal resolution on this item.

Resolution 1 – Election of a Director – Mr Richard England

Mr Richard England was originally appointed a Director of the Company on 5 February 2010. Under the Company’s Constitution, Mr England retires by rotation and, being eligible, wishes to stand for re-election. Information on Mr England is set out below.

Mr England joined the Board in February 2010. He is a chartered accountant and professional Non-Executive Director. Since 2002, Mr England has been a director and Chairman of Ruralco Holdings Limited (ASX:RHL). He has been a director of Macquarie Atlas Roads Limited (ASX:MQA) since June 2010, a director of Japara Healthcare Limited (ASX:JHC) since April 2014 and a director of HBF Health Limited since February 2015. He was a director and Chairman of Chandler Macleod Group Limited (ASX:CMG) from February 2008 to April 2015.

Directors’ Recommendation:

The Board (excluding Mr England) recommends that shareholders vote in favour of the Resolution.

Resolution 2 – Remuneration Report

The Company’s Remuneration Report is required to be considered for adoption in accordance with the Corporations Act 2001 (Cth). The Remuneration Report is contained in the Directors’ Report of the Annual Report. The vote on this Resolution is advisory only and non-binding. The Resolution gives the members the opportunity to ask questions or make comments concerning the Remuneration Report during the AGM. Under the Corporations Act 2001 (Cth), if 25% or more of votes that are cast vote 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 at which all of the Company’s Directors (other than the Managing Director) must go up for re-election. The Company encourages all shareholders to cast their votes on this Resolution.

Any undirected proxies held by the Chairman of the Meeting, other Directors, other key management personnel (KMP) or any of their closely-related parties will not be included in the votes for this Resolution. KMP of the Company are the Directors of the Company, and those other persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. The Remuneration Report identifies the Company’s KMP for the financial year to 30 June 2015. Closely-related parties are defined in the Corporations Act 2001 (Cth), and include certain family members, dependants and companies the KMP control.

Directors’ Recommendation:

The Board recommends that Shareholders vote in favour of this Resolution. Voting exclusions apply.

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Resolution 3 – Issue of 206,882 Performance Rights to the Chief Executive Officer and President, Mr Michael Kavanagh, under the 2015 Long-Term Incentive Scheme Invitation (2015 LTIS)

Approval is sought for the issue of 206,882 Performance Rights in the Nanosonics Employee Share Option Plan (ESOP) to Mr Michael Kavanagh under the terms of the 2015 LTIS in respect of the 2015-16 financial year.

Under the Australian Securities Exchange (ASX) Listing Rules, an issue of securities to a Director is required to be approved by shareholders.

ASX Listing Rule 10.15 requires this Notice of Meeting to include the following information in relation to the Performance Rights granted to Mr Kavanagh under the terms of the ESOP.

Terms and Conditions of the 2015 Invitation Issue of Performance Rights

Maximum Number of Shares

Each vested Performance Right, if any, will be converted to one ordinary Share on exercise. Accordingly, the maximum number of Shares that may be acquired by Mr Kavanagh, for which Shareholder approval under Resolution 3 is sought, is 206,882 Shares.

The number of Performance Rights that will vest in accordance with the rules of the ESOP and the invitation is dependent on the vesting conditions, which are summarised as follows:

Vesting Conditions

Vesting of the Performance Rights granted to Mr Kavanagh will be subject to both Performance and Service Vesting Conditions.

Performance Conditions

After Board consideration it is proposed that the 2015 LTIS be subject to external (Total Shareholder Return (TSR)) Performance Conditions as follows:

Relative TSR Performance: Tranche 1 Performance Rights

50% of the total number of Performance Rights granted (i.e. 103,441) will vest subject to Nanosonics’ relative TSR performance against the companies within the 2015 LTIS Comparator Group 1 over the Measurement Period 20 August 2015 to the date of the release of Nanosonics’ 2017-18 financial statements.

Relative TSR Performance: Tranche 2 Performance Rights

50% of the total number of Performance Rights granted (i.e. 103,441) will vest subject to Nanosonics’ relative TSR performance against the companies within the 2015 LTIS Comparator Group 2 over the Measurement Period 20 August 2015 to the date of the release of Nanosonics’ 2017-18 financial statements.

Vesting of the Performance Rights, subject to Relative TSR Performance (Tranches 1 and 2), shall be in the following proportions:

ollowing proportions:
Nanosonics TSR vs 2015 LTIS Comparator Group	Proportion of Performance Rights to Vest
Below the 50thpercentile	0%
50thto 75thpercentile	30% to 100% (pro-rata)
At the 75thPercentile	100%
Straight line interpolation will apply to the incremental results

Total Shareholder Return (TSR)

TSR will be measured by an independent third party following the end of the respective Measurement Periods. TSR, for the purposes of the 2015 LTIS, is defined as share price performance, including the value of all reinvested dividends. The dividend is calculated as being reinvested as from the day the share is traded exclusive the right to the dividend (ex date).

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The 2015 LTIS Comparator Group 1

The recommended group of companies set out below has been selected by the Board as comprising companies that are ASX-listed that have Global Industry Classification Standard (GICS) codes 3510 – Health Care Equipment and Services, and have one or more of the following characteristics:

• they are considered alternate investment vehicles by local and overseas investors;

• have similar operations; and / or

• are impacted by similar cyclical factors

as Nanosonics Limited. The group of companies is:

• 3DM 3D Medical Limited

ACG AtCor Medical Holdings Limited.

• AHZ Admedus Limited

• ALT Analytica Ltd.

• AMT Allegra Orthopaedics Limited

• ANN Ansell Ltd.

• AXP AirXpanders, Inc.

• AZV Azure Healthcare Limited

• CLV Clover Corporation Limited

• CMP Compumedics Ltd.

• COH Cochlear Ltd.

• CYC Cyclopharm Limited

• ELX Ellex Medical Lasers Limited

• FPH Fisher & Paykel Healthcare Corporation

• GID GI Dynamics, Inc.

• IMI IM Medical Ltd.

• IPD ImpediMed Limited

• ISN iSonea Limited

• ITD ITL Ltd.

• LBT LBT Innovations Limited

• MCT Metalicity Limited

• MGZ Medigard Limited

• MLA Medical Australia Limited

• OIL Optiscan Imaging Ltd.

• OSP Osprey Medical Inc. RHT Resonance Health Ltd.

• RMD ResMed Inc.

RVA REVA Medical, Inc.

• SBN Sun Biomedical Limited SDI SDI Limited

• SOM SomnoMed Limited

• TSXV:SV Simavita Limited

• UBI Universal Biosensors Inc.

• UCM Uscom Limited UNS Unilife Corporation

Should a company named in the table above be delisted, or the Board in its discretion considers for any reason whatsoever that it is no longer meaningful to include a company within the comparator list above, then the company’s relative position at the time it is removed will be set for the duration of the Measurement Period.

In any event, the Board’s decision is final in determining relative performance.

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The 2015 LTIS Comparator Group 2

The recommended group of companies, as described below, has been selected by the Board as comprising companies that are ASX-listed that make up the S&P/ASX 300 Small Ordinaries Index, which is comprised of companies included in the S&P/ASX 300, but not in the S&P/ASX 100 Index. The Board has determined to remove some of the companies in this broader index, as its relevance to investors in Nanosonics is questionable. Through the exclusion of certain industry sub-sectors to make the measure more relevant, the Board has determined to exclude the following sectors:

• Materials (primarily resource companies);

• Energy;

• Utilities;

• Industrials;

• Telecommunications; and

• Consumer indexes.

In the Board’s judgement, this retains a substantial number of companies as a foundation for comparative purposes.

Service Condition

In addition to the Performance Conditions above, the Performance Rights will only vest if Mr Kavanagh remains in continuous employment with Nanosonics in the position of CEO and President, or equivalent, from the date of grant to the respective Vesting Date of each Tranche.

Vesting Date

Tranche 1 and Tranche 2: 31 August 2018

Expiry Dates

The Performance Rights of each Tranche will automatically lapse, if not exercised before, 30 days after the respective Vesting Date.

Vesting of Performance Rights and Issue of Nanosonics Shares

• Any Performance Rights that fail to meet the Performance Conditions or Service Condition above will lapse immediately; there will be no re-testing.

• Any Performance Rights that vest on 31 August 2018 will be automatically exercised and shares acquired by the Trustee of the Nanosonics Deferred Employee Share Plan (DESP) on Mr Kavanagh’s behalf.

Consideration

As Mr Kavanagh’s grant forms part of his LTIS remuneration, the Performance Rights will be granted to Mr Kavanagh at no cost, and no amount is payable on vesting and automatic exercise of the Performance Rights (that is, nil exercise price). The Performance Rights will be granted under, and subject to, the ESOP. Performance Rights do not carry any dividend or voting rights prior to exercise.

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Value of the Grant of Performance Rights

The value of the grant of Performance Rights has been assessed by an independent consultant applying a Binominal Approximation Option Pricing methodology at $1.31 each (weighted average) or $271,015 in total based on variables determined at 25 September 2015 as below:

ased on variables determined at 25 September 2015 as below:
Input Variables
Indicative date	25 September 2015
Share Price	$1.31
Exercise Price	$0.00
Risk-free rate	1.9%
Expected dividend yield	0.0%
Standard deviation	43.75%
Number of days (weighted average)	1,070
Assessed value per Performance Right (weighted average)	$1.31
Number of Performance Rights	206,882
Gross estimated annualised value(before discount for performance probabilities)
2015-16 Financial Year	$70,413
2016-17 Financial Year	$92,449
2017-18 Financial Year	$92,449
2018-19 Financial Year	$15,704
	$271,015

A valuation at the date of grant, in accordance with AIFRS-2, will be undertaken and the value of these Performance Rights will be expensed in accordance with the standards.

Depending on the future value of Nanosonics shares, the estimated value of the benefit under a number of scenarios is as follows:

f scenarios is as follows:
Future NAN Share Price	Potential Value of the Benefit	Company Market Capitalisation if potential benefit achieved
	($’000)*	($’000)^
$1.00	206.88	283,508
$1.31	271.02	371,396
$1.50	310.32	425,262
$1.75	362.04	496,139
$2.00	413.76	567,016

• Assumes that performance and service conditions are met and does not include any dividend benefit. ^ Assumes a constant issued capital.

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Other Remuneration Entitlements

Mr Kavanagh’s other remuneration entitlements for the 2015-16 financial year are as follows:

• Total Fixed Remuneration: $471,000 (base remuneration $451,692 and superannuation $19,308)

• Short-Term Inventive (maximum opportunity): $225,846

The 2015 LTIS grant of Performance Rights represents a value equal to approximately 60% of Mr Kavanagh’s base remuneration for the 2015-16 financial year.

Other Securities held by Director

Mr Kavanagh currently owns, or has a beneficial interest in, the following securities of the Company at the date of this Notice of AGM:

• Shares (direct): 220,479

• Options (direct): 1,500,000 – being Performance Rights held under the ESOP

Change of Control

In the event of a takeover or change in control of Nanosonics, any unvested Performance Rights will vest on a pro-rata basis based on the most current financial reports available at the time that a change of control occurs, unless otherwise determined by the Board. The pro-rata period will be calculated from the grant date to the change of control date.

Performance Rights that vest following a change of control will not generally be subject to restrictions on dealings.

Termination of Employment

If Mr Kavanagh ceases employment, for any reason other than as a result of a change of control, before the vesting conditions are tested, unless the Board determines otherwise, the Performance Rights will automatically lapse.

Other Information

• It is intended that, if approved, the Performance Rights shall be issued to Mr Kavanagh within 60 days of this Meeting.

• The Company will not apply to the ASX for official quotation of the Performance Rights granted under the Plan. Shares issued pursuant to the vesting of Performance Rights will rank equally with Shares then on issue.

• There is no loan scheme in relation to the Performance Rights or the Plan.

• Mr Kavanagh is prohibited from hedging the share price exposure in respect of the Performance Rights during the vesting period applicable to those Performance Rights.

• Details of the Performance Rights granted to Mr Kavanagh will be provided in the Remuneration Report for the years ended 30 June 2016, 2017, 2018 and 2019.

Approval by Shareholders for the Issue of Securities to the Two Executive Directors of the Company, who are the only Directors who are Entitled to Participate in the ESOP, as Required under ASX Listing Rule 10.14.

The last approval from shareholders was sought and obtained at the 8 November 2013 AGM for the proposed issue of Performance Rights to the two Executive Directors of the Company at the time, and comprised: 1,500,000 Performance Rights to Mr Michael Kavanagh and 134,818 Performance Rights to Dr Ronald Weinberger. These Performance Rights were issued after approval at the 2013 AGM pursuant to the ESOP, for no cash consideration, and had an exercise price of $0.00, subject to performance and service vesting conditions, and with vesting dates of 31 August 2016 and 31 August 2017, and remain on issue at the date of this Notice of AGM. In addition, in September 2015 Mr Kavanagh exercised 70,479 Performance Rights into ordinary shares and Dr Weinberger exercised 52,994 Performance Rights into ordinary shares, in accordance with the terms and conditions of the ESOP.

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Director’s Recommendation:

The Board, other than Mr Kavanagh, consider the grant of Performance Rights to Mr Kavanagh to be appropriate in all circumstances, and unanimously recommend that shareholders vote in favour of the 2015 LTIS grant of Performance Rights to the CEO and President, Mr Michael Kavanagh.

Resolution 4 – Issue of 70,992 Performance Rights to the President Technology Development / Commercialisation, Dr Ronald Weinberger, under the 2015 Long-Term Incentive Scheme Invitation (2015 LTIS)

Approval is sought for the issue of 70,992 Performance Rights in the Nanosonics Employee Share Option Plan (ESOP) to Dr Ronald Weinberger under the terms of the 2015 LTIS in respect of the 2015-16 financial year.

Under ASX Listing Rules, an issue of securities to a Director is required to be approved by shareholders.

ASX Listing Rule 10.15 requires this Notice of Meeting to include the following information in relation to the Performance Rights granted to Dr Weinberger under the terms of the ESOP.

Terms and Conditions of the 2015 LTIS Invitation Issue of Performance Rights

Maximum Number of Shares

Each vested Performance Right, if any, will be converted to one ordinary Share on exercise. Accordingly, the maximum number of Shares that may be acquired by Dr Weinberger, for which Shareholder approval under Resolution 4 is sought, is 70,992 Shares.

The number of Performance Rights that will vest in accordance with the rules of the ESOP and the invitation is dependent on the vesting conditions, which are summarised as follows:

Vesting Conditions

Vesting of the Performance Rights granted to Dr Weinberger will be subject to both Performance and Service Vesting Conditions.

Performance Conditions

After Board consideration it is proposed that the 2015 LTIS be subject to external (Total Shareholder Return (TSR)) Performance Conditions as follows:

Relative TSR Performance: Tranche 1 Performance Rights

50% of the total number of Performance Rights granted (i.e. 35,496) will vest subject to Nanosonics’ relative TSR performance against the companies within the 2015 LTIS Comparator Group 1 over the Measurement Period 20 August 2015 to the date of the release of Nanosonics’ 2017-18 financial statements.

Relative TSR Performance: Tranche 2 Performance Rights

50% of the total number of Performance Rights granted (i.e. 35,496) will vest subject to Nanosonics’ relative TSR performance against the companies within the 2015 LTIS Comparator Group 2 over the Measurement Period 20 August 2015 to the date of the release of Nanosonics’ 2017-18 financial statements.

Vesting of the Performance Rights, subject to Relative TSR Performance (Tranches 1 and 2), shall be in the following proportions:

ollowing proportions:
Nanosonics TSR vs 2015 LTIS Comparator Group	Proportion of Performance Rights to Vest
Below the 50thpercentile	0%
50thto 75thpercentile	30% to 100% (pro-rata)
At the 75thPercentile	100%
Straight line interpolation will apply to the incremental results

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Total Shareholder Return (TSR)

TSR will be measured by an independent third party following the end of the respective Measurement Periods. TSR, for the purposes of the 2015 LTIS, is defined as share price performance, including the value of all reinvested dividends. The dividend is calculated as being reinvested as from the day the share is traded exclusive the right to the dividend (ex date).

The 2015 LTIS Comparator Group 1

The recommended group of companies set out below has been selected by the Board as comprising companies that are ASX-listed that have Global Industry Classification Standard (GICS) codes 3510 – Health Care Equipment and Services, and have one or more of the following characteristics:

• they are considered alternate investment vehicles by local and overseas investors;

• have similar operations; and / or

• are impacted by similar cyclical factors

as Nanosonics Limited. The group of companies is:

• 3DM 3D Medical Limited

ACG AtCor Medical Holdings Limited.

• AHZ Admedus Limited

• ALT Analytica Ltd.

• AMT Allegra Orthopaedics Limited

• ANN Ansell Ltd.

• AXP AirXpanders, Inc.

• AZV Azure Healthcare Limited

• CLV Clover Corporation Limited

• CMP Compumedics Ltd.

• COH Cochlear Ltd.

CYC Cyclopharm Limited

ELX Ellex Medical Lasers Limited

FPH Fisher & Paykel Healthcare Corporation

• GID GI Dynamics, Inc.

IMI IM Medical Ltd. IPD ImpediMed Limited

• ISN iSonea Limited

ITD ITL Ltd.

LBT LBT Innovations Limited MCT Metalicity Limited MGZ Medigard Limited MLA Medical Australia Limited OIL Optiscan Imaging Ltd. OSP Osprey Medical Inc. RHT Resonance Health Ltd. RMD ResMed Inc. RVA REVA Medical, Inc. SBN Sun Biomedical Limited SDI SDI Limited SOM SomnoMed Limited TSXV:SV Simavita Limited UBI Universal Biosensors Inc. UCM Uscom Limited UNS Unilife Corporation

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Should a company named in the table above be delisted, or the Board in its discretion considers for any reason whatsoever that it is no longer meaningful to include a company within the comparator list above, then the company’s relative position at the time it is removed will be set for the duration of the Measurement Period.

In any event, the Board’s decision is final in determining relative performance.

The 2015 LTIS Comparator Group 2

The recommended group of companies, as described below, has been selected by the Board as comprising companies that are ASX-listed that make up the S&P/ASX 300 Small Ordinaries Index, which is comprised of companies included in the S&P/ASX 300, but not in the S&P/ASX 100 Index. The Board has determined to remove some of the companies in this broader index, as its relevance to investors in Nanosonics is questionable. Through the exclusion of certain industry sub-sectors to make the measure more relevant, the Board has determined to exclude the following sectors:

• Materials (primarily resource companies);

• Energy;

• Utilities;

• Industrials;

• Telecommunications; and

• Consumer indexes.

In the Board’s judgement, this retains a substantial number of companies as a foundation for comparative purposes.

Service Condition

In addition to the Performance Conditions above, the Performance Rights will only vest if Dr Weinberger remains in continuous employment with Nanosonics in the position of President Technology Development / Commercialisation, or equivalent, from the date of grant to the respective Vesting Date of each Tranche.

Vesting Date

Tranche 1 and Tranche 2: 31 August 2018

Expiry Dates

The Performance Rights of each Tranche will automatically lapse, if not exercised before, 30 days after the respective Vesting Date.

Vesting of Performance Rights and Issue of Nanosonics Shares

• Any Performance Rights that fail to meet the Performance Conditions or Service Conditions above will lapse immediately; there will be no re-testing.

• Any Performance Rights that vest on 31 August 2018 will be automatically exercised and shares acquired by the Trustee of the Nanosonics Deferred Employee Share Plan (DESP) on Dr Weinberger’s behalf.

Consideration

As Dr Weinberger’s grant forms part of his LTIS remuneration, the Performance Rights will be granted to Dr Weinberger at no cost, and no amount is payable on vesting and automatic exercise of the Performance Rights (that is, nil exercise price).

The Performance Rights will be granted under, and subject to, the ESOP.

Performance Rights do not carry any dividend or voting rights prior to exercise.

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Value of the Grant of Performance Rights

The value of the grant of Performance Rights has been assessed by an independent consultant applying a Binominal Approximation Option Pricing methodology at $1.31 each (weighted average) or $93,000 in total based on variables determined at 25 September 2015 as below:

ased on variables determined at 25 September 2015 as below:
Input Variables
Indicative date	25 September 2015
Share Price	$1.31
Exercise Price	$0.00
Risk-free rate	1.9%
Expected dividend yield	0.0%
Standard deviation	43.75%
Number of days (weighted average)	1,070
Assessed value per Performance Right (weighted average)	$1.31
Number of Performance Rights	70,992
Gross estimated annualised value(before discount for performance probabilities)
2015-16 Financial Year	$24,163
2016-17 Financial Year	$31,724
2017-18 Financial Year	$31,724
2018-19 Financial Year	$5,389
	$93,000

A valuation at the date of grant, in accordance with AIFRS-2, will be undertaken and the value of these Performance Rights will be expensed in accordance with the standards.

Depending on the future value of Nanosonics shares, the estimated value of the benefit under a number of scenarios is as follows:

f scenarios is as follows:
Future NAN Share Price	Potential Value of the Benefit	Company Market Capitalisation if potential benefit achieved
	($’000)*	($’000)^
$1.00	70.99	283,508
$1.33	93.00	371,396
$1.50	106.49	425,262
$1.75	124.24	496,139
$2.00	141.98	567,016

• Assumes that performance and service conditions are met and does not include any dividend benefit. ^ Assumes a constant issued capital.

Page 14

2015 Annual General Meeting

Nanosonics Limited ACN 095 076 896

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Other Remuneration Entitlements

Dr Weinberger’s other remuneration entitlements for the 2015-16 financial year are as follows:

• Total Fixed Remuneration: $329,308 (base remuneration $310,000 and superannuation $19,308)

• Short-Term Inventive (maximum opportunity): $93,000

The 2015 LTIS grant of Performance Rights represents a value equal to approximately 30% of Dr Weinberger’s base remuneration for the 2015-16 financial year.

Other Securities held by Director

Dr Weinberger currently owns, or has a beneficial interest in, the following securities of the Company at the date of this Notice of AGM:

• Shares (direct): 104,994

• Options (direct): 235,369 – being Performance Rights held under the ESOP

Change of Control

In the event of a takeover or change in control of Nanosonics, any unvested Performance Rights will vest on a pro-rata basis based on the most current financial reports available at the time that a change of control occurs, unless otherwise determined by the Board. The pro-rata period will be calculated from the grant date to the change of control date.

Performance Rights that vest following a change of control will not generally be subject to restrictions on dealings.

Termination of Employment

If Dr Weinberger ceases employment, for any reason other than as a result of a change of control, before the vesting conditions are tested, unless the Board determines otherwise, the Performance Rights will automatically lapse.

Other Information

• It is intended that, if approved, the Performance Rights shall be issued to Dr Weinberger within 60 days of this Meeting.

• The Company will not apply to the ASX for official quotation of the Performance Rights granted under the Plan. Shares issued pursuant to the vesting of Performance Rights will rank equally with Shares then on issue.

• There is no loan scheme in relation to the Performance Rights or the Plan.

• Dr Weinberger is prohibited from hedging the share price exposure in respect of the Performance Rights during the vesting period applicable to those Performance Rights.

• Details of the Performance Rights granted to Dr Weinberger will be provided in the Remuneration Report for the years ended 30 June 2016, 2017, 2018 and 2019.

• The approval by shareholders for the issue of securities to the two Executive Directors of the Company, who are the only Directors who are entitled to participate in the ESOP, is required under ASX Listing Rule 10.14. Information under Listing Rule 10.14 on the securities under the ESOP to Dr Weinberger since the last approval, and the number of securities received by him and the acquisition price for each security is set out in the notes to Resolution 3 above, on page 10 of this Notice of AGM.

Director’s Recommendation:

The Board, other than Dr Weinberger, consider the grant of Performance Rights to Dr Weinberger to be appropriate in all circumstances, and unanimously recommend that shareholders vote in favour of the 2015 LTIS grant of Performance Rights to the President Technology Development / Commercialisation, Dr Ronald Weinberger.

Page 15

2015 Annual General Meeting

Nanosonics Limited ACN 095 076 896

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Nanosonics Limited ABN 11 095 076 896 14 Mars Road Lane Cove NSW 2066 Australia T: +61 2 8063 1600 F: +61 2 9418 3743 E: info@nanosonics.com.au

www.nanosonics.com.au

QUESTIONS FROM SHAREHOLDERS

Your questions are important to the Company.

Please click on the Investor Relations tab on the Nanosonics Limited website (www.nanosonics.com.au) and see the section ‘Investor Centre’, which is specifically designed for our shareholders’ questions.

If you have specific questions about Nanosonics Limited that you would like the Company’s Directors or Auditor (UHY Haines Norton) to respond to at the Annual General Meeting (AGM), please send them to the Company in one of the following ways:

• fill out this page and send it to the mail, facsimile or email address provided below; or

• click on the Contact Us tab on the Company’s website and fill out the Enquiry Form provided; or

• send an email to info@nanosonics.com.au.

Questions received by the Company will be collated and as many questions as possible will be responded to at the AGM, to be held at the Brisbane Room, Sofitel Sydney Wentworth Hotel, 61-101 Phillip Street, Sydney NSW Australia on Friday, 6 November 2015, commencing at 11:00am. Please note that we will not be able to reply to these questions individually.

Shareholder’s name:

---

Shareholder’s address:

---

__ ____ (SRN) or (HIN): ______

Questions:

_ _

_

_

_

_

_

---

---

---

To enable the Company and / or Auditor to prepare considered responses to your questions at the AGM, they should be received by the Company via one of the following methods by Friday, 30 October 2015:

By email: info@nanosonics.com.au By facsimile: +61 2 9418 3743 By mail: 14 Mars Road, Lane Cove, NSW 2066

Limited

Lodge your vote:

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----- Start of picture text -----


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Online:

www.investorvote.com.au

ABN 11 095 076 896



By Mail:

Computershare Investor Services Pty Limited GPO Box 242 Melbourne Victoria 3001 Australia

T 000001 000 NAN MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030

Alternatively you can fax your form to (within Australia) 1800 783 447 (outside Australia) +61 3 9473 2555

For Intermediary Online subscribers only (custodians) www.intermediaryonline.com

For all enquiries call:

(within Australia) 1300 850 505 (outside Australia) +61 3 9415 4000

Proxy Form

XX

Vote and view the annual report online



• Go to www.investorvote.com.au or scan the QR Code with your mobile device.

• • Follow the instructions on the secure website to vote.

Your access information that you will need to vote:

Control Number: 999999 SRN/HIN: I9999999999 PIN: 99999 PLEASE NOTE: For security reasons it is important that you keep your SRN/HIN confidential.

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 For your vote to be effective it must be received by 11.00am on Wednesday, 4 November 2015

How to Vote on Items of Business

All your securities will be voted in accordance with your directions.

Appointment of Proxy

Voting 100% of your holding: Direct your proxy how to vote by marking one of the boxes opposite each item of business. If you do not mark a box your proxy may vote or abstain as they choose (to the extent permitted by law). If you mark more than one box on an item your vote will be invalid on that item.

Voting a portion of your holding: Indicate a portion of your voting rights by inserting the percentage or number of securities you wish to vote in the For, Against or Abstain box or boxes. The sum of the votes cast must not exceed your voting entitlement or 100%.

Appointing a second proxy: You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you appoint two proxies you must specify the percentage of votes or number of securities for each proxy, otherwise each proxy may exercise half of the votes. When appointing a second proxy write both names and the percentage of votes or number of securities for each in Step 1 overleaf.

A proxy need not be a securityholder of the Company.

Signing Instructions for Postal Forms

Individual: Where the holding is in one name, the securityholder must sign.

Joint Holding: Where the holding is in more than one name, all of the securityholders should sign.

Power of Attorney: If you have not already lodged the Power of Attorney with the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it.

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

Attending the Meeting

Bring this form to assist registration. If a representative of a corporate securityholder or proxy is to attend the meeting you will need to provide the appropriate “Certificate of Appointment of Corporate Representative” prior to admission. A form of the certificate may be obtained from Computershare or online at www.investorcentre.com under the help tab, "Printable Forms".

Comments & Questions: If you have any comments or questions for the company, please write them on a separate sheet of paper and return with this form.

GO ONLINE TO VOTE,  or turn over to complete the form

Samples/000001/000001

MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030

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

Change of address. If incorrect, mark this box and make the correction in the space to the left. Securityholders sponsored by a  broker (reference number commences with ’ X ’) should advise your broker of any changes. I 9999999999 I ND

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Proxy Form

Please mark

to indicate your directions

Appoint a Proxy to Vote on Your Behalf

XX

I/We being a member/s of Nanosonics Limited hereby appoint

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the Chairman of the Meeting

OR

 PLEASE NOTE: Leave this box blank if you have selected the Chairman of the Meeting. Do not insert your own name(s).

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the Meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, and to the extent permitted by law, as the proxy sees fit) at the Annual General Meeting of Nanosonics Limited to be held at Brisbane Room, Sofitel Sydney Wentworth Hotel, 60 -101 Phillip Street, Sydney, NSW, Australia on Friday, 6 November 2015 at 11.00am and at any adjournment or postponement of that Meeting.

Chairman authorised to exercise undirected proxies on remuneration related resolutions : Where I/we have appointed the Chairman of the Meeting as my/our proxy (or the Chairman becomes my/our proxy by default), I/we expressly authorise the Chairman to exercise my/our proxy on Item 2 (except where I/we have indicated a different voting intention below) even though Item 2 is connected directly or indirectly with the remuneration of a member of key management personnel, which includes the Chairman.

Important Note: If the Chairman of the Meeting is (or becomes) your proxy you can direct the Chairman to vote for or against or abstain from voting on Item 2 by marking the appropriate box in step 2 below.

Items of Business  PLEASE NOTE: If you mark the Abstain box for an item, you are directing your proxy not to vote on your behalf on a show of hands or a poll and your votes will not be counted in computing the required majority.

ORDINARY BUSINESS

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• 1 Election of a Director - Mr Richard England

• 2 Remuneration Report

SPECIAL BUSINESS

• 3 Issue of 20 6, 882 Performance Rights to the Chief Executive Officer and President, Mr Michael Kavanagh, under the 2015 Long Term Incentive Scheme Invitation

• 4 Issue of 70 , 99 2 Performance Rights to the President Technology Development/Commercialisation, Dr Ron Weinberger, under the 2015 Long Term Incentive Scheme Invitation

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The Chairman of the Meeting intends to vote undirected proxies in favour of each item of business. In exceptional circumstances, the Chairman of the Meeting may change his/her voting intention on any resolution, in which case an ASX announcement will be made.

SIGN

Signature of Securityholder(s) This section must be completed.

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Individual or Securityholder 1 Securityholder 2 Securityholder 3
Sole Director and Sole Company Secretary Director Director/Company Secretary
Contact
Contact Daytime / /
Name Telephone Date
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9 9 9 9 9 9 A

N A N