McPherson : Corporate Governance Statement 2021

McPHERSON'S LIMITED

CORPORATE GOVERNANCE STATEMENT

2021

Board Approved: 17 August 2021

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Corporate Governance Statement - 2021

This Corporate Governance Statement ('statement') outlines the key aspects of the McPherson's Limited Group's ('Company' or 'Group') corporate governance framework and main governance practices. The Board of Directors is committed to achieving and demonstrating the highest standards of corporate governance. This is considered to be essential for the long term performance and sustainability of the Group, and to protect and enhance the interests of shareholders and other key stakeholders.

Review of Corporate Governance Arrangements

The Company and Board regularly review the Group's governance arrangements, as well as developments in market practice, stakeholder expectations and regulation.

The Company undertook a comprehensive review of its corporate governance arrangements during the prior year, including with reference to the 4th Edition of the Corporate Governance Principles and Recommendations ("Corporate Governance Principles") issued by the ASX Corporate Governance Council in February 2019, and the Board made a range of changes to the Company's Board charters and policies following that review.

The related Board charters and policies have been subject to further Company and Board reviews and update in 2021.

Conformity with the 4th Edition of the ASX Corporate Governance Principles

Apart from the exception outlined below, the Group's corporate governance arrangements have conformed to the 4th Edition of the ASX Corporate Governance Principles for the whole of the year ended 30 June 2021 and until the date of this statement.

From 1 July 2020 until 9 December 2020 the Board's Audit, Risk Management and Compliance Committee was comprised of three independent, non-executive Directors namely Grant Peck (Chairman), Graham Cubbin and Jane McKellar. However on his appointment as interim Chief Executive Officer and Managing Director on 10 December 2020, Grant Peck's independence status changed from being considered independent to non-independent. With effect from 19 January 2021, Grant Peck stepped down as a member (and therefore as Chairman) of the Audit, Risk Management and Compliance Committee and Alison Cook was appointed a member of the committee and also appointed as its Chairman. Each of Alison Cook, Graham Cubbin and Jane McKellar have been independent, non-executive Directors for the whole of the 2021 financial year and until the date of this statement.

The Company has therefore been in full compliance with relevant Corporate Governance Principles apart from a brief period of non-compliance with respect to items 4.1(a) (1) and (2) of the Corporate Governance Principles from 10 December 2020 to 19 January 2021. These Principles recommend that all members of an audit committee are non-executive directors and that the committee is chaired by an independent director.

In the Board's view the integrity of its related governance processes was not compromised as a consequence of the temporary non-compliance with these recommendations, and additionally notes that there were no external corporate reports issued by the Company during that brief period.

Corporate Governance Statement Approval

This Corporate Governance Statement has been approved by the Board and is current as at 17 August 2021. The statement outlines the Group's main corporate governance practices in place during the financial year ended 30 June 2021, and currently. Copies or summaries of the governance documents referred to in this statement can be found in the Corporate Governance section of the McPherson's Limited website which is located at the following address:

https://www.mcphersons.com.au/corporate-governance

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Principle 1: Lay solid foundations for management and oversight

The Board is ultimately responsible for the sound and prudent management of the Group. The Board's role is to represent shareholders, to account for the Company's performance and deliver long-term shareholder value. The Board is therefore responsible for the Group's strategic direction, for monitoring and guiding management, for overseeing effective governance and for ensuring the Group's long-term financial security.

The Board directs management in the execution of business objectives, strategies and financial performance. Other than the responsibilities specifically reserved for the Board and its committees in their respective charters, responsibility for management of the Group's day-to-day business activities is delegated to the Managing Director who is accountable to the Board. The Managing Director is supported by the senior leadership team who report to the Managing Director.

The Board's role is documented in a Board Charter which sets out its main responsibilities and a range of related governance matters. The powers which are specifically reserved for the Board and the matters which require specific Board approval are set out in a Retained and Delegated Authorities of the Board document. The Board has an Audit, Risk Management and Compliance Committee, and a People and Culture Committee (formerly called Nomination and Remuneration Committee) to assist in the execution of its responsibilities.

During the year ended 30 June 2021 the name of the Nomination and Remuneration Committee was changed to People and Culture Committee and its charter was amended, to align the Committee's name and charter more closely with its broader people and cultural related objectives.

An outline of the Board's key responsibilities, as articulated in the Board Charter, is presented below:

• Demonstrating leadership;
• Defining the Company's purpose and setting its strategic objectives;
• Monitoring management's implementation of financial and other strategic objectives;
• Instilling and reinforcing a culture across the Company of acting lawfully, ethically and responsibly and in a manner consistent with its Statement of Values;
• Approving the Company's Statement of Values and Code of Conduct Policy at least annually;
• Appointing and where necessary removing the Chairman;
• Appointing and where necessary removing the Managing Director;
• Approving operating budgets, major capital expenditure, acquisitions, joint venture arrangements and divestments;
• Monitoring capital management;
• Satisfying itself that the Company has in place an appropriate risk management framework (for both financial and non-financial risks) and setting the risk appetite within which the Board expects management to operate;
• Satisfying itself that an appropriate framework exists for relevant and accurate information to be reported by management to the Board;
• Overseeing the integrity of the Company's accounting and corporate reporting systems, including the external audit;
• Whenever required, challenging management and holding it to account;

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• Overseeing the Company's process for making timely and balanced disclosure of all material information reasonably expected to have a material effect on the price or value of the Company's securities;
• Monitoring compliance with legal, constitutional and ethical standards;
• Monitoring the effectiveness of the Company's governance practices;
• Ratifying the appointment of and where necessary the removal of the Chief Financial Officer, the Company Secretary and other senior executives;
• Monitoring and evaluating the performance of senior executives annually;
• Satisfying itself that the Company's remuneration policies are aligned with the Company's purpose, values, strategic objectives and risk appetite;
• Reviewing its skills matrix on a regular basis to make sure it covers the skills needed to address existing and emerging business, taxation (including income tax and other relevant taxes) and governance issues relevant to the Company;
• Reviewing succession planning and management development (including considerations of gender diversity);
• Assessing the Board's own performance and that of each Director annually; and
• Assessing the performance of each Board committee annually.

Selection and Election of Directors

When a Board vacancy exists, or where it is considered that the Group would benefit from the services of a new Director with particular skills, the People and Culture Committee selects a panel of candidates with the appropriate expertise and experience. The Board then appoints the most suitable candidate who must stand for election at the next Annual General Meeting of shareholders. Prior to appointing a new Director, or putting forward to shareholders a new candidate for election as a Director, the Group ensures appropriate checks are undertaken including as to the person's character, experience and education, and performing searches for any criminal or bankruptcy history.

All material information known to the Group that is relevant to a decision on whether or not to elect or re-elect a Director is included in the relevant meeting materials provided to shareholders.

The Group has formal written agreements in place with each Director and senior executive. These agreements set out the terms and conditions of their appointment. With respect to Directors the terms and conditions of the appointment and retirement of Directors are set out in an agreement between the Company and each non-executive Director personally (called a "Director's Deed"). The Director's Deed also includes provisions relating to Directors' other rights and obligations.

Non-executive Directors are also required to sign a formal letter of appointment which sets out further details relating to their engagement and a number of additional obligations. Details regarding contractual arrangements with the Managing Director and other key management personnel (KMPs) are included in the Remuneration Report in the Group's 2021 Annual Report.

Company Secretary

The Group's company secretary is accountable directly to the Board, through the Chairman, on all matters to do with the proper functioning of the Board and advising the Board and its committees on governance related matters.

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Diversity and Inclusion

The Group values diversity and inclusion and recognises the benefits they can bring to the Group's ability to achieve its goals. Accordingly, the Group has established a Diversity and Inclusion Policy which reflects the Group's commitment to providing a workplace environment in which employees have equal access to the opportunities available, where they are not judged by reference to unlawful or irrelevant attributes and employees can experience a genuine feeling of inclusion.

The main objectives of this Policy are to ensure that McPherson's:

• Maximises the value of each employee's skills, values, background and experiences;
• Develops an inclusive workplace environment, so each employee can realise their full potential, regardless of their gender identity, age, disabilities, work status, marital or family status, religious or cultural identity and socio-economic background, perspective and experience;
• Has zero tolerance for discrimination, harassment, vilification or victimisation; and
• Adopts recruitment and selection practices at all levels which are appropriately structured so that a broad range of candidates are considered, and guarding against conscious or unconscious biases that may result in discrimination.

A diverse workforce is one that recognises and embraces the value that different people can bring to a company through their gender, age, ethnicity, cultural background, marital status, sexual orientation and/or religious beliefs.

Inclusion refers to the adoption of workplace practices and behaviours which respond to people in order to ensure that each individual feels included in workplace activities. It involves both including people in opportunities and promoting a workplace in which individuals have a genuine sense of belonging.

McPherson's believes that promoting a diverse workforce:

• Enables the Company to achieve improved outcomes by benefiting from the differing perspectives and expertise that people from diverse backgrounds bring to their roles;
• Enables the Company to better attract, retain and motivate employees from the widest possible pool of available talent;
• Enables the Company to provide an enhanced service to its customers;
• Better represents the diversity of McPherson's stakeholders; and
• Is consistent with the Company's broader corporate governance principles, specifically as set out in McPherson's Ethical and Responsible Business Conduct Policy and
  McPherson's Equal Employment Opportunity Policy.

The Group promotes a diverse workforce by aiming to ensure that all employees and applicants for employment are fairly considered according to their skills, qualifications, abilities and aptitudes without regard to factors that are irrelevant to the person's skill or their ability to fulfil the inherent job requirements.

The Group has adopted the following initiatives to specifically assist with improving gender diversity:

• Operating mentoring and professional development programs targeted at female employees to prepare them for management positions;
• Promoting a safe work environment by taking action against inappropriate workplace and business behaviour (including discrimination, harassment, bullying, victimisation and vilification);

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