Sigma Healthcare : Corporate Governance Statement 2023

Sigma Healthcare Limited (Company) and its controlled entities (Group) are committed to delivering high quality health care services, long-term sustainable growth and shareholder returns. The Board recognises the importance of governance, environmental and social matters to our shareholders, suppliers and customers.

While our previous values statement served us well, this year we renewed and updated our company values to reflect Sigma's new strategic direction and growth. We reward and recognise our team members for demonstrating our key values and behaviours which include:

• We are obsessed with delighting our customers
• We act with honesty, integrity and respect
• We are resilient and focused
• We deliver on our goals.

This Corporate Governance Statement (Statement) is current as at 13 April 2023.

1. ASX Corporate Governance Principles and Recommendations

The Directors and management of the Company are committed to ensuring that the Group's business is conducted in accordance with high standards of corporate governance, including those described in the 4th edition of the ASX Corporate Governance Council "Corporate Governance Principles and Recommendations" (ASX Principles and Recommendations).

The Company's current corporate governance policies and practices comply with the ASX Principles and Recommendations, which applies to the Company for the year ending 31 January 2023.

A checklist cross-referencing the ASX Principles and Recommendations against the disclosures in this Statement is provided at the end of this Statement.

2. Our Board

(a) Role

The Board is primarily responsible for setting the strategic direction and endorsing the values of the Company and the Group, to effectively guide and oversee management of the Group and to approve, review and oversee implementation of the Group's risk management systems and governance practices, strategies and policies.

The Board has adopted a Board Charter (published on the Company's website) which sets out the structure and governance requirements of the Board and respective responsibilities of the Board and the "Executive Leadership Team" comprising the CEO & Managing Director (CEO) and the CEO's key direct reports.

Under the Board Charter, the Board has reserved responsibilities for a range of matters, including:

• defining the Company's purpose, establishing strategic goals and approving management's business plans and strategic opportunities;
• overseeing the management of the Company;
• Board and executive succession planning;
• appointment and annual evaluation of the CEO;
• setting risk appetite for management in alignment with strategic goals;
• monitoring the Company's performance with the aim of maximising long-term returns to the Company's security holders at an acceptable level of risk;
• approving the Company's financial plans, operating budgets and major capital expenditure; and
• reviewing and ratifying policies and systems of risk management, codes of conduct, legal compliance and corporate governance.

(b) Company Secretary

The Company Secretary is accountable directly to the Board, through the Chair, on all matters to do with the proper functioning of the Board. This includes agendas, Board papers and minutes, advising the Board and its Committees on governance matters, monitoring and ensuring that the Board and Committee

policies and procedures are followed, communication with regulatory bodies and the ASX and statutory and other filings. Under the Board Charter, responsibility for approving appointment and removal of the Company Secretary is reserved for the Board.

(c) Board composition

As at 13 April 2023 the Board consists of one Executive and six Non-Executive Directors, including the Chair. This includes the recent appointments of Mr Neville Mitchell on 2 February 2023 and Ms Annette Carey on 1 April 2023. Unfortunately during the year we had the tragic passing of Mr Ray Gunston (Chair) on 5 July 2022. Mr Gunston joined the Sigma Board in July 2010, was previously Chair of the Risk Management and Audit Committee, and ultimately became Chairman of Sigma in May 2020. Mr Gunston always acted in the best interests of shareholders and provided exceptional leadership to the Board and Sigma Management. He was renowned for his incredible work ethic, strategic thinking, financial acumen, and made a significant contribution to Sigma and the broader community. Above all, Mr Gunston will always be remembered as a gentleman renowned for his honesty, integrity

and genuine care, love and support for others. He is dearly missed at Sigma.

During the 2022/2023 reporting period, following Mr Gunston's sudden passing, the Board consisted of one Executive and four Non-Executive Directors, including the Chair. Mr Michael Sammells was appointed Interim Chair on 6 July 2022, and formally appointed Chair on 4 August 2022.

The Company's Constitution and Board Charter set out the process for the election and appointment of Directors, including the following:

• The Board is authorised to appoint Directors to vacancies and to elect the Chair. Any Director appointed by the Board must stand for election at the next annual general meeting (AGM) of security holders following their appointment.
• One third of Directors (excluding the CEO and a Director appointed to fill a casual vacancy and rounded down to the nearest whole number) must retire at every AGM. This constitutional requirement is being considered at the 2023 AGM. Sigma is proposing that Rule 3.6 of the Company's Constitution be amended to require Directors (other

than the Managing Director) to retire no later than the third Annual General Meeting following the Director's last election or re-election, or the third anniversary of their last election or re-election (whichever is longer). This amendment reflects common director rotation provisions amongst listed companies and is in line with the relevant ASX Listing Rules.

Before a Director is appointed or put forward for election, the Company undertakes checks into the proposed director's character, experience, education, criminal record and bankruptcy history.

Prior to each AGM:

• the Board determines whether it will recommend to security holders that they vote in favour of the re-election of each Non-Executive Director seeking election on a rotational basis with the other Directors. Board support for Directors retiring and seeking re- election is not automatic; and
• the Company provides security holders, in the notice of meeting for the AGM, material information in its possession relevant to a decision on whether or not to elect or re-elect a Non-Executive Director. This includes information about the Director's relevant skills and qualifications, current material directorships and, for existing Directors seeking re-election,
  their length of tenure.

1. Board skills, experience and selection process

The Board is committed to ensuring that the Company's Directors have a collective mix of skills, background, experience,

Skills

knowledge, education, expertise and diversity aligned with the Company's strategic direction. The Board also strives to retain a balance between long-serving Directors with established experience and knowledge of the Company's business and history, and new Directors who bring different insights and fresh perspectives. The Board considers this diversity is required to effectively govern the Group.

The Board members have a broad and diverse range of skills and experience across a number of business areas.

The Board identifies the key skills and experience required for the effective management of the business, including those required in the future. These key attributes are critical inputs to the Board review, development and succession planning processes. The key Board skills and experience are detailed below.

The Board believes that orderly succession and renewal contributes to strong corporate governance and is achieved by careful planning and continual review. The Nomination and Remuneration Committee (formerly known as the People and Remuneration Committee) reviews the size and composition of the Board regularly and at least once a year as part of the Board evaluation process.

When the need for a new Director is identified, the required experience and competencies of the new director are defined in the context of the above skills and experience matrix and any gaps that may exist. Generally, a list of potential candidates is identified based on these skills required and other issues such as geographic location and diversity

criteria. External advisors may be engaged where necessary to search for prospective Board members.

Candidates are assessed against the required skills and on their qualifications, backgrounds and personal qualities. In addition, candidates are sought who have a proven track record in creating security holder value and the required time to commit to the position. Appropriate probity checks are undertaken before the Nomination and Remuneration Committee recommends the most appropriate candidate(s) for consideration by the Board as a whole.

(e) Governance and renewal

As we evolve our business, we have also taken the opportunity to strengthen the expertise and skillsets within the Board

to govern the business moving forward. Whilst the two recent Non-Executive Director appointments were made after the end of the 2023 financial year, they are an important step in Sigma's overall renewal process.

Mr Neville Mitchell was appointed as a Non-Executive Director on 2 February 2023 and brings strong financial experience and expertise. Mr Mitchell will assume the Chair of the Audit and Risk Committee from April 2023. Ms Annette Carey commenced as a Non-Executive Director from 1 April 2023. Annette brings exceptional transport, supply chain and logistics expertise that will be invaluable for Sigma moving forward.

Mr David Manuel has decided not to stand for election at our upcoming AGM in May 2023. David has been a Non- Executive Director since October 2009 and is an active community pharmacist. His industry knowledge and experience have been of enormous benefit to the Board and management over many years.

1. Appointment and induction of new Directors

New Non-Executive Directors are issued with a formal letter of appointment that sets out the key terms and conditions of their appointment, including Director's duties, rights and responsibilities,

the time commitment envisaged and the Board's expectations regarding involvement with Committee work. An induction program is in place that encompasses all aspects of the Company's business, including touring the Sigma Group's facilities and meeting key management personnel.

1. Performance reviews and professional development

Each Non Executive Director has access to professional development opportunities to ensure they maintain the skills and knowledge required to perform their roles effectively.

The Chair, on the advice of the Nomination and Remuneration Committee, periodically conducts an internal review of the Non-Executive Directors which, amongst other things, identifies whether there is a need

for the Director to undertake further professional development. The results of the internal performance review are reported back to the Nomination and Remuneration Committee. In addition, the Board, on the advice of

the Nomination and Remuneration Committee, periodically engages an independent third party to undertake a formal, external review of the Board.

The Chair conducted an internal review of the Non-Executive Directors in the 2022/2023 reporting period. An external board review was not considered to be required in the 2022/2023 reporting period.

The Board reviews the performance of the CEO against the Board-approved key performance indicators on an annual basis.

(h) Independence of Directors

As required under the Board Charter, the majority of Directors, including the Chair, are independent Non-Executive Directors.

The Board's definition of "independence" is outlined in the Board Charter and reflects the commentary in the ASX Principles and Recommendations. The definition of independence is as follows:

An independent Director is a Non- executive Director who is free of any interest, position or relationship that might influence, or reasonably perceived to influence, in a material respect, the Director's capacity to bring an independent judgment to bear on issues before the Board and to act in the best interest of the Company as a whole rather than in the interests of an individual security holder or other party.

This includes a person who:

1. is not, does not represent, and has not within the last three years been an officer or employee of, or professional adviser to, a substantial security holder of the Company. A substantial security holder is a security holder who holds more than 3% of the issued capital of the Company;
2. is not, and has not been employed in an executive capacity by the Company or any of its child entities, within the three years prior to them serving on the Board;
3. is not, and has not within the last three years been, in a material business relationship (e.g. as a supplier, professional adviser, consultant or customer) with the entity or any of its child entities,

or is an officer of, or otherwise associated with, someone with such a relationship. A material supplier or customer is a supplier or customer who controls more than 5% of

the value of the Company's total purchases or 5% of the value of the Company's total sales or more than 50% of the suppliers or customers purchases or sales are from or to the Company;

1. does not receive performance-based remuneration (including options
   or performance rights) from, or participate in an employee incentive scheme of, the Company;
2. does not have close personal ties with any person who falls within any of the categories described above; and
3. has not been a Director of the Company for such a period that their independence from management and substantial holders may have been compromised.

The Board reviewed the independence of each Non-Executive Director against both of these definitions and found there was no material change in its conclusion about the independence of each Non-Executive Director.

The Board's assessment of the independence of each Non-Executive Director is as follows:

• Mr David Manuel - not independent. Mr Manuel is a practising pharmacist and customer of the Sigma Group.
  The Board values the insight and advice provided by Mr Manuel. In addition to being a skilled Board member, as an owner of multiple pharmacies he brings firsthand experience and insights that contribute greatly to the Board. The Board considers that the materiality of his relationship is such that it does not interfere with his capacity to bring an independent judgement on issues before the Board and to act in the best interests of Sigma and its security holders generally.
• Ms Christine Bartlett - independent.
• Ms Kathryn Spargo - independent.
• Mr Michael Sammells - independent.
• Mr Neville Mitchell - independent.
• Ms Annette Carey - independent.

Independent Directors are required to identify and disclose any matter which may affect their independent status.

In addition, only those transactions permitted by the Company's Constitution and the Corporations Act 2001 (Cth) are conducted with Directors or their related parties. These are on the same commercial terms and conditions applying to any other external party, supplier or customer. Directors are required to disclose in writing any related party transactions. Related party transactions are set out in the notes to the Company's financial report.

On a regular basis, Non-Executive Directors meet without the CEO or other members of management being present, to ensure that the Non-Executive Directors maintain independence of thought and judgement. The Non-Executive Directors also meet independently with the external auditors at least twice a year. Directors have a right of access to all Company information and executives.

(i) Conflict of interest

Directors must identify any actual or potential conflict of interest they may have in dealing with the Company's affairs and subsequently to refrain from participating in any discussion or voting on those matters. If a potential conflict of interest is likely to arise, the Director concerned does not receive copies of the relevant Board papers and withdraws from the Board meeting while those matters are considered. Accordingly, the Director concerned takes no part in discussion nor exercises any influence over other members

of the Board if a potential conflict of interest exists.

1. Access to information and independent advice

Directors are entitled, in fulfilling their duties and responsibilities, to obtain independent professional advice on any matter connected with the discharge of their responsibilities, with prior notice to the Chair, at the Company's expense.

1. Directors' fees and remuneration

The details of remuneration paid to each Director during the financial year and the principles behind the setting of such remuneration are included in the Remuneration Report.

(l) Shareholdings of directors

Directors' shareholdings are detailed in the Directors' Report and are updated by notification to the ASX. The rules and procedures governing the dealing in securities by Directors is set out in the Group's Share Trading Policy as noted further below.

To align the interests of Non-Executive Directors with shareholders, 25% of each Non-Executive Director's post- tax fees are used to purchase the Company's shares on market every three months. Further details of the Company's remuneration strategy and principles are outlined in the Remuneration Report.

3. Board committees

The Board has two standing committees (Committees) to facilitate and assist the Board in fulfilling its responsibilities. Other committees may be established from time to time with specific responsibilities as delegated by the Board. The Committees are governed by Charters, which detail their specific functions and responsibilities. Copies of the Committee Charters are available on the Company's website. The Board Charter requires the Board to review each Committee's Charter every two years. In addition, each Charter requires the relevant Committee to review its Charter at regular intervals.

The Committees make recommendations to the Board. They have no decision- making power except where expressly authorised by the Board. The relevant qualifications and experience of individual Committee members are set out in the Directors' Report.

The attendance and composition of the Committees as at, and throughout the financial year ended 31 January 2023, is summarised in the Directors' Report.

1. Risk Management and Audit Committee (RMAC)

As at 31 January 2023 the RMAC comprised Ms Kathryn Spargo (Chair), Mr Michael Sammells and Mr David Manuel who are all Non-Executive Directors. Mr Sammells, Mr Manuel and Ms Spargo all have relevant financial, commercial and risk management qualifications and/or experience, details of which are provided in the Directors' Report. Mr Neville Mitchell joined the Committee as at 2 February 2023. From 1 April 2023 Mr Mitchell will assume the role as Chair of RMAC. For the period 1 October 2022 to 31 March 2023 Ms Spargo assumed the role as Interim Chair. The RMAC has authority, within the scope of its responsibilities, to seek any information it requires from any employee of the Group or external party.

Consistent with its Charter, RMAC's main responsibility is to advise and assist the Board on the establishment and maintenance of a risk management framework, internal controls and standards for the management of the Group and to monitor the quality and reliability of the financial information of the Group.

The RMAC recommends the appointment, removal and remuneration of the external auditors. It also reviews the activities and organisational structure of the internal audit function. Prior approval of the RMAC must be gained for non- audit services to be performed by the external auditor. There are specified qualitative limits on non-audit services to ensure that the independence of the auditor is maintained. There is also a requirement that the audit partner responsible for the audit to not perform in that role for more than five years.

1. Nomination and Remuneration Committee (NRC)

As at 31 January 2023 the Nomination and Remuneration Committee (NRC) comprised Ms Christine Bartlett (Chair), Ms Kathryn Spargo and Mr David Manuel who are all Non-Executive Directors. Ms Annette Carey joined the NRC on 1 April 2023.