Australian Pharmaceutical Industries : Scheme Meeting - Chair's Address and Presentation

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API SCHEME MEETING

THURSDAY 17 MARCH 2022

CHAIR'S ADDRESS

On behalf of the Board and management of API, I welcome you to this Scheme Meeting. The Scheme Meeting has been convened in accordance with the orders of the Federal Court of Australia made on 14 February 2022.

I begin by acknowledging the Traditional Owners of all the lands on which we are meeting today. I also pay my respects to Elders past, present and emerging.

Today's Scheme Meeting is being held online via the Lumi platform. This allows Shareholders, proxies and guests to attend the meeting, virtually. Attendees can watch a live webcast of the meeting. In addition, Shareholders and proxies have the ability to ask questions and submit votes.

If you require assistance, please refer to the "Virtual Meeting User Guide" which can be found on the API website, which is www.api.net.au, under the "Investors" tab and the "API Scheme Documents" sub-tab. Also, if you require assistance with the technology for this meeting, please call 1300 737 760 or [phone].

As is normally the case at our shareholder meetings, I remind you that recording and broadcasting this meeting is not permitted.

This Meeting has been convened to consider the proposed scheme of arrangement under which WFM Investments Pty Ltd, a wholly-owned subsidiary of Wesfarmers Limited

[(ASX: WES)(Wesfarmers)] will acquire all of the shares in API that it does not already own ("Scheme") at $1.55 per share, less the cash amount of the ordinary dividend paid by API on 15 December 2021, and any special dividend paid by API before implementation of the Scheme.

Joining me online today are API's directors:

• Lee Ausburn, Independent Non-Executive Director, appointed in 2008, Chair of the People and Remuneration Committee and the Nomination Committee, and member of the Audit and Risk Committee.
• Jenny Macdonald, Independent Non-Executive Director, appointed in 2017, Chair of the Audit and Risk Committee, and member of the People and Remuneration Committee.

Australian Pharmaceutical Industries Limited

250 Camberwell Road Camberwell VIC 3124 Australia T: [phone] www.api.net.auACN 000 004 320

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• Janine Allis, Independent Non-Executive Director, appointed in 2020, and member of the People and Remuneration Committee.
• Clive Stiff, Independent Non-Executive Director appointed in 2020, and member of the Audit and Risk Committee.
• George Tambassis, Independent Non-Executive Director, appointed in 2021.
• Richard Vincent, Chief Executive Officer and Managing Director, who joined API in 2005 and was appointed CEO and Managing Director in 2017; Richard is also the current Chair of the National Pharmaceutical Services Association,

Also joining me online today is API's Company Secretary, Anne Mustow, appointed in 2019, and API's Chief Financial Officer, Peter Mendo, appointed in 2015.

API In Pictures

Today is a significant day in the history of API. API began as a co-operative of pharmacists on 19 April 1910, and is now in its 112th year. Whilst the Group has come a long way -having expanded the goods and services it distributes, been listed on ASX, and created a substantial retail footprint - it has always retained a strong community service focus.

We are immensely proud of the service API has provided in the past - including recently during the COVID-19 pandemic, the destructive bushfires of Christmas 2019, and now through the current devastating floods in QLD and NSW. We expect that this community focus will continue for a long time to come, under its proposed new owner, Wesfarmers, should shareholders vote in favour of the Scheme at this meeting.

Wesfarmers

Wesfarmers is one of Australia's largest listed companies. It has a diverse range of retail and industrial businesses, including brands such as Bunnings, Kmart, Target, and Officeworks. Wesfarmers is a large private sector employer in Australia and is owned by more than 494,000 shareholders. Should the Scheme be approved, API will form part of a new health division within the Wesfarmers Group. When it announced its proposal to acquire API in July 2021, Wesfarmers said:

"Wesfarmers is well-positioned to bring capital and unique capabilities to support investment that will strengthen the competitive position of API and its community pharmacy partners."

Your API Board is pleased that API will be in capable hands if the Scheme is implemented.

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Scheme Overview

Before moving to the formal business of the meeting, I will say a few words about the proposed Scheme of arrangement. Details of the Scheme are outlined in the Scheme Booklet dated 14 February 2022. The Scheme Booklet was made available to shareholders in accordance with the orders of the Federal Court of Australia.

The Scheme Booklet can be found on API's website which is www.api.net.au, under the "Investors" tab and the "API Scheme Documents" sub-tab.

If the Scheme is approved and implemented, Wesfarmers will acquire all shares in API held by Shareholders, other than itself, for $1.55 per share, less the ordinary dividend of $0.02 cents per share paid by API on 15 December 2021, and less any special dividend paid by API before implementation. As it is intended that API pay a Special Dividend of $0.03 cents per share, fully franked, immediately before the Scheme is implemented, the remaining $1.50 per share will be paid to API Shareholders in cash on implementation, if the Scheme is approved and all conditions are satisfied.

The Total Cash Value of the scheme consideration, being $1.55 per API share, implies an equity value for API of approximately $773.9 million.

The total cash value of $1.55 per share offered by Wesfarmers represents:

• a premium of 35.4% to the last undisturbed closing price of API shares on 9 July 2021 of $1.145;
• 36.9% premium to the one-month VWAP of API shares to, and including, 9 July 2021 of $1.132 per API Share; and
• 33.3% premium to the three-month VWAP of API shares to and including 9 July 2021 of $1.163.

The Scheme is subject to customary conditions, consistent with other schemes of arrangement, which are described in the Scheme Booklet and set out in the Scheme Implementation Deed. The API Directors are not aware of any reason why these conditions will not be satisfied.

Reasons to Vote in favour of the Scheme

The API Board has identified several reasons why you should vote in favour of the Scheme and, for balance, factors which may lead you to vote against it. These are all explained in detail in the Scheme Booklet, and those reasons supporting a vote in favour are summarised on the current slide.

Having regard to the Board's responsibility to act in the best interests of all shareholders, your Directors believe the advantages of the Scheme outweigh the disadvantages.

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Independent Expert's Conclusion

The Board appointed Grant Thornton to prepare an independent expert's report about whether, in the opinion of the independent expert, the Scheme is in the best interests of API shareholders.

In its report, the Independent Expert concluded that the Scheme is "fair and reasonable" and therefore, in the absence of a Superior Proposal, the Scheme is in the best interests of API shareholders.

In particular, the Independent Expert estimated the market value of API shares to be between $1.48 to $1.78 on a 100% controlled basis, and noted that the Total Cash Value of $1.55 per share offered by Wesfarmers falls within the market value range.

The full commentary of the Independent Expert in relation to the Scheme, is set out in its Report which is contained in Annexure A to the Scheme Booklet, and summarised on the current slide.

Recommendation of API Directors

Your API Directors continue to unanimously recommend that Shareholders vote in favour of the Scheme. In reaching their recommendation, your API Directors have assessed the Scheme, having regard to the reasons to vote in favour of, or against, the Scheme, as set out in the Scheme Booklet.

Your API Directors believe the Total Cash Value of the Scheme consideration, recognises the value of API's existing business, and its medium and longer term potential. The Scheme provides certainty, by virtue of the payment of cash proceeds in the near term for API Shareholders.

At the time of this Meeting, no Superior Proposal exists, and the API Directors are not aware of any Superior Proposal that is likely to emerge.

Prior to this meeting, the API Directors instructed that the API shares owned or controlled by them be voted in favour of the Scheme.

Scheme Vote and Resolution

The sole item of business is to consider, and, if thought fit, to pass the Scheme Resolution, which is set out in the Notice of this Meeting contained in Annexure D to the Scheme Booklet.

The Scheme Resolution is also now shown on the current slide and is as follows:

'That, pursuant to and in accordance with the provisions of section 411 of the Corporations Act 2001 (Cth), the scheme of arrangement proposed between API and the holders of its ordinary shares, as contained in and more particularly described in the Scheme Booklet of which the notice convening this meeting forms part, is agreed to, with or without alterations or conditions as approved by Federal Court of Australia to which API and Wesfarmers agree.'

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For the Scheme to be approved by API shareholders, the Scheme Resolution must be passed by:

1. a majority in number (that is more than 50%) of API shareholders present and voting at the Meeting (either in person or by proxy); and
2. at least 75% of the total votes cast on the scheme resolution by API shareholders present and voting at the Meeting (either in person or by proxy).

As Chair, I intend to call a poll on the Scheme Resolution. The poll will be undertaken by the use of the Lumi voting system, following consideration and discussion of the relevant item of business. There will be a five-minute period at the conclusion of the meeting to allow shareholders to finalise their voting using the online platform.

As Chair of the meeting, I can vote undirected proxies given to the Chair, where the proxy appointment expressly authorises the Chair of the meeting to exercise an undirected proxy. I intend to vote undirected proxies in favour of the Scheme Resolution where permitted.

Steve Hodkin of Boardroom Pty Ltd, representing our share registry, has agreed to act as Returning Officer, and I now appoint Steve Hodkin as the Returning Officer.

Scheme Implementation Timetable

If the Scheme Resolution is passed today by the required majorities, and the conditions I referred to earlier in the meeting are satisfied, API will apply to the Federal Court of Australia for approval of the Scheme.

If the Court approves the Scheme, a copy of the Court orders will be lodged with the Australian Securities and Investments Commission (ASIC), following which the Scheme will become legally effective, and API shares will be suspended from trading on the ASX.

The Court hearing to approve the Scheme is scheduled for 10.15am (Melbourne time) on 21 March 2022. Following this, if the Court approves the Scheme, lodgement of the Court Orders with ASIC, and suspension from trading on the ASX, is expected to occur on 22 March 2022.

The Scheme is then expected to be implemented on 31 March 2022. It is on this date that the scheme consideration would be paid to Shareholders in respect of API shares they held on the proposed record date of 29 March 2022.

These dates are subject to satisfaction of the outstanding conditions, with any changes to be announced to the ASX.

If the outstanding conditions are not satisfied or the Scheme is not approved by Shareholders and the Court, the Scheme will not proceed, and API will continue as a stand-alone entity listed on the ASX.

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