ANNUAL REPORT 2020 DISCLAIMER: Certain statements in this report constitute forward-looking statements. Forward- looking statements are statements (other than statements of historical fact) relating to future events and the anticipated or planned financial and operational performance of Michael Hill International Limited and its related bodies corporate (the Group). The words “targets,” “believes,” “expects,” “aims,” “intends,” “plans,” “seeks,” “will,” “may,” “might,” “anticipates,” “would,” “could,” “should,” “continues,” “estimates” or similar expressions or the negatives thereof, identify certain of these forward-looking statements. Other forward-looking statements can be identified in the context in which the statements are made. Forward-looking statements include, among other things, statements addressing matters such as the Group’s future results of operations; financial condition; working capital, cash flows and capital expenditures; and business strategy, plans and objectives for future operations and events, including those relating to ongoing operational and strategic reviews, expansion into new markets, future product launches, points of sale and production facilities. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the Group’s actual results, performance, operations or achievements or industry results, to differ materially from any future results, performance, operations or achievements expressed or implied by such forward- looking statements. Such risks, uncertainties and other important factors include, among others: global and local economic conditions; changes in market trends and end-consumer preferences; fluctuations in the prices of raw materials, currency exchange rates, and interest rates; the Group’s plans or objectives for future operations or products, including the ability to introduce new jewellery and non-jewellery products; the ability to expand in existing and new markets and risks associated with doing business globally and, in particular, in emerging markets; competition from local, national and international companies in the markets in which the Group operates; the protection and strengthening of the Group’s intellectual property rights, including patents and trademarks; the future adequacy of the Group’s current warehousing, logistics and information technology operations; changes in laws and regulations or any interpretation thereof, applicable to the Group’s business; increases to the Group’s effective tax rate or other harm to the Group’s business as a result of governmental review of the Group’s transfer pricing policies, conflicting taxation claims or changes in tax laws; and other factors referenced to in this presentation. Should one or more of these risks or uncertainties materialise, or should any underlying assumptions prove to be incorrect, the Company’s actual financial condition, cash flows or results of operations could differ materially from that described herein as anticipated, believed, estimated or expected. Accordingly, you are cautioned not to place undue reliance on any forward-looking statements, particularly in light of the current economic climate and the significant volatility, uncertainty and disruption caused by the COVID-19 pandemic. The Group does not intend, and do not assume any obligation, to update any forward-looking statements contained herein, except as may be required by law. All subsequent written and oral forward-looking statements attributable to us or to persons acting on the Group’s behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this announcement. TERMINOLOGY: In this report, unless otherwise specified or appropriate in the context, the term "Company" refers to Michael Hill International Limited, and the terms "Group" or "Michael Hill" refer to the Company and its subsidiaries (as appropriate). b The Directors are pleased to present the annual report of Michael Hill International Limited and its subsidiaries for the year ended 28 June 2020 What’s inside 3 COMPANY PROFILE 14 TREND STATEMENT 37 REMUNERATION REPORT An introduction to the A table of our historical Remuneration of Directors and Company and our vision performance over the past key executives five years 5 CHAIR & CEO REVIEW 46 AUDITOR’S DECLARATION Emma Hill & Daniel Bracken 17 SUSTAINABILITY review the Group’s overall 47 FINANCIAL STATEMENTS 22 OUR EXECUTIVE TEAM performance for the year 98 AUDITOR’S REPORT 25 DIRECTORS' REPORT 11 KEY FACTS 102 ADDITIONAL INFORMATION Key results and data for A review of the year’s the year operations and the plans and 104 CORPORATE DIRECTORY priorities for the future FRONT COVER: MODEL WEARS EVERMORE BRIDAL SET OPPOSITE PAGE: MODEL WEARS EVERMORE ENGAGEMENT RING 1 Our vision: to be the most loved jewellery destination 2 Company profile Michael Hill is an international The first Michael Hill store opened in 1979 when Sir Michael Hill and his wife, Lady Christine Hill, launched their multi-channel retail jewellery chain unique retail jewellery formula in the New Zealand town of Whangarei, some 160 kilometres north of Auckland. with a vision to be the most loved With dramatically different store designs, a product range jewellery destination by creating devoted exclusively to accessible jewellery and the clever use of high impact advertising, Michael Hill rapidly gained fine jewellery accessible to all. popularity and rose to national prominence. As of 28 June 2020, it operates Successful listing on the New Zealand Stock Exchange in 1987 saw the Group expand across the 290 stores and digital platforms Tasman to Australia. After 15 years of sustained growth in both countries, Michael Hill embraced the opportunity across Australia, New Zealand to expand to North America in 2002, opening its first and Canada. stores in Vancouver, Canada. The Group's Canadian retail presence continues to evolve as does its innovative online presence in all markets in which it operates. In 2016 Michael Hill moved its primary stock exchange to the Australian Securities Exchange and continues to maintain a secondary listing on the New Zealand Stock Exchange (ASX/NZX: MHJ). As of 28 June 2020, the Group proudly operates 155 stores in Australia, 49 in New Zealand and 86 stores in Canada. Around the world, the Group employs approximately 2,300 permanent employees across retail sales, manufacturing and administration roles. From 1979 until now and into the future, one constant underpins all that we do: we’re for love. Michael Hill remains committed to creating quality jewellery for our customers to cherish for a lifetime. Information on our corporate governance policies and practices, including our Corporate Governance Statement, is available on our Investor Relations Centre website at investor.michaelhill.com THIS PAGE AND OPPOSITE PAGE: JEWELLERY FROM OUR MARK HILL COLLECTION 3 We started the year celebrating our 40th birthday and our journey from a traditional retailer to a modern, differentiated omni-channel jewellery brand... 4 Dear Shareholders, BUILDING ON OUR VALUES, CULTURE, DIVERSITY AND INCLUSION STRONG HERITAGE DURING Strong, values-led leadership in times of uncertainty is UNCERTAIN TIMES paramount. I am proud of the determination, resilience The 2020 financial year has been and agility our leadership team demonstrated throughout extraordinary. We started the year the year. Our values; We care, We create outstanding celebrating our 40th birthday experiences, We are professional, and We are inclusive and our journey from a traditional and diverse were reflected and entrenched in the retailer to a modern, differentiated approach taken by the leadership team when dealing omni-channel jewellery brand. We with the crisis. These attributes and values are engrained shared memories from the early days, the many challenges in all levels of our business. As we navigate the rapidly overcome, and how the brand’s deep heritage remains changing environment, our commitment to creating a relevant in our business today. On a personal level, I’m very diverse and inclusive organisation will strengthen our proud of the company’s evolution, the strength that has company. We are striving to create a culture where every been built, and the direction it is headed in. team member can thrive and feel valued, so they can This past year has also been extremely challenging bring their whole self to work. This year we established and uncertain. Initially, bushfires, drought and floods the diversity and inclusion council with stakeholders affected our Australian communities. This was followed from all levels and geographies of the business meeting by the COVID-19 pandemic, one of the greatest health monthly to identify barriers to inclusion and opportunity threats of a generation, which profoundly impacts the for improvement. While there is much more to do, we are global economy, and continues to have a devastating proud of our female representation at 85% throughout impact on many people’s lives. COVID-19 resulted in an the company. The majority of our customers are women, unprecedented temporary closure of our entire store likewise women form the majority of our team. 40% of network severely impacting our operations, sales and profit. board, 50% of the executive and 52% of senior leadership While the effect of the pandemic on our business