MCPHERSON'S LIMITED — Interim / Quarterly Report 2011

Feb 22, 2011

McPherson's Limited ACN 004 068 419

5 Dunlop Road PO Box 4490 Mulgrave VIC 3170 Australia

==> picture [94 x 64] intentionally omitted <==

Telephone: +61 3 9566 3300 Facsimile: +61 3 9574 9075

ASX and Media Release

(ASX: MCP)

23 February 2011

McPherson’s First Half Profit $16.9 million

12 cent interim dividend fully franked

• Profit after tax up 20% on prior year

• Earnings per share up 16% on prior year

• Interim dividend up 20% to 12 cents

• Debt reduced and gearing further improved

• Forecast 10% EPS increase for full year

McPherson’s Limited, the consumer products and printing group, today announced an after-tax profit of $16.9 million for the six months to 31 December 2010. This represents a 20% increase over the first half net profit in FY 2010 ($14.1 million).

Reflecting the company’s stronger financial position and improved earnings, Directors have declared a fully franked interim dividend of 12 cents per share, payable on 1 April 2011. The company has substantial franking credits which will ensure future dividends are 100% franked.

Directors have determined that with effect from the 2011 final dividend, the dividend payment policy is to be changed from at least 50% of annual net profit before amortisation, to at least 60%, subject to other funding requirements.

Results summary for the six months	31 Dec 09 ($ million)	31 Dec 10 ($ million)	Change (%)
Sales revenue EBIT (Earnings before interest and tax) Profit before tax Profit aftertax	190.1 24.3 20.1 14.1	189.7 28.0 24.0 16.9	(0.2) 15.3 19.8 19.5
Earnings per share (cents) Interimdividend (cents)fullyfranked	20.3 10.0	23.6 12.0	15.8 20.0

Segment summary for the six	months
	Sales Revenue($ million)		Trading EBIT($ million)
	31 Dec 09	31 Dec 10	31 Dec 09	31 Dec 10
Consumer Products Printing Corporate/unallocated	157.7 32.4 0.0	158.4 31.3 0.0	24.8 1.5 (2.0)	29.1 1.4 (2.5)
Group	190.1	189.7	24.3	28.0

1

Consumer Products Division

McPherson’s Consumer Products designs and markets a large range of consumer products. Its key brands are Wiltshire and Stanley Rogers (housewares), Manicare, Lady Jayne and Swisspers (personal care), Multix (household consumables) and Home Living (impulse merchandising). Distribution is through all major retailers throughout Australia and New Zealand, and in Asia. Manufacturing is outsourced to a range of countries, particularly China, and McPherson’s has a major presence in Hong Kong and China focused on quality assurance and product sourcing. Most products are purchased in US dollars.

Consumer Products Divisional EBIT increased by 17% to $29.1 million.

Sales revenue increased by 0.5% despite the comparatively difficult environment experienced by the company’s retail customers. There were significant revenue increases from key branded products – in particular Multix and Swisspers – but these were largely offset by a decline in impulse merchandising revenue due to a reduction in available selling space for this category in some retailers.

The business improvement initiatives commenced in the previous financial year are ongoing and the efficiency gains from these are being realised. The stronger Australian dollar has assisted margins and the company's foreign currency hedging arrangements have been extended to provide forward protection until December 2011. The margin gains from the stronger currency were partially offset by competitive pressures and by increased input costs caused by a combination of higher commodity prices and factory labour costs in China.

Brand development, together with new and improved products, continue to be the major focus of Consumer Products to ensure the company remains a leader in its field, providing continuous innovation to the company’s retail partners.

Printing Division

McPherson’s Printing Group provides printing services for a range of customers including major domestic and international book publishers, directory and professional reference information publishers, magazine and periodical publishers, corporate/industrial catalogue and manual publishers, the automotive and horse racing industries and a variety of other specialised users.

Printing Divisional EBIT decreased slightly to $1.4 million from $1.5 million last year.

Sales revenue was below the previous corresponding period due to the continuation of subdued market conditions. Profit margins remained consistent with the previous year.

The business remains focused on cost containment and efficiency improvement. During the half year the company committed to invest in new sheet-fed colour printing equipment, which will be commissioned at the Mulgrave plant during the second half of the year and allow two older presses to be retired. This investment will increase efficiency and provide opportunities to expand competitively into additional market sectors, with the full benefits to be realised in FY 2012.

Net Debt and Gearing

Strong operating cash-flows resulted in net debt decreasing to $62.0 million at 31 December 2010, compared with $81.2 million a year earlier and $71.9 million at 30 June 2010. Net debt at 31 December 2010 represented 31% of shareholders' funds, an improvement from the gearing level of 37% at 30 June 2010.

2

Net Debt and Gearing (Cont’d)

Interest expense for the half was $4.0 million (H1 2010: $4.2 million), with interest savings from lower borrowing levels partly offset by higher interest rates. Interest cover for the first half was 7.1 times compared with 5.8 times for the six months to 31 December 2009.

As reported previously, term debt facilities are in place until 31 August 2013.

Outlook

Paul Maguire, Managing Director, said: “Second half trading to date has been consistent with expectations, with the Consumer Products Division’s earnings continuing to benefit from the strong Australian dollar and business efficiency initiatives.

“The company remains on target to achieve an increase of around 10% in earnings per share to approximately 40 cents for the full year to 30 June 2011, from the 36.4 cents reported last year. This assumes our performance is not unduly influenced by the uncertainties of the retail environment, competitive pressures or the net effect of movements in exchange rates and other input costs.”

Chairman Simon Rowell said: “The company is now actively searching for consumer products acquisition opportunities in existing channels and considering expansion into other sales channels such as hardware. The strong balance sheet will assist in maximizing the ability to take advantage of attractive acquisitions.”

For further information please contact:

Paul Maguire, Managing Director, telephone (03) 9566 3300.

3

Appendix 4D Half year report Period ended 31 December 2010

McPherson's Limited ABN: 98 004 068 419 Half Year ended 31 December 2010

Results for Announcement to the Market

				$A000's
Revenue	down	0.3%	to	189,792
Profitafter tax attributable to members	up	20%	to	16,883
Net profitfor the period attributable to members	up	20%	to	16,883

Dividends/distributions	Amount per security	Amount per security	Franked amount per security
Interim dividend	12.0¢		12.0¢
Previous corresponding period	10.0¢		10.0¢
Payment datefor interim dividend Record datefor determining entitlements to the dividend
			1 April, 2011
			15 March, 2011

Appendix 4D - Page 1

Appendix 4D Half year report Period ended 31 December 2010

McPherson's Limited Statement of Comprehensive Income For the period ended 31 December 2010

	Half Year	Half Year
	31 Dec 2010	31 Dec 2009
	A$000's	A$000's
	_____	_____
Revenue
Sales revenue	189,739	190,096
Interest	27	14
Royalties	26	194
	_____	_____
Total revenue	189,792	190,304
Other income
Net gain from disposal of property, plant and equipment	-	12
Waste recoveries	423	437
Commissions	76	53
Sundry	149	142
	_____	_____
Total other income	648	644
Share of net profit of associate	152	113
	_____	_____
Total revenue, other income and share of
net profit of associate	190,592	191,061
	_____	_____
Expenses
Materials and consumables used	94,225	101,871
Employee costs	32,834	32,253
Rental expenses relating to operating leases	4,662	4,828
Amortisation of other intangibles	103	340
Depreciation/other amortisation	2,695	2,437
Advertising and promotional	7,737	6,417
Repairs and maintenance	1,155	984
Cartage and freight	8,486	7,686
Net loss from disposal of property, plant and equipment	186	-
Other expenses	10,469	9,935
Borrowing costs expense	3,997	4,238
	_____	_____
Total expenses	166,549	170,989
	_____	_____
Profit before income tax expense	24,043	20,072
Income tax expense	(7,160)	(5,945)
	_____	_____
Profit after income tax expense	16,883	14,127
	_____	_____

The above statement of comprehensive income should be read in conjunction with the following notes and appendices.

Appendix 4D - Page 2

Appendix 4D Half year report Period ended 31 December 2010

McPherson's Limited Statement of Comprehensive Income (continued) For the period ended 31 December 2010

	Half Year	Half Year
	31 Dec 2010	31 Dec 2009
	A$000's	A$000's
	_____	_____
Profit after income tax expense	16,883	14,127
Other comprehensive income
Changes in the fair value of cash flow hedges	(2,586)	9,182
Exchange differences on translation of foreign operations	(2,029)	(536)
Income tax relating to components of
other comprehensive income	776	(2,755)
	_____	_____
Other comprehensive income for the half year	(3,839)	5,891
	_____	_____
Total comprehensive income for the half year	13,044	20,018
	_____	_____
	Half Year	Half Year
	31 Dec 2010	31 Dec 2009
	Cents	Cents
	_____	_____
**Basic earnings per share **	23.6	20.3
**Diluted earnings per share **	23.3	20.3

The above statement of comprehensive income should be read in conjunction with the following notes and appendices.

Appendix 4D - Page 3

Appendix 4D Half year report Period ended 31 December 2010

McPherson's Limited Balance Sheet As at 31 December 2010

	31 Dec 2010	30 June 2010
	A$000's	A$000's
	_____	_____
Current assets
Cash	5,635	467
Receivables / prepayments	68,043	57,368
Inventories	59,456	64,297
Derivative financial instruments	-	258
	_____	_____
Total current assets	133,134	122,390
	_____	_____
Non-current assets
Other financial assets	1,333	1,281
Property, plant and equipment	21,280	22,262
Intangibles	187,585	188,135
Derivative financial instruments	226	-
Deferred tax assets	7,530	6,274
	_____	_____
Total non-current assets	217,954	217,952
	_____	_____
Total assets	351,088	340,342
	_____	_____
Current liabilities
Payables	45,379	41,227
Derivative financial instruments	4,833	1,529
Borrowings	150	312
Provisions	9,991	10,947
Current tax liabilities	5,246	2,365
	_____	_____
Total current liabilities	65,599	56,380
	_____	_____
Non-current liabilities
Derivative financial instruments	-	290
Borrowings	67,514	72,018
Provisions	1,163	1,084
Deferred tax liabilities	13,701	13,672
	_____	_____
Total non-current liabilities	82,378	87,064
	_____	_____
Total liabilities	147,977	143,444
	_____	_____
Net assets	203,111	196,898
	_____	_____

The above balance sheet should be read in conjunction with the following notes and appendices.

Appendix 4D - Page 4

Appendix 4D Half year report Period ended 31 December 2010

McPherson's Limited Balance Sheet (continued) As at 31 December 2010

	31 Dec 2010	30 June 2010
	A$000's	A$000's
	_____	_____
Shareholders' equity
Share capital	127,193	127,193
Reserves	(5,795)	(2,290)
Retained profits	81,713	71,995
	_____	_____
Total shareholders' equity	203,111	196,898
	_____	_____

The above balance sheet should be read in conjunction with the following notes and appendices.

Appendix 4D - Page 5

Appendix 4D Half year report Period ended 31 December 2010

McPherson's Limited Statement of Changes in Equity For the period ended 31 December 2010

	Share		Retained
	Capital	Reserves	Profits	Total
	A$000's	A$000's	A$000's	A$000's
	__	__	__	__
Balance at 1 July 2010	127,193	(2,290)	71,995	196,898
Profit after income tax for
the half year	-	-	16,883	16,883
Cash flow hedges, net of tax	-	(1,810)	-	(1,810)
Exchange differences on translation
of foreign operations	-	(2,029)	-	(2,029)
	__	__	__	__
Total comprehensive income for
the half year	-	(3,839)	16,883	13,044
Transactions with shareholders
Share based payments expense	-	334	-	334
Dividends paid	-	-	(7,165)	(7,165)
	__	__	__	__
Balance at 31 December 2010	127,193	(5,795)	81,713	203,111
	__	__	__	__

The above statement of changes in equity should be read in conjunction with the following notes and appendices.

Appendix 4D - Page 6

Appendix 4D Half year report Period ended 31 December 2010

			McPherson's Limited	McPherson's Limited
		Statement of Changes in Equity
			Prior period comparative
	Share		Retained
	Capital	Reserves	Profits	Total
	A$000's	A$000's	A$000's	A$000's
	__	__	__	__
Balance at 1 July 2009	112,727	(11,906)	54,013	154,834
Adjustment on application of
AASB 2008-8, net of tax	-	554	(554)	-
	__	__	__	__
	112,727	(11,352)	53,459	154,834
Profit after income tax for
the half year	-	-	14,127	14,127
Cash flow hedges, net of tax	-	6,427	-	6,427
Exchange differences on translation
of foreign operations	-	(536)	-	(536)
	__	__	__	__
Total comprehensive income for
the half year	-	5,891	14,127	20,018
Transactions with shareholders
Share based payments expense	-	207	-	207
Share issues - equity raising	15,000	-	-	15,000
Net transaction costs arising on
share issues	(541)	-	-	(541)
Transfers	-	(52)	52	-
	__	__	__	__
	14,459	155	52	14,666
	__	__	__	__
Balance at 31 December 2009	127,186	(5,306)	67,638	189,518
	__	__	__	__

The above statement of changes in equity should be read in conjunction with the following notes and appendices.

Appendix 4D - Page 7

Appendix 4D Half year report Period ended 31 December 2010

McPherson's Limited Statement of Cash Flow For the period ended 31 December 2010

	Half Year	Half Year
	31 Dec 2010	31 Dec 2009
	A$000's	A$000's
	_____	_____
Cash flows from operating activities
Receipts from customers (inclusive of GST)	195,850	196,167
Payments to suppliers and employees (inclusive of GST)	(168,130)	(175,773)
Interest received	30	18
Interest and borrowing costs paid	(4,151)	(4,295)
Income tax paid	(4,654)	(5,112)
Dividend received	100	-
	_____	_____
Net cash inflows from operating activities	19,045	11,005
	_____	_____
Cash flows from investing activities
Payments for purchase of property, plant and equipment	(2,060)	(2,169)
Proceeds from sale of property, plant and equipment	61	15
Payments for purchase of intangibles	(10)	(48)
	_____	_____
Net cash outflows from investing activities	(2,009)	(2,202)
	_____	_____
Cash flows from financing activities
Proceeds from issue of shares	-	15,000
Costs from issue of shares	-	(773)
Proceeds from borrowings	66,000	64,000
Repayment of borrowings	(70,500)	(86,000)
Dividends paid	(7,165)	-
Repayment of finance lease liabilities	(6)	(6)
	_____	_____
Net cash outflows from financing activities	(11,671)	(7,779)
	_____	_____
Net increase in cash held	5,365	1,024
Cash at beginning of the financial year	164	897
Net effect of exchange rate changes on cash	(36)	(28)
	_____	_____
Net cash at end of half year	5,493	1,893
	_____	_____

The above statement of cash flow should read in conjunction with the following notes and appendices.

Appendix 4D - Page 8

Appendix 4D Half year report Period ended 31 December 2010

McPherson's Limited Notes to the Financial Statements For the period ended 31 December 2010

Material factors affecting the revenues and expenses of the Group for the current period.

Material factors affecting the revenues and expenses of the Group for the period ended 31 December 2010 and significant trends or events since that date, are included in the attachment to this announcement.

Material factors affecting the assets, liabilities and equity of the Group for the current period.

Significant movements in equity for the period are set out on pages 3 and 6.

Material factors affecting the cash flows of the Group for the current period.

A reconciliation of net cash provided by operating activities to operating profit after income tax is attached as Appendix A to this report.

Changes in accounting policies

There have been no changes in accounting policies since the last ASX release, required to be disclosed in accordance with Australian Accounting Standard AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors .

Extraordinary items

N/A

Reconciliation of income tax expense

A reconciliation of prima facie income tax to the actual income tax expense is attached as Appendix B to this report.

Segment note

Information on the business segments of the group is attached as Appendix C to this report and is prepared in accordance with Accounting Standard AASB 8 Operating Segments .

Appendix 4D - Page 9

Appendix 4D Half year report Period ended 31 December 2010

McPherson's Limited Notes to the Financial Statements For the period ended 31 December 2010

Discontinuing operations

N/A

Events occurring after reporting date

N/A

Impairment Testing – Intangibles

Impairment testing has been undertaken for the Printing Cash Generating Unit (CGU) at 31 December 2010. The key assumptions used in calculating the recoverable amount of the Printing CGU are largely unchanged from those applied at 30 June 2010 and reported in the 2010 financial statements. These assumptions have been reviewed and are considered appropriate. The impairment testing indicates that no impairment is evident at 31 December 2010.

Impairment testing of the Consumer Products CGUs has not been undertaken at 31 December 2010.

Appendix 4D - Page 10

Appendix 4D Half year report Period ended 31 December 2010

McPherson's Limited Supplementary Appendix 4D information For the period ended 31 December 2010

Statement of compliance

The financial report complies with Australian Accounting Standards, which includes Australian equivalents to International Financial Reporting Standards (AIFRS).

Compliance with AIFRS ensures the half year report complies with International Financial Reporting Standards (IFRS).

Additional dividend information

Details of dividends declared or paid during or subsequent to the period ended 31 December 2010 are as follows:

Interim 2010/11 ordinary dividend of 12.0 cents per fully paid ordinary share declared by directors (fully franked) but not recognised as a liability at half year.	A$000’s
	8,598

The 2010 final ordinary dividend of $7,165,000 (10.0 cents per fully paid ordinary share) referred to in the Directors’ Report dated 24 August 2010 was paid on 1 October 2010.

Dividend reinvestment plans

The Company's Dividend Reinvestment Plan remains suspended until further notice.

NTA Backing

	Half Year	Half Year
	31 Dec 2010	31 Dec 2009
	cents	cents
	_____	_____
Net tangible asset backing per ordinary share	21.7	1.9

Control gained over entities during the period

Nil

Appendix 4D - Page 11

Appendix 4D Half year report Period ended 31 December 2010

McPherson's Limited Supplementary Appendix 4D information For the period ended 31 December 2010

Loss of control of entities during the period

Nil

Associates and Joint Venture entities

The Group has a 33⅓% shareholding in an associate company, Denward Court Pty Ltd, which is incorporated in Australia and whose principal activity is book binding.

Audit

This report is based on accounts which have been subject to review in accordance with ASRE 2410: Review of an Interim Financial Report Performed by the Independent Auditor of the entity.

McPherson's Limited

P.R. Bennett

Company Secretary

Signed this 23[rd] day of February 2011.

Appendix 4D - Page 12

Appendix 4D Half year report Period ended 31 December 2010

APPENDIX A

McPherson's Limited Reconciliation of net cash provided by operating activities to operating profit after income tax For the period ended 31 December 2010

	Half Year	Half Year
	31 Dec 2010	31 Dec 2009
	A$000's	A$000's
	_____	_____
Operating profit after income tax	16,883	14,127
Amortisation of other intangibles	103	340
Depreciation/other amortisation	2,695	2,437
Loss/(Profit) on disposal of property, plant and equipment	186	(12)
Loss in disposal of intangibles	8	-
Share based payments expense	334	207
Share of profit in associate not received as
dividends or distributions	(152)	(113)
Dividends received from associate	100	-
Time value in option hedging contracts	460	28
Finance charges included in lease payments	1	1
Operating assets and liabilities, excluding the
effects from purchase or sale of controlled entities:
Increase/(Decrease) in payables	3,540	8,627
Increase/(Decrease) in other provisions	(794)	(1,842)
Increase/(Decrease) in employee entitlements	43	(654)
Increase/(Decrease) in tax payable	2,506	833
(Increase)/Decrease in receivables	(11,112)	(12,557)
(Increase)/Decrease in inventories	4,244	(417)
	_____	_____
Net cash inflows from operating activities	19,045	11,005
	_____	_____

Appendix 4D - Page 13

Appendix 4D Half year report Period ended 31 December 2010

APPENDIX B

McPherson's Limited Reconciliation of prima facie income tax to actual income tax expense For the period ended 31 December 2010

	Half Year	Half Year
	31 Dec 2010	31 Dec 2009
	A$000's	A$000's
	_____	_____
Operating profit before tax	24,043	20,072
	_____	_____
Prima facie income tax at 30%	7,213	6,022
Tax effect of amounts which are not
deductible/(taxable) in calculating taxable income:
Share of net profit of associate	(46)	(34)
Share based payments expense	100	62
Tax rate differences in overseas entities	(128)	(128)
(Over)/Under provision in prior years	(25)	33
Other	46	(10)
	_____	_____
Income tax expense	7,160	5,945
	_____	_____
Current tax	7,564	5,452
Deferred tax	(379)	460
(Over)/Under provision in prior years	(25)	33
	_____	_____
Income tax expense	7,160	5,945
	_____	_____
Deferred income tax expense included in
tax expense comprises:
(Increase)/Decrease in deferred tax assets	(418)	438
Increase in deferred tax liabilities	39	22
	_____	_____
	(379)	460
	_____	_____

Appendix 4D - Page 14

Appendix 4D Half year report Period ended 31 December 2010

APPENDIX C

McPherson's Limited Segment Report For the period ended 31 December 2010

			Inter-segment
	Consumer		Eliminations/
	Products	Printing	Unallocated	Consolidated
	A$000’s	A$000’s	A$000’s	A$000’s
	_______
2010 Segment Information
Sales to external customers	158,440	31,299	-	189,739
Inter-segment sales	-	39	(39)	-
	_______
Total sales revenue	158,440	31,338	(39)	189,739
Other revenue/income	142	546	13	701
Share of net profit of associate	-	152	-	152
	_______
Total segment revenue, other income and
share of net profit of associate	158,582	32,036	(26)	190,592
	_______
Profit before interest, tax,
depreciation and amorisation	30,373	2,976	(2,538)	30,811
Depreciation and amortisation expense	(1,262)	(1,535)	(1)	(2,798)
	____________
Profit before interest and tax	29,111	1,441	(2,539)	28,013
	__________
Net borrowing costs				(3,970)
				____
Profit before income tax				24,043
Income tax expense				(7,160)
				____
Profit after income tax				16,883
				____

Operating segments are reported in a manner which is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Managing Director of McPherson's Limited.

The internal reports reviewed by the Managing Director, which are used to make strategic decisions, are separated into two distinct reporting segments; Consumer Products and Printing.

The reporting segments derive revenue from the following products and services:

Consumer Products:

Producers of kitchen knives, scissors, cutlery, kitchen utensils, hair, beauty and personal care products, plastic bags, wraps, foils and other consumer products.

Printing:

Printers of a wide range of products including quality books, paperbacks and loose-leaf printing.

Appendix 4D - Page 15

Appendix 4D Half year report Period ended 31 December 2010

APPENDIX C McPherson's Limited Segment Report Prior Period Comparative

			Inter-segment
	Consumer		Eliminations/
	Products	Printing	Unallocated	Consolidated
	A$000’s	A$000’s	A$000’s	A$000’s
	________
2009 Segment Information
Sales to external customers	157,695	32,401	-	190,096
Inter-segment sales	-	45	(45)	-
	_______
Total sales revenue	157,695	32,446	(45)	190,096
Other revenue/income	326	524	2	852
Share of net profit of associate	-	113	-	113
	_______
Total segment revenue, other income and
share of net profit of associate	158,021	33,083	(43)	191,061
	_______
Profit before interest, tax,
depreciation and amorisation	26,100	2,955	(1,982)	27,073
Depreciation and amortisation expense	(1,317)	(1,458)	(2)	(2,777)
	____________
Profit before interest and tax	24,783	1,497	(1,984)	24,296
	__________
Net borrowing costs				(4,224)
				____
Profit before income tax				20,072
Income tax expense				(5,945)
				____
Profit after income tax				14,127
				____

Appendix 4D - Page 16

Appendix 4D Half year report Period ended 31 December 2010

McPherson’s Limited and Controlled Entities Directors’ Report

The Board of Directors issues the following report on the consolidated financial statements of the Group for the half-year ended 31 December 2010 and the state of affairs at that date.

(a) Directors

The names of the directors of McPherson’s Limited who were in office from the beginning of the financial year to the date of this report are as follows:

S.A. Rowell, P.J. Maguire, D.J. Allman, J.P. Clifford and P.D.J. Landos

G.A. Cubbin was appointed a non-executive director on 28 September 2010.

(b) Review of operations

Refer separate commentary which forms part of this report.

(c) Dividends

Directors have recommended that an interim dividend of 12.0¢ per share be paid.

(d) Rounding

The company is of a kind referred to in Class Order 98/0100 issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the financial report and Directors’ Report.

(e) Auditor's independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 18.

Signed in accordance with a resolution of the directors.

Dated at Melbourne this 23[rd] day of February 2011.

S.A. Rowell Director

Appendix 4D - Page 17

PricewaterhouseCoopers ABN 52 780 433 757

Freshwater Place 2 Southbank Boulevard SOUTHBANK VIC 3006 GPO Box 1331L MELBOURNE VIC 3001 DX 77 Telephone 61 3 8603 1000 Facsimile 61 3 8603 1999

Auditor’s Independence Declaration

As lead auditor for the review of McPherson’s Limited for the half-year ended 31 December 2010, I declare that to the best of my knowledge and belief, there have been:

• a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• b) no contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of McPherson’s Limited and the entities it controlled during the period.

Graeme Billings Partner PricewaterhouseCoopers

Melbourne 23 February 2011

Liability limited by a scheme approved under Professional Standards Legislation

Appendix 4D - Page 18

Appendix 4D Half year report Period ended 31 December 2010

McPherson’s Limited and Controlled Entities Directors’ Declaration

I, Simon A. Rowell being a director of McPherson's Limited, declare that in the opinion of the directors:

• (a) the financial statements set out in the Half-Yearly Report:

• (i) comply with Accounting Standards and have been prepared in accordance with the Corporations Act 2001 and other mandatory professional reporting requirements;

• (ii) comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB); and

• (iii) give a true and fair view of the consolidated entity’s financial position at 31 December 2010 and of their performance for the half-year ended on that date;

• (b) there are reasonable grounds to believe that McPherson’s Limited will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the directors.

Dated at Melbourne this 23[rd] day of February 2011.

S.A. Rowell Director

Appendix 4D - Page 19

PricewaterhouseCoopers ABN 52 780 433 757

Independent auditor’s review report to the members of McPherson’s Limited

Freshwater Place 2 Southbank Boulevard SOUTHBANK VIC 3006 GPO Box 1331L MELBOURNE VIC 3001 DX 77 Telephone 61 3 8603 1000 Facsimile 61 3 8603 1999

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of McPherson’s Limited which comprises the balance sheet as at 31 December 2010, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, selected explanatory notes and the directors’ declaration for the McPherson’s Limited Group (the consolidated entity). The consolidated entity comprises both McPherson’s Limited (the company) and the entities it controlled during that half-year.

Directors’ responsibility for the half-year financial report

The directors of company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 and for such control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of McPherson’s Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. It also includes reading the other information included with the financial report to determine whether it contains any material inconsistencies with the financial report. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

While we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent of our procedures, our review was not designed to provide assurance on internal controls.

Our review did not involve an analysis of the prudence of business decisions made by directors or management.

Liability limited by a scheme approved under Professional Standards Legislation

Appendix 4D - Page 20

Independent auditor’s review report to the members of McPherson’s Limited (continued)

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of McPherson’s Limited is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.

PricewaterhouseCoopers

Graeme Billings Partner

Melbourne 23 February 2011

Appendix 4D - Page 21