Corporate Governance Statement Mesoblast Limited (the Company or Mesoblast ) and its Board of Directors (the Board ) are committed to implementing and achieving an effective corporate governance framework to ensure that

Corporate Governance Statement

Mesoblast Limited (the Company or Mesoblast) and its Board of Directors (the Board) are committed to implementing and achieving an effective corporate governance framework to ensure that the Company is managed effectively and in an honest and ethical way.

A description of the Company and its controlled entities' (together, the Group) corporate governance practices are set out below. All of these practices, unless otherwise stated, were in practice for the entire year and are in compliance with the ASX Corporate Governance Principles and Recommendations, third edition (the ASXCGPR). The following report is structured to align with the principles set out in the ASXCGPR.

The information in this statement is current as at 21 October 2016 and has been approved by the Board. This statement includes cross references to the Company's charters, policies and codes, relevant copies or summaries of which are available in the Corporate Governance section of the Company's website, www.mesoblast.com. Further, this statement should be read in conjunction with the Directors' Report, the Remuneration Report and the Financial Report for the nancial year ended 30 June 2016 as these reports also contain information required to be included by the ASXCGPR. The Directors' Report can be found at Part 1 on the Form 20-F contained within our Annual Report (principally Item 4.B), the Remuneration Report can be found at Item 6 of the Form 20-F contained within the 2016 Annual Report, and the Financial Report can be found at Item 18 of Form 20-F contained within the 2016 Annual Report.

LAY SOLID FOUNDATIONS FOR

MANAGEMENT AND OVERSIGHT

The Board of Directors is primarily responsible for setting the strategic direction and corporate governance of the Group, and for overseeing the management and operations of the Group. In particular, the principal roles and responsibilities of the Board are to:

The Board operates in accordance with the broad principles set out in its charter, which provides a framework for its effective operation. The charter speci cally addresses the following:

A summary of the charter is available at www.mesoblast.com.

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BOARD SUB-COMMITTEES

The Board has delegated speci c authority to three sub-committees. These committees are the Audit and Risk Committee, the Nomination and Remuneration Committee and the Science and Technology Committee.

The Board established the Science and Technology Committee to have oversight of matters pertaining to the Company's strategic direction and investment in research and development and technology. This committee's responsibilities are to:

The Science and Technology Committee must comprise of at least two independent Directors and the Company's Chief Scienti c Of cer (or equivalent).

The following Directors are the members of the Science and Technology Committee:

The charter of the Science and Technology Committee is available at www.mesoblast.com.

Further details on the Nomination and Remuneration Committee and Audit and Risk Committee are at Principle 2 and Principle 4 of this statement, respectively.

Day to day management of the Group's operations and the implementation of the corporate strategy and policy initiatives are delegated by the Board to the Chief Executive and the executive team.

Speci c limits of authority delegated to the Chief Executive and senior executive team are outlined in a formal delegation of authority policy, which has been approved by the Board.

DIRECTOR SELECTION AND APPOINTMENT

The Company conducts appropriate checks before it appoints a person or puts forward to shareholders a new candidate for election as a Director. These include checks as to the person's

character, experience, education, criminal record, bankruptcy history, probity and any other relevant matters.

The Company also provides shareholders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a Director in the notice of meeting provided to shareholders. This includes information relevant for shareholders to be able to assess the Director's skills and competencies, industry experience, time commitments and other relevant information in their consideration of that election. Directors eligible for election are also invited to address the meeting and provide details of the relevant quali cations, experience and skills they will bring to the Board.

Formal letters of appointment are issued to all incoming new Directors setting out the Company's expectations, their responsibilities and rights and the terms and conditions of their engagement.

The Company Secretary is accountable directly to the Board, through the Chair, on all matters to do with the proper functioning of the Board. The Company Secretary assists the Board in its effectiveness by ensuring that Board policy and procedures are followed and coordinating the timely completion and dispatch of the Board agenda and supporting papers. The Directors have direct access to the Company Secretary and regularly communicate through email, by telephone and in in-person meetings.

The Group values diversity and recognizes the bene ts it can bring to the organization's ability to achieve its goals. Diversity can lead to a competitive advantage through broadening the talent pool for recruitment of high quality employees, by encouraging innovation and improving a corporation's image and reputation. Accordingly, the Group is committed to promoting diversity within the organization and has adopted a formal policy outlining the Group's diversity objectives. It includes requirements for the Board to establish measurable objectives for achieving diversity and for the Board to annually assess the objectives, and the Group's progress in achieving these objectives. A copy of the diversity policy is available at www.mesoblast.com.

With respect to gender diversity, the Group has set the following objectives:

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The following table reports the Group's progress towards achieving its gender diversity objectives for points one and two above. In regards to point three, the Group did ensure that an equal opportunity existed for gender participation in all levels of professional development programs during the year. For completeness, as at 30 June 2016 the Company had 108 employees, of which 57 (53%) were female.

The Board has delegated the responsibility for reviewing and reporting on diversity, speci cally gender diversity, to the Nomination and Remuneration Committee.

BOARD PERFORMANCE EVALUATION

The performance of the Board is reviewed periodically. A copy of the Group's performance evaluation process for the Board, its committees, individual Directors and senior management is available at www.mesoblast. com. A Board evaluation process including an evaluation of individual non-executives and the Board committees was undertaken during the 2016 nancial year. This review encompassed feedback on the Chair and individual non-executive Directors as well as consideration of Board succession planning, diversity and breadth and suf ciency of skills represented on the Board. At that time, the results con rmed that the Board continues to function in an appropriate manner. Detailed results of the review were reported back to the Board.

The Board also carries out informal performance monitoring sessions at each in-person meeting of the Board. In addition, Directors are encouraged to raise any issues of concern regarding the performance of the Board, Board committees or individual Directors with the Chair, or if the concern relates to the Chair, with the Chair of the Audit and Risk Committee.

SENIOR EXECUTIVE PERFORMANCE EVALUATION

The process for assessing performance of the Chief Executive and the senior executive team is described in the Remuneration Report. A performance evaluation for senior executives, which accords with the process described in the Remuneration Report, was undertaken during the 2016 nancial year.

STRUCTURE THE BOARD TO ADD VALUE

NOMINATION AND REMUNERATION COMMITTEE

The Board has established a Nomination and Remuneration Committee to assist it in the discharge of its responsibilities. The main responsibilities of the committee are to:

The Nomination and Remuneration Committee operates in accordance with its charter which sets out its roles and responsibilities, composition, structure and membership requirements. A summary of the Nomination and Remuneration Committee is available at www.mesoblast.com.

The following three independent Directors are the members of the Nomination and Remuneration Committee:

The details of the meetings attended by each member of the Nomination and Remuneration Committee during the 2016 nancial year are set out in Item 6.A of Form 20-F contained within our Annual Report.

The Company has developed a skills matrix setting out the mix of skills and diversity that the Board currently has or is looking to achieve in its membership. The skills matrix helps to identify any gaps in the collective skills of the Board that can then be addressed through professional development initiatives for Directors and in Board succession planning.

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The skills and experience the Board has, and is looking to continue in its membership are in the areas of, but not limited to:

Each of these skills is well represented on our Board.

INDEPENDENT DIRECTORS

With the exception of our Chief Executive, the Board comprises of independent Directors, namely Mr Brian Jamieson, Mr William Burns, Mr Donal O'Dwyer, Dr Eric Rose, Mr Michael Spooner and Dr Ben-Zion Weiner.

A Director is considered independent if he is a non-executive Director and he is free of any interest, position, association or relationship that might in uence, or reasonably be perceived to in uence, in a material respect his capacity to bring an independent judgement to bear on issues before the Board. The Board considers the factors set out in the ASXCGPR and outlined below when assessing the independence of each non-executive Director, being whether the Director:

The Board at least annually assesses independence of its non-executive Directors. To enable this assessment of independence, the Company maintains a con icts of interest register, and the Directors must provide all information that may be relevant to the assessment.

As part of its annual assessment of independence for 2016, the Board gave speci c consideration to:

With respect to Mr Spooner's former role as Executive Chair and his continuation on the Board, the Board maintains the view that he remains an independent Director on the basis that the Group has signi cantly expanded its operations since he held an executive role more than eight years ago. With respect to Mr Spooner and Mr O'Dwyer's tenure on the Board, the Board considers each of these Directors to be independent Directors on the basis that each continues to bring valuable expertise, independent judgement and has not formed associations with management or others that might compromise their ability to ful l their role as an independent Director.

The Chair is responsible for leading the Board and for the ef cient organization and conduct of the Board. The role of the Chair more speci cally is to ensure Directors are properly briefed in all matters relevant to their role and responsibilities, to facilitate Board discussions and to manage the Board's relationship with the Chief Executive and executive team. In accepting the position, the Chair has acknowledged that it will require a signi cant time commitment and has con rmed that other positions held will not hinder his effective performance in the role of Chair. The Chair of the Board, Mr Brian Jamieson, is considered an independent Director.

The Company's constitution speci es that no Director, except the Chief Executive, may hold of ce for a period in excess of three years, or beyond the third Annual General Meeting following the Director's election, whichever is the longer, without submitting himself or herself for re-election.

Additionally, at every Annual General Meeting one-third of the previously-elected Directors, and if their number is not a multiple of three, then the number nearest to, but not exceeding one third, must retire from of ce and are eligible for re-election.

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The term in of ce held by each Director in of ce as at 30 June 2016 is as follows:

BOARD INDUCTION AND PROFESSIONAL DEVELOPMENT

All new Directors participate in an informal induction program which covers the operation of the Board and its committees, and an overview of the Group's core programs, key strategy, nancial and relevant operational documents. The induction also includes meetings with existing Directors and senior executives to ensure all relevant and material information is explained thoroughly. The induction provided to new Directors enables them to actively participate in Board decision-making as soon as possible.

The Board encourages Directors to identify and participate in continuing education. The Board actively assesses relevant conferences and presentations that are appropriate for them to attend, particularly in the eld of regenerative medicine, to heighten their understanding of the Group's core technologies and industry.

ACT ETHICALLY AND RESPONSIBLY

As part of its commitment to recognizing the legitimate interests of stakeholders, the Group has established a code of conduct to guide all Directors and employees in respect of ethical and compliant behaviour expected by the Group. In summary, the code requires that at all times all Company personnel act with the utmost integrity, objectivity and in compliance with the law and Company policies. More speci cally, the code of conduct covers the following:

A copy of the code of conduct can be found at www.mesoblast.com. The code of conduct was reviewed and updated during the 2016 nancial year.

In addition, the Company has introduced a separate policy regarding reporting of complaints and concerns by Mesoblast personnel.

SAFEGUARD INTEGRITY IN FINANCIAL REPORTING

AUDIT AND RISK COMMITTEE

The Board has established an Audit and Risk Committee to which it has delegated the responsibility for ensuring that an effective internal control framework exists within the Group. The main responsibilities of the Audit and Risk Committee with respect to nancial reporting are to:

- effectiveness and ef ciency of operations and business processes;

- safeguarding of assets

- reliability of nancial reporting and maintaining proper accounting records;

- compliance with applicable laws and regulations; and

In ful lling its responsibilities, the Audit and Risk Committee:

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The Audit and Risk Committee operates under a formal charter approved by the Board which sets out the committee's role and responsibilities, composition, structure and membership requirements and the procedures for inviting non-committee members to attend meetings. A full copy of the Audit and Risk Committee charter, which was reviewed during the reporting year, can be found at www.mesoblast.com.

The following three independent Directors are the members of the Audit and Risk Committee:

All of the Directors are nancially literate and two of the members, Michael Spooner and Brian Jamieson, have accounting quali cations. Additionally, Michael Spooner and Donal O'Dwyer have valuable and relevant industry experience having served in the healthcare industry in senior positions for a number of years. The details of the meetings attended by each member of the Audit and Risk Committee during the 2016 nancial year are set out in Item 6.A of Form 20-F contained within our Annual Report.

CHIEF EXECUTIVE AND CHIEF FINANCIAL OFFICER DECLARATION

The integrity of the Company's nancial reporting depends upon the existence of a sound system of risk oversight and management and internal control. Management accountability for this is enhanced by the assurances it is required to give to the Board.

The Chief Executive and the Chief Financial Of cer provided assurance to the Board prior to release of the the Company's 2016 nancial year nancial statements that, in their opinion:

The opinions of the Chief Executive and the Chief Financial Of cer were formed on the basis of a sound system of risk management and internal control which is operating effectively.

The Audit and Risk Committee's policy is to appoint an external auditor who demonstrates quality and independence.

The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs. PwC was appointed as the external auditor in November 2007.

It is PwC's policy to rotate audit engagement partners on listed companies at least every ve years. The current audit engagement partner was appointed on and from the year ended 30 June 2014.

An analysis of fees paid to the external auditors for the 2016 nancial year is provided in note 18 to the Financial Report. There were no fees paid for non-audit services provided by the auditor. It is the policy of the external auditors to provide an annual declaration of their independence to the Audit and Risk Committee.

The external auditor will attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report.

MAKE TIMELY AND BALANCED DISCLOSURE

CONTINUOUS DISCLOSURE

The Company has a policy and procedures in place to ensure that it identi es and discloses any information concerning the Group that a reasonable person would expect to have a material effect on the price of the Company's securities (price sensitive information) in accordance with the continuous disclosure requirements under ASX Listing Rule 3.1. The Company's policy in relation to market disclosure and shareholder communications is available on the Mesoblast website.

The Company has established a Materials Review Committee which reviews all market announcements (other than routine administrative and nancial announcements) to ensure they are factual, comply with legal obligations, do not omit material information, provide a balanced view, and are presented in a clear and concise way. The Materials Review Committee operates in accordance with its charter.

The Chief Executive, acting in conjunction with the Global Head of Corporate Communications, the General Counsel, the Company Secretary and the Materials Review Committee, is responsible for overseeing the disclosure of information to the ASX. The Company Secretary is responsible for coordinating the timely disclosure of information to the ASX. The Board's approval and input is required in respect of certain disclosure matters as set out in the Company's policy on market disclosure and shareholder communications.

All price sensitive information disclosed to the ASX is posted on the Mesoblast website as soon as possible after it is disclosed to the ASX. When analysts are briefed on aspects of the Group's operations, the material used in the presentation is released to the ASX and posted on the Mesoblast website.

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RESPECT THE RIGHTS OF SECURITY HOLDERS

The Company provides information about itself and its governance on its website at www.mesoblast.com.

Mesoblast's investor relations program involves scheduled and ad hoc interactions with institutional investors, private investors, sell-side and buy-side analysts to facilitate understanding of the Group's business, corporate strategy, governance, nancial and operational performance and prospects.

Further, shareholders can contact us at any time through the Group's Investor Relations team. The contact details are available on www.mesoblast.com. The Board receives regular reports from our Chief Executive, Chief Financial Of cer and our Global Head of Corporate Communications regarding feedback from shareholders and analysts. This ensures Directors are aware of concerns being raised giving them a good understanding of current market and shareholder views.