First Graphene Ltd. — Governance Information 2016

Sep 27, 2016

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2016 Corporate Governance Statement

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Business & Corporate Office

First Graphite Limited ACN: 007 870 760 Suite 3 9 Hampden Road Nedlands WA 6009

T +61 1300 660 448 F +61 1300 855 044

Subsidiaries:

Sri Lanka

MRL Investments (Pvt) Ltd PV 92247 3[rd] Floor 460-3/1 Galle Road Colombo – 03 Sri Lanka

Sri Lanka

MRL Graphite (Pvt) Ltd PV92009

3[rd] Floor 460-3/1 Galle Road Colombo – 03 Sri Lanka

E info@firstgraphite.com.au W www.firstgraphite.com.au

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Introduction

This Corporate Governance Statement discloses the extent to which the Company has, during the financial year ending 30 June 2016, followed the recommendations set by the ASX Corporate Governance Council in its publication Corporate Governance Principles and Recommendations ( Recommendations ). The Recommendations are not mandatory, however the Recommendations that have not been followed for any part of the reporting period have been identified and reasons provided for not following them along with what (if any) alternative governance practices were adopted in lieu of the recommendation during that period.

Principle 1: Lay Solid Foundations for Management and Oversight

1.1	A listed entity should disclose: (a) the respective roles and responsibilities of its board and management; and (b) those matters expressly reserved to the board and those delegated to management.		The Board has adopted a Board Charter that formalises its roles and responsibilities and defines the matters that are reserved for the Board and specific matters that are delegated to management. The Board Charter is available on the Company’s website.
1.2	A listed entity should: (a) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and (b) provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director.		The Board is responsible for ensuring it is comprised of individuals who are best able to discharge the responsibilities of directors having regard to the law and the best standards of governance. The Company requires the Board to ensure appropriate checks (including checks in respect of character, experience, education, criminal record and bankruptcy history (as appropriate)) are undertaken before appointing a person, or putting forward to security holders a candidate for election, as a Director. The qualifications, experience and special responsibilities of the Board members are set out in the Directors Report.

Business & Corporate Office Subsidiaries: First Graphite Limited Sri Lanka Sri Lanka ACN: 007 870 760 MRL Investments (Pvt) Ltd MRL Graphite (Pvt) Ltd Suite 3 PV 92247 PV92009 9 Hampden Road 3[rd] Floor 3[rd] Floor Nedlands WA 6009 460-3/1 Galle Road 460-3/1 Galle Road Colombo – 03 Colombo – 03 T +61 1300 660 448 Sri Lanka Sri Lanka F +61 1300 855 044 E info@firstgraphite.com.au W www.firstgraphite.com.au

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1.3	A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment.		On appointment of a Director, the Company issues a letter of appointment setting out the terms and conditions of their appointment to the Board. Senior executives have executed services contracts with the Company.
1.4	The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board.		The Corporate Governance Manual outlines the roles, responsibility and accountability of the Company Secretary. In accordance with this, the Company Secretary is accountable to the Board, through the Chair, on all governance matters. The Company Secretary is to report to the Board on matters they are aware of which fall within the Materiality Threshold as set out in the Company's Board Charter.
1.5	A listed entity should: (a) have a diversity policy which includes requirements for the board or a relevant committee of the board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity’s progress in achieving them; (b) disclose that policy or a summary of it; and (c) disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with the entity’s diversity policy and its progress towards achieving them, and either: (1) the respective proportions of men and women on the board, in senior executive positions and across the whole organisation (including how the entity has defined “senior executive” for these purposes); or (2) if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s		The Company does have a Diversity and Equal Opportunity Policy, which is disclosed on the Company website. The Board acknowledges the absence of female participation on the Board of Directors. However, the Board has determined that the composition of the current Board represents the best mix of Directors that have an appropriate range of qualifications and expertise, can understand and competently deal with current and emerging business issues and can effectively review and challenge the performance of management. The Company has not set or disclosed measurable objectives for achieving gender diversity. Due to the size of the Company, the Board does not deem it practical to limit the Company to specific targets for gender diversity as it operates in a very competitive labour market where positions are sometimes difficult to fill. However, every candidate suitably qualified for a position has an equal opportunity of appointment regardless of gender, age, ethnicity or cultural background. The proportion of women employees in the whole organisation, women in senior executive positions and women

The Company does have a Diversity and Equal Opportunity Policy, which is disclosed on the Company website. The Board acknowledges the absence of female participation on the Board of Directors. However, the Board has determined that the composition of the current Board represents the best mix of Directors that have an appropriate range of qualifications and expertise, can understand and competently deal with current and emerging business issues and can effectively review and challenge the performance of management.

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	most recent “Gender Equality Indicators”, as defined in and published under that Act.			on the Board are set out in the following table: Proportion of women Whole organisation 0 out of 5 (0%) Senior Executive positions 0 out of 2 (0%) Board 0 out of 5 (0%)	on the Board are set out in the following table: Proportion of women Whole organisation 0 out of 5 (0%) Senior Executive positions 0 out of 2 (0%) Board 0 out of 5 (0%)
					Proportion of women
				Whole organisation	0 out of 5 (0%)
				Senior Executive positions	0 out of 2 (0%)
				Board	0 out of 5 (0%)
1.6	A listed entity should: (a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and (b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.			(a) The Board is responsible for evaluating the performance of the Board, its committees and individual Directors on an annual basis. It may do so with the aid of an independent advisor. (b) The Company has completed performance evaluations in respect of the Board, its committees and individual Directors for the past financial year in accordance with the above process.
1.7	A listed entity should: (a) have and disclose a process for periodically evaluating the performance of its senior executives; and (b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.			(a) The Board is responsible for evaluating the performance of the Company’s senior executives on an annual basis. The Board is responsible for evaluating the remuneration of the Company’s senior executives on an annual basis. A senior executive, for these purposes, means key management personnel (as defined in the Corporations Act) other than a non-executive Director. (b) The Company has completed performance evaluations in respect of the senior executives (if any) for the past financial year in accordance with the applicable processes.

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Principle 2: Structure the Board to Add Value

 The Company has not established a separate Nomination Committee. Given the current size and composition of the Board, the Board believes that there would be no efficiencies gained by establishing a separate Nomination Committee. Accordingly, the Board performs the role of the Nomination Committee. Items that are usually required to be discussed by a Nomination Committee are marked as separate agenda items at Board meetings when required. When the Board convenes as the Nomination Committee it carries out those functions which are delegated to it in the Company’s Nomination Committee Charter. The Board deals with any conflicts of interest that may occur when convening in the capacity of the Nomination Committee by ensuring that the director with conflicting interests is not party to the relevant discussions.

2.1 The board of a listed entity should: The Company has not established a separate Nomination Committee. (a) have a nomination committee Given the current size and composition which: of the Board, the Board believes that (1) has at least three members, a there would be no efficiencies gained majority of whom are independent by establishing a separate Nomination directors; and Committee. Accordingly, the Board performs the role of the Nomination (2) is chaired by an independent Committee. Items that are usually director, required to be discussed by a Nomination Committee are marked as and disclose: separate agenda items at Board (3) the charter of the committee; meetings when required. When the Board convenes as the Nomination (4) the members of the committee; Committee it carries out those functions and which are delegated to it in the (5) as at the end of each reporting Company’s Nomination Committee period, the number of times the Charter. The Board deals with any committee met throughout the conflicts of interest that may occur period and the individual when convening in the capacity of the attendances of the members at Nomination Committee by ensuring those meetings; or that the director with conflicting interests is not party to the relevant (b) if it does not have a nomination discussions. committee, disclose that fact and The full Board carries out the role of the the processes it employs to address Nomination Committee. The full Board board succession issues and to ensure that the board has the did not officially convene as a Nomination Committee during the appropriate balance of skills, Reporting Period, however nominationknowledge, experience, related discussions occurred from time independence and diversity to to time during the year as required. enable it to discharge its duties and responsibilities effectively. 2.2 A listed entity should have and X The Company supports the disclose a board skills matrix setting appointment of Directors who bring a out the mix of skills and diversity that wide range of business and professional the board currently has or is looking skills and experience. While the to achieve in its membership. Company does not have or disclose a formal skills matrix it does consider directors attributes prior to any appointment. The qualifications, skills and expertise relevant to the position of Director held by each Director in office at the date of the annual report and their attendance at Board and Committee meetings is included in the Directors’ Report.

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2.3 A listed entity should disclose:

(a) the names of the directors considered by the board to be independent directors;

(b) if a director has an interest, position, association or relationship of the type described in Box 2.3 but the board is of the opinion that it does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an explanation of why the board is of that opinion; and

(c) the length of service of each director.

 The Board considers Directors to be independent where they are free of any interest, position, association or relationship that might influence, or reasonably be perceived to influence, in a material respect his or her capacity to bring an independent judgement to bear on issues before the Board and to act in the best interests of the entity and its security holders generally.

The Board has adopted a definition of independence based on that set out in Principle 2.3 of the ASX Corporate Governance Council Principles and Recommendations. The Board will review the independence of each Director in light of interests disclosed to the Board from time to time.

In accordance with the definition of independence above, and the materiality thresholds set, the following Directors are considered to be independent: Mr Chris Banasik has been an independent director since his appointment on 20 May 2015; and Mr Warwick Grigor has been an independent director since his appointment on 7 December 2015. Mr Craig McGuckin is not considered to be an independent director due to his role as Managing Director. Mr Peter Youd is not considered to be an independent director due to his role as Executive Director, CFO and Company Secretary.

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2.4	A majority of the board of a listed entity should be independent directors.		The majority of the Board’s directors (3 out of 5) are considered independent.
2.5	The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity.		The Chairman of the Board, Mr Grigor is an independent director. Mr Craig McGuckin is the Managing Director of the Company.
2.6	A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors effectively.		The Board’s induction program provides incoming directors with information that will enable them to carry out their duties in the best interests of the Company. This includes supporting ongoing education of Directors for the benefit of the Company. Each director of the Company has the right to seek independent professional advice at the expense of the Company, however prior approval of the Chairman is required which will not be unreasonably withheld.
Principle 3: Act Ethically and Responsibly
3.1	A listed entity should: (a) have a code of conduct for its directors, senior executives and employees; and (b) disclose that code or a summary of it.		The Company has adopted an Employee Code of Conduct to be adhered to by the Board, management and employees. The Employee Code of Conduct is available on the Company’s website.
Principle 4: Safeguard Integrity in Corporate Reporting
4.1	The board of a listed entity should: (a) have an audit committee which: (1) has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and (2) is chaired by an independent director, who is not the chair of the board, and disclose: (3) the charter of the committee; (4) the relevant qualifications and experience of the members of the	x	The Company has established a separate Audit Committee. Members of the Audit Committee are Chris Banasik and Warwick Grigor with Mr Grigor as Chairman. The Audit Committee does not comply with Recommendation 4.1(a)(1) in that the committee does not consist of at least 3 members. The Board considers the directors to be the most appropriate members to constitute the Audit Committee given their technical, finance and accounting expertise and broad knowledge of the industry within which

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committee; and

(5) in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

(b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner.

the Company operates.

Details of each of the director’s qualifications and experience and the attendance at Audit Committee meetings are set out in the Directors Report under the section headed Board of Directors.

The Company has established procedures for the selection, appointment and rotation of its external auditor. The Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises, as recommended by the Audit Committee (or its equivalent). Candidates for the position of external auditor must demonstrate complete independence from the Company through the engagement period. The Board may otherwise select an external auditor based on criteria relevant to the Company’s business and circumstances. The performance of the external auditor is reviewed on an annual basis by the Audit Committee (or its equivalent) and any recommendations are made to the Board.

The Company’s Audit Committee Charter is available on the Company’s website.

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4.2 The board of a listed entity should,  The CEO and the CFO make a before it approves the entity’s statement to the Board prior to financial statements for a financial approval of the annual, half-yearly and period, receive from its CEO and quarterly accounts that, in their opinion, CFO a declaration that, in their the financial records of the entity have opinion, the financial records of the been properly maintained and that the entity have been properly financial statements comply with the maintained and that the financial appropriate accounting standards and statements comply with the give a true and fair view of the financial appropriate accounting standards position and performance of the entity and give a true and fair view of the and that the opinion has been formed financial position and performance on the basis of a sound system of risk of the entity and that the opinion has management and internal control been formed on the basis of a sound which is operating effectively. system of risk management and internal control which is operating effectively. 4.3 A listed entity that has an AGM  The external auditors are requested to should ensure that its external auditor attend the Annual General Meeting attends its AGM and is available to and are available to answer answer questions from security shareholders’ questions about the holders relevant to the audit. conduct of the audit and preparation of the Auditor’s Report.

Principle 5: Make Timely and Balanced Disclosure

5.1	A listed entity should: (a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and (b) disclose that policy or a summary of it.		The Company has adopted a Disclosure Policy which is available on the Company’s website.
Principle 6: Respect the Rights of Security Holders
6.1	A listed entity should provide information about itself and its governance to investors via its website.		The Company’s website provides a corporate governance landing page where all relevant corporate governance information can be accessed. The website also has access to copies of all releases and reports made to ASX and general information about the Company and its activities.
6.2	A listed entity should design and implement an investor relations program to facilitate effective two- way communication with investors.		The Company has adopted a Shareholder Communication Policy which is available on the Company’s website.

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6.3	A listed entity should disclose the	
	policies and processes it has in place
	to facilitate and encourage
	participation at meetings of security
	holders.
6.4	A listed entity should give security	
	holders the option to receive
	communications from, and send
	communications to, the entity and its
	security registry electronically.

 Shareholders are encouraged to participate at all general meetings and AGMs of the Company. Upon the despatch of any notice of meeting to Shareholders, the Company Secretary shall send out material stating that all Shareholders are encouraged to participate at the meeting.  The Shareholder Communication Policy provides that security holders can register with the Company to receive information updates. Links are made available to the Company’s website on which all information provided to the ASX is immediately posted. Shareholders can email the Company at info@firstgraphite.com.au.

The Company’s Share registrar is equipped for electronic enquiries and shareholders can make changes to their details online.

Principle 7: Recognise and Manage Risk

7.1	The board of a listed entity should:
	(a) have a committee or committees to oversee risk, each of which:
	(1) has at least three members, a
	majority of whom are independent directors; and
	(2) is chaired by an independent director,
	and disclose:
	(3) the charter of the committee;
	(4) the members of the committee; and
	(5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at
	those meetings; or
	(b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity’s risk management



The Company has no specific Risk Committee. The Company has a Risk and Opportunity Management Policy which is posted on the Company website.

The Board is responsible for approving the Company's policies on risk oversight and management and satisfying itself that management has developed and implemented a sound system of risk management and internal control.

The Managing Director has responsibility for identifying, assessing, monitoring and managing risks. The Managing Director is also responsible for identifying any material changes to the Company's risk profile and ensuring, with approval of the Board, the risk profile of the Company listed in the Risk and Opportunity Management Policy are updated to reflect any material change.

The Managing Director is required to report on the progress of, and on all matters associated with, risk management on a regular basis. The

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framework. Managing Director is to report to the Board as to the effectiveness of the Company's management of its material business risks, at least quarterly. The Managing Director provides a summary of the Company's management of its material business risks and report to the Board on the effectiveness of whether those risks are being managed effectively at least annually. 7.2 The board or a committee of the  (a) The Risk and Opportunity board should: Management Policy requires that (a) review the entity’s risk the Board should, at least management framework at least annually, satisfy itself that the annually to satisfy itself that it Company’s risk management framework continues to be sound. continues to be sound; and (b) The Board has completed a (b) disclose, in relation to each review of the Company’s risk reporting period, whether such a management framework in the review has taken place. past financial year. 7.3 A listed entity should disclose:  The Company does not have an internal audit function. The Board works (a) if it has an internal audit function, closely with the Management Team to how the function is structured and identify and manage operational, what role it performs; or financial and compliance risks which (b) if it does not have an internal could prevent the Company from audit function, that fact and the achieving its objectives. The Audit processes it employs for evaluating Committee actively encourages the and continually improving the External Auditor to raise internal control effectiveness of its risk management issues, and oversees management’s and internal control processes. timely remediation thereof. 7.4 A listed entity should disclose whether  The Board has identified exposure to it has any material exposure to economic, environmental and social economic, environmental and social sustainability risks in its Corporate Risk sustainability risks and, if it does, how Register as part of its annual risk review. it manages or intends to manage The Board has implemented suitable those risks. risk management processes to be incorporated into all aspects of business planning, operations management and employee relations.

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Principle 8: Remunerate Fairly and Responsibly

8.1	The board of a listed entity should: (a) have a remuneration committee which: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director, and disclose: (3) the charter of the committee; (4) the members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive.	x	Members of the Remuneration Committee are Chris Banasik and Warwick Grigor, both independent directors, with Mr Banasik as Chairman. The Remuneration Committee does not comply with Recommendation 8.1(a)(1) in that the committee does not consist of at least 3 members. Details of members and attendance of Remuneration Committee meetings is available in the Director’s Report. The Remuneration Committee charter is available on the Company’s website.
8.2	A listed entity should separately disclose its policies and practices regarding the remuneration of non- executive directors and the remuneration of executive directors and other senior executives.		The Company complies with the guidelines for executive and non- executive director remuneration, details of which are included in the Remuneration Report contained within the Annual Report.

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8.3 A listed entity which has an equitybased remuneration scheme should: (a) have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and (b) disclose that policy or a summary of it.



The Company’s Remuneration Committee Charter contains a policy restricting participants of the Employee Share Option Plan from entering into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme.

The Remuneration Committee Charter is available on the Company’s website.

The Company’s corporate governance practices were in place for the financial year ended 30 June 2016 and to the date of signing the Directors’ Report.

Various corporate governance practices are discussed within this statement. For further information on corporate governance policies adopted by the Company, refer to our website www.firstgraphite.com.au

This Corporate Governance Statement has been approved by the Board and is dated XX September 2016.