Nanosonics : 2016 Corporate Governance Statement - Appendix 4G

August 2016‌

The Board of Directors of Nanosonics Limited (Nanosonics) is committed to ensuring that its policies and practices reflect good corporate governance consistent with the Australian Securities Exchange (ASX) Listing Rules, and the ASX Corporate Governance Principles and Recommendations (3rd Edition released on 27 March 2014).

This Corporate Governance Statement sets out Nanosonics' key corporate governance principles and practices, and the extent to which the Company has followed the recommendations set by the ASX Corporate Governance Council during the last reporting period, being 1 July 2015 to 30 June 2016.

The Statement was reviewed and approved by the Board on 16 August 2016. A copy of this Statement is available on the Company's website at http://www.nanosonics.com.au/Investor-Centre/Corporate- Governance, together with the charters and policies referred to in this Statement.

The Chairman of Nanosonics is responsible for leading the Board, its meetings and Directors so that all Directors are able to contribute effectively, all matters are properly considered and there is clear decision-making. The Chairman has ultimate responsibility for ensuring that corporate governance matters are properly considered by the Directors.

Under the leadership of the Chairman, the role of the Board is to provide strategic guidance to the Company and to provide effective oversight of its management for the benefit of all stakeholders. The Board acts on behalf of shareholders, and is accountable to them for the overall strategy, governance and performance of the Company and its subsidiaries (the Group). The Board retains ultimate authority over the management of the Group. However, the day-to-day management of the Group's affairs and the implementation of its strategies are formally delegated by the Board to the Chief Executive Officer (CEO) and President / Managing Director and the senior executives.

The respective roles and responsibilities of the Board and senior executives, reflecting how they are distinct from each other, and the matters expressly reserved to the Board and those delegated to management, are set out in detail in the Company's Board Charter, which is available on the Company's website.

The Board meets regularly, in accordance with an agreed schedule, and special meetings are held as and when required. Details of Directors' attendances at meetings of the Board are shown in the Directors' Report contained in the Company's Annual Report.

The Board requires that each Director has the appropriate competencies to fulfil their role, and that they perform effectively in their respective role and on the Board. Nanosonics has a Nomination Committee which is responsible for recommending a framework for the assessment and evaluation of the performance of each Director individually, of each committee and of the Board as a whole, and the process for periodically evaluating these performances are explained in the Company's Nomination Committee Charter, which is available on the Company's website. The performance of the Board and each of the Board committees is reviewed annually, with the most recent review being completed in November 2015 in accordance with that process.

The responsibilities and performance expectations for all senior executives, including Executive Directors, are described in the Company's Annual Report in the Information on the Directors,

Company Secretaries and Senior Management section and in the Remuneration Report included in the Directors' Report.

Nanosonics has a process, and discloses that process, for periodically evaluating the performance of its senior executives. The Nanosonics Performance and Development Programme requires individual appraisals to be made by a Director at least annually for all senior executives, including Executive Directors, but excluding the CEO, who is assessed by the Non-Executive Directors. The Company discloses, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. Accordingly, individual appraisals of the performance of all senior executives were undertaken by the CEO during the last reporting period.

The Board has established and is assisted by committees that are responsible for aspects of the operation of the Group, and which act by examining relevant matters and making recommendations to the Board. The Board may establish additional committees to assist it in carrying out its responsibilities. The Board may also delegate specified responsibilities to ad-hoc committees. The Directors must be satisfied that the members of a committee are competent and will exercise their delegated functions in accordance with Directors' duties.

During the recent reporting period there were four committees of the Board: the Nomination Committee, the Audit and Risk Committee, the Remuneration Committee, and the R&D and Innovation Committee. Charters for these four Committees are available on the Company's website. Details of the number of meetings of the committees and Directors' attendances at those meetings are shown in the Directors' Report contained in the Company's Annual Report.

Nanosonics undertakes appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a Director, and the Company provides security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a Director. These include checks as to the person's character, experience, education, criminal record and bankruptcy history. Information provided to security holders in the Company's Notices of Meetings includes: biographical details, such as their relevant qualifications and experience, and the skills they bring to the Board; details of any other material directorships currently held by the candidate; in the case of a candidate standing for election as a Director for the first time, any material adverse information revealed by the checks the Company has performed about the Director, details 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 Company and its security holders generally, and, if the Board considers that the candidate will, if elected, qualify as an independent Director, a statement to that effect; in the case of a candidate standing for re-election as a Director, the term of office currently served by the Director and, if the Board considers the Director to be an independent Director, a statement to that effect, and a statement by the Board as to whether it supports the election or re-election of the candidate.

A candidate for appointment or election as a Non-Executive Director must provide the Board with the information above and a consent for Nanosonics to conduct any background or other checks the Company would ordinarily conduct. The candidate must also provide: details of his or her other commitments; an indication of the time involved; and an acknowledgement to the Company that he or she will have sufficient time to fulfil his or her responsibilities as a Director.

Nanosonics has a written agreement with each Director and senior executive setting out the terms of their appointment. The Directors and senior executives of Nanosonics have a clear understanding of their roles and responsibilities, and of the Company's expectations of them and these have been reduced to written agreements. These agreements take the form of letters of appointment in the

case of Non-Executive Directors and service contracts in the case of Executive Directors or other senior executives.

In the case of Non-Executive Directors, the agreements generally set out: the terms of appointments; the time commitment envisaged, including any expectations regarding involvement with committee work and any other special duties attaching to the positions; remuneration, including superannuation entitlements; the requirement to disclose Directors' interests and any matters that may affect Directors' independence; the requirement to comply with key corporate policies, including Nanosonics' Code of Conduct and Ethics, and its Securities Trading Policy; Nanosonics' policy on when Directors may seek independent professional advice at the expense of the Company (which is generally whenever Directors, especially Non-Executive Directors, judge such advice necessary for them to discharge their responsibilities as Directors); indemnity and insurance arrangements; ongoing rights of access to corporate information; and ongoing confidentiality obligations.

In the case of Executive Directors or other senior executives, the service contracts generally set out the information above, to the extent applicable, as well as: descriptions of their positions, duties and responsibilities; the persons or bodies to whom they report; the circumstances in which their services may be terminated; and any entitlements on termination.

Nanosonics is required under the ASX Listing Rules to disclose the material terms of any employment, service or consultancy agreement it or a child entity enters into with its CEO (or equivalent), any of its Directors, and any other person or entity who is a related party of its CEO or any of its Directors. It is also required to disclose any material variation to such an agreement.

The Company has a Securities Trading Policy, which applies to all designated persons, comprising its Directors, officers, employees, advisors, consultants and contractors, and such other persons as the Board nominates. Designated persons may only deal in the Company's securities in accordance with the Policy and the Company regularly reviews share trading reports and its share register to ensure compliance with the Policy. A copy of the Securities Trading Policy is available on the Company's website.

The Company Secretaries of Nanosonics are accountable directly to the Board, through the Chairman, on all matters to do with the proper functioning of the Board. The Company Secretaries of Nanosonics play an important role in supporting the effectiveness of the Board and its committees. The role of

the Company Secretaries include: advising the Board and its committees on governance matters; monitoring that Board and committee policies and procedures are followed; co-ordinating the timely completion and despatch of Board and committee papers; ensuring that the business at Board and committee meetings is accurately captured in the minutes; and helping to organise and facilitate the induction and professional development of Directors. Each Director is able to communicate directly