Silex : Corporate Governance Statement and Appendix 4G

CORPORATE GOVERNANCE STATEMENT‌

FOR THE YEAR ENDED 30 JUNE 2016

Silex Systems Limited (the Company) and the Board are committed to achieving and demonstrating the highest standards of corporate governance. The Company has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd Edition) published by the ASX Corporate Governance Council.

A description of the Company's main corporate governance practices is set out below. The 2016 Corporate Governance Statement is dated as at 30 June 2016 and reflects the corporate governance practices in place throughout the 2016 financial year. This Corporate Governance Statement was approved by the Board on 22 September 2016.

Silex's Corporate Governance Statement can be found in the Corporate Governance section of the Company's website (www.silex.com.au/Corporate-Governance), along with the ASX Appendix 4G, a checklist cross-referencing the ASX Principles and Recommendations to disclosures in this statement and the Company's website. The Corporate Governance Statement, together with the Appendix 4G, were lodged with the ASX on 22 September 2016.

The Directors are responsible to shareholders for the performance of the Company in both the short and the longer term and seek to balance sometimes competing objectives in the best interests of the Company as a whole. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Company is properly managed.

Day to day management of the Company's affairs and the implementation of the corporate strategy and policy initiatives are formally delegated by the Board to the CEO/MD and senior executives.

The Board of Directors is accountable to shareholders for the performance of the Company and is responsible for the corporate governance practices of the Company.

The Board's principal objective is to maintain and increase shareholder value while ensuring that the Company's overall activities are properly managed. The Board operates under a Charter and Code of Conduct which establishes guidelines for its conduct. The purpose of the Code is to ensure that Directors act honestly, legally, responsibly and ethically and at all times in the best interests of the Company.

Silex's corporate governance practices provide the structure which enables the Board's principle objective to be achieved, whilst ensuring that the business and affairs of the Company are conducted ethically and in accordance with the law.

The Board's overall responsibilities include:

• Providing strategic direction and approving corporate strategies;

• Appointing and removing the CEO;

• Reviewing and approving business plans, annual budgets and financial plans;

• Monitoring management and financial performance and reporting;

  FOR THE YEAR ENDED 30 JUNE 2016

• Monitoring and ensuring the maintenance of adequate risk management controls and reporting mechanisms; and

• Ensuring the business is conducted ethically and transparently.

The Board delegates responsibility for day-to-day management of the business to the CEO/MD and senior executives as set out in the Company's delegations policy. These delegations are reviewed on an annual basis. The CEO/MD also oversees the implementation of strategies approved by the Board. The Board uses committees to support it in matters that require more intensive review and involvement. Details of the Board Committees are provided below.

As part of its commitment to good corporate governance, the Board undertakes regular reviews of the practices and standards governing the Board's composition, independence and effectiveness, the accountability and compensation of Directors and the Board's responsibility for the stewardship of the Company.

When it is necessary to appoint a new Director to fill a vacancy on the Board or to complement the existing Board, a wide and diverse potential base of possible candidates is considered from a number of channels and, if required, external recruitment consultants are engaged. The Board assesses the qualifications of the proposed new Director against a range of criteria including experience, background, professional qualifications and skills, personal qualities, the potential for the candidate's skills to enhance and complement the existing Board, and the candidate's availability to commit to the Board's activities. A thorough reference checking process is then undertaken. Should the Board's criteria be met by the candidate, the Board appoints the candidate as a Director. The newly appointed Director must retire at the next Annual General Meeting (AGM) and will be eligible for election by shareholders at that AGM.

The Chair undertakes an annual assessment of the performance of the CEO/MD, senior executives and the non-executive directors and meets privately with each director to discuss this assessment. The CEO/MD meets annually with senior management to discuss their performance. Feedback is also sought from other Directors.

The Company Secretary reports directly to the Board through the Chair, and all Directors have access to the Company Secretary. The Company Secretary's role is in respect to matters concerning the proper functioning of the Board, coordination of Board business, matters of governance, monitoring adherence to Board policies and procedures, the engagement of independent professional advisers at the request of the Board, and assisting with the induction and professional development of new Directors.

The Company values diversity and recognises the benefits arising from the recruitment, development and retention of a talented, diverse and motivated workforce.

Diversity within the Company means all things that make individuals different to one another. Silex embraces all employee differences including but not limited to gender, ethnicity, religion, culture, language, disability and age. It involves a commitment to equality and treating one another with respect.

FOR THE YEAR ENDED 30 JUNE 2016

Accordingly, the Company has developed a Diversity and Inclusion Policy, a copy of which can be found on the Company's website. This policy outlines the Company's position on all forms of diversity. Responsibility for review of matters contained within the Diversity and Inclusion Policy rests with the Board as a whole and is reflected accordingly in its Charter. This includes requirements for the Board to establish measurable objectives for achieving diversity, and for the Board to assess annually both the objectives and the Company's progress in achieving them.

In accordance with the Diversity and Inclusion Policy and ASX Corporate Governance Principles, the Board has established the following objectives in relation to gender diversity for FY2016 that align with the revised structure of the Company. Our aim is to continue to achieve these objectives as Director, senior executive and management positions become vacant and appropriately skilled candidates are available. Senior executive and management positions comprise C-level incumbents and their direct reports who hold senior management positions.

*The above actual figures are based on a report prepared on 30 June 2016.

Responsibility for diversity has also been included in the Board Charter and the People & Remuneration Committee Charter (diversity at all levels of the Company).

In respect to gender diversity specifically, as at the 30 June 2016, 25% of the total Silex workforce is female. This statistic is somewhat skewed due to the unique nuclear knowledge and skillset required to work on the Company's uranium enrichment technology, traditionally this has not been an industry with strong female representation. Females are currently represented within each position level of the workforce, including at Board level, with the Silex Chair position held by a female.

Due to the Company's reduced headcount, Silex is no longer required to report under the Workplace Gender Equality Act (WGEA).

FOR THE YEAR ENDED 30 JUNE 2016

Measurable Objectives

The below table details the diversity objectives for measurement, that have been established by the Board:

The Board is comprised of both executive and non-executive directors with a majority of non- executive directors. Non-executive directors bring a balanced perspective to the Board's consideration of strategic, risk and performance matters and are best placed to exercise independent judgement and review and constructively challenge the performance of management.

The Chair is an independent non-executive director and all Directors are required to bring independent judgement to bear in their Board decision making. The Chair is elected by the full Board.

The Company has restructured the Board over time to reflect the changing requirements of the Company to ensure a mix of directors on the Board from different backgrounds with complementary skills and experience. When a new director is to be appointed, the Board prepares a list of the requisite range of skills, experience and expertise based on the needs of the Company. From this, the Board prepares a short-list of candidates with appropriate skills and experience. A number of channels are used to source candidates to ensure the company benefits from a broad range of individuals in the selection process.