am (Perth time) Wednesday, 11 November 2015

Queries

If you have any queries regarding the matters contained in the Meeting documents, please call Company Secretary Ian Wells, on +61 8 6218 8888.

AGENDA

The Explanatory Statement which accompanies and forms part of this Notice of Meeting describes the matters to be considered.

CEO and Chairman's address Financial Reports

To receive and consider the financial report, the reports of the Directors and the auditors of the Company and its controlled entities for the year ended 30 June 2015.

Note: There is no requirement for Shareholders to approve these reports.

Ordinary Business

Resolution 1- Adoption of Remuneration Report

To consider and, if thought fit, to pass the following resolution as an advisory resolution:

'That the Remuneration Report for the Company and its controlled entities for the year ended 30 June 2015 be approved and adopted.'

Voting Prohibition

A vote must not be cast (in any capacity) by or on behalf of:

• the Company's key management personnel (including the Directors), details of whose remuneration are included in the Remuneration Report (KMP); and

  
  

• closely related parties of KMP (including spouses, dependents and controlled companies).

  
  

  However, a vote may be cast on Resolution 1 by a KMP as a proxy, or a closely related party of a KMP as a proxy, if the vote is not cast on behalf of a KMP or a closely related party of a KMP, and:

  
  

• the proxy appointment is in writing and specifies the way the proxy is to vote on Resolution 1; or

  
  

• the proxy is the chairperson, and:

  o the proxy appointment does not specify the way the proxy is to vote on Resolution 1; and

  
  

  o the proxy appointment expressly authorises the chairperson to exercise the proxy even though Resolution 1 is connected, directly or indirectly, with the remuneration of KMP.

  
  

  The Chairman will vote all undirected proxies in favour of Resolution 1.

  
  

  Resolution 2 - Re-election of Mr Cao Huiquan

  
  

  
  

  To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

  
  

  'That Mr Cao Huiquan be re-elected as a Director of the Company.'

  
  

  Resolution 3 - Election of Dr Jean Baderschneider

  
  

  To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

  
  

  'That Dr Jean Baderschneider be elected as a Director of the Company.'

  
  

  Resolution 4 - Approval of the Performance Rights Plan

  
  

  To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

  
  

  'That, for the purposes of Listing Rule 7.2 (Exception 9(b)) and for all other purposes, Shareholders approve the terms of, and authorise the grant

  of performance rights and issue of shares pursuant to the terms of the performance rights, under the Fortescue Metals Group Ltd Performance Rights Plan.'

  
  

  Voting Prohibition and Exclusions

  
  

  The Company will disregard any votes on Resolution 4 by Mr Neville Power and Mr Peter Meurs and by their respective associates, being the Directors who are eligible to and who will participate in the Fortescue Metals

  Group Ltd Performance Rights Plan. Further, a vote must not be cast on Resolution 4 by a KMP, or a closely related party of a KMP, acting as proxy, if their appointment does not specify the way the proxy is to vote on the relevant Resolution.

  
  

  However, the Company need not disregard a vote on Resolution 4 (and that person is not prohibited from voting) if:

  
  

• it is cast by a person identified as proxy for a person who is entitled to vote on the Resolution and the vote is cast in accordance with the directions on the proxy form; or

  
  

• it is cast by the chairperson (who may be a KMP) as proxy for a person who is entitled to vote and the proxy appointment expressly authorises the chairperson to exercise the proxy even though the Resolution is connected, directly or indirectly, with the remuneration of a KMP.

  
  

  The Chairman will vote all undirected proxies in favour of Resolution 4.

  
  

  Resolution 5 - Participation in the Performance Rights Plan by Mr Neville Power and Mr Peter Meurs

  
  

  
  

  To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

  
  

  'That for the purposes of Listing Rule 10.14 and for all other purposes, Shareholders approve:

  
  

• the grant of up to 8,566,657 performance rights to Mr Neville Power and up to 3,148,248 performance rights to Mr Peter Meurs over a 3 year period under the Fortescue Metals Group Ltd Performance Rights Plan; and

  
  

• the issue, transfer or allocation of, and acquisition by Mr Neville Power and Mr Peter Meurs of, fully paid ordinary shares in respect of those performance rights, in accordance with the terms of the Fortescue Metals Group Ltd Performance Rights Plan and on the basis described in the Explanatory Statement.'

Voting Prohibition and Exclusions




The Company will disregard any votes on Resolution 5 by Mr Neville Power and Mr Peter Meurs and by their respective associates, being the Directors who are eligible to and who will participate in the Fortescue Metals

Group Ltd Performance Rights Plan. Further, a vote must not be cast on Resolution 5 by a KMP, or a closely related party of a KMP, acting as proxy, if their appointment does not specify the way the proxy is to vote on the relevant Resolution.




However, the Company need not disregard a vote on Resolution 5 (and that person is not prohibited from voting) if:




• it is cast by a person identified as proxy for a person who is entitled to vote on the Resolution and the vote is cast in accordance with the directions on the proxy form; or

• it is cast by the chairperson (who may be a KMP) as proxy for a person who is entitled to vote and the proxy appointment

  expressly authorises the chairperson to exercise the proxy even though the Resolution is connected, directly or indirectly, with the remuneration of KMP.

  
  

  The Chairman will vote all undirected proxies in favour of Resolution 5.

  
  

  Dated 9 October 2015 By Order of the Board

  
  

  Ian Wells

  Company Secretary, Fortescue Metals Group Ltd

  
  

  EXPLANATORY STATEMENT

  This Explanatory Statement has been prepared for the information of Shareholders of Fortescue Metals Group Ltd (Fortescue or the Company) in connection with the business to be conducted at the Annual General Meeting of Shareholders to be held in the Grand Ballroom, at the Hyatt Regency Perth, 99 Adelaide Terrace, East Perth, Western Australia on Wednesday, 11 November 2015 at 10.00 am (Perth time) (Meeting).

  
  

  This Explanatory Statement should be read in conjunction with the accompanying Notice of Meeting.

  
  

  This Explanatory Statement and all its attachments are important documents and should be read carefully and in their entirety. If you have any questions regarding the matters set out in this Explanatory Statement or the Notice of Meeting, please contact the Company or your financial adviser, stockbroker or solicitor.

  
  

  Financial Reports

  
  

  The first item of the Meeting deals with the presentation of the consolidated financial report of the Company for the year ended 30 June 2015, together with the Directors'declaration and report in relation to that financial year, and the auditor's report on those financial statements (Financial Reports).

  
  

  Shareholders are asked to consider the Financial Reports and raise any matters of interest with the Directors when this item is being considered. Shareholders will be provided with a reasonable opportunity at the Meeting to ask questions about, or make comments on, the Financial Reports. No resolution is required to be moved in respect of this item.

  
  

  Resolution 1 - Adoption of Remuneration Report

  
  

  In accordance with the Corporations Act, Shareholders are asked to consider and vote on the adoption of the Remuneration Report as presented in the Annual Report for the year ended 30 June 2015.

  
  

  A voting prohibition statement for Resolution 1 is contained in the Notice of Meeting.

  
  

  The Annual Report of the Company for the year ended 30 June 2015 contains a Remuneration Report, which sets out:

  • the remuneration policy for the Company; and

    
    

  • the remuneration arrangements in place for the Directors and specified Executives of the Company.

  
  

  A copy of the Remuneration Report, as contained in the 2015 Annual Report, is available on the Company's website at www.fmgl.com.au under the'Investors & Media'tab.

  
  

  The vote on Resolution 1 is advisory only and will not require the Company to alter the arrangements set out in the Remuneration Report should Resolution 1 not be passed. Notwithstanding the effect of this legislative requirement, the Board will take the outcome of the vote into consideration when applying the Company's remuneration policy.

  
  

  Directors' Recommendation

  
  

  The Board recommends that Shareholders vote in favour of Resolution 1.

  Resolution 2 - Re-election of Mr Cao Huiquan

  
  

  Mr Cao Huiquan retires by rotation at the Meeting and, being eligible, offers himself for re-election as a Director.

  
  

  Mr Cao Huiquan was appointed as a Non-Executive Director in February 2012 as the nominated Director on Fortescue's Board from Hunan Valin Iron and Steel Group Company Ltd.

  
  

  Mr Cao graduated from the Department of Physics, Beijing University in 1988 and obtained his Master Degree of Metal Physics from University of Science and Technology Beijing in 1991. He was an on the job Ph.D. of

  Engineering of Central Iron & Steel Research Institute, and was enrolled in the EMBA programme, China Europe International Business School in 2009.

  
  

  In 1991, Mr Cao joined Hunan Xiangtan Iron and Steel Co., Ltd and was appointed as General Manager in 2003. In 2005, he was appointed as CEO of Hunan Valin Steel Co., Ltd (formerly Hunan Valin Steel Tube & Wire Co., Ltd), and then concurrently held the position of General Manager of Lianyuan Iron and Steel Group Co., Ltd from 2010 to 2011. Mr Cao was

  appointed Chairman of Hunan Valin Iron & Steel Group, Chairman and CEO of Hunan Valin Steel Co., Ltd in 2011 and concurrently held the position of General Manager of Xiangtan Iron and Steel Group Co., Ltd from 2012 to 2014. Mr Cao is now the Chairman of Hunan Valin Iron and Steel Group Co., Ltd, the Chairman and CEO of Hunan Valin Steel Co., Ltd.

  
  

  Directors' Recommendation

  
  

  Mr Cao Huiquan has an interest in Resolution 2 and refrains from making any recommendation as to how Shareholders should vote on

  the Resolution.

  
  

  The Company's remaining Directors recommend that Shareholders vote in favour of Resolution 2.

  Resolution 3 - Election of Dr Jean Baderschneider

  
  

  Dr Jean Baderschneider, having been appointed by the Board as a Director of the Company since the last General Meeting, offers herself for election by Shareholders.

  
  

  Dr Baderschneider was appointed Director of the Company in January 2015.

  
  

  Dr. Baderschneider, a highly regarded leader in both business and civil society, brings extensive international experience in procurement, strategic sourcing and supply chain management along with a deep understanding of high-risk operations and locations and complex partnerships.

  
  

  With 35 years of experience, Dr. Baderschneider retired from ExxonMobil in 2013 where she was Vice-President, Global Procurement. She has been responsible for operations all over the world, including Africa, Middle East and Asia.

  
  

  Dr. Baderschneider is a past member of the Board of Directors of the Institute for Supply Management and the Executive Board of the National Minority Supplier Development Council (NMSDC). She was a Presidential appointee to the US Department of Commerce's National Advisory Council of Minority Business Enterprises in February 2011. She is a past board member of The Center of Advanced Purchasing Studies (CAPS) and the Procurement Council of both The Conference Board and the Corporate Executive Board.

  
  

  Dr. Baderschneider is a member of the Site Council and Executive Committee of President Lincoln's Cottage, a Historic Site of the National Trust for Historic Preservation, and an Advisory Council member of Ford's Theatre. In addition, she is a member of the Board of Trustees of the Maret School in Washington, D.C, and of the Advisory Council of the ILR School at Cornell University and a long-time member of Cornell's President's Council of Cornell Women.

  
  

  Dr. Baderschneider has a Master's degree from the University of Michigan and a Ph.D. from Cornell University.

  
  

  Directors' Recommendation

  
  

  Dr Baderschneider has an interest in Resolution 3 and refrains from making any recommendation as to how Shareholders should vote on the Resolution.

  
  

  The Company's remaining Directors recommend that Shareholders vote in favour of Resolution 3.

  Resolution 4 - Approval of the Fortescue Metals Group Ltd Performance Rights Plan

  
  

  The Fortescue Metals Group Ltd Performance Rights Plan requires Shareholder approval so that securities granted or issued by the Company under the plan do not count towards the Company's 15% annual limit on issuing securities without Shareholder approval.

  
  

  The current Fortescue Metals Group Ltd Performance Share Plan (2012 Performance Share Plan) was approved by Shareholders at the Company's Annual General Meeting on 14 November 2012. As approval of the 2012 Performance Share Plan would need to be refreshed this year to ensure that securities to be granted under the plan would not be counted in the 15% limit, the Company has taken the opportunity to update the plan to reflect changes in law and ASIC policy since the 2012 Performance Share Plan was approved.

  
  

  Accordingly, Resolution 4 seeks Shareholder approval for the Fortescue Metals Group Ltd (Performance Rights Plan). A summary of the terms of the Performance Rights Plan, which are broadly comparable to those of the 2012 Performance Share Plan, is set out in Annexure A of this Explanatory Statement.

  
  

  Remuneration objectives and implementation of the Performance Rights Plan

  
  

  Fortescue's reward strategy seeks to build a performance orientated culture that:

• supports the achievement of the Company's strategic vision; and

• attracts, retains and motivates employees by providing market competitive fixed remuneration and incentives.

  The reward strategy seeks to support Fortescue's commitment to achieving extraordinary growth and progression as one of the world's leading producers of iron ore by:

• delivering fair and market competitive rewards;

• supporting a clear performance focus; and

• aligning remuneration with the long-term goals of the Company.

  
  

  Fortescue is committed to providing competitive remuneration packages to its employees. The Company benchmarks staff remuneration against major indices such as the ASX 100 Resources, and seeks input from independent remuneration consultants regarding executive remuneration.

  
  

  The Company's remuneration strategy and its approach to the offering of short term and long term incentives include the offering of performance based equity securities.

  
  

  Executive short term incentives are awarded in the form of both cash and equity securities, with a maximum of 50% in cash, under the terms of the Company's Executive and Senior Staff Incentive Plan (ESSIP). Long

  term incentives are delivered solely in the form of performance based equity securities under the terms of the Company's Long Term Incentive Plan (LTIP).

  
  

  The proposed Performance Rights Plan allows the Company to achieve the objectives of its remuneration strategy by allowing the Company to grant performance rights under the Performance Rights Plan to executives

  and senior staff in satisfaction of the equity component of the ESSIP (ESSIP Performance Rights) and the LTIP (LTIP Performance Rights).

  Each performance right granted under the Performance Rights Plan will entitle the holder to be issued, transferred or allocated a share for nil consideration (unless the Board determines that an exercise price is required to be paid) subject to the satisfaction of any relevant vesting conditions and the exercise of the performance right (if required) within the vesting period.

  
  

  Further information on the vesting conditions and other terms and conditions that will apply to the grant of performance rights under the Performance Rights Plan is set out in the explanatory information relevant to Resolution 5 and in Annexure A.

  
  

  Approval for the purposes of ASX Listing Rule 7.2

  
  

  ASX Listing Rule 7.1 provides, that subject to certain exceptions, a listed company may not issue or agree to issue equity securities in any 12 month period that exceed 15% of the number of securities the company has on issue, except with the prior approval of shareholders of the company in general meeting, of the terms and conditions of the proposed issue.

  
  

  One of the exceptions to ASX Listing Rule 7.1, Listing Rule 7.2 (Exception 9(b)), provides that ASX Listing Rule 7.1 does not apply to an issue of securities under an employee incentive scheme if, within three years before the date of issue, shareholders have approved the issue of securities under the employee incentive scheme as an exception to ASX Listing Rule 7.1.

  
  

  The Performance Rights Plan has not yet been approved by Shareholders. Accordingly, Shareholder approval is required to rely on the exemption in ASX Listing Rule 7.2 (Exception 9(b)).

  
  

  The following information is disclosed to Shareholders for the purposes of Resolution 4:

• a summary of the terms and conditions of the Performance Rights Plan is set out in Annexure A to this Explanatory Statement;

• 19,511,592 performance rights have been granted under the 2012 Performance Share Plan, since the plan was approved in 2012;

• no performance rights have been granted under the Performance Rights Plan;

• the adoption of the Performance Rights Plan will not affect any existing performance rights granted or shares issued under the 2012 Performance Share Plan; and

• a voting exclusion statement in respect of Resolution 4 is set out in the Notice of Meeting.

  
  

  Directors' Recommendation

  
  

  Mr Neville Power, the Managing Director of the Company, and Mr Peter Meurs, the Executive Director for Development, will participate in the Performance Rights Plan and so have an interest in Resolution 4. Accordingly, Mr Power and Mr Meurs refrain from making any recommendation as to how Shareholders should vote on the Resolution.

  
  

  The Company's remaining Directors recommend that Shareholders vote in favour of Resolution 4.

  Resolution 5 - Participation in the Fortescue Metals Group Ltd Performance Rights Plan by Mr Neville Power and Mr Peter Meurs

  
  

  In accordance with the ASX Listing Rules, Shareholders are asked to consider the grant of performance rights to Mr Neville Power and Mr Peter Meurs under the Fortescue Metals Group Ltd Performance Rights Plan.

  
  

  Under ASX Listing Rule 10.14, the Company requires Shareholder approval to issue equity securities to a Director of the Company. Accordingly, Resolution 5 seeks Shareholder approval to issue securities under the Performance Rights Plan to the Managing Director, Mr Neville Power, and the Executive Director for Development, Mr Peter Meurs, over the next 3 years.

  
  

  For the purposes of the approval sought under Listing Rule 10.14 and in accordance with the requirements of Listing Rule 10.15A and for all other purposes, the following information is provided to Shareholders in respect of the proposed grant of performance rights under the Performance Rights Plan to Mr Power and Mr Meurs.

  
  

  Participation

  
  

• Under the Performance Rights Plan, performance rights may be granted to the Managing Director, Mr Power, and the Executive Director for Development, Mr Meurs, as part of their respective reasonable remuneration. Further information on Mr Power's and Mr Meurs'remuneration packages is contained within the Remuneration Report which is a section of the 2015 Annual Report.

  
  

• Mr Power and Mr Meurs are the only persons referred to in ASX Listing Rule 10.14 eligible to participate in the Performance Rights Plan. Any additional persons referred to in ASX Listing Rule 10.14 who become entitled to participate in the Performance Rights Plan will not do so until any Shareholder approval required under ASX Listing Rule 10.14 is obtained.

  
  

  Number of performance rights which may be granted

  
  

  The maximum number of performance rights that will be granted to Mr Power without further Shareholder approval:

  
  

  During the For the financial

  next 3 years year ending

  (including FY16) 30 June 2016

  
  

  ESSIP Performance Rights LTIP Performance Rights	3,671,425 4,895,232	1,249,862 1,666,482
  Total	8,566,657	2,916,344

  
  

  The maximum number of performance rights that will be granted to Mr Meurs without further Shareholder approval:

  
  

  During the For the financial

  next 3 years year ending

  ESSIP Performance Rights LTIP Performance Rights	1,349,249 1,798,999	459,324 612,432
  Total	3,148,248	1,071,756

  (including FY16) 30 June 2016

  The exact number of performance rights that will be granted to Mr Power and Mr Meurs during the next three years:

  
  

• cannot be calculated at the date of this Notice of Meeting as it depends upon Mr Power's and Mr Meurs'entitlement to share based incentive payments and the future VWAP of the Company's shares at the date performance rights are granted under the Performance Rights Plan; and

  
  

• will be calculated on the grant date by dividing the maximum value of share based incentive payments to which Mr Power and Mr Meurs are entitled by the 5 day VWAP of Company shares at the start of the applicable vesting period.

  
  

  Entitlement to shares

  
  

  Subject to the terms of the Performance Rights Plan, the satisfaction of vesting conditions and other conditions attached to performance rights, each performance right entitles the holder to be issued, transferred or allocated one share in the Company. Under the Performance Rights Plan, shares will only be issued, transferred or allocated to recipients (and value received) upon the vesting of relevant performance rights.

  
  

  Vesting conditions

  
  

  Under the Performance Rights Plan, the Board must determine the vesting conditions that will apply to the vesting of performance rights prior to the date of grant of those performance rights, which may not be modified during the vesting period. Further information regarding the vesting conditions is set out below.

  
  

  Vesting period

  
  

  The vesting period during which each of the vesting conditions attached to the performance rights to be granted under this Resolution must be satisfied is as follows:

  
  

• in relation to the ESSIP Performance Rights, by the end of 30 June 2018; and

• in relation to the LTIP Performance Rights to be granted in respect of the financial year ending 30 June 2016, by the end of 30 June 2018;

• in relation to the LTIP Performance Rights to be granted in respect of the financial year ending 30 June 2017, by the end of 30 June 2019; and

• in relation to the LTIP Performance Rights to be granted in respect of the financial year ending 30 June 2018, by the end of 30 June 2020.