MEC RESOURCES LIMITED - Annual Report 2009

ENERGY MINERALS EXPLORATION

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|Chairman's Letter|2|Statement of Changes|
|in Equity|31|
|Company Focus and|
|Developments|3|Cash Flow Statement|33|
|Directors’ Report|10|Notes to the Consolidated|
|Financial Statements|34|
|Auditor’s Independence|
|Declaration|21|Directors’ Declaration|63|
|Corporate Governance|Independent Auditor’s|
|Statement|22|Report|64|
|Income Statement|29|Additional Securities|
|Exchange Information|66|
|Balance Sheet|30|

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MEC Resources Ltd annual report 2009

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Corporate Directory

Directors

H Goh – Non-Executive Chairman S K Yap – Non-Executive Director D L Breeze – Executive Director K O Yap – Non-Executive Director C T Lim – Non-Executive Director

Auditor

PKF

Level 7, BGC Centre 28 The Esplanade Perth WA 6000

Share Registry

Registered Office

14 View Street North Perth WA 6006

Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153

Principal Business Address

14 View Street North Perth WA 6006 Telephone: (08) 9328 8477 Facsimile: (08) 9328 8733 Website: www.mecresources.com.au E-mail: [email protected]

Australian Securities Exchange Listing

Australian Securities Exchange Limited

(Home Exchange: Perth, Western Australia) ASX Code: MMR

Australian Business Number

44 113 900 020

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Chairman’s Letter

Dear Shareholder,

MEC’s primary investment in Advent Energy Ltd has demonstrated significant developments during the year, endorsing wholeheartedly MEC’s focus of its resources toward this entity.

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Advent continues to pursue the option to increase its interest in offshore Sydney Basin Petroleum Exploration Permit (PEP) 11 to 85% by drilling the first well in this highly prospective permit. During the year, the prospective recoverable gas resource estimate for the permit was increased to 16.3 Tcf (at the P10 or ‘high’ level), substantially upgrading the prospective value residing off the coast of Australia’s largest energy market of the SydneyWollongong-Newcastle metropolitan region.

In collaboration with RPS Energy, environmental applications for the pre-drilling site survey and the drilling programme itself are in the process of being lodged for approval. In addition, the drilling engineering and well testing design has been completed by Du-El Drilling Services. Du-El have also commenced the procurement process for major and long-lead items.

by Lan Nguyen of specialist tight gas consultants Tanvinh Resources Pty Ltd concluded that there is strong evidence from the pressure data that stratigraphic traps are present associated with the existing gas discoveries which would provide additional upside potential to the hydrocarbon resources/reserves previously identified in EP386 and RL1. Advent is now confident that there is commercial upside potential in the area if formation damage can be avoided which should enable commercial flow rates from the existing gas discoveries.

Advent holds an 8.3% interest in the Rivoli Gas Field in the Exmouth Sub-Basin of the Carnarvon Basin (joint venture led by Strike Oil Ltd). The Department of Defence is considering a proposal to supply gas from the Rivoli Gas Field to its communications station located north of Exmouth. The release of the Defence Force White Paper during the year has necessitated postponement of further discussions between the Rivoli Joint Venture and the Department of Defence, with resumption anticipated during the last half of 2009.

Advent also holds an Option to enter a farmin agreement in the South Australian Cooper Basin. The Option provides Advent with the right to participate in two wells with the Victoria Petroleum led Joint Venture in the prospects present in the PEL 111 Catalina Block.

I look forward to a year of exciting developments in MEC Resources’ investments.

Yours Sincerely,

Advent Energy commissioned a review of well completion reports and drill stem testing data from 100% held Exploration Permit EP 386 and Retention Lease RL-1 in the onshore Bonaparte Basin, straddling the WA/NT border. The report

Hock Goh Chairman

MEC Resources Ltd annual report 2009

Company Focus and Developments

MEC Resources’ investment capital is targeted for investments which have the potential to yield significant returns in energy and mineral resources. The Company is registered by the Australian Federal Government as a Pooled Development Fund enabling MEC shareholders to receive tax free capital gains on their shares and tax free dividends.

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MEC will seek to minimise the high risk that is usually associated with extremely large potential rewards by seeking to hold a portfolio of exploration investments.

MEC’s current major investment lies in Advent Energy Ltd, an unlisted oil and gas exploration and development company. Advent acquired Asset Energy Pty Ltd and a shareholding in Central Petroleum Ltd (ASX: CTP) from MEC for an equity consideration in Advent.

Oil and Gas NL (Bounty). Advent’s interest in PEP 11 is via wholly owned subsidiary Asset Energy Pty Ltd.

The Offshore Sydney Basin is an untested but proven petroleum basin situated along the heavily populated and industrialised central coast of New South Wales. No drilling has taken place in the basin despite a significant number of wells drilled in the adjacent Onshore Sydney Basin which have flowed gas or encountered oil shows.

In October 2008, Advent announced a $7 million funding commitment from Talbot Group Holdings, and has recently engaged the Pareto Group of Norway to complete Advent’s capital requirements.

Covered by PEP 11, a 200km long, 8,100km[2] permit, the Offshore Sydney Basin is a significant exploration area with large scale structuring and potentially multi-Tcf gas and condensate-charged Permo-Triassic reservoirs.

MEC’s investment focus:

PEP 11 Oil and Gas Permit

MEC Resources’ investee Advent Energy Ltd is pursuing its option to increase its current 25% interest to an 85% interest in Petroleum Exploration Permit PEP 11, an oil and gas permit located in the Offshore Sydney Basin from Bounty

Advent commissioned specialists from the Nanjing Institute to integrate the PEP11 1981, 1991 and 2004 seismic data for the first time. Six prospects and leads were identified which Advent estimates could comprise up to 16.3 (P10) Trillion cubic feet (Tcf) of prospective recoverable gas resources. The P50 and P90 estimated prospective recoverable resources are 5.1 Tcf and 1.2 Tcf respectively.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Company Focus and Developments

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The largest of these is the Fish Prospect, which alone has the potential to hold (at the P10 level) up to 9.2 Tcf prospective recoverable gas resources.

The Baleen prospect is located in the northern sector of the Permit in an average depth of 125m of water and is situated on the crest of the Offshore Uplift on a thrusted anticline.

Independent confirmation of a thermogenic hydrocarbon source in the offshore Sydney Basin was revealed at the Petroleum Exploration Society of Australia’s (PESA) Eastern Australasian Basins Symposium, 14-17 September 2008. The confirmation of this type of hydrocarbon gas seepage is a significant development for Advent, as active seeps of the nature reported are considered by experts in this field to occur in basins now actively generating hydrocarbons and/ or that contain excellent migration pathways.

The prospectivity of this proven petroleum basin has been further enhanced by the confirmation of the presence of apparent ongoing hydrocarbon seeps. Sub-bottom profile data, swath bathymetry, seismic and echosounder data collected by Geoscience Australia along the continental slope / permit margin has demonstrated active erosional features in conjunction with geophysical indications of gas escape.

Furthermore, in an ongoing review of its exploration data for the PEP11 project, Advent has interpreted significant new seismically indicated gas features.

Key indicators of hydrocarbon accumulation features have been interpreted from the ongoing review of the 2004 seismic data. The seismic features include apparent Hydrocarbon Related Diagenetic Zones (HRDZ), Amplitude Versus Offset (AVO) anomalies and potential flat spots.

Seismic features have been independently validated and revealed through collaboration with the CSIRO in Perth, Western Australia, and with Mr Timothy Berge, a consultant geophysicist whom has published widely in this area and possesses extensive international experience with multinational oil companies.

In additional prospectivity studies of PEP11, Advent has recently interpreted significant new prospective multi-Tcf stratigraphic plays. The Fish and Baleen Prospects and other leads reside in deeper, structural Permo-Triassic targets associated with the Offshore Uplift. Further examination of features in the Cainozoic sediment wedge overlying the Permo-Triassic sediments along the Sydney Basin continental shelf has demonstrated “soft” high amplitude anomalies (reverse polarity to the water bottom reflector) that are observed along sequential seismic lines continuously over considerable (>60 km) lateral NE-SW extent. An example of these seismic features is provided here.

The zones of contiguous amplitude anomalous horizons are depicted as yellow polygons in the permit map provided here.

Advent has been advised that these newly identified prospective zones are analogous to the Marlim Field in the Campos Basin in Brazil.

MEC Resources Ltd annual report 2009

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Mapped prospects and leads within the Offshore Sydney Basin are generally located less than 50km from Australia’s largest energy market, the Sydney-Wollongong-Newcastle greater metropolitan area. This area has a population of approximately 5,000,000 people. Traditionally, all natural gas used in New South Wales has been piped in from South Australia and the Bass Strait. However, studies by the Australian Bureau of Agricultural and Resource Economics (ABARE) and the Australian Petroleum Production and Exploration Association (APPEA) state that those sources may not be able to meet the demand for gas in the medium to longer term.

Although there have been over a thousand wells drilled in offshore Australia, no exploration drilling has ever taken place in the Offshore Sydney Basin.

During the 2[nd] quarter of 2009, Advent invited drilling rig companies to tender for the provision of a jack-up drilling rig to drill the Fish Prospect. Evaluation of the tenders received is continuing, as are discussions regarding the various subletting options of drilling rigs currently operating in the vicinity of PEP11.

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Environmental approvals are in the process of being lodged, whilst the conceptual well engineering design and drill stem testing planning has been completed by Du-El Drilling Services.

Advent is in discussions with possible farm-in partners and is highly optimistic of commencing drilling in PEP 11 during 2010.

Western Australia – Exmouth Sub-Basin

Advent Energy Ltd has an 8.3% interest (Permit Operator: Strike Oil Ltd) in a shallow, near shore permit in the Exmouth sub-Basin region of the Carnarvon Basin, which contains the undeveloped Rivoli Gas Field discovery. The Department of Defence is considering a proposal to supply gas from the Rivoli Gas Field to its communications station located north of Exmouth, following completion of the independent Front End Engineering Design study during the final quarter of 2007. In the meantime, the Department of Defence continues to fund further work including the gathering of environmental information to ensure an early and comprehensive stakeholder engagement upon project sanction.

Discussions between the Department of Defence and the Rivoli Joint Venture regarding the potential future energy supply had been postponed until the Department of Defence’s White Paper was produced. Advent is optimistic that discussions may now continue during the last half of 2009.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Company Focus and Developments

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Northern Perth Basin

In February 2009, Advent Energy farmed-out 100% of EP 419 to Exoma Energy Ltd. EP 419 covers 559km[2] on the north eastern side of the Perth Basin about 10km east of the Beharra Springs Gas Field. Advent has retained a 3% royalty on future profitable production from EP 419.

South Australia – Cooper Basin

Advent has a conditional non-exclusive farm-in agreement to acreage in the South Australian Cooper Basin with Victoria Petroleum N.L., Impress Energy Ltd and Roma Petroleum N.L. The agreement covers the Catalina block in Petroleum Exploration License (“PEL”) 111 situated in the Western Cooper basin of South Australia. The conditional agreement enables Advent to earn up to a 50% interest in the Catalina block in this PEL.

Northern Territory/Western Australia – Bonaparte Basin

Advent Energy holds EP 386 and RL 1 in the onshore Bonaparte Basin in Northern Australia. The Bonaparte Basin is a hydrocarbon-bearing sedimentary basin straddling the border between the Northern Territory (NT) and Western Australia (WA). Most of the basin is located offshore, covering 250,000 square kilometres, compared to just over 20,000 square kilometres onshore.

Advent Energy holds 100% of Exploration Permit EP 386 (4,760 square kilometres in area) which covers the entire Western Australian section of the onshore Bonaparte Basin. Since 1960 twelve wells have been drilled in or near EP 386 and only sixteen in the whole of the onshore basin. Although no commercial fields have yet been discovered, six exploration wells are classified as gas discoveries. The tenements contain five subcommercial gas fields which could be advanced to commercial status with additional work, in particular the Garimala Gas Field which may have

MEC Resources Ltd annual report 2009

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an areal extent of more than 10km[2] and could trap more than 25 Bcf OGIP. The main exploration target has been sandstone within a late Devonianearly Carboniferous sequence. This thick marine shale dominated sequence is interpreted to be the main source rock sequence for the greater Bonaparte Basin, including the offshore portion where gas resources have been identified.

Three modest gas discoveries have been made along the western edge of the basin, in an area characterised by a structural-stratigraphic trapping and active migration known as the Waggon Creek Embayment. In EP 386 the three main discoveries made so far, Vienta, Waggon Creek and Bonaparte, contain possible recoverable gas resources of 8 Bcf, 12 Bcf and 4 Bcf, respectively.

Advent received a report from Lan Nguyen (Tanvinh Resources Pty Ltd) during the period. Tanvinh Resources offers specialist consultancy services for tight gas projects. Upon investigation of well completion reports and drill stem testing data from the EP386 and RL1 wells, Tanvinh Resources has advised that there is strong evidence from the pressure data that there is considerable upside potential in the area if formation damage can be avoided. Advent is highly encouraged by this review that suggests commercial flow rates could be achieved from the existing gas accumulations and that stratigraphic traps are present associated with the existing discoveries which could provide additional upside potential to the hydrocarbon resources/reserves previously identifed within EP386 and RL1.

In the NT, Advent holds 100% of Retention Lease RL-1 (166 square kilometres in area), which covers the Weaber Gas Field and two related prospects, Weaber North and Weaber Southwest. The Weaber Gas Field was discovered in 1985 but has not been brought into production. Geoscience Australia has estimated that the Weaber field contains 4.3 million barrels of oil equivalent.

As a result of this review, Advent has initiated a multi-phased study to address methods of minimising formation damage and significantly improve gas flow rates. Advent is highly encouraged by this new review that enhances the near-term development potential of this excellent hydrocarbon asset.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Company Focus and Developments

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Central Australia – Amadeus, Pedirka, Basins

Advent holds a large shareholding in Australian onshore hydrocarbon explorer Central Petroleum Ltd (ASX: CTP). In December 2008, Central Petroleum Ltd announced the acquisition of a farmin partner (PXA) by BG Group subsidiary Queensland Gas Company (QGC) for over A$18 million to entitle QGC to contribute to the exploration of Central Petroleum Ltd’s permits to earn a 20% interest in those permits. Advent has reserved its right to claim damages from Central Petroleum Ltd and its subsidiaries following repudiatory breach of contract regarding farmin by Advent to Central’s permits.

CTP holds exploration tenements that cover approximately 253,000km[2] of central Australia: the largest prospective consolidated and underexplored onshore acreage in Australia.

CTP’s tenements cover the Amadeus, Pedirka, Georgina and Lander Trough basins. The company aims to explore and develop these tenements by targeting both conventional and unconventional sources of oil, gas and helium.

With the completion of the new rail link from Alice Springs direct to Port Darwin in 2004, the Red Centre now has the fundamental infrastructure in place to monetise gas via value adding to GTL diesel or other liquids and crude oil via bulk rail transport via export from Port Darwin.

The exploration programme for CTP and its JV partners kicking off in the second half of 2009 aims to drill a minimum of 5 fully cored CSM wells, 3–4 conventional oil and gas wells in the Amadeus Basin and over 1,200km of seismic in the Amadeus and the Pedirka Basins. CTP believes that the Amadeus is one of the world’s most under-explored producing basins. The basin

MEC Resources Ltd annual report 2009

has an average drill density of just one well per 4,600km[2] . The Pedirka Basin has demonstrated high prospectivity with a number of petroleum systems, oil shows and in one well oil flows to surface.

Given its acreage, an independent report from CTP has estimated that there is between 34 and 70 TCF of recoverable gas from coal seam sources in the Pedirka. In-house reports have concluded that close to 150 TCF of gas and over 1 billion barrels of oil may be in place in the Amadeus Basin Horn Valley Siltstone and the Southern Georgina Arthur Creek shale. CTP believes that these unconventional sources have geological similarities to the huge unconventional fractured shale gas and oil in the Baxter and Bakken Shales in the United States which have been prolific producers for some time.

In addition, CTP has identified and estimated, through recently released drilling data and seismic analysis, some 1 trillion tonnes of coal (at less than 1,000m in depth) which may be suitable for UCG GTL technologies.

Drilling beginning in Sep Qtr 2009.
Initial drilling of 5-10 CSM wells in the Pedirka Basin & flow testing of CBM93001 (previously drilled by CTP in 2008).
3-4 conventional oil and gas test wells follow in the Amadeus.
Further comprehensive seismic 1,250 km planned after drilling.
CTP holds the largest consolidated package of onshore tenements in Australia that are prospective for oil and gas.
Numerous petroleum systems offering discovery potential.
CTP’s tenements cover the Amadeus, Pedirka, Georgina and Lander Trough Basins in central Australia.
Only 1 exploration well per 4,600km[2] have been drilled in the Amadeus Basin, compared to 1 per 25 km[2] in the Cooper Basin.

Summary of CTP’s Exploration Target and Potential

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Basin Commodity Conventional Unconventional Notes
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Amadeus	Oil (MMbbl)	5,762*	10,000
	Gas (Tcf)	30-40*	12-90
	Helium(Bcf)	185	-
Pedirka	Oil (MMbbl)	5,000	-
	Gas (Tcf)	-	30-70	CMS to GTL
	Coal(Bt)	-	600-1,400	UCG to GTL
Georgina	Oil(MMbbl)	650(both	Conventional and Unconventional
	Gas(Tcf)	-	50.6

* Equivalent of the two Source: CTP

NOTE: In accordance with ASX listing requirements, the geological information supplied in this report has been based on information provided by geologists who have had in excess of five years experience in their field of activity.

Asset Energy Pty Ltd is a wholly owned subsidiary of Advent Energy Ltd and is the operator’s agent for PEP11 under the joint operating agreement with Bounty Oil and Gas NL.

MEC is an exploration investment company and relies on the resource and ore reserve statements compiled by the companies in which it invests. All Mineral Resource and Reserve Statements have been previously published by the companies concerned. Summary data has been used. Please refer to adventenergy.com.au and bountyoil.com and Bounty Oil & Gas NL ASX releases for details and attribution. Unless otherwise stated all resource and reserve reporting complies with the relevant standards. Resources quoted in this report equal 100% of the resource and do not represent MEC’s investees’ equity share.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Directors’ Report

The directors of MEC Resources Ltd present their report on the company for the financial year ended 30 June 2009.

Directors

The names of directors in office at any time during or since the end of the year are:

H Goh S K Yap D L Breeze K O Yap C T Lim

Company Secretary

Ms Deborah Ambrosini continues in her role of Company Secretary. She also holds the position of Financial Controller of the Company and has over 10 years experience in Corporate accounting roles.

Principal Activities

MEC Resources Ltd (“MEC”) is registered as a Pooled Development Fund under the Pooled Development Fund Act (1992). It has been formed to invest into exploration companies that are targeting potentially large energy and mineral resources.

Advent Energy has assembled a range of hydrocarbon permits which contain near term production opportunities with pre-existing infrastructure and exploration upside. It intends to undertake development activities on the tenement package with a view to supplying electrical power generation, gas and diesel markets by developing and value-adding to its oil and gas resources.

Advent Energy is actively seeking further oil and gas permits to include in its portfolio and is considering a future stock exchange listing of its securities.

Operating Results

Operating loss for the consolidated entity after tax for the year was $3,357,021 (2008: Loss $433,939)

Dividends

The Directors recommend that no dividend be paid in respect of the current period and no dividends have been paid or declared since the commencement of the period.

MEC will provide carefully selected companies in the energy and mineral exploration sectors with development and exploration funding. MEC intends to identify investment opportunities with a number of specific characteristics including: large targets; a stage of development that permits a strategic investor or PO within several years; strong and experienced management team and a definitive competitive advantage.

Financial Position

The net assets of the consolidated entity have decreased by $2,067,180 to $4,140,930 at 30 June 2009. The decrease can be wholly attributed to the reduction in the value of the consolidated entities listed investments. The decrease is in line with expectations and current market conditions.

Significant Changes In State Of Affairs

MEC is initially working to develop investment opportunities in PEP 11 (offshore Sydney Basin Gas prospect) and Advent Energy Ltd.

Advent Energy -Oil and Gas

MEC Resources Ltd has a controlling interest in the unlisted energy explorer Advent Energy Ltd (“Advent Energy”) by funding the company with an initial $1,000,000.

During the year MEC’s subsidiary Advent secured a $7 million conditional funding agreement.

On 7th August 2008 MEC completed a non renounceable rights issue. A total of 34,825,125 shares and 52,237,697 options were issued to shareholders who participated. Funds of $1,741,256 were raised.

MEC Resources Ltd annual report 2009

After Balance Date Events

On the 14th August 2009, the directors announced that Advent had mandated the Pareto Group from Norway to act as lead brokers to help source the company’s capital requirements in relation to the proposed drilling program in the offshore Sydney Basin (PEP 11).

Future Developments

The entity will continue to develop its investee portfolio projects including PEP11 and Advent Energy Ltd and will evaluate and invest in a range of resource projects.

Information on Directors

H Goh

Non-Executive Chairman – Age 54 Shares held – 5,096,248 Listed Options held – 4,725,144 Unlisted Options held – nil

Hock was formerly President of Network and Infrastructure Solutions, a division of Schlumberger Limited, based in London with revenue in excess of US$1.5 billion. He had global responsibility of Schlumberger’s outsourcing services, security, business continuity and networked related business units.

Prior to that, Hock was President of Schlumberger Asia based in Beijing, China where he managed their Asian operations consisting of a broad range of services including oil field services, outsourcing, financial software and smartcards. Hock was responsible for US$800 million in revenue and more than 2,000 employees spread across 17 countries.

In his 25 year career with Schlumberger, Hock held several other field and management responsibilities in the oil and gas industry spanning more than ten countries in Asia, the Middle East and Europe. Hock started as an oil field service engineer in Indonesia in 1980 before moving to Australia where he worked on the rigs in Roma, Queensland, Bass Strait in Victoria and the Northwest Shelf, offshore Western Australia.

Hock is also an operating partner with Baird Capital Partners, the U.S. based buyout fund of Baird Private Equity, providing change-of-control

and growth capital to middle-market companies. Baird Private Equity has raised and managed $1.7 billion in capital.

Hock is the Chairman of Netgain Systems, a network monitoring software provider. He also serves on the Board of Xaloy Holdings, a US based steel components manufacturer for the plastic industry, as well as an independent director of THISS Technologies Pte Ltd, a Singapore based satellite communication provider. He received his B Eng (Hons) in Mechanical Engineering from Monash University, Australia. He also completed an Advanced Management Program at INSEAD/ France in 2004.

Hock is a Non Executive director of ASX listed company BioPharmica Limited.

S K Yap

Non-Executive Director – Age 54 Shares held – 2,382,250 Listed options – nil Unlisted Options held – 3,000,000

After graduating from Kyoto University, Seng was employed by Schlumberger Limited, working in international Oil & Gas exploration projects across Asia, Australia and New Zealand. He worked as an International Staff Engineer at various Schlumberger onshore and offshore locations in Indonesia, Brunei, Japan, Australia, New Zealand and Papua New Guinea. He was Engineer in charge of land operations in Western Australia, and worked in Brunei as Engineer-in-Charge.

Seng was head of the joint venture between the NSW Investment Corporation and the venture capital operation of Daiwa Securities. He was Executive Director of Daiwa Securities Australia Limited and was instrumental in the establishment of the Australian stockbroking operations for the company.

Seng also worked as a senior advisor to leading venture capital groups and multi-nationals in Australia, Japan and China, advising on corporate, investment and development strategies. Seng, in his former investment banker role, was the leader in a series of transactions worth in excess of AU$500 million. He has also been on the Board of several resort management companies.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Directors’ Report

Information on Directors (cont’d)

S K Yap

Seng is currently a Director on the Board of a Japanese Coca-Cola Bottler with an annual turnover of approximately one billion dollars. He is also a Director for ASX listed Biopharmica Limited and a number of unlisted companies in Australia, Japan and China. Seng was also an Associate of the Securities Institute of Australia and a Fellow of the Australian Institute of Company Directors.

D L Breeze

Executive Director – Age 55 Shares held – 10,144,304 Listed Options – 7,608,228 Unlisted Options held – 3,000,000

David has extensive experience in transaction structuring, corporate advisory and funding for listed and unlisted companies and has held executive, consulting and/or board positions across a range of stockbroking companies in Australia including Daiwa Securities, Eyres Reed McIntosh and BNZ North’s.

David has provided capital raising, valuation and corporate advisory services for a wide ranging group of resources companies including Independent Experts reports for asset valuation under the provisions of the Australian Securities Exchange Rules and Corporations Law. The advisory function included advice on corporate structure, ASX listing rules and the structuring and running of IPO’s. He has also published in the Australian Securities Industry Journal on resource valuation.

David has worked on the structuring, capital raising and public listing of over 80 companies involving in excess of $250M. These capital raisings covered a diverse range of areas including oil and gas, gold, biotechnology and manufacturing. David is Chairman of Grandbridge Limited, a publicly listed investment and advisory company and BioPharmica Limited an ASX listed biotechnology commercialization business.

He holds a Bachelor of Economics and a Masters of Business Administration (MBA) and is a Member of the Australian Institute of Management, an Affiliate member of the Securities Institute of Australia and a Fellow of the Institute of Company Directors of Australia.

K O Yap

Non-Executive Director – Age 47 Shares held – 4,000,000 Listed options – 3,000,000 Unlisted Options held – nil

K O Yap has over 16 years experience in investment banking. Prior to establishing Eton Advisory Services Ltd, K O was Head of Corporate Finance at Daiwa Securities (H.K.) Ltd and Executive Director at Alta Financial Group. His career took him from general audit, computer audit and corporate advisory with Ernst & Young in London to investment banking with Barclays de Zoete Wedd Asia Ltd and then Daiwa Securities (H.K.) Ltd.

His extensive experience covers all aspects of corporate finance, advisory, mergers and acquisitions and capital raisings throughout Asia. These include privatisation, listing and public offerings from the PRC (Northeast Electric, H-Share), Malaysia (Petronas Gas), Thailand (PTTEP); equity-linked issues from HK (Emperor International) and Thailand (Bangkok Land) and debt issues including a samurai bond for Wharf (H.K.).

K O also has extensive experience in mergers and acquisitions (and related restructurings) with transactional experience in Thailand, Indonesia, Malaysia, Hong Kong and China.

K O a graduate from the London School of Economics, in 1984, is also a fellow of the Institute of Chartered Accountants in England and Wales.

C T Lim

Non-executive Director – Age 54 Shares held – 3,395,000 Listed options – 2,062,500 Unlisted Options held – nil

Lim is a founder and director of Encus International Pte Ltd, a contract design and manufacturing company. Lim was also the Chief Executive of Xpress Holdings Ltd during the period from 2001 to August 2005 and its Group Managing Director in 2000. He is currently an Executive Director of Manufacturing Integration Technology Ltd.

For 20 years Lim was with the Singapore Economic Development Board and held various positions with responsibilities for promoting and developing venture capital, mergers and acquisitions,

MEC Resources Ltd annual report 2009

engineering industries, local enterprises, skills training, automation and overseas investments. This included a period as a Director for the Enterprise Development Division of the Singapore Economic Development Board.

Lim is also involved with several listed and private companies in Singapore.

He is an Independent and Non-Executive Director on the boards of FibreChem Technologies Ltd, Metal Component Engineering Ltd, Rotol Singapore Ltd, all of which are listed on the Singapore Exchange. In addition, he sits on the Boards of GRN Singapore Pte Ltd and Atlas Vending Pte Ltd.

In the academic area, Lim is a member of the Board of Governors of Nanyang Polytechnic in Singapore.

Lim holds a Bachelor of Science (Honours) Degree in Mechanical Engineering from the University of Leeds and a Diploma in Business Administration from the National University of Singapore. In addition, Lim attended the Program for Management Development at Harvard Business School.

Lim is a Non Executive director of ASX listed company Grandbridge Limited.

Remuneration Report

This report details the nature and amount of remuneration for each director of MEC Resources Ltd, and for the executives receiving the highest remuneration.

H Goh – Non-Executive Chairman D L Breeze – Executive Director S K Yap – Non-Executive Director K O Yap – Non-Executive Director C T Lim – Non-Executive Director C R Murphy – Non Executive Director (resigned 29 November 2007)

D Ambrosini – Company Secretary

Remuneration Policy

The remuneration policy of MEC Resources Ltd has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the economic entity’s financial results. The board believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the economic entity, as well as create goal congruence between directors, executives and shareholders.

The board’s policy for determining the nature and amount of remuneration for board members and senior executives of the economic entity is as follows:

The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was approved by the board after seeking professional advice from independent external consultants.
All executives receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits, options and performance incentives.
The Board reviews executive packages annually by reference to the economic entity’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries.

The performance of executives is measured against criteria agreed biannually with each executive and is based predominantly on the forecast growth of the economic entity’s profits and shareholders’ value. All bonuses and incentives must be linked to predetermined performance criteria. The board may, however, exercise its discretion in relation to approving incentives, bonuses and options. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance that results in longterm growth in shareholder wealth.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Directors’ Report

Remuneration Policy (cont’d)

Executives are also entitled to participate in the employee share and option arrangements.

The executive directors and executives receive a superannuation guarantee contribution required by the government, which is currently 9%, and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation.

All remuneration paid to directors and executives is valued at the cost to the company and expensed. Shares given to directors and executives are valued as the difference between the market price of those shares and the amount paid by the director or executive. Options are valued using the Black-Scholes methodology.

The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The remuneration committee determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the economic entity. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the company and are able to participate in the employee option plan.

Compensation Practices

The board’s policy for determining the nature and amount of compensation of key management for the group is as follows:

The compensation structure for key management personnel is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of the company. The contracts for service between the company and key management personnel are on a continuing basis,

the terms of which are not expected to change in the immediate future. Upon retirement key management personnel are paid employee benefit entitlements accrued to date of retirement. Key management personnel are paid six months of salary in the event of redundancy options not exercised before or on the date of termination do not lapse.

The employment conditions of the executive directors and other key management personnel are formalised in contracts of employment.

The employment contract stipulates a six month resignation period. The company may terminate an employment contract without cause by providing six months written notice or making payment in lieu of notice, based on the individual’s annual salary component. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the company can terminate employment at any time. Any options not exercised before or on the date of termination will lapse.

The Board determines the proportion of fixed and variable compensation for each key management personnel.

Employment contracts of directors and senior executives

The employment conditions of the executive director and specified executives are formalised in contracts of employment. The directors are permanent employees of MEC Resources Ltd. The employment contracts stipulate a six month resignation period. The company may terminate an employment contract without cause by providing six months written notice or making payment in lieu of notice, based on the individual’s annual salary component together with a redundancy payment of six months of the individual’s fixed salary component. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the company can terminate employment at any time. Any options not exercised before or on the date of termination will not lapse.

MEC Resources Ltd annual report 2009

Details of Remuneration for the year ended 30 June 2009

The remuneration for each director and each of the executive officers of the consolidated entity receiving the highest remuneration during the year was as follows:

2009

Key Management Person	Cash, Salary and Fees	Short-term Benefts Director fees Non-cash beneft	Short-term Benefts Director fees Non-cash beneft	Other	Post- employment Benefts Super- annuation
H Goh	-	50,000	-	-	-
S K Yap	-	25,000	-	-	-
D L Breeze	65,000	25,000	-	-	-
K O Yap	-	25,000	-	-	-
C T Lim	-	25,000	-	-	-
D Ambrosini	-	-	-	-	-

2009 (cont’d)

Key Management Person	Long-term Benefts Other	Share-based payment Equity Options	Share-based payment Equity Options	Total $	Performance Related %
H Goh	-	-	-	50,000	-
S K Yap	-	-	-	25,000	-
D L Breeze	-	-	60,941	150,941	-
K O Yap	-	-	-	25,000	-
C T Lim	-	-	-	25,000	-
D Ambrosini	-	-	-	-	-

2008

Key Management Person	Cash, Salary and Fees	Short-term Benefts Cash proft share Non-cash beneft	Short-term Benefts Cash proft share Non-cash beneft	Other	Post- employment Benefts Super- annuation
H Goh	-	-	-	-	-
S K Yap	25,000	-	-	-	-
D L Breeze	65,000	25,000	-	-	-
C R Murphy	16,250	-	-	-	-
K O Yap	25,000	-	-	-	-
C T Lim	25,000	-	-	-	-
D Ambrosini	-	-	-	-	-

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Directors’ Report

2008 (cont’d)

Key Management Person	Long-term Benefts	Share-based payment	Share-based payment	Total	Performance Related
	Other	Equity	Options	$	%
H Goh	-	252,000	-	252,000	60.00
S K Yap	-	-	-	25,000	-
D L Breeze	-	-	-	90,000	-
C R Murphy	-	-	-	16,250	-
K O Yap	-	-	-	25,000	-
C T Lim	-	-	-	25,000	-
D Ambrosini	-	-	1,548	1,548	100.00

The company has an agreement with Trandcorp Pty Ltd on normal commercial terms procuring the services of David Breeze. The agreement is at the rate of $65,000 per annum, commencing from the time of receiving listing approval. Board payments may be made up to a level of $250,000 per annum. Payments are to be made up to $25,000 per annum per director and $50,000 per annum for the Chairman.

Options and Rights Holdings

2009 Number of Listed Options Held by Key Management Personnel

	Balance 1.7.2008	Granted as Compen- sation	Options Exercised	Net Change Other	Balance 30.6.2009	Total Vested 30.6.2009	Total Exercis- able 30.6.2009	Total Unexercis- able 30.6.2009
H Goh	-	-	-	4,725,144	4,725,144	4,725,144	4,725,144	-
S K Yap	-	-	-	-	-	-	-	-
D Breeze	-	-	-	7,608,228	7,608,228	7,608,228	7,608,228	-
K O Yap	-	-	-	3,000,000	3,000,000	3,000,000	3,000,000	-
C T Lim	-	-	-	2,062,500	2,062,500	2,062,500	2,062,500	-
D Ambrosini	-	-	-	13,635	13,635	13,635	13,635	-

2008 Number of Listed Options Held by Key Management Personnel

	Balance 1.7.2007	Granted as Compen- sation	Options Exercised	Net Change Other	Balance 30.6.2008	Total Vested 30.6.2008	Total Exercis- able 30.6.2008	Total Unexercis- able 30.6.2008
H Goh	-	-	-	-	-	-	-	-
S Yap	2,382,250	-	-	(2,382,250)	-	-	-	-
D Breeze	5,006,252	-	-	(5,006,252)	-	-	-	-
C Murphy	1,000,000	-	-	(1,000,000)	-	-	-	-
K Yap	2,000,000	-	-	(2,000,000)	-	-	-	-
C Lim	1,666,667	-	-	(1,666,667)	-	-	-	-
D Ambrosini	-	-	-	-	-	-	-	-

MEC Resources Ltd annual report 2009

2009 Number of Unlisted Options Held by Key Management Personnel

	Balance 1.7.2008	Granted as Compen- sation	Options Exercised	Net Change Other	Balance 30.6.2009	Total Vested 30.6.2009	Total Exercis- able 30.6.2009	Total Unexercis- able 30.6.2009
H Goh	-	-	-	-	-	-	-	-
S K Yap	3,000,000	-	-	-	3,000,000	3,000,000	3,000,000	-
D Breeze	3,000,000	-	-	-	3,000,000	3,000,000	3,000,000	-
K O Yap	-	-	-	-	-	-	-	-
C T Lim	-	-	-	-	-	-	-	-
D Ambrosini	1,000,000	-	-	-	1,000,000	333,333	333,333	666,667

2008 Number of Unlisted Options Held by Key Management Personnel

	Balance 1.7.2007	Granted as Compen- sation	Options Exercised	Net Change Other	Balance 30.6.2008	Total Vested 30.6.2008	Total Exercis- able 30.6.2008	Total Unexercis- able 30.6.2008
H Goh	-	-	-	-	-	-	-	-
S K Yap	3,000,000	-	-	-	3,000,000	3,000,000	3,000,000	-
D Breeze	3,000,000	-	-	-	3,000,000	3,000,000	3,000,000	-
K O Yap	-	-	-	-	-	-	-	-
C R Murphy	3,000,000	-	-	-	3,000,000	3,000,000	3,000,000	-
C T Lim	-	-	-	-	-	-	-	-
D Ambrosini	-	1,000,000	-	-	1,000,000	-	-	1,000,000

Shareholdings

2009 Number of Shares Held by Key Management Personnel

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Balance Received as Options Net Change Balance
1.7.2008 Compensation Exercised Other 30.6.2009
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H Goh	3,150,096	-	-	2,150,096	5,300,192
S K Yap	2,382,250	-	-	-	2,382,250
D L Breeze	5,072,151	-	-	5,072,153	10,144,304
K O Yap	2,000,000	-	-	2,000,000	4,000,000
C T Lim	2,020,000	-	-	1,375,000	3,395,000
D Ambrosini	-	-	-	18,180	18,180

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Directors’ Report

Shareholdings (cont’d)

2008 Number of Shares Held by Key Management Personnel

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Balance Received as Options Net Change Balance
1.7.2007 Compensation Exercised Other 30.6.2008
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H Goh	-	3,100,096	-	50,000	3,150,096
S K Yap	2,382,250	-	-	-	2,382,250
D L Breeze	5,022,151	-	-	50,000	5,072,151
C R Murphy	3,850,000	-	-	-	3,850,000
K O Yap	2,000,000	-	-	-	4,000,000
C T Lim	2,000,000	-	-	20,000	2,020,000
D Ambrosini	-	-	-	-	-

There were no shares or options granted to key management personnel during the year.

Company performance, shareholder wealth, and director and executive remuneration

The following table shows the gross revenue and the operating result for the last 3 years for the listed entity, as well as the share price at the end of the respective financial years. Analysis of the actual figures shows an increase in the operating loss in the last year, however the share price has been maintained. The Board is of the opinion that the increased expenses is in line with expectations as the company progresses with its drilling preparations. The Board is satisfied that the current developments will translate to increased shareholder wealth.

	2007	2008	2009
Revenue	105,971	1,067,694	108,306
Net Proft/Loss	(765,217)	(433,939)	(3,357,021)
Shareprice at Year end	$0.115	$0.115	$0.105

Meetings of Directors

During the financial year, four meetings of directors (including committees of directors) were held. Attendances by each director during the year were:

		Directors’ Meetings
	Number eligible	to attend Number attended
H Goh	4		4
S K Yap	4		4
D L Breeze	4		4
K O Yap	4		4
C T Lim	4		4

MEC Resources Ltd annual report 2009

Indemnifying Officers or Auditors

During or since the end of the financial year the company has given an indemnity or entered an agreement to indemnify, or paid or agreed to pay insurance premiums as follows:

The company has paid premiums to insure each of the following directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of the company, other than conduct involving a wilful breach of duty in relation to the company. The amount of the premium was $18,810.

D Breeze
S K Yap
H Goh
K O Yap
C T Lim

Options

At the date of this report, the unissued ordinary shares of MEC Resources Ltd under unlisted options are as follows:

MEC Resources

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Grant Date Date of Exercise Number Under
Expiry Price Option
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18/05/2006	1/12/2010	$0.21	9,000,000
01/06/2008	30/06/2013	$0.15	2,150,000
22/01/2009	1/12/2010	$0.20	500,000
23/07/2009	30/06/2010	$0.20	500,000
06/08/2008	06/08/2013	$0.15	1,500,000

Advent Energy

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Grant Date Date of Exercise Number Under
Expiry Price Option
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28/07/2004	30/06/2010	$0.20	9,000,000
10/11/2004	30/06/2010	$0.20	100,000
04/03/2005	30/06/2010	$0.20	100,000
04/04/2005	30/06/2010	$0.20	125,000
13/05/2005	30/06/2010	$0.20	2,500,000
04/10/2005	30/06/2010	$0.20	1,000,000
14/05/2008	28/12/2012	$0.06	2,000,000
01/06/2008	30/06/2012	$0.06	3,500,000

Listed Options - MEC Resources Ltd

Grant Date	Date of Expiry	Exercise Price	Number Under Option
07/08/2008	04/07/2013	$0.20	52,237,694

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Directors’ Report

On 6 August 2008 1,500,000 options were issued under the MEC Resources Ltd Employee Incentive Option Plan. The options are exercisable at 15 cents with an expiry date of 6 August 2013. The options had a fair value of $69,450. The fair value of the options was determined using the Black Scholes option pricing model.

On 22 January 2009 500,000 options were issued under the MEC Resources Ltd Employee Incentive Option Plan. The options are exercisable at 20 cents with an expiry date of 1 December 2010. The options had a fair value of $4,300. The fair value of the options was determined using the Black Scholes option pricing model.

On 23 July 2009 500,000 options were issued under the MEC Resources Ltd Employee Incentive Option Plan. The options are exercisable at 20 cents with an expiry date of 30 June 2010. The options had a fair value of $8,550. The fair value of the options was determined using the Black Scholes option pricing model.

During the year ended 30 June 2009, no ordinary shares of MEC Resources Ltd were issued on the exercise of options granted under the MEC Resources Ltd Employee Option Plan. No amounts are unpaid on any of the shares.

No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate.

Non-audit Services

The board of directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons:

all non-audit services are reviewed and approved by the board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

No fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2009.

Auditor’s Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2009 has been received and can be found on page 21.

Signed in accordance with a resolution of the Board of Directors.

Proceedings on Behalf of Company

No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The company was not a party to any such proceedings during the year..

Environmental Issues

The consolidated group’s operations are not subject to significant environmental regulation under the law of the Commonwealth and State.

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David Breeze Director

Dated this 19th Day of August 2009

MEC Resources Ltd annual report 2009

Auditor’s Independence Declaration

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As lead auditor for the audit of MEC Resources Ltd for the year ended 30 June 2009, I declare that to the best of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of MEC Resources Ltd and the entities it controlled during the year.

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PKF Chartered Accountants

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Chris Nicoloff Partner

Dated at Perth, Western Australia this 19th day of August 2009.

PKF is a national association of independent chartered accounting and consulting firms, each trading as PKF. PKF Australia Ltd is also a member of PKF International, an association of legally independent chartered accounting and consulting firms.

Liability limited by a scheme approved under Professional Standards Legislation

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Corporate Governance Statement

The Board of Directors of MEC Resources Limited (“MEC or “the Company”) is responsible for the corporate governance of the economic entity. The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable.

To ensure that the Board is well equipped to discharge its responsibilities, it has established guidelines and accountability as the basis for the administration of corporate governance.

Corporate Governance Disclosures

MEC and the board are committed to achieving and demonstrating the highest standards of corporate governance. The board continues to review the framework and practices to ensure they meet the interests of shareholders. The company and its controlled entities together are referred to as the Group in this statement.

Composition of the Board

The composition of the Board is determined in accordance with the following principles and guidelines:

the Board should comprise a majority or at least 50% of the Board will be independent non-executive directors;
the Board should comprise of at least one director with an appropriate range of qualifications and expertise; and
the Board shall meet at regular intervals and follow meeting guidelines set down to ensure all directors are made aware of, and have available all necessary information, to participate in an informed discussion of all agenda items.

When a vacancy exists, through whatever cause, or where it is considered that the Board would benefit from the service of a new director with particular skills, the Board selects a candidate or panel of candidates with the appropriate expertise.

The Board then appoints the most suitable candidate, who must stand for election at the next general meeting of shareholders. The Company does not have a formal Nomination Committee.

Remuneration And Nomination Committees

The Company does not have a formal Remuneration or Nomination Committee. The full Board attends to the matters normally attended to by a Remuneration Committee and a Nomination committee. Remuneration levels are set by the Company in accordance with industry standards to attract suitable qualified and experienced Directors and senior executives.

Audit Committee

The Company does not have a formal Audit Committee. The full Board carried out the functions of an Audit Committee. Due to the status of the Company and the relatively straight forward accounts of the Company, the Directors believe that at the moment there would be no additional benefits obtained by establishing such a committee. The Board follows the Audit Committee Charter, a copy of which is available on request.

Board Responsibilities

As the Board acts on behalf of and is accountable to the shareholders, it seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks. The Board seeks to discharge these responsibilities in a number of ways.

The responsibility for the operation and administration of the economic entity is delegated by the Board to the Chief Executive Officer. The Board ensures that the Chief Executive Officer is appropriately qualified and experienced to discharge his responsibilities, and has in place procedures to assess the performance for the Company’s officers, employees, contractors and consultants.

MEC Resources Ltd annual report 2009

The Board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risks identified by the Board. It has a number of mechanisms in place to ensure this is achieved, including the following:

Board approval of a strategic plan, designed to meet shareholder needs and manage business risk;
Implementation of operating plans and budgets by management and Board monitoring progress against budget;
Procedures to allow directors, in the furtherance of their duties, to seek independent professional advice at the Company’s expense.

Monitoring of the Board’s Performance

In order to ensure that the Board continues to discharge its responsibilities in an appropriate manner, the performance of all directors is to be reviewed annually by the chairperson. Directors whose performance is unsatisfactory are asked to retire.

Best Practice Recommendation

Outlined below are the 8 Essential Corporate Governance Principles as outlined by the ASX and the Corporate Governance Council. The Company has complied with the Corporate Governance Best Practice Recommendations except as identified below.

Action taken and reasons if not adopted

Principle 1: Lay solid foundations for management and oversight

The relationship between the board and senior management is critical to the Group’s long-term success. The directors are responsible to the shareholders for the performance of the Group in both the short and the longer term and seek to balance sometimes competing objectives in the best interests of the Group as a whole. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Group is properly managed.

The responsibilities of the board include:

providing strategic guidance to the Group including contributing to the development of and approving the corporate strategy;
reviewing and approving business plans, and financial plans including major capital expenditure initiatives;
overseeing and monitoring:
organisational performance and the achievement of the Group’s strategic goals and objectives and
progress of major capital expenditures and other significant corporate projects including any acquisitions or divestments
monitoring financial performance including approval of the annual and half-year financial reports;
appointment, performance assessment and, if necessary, removal of the Managing Director;
ratifying the appointment and/or removal and contributing to the performance assessment for the members of the senior management team including the CFO and the Company Secretary;
ensuring there are effective management processes in place and approving major corporate initiatives;
enhancing and protecting the reputation of the organization;
overseeing the operation of the Group’s system for compliance and risk management reporting to shareholders;

Day to day management of the Group’s affairs and the implementation of the corporate strategy and policy initiatives are formally delegated by the board to the Managing Director and senior executives.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Corporate Governance Statement

Action taken and reasons if not adopted

Principle 2: Structure the board to add value

The board operates in accordance with the broad principles set out in its charter. The charter details the board’s composition and responsibilities.

The board seeks to ensure that :

at any point in time, its membership represents an appropriate balance between directors with experience and knowledge of the Group and directors with an external or fresh perspective; and
the size of the board is conducive to effective discussion and efficient decision-making.

Directors’ independence

The board has adopted specific principles in relation to directors’ independence. These state that when determining independence, a director must be a non-executive and the board should consider whether the director:

is a substantial shareholder of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company;
is or has been employed in an executive capacity by the company or any other Group member within three years before commencing to serve on the board;
within the last three years has been a principal of a material professional adviser or a material consultant to the company or any other Group member, or an employee materially associated with the service provided;
has a material contractual relationship with the company or a controlled entity other than as a director of the Group;
is free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s independent exercise of their judgement.

Materiality for these purposes is determined on both quantitative and qualitative bases. A transaction of any amount or a relationship is deemed material if knowledge of it may impact the shareholders’ understanding of the director’s performance.

The board assesses independence each year. To enable this process, the directors must provide all information that may be relevant to the assessment.

Board members

Details of the members of the board, their experience, expertise, qualifications, term of office, relationships affecting their independence and their independent status are set out in the directors’ report under the heading ‘’Information on directors’’. At the date of signing the directors’ report, there are two non-executive directors and one executive director, two of whom have no relationships adversely affecting independence and so are deemed independent under the principles set out above.

Mr Breeze has business dealings with the Group as disclosed in note 23 to the financial report. However, these are not of a value or significance that adversely affects the directors’ independence.

Term of office

The company’s Constitution specifies that all non-executive directors must retire from office no later than the third annual general meeting (AGM) following their last election. Where eligible, a director may stand for re-election, subject to the following limitations:

on attaining the age of 72 years a director will retire, by agreement, at the next AGM and will not seek re-election.

MEC Resources Ltd annual report 2009

Action taken and reasons if not adopted

Chair and Chief Executive Officer (CEO)

The Chair is responsible for leading the board, ensuring directors are properly briefed in all matters relevant to their role and responsibilities, facilitating board discussions and managing the board’s relationship with the company’s senior executives. In accepting the position, the Chair has acknowledged that it will require a significant time commitment and has confirmed that other positions will not hinder his effective performance in the role of Chair.

The CEO is responsible for implementing Group strategies and policies.

Committees

The number of meetings of the company’s board of directors and of each board committee held during the year ended 30 June 2009, and the number of meetings attended by each director is disclosed on page 18.

It is the company’s practice to allow its executive directors to accept appointments outside the company. No appointments of this nature were accepted during the year ended 30 June 2009.

The Company is not of a size at the moment that justifies having a separate Nomination Committee. However, matters typically dealt with by such a committee are dealt with by the Board.

Notices of meetings for the election of directors comply with the ASX Corporate Governance Council’s best practice recommendations.

Principle 3: Promote ethical and responsible decision making

The company has developed a statement of values a which has been fully endorsed by the board and applies to all directors and employees. The Statement is regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the Group’s integrity and to take into account legal obligations and reasonable expectations of the company’s stakeholders.

The Statement requires that at all times all company personnel act with the utmost integrity, objectivity and in compliance with the letter and the spirit of the law and company policies.

The purchase and sale of company securities by directors and employees is monitored by the Board.

Principle 4: Safeguard integrity in financial reporting

Adopted except as follows:-

The Company does not have a separate Audit Committee. The full Board carries out the functions of an Audit Committee. The Board has the authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party.

Due to the status of the Company and the relatively straight forward accounts of the Company, the Directors at the moment can see no additional benefits to be obtained by establishing such a committee.

The Board follows the Audit Committee Charter, a copy of which is available on request.

The Company is not of a size at the moment that justifies having a internal audit division.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Corporate Governance Statement

Action taken and reasons if not adopted

Principle 4: Safeguard integrity in financial reporting (cont’d)

External auditors

The Board’s policy is to appoint external auditors who clearly demonstrate 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. PKF was appointed as the external auditor in 2008. It is PKF’s policy to rotate audit engagement partners on listed companies at least every five years.

An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in the directors’ report and in note 4 to the financial statements. It is the policy of the external auditors to provide an annual declaration of their independence to the Board.

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.

Principle 5&6: Make timely and balanced disclosures and respect the rights of shareholders

Continuous disclosure and shareholder communication

The company has policies and procedures on information disclosure that focus on continuous disclosure of any information concerning the Group that a reasonable person would expect to have a material effect on the price of the company’s securities. These policies and procedures also include the arrangements the company has in place to promote communication with shareholders and encourage effective participation at general meetings.

The Company Secretary has been nominated as the person responsible for communications with the ASX. This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.

All information disclosed to the ASX is posted on the company’s website as soon as 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 company’s web site. Procedures have also been established for reviewing whether any price sensitive information has been inadvertently disclosed and, if so, this information is also immediately released to the market.

All shareholders receive a copy of the company’s annual (full or concise) and half-yearly reports. In addition, the company seeks to provide opportunities for shareholders to participate through electronic means. Recent initiatives to facilitate this include making all company announcements, media briefings, details of company meetings, and financial reports available on the company’s website.

MEC Resources Ltd annual report 2009

Action taken and reasons if not adopted

Principle 7: Recognise and manage risk

The board and senior executives are responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. In summary, the company policies are designed to ensure strategic, operational, legal, reputational and financial risks are identified, assessed, effectively and efficiently managed and monitored to enable achievement of the Group’s business objectives.

Considerable importance is placed on maintaining a strong control environment. There is an organisation structure with clearly drawn lines of accountability and delegation of authority. The board actively promotes a culture of quality and integrity.

The responsibility for the operation and administration of the economic entity is delegated by the board to the Chief Executive Officer. The board ensures that the Chief Executive Officer is appropriately qualified and experienced to discharge his responsibilities, and has in place procedures to assess the performance for the Company’s officers, employees, contractors and consultants. The board receives monthly updates as to the effectiveness of the company’s management of material risks that may impede meeting business objectives.

The board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risks identified by the board. It has a number of mechanisms in place to ensure this is achieved, including the following:

Board approval of a strategic plan, designed to meet shareholder needs and manage business risk;
Implementation of operating plans and budgets by management and board monitoring progress against budget;
Procedures to allow directors, in the furtherance of their duties, to seek independent professional advice at the Company’s expense.

Control procedures cover management accounting, financial reporting, project appraisal, IT security, compliance and other risk management issues. The Chief Executive Officer is required to ensure that appropriate controls are in place to effectively manage the identified risks. This is monitored by the board on a monthly basis.

The environment

Information on compliance with significant environmental regulations is set out in the directors’ report.

Corporate reporting

The Managing Director and CFO have made the following certifications to the board:

that the company’s financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the company and Group and are in accordance with relevant accounting standards;
that the above statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board and that the company’s risk management and internal compliance and control is operating efficiently and effectively in all material respects in relation to financial reporting risks.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Corporate Governance Statement

Action taken and reasons if not adopted

Principle 8: Remunerate fairly and responsibly

The Company is not of a size at the moment that justifies having a separate Remuneration Committee. However, matters typically dealt with by such a committee are dealt with by the board.

The board makes specific recommendations on remuneration packages and other terms of employment for executive directors, other senior executives and non-executive directors.

Each member of the senior executive team signs a formal employment contract at the time of their appointment covering a range of matters including their duties, rights, responsibilities and any entitlements on termination. The standard contract refers to a specific formal job description.

Further information on directors’ and executives’ remuneration, including principles used to determine remuneration, is set out in the directors’ report under the heading ‘’Remuneration report’’. In accordance with Group policy, participants in equity-based remuneration plans are not permitted to enter into any transactions that would limit the economic risk of options or other unvested entitlements.

The board with the Chief Executive Office also assumes responsibility for overseeing management succession planning, including the implementation of appropriate executive development programmes and ensuring adequate arrangements are in place, so that appropriate candidates are recruited for later promotion to senior positions.

MEC Resources Ltd annual report 2009

Income Statement

for the year ended 30 June 2009

Note Revenue 2 Other Income 2 Administration expenses Consulting and Legal expenses Depreciation and amortisation expense Impairment expense Employee expenses 3 Insurance expenses Data Centre administration Service Fees Travelling expenses Other expenses from ordinary activities Operating Loss Before Income Tax Income tax expense 8 *Operating Loss from continuing* *operations* Operating Loss for the year Operating Loss attributable to minority equity interest *Operating Loss attributable to* *members of the parent entity* Earnings Per Share – Basic and diluted earnings per share (cents per share) 6	Consolidated 2009 $ 2008 $ 108,306 239,646 (1,591,434) 828,048 (217,650) (190,122) (801,692) (314,178) (3,040) (2,376) (55,611) - (653,199) (527,081) (25,350) (19,466) (31,927) (53,055) (347,029) (216,000) (181,132) (54,830) (198,742) (124,525) (3,998,500) (433,939) - - (3,998,500) (433,939) (3,998,500) (433,939) (641,479) - (3,357,021) (433,939) (3.27) (0.67)	Parent 2009 $ 2008 $
		94,696 239,646 (513,309) 805,736 (127,025) (190,122) (258,530) (314,178) (3,040) (2,376) - - (421,918) (527,081) (24,562) (19,466) - (53,055) (216,000) (216,000) (6,139) (54,830) (55,444) (124,525)
		(1,531,271) (456,251) - -
		(1,531,271) (456,251)
		(1,531,271) (456,251)
		-
		(1,531,271) (456,251)

The accompanying notes form part of these financial statements.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Balance Sheet

as at 30 June 2009

Note Current Assets Cash and cash equivalents 7 Trade and other receivables 9 Financial assets 12 Total Current Assets Non-Current Assets Other non-current assets 10 Capitalised exploration costs 11 Financial assets 12 Property, plant & equipment 13 Total Non-Current Assets Total Assets Current Liabilities Trade and other payables 14 Provisions 15 Total Current Liabilities Non Current Liabilities Financial liabilities 16 Total Non Current Liabilities Total Liabilities Net Assets Equity Issued capital 17 Option Reserve 18 Accumulated losses Total Parent Entity Equity Interest Minority Equity Interest Total Equity	Consolidated 2009 $ 2008 $ 1,480,629 1,966,361 43,382 43,651 178,063 40,698 1,702,074 2,050,710 22,673 22,673 2,617,507 2,671,564 817,013 2,385,911 4,378 6,095 3,461,571 5,086,243 5,163,645 7,136,953 348,086 290,052 101,971 95,727 450,057 385,779 572,658 543,064 572,658 543,064 1,022,715 928,843 4,140,930 6,208,110 8,412,535 6,671,278 219,953 29,890 (4,677,981) (1,320,960) 3,954,507 5,380,208 186,423 827,902 4,140,930 6,208,110	Parent 2009 $ 2008 $
		544,661 1,500,338 28,993 39,388 1,718,111 46,335
		2,291,765 1,586,061
		- - 62,365 62,365 3,473,951 3,983,474 4,207 6,095
		3,540,523 4,051,934
		5,832,288 5,637,995
		136,506 202,856 20,127 13,884
		156,633 216,740
		1,684 41,047
		1,684 41,047
		158,317 257,787

		5,673,971 5,380,208
		8,412,535 6,671,278 113,667 29,890 (2,852,231) (1,320,960)
		5,673,971 5,380,208 - -
		5,673,971 5,380,208

The accompanying notes form part of the financial statements.

MEC Resources Ltd annual report 2009

Statement of Changes in Equity

for the year ended 30 June 2009

		Consolidated	Consolidated
	Ordinary	Accumulated	Option	Minority	Total
	Share	losses	Reserve	Interest
	Capital
	$	$	$	$	$
Balance at 1 July 2007	4,349,560	(872,198)	440,997	-	3,918,359
Shares issued during the
fnancial year	1,772,346	-	-	-	1,772,346
Options exercised during the
fnancial year	140,028	-	(6,668)	-	133,360
Options expired during the
fnancial year	408,328	-	(408,328)	-	-
Options issued during the
fnancial year	-	-	3,889	-	3,889
Transaction costs	1,016	-	-	-	1,016
Loss attributable to members
of the consolidated entity	-	(433,939)	-	-	(433,939)
Sale of Subsidiary	-	(14,823)	-	-	(14,823)
Minority Equity Interest	-	-	-	827,902	827,902
Balance at 30 June 2008	6,671,278	(1,320,960)	29,890	827,902	6,208,110
Balance at 1 July 2008	6,671,278	(1,320,960)	29,890	827,902	6,208,110
Shares issued during the
fnancial year	1,741,257	-	-	-	1,741,257
Options issued during the
fnancial year	-	-	190,063	-	190,063
Loss attributable to members
of the consolidated entity	-	(3,357,021)	-	-	(3,357,021)
Minority Equity Interest	-		-	(641,479)	(641,479)
Balance at 30 June 2009	8,412,535	(4,677,981)	219,953	186,423	4,140,930

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Statement of Changes in Equity

for the year ended 30 June 2009

Company

Balance at 1 July 2007 Shares issued during the fnancial year Options exercised during the fnancial year Options expired during the fnancial year Options issued during the fnancial year Transaction costs Loss attributable to members of parent entity Balance at 30 June 2008 Balance at 1 July 2008 Shares issued during the fnancial year Options issued during the fnancial year Loss attributable to members of parent entity Balance at 30 June 2009	Ordinary Share Capital $ Accumulated losses $ Option Reserve $ Total $
	4,349,560 (864,709) 440,997 3,925,848 1,772,346 - - 1,772,346 140,028 - (6,668) 133,360 408,328 - (408,328) - - - 3,889 3,889 1,016 - - 1,016 - (456,251) - (456,251)
	6,671,278 (1,320,960) 29,890 5,380,208
	6,671,278 (1,320,960) 29,890 5,380,208 1,741,257 - - 1,741,257 - - 83,777 83,777 - (1,531,271) - (1,531,271)
	8,412,535 (2,852,231) 113,667 5,673,971

The accompanying notes form part of these financial statements.

MEC Resources Ltd annual report 2009

Cash Flow Statement

for the year ended 30 June 2009

Note *Cash Flows From Operating* *Activities* Receipts from customers Payments to suppliers and employees Payment for deferred exploration expenditure Interest received Net cash used in operating activities 19 *Cash Flows From Investing* *Activities* Amounts repaid by/ (loaned to) other entities Payment for investments Payment for property, plant and equipment Net cash infow on acquisition of subsidiary 19 Net cash used in investing activities *Cash Flows From Financing* *Activities* Proceeds from capital raising Proceeds from/(repayment of) borrowings Share issue costs Net cash provided by fnancing activities Net increase (decrease) in Cash Held Cash At the Beginning Of The Financial Year *Cash At The End Of The* *Financial Year* 7	Consolidated 2009 $ 2008 $ - 70,000 (1,933,146) (1,050,237) (1,554) (49,321) 102,840 169,646 (1,831,860) (859,912) (371,280) 57,599 (22,526) (2,369,316) (1,323) (6,731) - 465,408 (395,129) (1,853,040) 1,741,257 1,651,721 - - - - 1,741,257 1,651,721 (485,732) (1,061,231) 1,966,361 3,027,592 1,480,629 1,966,361	Parent 2009 $ 2008 $
		- 70,000 (1,013,417) (1,001,200) - (35,400) 94,696 169,646
		(918,721) (796,954)
		(1,773,274) (5,182) (3,786) (2,369,316) (1,153) (6,731) - -
		(1,778,213) (2,381,229)
		1,741,257 1,651,721 - - - -
		1,741,257 1,651,721
		(955,677) (1,526,462) 1,500,338 3,026,800
		544,661 1,500,338

The accompanying notes form part of these financial statements.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

1. Statement of Significant Accounting Policies

Corporate Information

The financial report includes the consolidated financial statements and the notes of MEC Resources Ltd and controlled entities (‘Consolidated Group’ or ‘Group’), and the separate financial statements and notes of MEC Resources Lt as an individual parent entity (‘Parent Entity’).

MEC Resources Ltd is a public listed company on the ASX, which is incorporated and domiciled in Australia.

The financial report was authorised for issue on 19th August 2009 by the board of directors.

Basis of Preparation

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated.

The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

Going Concern

The consolidated entity and the parent entity has incurred losses for the year ended 30 June 2009 of $3,357,021 (30 June 2008: losses of $433,939) and $1,531,271 (30 June 2008: losses of $456,251) respectively.

The directors have reviewed their expenditure and commitments for the consolidated entity and parent entity and have implemented methods of costs reduction.

The directors have prepared cash flow forecasts that indicate that the consolidated entity and the parent entity will have sufficient cashflows for a period of at least 12 months from the date of this report.

Based on the cash flow forecasts and the monitoring of operational costs, the directors are satisfied that, the going concern basis of preparation is appropriate. The financial report has therefore been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

MEC Resources Ltd annual report 2009

Accounting Policies

(a) Principles of Consolidation

A controlled entity is any entity MEC Resources Ltd has the power to control the financial and operating policies of so as to obtain benefits from its activities.

All inter-company balances and transactions between entities in the consolidated group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.

Where controlled entities have entered or left the consolidated group during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased.

Minority equity interests in the equity and results of the entities that are controlled are shown as a separate item in the consolidated financial report.

(b) Business Combinations

Business combinations occur where control over another business is obtained and results in the consolidation of its assets and liabilities. All business combinations, including those involving entities under common control, are accounted for by applying the purchase method.

The purchase method requires an acquirer of the business to be identified and for the cost of the acquisition and fair values of identifiable assets, liabilities and contingent liabilities to be determined as at acquisition date, being the date that control is obtained. Cost is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for control together with costs directly attributable to the business combination. Any deferred consideration payable is discounted to present value using the entity’s incremental borrowing rate.

Goodwill is recognised initially at the excess of cost over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If the fair value of the acquirer’s interest is greater than cost, the surplus is immediately recognised in profit or loss

(c) Income Tax

The charge for current income tax expense is based on the profit for the year adjusted for any nonassessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

1. Statement of Significant Accounting Policies (cont’d)

(c) Income Tax (cont’d)

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

(d) Property, plant and equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses.

Plant and equipment

Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation

The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over their useful lives to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

Class of Fixed Asset	Depreciation Rate
Plant and equipment	33.33%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

MEC Resources Ltd annual report 2009

(e) Exploration and Development Expenditure

Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

(f) Financial Instruments

Recognition and Initial Measurement

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention.

Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below.

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity is no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

1. Statement of Significant Accounting Policies (cont’d)

(f) Financial Instruments (cont’d)

Classification and Subsequent Measurement

(i) Financial assets at fair value through profit or loss Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss in the period in which they arise.
(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method.

(iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost using the effective interest rate method.

(iv) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated as such or that are not classified in any of the other categories. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments.

(v) Financial Liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method.

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Impairment

At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the income statement.

(g) Impairment of Assets

At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

MEC Resources Ltd annual report 2009

(h) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other shortterm highly liquid investments, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet.

(i) Revenue

Revenue from the sale of goods is recognised upon the delivery of goods to customers.

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates and joint venture entities are accounted for in accordance with the equity method of accounting.

Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.

All revenue is stated net of the amount of goods and services tax (GST).

(j) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

Receivables and payables in the balance sheet are shown inclusive of GST.

Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

(k) Trade and other payables

Liabilities are recognized for amounts to be paid in the future for goods or services received, whether or not billed to the consolidated entity. The amounts are unsecured and are usually paid within 30 days.

(l) Share based payments

Share based compensation benefits are provided to employees via the Company’s Employee Option plan.

The fair value of options granted under the Company’s Employee Option Plan is recognized as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognized over the period during which the employees become unconditionally entitled to the options.

The fair value at grant date is independently determined using a Black and Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected volatility of the underlying share, the expected dividend yield and risk free interest rate for the term of the option.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

1. Statement of Significant Accounting Policies (cont’d)

(l) Share based payments (cont’d)

The fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital.

The market value of shares issued to employees for no cash consideration is recognised as an employee benefits expense with a corresponding increase in equity when the employees become entitled to the shares.

(m) Earnings per share

Basic earnings per share (EPS) is calculated as net profit/loss attributable to members, adjusted to exclude costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

(n) Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

Critical accounting estimates and judgments

The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group.

Key estimates — Impairment

The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

Key Judgments —Impairment of capitalised and carried forward exploration expenditure

Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current. During the period $55,611 was written off to the income statement. These costs are carried forward in respect of an area that has not at balance sheet date reached a stage that permits reasonable assessment of the existence of economically recoverable reserves, refer to the accounting policy stated in note 1(e).

Key Judgments —Impairment of financial assets

No impairment has been recognised in respect of the Company’s carrying value of its investments in its subsidiaries Advent Energy Ltd and Asset Energy Pty Ltd. After a review of the carrying values, the directors believe that the full amount of these investments is recoverable through the projected activities of each entity and no provision for impairment has been made as at 30 June 2009.

MEC Resources Ltd annual report 2009

		Consolidated	Consolidated	Parent
		2009	2008	2009	2008
		$	$	$	$
2.	Revenue
	Revenue
	Interest revenue : other entities	102,840	169,646	94,696	169,646
	Consulting income	5,466	-	-	-
	Sub underwriting income	-	70,000	-	70,000
	Total revenue	108,306	239,646	94,696	239,646
	*Other Income*
	Fair value adjustment of available
	for sale fnancial assets	(1,606,457)	336,986	(515,832)	336,986
	Gain on Sale of Investments	15,023	468,750	2,523	468,750
	Other gains	-	22,312	-	-
		(1,591,434)	828,048	513,309	805,736
3.	Proft For The Year
	Expenses
	Employee Expenses
	Salary	468,330	247,851	343,333	247,851
	Superannuation expense	17,400	13,346	17,400	13,346
	Share-based payments	161,226	252,000	54,942	252,000
	Other payroll expenses	6,243	13,884	6,243	13,884
		653,199	527,081	421,918	527,081
4.	Auditors’ Remuneration
	Remuneration of the auditor of the
	parent entity for:
	- auditing or reviewing the
	fnancial report	33,006	34,243	33,006	34,243
	- other services	-	-	-	-
	Remuneration of other auditors of
	subsidiaries for:
	- auditing or reviewing the
	fnancial report of subsidiaries	12,000	-	-	-
		45,006	34,243	33,006	34,243

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

5. Key Management Personnel Compensation

(a) Names and positions held of economic and parent entity key management personnel in office at any time during the financial year are:

Key Management Personnel

H Goh – Non-Executive Chairman

D L Breeze – Executive Director

S K Yap – Non-Executive Director

K O Yap – Non-Executive Director

C T Lim – Non-Executive Director D Ambrosini – Company Secretary

Key management personnel remuneration, shareholdings and option holdings have been included in the Remuneration Report section of the Directors Report.

6. Earnings per share

Consolidated

(a) Reconciliation of Earnings to Proft or Loss Net loss attributable to members of the parent Earnings used to calculate basic and diluted EPS (b) Weighted average number of ordinary shares outstanding during the year used in calculating basic and diluted EPS The Company’s potential ordinary shares, being its options granted, are not considered dilutive as the conversion of these options will result in a decreased net loss per share.	2009 $ 2008 $
	(3,357,021) (433,939)
	(3,357,021) (433,939)
	102,367,745 64,939,561

7. Cash and cash equivalents Cash at bank and in hand	Consolidated 2009 $ 2008 $ 1,480,629 1,966,361	Parent 2009 $ 2008 $
		544,661 1,500,338

Reconciliation of cash

Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the balance sheet as follows:

Cash and cash equivalents 1,480,629 1,966,361 544,661 1,500,338

MEC Resources Ltd annual report 2009

8. Income Tax Expense

		Consolidated	Consolidated	Parent
		2009	2008	2009	2008
		$	$	$	$
	The components of tax expense
	comprise:
	Current tax	-	-	-	-
	Deferred tax	-	-	-	-
(a)	The prima facie tax on proft from ordinary
	activities before income tax is reconciled
	to the income tax as follows:
	Prima facie tax payable on proft from
	ordinary activities before income tax at
	15% (2008: 15%)
	Company	(1,199,550)	(65,091)	(1,531,271)	(68,437)
	Tax beneft of revenue losses not
	recognised	699,675	94,529	504,163	95,773
	Permanent differences	553,366	-	89,728	-
	Temporary differences	(53,491)	-	937,380	-
	Exploration and evaluation costs	-	(7,398)	-	(5,310)
	Tax beneft of equity raising costs not
	recognised	-	(22,040)	-	(22,040)
	Income tax attributable to parent entity	-	-	-	-
		%	%	%	%
	Weighted average rate of tax	-	-	-	-
	The following deferred tax balances
	at 15% (2008: 15%) have not been
	recognised
	Deferred Tax Assets:
	Carry forward revenue losses	1,121,181	421,506	924,697	420,534
	Capital raising costs	-	44,050	-	44,050
(b)	The tax benefts of the above Deferred
	Tax Assets will only be obtained if:
	(i) company derives future assessable
	income in a nature and of an
	amount suffcient to enable the
	benefts to be utilised;
	(ii) the company continues to comply
	with the conditions for deductibility
	imposed by law; and
	(iii) no changes in income tax
	legislation adversely affect the
	company in utilising the benefts.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

8. Income Tax Expense (cont’d)

Deferred Tax Liabilities Exploration Expenditure The above Deferred Tax Liabilities have not been recognised as they have given rise to the carry forward revenue losses for which the Deferred Tax Asset has not been recognised. 9. Trade and other receivables CURRENT Trade receivables Other receivables 10. Other Assets Other Assets Total Other Assets 11. Capitalised Exploration Costs Exploration expenditure capitalised Exploration and evaluation phases	Consolidated 2009 $ 2008 $ 233 7,398 22,507 16,505 20,875 27,146 43,382 43,651 22,673 22,673 22,673 22,673 2,617,507 2,671,564 2,617,507 2,671,564	Parent 2009 $ 2008 $
		- 5,310 13,164 13,163 15,829 26,225
		28,993 39,388
		- -
		- -
		62,365 62,365
		62,365 62,365

Recoverability of the carrying amount of exploration assets is dependent on the successful exploration and sale of natural or coal seam gas.

Capitalised costs amounting to $1,554 (2008:$49,321) have been included in cash flows from operating activities in the cash flow statement.

MEC Resources Ltd annual report 2009

12. Financial Assets Current Loans receivable - loan to Grandbridge Limited - loans to subsidiaries Non current Investment in Advent Energy Ltd Investment in Asset Energy Pty Ltd Investment in Central Petroleum Ltd	Consolidated 2009 $ 2008 $ 178,063 40,698 178,063 40,698 - - - - - - 817,013 2,385,911 817,013 2,385,911	Parent 2009 $ 2008 $
		1,718,111 46,335
		178,063 40,698 1,540,048 5,637 3,285,062 3,285,062 - - 188,889 698,412
		3,473,951 3,983,474

Refer to Note 23 for details of related party terms and conditions.

The loan to Grandbridge Limited is an unsecured non-interest bearing and repayable on demand.

13. Property, Plant and Equipment

Plant and Equipment: At cost Accumulated depreciation Total Property, Plant and Equipment (a) Movements in Carrying Amounts	9,952 8,580 (5,574) (2,485) 4,378 6,095	9,733 8,580 (5,526) (2,485)
		4,207 6,095

Movements in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year.

	2009	Total	2008	Total
	$	$	$	$
Consolidated Entity:
Balance at the beginning of the year	6,095	6,095	1,740	1,740
Additions	1,370	1,370	6,731	6,731
Disposals	-	-	-	-
Depreciation expense	(3,087)	(3,087)	(2,376)	(2,376)
Carrying amount at the end of the year	4,378	4,378	6,095	6,095
Parent Entity:
Balance at the beginning of the year	6,095	6,095	1,740	1,740
Additions	1,152	1,152	6,731	6,731
Disposals	-	-	-	-
Depreciation expense	(3,040)	(3,040)	(2,376)	(2,376)
Carrying amount at the end of the year	4,207	4,207	6,095	6,095

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

14. Trade and other payables Trade payables Sundry payables and accrued expenses 15. Provisions Employee entitlements: Opening balance at 1 July Increase in provision Balance at 30 June Share sale agreement: Opening balance at 1 July Increase in provision Balance at 30 June Total Provisions	Consolidated 2009 $ 2008 $ 157,743 64,063 190,343 225,989 348,086 290,052 13,884 - 6,243 13,884 20,127 13,884 81,843 - - 81,843 81,843 81,843 101,971 95,727	Parent 2009 $ 2008 $
		19,986 27,907 116,520 174,949
		136,506 202,856
		13,884 - 6,243 13,884
		20,127 13,884 - - - -
		- -
		20,127 13,884

Provision for Employee Entitlements

A provision has been recognised for employee entitlements relating to annual leave. The measurement and recognition criteria relating to employee benefits has been included in Note 1 to this report.

Provision for Share Sale Agreement

A provision has been recognised for the payment of fees to relevant parties upon the successful listing of Advent Energy Ltd.

16. Financial Liabilities

Loans payable Loan to Grandbridge Limited Loans to other entities	572,658 543,064 570,974 543,064 1,684 -	1,684 41,047
		- 41,047 1,684 -

Loans payable are unsecured, non-interest bearing and repayable on demand.

The loan from Grandbridge Limited is secured by a registered charge over all assets and rights over Advent Energy including but not limited to , all real and personal property, choses in action, goodwill and called but unpaid nominal and premium capital. The loan does not have a fixed repayment date.

MEC Resources Ltd annual report 2009

17. Issued Capital 105,897,963 (2008:71,072,838) fully paid ordinary shares Less: Capital raising costs Issued Capital The Company does not have an authorized capital and issued shares have no par value. Ordinary Shares At the beginning of reporting period Shares issued during the year Shares issued during the year on conversion of options At reporting date	Consolidated 2009 $ 2008 $ 9,145,684 7,404,427 (733,149) (733,149) 8,412,535 6,671,278 No No 71,072,838 52,260,942 34,825,125 18,145,096 - 666,800 105,897,963 71,072,838	Parent 2009 $ 2008 $
		9,145,684 7,404,427 (733,149) (733,149)
		8,412,535 6,671,278

		No No 71,072,838 52,260,942 34,825,125 18,145,096 - 666,800
		105,897,963 71,072,838

Fully Paid Ordinary Share Capital

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

(a) Options

There were 31,475,000 unlisted employee options on issue at the end of the year:

Advent Energy

Total number	Exerciseprice	Expiry date
12,825,000	$0.20	30 June 2010
3,500,000	$0.06	30 June 2012
2,000,000	$0.06	28 December 2012
18,325,000
MEC Resources
9,000,000	$0.21	1 December 2010
2,150,000	$0.15	30 June 2013
1,500,000	$0.15	6 August 2013
500,000	$0.20	30 June 2010
13,150,000

There were 52,237,694 listed options on issue at the end of the year:

MEC Resources

MEC Resources
Total number	Exerciseprice	Expiry date
52,237,694	$0.20	04 July 2013
52,237,694

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

17. Issued Capital (cont’d)

The market price of the company’s ordinary shares at 30 June 2009 was 10.5 cents.

The holders of options do not have the right, by virtue of the option, to participate in any share issue or interest issue of any other body corporate or registered scheme.

The difference between the total market value of options issued during the period, at the date of issue, and the total amount received from executives and employees is not recognised in the financial statements except for the purposes of determining directors’ and executives’ remuneration in respect of that period.

(b)

Capital risk management

The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they may continue to provide returns for shareholders and benefits for other stakeholders.

The focus of the Group’s capital risk management is the current working capital position against the requirements of the Group to meet corporate overheads. The Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The working capital position of the Group and the parent entity at 30 June 2009 and 30 June 2008 are as follows:

Cash and cash equivalents Trade and other receivables Trade and other payables Working capital position Reserves Options Reserve	Consolidated 2009 $ 2008 $ 1,480,629 1,966,361 43,382 43,651 (348,086) (290,052) 1,175,925 1,719,960 219,953 29,890	Parent 2009 $ 2008 $
		544,661 1,500,338 28,993 39,388 (136,506) (202,856)
		437,148 1,336,870
		113,667 29,890

18. Reserves

(a) Option Reserve

The option reserve records items recognized as expenses on the valuation of Director and Employee share options.

Reconciliation of movement Opening balance Options charges during the year Expired options Closing balance	2009 $ 2008 $ 29,890 440,997 190,063 3,889 - (414,996) 219,953 29,890	2009 $ 2008 $ 29,890 440,997 83,777 3,889 - (414,996)
		113,667 29,890

MEC Resources Ltd annual report 2009

Consolidated 2009 $ 2008 $ 19. Cash Flow Information (a) Reconciliation of Cash Flow from Operations with Proft after income tax Operating loss after income tax (3,998,500) (433,939) Non-cash fows in proft: Depreciation 3,040 2,376 Gain on disposal of investments (15,023) (828,048) Revaluation on investments 1,606,447 (14,821) Share based payments 189,917 258,889 Exploration costs written off 55,611 - Administration recharges 263,654 - Changes in net assets and liabilities, net of effects of purchase and disposal of subsidiaries (Increase)/decrease in trade and term receivables (5,080) 137,222 (Increase)/decrease in other assets (543) (45,944) Increase/(decrease) in trade payables and accruals 62,374 50,469 Increase/(decrease) in provisions 6,243 13,884 Net cash fow from operating activities (1,831,860) (859,912)	Parent 2009 $ 2008 $
	(1,531,271) (456,251) 3,040 2,376 (2,523) (805,736) 515,832 - 83,777 258,889 - - 62,012 - - 142,482 4,403 (11,442) (60,234) 72,728 6,243 -
	(918,721) (796,954)

Consolidated
2009
$
2008
$
19.
Cash Flow Information
(a)
Reconciliation of Cash Flow from
Operations with Proft after income tax
Operating loss after income tax
(3,998,500)
(433,939)
Non-cash fows in proft:
Depreciation
3,040
2,376
Gain on disposal of investments
(15,023)
(828,048)
Revaluation on investments
1,606,447
(14,821)
Share based payments
189,917
258,889
Exploration costs written off
55,611
-
Administration recharges
263,654
-
Changes in net assets and liabilities,
net of effects of purchase and disposal
of subsidiaries
(Increase)/decrease in trade and term
receivables
(5,080)
137,222
(Increase)/decrease in other assets
(543)
(45,944)
Increase/(decrease) in trade payables
and accruals
62,374
50,469
Increase/(decrease) in provisions
6,243
13,884
Net cash fow from operating
activities
(1,831,860)
(859,912)

Parent
2009
$
2008
$

(1,531,271)
(456,251)
3,040
2,376
(2,523)
(805,736)
515,832
-
83,777
258,889
-
-
62,012
-
-
142,482
4,403
(11,442)
(60,234)
72,728
6,243
-

(918,721)
(796,954)

==> picture [305 x 295] intentionally omitted <==

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

19. Cash Flow Information (cont’d)

(b) Acquisition of Entities During the prior year 74% of the controlled entity Advent Energy Ltd was acquired. Details of this transaction are: Purchase consideration Cash consideration Amount due under contract of sale Cash Outfow Assets and liabilities held at acquisition date: Investment in controlled entity Cash Receivables Investments Capitalised exploration and evaluation expenditure Payables Loans from other entities Minority interest in acquisition (c) Disposal of entities During the priori year the controlled entity Asset Energy Pty Ltd was sold. Aggregate details of this transaction are: Disposal price Cash consideration Assets and liabilities held at disposal date: Investment in controlled entity Cash Receivables Intangibles Loans from other entities Net gain on disposal	Consolidated 2009 $ 2008 $ - 3,285,062 - 1,000,000 - 2,285,062 - 1,000,000 - - - 466,022 - 4,263 - 1,687,500 - 1,803,970 - (169,039) - (507,654) - 3,285,062 - 827,903 - 4,112,965 - 660,062 - - - - - 554 - 921 - 658,404 - (22,189) - 637,690 - 22,372	Parent 2009 $ 2008 $
		- 3,285,062
		- 1,000,000 - 2,285,062
		- 1,000,000
		- 3,285,062 - - - - - - - - - - - -
		- -
		- -
		- -
		- -
		- -
		- 660,062 - - - - - - - -
		- - - -

MEC Resources Ltd annual report 2009

(d) Non cash investing and fnancing activities i) Sale of Asset Energy Pty Ltd During the year controlled entity (Asset Energy Pty Ltd) was sold to Advent Energy Ltd. MEC Resources Ltd was issued 13,201,240 ordinary shares each with a value of 5c in Advent Energy Ltd. ii) Sale of Central Petroleum shares to Advent Energy Ltd During the year MEC Resources sold a major portion of its interests in Central Petroleum Limited to Advent Energy Ltd. MEC Resources was issued 32,500,000 ordinary shares each with a value of 5c in Advent Energy Ltd.	Consolidated 2009 $ 2008 $ - 660,062 - 1,625,000	Parent 2009 $ 2008 $
		- - - -

20. Financial Risk Management

(a) Financial Risk Management

The group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable, and loans to and from related parties. The main purpose of nonderivative financial instruments is to raise finance for group operations policies.

i. Financial Risk Exposures and Management

The main risks the group is exposed to through its financial instruments are interest rate risk, liquidity risk and credit risk.

Interest rate risk

Interest rate risk is managed with a mixture of fixed and floating rate debt.

Liquidity risk

The group manages liquidity risk by monitoring forecast cash flows.

Credit risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements.

Credit risk for derivative financial instruments arises from the potential failure by counter-parties to the contract to meet their obligations.

The economic entity does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the economic entity.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

20. Financial Risk Management (cont’d)

(b) Financial Instruments

i. Interest rate risk

The economic entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows:

Consolidated Group

2009 Effective Average Interest Rate Payable %	Floating Interest Rate $ Non- Interest Bearing $ Total $
*Financial Assets* Cash and cash equivalents 3.00% Trade and other receivables - Financial Assets -current - Financial Assets- non current - *Financial Liabilities* Trade and sundry Payables - Financial liabilities -	1,480,629 - 1,480,629 - 43,382 43,382 - 178,063 178,063 - 817,013 817,013
	1,480,629 1,038,458 2,519,087
	- 348,086 348,086 - 572,658 572,658
	- 920,744 920,744

2008 Effective Average Interest Rate Payable %	Floating Interest Rate $ Non- Interest Bearing $ Total $
*Financial Assets* Cash and cash equivalents 3.85% Trade and other receivables - Financial Assets -current - Financial Assets –non current - *Financial Liabilities* Trade and sundry Payables - Other loans -	1,966,361 - 1,966,361 - 43,651 43,651 - 40,698 40,698 - 2,385,911 2,385,911
	1,966,361 2,470,260 4,436,621
	- 290,052 290,052 - 543,064 543,064
	- 833,116 833,116

MEC Resources Ltd annual report 2009

Parent Entity

Parent Entity
2009 Effective Average Interest Rate Payable %	Floating Interest Rate $ Non- Interest Bearing $ Total $
*Financial Assets* Cash and cash equivalents 3.00% Trade and other receivables - Financial Assets -current - Financial Assets –non current - *Financial Liabilities* Trade and sundry Payables - Other loans -	544,661 - 544,661 - 28,993 28,993 - 1,718,111 1,718,111 - 188,889 188,889
	544,661 1,935,993 2,480,654
	- 136,506 136,506 - 1,684 1,684
	- 138,190 138,190

	Effective Average	Floating	Non-
	Interest Rate	Interest	Interest	Total
	Payable	Rate	Bearing
2008	%	$	$	$
*Financial Assets*
Cash and cash equivalents	3.85%	1,500,338	-	1,500,338
Trade and other receivables	-	-	39,388	39,388
Financial Assets -current	-	-	46,335	46,335
Financial Assets –non current	-	-	698,412	698,412
		1,500,338	784,135	2,284,473
*Financial Liabilities*
Trade and sundry Payables	-	-	202,856	202,856
Other loans	-	-	41,047	41,047
		-	243,903	243,903

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

20. Financial Risk Management ( cont’d)

ii. Net Fair Values

The net fair values of:

Term receivables are determined by discounting the cash flows, at the market interest rates of similar securities, to their present value.
Listed investments have been valued at the quoted market bid price at balance date, adjusted for transaction costs expected to be incurred. For unlisted investments where there is no organised financial market, the net fair value has been based on a reasonable estimation of the underlying net assets or discounted cash flows of the investment.
Other loans and amounts due are determined by discounting the cash flows, at market interest rates of similar borrowings to their present value.
Other assets and liabilities approximate their carrying value.

No financial assets and financial liabilities are readily traded on organised markets in standardised form other than listed investments.

Financial assets where the carrying amount exceeds net fair values have not been written down as the economic entity intends to hold these assets to maturity. Aggregate net fair values and carrying amounts of financial assets and financial liabilities at balance date:

*Financial Assets* Available-for-sale fnancial assets at fair value Held-to-maturity fnancial assets Loans and receivables *Financial Liabilities* Other loans and amounts due Other liabilities	2009 Carrying Amount Net Fair Value 817,013 817,013 - - 221,445 221,445 1,038,458 1,038,458 572,658 572,658 348,086 348,086 920,744 920,744	2008 Carrying Amount Net Fair Value
		2,385,911 2,385,911 - - 84,349 84,349
		2,470,260 2,470,260
		543,064 543,064 290,052 290,052
		833,116 833,116

MEC Resources Ltd annual report 2009

iii. Sensitivity Analysis

Interest Rate Risk

The group has performed sensitivity analysis relating to its exposure to interest rate risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks

Interest Rate Sensitivity Analysis

The effect on profit and equity as a result of changes in the interest rate, with all other variables remaining constant would be as follows:

Change in proft — Increase in interest rate by 1% — Decrease in interest rate by 0.5% Change in Equity — Increase in interest rate by 1% — Decrease in interest rate by 0.5%	Consolidated Group 2009 2008 34,280 44,064 (17,140) (22,032) 34,280 44,064 (17,140) (22,032)	Parent Entity 2009 2008
		31,565 44,064 (15,783) (22,032) 31,565 44,064 (15,783) (22,032)

21. Segment Information

MEC Resources Ltd operates predominantly in one industry, namely investments in the mining and resources. These activities are predominantly in Australia.

22. Events after the Balance Sheet Date

On 23 July 2009 MEC Resources Ltd issued 2,000,000 shares and 500,000 unlisted options to Mr Ding Gui Ming, a member of their advisory board. The options are exercisable at 20 cents and have an expiry date of 30 June 2010.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

23. Related Party Transactions

(a) Directors’ Remuneration

Details of directors’ remuneration and retirement benefits are disclosed in the remuneration report in the Directors report.

(b) Directors’ Equity Holdings

Parent

Ordinary Shares Held as at the date of this report by directors and their director- related entities in: MEC Resources Ltd Advent Energy Ltd Other Equity Instruments Listed Options Held as at the date of this report by directors and their director- related entities in: MEC Resources Ltd Unlisted Options Held as at the date of this report by directors and their director- related entities in: MEC Resources Ltd Advent Energy Ltd	2009 2008 $ $
	25,221,746 18,474,797 7,000,000 7,000,000
	17,395,872 -
	6,000,000 9,000,000 2,000,000 2,000,000

(c) Related entities

A loan facility exists between Advent Energy and its parent entity , MEC Resources $1,536,102 (2008: $nil). The loan is secured by a second charge over all of the assets and rights of Advent Energy including by not limited to, all real and personal property, choses in action, goodwill and called but unpaid nominal and premium capital. The loan is due and payable on the earlier a successful capital raising or the date the MEC issues a notice for repayment.

24. Controlled Entities

24. Controlled Entities
Name of	Principal	Country of	Ownership Interest
Entity	Activity	Incorporation	%
			2009 2008
Parent Entity
MEC Resources Limited	Investment	Australia
Subsidiaries of MEC Resources Ltd
Advent Energy Limited	Oil and Gas	Australia	74.00 74.00
	exploration and
	development
Asset Energy Proprietary Limited	Oil and Gas	Australia	74.00 100
	exploration and
	development

MEC Resources Ltd annual report 2009

25. Share-Based Payments

The following share-based payment arrangements existed at 30 June 2009:

On 6 August 2008, share options were granted to employees of MEC Resources Limited under the MEC Resources Employee Incentive Scheme. The options entitle employees to take up ordinary shares at an exercise price of $0.15 each. The options hold no voting or dividends rights and are not transferable.

On 22 January 2009, share options were granted to employees of MEC Resources Limited under the MEC Resources Employee Incentive Scheme. The options entitle employees to take up ordinary shares at an exercise price of $0.20 each. The options hold no voting or dividends rights and are not transferable.

At balance date, no share option had been exercised.

All options granted to key management personnel are ordinary shares in MEC Resources Ltd or its subsidiary Advent Energy Ltd, which confer a right of one ordinary share for every option held.

	Consolidated Group Parent Entity 2009 2008 2009 2008
	Number of Options Weighted Average Exercise Price $ Number of Options Weighted Average Exercise Price $ Number of Options Weighted Average Exercise Price $ Number of Options Weighted Average Exercise Price $
Outstanding at the beginning of the year Granted Granted Granted Forfeited Exercised Expired Outstanding at year-end Exercisable at year-end	28,475,000 - 21,055,169 - 12,150,000 - 21,055,169 - 1,500,000 0.15 2,150,000 0.15 1,500,000 0.15 2,150,000 0.15 500,000 0.20 1,000,000 - 500,000 0.20 1,000,000 - 2,000,000 0.06 - - - - - - - - - - - - - - - - - - - - - - (1,000,000) 0.10 (12,055,169) 0.12 (1,000,000) 0.10 (12,055,169) 0.12
	31,475,000 - 12,150,000 - 13,150,000 - 12,150,000 -
	24,541,667 - 1,716,667 - 9,716,667 - 1,716,667 -

No options were exercised during the year ended 30th June 2009.

The weighted average fair value of the options granted during the year was $73,750.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

25. Share-Based Payments (cont’d)

This price was calculated by using a Black-Scholes option pricing model applying the following inputs:

Weighted average exercise price	$0.15
Weighted average life of the option	60 months
Underlying share price	$0.071
Expected share price volatility	95%
Risk free interest rate	7.25%
Weighted average exercise price	$0.20
Weighted average life of the option	23 months
Underlying share price	$0.046
Expected share price volatility	95%
Risk free interest rate	7.25%

Historical volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future tender, which may not eventuate.

The life of the options is based on the historical exercise patterns, which may not eventuate in the future.

Included under employee benefits expense in the income statement is $161,226 (2008: $252,000), and relates, in full, to equity.

26. Contingent Liabilities

A claim for outstanding consulting fees has been brought against the parent entity and its subsidiary Advent Energy Ltd. The case is currently in pre trial stages with the first discussions to resolve the matter taking place in June 09. The claim is being vigorously defended by the parent entity as all fees have been paid in accordance with the agreed contracts.

A secured loan exists between Advent and Grandbridge Limited. It is secured by a registered charge over all assets and rights over Advent Energy including but not limited to, all real and personal property, choses in action, goodwill and called but unpaid nominal and premium capital. The loan does not have a fixed repayment date.

A loan facility exists between Advent Energy and its parent entity. The loan is secured by a second charge over all of the assets and rights of Advent Energy including by not limited to, all real and personal property, choses in action, goodwill and called but unpaid nominal and premium capital. The loan is due and payable on the earlier of a successful capital raising or the date the MEC issues a notice for repayment.

MEC Resources Ltd annual report 2009

27. Commitments

Capital Commitments

In order to maintain an interest in the exploration tenements in which the Company is involved, the Company is committed to meet the conditions under which the tenements were granted.

Capital expenditure forecasted for at the reporting date but not recognised as liabilities as follows:

Work Program Commitments – Exploration permits Payable: Within one year Greater than one year less than fve years Total	Consolidated 2009 $ 2008 $ 25,250,000 - 50,000 - 25,300,000 -	Parent 2009 $ 2008 $
		- - - - - -

The Company has also applied with the Department of Mines and Petroleum for a waiver on their work commitments on their tenement permit EP 386.

28. Changes in Accounting Policies

The following Australian Accounting Standards have been issued or amended and are applicable to the parent and consolidated group but are not yet effective. They have not been adopted in preparation of the financial statements at reporting date.

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MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

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----- Start of picture text -----

New or revised requirement Effective for More Impact on
annual reporting information Group
periods
beginning/
ending on or
after
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New or revised requirement	Effective for annual reporting periods beginning/ ending on or after	More information	Impact on Group

AASB 101 Presentation of Financial Statements (Revised September 2007), AASB 2007-8 Amendments to Australian Accounting Standards & Interpretations and AASB 2007-10 Further Amendments to AASBs arising from AASB 101 The revised standard affects the presentation of changes in equity and comprehensive income. It does not change the recognition, measurement or disclosure of specifc transactions and other events required by other AASB standards.	Beginning 1 January 2009	This will be adopted for the year ended 30 June 2010	This is a disclosure standard, so will have no direct impact on amounts in the fnancial report, other than amendments to disclosures.
AASB 123 Borrowing Costs (Revised), AASB 2007-6 Amendments to Australian Accounting Standards 1, 101, 107, 111, 116, 138 and Interpretations 1 & 12 This revision eliminates the option to expense borrowing costs on qualifying assets and requires that they be capitalised. The Amending Standard eliminates reference to the expensing option in various other pronouncements.	Beginning 1 January 2009	This will be adopted for the year ended 30 June 2010	The adoption of this standard will have no impact on the group.
AASB 3 Business Combinations (Revised), AASB 127 Consolidated and Separate Financial Statements (Amended), AASB 2008-3 Amendments to AASBs arising from AASB 3 and AASB 127 This revision changes the application of acquisition accounting for business combinations and accounting for non- controlling interests. The revised and amended standards incorporate many changes which will have a signifcant impact on the proft and loss for entities entering into business combinations.	Beginning 1 July 2009	This will be adopted for the year ended 30 June 2010	The impact of this standard on the group has not yet been determined.

MEC Resources Ltd annual report 2009

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AASB 8 Operating Segments, AASB	Beginning	This will be	AASB 8 is a
2007-3 Amendments to Australian	1 January 2009	adopted for the	disclosure
Accounting Standards 5, 6, 102, 107, 119,		year ended	standard, so
127, 134, 136, 1023 & 1038 arising from		30 June 2010	will have no
AASB 8			direct impact
			on amounts in
This standard supersedes AASB 114			the fnancial
Segment Reporting, introducing a US			report, other than
GAAP approach of management reporting			amendments to
as part of the convergence project with			disclosures.
FASB.
AASB 2008-1 Amendments to Australian	Beginning	This will be	The impact of
Accounting Standards: Share-Based	1 January 2009	adopted for the	this standard on
Payments: Vesting Conditions and		year ended	the group has
Cancellations		30 June 2010	not yet been
			determined.
This clarifes that vesting conditions
comprise service conditions and
performance conditions only and that
other features of a share-based payment
transaction are not vesting conditions.
It also specify that all cancellations,
whether by the entity or by other parties,
should receive the same accounting
treatment.
AASB 2008-5: Amendments to Australian	Beginning	This will be	The impact of
Accounting Standards arising from the	1 January 2009	adopted for the	this standard on
Annual Improvements Project		year ended	the group has
		30 June 2010	not yet been
The amendments to some Standards			determined.
result in accounting changes
for presentation, recognition or
measurement purposes, while some
amendments that relate to terminology
and editorial changes are expected to
have no or minimal effect on accounting.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

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New or revised requirement	Effective for annual reporting periods beginning/ ending on or after	More information	Impact on Group

AASB 2008-6: Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project AASB 2008-6 amends AASB 1 and AASB 5 to include requirements relating to a sale plan involving the loss of control of a subsidiary.	Beginning 1 July 2009	This will be adopted for the year ended 30 June 2010	The impact of this standard on the group has not yet been determined.
AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate This amends and clarifes the following standards AASB 101, AASB 118, AASB 127 and AASB 136 for the treatment of determining the cost of an investment in a subsidiary, jointly controlled entity or associate.	Beginning 1 January 2009	This will be adopted for the year ended 30 June 2010	The impact of this standard on the group has not yet been determined.
Interpretation 17 Distributions of Non- cash Assets to Owners This Interpretation provides guidance on how an entity should measure distributions of assets other than cash when it pays dividends to its owners, except for common control transactions.	Beginning 1 January 2009	This will be adopted for the year ended 30 June 2010	The impact of this standard on the group has not yet been determined.

MEC Resources Ltd annual report 2009

Directors’ Declaration

The directors of the company declare that:

the financial statements and notes, as set out on pages 29 to 62, are in accordance with the Corporations Act 2001 and:
(a) comply with Accounting Standards and the Corporations Regulations 2001; and
(b) give a true and fair view of the financial position as at 30 June 2009 and of the performance for the year ended on that date of the company and economic entity;
the Financial Statements and Notes comply with International Accounting Standards as disclosed in Note 1;
the Chief Executive Officer and Chief Finance Officer have each declared that:
(a) the financial records of the company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001;
(b) the financial statements and notes for the financial year comply with the Accounting Standards; and
(c) the financial statements and notes for the financial year give a true and fair view.
in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

Director

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David Breeze Executive Director

Dated this 19th Day of August 2009

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MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Independent Auditor’s Report

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To The Members Of MEC Resources Ltd

Report on the Financial Report

We have audited the accompanying financial report of MEC Resources Ltd, which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies and other explanatory notes and the directors’ declaration for both MEC Resources Ltd and the consolidated entity. The consolidated entity comprises the entity and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with Australian Accounting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Tel: 61 8 9278 2222 | Fax: 61 8 9278 2200 | www.pkf.com.au West Australian Partnership | ABN 39 542 778 278

Liability limited by a scheme approved under Professional Standards Legislation

MEC Resources Ltd annual report 2009

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s Opinion

In our opinion:

(a) the financial report of MEC Resources Ltd is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the entity’s and consolidated entity’s financial position as at 30 June 2009 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and
(b) the consolidated financial statements and notes or financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report included in page 13 to 16 of the directors’ report for the year ended 30 June 2009. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of MEC Resources Ltd for the year ended 30 June 2009, complies with section 300A of the Corporations Acts 2001.

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PKF Chartered Accountants

Chris Nicoloff Partner

Dated at Perth, Western Australia this 19th day of August 2009.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Additional Securities Exchange Information

Additional information required by Australian Securities Exchange Limited and not shown elsewhere in this report as follows. The information is made up to 13th August 2009.

1. Substantial Shareholder

The name of the substantial shareholder listed in the company’s register is:

Shareholder	Shares	%
David Breeze	10,144,304	9.40

2. Distribution of Shareholders

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Range of Holding Shareholders Number %
Ordinary Shares
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1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	258 160,996 0.15 114 344,910 0.32 388 3,785,280 3.51 951 36,269,010 33.61 154 67,337,767 62.41
	1,865 107,897,963 100.00

3. (a) Distribution of Listed Optionholders

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Range of Holding Optionholders Number %
Ordinary Shares
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1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	24 12,150 0.02 24 53,665 0.10 23 157,920 0.30 330 12,483,152 23.90 99 39,530,807 75.67
	500 52,237,694 100.00

(b) Distribution of Unlisted Optionholders

Range of Holding	Optionholders Number of Options %
MEC Resources 10,001 to 100,000 100,001 and over Advent Energy 10,001 to 100,000 100,001 and over	3 150,000 1.10 11 13,500,000 98.90
	30 13,650,000 100.00
	2 200,000 1.10 12 18,125,000 98.90
	14 18,325,000 100.00

MEC Resources Ltd annual report 2009

4. Voting Rights - Shares

All ordinary shares issued by MEC Resources Ltd carry one vote per share without restriction.

5. Voting Rights - Options

The holders of employee options do not have the right to vote.

6. Restricted Securities

Restricted Securities
Shares- Number of Shares free of escrow		107,897,963
	Total Shares	107,897,763
Options
Number of Employee options not subject to		52,237,694
Escrow (Listed)
Number of Employee options not subject to		24,541,667
Escrow (Not Listed)
	Total Options	76,779,361

7. Tenements and Interests Held

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Permit Details Interest Held Entity
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Petroleum Exploration Permit 386	100%	Advent Energy
Petroleum Exploration Permit 11	25%	Advent Energy
Petroleum Exploration Permit 325	8.3%	Advent Energy
Petroleum Exploration Licence 111	*	Advent Energy
Retention Lease 1	100%	Advent Energy

*Advent Energy has a conditional non-exclusive farm-in agreement to acreage in the South Australian Cooper Basin with Victoria Petroleum N.L., Impress Energy Ltd and Roma Petroleum Ltd.

MEC Resources Ltd annual report 2009

ENERGY MINERALS EXPLORATION

Additional Securities Exchange Information

8. Twenty Largest Shareholders

The names of the twenty largest shareholders of the ordinary shares of the company are:

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Name Number of ordinary % held of issued
fully paid shares ordinary capital
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D Breeze Grandbridge Ltd H Goh K O Yap C T Lim S K Yap D G Ming Robinia Partners PL Kardinia Nom PL Antony Brian Websdale Edward YI Fincl Svcs PL Avatar Energy PL Feng Liu and Hua Wen Sheng M and J F Lawrence Birch Colin Alexander Batts Heather Lynette Dean Ian Sargent Naracoorte Devlmts PL Chenille PL Patricia and Bian Luan Lee	10,044,304 9,747,362 4,996,248 4,000,000 3,395,000 2,382,250 2,000,000 1,006,961 874,740 800,000 630,000 625,000 430,000 425,500 400,000 400,000 400,000 400,000 376,420 364,500 14.42 13.99 5.75 3.71 3.15 2.21 1.85 0.93 0.81 0.74 0.58 0.58 0.40 0.39 0.37 0.37 0.37 0.37 0.35 0.34
	43,698,285 40.49

MEC Resources Ltd annual report 2009

8. Twenty Largest Listed Option Holders (as at 13 August 2009)

The names of the twenty largest listed Option Holders of the company are:

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Name Number of listed % held of issued
options ordinary capital
----- End of picture text -----

Trandcorp Pty Ltd	7,533,228	14.42
Grandbridge Ltd	7,310,522	13.99
H Goh	4,650,144	8.90
K O Yap	3,000,000	5.74
C T Lim	2,062,500	3.95
C A Batts	420,000	0.80
Luan Biau Tan	397,500	0.76
David E Perks and Assoc PL	365,000	0.70
Lewis Sec Ltd	363,626	0.70
M and J F Lawrence Birch	319,125	0.61
Ian Sargent	300,000	0.57
Sykes Frederick and J	275,000	0.53
Patricia and Bian Luan Lee	273,375	0.52
Damian Scanlon	242,250	0.46
Jacqueline Sykes	225,000	0.43
Chin Peter K and ACM	225,000	0.43
Timothy John Ryan	225,000	0.43
David Gordon	222,000	0.42
Comsec Nom PL	218,813	0.42
Marek Glinsk	200,000	0.37
	28,828,083	55.16

ENERGY MINERALS EXPLORATION

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ACN 113 900 020

www.mecresources.com.au

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14 View Street North Perth WA 6006 Telephone: (08) 9328 8477 Facsimile: (08) 9328 8733 [email protected]

Photographs and Images

Photographs and images used throughout this report do not depict assets of the company unless expressly indicated otherwise.

AI assistant

MEC RESOURCES LIMITED — Annual Report 2009

65353_rns_2009-09-29_9a249a80-41c5-4487-9560-598e7313c94c.pdf

Contents

Corporate Directory

Directors

Auditor

PKF

Share Registry

Registered Office

Principal Business Address

Australian Securities Exchange Listing

Australian Securities Exchange Limited

Australian Business Number

Chairman’s Letter

Dear Shareholder,

Company Focus and Developments

MEC’s investment focus:

PEP 11 Oil and Gas Permit

Company Focus and Developments

Western Australia – Exmouth Sub-Basin

Company Focus and Developments

Northern Perth Basin

South Australia – Cooper Basin

Northern Territory/Western Australia – Bonaparte Basin

Company Focus and Developments

Central Australia – Amadeus, Pedirka, Basins

Directors’ Report

Directors

Company Secretary

Principal Activities

Operating Results

Dividends

Financial Position

Significant Changes In State Of Affairs

Advent Energy -Oil and Gas

After Balance Date Events

Future Developments

Information on Directors

H Goh

S K Yap

Directors’ Report

Information on Directors (cont’d)

S K Yap

D L Breeze

K O Yap

C T Lim

Remuneration Report

Remuneration Policy

Directors’ Report

Remuneration Policy (cont’d)

Compensation Practices

Employment contracts of directors and senior executives

Details of Remuneration for the year ended 30 June 2009

2009

2009 (cont’d)

2008

Directors’ Report

2008 (cont’d)

Options and Rights Holdings

2009 Number of Listed Options Held by Key Management Personnel

2008 Number of Listed Options Held by Key Management Personnel

2009 Number of Unlisted Options Held by Key Management Personnel

2008 Number of Unlisted Options Held by Key Management Personnel

Shareholdings

Directors’ Report

Shareholdings (cont’d)

2008 Number of Shares Held by Key Management Personnel

Company performance, shareholder wealth, and director and executive remuneration

Meetings of Directors

Indemnifying Officers or Auditors

Options

MEC Resources

Advent Energy

Listed Options - MEC Resources Ltd

Directors’ Report

Non-audit Services

Auditor’s Independence Declaration

Proceedings on Behalf of Company

Environmental Issues

MEC RESOURCES LIMITED Annual Report 2009