MEC RESOURCES LIMITED - Annual Report 2013

ENERGY[n] MINERALS[n] EXPLORATION

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2013 ANNUAL REPORT

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Page number

Chairman’s Letter	1
Company Focus and Developments	2
Directors’ Report	10
Auditor’s Independence Declaration	22
Corporate Governance Statement	23
Consolidated Statement of Proft or Loss
and Other Comprehensive Income	33
Consolidated Statement of Financial Position	34
Consolidated Statement of Changes in Equity	35
Consolidated Statement of Cash Flows	36
Notes to the Consolidated Financial Statements	37
Directors’ Declaration	68
Independent Auditor’s Report	69
Additional Securities Exchange Information	71

Corporate Directory

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Directors

H Goh Non Executive Chairman

D L Breeze Executive Director

K O Yap Non Executive Director

D Ambrosini Executive Director

Registered Office

14 View Street North Perth WA 6006

Principal Business Address

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

Auditor

Nexia Perth Audit Services Pty Ltd Level 3 88 William Street Perth WA 6000

Share Registry

Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153

Australian Securities Exchange Listing

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

Australian Business Number

44 113 900 020

ENERGY[n] MINERALS[n] EXPLORATION

Chairman’s Letter

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Dear Shareholder

I am pleased to report that MEC Resources’ investments have continued to be further developed during the year providing reassuring results.

On 13 August 2012 MEC investee Advent Energy confirmed the renewal of key offshore Sydney Basin permit Petroleum Exploration Permit 11 (PEP 11) for a further 5 year term. The renewal program includes, as a minimum work program only, further seismic acquisition and exploratory drilling. Further details of the exploration works within PEP11 will be advised to the market as the activities are matured.

In the north of Australia, Advent Energy has 100% ownership of two permits in the proven and producing Bonaparte Basin. Advent Energy re-entered Waggon Creek-1 located within EP386, and 10km from Vienta-1, for the purpose of recompletion and production testing in 2011. The well was flowed for 6 hours before operations were suspended for the northern wet season. In September 2012 Advent Energy concluded the production testing program on Waggon Creek-1. The testing in 2012 produced gas flows of up to 26,370m[3] (0.96 MMscf) per day without production of formation water. Comparison of gas compositions of samples obtained from the 2011 perforated zones and the recent 2012 perforated zones indicates a potential single gas column of over 217 metres between the top and bottom perforated zones. This provides a significant gas resource upside in this stratigraphic trap should Advent Energy successfully identify areas within the interpreted Waggon Creek gas accumulation of thicker reservoir development. Further investigative work could refine this upside potential.

In September 2012, Advent Energy advised that, following an extensive review of all available data, it had increased the volumetric estimates of conventional prospective recoverable resources in EP386 in the onshore Bonaparte Basin, northern Western Australia. New prospective recoverable resources of between 53.3 Billion Cubic Feet (Bcf) (Low Estimate) and 1,326.3 Bcf (High Estimate) were assessed for the conventional hydrocarbon prospectivity within EP386. This is in addition to the

considerable unconventional (shale) gas resources previously identified across EP386 and RL1. Advent has calculated a risked recoverable of 9.8 TCF (P50) prospective resources.

Furthermore Advent Energy entered into a data sharing and land access agreement with Beach Energy Ltd. The agreement was reached in relation to Beach’s acquisition of airborne gravity and aeromagnetic data, and the resultant sharing of that data, in the onshore Bonaparte Basin. The survey covered portions of EP386 and all of RL1. Under the data sharing agreement Advent also received data over an intervening area between EP386 and RL1. At the time of writing, data had just been received and interpretation can now commence. Advent expects the data to provide assistance in the identification of the structural controls of the Weaber gas field and other prospects and leads.

Advent is assessing near term commercialisation options for its discovered conventional resources. The recent regional development may assist in the development of the Advent’s fields through potential infrastructure development and associated market expansion. The Company’s assets provide an opportunity to gain market entry into a developing region. Key market opportunities include the various major resource projects close to EP386 and RL1.

Finally I thank our valued shareholders for their continued support. I look forward to the year ahead and remain optimistic that the Company will experience continued success in 2013 and beyond.

Yours faithfully

Mr Hock Goh Chairman

MEC Resources 2013 ANNUAL REPORT 1

Company Focus and Developments

MEC Resources’ investment capital is targeted for new and emerging companies in which investments have the potential to yield significant returns in energy and mineral resources.

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. The Company is registered by the Australian Federal Government as a Pooled Development Fund (“PDF”) enabling most MEC shareholders to receive tax free capital gains on their shares and tax free dividends.

MEC’s current major investment lies in Advent Energy Ltd, an unlisted oil and gas exploration and development company with onshore and offshore exploration and near term development assets around Australia.

MEC’s investment focus:

ADVENT ENERGY

Western Australia / Northern Territory – Onshore Bonaparte Basin

MEC Resources’ investee Advent Energy Ltd (“Advent”) holds 100% of each of EP 386 and RL1 in the onshore Bonaparte Basin in northern Australia. The Bonaparte Basin is a highly prospective petroliferous basin, with significant reserves of oil and gas. Most of the basin is located offshore, covering 250,000 square kilometres, compared to just over 20,000 square kilometres onshore.

Advent holds Exploration Permit EP 386 (2,568 square kilometres in area) which is the sole petroleum permit in the 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, with a resultant excellent technical success rate of encountering hydrocarbons.

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Location of EP386 and RL1 including the Weaber, Waggon Creek and Vienta gas fields, and other prospects and leads.

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Production testing at Waggon Creek-1 during 2012.

Waggon Creek-1, drilled in 1995, provided strong evidence of a significant sweet gas-charged stratigraphic trap with fair to good quality sandstone reservoir within the upper Milligans Formation. Drilling of Vienta-1 in 1998 demonstrated numerous gas shows within Enga Sandstone units, with dry gas flowed to surface and visual porosity described in the cuttings. Both Waggon Creek-1 and Vienta-1 were cased and suspended for future production.

During the period, Advent concluded the production testing of the Waggon Creek-1 gas discovery that had originally commenced in 2011. Perforation of four zones (including two zones perforated in 2011) over the interval of 378 – 595 mKB was undertaken with an interpreted net pay of 5.5 m to 7.8m. Pressure analysis indicates that the drainage area accessible by these perforated zones in Waggon Creek-1 is restricted. Gas flows of up to 26,370m[3] (0.96 MMscf) per day were recorded without any formation water production. Subsequent wireline log review and pressure build-up analysis have indicated a further four metres of net pay may yet to be accessed by the existing perforations and could contribute additional gas flowing capacity to the Waggon Creek-1 well.

Comparison of gas compositions of samples obtained from the 2011 perforated zones and recent 2012 perforated zones indicates a potential single gas column over the 217 metre interval between the top perforated and bottom perforated zones. This provides a significant gas resource upside in this stratigraphic trap should Advent successfully identify areas within the interpreted Waggon Creek gas accumulation of thicker reservoir development. Further investigative work could refine this upside potential.

In the NT, Advent holds Retention Licence RL1 (166 square kilometres in area), which covers the Weaber Gas Field, originally discovered in 1985. Application has been made to renew the Retention Licence for a further five year term.

MEC Resources 2013 ANNUAL REPORT 3

Company Focus and Developments

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Gas flowing during production testing at Advent’s Waggon Creek-1 well in EP 386.

Advent has previously advised that the 2C Contingent Resources* for the Weaber Gas Field in RL1 are 11.5 billion cubic feet (Bcf) of natural gas following an independent audit by RISC. Significant upside 3C Contingent Resources of 45.8 Bcf have also been assessed by RISC.

The results are summarised below:

Weaber Field	1C	2C	3C	Mean1
Gas Initially In Place (Bcf)	0.33	13.9	54.1	21.9
Contingent Resources (Bcf)	0.25	11.5	45.8	18.4

1 The mean is the average of the probabilistic resource distribution

Contingent Resources, as defined under the Society of Petroleum Engineers Petroleum Resource Management System (SPE PRMS) guidelines.

The current rapid development of the Kununurra region in northern Western Australia, including the Ord River Irrigation Area phase 2, the township of Kununurra, and numerous regional resource projects provides an exceptional opportunity for Advent to potentially develop its nearby gas resources.

During 2012, Advent Energy entered into a land access and data sharing agreement with Beach Energy Ltd (“Beach”) (ASX: BPT) in relation to Beach’s acquisition of airborne gravity and aeromagnetic data, and the resultant sharing of that data, in the onshore Bonaparte Basin. The full survey covered a large area of the onshore Bonaparte Basin including areas held by Advent. The shared data area incorporated a portion of Advent’s 100% owned EP386, the entirety of Advent’s 100% owned RL1.

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The airborne survey was performed to measure the density of the subsurface which may include the identification of hydrocarbon accumulations. Potential anomalies detected will assist in interpretation of key geological features including the complex fault system present in the onshore Bonaparte Basin and the Weaber Gas Field in particular. In addition, reef structures and salt diapirs may also be identified. The system can provide a 3D measurement for enhanced subsurface imaging, along with a wider bandwidth of data for high resolution measurement to improve the signal to noise ratio. The high resolution magnetic data also acquired should provide visualisation of the geological structure of the upper crust in the subsurface, particularly the spatial geometry of bodies of rock and the presence of faults and folds.

Advent is now processing and integrating this data with existing seismic data and the numerous available well logs. Interpretation of this data with a particular focus around the Weaber Gas Field (RL1) may refine the gas field’s geometry and to assist in the field’s proposed development. In addition, interpretation of the data may also allow the refinement of existing conventional prospects and leads in the east of EP386 and potentially identify new targets, while also continuing to incorporate all findings into the understanding of the permits’ massive unconventional potential.

The East Kimberley Development Programme is progressing well. Key infrastructure will be completed this dry season, with the new sealed road expected to be open in August for public use. The State and Federal Government’s investments into the East Kimberley region have resulted in major potential intended developments including a sugar mill (Kimberley Agricultural Investments) and massive aquaculture project (Western Australian Resources Limited). Each of these proposed developments may require considerable energy input, including a possible 18TJ per day requirement for the mooted aquaculture development.

Advent is in an exceptional position to potentially satisfy this growing regional demand where it remains the operator and 100% owner of key petroleum permits in the vicinity of this region.

Unconventional Resources Within EP386 and RL1

The prospectivity of the Bonaparte Basin is evident from the known oil and gas fields in both the offshore and onshore portions of the basin. Advent’s onshore EP386 and RL1 contain many large structures with conventional reservoir gas discoveries.

Advent has identified significant shale areas in EP386 and RL1 and is continuing to assess these resources. The following data illustrates detail from that study showing results from the re-analysis of the well logs from prior drilling in Advent’s areas using enhanced computer processes.

Advent has indicated significant potential upside in prospective shale gas resources with estimated unrisked original gas in place (OGIP) in the range from 19 TCF to 141 TCF for the 100% Advent owned EP386 and RL1;
The thickness of the prospective shale gas play varies from 300m to over 1500m;
In addition to the existing gas discoveries in conventional petroleum reservoirs, composite wireline and mudlog gas display of these wells have consistently indicated the presence of continuous elevated gas shows. Source rock analyses on core, sidewall core and cuttings samples have indicated the presence of source rocks with up to 4.3 % Total Organic Contact and mature for gas and oil generation; and
Advent has calculated a risked recoverable of 9.8 TCF for the shale gas areas of the Bonaparte permits of EP386 and RL1.

Advent has recognised a considerable potential hydrocarbon resource and is working toward identifying and understanding the nature of the unconventional shale gas/condensate play in its 100% owned EP386 and RL1 permits.

MEC Resources 2013 ANNUAL REPORT 5

Company Focus and Developments

Garimala-1: Elevated Gas Shows over Milligans-Langfield Section

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Elevated gas shows over 1700m in shale/siltstone section. TOC from Lab matched well with computed value from logs and maximum TOC value can be up to 5%(right column).

Example well composite log from Garimala-1 demonstrating elevated gas shows over a considerable shale sequence. Composite well logs from all onshore Bonaparte Basin wells demonstrate similar characteristics.

PEP 11 Oil and Gas Permit

Advent holds 85% of Petroleum Exploration Permit 11 (PEP 11), an exploration permit prospective for natural gas located in the Offshore Sydney Basin. This interest was earned following the drilling of New Seaclem-1 that concluded in January 2011. PEP 11 is a significant offshore exploration area with large scale structuring and potentially multi-Trillion cubic feet (Tcf) gas charged Permo-Triassic reservoirs.

During the period, MEC Investee Advent Energy confirmed the renewal of the Sydney Basin permit, PEP 11 for a further 5 year term. The renewal was formally granted on 13 August 2012.

The prospectivity of this proven petroleum basin has been 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.

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Advent has previously interpreted significant seismically indicated gas features. Key indicators of hydrocarbon accumulation features have been interpreted following review of the 2004 seismic data (reprocessed in 2010). The seismic features include apparent Hydrocarbon Related Diagenetic Zones (HRDZ), Amplitude Versus Offset (AVO) anomalies and potential flat spots.

Mapped prospects and leads within the Offshore Sydney Basin are generally located less than 50km from the Sydney-Wollongong-Newcastle greater metropolitan area. This area has a population of approximately 5,000,000 people.

Advent has demonstrated considerable gas generation and migration within PEP11, with the mapped prospects and leads highly prospective for the discovery of gas.

MEC Resources 2013 ANNUAL REPORT 7

Company Focus and Developments

Western Australia – Exmouth Sub-Basin (EP325)

Advent Energy Ltd has an 8.3% interest (Permit Operator: Strike Energy Ltd) in a shallow, near shore permit in the Exmouth sub-Basin region of the Carnarvon Basin, which contains the undeveloped Rivoli Gas Field. The Rivoli Gas Field contains approximately 6.8 – 18 PJ of gas. The permit also contains the Rivoli Deep prospect and other leads. The Joint Venture is now planning for 3D seismic coverage of the Rivoli Gas Field and nearby prospects and leads.

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Exploration Permit 325.

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BPH Energy Limited

MEC Resources holds 8.3% of BPH Energy Limited (“BPH”).

BPH is a diversified company holding investments in biotechnology and resources. BPH holds a significant interest (27%) in unlisted oil and gas exploration company Advent Energy Ltd. BPH is commercialising a portfolio of Australian biomedical technologies emerging from collaborative research by leading universities, medical institutes and hospitals across Australia.

Biomedical technologies in the commercialisation stage include:

Diagnostic Array Systems; BacTrak (a faster and more effective method for detecting infectious disease).
Cortical Dynamics’ Brain Anaesthesia Response (BAR) Monitor; a device that measures a patient’s brain electrical activity (EEG) to indicate the response to drugs administered during surgery.
HLS5 Tumour Suppress Gene; a genetic marker for early and accurate cancer detection.
Microtubule drugs that target the tumour vasculature.

Molecular Discovery Systems (MDSystems), launched in 2006 and spun off from BPH in 2009, is a subsidiary of BPH for drug discovery and validation of biomarkers for disease, therapy and diagnostics.

Cortical Dynamics has now completed its first human clinical trial using the BAR monitor end-to-end (from electrode to monitor). The aim of study was to (a) evaluate the BAR monitor’s ability to distinguish between two doses of fentanyl, a commonly used analgesic agent, and (b) assess the immunity of the BAR monitor to a range of mechanical and electrical artifacts known to complicate EEG measurement. In the study a total of 25 patients undergoing coronary artery graft bypass surgery were recruited in to the trial.

Significantly, the analysis concluded that the Cortical Index (CI) could differentiate between the different doses of fentanyl while Cortical State (CS) was well correlated with the Bispectral Index (BIS), a generally accepted measure of sedation. In addition this trial demonstrated the ability of the BAR monitor to operate effectively in an electrically noisy operating room environment. The trial’s findings suggest that the BAR monitor may find significant utility in the delivery of optimal and balanced surgical anaesthesia.

During the period, BPH investee MDSystems Ltd signed a collaboration agreement with the Peter MacCallum Centre. The collaborative research program will focus on the discovery and development of new cancer drugs that normalise the function of the key tumour suppressor p53.

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 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 Resource and Reserve Statements have been previously published by the companies concerned. Summary data has been used. 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 unless stated.

MEC Resources 2013 ANNUAL REPORT 9

Directors’ Report

The directors of MEC Resources Ltd (“MEC” or the “Company”) present their report on the company for the financial year ended 30 June 2013.

Directors

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

H Goh

D L Breeze K O Yap D Ambrosini

Company Secretary

Ms Deborah Ambrosini continues in her role of Company Secretary. She also holds the position of Chief Financial Officer of the Company and has over 15 years experience in corporate accounting roles.

Principal Activities

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.

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 IPO within several years; strong and experienced management team and a definitive competitive advantage.

MEC’s current major investment lies in unlisted Australian oil and gas exploration company, Advent Energy Ltd.

Advent Energy Ltd - Oil and Gas

MEC has a controlling interest in the unlisted energy explorer Advent Energy Ltd (“Advent”) of 44.89%.

Advent has assembled a range of hydrocarbon permits which contain near term production opportunities with pre-existing infrastructure and exploration upside.

Advent’s assets include EP386 and RL1 (100%) in the onshore Bonaparte Basin in the north of Western Australia and Northern Territory, PEP11 (85%) in the offshore Sydney Basin and EP325 (8.3%) in the Exmouth Sub-basin of the Carnarvon Basin near Exmouth in WA. Advent’s portfolio of assets has an estimated AUD $156m invested historically on exploration.

Advent is investigating a considerable potential shale gas resource within EP386 and RL1. Studies indicate significant potential upside in prospective shale gas resources with an estimated (P50) prospective recoverable resource of 9.8 Tcf.

A mean contingent Resource of 18.4 Bcf for the Weaber Gas Field (RL1) has recently been assessed by an independent third party as a component of Advent’s drive to commercialise its 100% owned onshore Bonaparte Basin assets. The current rapid development of the Kununurra region in northern Western Australia, including the Ord Irrigation Expansion Project and numerous resource projects, provides an exceptional opportunity for Advent to potentially develop its nearby gas resources for the benefit of the region along with Advent and its shareholders.

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The Sydney Basin is a proven petroleum basin with excellent potential for the discovery of gas and oil. Advent has demonstrated an active hydrocarbon system with seeps reported in the offshore area and sampling has indicated the presence of thermogenic hydrocarbon gas. This is considered to occur in basins actively generating hydrocarbons and/or that contain excellent migration pathways. Previous drilling has shown that the early Permian geological sequence is mature for hydrocarbons.

Undiscovered prospective recoverable gas resources for structural targets within the PEP11 offshore permit have been estimated at 5.7 Tcf (at the P50 level) or up to 22.7 Tcf on a probabilistic mean calculation. PEP 11 lies adjacent to the most populous region of Australia and the major industrial hub and port of Newcastle.

Operating Results

The loss attributable to the owners of the consolidated entity after tax for the year was $2,045,593 (2012: Loss $9,178,725).

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.

Financial Position

The net assets of the consolidated entity have decreased by $3,034,509 to $33,689,034 at 30 June 2013. The reduced net asset position can be attributed to the decrease in the valuation of listed investments and a reduced cash balance after increased consulting expenditure was incurred.

Significant Changes In State Of Affairs

During the period, MEC Investee Advent confirmed the renewal of key offshore Sydney Basin permit Petroleum Exploration Permit 11 (PEP11) for a further 5 year term. The renewal was formally granted on 13 August 2012.

Advent entered into a data sharing and land access agreement with Beach Energy Ltd. The agreement was reached in relation to Beach’s acquisition of airborne gravity and aeromagnetic data, and the resultant sharing of that data, in the onshore Bonaparte Basin including RL1 and within a portion of EP386. The airborne survey was performed to measure the density of the subsurface, which may include the identification of hydrocarbon accumulations. The high resolution magnetic data also acquired should provide visualisation of the geological structure of the upper crust in the subsurface, particularly the spatial geometry of bodies of rock and the presence of faults and folds. Advent will now process and integrate this data with the existing seismic data and the numerous available well logs to refine existing fields and prospects and potentially identify new targets.

Advent re-entered Waggon Creek-1 located within EP386, and 10km from Vienta-1, for the purpose of recompletion and production testing in 2011. The well was flowed for 6 hours before operations were suspended for the 2011 northern wet season. In 2012, Advent concluded the production testing program on Waggon Creek-1. The testing produced gas flows of up to 26,370m3 (0.96 MMscf) per day without production of formation water. Comparison of gas compositions of samples obtained from the 2011 perforated zones and the recent 2012 perforated zones indicates a potential single gas column of over 217 metres between the top and bottom perforated zones. This provides a significant gas resource upside in this stratigraphic trap should Advent successfully identify areas within the interpreted Waggon Creek gas accumulation of thicker reservoir development. Further investigative work could refine this upside potential.

MEC Resources 2013 ANNUAL REPORT 11

Directors’ Report

Significant Changes In State Of Affairs (continued)

In September 2012, Advent advised that, following an extensive review of all available data, it had increased the volumetric estimates of conventional prospective recoverable resources in EP386 in the onshore Bonaparte Basin, northern Western Australia. New prospective recoverable resources of between 53.3 Billion Cubic Feet (Bcf) (Low Estimate) and 1,326.3 Bcf (High Estimate) were assessed for the conventional hydrocarbon prospectivity within EP386. This is in addition to the considerable unconventional (shale) gas resources previously identified in EP386 and RL1 where studies indicate potential prospective shale gas resources with an estimated prospective recoverable resource of 9.8Tcf.

To progress Advent’s intended initial commercialisation of its EP386 and RL1 assets, Advent has commissioned an engineering study to investigate field development of RL1 through the production of Compressed Natural Gas (CNG) and distribution to regional energy consumers.

After Balance Date Events

On 8th July 2013, Advent Energy announced it had signed a Letter Of Intent (LOI) with CO2 Group subsidiary Western Australian Resources Limited (WARL) for the potential future supply of gas to WARL’s proposed aquaculture project in northern Australia.

The non-binding LOI provides an initial framework for discussion, information sharing and negotiation towards a possible gas supply agreement by the fourth quarter of 2014. This timeframe corresponds with WARL’s intended feasibility studies and financial investment decision timetable.

On the 19th August 2013 MEC Resources signed a variation to their secured loan agreement with Advent Energy Ltd which varied the agreement to incorporate a fixed repayment date of 19 November 2015.

On 21 August 2013 Advent Energy subsidiary Asset Energy Pty Ltd settled its dispute with Fugro Services Pty Ltd and RPS Energy following a court appointed mediation. The dispute between Asset, Fugro and RPS arose over performance and fees in connection with pre-drilling site survey works conducted by Fugro at PEP 11, offshore Sydney Basin, in 2010.

Asset settled Fugro’s claim of $2.2 million with a payment of $100,000.

Future Developments

The entity will continue to develop its investee portfolio projects including PEP 11 and EP 386 and will evaluate and invest in a range of resource projects.

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Information on Directors

H Goh

Non Executive Chairman – Age 58

Shares held in MEC – 5,085,598 Shares held in Advent – 3,000,000 Listed Options held – 4,725,144 Unlisted Options held MEC – nil

Mr Goh 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.

In October 2012, Hock was appointed to the Board of Directors of ASX listed Santos Ltd. He is also a Non Executive director of ASX listed company BPH Energy Limited.

MEC Resources 2013 ANNUAL REPORT 13

Directors’ Report

Information on Directors (continued)

D L Breeze

Executive Director and Managing Director – Age 59

Shares held MEC – 13,183,654 Shares held in Advent – 2,000,000 Listed Options – 7,608,228 Unlisted Options held in Advent – 4,000,000 Unlisted Options held in MEC - nil

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 is Chairman of Grandbridge Limited, a publicly listed investment and advisory company, and BPH Energy Limited, an ASX listed alternative investment business.

He holds a Bachelor of Economics and a Masters of Business Administration (MBA) and is a Fellow of the Securities Institute of Australia and a Fellow of the Institute of Company Directors of Australia.

K O Yap

Non Executive Director – Age 51

Shares held MEC – 4,039,350 Listed options – 3,000,000 Unlisted Options held in MEC – 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, M&A and capital raisings throughout Asia. These include privatisation, listing and public offerings from the PRC (Northeast Electric, H-Share), Malaysia (Petronas Gas) and 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 is a graduate from the London School of Economics, in 1984, is also a fellow of the Institute of Chartered Accountants in England and Wales.

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D Ambrosini

Executive Director and Company Secretary – Age 39

Shares held – nil Listed options – nil Unlisted Options held in MEC – 800,000 Unlisted Options held in Advent – 500,000

Deborah is a chartered accountant with over 15 years’ experience in accounting and business development spanning the biotechnology, mining, IT communications and financial services sectors. She has extensive experience both nationally and internationally in financial and business planning, compliance and taxation.

Deborah is a member of the Institute of Chartered Accountants in Australia and was a state finalist in the 2009 Telstra Business Woman Awards. Deborah was also a recipient of the highly regarded 40 under 40 award held by the WA Business News.

Deborah is also a Director of ASX listed BPH Energy Limited and Grandbridge Limited.

Remuneration Report (Audited)

This report details the nature and amount of remuneration for each key management personnel of MEC Resources Ltd.

H Goh – Non Executive Chairman

D L Breeze – Executive Director

K O Yap – Non Executive Director

D Ambrosini – Executive Director and Company Secretary

E H Tan – Non Executive Director of Advent

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 as determined by the board and/or shareholders. The remuneration report, as contained in the 2012 financial accounts was adopted at the Company’s 2012, annual general meeting. Remuneration for both Executive and Non-Executive directors has not increased since company inception. Although remuneration is reviewed annually against local market levels, the Board believes this course of action to be appropriate.

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.
All executives receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits and options.

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.

MEC Resources 2013 ANNUAL REPORT 15

Directors’ Report

Remuneration Policy (continued)

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. 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 long-term growth in shareholder wealth.

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

The executives receive a superannuation guarantee contribution required by the government, which is currently 9.25%, and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation.

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. Payments to non-executive directors are based on market practice, duties and accountability. Independent external advice is sought when required on payments to non-executive directors. 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 and options not exercised before or on the date of termination do not lapse.

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

Employment contracts of directors

The employment conditions of the managing director are formalised in a contract 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 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 lapse.

The remaining directors are consultants to MEC Resources Ltd and each party can terminate their services by written notice.

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Details of Remuneration for the year ended 30 June 2013

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

2013

Key Management Person	Cash, Salary and Fees	Short-term Benefts Bonus Non-cash beneft	Short-term Benefts Bonus Non-cash beneft	Other	Post- employment Benefts Super- annuation
H Goh	100,000	-	-	-	-
D L Breeze	115,000	-	-	-	-
K O Yap	25,000	-	-	-	-
D Ambrosini	50,000	-	-	-	-
E H Tan	25,000	-	-	-	-

2013 (continued)

Key Management Person	Long- term Benefts Other	Share-based payment Shares Options	Share-based payment Shares Options	Total $	Performance Related %	Compensation relating to options %
H Goh	-	-	-	100,000	-	-
D L Breeze	-	-	-	115,000	-	-
K O Yap	-	-	-	25,000	-	-
D Ambrosini	-	-	-	50,000	-	-
E H Tan	-	-	-	25,000	-	-

2012

Key Management Person	Cash, Salary and Fees	Short-term Benefts Bonus Non-cash beneft	Short-term Benefts Bonus Non-cash beneft	Other	Post- employment Benefts Super- annuation
H Goh	100,000	-	-	-	-
D L Breeze	115,000	-	-	-	-
K O Yap	25,000	-	-	-	-
C T Lim	18,750	-	-	-	-
D Ambrosini	50,000	-	-	-	-
E H Tan	25,000	-	-	-	-

MEC Resources 2013 ANNUAL REPORT 17

Directors’ Report

Details of Remuneration for the year ended 30 June 2013 (continued)

2012 (continued)

Key Management Person H Goh	Long- term Benefts Other -	Share-based payment Shares Options - -	Share-based payment Shares Options - -	Total $ 100,000	Performance Related % -	Compensation relating to options % -
D L Breeze	-	-	-	115,000	-	-
K O Yap	-	-	-	25,000	-	-
C T Lim	-	-	-	18,750	-	-
D Ambrosini	-	-	37,167	87,167	-	43%
E H Tan	-	-	-	25,000	-	-

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.

The following share-based payment arrangements were in existence relating to directors remuneration.

Option Series	Company	Grant date	Expiry date	Grant date fair value	Vesting date	No. of Options
05/08/2010	Advent Energy	05/08/2010	05/08/2015	0.1784	05/08/2010	2,000,000
05/08/2010	Advent Energy	05/08/2010	05/08/2015	0.1784	50% - 05/08/2013 50% - 05/08/2014	500,000

There are no further service or performance criteria that need to be met in relation to options granted.

There were no grants of share based payment compensation to directors and senior management 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 five 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 current year. The Board is of the opinion that the increased loss is in line with expectations after the Company incurred losses on the revaluation of its listed investments. Further additional legal fees were incurred as Asset Energy continued to prepare its defence against a claim made by Fugro Survey Pty Ltd for outstanding consulting fees in relation to site works at the PEP 11 site.

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2009 2010 2011 2012 2013
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Revenue	108,306	309,685	670,522	376,380	164,590
Net Proft/Loss	(3,357,021)	(2,905,010)	(8,005,537)	(9,645,887)	(3,263,080)
Share price at Year end	$0.105	$0.385	$0.11	$0.085	$0.038
Earnings per share	($3.27)	($2.53)	($2.79)	($5.89)	($1.31)

End of remuneration report.

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Meetings of Directors

During the financial year, two 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	2		2
D L Breeze	2		2
K O Yap	2		2
D Ambrosini	2		2

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 $27,320.

D Breeze
D Ambrosini
H Goh
K O Yap

The company has not indemnified the current or former auditor of the Company.

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

Grant Date Date of Expiry Exercise Price Number Under Option
----- End of picture text -----

06/08/2008	06/08/2013	$0.15	833,333
05/08/2010	05/08/2015	$1.25	150,000
06/10/2010	06/10/2015	$1.25	250,000
06/10/2010	06/10/2015	$1.50	250,000
04/11/2010	04/11/2015	$1.25	100,000
21/01/2011	21/01/2016	$0.80	325,000

MEC Resources 2013 ANNUAL REPORT 19

Directors’ Report

MEC Resources Ltd and its controlled subsidiaries

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 Expiry Exercise Price Number Under Option
05/08/2010 05/08/2015 $2.00 3,500,000
MEC Resources Ltd
Grant Date Date of Expiry Exercise Price Number Under Option
07/08/2008 04/07/2013 $0.20 48,954,570
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Advent Energy Listed Options – MEC Resources Ltd

During the year ended 30 June 2013, nil ordinary shares of MEC Resources Ltd were issued on the exercise of options granted under the MEC Resources Ltd Incentive Option Scheme (2012: 10,000). 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.

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 subject to significant environmental regulation under Commonwealth and State laws. Details of the consolidated group’s performance in relation to environmental regulation follow.

MEC investee Advent performed and concluded its production testing operations in 2012 under the existing Environmental Management Plan approved prior to the production testing operations that had commenced in 2011.

During 2011 Advent applied for and was granted the approval to re-enter Waggon Creek-1 within EP 386 during the 2011 dry season for the purposes of performing recompletion and production testing on this gas discovery well. Waggon Creek-1 was drilled in 1995 by previous operators. Advent opted to access this site using existing access roads, tracks and previously cleared seismic lines to ensure that any impact on the environment through its re-entry activities was as low as reasonably practical. The early onset of the wet season prevented Advent from concluding its production testing operations during 2011. These were concluded during the 2012 dry season under the existing approved Environmental Management Plan.

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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 2013 (2012: Nil).

Auditor’s Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2013 has been received and can be found on page 22.

The directors’ report is signed in accordance with a resolution of directors made pursuant to S298(2) of the Corporations Act 2001 .

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David Breeze Director

Dated this 26th Day of August 2013

MEC Resources 2013 ANNUAL REPORT 21

Auditor’s Independence Declaration

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Independent auditor’s report to the members of BPH Energy Limited

Report on the financial report

We have audited the accompanying financial report of BPH Energy Limited, which comprises the Lead auditor’s independent declaration under section 307C of the consolidated statement of financial position as at 30 June 2013, and the consolidated statement of Corporations Act 2001. profit or loss and other comprehensive income, the consolidated statement of changes in equity

and the consolidated statement of cash flows for the year ended on that date, a summary of

To the directors of MEC Resources Limited significant accounting policies, other explanatory notes and the directors’ declaration of the

consolidated entity comprising the company and the entities it controlled at the year’s end or from I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended time to time during the financial year. 30 June 2013 there have been:

Directors’ responsibility for the financial report

(i) no contraventions of the auditor’s independence requirements as set out in the Corporations The directors of the company are responsible for the preparation and fair presentation of the Act 2001 in relation to the audit; and financial report in accordance with the Australian Accounting Standards and the Corporations Act

2001 . This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, (ii) no contraventions of any applicable code of professional conduct in relation to the audit. 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 that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

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. Those standards require that we Nexia Perth Audit Services Pty Ltd 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, we consider internal controls relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures Amar Nathwani B.Eng, CA that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Director effectiveness of the entity’s internal controls. 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.

Perth We believe that the audit evidence we have obtained is sufficient and appropriate to provide a 26 August 2013 basis for our audit opinion.

Independence

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

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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 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 Committees. 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 suitably qualified and experienced Directors and senior executives.

Audit Committee

The Company does not have a formal Audit Committee. The full Board carries 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 there presently 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.

MEC Resources 2013 ANNUAL REPORT 23

Corporate Governance Statement

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 Managing Director. The Board ensures that the Managing Director 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 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; and
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.

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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 Company Secretary (Deborah Ambrosini);
ensuring there are effective management processes in place and approving major corporate initiatives;
enhancing and protecting the reputation of the organization; and
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 2013 ANNUAL REPORT 25

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; and
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 two executive directors, all four 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.

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Action taken and reasons if not adopted

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.

Chair and Managing Director

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 Managing Director 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 2013 and the number of meetings attended by each director is disclosed on page 19.

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 2013.

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.

MEC Resources 2013 ANNUAL REPORT 27

Corporate Governance Statement

Action taken and reasons if not adopted

Principle 3: Promote ethical and responsible decision making

The company has developed a statement of values 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 Company’s share trading policy is set out on the Company’s website.

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

The Company’s policy regarding diversity is set out on the Company’s website.

Principle 3: Promote ethical and responsible decision making (continued)

The Company’s diversity policy does not include measurable objectives as the Board believes that the Company will not be able to successfully meet these given the size and stage of development of the Company. If the Company’s activities increase in size, nature and scope in the future, the suitable measurable objectives will be agreed and put into place. The company is committed to Diversity and Equal Opportunity within its workforce, placing particular focus on the level of gender diversity at senior levels of the organisation. The company ensures this is achieved by :

ensuring recruitment and selection practices enable the availability of a diverse candidate pool for appointments at senior levels;
development of high potential women;
implementation of flexible working arrangements; and
ensuring remuneration practices are free from gender bias.

Given the size of the Company the Directors do not consider it appropriate to set and include measurable objectives in relation to diversity within the annual report. Notwithstanding this, the Company strives to provide the best possible opportunities for current and prospective employees of all backgrounds in such a manner that best adds to overall shareholder value and which reflects the values, principles and spirit of the Company’s Diversity Policy.

At conclusion of the reporting year, one of MEC’s four directors is female.

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Action taken and reasons if not adopted

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.

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. Nexia was appointed as the external auditor in 2012. It is the Corporation Act’s policy to rotate audit engagement partners on listed companies at least every five years. A partner should not be re-assigned to a listed entity audit engagement if this equates to the partner serving in this role for more than 5 out of 7 successive 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. The external auditors 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.

MEC Resources 2013 ANNUAL REPORT 29

Corporate Governance Statement

Action taken and reasons if not adopted

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.

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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.

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; and
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 Managing Director 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; and
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 2013 ANNUAL REPORT 31

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 Managing Director 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.

32 MEC Resources 2013 ANNUAL REPORT

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Statement of Profit or Loss and other Comprehensive Income for the year ended 30 June 2013

Note Revenue 2 Other gains and losses 2 Other Income 2 Administration expenses Consulting and Legal expenses 3 Depreciation and amortisation expense Share of gains and losses in associate Employee expenses 3 Insurance expenses Interest expenses Data Centre administration Service Fees Travelling expenses Other expenses Operating Loss Before Income Tax Income tax expense 8 Operating Loss for the year Other Comprehensive Income Total Comprehensive income for the period Loss attributable to non-controlling interest Loss attributable to owners of the company Total Comprehensive income attributable to non-controlling interest Total Comprehensive Income attributable to the owners of the Company Earnings Per Share – Basic and diluted earnings per share (cents per share) 6	Consolidated 2013 $ 2012 $
	164,590 376,380 (285,659) (7,766,232) 671 5,837 (222,950) (240,785) (1,549,328) (145,008) (4,928) (3,755) - (33,989) (590,821) (791,650) (5,382) (48,909) (2,198) (23,817) (17,521) (26,360) (364,385) (347,040) (164,827) (205,739) (220,342) (394,820)
	(3,263,080) (9,645,887) - -
	(3,263,080) (9,645,887) - -
	(3,263,080) (9,645,887)
	(1,217,487) (467,162)
	(2,045,593) (9,178,725)
	(1,217,487) (467,162)
	(2,045,593) (9,178,725) (1.31) (5.89)

The accompanying notes form part of these financial statements.

MEC Resources 2013 ANNUAL REPORT 33

Consolidated Statement of Financial Position as at 30 June 2013

Note Current Assets Cash and cash equivalents 7 Trade and other receivables 9 Financial assets 12 Other current assets 10 Total Current Assets Non-Current Assets Other non-current assets 10 Evaluation and exploration expenditure 11 Financial assets 12 Property, plant & equipment 13 Total Non-Current Assets Total Assets Current Liabilities Trade and other payables 14 Provisions 15 Financial liabilities 16 Total Current Liabilities Non-Current Liabilities Provisions 16 Financial Liabilities 16 Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital 17 Option Reserve 18 Accumulated losses Total Equity Attributable to Owners Non-controlling Interest Total Equity	Consolidated 2013 $ 2012 $
	4,207,474 7,033,662 114,642 126,116 44,867 44,867 35,357 29,529
	4,402,340 7,234,174
	22,673 22,673 30,337,044 31,694,213 714,893 1,000,552 9,243 12,436
	31,083,853 32,729,874
	35,486,193 39,964,048
	1,241,081 2,701,145 82,369 117,241 470,557 416,889
	1,794,007 3,235,275
	3,152 5,230 - -
	3,152 5,230

	1,797,159 3,240,505

	33,689,034 36,723,543
	24,922,466 24,922,466 493,767 385,196 (21,701,133) (19,655,540)
	3,715,100 5,652,122 29,973,934 31,071,421
	33,689,034 36,723,543

The accompanying notes form part of these financial statements.

34 MEC Resources 2013 ANNUAL REPORT

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Consolidated Statement of Changes in Equity for the year ended 30 June 2013

Balance at 1 July 2011 Loss attributable to members of the consolidated entity Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners Options exercised during the fnancial period Options issued during the fnancial period Balance at 30 June 2012 Balance at 1 July 2012 Loss attributable to members of the consolidated entity Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners Options exercised during the fnancial period Options issued during the fnancial period Balance at 30 June 2013	Ordinary Share Capital $ Accumu- lated losses $ Option Reserve $ Total attributable to owners $ Non- controlling Interest $ Total $
	24,920,661 (10,476,815) 262,690 14,706,536 31,427,083 46,133,619 - (9,178,725) - (9,178,725) (467,162) (9,645,887) - - - - - -
	- (9,178,725) - (9,178,725) (467,162) (9,645,887) 1,805 - - 1,805 - 1,805 - - 122,506 122,506 111,500 234,006
	24,922,466 (19,655,540) 385,196 5,652,122 31,071,421 36,723,543
	24,922,466 (19,655,540) 385,196 5,652,122 31,071,421 36,723,543 - (2,045,593) - (2,045,593) (1,217,487) (3,263,080) - - - - - -
	- (2,045,593) - (2,045,593) (1,217,487) (3,263,080) - - - - 120,000 120,000 - - 108,571 108,571 - 108,571
	24,922,466 (21,701,133) 493,767 3,715,100 29,973,934 33,689,034

The accompanying notes form part of these financial statements.

MEC Resources 2013 ANNUAL REPORT 35

Consolidated Statement of Cash Flows for the year ended 30 June 2013

Note *Cash Flows From Operating Activities* Receipts from customers Payments to suppliers and employees Interest received Net cash used in operating activities 19 Cash Flows From Investing Activities Amounts repaid by/ (loaned to) other entities Receipt/(Payment) for investments Payment for property, plant and equipment Payment for deferred expenditure – (net of reimbursements) Net cash used in investing activities *Cash Flows From Financing Activities* Proceeds from/(repayment of) borrowings 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 2013 $ 2012 $
	- - (2,418,050) (2,968,234) 165,256 382,216
	(2,252,794) (2,586,018)
	(120,000) (1,946,613) - 1,350,000 (1,735) (12,026) (571,659) (2,188,346)
	(693,394) (2,796,985)
	120,000 1,500
	120,000 1,500
	(2,826,188) (5,381,503) 7,033,662 12,415,165
	4,207,474 7,033,662

The accompanying notes form part of these financial statements.

36 MEC Resources 2013 ANNUAL REPORT

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Notes to the Financial Statements for the year ended 30 June 2013

1. Statement of Significant Accounting Policies

Corporate Information

The financial report includes the consolidated financial statements and the notes of MEC Resources Ltd and its controlled entities (‘Consolidated Group’ or ‘Group’).

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 26th August 2013 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. 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 stated below.

Compliance with IFRS

The consolidated financial statements of the MEC Resources Ltd comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Accounting Policies

(a) Principles of Consolidation

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

A list of controlled entities is contained in Note 24 to the financial statements. All controlled entities have a June financial year-end.

As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

All inter-company balances and transactions between entities in the economic entity, 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 economic entity during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased.

MEC Resources 2013 ANNUAL REPORT 37

Notes to the Financial Statements for the year ended 30 June 2013

1. Statement of Significant Accounting Policies (continued)

(a) Principles of Consolidation (continued)

Non-controlling interests in the results and equity of subsidiaries are shown separately in the statement of comprehensive income, statement of changes in equity and statement of financial position respectively.

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under AASB 139 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.

(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. Any deferred consideration payable is discounted to present value using the entity’s incremental borrowing rate. Acquisition-related costs are recognised in profit or loss as incurred.

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 non-assessable 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 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.

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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 recognised in the statement of profit or loss and other comprehensive income except where it relates to items that may be recognised directly to equity, in which case the deferred tax is adjusted directly against equity.

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 or unused tax losses and tax credits 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 statement of comprehensive income 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 15.00 - 33.33%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position 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 2013 ANNUAL REPORT 39

Notes to the Financial Statements for the year ended 30 June 2013

1. Statement of Significant Accounting Policies (continued)

(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 where right of tenure of the area of interest is current and 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.

Should exploration be successful and result in a project, 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.

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 and 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 and loss.

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Classification and Subsequent Measurement

(i) Financial assets at fair value through profit or loss

Financial assets are classified at fair value through profit and 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 the profit and 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. Such assets are initially recognised at fair value plus any directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest rate method.

(iii) 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.

The Group also has investments in unlisted shares that are not traded in an active market but that are also classified as AFS financial assets and stated at fair value (because the directors consider that fair value can be reliably measured). Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments revaluation reserve, with the exception of impairment losses, interest calculated using the effective interest method, and foreign exchange gains and losses on monetary assets, which are recognised in profit or loss.

(iv) 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 significant or prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the statement of comprehensive income.

MEC Resources 2013 ANNUAL REPORT 41

Notes to the Financial Statements for the year ended 30 June 2013

1. Statement of Significant Accounting Policies (continued)

(g) Derivatives

Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the statement of profit or loss and other comprehensive income immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the statement of profit or loss and other comprehensive income depends on the nature of the hedge relationship. A derivative with a positive fair value is recognised as a financial asset; a derivative with a negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

(h) 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 statement of profit or loss and other comprehensive income.

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.

(i) 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 statement of financial position.

(j) Revenue

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

Interest revenue is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest revenue is accrued on a timely basis, by reference to the principal outstanding and at the effective interest rate applicable.

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 by reference to the stage of completion of the contract.

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

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(k) 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 statement of financial position are shown inclusive of GST.

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

(l) 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.

(m) 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.

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 vest. At each balance sheet date, the entity revises its estimate of the number of options that are expected to vest. 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.

(n) 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.

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

MEC Resources 2013 ANNUAL REPORT 43

Notes to the Financial Statements for the year ended 30 June 2013

1. Statement of Significant Accounting Policies (continued)

(o) Foreign Currency

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in Australian dollars (‘$’), which is the functional currency of the Company and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Nonmonetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise.

(p) Comparative Figures

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

(q) Employee Benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to statement of financial position. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

(r) Critical Accounting Estimates and Judgements

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 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. These costs are carried forward in respect of an area that has not at statement of financial position 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, Onshore Energy Pty 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 2013.

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2. Revenue Revenue Interest revenue: other entities Total revenue *Other Income and gains and losses* Net gain/loss on fnancial assets designated as fair value through proft and loss Losses on disposal of associate Other income 3. Loss For The Year Expenses Employee Expenses Salary Superannuation expense Share based payments Other payroll expenses Consulting and Legal Consulting fees Legal fees	Consolidated 2013 $ 2012 $
	164,590 376,380
	164,590 376,380
	(285,659) 63,293 - (7,829,525)
	(285,659) (7,766,232) 671 5,837
	(284,988) (7,760,395)
	495,879 522,386 22,318 22,828 108,571 234,310 (35,947) 12,126
	590,821 791,650
	322,335 17,916 1,226,993 127,092
	1,549,328 145,008

During the period additional legal fees were incurred as Advent’s subsidiary Asset Energy continued to prepare its defence against a claim made by Fugro Survey Pty for outstanding consulting fees in relation to site works at the PEP 11 site.

4. Auditors’ Remuneration

Remuneration of the auditor of the parent entity for: Nexia Perth Audit Services Deloitte Touche Tohmatsu Remuneration of other auditors of subsidiaries for: - auditing or reviewing the fnancial report of subsidiaries Nexia Perth Audit Services Deloitte Touche Tohmatsu	37,000 - - 50,619 7,500 - - 7,700
	44,500 58,319

MEC Resources 2013 ANNUAL REPORT 45

Notes to the Financial Statements for the year ended 30 June 2013

Consolidated	Consolidated
2013	2012
$	$

	Consolidated 2013 $ 2012 $
5. Key Management Personnel Compensation (a) Names and positions held of economic and parent entity key management personnel in offce at any time during the fnancial year are: *Key Management Personnel* H Goh –Non Executive Chairman D L Breeze –Executive Director K O Yap –Non Executive Director D Ambrosini –Executive Director E H Tan –Non Executive Director of Advent Short term employee benefts Share based payments	315,000 333,750 - 37,167
	315,000 370,917

Consolidated
2013
$
2012
$

5.
Key Management Personnel Compensation
(a)
Names and positions held of economic and parent entity
key management personnel in offce at any time during the
fnancial year are:
Key Management Personnel
H Goh –Non Executive Chairman
D L Breeze –Executive Director
K O Yap –Non Executive Director
D Ambrosini –Executive Director
E H Tan –Non Executive Director of Advent
Short term employee benefts
Share based payments

315,000
333,750
-
37,167

315,000
370,917

Key management personnel remuneration is disclosed in the remuneration report included in the directors report. Key management personnel shareholdings and option holdings are show below:

Options and Rights Holdings

2013 Number of Listed Options Held by Key Management Personnel

							Total	Total
		Granted as		Net		Total	Vested and	Unexercis
	Balance	Compen-	Options	Change	Balance	Vested	Exercisable	-able
	1.7.2012	sation	Exercised	Other	30.6.2013	30.6.2013	30.6.2013	30.6.2013
H Goh	4,725,144	-	-	-	4,725,144	4,725,144	4,725,144	-
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	-
D Ambrosini	-	-	-	-	-	-	-	-
E H Tan	-	-	-	-	-	-	-	-

2012 Number of Listed Options Held by Key Management Personnel

							Total	Total
		Granted as		Net		Total	Vested and	Unexercis
	Balance	Compen-	Options	Change	Balance	Vested	Exercisable	-able
	1.7.2011	sation	Exercised	Other	30.6.2012	30.6.2012	30.6.2012	30.6.2012
H Goh	4,725,144	-	-	-	4,725,144	4,725,144	4,725,144	-
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)	-	-	-	-
D Ambrosini	-	-	-	-	-	-	-	-
E H Tan	-	-	-	-	-	-	-	-

46 MEC Resources 2013 ANNUAL REPORT

ENERGY[n] MINERALS[n] EXPLORATION

2013 Number of Unlisted Options Held by Key Management Personnel MEC Resources Ltd

		Granted		Net			Total	Total
		as		Change		Total	Vested and	Unexercis-
	Balance	Compen-	Options	Other /	Balance	Vested	Exercisable	able
	1.7.2012	sation	Exercised	Expired	30.6.2013	30.6.2013	30.6.2013	30.6.2013
H Goh	-	-	-	-	-	-	-	-
D Breeze	-	-	-	-	-	-	-	-
K O Yap	-	-	-	-	-	-	-	-
D Ambrosini	800,000	-	-	800,000	-	-	-	-
E H Tan	-	-	-	-	-	-	-	-

2012 Number of Unlisted Options Held by Key Management Personnel MEC Resources Ltd

		Granted					Total	Total
		as		Net		Total	Vested and	Unexercis-
	Balance	Compen-	Options	Change	Balance	Vested	Exercisable	able
	1.7.2011	sation	Exercised	Other	30.6.2012	30.6.2012	30.6.2012	30.6.2012
H Goh	-	-	-	-	-	-	-	-
D Breeze	-	-	-	-	-	-	-	-
K O Yap	-	-	-	-	-	-	-	-
C T Lim	-	-	-	-	-	-	-	-
D Ambrosini	800,000	-	-	-	800,000	800,000	800,000	-
E H Tan	-	-	-	-	-	-	-	-

2013 Number of Unlisted Options Held by Key Management Personnel Advent Energy Ltd

							Total	Total
		Granted as		Net		Total	Vested and	Unexercis-
	Balance	Compen-	Options	Change	Balance	Vested	Exercisable	able
	1.7.2012	sation	Exercised	Other	30.6.2013	30.6.2013	30.6.2013	30.6.2013
H Goh	-	-	-	-	-	-	-	-
S K Yap	-	-	-	-	-	-	-	-
D Breeze	4,000,000	-	2,000,000	-	2,000,000	2,000,000	2,000,000	-
K O Yap	-	-	-	-	-	-	-	-
D Ambrosini	500,000	-	-	-	500,000	333,333	333,333	166,667
E H Tan	-	-	-	-	-	-	-	-

MEC Resources 2013 ANNUAL REPORT 47

Notes to the Financial Statements for the year ended 30 June 2013

5. Key Management Personnel Compensation (continued)

2012 Number of Unlisted Options Held by Key Management Personnel Advent Energy Ltd

							Total	Total
		Granted as		Net		Total	Vested and	Unexercis-
	Balance	Compen-	Options	Change	Balance	Vested	Exercisable	able
	1.7.2011	sation	Exercised	Other	30.6.2012	30.6.2012	30.6.2012	30.6.2012
H Goh	-	-	-	-	-	-	-	-
S K Yap	-	-	-	-	-	-	-	-
D Breeze	4,000,000	-	-	-	4,000,000	4,000,000	4,000,000	-
K O Yap	-	-	-	-	-	-	-	-
C T Lim	-	-	-	-	-	-	-	-
D Ambrosini	500,000	-	-	-	500,000	-	-	500,000
E H Tan	-	-	-	-	-	-	-	-

Shareholdings - MEC Resources

Number of Shares Held by Key Management Personnel 2013

2013
	Balance	Received as	Options	Net Change	Balance
	1.7.2012	Compensation	Exercised	Other	30.6.2013
H Goh	5,085,498	-	-	-	5,085,498
D L Breeze	13,183,654	-	-	-	13,183,654
K O Yap	4,039,350	-	-	-	4,039,350
D Ambrosini	-	-	-	-	-
E H Tan	-	-	-	-	-

2012

2012
	Balance	Received as	Options	Net Change	Balance
	1.7.2011	Compensation	Exercised	Other	30.6.2012
H Goh	5,085,498	-	-	-	5,085,498
D L Breeze	13,183,654	-	-	-	13,183,654
K O Yap	4,039,350	-	-	-	4,039,350
C T Lim	3,434,350	-	-	(3,434,350)	-
D Ambrosini	-	-	-	-	-
E H Tan	-	-	-	-	-

48 MEC Resources 2013 ANNUAL REPORT

ENERGY[n] MINERALS[n] EXPLORATION

Shareholdings - Advent Energy Number of Shares Held by Key Management Personnel

2013

2013
	Balance	Received as	Options	Net Change	Balance
	1.7.2012	Compensation	Exercised	Other	30.6.2013
H Goh	3,000,000	-	-	-	3,000,000
D L Breeze	-	-	2,000,000	-	2,000,000
K O Yap	-	-	-	-	-
C T Lim	-	-	-	-	-
D Ambrosini	-	-	-	-	-
E H Tan	2,000,000	-	-	-	2,000,000
2012
	Balance	Received as	Options	Net Change	Balance
	1.7.2011	Compensation	Exercised	Other	30.6.2012
H Goh	3,000,000	-	-	-	3,000,000
D L Breeze	-	-	-	-	-
K O Yap	-	-	-	-	-
C T Lim	-	-	-	-	-
D Ambrosini	-	-	-	-	-
E H Tan	2,000,000	-	-	-	2,000,000

6. Earnings per share

6. Earnings per share
(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. 7. Cash and cash equivalents Cash at bank and in hand Reconciliation of cash Cash at the end of the fnancial year as shown in the statement of cash fows is reconciled to items in the statement of fnancial position as follows: Cash and cash equivalents	Consolidated 2013 $ 2012 $
	(2,045,593) (9,178,725)
	(2,045,593) (9,178,725)
	155,813,150 155,812,574 4,207,474 7,033,662
	4,207,474 7,033,662

MEC Resources 2013 ANNUAL REPORT 49

Notes to the Financial Statements for the year ended 30 June 2013

8. Income Tax Expense (a) The components of tax expense comprise: Current tax Deferred tax The expense for the year can be reconciled to accounting loss as follows: Loss from continuing operations Prima facie tax payable on proft from ordinary activities before income tax at 30% (2012: 30%) Non deductible expenses Difference in tax rates of parent which is taxed at 25% (due to pooled development fund status) Unused tax losses not recognised as deferred tax assets Weighted average rate of tax (b) The following deferred tax balances at 30% (2012: 30%) have not been recognised Deferred Tax Assets: Temporary differences Carry forward revenue losses 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. (c) Unrecognised deferred liabilities Fair value movement in investments 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.	Consolidated 2013 $ 2012 $
	- - - - (3,263,080) (9,645,887)
	(978,924) (2,893,766) 348,796 2,369,010 46,375 37,672 583,753 487,084
	- -
	-% -% 112,572 125,475 14,561,686 13,760,781 79,481 131,981 9,107,824 9,812,251

50 MEC Resources 2013 ANNUAL REPORT

ENERGY[n] MINERALS[n] EXPLORATION

9. Trade and other receivables Current Trade receivables Net GST receivables Ageing of past due but not impaired 60-90 days 90-120 days 120 days and over Total 10. Other Assets Current Prepaid expenses Non Current Other Assets Total Other Assets 11. Capitalised Exploration Costs Exploration expenditure capitalised Exploration and evaluation phases Reconciliation of movement during the year Opening balance at 1 July Capitalised expenditure – EP325 Capitalised expenditure – PEP 11 Capitalised expenditure – EP 386 Balance at 30 June	Consolidated 2013 $ 2012 $
	105,007 105,007 9,635 21,109
	114,642 126,116
	- - - - 105,007 105,007
	105,007 105,007
	35,357 29,529
	35,357 29,529
	22,673 22,673
	22,673 22,673
	30,337,044 31,694,213
	30,337,044 31,694,213
	31,694,213 29,505,867 5,893 4,980 (1,928,432) 920 565,370 2,182,446
	30,337,044 31,694,213

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

Capitalised costs amounting to $571,659 (2012:$2,188,346) have been included in cash flows from investing activities in the statement of cashflows.

At a court appointed mediation Asset Energy Pty Ltd settled its dispute with Fugro Services Pty Ltd and RPS Energy. The dispute between Asset, Fugro and RPS arose over performance and fees in connection with pre-drilling site survey works conducted by Fugro at Petroleum Exploration Permit 11 (PEP 11), offshore Sydney Basin, in 2010. Asset settled Fugro’s claim of $2.2 million with a payment of $100,000. The amount of $2.2m had previously been recognized in capitalized exploration expenditure and current liabilities.

MEC Resources 2013 ANNUAL REPORT 51

Notes to the Financial Statements for the year ended 30 June 2013

		Consolidated	Consolidated
		2013	2012
		$	$
12.	Financial Assets
	Current
	Loan receivable	44,867	44,867
	Total	44,867	44,867
	Loans receivable
	Loan to Grandbridge Limited (a)	44,867	44,867
	Non current
	Fair Value through Proft and Loss
	Financial Assets
	Investment in Central Petroleum Ltd	501,321	686,418
	Investment in BPH Energy Limited (b)	143,661	244,223
	Available for sale fnancial assets
	Investment in Molecular Discovery
	Systems Ltd	69,911	69,911
		714,893	1,000,552
(a)	The loan to Grandbridge Limited is unsecured non-interest bearing and repayable on demand.
13.	Property, Plant and Equipment
	Plant and Equipment:
	At cost	19,908	27,907
	Accumulated depreciation	(10,665)	(15,471)
	Total Property, Plant and Equipment	9,243	12,436
	Movements in the carrying amounts for each class of property,
	plant and equipment between the beginning and the end of the
	current fnancial year.
	Balance at the beginning of the year	12,436	4,165
	Additions	1,735	12,026
	Disposals	-	-
	Depreciation expense	(4,928)	(3,755)
	Carrying amount at the end of the year	9,243	12,436

52 MEC Resources 2013 ANNUAL REPORT

ENERGY[n] MINERALS[n] EXPLORATION

14. Trade and other payables Trade payables Sundry payables and accrued expenses 15. Provisions Current Employee entitlements: Opening balance at 1 July Increase/Decrease in provision Balance at 30 June Share sale agreement Opening balance at 1 July Increase in provision Balance at 30 June Total Provisions	Consolidated 2013 $ 2012 $
	443,456 2,354,764 797,625 346,381
	1,241,081 2,701,145
	35,398 24,260 (34,872) 11,138
	526 35,398 81,843 81,843 - -
	81,843 81,843
	82,369 117,241

Provision for Employee Entitlements

A provision has been recognised for employee entitlements relating to annual leave and long service 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.

Non Current Employee entitlements: Opening balance at 1 July Increase/Decrease in provision Balance at 30 June	5,230 4,242 (2,078) 988
	3,152 5,230

MEC Resources 2013 ANNUAL REPORT 53

Notes to the Financial Statements for the year ended 30 June 2013

16. Financial Liabilities Loans payable - Current Loan from BPH Energy Limited Loan from Grandbridge Limited Loans from other entities Loans payable- Non current Loan from Grandbridge Limited	Consolidated 2013 $ 2012 $
	41,935 41,935 427,264 373,596 1,358 1,358
	470,557 416,889
	- -
	- -

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

17. Issued Capital 155,813,150 (2012: 155,813,150) 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 on conversion of options Capital raising costs incurred At reporting date	2013 2012	25,952,615 25,952,615 (1,030,149) (1,030,149)
		24,922,466 24,922,466
		2013 2012
	$ $ 24,922,466 24,922,466 - - - -	No No 155,813,150 155,813,150 - - - -
	24,922,466 24,922,466	155,813,150 155,813,150

Fully Paid Ordinary Share Capital

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

(a) Options

There were 6,408,333 unlisted employee options on issue at the end of the year:

Advent Energy

Advent Energy
Total number	Exercise price	Expiry date
3,500,000	$2.00	05 August 2015
3,500,000

54 MEC Resources 2013 ANNUAL REPORT

ENERGY[n] MINERALS[n] EXPLORATION

MEC Resources

MEC Resources
Total number	Exercise price	Expiry date
833,333	$0.15	06 August 2013
150,000	$1.25	05 August 2015
250,000	$1.25	06 October 2015
250,000	$1.50	06 October 2015
100,000	$1.25	04 November 2015
325,000	$0.80	21 January 2016
1,000,000	$0.35	14 July 2015
2,908,333

There were 48,954,570 listed options on issue at the end of the year:

MEC Resources

MEC Resources
Total number	Exercise price	Expiry date
48,954,570	$0.20	04 July 2013
48,954,570

The market price of the company’s ordinary shares at 30 June 2013 was 3.8 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.

(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 2013 and 30 June 2012 are as follows:

Cash and cash equivalents Trade and other receivables Trade and other payables Working capital position	Consolidated 2013 $ 2012 $
	4,207,474 7,033,662 114,642 126,116 (1,241,081) (2,701,145)
	3,081,035 4,458,633

MEC Resources 2013 ANNUAL REPORT 55

Notes to the Financial Statements for the year ended 30 June 2013

		Consolidated	Consolidated
		2013	2012
		$	$
18.	Reserves
	Options Reserve	493,737	385,196
	The option reserve records items recognised as
	expenses in respect of the granting of Director
	and Employee share options.
	Reconciliation of movement
	Opening balance	385,196	262,690
	Options charged during the year	108,571	234,006
	Transfer to non-controlling interest (a)	-	(111,500)
	Closing balance	493,767	385,196
(a)	This relates to options issued by Advent Energy in its own right, as such transferred share based
	payment expense to the non-controlling interest.
19.	Cash Flow Information
(a)	Reconciliation of Cash Flow from
	Operations with Proft after income tax
	Operating loss after income tax	(3,263,080)	(9,645,887)
	Non-cash fows in proft:
	Depreciation	4,928	3,755
	Revaluation on investments	285,659	7,766,232
	Share based payments	108,571	234,310
	Share of associated loss	-	33,989
	Administration recharges	173,668	140,272
	Changes in net assets and liabilities, net
	of effects of purchase and disposal of
	subsidiaries
	(Increase)/decrease in trade and term
	receivables	(17,940)	151,855
	(Increase)/decrease in other assets	(5,828)	(11,094)
	Increase/(decrease) in trade payables
	and accruals	498,178	(1,271,576)
	Increase/(decrease) in provisions	(36,950)	12,126
	Net cash fow from operating activities	(2,252,794)	(2,586,018)

56 MEC Resources 2013 ANNUAL REPORT

ENERGY[n] MINERALS[n] EXPLORATION

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, credit risk and equity price 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 statement of financial position 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.

Equity Price Risk

The Group is exposed to equity price risks arising from equity investments. Equity investments areheld for strategic rather than trading purposes. The Group does not actively trade these investments.

Equity Price Sensitivity Analysis

The sensitivity analyses below have been determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 5% higher/lower:

Net loss for the year ended 30 June 2013 would decrease/increase $7,562 (2012: increase/decrease by $46,532) as a result of the changes in fair value of financial assets through the profit and loss; and

The Group’s sensitivity to equity prices has not changed significantly from the prior year.

All listed investments are to be accounted at fair value through the profit and loss in accordance with the current Risk Management Policy.

MEC Resources 2013 ANNUAL REPORT 57

Notes to the Financial Statements for the year ended 30 June 2013

20. Financial Risk Management (continued)

(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:

2013 Effective Average Interest Rate Payable %	Floating Interest Rate $ Non- Interest Bearing $ Total $
*Financial Assets* Cash and cash equivalents 2.63% Trade and other receivables - Financial Assets -current - Financial Assets- non current - *Financial Liabilities* Trade and sundry Payables - Financial liabilities - 2012 Effective Average Interest Rate Payable %	4,207,474 - 4,207,474 - 114,642 114,642 - 44,867 44,867 - 714,893 714,893
	4,207,474 874,402 5,081,876
	- 1,241,081 1,241,081 - 470,557 470,557
	- 1,711,638 1,711,638
	Floating Interest Rate $ Non- Interest Bearing $ Total $
*Financial Assets* Cash and cash equivalents 3.83% Trade and other receivables - Financial Assets -current - Financial Assets- non current - *Financial Liabilities* Trade and sundry Payables - Financial liabilities -	7,033,662 - 7,033,662 - 126,116 126,116 - 44,867 44,867 - 1,000,552 1,000,552
	7,033,662 1,171,535 8,205,197
	- 2,701,145 2,701,145 - 416,889 416,889
	- 3,118,034 3,118,034

ii. Fair Values

The 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. 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.

58 MEC Resources 2013 ANNUAL REPORT

ENERGY[n] MINERALS[n] EXPLORATION

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

Aggregate fair values and carrying amounts of financial assets and financial liabilities at balance date:

*Financial Assets* Financial assets at fair value through proft or loss Available for sale fnancial assets Derivative fnancial assets Loans and receivables *Financial Liabilities* Other loans and amounts due Other liabilities	2013 2012 Carrying Amount Fair Value Carrying Amount Fair Value
	644,982 644,982 930,641 930,641 69,911 69,911 69,911 69,911 - - - - 159,509 159,509 170,983 170,983
	874,402 874,402 1,171,535 1,171,535
	470,557 470,557 416,889 416,889 1,241,081 1,241,081 2,701,145 2,701,145
	1,711,638 1,711,638 3,118,034 3,118,034

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%	Consolidated Group 2013 2012
	62,701 111,520 (31,350) (55,760)

MEC Resources 2013 ANNUAL REPORT 59

Notes to the Financial Statements for the year ended 30 June 2013

20. Financial Risk Management (continued)

(c) Fair value measurements recognised in the statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

30 June 2013

Financial assets at FVTPL – Investments in listed entities Available for sale fnancial assets – Investments in unlisted entities Total 30 June 2012 Financial assets at FVTPL – Investments in listed entities Available for sale fnancial assets – Investments in unlisted entities Total	Level 1 Level 2 Level 3 Total
	644,982 - - 644,982 - - 69,911 69,911
	644,982 - 69,911 714,893
	Level 1 Level 2 Level 3 Total
	930,641 - - 930,641 - - 69,911 69,911
	930,641 - 69,911 1,000,552

Reconciliation of Level 3 fair value measurements of financial assets:

Reconciliation of Level 3 fair value measurements of fnancial assets:
Opening balance Add: Purchases Total gains or loss in the proft and loss Closing balance	2013 2012 Available for sale (Level 3) Available for sale (Level 3)
	69,911 69,911 - - - -
	69,911 69,911

The Company received through an in specie distribution an investment in Molecular Discovery Systems Ltd in January 2010. Management have made an assessment and believe that there is no material change in the fair value of their investments at reporting date. The investment in Molecular Discovery Systems Ltd was an arm’s length transaction.

60 MEC Resources 2013 ANNUAL REPORT

ENERGY[n] MINERALS[n] EXPLORATION

iv. Liquidity risk

The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

Liquidity is the risk that the company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

The following are the contractual maturities at the end of the reporting period of financial liabilities.

30 June 2013

30 June 2013
	Contractual cash fows Carrying amount Total 2 mths or less 2-12 mths 1-2years 2-5years More than 5 years
Financial liabilities Trade and other payables Unsecured loans 30 June 2012	1,241,081 (1,241,081) - (1,241,081) - - - 470,557 (470,557) - (470,557) - - -
	1,711,638 (1,711,638) - (1,711,638) - - -
	Contractual cash fows Carrying amount Total 2 mths or less 2-12 mths 1-2years 2-5years More than 5 years
Financial liabilities Trade and other payables Unsecured loans	2,701,145 (2,701,145) - (2,701,145) - - - 416,889 (416,889) - (416,889) - - -
	3,118,034 (3,118,034) - (3,118,034) - - -

MEC Resources 2013 ANNUAL REPORT 61

Notes to the Financial Statements for the year ended 30 June 2013

21. Operating Segment

Identification of reportable segments

The group has identified its operating segments based on the internal reports that are reviewed and used by the Managing Director and his management team (the chief operating decision makers) in assessing performance and in determining the allocation of resources.

The operating segments are identified by management based on their investment in exploration companies. Financial information of these investments is reported to the managing director and his management team on at least a monthly basis. Currently, management’s focus is on the exploration program of Advent Energy project’s PEP 11, EP 325 and EP 386, which is disclosed in Note 11.

The Group operates predominantly in one industry, namely investments in the mining and resources. These activities are predominantly in Australia.

Accounting policies and inter-segment transactions

The accounting policies used by the Group in reporting segments are the same as those contained in note one to the accounts and in the prior period.

22. Events after the Balance Sheet Date

On the 19th August 2013 MEC Resources signed a variation to their secured loan agreement with Advent Energy Ltd which varied the agreement to incorporate a fixed repayment date of 19 November 2015.

Asset settled Fugro’s claim of $2.2 million with a payment of $100,000. The amount of $2.2m had previously been recognized in capitalized exploration expenditure and current liabilities.

62 MEC Resources 2013 ANNUAL REPORT

ENERGY[n] MINERALS[n] EXPLORATION

23. Related Party Transactions

(a) Directors’ Remuneration

Details of directors’ remuneration and retirement benefits are disclosed in the remuneration report in the Directors report and note 5.

(b) Directors’ Equity Holdings 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 key management personnel and their key management personnel-related entities in: MEC Resources Ltd Advent Energy Ltd	Parent 2013 2012 $ $
	22,308,502 22,308,502 7,000,000 5,000,000
	15,333,372 15,333,372
	800,000 800,000 2,500,000 4,500,000

(c) Related entities

A loan facility exists between Advent and its parent entity MEC, $3,600,000 (2012: $3,600,000). The loan is secured by a second charge over all of the assets and rights of 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 is due and payable on the earlier of a successful capital raising or the date that MEC issues a notice for repayment. On the 19th August 2013 MEC Resources signed a variation to their secured loan agreement with Advent Energy Ltd which varied the agreement to incorporate a fixed repayment date of 19 November 2015.

(d) Directors

The Company has an agreement with Trandcorp Pty Limited on normal commercial terms procuring the services of David Breeze to provide product development services. $65,000 (2012: $65,000) was paid during the year.

MEC Resources 2013 ANNUAL REPORT 63

Notes to the Financial Statements for the year ended 30 June 2013

24. Controlled Entities

24. Controlled Entities
		Country of	Ownership Interest
Name of Entity	Principal Activity	Incorporation	%
Parent Entity			2013 2012
MEC Resources Limited	Investment	Australia
Subsidiaries of MEC Resources Ltd
Advent Energy Limited	Oil and Gas	Australia	44.89 44.89
	exploration and
	development
Asset Energy Pty Ltd	Oil and Gas	Australia	44.89 44.89
	exploration and
	development
Onshore Energy Pty Ltd	Oil and Gas	Australia	44.89 44.89
	exploration and
	development

MEC owns 44.89% equity interest in Advent Energy and its subsidiaries and consequentially does not control more than half of the voting power of those shares. However, the majority of the board of MEC is on the board of Advent Energy and therefore have the ability to add and remove directors of Advent Energy and hence has control over the financial and operating policies of Advent Energy. Therefore Advent Energy is controlled by the Group and is consolidated in these financial statements.

25. Share-Based Payments

The following share-based payment arrangements existed at 30 June 2013:

There were 6,408,333 unlisted employee options on issue at the end of the year:

Advent Energy				Fair Value at
Total number	Exercise price	Expiry date	Grant Date	grant date
3,500,000	$2.00	05 August 2015	05 August 2010	$0.1784
3,500,000
MEC Resources
833,333	$0.15	06 August 2013	06 August 2008	$0.0463
150,000	$1.25	05 August 2015	05 August 2010	$0.3032
250,000	$1.25	06 October 2015	06 October 2010	$0.3011
250,000	$1.50	06 October 2015	06 October 2010	$0.2780
100,000	$1.25	04 November 2015	04 November 2010	$0.3255
325,000	$0.80	21 January 2016	21 January 2011	$0.1000
1,000,000	$0.35	14 July 2015	14 July 2011	$0.0498
2,908,333

At balance date, nil MEC share options have been exercised (2012: 10,000).

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.

64 MEC Resources 2013 ANNUAL REPORT

ENERGY[n] MINERALS[n] EXPLORATION

MEC Resources Ltd

Outstanding at the beginning of the year Granted Exercised Expired / Cancelled Outstanding at year-end Exercisable at year-end Outstanding at the beginning of the year Granted Exercised Expired / Cancelled Outstanding at year-end Exercisable at year-end	2013 2012 Number of Options Weighted Average Exercise Price $ Number of Options Weighted Average Exercise Price $
	4,495,000 0.397 3,505,000 0.15 - - 1,000,000 0.35 - - (10,000) 0.15 (1,586,667) 0.252 - - 2,908,333 0.597 4,495,000 0.48
	2,133,333 0.663 3,111,667 0.45
	Advent Energy Limited 2013 2012 Number of Options Weighted Average Exercise Price $ Number of Options Weighted Average Exercise Price $
	7,500,000 0.965 7,500,000 0.965 - - - - (2,000,000) 0.060 - - (2,000,000) 0.060 - - 3,500,000 2.000 7,500,000 0.965
	3,500,000 2.000 6,000,000 0.71

MEC Resources 2013 ANNUAL REPORT 65

Notes to the Financial Statements for the year ended 30 June 2013

26. Contingent Liabilities

There were no contingent liabilities at reporting date.

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 Parent Entity Disclosures Financial Position Assets Current assets Non-current assets Total asset Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued Capital Retained earnings Reserves Option Reserve Total equity Financial Performance Proft/Loss for the year Other comprehensive income Total comprehensive income	Consolidated 2013 $ 2012 $
	2,212,500 418,979 18,688,500 20,522,500
	20,901,000 20,941,479
	6,393,109 7,203,869 3,568,571 3,679,230
	9,961,680 10,883,099
	255,011 178,926 3,152 -
	258,163 178,926
	24,922,466 24,922,466 (15,656,958) (14,603,485) 438,009 385,192
	9,703,517 10,704,173
	(1,053,473) (8,798,040) - -
	(1,053,473) (8,798,040)

28. Parent Entity Disclosures

66 MEC Resources 2013 ANNUAL REPORT

ENERGY[n] MINERALS[n] EXPLORATION

29. Adoption of New and Revised Accounting Standards

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2012, and have not been applied in preparing these consolidated financial statements. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early.

AASB 10 Consolidated Financial Statements

AASB 10 introduces a single control model to determine whether an investee should be consolidated. As a result, the Group will need to change its consolidation conclusion in respect of its investees, which may lead to changes in the current accounting for these investees.

AASB 12 Disclosures of Interests in Other Entities (2011)

AASB 12 brings together into a single standard all the disclosure requirements about an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. The Group is currently assessing the disclosure requirements for interests in subsidiaries, interests in joint arrangements and associates and unconsolidated structured entities in comparison with the existing disclosures. AASB 12 requires the disclosure of information about the nature, risks and financial effects of these interests.

AASB 9 Financial Instruments (2010)

AASB 9 Financial Instruments (2009) introduces new requirements for the classification and measurement of financial assets. Under AASB 9 (2009), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. AASB 9 (2010) introduces additions relating to financial liabilities. The IASB currently has an active project that may result in limited amendments to the classification and measurement requirements of AASB 9 and add new requirements to address the impairment of financial assets and hedge accounting. AASB 9 (2010 and 2009) are effective for annual periods beginning on or after 1 January 2015 with early adoption permitted. The adoption of AASB 9 (2010) is not expected to have an impact on the Group’s financial assets and liabilities.

MEC Resources 2013 ANNUAL REPORT 67

Directors Declaration

The directors of the company declare that:

the financial statements and notes, as set out on pages 33 to 67, 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 2013 and of the performance for the year ended on that date of the consolidated entity;
the Financial Statements and Notes comply with International Accounting Standards as disclosed in Note 1;
the directors have been given the declarations required by S295A of the Corporations Act 2001.
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.

Signed in accordance with a resolution of the directors made pursuant to S295(5) of the Corporations Act 2001 .

Director

David Breeze Executive Director

Dated this 26th Day of August 2013

68 MEC Resources 2013 ANNUAL REPORT

ENERGY[n] MINERALS[n] EXPLORATION

Independent Auditor’s Report

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Independent auditor’s report to the members of MEC Resources Limited

Report on the financial report

We have audited the accompanying financial report of MEC Resources Limited, which comprises the Independent auditor’s report to the members of BPH Energy Limited consolidated statement of financial position as at 30 June 2013, and the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the Report on the financial report consolidated statement of cash flows for the year ended on that date, a summary of significant accounting We have audited the accompanying financial report of BPH Energy Limited, which comprises the policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the consolidated statement of financial position as at 30 June 2013, and the consolidated statement of company and the entities it controlled at the year’s end or from time to time during the financial year. profit or loss and other comprehensive income, the consolidated statement of changes in equity

and the consolidated statement of cash flows for the year ended on that date, a summary of

Directors’ responsibility for the financial report significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from The directors of the company are responsible for the preparation and fair presentation of the financial report time to time during the financial year. in accordance with the Australian Accounting Standards and the Corporations Act 2001 . This responsibility Directors’ responsibility for the financial report includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting The directors of the company are responsible for the preparation and fair presentation of the and applying appropriate accounting policies; and making accounting estimates that are reasonable in financial report in accordance with the Australian Accounting Standards and the Corporations Act the circumstances. In Note 1, the directors also state that the financial report, comprising the financial 2001 . This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, statements and notes, complies with International Financial Reporting Standards as issued by the whether due to fraud or error; selecting and applying appropriate accounting policies; and making International Accounting Standards Board. accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state

that the financial report, comprising the financial statements and notes, complies with International

Financial Reporting Standards as issued by the International Accounting Standards Board.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our Auditor’s responsibility audit in accordance with Australian Auditing Standards. Those standards require that we comply with Our responsibility is to express an opinion on the financial report based on our audit. We conducted relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain our audit in accordance with Australian Auditing Standards. Those standards require that we reasonable assurance whether the financial report is free from material misstatement. 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 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the misstatement. financial report. The procedures selected depend on the auditor’s judgement, including the assessment of An audit involves performing procedures to obtain audit evidence about the amounts and the risks of material misstatement of the financial report, whether due to fraud or error. In making those disclosures in the financial report. The procedures selected depend on the auditor’s judgement, risk assessments, we consider internal controls relevant to the entity’s preparation and fair presentation of including the assessment of the risks of material misstatement of the financial report, whether due the financial report in order to design audit procedures that are appropriate in the circumstances, but not to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness estimates made by the directors, as well as evaluating the overall presentation of the financial report. 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 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a audit opinion. basis for our audit opinion.

Independence

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

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MEC Resources 2013 ANNUAL REPORT 69

Independent Auditor’s Report

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Opinion

In our opinion:

Opinion

(a) the financial report of MEC Resources Limited is in accordance with the Corporations Act 2001 , In our opinion: including:
(a) the financial report of BPH Energy Limited is in accordance with the Corporations Act 2001 ,
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 including: and of its performance for the year ended on that date; and
```
 - (i) giving a true and fair view of the consolidated entity’s financial position as at 30
```
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. June 2013 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations
(b) the financial report also complies with International Financial Reporting Standards as disclosed 2001. in Note 1.
- (b) the 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 pages 15 to 18 of the directors’ report for the Report on the remuneration report

We have audited the remuneration report included in pages 7 to 10 of the directors’ report for the year ended 30 June 2013. The directors of the company are responsible for the preparation and year ended 30 June 2013. 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 presentation of the remuneration report in accordance with Section 300A of the 2001 . Our responsibility is to express an opinion on the remuneration report, based on our audit Corporations Act 2001 . Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in conducted in accordance with Australian Auditing Standards. accordance with Australian Auditing Standards. Opinion

In our opinion, the remuneration report of BPH Energy Limited for the year ended 30 June 2013,

Opinion

complies with Section 300A of the Corporations Act 2001 . In our opinion, the remuneration report of MEC Resources Limited for the year ended 30 June 2013, complies with Section 300A of the Corporations Act 2001 .

Nexia Perth Audit Services Pty Ltd

Nexia Perth Audit Services Pty Ltd

Amar Nathwani B.Eng, CA Director

Perth, 26 August 2013 Amar Nathwani B.Eng, CA Director

Perth, 26 August 2013

70 MEC Resources 2013 ANNUAL REPORT

ENERGY[n] MINERALS[n] 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 20th August 2013.

1. Substantial Shareholder

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

Shareholder	Shares	%
David Breeze	13,183,654	8.46
Robert Healy	9,229,608	5.92

2. Distribution of Shareholders

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

Range of Holding Shareholders Number Ordinary %
Shares
----- End of picture text -----

Range of Holding	Shareholders Number Ordinary Shares %
1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	488 219,586 0.14 522 1,594,074 1.02 548 4,809,724 3.09 1297 44,902,298 28.82 223 104,287,468 66.93
	3078 155,813,150 100.00

3. (a) Distribution of Unlisted Optionholders

Range of Holding	Optionholders Number of Options %
MEC Resources 10,001 to 100,000 100,001 and over	6 515,000 16.48 6 2,610,000 83.52
	12 4,495,000 100.00

Range of Holding	Optionholders Number of Options %
Advent Energy 100,001 and over	4 4,000,000 100.00
	4 4,000,000 100.00

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.

MEC Resources 2013 ANNUAL REPORT 71

Additional Securities Exchange Information

6. Restricted Securities

Restricted Securities
Shares- Number of Shares free of escrow Total Shares Options Number of Employee options not subject to Escrow (Not Listed) Total Options	155,813,150
	155,813,150
	3,125,000
	3,125,000

7. Tenements and Interests Held

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

Permit Details Interest Held Entity
----- End of picture text -----

Petroleum Exploration Permit 386	100%	Advent Energy
Petroleum Exploration Permit 11	85%	Advent Energy
Petroleum Exploration Permit 325	8.3%	Advent Energy
Retention Licence 1	100%	Advent Energy

8. Twenty Largest Shareholders (as at 20 August 2013)

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

Name	Number of ordinary fully paid shares % held of issued ordinary capital
Grandbridge Ltd Healy Robert Anthony Breeze David Citicorp Nom PL Merrill Lynch Aust Nom PL Trandcorp PL Trandcorp PL Pado John Thomas Ming Ding Gui Lam Terry L and Chan PS Lim Chin Tong Ware Colin Victor Protax Nom PL Birch Lawrence M and JF Websdale Antony Brian Avco PL Edward YI Financial Services Avatar Energy PL Moore Rhonda Kate JP Morgan Nom Aust Ltd	9,747,362 9,229,608 6,234,438 5,839,420 5,456,534 3,849,216 3,100,000 2,502,870 2,000,000 1,790,000 1,305,433 1,000,000 1,000,000 892,373 850,000 812,375 694,000 687,500 666,667 637,307 6.26 5.92 4.00 3.75 3.50 2.47 1.99 1.61 1.28 1.15 0.84 0.64 0.64 0.57 0.55 0.52 0.45 0.44 0.43 0.41
	58,295,103 37.42

72 MEC Resources 2013 ANNUAL REPORT

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ACN 113 900 020

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

www.mecresources.com.au

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ENERGY MINERALS EXPLORATION

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AI assistant

MEC RESOURCES LIMITED — Annual Report 2013

65353_rns_2013-09-29_b6546b50-45b3-4e18-abce-1bd7ec4bb4a7.pdf

Contents

Corporate Directory

Directors

Registered Office

Auditor

Share Registry

Australian Securities Exchange Listing

Australian Business Number

Chairman’s Letter

Dear Shareholder

Company Focus and Developments

MEC’s investment focus:

ADVENT ENERGY

Western Australia / Northern Territory – Onshore Bonaparte Basin

Company Focus and Developments

Unconventional Resources Within EP386 and RL1

Company Focus and Developments

Garimala-1: Elevated Gas Shows over Milligans-Langfield Section

PEP 11 Oil and Gas Permit

Company Focus and Developments

Western Australia – Exmouth Sub-Basin (EP325)

BPH Energy Limited

Directors’ Report

Directors

Company Secretary

Principal Activities

Advent Energy Ltd - Oil and Gas

Operating Results

Dividends

Financial Position

Significant Changes In State Of Affairs

Directors’ Report

Significant Changes In State Of Affairs (continued)

After Balance Date Events

Future Developments

Information on Directors

H Goh

Directors’ Report

Information on Directors (continued)

D L Breeze

K O Yap

D Ambrosini

Remuneration Report (Audited)

Remuneration Policy

Directors’ Report

Remuneration Policy (continued)

Compensation Practices

Employment contracts of directors

Details of Remuneration for the year ended 30 June 2013

2013

2012

Details of Remuneration for the year ended 30 June 2013 (continued)

2012 (continued)

Company performance, shareholder wealth, and director and executive remuneration

Meetings of Directors

Indemnifying Officers or Auditors

Options

MEC Resources

Directors’ Report

MEC Resources Ltd and its controlled subsidiaries

Advent Energy Listed Options – MEC Resources Ltd

Proceedings on Behalf of Company

Environmental Issues

Non-audit Services

Auditor’s Independence Declaration

Auditor’s Independence Declaration

Report on the financial report

Corporate Governance Statement

Corporate Governance Disclosures

Composition Of The Board

Remuneration and Nomination Committees

Audit Committee

Corporate Governance Statement

Board Responsibilities

Monitoring Of The Board’s Performance

Best Practice Recommendation

Action taken and reasons if not adopted

MEC RESOURCES LIMITED Annual Report 2013