Mission NewEnergy Ltd Reports Audited Year End Financial ... · 28 September 2016 ASX ANNOUNCEMENT Mission NewEnergy Ltd Reports Audited Year End Financial Results The Company is

28 September 2016 ASX ANNOUNCEMENT

Mission NewEnergy Ltd Reports Audited Year End Financial Results

The Company is pleased to present the Audited Financial Report for the year ended 30 June 2016. For more information and a copy of this announcement, please visit: www.missionnewenergy.com or contact: Company Contact: James Garton Phone: +61 438 657 057 Email: [email protected]

Tempo Offices, Unit B9, 431 Roberts Rd, Subiaco,

Western Australia, 6008

Tel: + 618 6313 3975 Fax: + 618 6270 6339

Email: [email protected]

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MissionNewEnergyLimited

FinancialReportfortheYearEnded

30June2016

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DIRECTORSREPORT................................................................................................................3

1. DirectorsDetails.................................................................................................................3

2. AdvisortoTheBoard..........................................................................................................7

3. MeetingsofDirectors.........................................................................................................7

4. InsurancePremiumPaidforDirectorsandOfficers...........................................................8

5. UnissuedSharesUnderOption..........................................................................................8

6. RemunerationReport.........................................................................................................8

7. PrincipalActivities............................................................................................................15

8. OperatingandFinancialReview.......................................................................................15

9. ReviewofOperations.......................................................................................................15

10. FinancialPosition..............................................................................................................16

11. DividendsPaidorRecommended....................................................................................16

12. EventsSubsequenttoReportingDate.............................................................................16

13. SignificantChangesinStateofAffairs..............................................................................16

14. LikelyDevelopment,ProspectsandBusinessStrategies..................................................16

15. ProceedingsonBehalfoftheCompany...........................................................................16

16. NonAuditServices...........................................................................................................16

17. EnvironmentalRegulations..............................................................................................17

18. TheLeadAuditor’sIndependenceDeclaration................................................................17

AUDITORSINDEPENDENCEDECLARATION.............................................................................18

FINANCIALSTATEMENTSTABLEOFCONTENTS......................................................................19

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DIRECTORSREPORT

Your Directors present their report on the Company and its controlled entities for the yearended30June2016.

1. DirectorsDetails

ThenameofDirectors’inofficeatanytimeduringorsincetheendoftheyearare:

Datuk Mohamed Zain BinMohamedYusuf

Chairman(IndependentNon-executive)

Qualifications BachelorofEconomics(Hons.)(UniversityofWesternAustralia)

Experience DatukZainhasover25yearsexperience inShellMalaysia.From1986 to 1988, he was seconded to Shell International, UnitedKingdom and worked as Marketing Consultant in Shell UK andShell Caribbean. Upon his return to Malaysia, he was madeMarketingDirectorofShellMalaysia.Hesubsequentlyservedonthe Board of Directors of Shell Group Malaysia as ExecutiveDirector,withresponsibilityoveratotalof18groupsubsidiariesinvolved in both the upstream and downstream petrochemicalbusiness.Datuk Zain is a Director of WSA Group of Companies andChairman of Malacca Securities Sdn Bhd, past chairman of theMalaysianAustraliaBusinessCouncilandservedasaDirectorofAirodSdnBhd,NADIBhd,FaberGroupBhd,PJBumiBhdandaschairmanofConfoil(Malaysia)Bhd,aMalaysian-AustralianjointventurecompanyinMalaysia.Boardmembersince24January2006.AppointedChairmanon1July2014.

SpecialResponsibilities Datuk Zain is a member of the Audit and Risk ManagementCommittee andChairmanof theNomination andRemunerationCommittee.

Former Directorships in listedentitiesoverthelast3years

ChairmanofMalaccaSecuritiesSdnBhd(sinceNovember2000),resignedasaDirectorfromFaberGroupBhdinMay2013.

Admiral (Ret) Tan Sri Dato’ SriMohdAnwarbinHajiMohdNor

Director(IndependentNon-executive)

Qualifications Master of Science in Engineering Business Management(UniversityofWarwick,U.K)

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Experience Tan Sri Anwarmade history in April 2005when he became thefirstnavalchief in theMalaysianArmedForces (MAF) toascendto its highest military office of the Chief of Defence Force,commandingworkforce strength of nearly 130,000.With nearly40 years of military experience with the Royal Malaysian Navy(RMN) and MAF, he has acquired a massive portfolio ofachievements.His outstanding performance extends to the academic arena aswell inclusive of stints at theNaval Staff College (Rhode Island,USA), Navigation and Direction Course and Principal WarfareOfficers Course (HMSDRYAD,UnitedKingdom).He alsoholds aMasterofScienceinEngineeringBusinessManagementfromtheUniversityofWarwick,UnitedKingdom.Tan Sri Anwar has received numerous commendations, awardsandaccoladesinrecognitionofhistalents,andwasbestowedthePanglimaMangkuNegara(PMN),whichcarriesthetitleofTanSri,byHisMajestytheYangDi-PertuanAgong(theKingofMalaysia).He has also received distinguished medals from foreigngovernmentssuchastheOrdreNationalDeLaLegionD'HonneurfromFranceand theCommandof the LegionofMerit from theUS.Most recently hewas appointed as a Senator to theUpperHouseofMalaysia.Boardmembersince25June2009.

SpecialResponsibilities Tan Sri Anwar is Chairman of the Audit and Risk ManagementCommitteeandamemberoftheNominationandRemunerationCommittee.

Former Directorships in listedentitiesoverthelast3years

Chairmanofthearmedforcesfund(PensionFund)andChairmanofTitijayaLandBhd.

Mr.MohdAzlanbinMohammed Director(Non-IndependentNon-executive)Qualifications Bachelor of Arts Degree (Honours) majoring in Accounting and

Business.Experience Mr Mohd Azlan, is currently the Managing Director of Wasco

Oilfield Services Sdn Bhd, which is principally involved in theprovision of oil and gas services internationally. Wasco is asubsidiary of Bursa Malaysia listed Wah Seong CorporationBerhadandalsositsontheboardofitsvarioussubsidiaries.He is also theChairmanof Indra Technology SolutionsMalaysiaSdnBhd,asubsidiaryofIndraSistemas,S.A.ofSpain.In May 2015, Mohd Azlan was appointed as IndependentChairman of Multi-Purpose Generali Insurans Bhd, a leadingMalaysianinsurancecompany.Boardmemberfrom15September2014.

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SpecialResponsibilities Mohd Azlan is a member of the Audit and Risk ManagementCommitteeandtheNominationandRemunerationCommittee.

Former Directorships in listedentitiesoverthelast3years

Nil

Dato’NathanMahalingam ManagingDirector/GroupChiefExecutiveOfficer(Executive)

Qualifications Bachelor of Economics (Hons.) (University ofMalaya) andMBA(MurdochUniversity,WesternAustralia).

Experience MrMahalingamhasover25yearsofmanagementexperienceinbanking and finance, heavy industries and infrastructuredevelopment.Hehas successfully implementednumerous start-up manufacturing operations in Malaysia during his tenure ofservicewitha largeMalaysianconglomerate.Between1995and2000, he served as project director in the Westport Group,developers of one of Malaysia's largest privatised port andtranshipmentfacility.Board member since incorporation of the Company (17November2005).

PerformanceRights NilSpecialResponsibilities ManagingDirector/GroupChiefExecutiveOfficerofthecompany.

Former Directorships in listedentitiesoverthelast3years

Nil

MrGuyBurnett FinanceDirector/ChiefFinancialOfficer(Executive)andCompany

Secretary.Qualifications MemberoftheInstituteofCharteredAccountantsAustralia

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Experience Mr Burnett, a Chartered Accountant, has been a FinanceProfessional inseveral largecorporations.AfterfinishingasaCAtraineeandAuditmanager,MrBurnett joinedUmgeniWater,alarge corporatised water utility in South Africa, as its FinancialAccountant. He was promoted to the position of FinancialController in mid 1999. He left Umgeni in 2004 to migrate toWesternAustraliawithhisfamily.PriortojoiningtheCompanyMrBurnettwasManager:CorporateAccounting&TaxwithWesternPower.Prior to thisMrBurnettworkedasActingFinancialAccountantforWaterCorporationandserved as aManagerwithKPMGwhereheplayed a key role inassisting KPMG's clients in rolling out their IFRS accountingimplementations.MrBurnetthasalsoservedontheBoardoftheSorrentoSurfLifeSavingClub.Boardmembersince6April2009.

Former Directorships in listedentitiesoverthelast3years

Nil

MrJamesGarton ExecutiveDirector–CorporateFinanceQualifications Bachelor of Business Administration - Finance, Bachelor of

Science–EconomicsandMasterofAppliedFinance

Experience Mr. Garton has over 15 years experience in corporate finance,working in investment banking. Prior to his current role, Jameswas has been Head of Corporate Finance and Mergers andAcquisitions forMission since 2008. Mr.Garton joinedMissionNewEnergy from U.S. investment bank, FBR Capital Markets,where hewas Vice President, Investment Banking. Prior to FBRCapital Markets, he worked in corporate finance and equitycapitalmarketswithAustralianfirmBBYLimited.BeforeBBY,Mr.GartonworkedinprivateequitywiththeAustralianadvisoryfirmInvestmentCapitalLimited.Boardmembersince1July2014.

SpecialResponsibilities NilFormer Directorships in listedentitiesoverthelast3years

Nil

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2. AdvisortoTheBoard

On16thDecember2014 theCompanyappointedDato’MohamedNizambinAbdulRazakasAdvisor to theBoard.Dato’NizamRazak, aMalaysian,wasattached toBumiputraMerchantBankers Bhd, an investment bank, from 1981 to 1984 and to PB Securities Sdn Bhd, astockbrokingfirmfrom1984to1998.HeisanindependentandNon-ExecutiveDirectorofYeoHiap Seng Limited andMamee-Double Decker (M) Sdn Bhd. He also serves on the board ofseveralprivatelimitedcompaniesengagedinawiderangeofactivitiesandisactivelyinvolvedin several charitable foundations such as Noah Foundation, National Children WelfareFoundation, YayasanCemerlang, YayasanRahahandYayasanWahSeong. InMarch2012,hewas appointed Pro-Chancellor of University Tun Abdul Razak and in July 2013, he wasappointedChancellorofUnitarInternationalUniversity.Inthepasthehashelddirectorshipsincompaniesinvolvedinawiderangeofactivitiessuchasbanking,insurance,mutualfunds,steel,autopartsmanufacturing,healthcare,IT,retailandfoodproduction.Dato’Nizamgraduatedin1980 with a Bachelor of Arts (Oxon) degree in Politics, Philosophy and Economics from theOxfordUniversity,UnitedKingdom.

3. MeetingsofDirectors

Duringthefinancialyear,10meetingsofDirectors(includingBoardsubcommittees)wereheld.

AttendancebyeachDirectorduringtheyearwereasfollows:

CommitteeMeetings

Directors’Meetings

Audit & RiskManagement

Nomination &RemunerationCommitteeCommittee

A B A B A BDatukMohamedZainBinMohamedYusuf 4 4 4 4 2 2

Tan Sri Dato’ Sri Mohd Anwar binHajiMohdNor 4 4 4 4 2 2

MohdAzlan 4 4 4 4 2 2Dato’NathanMahalingam 4 4 - - - -MrGuyBurnett 4 4 - - - -MrJamesGarton 4 4 - - - -

A - Number eligible to attend B - Number attended

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4. InsurancePremiumPaidforDirectorsandOfficers

The Company has paid an insurance premium in respect of a contract insuring each of theDirectors of the Company named earlier in this report and the executive officers of theCompanyagainst liabilitiesandexpenses, to theextentpermittedby law,arising fromclaimsmade against them in their capacity as Directors and officers of the Company, other thanconduct involving awillful breach of duty in relation to the Company.Due to confidentialityclausescontainedintheinsurancepolicytheLimitofLiabilityandPremiumpaidhasnotbeendisclosed.

5. UnissuedSharesUnderOption

TherearenounissuedordinarysharesofMissionNewEnergyLtdunderoptionatthedateofthisreport.

6. RemunerationReport(Audited)

This report details the nature and amount of remuneration for each Director of MissionNewEnergyLimitedandforthekeymanagementpersonnel.

TheremunerationpolicyofMissionNewEnergyLimitedistwofold:

• TocreatearemunerationstructurethatwillallowMissionNewEnergytoattract,rewardand retain qualified Executives and Non-Executive Directors who will lead MissionNewEnergyinachievingitsstrategicobjectives,

• To provide andmotivate the Executives andNon-ExecutiveDirectorswith a balancedandcompetitiveremuneration.

ThespecificobjectivesoftheExecutiveRemunerationPolicyareasfollows:

• Tomotivateexecutivemanagementtomanageand leadthebusinesssuccessfullyandto drive strong long-termorganisational growth in linewith theGroup’s strategy andbusinessobjectives,

• Todrivesuccessfulorganisationalperformancebyincorporatinganannualperformanceincentiveandestablishlonger-termperformanceobjectives,

• To further drive longer-term organisational performance through an equity-basedrewardstructure,

• Tomakesurethatthere istransparencyandfairness inexecutiveremunerationpolicyandpractices,

• Todeliverabalancedsolutionaddressingallelementsoftotalpay[base-pay,incentivepay(cashandequity)andbenefits],

• Tomakesureappropriatesuperannuationarrangementsareinplaceforexecutives,and• Tocontributetoappropriateattractionandretentionstrategiesforexecutives.

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ThespecificobjectivesoftheNon-ExecutiveDirectorremunerationpolicyareasfollows:

• ToattractandretainappropriatelyqualifiedandexperiencedDirectors,• ToremunerateDirectorsfairlyhavingregardtotheirresponsibilities,includingproviding

leadershipandguidancetomanagement,• To build sustainable shareholder value by encouraging a longer-term strategic

perspective, by not linking fees to the results of the Mission NewEnergy Group ofCompanies,

• TheNon-ExecutiveDirectorsdonotreceiveperformancebasedpay,and• ThemaximumannualaggregateDirector’sfeepoollimitis$500,000andwasapproved

byshareholdersatageneralmeetingon19October2009.

Base fees (excluding

superannuation)

1July2015to30June

2016

1July2014to30June

2015

Chairman 55,000 42,500Deputychairman 35,000 24,000Non-executiveBoardmember 35,000 24,000Chairman of the Audit and RiskCommittee

NIL NIL

Chairmanof theNomination andRemunerationCommittee

NIL NIL

TheBoardofMissionNewEnergyLimitedbelieves the remunerationpolicy tobeappropriateand effective in its ability to attract and retain the best executives andDirectors to run andmanage the Group, as well as create goal congruence between Directors, executives andshareholders.

TheBoard’spolicyfordeterminingthenatureandamountofremunerationforboardmembersandseniorexecutivesoftheGroupisasfollows:

RemunerationGovernance

Theremunerationpolicy,settingthetermsandconditionsfortheExecutiveDirectorsandothersenior executives, was developed by the Nomination and Remuneration Committee andapprovedbytheBoard.

Allexecutivesareentitledtoreceiveabasesalary(whichisbasedonfactorssuchaslengthofserviceandexperience),superannuation,fringebenefits,optionsandperformanceincentives.

The Nomination and Remuneration Committee review the executive packages annually byreference to the Group’s performance, executive performance and comparable informationfromindustrysectors.

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TheDirectorsandexecutivesreceiveasuperannuationguaranteecontribution(orequivalent)required by the relevant government authority and do not receive any other retirementbenefits.

All remuneration paid toDirectors and executives is valued at the cost to the Company andexpensed.SharesgiventoDirectorsandexecutivesarevaluedasthedifferencebetweenthemarketpriceof thosesharesandtheamountpaidby theDirectororexecutive. Optionsarevaluedusinganappropriateoptionpricingmethodology.

Inconsidering theGroup’sperformanceandbenefits for shareholderwealth, theBoardhaveregard to the following indices in respectof the current financial year and theprevious fourfinancialyears:

2016 2015 2014 2013 2012

Revenue($000) 42 7,271 9,684 8,413 38,202PBIT beforediscontinued operations($000)

(2,218) 4,187 (609) 10,774 (3,427)

Profit/(loss) afterincome tax - owners($000)

(2,328) 28,357 (1,077) 10,043 (6,130)

Basicearnings/(loss)pershare–owners($) (0.06) 0.91 (0.08) 0.96 (0.69)

Dividends - - - - -Shareprice($) 0.034 0.04 0.01 0.01 0.15

Currentexecutive remunerationdoesnothaveaperformanceelement included.ACompanyretentionplanwasconcludedduringthefinancialyearunderreview.

The board policy is to remunerate Non-Executive Directors at market rates for time,commitment and responsibilities. TheNomination and Remuneration Committee determinespayments to theNon-ExecutiveDirectorsand reviews their remunerationannually,basedonmarketpractice,dutiesandaccountability.Independentexternaladvicewasnotsoughtduringthefinancialyear.Themaximumaggregateamountoffeesthatcanbepaidtonon-executiveDirectorsissubjecttoapprovalbyshareholdersattheAnnualGeneralMeetingandisallocatedto each non-executive Director based on responsibility, which include the Chairman of theBoard, Chairman of the Audit and Risk Committee and Chairman of the Nomination andRemunerationCommittee.Feesfornon-executiveDirectorsarenotlinkedtotheperformanceoftheGroup. F

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KeyManagementPersonnel

TheCompanyhasdefinedthefollowingclassesofpeopleaskeymanagementpersonnel:

• Non-ExecutiveDirectors• ExecutiveDirectors• ManagementreportingdirectlytotheGroupChiefExecutiveOfficer

DetailsofremunerationfortheyearendedJune2016

The remuneration for the key management personnel of the group during the year was asfollows:

2016

FixedRemuneration

Salary

Non-cashBenefits,includingnetannual

leave

LongtermBonus

Sharebased

payments

PostEmployment

SuperContribution

Total

$ $ $ $ $ $

Non-ExecutiveDirectors DatukZainYusuf 55,000 - - - - 55,000

Admiral(Ret)TanSriAnwar 35,000 - - - 333 35,333

MohdAzlan 35,000 - - - 333 35,333Total Non-executive

Directors125,000 - - - 666 125,666

Dato’NathanMahalingam 290,000 3,782 - - - 293,782

Mr.GuyBurnett 216,319 10,429 - - 20,900 247,648Mr.JamesGarton 200,000 - - - 19,000 219,000TOTAL KEY MANAGEMENT

PERSONNEL831,319 14,211 - - 40,566 886,096

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2015

Fixedremuneration

Salary

Non-cashBenefits,

includingnetannualleave

LongtermBonus

Sharebased

payments

PostEmployment

SuperContribution

Total

$ $ $ $ $ $Non-ExecutiveDirectors

DatukZainYusuf 42,500 - - - - 42,500

Admiral(Ret)TanSriAnwar 24,000 - - - 184 24,184

MohdAzlan 19,000 - - - 144 19,144TotalNon-executive

Directors85,500 - - - 328 85,828

Dato’NathanMahalingam 291,625 18,910 50,000 50,000 - 410,535

Mr.GuyBurnett 216,121 7,253 50,000 50,000 20,900 344,274Mr.JamesGarton 200,000 5,368 50,000 50,000 19,000 324,368TOTALKEY

MANAGEMENT

PERSONNEL

793,246 31,531 150,000 150,000 40,228 1,165,005

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EmploymentcontractsofDirectorsandseniorexecutives

Non-Executive Directors have no service contract with Mission NewEnergy Ltd. Theircompensation for the year ended30 June2016 and future years is basedonmarket-relatedcompensationandthere isnoagreementbyMissionNewEnergyLtdtopayapre-determinedcompensationduringtheyearended30June2016andfuturefinancialyears.Thereisalsonoagreement by Mission NewEnergy Ltd to pay any pre-determined amounts in the event oftermination.

TheemploymentconditionsoftheGroupChiefExecutiveOfficer,ChiefFinancialOfficerandtheHead of Corporate Finance are formalised in contracts of employment, which the Directorsconsidertobeonreasonableandcommercialterms.

Theemploymentagreementscontainthefollowingtermsandconditions:

• standard leave entitlements; fixed terms of 2 years,withMissionNewEnergy able toterminate the employment prior to the expiration of themaximum term by giving 2months’noticeand;o apaymentequivalentto12monthssalaryfortheGroupChiefExecutiveOfficer;ando apaymentequivalentto3months’salaryfortheChiefFinancialOfficerandHeadof

CorporateFinance,exceptinthecasewhereterminationisasaresultofachangeincontrolinthebusinesswhereitwillbe12months’salary;

• employeeabletodothesamebygiving2monthsnotice;• rightsofsummarydismissalarepreserved;• totalremunerationissubjecttoyearlyreview,butanincreaseisnotguaranteed;• noprovisionforautomaticbonuspayments;• noprobationaryperiods;and• cascadingpostemploymentrestraints.• aretentionplanwasapprovedbytheBoardinApril2013wheretheCEO,CFOandHead

ofCorporateFinancewillreceive,uponcontinuedemployment,aproportionoftheirannualsalarybasedvariouscriteria.Atthe2014AnnualGeneralmeetingshareholdersapprovedanamendmenttotheretentionplanamountswherebyacashvalueandanissueofcompanysharesweretobemadeuponthecriteriabeingmet.Allcriteriaweremetandtheappropriateretentionamountpaidandsharesissued.At30June2016thereisnoretentionplaninplace.

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Thefollowingtablereflectsthekeytermsoftheemploymentagreements:

Name Termofagreement

Base salary

including

superannuation

Terminationbenefit

NathanMahalingamChiefExecutiveOfficer Terminates30June2017 A$290,000 12monthssalary

GuyBurnettChiefFinancialOfficer Terminates30June2017 A$240,900

3 or 12 months salary(refer to commentsabove)

JamesGartonHeadofCorporateFinance Terminates30June2017 A$219,000

3 or 12 months salary(refer to commentsabove)

Ordinarysharedheldbykeymanagementpersonnel

Balance

01/07/2015

Acquired/Issued

pursuantto

retentionplan

DisposedBalance

30/06/2016

DatukZainYusuf - - - -

Admiral(Ret)TanSriAnwar - - - -

MohdAzlan1 5,000,000 - - 5,000,000Dato’NathanMahalingam2 5,612,956 - - 5,612,956GuyBurnett3 5,112,001 - - 5,112,001JamesGarton 5,112,051 - - 5,112,051Total 20,837,008 - - 20,837,008

Noremunerationconsultantswereusedduringthecurrentorpreviousfinancialyear.

Therewerenoloanstoorfromkeymanagementpersonnelduringthereportingperiods.

1HeldindirectlythroughKarismaIntegrasiSdnBhd

2HeldpersonallyandindirectlythroughMissionEquitiesSdnBhd,acompanythatDato’Mahalingamhasa34%interestin.

3HeldpersonallyandindirectlythroughMkhambathiTrust,atrustthatMrBurnettisabeneficiaryof.

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Votingandcommentsmadeatthecompany’s2015AnnualGeneralMeeting

MissionNewEnergyLtdreceivedmorethan99%of“yes”votesonitsremunerationreportforthe2015financialyear.TheCompanydidnotreceiveanyspecificfeedbackattheAGMonitsremunerationreport.

EndofAuditedRemunerationreport.

7. PrincipalActivities

TheprincipalactivitiesoftheGroupduringthefinancialyearwere:

• 20%shareina250,000tpaBiodieselPlantinMalaysia• Therewere no significant changes in the nature of the principal activities during the

financialyear.

8. OperatingandFinancialReview

Other income for the Group amounted to $41,960 (2015: $7,270,759). Net cash(used)/generated in operating activities was ($2,077,633) (2015: $391,464). The net(loss)/profit of theGroup amounted to ($2,328,545) (2015: $28,357,244). In 2015 theGrouphadagainfromdiscontinuedoperations,wherethegainwasprimarilydrivenbythereversalofapriorperiodimpairmentofrefineriesuponthesaleofthatrefinery.

9. ReviewofOperations

BiodieselRefining

TheCompaniesfullyownedMalaysiansubsidiary,M2CapitalSdnBhd(M2Capital)hasa20%shareofFGVGreenEnergySdnBhd,acompanythatownsandisintheprocessofretrofittinga250,000tparefineryatKuantanport,eastcoastMalaysia,with“ENSEL®”technology,tobeabletoproducebiodiesel from lowqualityvegetableoils.Theother stakeholders in this companyareFeldaGlobalVenturesDownstreamSdnBhd(“FGVD”),asubsidiaryofFeldaGlobalVenturesHoldingsBerhad,andBenefuelInternationalHoldingsS.A.R.L(Benefuel).

Duringthefinancialyear,theCompanyannouncedthattheongoingdisputewithKNMProcessSystemsSdnBhd(KNM)hadbeenamicablysettled.Thematerial termsofthesettlementarethatMissionwillpaytoKNMA$4m,beingtheamountputasidebyMissionuponthesaleofMission’s 250,000 tpa refinery in February 2015, pursuant to a consent order agreed to byMissionandKNMearlier.Bothpartieshaveagreed towithdrawallother claimsandcounterclaimsandwilldiscontinuealllegalactionsagainsteachother.

CapitalMarketsandFunding

TherehavebeennoCapitalMarketmattersundertakenduringthecurrentfinancialyear.

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10. FinancialPosition

TheGrouprealisedanoperating(loss)/profitfortheyearended30June2016of($2,328,545)(2015: $28,357,244), with net cash (used)/generated in operating activities of ($2,077,633)(2015: $391,464). At reporting date, the current assets less current liability surplus was$1,116,600(2015:$2,999,383)andanetassetsurplusof$4,765,266(2015:$6,769,556).

11. DividendsPaidorRecommended

Nodividendshavebeenpaidordeclaredforpayment.

12. EventsSubsequenttoReportingDate

Otherthanthemattersmentionedbelow,therehavebeennosignificantsubsequenteventsupuntilthedateofsigningthisFinancialReport.

13. SignificantChangesinStateofAffairs

There have been no significant changes to the state of affairs up to the date of signing thisFinancialReport.

14. LikelyDevelopment,ProspectsandBusinessStrategies

TheCompanyisfocusedonmaximisingstakeholdervaluethroughoperationordivestmentofassets.InadditiontoitsinterestinthenewMalaysianjointventureCompany,theCompanywillcontinue to lookatotheropportunitiesandprojects toenhance shareholdervalue, includingpotentialreversemergeropportunities.

15. ProceedingsonBehalfoftheCompany

Nopersonhas applied for leave of Court to bring proceedings on behalf of the Companyorintervene in any proceedings to which the Company is a party for the purpose of takingresponsibilityonbehalfoftheCompanyforalloranypartofthoseproceedings.TheCompanywasnotapartytoanysuchproceedingsduringtheyear.

16. NonAuditServices

TheBoardofDirectors,inaccordancewithadvisefromtheauditandriskcommittee,issatisfiedthattheservicesdisclosedbelowdidnotcompromisetheexternalauditor’sindependenceforthefollowingreasons:

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• Allnon-auditservicesarereviewedandapprovedbytheauditandriskcommitteepriortocommencementtoensuretheydonotadverselyaffecttheintegrityandobjectivityoftheauditor,and

• Thenatureoftheservicesprovideddoesnotcompromisethegeneralprinciplesrelatingtoauditor independence inaccordancewithAPES110:CodeofEthics forprofessionalAccountantssetbytheAccountingProfessionalandEthicsStandardsBoard.

TheGroup’sauditorshavenotprovidedotherassuranceornon-assuranceservicesduringtheyear.RefertoNote28fordetailsofamountspaidtotheGroup’sauditorsduringtheyear.

17. EnvironmentalRegulations

Mission NewEnergy Ltd operations are not subject to any particular or significantenvironmental regulation under a law of the Commonwealth or of a State or Territory inAustralia.

18. TheLeadAuditor’sIndependenceDeclaration

Theleadauditor’sindependencedeclaration,inaccordancewithS307CoftheCorporationsAct2001fortheyearended30June2016hasbeenreceivedandcanbefoundonpage18oftheDirectors’Report.

SignedinaccordancewitharesolutionoftheBoardofDirectors.

Dato’NathanMahalingam

GroupChiefExecutiveOfficer

Date:28September2016

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38 Station StreetSubiaco, WA 6008PO Box 700 West Perth WA 6872Australia

Tel: +61 8 6382 4600Fax: +61 8 6382 4601www.bdo.com.au

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UKcompany limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved underProfessional Standards Legislation, other than for the acts or omissions of financial services licensees.

DECLARATION OF INDEPENDENCE OF WAYNE BASFORD TO THE DIRECTORS OF MISSION NEWENERGYLIMITED

As lead auditor of Mission NewEnergy Limited for the year ended 30 June 2016, I declare that, to thebest of my knowledge and belief, there have been:

1. No contraventions of the auditor independence requirements of the Corporations Act 2001 inrelation to the audit; and

2. No contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Mission NewEnergy Limited and the entity it controlled during theperiod.

Wayne Basford

Director

BDO Audit (WA) Pty Ltd

Perth, 28 September 2016

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FINANCIALSTATEMENTSTABLEOFCONTENTS

CONSOLIDATEDSTATEMENTOFPROFITORLOSS...................................................................21

CONSOLIDATEDSTATEMENTOFCOMPREHENSIVEINCOME...................................................23

CONSOLIDATEDSTATEMENTOFFINANCIALPOSITION...........................................................24

CONSOLIDATEDSTATEMENTOFCHANGESINEQUITY............................................................26

CONSOLIDATEDSTATEMENTOFCASHFLOWS........................................................................28

NOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTS.......................................................29

HOWNUMBERSARECALCULATED......................................................................................29

1. Natureofoperationsandgeneralinformation............................................................29

2. Basisofpreparation.....................................................................................................30

3. New,revisedoramendingAccountingStandardsandInterpretationsadopted.........32

4. NewAccountingStandardsandInterpretationsnotyetmandatoryorearlyadopted32

5. Segmentreporting.......................................................................................................35

6. Revenue........................................................................................................................38

7. Expenses.......................................................................................................................39

8. IncomeTax...................................................................................................................40

9. Earningspershare........................................................................................................41

10. Cashandcashequivalents........................................................................................42

11. TradeandOtherReceivables...................................................................................42

12. PropertyPlantandEquipment.................................................................................43

13. OtherAssets.............................................................................................................45

14. TradeandOtherPayables........................................................................................45

15. Provisions.................................................................................................................45

16. Tax............................................................................................................................46

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17. IssuedCapital...........................................................................................................47

18. Reserves...................................................................................................................48

19. CashFlowInformation.............................................................................................49

GROUPSTRUCTURE..............................................................................................................50

20. Investmentsinsubsidiaries,unconsolidatedentitiesandassociates......................50

RISK.......................................................................................................................................53

21. CriticalAccountingEstimatesandJudgments..........................................................53

22. FinancialInstrumentsandFinancialRiskManagement...........................................54

23. CapitalManagement................................................................................................58

UNRECOGNISEDITEMS........................................................................................................59

24. CapitalandLeasingCommitments...........................................................................59

25. ContingentLiabilitiesandContingentAssets...........................................................59

26. Eventsoccurringafterthereportingperiod.............................................................59

OTHERINFORMATION..........................................................................................................60

27. RemunerationofAuditors........................................................................................60

28. RelatedParties.........................................................................................................60

29. Parententityinformation.........................................................................................60

30. Non-currentassetsheldforsaleanddiscontinuedoperations...............................61

31. CompanyDetails.......................................................................................................62

32. Authorisationoffinancialstatements......................................................................62

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CONSOLIDATEDSTATEMENTOFPROFITORLOSS

FORTHEYEARENDED30JUNE2016

Note 2016 2015

$ $

Otherincome 6 41,960 7,270,759

Totalrevenue 41,960 7,270,759

DirectorandEmployeebenefitsexpense 7a (1,090,634) (1,574,264)

Netforeignexchange(losses)/gains (339,576) 3,240,119

Consultants’expenses (9,301) (16,333)

Impairmentofreceivable - (671,660)

Regulatoryexpenses (28,645) (67,589)

Travelexpenses (188,092) (175,320)

Rentalexpenses (17,039) (10,136)

Otherexpenses 7b (586,192) (1,985,187)

Depreciationandamortisationexpenses (175) (2,874)

FinanceCost–amortisation - (944,123)

FinanceCosts - (870,703)

(Loss)/Profitbeforeincometax (2,217,694) 4,192,689

Incometaxexpense 8 (844) (5,497)

(Loss)/NetProfitbeforenon-controllinginterest (2,218,538) 4,187,192

Shareofnet(loss)/profitofassociateaccountedforusingtheequitymethod 20 (110,007) 37,510

Gainfortheyearfromdiscontinuedanddeconsolidatedoperations 30 - 24,132,542

(Loss)/Profitfortheyearaftertax (2,328,545) 28,357,244

Profit/(Loss)isattributableto:

OwnersofMissionNewEnergyLtd (2,328,545) 28,357,244

Non-controllinginterests - -

(2,328,545) 28,357,244

CONSOLIDATEDSTATEMENTOFPROFITORLOSSContd.

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Earningspersharefromcontinuingoperationsattributabletotheordinaryequityholdersoftheparent:

Basic(loss)/earningspershare(dollars) 9 (0.06) 0.13

Diluted(loss)/earningspershare(dollars)

9 (0.06) 0.13

Earningspersharefromprofitsattributabletotheordinaryequityholdersoftheparent:

Basicearnings/(loss)pershare(dollars) 9 (0.06) 0.91

Dilutedearnings/(loss)pershare(dollars) 9 (0.06) 0.91

The above Consolidated Statement of Profit or Loss should be read in conjunctionwith theaccompanyingnotes.

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CONSOLIDATEDSTATEMENTOFCOMPREHENSIVEINCOME

FORTHEYEARENDED30JUNE2016

2016

$

2015

$

Profit/(Loss)fortheperiod (2,328,545) 28,357,244

Othercomprehensiveincome

Itemsthatwillberealisedthroughprofitorloss:

Exchangedifferencesontranslatingforeignoperations 324,255 (2,485,775)

Othercomprehensive(loss)/incomefortheperiodnetoftax 324,255 (2,485,775)

Totalcomprehensiveincomefortheperiod (2,004,290) 25,871,469

Attributabletonon-controllingequityinterests - -

Attributabletoownersoftheparent (2,004,290) 25,871,469

Comprehensive(loss)/incomefromContinuingOperations (2,004,290) 1,738,927

ComprehensiveincomefromDiscontinuedOperation - 24,132,542

TheaboveConsolidatedStatementofComprehensiveIncomeshouldbereadinconjunctionwiththeaccompanyingnotes.

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CONSOLIDATEDSTATEMENTOFFINANCIALPOSITION

ASAT30JUNE2016

Note 2016 2015

$ $

CurrentAssets

Cashandcashequivalents 10 1,400,538 3,150,776

Tradeandotherreceivables 11 1,117,594 5,657,362

Otherassets 13 4,166 42,937

Totalcurrentassets 2,522,298 8,851,075

Non-CurrentAssets

Property,plantandequipment 12 2,455 -

Investmentsaccountedforusingtheequitymethod 20 3,646,211 3,770,173

Totalnon-currentassets 3,648,666 3,770,173

TotalAssets 6,170,964 12,621,248

CurrentLiabilities

Tradeandotherpayables 14 104,157 440,013

Short-termprovisions 15 1,301,541 5,411,679

Totalcurrentliabilities 1,405,698 5,851,692

NetAssets 4,765,266 6,769,556

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CONSOLIDATEDSTATEMENTOFFINANCIALPOSITIONContd.

Note 2016 2015

$ $

Equity

Issuedcapital 17 523,197 523,197

Reserves 18 1,204,799 880,544

(Accumulatedprofits) 3,037,270 5,365,815

Non-controllingInterests 20 - -

TotalEquity 4,765,266 6,769,556

TheaboveConsolidatedStatementofFinancialPositionshouldbereadinconjunctionwiththeaccompanyingnotes.

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CONSOLIDATEDSTATEMENTOFCHANGESINEQUITYFORTHEYEARENDED30JUNE2016

OrdinaryShareCapital

RetainedEarnings

ShareBased

PaymentsReserve

ForeignCurrencyTranslationReserve

ConvertibleNotesReserve

Non-controllingInterests

Total

$ $ $ $ $ $ $Balance as at 30 June2014

110,523,197 (141,617,611) 4,907,496 3,216,319 11,690,242 (70,864) (11,351,221)

Profitafter incometaxexpensefortheyear - 4,187,192 - - - - 4,187,192

Share of net profit ofassociate accountedfor using the equitymethod

- 37,510 - - - - 37,510

Discontinuedoperations - 24,132,542 - - - - 24,132,542

Discontinuedoperations-NCI - 70,338 - - - (70,338) -

Other Comprehensive(loss)fortheperiod - - - (2,485,775) - - (2,485,775)

Total ComprehensiveIncome

28,427,582 - (2,485,775) - (70,338) 25,871,469

Settlement of series 4connotedebt - 3,648,348 - - (11,690,242) - (8,041,894)

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CONSOLIDATEDSTATEMENTOFCHANGESINEQUITYFORTHEYEARENDED30JUNE2016

OrdinaryShareCapital

RetainedEarnings

ShareBased

PaymentsReserve

ForeignCurrencyTranslationReserve

ConvertibleNotesReserve

Non-controllingInterests

Total

$ $ $ $ $ $ $

Sharecapitalreductionviaaccumulatedlossesoffset4

(110,000,000) 110,000,000 - - - - -

Sharebasedpayment - - 150,000 - - - 150,000Share based paymentreservecleared - 4,907,496 (4,907,496) - - - -

Balance as at 30 June2015

523,197 5,365,815 150,000 730,544 - - 6,769,556

Loss after income taxexpensefortheyear - (2,328,545) - - - - (2,328,545)

OtherComprehensiveincomefortheperiod - - - 324,255 - - 324,255

Total ComprehensiveIncome

- (2,328,545) - 324,255 - - (2,004,290)

Balance as at 30 June2016

523,197 3,037,270 150,000 1,054,799 - - 4,765,266

TheaboveConsolidatedStatementofChangesinEquityshouldbereadinconjunctionwiththeaccompanyingnotes.

4ThesharecapitalreductiondoesnotaffectthenumberoffullypaidordinarysharesonissuesbytheCompany.

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CONSOLIDATEDSTATEMENTOFCASHFLOWS

FORTHEYEARENDED30JUNE2016

Note 2016

$

2015

$

CashFlowsFromOperatingActivities

Receiptsfromcustomers - 3,840,439

Paymentstosuppliersandemployees (2,118,136) (3,461,059)

Interestreceived 41,347 17,529

Incometaxpaid (844) (5,445)

Netcashgenerated/(usedin)operatingactivities 19 (2,077,633) 391,464

CashFlowsFromInvestingActivities

Purchaseofproperty,plantandequipment (2,618) -

Proceedsanddepositfromsaleofassets - 28,894,946

Releaseofperformancebondanddeposits - 20,843

Settlementpaymentoflegaldispute (4,040,886) -

Amountsreleased/(placed)ondepositforlegaldispute 4,040,886 (5,105,051)

Assetsaleretentiondeposit 332,333 (354,610)

PaymentsforinvestmentinAssociate - (3,731,689)

Cashbalancefromdeconsolidatedoperations 30 - (32,648)

Netcashprovidedfrominvestingactivities 329,715 19,691,791

CashFlowsFromFinancingActivities

Repaymentsofborrowings - (17,730,983)

Netcash(used)byfinancingactivities - (17,730,983)

NetIncrease(Decrease)InCashAndCashEquivalents (1,747,918) 2,352,272

Cashandcashequivalentsatbeginningofthefinancialyear

3,150,776 451,953

Effectsofexchangeratefluctuationsofcashheldinforeigncurrencies

(2,320) 346,551

CashAndCashEquivalentsAtEndOfFinancialYear 10 1,400,538 3,150,776

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NOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTS

HOWNUMBERSARECALCULATED

This sectionprovidesadditional informationabout those individual line items in the financialstatements that theDirectors considermost relevant in the contextof theoperationsof theentity,including:(a) information and accounting policies that are relevant for an understanding of the itemsrecognisedinthefinancialstatements.AccountingpoliciesspecifictoanitemofdisclosureareincludedwiththatdisclosureintheseFinancialStatements,(b)analysisandsub-totals,includingsegmentinformation,(c)informationaboutestimatesandjudgementsmadeinrelationtoparticularitems.

1. Natureofoperationsandgeneralinformation

MissionNewEnergyLimitedisacompanydomiciledinAustralia(ACN:117065719)and:

• listedontheASX(MBT)withitsoperationsinMalaysia;• thathasa20%interestinanAssociateowninga250,000tpa(approx.75milliongallon

p.a.) biodiesel refinery, located in Malaysia, which will be retrofitted to producebiodieselfromlowercostfeedstock.Thisinvestmentisequityaccountedandclassifiedasanassociatewithin these financial statementswitha carryingvalueof$3.6million(note20).

• Followingthelegalsettlementintheprioryear.Missionhasareceivableof$1,114,830($920,000USD)thisamountwhencollectedwillbeusedtosettlethe liabilityowingof$1,114,830(note15)ItisanticipatedthatfundswillflowtotheGroup,andbepaidoutwithin12months.

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2. Basisofpreparation

Statementofcompliance

The financial report is a general purpose financial report which has been prepared inaccordancewithAustralianAccountingStandards(AASB’s)(includingAustralianinterpretations)issued by theAustralianAccounting Standards Board (AASB) and the Corporations Act 2001.TheconsolidatedfinancialreportoftheGroupcomplieswithInternationalFinancialReportingStandards (IFRSs)and Interpretations issuedby the InternationalAccountingStandardsBoard(IASB). Mission NewEnergy Limited is a for-profit entity for the purpose of preparing thefinancialstatements.

Theseaccountingpolicieshavebeenconsistentlyappliedbyeachentity intheGroupandareconsistentwiththoseofthepreviousyear.

Basisofmeasurement

Thefinancialreporthasbeenpreparedonanaccrualsbasisandisbasedonhistoricalcosts.AllamountsshownareinAustraliandollars($A)unlessotherwisestated.

Significantmatters

Goingconcern

TheGroup realisedanetoperating loss for theyearended30 June2016of$2,328,545,andincurrednetcashoutflowsfromoperatingactivitiesof$2,077,633.At30June2016theGrouphadnetworkingcapitalof$1,116,600.

The ability of theGroup to continue as a going concern is dependent on securing additionalfundingthroughtheissueoffurtherequityordebt,generatingpositivecashflowsfromexistingornewoperations,and/orrealisingcashthroughthesaleofassets.

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These conditions indicate amaterial uncertainty thatmay cast a significant doubt about theGroup’sabilitytocontinueasagoingconcernand,therefore,thatitmaybeunabletorealiseitsassetsanddischargeitsliabilitiesinthenormalcourseofbusiness.

Management believe there are sufficient funds to meet the Group’s working capitalrequirementsasat thedateof this report, and that thereare reasonablegrounds tobelievethat theGroupwillcontinueasagoingconcernasaresultofacombinationof the followingreasons:

• raiseadditionalfundingthroughdebtand/orequity;• generatepositivecashflowsfromexistingornewoperations;and• realisecashthroughthesaleofassets.

ShouldtheGroupnotbeabletocontinueasagoingconcern,itmayberequiredtorealiseitsassetsanddischargeitsliabilitiesotherthanintheordinarycourseofbusiness,andatamountsthatdifferfromthosestatedinthefinancialstatements.Thefinancialreportdoesnotincludeanyadjustmentrelatingtotherecoverabilityandclassificationofrecordedassetsor liabilitiesthatmightbenecessaryshouldtheentitynotecontinueasagoingconcern.

Carryingvalueofinvestmentinassociate

Felda Global Ventures Holdings Bhd (FGVD), which own 60% of FGV Green Energy Sdn Bhd(FGVGE),inwhichtheGroupholdsa20%stake(seenote20).FGVDthroughFGVcapitalisalsotheprimaryfunderofFGVGreenEnergy’sprojecttorefurbishthe250,000tparefinery.

FGVGEiscurrently intheprocessofassessingwhether itwillcontinuetoretrofitthe250,000tparefineryandthisassessmentincludes:

• Assessingtheexpectedcostsoftherefurbishmenttoinstallthenewtechnologytotherefinery to enable it to produce Biodiesel using lower quality, and hence generallycheapercostfeedstock;

• Assessmentoftheforecastprofitabilityoftherefinerygivencurrentoilprices,feedstockpricesandgovernmentincentives;

• AssessmentoffinancingoptionsfortherefurbishmentoftherefinerywhichiscurrentlymadeupofequityinjectedbyeachshareholderandinterimfundingfromFGVCapital;and

• Finalisingasalesoff-takeagreement.

FGVGEiscurrentlypursuingoptionstorefinancetheexistingloanfromFGVCapitalwiththirdpartydebtfinanciers.

TheBoardofFGVGEwillmakeadecisionastowhethertocontinuewiththeprojectoncealltheaboveactivitieshavebeenfinalised.Itisestimatedthatthisassessmentwillbecompletedwithinthenext6-9months.

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ShouldtheongoinganalysisindicateFGVGEisnotwillingtoprogresstheproject,itcouldresultinanimpairmentoftheGroup’sinvestmentintheAssociatecompany.

TheGroup’sinvestmentinassociateisrecordedat$3,646,211,pleaserefertonote20.Atthedateofsigningthisfinancialreport,nodecisionhasbeenfinalised.

GoodsandServicesTax(GST)

Revenues, expenses and assets are recognised net of the amount of GST, exceptwhere theamount of GST incurred is not recoverable from the Australian Tax Office. In thesecircumstancestheGSTisrecognisedaspartofthecostofacquisitionoftheassetoraspartofan item of the expense. Receivables and payables in the statement of financial position areshowninclusiveofGST

FunctionalandPresentationcurrency

The consolidated financial statements are presented in Australian Dollars. The functionalcurrenciesoftheoperatingunitsareasfollows:

• Refiningoperations(20%investmentinAssociate)-MalaysianRinggit• Other–AustralianDollar.

TheBoardofDirectorsapprovedthisfinancialreporton28September2016.

3. New,revisedoramendingAccountingStandardsandInterpretationsadopted

The Group has adopted all of the new, revised or amending Accounting Standards andInterpretations issuedby theAASB that aremandatory for the current reportingperiod. TheadoptionoftheseAccountingStandardsandInterpretationsdidnothaveamaterialimpactonthefinancialperformanceorpositionoftheconsolidatedentity.

Any new, revised or amending Accounting Standards or Interpretations that are not yetmandatoryhavenotbeenearlyadopted.

4. New Accounting Standards and Interpretations not yet mandatory or early

adopted

Australian Accounting Standards and Interpretations that have recently been issued oramendedbutarenotyetmandatory,havenotbeenearlyadoptedbytheconsolidatedentityfor period ended 30 June2016. The consolidated entity's assessmentof the impact of theseneworamendedAccountingStandardsandInterpretations,mostrelevanttotheconsolidatedentity,aresetoutbelow.

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• AASB2015-1AmendmentstoAustralianAccountingStandards–AnnualImprovementstoAustralianAccountingStandards2012-2014Cycle,and

• AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative:AmendmentstoAASB101.

Astheseamendmentsmerelyclarifytheexistingrequirements,theydonotaffecttheGroup’saccountingpoliciesoranyofthedisclosures.

AASB9FinancialInstruments

Theseamendmentsmustbeappliedforfinancialyearscommencingonorafter1January2018.ThereforeapplicationdatefortheCompanywillbe30June2019.

AASB 9 addresses the classification,measurement and de-recognition of financial assets andfinancialliabilities,italsosetsoutnewrulesforhedgeaccounting.Therewillbenoimpactonthe Company’s classification or measurement for financial assets and financialliabilities,currentlytheGroupholdsnofinancialinstrumentsthatwoulditwouldhavepaidtheamortised cost for.. The new hedging rules align hedge accounting more closely with theCompany’s risk management practices. As a general rule it will be easier to apply hedgeaccounting going forward. The new standard also introduces expanded disclosurerequirementsandchangesinpresentation.CurrentlytheGroupdoesnotenterintoderivativecontracts.

AASB15RevenuefromContractswithCustomers

These amendments must be applied for annual reporting periods beginning on or after 1January2018.ThereforeapplicationdatefortheCompanywillbe30June2019.

An entity will recognise revenue to depict the transfer of promised goods or services tocustomers in an amount that reflects the consideration to which the entity expects to beentitled in exchange for those goods or services. This means that our Associate once inproduction,willonlyrecognizerevenuewhencontrolofgoodsorservicesistransferred,ratherthanontransferofrisksandrewardsasiscurrentlythecaseunderIAS18Revenue.

AASB16Leases

AASB 16 eliminates the operating and finance lease classifications for lessees currentlyaccountedforunderAASB117Leases.It insteadrequiresanentitytobringmostleasesontoits statementof financialposition ina similarway tohowexisting finance leasesare treatedunderAASB117.Anentitywillberequiredtorecognisealeaseliabilityandarightofuseassetinitsstatementoffinancialpositionformostleases.

Therearesomeoptionalexemptionsforleaseswithaperiodof12monthsorlessandforlowvalueleases.Theapplicationdateofthisstandardisforannualreportingperiodsbeginningon

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orafter1January2019.Duetotherecentreleaseofthisstandard,thegrouphasnotyetmadeadetailedassessmentoftheimpactofthisstandard.

Annualperiodsbeginningonorafter1January2016.

Therewillbenoimpactonthefinancialstatementswhentheseamendmentsarefirstadoptedbecausetheyapplyprospectivelytoacquisitionsofinterestsinjointoperations.

AASB2014-3(issuedAugust2014)-AmendmentstoAustralianAccountingStandards-SaleorContributionofAssetsbetweenAnInvestoranditsAssociateorJointVenture

RemovestheinconsistencybetweenAASB10ConsolidatedFinancialStatementsandAASB128Investments in Associates and Joint Ventures in accounting for transactions where a parentlosescontroloverasubsidiarythatisnotabusinessunderAASB3BusinessCombinations,bysellingpartofitsinteresttoanassociateorjointventure,orbysellingdownpartofitsinterestsothattheremaininginvestmentbecomesanassociateorjointventure.Requiresthat:

• Gainorlossfrommeasuringtheretainedinterestintheformersubsidiaryatfairvalue,aswellasgainsorlossestobereclassifiedfromothercomprehensiveincometoprofitor loss, only be recognised to the extent of the unrelated investor’s interest in thatassociateorjointventure,and

• Remaininggainsorlossestobeeliminatedagainsttheinvestmentinassociateorjointventure.

Annualperiodsbeginningonorafter1January2016.Therewillbenoimpactonthefinancialstatementswhentheseamendmentsarefirstadoptedbecausetheyapplyprospectivelytosalesorcontributionsofassetsoccurringaftertheapplicationdate.

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5. Segmentreporting

SegmentReport–2016 BiodieselRefining

Corporate Total

2016

$

2016

$

2016

$

Revenue

Revenuefromexternalcustomers - - -

Interestreceived 12,881 28,336 41,217

Otherincome 731 12 743

Totalsegmentrevenue 13,612 28,348 41,960

Employeebenefitsexpense (96,008) (79,065) (175,073)

ExecutiveDirectorsbenefitsexpense (39,995) (749,900) (789,895)

Non-ExecutiveDirectorsbenefitsexpenses - (125,666) (125,666)

Depreciationandamortisation (175) - (175)

Financecosts - - -

Otherexpenses (867,092) (301,753) (1,168,845)

Shareofnetlossofassociateaccountedforusingtheequitymethod

(110,007) - (110,007)

Segmentresultbeforetax (1,099,665) (1,227,118) (2,327,701)

Incometaxexpense (844)

Net(loss)fortheyear (2,328,545)

Non-currentSegmentassets 3,648,666 - 3,648,666

TotalSegmentassets 5,069,833 1,101,131 6,170,964

Segmentliabilities (1,114,920) (290,778) (1,405,698)

Acquisitionsofproperty,plantandequipment 2,455 - 2,455For

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BiodieselRefining

(ContinuingOperations)

Corporate

Consolidated(ContinuingOperations)

DiscontinuedOperations

Total(Continuing

andDiscontinuedOperations)

2015$

2015$

2015$

2015$

2015$

Revenue Interestreceived 2,262 15,645 17,907 - 17,907Otherrevenue 999,195 7,245,011 8,244,206 679,364 8,923,570Totalsegmentrevenue 1,001,457 7,260,656 8,262,113 679,364 8,941,477Employeebenefitsexpense (200,912) (1,373,352) (1,574,264) - (1,574,264)Impairmentreversal 26,914,912 - 26,914,912 - 26,914,912Depreciationandamortisation - (2,876) (2,876) - (2,876)

Financecosts - (1,814,826) (1,814,826) - (1,814,826)

Otherexpenses (3,533,839) (691,873) (4,225,712) 260,371 (3,965,341)Shareofnetprofitofassociateaccountedforusingtheequitymethod

37,510 - 37,510 - 37,510

Segmentresultbeforetax 24,219,128 3,377,729 27,596,857 939,735 28,536,592Incometaxexpense (5,497) - (5,497)Netprofitbeforeaccumulatedlossfromdiscontinuedoperations 27,591,360 939,735 28,531,095Non-controllinginterest - (141,202) (141,202)Netassetswrittenofffromdiscontinuedoperations - (32,648) (32,648)Netprofitfortheyear 27,591,360 765,885 28,357,245

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AccountingPolicies:Segmentreporting

TheGroupChiefExecutiveOfficeristheChiefoperatingdecisionmaker.ThereportablesegmentspresentedareinlinewiththesegmentalinformationreportedduringthefinancialyeartotheGroupChiefExecutiveOfficer.

Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenseswhere areasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of cash, receivables,inventories, intangiblesandproperty,plantandequipment,netofallowancesandaccumulateddepreciationandamortisation.Segmentliabilities consist principally of payables, employee benefits, accrued expenses and borrowings. Segment assets and liabilities do notincludedeferredincometaxes.Segmentsexcludediscontinuedoperations.

IntersegmentTransfers:Therearenointersegmenttransfers.

BusinessandGeographicalSegments:TheGrouphadonekeybusinesssegment,beingbiodiesel,whichislocatedinMalaysia.

BiodieselRefining

(ContinuingOperations)

Corporate

Consolidated(ContinuingOperations)

DiscontinuedOperations

Total(Continuing

andDiscontinuedOperations)

2015

$2015

$2015

$2015

$2015

$Non-currentSegmentassets 3,769,200 973 3,770,173 - 3,770,173TotalSegmentassets 9,506,177 3,115,071 12,621,248 - 12,621,248Segmentliabilities (5,478,468) (377,224) (5,851,692) - (5,851,692)Acquisitionsofproperty,plantandequipment - - - - -

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6. Revenue

2016$

2015$

OtherIncome

Interestrevenue 41,217 17,907

Gainonsettlementandrestructureofconvertiblenotes - 7,245,011

Sundryincome 743 7,841

TotalOtherIncome 41,960 7,270,759

TheCompanysuccessfullysettledtheSeries4ConvertibleNotesduringthepriorperiod,whichresultedinanon-cashgain.

Accountingpolicy:RevenueRecognition

Interest revenue is recognised on a proportional basis taking into account the interest ratesapplicabletothefinancialassets.

Dividend revenue is recognised when the right to receive a dividend has been established.Dividendsreceivedfromassociatesandjointventureentitiesareaccountedforinaccordancewiththeequitymethodofaccounting.

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7. Expenses

2016$

2015$

7a)Employeecosts

WagesandSalaries 1,041,974 1,369,926

Contributiontodefinedcontributionplans 48,660 54,338

Sharebasedpayment - 150,000

1,090,634 1,574,264

Accountingpolicy:ShareBasedPayments

Thefairvalueofemployeesharebasedpaymentsismeasuredusingthesharepriceongrantdate.

7b)Otherexpenses:

Auditfees 66,748 53,096

Computermaintenance&consumables 6,114 5,670

Communicationexpenses 28,773 40,209

Insurancecosts 91,138 149,578

Legalfees 152,961 1,372,921

Plantsaleandoperatingcosts 188,185 293,384

Otheradministrativecosts 52,273 70,329

Total 586,192 1,985,187

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8. IncomeTax

2016$

2015$

a.Thecomponentsoftaxexpensecomprise

Currenttax (844) (5,497)Deferredtax 17 - - (844) (5,497)

b.Theprimafacietaxontheprofit(loss)fromordinaryactivitiesbeforeincometaxisreconciledtotheincometaxasfollows:

Accountingprofit/(loss)beforetax (2,217,694) 4,192,689Gain/(Loss)fortheyearfromdiscontinuedoperations

- 24,132,542

TotalGain/(Loss)fortheyear (2,217,694) 28,357,244Primafacietax(benefit)/expenseonprofit/(loss)fromordinaryactivitiesbeforeincometaxat30%

(665,308) 8,549,724

Adjustedfor: Taxeffectof:

• lossesnotbroughttoaccount 664,464 (480,747)• Impairmentofnon-assessable

item - (8,074,474)

(844) (5,497)Add: Overprovisionforincometaxinprioryear

- -

Incometaxattributabletoentity (844) (5,497) Theapplicableweightedaverageeffectivecurrenttaxrateisasfollows:

0% 0%

Deferred taxassetson temporarydifferencesand lossesarenot recognisedbecause it isnotprobablethatfuturetaxableprofitwillbeavailableagainstwhichtheunusedtaxlossescanbeused andmay be subject to continuity of ownership and business test. Refer to note 17 forfurtherdisclosuresondeferredtaxassetsandliabilities.

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9. Earningspershare

a.Reconciliationofearningstoprofitorloss EarningsusedincalculationofbothordinaryanddilutiveEPS (2,328,545) 28,357,244

b.EarningsusedincalculationofbothordinaryanddilutiveEPSforongoingoperations

(2,328,545) 4,187,192

c.WeightedaveragenumberofordinarysharesoutstandingduringtheyearusedincalculatingbasicEPS

40,870,275 31,253,837

Effectof: WeightedaveragenumberofordinarysharesoutstandingduringtheyearusedincalculatingdilutiveEPS 40,870,275 31,253,837

Accountingpolicy:Earningspershare

Basic earnings per share are calculated by dividing the profit attributable to owners of thecompany,excludingcostsofservicingequityotherthanordinaryshares,bytheweightedaveragenumberofordinarysharesoutstandingduringthefinancialyear.

Diluted earnings per share adjusts the figures used in the determination of basic earnings pershare to take into account theafter tax effectof interest andother financing costs associatedwith the dilutive potential ordinary shares, and the weighted average number of additionalordinary shares that would have been outstanding assuming the conversion of all dilutivepotentialordinaryshares.

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10. Cashandcashequivalents

2016$

2015$

Cashatbankandinhand 271,158 1,033,903

Short-termbankdeposits 1,129,380 2,116,873

1,400,538 3,150,776Seenote23,FinancialInstruments,forinformationonriskexposuresforcashandcashequivalents.Accountingpolicy:CashandCashEquivalentsCashandcashequivalentsincludecashonhand,depositsheldatcallwithbanks,othershort-termhighlyliquidinvestmentswithoriginalmaturitiesof3monthsorless.

11. TradeandOtherReceivables

2016$

2015$

CURRENT

Sundryfinancialassets - 345,961

Receivable–salesproceedswithheld 1,114,830 5,234,061

Otherreceivables 2,764 77,340

TOTAL 1,117,594 77,340TheReceivable–Salesproceedswithheld,relatestoaportionoftheproceedsfromthesaleofthe 250,000 tp refinery withheld to be settled as deferred consideration on settlement ofconvertiblenotespreviouslyowed(seenote15).Ateachreportingdate,theBoardassessesthelikelytimingofrecoverabilityofreceivablesandbasesthisassessmentonanumberofassumptionsandestimates.Pleaserefertonote22foradiscussionaroundcreditrisk,provisioningandageanalysisoffinancialassets.F

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12. PropertyPlantandEquipment

LandandBuilding

OfficeEquipment IT

MotorVehicle

AssetUnderConstruction Total

Costat30June2014 338 140,776 852,998 115,387 45,565,421 46,674,920Additions - - - - - -Disposal/Impairment (338) (140,776) (840,798) (115,387) (45,565,421) (46,662,720)Costat30June2015 - - 12,200 - - 12,200Disposals (2700) (2700)Additions - - 2,630 - - 2,630Costat30June2016 - - 12,130 - - 12,130AccumulatedDepreciationandImpairmentat30June2014 338 140,776 850,177 115,387 45,565,421 46,672,099Depreciationfortheyear - - 2,874 - - 2,874Impairment (338) (140,776) (840,851) (115,387) (45,565,421) (46,662,773)AccumulatedDepreciationandImpairmentat30June2015 - - 12,200 - - 12,200Disposals (2,700) (2,700)Depreciationfortheyear - - 175 - - 175AccumulatedDepreciationandImpairmentat30June2016 - - 9,675 - - 9,675

CarryingAmounts At30June2015 - - - - - -

At30June2016 - - 2,455 - - 2,455

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Accountingpolicy:Property,PlantandEquipment

Each class of property, plant and equipment is carried at cost less, where applicable, anyaccumulateddepreciationandimpairmentlosses.

The cost of fixed assets constructed within the Group includes the cost of materials, directlabour,borrowingcostsandanappropriateproportionoffixedandvariableoverheads.

Subsequentcostsareincludedintheasset’scarryingamountorrecognisedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtotheGroupandthecostoftheitemcanbemeasuredreliably.AllotherrepairsandmaintenancearechargedtotheStatementofprofitorlossduringthefinancialperiodinwhichtheyareincurred.

Depreciation

Thedepreciableamountofallfixedassetsincludingbuildingsandcapitalisedleasedassets,butexcluding freehold land, is depreciated on a straight-line basis over their useful livescommencing from the time the asset is held ready for use. Leasehold improvements aredepreciatedovertheshorterofeithertheunexpiredperiodoftheleaseortheestimatedusefullivesoftheimprovements.Computerequipmentisdepreciatedat20%-33%.

Theassets’residualvaluesanduseful livesarereviewed,andadjusted ifappropriate,ateachreportingdate.

Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanitsestimatedrecoverableamount.

Gainsandlossesondisposalsaredeterminedbycomparingproceedswiththecarryingamount.ThesegainsandlossesareincludedintheStatementofprofitorloss.

Leases

Leasepaymentsforoperatingleases,wheresubstantiallyalltherisksandbenefitsremainwiththelessor,arechargedasexpensesintheperiodsinwhichtheyareincurred.

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13. OtherAssets

CURRENT

2016 2015

SecurityDeposits 4,166 42,937

4,166 42,937

14. TradeandOtherPayables

CURRENT

Unsecuredliabilities:

Tradepayables 55,069 182,128

Sundrypayablesandaccruedexpenses 49,088 257,885

104,157 440,013

15. Provisions

CURRENT

Provisionforleave 186,711 177,619

Provisionforlegalsettlements 1,114,830 5,234,060

1,301,541 5,411,679The Provision for legal settlement, relates to a portion of the proceeds from the sale of the250,000 tpa refinery withheld to be settled as deferred consideration on settlement ofconvertiblenotespreviouslyowed(seenote11).

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16. Tax

At both period ends the Group has not recognised any current or deferred tax liabilities orassets.

Deferredtaxassetsonlossestoavalueof$2.9milliontodatearenotbroughttoaccountdueto not being probable of being recovered. In addition, deferred tax assets for deductibletemporarydifferencesofA$1.2million.

AccountingPolicy:IncomeTax

Thechargeforcurrentincometaxexpenseisbasedontheprofit/(loss)fortheyearadjustedforany non-assessable or disallowed items. It is calculated using the tax rates that have beenenactedoraresubstantiallyenactedbythereportingdate.

Deferredtaxisaccountedforusingthebalancesheetliabilitymethodinrespectoftemporarydifferencesarisingbetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsinthefinancialstatements.Nodeferredincometaxwillberecognisedfromtheinitialrecognitionofanassetorliability,excludingabusinesscombination,wherethereisnoeffectonaccountingortaxableprofitorloss.

Deferredtax iscalculatedat the tax rates thatareexpectedtoapply to theperiodwhentheassetisrealisedorliabilityissettled.DeferredtaxiscreditedintheStatementofprofitorloss,except where it relates to items that may be credited directly to equity, in which case thedeferredtaxisadjusteddirectlyagainstequity.

Deferred income tax assets are recognised to the extent that it is probable that future taxprofitswillbeavailableagainstwhichdeductibletemporarydifferencescanbeutilised.

Theamountofbenefitsbroughttoaccountorwhichmayberealisedinthefutureisbasedonthe assumption that no adverse change will occur in income taxation legislation and theanticipationthattheGroupwillderivesufficientfutureassessableincometoenablethebenefittoberealisedandcomplywiththeconditionsofdeductibilityimposedbythelaw.

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17. IssuedCapital

Fullypaidordinaryshares(Issuedandauthorised)

2016Number

2016$

2015Number

2015$

Atthebeginningofreportingperiod 40,870,275 523,197 25,870,275 110,523,197

Ordinarysharesissued

February2015-Sharesissuedpursuanttoemployeesharescheme

- - 15,000,000 -

SuSub-total 40,870,275 523,197 40,870,275 110,523,197

SharescapitalreductionpursuanttoShareholderapproval

- - - (110,000,000)

Atreportingdate 40,870,275 523,197 40,870,275 523,197

Ordinarysharesparticipateindividendsandtheproceedsonwindingupoftheparententityinproportion to the number of shares held. At shareholder meetings each ordinary share isentitledtoonevotewhenapolliscalled,otherwiseeachshareholderhasonevoteonashowofhands.

Therewerenowarrants,performancerightsoroptionsinexistenceatreportingdate.

ForinformationrelatingtotheMissionNewEnergyLimitedoptionandperformancerightplans,including details of options and performance shares issued, exercised and lapsed during thecurrentandpriorfinancialyear,refertotheRemunerationreport.

Accountingpolicy:Contributedequity

Ordinary shares are classifiedas equity. Incremental costsdirectly attributable to the issueofnewsharesareshowninequityasadeduction,netoftax,fromtheproceeds.

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18. Reserves

1. Sharebasedpaymentsreserve

Thesharebasedpaymentsreservearoseinthepriorfinancialyearontheissueof150,000 shares to various officers of the Company. There was no share basedpaymentinthecurrentfinancialyear.

2. Foreigncurrencytranslationreserve

The foreign currency translation reserve recordsexchangedifferencesarisingontranslationofforeigncontrolledsubsidiaries.

3. ConvertibleNotesReserve

TheConvertibleNotesreservewasusedtorecordtheequitycomponent,lessthecostof issue,of theconvertiblenotes.Thesenoteswere fully settledduring thepriorfinancialyear.

RefertotheStatementofChangesinEquityforareconciliationofmovementsinthesereserves.

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19. CashFlowInformation

Reconciliation of Cash Flow from Operations with Profit

(Loss)afterIncomeTax

2016

$

2015

$

Profit / (Loss) after income tax before non-controllinginterests

(2,328,545) 28,357,244

Noncashflowsinprofit/(loss) Depreciationofplantandequipment–continuedoperations 175 2,874Gainfromdiscontinuedanddeconsolidatedoperations - (24,132,542)Shareofnetloss/(profit)ofassociate 110,007 (37,510)Interestaccrued - 870,703Gainonthesettlement/restructureofConvertibleNote - (7,245,011)AmortisationofEquityportionofConvertibleNote - 944,123Provisionforemployeebenefits 9,094 27,883

Impairmentofassets - -

Sharebasedpayment - 150,000Impairmentofreceivablesandloans - 672,510Net cash (used in) operating activities before change in

assetsandliabilities (2,209,269) (389,726)

Changeinassetsandliabilities Decreaseinreceivables 75,730 3,123,545(Increase)/decreaseinotherassets 36,022 (17,268)Decrease/(Increase)indeferredtaxandcurrenttax - 52Increaseincreditorsandaccruals (325,926) 316,172ForeignCurrencyAdjustments 345,810 (3,581,046) 131,636 (158,545)Cashgeneratedbydiscontinuedoperations - 939,735Cashgenerated/(usedin)operations (2,077,633) 391,464

Cash flows in the prior period included above from discontinued operations (being theIndonesian PalmOil segment and theMauritian holding company) are a net operating cashgenerationof$0.9million(primarilyfromthegainonsettlementofarbitrationproceedings)fortheperiodended30June2015.

Therewerenonon-cashinvestingactivitiesduringthereportedperiods.

Cash flowsarepresented in thestatementofcash flowsonagrossbasis,except for theGSTcomponentofinvestingandfinancingactivities,whicharedisclosedasoperatingcashflows.

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GROUPSTRUCTURE

This section provides informationwhichwill help users understand how the group structureaffects the financialpositionandperformanceof thegroupasawhole. Inparticular, there isinformationabout:

• changes to the structure that occurred during the year as a result of businesscombinationsandthedisposalofadiscontinuedoperation

•transactionswithnon-controllinginterestsandinterestsinjointventures.A listof subsidiaries isprovided innote20.Thisnotealsodisclosesdetailsabout thegroup’sequityaccountedinvestments.

20. Investmentsinsubsidiaries,unconsolidatedentitiesandassociates

(a)Subsidiaries

TheGroup’ssubsidiariesat30June2016aresetoutbelow.Unlessotherwisestated,theyhavesharecapitalconsistingsolelyofordinaryshares thatarehelddirectlyby theGroup,andtheproportionofownershipinterestsheldequalsthevotingrightsheldbytheGroup.Thecountryofincorporationorregistrationisalsotheirprincipalplaceofbusiness.

Set out below is the associate of the group as at 30 June 2016which, in the opinion of thedirectors,ismaterialtothegroup.Theentitylistedbelowhassharecapitalconsistingsolelyofordinary shares, which are held directly by the group. The country of incorporation orregistrationisalsotheirprincipalplaceofbusiness,andtheproportionofownershipinterestisthesameastheproportionofvotingrightsheld.

Countryof

IncorporationPercentage

Owned(%)Ownership

interestheldby

non-controlling

interests

Principal

activities

2016 2015 2016 2015A.ControlledEntitiesConsolidated ParentEntity: MissionNewEnergyLimited Australia SubsidiariesofMissionNewEnergy

Limited:

MissionBiofuelsSdnBhd Malaysia 100 100 - - Administrativeentity

M2CapitalSdnBhd Malaysia 100 100 - - Holds20%ofFGVGreenEnergySB

B.Associates FeldaGreenEnergySdnBhd Malaysia 20 20 80 80 Biodieselrefining

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Name of entity Country of Incorporation

Percentage Owned (%)

Nature of relationship

Measurement method

Carrying amount ($)

2016 2015 2016 2015 FGV Green Energy Sdn Bhd

Malaysia 20 20 Associate Equity method

3,646,211 3,770,173

Summarised statement of comprehensive income

FGV Green Energy Sdn Bhd 2016 2015

Interest income - - (Loss)/Profit from operations (550,035) 187,553 Dividends received - - The Groups share of (Loss)/profit from operations

(110,007) 37,510

Summarised balance sheet FGV Green Energy Sdn Bhd 2016 2015

Cash and cash equivalents 310,610 29,197,747 Other current assets 22,969,284 337,653 Non-current assets 35,559,859 33,716,894 Current liabilities (42,184,168) (1,686,587) Non-current financial liabilities (101,291) (42,940,643) Net Assets 16,554,294 18,625,064

Accountingpolicy:PrinciplesofConsolidation

TheconsolidatedfinancialstatementscomprisethefinancialstatementsofMissionNewEnergyLimited and its subsidiaries, as defined in Accounting Standard AASB 127 ‘Consolidated andSeparate Financial Statements’. These includeMission Biofuels Sdn Bhd andM2 Capital SdnBhd. A list of controlled and associate entities with details of acquisitions and disposals iscontainedinthisnote.Allcontrolledentitieshavea30Junefinancialyear-end.TheAssociatecompanyhasa31Decemberyearend.

All inter-company balances and transactions between entities in the Consolidated Group,includinganyunrealisedprofitsor losses,havebeeneliminatedonconsolidation.Accountingpolicies of subsidiaries have been changed where necessary to ensure consistency with thepoliciesappliedbytheparententity.

Wherecontrolledentitieshaveenteredor left theConsolidatedGroupduring theyear, theiroperatingresultshavebeenincluded/excludedfromthedatecontrolwasobtainedoruntilthedatecontrolceased.

Non-controllinginterestsintheequityandresultsoftheentitiesthatarecontrolledareshownasaseparateitemintheconsolidatedfinancialreport.

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ForeignCurrencyTransactionsandBalances

Functionalandpresentationcurrency

ThefunctionalcurrencyofeachoftheGroup’sentities ismeasuredusingthecurrencyoftheprimary economic environment in which that entity operates. The consolidated financialstatements are presented in Australian dollars which is the parent entity’s functional andpresentationcurrency.

Transactionandbalances

Foreigncurrencytransactionsaretranslatedintofunctionalcurrencyusingtheexchangeratesprevailingatthedateofthetransaction.Foreigncurrencymonetaryitemsaretranslatedattheyear-endexchangerate.Non-monetaryitemsmeasuredathistoricalcostcontinuetobecarriedattheexchangerateatthedateofthetransaction.Non-monetaryitemsmeasuredatfairvaluearereportedattheexchangerateatthedatewhenfairvaluesweredetermined.

Exchange differences arising on the translation of monetary items are recognised in theStatementof profit or loss, exceptwheredeferred in equity as a qualifying cash flowor netinvestmenthedge.

Exchangedifferencesarisingonthetranslationofnon-monetaryitemsarerecogniseddirectlyin equity to the extent that the gain or loss is directly recognised in equity, otherwise theexchangedifferenceisrecognisedintheStatementofProfitorLoss.

Groupcompanies

The financial resultsandpositionof foreignoperationswhose functionalcurrency isdifferentfromtheGroup’spresentationcurrencyaretranslatedasfollows:

• assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;

• income and expenses are translated at average exchange rates for the period where this is not materially different from the rate at the date of the transaction; and

• retained earnings are translated at the exchange rates prevailing at the date of the transaction.

ExchangedifferencesarisingontranslationofforeignoperationsaretransferreddirectlytotheGroup’s foreign currency translation reserve in the statement of financial position. Thesedifferences are recognised in the Statement of Profit or Loss in the period in which theoperationisdisposed.

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RISK

ThissectionofthenotesdiscussesthegroupsexposuretovariousrisksandshowshowthesecouldaffecttheGroupsfinancialpositionandperformance.

21. CriticalAccountingEstimatesandJudgments

ThepreparationofannualfinancialreportsrequirestheBoardtomakejudgements,estimatesandassumptionsthataffecttheapplicationofaccountingpoliciesandthereportedamountsofassets and liabilities, income and expenses. The Board evaluates estimates and judgmentsincorporatedintothefinancialreportbasedonhistoricalknowledgeandbestavailablecurrentinformation. Estimates assume a reasonable expectation of future events and are based oncurrent trends and economic data, obtained both externally and within the Group. Actualresultsmaydifferfromtheseestimates

Except as described below, in preparing this consolidated financial report, the significantjudgements made by management in applying the Group’s accounting policies and the keysources of estimation uncertainty were the same as those that were applied to theconsolidated financial report as at end for the year ended 30 June 2016. During the twelvemonthsended30June2016managementreassesseditsestimatesinrespectof:

Impairmentofassets

The Group assesses impairment of assets at each reporting date by evaluating conditionsspecific to theGroup thatmay lead to impairment.Where an impairment trigger exists, therecoverableamountoftheassetisdetermined.

Investmentsinsubsidiaries

Investments held by the parent entity, Mission NewEnergy Limited, are reviewed forimpairment if there is any indication that the carrying amountmay not be recoverable. Therecoverable amount is assessed by reference to the higher of ‘value in use’ (being the netpresentvalueofexpectedfuturecashflowsoftherelevantcashgeneratingunit)and‘fairvaluelesscoststosell’.

Inlinewiththeimpairmentofthecarryingvalueofassetsinthesubsidiaries,theparententityhasimpairedthevalueofallsubsidiariestozero.ThisaccountingadjustmenthasnoimpactonthecashflowsortheConsolidatedFinancialStatementsoftheGroup.Refertonote30:ParentInformationforfurtherdetails.

Investmentsinassociates

Investmentsinassociatesheldbytheparententity,MissionNewEnergyLimited,arereviewedforimpairmentifthereisanyindicationthatthecarryingamountmaynotberecoverable.Therecoverable amount is assessed by reference to the higher of ‘value in use’ (being the net

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presentvalueofexpectedfuturecashflowsoftherelevantcashgeneratingunit)and‘fairvaluelesscoststosell’.

The20%shareholdingofFeldaGreenEnergySdnBhd(FGVGE)inMalaysiaiscarriedatcostlessthegroupsshareoflossesforthereportingperiod(Refertonote20).

22. FinancialInstrumentsandFinancialRiskManagement

FinancialRiskManagement

TheGrouphasafinancialriskmanagementpolicyinplaceandthefinancialrisksareoverseenby theBoard. TheGroup’s financial instruments consistmainlyofdepositswithbanks,otherfinancialassets,accountspayable,andloanstoandfromsubsidiaries.

Theprincipal risks theGroup isexposed to through its financial instrumentsare interest raterisk,foreigncurrencyrisk,liquidityriskandcreditrisk.

The Group does not have any financial assets carried at fair value therefore no furtherdisclosure in relation to the fair valuehierarchy ispresented. Inaddition thegroupdoesnothave any financial instruments that are subject to recurring or non-recurring fair valuemeasurements.

Fairvalueoffinancialinstrumentsat30June2016

Carryingamount

$

FairValue

$

Financialassets

Cashandcashequivalents 1,400,538 1,400,538

Receivables(Current) 1,117,594 1,117,594

Financialliabilities

Tradeandotherpayables 104,157 104,157

The fair value measurements are shown by level of the following fair value measurementhierarchy:

• Level1-quotedprices(unadjusted)inactivemarketsforidenticalas-setsorliabilities• Level2-inputsotherthanquotedpricesincludedwithinlevel1thatareobservablefor

theassetorliability,eitherdirectlyorindirectly,and• Level3- inputsfortheassetor liabilitythatarenotbasedonobservablemarketdata

(unobservableinputs).

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Thefairvalueofcashandcashequivalents,otherfinancialassets,receivables,tradeandotherpayables and current loans are short-term instruments in nature whose carrying value isequivalenttofairvalue.

InterestrateriskInterestrateriskismanagedwithfloatingratedeposits.GroupsensitivityAt30 June2016, if interest rateshadchangedby -/+25basispoints,withallothervariablesheldconstant,thefollowingfinancialimpactswouldhavebeenrecordedbytheGroup;

• Effectonposttaxprofit–A$2,500lower/higher(2015:A$Nillower/higher)• Equitywouldhavebeen–A$2,500lower/higher(2015:A$Nillower/higher)

Foreigncurrencyrisk

TheGroupoperates internationally through a number of subsidiaries and is thus exposed tofluctuationsinforeigncurrencies,arisingfromtheforeigncurrenciesheldinitsbankaccounts,the sale of goods in currencies other than the Group’s measurement currency, and thetranslationofresultsfrominvestmentsinforeignoperations.TheforeignexchangeexposuresareprimarilytotheMalaysianRinggitandtheUSdollar.

Foreigncurrencyrisksarisingfromcommitmentsinforeigncurrenciesaremanagedbyholdingcash in that currency. Foreign currency translation risk is not hedged, with translationdifferencesbeingreflectedintheforeigncurrencytranslationreserve.

Groupsensitivity

At 30 June 2016, if foreign currencies had changed by -/+ 10%,with all other variables heldconstant,thefollowingfinancialimpactswouldhavebeenrecordedbytheGroup;

Effect on cash and cash equivalent – A$167,019 lower / A$16,877 higher (2015: A$ 24,563lower/A$148,500higher)

ProfitandLosswouldhavebeen–A$167,019lower/A$16,877higher(2015:A$24,563lower/A$148,500higher)

HedgingofForeignCurrencyRisk

AtfinancialreportdatetheGrouphadnoforwardexchangecontractsinplace.

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Creditrisk

Thefollowingtablesetsoutthecreditqualityoffinancialassets:

2016

$

2015

$

CashandCashEquivalents

Counterpartieswithexternalcreditrating(StandardandPoors)

A-1+(Australian) 1,100,041 3,037,914

P-2(Malaysia) 300,497 112,862

1,400,538 3,150,776

Receivables

Counterpartieswithoutexternalcreditrating

Group1 1,117,594 5,657,362

Group1receivablesprimarilyrelatetoreceivablesrelatedtothesaleoftherefineryinthepriorfinancialyearwherebyproceedsofthesalewerewithheldpendingcertainlegalproceedings.

CommodityRisk

Astherewasnoinventoryheldasat30June2016,theGrouphasnoexposuretomarketpricesofinputcostsintotheproductionofbiodiesel.

Liquidityrisk

Weighted AverageInterestRate

2016 2015 2016 2015

$ $ % %

FinancialAssets:

Cashandcashequivalents 1,400,538 3,150,776 1.93 2.00%LoansandReceivables 1,117,594 5,657,362 - - 2,518,132 8,808,138

TheGroupmanagesliquidityriskbymonitoringforecastcashflowsandensuringthatadequatecashismaintained. F

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Accountingpolicy:FinancialInstruments

Recognition

Financial instruments are initially measured at fair value on trade date, which includestransactioncosts(exceptwheretheinstrumentisclassifiedas‘fairvaluethroughprofitorloss’inwhichcasetransactioncostsareexpensedtoprofitor loss immediately),whentherelatedcontractual rightsorobligationsexist.Subsequentto initial recognitionthese instrumentsaremeasuredassetoutbelow.

Loansandreceivables

Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquoted inanactivemarketandare statedat amortised costusing theeffectiveinterestratemethod.

Compoundfinancialinstruments(ConvertibleNotes)

Compound financial instruments issuedby theGroupcompriseconvertiblenotes thatcanbeconvertedtosharecapitalattheoptionoftheholder,andthenumberofsharestobeissueddoesnotvarywithchangesintheirfairvalue.Theliabilitycomponentofacompoundfinancialinstrument is recognised initially at the fair value of a similar liability that does not have anequity conversion option. The equity component is recognised initially at the differencebetweenthefairvalueofthecompoundfinancial instrumentasawholeandthefairvalueoftheliabilitycomponent.Anydirectlyattributabletransactioncostsareallocatedtotheliabilityand equity components in proportion to their initial carrying amounts. Subsequent to initialrecognition, the liability component of a compound financial instrument is measured atamortised cost using the effective interestmethod. The equity component of a compoundfinancialinstrumentisnotremeasuredsubsequenttoinitialrecognition.

Interest,dividends,lossesandgainsrelatingtothefinancialliabilityarerecognisedinprofitorloss.Onconversion,thefinancialliabilityisreclassifiedtoequity;nogainorlossisrecognisedonconversion.

Financialliabilities

Non-derivativefinancialliabilitiesarerecognisedatamortisedcost.

Impairmentoffinancialassets

Ateachreportingdate,theGroupassesseswhetherthereisobjectiveevidencethatafinancialinstrumenthasbeenimpaired.ImpairmentlossesarerecognisedintheStatementofprofitorloss.

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BorrowingCosts

Borrowing costs directly attributable to the acquisition, construction or production of aqualifying asset are capitalised during the period of time that is necessary to complete andprepare the asset for its intended use.Other borrowing costs are expensed in the period inwhichtheyareincurred.

23. CapitalManagement

Management controls the capital of the Group in order tomaintain an appropriate debt toequity ratio, provide the shareholderswith adequate returns andensure that theGroup canfund itsoperationsandcontinueasagoingconcern.Duetothestagethatthebusiness is in,managementspreferredapproach is to fundthebusinesswithequity,howeverwhereequityfundingisnotavailabledebtfundingisconsidered.Managementreviewshistoricandforecastcashflowsonaregularbasisinordertodeterminefundingneeds.

TheGrouphasnodebtandcapitalincludesordinarysharecapital,supportedbyfinancialassets.

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UNRECOGNISEDITEMS

Thissectionofthenotesprovidesinformationaboutitemsthatarenotrecognisedinthefinancialstatementsastheydonot(yet)satisfytherecognitioncriteria.

24. CapitalandLeasingCommitments

CapitalExpenditureCommitments

25. ContingentLiabilitiesandContingentAssets

TheGroupisnotawareofanycontingentliabilitiesorcontingentassetsasat30June2016.

26. Eventsoccurringafterthereportingperiod

Otherthanthemattersmentionedbelow,therehavebeennosignificantsubsequenteventsupuntilthedateofsigningthisFinancialReport.

2016$

2015$

OperatingLeaseCommitments • -notlaterthan12months - 8,303• -between12monthsand5years - -• -greaterthan5years - -

- 8,303

2016$

2015$

Capitalexpenditurecommitmentscontractedfor. - -

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OTHERINFORMATION

Thissectionofthenotesincludesotherinformationthatmustbedisclosedtocomplywiththeaccounting standards and other pronouncements, but that is not immediately related toindividuallineitemsinthefinancialstatements.

27. RemunerationofAuditors

2016$

2015$

Auditservices Remunerationoftheauditoroftheparententityfor: • auditingorreviewingthefinancialreports–BDOAudit(WA)

PtyLtd60,909 49,725

28. RelatedParties

During theperiodasubsidiary in theGroup leasedaportionofofficespace fromacompanyownedbytheChiefExecutiveOfficeratacostofaroundA$1,300permonth.Theleaseisonamonthtomonthbasis.

There were no other transactions with related parties during the period other than withsubsidiarieswhichwere100%whollyowned.

29. Parententityinformation

2016 2015

InformationrelatingtoMissionNewEnergyLimited: $ $Currentassets 1,101,131 6,845,637Totalassets 1,101,131 6,846,610Currentliabilities (290,778) (377,214)Totalliabilities -Netassetsurplus/(deficit) 4,526,067 6,469,396Issuedcapital 418,635 418,635OpeningRetainedProfit/(Loss) 5,900,761 (138,994,472)Sharebasedpaymentsreserve 150,000 150,000Convertiblenotesreserve - -Totalshareholders’equity/deficit (4,526,067) (6,469,396)Profit/(Loss)oftheparententityTotalcomprehensiveincomeoftheparententity

(1,944,248)(1,944,248)

26,339,39026,339,390

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Details of any contingent liabilities of the parententity

- -

Details of any contractual commitments by theparent entity for the acquisition of property, plantorequipment.

- -

Theparententityisnotawareofanyothercontingentliabilitiesorcontingentassetsasat30June2016.

30. Non-currentassetsheldforsaleanddiscontinuedoperations

During the prior financial year Mission Agro Energy Limited, and Oleovest PL have beendeconsolidated from theGroup financialswitheffect from1March2015due toaneffectivechangeincontrolasaresultofasettlementagreementwithconvertiblenoteholders.Includedindiscontinuedoperations is thereversalof theasset impairmentonsaleof the250,000tparefinery,againonconclusionofthesaleandaprovisionraisedforlegalsettlementofmattersrelatedtotherefinery.

Therevenue,expenditureandcarryingamountoftheassetsandliabilitiesinthisdisposalgrouparesummarisedasfollows:

Discontinuedoperations 2016

$

2015

$

Revenue - 679,364Gainonsaleofassets - 991,354Legalsettlement - (5,211,269)Impairmentreversal–non-currentassets - 27,586,572NetImpairment–currentassets - -OtherexpensesandFXgains - 260,371FinanceCosts - -Incometaxexpense - -Netassetswrittenoffondeconsolidation (32,648)Netgainfromdiscontinuedoperations - 24,273,744Net gain from discontinued operationsattributabletonon-controllinginterests

- (141,202)

Net gain from discontinued operationsattributabletomembersoftheparent

- 24,132,542

Theassetsinthisdisposalgroupweredeconsolidatedduringthecurrentfinancialperiod.

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31. CompanyDetails

The registered office of the company is: Mission NewEnergy Limited, Unit B9, 431 RobertsRoad,Subiaco,WA6008,Australia.

Theprincipalplacesofbusinessare:

Australia MissionNewEnergyLimitedHeadOfficeUnitB9,431RobertsRd,Subiaco,WesternAustralia,6008,Australia.

Malaysia MissionBiofuelsSdnBhd

M2CapitalSdnBhd

No5ENadayu28DagangJalanPJS11/7BandarSunway47500SubangJayaSelangor,Malaysia

32. Authorisationoffinancialstatements

The consolidated financial statements for the year ended 30 June 2016 (includingcomparatives)wereapprovedbytheBoardofDirectorson28September2016.

Dato’NathanMahalingam

Director

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DirectorsDeclaration

MissionNewEnergyLimitedandControlledEntities(ABN63117065719)

1. IntheopinionoftheDirectorsofMissionNewEnergyLimited(thecompany):

a. The consolidated financial statements and notes are in accordance with theCorporationsAct2001,including:

I. givinga trueand fair viewof the financialpositionof theGroupasat30 June2016:

II. andofit’sperformance,forthefinancialyearendedonthatdate,andIII. complyingwithAustralianAccountingStandards(includingAustralianAccounting

Interpretations)andtheCorporationsRegulations2001;andIV. The financial report also complies with International Financial Reporting

Standards and other mandatory professional reporting requirements asdisclosedinnote2.

b. there are reasonable grounds to believe that Mission NewEnergy Ltd will beabletopayitsdebtsasandwhentheybecomedueandpayable

2. The Directors have been given the declarations required by section 295A of theCorporationsAct2001fromtheGroupChiefExecutiveOfficerandChiefFinanceOfficerforthefinancialyearended30June2016.

ThisdeclarationismadeinaccordancewitharesolutionoftheBoardofDirectors.

Dato’NathanMahalingam

GroupChiefExecutiveOfficer

Dated:28September2016

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38 Station StreetSubiaco, WA 6008PO Box 700 West Perth WA 6872Australia

Tel: +61 8 6382 4600Fax: +61 8 6382 4601www.bdo.com.au

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UKcompany limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved underProfessional Standards Legislation, other than for the acts or omissions of financial services licensees.

INDEPENDENT AUDITOR’S REPORT

To the members of Mission NewEnergy Limited

Report on the Financial Report

We have audited the accompanying financial report of Mission NewEnergy Limited, which comprises theconsolidated statement of financial position as at 30 June 2016, the consolidated statement of profit orloss and other comprehensive income, the consolidated statement of changes in equity and theconsolidated statement of cash flows for the year then ended, notes comprising a summary ofsignificant accounting policies and other explanatory information, and the directors’ declaration of theconsolidated entity comprising the company and the entities it controlled at the year’s end or fromtime to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives atrue and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001and for such internal control as the directors determine is necessary to enable the preparation of thefinancial report that gives a true and fair view and is free from material misstatement, whether due tofraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101Presentation of Financial Statements, that the financial statements comply with InternationalFinancial Reporting Standards.

Auditor’s Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial report. The procedures selected depend on the auditor’s judgement, including theassessment of the risks of material misstatement of the financial report, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevant to the company’spreparation of the financial report that gives a true and fair view in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the company’s internal control. An audit also includes evaluating the appropriatenessof accounting policies used and the reasonableness of accounting estimates made by the directors, aswell 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 basisfor our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the CorporationsAct 2001. We confirm that the independence declaration required by the Corporations Act 2001, whichhas been given to the directors of Mission NewEnergy Limited, would be in the same terms if given tothe directors as at the time of this auditor’s report.

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Opinion

In our opinion:

(a) the financial report of Mission NewEnergy Limited is in accordance with the Corporations Act2001, including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016and of its performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and

(b) the financial report also complies with International Financial Reporting Standards as disclosed inNote 1.

Emphasis of matter

Without modifying our opinion, we draw attention to Note 2 in the financial report, which describesconditions that give rise to the existence of a material uncertainty that may cast significant doubtabout the consolidated entity’s ability to continue as a going concern and therefore the consolidatedentity may be unable to realise its assets and discharge its liabilities in the normal course of business.

Other matter

Without modifying our opinion, we draw attention to Note 2 in the financial report which describesconditions that give rise to the existence of a material uncertainty about the consolidated entity’scarrying value of its investment in Associate.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 8 to 15 of the directors’ report for theyear ended 30 June 2016. The directors of the company are responsible for the preparation andpresentation of the Remuneration Report in accordance with section 300A of the Corporations Act2001. Our responsibility is to express an opinion on the Remuneration Report, based on our auditconducted in accordance with Australian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of Mission NewEnergy Limited for the year ended 30 June 2016complies with section 300A of the Corporations Act 2001.

BDO Audit (WA) Pty Ltd

Wayne Basford

Director

Perth, 28 September 2016

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