Prosperity Resources : 30 June 2016 Annual Report

Non-Executive Chairman & Managing Director

John Arbuckle

Non-Executive Director

Sebastian (Seb) Hempel

Non-Executive Director

Facsimile: (08) 9322 9485 Email: info@prosperity.net.au Internet: www.prosperity.net.au

West Perth, Western Australia, 6005

108 St George's Terrace Perth, Western Australia, 6000

Level 11, 172 St Georges Terrace Perth, Western Australia 6000 Telephone: (08) 9323 2000

Facsimile: (08) 9323 2033

Email: perth.services@computershare.com.au

Perth, Western Australia, 6000

The directors present their report together with the financial statements of Prosperity Resources Limited ("the Company") and the consolidated financial statement of the consolidated entity, being the Company and its controlled entities, for the year ended 30 June 2016 and the auditor's report thereon.

The directors of the Company at any time during or since the end of the financial year are:

Mr Munshi is a geologist with an extensive mining engineering background with over 20 years experience in exploration, development, production and both technical and corporate management, in the global mining industry.

Mr Munshi has worked in the Australasian and African regions, primarily in Australia, China, Mongolia, Philippines, Indonesia, Ghana, Tanzania and South Africa, and more recently he has had exposure to South America, Ecuador, Peru, Brazil and Argentina, and Eastern Europe in Kosovo and Turkey.

Over the last 20 years, he has had extensive experience and gained detailed knowledge of the geology and mineral resources in these countries, and the opportunities and projects in these countries, through his role as a Business Development Executive for several companies.

He has a broad exposure to large multi-national corporations and junior mining and entrepreneurial companies, having worked previously for ACM Limited, Posgold/Normandy Mining, Great Central Mines NL, Ashanti Goldfields Limited, JCI Limited and Ivanhoe Mines Limited, and was involved in project evaluation, financing, legal and administrative functions in the companies that he worked for.

During the last 3 years, Mr Munshi has also served as a director of Paramount Mining Corporation Limited.

Mr Arbuckle is an accountant with extensive experience in the resources industry in Australia and overseas. Currently, he operates a corporate advisory business that provides corporate and capital financing advice to resource industry companies. His previous positions included Chief Financial Officer and Company Secretary of Mount Gibson Iron Limited and Chief Financial Officer of Perilya Limited, where he guided both companies through difficult operational start up phases.

Prior to this he held senior financial management roles with Rio Tinto Limited, North Limited and Anaconda Nickel Limited. He has considerable experience in developing financial and risk management strategies for mining companies and the implementation of accounting controls and systems.

During the last 3 years, Mr Arbuckle has also served as a director of Paramount Mining Corporation Limited.

Mr Hempel is a well regarded and accomplished corporate lawyer based in Sydney, Australia. He has over 20 years of corporate advisory experience in listed companies, with specialities in capital raisings and in the resources sector. He has strong corporate governance expertise through company secretarial and corporate law work, and being a trusted corporate adviser to several companies and boards.

During the last 3 years, Mr Hempel has also served as a director of Fitzroy River Corporation Ltd. He resigned from the position effective from 30 June 2014.

Mr Taylor is an accountant with an extensive background in corporate financial management across a range of industries.

He holds a MBA from the University of Western Australia, Bachelor of Business degree majoring in Accounting and a Graduate Diploma in Banking and Finance from Monash University, as well as a Graduate Diploma in Applied Corporate Governance from Chartered Secretaries Australia.

He is a member of CPA Australia, a fellow of the Chartered Institute of Secretaries, and a graduate member of the Australian Institute of Company Directors.

Mr Taylor is also Chief Financial Officer and Company Secretary of Paramount Mining Corporation Limited.

Mr Liew is a qualified accountant with a background in external audit and assurance. He is a member of CPA Australia and CPA Singapore.

Mr Liew is a joint Company Secretary of Paramount Mining Corporation Limited.

As at the date of this report the interests of the directors in the shares of Prosperity Resources Ltd were:

Basic loss per Share 0.13

No dividends have been paid or will be recommended to be paid.

CORPORATE INFORMATION

Prosperity Resources Limited is a company limited by shares that is incorporated and domiciled in Australia. The Company has the following subsidiary companies:

Domicile in Australia:

Prosperity Resources (Yalgoo) Pty Ltd - 100% Prosperity Resources (Mt Gibson) Pty Ltd - 100% Prosperity Resources (Tennant Creek) Pty Ltd - 100% Prosperity Resources (Indonesia) Pty Ltd - 100% Prosperity Resources Indonesia (Energy) Pty Ltd - 100%

Domicile in Singapore:

Prospindo Singapore Pte Ltd - 90% Prospindo Energi Singapore Pte Ltd - 81%

Domicile in Indonesia: PT Prospindo - 90%

PT Prosperity Surya Persada - 81% PT Aspirasi Widya Chandra - 83.7% PT Arus Tirta Power - 83.7%

PT Aneka Mining Nasional - 83.7% PT Multi Mineral Utama - 73.8%

PT Mulia Kencana Makmur - 73.8% PT Bintang Agung Mining - 73.8%

The exploration at Tennant Creek and Indonesia are paid for by Prosperity Resources Limited, however these companies are the beneficial owners of the tenements.

The principal activity of the consolidated entity during the course of the financial year was mineral exploration. There has been no other significant change in the nature of this activity during the year.

The auditors have issued an emphasis of matter opinion on the inherent uncertainty regarding the going concern of the Company.

As the Company has no internally generated cash flow, the continuity of exploration activities will require access to new funding. These activities to be carried out in the future and the Company's planned discretionary expenditure may vary significantly due to a variety of factors. The Company has the ability to substantially reduce or defer actual exploration expenditure when required to match the funds available at any point in time.

The directors have prepared the financial statements on a going concern basis which contemplates the continuity of normal business activities.