INTERIM CONSOLIDATED FINANCIAL STATEMENTS OF PRANA BIOTECHNOLOGY LIMITED AND SUBSIDIARIES (A DEVELOPMENT STAGE ENTERPRISE), OR THE GROUP AS OF DECEMBER 31, 2016 IN AUSTRALIAN DOLLARS INDEX Page CONSOLIDATED STATEMENT OF

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

OF PRANA BIOTECHNOLOGY LIMITED AND SUBSIDIARIES

DEVELOPMENT STAGE ENTERPRISE), OR THE GROUP

AS OF DECEMBER 31, 2016

IN AUSTRALIAN DOLLARS

CONSOLIDATED STATEMENT OF FINANCIAL

(in Australian dollars)

The above Consolidated Statement of Financial

Position should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF PROFIT OR

LOSS AND OTHER COMPREHENSIVE INCOME

(in Australian dollars)

The above Consolidated Statement of Profit

or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF CASH FLOWS

(in Australian dollars)

The above Consolidated Statement of Cash

Flows should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF CHANGES IN

(in Australian dollars)

The above Consolidated Statement of Changes

in Equity should be read in conjunction with the accompanying notes.

NOTES TO THE CONSOLIDATED FINANCIAL

(in Australian dollars)

Note 1: Basis of Preparation

This condensed consolidated interim report

for the half-year reporting period ended 31 December 2016 has been prepared in accordance with Accounting Standard AASB 134 Interim

Financial Reporting and the Corporations Act 2001. This interim financial report also complies with International Financial Reporting

Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

This condensed consolidated interim report

does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read

in conjunction with the annual report for the year ended 30 June 2016 and any public announcements made by Prana Biotechnology

Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The accounting policies adopted are consistent

with those of the previous financial year and corresponding interim reporting period. There were no new accounting standards or

interpretations adopted by the Group during this reporting period.

Note 2: Significant estimates and assumptions

Estimates and judgements are continually

evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial

impact on the entity and that are believed to be reasonable under the circumstances.

The group makes estimates and assumptions

concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates

and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities

within the next financial period are discussed below.

The Group is a development stage medical biotechnology

company and as such expects to be utilising cash until the results of its research activities have become marketable. For the six

months ended 31 December 2016, the Group incurred an operating loss of $3,651,845 (2015: $2,854,825) and an operating cash outflow

of $620,953 (2015: $7,378,540). As at 31 December 2016 the net assets of the Group stood at $27,561,006 (30 June 2016: $31,367,213)

and the cash position has decreased to $28,341,761 from $28,593,538 at 30 June 2016.

Cash on hand at 31 December 2016 plus projected

operating inflows are considered sufficient to meet the Group's forecast cash outflows for at least 12 months from the date of

this report. While there is an inherent uncertainty in the Group's cash flow forecast in relation to the proposed expenditure on

research and development which may impact the forecast cash position, the Directors believe the Group will be able to maintain

sufficient cash reserves through a range of options, including:

Additionally, the Group has recorded a

receivable at 31 December 2016 in the amount of $1,830,734 from the Australian Tax Office in respect of its 2017 research and development

tax incentive claim. The Group expects to receive this amount during the next 12 months.

On this basis, the Directors are satisfied

that the Group is a going concern and at this time and are of the opinion that no asset is likely to be realised for an amount

less than the amount at which it is recorded in the Consolidated Statement of Financial Position as at 31 December 2016.

Therefore, no adjustments have been made

to the financial report relating to the recoverability and classification of the asset carrying amounts or the classification of

liabilities that might be necessary should the Group not continue as a going concern.

The Australian Government replaced the

research and development tax concession with the research and development tax incentive from 1 July 2011. The provisions provide

refundable or non-refundable tax offsets. The research and development tax incentive applies to expenditure incurred and the use

of depreciating assets in an income year commencing on or after 1 July 2011. A refundable research and development tax incentive

offset of 43.5%, equivalent to a deduction of 150%, will be available to eligible small companies with an annual aggregate turnover

of less than $20 million. Eligible companies can receive a refundable research and development tax incentive offset of 43.5% of

their research and development spending.

The Group's research and development activities

are eligible under an Australian Government tax incentive for eligible expenditure from 1 July 2011. Management has assessed these

activities and expenditure to determine which are likely to be eligible under the incentive scheme. For the period to 31 December

2016 the Group has recorded an item in other income of $1,830,734 (2015: $2,779,343) to recognise this amount which relates to

The value attributed to share options and

remuneration shares issued is an estimate calculated using an appropriate mathematical formula based on an option-pricing model.

The choice of models and the resultant option value require assumptions to be made in relation to the likelihood and timing of

the conversion of the options to shares and the value and volatility of the price of the underlying shares.

Note 3: Segment information

Operating segments are reported in a manner

consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who

is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive

Officer of Prana Biotechnology Limited. For the current and previous reporting periods, the Group operated in one segment, being

research into Alzheimer's disease, Huntington disease and other neurodegenerative disorders.

Note 4: Loss per share

Options that are considered to be potential

ordinary shares are excluded from the weighted average number of ordinary shares used in the calculation of basic loss per share.

Where dilutive, potential ordinary shares are included in the calculation of diluted loss per share. All the options on issue do

not have the effect to dilute the loss per share. Therefore, they have been excluded from the calculation of diluted loss per share.

Note 5: Revenue and other income