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CARPATHIAN RESOURCES LIMITED ANNUAL REPORT 2009 by chenmeixiu

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									CARPATHIAN RESOURCES LIMITED
        ABN 30 080 273 703




     ANNUAL REPORT 2009
CORPORATE DIRECTORY

Directors
David Hammer                (Executive Director)
James Wiberg                (Executive Director)
Charles Posternack          (Non-Executive Director)
Errol Levitt                (Non-Executive Director)
Gregory Peacocke            (Non-Executive Director)

Company Secretaries
David Hammer
Gregory Peacocke

Principal and Registered Office
Zenith Centre, Tower A, Level 20
821 Pacific Highway
Chatswood NSW 2067 Australia
Telephone +61 02 9410 9294
Facsimile +61 02 8448 2010
Email       info@carpathian.com.au
Website     www.carpathian.com.au

Auditors                                          Bankers
Hall Chadwick                                     Valartis Bank AG
Level 29                                          Rathausstrasse 20
St Martins Tower                                  A-1010 Vienna, Austria
31 Market Street
Sydney NSW 2001
Australia

Lawyers
Blake Dawson
Level 36 Grosvenor Place
225 George Street
Sydney NSW 2000
Australia

Share Registries
ASX
Computershare Investor Services Pty Ltd
Level 2, 45 St George‘s Terrace
Perth WA 6000
Australia
Telephone +61 1300 557 010
Facsimile +61 8 9323 2033
Website     www.computershare.com

ASX Code
CPN (Ordinary Shares)
Carpathian Resources Limited             Annual Report 2009

REVIEW OF OPERATIONS

Production Activities

Czech Republic

Janovice Gas Field (60% interest)

The Janovice production licence is located in Northern Moravia, Czech Republic. It is some 20
kilometres south of Ostrava, a major industrial centre and five kilometres from Carpathian‘s
50% (75% before payout) owned Krásná oil field. The Ja3a discovery well drilled in 2004
encountered a 38-metre gas column in a good quality sand of Miocene age. Production from
the field commenced in late October 2005.

A scheduled production test in October 2005 confirmed the previous test and the estimate of
gas-originally-in-place, which is approximately 108-113 million cubic metres (3.8 to 4.0 billion
cubic feet).

Apart from the period of testing, gas was produced almost without interruption in the year to
the end of June 2009, but the average rate of 20,000 cubic metres per day dropped to 14,000
cubic metres per day to slow down any potential increase in water inflow.

Krásná Oil Field (75% reducing to 50% after payout)

KS7 has been permanently closed.




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Carpathian Resources Limited               Annual Report 2009

Exploration Activities

Mošnov, 90% interest (contributing 100%)

The Mo-1 Skotnice well was spudded in November 2006. The well lies south of the depleted
Kremlin gas field and north of the Priobor-Klokocov Field. It is reported that the latter
produced 23 billion cubic feet of gas between 1945 and 1984 at rates of up to 5 million cubic feet
per day.

The Skotnice prospect was defined by 28 coal exploration holes, 0.5 – 1 kilometre apart and the
target was Tertiary (Miocene) sandstones in a potential trap at a depth of about 400 metres and
sandstones within the Carboniferous section not far beneath. The location is very close to and
updip of a coal exploration hole from which a gas flow of 80,000 cubic metres (approximately
2.8 million cubic feet per day) was recorded in 1961, some two years after it had been drilled.

The well reached the final total depth of 430 metres in early December 2006. Only minor shows
of gas were recorded while drilling yet analysis of the wireline logs indicated the presence of a
3.2 metre gas column in a good quality Miocene sandstone reservoir with up to 17% porosity.
Laboratory measurements of plugs from the core indicate porosities in the range 12-25% and
permeabilities of 600 – 2,300 millidarcies, yet no flow was recorded when the section was
tested. It is not clear why such a good reservoir rock failed to produce a flow. Damage to the
formation while drilling or whilst cementing the production string is suspected, as is
inadequate perforating of the production string.

In late June 2008 final preparations were being made to hydraulically fracture the reservoir and
treat it with acid (an ―acid frac‖). The operation is designed to establish permanent pathways
between the reservoir and the well and to clean up or alleviate any formation damage that may
have been caused during the drilling of the well and the cementing of the casing.

In August 2008, after completion of the frac, the flow-testing process registered gas inflow,
although the wellhead pressure is very low. At least part of the reason is the reservoir has a
lower formation pressure than expected and it may be connected with its shallow position
under the surface. The operator has recommended that the Company perform a 30-day gas
flow testing process, so that the Company can determine the feasibility of further developing
the well. The Company is waiting on the information it requested from Unigeo on the Janovice,
Skalice and Răskovice permits so that is can develop a comprehensive exploration plan and
budget, which will include a determination as to whether to perform the gas flow testing
process.

Janovice, Skalice & Raškovice – Morávka (60%)

The Skalice licence is a very small area lying immediately north of the Janovice production
licence while the Raškovice-Morávka licence lies to the east of Janovice. A widely spaced
reconnaissance grid of reflection seismic was acquired in 2005 largely over the Raškovice –
Morávka permit but the results were mixed. Although the seismic is of good quality the
‗picking‘ of controlling faults proved difficult and although several attractive features were
recognised, none was drillable and in each case more work was needed to reduce the
exploration risk.

During the financial year of 2009 the Company has requested some basic investment and
analytical information from Unigeo, the operator, in order to determine its exploration strategy

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Carpathian Resources Limited               Annual Report 2009

and budget with respect to these permits, including delineating any extension of the Janovice
field and defining whether to order a geochemical survey once Unigeo supplies it with the
requested information.

Morava, 90% interest (contributing 100%)

The Morava project is located near Hodonin in the northern part of the Vienna Basin, a prolific
oil and gas producer. Hodonin is a regional centre for oil and gas production. There is potential
for oil and gas prospects in both stratigraphic and structural traps at varying depths.

Of considerable interest to the Company was the discovery by OMV of an estimated 140 billion
cubic feet gas field in the Vienna Basin approximately 75 kilometres to the south west of the
Morava permit. Two potential hydrocarbon prospects were identified following a seismic
survey in 2005-2006. The first, Neogene in age, is an extension of the Vienna Basin from which
oil and gas is produced. The target is principally oil. The second prospect, Vazany, is in the
flysch sequence of the Magura Nappe; it is deeper, larger in size and is more likely to contain
gas. An independent review of the prospect favoured the deeper 28 billion cubic feet target,
which was the subject of a feasibility study. The Company is considering all its options at this
time and is waiting on information it has requested from Unigeo so that it can develop a
comprehensive exploration plan and budget which will include a determination on whether
and to what extent it should explore the Morava project, including Vazany.

Rožnov, 90% interest (contributing 100%)

The Rožnov project area is a group of four permits that are 25 kilometres south west of
Carpathian‘s Krásná and Janovice areas, including several potential trapping mechanisms on a
faulted margin, the Sub-Beskydy Step, a bulwark on the edge of the Palaeozoic European
Platform that slopes southwards beneath the Carpathians. The Step is overlain by a series of
Silesian and Sub-Silesian flysch nappes. The largest targets are a series of reasonably deep
features at the base of a large basin slope, identified by seismic amplitudes, which have been
interpreted to be autochthonous fan sequences. These could have major potential (100 billion
cubic feet). Similar fan sequences of Palaeogene age have been described on trend to the
southwest.

A drilling location to test the Zar feature, a Miocene trap draping the platform edge, has been
selected. The Company has a valid land approval for the Zar feature that expires November
2009. The Company is waiting on information it has requested from Unigeo so that it can
develop a comprehensive exploration plan and budget which will include a determination
whether to begin drilling sometime in the future.

CHANGE OF COMPANY ACTIVITIES

The Company announced on 6 July 2009 that the shareholders approved a change in the nature
of the Company‘s business activities. The Company intends to broaden its investment activities
and will become essentially an investor in start-up or second stage financing opportunities. The
Company intends to consider, and if appropriate, invest in companies that provide potential
for significant returns on invested capital. These investments may be in any industry and in
any politically stable country which offers a positive investment environment. The Company
intends to manage the portfolio of investments with the aim to be increasingly profitable in
each financial year, as well as to achieve significant capital gains. The Company has begun the
process of investing in the industries of retail vehicle fuel and convenience store sales, outdoor
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Carpathian Resources Limited                 Annual Report 2009

mobile advertising, satellite and cable television, and prescription eyewear lens distribution.

Retail vehicle fuel and convenience store sales

The Company acquired the operations of two stores which both offer vehicle fuel and
convenience store merchandise to individual customers in the second half of the 2009 financial
year. The initial investment in the operations was approximately $890,000. Both stores are
located in the United States on the east coast of Florida. While this is a competitive industry,
the Company believes with the proper management operating margins can be increased
increasing the overall value of the investments, with a view toward resale of the stores at a
profit.

Outdoor mobile advertising

The Company acquired a mobile adverting franchise on the east coast of Florida on March 2009
for $280,000. The franchise has been profitable since its inception. At its current operating levels
the Company will recoup its full investment within twenty–four months.

Satellite and cable television

The Company acquired publically traded shares in a satellite and cable television company,
called MDU Communications International, Inc. (―MDU‖) in March 2009 for $490,000. MDU is
traded on the United States ―Over the Counter‖ market (OTCBB: MDTV). The Company‘s
investment has appreciated approximately 140% since the acquisition. The Company is
confident that the investment will continue to increase in value.

Prescription eyewear lens distributor

The Company acquired approximately 70% of a small prescription eyewear lens distributor in
May 2009, for an initial investment of $220,000. The distributor specializes in ―free form
progressive lenses,‖ which are a new generation of progressive lenses which are computer-
designed and machine-cut, that deliver a sharper and clearer view for the wearer. The free form
lens market has seen major growth throughout the world; however, to date, this market is still
in its embryonic stage in the United States. The distributor is also engaged in the distribution
of semi-finished lens blanks and has secured exclusive distribution rights in the United States
to two high-end brands of eyewear products manufactured by two extremely reputable
European producers. The Company perceives that the distributor has an excellent opportunity
to distribute free form lenses in the United States, and to capture significant market share at the
ground level. The Company is investing in the distributor with the intentions of growing its
market share and increasing the overall value of the distributor and the Company‘s
corresponding investment.

REVIEW OF CORPORATE ACTIVITIES

During financial year 2009, numerous changes took place in the Board of Directors. On 28
August 2008 Robert Downey and John Arbuckle resigned. David Hammer was appointed a
director on 5 September 2008. On 1 November 2008, Andrew Carroll and Geoffrey King were
appointed as directors of the Company. On 30 December 2008 Charles Posternack and James
Wiberg were appointed as directors. Andrew (AT) Meister and Franck Griaudeau resigned as
directors on 31 December 2008. On 28 April 2009 Andrew Carroll and Geoffrey King resigned
as directors. Gregory Peacocke and Errol Levitt were appointed directors on 1 July 2009.
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Carpathian Resources Limited           Annual Report 2009


Directors’ Report
The Directors present their report on Carpathian Resources Limited for the year ended 30 June
2009 and the auditor‘s report thereon.

Directors

The names and details of the Company‘s Directors in office during the financial year and until
the date of this report are as follows.

David Hammer – Executive Director (Appointed 5 September 2008)
David E. Hammer, Esq., is an attorney with a Master of Laws degree in taxation. Mr. Hammer
has spearheaded a successful law practice, and represents several corporate clients in various
transactions and litigation. Mr. Hammer holds the degrees of Master of Laws in Taxation and
Juris Doctorate, cum laude, from the Fredric G. Levin College of Law at the University of
Florida, and a Bachelor of Science in Business Administration from the Warrington College of
Business at the University of Florida. Mr. Hammer is a member of The Florida Bar, and
practices before state and federal courts in Florida. Mr. Hammer was appointed director on 5
September 2008. Mr. Hammer was appointed joint company secretary on 27 October 2008.
Present Directorships: None.

Previous Directorships (last 3 years): None.

James Wiberg - Executive Director (Appointed 30 December 2008)
Mr. Wiberg is the founder and president of Triode Realty Advisory Corp., a commercial real
estate investment consulting firm that advised clients in transactions totalling in excess of
US$20.2 billion since 1998. He previously served as president of Alliance Partners, Inc. and
HHH Management, Inc. Mr. Wiberg also served as Senior Vice President of Finance for
Parmenter Realty & Investment Corp., controller of the South Florida Apartment Development
Division of Trammell Crow Residential, and as an audit professional for Coopers & Lybrand
CPAs prior to its merger with Price Waterhouse. Mr. Wiberg is a licensed Florida Certified
Public Accountant, and holds a Bachelor of Science in Accounting from Florida State
University. Mr. Wiberg was appointed director on 30 December 2008.
Present Directorships: MDU Communications International, Inc.

Previous Directorships (last 3 years): None.

Charles Posternack – Non-Executive Director (Appointed 30 December 2008)
Dr. Posternack is currently Chief Medical Officer at JFK Medical Center, and the Program
Director of Internal Medicine Residency for University of Miami at Florida Atlantic University
at Palm Beach County. He founded Cleveland Clinic Florida and served as the director of its
Internal Medicine Residency Program, and the Chief of Medicine of its hospital. Dr. Posternack
has been a professor at the University of Miami, Miller School of Medicine, and holds both
Bachelor of Science and Doctor of Medicine degrees from McGill University. Dr. Posternack
was appointed director on 30 December 2008.
Present Directorships: None.

Previous Directorships (last 3 years): None.



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Carpathian Resources Limited            Annual Report 2009

Errol Levitt – Non-Executive Director (Appointed 1 July 2009)

Mr. Levitt is an independent consultant with clients in various, diverse sectors. Mr. Levitt co-
founded GEM Consulting and Poynton & Partners Pty Ltd, a boutique consulting and
corporate advisory firm. Prior to that, Mr. Levitt served for seven years with McKinsey and
Company, consulting to large companies in Australia, New Zealand, the United States, and
France. His experience covers mining, manufacturing, energy, insurance, banking and
agribusiness. Mr. Levitt holds a Master of Business Administration degree from Harvard
Business School, a Bachelor of Science (Honours) degree in Mathematical Statistics from the
University of Cape Town in South Africa and a Bachelor of Science degree from the University
of the Witwatersrand in South Africa. Mr. Levitt was appointed director on 1 July 2009.

Present Directorships: None.

Previous Directorships (last 3 years): None

Gregory Peacocke – Non-Executive Director (Appointed 1 July 2009)

Mr. Peacocke currently serves as a director of four firms in the refrigeration, recreation and
tourism, and corporate advisory industries. Mr. Peacocke is the founding shareholder and
director of Curideo Group Pty Ltd, an investment company. He has independent advisory
experience with Australian and New Zealand clients in telecommunications, building,
consumer products and financial services, and has worked for nine years as a management
consultant and corporate finance advisor. Mr. Peacocke holds a Master of Arts degree in social
and political sciences from Cambridge University, UK, a Bachelor of Laws degree and a
Bachelor degree in Economics from Otago University in New Zealand. Mr. Peacocke was
appointed director on 1 July 2009, and was appointed joint company secretary on 10 September
2009.

Present Directorships: None

Previous Directorships (last 3 years): None

Other directors

Messrs. R. Downey and J. Arbuckle were directors of the Company until their resignation on 28
August 2008. Messrs. Andrew (AT) Meister and Frank Giraudeau were directors of the
Company until their resignation on 31 December 2008. Messrs Andrew Carroll and Geoffrey
King were directors from their appointment on 1 November 2008 until their resignation on 28
April 2009. Andrew Carroll served as a company secretary from 1 October 2008 until 1
November 2008. Geoffrey King served as a joint company secretary from 1 November 2008
until 24 April 2009.

Company Secretary

David Hammer and Gregory Peacocke currently serve as joint company secretaries.




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Carpathian Resources Limited             Annual Report 2009

Principal Activities

The principal activities of the consolidated entity in the Czech Republic during the course of
the financial year included:

       exploration for oil and gas;
       appraisal and development of oil and gas properties; and
       production and sale of oil and gas.

The Company has begun the process of investing in other industries and has invested, through
its subsidiaries, in companies in the retail vehicle fuel and convenience store, outdoor mobile
advertising, satellite and cable television, and prescription eyewear lens distribution industries.

Consolidated Results

Revenue from the sale of oil and gas production for 2009 was $1.9 million compared with $1.8
million in 2008. Total revenue increased to $3.2 million in 2009 from $1.8 million in 2008 due to
investing in other industries. Total expenses decreased to $3.3 million in 2008 from $5.9 million
in 2008. The consolidated loss after taxes for 2009 was $.5 million compared to a loss of $4.2
million in 2008.

Review of Operations

A Review of Operations for the financial year and up to the date of this report is included in
this document and should be read as part of the Directors' Report.

Significant Changes in the State of Affairs

In the opinion of the Directors there were no significant changes in the state of affairs of the
consolidated entity that occurred during the financial year, other than those which were stated
in the foregoing.

Likely Developments

The Company announced on 6 July 2009 that the shareholders approved a change in the nature
of the Company‘s business activities. The Company intends to broaden its investment activities
and will become essentially an investor in start-up or second stage financing opportunities. The
Company intends to consider, and if appropriate, invest in companies that provide potential
for significant returns on invested capital. These investments may be in any industry and in
any politically stable country which offers a positive investment environment. The Company
intends to manage the portfolio of investments with the aim to be increasingly profitable in
each financial year, as well as to achieve significant capital gains.

Dividends

No dividends have been paid during the year and the Directors have not recommended that
any dividend be paid.

Events Subsequent to Reporting Date

Effective 1 July 2009, Errol Levitt and Gregory Peacocke were appointed as non-executive
directors of the Company. Effective 10 September, Gregory Peacocke was appointed a joint
company secretary.


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Carpathian Resources Limited                Annual Report 2009



Mr. Levitt is an independent consultant with clients in various, diverse sectors. His experience
covers mining, manufacturing, energy, insurance, banking and agribusiness.

Mr. Peacocke currently serves as a director of four firms in the refrigeration, recreation and
tourism, and corporate advisory industries. He has independent advisory experience with
Australian and New Zealand clients in telecommunications, building, consumer products and
financial services, and has worked for nine years as a management consultant and corporate
finance advisor.

On 1 July 2009 the Company issued unlisted options to acquire 5,400,000 shares of the
Company‘s stock. The individuals receiving the options are directors of the Company, certain
employees of the Company‘s subsidiaries and former directors of the Company.

The Options shall vest in the schedule set forth below. In the event any of the optionees resigns
or is removed for cause, all unvested options issued with respect to that person will be
cancelled. The Option is a right in favour of the option holder to subscribe for one fully paid
ordinary share in the capital of the Company. The Options are not transferable. The details of
the Options are set forth below:

                        Exercise
                         Price         Number        Vesting         Expiry
                           $0.151       400,000      1 July 2009    28 Feb 2011
                           $0.151       166,667     5 Sept 2009     5 Sept 2011
                           $0.151       116,667     13 Oct 2009     13 Oct 2011
                           $0.151       333,333    30 Dec 2009     30 Dec 2011
                           $0.151       166,667     15 Jan 2010     15 Jan 2012
                           $0.151        50,000     23 Feb 2010     23 Feb 2012
                           $0.151       166,667    30 Mar 2010     30 Mar 2012
                           $0.151       666,666      1 July 2010     1 July 2012
                           $0.133       166,667     5 Sept 2010     5 Sept 2011
                           $0.133       116,667     13 Oct 2010     13 Oct 2011
                           $0.133       333,333    30 Dec 2010     30 Dec 2011
                           $0.133       166,667     15 Jan 2011     15 Jan 2012
                           $0.133        50,000     23 Feb 2011     23 Feb 2012
                           $0.133       166,667    30 Mar 2011     30 Mar 2012
                           $0.133       666,666      1 July 2011     1 July 2012
                           $0.133       166,666     5 Sept 2011     5 Sept 2012
                           $0.133       116,666     13 Oct 2011     13 Oct 2012
                           $0.133       333,334    30 Dec 2011     30 Dec 2012
                           $0.133       166,666     15 Jan 2012     15 Jan 2013
                           $0.133        50,000     23 Feb 2012     23 Feb 2013
                           $0.133       166,666    30 Mar 2012     30 Mar 2013
                           $0.133       666,668      1 July 2012     1 July 2013

                               Total   5,400,000

Other than the foregoing, there has been no matter or circumstance that has arisen since 30 June
2009 that has significantly affected, or may significantly affect:

   a) the consolidated entity‘s operations in future financial years, or
   b) the results of those operations in future financial years, or
   c) the consolidated entity‘s state of affairs in future financial years.


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Carpathian Resources Limited               Annual Report 2009

Directors' Interests

As of this report date the options have been issued to current directors with corresponding
vesting amounts listed:


                           Director          Options issued        Options Vested
                        David Hammer            500,000                166,667
                         James Wiberg          1,000,000                  -
                          Errol Levitt         1,000,000                  -
                       Gregory Peacocke        1,000,000                  -

Options

During the financial year, the Company cancelled 14,200,000 options for no consideration,
which had been earlier issued for no consideration. These options carried an exercise price of
$0.10.

At the date of this report, the unissued ordinary shares of the Company under option are as
follows:


        Grant Date             Date of Expiry          Exercise Price      Number
                                                                         under Option
         30 June 2008              30 June 2012                 $0.100         800,000
    3 September 2008         3 September 2012                   $0.290       2,725,335
         12 June 2009        28 February 2011                   $0.151         400,000
         12 June 2009        5 September 2011                   $0.151         166,667
         12 June 2009          13 October 2011                  $0.151         116,667
         12 June 2009       30 December 2011                    $0.151         333,333
         12 June 2009          15 January 2012                  $0.151         166,667
         12 June 2009        23 February 2012                   $0.151          50,000
         12 June 2009           30 March 2012                   $0.151         166,667
         12 June 2009               1 July 2012                 $0.151         666,666
         12 June 2009        5 September 2011                   $0.133         166,667
         12 June 2009          13 October 2011                  $0.133         116,667
         12 June 2009       30 December 2011                    $0.133         333,333
         12 June 2009          15 January 2012                  $0.133         166,667
         12 June 2009        23 February 2012                   $0.133          50,000
         12 June 2009           30 March 2012                   $0.133         166,667
         12 June 2009               1 July 2012                 $0.133         666,666
         12 June 2009        5 September 2012                   $0.133         166,666
         12 June 2009          13 October 2012                  $0.133         116,666
         12 June 2009       30 December 2011                    $0.133         333,334
         12 June 2009          15 January 2013                  $0.133         166,666
         12 June 2009        23 February 2013                   $0.133          50,000
         12 June 2009           30 March 2013                   $0.133         166,666
         12 June 2009               1 July 2013                 $0.133         666,668
                                                                             8,925,335


There were no options exercised during the financial year 2009.

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



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Carpathian Resources Limited            Annual Report 2009



Directors’ Meetings

There were seven Directors‘ meetings during financial year 2009. The number of meetings
attended by each of the directors of the Company during the period they were a director
follows:
                                             Board
                                           Meetings       Attended
                                              Held
                    David Hammer               6              6
                    James Wiberg               3              3
                    Charles Posternack         3              3
                    R Downey                   1              1
                    J Arbuckle                 1              1
                    Andrew Meister             4              4
                    Frank Giraudeau            4              3
                    Andrew Carroll             3              3
                    Geoffrey King              3              3

Remuneration Report

Remuneration levels for Directors, Secretaries, Senior Executives of the Company, and relevant
group Executives of the consolidated entity (―the Directors and Senior Executives‖) are
competitively set to attract and retain appropriately qualified and experienced Directors and
Senior Executives.

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

The remuneration policy setting out the terms and conditions for the executive directors and
other senior executives was developed by the Board.

Executive remuneration and other terms of employment are reviewed annually by the Board
having regard to performance against goals set at the start of the year, relevant comparative
information and independent expert advice.

As well as a base salary, remuneration packages include superannuation, retirement and
termination entitlements, performance-related bonuses and fringe benefits.

Remuneration and other terms of employment for the executive Director has been formalised
in a service agreement.

The Board undertakes an annual review of its performance against goals set at the start of the
year. The Board may exercise discretion in relation to approving incentives, bonuses, and
options. The policy is designed to attract the highest calibre of executives and reward them for
performance that results in long-term growth in shareholder wealth.

All remuneration paid to directors and executives is valued at the cost to the Company and
expensed.

The remuneration structures explained below are designed to attract suitably qualified
candidates, reward the achievement of strategic objectives and achieve the broader outcome of
creation of value for shareholders. The remuneration structures take into account:
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Carpathian Resources Limited                Annual Report 2009

        the capability and experience of the Directors and Senior Executives;

        the Directors‘ and Senior Executives‘ ability to control the relevant segments‘
        performance;

        the consolidated entity‘s performance including:
            (a) the consolidated entity‘s earnings
            (b) the growth in share price and returns on shareholder wealth; and

        the amount of incentives within each Director‘s and Senior Executive‘s remuneration.

Key Management Personnel Compensation

Non-Executive Directors

Total remuneration for all Non-Executive Directors, is not to exceed $250,000 per annum as
approved by shareholders. This does not include Consulting Fees. At 30 June 2009, no Non-
Executive Director has an approved Base Emolument.

Executive Officers

Messrs. David Hammer and Gregory Peacocke are the Joint Company Secretaries of the
Company and serve this function as part of their director compensation.

Directors’ and Executive Officers’ remuneration

The remuneration of each Director and Executive Officer during the financial year was as
follows:

                                                    (i) Removed 28 February 2008.
                           Salary        Salary     (ii) Resigned 28 August 2008.
Names                     and Fees      and Fees    (iii) Resigned 29 November 2007.
                                                    (iv) Removed 28 February 2008.
                            2009         2008       (v) Resigned 17 March 2008.
                              $           $         (vii) Resigned 31 December 2008.
Directors                                           (viii) Appointed 1 November 2008;
M Danishevski (i)                   -    474,716               resigned 28 April 2009
R Downey (ii)                  94,994    290,303    (ix) Appointed 1 November 2008;
A Hawkshaw (iii)                    -     60,727              resigned 28 April 2009
F Uzbekov (iv)                      -          -    (x) Appointed 30 December 2008.
D Jendry (v)                        -     13,300    (xi) Resigned 28 August 2008
V Danko (vi)                        -          -    (xii) Resigned 31 December 2008
 F Giraudeau (vii)                  -          -    (xiii) Appointed 5 September 2008
 Geoffrey King (viii)          11,642          -    (xiv) Appointed 30 December 2008
A Carroll (ix)                  9,331          -    (xv) Appointed Chief Financial Officer
 Charles Posternack (x)         6,250          -              28 March 2009
Executive
 J Arbuckle (xi)            100,844       185,725   There were no cash bonuses, non-monetary
A Meister (xii)              90,000        67,342   benefits, superannuation, or options issued
D Hammer (xiii)              75,628             -
                                                    during financial year 2009. There were no
J Wiberg (xiv)              128,000             -
                                                    shares issued to Key Management Personnel on
D West (xv)                  33,951             -
                                                    the exercise of compensation options.
Totals                      550,640     1,092,113



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Carpathian Resources Limited            Annual Report 2009

Service Agreements

Remuneration and other terms of employment for present and former Directors are formalised
in service agreements. The main provisions of the agreements are set out below.

Andrew ―A.T.‖ Meister, Executive Chairman (Effective 1 March 2008, Terminated 31
December 2008)
     Terms of the agreement – service-based; 24 months.
     Basic salary of AUD$180,000.
     The service agreement may be terminated by either party giving 30 days notice to the
     other party.

James Wiberg, Executive Director (Effective 1 January 2009)
      Terms of the agreement – service-based; 12 months.
      Basic salary, of US$200,000.
      The service agreement may be terminated by either party without notice to the other
      party.

Environmental Regulations

The consolidated entity‘s operations are situated in the Czech Republic and Slovakia. The
exploration and production licences under which the consolidated entity operates are subject to
stringent environmental regulations and the mining legislation of the Czech Republic.

The Directors are satisfied that no breaches of the environmental conditions of these licences
have occurred as they are continually monitoring the consolidated entity‘s operations. The
Company receives periodic reports from Unigeo a.s, no environmental or safety breaches have
been reported for the year ended 30 June 2009.

The consolidated entity maintains strict environmental protection mechanisms by its appointed
operator in the Czech Republic – Unigeo a.s. Under the contractual arrangements, they are
responsible for all environmental management operations.

No environmental breaches have been notified by any authority during the year ended 30 June
2009.

Insurance of officers

During the financial year, Carpathian Resources Limited procured a policy of insurance to
insure the Directors and Secretaries of the company and its Australian-based controlled
entities.

The liabilities insured are legal costs that may be incurred in defending civil or criminal
proceedings that may be brought against the officers in their capacity as officers of entities in
the Group, and any other payments arising from liabilities incurred by the officers in
connection with such proceedings. This does not include such liabilities that arise from conduct
involving a wilful breach of duty by the officers or the improper use by the officers of their
position or of information to gain advantage for themselves or someone else or to cause
detriment to the company. It is not possible to apportion the premium between amounts
relating to the insurance against legal costs and those relating to other liabilities.

The Company has entered into Indemnity Deeds to indemnify Directors of the Company
against all liabilities incurred in the course of or arising out of their employment with the
Company and its controlled entities, except where the liability results wholly or in part from
serious and wilful misconduct by the executive.
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Carpathian Resources Limited            Annual Report 2009



Corporate Governance

The Company‘s corporate governance statement is contained in the ASX Additional
Information.

Proceedings on Behalf of Company

No person has applied for leave of Court to bring proceedings on behalf of the company or
intervene in any proceedings to which the company is a party for the purpose of taking
responsibility on behalf of the company for all or any part of those proceedings.

The company was not a party to any such proceedings during the year.

Non-audit services

The board of directors ensure that the provision of any non-audit services during the year is
compatible with the general standard of independence for auditors imposed by the Corporations
Act 2001. The directors ensure that any services do not compromise the external auditor‘s
independence for the following reasons:

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

Auditor’s Independence Declaration

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

In accordance with section 307C of the Corporations Act 2001, the Directors have obtained a
declaration of independence from Hall Chadwick Chartered Accountants, the consolidated
entity's auditors. This declaration, which forms part of the Directors‘ Report, is set out on page
14.

Dated 30 September 2009.

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



David Hammer
Executive Director




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Carpathian Resources Limited            Annual Report 2009



DIRECTORS DECLARATION

In the opinion of the Directors of Carpathian Resources Limited (―the Company‖):

1. the financial statements and notes set out on pages 18 to 55, are in accordance with the
   Corporations Act 2001, including:

   (a) giving a true and fair view of the financial position of the Company and consolidated
   entity as at 30 June 2009 and of their performance, as represented by the results of their
   operations and their cash flows, for the year ended on that date; and

   (b) complying with Accounting Standards in Australia and the Corporations Regulations
       2001; and

2. there are reasonable grounds to believe that the Company will be able to pay its debts as
   and when they become due and payable.

3. the Directors have been given the declarations required by Section 295A of Corporations
   Act 2001 from the chief financial officer for the financial year ended 30 June 2009.

Dated 30 September 2009.

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



David Hammer
Executive Director




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Carpathian Resources Limited                    Annual Report 2009

INCOME STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009
                                                                 Consolidated                 Company
                                                               2009        2008            2009     2008
                                                    Notes       $           $               $         $

Revenue
Revenue from operations                               2       3,223,487    1,788,170              -             -
Total Revenue                                                 3,223,487    1,788,170              -             -

Cost of Sales
Production of gas                                               488,026      648,465              -             -
Convenience stores                                              779,264            -              -             -
Total Cost of Sales                                           1,267,290      648,465              -

Gross Profit                                                  1,956,197    1,139,705              -             -

Gain on financial assets                              8        712,338             -             -             -
Other revenue                                         2        199,697       562,400       184,959       561,648

                                                              2,868,232    1,702,105       184,959       561,648

Expenses
Administration expenses                                        501,846     1,336,247       285,353     1,131,752
Amortisation expenses                                                -        32,273             -             -
Borrowing expenses                                             100,000       102,874       100,000       102,874
Consulting fees                                                441,415       985,582       300,888       985,582
Depreciation expenses                                 3        277,645       622,536         2,504         4,726
Exploration and evaluation expenditure
written off                                           3               -          886             -             -
Plant and equipment written off                       3               -      262,044             -             -
Foreign office expenses                                               -      354,789             -       354,789
Legal fees                                                       57,939      208,933        57,043       208,933
Occupancy expenses                                              222,105       64,940         8,069        64,940
Payroll expenses                                                845,394      198,480       199,607       198,490
(Recovery) of loan to controlled entities                             -            -             -      (11,863)
Impairment of loan to non-controlled entities         3               -      984,196             -       984,196
Other expenses                                                  852,704      705,681       452,603       345,092
Total Expenses                                                3,299,048    5,859,471     1,406,067     4,369,511

Loss before income tax expense                                (430,816)   (4,157,366)   (1,221,108)   (3,807,863)
Income tax expense attributable to operating
(loss)                                                4       (142,292)      (43,878)             -             -
Net Loss for the year                                         (573,108)   (4,201,244)   (1,221,108)   (3,807,863)
Minority (loss)                                                (24,690)             -             -             -
Loss attributable to members of the parent
entity                                                        (548,418)   (4,201,244)   (1,221,108)   (3,807,863)

Earnings per share                                            Cents        Cents
                                                             per share    per share
- Basic and Diluted Earnings per share                26        (0.206)      (1.616)


The income statements are to be read in conjunction with the notes of the financial statements set out on
pages 23 to 55.
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Carpathian Resources Limited                Annual Report 2009

BALANCE SHEETS
AS AT 30 JUNE 2009
                                                                Consolidated                    Company
                                                              2009        2008              2009       2008
                                               Notes           $            $                $          $
ASSETS
Current Assets
Cash and cash equivalents                         5          4,865,155      8,855,369      3,865,256      7,522,271
Trade and other receivables                       6            364,710        524,614         31,857         15,562
Inventories                                       7            183,570              -              -              -
Prepaid expenses                                  6            138,074              -         34,687              -

Total Current Assets                                         5,551,509      9,379,983      3,931,800      7,537,833

Non-Current Assets
Trade and other receivables                      6                   -              -      3,788,761      1,408,089
Financial assets                                 8           1,203,606              -              -              -
Other financial assets                           8                   -              -              -          5,235
Plant and equipment                              9           1,235,053        700,186         14,893         14,794
Intangible Assets                                10            988,918              -              -              -
Deposits                                         6             266,968              -              -              -

Total Non-Current Assets                                     3,694,545        700,186      3,803,654      1,428,118

TOTAL ASSETS                                                 9,246,054     10,080,169      7,735,454      8,965,951

LIABILITIES
Current Liabilities
Trade payables                                   12            914,819        763,726        112,722        143,386
Provisions                                       13            450,000        450,000              -              -
Current tax liabilities                          14             99,384         43,878              -              -
Interest bearing liabilities                     15          1,000,000      1,000,000      1,000,000      1,000,000
Deferred revenue                                 12             49,439              -              -              -
Other current liabilities                        12             48,268

Total Current Liabilities                                    2,561,910      2,257,604      1,112,722      1,143,386

TOTAL LIABILITIES                                            2,561,910      2,257,604      1,112,722      1,143,386

NET ASSETS                                                   6,684,144      7,822,565      6,622,732      7,822,565

EQUITY
Issued capital                                   16          22,919,325     22,919,325     22,919,325     22,919,325
Reserves                                                      (338,857)        325,907         21,275              -
Accumulated losses                                         (15,971,085)   (15,422,667)   (16,317,868)   (15,096,760)

Parent Interest                                              6,609,383      7,822,565      6,622,732      7,822,565
Minority Interest                                               74,761              -              -              -

TOTAL EQUITY                                                 6,684,144      7,822,565      6,622,732      7,822,565


The Balance sheets are to be read in conjunction with the notes of the financial statements set out on
pages 23 to 55.

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Carpathian Resources Limited                 Annual Report 2009

STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2009


                                     Attributed to equity holders of the equity

                    Issued          Foreign         Option        Accumulated     Minority     Total
                    capital        Currency         Reserve          Losses       Interest    equity
                                  Translation
                                   Reserve
                       $              $               $                $             $           $
Consolidated

Balance at 30      13,319,085          (67,474)               -    (11,221,423)          -    2,030,188
June 2007

Issue of shares
                    8,900,000                   -             -               -          -    8,900,000
Conversion of
options             4,821,440                   -             -               -          -    4,821,440
Transaction
costs of capital
raising
                   (4,121,200)                  -             -               -          -   (4,121,200)
Translation of
foreign
subsidiaries                  -        393,381                -               -          -      393,381
Loss for the
year                          -                 -             -     (4,201,244)          -   (4,201,244)

Balance at 30
June 2008          22,919,325          325,907                -    (15,422,667)          -    7,822,565

Shared based
payments                      -                 -     21,275                  -          -       21,275
Translation of
currency held
by foreign
subsidiaries                  -       (686,039)               -               -          -    (686,039)
Minority
interest                      -                 -             -               -     74,761       74,761
Loss for the
year                          -                 -             -      (548,418)           -    (548,418)

Balance at 30
June 2009          22,919,325         (360,132)       21,275       (15,971,085)     74,761    6,684,144




The Statement of Changes in Equity is to be read in conjunction with the notes of the financial statements
set out on pages 23 to 55.

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Carpathian Resources Limited                Annual Report 2009

STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2009, continued

                                         Issued             Option        Accumulated     Total
                                         Capital            Reserve          Losses      Equity

                                             $                 $                $          $
Company

Balance at 30 June 2007                 13,319,085                    -   (11,288,897)    2,030,188

Issue of shares                           8,900,000                   -              -     8,900,000
Conversion of options                     4,821,440                   -              -     4,821,440
Transaction costs of capital raising    (4,121,200)                   -              -   (4,121,200)
Loss for the year                                 -                   -    (3,807,863)   (3,807,863)

Balance at 30 June 2008                 22,919,325                 -      (15,096,760)    7,822,565
Shared based payments                            -            21,275                 -       21,275
Conversion of options                              -                  -              -             -
Transaction costs of capital raising               -                  -              -             -
Loss for the year                                  -                  -    (1,221,108)   (1,221,108)

Balance at 30 June 2009                 22,919,325            21,275      (16,317,868)    6,622,732




The Statement of Changes in Equity is to be read in conjunction with the notes of the financial statements
set out on pages 23 to 55.

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Carpathian Resources Limited                Annual Report 2009

CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2009

                                                               Consolidated                   Company
                                                             2009        2008             2009       2008
                                               Notes          $            $               $          $

Cash flows from operating activities
Receipts from customers                                      3,447,568     1,563,469             -         51,902
Payments to suppliers and employees                        (4,309,006)   (4,400,219)   (1,358,332)    (3,601,232)
Interest received                                              184,959       510,498       184,592        509,746
Interest paid                                                (100,000)     (102,874)     (100,000)      (100,000)
Income tax paid                                              (234,998)     (172,000)             -              -
Net cash flows from/(used in)
operating activities                             29        (1,011,477)   (2,601,126)   (1,273,740)    (3,139,584)

Cash flows from investing activities
Purchase of plant and equipment                             (415,003)       (27,817)       (2,603)          (19,519)
Purchase of convenience stores leases and
mobile advertising franchise                               (1,171,517)             -             -                 -
Purchase of eye lens distributor                             (214,910)             -             -                 -
Purchase of equity investment                                (491,268)             -             -                 -
Loans repaid/(paid) by/to controlled
entities                                                             -            -    (2,380,672)        668,556
Loan paid to non-controlled entities                                 -    (984,196)              -      (984,196)
Net cash flows from/(used in
investing activities                                       (2,292,698)   (1,012,013)   (2,383,275)      (335,159)

Cash flows from financing activities
Proceeds from issue of shares                                        -     8,900,000             -      8,900,000
Transaction costs from issue of shares                               -   (4,121,200)             -    (4,121,200)
Proceeds from conversion of options to
shares                                                               -    4,821,440              -     4,821,440
Net cash flows from/(used in)
financing activities                                                 -    9,600,240              -     9,600,240



Net increase in cash and cash equivalents                  (3,304,175)    5,987,101    (3,657,015)     6,125,497
Cash and cash equivalents
at beginning of period                                      8,855,369     2,714,787      7,522,271     1,396,774
Effects of exchange rate changes on cash
and cash equivalents                                        (686,039)       153,481              -                 -
Cash and cash equivalents
at end of period                                  5         4,865,155     8,855,369      3,865,256     7,522,271




The cash flow statements are to be read in conjunction with the notes of the financial statements set out
on pages 23 to 55.

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Carpathian Resources Limited            Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

This financial report includes the consolidated financial statements and notes of Carpathian
Resources, Ltd., and controlled entities (‗consolidated group‘ or ‗Group‘), and the separate
financial statements and notes of Carpathian Resources, Ltd, as an individual parent entity
(‗Parent Entity‘).

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

(a)    Principles of Consolidation

Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all entities
controlled by Carpathian Resources Limited (‖company‖ or ―parent entity‖) as at 30 June 2009
and the results of all controlled entities for the year then ended.

Subsidiaries are all those entities (including special purpose entities) over which the Group has
the power to govern the financial and operating policies, generally accompanying a
shareholder of more than one-half of the voting rights. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered when assessing
whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the
Group.

Intercompany transactions, balances and unrealised gains on transactions between Group
companies are eliminated. Unrealised losses are also eliminated unless the transaction provides
evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by the Group.

Investments in subsidiaries are accounted for at cost in the individual financial statements of
the company.
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Carpathian Resources Limited             Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(b)    Foreign Currency Transactions and Balances

(i)    Functional and presentation currency
The functional currency of each of the group‘s entities is measures using the currency of the
primary economic environment in which that entity operates. The consolidated financial
statements are presented in Australian dollars which is the parent entity‘s functional and
presentation currency.

(ii)    Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates
prevailing at the date of the transaction. Foreign currency monetary items are translated at the
year-end exchange rate. Non-monetary items measured at historical cost continue to be carried
at the exchange rate at the date of the transaction. Non-monetary items measured at fair value
are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the income
statement, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange difference arising on the translation of non-monetary items are recognised directly in
equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange
difference is recognised in the income statement.

(iii)  Subsidiary companies
The financial results and position of foreign operations whose functional currency is different
from the group‘s presentation currency are translated as follows:

• 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.
• Retained profits are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the
foreign currency reserve in the balance sheet. These differences are recognised in the income
statement in the period in which the operation is disposed.

(c)    Income tax

The charge for current income tax expenses is based on the profit for the year adjusted for any
non-assessable or disallowed items. It is calculated using the rates that have been enacted or
are substantively enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary
differences arising between the tax base of assets and liabilities and their carrying amounts in
the financial statements. No deferred income tax will be recognised from the initial recognition
of an asset or liability, excluding a business combination, where there is no effect on accounting
or taxable profit or loss.


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Carpathian Resources Limited             Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(c)    Income tax (continued)

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

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

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

(d)    Plant and equipment

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

Plant and equipment is measured on the cost basis less depreciation and impairment losses.

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

Depreciation
The depreciable amount of all fixed assets is depreciated on a straight-line basis over their
useful lives to the entity commencing from the time the asset is held ready for use.

The depreciation rates used for each class of depreciable assets are:

Plant and equipment: 5 - 20%.

The assets‘ residual values and useful lives are reviewed, and adjusted if appropriate, at each
balance sheet date and where adjusted, shall be accounted for as a change in accounting
estimate. Where depreciation rates or method are changed, the net written down value of the
asset is depreciated from the date of the change in accordance with the new depreciation rate
or method.

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

Gains and losses on disposals are determined by comparing proceeds with the carrying
amount. These gains and losses are included in the income statement.




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Carpathian Resources Limited             Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(e)    Exploration and development expenditure

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

Costs of evaluation, seismic and unsuccessful exploration in the area of interest where
economically recoverable reserves do not currently exist are expensed as incurred even if
activities in this area of interest are continuing.

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

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

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

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

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

(f)    Oil and gas properties

Oil and gas properties include capitalised project expenditure, exploration and development
expenditure. The consolidated entity uses the straight-line method to amortise costs carried
forward.




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Carpathian Resources Limited            Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(g)    Share-based payments

Share-based compensation benefits are provided to directors, executives and advisers.

The fair value of options granted to directors and executives is recognised as an employee
benefit expense with a corresponding increase in contributed equity. The fair value is measured
at grant date and recognised over the period during which the directors and/or executives
becomes unconditionally entitled to the options.

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

(h)    Impairment of assets

Assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is recognised for the amount
by which the asset‘s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset‘s fair value less costs to sell and value in use. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the cash inflows from other assets or
groups of assets (cash-generating units). Non-financial assets that suffered impairment are
reviewed for possible reversal of the impairment at each reporting date.

(i)    Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other than short-term, highly liquid investments with original maturities of three
months or less net of outstanding bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the balance sheet.

(j)    Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised
cost, less provision for doubtful debts. Trade receivables are due for settlement no more than
30 days.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to
be uncollectible are written off. A provision for doubtful receivables is established when there
is objective evidence that the amounts are not collectible according to the original terms of
receivables.




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Carpathian Resources Limited             Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(k)    Financial assets at fair value through profit and loss

Financial assets are classified at ‗fair value through profit or loss‘ when they are either held for
trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or
when they are designated as such to avoid an accounting mismatch or to enable performance
evaluation where a group of financial assets is managed by key management personnel on a fair
value basis in accordance with a documented risk management or investment strategy. Such
assets are subsequently measured at fair value with changes in carrying value being included in
profit or loss.

(l)    Trade and other payables

These amounts represent liabilities for goods and services provided to the consolidated entity
prior to the end of financial year which are unpaid. The amounts are unsecured and are
usually paid within 30 days of recognition.

(m)    Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the
period of time that is required to complete and prepare the asset for its intended use or sale.
Other borrowing costs are expensed.

(n)    Provisions

Provisions for are recognised when: the Group has a present legal or constructive obligation as
a result of past events; it is probable that an outflow of resources will be required to settle the
obligation; and the amount has been reliably estimated. Provisions are not recognised for
future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required
in settlement is determined by considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any one item included in the
same class of obligations may be small.

Provisions are measured at the present value of management‘s best estimate of the expenditure
required to settle the present obligation at the balance sheet date. The discount rate used to
determine the present value reflects current market assessments of the time value of money
and the risks specific to the liability. The increase in the provision due to the passage of time is
recognised as interest expense.

(o)    Revenue recognition

Revenues are recognised at fair value of the consideration received net of the amount of goods
and services tax (GST/VAT) payable to the taxation authority. Exchanges of goods or services
of the same nature and value without any cash consideration are not recognised as revenues.


www.carpathian.com.au                            28
Carpathian Resources Limited             Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(o)    Revenue recognition (continued)

Oil and Gas revenue
Revenue from the sale of oil and gas is recognized upon delivery of the goods to the customer.

Advertising Revenue
Advertising revenue is recognized when the advertisement is displayed. The revenue is
recognized proportionately over the term of the advertising contract.

Convenience Store Revenue
Convenience store revenue is recognized when a product is purchased by the customer at the
cash register.

Gasoline Commission Revenue
Gasoline commission revenue is recognized when the gas customer pumps the gas and pays
for the gasoline pumped into the vehicle

Revenue from Eyewear Sales
Eyewear products revenue is recognized when the product is delivered to the customer and
title has transferred to the customer.

Interest income
Interest income is recognised on a time proportion basis using the effective interest method.

(p)    Earnings per share

(i)    Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the
company, excluding any costs of servicing equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year.

(ii)    Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per
share to take into account the after income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares and the weighted average number of shares
assumed to have been issued for no consideration in relation to dilutive potential ordinary
shares.

(q)    Goods and Services Tax (GST) and Value Added Tax (VAT)

Revenues, expenses and assets are recognised net of the amount of associated GST/VAT,
unless the GST/VAT incurred is not recoverable from the taxation authority. In this case it is
recognised as part of the cost of acquisition of the asset or as part of the expense.



www.carpathian.com.au                           29
Carpathian Resources Limited              Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(q)    Goods and Services Tax (GST) and Value Added Tax (VAT) (continued)

Receivables and payables are stated inclusive of the amount of GST/VAT receivable or
payable. The net amount of GST/VAT recoverable from, or payable to, the taxation authority is
included with other receivables or payables in the balance sheet.

Cash flows are presented on a gross basis. The GST/VAT components of cash flows arising
from investing or financing activities which are recoverable from, or payable to the taxation
authority, are presented as operating cash flow.

(r)    Intangibles

Goodwill

Goodwill and goodwill on consolidation are initially recorded at the amount by which the
purchase price for a business combination exceeds the fair value attributed to the interest in the
net fair value of identifiable assets, liabilities and contingent liabilities at date of acquisition.
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested
annually for impairment and carried at cost less accumulated impairment losses. Gains and
losses on the disposal of an entity include the carry amount of good will relating to the entity
sold.

Licenses and Development Costs

Licenses and development costs are initially recorded at the cost of obtaining the license or
developing the business opportunity. Licenses and development costs have a finite life and are
carried at cost less any accumulated amortisation and any impairment losses. Licenses and
development costs are amortized over their useful life ranging from 15 to 20 years.

(s)    Impairment

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

(t)     Critical Accounting Estimates and Judgements

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




www.carpathian.com.au                            30
Carpathian Resources Limited            Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(u)    New Accounting Standards for Application in Future Periods

The AASB has issued new, revised and amended standards and interpretations that have
mandatory application dates for future reporting periods. The consolidated group has decided
against early adoption of these standards. A discussion of those future requirements and their
impact on the consolidated group follows:
•     AASB 3: Business Combinations, AASB 127: Consolidated and Separate Financial
      Statements, AASB 2008-3: Amendments to Australian Accounting Standards arising
      from AASB 3 and AASB 127 [AASBs 1,2,4,5,7,101,107, 112, 114, 116, 121, 128, 131, 132,
      133, 134, 136, 137, 138 & 139 and Interpretations 9 & 107] (applicable for annual reporting
      periods commencing from 1 July 2009) and AASB 2008-7: Amendments to Australian
      Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity
      or Associate [AASB 1, AASB 118, AASB 121, AASB 127 & AASB 136] (applicable for
      annual reporting periods commencing from 1 January 2009). These standards are
      applicable prospectively and so will only affect relevant transactions and consolidations
      occurring from the date of application. In this regard, its impact on the Group will be
      unable to be determined. The following changes to accounting requirements are
      included:
      —acquisition costs incurred in a business combination will no longer be recognised in
       goodwill but will be expensed unless the cost relates to issuing debt or equity securities;
      —contingent consideration will be measured at fair value at the acquisition date and may
       only be provisionally accounted for during a period of 12 months after acquisition;
       a
      — gain or loss of control will require the previous ownership interests to be remeasured
       to their fair value;
      —there shall be no gain or loss from transactions affecting a parent‘s ownership interest
       of a subsidiary with all transactions required to be accounted for through equity (this
       will not represent a change to the Group‘s policy);
      —dividends declared out of pre-acquisition profits will not be deducted from the cost of
       an investment but will be recognised as income;
      —impairment of investments in subsidiaries, joint ventures and associates shall be
       considered when a dividend is paid by the respective investee; and
      —where there is, in substance, no change to Group interests, parent entities inserted
       above existing groups shall measure the cost of its investments at the carrying amount
       of its share of the equity items shown in the balance sheet of the original parent at the
       date of reorganisation.
      The Group will need to determine whether to maintain its present accounting policy of
      calculating goodwill acquired based on the parent entity‘s share of net assets acquired or
      change its policy so goodwill recognised also reflects that of the non-controlling interest.
•     AASB 8: Operating Segments and AASB 2007-3: Amendments to Australian Accounting
      Standards arising from AASB 8 [AASB 5, AASB 6, AASB 102, AASB 107, AASB 119,
      AASB 127, AASB 134, AASB 136, AASB 1023 & AASB 1038] (applicable for annual
      reporting periods commencing from 1 January 2009). AASB 8 replaces AASB 114 and
      requires identification of operating segments on the basis of internal reports that are
      regularly reviewed by the Group‘s Board for the purposes of decision making. While the
      impact of this standard cannot be assessed at this stage, there is the potential for more
      segments to be identified. Given the lower economic levels at which segments may be
      defined, and the fact that cash generating units cannot be bigger than operating
      segments, impairment calculations may be affected. Management does not presently
      believe impairment will result however.
www.carpathian.com.au                           31
Carpathian Resources Limited            Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(u)    New Accounting Standards for Application in Future Periods (continued)

•     AASB 101: Presentation of Financial Statements, AASB 2007-8: Amendments to
      Australian Accounting Standards arising from AASB 101, and AASB 2007-10: Further
      Amendments to Australian Accounting Standards arising from AASB 101 (all applicable
      to annual reporting periods commencing from 1 January 2009). The revised AASB 101
      and amendments supersede the previous AASB 101 and redefines the composition of
      financial statements including the inclusion of a statement of comprehensive income.
      There will be no measurement or recognition impact on the Group. If an entity has made
      a prior period adjustment or reclassification, a third balance sheet as at the beginning of
      the comparative period will be required.
•     AASB 123: Borrowing Costs and AASB 2007-6: Amendments to Australian Accounting
      Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116
      & AASB 138 and Interpretations 1 & 12] (applicable for annual reporting periods
      commencing from 1 January 2009). The revised AASB 123 has removed the option to
      expense all borrowing costs and will therefore require the capitalisation of all borrowing
      costs directly attributable to the acquisition, construction or production of a qualifying
      asset. Management has determined that there will be no effect on the Group as a policy
      of capitalising qualifying borrowing costs has been maintained by the Group.
•     AASB 2008-1: Amendments to Australian Accounting Standard – Share-based Payments:
      Vesting Conditions and Cancellations [AASB 2] (applicable for annual reporting periods
      commencing from 1 January 2009). This amendment to AASB 2 clarifies that vesting
      conditions consist of service and performance conditions only. Other elements of a
      share-based payment transaction should therefore be considered for the purposes of
      determining fair value. Cancellations are also required to be treated in the same manner
      whether cancelled by the entity or by another party.
•     AASB 2008-2: Amendments to Australian Accounting Standards – Puttable Financial
      •
      Instruments and Obligations Arising on Liquidation [AASB 7, AASB 101, AASB 132 &
      AASB 139 & Interpretation 2] (applicable for annual reporting periods commencing
      from 1 January 2009). These amendments introduce an exception to the definition of a
      financial liability to classify as equity instruments certain puttable financial instruments
      and certain other financial instruments that impose an obligation to deliver a pro-rata
      share of net assets only upon liquidation.
•     AASB 2008-5: Amendments to Australian Accounting Standards arising from the
      •
      Annual Improvements Project (July 2008) (AASB 2008-5) and AASB 2008-6: Further
      Amendments to Australian Accounting Standards arising from the Annual
      Improvements Project (July 2008) (AASB 2008-6) detail numerous non-urgent but
      necessary changes to accounting standards arising from the IASB‘s annual
      improvements project. No changes are expected to materially affect the Group.
•     AASB 2008-8: Amendments to Australian Accounting Standards – Eligible Hedged
      •
      Items [AASB 139] (applicable for annual reporting periods commencing from 1 July
      2009). This amendment clarifies how the principles that determine whether a hedged
      risk or portion of cash flows is eligible for designation as a hedged item should be
      applied in particular situations and is not expected to materially affect the Group.
•     AASB 2008-13: Amendments to Australian Accounting Standards arising from AASB
      •
      Interpretation 17 – Distributions of Non-cash Assets to Owners [AASB 5 & AASB 110]
      (applicable for annual reporting periods commencing from 1 July 2009). This
      amendment requires that non-current assets held for distribution to owners to be
      measured at the lower of carrying value and fair value less costs to distribute.
www.carpathian.com.au                           32
Carpathian Resources Limited           Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(u)     New Accounting Standards for Application in Future Periods (continued)

•     AASB Interpretation 15: Agreements for the Construction of Real Estate (applicable for
      •
      annual reporting periods commencing from 1 January 2009). Under the interpretation,
      agreements for the construction of real estate shall be accounted for in accordance with
      AASB 111 where the agreement meets the definition of ‗construction contract‘ per AASB
      111 and when the significant risks and rewards of ownership of the work in progress
      transfer to the buyer continuously as construction progresses. Where the recognition
      requirements in relation to construction are satisfied but the agreement does not meet
      the definition of ‗construction contract‘, revenue is to be accounted for in accordance
      with AASB 118. Management does not believe that this will represent a change of policy
      to the Group.
•     AASB Interpretation 16: Hedges of a Net Investment in a Foreign Operation (applicable
      •
      for annual reporting periods commencing from 1 October 2008). Interpretation 16
      applies to entities that hedge foreign currency risk arising from net investments in
      foreign operations and that want to adopt hedge accounting. The interpretation
      provides clarifying guidance on several issues in accounting for the hedge of a net
      investment in a foreign operation and is not expected to impact the Group.
•     AASB Interpretation 17: Distributions of Non-cash Assets to Owners (applicable for
      •
      annual reporting periods commencing from 1 July 2009). This guidance applies
      prospectively only and clarifies that non-cash dividends payable should be measured at
      the fair value of the net assets to be distributed where the difference between the fair
      value and carrying value of the assets is recognised in profit or loss.

The Group does not anticipate early adoption of any of the above reporting requirements and
does not expect these requirements to have any material effect on the Group‘s financial
statements.

NOTE 2. REVENUE
                                                     Consolidated             Company
                                                   2009        2008       2009       2008
                                                    $            $         $          $
Revenue from operating activities
Sale of gas                                     1,878,687     1,788,170          -           -
Convenience store sales                         1,100,447             -          -           -
Commissions from gasoline sales                   145,300             -          -           -
Mobile advertising                                 86,090             -          -           -
Sale of eye wear lenses                            12,963             -          -           -
                                                3,223,487     1,788,170          -           -

Other revenues
Interest received                                 184,959       510,498    184,959     509,746
Other revenue                                      14,738        51,902          -      51,902
                                                  199,697       562,400    184,959     561,648
Total Revenue                                   3,423,184     2,350,570    184,959     561,648




www.carpathian.com.au                         33
Carpathian Resources Limited                Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 3. EXPENSES
Operating loss before income tax includes the following specific net gains and expenses:
                                                       Consolidated                  Company
                                                    2009          2008           2009       2008
                                                      $             $             $          $
Expenses
Amortisation of exploration development costs              -         32,273            -                   -

(Decrease)/increase in provisions
- impairment (recovery) of loan to controlled
entity                                                          -            -              -       (11,863)
- impairment of loan to non-controlled entity                   -      984,196              -        984,196
                                                                -      984,196              -        972,333

Depreciation of plant and equipment                       277,645      622,536          2,504         4,726

Plant and equipment written off                                 -      262,044              -              -

Exploration and evaluation expenditure
written off                                                     -            886            -              -

Rental expense on operating leases
-minimum lease payments                                   222,105              -        8,069              -


NOTE 4. INCOME TAX EXPENSE
                                                            Consolidated                 Company
                                                          2009        2008           2009       2008
                                                           $            $             $          $


Prima facie income tax on operating (loss) is reconciled to the income tax benefit provided in the financial
statements as follows:
Prima facie income tax benefit on operating
(loss) at 30% (2008: 30%)                              (129,245)    (1,247,210)     (366,332)    (1,142,359)
Add back:
International tax rate differential                     (38,455)       (18,805)             -              -
Non-deductible expenses                                  229,585        548,917       175,405              -
Writedown of exploration costs                                  -             -             -              -
Writedown of plant and equipment                                -             -             -              -
Less:
Temporary differences and tax losses not
brought to account as a deferred tax asset                80,407        760,976       190,927      1,142,359
Income tax expense                                       142,292         43,878             -              -

The income tax expense is due and tax payable by Nord Gas Ostrava s.r.o. which is a company
incorporated in the Czech Republic. The income tax rate in the Czech Republic is 20% for the year ended
31 December 2009 (2008: 21%).




www.carpathian.com.au                                34
Carpathian Resources Limited                Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 4. INCOME TAX EXPENSE (continued)

                                                            Consolidated                 Company
                                                          2009        2008           2009       2008
                                                           $            $             $          $

Deferred tax asset calculated at 30% (2008: 30%) not taken to account:
The potential deferred tax asset, arising from tax losses and temporary differences has not been
recognised as an asset because recovery of tax losses and temporary differences is not considered
probable.

Tax losses carried forward                            2,876,477      2,361,012      2,331,155     2,207,642
Temporary differences                                   630,245        235,259      2,665,454     2,071,556
                                                      3,506,722      2,596,271      4,996,609     4,279,198

The potential deferred tax asset will only be obtained if:
(a) the relevant Company derives future assessable income of a nature and an amount sufficient to enable
    the benefit to be realised, or the benefit can be utilised by another Company in the consolidated entity
    in accordance with Division 170 of the Income Tax Assessment Act 1997;
(b) the relevant Company and/or consolidated entity continues to comply with the conditions for
    deductibility imposed by the Law; and
(c) no changes in tax legislation adversely affect the relevant Company and/or consolidated entity in
    realising the benefit.

Tax Consolidation System
The Company is unable to consolidate as a tax consolidated group due to the fact that there is only one
Australian domiciled company.

NOTE 5. CASH AND CASH EQUIVALENTS

Cash at bank and on hand                               4,865,155     8,855,369      3,865,256       7,522,271

The bank accounts are at call and the principal account in use bears interest at 2.5% (2008: weighted
average 7.0%).

NOTE 6. TRADE, OTHER RECEIVABLES AND PREPAID EXPENSES

Current
Other debtors (i)                                         364,710      510,633         31,857          1,580
GST receivable                                                  -       13,981              -         13,982
                                                          364,710      524,614         31,857         15,562

Loans to unrelated entities
  Interest bearing (ii)                                  784,196       784,196        784,196       784,196
  Non-interest bearing                                   200,000       200,000        200,000       200,000
Provision for non-recovery (iii)                       (984,196)     (984,196)      (984,196)     (984,196)
                                                               -             -              -             -
                                                         364,710       524,614         31,857        15,562
Non-Current
Loans to controlled entities‘ (iv)                              -             -     7,149,869     5,021,197
Less provision for non recovery                                 -             -     3,361,108     3,613,108
                                                                -             -     3,788,761     1,408,089

www.carpathian.com.au                                35
Carpathian Resources Limited                Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 6. TRADE, OTHER RECEIVABLES AND PREPAID EXPENSES (continued)

                                                             Consolidated                    Company
                                                          2009         2008              2009       2008
                                                            $            $                $          $
 Prepaid Expenses                                          138,074                -        34,687                    -

 Deposits                                                 266,968                 -                -                 -


    (i)     Other debtors are non-interest bearing and are generally paid on 30 day settlement terms. A
            provision for impairment loss will be recognised when legal notice has been sent and reply
            not received in 30 days. No debtors were outside the terms at 30 June 2009 (2008: $nil).
    (ii)    This amount is a demand loan, with interest payable annually at 12%.
    (iii)   A provision for non recovery of a promissory note receivable has been recorded for the
            previous financial year due to an uncertainty of the Company‘s ability to collect the note.
    (iv)    Loans to controlled entities relate principally to advances to fund exploration expenditure,
            therefore, recoverability of these loans is dependent upon the successful development and
            commercial exploitation, or sale, of exploration interests. A provision for non recovery of
            these loans has been recorded for the financial year due to an uncertainty of the controlled
            entities ability to repay the loans. The rate of interest to be charged on loan to controlled
            entities will be at a commercial rate.

NOTE 7. INVENTORIES

                                                            Consolidated                    Company
                                                         2009         2008              2009       2008
                                                           $            $                $          $
Finished goods at cost                                    183,570             -               -                  -

NOTE 8. FINANCIAL ASSETS
                                                                     Financial
                                                                       year
                                                                    Unrealized
                                                   Cost Basis          Gains          Fair Value
                                                        $                $                $
At fair value through profit and loss
Listed investments at fair value                         491,268       712,338         1,203,606

Listed investments are in MDU Communications International, Inc. (―MDU‖), traded on the over-the-
counter bulletin board exchange in the United States (symbol: MDTV). The principal activity of MDU is
satellite and cable television. At the end of financial year 2009, the consolidated group owned 3.78% of
the outstanding MDU common shares; additionally, the consolidated group held options and proxies
over 24.73% of the outstanding MDU common shares. More details regarding these transactions are
available in the SEC Forms 13D which have been lodged with ASX.
                                                             Consolidated                  Company
                                                          2009           2008          2009         2008
                                                            $              $            $            $

Unlisted shares
Shares in controlled entities at cost                           -             -                -         2,307,925
Less provision for diminution in value                          -             -                -       (2,302,690)
                                                                -             -                -             5,235
www.carpathian.com.au                               36
Carpathian Resources Limited                 Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 9. PLANT AND EQUIPMENT

                                                            Consolidated                  Company
                                                          2009        2008            2009       2008
                                                           $            $              $          $

Plant and equipment at cost                            2,736,943      2,976,783        16,860          19,022
Less accumulated depreciation                          (851,711)    (1,626,418)        (1,967)        (4,228)
Less accumulated impairment losses                     (650,179)      (650,179)              -              -
                                                       1,235,053        700,186        14,893          14,794

Movement in carrying amount during the year:
Carrying amount at beginning of year                     700,186      1,317,049        14,794               -
Additions                                                558,648         27,817          2,603         19,022
Transfer from/(to) exploration expenditure                     -              -              -              -
Depreciation                                           (277,645)      (622,536)        (2,504)        (4,228)
Expenditure written off in current year                        -      (262,044)              -              -
Effects of movements in foreign currency                 253,864        239,900              -              -
Carrying amount at end of year                         1,235,053        700,186        14,893          14,794

The plant and equipment relates to the Company‘s oil and gas operations in the Czech Republic. The
recoverable amount of the plant and equipment is determined based on value-in-use calculations. Value-
in-use is calculated based on the present value of cash flow projections over an 8-year period. The cash
flows are discounted using a discount rate of 10%.

Management has based the value-in-use calculations on the budget for the group‘s oil and gas operation
cash-generating unit. This budget uses historical weighted average growth rates to project revenue.
Costs are calculated taking into account historical gross margins as well as estimated weighted average
inflation rates over the period which is consistent with inflation rates applicable to the locations in which
the segment operates. Discount rates are pre-tax and are adjusted to incorporate risks associated with
this particular segment. The Company is satisfied that management‘s calculation of the impairment of
plant and equipment is accurate based upon the Company‘s projections for the performance of those
assets.

NOTE 10. INTANGIBLE ASSETS

                                                            Consolidated                  Company
                                                          2009        2008            2009       2008
                                                           $            $              $          $

Licenses/Development costs                                859,718             -              -              -
Goodwill at cost                                          129,200             -              -              -
                                                          988,918             -              -              -
Accumulated amortization                                        -             -              -              -
Intangible assets, net                                    988,918             -              -              -

Impairment Disclosures

Goodwill is allocated to cash-generating units which are based on the Company‘s reporting segments.
The goodwill relates to the acquisition of the eyewear lens distributor acquired on 12 May 2009. The
Directors have assessed the value of the goodwill at cost on the basis that this business was only recently
acquired in an arms-length transaction.

www.carpathian.com.au                                37
Carpathian Resources Limited               Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 10. INTANGIBLE ASSETS (continued)

The licenses/development relate to the acquisition of a gasoline convenience store acquired on 12
January 2009, a mobile advertising franchise acquired on 9 March 2009, and a gasoline convenience store
acquired on 6 May 2009. On the basis that these businesses were only recently acquired in arms-length
transactions, the Directors have assessed the carrying value of the licenses/development at cost.

Due to the timing of the acquisition of the licenses and development costs, the Company has not yet
commenced amortizing them. Any amortization in the 2009 financial year is immaterial to the financial
results of the Company.

NOTE 11. OIL AND GAS PROPERTIES

                                                          Consolidated                   Company
                                                        2009        2008          2009         2008
                                                         $             $           $             $
Opening balance                                              -         32,273             -         -
Amortisation expense                                         -       (32,273)             -         -
Closing balance                                              -              -             -         -


NOTE 12. TRADE AND OTHER LIABILITIES

Trade creditors                                        663,998        620,340      53,227              -
Accrued expenses                                       250,821        143,386      59,495        143,386
Deferred revenue                                        49,439              -           -              -
Other current liabilities                               48,268              -           -              -
                                                     1,012,526        763,726     112,722        143,386

Due to the short term nature of these payables, their carrying value is assumed to approximate fair
value. Trade payables are non-interest bearing and are generally settled on 30 day terms.

NOTE 13. PROVISIONS
                                                           Consolidated               Company
                                                        2009         2008         2009       2008
                                                          $            $           $          $
Provision for restoration works                          450,000      450,000           -              -

As at 30 June 2009, the estimated costs of restoration works relating to the abandoned licences in Czech
Republic were $450,000.

NOTE 14. CURRENT TAX LIABILITIES

Current tax liabilities                                  99,384        43,878            -             -




www.carpathian.com.au                              38
Carpathian Resources Limited               Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 15. INTEREST BEARING LIABILITIES
                                                          Consolidated                 Company
                                                        2009        2008           2009       2008
                                                         $            $             $          $

Current
Secured Convertible Notes                           1,000,000     1,000,000      1,000,000     1,000,000

10 Secured Convertible Notes ($100,000 face value) (2008:10) were originally issued in June 2004. The
term is 24 months and 10% coupon rate pa. A fixed and floating charge is secured over the assets of the
Company by Energo Holdings Corporation. The convertible notes were extended by a further 2 years at
the 12 April 2006 General Meeting to 16 June 2008. During the financial year 2007, the convertible notes
were transferred by Persal and Co Investments Pty Ltd and Elcos Pty Ltd to Energo. At 30 June 2009, the
convertible notes are in a call position; however, the Company expects the secured notes to be extended
under the current terms.

On conversion the Company must issue to the note holder that number of Shares for the aggregate
number of Convertible Notes being converted as determined in accordance with the following:

A = B / C, where
A is the aggregate number of Shares to be issued (rounded down to the nearest whole number);
B is the aggregate Face Value of the Convertible Notes (in dollars) being converted by the note holder
     into Shares; and
C is, at the election of the noteholder, 12 cents or the issue price at which any future equity capital
     raisings is undertaken by the Company provided that the issue price is at least 10 cents.

NOTE 16. ISSUED CAPITAL



Share capital
265,533,501 (2008: 265,533,501) Ordinary shares
   fully paid                                      22,919,325    22,919,325    22,919,325    22,919,325

                                                                                   Company
                                                                               Number      $
Movements in ordinary shares on issue
Balance at 30 June 2007                                                       157,533,501     13,319,085
Share placement – July 2007                                                   100,000,000      8,000,000
Share placement – October 2007                                                  8,000,000        900,000
Capital raising expenses                                                                -    (4,121,200)
Conversion of options                                                                   -      4,821,440
Balance at 30 June 2009 and 2008                                              265,533,501     22,919,325




www.carpathian.com.au                              39
Carpathian Resources Limited                 Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 16. ISSUED CAPITAL (continued)

Terms and conditions
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are
entitled to one vote per share at shareholders‘ meetings.

In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and
creditors and are fully entitled to any proceeds of liquidation. Ordinary shares issued as a result of the
exercise of options, will rank equally and on the same terms and conditions as all other shareholders.

The following options were cancelled during the financial year:
        On 14 April 2009, 14,200,000 options with an exercise price of $0.10 each and exercisable until 30
        June 2012 were cancelled by the Company due to no consideration being received;
There were 5,400,000 options granted during the financial year. The options were issued after the
financial year. (See footnote 29.)

There were no options exercised during the financial year.

As of 30 June 2009 there were 3,525,335 options issued and outstanding as follows:
          800,000 options with an exercise price of $0.10 and exercisable until 30 June 2012
          2,725,335 options with an exercise price of $0.29 and exercisable until 3 September 2012




NOTE 17. CONTINGENT ASSETS AND LIABILITIES

The Company is of the opinion that provisions are not required in respect of contingent liabilities as it is
not probable that a future sacrifice of economic benefits will be required or the amount is not capable of
reliable measurement. On 9 May 2008, the Company filed a Statement of Claim against former Chairman
Maximiliaan Danishevski in the Supreme Court of Western Australia. Mr. Danishevski failed to enter an
appearance, and a Default Judgment in Action for Liquidated Demand was entered on 21 August 2008 in
the amount of $515,851.91 plus costs. The Company is currently domesticating the judgement in a
foreign country. No contingent assets have been brought to account.

NOTE 18. COMMITMENTS FOR EXPENDITURE

The Company has no commitments for expenditure.

NOTE 19. KEY MANAGEMENT PERSONNEL

Details of the compensation of all Key Management Personnel of the Company are set out in the
following table:
                                                  Consolidated              Company
                                                          2009        2008           2009             2008
                                                            $           $              $                $
Short term benefits                                        373,280   1,092,112        373,280        1,092,112
Post employment benefits                                         -           -              -                -
Share base payments                                              -           -              -                -
                                                           373,280   1,092,112        373,280        1,092,112




www.carpathian.com.au                                40
Carpathian Resources Limited                   Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 19. KEY MANAGEMENT PERSONNEL (continued)

Options
Options were granted but not issued to Key Management Personnel during the financial year ending 30
June 2009. The value of these options expensed in the financial year 30 June 2009 was $21,275. There
were no share issues to Key Management Personnel on the exercise of compensation options. There were
no options actually held by Key Management Personnel during or at the end of the financial year.

Shareholdings
The number of shares in the Company held during the financial year by each Director of Carpathian
Resources Limited and each of the specified Executives of the consolidated entity, including their personally-
related entities are set out below:

                                   Balance          Granted as          Options         Net Change      Balance
Name                             1 July 2008       Remuneration         Exercised         Other       30 June 2009
Directors
David Hammer                                 -                      -               -             -                -
James Wiberg                                 -                      -               -             -                -
Charles Posternack (i)              34,246,540                      -               -             -       34,246,540

                                    34,246,540                      -               -             -       34,246,540

(i): Dr. Posternack holds a one-third interest in OAG Fund Ltd., which holds a five-sixths interest in
Energo Holdings Corporation, which holds 123,287,543 ordinary shares of the Company‘s ordinary
shares. He is therefore imputed to own 34,246,540 ordinary shares in the Company.

Transactions with Key Management Personnel

In the 2008 and 2009 financial years, the following transactions with key management personnel
occurred as follows:

Mr R Downey and Mr J Arbuckle are Directors of Westwind Capital Pty Ltd., which provided office rental and
administration services to Carpathian resources Limited during the financial year 2008.

Maybach Consulting Pty Ltd (as associate of Mr Arbuckle) provided company secretarial services to the Company.

Quantum Vis Pty Ltd and DNA Capital (an associate of Mr Downey) provided his services as a Director
of the Company.

1391634 Ontario Ltd (an associate of Mr Meister) provided his services as a Director of the Company.

Rialto Energy ( an associate of Mr Arbuckle) provided office rental and administrative services to the
Company.

In the 2008 financial year, the following transactions with key management personnel occurred as
follows:

PXP Management Limited (an associate of Dr Linsley) provided technical oil and gas consulting services
to the consolidated entity.

GTIB Inc (is an associate of Mr Danishevski) provided his services as a Director of the Company.



www.carpathian.com.au                                 41
Carpathian Resources Limited                Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 19. KEY MANAGEMENT PERSONNEL (continued)

Aggregate amounts of each of the above types of other transactions with Director and Director related
entities are as follows:
                                                        Consolidated                  Company
                                                     2009           2008          2009           2008
                                                       $              $             $              $
Office rental and administration
Rialto Energy                                           11,149             -        22,095              -
Westwind Capital Pty Ltd                                     -        58,800             -         58,800
Maybach Consulting Pty Ltd                                 384       144,222           384        144,222
                                                        11,533       203,022        22,479        203,022
Interest – Convertible Notes
Energo Holdings Corporation                           100,000        100,000       100,000        100,000
                                                             -       100,000             -        100,000
Consulting/Directors Fees
DNA Capital                                             93,813             -        94,994              -
GTIB Inc                                                     -       311,655             -        311,655
Quantum Vis Pty Ltd                                          -       202,035             -        202,035
PXP Management Limited                                  19,278       253,999        19,278        253,999
1391634 Ontario Ltd.                                    90,000        67,341        90,000         67,341
                                                      203,091        835,030       204,272        835,030

NOTE 20. RELATED PARTY TRANSACTIONS

Key Management Personnel
Disclosure relating to key management personnel is set out in Note 19.

Wholly Owned/Controlled Group
The wholly owned/controlled group consists of Carpathian Resources Limited and its controlled
entities, Nord Gas Ostrava s.r.o.; Karpatia Gas s.r.o.; Unica Exploration s.r.o.; Carpathian Holding
Company Ltd.; International Investors Group, Inc.; Pro Fit Optix Inc.‘ International Petroleum LLC;
International Petroleum Investments of West Palm Beach LLC; International Petroleum of Hollywood
FL, LLC; International Petroleum Co. #101; International Petroleum Co. #102; and Mobile Advertising of
West Palm Beach LLC. Ownership interests in these controlled entities are set out in Note 27.

Transactions between Carpathian Resources Limited and other entities in the wholly owned/controlled
group during the years ended 30 June 2009 and 2008 consisted of:
 1. loans for the associated cash calls in the controlled entities by Carpathian Resources Limited; and
 2. working capital provided by Carpathian Resources Limited to controlled entities.

Payments to Beneficial Shareholders
During financial year 2009 International Investments Ltd. was paid $265,737 (2008: $60,000) for
consulting services and reimbursable expenses.




www.carpathian.com.au                              42
Carpathian Resources Limited                Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 20. RELATED PARTY TRANSACTIONS (continued)

Aggregate amounts in the determination of loss from ordinary activities before income tax that resulted
from transactions with entities in the wholly-owned group:
                                                        Consolidated                  Company
                                                      2009        2008            2009          2008
                                                       $            $               $             $
Loan to controlled entities                                 -             -      7,401,869     5,021,197
Less provision for non recovery                             -             -    (3,613,108)   (3,613,108)
                                                            -             -      3,788,761     1,408,089

NOTE 21. SHARE BASED PAYMENTS

Share based payments are provided to directors, employees and others at the discretion of the Board.

The issue to each individual director, consultant or advisor is controlled by the Board and the ASX
Listing Rules. Terms and conditions of the payments, including the grant date, vesting date, exercise
price and expiry date are determined by the Board, subject to shareholder approval where required.

During the financial year, the following options were cancelled over ordinary shares:
       On 14 April 2009, 14,200,000 options with an exercise price of $0.10 each and exercisable until 30
       June 2012 were cancelled be the Company due to no consideration being received;

There were no options issued during the year and no options exercised during the year. There were
5,400,000 unlisted options granted but not issued in the 2009 financial year. There were no listed options
granted during the financial year.

The fair value of the options is estimated at the date of grant using the binomial model. The following
table gives the assumptions made in determining the fair value of the options granted in the financial
year.

                                                      Expiry                Expiry
                                                  Various dates in      Various dates in
                                                   2011 and 2012         2012 and 2013
       Dividend yield (%)                                 -                     -
       Expected volatility (%)                           183                   183
       Risk-free interest rate (%)                      6.25                  6.25
       Expected life of option (years)                    2                     1
       Option exercise price ($)                        .151                  .133
       Share price at approval date ($)                 0.18                  0.18
       Share price at issue date ($)                    0.11                  0.11

The expected life of the options is based on historical data and is not necessarily indicative of exercise
patterns that may occur. The expected volatility reflects the assumption that the historical volatility is
indicative of future trends, which may also not necessarily be the actual outcome. No other features of
options granted were incorporated into the measurement of fair value.




www.carpathian.com.au                               43
Carpathian Resources Limited                   Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 21. SHARE BASED PAYMENTS (Continued)

During the financial year, nil options were exercised over ordinary shares. Movement in number of share
options held by consultants and advisors:

                                                                       2009               2008
                                                                       No.                No.
        Outstanding at 1 July 2007                                               -                   -

        Granted during the year                                                  -          17,725,335
        Forfeited during the year                                                -                   -
        Exercised during the year                                                -                   -
        Expired during the year                                                  -                   -
        Outstanding at 30 June 2008                                     17,725,335          17,725,335
        Granted during the year                                          5,400,000                   -
        Forfeited during the year                                     (14,200,000)                   -
        Exercised during the year                                                -                   -
        Expired during the year                                                  -                   -
        Outstanding at 30 June 2009                                      8,925,335                   -

        Exercisable at 30 June 2009                                               -


Share options issued and outstanding at the end of the year have the following exercise prices:

                                                   Exercise            2009               2008
                Expiry Date                         price              No.                No.

        30 June 2012                                  0.10                800,000           15,000,000
        3 September 2012                              0.29              2,725,335            2,725,335
                                                                        3,525,335           17,725,335



NOTE 22. AUDITOR’S REMUNERATION

                                                             Consolidated                 Company
                                                           2009        2008           2009       2008
                                                            $            $             $          $
Amounts received or due and receivable by
- auditing or reviewing the financial report                 45,161      53,000        45,161       53,000
Total remuneration                                           45,161      53,000        45,161       53,000




www.carpathian.com.au                                 44
Carpathian Resources Limited               Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 23. RECEIVABLES/PAYABLES DENOMINATED IN FOREIGN CURRENCIES

                                                         Consolidated                     Company
                                                       2009        2008               2009       2008
                                                        $            $                 $          $
Receivables
Current, not effectively hedged
- Czech Republic Korunas                               217,575       402,323                -                  -
- US Dollars                                           115,277             -                -                  -
                                                       332,852       402,323                -                  -

Payables
Current, not effectively hedged
- Czech Republic Korunas                               184,241        63,140                -                -
- Euros                                                      -             -                -                -
- UK Pounds Sterling                                         -        18,472                -           18,472
- US Dollars                                           265,639
                                                       449,880        81,612                -           18,472

NOTE 24. SEGMENT REPORTING

Primary Reporting — Business Segments
                                              Convenience
                                            Stores and Retail
                         Gas Production and     Gasoline
                            Exploration        Operation                    Other                      Total
                           2009      2008     2009     2008          2009           2008        2009           2008
REVENUE
External sales             1,878,687 1,788,170 1,245,747         -     99,053              - 3,223,487     1,788,170
Other segments                     -         -         -         -          -              -         -             -
Total sales revenue        1,878,687 1,788,170 1,245,747         -     99,053              - 3,223,487     1,788,170
Unallocated revenue                -         -         -         -          -              -         -             -
Total revenue              1,878,687 1,788,170 1,245,747         -     99,053              - 3,223,487     1,788,170

RESULT
Segment result               653,836   856,245      5,574        - (1,232,518) (5,057,699) (573,108) (4,201,244)


ASSETS
Segment assets             4,754,301 5,224,276 1,252,809         - 3,238,944               - 9,246,054 10,080,169
Acquisition of non-
current assets                     -         -   752,214         -    503,672              - 1,255,886                -
LIABILITIES
Segment liabilities        1,183,548   847,778   183,836         - 1,194,526 1,409,826 2,561,910           2,257,604




www.carpathian.com.au                             45
Carpathian Resources Limited                Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 24. SEGMENT REPORTING (continued)

Secondary Reporting — Geographical Segments
                                                                                           Acquisitions of
                                     Segment Revenues             Carrying Amount           Non-current
                                  from External Customers         of Segment Assets          Segment
                                                                                               Assets

                                     2009          2008           2009        2008          2009        2008
                                       $            $               $          $             $           $
Geographical location:
Europe                              1,878,687      1,788,170      5,388,924    7,160,460            -          -
United States                       1,344,800                -    1,837,532            -    1,255,886          -
Australia                                   -                -    2,019,598    2,919,709
                                    3,223,487      1,788,170      9,246,054   10,080,169    1,255,886          -


Accounting Policies
Segment revenues and expenses are those directly attributable to the segments and include any joint
revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets
used by a segment and consist principally of cash, receivables, inventories, intangibles and property,
plant and equipment, net of allowances and accumulated depreciation and amortisation. Segment
liabilities consist principally of payables, employee benefits, accrued expenses, provisions and
borrowings. Segment assets and liabilities do not include deferred income taxes.


Intersegment Transfers
There were no intersegment transfers for either financial year.

Business and Geographical Segments
Business segments
The consolidated group has the following business segments:
—     Gas production and exploration segment has a producing gas well along with exploration
      rights to certain areas within Europe. The major product is the production of gas.
—     The convenience store and retail gasoline sales operation is a segment that operates two
      convenience stores with gasoline sales in the United States.
—     The other segment consists of a mobile advertising franchise and an eyewear lens distributor in
      the United States.

Geographical segments
The consolidated group‘s business segments are located in two countries with the gas production and
exploration division having operations in the Europe with the other operations being in the United
States.

NOTE 25. EMPLOYEES
The Company has nil (2008: nil) employees at balance date.




www.carpathian.com.au                               46
Carpathian Resources Limited                  Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 26. EARNINGS PER SHARE

                                                             Consolidated
                                                           2009        2008
                                                            $            $

Loss used to calculate basic and diluted
earnings per share                                      (548,418)    (4,201,244)


                                                        2009           2008
                                                       Number         Number
Weighted average number of ordinary shares
used in calculating basic and diluted earnings
per share                                             265,533,501    260,014,375


          (i)    Diluted earnings per share are calculated after classifying all options on issue remaining
                unconverted at 30 June 2009 as potential ordinary shares. As at 30 June 2009, the Company
                has on issue 3,525,335 options over unissued capital and has incurred a net loss. As the
                notional exercise prices of these options is greater than the current market price of the
                shares, they have not been included in the calculations of the diluted earnings per share as
                they are anti-dilutive for all periods presented.

          (ii) There have been no transactions involving ordinary shares or potential ordinary shares
               that would significantly change the number of ordinary shares or potential ordinary
               shares outstanding between the reporting date and the date of completion of these
               financial statements.

NOTE 27. FINANCIAL RISK MANAGEMENT

The Consolidated entity‘s activities expose it to a variety of financial risks, including market risk, credit risk,
liquidity risk and cash flow interest rate risk. The consolidated entity‘s overall risk management program
focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the
financial performance of the business. To date, the consolidated entity has not used derivative financial
instruments.

Risk management is carried out under an approved framework covering a risk management policy and
internal compliance and control by management. The Board identifies, evaluates and approves measures to
address financial risks.

The Consolidated entity holds the following financial instruments:




www.carpathian.com.au                                 47
Carpathian Resources Limited                   Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 27. FINANCIAL RISK MANAGEMENT (Continued)

                                                             Consolidated                     Company
                                                           2009        2008               2009       2008
                                                            $            $                 $          $
 Financial assets
  Cash and cash equivalents                                4,865,155       8,855,369     3,865,256       7,522,271
  Trade and other receivables                                364,710         524,614        31,857       1,423,651
  Listed investments at fair value                         1,203,606               -             -               -
 Total financial assets                                    6,433,471       9,379,983     3,897,113       8,945,922
 Financial liabilities
  Interest bearing liabilities                             1,000,000       1,000,000     1,000,000       1,000,000
  Trade and other payables                                   914,819         763,726       112,722         143,386
 Total financial liabilities                               1,914,819       1,763,726     1,112,722       1,143,386

    (a) Market risk

        Cash flow and fair value interest rate risk
        The Consolidated entity‘s main interest rate arises from cash deposits and movements in the fair
        value of listed investments. Deposits at variable rates expose the Consolidated entity to cash flow
        interest rate risk. Deposits at fixed rates expose the Consolidated entity to fair value interest rate
        risk. During 2009 and 2008 the Consolidated entity‘s deposits were denominated in Australian
        Dollars, US Dollars and Czech Koruna.

As at the reporting date, the consolidated entity had the following variable rate deposits and there were no
interest rate swap contracts outstanding.


   Consolidated Entity                                    2009                           2008
                                                       Weighted                       Weighted
                                                        average           Balance      average         Balance
                                                      interest rate          $       interest rate        $
                                                           %                              %
   Deposit                                                 2.5             4,865,155      7.0           8,855,369

   Net exposure to cash flow interest rate risk                            4,865,155                    8,855,369


Company                                               2009                            2008
                                                   Weighted                        Weighted
                                                    average            Balance      average          Balance
                                                  interest rate           $       interest rate         $
                                                       %                               %
Deposit                                                2.5              3,865,256      7.0           7,522,271
Net exposure to cash flow interest rate risk                            3,865,256                    7,522,271

        Sensitivity
        During the financial year, if the interest rates had been 1% higher or lower than the prevailing rates
        realised, with all other variables held constant, the profit would be $38,653 higher or lower for the
        company and $48,670 for the consolidated group (2008: $75,223 for the company and $88,554 for the
        consolidated group).



www.carpathian.com.au                                 48
Carpathian Resources Limited               Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 27. FINANCIAL RISK MANAGEMENT (Continued)

       Foreign Exchange Risk

       Foreign exchange risk arises from future commercial transactions and recognised assets and
       liabilities that are denominated in foreign currency that is not the entity‘s functional currency. The
       consolidated entity‘s exposure to foreign exchange risk is the operation of its subsidiaries in the
       Czech Republic, Slovakia and the United States. Movements in foreign currency have been reflected
       in the foreign currency translation reserve.

       The consolidated entity is exposed to currency risk on investments, revenue receipts from oil and
       gas sales and forecast foreign currency denominated purchases in a currency other than the
       functional currencies of the company, primarily Australian Dollar. Other currencies which these
       transactions are denominated are in Great British Pound (GBP), Czech Koruna (CZK) and United
       States Dollar (USD).

       The consolidated entity has not entered into any derivative financial instruments to hedge such
       transactions and anticipated future receipts or payments that are denominated in foreign currency.

       The consolidated entity‘s investments in its subsidiaries are not hedges as those currency positions
       are considered to be long term in nature.

       The following significant rates applied during the year:

                                        Average Rate               Reporting date spot rate
                                     2009           2008             2009           2008
              AUD/GBP               0.4629         0.4476           0.4873         0.4821
              AUD/CZK              14.0555        16.0778           14.9013       14.5456
              AUD/USD               0.7480            -             0.8048            -

   (b) Credit risk

       The credit risk on financial assets of the Consolidated entity which have been recognised on the
       balance sheet is generally the carrying amount, net of any provisions for doubtful debts.

       Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions,
       as well as credit exposures on outstanding receivables and committed transactions. In relation to
       other credit risk areas management assesses the credit quality of the customer, taking into account
       its financial position, past experience and other factors.

       The exposure to credit risk at the reporting date is the extent to which assets are not recoverable i.e.
       deposits not refundable or trade receivables not collectible.

   (c) Liquidity risk

       Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding
       through an adequate amount of committed credit facilities and the availability to close out market
       positions. The Consolidated entity manages liquidity risk by continuously monitoring forecasts and
       actual cash flows and matching the maturity profiles of financial assets and liabilities. The
       Consolidated entity will aim at maintaining flexibility in funding by accessing appropriate
       committed credit lines available from different counterparties where appropriate and possible.
       Surplus funds when available are generally only invested in high credit quality financial institutions
       in highly liquid markets.
www.carpathian.com.au                               49
Carpathian Resources Limited                 Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

 NOTE 27. FINANCIAL RISK MANAGEMENT (Continued)

        Interest Rate Risk Exposure
        The Consolidated entity‘s exposure to interest rate risk and the effective weighted average interest
        rate for each class of financial assets and financial liabilities is set out below.

        Exposures arise predominantly from assets and liabilities bearing variable interest rates as the
        Consolidated entity‘s intends to hold fixed rate assets and liabilities to maturity.


2009                                  Floating        Fixed interest maturing in:           Non-
Consolidated entity                   Interest       1 year      over 1 to    More         interest
                                        Rate         or less      5 years     Than         Bearing     Total
                               Note                                          5 years
                                         $              $            $          $             $          $
Financial Assets
Cash                            5     4,865,155              -            -        -              -   4,865,155
Receivables                     6             -              -            -        -        364,710     364,710

                                      4,865,155              -            -        -        364,710   5,229,865
Weighted average
interest rate of principal             2.5%
account

Financial Liabilities
Payables                       11                -           -            -        -        914,819     914,819
Interest bearing liabilities   14                -           -    1,000,000        -              -   1,000,000

                                                 -           -    1,000,000        -        914,819   1,914,819
Weighted average
interest rate                                                         10%

2008                                  Floating        Fixed interest maturing in:           Non-
Consolidated entity                   Interest       1 year      over 1 to    More         interest
                                        Rate         or less      5 years     Than         Bearing     Total
                               Note                                          5 years
                                         $              $            $          $              $         $
Financial Assets
Cash                            5     8,855,369              -            -            -          -   8,855,369
Receivables                     6             -              -            -            -    524,614     524,614

                                      8,855,369              -            -            -    524,614   9,379,983
Weighted average
interest rate                          7.0%

Financial Liabilities
Payables                       11                -           -            -            -    763,726     763,726
Interest bearing liabilities   14                -           -    1,000,000            -          -   1,000,000

                                                 -           -    1,000,000            -    763,726   1,763,726
Weighted average
interest rate                                                      10%
www.carpathian.com.au                                50
Carpathian Resources Limited                 Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 27. FINANCIAL RISK MANAGEMENT (Continued)

2009                                  Floating        Fixed interest maturing in:           Non-
Parent entity                         Interest       1 year      over 1 to    More         Interest
                                        Rate         or less      5 years     Than         Bearing      Total
                               Note                                          5 years
                                         $              $            $          $             $           $
Financial Assets
Cash                            5     3,865,256              -            -            -           -   3,865,256
Receivables                     6             -              -            -            -   3,788,761   3,788,761

                                      3,865,256              -            -            -   3,788,761   7,655,017
Weighted average
interest rate of principal
account                                2.5%

Financial Liabilities
Payables                       11                -           -            -            -    112,722      112,722
Interest bearing liabilities   14                -           -    1,000,000            -          -    1,000,000

                                                 -           -    1,000,000            -    112,722    1,112,722
Weighted average
interest rate                                                      10%


2008                                  Floating        Fixed interest maturing in:           Non-
Parent entity                         Interest       1 year      over 1 to    More         Interest
                                        Rate         or less      5 years     Than         Bearing      Total
                               Note                                          5 years
                                         $              $            $          $             $           $
Financial Assets
Cash                            5     7,522,271              -            -            -           -   7,522,271
Receivables                     6             -              -            -            -   1,423,651   1,423,651

                                      7,522,271              -            -            -   1,423,651   8,945,922
Weighted average
interest rate                          7.0%

Financial Liabilities
Payables                       11                -           -            -            -    143,386      143,386
Interest bearing liabilities   14                -           -    1,000,000            -          -    1,000,000

                                                 -           -    1,000,000            -    143,386    1,143,386
Weighted average
interest rate                                                      10%




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Carpathian Resources Limited               Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 27. FINANCIAL RISK MANAGEMENT (Continued)

       Maturities of financial assets and liabilities
       The note above analyses the consolidated entity‘s financial liabilities. Theses liabilities comprise
       trade and other payables, are non interest bearing and will mature within 12 month; and interest
       bearing liabilities in the form of convertible notes expiring on 16 June 2012. The amounts
       disclosed are the contractual undisclosed cash flows. There are no derivatives.

   (d) Fair value estimation

       The fair value of financial assets and financial liabilities must be estimated for recognition and
       measurement or for disclosure purposes.

       The carrying value less impairment provision of trade receivables and payables are assumed to
       approximate their fair values do to their short term nature.


NOTE 28. INVESTMENT IN CONTROLLED ENTITIES

                                                        Equity Holdings           Date Formed (if formed
                                                                                   during financial year
                                                                                   ending 30 June 2009)
                                                        2009         2008
                                                         %            %
Name of Entity
Nord Gas Ostrava s.r.o                                         100          100
UNICA Exploration s.r.o. (i)                                    90           90
Karpatia Gas s.r.o. (i)                                         90           90
Carpathian Oil Slovakia s.r.o (i)                                -          100
Carpathian Holdings Company Ltd                                100            -
International Investors Group, Inc.                            100            -       2 October 2008
Pro Fit Optix Inc                                               73            -         7 May 2009
International Petroleum LLC                                    100            -     10 December 2008
International Petroleum Investments, LLC                       100            -      8 December 2008
International Petroleum Investments of West
Palm Beach LLC                                                 100            -     10 December 2008
International Petroleum of Hollywood FL LLC                    100            -     10 December 2008
International Petroleum Co. #101                               100            -        7 May 2009
International Petroleum Co. #102                               100            -        7 May 2009
Mobile Advertising of West Palm Beach LLC                      100            -       9 March 2009


(i) As required by Czech Republic mining regulations a 10% nominal holding is held by a Czech Republic
resident company. Carpathian Resources Limited has a 100% beneficial interest in the operations of the
entity.




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 Carpathian Resources Limited                 Annual Report 2009

 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
 FOR THE YEAR ENDED 30 JUNE 2009

 NOTE 28. INVESTMENT IN CONTROLLED ENTITIES (continued)

                                                     Consolidated                     Company
                                                   2009           2008            2009       2008
 Acquisition of Entities                             $             $               $          $
 During the year 70% of Pro Fit Optix,
 Inc. was acquired. Details of this
 transaction are:
 Purchase consideration
 Consisting of:
 —      Cash consideration                                221,788         -                -               -
 Total consideration                                      221,788         -                -               -
 Assets and liabilities held at acquisition
 date:
 Receivables                                               10,257         -                -               -
 Property, plant and equipment                            181,782         -                -               -
                                                          192,039         -                -               -
 Goodwill                                                 129,200         -                -               -
                                                          321,239         -                -               -
 Minority Interest in acquisition                         (99,451)        -                -               -
                                                          221,788

                                                      Consolidated                        Company
                                                    2009           2008            2009             2008
Acquisition of Entities                               $             $               $                $
During the year 100% of the two
convenience stores with gasoline retail
sales were acquired. Details of this
transaction are:
Purchase consideration
Consisting of:
—      Cash consideration                                  893,740            -                -               -
Total consideration                                        893,740            -                -               -
Assets and liabilities held at acquisition
date:
Inventories                                                127,300            -                -               -
Deposits                                                   123,457            -                -               -
Other assets                                                56,563            -                -               -
Development costs                                          586,420            -                -               -
Subtotal                                                   893,740




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 Carpathian Resources Limited                  Annual Report 2009

 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
 FOR THE YEAR ENDED 30 JUNE 2009

 NOTE 28. INVESTMENT IN CONTROLLED ENTITIES (continued)

                                                        Consolidated                        Company
                                                      2009           2008            2009               2008
Acquisition of Entities                                 $             $               $                  $
During the year 100% of mobile
advertising franchise acquired. Details of
this transaction are:
Purchase consideration
Consisting of:
—      Cash consideration                                   277,777             -                 -                 -
Total consideration                                         277,777             -                 -                 -
Assets and liabilities held at acquisition
date:
Development costs                                           277,777             -                 -                 -

 NOTE 29. RECONCILIATION OF OPERATING LOSS AFTER INCOME TAX TO NET
 CASH USED IN OPERATING ACTIVITIES

                                                           Consolidated                    Company
                                                         2009         2008             2009        2008
                                                          $             $               $           $
 Loss for the year                                      (548,418)  (4,201,244)      (1,221,107) (3,807,863)

 Non-cash flows in loss:
 - Amortisation of oil and gas properties                         -       32,273             -                 -
 - Depreciation                                             277,645      622,536         2,504             4,726
 - Reserves                                                       -            -        21,275                 -
 - Exploration expenditure written off                            -          886             -                 -
 - Plant and equipment written off                                -      262,044             -                 -
 - Impairment (recovery) of loan to controlled
        entities                                                -              -              -         (11,863)
 - Impairment of loan to non-controlled entities                -        984,196              -          984,196
 - Gains on financial assets                            (712,338)              -              -                -

 Changes in assets and liabilities
 - (Increase)/decrease in receivables                     159,904      (276,603)      (16,295)            44,633
 - (Increase)/decrease in inventory                     (183,570)              -             -                 -
 - (Increase)/decrease in prepaid expenses              (138,074)              -      (34,687)                 -
 - Decrease in other financial assets                           -              -         5,235                 -
 -(Increase) in deposits                                (170,932)              -             -                 -
 - Increase/(decrease) in payables                        151,093        102,908      (30,665)         (353,413)
 - Increase in deferred revenue                            49,439              -             -                 -
 - Increase/(decrease) in other current liabilities        48,268              -             -                 -
 - Increase/(decrease) in tax payable                      55,506      (128,122)             -                 -

 Net cash from operating activities                    (1,011,477)    (2,601,126)   (1,273,740)       (3,139,584)




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Carpathian Resources Limited                 Annual Report 2009

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009

NOTE 30. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

Effective 1 July 2009 Errol Levitt and Gregory Peacocke were appointed as non-executive directors of the
Company.

Mr. Levitt is an independent consultant with clients in various, diverse sectors. His experience covers
mining, manufacturing, energy, insurance, banking and agribusiness.

Mr. Peacocke currently serves as a director of four firms in the refrigeration, recreation and tourism, and
corporate advisory industries. He has independent advisory experience with Australian and New
Zealand clients in telecommunications, building, consumer products and financial services, and has
worked for nine years as a management consultant and corporate finance advisor.

On 1 July 2009 the Company issued unlisted options to acquire 5,400,000 shares of the Company‘s stock.
The individuals receiving the options are directors of the Company, certain employees of the Company‘s
subsidiaries and former directors of the Company.

The Options shall vest in the schedule set forth below. In the event any of the optionees resigns or is
removed for cause, all unvested options issued with respect to that person will be cancelled. The Option
is a right in favour of the option holder to subscribe for one fully paid ordinary share in the capital of the
Company. The Options are not transferable. The details of the Options are set forth below:

                        Exercise Price    Number          Vesting           Expiry
                                $0.151      400,000     01 July 2009       28 Feb 2011
                                $0.151      166,667      5 Sept 2009       5 Sept 2011
                                $0.151      116,667      13 Oct 2009       13 Oct 2011
                                $0.151      333,333     30 Dec 2009       30 Dec 2011
                                $0.151      166,667      15 Jan 2010       15 Jan 2012
                                $0.151       50,000      23 Feb 2010       23 Feb 2012
                                $0.151      166,667     30 Mar 2010       30 Mar 2012
                                $0.151      666,666       1 July 2010       1 July 2012
                                $0.133      166,667      5 Sept 2010       5 Sept 2011
                                $0.133      116,667      13 Oct 2010       13 Oct 2011
                                $0.133      333,333     30 Dec 2010       30 Dec 2011
                                $0.133      166,667      15 Jan 2011       15 Jan 2012
                                $0.133       50,000      23 Feb 2011       23 Feb 2012
                                $0.133      166,667     30 Mar 2011       30 Mar 2012
                                $0.133      666,666       1 July 2011       1 July 2012
                                $0.133      166,666      5 Sept 2011       5 Sept 2012
                                $0.133      116,666      13 Oct 2011       13 Oct 2012
                                $0.133      333,334     30 Dec 2011       30 Dec 2012
                                $0.133      166,666      15 Jan 2012       15 Jan 2013
                                $0.133       50,000      23 Feb 2012       23 Feb 2013
                                $0.133      166,666     30 Mar 2012       30 Mar 2013
                                $0.133      666,668       1 July 2012       1 July 2013
                                 Total    5,400,000

NOTE 31. COMPANY DETAILS

The registered office of the company, as well as its principal place of business, is at Zenith Centre, Tower
A, Level 20, 821 Pacific Highway, Chatswood NSW 2067, Australia.


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Carpathian Resources Limited               Annual Report 2009

ASX ADDITIONAL INFORMATION

Additional information required by the Australian Stock Exchange Limited Listing Rules and not
disclosed elsewhere in this report is set out below.

SHAREHOLDINGS (as of 26 August 2009)

Substantial shareholders

The number of shares held by substantial shareholders and their associates are set out below:

                                                                               Ordinary           %
                                                                                Shares
  Energo Holdings Corporation                                                 123,287,543        46.43


Voting Rights

Each shareholder is entitled to receive notice of and attend and vote at general meetings of the Company.
At a general meeting, every shareholder present in person or by proxy, representative or attorney will
have one vote on a show of hands and on a poll, one vote for each share held.

Distribution of equity security holders

                                                    Ordinary
  Category                                           Shares
  1 – 1,000                                                20
  1,001 – 5,000                                            79
  5,001 – 10,000                                          185
  10,001 – 100,000                                        384
  100,001 and over                                         70
  Total                                                   738

The number of shareholders holding less than a marketable parcel of ordinary shares is 8.

On-market buy back

There is no current on-market buy back.

Securities on Issue

The number of securities issued by the Company, as of the balance sheet date is set out below:

  Category                                                        Number
  Ordinary Shares                                               265,533,501
  Unlisted Options – expiry date 30 June 2012                       800,000
  Unlisted Options – expiry date 3 September 2012                 2,725,335
  Unlisted Options – expiry various dates listed in
  Note 29                                                         5,400,000
  Unlisted Secured Convertible Notes – 16 June 2008                      10




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Carpathian Resources Limited                 Annual Report 2009



ASX ADDITIONAL INFORMATION (continued)

Twenty largest shareholders

  Name                                                                      Ordinary               %
                                                                             Shares
  Energo Holdings Corporation                                               123,287,543            46.43
  ANZ Nominees Ltd < Cash Income A/C>                                        90,924,169            34.24
  National Nominees Limited                                                   6,167,465             2.32
  HSBC Custody Nominees (Australia) Ltd                                       5,379,180             2.03
  Citicorp Nominees Pty Ltd                                                   4,813,889             1.81
  Fitel Nominees Ltd                                                          1,277,532             0.48
  Princeton Enterprises Pty Ltd                                               1,144,000             0.43
  Chase Nominees Ltd                                                            700,000             0.26
  Mr Paul Eric Light                                                            700,000             0.26
  Starvest Plc                                                                  666,666             0.25
  Chepaliv Pty Ltd                                                              600,000             0.23
  Empjar Pty Ltd                                                                600,000             0.23
  HSBC Global Custody Nominee                                                   554,901             0.21
  Mrs Liliana Teofilova                                                         520,000             0.20
  Mr Shane Bach                                                                 500,000             0.19
  CVC Ltd                                                                       500,000             0.19
  Mr Harvey Gilbert                                                             500,000             0.19
  Mr Raymond Oliver Jeffs                                                       500,000             0.19
  HSBC Custody Nominees (Australia) Ltd A/C 2                                   486,868             0.18
  Securities Services Nominees Ltd                                              430,000             0.16

  Total                                                                     240,252,213            90.48


OIL AND GAS INTERESTS

As at 30 June 2009

Basin               Project    Licence               Area       Effective    Entity                        Status
                                                     km2        Interest (%)

Czech Republic

Outer Carpathians   Mošnov     Mošnov                     16         90      UNICA Exploration s.r.o.      Exploration

                    Krásná     Krásná                      4         75      Nord Gas Ostrava s.r.o.       Production

                    Janovice   Janovice                    5         60      Nord Gas Ostrava s.r.o.       Production

                               Raškovice - Morávka        32         60      Nord Gas Ostrava s.r.o.       Exploration

                               Skalice                    3.9        60      Nord Gas Ostrava s.r.o.       Exploration

Sub-Beskydy Step    Rožnov     Zubří                      52         90      UNICA Exploration s.r.o.      Exploration

                               Horni Bečva                32         90      UNICA Exploration s.r.o.      Exploration

                               Dolní Bečva                49         90      UNICA Exploration s.r.o.      Exploration

                               Čeladná-Ostravice          54         90      UNICA Exploration s.r.o.      Exploration

Vienna Basin and    Morava     Morava                     181        90      Karpatia Gas s.r.o.           Exploration
Magura Nappe


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Carpathian Resources Limited                Annual Report 2009

CORPORATE GOVERNANCE STATEMENT

Recent external events have changed the way in which corporate governance responsibilities are viewed
and in March 2003 the ASX Corporate Governance Council released its ‗Principles of Good Corporate
Governance and Best Practice Recommendations‘. The principles of corporate governance have been
developed, supported by best practice and implementation recommendations. The Council has
recognised that these principals and recommendations do not contain a ―one size fits all‖ solution and
that it will be necessary for companies to adopt a ―fit for purpose‖ solution in the adoption of these
practices.

The ASX Listing Rules require listed entities to disclose the extent to which they have followed the best
practice recommendations set by the ASX Corporate Governance Council during the reporting period.
This corporate governance statement summarises the corporate governance practices that have been
formally reviewed and adopted by the Board with a view to ensuring continued investor confidence in
the operations of the Company and is endorsing the corporate governance principles relevant to a
Company of Carpathian‘s nature and size. A table has been included at the end of this statement
detailing the Company‘s compliance with the best practice recommendations.


BOARD OF DIRECTORS

Role of the Board (1.1)

In general, the Board is responsible for, and has the authority to determine, all matters relating to the
policies, practices, management and operations of the Company. It is required to do all things that may
be necessary to be done in order to carry out the objectives of the Company.

Without intending to limit this general role of the Board, the principal functions and responsibilities of
the Board include the following:

        Recognize and publish the respective roles and responsibilities of board and management;
        Have a board of an effective composition, size and commitment to adequately discharge its
        responsibilities and duties;
        Actively promote ethical and responsible decision-making;
        Have a structure to independently verify and safeguard the integrity of the company‘s financial
        reporting;
        Promote timely and balanced disclosure of all material matters concerning the company;
        Respect the rights of shareholders and facilitate the effective exercise of those rights;
        Establish a sound system of risk oversight and management and internal control;
        Fairly review and actively encourage enhanced board and management effectiveness;
        Ensure that the level and composition of remuneration is sufficient and reasonable and that its
        relationship to corporate and individual performance is defined, and
        Recognise legal and other obligations to all legitimate stakeholders.

Composition of the Board

To add value to the Company the Board has been formed so that it has effective composition, size and
commitment to adequately discharge its responsibilities and duties given its current size and scale of
operations.

The names of Directors of the Company in office at the date of this statement are set out in the Directors‘
Report. Information regarding Directors‘ experience and responsibilities will be included in the
Directors‘ Report section of the Annual Report (2.6).

The number of Directors is specified in the Constitution of the Company as a minimum of three up to a
maximum of ten. The Board has resolved that it will at all times have a majority of Non-Executive
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Carpathian Resources Limited                 Annual Report 2009

Directors, with at least 30% of Directors considered to be independent.

The preferred skills and experiences for a Director of the Company include:
        Exploration and Development;
        Production operations;
        Financial expertise;
        Legal expertise;
        Management experience;
        Business Development; and
        Public Company administration.

Chairman of the Board

Currently the Company has no Chairman of the Board.

Independent Directors (2.1)

The Board considers that a Director is independent if that Director complies with the following criteria:

        Apart from Director‘s fees and shareholding, independent Directors should not have any
        business dealings which could materially affect their independent judgment;
        Must not have been in an Executive capacity in the Company in the last 3 years;
        Must not have been in an advisory capacity to the Company in the last 3 years;
        Must not be a significant customer or supplier for the Company;
        Must not be appointed through a special relationship with a Board member;
        Must not owe allegiance to a particular group of shareholders which gives rise to a potential
        conflict of interest;
        Must not hold conflicting cross Directorships; and
        Must not be a substantial shareholder or a nominee of a substantial shareholder (as defined
        under section 9 of the Corporations Act).

Using the ASX Best Practice Recommendations on the assessment of the independence of Directors, the
Board considers that of a total of five Directors, two are considered to be independent (Mr. Errol Levitt
and Mr. Greg Peacocke).

David Hammer and James Wiberg are the Executive Directors of the Company and are not considered to
be independent. However, their experience and knowledge of the Company makes their contribution to
the Board such that it is appropriate for them to serve on the Board.

Retirement and Rotation of Directors

Retirement and rotation of Directors are governed by the Corporations Act 2001 and the Constitution of
the Company. Each year one third Directors must retire and offer themselves for re-election. Any casual
vacancy filled will be subject to shareholder vote at the next Annual General Meeting of the Company.

Access to Employees

Directors have the right of access to any employee. Any employee shall report any breach of corporate
governance principles or Company policies to a Non-Executive Director and/or Company
Secretary/Financial Controller who shall remedy the breach. If the breach is not rectified to the
satisfaction of the employee, they shall have the right to report any breach to an independent Director
without further reference to senior managers of the Company.

Directors and Officers Liability Insurance

Directors and officers insurance for Directors are paid for by the Company.
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Carpathian Resources Limited                 Annual Report 2009



Share Ownership

Directors are encouraged to own Company shares.

Board Meetings

The following points identify the frequency of Board Meetings and the extent of reporting from
management at the meetings:

        A minimum of four meetings are to be held per year with additional meetings to be held as
        required,
        Meetings can be held telephonically,
        Information provided to the Board includes all material information on: operations, budgets,
        cash flows, funding requirements, shareholder movements, broker activity in the Company‘s
        securities, assets and liabilities, disposals, financial accounts, external audits, internal controls,
        risk assessment, new venture proposals, and health, safety and environmental reports.

The number of Directors‘ meetings and the number of meetings attended by each of the Directors of the
Company during the financial year are set out in the Directors‘ Report.

Board Performance Review (2.5)

It is the policy of the Board to conduct an evaluation of its performance. The objective of this evaluation
is to provide best practice governance of the Company.

Other Areas for Board Review

        Reporting to shareholders and the market to ensure trade in the Company‘s securities takes
        place in an efficient, competitive and informed market; and
        Insurance, both corporate and joint venture related insurances.

Board Committees

Audit Committee (4.1)

The Company does not have an audit committee. The Board is of the opinion that due to the nature and
size of the Company, the functions performed by an audit committee can be adequately handled by the
full Board.

A majority of directors declare in writing to the Board that the Company‘s financial statements for the
year ended 30 June 2009 present a true and fair view, in all material aspects, of the Company‘s financial
condition and operational results and are in accordance with relevant accounting standards. This
representation is made by the Non-Executive Director and Company Secretary/Financial Controller
prior to the Director‘s approval of the release of the annual and six monthly accounts. This
representation is made after enquiry of, and representation by, appropriate levels of management (4.1).

Nomination Committee (2.4)

The Board of Directors of the Company does not have a nomination committee. The Board is of the
opinion that due to the nature and size of the Company, the functions performed by a nomination
committee can be adequately handled by the full Board.

Remuneration Committee (8.1)

The Company does not have a remuneration committee. The Board is of the opinion that due to the

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Carpathian Resources Limited               Annual Report 2009

nature and size of the Company, the functions performed by a remuneration committee can be
adequately handled by the full Board.

Remuneration levels for Directors, Secretaries, Senior Executives of the Company, and relevant group
Executives of the consolidated entity (―the Directors and Senior Executives‖) are competitively set to
attract and retain appropriately qualified and experienced Directors and Senior Executives.

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

The remuneration policy setting out the terms and conditions for the executive directors and other senior
executives was developed by the Board.

Executive remuneration and other terms of employment are reviewed annually by the Board having
regard to performance against goals set at the start of the year, relevant comparative information and
independent expert advice.

As well as a base salary, remuneration packages include superannuation, retirement and termination
entitlements, performance-related bonuses and fringe benefits.

Remuneration and other terms of employment for the executive Directors and certain other senior
executives have been formalised in service agreements.

The Board undertakes an annual review of its performance against goals set at the start of the year. The
Board may exercise discretion in relation to approving incentives, bonuses, and options. The policy is
designed to attract the highest calibre of executives and reward them for performance that results in
long-term growth in shareholder wealth.

All remuneration paid to directors and executives is valued at the cost to the Company and expensed.

The remuneration structures explained below are designed to attract suitably qualified candidates,
reward the achievement of strategic objectives and achieve the broader outcome of creation of value for
shareholders. The remuneration structures take into account:

        the capability and experience of the Directors and Senior Executives

        the Directors and Senior Executives ability to control the relevant segments‘ performance

        the consolidated entity‘s performance including:

            (a) the consolidated entity‘s earnings

            (b) the growth in share price and returns on shareholder wealth
        the amount of incentives within each Director‘s and Senior Executive‘s remuneration.

For details of remuneration paid to Directors and officers for the financial year please refer to the
Directors‘ Report and Note 18 to the Financial Statements.

Risk Management (7.1)

The risks involved in oil and gas exploration, development and production Company and the specific
uncertainties for the Company continue to be regularly monitored and the full Board of the Company
meets on an annual basis to formally review such risks. All proposals reviewed by the Board include a
consideration of the issues and risks of the proposal.

The potential exposures associated with running the Company have been managed by the Board and
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Carpathian Resources Limited                   Annual Report 2009

senior consultants who have significant broad-ranging industry experience, work together as a team and
regularly share information on current activities.

Additionally, it is the responsibility of the Board to assess the adequacy of the Company‘s internal
control systems and that its financial affairs comply with applicable laws and regulations and
professional practices. A majority of directors declare in writing to the Board that the financial reporting
risk management and associated compliance controls have been assessed and found to be operating
efficiently and effectively. This representation is made by a majority of directors prior to the Director‘s
approval of the release of the annual and six monthly accounts. This representation is made after enquiry
of, and representation by, appropriate levels of management (7.2).

PROMOTION OF ETHICAL AND RESPONSIBLE DECISION-MAKING

Code of Conduct (3.1)

The goal of establishing the Company as a significant Australian-based diversified investment Company
is underpinned by its core values of honesty, integrity, common sense and respect for people. The
Company desires to remain a good corporate citizen and appropriately balance, protect and preserve all
stakeholders‘ interests.

The Board has adopted a Code of Conduct for Directors and employees of the Company. The Company‘s
goal of achieving above average wealth creation for our shareholders should be enhanced by complying
with this code of conduct which provides principles to which Directors and employees should be
familiar and to which they are expected to adhere and advocate (3.1).

It is the responsibility of the Board to ensure the Company‘s performance under this Code and for its
regular review.

Trading in Company securities by directors, officers and employees

Trading of shares is covered by, amongst other things, the Corporations Act, and the ASX Listing Rules.
The Board has established a Securities Trading Policy that establishes strict guidelines as to when a
Director, officer or an employee can deal in Company shares. The policy prohibits trading in the
Company‘s securities whilst the Directors, officer or employee is in the possession of price sensitive
information.

For details of shares held by Directors and officers please refer to the Directors‘ Report and Note 19 to
the Financial Statements.




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Carpathian Resources Limited               Annual Report 2009

SHAREHOLDER COMMUNICATION

The Board aims to ensure that shareholders and investors have equal access to the Company‘s
information.

The Company has policies and procedures that are designed to ensure compliance with disclosure
requirements of the ASX Listing Rules and to ensure accountability at a senior management level for that
compliance. This disclosure policy includes processes for the identification of matters that may have a
material effect on the price of the Company‘s securities, notifying them to the ASX and posting them on
the Company‘s website (5.1).

The Company also has a strategy to promote effective communication with shareholders (6.1) and
encourage effective participation at general meetings through a policy of open disclosure to
shareholders, regulatory authorities and the broader community of all material information with respect
to the Company‘s affairs including, but not limited to:

        Conflicts of interest and related party transactions;
        Executive remuneration;
        The grant of options and details of Share Option Plans;
        The process for performance evaluation of the Board, its committees, individual Directors and
        key managers;
        The link between remuneration paid to Directors and Executives and corporate performance;
        and
        Shorter, more comprehensible notices of meetings.

The following information is communicated to shareholders:

        The Annual Report and notices of meetings of shareholders;
        Quarterly reports reviewing the operations, activities and financial position of the Company;
        All documents that are released to the ASX are made available on the Company‘s website; and
        All other information on the Company‘s website is updated on an ongoing basis.

ASX BEST PRACTICE RECOMMENDATIONS

The table below identifies the ASX Best Practice Recommendations and whether or not the Company has
complied with the recommendations during the reporting period:

                                                                                  Complied    Note
1.1    Formalise and disclose the functions reserved to the Board and those          X
       delegated to management.

2.1    A majority of the Board should be independent Directors.                      X

2.2    The Chairperson should be an independent Director.                           N/A

2.3    The roles of Chairperson and Chief Executive Officer should not be           N/A
       exercised by the same individual.

2.4    The Board should establish a Nomination Committee.                                       1

2.5    Provide the information indicated in Guide to Reporting on Principle          X
       2.

3.1    Establish a code of conduct to guide the Directors, the Chief Executive       X
       Officer (or equivalent), the Chief Financial Officer (or equivalent) and

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       any other key Executives as to:

       3.1.1 the practices necessary to maintain confidence in the
            Company‘s integrity.

       3.2.1 the responsibility of and accountability of individuals for
             reporting and investigating of unethical practices.

3.2    Disclose the policy concerning trading in Company securities by           X
       Directors, officers and employees.

3.3    Provide information indicated in Guide to reporting on Principle 3.       X

4.1    Require the Chief Executive Officer (or equivalent) and the Chief         X
       Financial Officer (or equivalent) to state in writing to the Board that
       Company‘s financial reports present a true and fair view, in all
       material respects, of the Company‘s financial condition and
       operational results and are in accordance with relevant accounting
       standards.

4.2    The Board should establish an Audit Committee.                                2

4.3    Structure the Audit Committee so that it consists of:                         2
           - Only Non-Executive Directors;
           - A majority of independent Directors;
           - An independent Chairperson, who is not Chairperson of the
               Board; and
           - At least three members.

4.4    The Audit Committee should have a formal charter.                             2

4.5    Provide the information indicated in Guide to reporting on Principle 4.   X

5.1    Establish written policies and procedures designed to ensure              X
       compliance with ASX Listing Rule disclosure requirements and to
       ensure accountability at a senior management level for the
       compliance.

5.2    Provide the information indicated in Guide to reporting on Principle 5.   X

6.1    Design and disclose a communication strategy to promote effective         X
       communication with shareholders and encourage effective
       participation at general meetings.

6.2    Request the external auditor to attend the Annual General Meeting         X
       and be available to answer shareholder questions about the conduct of
       the audit and the preparation and content of the Auditors‘ Report.

7.1    The Board or appropriate Board Committee should establish policies        X
       on risk oversight and management.

7.2    The Chief Executive Officer (or equivalent) and the Chief Financial       X
       Officer (or equivalent) should state to the Board in writing that:

       7.2.1 the statement given in accordance with the best practice

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Carpathian Resources Limited               Annual Report 2009

       recommendation 4.1 (the integrity of financial statements) is founded
       on a system of risk management and internal compliance and control
       which implements the policies adopted by the Board.

       7.2.2 the Company‘s risk management and internal compliance and
       control system is operating efficiently in all material respects.

7.3    Provide the information indicated in Guide to reporting on Principle 7.   X

8.1    Disclose the process for performance evaluation of the Board, its         X
       committees and individual Directors, and key Executives and
       corporate performance.

9.1    Provide disclosure in relation to the Company‘s remuneration policies     X
       to enable investors to understand
            (i) The costs and benefits of these policies; and
            (ii) The link between remuneration paid to Directors and key
            Executives and corporate performance.

9.2    The Board should establish a Remuneration Committee.                                 3

9.3    Clearly distinguish the structure of        Non-Executive    Directors‘   X
       remuneration from that of Executives.

9.4    Ensure that payment of equity-based Executive remuneration is made        X
       in accordance with thresholds set in plans approved by shareholders.

9.5    Provide the information indicated in Guide to reporting on Principle 9.   X

10.1   Establish and disclose a code of conduct to guide compliance with         X
       legal and other obligations to legitimate stakeholders.


Note 1: The Board of Directors of the Company does not have a Nomination Committee. The Board is of
the opinion that due to the nature and size of the Company, the functions performed by a Nomination
Committee can be adequately handled by the full Board.

Note 2: The Company does not have an Audit Committee. The Board is of the opinion that due to the
nature and size of the Company, the functions performed by an Audit Committee can be adequately
handled by the full Board.

Note 3: The Company does not have a Remuneration Committee. The Board is of the opinion that due to
the nature and size of the Company, the functions performed by a Remuneration Committee can be
adequately handled by the full Board.




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