Final Results

RNS Number : 5040L

Carpathian PLC

07 May 2010

Date: 7 May 2010

On behalf of: Carpathian PLC ("Carpathian", the "Group" or the "Company")

Embargoed until: 0700hrs

Carpathian PLC

Preliminary results for the year ended 31 December 2009

Carpathian PLC (AIM: CPT), the commercial property investment company focused on retail properties in Central and Eastern Europe, today announces its preliminary results for the year ended 31 December 2009.

Financial Highlights

- Net Asset Value per share of €32.6 cents (2008: €82.1 cents).

o The derecognition of the Plaza Portfolio in the 1^st quarter of 2010 results in Net Asset Value per share increasing by approximately €6.6 cents**

- Loss after tax of €104.5 million (2008: €189.2 million)

- Adjusted profit after tax* of €3.5 million (2008: €14.8 million)

- Negative earnings per share of €45.0 cents for the period (2008: Negative earnings per share of €79.7 cents)

- Adjusted earnings per share* of €1.5 cents (2008: €6.4 cents)

- Net rental income of €27.5 million (2008: €43.3 million)

- A dividend payment of €4.5 cents per share was made in January 2010

- Total cash of €39.9 million as at 31 December 2009 (2008: €63.8 million)

- Group's uncommitted cash is approximately €16.2 million as at 28 February 2010, equating to €7.0 cents per share

*Adjusted profits after tax and adjusted earnings per share exclude fair value, impairment, loss on sale, deferred tax and foreign exchange adjustments

** Q1 2010 estimated net asset value per share of €39.2 cents is unaudited

Operational Highlights

- New portfolio management agreement in place from 1 March 2010, designed to incentivise the property investment adviser to focus on delivering the Company's revised strategy of maximising shareholder value in the short to medium-term in addition to achieving significant cost savings for the Company. The property investment adviser, Carpathian Asset Management Ltd, which was previously owned as to 50% by the Company, became fully externalised.

- Carpathian disposed of certain subsidiaries holding the non-core development sites of Arad and Cluj and the Romanian Development management platform to related parties for a nominal sum as announced on 23 March 2010. This enables the Company to focus on the remaining investment assets within the core portfolio and considerably reduce ongoing management costs. All debt obligations encumbering these non-core development assets have been taken on by the acquirer.

- The core portfolio continues to trade materially in line with the Board's expectations.

- Carpathian completed the €275 million debt restructuring of its core investment portfolio during 2009 (representing 75% of the Group's total debt).

- The Board set out on 1 May 2009 a dividend target of 8 pence (equivalent to €9.2 cents) per share payable by May 2010. On 17 December 2009, the Company announced an interim dividend of €4.5 cents (equivalent to 4 pence) per share. As announced on 5 February 2010, the Company is not in a position to meet its previously stated €9.2 cents dividend target payable by May 2010. The intention of returning cash from asset sales to shareholders remains unchanged with distributions planned to be made shortly after the receipt of any significant proceeds. However, the Board must take into account the requirement to maintain sufficient liquidity within the Group to successfully execute its business plan.

- Carpathian continues to focus on value preservation and realisation of its core investment portfolio together with the reduction of its cost base in order to maximise the cash proceeds to shareholders.

- A portfolio of non-core assets financed by Anglo Irish Bank Corporation Ltd has been derecognised from the Group's consolidated financial statements from 1 July 2009.

Rory Macnamara, Non-executive Chairman of Carpathian, said

"During 2009 and the beginning of 2010, the Company has made some significant progress following the demise of global property markets towards the end of 2008. We have agreed debt restructurings across the core investment portfolio, successfully reduced the Group's cost base through, inter alia, the disposal of a number of non-core assets and entered into a new portfolio management agreement that aligns the property investment adviser firmly with the Company's strategy.

"Against the dividend target of €9.2 cents for 2009 payable by May 2010, we have delivered €4.5 cents. The Board's intention to distribute all available cash to shareholders remains unchanged, although we must maintain sufficient cash levels within the Group to meet continuing running costs in line with the business plan. We expect to be in a position to make further distributions shortly after the receipt of further proceeds.

"Given the progress achieved and set against an improving backdrop in the Central and Eastern European property markets, the Company is now well positioned to deliver value identified during the course of the Strategic Review in 2009."

-Ends-

Enquiries:

Carpathian PLC
Rory Macnamara, Non-Executive Chairman	Via Redleaf Communications

Carpathian Asset Management Ltd	020 7529 6413
Paul Rogers/Balazs Csepregi	ir@carpathianam.com
Collins Stewart Europe Limited	020 7523 8350
Bruce Garrow

Redleaf Communications	020 7566 6700
Emma Kane/Adam Leviton/Henry Columbine	carpathian@redleafpr.com
Notes to Editors: - Carpathian was created in 2005 for the purpose of investing in Central and Eastern European commercial real estate. - Carpathian's primary focus is on shopping centres, supermarkets and retail warehousing in Croatia, the Czech Republic, Hungary, Poland, Romania, Lithuania and Latvia. - Carpathian was admitted to trading on AIM in July 2005. - CAM is the Property Investment Adviser to Carpathian. CAM, together with its parent company, CPT LLP, is responsible for managing the core portfolio of assets and transactions within Central and Eastern Europe.

Chairman's Statement

Introduction

In response to the unprecedented challenges seen in the financial and property markets over the past two years, I am pleased to report that we have substantially stabilised our operations and investments during 2009.

While the turmoil of these markets continued in Europe and globally, some positive signs of stabilisation emerged towards the end of 2009. In this period the Company has been focused on preserving the value of its core assets and restructuring its non-core portfolio and management platform in line with its revised business plan.

Financial results

During the year, the Group suffered negative non-cash adjustments totalling approximately €108.0 million (2008: €204.1 million) relating to the underlying valuations of its property portfolio. These adjustments materially relate to the non-core portfolio and reflect the modest investor demand for Central and Eastern European real estate over the last year. This non-cash adjustment has resulted in a loss after tax of €104.5 million for the year (2008: €189.2 million).

The largest non cash item is the fair value adjustment of €56.7 million (2008: €205.8 million) to the investment and development portfolio based on the independent portfolio valuation of Colliers CRE for 2009. The adjustment consists of an uplift in value of €6.5 million relating to the core portfolio and a reduction to the non-core portfolio of €63.2 million. In addition, an impairment loss of €32.3 million has been recognised in the profit and loss account for the year in relation to loans receivable from our joint venture holding the Riga development to reflect the present market value of this investment.

This loss after tax generates negative earnings per share of €45.0 cents (2008: €79.7 cents).

The adjusted profit after tax excluding non-cash adjustments for the period is €3.5 million (2008: €14.8 million). The results for 2008 included the full year income from the Varyada Shopping Center, which was sold in December 2008, and the one-off contribution of the bank guarantee received in 2008 of €4.5 million for the default of the Interfruct portfolio.

This adjusted profit after tax generates earnings per share of €1.5 cents (2008: €6.4 cents).

The net rental income of the Group was €27.5 million (2008: €43.3 million). This decrease of income from 2008 is largely due to the sale of Varyada and the derecognition of certain assets financed by Anglo Irish Bank Corporation Ltd from 1 July 2009.

The part of the non-core investment portfolio financed by Anglo Irish Bank Corporation Ltd consisted of the Interfruct portfolio, the Ericsson office building in Hungary and the Marina Mokotow retail asset in Poland. The financing bank took a decision to access all net cash proceeds from these assets and agreed with Carpathian to assume operational control of these properties. As part of the transaction in July 2009, Carpathian contributed a capped amount of €3.0 million towards this portfolio, while Anglo Irish Bank Corporation Ltd in return agreed to release the net sales proceeds of Varyada of approximately €10.5 million.

The administrative expenses of the Group decreased by approximately 34% to €5.4 million in 2009 (2008: €8.2 million). This is the result of cost efficiencies, one-off costs in 2008 including the sale of Varyada and the derecognition of the Anglo Irish Bank Corporation Ltd portfolio in 2009.

As at 31 December 2009, the Group's net asset value per share was €32.6 cents (€82.1 cents as at 31 December 2008). During the first quarter of 2010, Carpathian also derecognised the non-core assets of the Plaza portfolio, as the financing bank took a decision to take over the properties. The derecognition results in an unaudited increase of the net asset value per share of €6.6 cents to € 39.2 cents as at 31 December 2009.

In the notes to the audited financial statements you will find a detailed statement of comprehensive income grouped by the three main segments of the operation: core assets, non-core assets and fund overheads.

The total cash of the Group was €39.9 million as at 31 December 2009, down from €63.8 million as at 31 December 2008. The total cash as at 28 February 2010 was €29.3 million. The uncommitted cash at 28 February 2010 was €16.2 million equating to €7.0 cents per share (31 August 2009: €28 million, €12.1 cents). The main contributor to the decrease is the payment of the interim dividend of €4.5 cents per share equating to €10.4 million as declared in December 2009.

The Group's debt position has also decreased from €417.1 million as at 31 December 2008 to €364.8 million at the end of 2009. Short-term debt facilities expiring within one year decreased from €219.3 million to €102.4 million. Since the year end, these short-term debt facilities have decreased by a further €90 million, following the disposal of the non-core development sites of Arad and Cluj and the derecognition of the Plaza portfolio. Long-term debt facilities increased to €262.3 million from €197.8 million a year earlier. Further detail on the Company's debt facilities can be found in the Property Investment Adviser's Report.

Key achievements

The Board's priority during the later part of 2009 was to implement the key actions identified by the Strategic Review.

The first priority was to complete all debt renegotiations within the Group by extending maturity dates and, where possible, improving terms in relation to core asset financing. Carpathian successfully delivered the extension of terms of approximately €275 million with Deutsche Pfandbriefbank and Erste Bank.

In February 2010, Carpathian entered into a new portfolio management agreement expiring on 31 December 2011 with the Company's Property Investment Adviser, CPT LLP. In line with our second priority, this new agreement incentivises the management team to achieve higher short-term returns to shareholders through performance related compensation in relation to the realisation of the Company's core portfolio of assets.

Our third priority was to reduce ongoing management costs. We have already achieved a reduction of approximately 34% to €5.4 million for the year. The new management agreement is also expected to result in further cost savings, with predefined decreases over time. The revised fees for management of the core portfolio are expected to reduce further on an annualised basis by approximately 22% for 2010 (before any exceptional costs).

In addition to the derecognition of the non-core asset portfolio of the Anglo Irish Bank Corporation Ltd assets, Carpathian also sold its interest in the non-core developments of Arad and Cluj in Romania together with the development management platform to related parties for a nominal sum in a related party transaction in March 2010. This has helped to deliver a clearer balance sheet and reduced ongoing management overheads.

The core portfolio continues to trade materially in line with the Board's expectations. The Board continues to investigate options for the most effective ways to operate the business in order to achieve value realisation over the short to medium-term.

Dividend policy

The Board set out on 1 May 2009 a dividend target of 8 pence (equivalent to €9.2 cents) per share payable by May 2010. On 17 December 2009, the Company announced an interim dividend of €4.5 cents (equivalent to 4 pence) per share. As announced on 5 February 2010, the Company is not in a position to meet its previously set €9.2 cents target payable by May 2010. The intention of returning cash from asset sales to shareholders remains unchanged with distributions planned to be made shortly after the receipt of significant proceeds. However, the Board must take into account the requirement to maintain sufficient liquidity within the Group to successfully execute its business plan.

Corporate matters

As previously announced, resolutions were passed at the Annual General Meeting held on 21 July 2009 under which the Company re-registered as a company incorporated under the Companies Act 2006, adopted new Memorandum and Articles and the Ordinary Shares of the Company were redenominated from Sterling to Euros such that the nominal value of the Ordinary Shares is now €0.01. The Ordinary Shares were converted at the rate of €1.0: £0.8645 and the change took effect on 27 July 2009.

On the same date, €173.5 million of the Company's share premium was released to retained earnings.

Outlook and strategy

As all of the major operational hurdles to execute the business plan identified in the Strategic Review have been cleared over the past year, and our core investment markets have also shown some signs of stabilisation, the Company is well placed to deliver value for shareholders as identified during the Strategic Review over the short to medium-term as and when excess funds become available.

Rory Macnamara

Chairman

7 May 2010

Note on going concern

The Board continues to focus on value preservation and realisation of its core investment portfolio together with optimisation of its cost base, in order to maximise cash returns to shareholders.

The Board has reviewed a detailed cash flow and underlying assumptions for the period until the end of 2011, which projects that the Group and Company have adequate resources for that period.

During that period the Company must focus upon its operational efficiencies and maintain income streams, with the intention of returning cash from asset sales to shareholders (with distributions planned to be made shortly after the receipt of significant proceeds), having due regard to the requirement to maintain sufficient liquidity within the Group to successfully execute its business plan.

In the view of the Board and its Property Adviser, the Company's portfolio retains significant enduring equity value. A number of assets are subject to sustainable loan facilities and the Group has cash reserves that may be used prudently to maintain the asset base.

The Group is also exposed to a number of risks, including interest rate risk, currency risk, market risk, credit risk and liquidity risk.

The Board has overall responsibility for establishment and oversight of the Group's risk management framework. It oversees how management monitors compliance with the Group's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

The Group's risk management policies are established, in conjunction with the Property Adviser, to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities.

The Directors recognise that these circumstances represent an uncertainty that casts doubt upon the Group's and Company's ability to continue as a going concern. However after making suitable enquiries and based upon the factors described above and in particular the agreements with its lending banks, as described in the review of debt financing contained in the Property Investment Advisers Report, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue their operations for at least the next eighteen months. For these reasons, the Directors continue to adopt the going concern basis in preparing the Annual Report and accounts.

Property investment adviser's report for year ended 31 December 2009

Overview

Following the disruptive events of the previous period, 2009 has been a year of relative stabilisation. After 18 months of virtually frozen property markets within the CEE region, we now observe the return of genuine investment buyers in addition to the opportunistic "vulture" vehicles.

It is felt that the orderly sale plan is now more achievable than would have been the case one year ago.

These realisation prospects vary between countries and individual properties, but with 71% of the property portfolio's equity value residing in the most positive CEE market of Poland, the realisation of value is made more accessible.

Other territories in the region remain challenging but capital is beginning to return to the search for value rather than exploitation.

The debt exposure in these markets was never as great as in many Western economies. Some aggressive lending took place at the peak of the market but there has generally been less prospect of a debt driven market fall out. Banks are lending conservatively, applying loans capped at gearing ratios of approximately 65% of value for selectively chosen assets.

Valuers are still operating with few comparables but, since last year, they are now able to have a greater sense of investor sentiment and likely tradable values.

The portfolio valuation for this period stands at €488,200,000 (2008: €528,300,000). Of this €352,950,000 relates to the identified core assets (2008: €345,260,000), and €135,250,000 to the non-core (2008 €145,290,000).

This underlines the stabilisation of those assets and markets where the Company identified, and sought to protect, shareholder value following the Company's Strategic Review.

Income collection within the core portfolio is good standing at 96% and vacancies (excluding strategic voids) are 7.4% by rental value.

The debt position for most of the core portfolio is stable with agreements signed, removing value tests and most loans now covering the anticipated remaining trading period of the Company.

The revised management fee arrangements entered into by the Property Investment Adviser (CPT LLP) for the core portfolio have been implemented and expected to reduce the portfolio management fees paid by the Company on an annualised basis by approximately 22% for 2010 (excluding exceptional costs up to a maximum of £400,000 relating to restructuring as part of the Agreement) (such reduction increasing as asset sales occur) in comparison to the fees of approximately £3.7m charged for 2009, which exclude costs associated with the Atrium development.

Strategy

Following consultation with certain major shareholders, the Company's strategy is to return capital via an orderly sales programme whilst maintaining liquidity through operational cost reductions and maintaining the stability of property loans.

The Property Investment Adviser's contract has been replaced and is now for a shorter period expiring 31 December 2011. This contract has been structured to provide a performance incentive CPT LLP to implement sales returning best value to the shareholders in accordance with the announcement issued on 5 February 2010.

This new Agreement provides for a capital performance payment to CPT LLP, based upon actual cash available for return to shareholders. CPT LLP will receive 10% of any return above a distribution available to shareholders in excess of a €17.25 cents per share hurdle and 25% of any returns available to shareholders above a €34.5 cents per share hurdle. However, to avoid the capital performance payment reducing the €34.5 cents hurdle below this level following payment, the effective hurdle is set at €36.4 cents in order to accommodate any capital performance payment. Such capital performance payment shall be payable in cash but accumulated and deferred until the earlier of (i) the completion of the sale of the core portfolio and (ii) the termination of the Agreement.

CPT LLP is engaged in preparing assets for sale throughout the period of the management contract in an orderly manner, having regard to timing in the context of respective market strengths and to individual asset management issues.

The management team is also implementing the phased reduction of the operational resources and personnel in line with anticipated disposals, agreed cost reduction budgets and the contract end date.

Market

During 2009 the property investment market throughout most of the relevant countries has been virtually stagnant. Very few transactions have occurred.

This "market" has been characterised by opportunistic buyers of distressed assets, seeking but generally not finding transactions of 12% cap' rates or more; as well as owners, being either investors with stable debt or the Banks having the option of foreclosure, all awaiting a short to medium-term pricing recovery.

At the very end of 2009, some movement started to become visible, particularly in Poland with investment deals being transacted within the office sector.

During the first few months of 2010, this positive movement has become much more apparent. Poland is now recognised as a relatively secure growth prospect by an increasing list of longer term investors. This is most apparent currently at the prime end of the property spectrum.

Activity outside Poland is still languishing although there are signs of some cautious and selective interest throughout the regions. The sentiment is starting to predominate that these property markets have either bottomed out, or are within view of doing so and are therefore showing some prospects for interesting returns over the next three years or so.

The poor liquidity within these markets could potentially continue to drive volatile pricing movements as the limited stock of available quality properties could be quickly overwhelmed by growing investment demand once a stronger recovery is established.

Macro-economic data

The CEE region began showing some positive signs in late 2009 and early 2010 after a challenging period. Following a flight from risk in late 2008, capital is beginning to flow once again into the region.

Poland was the only one of the Group's countries that maintained positive GDP growth (+1.8%) throughout 2009, whilst Baltic countries suffered severely. It is likely that high unemployment in Latvia and Lithuania will continue to be a drag on their economies until this can be reduced. On the other hand, countries like Poland, Czech Republic, and Romania all have unemployment rates below the EU average.

As we move through 2010, recent activity has indicated that the search for prime retail and office space has returned as the prospects for growth become more and more likely. The IMF predicts positive GDP growth in 2010 and beyond for most CEE countries, often forecasting growth rates higher than their Western European counterparts.

With respect to currency fluctuations to the Euro, most CEE currencies have rebounded from their lows reached in the first quarter of 2009. The Polish Zloty has gained 17% against the Euro since February 2008 while the Hungarian Forint has advanced 17% against the Euro. These currencies now stand only 3% and 5% below their 5-year average.

Transactions

Poldrim

In June 2009, as part of its strategy for the Promenada Shopping Centre, Warsaw, the Company acquired 100% of the share capital of Poldrim Sp Z.o.o ('Poldrim') for €6.2 million in cash. Poldrim owns a 5,500 sq m plot of land comprising 2,300 sq m of existing retail space anchored by a Go Sport unit and 61 car parking spaces. At the time of purchase Poldrim was generating annual net operating income of approximately €450,000, equating to a yield on acquisition of approximately 6.9%. The property adjoins and completes the ownership of the Promenada shopping centre. Promenada now comprises over 55,000 sq m of prime retail and office space. This was a strategic acquisition for Carpathian, unlocking marriage value and future asset enhancement and new development opportunities, benefitting the value and liquidity of the larger Promenada project.

Anglo Irish Bank Corporation Ltd loans

Assets subject to loans from Anglo Irish Bank Corporation Ltd included the Interfruct portfolio and the Ericsson building in Budapest, Hungary, and the Marina Mokotow shopping district in Warsaw, Poland. Anglo Irish Bank Corporation Ltd was granted an option to acquire these defaulting assets for a nominal sum.

Whilst the debt bank has yet to exercise that option, the Company has derecognised these assets from its balance sheet from 1 July 2009 with a consolidated debt balance of approximately €76.7 million. The bank has full cash sweep in place, and transferred the operational management function to another property adviser. As part of the transaction in July 2009, Carpathian contributed a capped amount of €3.0 million towards this portfolio, while Anglo Irish Bank Corporation Ltd in return agreed to release the net sales proceeds of Varyada of approximately €10.5 million.

MKB development loans - Romania

Post the 2009 year end, the Company disposed of the Arad development project and Cluj development site in Romania. The assets, subject to defaulted loans with MKB Bank were transferred in a related party transaction to the bank nominated entity, comprising the local Atrium management team and certain members of CPT LLP, and in Arad, the development contractor also. As a result of this transaction, €48.3 million of debt was removed from the Company's balance sheet. The Atrium development management platform, with its carrying annual cost of €1.5 million per annum, was also disposed of.

The sale of the Arad and Cluj sites and the Atrium development platform effectively sees the withdrawal of CPT from the development sector. Remaining projects are Riga, which is due to finish construction shortly, and the Baia Mare and Satu Mare land plots in Romania, which shall be disposed of in due course.

Further investment disposals are intended during 2010 as part of the Company's orderly realisation strategy.

Valuation

For the 2009 year end valuation and following four years of portfolio valuation by DTZ, a review was undertaken of prospective valuers, their fees and their coverage of the relevant regions.

It was decided by the Board of Carpathian to appoint Colliers CRE to undertake the 2009 valuation.

The figures are presented below for core and non-core assets.

Core portfolio - investment properties	Country	Lender	Loan amount 31 Dec 2009 €000's	Loan expiry	Valuation 31 Dec 2009 €000's
Agrokor	Croatia	Erste Bank	40,103	Mar 11	46,000
Antana	Hungary	Barclays PLC	12,011	Mar 10	14,000
Gdansk-Osowa	Poland	DPB	21,232	Dec 11	32,500
Lodz-Tulipan	Poland	DPB	15,763	Dec 11	29,000
Sosnowiec - Centrum	Poland	DPB	2,860	Dec 11	3,650
Torun-Kometa	Poland	DPB	3,923	Dec 11	6,300
Biedronka	Poland	No debt	-	-	800
Promenada	Poland	DPB	102,509	Dec 11	157,500
Macromall	Romania	No debt	-	-	4,750
Total			198,401		294,500*

* 31 December 2008 valuation: €268,060

Core portfolio - development properties	Country	Lender	Loan amount	Loan expiry	Valuation 31 Dec 2009 €000's
Riga Shopping Center	Latvia	Nordea	39,000	Jun 17	54,400
Baia Mare - Land	Romania	-	-	-	2,350
Satu Mare - Land	Romania	-	-	-	1,700
Total			39,000		58,450*

* 31 December 2008 valuation: € 77,200

Non-core portfolio - investment properties	Country	Lender	Loan amount 31 Dec 2009 €000's	Loan expiry	Valuation 31 Dec 2009 €000's
Point Portfolio	Hungary and Czech Republic	DPB	54,313	Dec 11	52,500
Babilonas	Lithuania	DPB	23,350	Dec 11	22,500
Plaza Portfolio	Hungary	MKB	42,078	In default	32,950
Total			119,741		107,950*

* 31 December 2008 valuation: €145,290

Non-core portfolio - development properties	Country	Lender	Loan amount	Loan expiry	Valuation 31 Dec 2009 €000's
Arad Shopping Centre	Romania	MKB	39,365	Mar 10	24,500
Cluj - Land	Romania	MKB	8,500	Sep 09	2,800
Total			47,865		27,300* **

* 31 December 2008 valuation: €17,700

** The aggregate valuation of €27.3 million compares to the €27.9 million valuation provided by another independent valuer in March 2010 in connection with the disposal of the two properties.

The valuation of the core assets has increased by 2.22% since the end of 2008 with gains in Poland, undermined by other assets, particularly Antana, Hungary and Macromall, Romania.

The non-core asset valuation (on a like for like basis after disposals) has fallen 6.9%.

Separately, the Riga project features as an off balance sheet investment and is recognised under IFRS at the estimated recoverable amount of the investment and loans. The debt financing of this project currently amounts to €39.0 million. The project is now valued as at year end at €54.4 million by Colliers.

Further reference is made to the status of the Riga project within the Portfolio review.

The contribution to total NAV from property assets and the off balance sheet investment loan is €115,500 (€ 0.49 per share).

Portfolio review

Core assets

The core portfolio was stable overall in 2009 with growth experienced from the key core Polish assets but further difficulties and income reductions experienced with other assets.

The core properties are made up of 450 tenants with gross rent of approximately €23.3 million. The top 10 tenants in the core portfolio account for 40% of total rent, or about €8.86 million.

Performance between tenants has been quite variable, even within the environ of each centre. In total, there were 79 leases renewed at the core properties in 2009, representing 18% of core rent, or €3.97 million. The renewals helped keep the average lease length of the core properties at 4.20 years, roughly the same as the 2008 level of 4.25 years.

Income collection has been good with 96% of all invoiced rents collected at core properties.

The Polish properties (Blue Knight, Promenada, and Biedronka) experienced a 6% growth in NOI from 2008. These properties also achieved record aggregate centre turnover levels, up 6% from 2008 and benefited from a strengthening Zloty. We believe that the core assets, particularly in Poland, have weathered the credit crunch commendably and are well positioned to realise their potential in the short to medium-term.

Operational difficulties are experienced with Antana (Budapest, Hungary) and Macromall (Brasov, Romania) which undermine the otherwise positive performance of the core assets.

Core portfolio - investment properties	Country	Gross lettable area (sqm)	Number of leases	Voids as % of total rental value	NOI 31 Dec 2009 €000's
Agrokor	Croatia	31,647	6	0%	4,263
Antana	Hungary	36,997	38	56%	552
Gdansk-Osowa	Poland	13,167	67	5%	2,885
Lodz-Tulipan	Poland	9,621	58	5%	2,498
Sosnowiec - Centrum	Poland	2,162	22	0%	379
Torun-Kometa	Poland	1,958	19	13%	655
Biedronka	Poland	1,220	3	0%	99
Promenada	Poland	53,472	206	4%	10,050
Macromall	Romania	7,489	31	37%	664
Total		157,733	450	7%	22,045

Core portfolio - investment properties
Weighted average lease expiry	4.2 years
Voids by rental value/%	€1,799k/7%
Lease expiries within 1 year (value/no. of leases)	€5,712k/171
NOI growth over the last 12 months	(2%)
Year to date income collection	96%

Core portfolio - development properties	Country	Land size (sqm)	Gross lettable area (sqm)	Completion date
Riga Shopping Center	Latvia	8,203	37,742	September 2010
Baia Mare - Land	Romania	125,238	50,517	N/A
Satu Mare - Land	Romania	26,759	32,112	N/A
Total		160,200	120,371

Non-core assets

Despite the difficult trading circumstances present in the economies in which most non-core properties are located, there were some positive achievements. The Point assets in Hungary and Czech Republic saw a 5% NOI increase from a year ago. Rent collection amongst all non-core properties was at 92% for the year, a drop from 97% in 2008. Renewals achieved an increase in the weighted average lease length to 5.4 years from 4.3 years in 2008.

Looking at the tenant profile, the top ten tenants of the non-core portfolio account for 52% of the total non-core rent roll. The remaining 48%, or €5.2 million of the non-core rent roll, is made up from 296 tenants.

Non-core portfolio - investment properties	Country	Gross lettable area (sqm)	Number of leases	Voids as % of total rental value	NOI 31 Dec 2009 €000's
Point Portfolio	Czech R/ Hungary	45,340	31	2%	4,859
Babilonas	Hungary	21,475	119	10%	2,563
Plaza Portfolio	Hungary	48,374	159	20%	3,459
Total		115,189	309	10%	10,981

Non-core portfolio - investment properties
Weighted average lease expiry	5.4 years
Voids by rental value/%	€1,230k/10%
Lease expiries within 1 year (value/no. of leases)	€1,860k/141
NOI growth over the last 12 months	(48)%
Year to date income collection	92%

The assets

Core properties

Promenada Shopping Centre

The valuation increased from €116m in 2008 to €157m in 2009 (€ 150m excluding the Poldrim purchase). This reflects the significant increase in investor demand for this type of asset which is being witnessed by the market. The Company is now receiving advice from Jones Lang LaSalle on the prospects for a sale of the investment. This is in line with the Company's stated strategy to deliver cash returns to investors during the next two years.

Promenada, experienced strong income growth in 2009, increasing 13%, from €9.2 million in 2008 to €10.4 million, partially as a result of the Poldrim acquisition in June which provides an additional €0.45 million income per annum, but also due to cost reductions in service charge shortfalls, indexation and rental uplifts.

The operational cost recovery has been increased by €400,000 per annum, of which €200,000 has been realised in 2009.

New leases introduce a weighting system for service charge contribution which is forecast to increase recovery by a further €350,000 per annum by the third quarter of 2010.

Centre turnovers were up 9% over 2008 while concurrently maintaining an attractive rent to sales ratio of approximately 7.9%.

There were 23 executed renewals in 2009 achieving a 16%, or €265,697, increase over previous rent. Among the renewals in 2009 was Cinema City, a major tenant which accounts for 10% of overall income and was renewed for 7 years. There were an additional 6 lettings of vacant units for an added income of €368,866 per annum. The total 2009 impact of the renewals and lettings was €458,643. The tone established from these lettings set a rental level for prime retail space in the range of €55 - €60 per sqm. 2010 has strong potential for further increases with over 70 leases expiring, representing 22% of total, current rent, or €2.4 million. Forecast annual NOI after the third quarter 2010 is in excess of €11.5 million.

The potential sale of this asset that is being explored will reflect this projected income increase. Also Carpathian has been working up plans for two extensions, which combined, add 20,000 sqm of retail and leisure space for an incoming buyer to develop out.

Blue Knight portfolio

The Blue Knight Portfolio has seen mixed but generally stable performance for the period since 2008.

Some assets within this portfolio have performed better than others. Likewise, there has been a marked difference in the performance of retailers with some suffering significant falls in turnover, whilst others have continued to grow. Similarly, temporary rental concessions have been permitted to a few tenants, whilst lettings of other units continue to support average passing levels.

It is probable that general economic and financing stresses are influencing vulnerable operations whilst others are proving more robust. We are therefore likely to be experiencing a period of rationalisation that will see some retailers falling away, new brands starting and established operators consolidating their strength.

Pedestrian flow counts have fallen 13% year on year although this has not translated into a like for like fall in turnover which has remained virtually unchanged (-0.1%).

For all four centres, 56 of 58 leases expiring in 2009 were renewed, representing 34% of total rent. Those renewals achieved rental levels at, or slightly above, previous levels. These renewals have also led to an increase in the weighted average lease length to 3.52 years from 2.85 a year ago.

Rent collection at the properties has been excellent, with 99.5% of all rents collected within the year.

Blue Knight portfolio assets

Osowa Shopping Centre, Gdansk

Osowa Centre has 13,167sqm of net lettable space, parking for 1,850 vehicles, 73 shop units and is anchored by the separately owned Real Hypermarket.

The retail environment has been very competitive following the opening in November 2007 of the Auchan Rumia (40,000 sqm in total including a 28,000 sqm shopping gallery with 85 units) to the north of the Osowa Centre, which eats into the retail catchment.

Seven lease renewals took place in 2009 representing 10% of the total rent, maintaining current rental levels. One further renewal has been agreed thus far in 2010. Of the seven units currently vacant four are under offer.

Average rental levels throughout the respective areas within the centre are being maintained.

The main anchor tenants continue to be Go Sport, Euro RTV AGD and Rossmann. Tenant losses throughout 2009 have been mostly confined to smaller boutiques while we gained from a move in of Deichmann (819 sqm) in October.

Tulipan Shopping Centre, Lodz

Tulipan has 9,621 sqm of net lettable space, parking for 1,945 vehicles, 59 shop units and is anchored by the separately owned Real Hypermarket.

This centre has performed strongly over the period experiencing few voids and good take up from new tenants.

27 lease renewals took place in 2009 representing 60% of total rent, achieving rental levels marginally ahead over the period.

Anchor retailers include Go Sport and Euro RTV AGD, and new brands entering the scheme include Bon Prix, CCC and Benetton.

The Management team has proposals for a 2,770 sqm extension that is in accordance with the Municipality's Master Plan. Such an extension will require cooperation with the co-owner of the Hypermarket and an investment of capital that goes beyond the current Carpathian business plan. The potential for this extension may assist in increasing the appeal of the investment to any future prospective buyers.

Torun Shopping Centre

The Kometa centre has 1,958 sqm of net lettable space, parking for 883 vehicles, 19 shop units and is anchored by the separately owned Real Hypermarket.

14 lease renewals took place in 2009 representing 70% of total rent, achieving rental levels marginally ahead over the period. This centre has been stable with very few voids and rental levels being maintained.

Competition within the catchment is strong and the scheme would be improved by an increase in the number and variety of units to create a greater retail attraction.

The Management team has proposals for a 6,132 sqm extension that is in accordance with the Municipality's recently adopted Master Plan. Such an extension will require cooperation with the co-owner of the Hypermarket and an investment of capital that goes beyond the current Carpathian business plan. The potential for this extension may assist in increasing the appeal of the investment to any future prospective buyers.

Sosnowiec Shopping Centre

Sosnowiec centre has 2,162 sqm of net lettable space, parking for 1,111 vehicles, 22 shop units and is anchored by the separately owned Real Hypermarket.

This is the smallest of the four schemes by NOI in the portfolio, representing only 6% of the portfolio NOI.

The centre continues to be fully occupied but presents challenges due to its small size and lack of variety to shoppers.

The 66,120 sqm plot is considered to be under-utilised and creates longer term opportunity for a potential large extension able to attract greater shopping activity.

Agrokor Supermarket Portfolio

The Agrokor portfolio comprises 6 stores with a total of 34,916 sqm lettable area. The properties are let to Konzum, Croatia's largest retailer, and they continue to trade well.

Agrokor remains a stable asset providing a steady income stream of €4.3 million in 2009, up 1% from 2008.

Carpathian's separate local holding companies are being merged to save circa €150k in running costs per annum.

The Croatian market is beginning to see interest from investors actively looking in the area.

Antana Logistics Park

The Antana Logistics Park in Budapest suffered a 50% fall in income due to a key tenant moving out in February. Since that point, the focus has been on maintaining cash flow while searching for new tenants. We have achieved an extension of the loan facility to March 2010 and are in discussions with Barclays to secure a further 6-month extension. We believe the income level has stabilised and are now focusing on re-building the tenant list or a sale of part or all of the estate.

The Antana site of approximately 10 hectares is currently covered by buildings providing 36,997 sqm. The existing buildings have an occupancy rate of 43% in logistics and trade businesses.

The site is in a prominent location visible from the M1 and M7 motorways.

Any future redevelopment for retail use must address the traffic congestion arising at peak usage before a scheme can be progressed.

Interest has been expressed in the site from developers to explore and test the parameters of the constraints and this is currently being undertaken. In the interim agents are appointed to seek new tenants to occupy the existing vacant space.

Macromall Shopping Centre

Macromall, in Brasov, has been hit by the severe economic conditions in the Romanian economy and poor retail performance throughout Brasov in particular. Income has dropped approximately 40% due to increased voids, problematic rent collection, and rental rebates granted to tenants in financial difficulty. NOI for 2009 was €0.66 million. Because the asset is un-geared, the Group hopes to realise value from this centre once some current problems are resolved and when interest in the Romanian market returns.

The Macromall centre has 7,489 sqm of lettable area and 350 parking spaces. The scheme currently has 36 tenants with a vacancy rate of 37% and is anchored by Domo Romania electrical store.

The daily property management of the Macromall centre is being brought in-house by the Property Investment Adviser through its legal subsidiary with a view to applying a more hands-on approach, minimising expenditure in running the scheme and maximising income. The project is currently running at a deficit of cost exceeding income €244,000 for 2010.

Core developments

Riga

The prime retail development project in Riga, Latvia, is scheduled for completion in September this year. The first phase of the development comprising a gross area of 29,000 sqm is arranged over seven levels including a roof garden which, with its location in the heart of the commercial area, will offer panoramic views over the City. The superstructure of the building was recently completed and internal works have commenced.

In June 2009, the 65% pre-lettings target was met, a banking condition allowing the release of the remaining debt financing. However, in the autumn of 2009, widespread retailer withdrawals and lease re-negotiations were encountered due to the economic conditions in Latvia. As a result it was necessary to re-negotiate the loan terms with Nordea to allow the financing of construction costs through to completion.

The leasing progress has been positive but slow which reflects the challenging market conditions. In 2009 43 new tenants were secured, including the food anchor Rimi, and several tenants new to Latvia. The re-negotiation of 60 additional leases was completed and there are another 22 tenants having agreed Heads of Terms who are finalising their contracts. Terms are now agreed on 60% of floor space and negotiations continue on the remainder.

On an operational level, the building permit for the adjoining Blaumana 10 building has been obtained and will be incorporated into the 1^st phase of the development. Vacant possession was secured of the adjoining D63 building, which now enables future development for either residential or retail subject to the required consents.

Subject to ongoing negotiations with CPT's development partner and the construction company, along with the revised terms negotiated with Nordea, it is felt that funding can be secured for completion of the project with trading to commence in September 2010. Once finalised, a further announcement on these negotiations will be forthcoming.

Baia Mare and Satu Mare sites

Baia Mare is a town with a population of 137,000 in Maramures County in North West Romania, close to the Hungarian border. The site sits on the Western edge of the town and comprises 125,238 sq m.

The site has detailed planning consent (PUZ and PUD) granted for 50,517 sqm divided into a covered gallery shopping centre with hypermarket and big box furniture, electrical and DIY stores, as well as 1,800 car spaces.

Satu Mare is the County Town of Satu Mare in North West Romania, again close to the Hungarian border, with a population of 115,0000. The site sits centrally in the town just to the south of the High Street and adjacent to a major road junction and comprises 26,759 sqm.

The site has detailed planning consent (PUZ and PUD) granted for 29,600 sq m GLA on the ground and first floors, with a Cinema on the third floor and a 100 bedroom hotel. Planning consent also exists for 802 car park spaces split between underground roof levels.

The prospects for both sites shall be reviewed in the short to medium-term to establish how value may be realised. This may comprise a sale or joint venture with developers or construction companies for a variety of uses. The intention is for the Company to realise value from these sites rather than to invest further.

The non-core properties

Babilonas Shopping Centre

The Lithuanian economy remains in recession with few new entrants to the Baltic retailer market. Potential investor interest in the area is limited, as is the availability of debt finance.

The Company is actively engaging with tenants to improve lease lengths in the Babilonas centre and implement arrears repayment plans. Further work is being done to improve the current tenant mix.

The Lithuanian economy has suffered particularly badly and remains in recession, with 2009 GDP down 15% compared to 2008. Retailer and Investor demand is very limited with the lack of available debt finance restricting new entrants to the market. In particular retailers have seen significant drops in turnover and are struggling to pay rent on time.

In response to this challenging environment the Company is actively engaging with tenants at Babilonas to agree debt repayment plans and temporary rent reductions to help them survive the current challenging trading conditions. In return for these temporary concessions, the Company has managed to negotiate a number of lease extensions with key tenants and is actively working to position the centre for the upturn, through turnover based top-ups to tenants rents and discussions with new fashion retailers to optimise the tenant mix.

Point Portfolio

The Point Portfolio comprises four units leased to Interspar and Baumax. The total lettable area is 45,340 sqm, producing a portfolio NOI of circa €4,723,000, up 5% from 2008.

The Ozd property occupies a site of approximately 32,200 sqm and comprises a modern Interspar hypermarket of approximately 8,000 sqm adjoining a seven unit family centre with an area of circa 2,300 sqm. It also provides parking for 429 cars.

There are some vacant units at this property where little retailer demand has been witnessed. The income weighted unexpired lease term is 9.87 years. The Company is reviewing the efficiencies of the centre's local management.

The Gyula scheme covers approximately 30,100 sqm and comprises an Interspar unit of 8,000 sqm and a 1,000 sqm family centre.

The average unexpired lease term is 11.45 years.

The Hradec Kralove centre is a modern retail development comprising a three storey shopping centre (Euro Centre), anchored by a 5,000 sqm Interspar along with a 13,000 sqm shopping gallery. Adjoining the centre is an 8,000 sqm single storey retail warehouse let to Baumax.

The shopping centre is arranged over first and part second floors, with an open car parking area and access road on the ground floor beneath the building. Externally, there is a surface car park to the south of the buildings which, provides approximately 600 car parking spaces. A further 300 spaces are provided in the ground floor car park beneath the shopping centre.

The centre is performing well with almost all tenant rent to sales ratio's below 10%. The income weighted unexpired lease term is 6.29 years.

The Znojmo centre also performs well with the average unexpired lease term at 9 years.

This property comprises a 7,600 sqm single level retail unit accommodating a hypermarket and a gallery comprising a number of smaller retail units, as well as parking for 400 vehicles.

Plaza Portfolio

The Plaza Portfolio consists of four shopping centres in Hungary located in Pecs, Balaton, Szombathely and Sopron with a total GLA of 48,374 sqm and an annual NOI of approximately €3.4 million. These centres suffer from high vacancy (20%) and a service charge loss (€0.75 million per annum).

During the first quarter of 2010, Carpathian also derecognised this portfolio, as the financing bank took a decision to take over the properties.

Pecs Plaza is a 15,122 sqm centre with 75 total units and parking spaces for about 840 cars. The centre is anchored by Match supermarket and Cinema City. The property has a 7% vacancy rate and an NOI of circa €1.27 million and a shortfall of about €0.14 million.

Sopron Plaza occupies 15,828 sqm, 77 units, and has parking for 800 cars. The centre is anchored by CBA supermarket, Merkur Spilothék (casino) and Cinema City, which combine to contribute about 27% of total rent. The NOI for the property in 2009 was €1 million with a loss of €0.36 million.

Savaria Plaza in Szombathely is an 8,274 sqm property with 42 retail units and 310 parking spaces. The centre in anchored by CBA supermarket and Cinema City The property suffers from a very high vacancy rate of 53% and an NOI loss of (€0.02) million per annum.

Balaton Plaza is 9,150 sqm with 55 units and 400 car park spaces. Anchors include CBA supermarket, Cinema City, Jeans Club, and Deichmann. The centre has relatively low vacancy of 11%, an NOI of €1.1 million and a shortfall of €0.1 million. Balaton is the best performing centre of the Plaza portfolio.

As stated in the announcement of 1 April 2010,, the nearly completed Arad development and the Cluj land plot were disposed of in a related party transaction. The schedule under "Valuation" should be observed. In recognition of the default position with MKB bank, the Company transferred the entities to the bank nominated party involving the management and the Arad construction company. Without resource to address and negotiate medium to long-term funding issues, the Company had no option but to drop the projects that were experiencing value income and prospective servicing defaults. This disposal, as previously detailed, removed debt from the Company balance sheet as well as the costs of the development management platform.

Paul Rogers

Managing Partner

CPT LLP

7 May 2010

REPORT OF THE INDEPENDENT AUDITORS, KPMG AUDIT LLC

TO THE MEMBERS OF CARPATHIAN PLC

We have audited the Group and Parent Company financial statements (the "financial statements") of Carpathian Plc for the year ended 31 December 2009 which comprise the Group Statement of Comprehensive Income, the Group and Parent Statement of Financial Position, the Group Statement of Cash Flows and the Group Statement of Changes in Equity and the related notes. These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the Company's members, as a body. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditors

The Directors' responsibilities for preparing the Directors' Report and the financial statements in accordance with applicable law and International Financial Reporting Standards are set out in the Statement of Directors' Responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view. We also report to you if, in our opinion, the Company has not kept proper accounting records, or if we have not received all the information and explanations we require for our audit.

We read the Directors' Report and any other information accompanying the financial statements and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the audited financial statements. Our responsibilities do not extend to any other information.

Basis of opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group's and Company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion

In our opinion the financial statements give a true and fair view, in accordance with International Financial Reporting Standards, of the state of the Group and Parent Company's affairs as at 31 December 2009 and of the Group's loss for the year then ended.

Emphasis of matter

In forming our opinion on the financial statements, which is not qualified, we have considered and would like to draw your attention to the disclosure within Note 2 Basis of preparation to the financial statements, which details the uncertainty and risk factors to which the Group is exposed.

KPMG Audit LLC

Chartered Accountants

Heritage Court

41 Athol Street

Douglas

Isle of Man IM99 1HN

6 May 2010

Consolidated Statement of Comprehensive Income
for the year ended 31 December 2009
		2009	2009	2009	2008	2008	2008
	Note	Revenue	Capital	Total	Revenue	Capital	Total
		€'000	€'000	€'000	€'000	€'000	€'000
Gross rental income	4	36,266	-	36,266	47,275	-	47,275
Service charge income		12,872	-	12,872	15,034	-	15,034
Service charge expense		( 15,742)	-	( 15,742)	( 17,886)	-	( 17,886)
Property operating expenses		( 7,768)	-	( 7,768)	( 7,164)	-	( 7,164)
Other property income	5	1,921		1,921	6,079	-	6,079
Net rental and related income		27,549	-	27,549	43,338	-	43,338

Changes in fair value of investment property	10	-	( 56,722)	( 56,722)	-	( 205,833)	( 205,833)

Loss on derecognition of investment properties		-	( 14,053)	( 14,053)	-	-	-

Loss on disposal of investment properties		-	(1,500)	(1,500)	-	(1,336)	(1,336)

Impairment of goodwill	11	-	( 3,817)	( 3,817)	-	( 32,377)	( 32,377)

Impairment of loans receivable	14	-	( 32,332)	( 32,332)	-	-	-

Changes in fair value of derivative assets and liabilities		-	( 436)	( 436)	-	6,709	6,709

Net foreign exchange loss		-	( 1,209)	( 1,209)	-	( 4,001)	( 4,001)

Administrative expenses	6	( 5,422)	-	( 5,422)	( 8,235)	-	( 8,235)

Net operating profit / (loss) before net financing expense		22,127	( 110,069)	( 87,942)	35,103	( 236,838)	( 201,735)

Financial income	7	572	-	572	6,837	-	6,837
Financial expense	7	( 20,124)	-	( 20,124)	( 26,094)	-	( 26,094)
Changes in fair value of interest rate swaps	7	-	( 1,029)	( 1,029)	-	( 10,986)	( 10,986)
Net financing expense		( 19,552)	( 1,029)	( 20,581)	( 19,257)	( 10,986)	( 30,243)
Net profit / (loss) before tax		2,575	( 111,098)	( 108,523)	15,846	( 247,824)	( 231,978)

Tax credit / (expense)	8	968	3,089	4,057	( 1,025)	43,755	42,730

Profit / (loss) for the year and total comprehensive income for the year		3,543	( 108,009)	( 104,466)	14,821	( 204,069)	( 189,248)

Attributable to:
Equity holders of the Company	9			( 104,417)			( 183,913)
Non controlling interest	9			( 49)			( 5,335)
Basic and diluted earnings per share for loss attributable
to the equity holders of the Company during the year
(expressed as cents per share)
Basic earnings per share	9			(45.0) c			(79.7) c
Diluted earnings per share	9			(45.0) c			(79.7) c

Consolidated Statement of Changes in Equity
for the year ended 31 December 2009
GROUP	Note	Share Capital €'000	Share Premium €'000	Non-Controlling Interest €'000	Retained Earnings €'000	Total €'000

Balance as at 1 January 2008		3,348	260,386	5,395	122,670	391,799
Total comprehensive income for the year
Loss for the year		-	-	-	( 189,248)	( 189,248)

Transactions with owners recorded directly to equity
Dividends paid	22	-	-	-	( 15,505)	( 15,505)
Carried interest allocation to non-controlling shareholders		-	-	(5,335)	5,335	-
Issue of share capital	18	35	3,549	-	-	3,584
Balance as at 31 December 2008		3,383	263,935	60	( 76,748)	190,630

Balance as at 1 January 2009		3,383	263,935	60	( 76,748)	190,630
Total comprehensive income for the year
Loss for the year		-	-	-	( 104,466)	( 104,466)

Transactions with owners recorded directly to equity
Dividends declared	22	-	-	-	( 10,446)	( 10,446)
Carried interest allocation to non-controlling shareholders		-	-	( 49)	49	-
Redenomination of share capital	18	( 1,062)	1,062	-	-	-
Share premium release	18	-	( 173,520)	-	173,520	-
Balance as at 31 December 2009		2,321	91,477	11	( 18,091)	75,718

Consolidated Statement of Financial Position
As at 31 December 2009
		2009	2008
	Note	Group	Group
		€'000	€'000
ASSETS
Non current assets
Investment property	10	453,226	551,155
Goodwill	11	7,897	13,600
Costs relating to future acquisitions		-	65
Investments in equity accounted investees	12	-	191
Other Investments	13	7,452	7,452
Loans receivable	14	3,920	25,177
Deferred tax assets	15	3,925	2,955
		476,420	600,595
Current assets
Trade and other receivables	16	12,988	15,711
Loans receivable	14	2,000	8,200
Cash and cash equivalents	17	39,944	63,853
Financial assets		7,825	8,030
		62,757	95,794

TOTAL ASSETS		539,177	696,389
EQUITY
Issued capital	18	2,321	3,383
Share premium	18	91,477	263,935
Retained earnings		( 18,091)	( 76,748)
Total equity attributable to equity holders of the parent		75,707	190,570

Non-controlling Interest		11	60
TOTAL EQUITY		75,718	190,630
LIABILITIES
Non-current liabilities
Bank loans	19	262,364	197,835
Other payables	20	27,518	25,001
Deferred tax liabilities	15	24,757	26,814
		314,639	249,650
Current liabilities
Trade and other payables	20	28,941	29,926
Bank loans	19	102,414	219,304
Provisions	21	2,398	1,710
Dividends payable	22	10,446	-
Financial liabilities		4,621	5,166
		148,820	256,106

TOTAL LIABILITIES		463,459	505,756

TOTAL EQUITY AND LIABILITIES		539,177	696,386

Consolidated Statement of Cash Flows
for the year ended 31 December 2009
		2009	2008
	Note	Group	Group
		€'000	€'000

Cash flows from operating activities
Cash generated from / (used in) operations	23	18,832	27,582
Income taxes paid		398	( 1,088)
Net cash generated from / (used in) operating activities		19,230	26,494

Cash flows from investing activities
Capital expenditure on investment properties		( 34,929)	( 23,805)
Capital expenditure on intangible assets		-	18
Loan receipts / (advances) to unconsolidated entities		75	( 13,149)
Cash received on disposal of investment property		-	11,979
Cash conceded on derecognition		( 1,496)	-
Investment in unconsolidated entities		-	( 191)
Interest received		571	2,748
Acquisition of subsidiaries		( 4,066)	-
Loan to subsidiary		-	-
Net cash (used in) / generated from investing activities		( 39,845)	( 22,400)

Cash flows from financing activities
Proceeds on issue of shares, net of share issuance costs		-	-
New bank loans raised		30,212	100,843
Interest paid		( 22,257)	( 25,078)
Repayments of borrowings		( 11,249)	( 74,625)
Dividends paid		-	( 25,898)
Net cash used in financing activities		( 3,294)	( 24,758)

Net decrease in cash and cash equivalents		( 23,909)	( 20,664)
Cash and cash equivalents at the beginning of the year		63,853	84,517
Cash and cash equivalents at the end of the year	17	39,944	63,853

ABBREVIATED Notes to the financial statements

1 General information

Carpathian PLC (the "Company") is a company domiciled and incorporated in the Isle of Man on 2 June 2005 for the purpose of investing in the retail property market in Central and Eastern Europe. On 24 July 2009 the Company re-registered as a company governed by the Isle of Man Companies Act 2006 and redenominated the par value of it's ordinary shares from pounds Sterling 0.01 to Euro 0.01.

The consolidated financial statements include the share capital of the Company denominated in pounds Sterling, translated to Euro at the exchange rates ruling at the dates of issue. As from 24 July 2009 the share capital will be denominated in Euro, converted from pounds Sterling, based on the exchange rate prevailing on that date.

The financial information set out above does not constitute the Group's statutory accounts for the year ended 31 December 2009. The figures for the year ended 31 December 2009 are extracted from the audited Group financial statements ("the financial statements"). A copy of the financial statements, on which the auditors have issued an unqualified report, will be lodged with the Registrar of Companies. The results for the year ended 31 December 2009 have been prepared on the basis of the accounting policies set out in the financial statements.

2 Significant accounting policies

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS's") and its interpretations adopted by the International Accounting Standards Board ("IASB"). Details of the accounting policies adopted by the Group can be found in the financial statements.

Basis of preparation

The functional currency of the consolidated financial statements is the Euro as it is the currency of the primary economic environment in which the Group operates. In prior periods the consolidated financial statements were presented in pounds Sterling. Following the redenomination of the share capital to Euro, this Annual Report and all future financial information will be presented in Euro. The comparative figures are also reported in Euro.

The Group applies revised IAS1 Presentation of Financial Statements (2007), which became effective as of 1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas non-owner changes in equity are presented in the consolidated statement of comprehensive income.

Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain assets including the revaluation of investment property and financial instruments. The accounting policies have been consistently applied to the results, gains and losses, assets, liabilities and cash flows of all entities included in the consolidated financial statements.

The preparation of financial statements in conformity with IFRS requires the Directors to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. These estimates and associated assumptions are based on historical experience and various other factors which are believed to be reasonable under the circumstances, and are reviewed on an ongoing basis; they may have a significant impact on the financial statements, and actual results may differ from these estimates. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision effects both current and future years.

The activities of Group are subject to a number of risk factors. The global financial crisis and the deteriorating economic environment in the jurisdictions within which the Group operates have increased the intensity of these risk factors. The Directors, who are advised by professionally qualified external valuers, consider that the future economic outlook presents specific challenges, in terms of the significant reduction in the volume of property transactions in the jurisdictions within which the Group operates, the significant reduction in the availability of loan finance for property transactions in those jurisdictions, enhanced risk of tenant default and the consequent impact on the valuations of the properties held by the Group.

The financial statements have been prepared on a going concern basis, taking into consideration the level of cash and cash equivalents presently held by the Company and the re-negotiation of borrowing facilities. The Directors therefore have a reasonable expectation that the Company will have adequate resources for its continuing operational existence for the foreseeable future, and for these reasons, continue to adopt the going concern basis in preparing the 2009 financial statements.

3 Operating segments

The Group has 3 reportable segments, as described below, which are the Groups business units. The business units are managed separately because they represent the varying strategic objectives of the Group. For each of these strategic business units the Board reviews internal management accounts on at least a quarterly basis.

The Fund segment comprises the holding companies in Isle of Man and Luxembourg.

Core assets are those which are considered to retain significant enduring equity value, to protect on a prudent basis. All other assets are classified as non-core.

Statement of Comprehensive Income	2009	2009	2009	2009
	Fund	Core	Non-core	Total
	€'000	€'000	€'000	€'000

Gross rental income	-	23,298	12,968	36,266
Service charge income	-	7,817	5,055	12,872
Service charge expense	-	(9,310)	(6,432)	(15,742)
Property operating expenses	(1,209)	(2,753)	(3,806)	(7,768)
Other property income	(9)	1,641	289	1,921
Net rental and related income	(1,218)	20,693	8,074	27,549

Changes in fair value of investment property	-	6,505	(63,227)	(56,722)

Loss on derecognition of investment properties	(599)	-	(13,454)	(14,053)

Loss on sale of investment properties	-	-	(1,500)	(1,500)

Impairment of goodwill	-	2,088	(5,905)	(3,817)

Impairment of loans receivable	-	(32,332)	-	(32,332)

Changes in fair value of derivative assets and liabilities	(386)	(50)	-	(436)

Net foreign exchange gain / (loss)	357	128	(1,694)	(1,209)

Administrative expenses	(2,525)	(1,452)	(1,445)	(5,422)

Net operating loss before net financing expense	(4,371)	(4,420)	(79,151)	(87,942)

Financial income	394	106	72	572
Financial expense	(367)	(11,862)	(7,895)	(20,124)
Changes in fair value of interest rate swaps	-	(796)	(233)	(1,029)
Net financing income / (expense)	27	(12,552)	(8,056)	(20,581)

Net loss before tax	(4,344)	(16,972)	(87,207)	(108,523)

Current tax	(86)	1,075	(22)	967
Deferred tax	-	61	3,029	3,090

Loss for the year and total comprehensive loss for the year	(4,430)	(15,836)	(84,200)	(104,466)

Statement of Financial Position	2009	2009	2009	2009
	Fund	Core	Non-core	Total
	€'000	€'000	€'000	€'000
ASSETS
Non current assets
Investment property	-	317,976	135,250	453,226
Goodwill	-	7,897	-	7,897
Other investments	-	7,452	-	7,452
Loans receivable	-	3,920	-	3,920
Deferred income tax assets	-	3,413	512	3,925
	-	340,658	135,762	476,420

Current assets
Trade and other receivables	1,945	5,365	5,678	12,988
Loans receivable	-	2,000	-	2,000
Cash and cash equivalents	29,296	5,769	4,879	39,944
Financial assets	7,823	2	-	7,825
	39,064	13,136	10,557	62,757

TOTAL ASSETS	39,064	353,794	146,319	539,177


LIABILITIES
Non-current liabilities
Bank loans	-	186,584	75,780	262,364
Other payables	10,492	17,026	-	27,518
Deferred income tax liabilities	-	15,018	9,739	24,757
	10,492	218,628	85,519	314,639


Current liabilities
Trade and other payables	2,545	15,536	10,860	28,941
Bank loans	-	13,663	88,751	102,414
Provisions	-	898	1,500	2,398
Dividends payable	10,446	-	( 0)	10,446
Financial liabilities	-	2,320	2,301	4,621
	12,991	32,417	103,412	148,820

TOTAL LIABILITIES	23,483	251,045	188,931	463,459

NET ASSETS	15,581	102,749	( 42,612)	75,718

EQUITY

Issued Capital				2,321
Share Premium				91,477
Retained Earnings				( 18,091)
Total equity attributed to equity holders of the parent				75,707

Minority Interest				11
TOTAL EQUITY				75,718

	Geographical segments
	The Company is incorporated in the Isle of Man but operates in several jurisdictions in mainland Europe. In presenting information on geographical segments revenue is based on geographical location of property. Segment assets are based on the geographical location of the assets.

						Other
		Isle of Man	Poland	Hungary	Croatia	Jurisdictions		Total
		€'000	€'000	€'000	€'000	€'000		€'000

	Revenue
	Gross rental income	-	17,769	7,925	4,241	6,331		36,266
	Service charge income	-	7,148	3,706	84	1,934		12,872
	Other property income	-	1,270	117	-	534		1,921
	Total	-	26,187	11,748	4,325	8,799		51,059

	Non-current assets
	Investment property	-	246,776	67,450	46,000	93,000		453,226
	Goodwill	-	6,495	-	1,260	142		7,897
	Other investments	-	-	-	-	7,452		7,452
	Loans receivable	-	-	-	-	3,920		3,920
	Deferred income tax assets	-	2,040	652	234	999		3,925
	Total	-	255,311	68,102	47,494	105,513		476,420

						2009		2008
4	Gross rental income					Group		Group
						€'000		€'000

	Gross lease payments collected / accrued					36,266		47,275

	The Group leases out its investment property under operating leases. All operating leases are for terms of 1 - 15 years.

5	Other property income						2009 Group	2008 Group
							€'000	€'000

	Parking revenue						20	17
	Penalty interest						91	59
	Penalties on early termination of lease agreements						100	234
	Ice rink income						64	91
	Other property income						104	115
	Other corporate income						1,542	5,563
							1,921	6,079

	Other corporate income in 2008 includes €4.5 million of bank guarantee income. This income became receivable upon the corporate failure of a main tenant. The funds were used to pay-down the loan facility on the property.

6	Administrative expenses	2009		2008
		Group		Group
		€'000		€'000

	Accounting fees	1,021		1,275
	Legal fees	1,191		1,016
	Audit fees	788		1,211
	Non audit services	78		-
	Abortive acquisition costs and irrecoverable debts	131		971
	Other administrative expenses	633		1,519
	Irrecoverable VAT	170		582
	Portfolio management fees	432		362
	Tax advisory fees	250		323
	Consultancy fees	65		294
	Non-executive Directors fees	312		257
	Custody/trust fees	85		116
	Public relation fees	4		115
	Bank charges and fees	121		106
	Nominated advisor fees	141		88
		5,422		8,235

	Other administrative expenses include items of a general corporate nature.


7	Net financing income and expenditure		2009	2008
			Group	Group
			€'000	€'000
	Financing income:
	Interest income from financial institutions		572	2,659
	Interest income from subsidiary		-	-
	Interest income from related party		-	4,178
			572	6,837


	Financing expenditure:
	Net interest expenses on bank borrowings		( 19,048)	( 25,378)
	Finance costs amortised		( 966)	( 535)
	Unwinding of unrealised direct issue costs of borrowings		( 110)	( 181)
			( 20,124)	( 26,094)


	Fair value adjustment of interest rate swaps		( 1,029)	( 10,986)

	Bank loan interest totalling €1.4 million (2008: €0.9 million) was capitalised on development property.

8		Taxation
						2009	2008
		Recognised in the Statement of Comprehensive Income				Group	Group
						€'000	€'000
		Current tax (credit) / expense
		Current year				( 168)	1,001
		Adjustment for prior years				( 800)	24
						( 968)	1,025
		Deferred tax credit
		Origination of temporary differences				( 3,089)	( 43,755)

		Total tax credit in the Statement of Comprehensive Income				( 4,057)	( 42,730)

		The tax rate applicable to the Company in the Isle of Man is 0%. The tax refund of €1.0 million (2008: €1.0 million charge) in respect of current and prior year profits represents tax charges on rental income arising in other jurisdictions, that is subject to corporate income tax in those jurisdictions at rates in the range 16% to 24% and a Municipal Business tax at the rate of 7.5% in Luxembourg. As all current year tax charges arise in jurisdictions outside the Isle of Man, a full tax rate reconciliation of the relationship between the tax expense and accounting profit has not been included within these financial statements.

9			Earnings per share

	Basic earnings per share

	The calculation of basic earnings per share for the year ended 31 December 2009 was based on the loss attributable to ordinary shareholders of €104.4 million (2008: €183.9 million) and a weighted average number of ordinary shares in issue of 232,148,175 (2008: 230,461,630), calculated as follows:
					2009			2008
	Loss attributable to ordinary shareholders				Group			Group
					€'000			€'000
	Loss for the year				( 104,466)			( 189,248)
	Non-controlling interest				49			5,335
	Loss attributable to ordinary shareholders				( 104,417)			( 183,913)


	Weighted average number of ordinary shares
					2009			2008
	Shares in issue at 1 January				232,148,175			229,363,349
	Effect of shares issued on 16 July 2008				-			1,278,281
	Weighted average number of ordinary shares				232,148,175			230,641,630

	Basic earnings per share				( 45.0) €,c			( 79.7) €,c

	Diluted earnings per share
	The calculation of diluted earnings per share for the year ended 31 December 2009 was based on the diluted loss attributable to ordinary shareholders of £104.4 million (2008: €183.9 million) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2009 of 232,148,175 (2008: 230,641,630), calculated as follows:

	Loss attributed to ordinary shareholders (diluted)				2009			2008
					Group			Group
					€'000			€'000
	Loss for the year				( 104,466)			( 189,248)
	Minority interest				49			5,335
	Loss attributable to ordinary shareholders				( 104,417)			( 183,913)

	Weighted average number of ordinary shares for the purposes of diluted earnings per share			2009				2008
				Group				Group
	Weighted average number of ordinary shares for the purposes of diluted earnings per share			232,148,175				230,641,630

	Diluted earnings per share			( 45.0) €,c				( 79.7) €,c

10		Investment property and development property

			2009	2009	2009	2008		2008		2008
			Investment	Development		Investment		Development
			Property	Property	Total	Property		Property		Total
			Group	Group	Group	Group		Group		Group
						as restated				as restated
			€'000	€'000	€'000	€'000		€'000		€'000

		Balance at 1 January	522,477	28,678	551,155	714,576		56,366		770,942
		Acquisitions through direct access purchases	6,512	-	6,512	-		17,884		17,884
		Additions	-	34,927	34,927	5,977		-		5,977
		Disposals	-	-	-	( 52,102)		-		( 52,102)
		Derecognition of assets	( 82,556)	-	( 82,556)	-		-		-
		Finance lease obligations	( 90)	-	( 90)	14,287				14,287
		Decrease in fair value	( 24,467)	( 32,255)	( 56,722)	( 160,261)		( 45,572)		(205,833)
		Balance at 31 December	421,876	31,350	453,226	522,477		28,678		551,155

	The fair value of the Group's investment and development property at 31 December 2009 has been arrived at on the basis of a valuation carried out at that date by Colliers CRE, qualified independent valuers with recent experience in the location and category of investment property being valued. Fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm's length transaction after proper marketing at the date of the valuation.

	Over recent months, financial markets have seen significant turbulence, resulting in severe liquidity shortages. The turmoil in the credit markets has had an immediate effect on the real estate investment market, resulting in some transactions failing and all prices being negotiated downwards. This has caused a marked reduction in the volume of transactions, with activity below the levels of recent years. Generally, there is a greater degree of uncertainty than that which exists in a more active and stronger market, and this has impacted the formation of an opinion by the Company's appointed independent professional valuers in relation to the realisation prices of property assets.

	In this context, valuers must use their market knowledge and professional judgment and not only rely upon historic market sentiment based on historic transactional comparables. In the market conditions which currently prevail, there is likely to be a greater than usual degree of uncertainty in respect of valuations, and until the number and consistency of comparable transactions increases, this situation is likely to remain.

	The appointed independent professional valuers have advised that the circumstances described above are particularly acute in respect of properties with a value in excess of £100m and for development of properties. The former category, because of the severe shortage of debt at these levels associated with the difficulty or inability to syndicate or securities loans and the latter category due to the adverse impact of current market conditions on the feasibility of many developments, and the increasing risk premiums required by providers of finance for all properties and in particular those impacted by the uncertainty of the development process.

	The Group has pledged its investment properties and two of its development properties to secure related interest bearing debt facilities granted to the purchasing entities of such properties.

	Development properties include capitalised interest amounting to €1.4m at 31 December 2009 (31 December 2008: €1.0m).

	The valuation of the Promenada investment property has been adjusted to avoid the double-counting of assets and liabilities:

							2009		2009
							€'000		€'000
	Valuation per independent valuer						150,080		116,600
	Finance lease obligations						17,026		17,117
							167,106		133,717



	Investment properties at an aggregate value of €174.2m at 31 December 2009 (2008: €131.5m) are held under long-term lease arrangements which expire at varying dates between 2080 and 2097.

In July 2009 refinancing was agreed with Anglo Irish Bank on several properties in Hungary and Poland. As a result of the terms of the agreement Anglo Irish Bank took full control over the cash of the companies and also appointed a new asset manager for those companies. Given that Carpathian PLC has effectively relinquished control of these entities and transferred the significant risks and rewards of ownership to the Bank a decision was made to derecognise these assets in the accounts to 31 December 2009.

The individual statements of financial position on the derecognised entities are detailed below:

				Silver		Elef	Market
	Ironbark	Marise	Mallee	Estate	A Invest	Property	Estate	Total
	Kft	Invest	Kft	Kft	Kft	Kft	Kft
	€'000	€'000	€'000	€'000	€'000	€'000	€'000	€'000
Assets
Investment property	15,273	7,923	-	42,900	4,950	2,950	8,560	82,556
Trade & other receivables	83	279	19	282	32	48	48	791
Cash & cash equivalents	1,043	334	101	47	20	225	2	1,772
Investments in subsidiaries
Investments in subsidiaries	-	-	24,500	-	-	-	-	42,127
Inter-company loans receivables
Inter-company loans receivables	-	-	937	2,450	639	276	2,005	6,307
Deferred tax assets	417	-	29	525	-	-	-	971
Total assets	16,816	8,536	25,586	63,831	5,641	3,499	10,615	134,524

Liabilities
Bank loans	11,443	6,773	-	53,149	-	-	-	71,365
Trade and other payables	192	463	17	54	41	15	18	800
Other payables	-	-	-	-	-	-	-	-
Derivative liabilities	-	390	-	1,285	-	-	-	1,675
Provisions	-	-	-	-	-	-	-	-
Dividends payable	-	45	-	-	-	-	-	45
Inter-company loans payable
Inter-company loans payable	3,718	3,803	32,274	4,647	67	2,458	197	47,164
Deferred income tax liabilities
Deferred income tax liabilities	61	5	-	1,494	782	107	1,450	3,899
Total liabilities	15,414	11,479	32,291	60,629	890	2,580	1,665	124,948

Net assets / (liabilities)	1,402	( 2,943)	( 6,705)	3,202	4,751	919	8,950	9,576


11		Goodwill
			2009	2008
			Group	Group
			€'000	€'000
		Cost
		Balance at 1 January	45,977	34,799

		Acquisitions through business combinations	1,021	-
		Write off through derecognition	( 2,173)	-
		Disposals	-	(768)
		Purchase price adjustments	( 734)	11,946

		Balance at 31 December	44,091	45,977

		Impairment losses
		Balance at 1 January	( 32,377)	-

		Impairment gain / (loss)	2,088	( 32,377)
		Write off non-core goodwill	(5,905)	-

		Balance at 31 December	( 36,194)	( 32,377)

		Carrying amounts
		At 1 January	13,600	34,799
		At 31 December	7,897	13,600

	Derecognition
	In July 2009 refinancing was agreed with Anglo Irish Bank on several properties in Hungary and Poland. As a result of the terms of the agreement Anglo Irish Bank took full control over the cash of the companies and also appointed a new asset manager for those companies. Given that Carpathian PLC has effectively relinquished control of these entities and transferred the significant risks and rewards of ownership to the Bank a decision was made to derecognise these assets in the accounts to 31 December 2009.

	As a result of the derecognition €2.2 million of the goodwill asset has been written off which is comprised of €6.6 million capitalised on acquisition less €4.4 million previously provided for in the year to 31 December 2008.

	Goodwill on non-core assets

	Goodwill on non-core assets to has been written off due to the opinion that insufficient sales values will be achieved to recover any goodwill capitalised on non-core assets. Goodwill on non-core assets amounted to €6.0 million at 31 December 2009 and was comprised of €10.4 million capitalised on acquisition less €4.4 million previously provided for in the year to 31 December 2008.
	Impairment


	At acquisition, the purchase price payable in respect of each subsidiary is determined on a basis which usually excludes the amount of deferred tax liabilities relevant to that subsidiary. The determination of deferred tax liabilities is an IFRS requirement, which is not usually obligatory in accordance with accounting standards under which the subsidiary prepares its accounts. The net assets acquired are expected to be higher than the equivalent net assets calculated in accordance with IFRS, adjusted for the deferred tax liability. This difference is classified as goodwill.

	Half of the deferred tax liabilities of that subsidiary are expected to be ultimately recoverable by the Group upon disposal of the subsidiary.

	The carrying values of the Group's goodwill are reassessed at least annually or whenever events or changes in circumstances indicate that the carrying values may not be recoverable. For each subsidiary, the amount of goodwill is compared to the relevant deferred tax liabilities. Full provision for impairment is made in cases where the goodwill exceeds the amount of recoverable deferred tax liabilities. No provision is made where goodwill is equal or less than the deferred tax liabilities.

	The impairment gain for the year amounts to €2.1 million (2008: €22.1 million loss), which reflects the increase in value of core investment properties.


12	Investments in equity accounted investees
		2009	2008
		Group	Group
		€'000	€'000

	Investment in Carpathian Asset Management Ltd	-	191


	The Company has a 50% investment in Carpathian Asset Management Ltd. The Company does not exert significant influence over Carpathian Asset Management Ltd and as such does not consolidate this entity. The investee is incorporated in England and acts as the Group's property investment adviser.

	The investment in Carpathian Asset Management Ltd and any loans made to the investee have been provided for in full at the year end due to the disposal of the investment on 5 February 2010.

13	Other investments	2009	2008
		Group	Group
		€'000	€'000
	Investment in SIA Patollo:
	Balance at 1 January	7,452	7,452
	Balance at 31 December	7,452	7,452

	In April 2007 the Group acquired 17.95% of the issued share capital of SIA Patollo. SIA Patollo is undertaking the development of the Galleria Shopping Centre in Riga, Latvia which is expected to complete in mid 2010.

	The shares confer 50% of the shareholder voting rights, dividend rights and rights upon a winding up. The Group has appointed 2 of the 4 directors to SIA Patollo; certain key decisions require the consent of at least 75% of those directors.

	The Group has also made convertible loans to SIA Patollo amounting to €35.7m at 31 December 2009 (December 2008: €33.2m). See note 18 for further details.

	Upon opening of the Centre, the loans will either convert into shares in or repaid by SIA Patollo. If repaid, the proceeds will be used by the Group to subscribe for further shares. After issue of the additional shares, the Group will own 50% of the share capital of SIA Patollo.

	Approximately four months after opening, the Group shall acquire a further 5%, resulting in ownership of 55% of the total issued share capital of SIA Patollo. At that time, the Group is also required to make a further settlement payment to SIA Patollo, should the aggregate of the Group's investment, loans and any other amounts owed to it, be less than its 55% share of the value of Galleria Centre, calculated on the basis of net operating income at a yield of 8%.

14	Loans receivable	2009	2008
		Group	Group
		€'000	€'000
	Non current assets
	Loans to SIA Patollo	3,920	25,000
	Loans to Carpathian Asset Management Ltd	-	177

		3,920	25,177

	Current assets
	Loans to SIA Bluebeech	2,000	8,200

	The loans to SIA Bluebeech bear interest at 25% pa and are repayable by 1 April 2009. In March 2009, the repayment date was extended to 5 February 2010. The loans are secured by a first legal charge over that company's property and its shares and are further subject to a guarantee provided by SIA Patollo (secured by a third legal charge over that company's properties).
	Loans to SIA Patollo
		2009	2008
		Group	Group
		€'000	€'000

	Balance at 1 January	27,495	25,000

	Interest receivable	-	2,495
	Impairment loss	( 23,575)	-

	Balance at 31 December	3,920	27,495

	The development asset held by SIA Patollo was valued at 31 December 2009 at €50m. There is bank financing on the asset at the year end of €38.6m. The loans receivable from SIA Patollo have been impaired by €23.6m to ensure that the carrying value of the investment in and loans to SIA Patollo do not exceed the equity in the property.

	Loans to SIA Bluebeech
		2009	2008
		Group	Group
		€'000	€'000

	Balance at 1 January	10,757	8,200

	Interest receivable	-	2,557
	Impairment loss	( 8,757)	-

	Balance at 31 December	2,000	10,757

	The development asset held by SIA Bluebeech was valued at 31 December 2009 at €2m. The loans receivable from SIA Patollo have been impaired by €6.2m to ensure that the carrying value of the loans to SIA Bluebeech does not exceed the equity in the property.

15		Deferred tax assets and liabilities

	Deferred tax assets & liabilities are attributable to the following items:
			2009 Group	2009 Group	2009 Group		2009 Group
			Assets	Liabilities	Assets		Liabilities
			€'000	€'000	€'000		€'000

	Investment property valuation		-	23,914	-		26,534
	Interest rate swap valuation		449	-	605		-
	Accrued interest payable		-	528	-		242
	Tax losses carried forward		2,796	-	2,347		-
	Capital allowances		-	-	3		-
	Other temporary differences		680	315	-		48
			3,925	24,757	2,955		26,816


	The movement in deferred tax in the year comprises:				2009	2008
					Group	Group
					€'000	€'000

	Net balance at 1 January				23,859	67,614
	Origination and reversal of temporary differences				( 3,027)	( 43,755)
	Net balance at 31 December				20,832	23,859

16			Trade and other receivables	2009	2008
				Group	Group
				€'000	€'000

	Trade receivables			5,090	3,774
	Other receivables			6,503	5,788
	Prepayments			810	657
	Accrued interest on loans			43	5,130
	Subsidiary purchase price adjustment receivable			542	362
				12,988	15,711


	As at 31 December 2009, trade receivables at a nominal value of € 3,760,516 (2008: € 3,232,559) were impaired and fully provided for. Movements in the provision for impairment of receivables were as follows:

				2009	2008
				Group	Group
				€'000	€'000

	Balance at 1 January			3,233	3,500
	Amounts written off during the year			( 111)	( 598)
	Amounts recovered			( 3)	( 3)
	Increase in allowance recognized in Statement of Comprehensive Income			641	334
	Balance at 31 December			3,760	3,233


	At 31 December 2009 and 31 December 2008 the ageing analysis of trade receivables is as follows:

				2009	2008
				Group	Group
				€'000	€'000

	Less than 30 days			2,565	2,218
	30-60 days			660	294
	60-90 days			499	176
	90-120 days			352	65
	Greater than 120 days			1,014	1,021
				5,090	3,774

17		Cash and cash equivalents

	Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.

18	Share capital and share premium
	Authorised	Number of Ordinary Shares of 1 cent each		€'000

	At 31 December 2009 & 31 December 2008	350,000,000		3,500

	Issued:	Number of Shares Issued and Fully Paid	Share Capital	Share Premium
			€'000	€'000
	Ordinary shares of 1c each

	Balance at 31 December 2007	229,363,349	3,348	260,386
	16 July 2008 - issue for cash	2,784,826	35	3,549
	Balance at 31 December 2008	232,148,175	3,383	263,935

	Share capital conversion €0.01 for £0.01 24 July 2009 Share premium release 24 July 2009	-	( 1,062)	1,062
		-	-	( 173,520)
	Balance at 31 December 2009	232,148,175	2,321	91,477

19	Interest-bearing loans and borrowings

	This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings.

			2009	2008
			Group	Group
			€'000	€'000

	Bank loans due after more than one year		262,364	197,835
	Bank loans due within one year		102,414	219,304
			364,778	417,139


	The borrowings are repayable as follows:
	One demand within one year		102,414	219,304
	In the second year		66,229	33,459
	In the third to fifth years inclusive		196,135	70,329
	After five years		-	94,047
			364,778	417,139
	Unrealised direct cost of borrowings		-	-
			364,778	417,139

	Less: Amount due for settlement with 12 months (shown under current liabilities)		( 102,414)	( 219,304)

	Amount due for settlement after 12 months		262,364	197,835

	Since the year end, bank loans due within one year have decreased by €90 million, following the disposal of the non-core development sites of Arad and Cluj and the derecognition of the Plaza portfolio (see note 24). The Group has pledged each of its investment properties and two of its development properties and its shares in the special purpose vehicles holding the investment properties to secure related interest-bearing debt facilities granted to the Group for the purchase of such investment properties. The weighted average cost of debt of the year was 5.14% (2008: 6.05%).

	As more fully described in note 2(c), the global financial crisis and the deteriorating economic environment within the jurisdictions in which the Group operates have resulted in significant pressure being placed on the valuations of properties held by the Group, through entities controlled by the Company. A number of the borrowing arrangements in respect of these properties are in the course of re-negotiation with the Group's bankers either due to the term of the original borrowing arrangements having expired, or due to a breach of borrowing covenants having taken place. This re-negotiation of borrowing arrangements is ongoing, and in the meantime all loans continue to be serviced in accordance with the terms agreed at inception.

	On 31 July, the Group completed the restructuring of all of its debt facilities, totalling €235 million, with Hypo Real Estate (recently renamed Deutsche Pfandbriefbank AG.).

	Under these new arrangements, €133 million of interest-bearing loans and borrowings which were included within current liabilities at 30 June became non-current liabilities.

	Further details of both restructurings, together with on update on the Group's other facilities, are included in the Chairman's Statement and Property Adviser's Report.
20	Trade and other payables		2009	2008
			Group	Group
			€'000	€'000

	Trade payables		12,261	12,382
	Tenant deposits		2,304	2,595
	Accrued interest		1,999	4,133
	Deferred consideration		10,492	7,884
	Related party payables		8,135	7,576
	Finance lease		17,026	17,117
	Tax payable		211	92
	Accrued expenses		2,336	1,712
	Income received in advance		1,695	1,436
			56,459	54,927


	At 31 December 2009 and 31 December 2008 the ageing analysis of trade payables was as follows:

			2009	2008
			Group	Group
			€'000	€'000

	Less than 3 months		22,559	15,032
	3 to 12 months		4,398	11,683
	1-5 years		19,010	27,404
	Greater than 5 years		10,492	808
			56,459	54,927

21	Provisions			2009
				Group
				€'000

	Provisions at 1 January			1,710
	Increase in provisions			688
	Provisions as at 31 December			2,398



	Provisions include an amount of €0.9 million (December 2008: €0.8 million) relating to perpetual usufruct charges payable by a Group subsidiary, Elas Business Development Sp. z o.o. to the Polish State Treasury. This amount is in accordance with a final and legally valid Court decision dated June 2007. The remainder represents a provision in respect of the loss anticipated on disposal of development property. Provisions are made on the best estimates of the Directors at the time and are expected to be released within twelve months.


22	Dividends		2009	2008
			€'000	€'000

	First interim dividend (declared and paid in 2008)		-	9,654
	Final dividend (declared and paid during 2008)		-	5,851
	Interim dividend (declared December 2009)		10,446	-
			10,446	15,505


	The Board has declared an interim dividend of 4.5 cents per share for the year to 31 December 2009, which was paid on 22 January 2010.

	During 2008 a dividend of 3.34 pence per share was paid in respect of the year ended 31 December 2008 and an interim dividend of 2 pence per share for the year ended 31 December 2008. No final divided was paid for the year ended 31 December 2008 due to the Company not having sufficient levels of distributable reserves due to the fair value impairment of its investments in its subsidiaries.
23	Notes to the cash flow statement
			2009	2008
			Group	Group
	Cash generated from / (used in) operations	Note	€'000	€'000

	Loss for the year		( 104,466)	( 189,248)
	Adjustments for:
	(Increase) / decrease in fair value of financial instruments		( 2,659)	3,554
	Unwinding of unrealised direct issue costs of borrowings		(1,230)	181
	Net other finance income		19,552	19,073
	Decrease in fair value of investment property	13	56,808	205,819
	Costs relating to future acquisitions written off		-	330
	Provisions		688	830
	Tax credit	11	( 4,057)	(50,024)
	Impairment of loans receivable		29,775	-
	Impairment of goodwill		5,419	32,377
	Profit on disposal of investment		14,094	3,677
	Operating cash flows before movements in working capital		13,924	26,569
	Decrease / (increase) in receivables		1,966	7,082
	Increase / (decrease) in payables		2,942	(6,069)
	Cash generated from / (used in) from operations		18,832	27,582

24	Events after the balance sheet date

	On 5 February 2010, the Company disposed of its 50% investment in and loans and interest receivable from Carpathian Asset Management Ltd for nominal consideration to CPT LLP. CPT LLP is a related party to the Company due to the management agreement as detailed below being a material contract for CPT LLP and Carpathian Asset Management Limited.

	On 5 February 2010, the Company entered into a new portfolio management agreement with CPT LLP and Carpathian Asset Management Ltd. This Agreement replaces the previous portfolio and development management agreements between the Company and Carpathian Asset Management Ltd, and is designed to incentivise the management team to focus on delivering the Company's revised strategy of returning cash to shareholders over the period of the Agreement, as well as aligning these incentive arrangements to the interests of the shareholders. The Agreement commenced on 1 March 2010 and will run until 31 December 2011, following which any extension will be subject to approval by shareholders.

	On 11 March 2010, the Company disposed of its investments in and loans receivable from Atrium & Arcadom Holdings BV, Carpathian Mastweight Holdings BV, Mastweight Srl, Redwood Investments Srl and SC Cluj Atrium Center SA for nominal consideration to Glarstyle Limited. Together, these companies owned the Group's development properties at Arad and Cluj in Romania. The Arad disposal is conditional upon consent being received from MKB bank for the transfers together with an acknowledgement from MKB that the Company is released from any obligation to provide further funding to Arad and Cluj. To achieve such consent and to release the Company from funding any future costs through the Atrium management structure, the Company has agreed to contribute €400,000 to the subsidiaries being disposed. Glarstyle Limited is a related party to the Company due to its directors either being members of CPT LLP or directors of Bogol Management Limited, a company with a minority shareholding in a subsidiary of the Company.

	In March 2010 MKB bank took control of the Plaza portfolio and has taken the decision to enforce the sale the properties. Since effective control of the companies has been relinquished by Carpathian PLC, a decision has been made to derecognise these assets as of 31 March 2010.

The balance sheets of the Atrium and Plaza portfolios disposed or derecognised are detailed below:

	Atrium	Plaza	Total
	€'000	€'000	€'000
Assets
Investment property	52,750	32,950	85,700
Trade and other receivables	2,930	1,491	4,421
Cash and cash equivalents	744	1,837	2,581
Investment in subsidiaries	16,553	23,547	40,100
Inter-company loans receivable	2,962	5,491	8,453
Total assets	75,939	65,316	141,255

Liabilities
Bank loans	47,865	42,081	89,946
Trade and other payables	5,120	1,982	7,102
Other payables	1,801	-	1,801
Inter-company loans payable	34,056	32,755	66,811
Deferred income tax liabilities	-	7,505	7,505
Total liabilities	88,842	84,323	173,165

Net liabilities	(12,903)	(19,007)	(31,910)

Financial Statements

Copies of the 2009 financial statements will be sent to all shareholders as soon as practical. These documents will be available to the public at the offices of the company: IOMA House, Hope Street, Douglas, Isle of Man, as well as on our website www.carpathianplc.com.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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