HYTERRA LTD — Annual Report 2011

May 31, 2011

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Tango Petroleum Limited ABN 68 116 829 675

Annual Financial Report 31 March 2011

Contents

Page

Corporate Information	1
Directors’ Report	2
Corporate Governance Statement	10
Auditor’s Independence Declaration	17
Statement of Comprehensive Income	18
Statement of Financial Position	19
Statement of Changes in Equity	20
Statement of Cash Flows	21
Notes to the Financial Statements	22
Directors’ Declaration	43
Independent Auditor’s Report	44
Additional Shareholder Information	46

Tango Petroleum Limited

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CORPORATE INFORMATION ABN 23 380 374 314

Directors

Mr Mathew Walker Mr Garry Ralston Mr Tim Johnston

Company secretary

Mr James Robinson

Registered office Suite 9, 1200 Hay Street WEST PERTH WA 6005 Telephone: (08) 6460 4960 Facsimile: (08) 9324 3045

Principal place of business Suite 9, 1200 Hay Street WEST PERTH WA 6005

Share register Security Transfer Registrars Pty Ltd 770 Canning Highway APPLECROSS WA 6153

Solicitors

Steinepreis Paganin Level 4, Next Building 16 Milligan Street PERTH WA 6000

Bankers National Australia Bank Level 1, 1238 Hay Street WEST PERTH WA 6005

Auditors HLB Mann Judd Level 4, 130 Stirling Street PERTH WA 6000

Website www.tangopetroleum.com.au

Tango Petroleum Limited

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DIRECTORS’ REPORT

Your directors submit the annual financial report of the Company for the financial year ended 31 March 2011. In order to comply with the provisions of the Corporations Act, the directors report as follows:

Directors

The names of directors who held office during or since the end of the year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

Mr Mathew Walker Executive Chairman Mr Garry Ralston Non-Executive Director Mr Tim Johnston Non-Executive Director (appointed 1 November 2010) Mr James Robinson Non-Executive Director (appointed 27 July 2010, resigned 1 November 2010) Mr Keith Goodall Non-Executive Chairman (resigned 27 July 2010)

Names, qualifications, experience and special responsibilities

Mr Mathew Walker Executive Chairman Age: 40 Qualifications: Bachelor of Business from the University of Technology Sydney

Mr Walker has extensive experience in the provision of corporate advice and in public company management. Specialising in the mining sector, Mr Walker has served as executive chairman or managing director for public companies with mining interests in North America, South America, Africa, Asia and Australia. Currently he serves as managing director of Hastings Rare Metals Limited. He is a director of boutique investment banking firm Alto Capital and Chairman of corporate advisory firm Cicero Corporate Services. He is a member of the Australian Institute of Company Directors and holds a Bachelor of Business from the University of Technology, Sydney.

During the last three years, Mr Walker has served as a director of the following listed companies:

• Hastings Rare Metals Limited (appointed 29 November 2006)

• Pacific Ore Limited (resigned 20 November 2009)

• Aspire Mining Limited (resigned 12 February 2010)

• Pilbara Minerals Limited (resigned 25 August 2010)

Mr Garry Ralston Non-Executive Director Age: 55 Qualifications: Licensed Finance Broker (CFB)

Mr Garry Ralston serves as a Non-Executive Director of the Company and is based in Perth, Western Australia. Mr Ralston has been directly involved in the banking and finance industry for over 35 years. Mr Ralston was a co-founder and until recently a director of Finance and Systems Technology (FAST) which is one of Australia's premier mortgage aggregators. Mr Ralston is also a director and co-founder of Select Mortgage Services.

During the last three years Mr Ralston has served as a director of the following listed companies:

• Hastings Rare Metals Limited (resigned 9 March 2011)

• Pilbara Minerals Limited (resigned 12 February 2010)

Mr Ralston is a member of the non-executive directors committee, which deals with responsibilities usually set aside for Remuneration, Risk, Audit and Nomination committees.

Mr Tim Johnston

Non-Executive Director

Age: 59

Qualifications: Bachelor of Science in Business Administration-Accountancy from Oklahoma State University

Mr Johnston serves as a Non-Executive Director based in Tulsa, Oklahoma USA. Mr Johnston has extensive experience in accounting and taxation while working in various capacities for both public and private companies in the oil and gas industry. Mr Johnston received a Bachelor of Science in Business Administration-Accountancy from Oklahoma State University.

Mr Johnston is currently President of Energy Financial Management which serves oil and gas entities with their accounting, administration and taxation needs. Mr Johnston is also President of Oklahoma Energy Consultants Inc which is involved in the acquisition of and administration of oil and gas properties in the US.

Mr Johnston is a member of the non-executive directors committee, which deals with responsibilities usually set aside for Remuneration, Risk, Audit and Nomination committees.

Tango Petroleum Limited

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DIRECTORS’ REPORT (continued)

Company Secretary

Mr James Robinson Company Secretary Age: 32 Qualifications: Bachelor of Economics from The University of Western Australia

Mr Robinson gained extensive capital markets experience during 10 years with one of Western Australia’s leading corporate advisory and stockbroking firms. He is currently a Director of Hastings Rare Metals Limited, Blue River Mining Limited, Cohiba Minerals Limited and a Director of corporate advisory firm Cicero Corporate Services.

He is a member of the Australia Institute of Company Directors and holds a Bachelor of Economics from the University of Western Australia.

Interests in the shares and options of the Company

The following relevant interests in shares and options of the Company or a related body corporate were held by the directors as at the date of this report.

Directors	Number of options over ordinary shares*	Number of fully paid ordinary shares
Mr Mathew Walker	6,875,000	13,750,000
Mr Garry Ralston	3,000,000	6,000,000
Mr Tim Johnston	-	-

*All options were issued in the Entitlement Issue completed in May 2010 and are exercisable at 20 cents on or before 31 May 2011.

Tango Petroleum Limited

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DIRECTORS’ REPORT (continued)

No ordinary shares were issued by the Company during or since the end of the financial year as a result of the exercise of an option.

There are no unpaid amounts on the shares issued.

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

Expiry Date	Exercise price	Number of shares
31 May 2011	$0.20	86,000,000
		86,000,000

Dividends

No dividends have been paid or declared since the start of the financial year and the directors do not recommend the payment of a dividend in respect of the financial year.

Principal Activities

The principal activity of the Company at balance date was the exploration for natural resources.

Review of Operations

At a meeting of shareholders held on 14 May 2010 approval was received for a change in nature and scale of activities to the oil and gas sector and a change of name from Brainz Instruments Limited to Tango Petroleum Limited among other things.

Amazon Prospect

During the year, the Marion Baker #1 well on the Amazon prospect was drilled to a total depth of 15,462 feet.

Caza Oil & Has, Inc. (project operator) and the project partners analysed data collected from logging and surveying of the well, and although several sand sections existed throughout the wellbore, the log data indicated that the targeted Middle Frio section between 12,500-15,462 feet has extremely low porosity and permeability. The shallower sands in the Upper Frio sections between 9,600-12,200 feet, which produce in the immediate area from the Midland Field, appeared to be wet at this location. However, based on log data, Caza advised that it has reason to evaluate these shallower sands for additional potential across its current acreage block. After determining that none of the sands were likely to be productive at commercial rates, Caza sought approval from its partners in the Well to proceed with plug and abandonment procedures.

Thames Prospect

The Company are currently reviewing data obtained during the drilling of the Amazon prospect and its impact on the prospectivity of the Thames prospect. This review and subsequent decision to participate in the Thames prospect is likely to be made during the current quarter.

Project Evaluation

The Company is currently reviewing a number of potential opportunities within the oil and gas sector with a view to identifying an appropriate project in which to participate in the near future. The market will be updated with any developments in this regard if and when they occur.

Corporate

During the June quarter 2010, the Company undertook and entitlement issue and placement of options to raise $375,000 (before costs) through the issue of 75,000,000 options at $0.005.

The Company also lodged a prospectus as part of its capital raising and re-compliance requirements. Pursuant to this prospectus the Company raised $1,000,000 (before costs) through the issue of 5,000,000 shares at $0.20 and 5,000,000 free attaching options. This capital raising was finalised in July.

In February 2011 the Company finalised a placements 6 million shares at 12 cents per share to sophisticated and professional clients of Cygnet Capital Pty Limited to raise $720,000 before costs. Each share subscribed for had a free attaching option on the same terms as the existing listed company options (ASX Code: TNPO). The Placement was done pursuant to ASX listing rule 7.1.

Tango Petroleum Limited

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DIRECTORS’ REPORT (continued)

Operating results for the year

The consolidated net loss after income tax attributable to members of company amounted to $4,047,333 (2010: $500,502).

Review of financial conditions

The Company currently has $340,787 in cash assets which the Directors believe is sufficient to enable the Company to continue to review new opportunities. However it is likely the Company will need to raise further capital in order to participate in future exploration activities.

Risk management

Details of the Company’s Risk Management policies are contained within the Corporate Governance Statement in the Directors’ Report.

Corporate Governance

Details of the Company’s Corporate Governance policies are contained within the Corporate Governance Statement in the Directors’ Report.

Significant events after balance date

On 23 May 2011, the Company announced the following subsequent events:

The Board of Tango Petroleum Ltd announced that it has signed a Participation Agreement to acquire a 17.25% working interest in the Lyons Point Prospect, operated by Clayton Williams Energy Inc in Acadia Parish, Louisiana. The Company’s share of the initial dry hole well costs are estimated at US$1,317,000 (includes entry costs). In a success case the Company’s share of completion and facilities costs are estimated to be a further US$520,000.

The Company announced a non-renounceable entitlement issue to shareholders of one option (“Entitlement Option”) for every one share held at the record date, at an issue price of 0.5 cents. The Entitlement Options will be a new series of quoted options exercisable at 6 cents each on or before 30 June 2012. The entitlement issue will raise up to approximately $430,000 before costs.

The Company also announced that subject to shareholder approval, it has agreed to place 34,000,000 new shares (“Placement Shares”) at a price of 3.5 cents per share. Each Placement Share subscribed for will have a free attaching Company Option (“Placement Option”) on the same terms as the Entitlement Options, that is, an exercise price of 6 cents on or before 30 June 2012. The placement will raise $1,190,000 before costs.

Likely developments and expected results

Disclosure of information regarding likely developments in the operations of the Company in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the Company. Therefore, this information has not been presented in this report.

Environmental legislation

The Company is subject to significant environmental and monitoring requirements in respect of its natural resources exploration activities.

The directors are not aware of any significant breaches of these requirements during the period.

Indemnification and insurance of Directors and Officers

The Company has agreed to indemnify all the directors of the Company for any liabilities to another person (other than the Company or related body corporate) that may arise from their position as directors of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith.

During the financial year the Company paid a premium in respect of a contract insuring the directors and officers of the Company and its controlled entities against any liability incurred in the course of their duties to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

Tango Petroleum Limited

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DIRECTORS’ REPORT (continued)

Remuneration report

This report outlines the remuneration arrangements in place for directors and senior management of Tango Petroleum Limited (the “Company”) for the financial year ended 31 March 2011.

The following persons acted as directors during or since the end of the financial year:

Mr Mathew Walker (Executive Chairman)

Mr Garry Ralston (Non-Executive Director)

Mr Tim Johnston (Non-Executive Director) (appointed 1 November 2010)

Mr James Robinson (Non-Executive Director) (appointed 27 July 2010, resigned 1 November 2010)

Mr Keith Goodall (Non-Executive Chairman) (resigned 27 July 2010)

The term ‘senior management’ is used in this remuneration report to refer to the following persons. Except as noted the named persons held their current position for the whole of the financial year and since the end of the financial year: Mr Mathew Walker (Executive Chairman)

Mr Garry Ralston (Non-Executive Director)

Mr Tim Johnston (Non-Executive Director) (appointed 1 November 2010)

Mr James Robinson (Non-Executive Director) (appointed 27 July 2010, resigned 1 November 2010)

Mr Keith Goodall (Non-Executive Chairman) (resigned 27 July 2010)

Mr James Robinson (Company Secretary)

Remuneration philosophy

The performance of the Company depends upon the quality of the directors and executives. The philosophy of the Company in determining remuneration levels is to:

• set competitive remuneration packages to attract and retain high calibre employees;

• link executive rewards to shareholder value creation; and

• establish appropriate, demanding performance hurdles for variable executive remuneration

Non-executive director committee

The Non-executive Director Committee of the Board of Directors of the Company is responsible for determining and reviewing compensation arrangements for the directors and the senior management team.

The Non-executive Director Committee assesses the appropriateness of the nature and amount of remuneration of directors and senior executives on a periodic basis by reference to relevant employment market conditions with an overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team.

Remuneration structure

In accordance with best practice Corporate Governance, the structure of non-executive director and executive remuneration is separate and distinct.

Non-executive director remuneration

The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.

The ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. The latest determination was at the Annual General Meeting held on 31 August 2010 when shareholders approved an aggregate remuneration of up to $250,000 per year.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers advice from external shareholders as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process. Each director receives a fee for being a director of the Company.

Tango Petroleum Limited

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DIRECTORS’ REPORT (continued)

Remuneration report (continued)

The remuneration of non-executive directors for the period ended 31 March 2011 is detailed in the Remuneration of directors and named executives section on page 8 of this report.

Senior manager and executive director remuneration

Remuneration consists of fixed remuneration and Company options (as determined from time to time). In addition the Company employees and directors, the Company has contracted key consultants on contractual basis. These contracts stipulate the remuneration to be paid to the consultants.

Fixed Remuneration

Fixed remuneration is reviewed annually by the non-executive directors committee (which assumes the role of the Remuneration Committee). The process consists of a review of relevant comparative remuneration in the market and internally and, where appropriate, external advice on policies and practices. The Committee has access to external, independent advice where necessary.

Fixed remuneration is paid in the form of cash payments.

The fixed remuneration component of the 5 most highly remunerated Company executives is detailed in Table 1.

Employment Contracts

The Company currently has a services agreement with Mr Mathew Walker (Services Agreement) effective as from 1 April 2011. Under the Services Agreement, Mr Walker is engaged by the Company to provide services to the Company in the capacity of Executive Director. Mr Walker is to be paid an annual remuneration of GBP120,000. Mr Walker will also be reimbursed for reasonable expenses incurred in carrying out his duties.

The Services Agreement continues for a period of 1 year, with an option to extend for a further 1 year term, unless terminated in accordance with the relevant provisions of the Services Agreement. The Services Agreement contains standard termination provisions under which the Company must give three months notice prior to termination, or alternatively, payment in lieu of service. In addition, Mr Walker is entitled to all unpaid remuneration and entitlements up to the date of termination.

Options

During the period ended 31 March 2011, there were no Options that were granted, vested or lapsed as part of director remuneration. Options currently on issue are listed and exercisable at $0.20 on or before 31 May 2011.

Tango Petroleum Limited

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Remuneration of directors and named executives

Table 1: Directors’ and named executives remuneration for the year ended 31 March 2011

	Short-term employee benefits	Short-term employee benefits		Post-employment	benefits	Equity	Other	Total	%
	Salary & Fees	Bonuses	Non- Monetary Benefits	Superannuation	Prescribed Benefits	Options			Performance Related
Mr Keith Goodall	16,597	-	-	-	-	-	-	16,597	-
Mr Mathew Walker	194,728	-	-	-	-	-	-	194,728	-
Mr Garry Ralston	30,000	-	-	-	-	-	-	30,000	-
Mr James Robinson	57,880	-	-	-	-	-	-	57,880	-
Mr Tim Johnston	12,282	-	-	-	-	-	-	12,282	-
Total	311,487	-	-	-	-	-	-	311,487	-

Table 2: Directors’ and named executives remuneration for the year ended 31 March 2010

	Short-term employee benefits Post-employment benefits Equity Other Total %
	Salary & Fees Bonuses Non- Monetary Benefits Superannuation Prescribed Benefits Options Performance Related
Mr Keith Goodall	20,950 - - - - - - 20,950 -
Mr Mathew Walker	45,900 - - - - - - 45,900 -
Mr Garry Ralston	12,500 - - - - - - 12,500 -
Mr James Robinson	18,333 - - - - - - 18,333 -
Dr Damian Pethica	13,442 - - - - - - 13,442 -
Dr James Brown	9,484 - - - - - - 9,484 -
Mr Keith Aitchison	9,595 - - - - - - 9,595 -
Total	130,184 - - - - - - 130,184 -

Tango Petroleum Limited

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DIRECTORS’ REPORT (continued) Directors’ Meetings

The number of meetings of Directors (including m e etings of co m mittees of D irectors) hel d during the year and th e number of m e etings atten d ed by each D irector was a s follows:

Directo r	Boa rd Meetings N on-Executiv e Director Me etings
	Attended Eligible to Attend A ttended Eligible to A ttend
Mr Math Mr Garry Mr TimJ Mr Jame Mr Keith ew Walker Ralston ohnston s Robinson Goodall	4 4 0 4 1 4 4 0 4 1 0 2 1 1 0 0 2 1 1 0

In addition, 14 circulating r esolutions w e re signed by t he board dur i ng the period.

Auditor’s Independence and Non-Audit Services

Section 307 C of the Cor p orations Act 2001 requir e s our auditors, HLB Mann Judd, to p r ovide the di r ectors of th e Company wi t h an Indepe n dence Decla r ation in relati o n to the aud i t of the annu a l report. This Independen c e Declaratio n is set out on page 17 and f orms part of t his directors’ report for the year ended 3 1 March 2011.

Non-Audit Services

During the 2 0 11 financial y ear the Com p any’s audito r s prepared t h e independe n t accountant s report which was part of the prospect u s lodged in t h e June quarter.

The directors are satisfi e d that the p rovision of n on-audit ser v ices is compatible with the general s tandard of independen c e for auditors imposed by t h e Corporations Act 2001.

The director s are of the o pinion that t he services d o not comp r omise the a u ditors’ indep e ndence as a ll non-audit services have been revie w ed to ensur e that they do not impact the integrity an d objectivity o f the auditor a nd none of the services undermine t h e general pri n ciples relati n g to auditor independenc e as set out i n Code of Co n duct APES 110 Code of Ethics for Pr o fessional Ac c ountants issu e d by the Ac c ounting Professional and Ethical Standa r ds Board.

Signed in ac c ordance with a resolution o f the Directo r s.

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Mathew Walker Executive Chairman Dated this 31[st] day of May 2011

Tango Petroleum Limited

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CORPORATE GOVERNANCE STATEMENT

The Board of Directors of Tango Petroleum Limited is responsible for establishing the corporate governance framework of the Company having regard to the ASX Corporate Governance Council (‘CGC’) published guidelines as well as its corporate governance principles and recommendations.

The CGC’s published guidelines are as follows:

Principle 1. Lay solid foundations for management and oversight Principle 2. Structure the board to add value Principle 3. Promote ethical and responsible decision making Principle 4. Safeguard integrity in financial reporting Principle 5. Make timely and balanced disclosure Principle 6. Respect the rights of shareholders Principle 7. Recognise and manage risk Principle 8. Remunerate fairly and responsibly

Tango Petroleum Limited’s current corporate governance practices were put in place in November 2009 following the change in the Board of Directors and change in domicile to comply with the Council’s best practice recommendations.

Structure of the Board

The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report is included in the Directors’ Report. Directors of Tango Petroleum Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of their unfettered and independent judgment.

In the context of director independence, 'materiality' is considered from both the company and individual director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively immaterial if it is equal to or less than 5% of the appropriate base amount. It is presumed to be material (unless there is qualitative evidence to the contrary) if it is equal to or greater than 10% of the appropriate base amount. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors that point to the actual ability of the director in question to shape the direction of the company’s loyalty.

In accordance with the definition of independence above, and the materiality thresholds set, the following current directors of Tango Petroleum Limited are considered to be independent:

Name Position Mr Garry Ralston Non-Executive Director Mr Tim Johnston Non-Executive Director There are procedures in place, agreed by the Board, to enable directors in the furtherance of their duties to seek independent professional advice at the company’s expense.

The term in office held by each current director in office at the date of this report is as follows:

Name Term in Office Mr Mathew Walker 17 months Mr Garry Ralston 16 months Mr Tim Johnston 7 months

Tango Petroleum Limited

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CORPORATE GOVERNANCE STATEMENT (continued)

ASX BEST PRACTICE RECOMMENDATIONS AND COMMENTS

	BEST PRACTICE RECOMMENDATION	COMMENT
1	Lay solid foundations for management and oversight
1.1	Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions.	The Company’s Corporate Governance Policies includes a Board Charter, which discloses the specific responsibilities of the Board and provides that the Board shall delegate responsibility for the day-to-day operations and administration of the Company to the Executive Director.
1.2	Companies should disclose the process for evaluating the performance of senior executives.	The Company’s Corporate Governance Policies includes a section on Performance Evaluation Practices, which discloses the performance evaluation criteria. During the period a Performance evaluation of senior executives (the Executive Director) was performed once during the year and was in accordance with the process described in the Corporate Governance Policies.
1.3	Companies should provide the information indicated in the Guide to reporting Principle 1.	Any departure from principle 1.1 and 1.2 are contained in the above points. A Performance evaluation of senior executives (the Executive Director) was performed once during the year and was in accordance with the process described in the Company’s Corporate Governance Policies. The Corporate Governance Policies which discloses the board charter is available on the Company’s web site.
2	Structure the board to add value
2.1	A majority of the board should be independent directors.	Adopted. The Independent Directors are considered to be: Mr Garry Ralston Mr Tim Johnston
2.2	The chairperson should be an independent director.	The chairperson is Mr Mathew Walker. He is not considered to be an independent director. Given the Company’s size and the fact the majority of the Board is considered to be independent, the Board considers this to be appropriate.
2.3	The roles of chairperson and chief executive officer should not be exercised by the same individual.	The Company has an Executive Chairman; Mr Mathew Walker (considered to be the Chief Executive Officer). Given the Company’s size and the fact the majority of the Board is considered to be independent, the Board considers this to be appropriate.
2.4	The board should establish a nomination committee.	The Board did not believe it was necessary to establish a nomination committee during the year, however the Board has established a non-executive Directors Committee that has assumed the role of the Nomination Committee. The non- executive Directors Committee meets at least annually, to ensure that the Board continues to operate within the established guidelines, including when necessary, selecting candidates for the position of director. The non-executive Directors Committee comprised the following members and met twice throughout the year: Mr Garry Ralston Mr James Robinson (resigned 1 November 2010) Mr Tim Johnston (appointed 1 November 2010) The Company has a formal Nomination Committee Charter, which is included in the Company’s Corporate Governance Policy which is available on the Company’s web site.

Tango Petroleum Limited

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CORPORATE GOVERNANCE STATEMENT (continued)

2.5	Companies should disclose the process for evaluating the performance of the board, its committees and individual directors.	The Company’s Corporate Governance Policies include performance evaluation practices that are used to evaluate theperformance of the board.
2.6	Companies should provide the information indicated in_Guide to Reporting on Principle 2._	The Company has included details for each director, such as their skills, experience and expertise relevant to their position in the Directors Report (section 2). Any departures from best practice recommendations 2.1, 2.2, 2.3, 2.4 and 2.5 are included in the above sections.
3	Promote ethical and responsible decision- making
3.1	Establish a code of conduct to guide the directors, the chief executive officer (or equivalent), the chief financial officer (or equivalent) and any other key executives as to: (a) The practices necessary to maintain confidence in the Company’s integrity (b) The practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders; and (c) The responsibility and accountability of individuals for reporting and investigating reports of unethical practices.	The Company’s Corporate Governance Statement includes a Code of Conduct, which provides a framework for decisions and actions in relation to ethical conduct in employment. General Principles of the Code of Conduct include: 1. Employees of the Company must act honestly, in good faith and in the best interests of the Company as a whole. 2. Employees have a duty to use due care and diligence in fulfilling the functions of their position and exercising the powers attached to their employment 3. Employees must recognise that their primary responsibility is to the Company’s shareholders as a whole. 4. Employees must not take advantage of their position for personal gain, or the gain of their associates. 5. Directors have an obligation to be independent in their judgments. 6. Confidential information received by employees in the course of the exercise of their duties remains the property of the Company. Confidential information can only be released or used with specific permission from the Company. 7. Employees have an obligation, to comply with the spirit as well as the letter, of the law and with the principles of this code.
3.2	Companies should establish a policy concerning trading in Company securities by directors, senior executives and employees, and disclose the policy or a summary of that policy.	The Company’s Corporate Governance Policy includes a section on Securities Trading Policy, which provides guidelines for transacting (buying and selling) securities in the Company, which has been posted on the Company’s web site. The key policy items include: 1. General Restrictions when in possession of Inside Information, which includes sections dedicated to Insider Trading Laws and Confidential Information. 2. Additional Trading restrictions for directors and some employees. This section details times when Restricted Persons are prohibited from trading the Company’s securities and policies on exceptional circumstances where clearance is given to restricted persons. 3. Policies that Restricted persons must comply with prior to and after trading of the Company’s securities. 4. Other sections of this policy include Notification of Trading, Breaches of Policy and General.
3.3	Companies should provide the information indicated in Guide to Reporting on Principle 3.	Any departures (if any) from best practice recommendations 3.1, 3.2 and 3.3 during the period are disclosed in the above sections. The Corporate Governance Statement which includes an applicable code of conduct or a summary and the trading policy or a summary, has been posted on the Company’s website.

Tango Petroleum Limited

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CORPORATE GOVERNANCE STATEMENT (continued)

4	Safeguard integrity in financial reporting
4.1	The board should establish an audit committee.	The Board has not established an Audit Committee, however has established a non-executive Directors Committee that has assumed the role of the Audit Committee which operates under a charter approved by the Board. It is the Board’s responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial information as well as non financial considerations such as the benchmarking of operational key performance indicators. The Board has delegated responsibility for establishing and maintaining a framework of internal control and ethical standards to the non-executive Directors Committee. The Committee also provides the Board with additional assurance regarding the reliability of financial information for inclusion in the financial reports. All members of the non- executive Directors Committee are non-executive directors. The Company has a formal Audit Committee Charter, which is included in the Company’s Corporate Governance Policy which is available on the Company’s web site.
4.2	The audit committee should be structured so that it: 1. consists of only non-executive directors 2. consists of a majority of independent directors 3. is chaired by an independent director, who is not the chair of the Company 4. has at least three members.	As described in section 4.1, the non-executive Directors Committee assumed the role of the Audit Committee during the year. The non-executive Directors Committee: 1. Does consist of only non-executive directors, Mr Garry Ralston and Mr Tim Johnston. 2. Does consist of a majority of independent directors. 3. Is chaired by an independent director, who is not the chair of the Company. This Committee is chaired by Garry Ralston who is the Chair of the Company. 4. The Committee does not have three members, only two members. This is due to the Company only having two independent, non-executive directors to form the committee. The members of the non-executive Directors committee that has the responsibility of the Audit Committee during the year were: Mr Garry Ralston Mr James Robinson (resigned 1 November 2010) Mr Tim Johnston (appointed 1 November 2010) Qualifications of audit committee members: Mr Garry Ralston - Licensed Finance Broker (CFB) Mr Tim Johnston - Bachelor of Science in Business Administration-Accountancy from Oklahoma State University
4.3	The audit committee should have a formal charter.	The formal Audit Committee is included in the Company’s Corporate Governance Policy which is available on the Company’s web site.
4.4	Companies should provide information indicated in the Guide to reporting on Principle 4.	This information is included in the above sections 4.1, 4.2 and 4.3. The Corporate Governance Statement has been posted on the Company’s website.

Tango Petroleum Limited

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CORPORATE GOVERNANCE STATEMENT (continued)

5	Make timely and balanced disclosure
5.1	Companies should establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.	The Company has a continuous disclosure program in place designed to ensure the factual presentation of the Company’s financial position and the development of the Company’s assets and activities. There is a vetting and authorisation processes in place that is designed to ensure that the Company's announcements: 1. Are made in a timely manner 2. Are factual 3. Do not omit material information 4. Are expressed in a clear and objective manner that allows investors to assess the impact of the information when making investment decisions.
5.2	Provide the information indicated in_Guide to_ Reporting on Principle 5.	Any departures are included in section 5.1 and 5.2 of this report. The Corporate Governance Statement has been posted on the Company’s website.
6	Respect the rights of shareholders
6.1	Design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of the policy.	The Company’s Corporate Governance Policy includes a Shareholder Communications Strategy, which aims to ensure that the shareholders are informed of all major developments affecting the Company’s state of affairs.
6.2	Companies should provide the information indicated in the Guide to reporting on Principle 6.	Any departures are included in section 6.1 and 6.2 of this report. The Corporate Governance Statement has been posted on the Company’s website.
7	Recognise and manage risk
7.1	Companies should establish policies for oversight and management of material risks and disclose a summary of these policies.	The Board determines the Company’s “risk profile” and is responsible for overseeing and approving risk management strategy and policies, internal compliance and internal control. The Company’s Corporate Governance Policies include policies for oversight and management of material risks under the section Risk Management and Internal Compliance and Control, which is disclosed on the Company’s web site.
7.2	The board should require management to design and implement the risk management and internal control systems to manage the Company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material business risks.	1. Risk Management and internal control system. The Executive Director is responsible for Risk Management and internal control systems and reports material business risks to the board. 2. Internal audit function The Audit Committee / non-executive Directors Committee described in section 4.1 and 4.2. has assumed the responsibility of the internal audit function. 3. Risk Management Committee The Board has not established a Risk Committee, however has established a non-executive Directors Committee that has assumed the role of the Risk Committee which operates under a charter approved by the Board. The Board is ultimately responsible for risk oversight and risk management. During the year, the non-executive Directors Committee met twice and discussed the recognition and management of risk, andreported this to the board.

Tango Petroleum Limited

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CORPORATE GOVERNANCE STATEMENT (continued)

7.3	The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration in accordance with section 295A of the Corporations Act is founded on a and system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.	At present, the Board believes that it has adequately addressed issues of Risk and the future management of risk.
7.4	Provide the information indicated in_Guide to_ Reporting on Principle 7.	The Board considers it is appropriate to require the Chief Executive Officer and Chief Financial Officer (Company Secretary) to provide such a statement at the relevant time, i.e. as part of the annual and half yearly financial report process. Any departures from best practice recommendations 7.1, 7.2 7.3 and 7.4 are included in the above sections. The Corporate Governance Statement has been posted on the Company’s website.
8	Remunerate fairly and responsibly
8.1	The board should establish a remuneration committee.	1. Purpose of the Remuneration Committee The Board has not established a Remuneration Committee, however has established a Non-executive Directors Committee that has assumed the role of the Remuneration Committee, which operates under a charter approved by the Board. This committee met twice during the year. 2. Charter The Company’s Corporate Governance Policies includes a section on Remuneration Committee Charter, which form the charter that the Non-executive Directors Committee relies upon when discussing remuneration. 3. Composition of the Non-executive Directors Committee The Non-executive Directors Committee: 1. Does consists of only independent directors, Garry Ralston (Chair) and Tim Johnston. 2. Is chaired by an independent director, who is not the chair of the Company. 4. The Committee does not have three members, only two members. This is due to the Company only having two independent, non-executive directors to form the committee. 5. Remuneration Policy The remuneration policy is described in the Remuneration Committee Charter in the Corporate Governance Policies which is available on the Company’s web site.

Tango Petroleum Limited

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CORPORATE GOVERNANCE STATEMENT (continued)

8.2	Clearly distinguish the structure of non- executive directors’ remuneration from that of executives.	Remuneration It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and executive team by remunerating directors and key executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the non-executive Directors Committee links the nature and amount of executive directors’ and officers’ emoluments to the Company’s financial and operational performance. The expected outcomes of the remuneration structure are:  retention and motivation of key executives;  attraction of high quality management to the Company; and  performance incentives that allow executives to share the success of Tango Petroleum Limited. For a full discussion of the Company’s remuneration philosophy and framework and the remuneration received by directors and executives in the current period please refer to the remuneration report, which is contained within the Directors’ Report. There is no scheme to provide retirement benefits to non- executive directors. The Board is responsible for determining and reviewing compensation arrangements for the directors themselves and the chief executive officer and executive team. The Board has established a non-executive Directors Committee. Members of the non-executive Directors Committee throughout the year were: Mr Garry Ralston Mr James Robinson (resigned 1 November 2010) Mr Tim Johnston (appointed 1 November 2010)
8.3	Provide the information indicated in_Guide to_ Reporting on Principle 8.	The names of the members of the non-executive Directors Committee which assumed the role of the Remuneration Committee during the year is included in section 8.2 above. The Company does not currently have in existence any schemes for retirement benefits. Any departures from best practice recommendations 8.1, 8.2 and 8.3 are included above. The Company's Corporate Governance Policies, which includes a Remuneration Committee Charter is available on the Company’sweb site.

Tango Petroleum Limited

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AUDITOR’S INDEPENDENCE DECLARATION

As lead aud i tor for the a u dit of the fin a ncial report of Tango Petroleum Limit e d for the ye a r ended 31 M arch 2011, I declare that t o the best of my knowledg e and belief, t h ere have be e n no contrav e ntions of:

• a) the auditor indep e ndence requirements of the Corporatio n s Act 2001 in relation to th e audit; and

• b) any applicable c o de of profess i onal conduct in relation to t he audit.

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Perth, Western Australia N G NEILL 31 May 2011 Partner, HLB Mann Judd

HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers.

Tango Petroleum Limited

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STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2011

Notes Continuing operations Other income 2 Other expenses 2 Transfer of net foreign movement on disposal of foreign operation Exploration expenditure write off Loss before income tax expense Income tax expense 3 Loss from continuing operations after income tax expense Loss from discontinued operations after income tax expense 6 Net (loss) for the period Other comprehensive income/(loss) Exchange differences on translation of foreign operations Other comprehensive income/(loss) for the period, net of tax Total comprehensive income/(loss) for the period Basic deficit per share from continuing operations (cents per share) 4 Basic deficit per share from discontinued operations (cents per share) 4	2011 $ 2010 $ 36,518 42,460 (1,014,611) (342,559) - (200,403) (3,069,240) -
	(4,047,333) (500,502) - -
	(4,047,333) (499,537) - (965)
	(4,047,333) (500,502)
	- (220,091)
	- (220,091)
	(4,047,333) (720,593)
	(5.09) (0.79) - (0.002)

The accompanying notes form part of these financial statements.

Tango Petroleum Limited

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STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2011

Notes Assets Current Assets Cash and cash equivalents 8 Other current assets 9 Total Current Assets Non-Current Assets Deferred exploration and evaluation expenditure 10 Total Non-Current Assets Total Assets Liabilities Current Liabilities Trade and other payables 11 Total Current Liabilities Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital 7 Reserves Accumulated losses Total Equity	2011 $ 2010 $ 340,787 2,250,452 30,190 10,967
	370,977 2,261,419
	4,942 217,272
	4,972 217,272
	375,919 2,478,691
	21,187 43,101
	21,187 43,101
	- -
	21,187 43,101
	354,732 2,435,590
	22,696,239 21,104,764 (707,645) (1,082,645) (21,633,862) (17,586,529)
	354,732 2,435,590

The accompanying notes form part of these financial statements.

Tango Petroleum Limited

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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2011

	Ordinary Shares Foreign Exchange Reserves Capital Reserves Option Reserves Accumulated Losses Total
As at 1 April 2009 Loss for the period Other comprehensive income Total comprehensive income/ (loss) for the period Shares and options issued Transaction costs on share issue As at 31 March 2010 As at 1 April 2010 Loss for the period Total comprehensive loss for the period Shares and options issued Transaction costs on share issue As at 31 March 2011	$ $ $ $ $ $ 20,553,453 19,688 (1,082,645) - (17,086,027) 2,404,469
	- 200,403 - - (500,502) (300,459) - (220,091) - - - (220,091)
	- (19,688) - - (500,502) (520,190)
	600,000 - - - - 600,000 (48,689) - - - - (48,689)
	21,104,764 - (1,082,645) - (17,586,126) 2,435,590
	21,104,764 - (1,082,645) - (17,586,529) 2,435,590
	- - - - (4,047,333) (4,047,333)
	- - - - (4,047,333) (4,047,333)
	1,720,000 - - 375,000 - 2,095,000 (128,525) - - - - (128,525)
	22,696,239 - (1,082,645) 375,000 (21,633,862) 354,732

The accompanying notes form part of these financial statements.

Tango Petroleum Limited

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STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2011

Notes Cash flows from operating activities Interest received Payments to suppliers and employees Net cash flows (used in) operating activities 8 Cash flows from investing activities Proceeds on disposal of subsidiary 6 Payments for exploration and evaluation expenditure Acquisition of exploration assets Net cash flows (used in)/from investing activities Cash flows from financing activities Proceeds from issue of shares and options Transaction costs on issue of shares Net cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Net foreign exchange differences Cash and cash equivalents at the beginning of the period 8 Cash and cash equivalents at the end of the period	2011 $ 2010 $
	Inflows/(Outflows)
	35,912 42,489 (1,055,142) (393,096)
	(1,019,230) (350,607)
	- 337,265 (2,856,910) - - (217,272)
	(2,856,910) 119,993
	2,095,000 600,000 (128,525) (48,689)
	1,966,475 551,311
	(1,909,665) 320,697 - (231,635) 2,250,452 2,161,390
	340,787 2,250,452

The accompanying notes form part of these financial statements.

Tango Petroleum Limited

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Accounting Standards and Interpretations and complies with other requirements of the law.

The financial report has also been prepared on a historical cost basis. Cost is based on the fair values of the consideration given in exchange for assets.

The financial report is presented in Australian dollars.

The Company is a listed public company, domiciled in Australia and operating in Australia. The entity’s principal activities are Mining Exploration.

The Company has applied the revised AASB 101 Presentation of Financial Statements which became effective on 1 January 2009. The revised standard requires the separate presentation of a statement of comprehensive income and a statement of changes in equity. All non-owner changes in equity must now be presented in the statement of comprehensive income. As a consequence, the Company had to change the presentation of its financial statements. Comparative information has been re-presented so that it is also in conformity with the revised standard.

(b) Adoption of new and revised standards

Changes in accounting policies on initial application of Accounting Standards

In the year ended 31 March 2011, the Company has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period.

It has been determined by the Company that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change is necessary to Company accounting policies.

The Company has also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 31 March 2011. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to Company accounting policies.

(c) Statement of Compliance

The financial report was authorised for issue on 31 May 2011.

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

Tango Petroleum Limited

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(d) Critical accounting judgements and key sources of estimation uncertainty

The application of accounting policies requires the use of judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is revised if it affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

(e) Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Interest income

Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.

(f) Cash and cash equivalents

Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(g) Trade and other receivables

Trade receivables are measured on initial recognition at fair value. Trade receivables are generally due for settlement within periods ranging from 15 days to 30 days.

Impairment of trade receivables is continually reviewed and those that are considered to be uncollectible are written off by reducing the carrying amount directly. An allowance account is used when there is objective evidence that the Company will not be able to collect all amounts due according to the original contractual terms. Factors considered by the Company in making this determination include known significant financial difficulties of the debtor, review of financial information and significant delinquency in making contractual payments to the Company.

The amount of the impairment loss is recognised in the income statement within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the income statement.

Tango Petroleum Limited

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(h) Derecognition of financial assets and financial liabilities

(i) Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is derecognised when:

• the rights to receive cash flows from the asset have expired;

• the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or

• the Company has transferred its rights to receive cash flows from the asset and either:

• (a) has transferred substantially all the risks and rewards of the asset, or

• (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Company’s continuing involvement is the amount of the transferred asset that the Company may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, the extent of the Company’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

(ii) Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

(i) Foreign currency translation

The functional and presentation currency of Tango Petroleum Limited is Australian dollars. Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

(j) Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance date.

Deferred income tax is provided on all temporary differences at the balance date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

• when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or

• when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Tango Petroleum Limited

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

• when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

• or

• when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

(k) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• receivables and payables, which are stated with the amount of GST included.

• The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

Tango Petroleum Limited

• 26 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(l) Impairment of assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease).

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

(m) Trade and other payables

Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.

(n) Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate assets but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability.

When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

Tango Petroleum Limited

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(o) Share-based payment transactions

The Company provides benefits to employees (including senior executives) of the Company in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions).

The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Tango Petroleum Limited (market conditions) if applicable.

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Company’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

Cash settled transactions:

The Company also provides benefits to employees in its electronics segment in the form of cash-settled sharebased payments, whereby employees render services in exchange for cash, the amounts of which are determined by reference to movements in the price of the shares of Tango Petroleum Limited.

The cost of cash-settled transactions is measured initially at fair value at the grant date using the Black-Scholes formula taking into account the terms and conditions upon which the instruments were granted. This fair value is expensed over the period until vesting with recognition of a corresponding liability. The liability is re-measured to fair value at each balance date up to and including the settlement date with changes in fair value recognised in profit or loss.

(p) Issued capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(q)

Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:

• costs of servicing equity (other than dividends) and preference share dividends;

• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

Tango Petroleum Limited

• 28 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(r) Exploration and evaluation

Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied:

• (i) the rights to tenure of the area of interest are current; and

• (ii) at least one of the following conditions is also met:

• (a) the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the area of interest, or alternatively, by its sale; or

• (b) exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation and amortised of assets used in exploration and evaluation activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest.

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and evaluation asset (for the cash generating unit(s) to which it has been allocated being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years.

Where a decision has been made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment and the balance is then reclassified to development.

(s) Going concern

The directors are of the opinion that the company is a going concern due to the current low cash burn and current capital raising initiatives to ensure the Company will be able to meet its commitments with regards to any future exploration activities.

(t) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of Tango Petroleum Limited.

Change in accounting policy

The Company has adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114 Segment Reporting . The new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. This has not resulted in a change in the number of reportable segments presented by the Company as operating segments are reported in a manner that is consistent with internal reporting provided to the chief operating decision maker.

Tango Petroleum Limited

• 29 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 2: REVENUES AND EXPENSES

NOTE 3: INCOME TAX (a) Income tax benefit (b) Numerical reconciliation between tax expense and pre- tax net loss Loss before income tax benefit Income tax using the Company’s domestic tax rate of 30% (2010: 30%) Exchange differences on translation of foreign operations Debt forgiveness expense Current year losses not meeting loss recoupment tests Non-deductible expenses/(deductible tax adjustments) Other timing differences not recognised Capitalised exploration expenditure Current year losses for which no deferred tax asset was recognised Income tax benefit/(expense) attributable to entity (a) Other income Interest Other (b) Expenses Accounting and audit fees Administrative expenses Company secretarial costs Debt forgiveness expense Directors’ fees Foreign exchange loss Insurance Legal fees Rent Other	2011 $ 2010 $
	35,912 42,460 606 -
	36,518 42,460
	68,864 18,005 168,499 18,630 47,500 18,333 - 101,081 261,295 111,700 327,615 - 11,961 27,793 46,147 32,996 65,000 - 17,730 14,021
	1,014,611 342,559
	- -
	(4,047,333) (720,593)
	(1,214,200) (216,178) - 66,027 - 30,324 - 17,108 1,147,639 4,169 (2,328) - - (65,182) 68,889 163,732
	- -

Tango Petroleum Limited

• 30 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 3: INCOME TAX (continued)

(c) Tax losses

Unused tax losses for which no deferred tax asset has been recognised have not been recognised as a deferred tax asset as the future recovery of these losses is subject to the Company satisfying the requirements imposed by the regulatory authorities. The benefit of deferred tax assets not brought to account will only be brought to account if:

• Future assessable income is derived of a nature and an amount sufficient to enable the benefit to be realised; and

• The conditions for deductibility imposed by tax legislation continue to be complied with and no changes in tax legislation adversely affect the Company in realising the benefit.

Prior period tax losses are deductible to the Company if the Company continues to pass the requirements of either the continuity of ownership test or the same business test. It is probable that the Company has failed the continuity of ownership test and same business test during the previous financial year. Specifically the Company’s major shareholder disposed of its 56.67% interest in the Company on 25 September 2009 resulting in the probable breach of the continuity of ownership test. Further there was a change in the business of the Company as a result of the Company’s move away from the medical technology business conducted by it prior to November 2009. As a result, as at 31 March 2010 it is assumed that the requirements of the continuity of ownership test have been satisfied from 25 September 2009 onwards and therefore tax losses incurred prior to 25 September 2009 are no longer tax deductible to the Company. As at 31 March 2011 the Company has estimated carry forward tax losses of $229,629 (31 March 2010: $345,370).

(d) Unrecognised temporary differences Net deferred tax assets (calculated at 30% (2010:30%)) have not been recognised in respect of the following items: Tax losses Prepayments Capital raising costs recognised directly in equity Unrecognised deferred tax assets/(liabilities) relating to the above temporary differences	2011 $ 2010 $
	68,889 - (3,399) (1,231) 595 12,795
	66,085 11,564

Tango Petroleum Limited

• 31 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 4: EARNINGS PER SHARE

(a) Earnings used in calculating earnings per share For basic earnings per share: Continuing Operations Discontinued Operations (b) Weighted average number of shares Weighted average number of ordinary shares for basic earnings per share	2011 $ 2010 $
	(4,047,333) (499,537) - (965)
	79,479,452 62,876,712

There are no potential ordinary shares that are considered dilutive, as a result no dilutive earnings per share has been disclosed.

NOTE 5: OPERATING SEGMENTS

Identification of reportable segments

Tango Petroleum is focused on the oil and gas sector with a view to identifying an appropriate project in which to participate.

The Company has identified its operating segments based on the internal reports that are reviewed and used by the executive management team (the chief operating decision makers) in assessing performance and in determining the allocation of resources.

The operating segments are identified by management based on the nature of its interests and projects. Discrete financial information about each of these projects is reported to the executive management team on at least a monthly basis.

Location of interests and nature of projects

Oil and gas exploration projects

The Company is currently reviewing a number of potential opportunities within the oil and gas sector with a view to identifying an appropriate project in which to participate in the near future.

Accounting policies and inter-segment transactions

The accounting policies used by the Company in reporting segments internally are the same as those contained in note1 to the accounts and in the prior period.

Tango Petroleum Limited

• 32 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 5: OPERATING SEGMENTS (continued)

Year ended 31 March 2011 Total segment revenue Segment net operating profit/(loss) after tax Interest revenue Other non-cash expenses Segment assets Segment liabilities Cash flow information Net cash flow from operating activities Net cash flow from investing activities Net cash flow from financing activities Year ended 31 March 2010 Total segment revenue Segment net operating profit/(loss) after tax Interest revenue Other non-cash expenses Segment assets Segment liabilities Cash flow information Net cash flow from operating activities Net cash flow from investing activities Net cash flow from financing activities	Oil and Gas Projects $ Unallocated Items $ Total $
	- 36,518 36,518
	(3,069,240) (978,093) (4,047,333)
	- 35,912 35,912 - (327,615) (327,615) 4,942 370,977 375,919
	- 21,187 21,187
	- (1,019,230) (1,019,230) (2,856,910) - (2,856,910) - 1,966,475 1,966,475
	Oil and Gas Projects $ Unallocated Items $ Total $
	- - -
	- (500,502) (500,502)
	- 42,460 42,460 - (101,081) (101,081) 217,272 2,261,419 2,478,691
	- 43,101 43,101
	- (350,607) (350,607) (217,272) (337,265) 119,993 - 551,311 551,311

Tango Petroleum Limited

• 33 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 6: DISCONTINUED OPERATIONS

(a) Details of operations disposed

In October 2008 Tango Petroleum (formerly BrainZ Instruments Limited) entered into an Asset Purchase Agreement with Natus Medical (Natus) to sell substantially all of its assets. A special meeting of shareholders was held on 5 November 2008, approving the transaction. Under this agreement Natus took ownership of the assets and assumed the Company’s obligations under its then existing customer and supplier contracts. The Asset Purchase Agreement closed on 2 December 2008 with some transitional services being provided to Natus and the majority of the Company’s employees completing their notice periods around the end of January 2009. The final monies outstanding from Natus under the Asset Purchase Agreement were collected in May 2009.

(b) Financial performance of operations disposed

The results of the discontinued operations for the year until disposal are presented below:

Revenue Expenses Gross profit/(loss) Other income Administrative expenses Net foreign exchange movement Loss before tax from discontinued operations Tax income Loss for the year from discontinued operations Net cash inflow from disposal: Reflected in the consolidated statement of cash flows	2011 $ 2010 $
	- - - -
	- - - - - (965) - -
	- (965) - -
	- (965)
	- 337,265

Tango Petroleum Limited

• 34 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 7: ISSUED CAPITAL

Ordinary shares Issued and fully paid Movements in ordinary shares on issue At 1 April 2010 Movements during the period Shares at 20 cents issued July 2010 Shares at 12 cents issued February 2011 Transaction costs At 31 March 2011 Company options Company options carry no voting rights and carry no right to dividends. Movements in share options At 1 April 2010 Movements during the period Options at 0.5 cents issued May 2010 Options at 0.5 cents issued June 2010 Options free attaching issued July 2010 Options free attaching issued February 2011 At 31 March 2011	2011 $ 2010 $ 22,696,239 21,104,764
	No. $ 75,000,000 21,104,764 5,000,000 1,000,000 6,000,000 720,000 - (128,525)
	86,000,000 22,696,239
	2011 No. 2010 No.
	86,000,000 -
	No. $ - - 31,132,465 155,662 43,867,535 219,338 5,000,000 - 6,000,000 -
	86,000,000 375,000

Tango Petroleum Limited

• 35 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 8: CASH AND CASH EQUIVALENTS

Cash at bank and on hand Short-term deposits	2011 $ 2010 $
	40,787 50,452 300,000 2,200,000
	340,787 2,250,452

Cash at bank earns interest at floating rates based on daily bank deposit rates.

Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Company, and earn interest at the respective short-term deposit rates.

The Company did not engage in any non-cash financing activities for the period ended 31 March 2011 was not party to any borrowing facilities for the same period.

All cash was available for use, and no restrictions were placed on the use of it at any time during the period.

Reconciliation of loss for the year to net cash flows from operating activities (Loss) for the year Adjustments for: Net foreign exchange loss on disposal of subsidiary Write off of exploration expenditure Net (gain)/loss on foreign exchange Change in net assets and liabilities: (Increase)/decrease in trade and other receivables (Decrease)/increase in trade and other payables Net cash used in operating activities	2011 $ 2010 $
	(4,047,333) (720,593) - 200,403 3,069,240 - - (24,830) (19,223) 337,265 (21,914) (162,540)
	(1,019,230) (350,607)

Tango Petroleum Limited

• 36 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 9: OTHER CURRENT ASSETS

	2011	2010
	$	$
GST receivables	18,791	-
Prepayments	11,399	-
Trade and other receivables	30,190	-
OTE 10: DEFERRED EXPLORATION AND EVALUATION	EXPENDITURE
Costs carried forward in respect of areas of interest
in the following phases:
Exploration and evaluation phase - at cost
Balance at beginning of year	217,272	-
Acquisition costs – Interest in Amazon Prospect	-	217,272
Exploration expenditure – Amazon Prospect	2,856,910	-
Write off of exploration expenditure	(3,069,240)	-
Total deferred exploration and evaluation expenditure	4,942	217,272

NOTE 10: DEFERRED EXPLORATION AND EVALUATION EXPENDITURE

The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the interest.

NOTE 11: TRADE AND OTHER PAYABLES (CURRENT)

Other payables *	21,187 43,101

(i) *Other payables are non-interest bearing and are normally settled on 60-day terms.

Tango Petroleum Limited

• 37 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 12: FINANCIAL INSTRUMENTS

Financial assets Cash and cash equivalents	2011 $ 2010 $
	340,787 2,250,452

The following table details the expected maturity/s for the Company’s non-derivative financial assets. These have been drawn up based on undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where the Company anticipates that the cash flow will occur in a different period.

	Weighted
	average
	effective	Less than 1		3 months –
	interest rate	month	1 – 3 Months	1 year	1 – 5 years	5+ years
	%	$	$	$	$	$
2011
Non-interest bearing	-	40,787	-	-	-		-
Variable interest rate instruments	-	-	-	-	-		-
Fixed interest rate instruments	4.75%	-	300,000	-	-		-
		40,787	300,000	-	-		-
2010
Non-interest bearing	-	50,452	-	-	-		-
Variable interest rate instruments	-	-	-	-	-		-
Fixed interest rate instruments	4.91%	-	2,200,000	-	-		-
		50,452	2,200,000	-	-		-

Tango Petroleum Limited

• 38 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 12: FINANCIAL INSTRUMENTS (continued)

The following tables detail the Company’s remaining contractual maturity/s for its non-derivative financial liabilities. These are based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows.

Weighted average effective interest rate	Less than 1 month 1 – 3 Months 3 months – 1 year 1 – 5 years 5+ years
%	$ $ $ $ $
2011 Non-interest bearing - Variable interest rate instruments - Fixed interest rate instruments - 2010 Non-interest bearing - Variable interest rate instruments - Fixed interest rate instruments -	- 21,187 - - - - - - - - - - - - -
	- 21,187 - - -
	- 43,101 - - - - - - - - - - - - -
	- 43,101 - - -

NOTE 13: FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICES

The Company has exposure to the following risks from their use of financial instruments:

• Credit risk

• Liquidity risk  Market risk

This note presents the information about the Company’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital.

The Board has overall responsibility for the establishment and oversight of the risk management framework. The Board reviews and agrees policies for managing each of these risks as summarised below.

The Company’s principal financial instruments comprise cash and short term deposits. The main purpose of the financial instruments is to earn the maximum amount of interest at a low risk to the Company. The Company also has other financial instruments such as trade debtors and creditors which arise directly from its operations. For the year ended 31 March 2011, it has been the Company’s policy not to trade in financial instruments.

(a) Credit risk management

Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company only transacts with entities that are rated the equivalent of investment grade and above. This information is supplied by independent rating agencies where available and, if not available, the Company uses publicly available financial information and its own trading record to rate its major customers. The Company’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee annually.

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.

The carrying amount of financial assets recorded in the financial statements, net of any allowance for losses, represents the Company’s maximum exposure to credit risk without taking account of the value of any collateral obtained.

Tango Petroleum Limited

• 39 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 13: FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICES (continued)

(b) Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk management framework for the management of the Company’s short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The company did not have any undrawn facilities at its disposal as at balance date.

(c) Interest rate risk management

The company is exposed to interest rate risk as the Company deposits the bulk of the Company’s cash reserves in Term Deposits with the NAB. The risk is managed by the Company by maintaining an appropriate mix between short term and medium-term Deposits. The Company’s exposures to interest rate on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.

(d) Market risk

Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or value of the holdings of financial instruments. The Company is exposed to movements in market interest rates on short term deposit, and foreign currency movements on the trade receivables. The policy is to monitor the interest rate yield curve out to 120 days to ensure a balance is maintained between the liquidity of cash assets and the interest rate return. The Company does not have short or long term debt, and therefore this risk is minimal. The Company limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have acceptable credit ratings.

NOTE 14: COMMITMENTS AND CONTINGENCIES

Guarantees

Tango Petroleum Limited did not commit to nor make guarantees of any form as at 31 March 2011.

NOTE 15: DIVIDENDS

The directors of the company have not declared any dividend for the year ended 31 March 2011.

NOTE 16: CONTINGENT LIABILITIES

There were no contingent liabilities as at 31 March 2011.

Tango Petroleum Limited

• 40 -

TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2010

NOTE 17: EVENTS SUBSEQUENT TO REPORTING DATE

On 23 May 2011, the Company announced the following subsequent events:

The Board of Tango Petroleum Ltd announced that it has signed a Participation Agreement to acquire a 17.25% working interest in the Lyons Point Prospect, operated by Clayton Williams Energy Inc in Acadia Parish, Louisiana. The Company’s share of the initial dry hole well costs are estimated at US$1,317,000 (includes entry costs). In a success case the Company’s share of completion and facilities costs are estimated to be a further US$520,000.

The Company announced a non-renounceable entitlement issue to shareholders of one option (“Entitlement Option”) for every one share held at the record date, at an issue price of 0.5 cents. The Entitlement Options will be a new series of quoted options exercisable at 6 cents each on or before 30 June 2012. The entitlement issue will raise up to approximately $430,000 before costs.

The Company also announced that subject to shareholder approval, it has agreed to place 34,000,000 new shares (“Placement Shares”) at a price of 3.5 cents per share. Each Placement Share subscribed for will have a free attaching Company Option (“Placement Option”) on the same terms as the Entitlement Options, that is, an exercise price of 6 cents on or before 30 June 2012. The placement will raise $1,190,000 before costs.

NOTE 18: AUDITOR’S REMUNERATION

The auditor of Tango Petroleum Limited is HLB Mann Judd.

The auditor of Tango Petroleum Limited is HLB Mann Judd.
Amounts received or due and receivable by HLB Mann Judd for: Preparation of independent accountants report Audit or review of financial reports	2011 $ 2010 $
	6,000 - 28,500 10,000
	34,500 10,000

Tango Petroleum Limited

• 41 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011

NOTE 19: DIRECTORS AND EXECUTIVES DISCLOSURES

(a) Details of Key Management Personnel

Mr Mathew Walker Executive Chairman Mr Garry Ralston Non-Executive Director Mr Tim Johnston Non-Executive Director Mr James Robinson Company Secretary

Key management personnel remuneration has been included in the Remuneration Report section of the Directors’ Report.

(b) Option holdings of Key Management Personnel

As at 31 March 2011

Mr Mathew Walker Mr Garry Ralston Mr James Robinson Mr Tim Johnston Mr Keith Goodall Total	Balance at beginning of period Granted as remuneration Options exercised Net change Other* Balance at end of period
	6,875,000 - - - 6,875,000 3,000,000 - - - 3,000,000 1,435,619 - - 64,381 1,500,000 - - - - - 2,000,000 - - - 2,000,000
	13,310,619 - - 64,381 13,375,000

• On market transaction

As at 31 March 2010

Mr Keith Goodall Mr Mathew Walker Mr Garry Ralston Mr James Robinson Total	Balance at beginning of period Granted as remuneration Options exercised Net change Other* Balance at end of period
	- - - 2,000,000 2,000,000 - - - 6,875,000 6,875,000 - - - 3,000,000 3,000,000 - - - 1,435,619 1,435,619
	- - - 13,310,619 13,310,619

• Entitlement issue

Tango Petroleum Limited

• 42 -

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2010

NOTE 19: DIRECTORS AND EXECUTIVES DISCLOSURES (continued)

(c) Shareholdings of Key Management Personnel

Shares held in Tango Petroleum Limited

As at 31 March 2011

As at 31 March 2011
	Balance at beginning of period Granted as remuneration On Exercise of Options Net Change Other* Balance at end of period Ord Ord Ord Ord Ord
Mr Mathew Walker Mr Garry Ralston Mr James Robinson Mr Tim Johnston Mr Keith Goodall (resigned 27 July 2010)	13,750,000 - - - 13,750,000 6,000,000 - - - 6,000,000 2,871,238 - - 28,762 2,900,000 - - - - - 4,000,000 - - (4,000,000) -
	26,621,238 - - (3,971,238) 22,650,000

• On market transactions.

As at 31 March 2010

As at 31 March 2010
	Balance at beginning of period Granted as remuneration On Exercise of Options Net Change Other* Balance at end of period Ord Ord Ord Ord Ord
Mr Keith Goodall Mr Mathew Walker Mr Garry Ralston Mr James Robinson Mr Keith Aitchison (resigned 8 October 2009)	- - - 4,000,000 4,000,000 - - - 13,750,000 13,750,000 - - - 6,000,000 6,000,000 - - - 2,871,238 2,871,238 3,548,672 - - (3,548,672) -
	3,548,672 - - 23,072,566 26,621,238

• On market transactions.

NOTE 20: RELATED PARTY DISCLOSURES

Disclosure of interest of Administration Agreement with Cicero Corporate Services Pty Ltd:

• Mathew Walker and James Robinson are shareholders and directors of Cicero Corporate Services Pty Ltd.

• Services provided include office rent of the Company’s principal place of business, bookkeeping and boardroom facilities.

• Cicero Corporate Services Pty Ltd is contracted to provide administration services on an ongoing basis, of approximately $5,000 (excluding GST) plus reimbursements per month.

• All dealings with Cicero Corporate Services Pty Ltd are completed as arms length transactions.

Tango Petroleum Limited

• 43 -

DIRECTORS’ DECLARATION

In the opinio n of the direct o rs of Tango P etroleum Li m ited (‘the Co m pany’):

1. Th e financial st a tements and notes there t o, as set o u t on pages 18 to 42, a r e in accord a nce with th e Corporations Act 2001 including:

2. a. giving a tr u e and fair vi e w of the Company financial position as a t 31 March 2 0 11 and of th e performanc e of the Co m pany for the y ear then en d ed; and

3. b. complying with Austral i an Accounti n g Standards (including th e Australian A ccounting I n terpretations ) and the C o rporations R e gulations 20 0 1; and

4. Th e re are reaso n able ground s to believe that the com p any will be a ble to pay it s debts as a n d when the y bec o me due and payable.

5. Thi s declaration has been made after re c eiving the d e clarations r e quired to be made to th e directors i n acc o rdance with S ection 295A of the Corpor a tions Act 20 0 1 for the fina n cial year en d ed 31 March 2011.

This declara t ion is signed in accordan c e with a res o lution of the Board of Dir e ctors made p ursuant to s . 303(5) of th e Corporation s Act 2001.

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Mathew Walker Executive Chairman Dated this 31[st] day of May 2011

Tango Petroleum Limited

• 44 -

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INDEPENDENT AUDITOR’S REPORT

To the members of TANGO PETROLEUM LIMITED

Report on the Financial Report

We have au d ited the acc o mpanying financial report of Tango Petroleum Limit e d (“the comp a ny”), which c omprises th e statement of financial position as at 31 March 2011, the stateme n t of comprehensive income, statement o f changes i n equity and s tatement of cash flows for the year e nded on th a t date, note s comprising a summary of significan t accounting policies and ot h er explanatory notes and t he directors’ d eclaration fo r Tango Petroleum Limited.

Directors’ Responsibility for the Financial Report

The director s of the comp a ny are resp o nsible for the preparation o f the financi a l report that g ives a true a n d fair view i n accordance with Austral i an Accounti n g Standard s (including t he Australia n Accountin g Interpretati o ns) and th e Corporation s Act 2001 , a n d for such int e rnal control a s the directo r s determine is necessary to enable the p reparation o f the financial report that is f ree from mat e rial misstate m ent, whethe r due to fraud or error.

In Note 1(c), the director s also state, in accordanc e with Accounting Standa r d AASB 101: Presentatio n of Financia l Statements, t hat the cons o lidated finan c ial statement s comply with International Financial Re p orting Stand a rds.

Auditor’s Responsibility

Our respon s ibility is to e x press an o p inion on the financial report based on our audit. W e conducte d our audit i n accordance with Australian Auditing Standards. T hose stand a rds require that we co m ply with relevant ethica l requirement s relating to a u dit engagem e nts and plan and perform the audit to o btain reason a ble assuranc e whether th e financial rep o rt is free fro m material mis s tatement.

An audit inv o lves perfor m ing procedur e s to obtain a udit evidenc e about the a mounts and d isclosures i n the financia l report. The p rocedures s e lected depe n d on the au d itor’s judgm e nt, including the assessm e nt of the ris k s of materia l misstatement of the fina n cial report, w hether due t o fraud or error. In maki n g those risk assessment s , the audito r considers internal control r elevant to th e entity's prep a ration and fair presentatio n of the finan c ial report in order to desig n audit procedures that are appropriate in the circum s tances, but not for the p u rpose of ex p ressing an opinion on th e effectivenes s of the entity's internal control. An audit also includes evaluating the appropriateness of acco u nting policie s used and t h e reasonabl e ness of ac c ounting esti m ates made by the direc t ors, as well as evaluating the overal l presentation of the financi a l report.

Our audit di d not involve an analysis of t he prudence of business d e cisions mad e by directors or managem e nt.

We believe that the audi t evidence w e have obtai n ed is suffici e nt and appr o priate to pr o vide a basis for our audi t opinions.

HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers.

• 45 - Tango Petroleum Limited

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Independence

In conductin g our audit, w e have complied with the in d ependence r equirements o f the Corpor a tions Act 20 0 1 .

Opinion

In our opinio n :

• (a) the fin a ncial report o f Tango Petr o leum is in ac c ordance with the Corporations Act 2001, including: i) giving a true and fair vie w of the comp a ny’s financia l position as a t 31 March 2 0 11 and of it s performanc e for the year e nded on that date; and

• ii) complying with Australian Accounting S tandards (in c luding the A u stralian Acc o unting Interp r etations) an d the Corporations Regulati o ns 2001 ; an d

(b) the fin a ncial statem e nts also com p ly with International Finan c ial Reporting Standards a s disclosed in Note 1(c).

Report on the Remuneration Report

We have au d ited the Re m uneration R e port include d in the direc t ors’ report f o r the year e n ded 31 Mar c h 2011. Th e directors of t h e company a re responsibl e for the preparation and p r esentation of the Remune r ation Report in accordanc e with section 3 00A of the C orporations A ct 2001 . Our responsibility is to express an opinion o n the Remuneration Report , based on ou r audit condu c ted in accord a nce with Au s tralian Auditi n g Standards.

Opinion

In our opini o n the Remuneration Repo r t of Tango Petroleum for t he year end e d 31 March 2 011 complie s with sectio n 300A of the C orporations A ct 2001 .

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HLB MANN JUDD Chartered Accountants Perth, Western Australia N G NEILL 31 May 2011 Partner

• 46 - Tango Petroleum Limited

ADDITIONAL SHAREHOLDER INFORMATION

A. Corporate Governance

A statement disclosing the extent to which the Company has followed the best practice recommendations set by the ASX Corporate Governance Council during the period is contained within the Director’s Report.

B. Shareholding

1. Substantial Shareholders

There were five substantial shareholders as at the balance date:

• i) Mr Mathew Walker holds 13,750,000 ordinary shares, or 15.99% of the voting rights in the Company

• ii) Mr Stephen Rohde and Mrs Cheryl Rohde (The Lindrew A/C) hold 6,075,000 ordinary shares, or 7.06% of the voting rights in the Company

• iii) Mr Garry Ralston holds 6,000,000 ordinary shares, or 6.98% of the voting rights in the Company

• iv) Ms Loraine Von der Weid de Weck holds 5,000,000 ordinary shares, or 5.81% of the voting rights in the Company

• v) ABN Amro Clearing Sydney Nominees Pty Ltd holds 4,417,159 ordinary shares, or 5.14% of the voting rights in the Company.

2. Number of holders in each class of equity securities and the voting rights attached (as at 20 May 2011)

Ordinary Shares

There are 629 holders of ordinary shares. Each shareholder is entitled to one vote per share held.

In accordance with the Company’s Constitution, on a show of hands every number present in person or by proxy or attorney or duly authorized representative has one vote. On a poll every member present in person or by proxy or attorney or duly authorized representative has one vote for every fully paid ordinary share held.

Options

There are 298 holders of options. There are no voting rights attached to these options.

3. Distribution schedule of the number of holders in each class of equity security as at 25 May 2011.

a) **Fully Paid Ordinary **	Shares
Spread of holdings	Holders		Securities	% of Issued Capital
NIL holding
1 - 1,000		20	10,797	0.01%
1,001 - 5,000		82	300,198	0.35%
5,001 - 10,000		148	1,358,430	1.58%
10,001 - 100,000		274	11,046,324	12.84%
100,001 -		105	73,284,251	85.21%
Totalon register		629	86,000,000	100.00%

b) Listed Options exercisable at $0.20 on or before 31 May 2011

Spread of holdings	Holders		Securities	% of Issued Capital
NIL holding
1 - 1,000		4	3,240	0.01%
1,001 - 5,000		40	136,612	0.28%
5,001 - 10,000		62	581,935	1.20%
10,001 - 100,000		120	5,976,499	12.32%
100,001 -		71	41,801,714	86.19%
Total on register		297	48,500,000	100.00%

• 47 - Tango Petroleum Limited

ADDITIONAL SHAREHOLDER INFORMATION (Continued)

4. Marketable Parcel

There are 258 shareholders with less than a marketable parcel.

5. Twenty largest holders of each class of quoted equity security

The names of the twenty largest holders of each class of quoted security, the number of equity security each holds and the percentage of capital each holds (as at 25 May 2011) is as follows:

Ordinary Shares Top 20 holders and percentage held

Pos	Holder name	Designation	Securities	% of issued
1	WALKER MATHEW DONALD		13,750,000	15.99%
2	ROHDE STEPHEN C + C D	LINDREW A/C	6,075,000	7.06%
3	RALSTON GARRY		6,000,000	6.98%
4	WECK LORAINE VON DER W		5,000,000	5.81%
5	ABN AMRO CLEARING SYDNEY	CUST A/C	4,417,159	5.14%
6	SABRELINE PL	JPR INV A/C	2,900,000	3.37%
7	MIKADO CORP PL	JFC SUPER A/C	2,242,000	2.61%
8	S H R PL		1,458,338	1.70%
9	DONGRAY RICHARD S + J	S/F A/C	1,000,000	1.16%
10	MCELROY BRAD		1,000,000	1.16%
11	BATIO PL	WILD S/F A/C	1,000,000	1.16%
12	DILKES BRADLEY JOHN		1,000,000	1.16%
13	KROGER ANDREW		918,366	1.07%
14	PEWKLIANG BOONSRI		913,408	1.06%
15	DELARO HLDGS PL	DONGRAY DISCRE NO4	829,290	0.96%
16	DE SIMONE NOM PL		800,000	0.93%
17	DECK CHAIR HLDGS PL		750,000	0.87%
18	DAANCH PL	SPENCER HLDGS A/C	750,000	0.87%
20	BELL POTTER NOM LTD	BB NOM A/C	699,938	0.81%
		** Top20 total -	52,228,499	60.71%
		** Balance total -	33,771,501	39.29%

• 48 - Tango Petroleum Limited

ADDITIONAL SHAREHOLDER INFORMATION (Continued)

Options exercisable at $0.20 on or before 31 May 2011 Top 20 holders and percentage held

Pos	Holder name	Designation	Securities	% of issued
1	WALKER MATHEW DONALD		6,875,000	14.18%
2	RALSTON GARRY B + T M	RALSTON S/F A/C	3,000,000	6.19%
3	MO YI JIN + XU LING	GREAT RIVER STAR S	2,815,000	5.80%
4	ROHDE STEPHEN C + C D	LINDREW A/C	2,500,000	5.15%
5	AUGUSTUS MINERALS LTD		2,050,000	4.23%
6	GOODALL KEITH N + P J	WARATAH A/C	2,000,000	4.12%
7	SAYLE MARK		1,633,000	3.37%
8	SABRELINE PL	JPR INV A/C	1,500,000	3.09%
9	MIKADO CORP PL	JFC SUPER A/C	1,250,000	2.58%
10	LAMBERT NIGEL		1,000,000	2.06%
11	PATEL HEMAL		1,000,000	2.06%
12	ABN AMRO CLEARING SYDNEY	CUST A/C	957,143	1.97%
13	KHALIQI HARIS		891,655	1.84%
		BAWNLUSK
14	CORR JOHN FRANCIS	PORTFOLIO	625,000	1.29%
15	DONGRAY RICHARD S + J	S/F A/C	600,000	1.24%
16	O'GORMAN RICHARD		558,422	1.15%
17	SILVA DANIELA PENELLA		540,000	1.11%
18	MCELROY BRAD		500,000	1.03%
19	NAHLOUS NICHOLAS GEORGE		500,000	1.03%
20	FLETCHER ANTHONY		500,000	1.03%
		**Top 20 total-	31,295,220	36.39%
		** Balance total -	54,704,780	63.61%

• 49 - Tango Petroleum Limited

ADDITIONAL SHAREHOLDER INFORMATION (Continued)

1. Company Secretary

The name of the Company secretary is James Robinson.

2. Address and telephone details of the Company’s registered administrative office and principle place of business:

Suite 9, 1200 Hay Street WEST PERTH WA 6005 Telephone: (08) 6460 4960 Fax: (08) 9324 3045

3. Address and telephone details of the office at which a registry of securities is kept:

Security Transfer Registrars Pty Ltd 770 Canning Highway APPLECROSS WA 6153

4. Securities exchange on which the Company’s securities are quoted:

The Company’s listed equity securities are quoted on the Australian Securities Exchange.

5. Restricted Securities

The Company has 37,500,000 options escrowed until 1 June 2011.

6. Review of Operations

A review of operations is contained in the Directors’ Report.

7. Consistency with business objectives - ASX Listing Rule 4.10.19

In accordance with Listing Rule 4.10.19, the Company states that it has used the cash and assets in a form readily convertible to cash that it had at the time of admission in a way consistent with its business objectives. The business objective is primarily exploration for natural resources and acquisition of resource based projects.