ASF GROUP LIMITED - Annual Report 2008

mining | property | travel | investments

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ASF GROUP LIMITED ABN 50 008 924 570 AND ITS CONTROLLED ENTITIES
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2008 annual report

Bridging business between Australia & China

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

CORPORATE DIRECTORY

ASF Group Limited’s (“the Company”) shares are quoted on the official list of the Australian Stock Exchange Limited.

The ASX code for the Company’s ordinary fully paid shares is “AFA”.

Directors

Ms Min Yang, Director and Chairman

Mr Alex Lao, Vice Chairman/Non-Executive Director

Mr Quan (David) Fang. Director Mr Wai Sang Ho, Non-Executive Director Mr Geoff Baker, Non-Executive Director

Mr Alan Humphris, Non-Executive Director

Company secretary

Mr Tony Sin Pyng Teng

Registered office and principal place of business

Suite 2/ 3B Macquarie Street Sydney NSW 2000 Telephone: 02 9251 9088 Internet: www.asfgroupltd.com Facsimile: 02 9251 9066 Email: [email protected]

Share Registry

Registries Limited Level 2, 28 Margaret Street Sydney NSW 2000

Home Exchange

Australian Stock Exchange Limited Exchange Centre 20 Bridge Street Sydney NSW 2000

Auditors

Hall Chadwick St Martins Tower Level 29, 31 Market Street Sydney NSW 2000

Solicitors

Deacons, Lawyers Level 8, 1 Alfred Street Sydney NSW 2000

Bankers

Australian & New Zealand Banking Group Limited 68 Pitt Street Sydney NSW 2000

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

CHAIRMAN’S REPORT TO SHAREHOLDERS

Dear Shareholder,

It is with pleasure that the directors present the 2008 Annual Report of ASF Group Limited and its controlled entities (‘the consolidated entity”).

For the financial year ended 30 June 2008, the consolidated entity’s operating revenue for the financial year is $19,941,109 (FY07: $20,117,000). The net loss after adjusting for minority interest is $4,516,427 (FY07: $1,541,413).

After a period of restructuring, the Company issued a prospectus during the year and re-quoted its shares on the ASX on 29 January 2008. The Company has continued to develop while its activities, other than its investment interest in the Macau based travel business, Macau Multinational Youth Travel Agency Limited, are in the developmental stage.

The Company’s strategy is to add shareholder value in the short to medium term by further development of its existing assets and activities, particularly in resources and property.

The Company continued to improve its performance in its property division under the Aushome name and with the marketing of property development projects at our two international property exhibition centres in China. The property business showed improvement during the year but did not record a profit after the allocation of overhead costs

In the current year we are concentrating on adding value to the Company’s mineral tenements, particularly those in the Canning Basin of Western Australia where our preliminary work during the year under review suggested that large amounts of relatively shallow coal are present. We are excited by this prospect and are currently preparing a work program of exploration for the Canning Basin tenements and are in discussions with potential partners who may become involved in the program. The objective of the program is to establish a large mineable resource of thermal coal.

In early 2008 the Company was appointed as the sole Australian Official Partner for China International Fair for Investment and Trade (CIFIT) which is sponsored by China’s Ministry of Commerce. The Company establishing an Australian pavilion for the promotion of bilateral investment and trade at CIFIT held on 8-11 September 2008 in Xiamen attracting considerable interest from Chinese investors looking to invest in Australia,

In June 2008, the Company entered into an agreement with Guangzhou Zhongsai Investment Consulting Co Ltd (‘Zhongsai’) under which Zhongsai (or its nominees) will subscribe for new shares in the Company at an issue price of 12 cents per share. As at the date of this Report approximately $1.29 million had been subscribed for shares under the agreement which expires on 15 October 2008.

We plan to expand the board of the Company and at the forthcoming Annual General Meeting a representative of Zhongsai and a representative each of CITIC International Assets Management Limited (‘CIAM’) and Goldenray Consortium(S)Pte Ltd will be standing for election as directors. CIAM emerged as a 4.68% shareholder of the Company in January 2008.

The directors extend their appreciation to all our partners and team members for their efforts during the year, our shareholders and valued clients.

Yours sincerely,

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Min Yang Chairman 30 September 2008

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

CORPORATE GOVERNANCE STATEMENT

ASF is committed to good corporate governance and disclosure. The Company has substantially adopted the ASX Corporate Governance Council’s “Principles of Good Corporate Governance and Best Practice Recommendations’ (First edition March 2003) for the entire FY08 financial year. Where the ASX Corporate Governance Council’s recommendations have not been adopted by the Company, this has been identified and explained below.

		Complied	Note
1.1	Formalise and disclose the functions reserved to the Board and those delegated to management	Yes	1
2.1	A majorityof the Board should be independent directors’.	No	2
2.2	The chairperson should be an independent director	No	3
2.3	The roles of chairperson and chief executive officer should not be exercised by the same individual	No	4
2.4	The Board should establish a nomination committee	No	5
2.5	Provide the information indicated in Guide to Reportingon Principle 2	Yes
3.1	Establish a code of conduct to guide the directors, the chief executive officers, the chief financial officer and another other key executives as to: •the practices necessary to maintain confidence in the company's integrity •the responsibility and accountability of individuals for reporting and investigating reports of unethical practices	Yes Yes Yes	6
3.2	Disclose the policy concerning trading in company securities by directors, offices and employees	Yes	7
3.3	Provide the information indicated in Guide to Reportingon Principle 3.	Yes
4.1	Require the chief executive officer and the chief financial officer to state in writing to the Board that the Company’s financial reports present a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards.	Yes
4.2	The Board should establish an audit committee.	No	8
4.3	Structure the audit committee so that it consists of •only non-executive directors •a majority of independent directors •an independent chairperson, who is not chairperson of the Board •at least three members	No	8-9
4.4	The audit committee should have a formal charter	No	9
4.5	Provide the information indicated in Guide to Reportingon Principle 4	Yes
5.1	Establish written policies 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	Yes	10
5.2	Provide the information indicated in Guide to reportingon Principle 5.	Yes
6.1	Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at general meetings	Yes	11
6.2	Require the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.	Yes
7.1	The Board or appropriate Board committee should establish policies on risk oversight and management.	Yes	12

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

CORPORATE GOVERNANCE STATEMENT (continued)

7.2	The chairman and the chief financial office should state to the Board in writing that:- •the statement given in accordance with best practice recommendation 4.1 is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board •the company’s risk management and internal compliance and control system is operating efficiently and effectively in all material aspects.	Yes Yes
7.3	Provide the information indicated in Guide to reportingon Principle 7.	Yes
8.1	Disclose the process for performance evaluation of the Board, its committee and individual directors, and key executives	Yes	13
9.1	Provide disclosure in relation the company’s remuneration policies to enable investors to understand the costs and benefits of those policies and the link between remuneration paid to directors and key executives and corporate performance.	Yes	14
9.2	The Board should consist of a remuneration committee	No	15
9.3	Clearly distinguish the structure of non-executive directors’ remuneration from that of executives	Yes
9.4	Ensure that payment of equity-based executive remuneration is made in accordance with thresholds set in plans approved by shareholders.	Yes
9.5	Provide the information indicated in Guide to reportingon Principle 9.	Yes
10.1	Establish and disclose a code of conduct to guide compliance with legal and other obligations to legitimate stockholders.	Yes	16

Notes

The directors of the Company are accountable to shareholders for the proper management of the business and affairs of the Company.

The key responsibilities of the Board are:-

the oversight of the Company, including its control and accountability systems;
establishing, monitoring and modifying corporate strategies and performance objectives;
ensuring that appropriate risk management systems, internal compliance and control, reporting systems, codes of conduct, and legal compliance measures are in place;
monitoring the performance of management and implementation of strategy, and ensuring appropriate resources are available;
approving and monitoring of financial and other reporting;
approving dividends, major capital expenditure, acquisitions and capital raising/restructures;
appointment and removal of Directors, Company Secretary and senior management.

The Company has an informal process to educate new directors about the nature of the business, current issues, the corporate strategy and the expectations of the consolidated entity concerning performance of directors. Directors also have the opportunity to visit consolidated entity facilities and meet with management to gain a better understanding of business operations.

While the majority of the board members are not independent directors, the board believes that the people on the board can and do make independent judgments in the best interests of the Company at all times
The chairperson is an executive director and therefore is not an independent director. The Board believes, that even thought the chairperson is not an independent director, the chairperson is able to make quality and independent judgement on all relevant issues falling within the scope of the role of a chairman.

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

CORPORATE GOVERNANCE STATEMENT (continued)

The Company will work towards this principle, however at this time while the Company is in the development phase, the Board believes it is not appropriate to meet this criterion .

The roles of chairperson and chief executive officer is currently exercised by the by the same individual which is believed to be appropriate at this stage in the Company’s development.
The Company does not have a nomination committee as the size of the company and the Board does not warrant such a committee. All Board nomination matters are considered by the whole Board.

The Board oversees the appointment and induction process for directors and committee members, and the selection, appointment and succession planning process of the Company’s executive management team. The appropriate skill mix, personal qualities, expertise and diversity are factors taken into account in each case. When a vacancy exists or there is a need for particular skills, the Board determines the selection criteria based on the required skills.

The Board annually reviews the effectiveness of the functioning of the Board, individual directors, and senior executives.

The consolidated entity recognises the need for directors and employees to observe the highest standards of behaviour and business ethics. All directors and employees are required to act in accordance with the law and with the highest standard of propriety.

A code of contact has been developed and approved by the Board a copy of which can be found on the Company’s website (http://www.asfgroupltd.com).

The Company’s policy regarding directors and employees trading in its securities is set by the Board. The policy restricts directors and employees from acting on material information until it has been released to the market and adequate time has been given for this to be reflected in the security’s prices
The Company has not established an Audit Committee and the Board performs this role. The Board advises on the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the consolidated entity. After expansion of the number of Directors, the Board intends to establish an Audit Committee .

Currently the Board:

reviews the annual, half-year and concise financial reports and other financial information distributed externally. This includes approving new accounting policies to ensure compliance with Australian Accounting Standards and generally accepted accounting
principles, and assessing whether the financial information is adequate for shareholder needs;
• assesses whether non-audit services provided by the external auditor are consistent with maintaining the external auditor’s independence. Each reporting period the external auditor provides an independence declaration in relation to the audit or review;
assesses the adequacy of the internal control framework and the Company’s code of ethical standards;
discusses the external audit and internal audit plans, identifying any significant changes in structure, operations, internal controls or accounting policies likely to impact the financial statements and to review the fees proposed for the audit work to be performed;
monitors the procedures to ensure compliance with the Corporations Act 2001 and the ASX Listing Rules and all other regulatory requirements;
addresses any matters with the auditors, Australian Taxation Office, Australian Securities and Investments Commission, and ASX;
reviews the nomination and performance of the external auditor. The current external auditor was appointed at the Company’s 2005 General Meeting; and
reviews and approves corporate governance policy
The company the Board intends to establish an Audit Committee with an independent chairman and a majority of independent directors and is in the process of preparing a formal charter of the proposed audit and risk management committee covering the areas as set out in note 8.

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

CORPORATE GOVERNANCE STATEMENT (continued)

The Company has established procedures designed to ensure compliance with the ASX Listing Rules so that company announcements are made in a timely manner, are factual, do not omit material information and are expressed in a clear and objective manner that allows investors to assess the impact of the information when making investment decisions.

Established policies which can be viewed on the company’s website also ensure accountability at a senior management level for ASX compliance. The Board approves all disclosures necessary to ensure compliance with ASX Listing Rule disclosure requirements.

The Company has a communications strategy and an established policy on stakeholder communication and continuous disclosure to promote effective communication with shareholders, subject to privacy laws and the need to act in the best interests of the Company by protecting commercial information.

The Company’s policy on communication with shareholders is set out in the company’s ‘Policy on stakeholder communication and continuous disclosure’ which can be viewed on the Company’s website

The Board has established policies on risk oversight and management which can be viewed on the Company’s website. To carry out this function the Board:
oversees the establishment, implementation, and annual review of the Company’s risk management system, including assessing, monitoring and managing operational, financial reporting, and compliance risks for the consolidated entity;
reviews the financial reporting process of the Company;
discusses with management and the external auditors, the adequacy and effectiveness of the accounting and financial controls, including the policies and procedures of the Company to assess, monitor and manage business risk;
reviews with the external auditor any audit problems and the Company’s critical policies and practices; and
reviews and assesses the independence of the external auditor.

Systems of internal financial control have been put in place by the management of the Company and are designed to provide reasonable, but not absolute protection against fraud and material misstatement. These controls are intended to identify, in a timely manner, control issues that require attention by the Board.

The Board is responsible for the overall internal control framework, but recognises that no costeffective internal control system will preclude all errors and irregularities.

Practices have been established to ensure:

capital expenditure and revenue commitments above a certain size obtain prior Board approval;
• financial exposures are controlled, including the use of derivatives. Further details of the Company’s policies relating to interest rate management, forward exchange rate management and credit risk management are included in the financial statements;
occupational health and safety standards and management systems are monitored and reviewed to achieve high standards of performance and compliance with regulations;
business transactions are properly authorised and executed;
the quality and integrity of personnel; and
financial reporting accuracy and compliance with the financial reporting regulatory framework.
While no performance evaluation of the Board or management was carried out for the financial year ended 30 June 2008 this is continually monitored by the Chairman and the Board. The chairman also speaks to each director individually regarding their role as a director.
The remuneration policy, which sets the terms and conditions for the Chairman and other senior executives has been approved by the Board.

All executives receive fees and also may receive performance incentives in the form of options. The Board reviews executive packages annually by reference to company performance, executive performance, comparable information from industry sectors and other listed companies.

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

CORPORATE GOVERNANCE STATEMENT (continued)

Executives may be entitled to participate in the employee share option arrangements within the maximum total number of options as set by shareholders at the 2008 Annual General Meeting.

The criteria used in determining the issue of options to management include achievement of revenue and profit targets, new business generated, loyalty and years of service.

The amount of remuneration of all directors and executives, including all monetary and nonmonetary components, is detailed in the Director’s Report. All remuneration paid and options issued to executives are valued at a cost to the company and expensed. Options are valued using the Black-Scholes methodology

The Board expects that the remuneration structure implemented will result in the company being able to attract and retain the best executives to run the economic entity. It will also provide executives with the necessary incentives to work to grow long-term shareholder value.

Due to the size of the Board the company does not have a remuneration committee. The functions normally carried out by such a committee are currently handled by the whole Board as discussed in note 13.
The Company has adopted a code of conduct to guide compliance with legal and other obligations to stakeholders of the Company which may be accessed on the Company’s website. This code provides guidance to directors and management on practices necessary to maintain confidence in the integrity of the Company

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

DIRECTORS’ REPORT

The directors of ASF Group Limited present their report on the Company and its controlled entities for the financial year ended 30 June 2008.

Directors

The names of directors in office at any time during or since the end of the year are:-

Ms Min Yang

Director and Chairman

Experience : Appointed a director on 9 September 2005 and Chairman on 16 February 2006. Min Yang has extensive business connections in the Asia Pacific region including greater China. Min Yang has been involved in businesses and transactions across a number of sectors including resources, telecommunications, property, travel and media.

Interest in shares: 21,096,500 ordinary shares in ASF Group Limited held directly and indirectly by a related entity.

Mr Alex Lao

Vice Chairman/Non-Executive Director

Experience : Appointed as Vice Chairman and non-executive director effective 30 November 2006. Mr Lao is Managing Director of ASF Macau Multinational Holdings Limited in charge of the operations in Multinational Youth Travel Agency Limited.

Mr Lao resides in Macau where he has business interests in the property, travel and retail industries and is Chairman of the Macau Travel Agency Association.

Interest in shares: 12,928,000 ordinary shares in ASF Group Limited.

Mr Quan (David) Fang

Director

Experience : Appointed a director on 9 September 2005.

David Fang was born in Shanghai. He has extensive business experience, particularly in property development and sales, hotel businesses and investments.

Interest in shares: 20,820,000 ordinary shares in ASF Group Limited held directly and indirectly by a related entity.

Mr Wai Sang Ho

Non - Executive Director

Experience: Appointed a Non–Executive director on 30 November 2006.

Mr Ho is a Hong Kong resident and large property developer in Southern China. He has substantial property interests in Hong Kong and China and is a major shareholder in the Company,

Interest in shares: 8,333,333 ordinary shares in ASF Group Limited.

Mr Geoff Baker

Non - Executive Director

Qualifications: Geoff Baker is a qualified lawyer in Australia and Hong Kong with a Commerce degree (Accounting and Financial management), a Law degree and MBA.

Experience: Appointed a director on 30 November 2006.

Geoff Baker assists in the international operations of the Group. He joined the Company after practising extensively for 28 years as a lawyer in Australia, Japan, Asia and China.

Interest in shares: 5,234,517 ordinary shares in ASF Group Limited held by a related entity.

Mr Alan Humphris

Non-Executive Director

Qualifications: Alan Humphris holds degrees in science, economics and law and is an FCPA.

Experience: Appointed a Non-Executive director on 5 September 2007.

Alan Humphris is an investment banker with more than 30 years experience in Australian and international markets. He is Managing Director of Balmoral Capital Pty Limited, an investment banking firm specialising in providing corporate advisory services which he founded in 1997.

Other current directorships: Alan Humphris is a non-executive director of Rey Resources Limited.

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

Interest in shares: 700,000 ordinary shares in ASF Group Limited held directly and by a related entity. Mr Tony Sin Pyng Teng

Director

Appointed a director on 16 July 1997 and resigned as a Director on 31 August 2007.

Company Secretary

Mr Tony Sin Pyng Teng

Qualifications: Mr Teng is a Certified Practising Accountant, a Fellow of the Australian Institute of Company Directors and an Associated Fellow of the Australian Institute of Management. Interest in shares: 179,161 ordinary shares in ASF Group Limited

Earnings per share

Earnings per share cents Basic earnings per share (2.63) Diluted earnings per share (2.41)

Corporate structure

ASF Group Limited is a listed public company, limited by shares, that is incorporated and domiciled in Australia. The Company has prepared a consolidated financial report incorporating the entities that it controlled during the financial year.

Principal activities

During the year the principal continuing activities of the Group consisted of:-

Mineral Resources
Property Marketing and Services
Travel Services
Investments

There were no changes in the Group’s principal activities during the course of the financial year.

Significant changes in state of affairs

Significant changes in the state of affairs of the Group during the financial year were as follows:

(a) After a period of restructuring, the Company issued a prospectus during the year and re-quoted its shares on the ASX on 29 January 2008;
(b) An increase in contributed equity of $4,089,112 of which $2,775,450 was the net proceeds of share issues and $1,313,661 share based payments. Net cash received was used principally as working capital. Details of this increase are set out in note 20; and
(c) On 20 June 2008 the Company made a placement of 1,666,666 ordinary shares at an issue price of 12 cents per share to nominees of Guangzhou Zhongsai Investment Consulting Co Ltd (“Zhongsai”) to raise $200,000 for working capital purposes

Dividends

No dividends have been declared in the 2008 financial year (2007: no dividend declared).

Review of operations, financial position, business strategies and prospects

For the financial year ended 30 June 2008, the consolidated entity’s operating revenue is $19,941,109 (FY07: $20,117,000). The revenues were down 0.87% for the 2008 year compared with the previous corresponding period, mainly as a result of the effect of the stronger Australian dollar on the Macau based travel business.

The net loss attributable to members of the consolidated entity after income tax and adjusting for minority interest is $4,516,427 (FY07: loss of $1,541,413). The loss is after the write-down of goodwill by $999,990 relating to the property business and after $1,313,661 was expensed in relation to a total of 5,254,645 shares issued in share based payments.

ASF Group Limited has a strong Australia-China focus across a number of sectors, particularly mineral resources, property, travel and investment. The Company’s strategy is to act as a business ‘bridge ‘

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

between Australia and China and to co-invest with partners in both countries. The Company seeks to add shareholder value through these activities which are still in the development phase.

ASF Group Limited operates from its Sydney head office and across China with offices in Beijing, Shanghai, Guangzhou, Hong Kong and Macau. In addition the directors and senior management have extensive experience in dealing in China and operating businesses in Australia.

The Company’s activities are summarised, below:

Mineral Resources

Canning Basin, W.A.

The Company undertook a program of mapping and collation of all historic exploration work relevant to coal occurrences on the six Exploration Licences and one Prospecting Licence that are wholly owned by the Company, in the second half-year. The Company is encouraged by the possible extent of coal occurrences in the tenements and also by the results being obtained by another listed company in assessing its coal deposits on nearby Canning Basin tenements. Discussions were commenced with both local and Chinese companies concerning co-operation to advance the assessment of coal in the Company’s tenement areas.

Tasmania
During the second half, the Company’s consultant geologist carried out a detailed review of prior exploration on the Company’s three exploration licences in western Tasmania. One of the exploration licences was granted during the year.

Discussions have commenced with Chinese mining groups, two of which have made site visits, concerning possible exploration joint ventures.

Property Services

Operations continued satisfactorily with the marketing and sale of Australian property under the Aushome name and with the marketing of property development projects at the Company’s two international property exhibition centres in China.

The proposed Australian based property trust to invest in property projects in China continued to be assessed in the prevailing financial environment. The property business segment has not yet reached profitability after overhead allocation.

Travel Services

The Company’s 40% owned Macau based travel business, Macau Multinational Youth Travel Agency Limited (MYTA) continued to operate satisfactorily and reported a profit for the year. The business has been consolidated for accounting purposes during the year as a result of it being controlled by the Company. However, the Company relinquished control of the MYTA as part of a streamlining of management arrangements and, accordingly, is equity accounting the investment effective from 1 July 2008.

Investment

The Company was appointed as the sole Australian Official Partner for China International Fair for Investment and Trade (CIFIT) which is sponsored by China’s Ministry of Commerce. During the second half the Company was active in making arrangements for the 12[th] CIFIT which was held on 8-11 September 2008 in Xiamen, China at which the Company established an Australian pavilion for the promotion of bilateral investment and trade.

Other investment opportunities are under review.

After balance date events

ASF Group Limited relinquished Board control of ASF MML effective on and from 1 July 2008 but retains its 40% shareholding. The Company’s co-shareholder in this business, Mr Alex Lao, who is currently Chairman of MYTA and who is an experienced travel business operator, has assumed Board and management control of ASF MML.

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

Pursuant to an agreement signed in June 2008 with Zhongsai, as amended, Zhongsai or its nominees can subscribe up to an additional $2.8 million in the Company’s shares at an issue price of 12 cents per share prior to expiry of the agreement on 15 October 2008. Subscriptions amounting to approximately $1.09 million were received in September as at the date of this Annual Report.

Environmental regulations

The consolidated entity’s operations other than in respect of proposed mineral exploration activities are not subject to any significant environmental regulation under a law of the Commonwealth or of a State or Territory.

Indemnifying and insurance of directors and officers

Since the end of the previous financial year, the Company has not indemnified or made a relevant agreement for indemnifying against a liability any person who is or has been a director or officer of the Company.

The Company in the 2008 financial year did not have directors’ and officers’ liability and legal expenses’ insurance policies against liability which may arise from holding the position of Director or Officer. The Board has determined to take out a policy in the 2009 financial year to cover all directors and the company secretary.

Remuneration report

This report outlines the remuneration arrangements in place for directors and executives of ASF Group Limited.

Remuneration philosophy

The performance of the Company depends upon the quality of its directors and executives. To prosper, the company must attract, motivate and retain highly skilled directors and executives.

To this end, the Company embodies the following principles in its remuneration framework;

Provide competitive rewards to attract high calibre executives;
Link executive rewards to shareholder value; and
Establish appropriate, demanding performance hurdles in relation to variable executive remuneration.

While the Company does not have a remuneration committee, the board of directors is responsible for determining and reviewing compensation arrangements for the directors and the senior management team.

Remuneration structure

Remuneration levels are competitively set to attract and retain appropriately qualified and experienced directors, senior executives and consultants.

The Board sets aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of a high calibre, whilst incurring a cost which is acceptable to shareholders

Directors receive fees for providing consulting services to the consolidated entity.

Executive directors and other executives may receive bonuses based on the achievement of specific performance hurdles. No bonuses were granted during the financial year under review.

Details of remuneration

Details of the remuneration of the Directors, the key management personnel of the Group (as defined in AASB 124 Related Parry Disclosures) and specified executives of ASF Group Limited are set out in the following tables

The key management personnel of the Group are the directors of ASF Group Limited and the company secretary, details of which are disclosed on pages 8-9:

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

Amounts of Remuneration

Key management personnel of the Group

2008	Base remuneration (Fees and Commission) $ Related Party Fees $ Super- annuation $ Non-cash benefits $ Total $*
Directors *Non-executive* Alex Lao Wai Sang Ho Geoff Baker Alan Humphris Tony S P Teng Non-executive directors *Executive* Min Yang David Fang Executive directors	- - - - - - - - - - - 164,000 - 1,250,000 1,414,000 27,300 72,000 2,700 - 102,000 45,000 45,000
	27,300 281,000 2,700 1,250,000 1,561,000
	58,800 - - 58,800 - 58,800 - - 58,800
	- 117,600 - - 117,600

Executive directors - 117,600 - - 117,600	Executive directors - 117,600 - - 117,600
* Non-cash benefits consist of a share-based payment to a related party of Geoff Baker of 5,000,000 shares at a fair value of 25 cents. Further details are provided in Note 32.
2007	Base remuneration (Fees and Commission) $ Related Party Fees $ Super- annuation $ Non-cash benefits $ Total $
Directors *Non-executive* Alex Lao Wai Sang Ho Tony S P Teng Non-executive directors *Executive* Min Yang David Fang Geoff Baker Executive directors	- - - - - - - - - - 66,000 - - 66,000
	- 66,000 - - 66,000
	- 58,800 - - 58,800 - 58,800 - - 58,800 92,600 92,600
	- 210,200 - - 210,200

Group performance

The following table shows the performance of the Consolidated Group over the past six financial years:-

FY	Sales Revenue	NPAT/(NLAT)	Basic EPS	Net Equity	NTA per share Dividends	Average Share Price
	$	$	Cents	$	cents $	Cents
2003 2004 2005 2006 2007 2008	375,000 674,000 302,655 3,465,995 20,117,000 19,941,109	(2,494,000) (15,877,000) (492,151) 2,643,947 (1,541,413) (4,516,427)	(0.01) (0.06) (0.00) 0.005 (0.11) (2.63)	11,248,000 (3,035,000) (3,528,022) 3,995,925 4,946,728 4,388,212	0.02 0 0.01 0 0.01 0 0.01 0 0.01 0 0.01 0	- - - - - 0.14

ASF Group Limited re-quoted its shares on the ASX during the financial year. The Company’s activities other than Travel Services are still in the developmental stage and the Group recorded a net loss after tax in the reporting year. There is at present no direct link between remuneration to directors and

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

earnings except that the directors have decided that payments to directors for services rendered should be kept to a minimum.

Options

financial year and there were no options outstanding at the date of this report.

Directors’ meetings

The following table sets out the number of directors’ meetings (including meeting of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or a committee member). During the financial year 8 board meetings were held.

	No. of Meetings	No. of Meetings
	held whilst in	Attended
	Office
Min Yang	8	8
David Fang	8	8
Alex Lao	8	4
Wai Sang Ho	8	4
Geoff Baker	8	8
Alan Humphris	7	7
Tony S P Teng	2	2

Auditor Independence declaration

The lead auditor’s independence declaration for the year ended 30 June 2008 has been received and can be found on page 14 of the financial report,

The board of directors, in accordance with advice from the audit committee, is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditor imposed by the Corporations Act 2001. The directors are satisfied that the service disclosed below did not compromise the external auditor’s independence for the following reasons:

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

Details of amounts paid to the auditor, for audit and non-audit services provided during the financial year are set out below

Other services: Hall Chadwick - Taxation services - Corporate advisory services	2008 $ 2007 $ 12,500 4,350 108,020 7,300
	120,520 11,650

Proceedings on behalf of the Company

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

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

Signed in accordance with a resolution of the board of directors.

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Min Yang Chairman Sydney, 30 September 2008

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

DIRECTORS’ DECLARATION

The directors of the company declare that:

The financial statements and notes, as set out on pages 18-42, are in accordance with the Corporations Act 2001 and:
- a) comply with Accounting Standards and the Corporations Regulations 2001; and
- b) give a true and fair view of the financial position as at 30 June 2008 and of the performance for the year ended on that date of the company and consolidated group;
The Chairman and Chief Finance Officer have given declarations required by section 295A of the ’Corporations Act 2001’ that:
- a) the financial records of the company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001;
- b) the financial statements and notes for the financial year comply with the Accounting Standards; and
- c) the financial statements and notes for the financial year give a true and fair view.
The remuneration disclosures set out on pages 11-12 of the directors’ report comply with Accounting Standards AASB ‘Related Party Disclosures’ and the ‘Corporations Regulations 2001’; and
in the directors’ opinion there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the directors.

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Min Yang Chairman

Sydney, 30 September 2008

Page 17 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

INCOME STATEMENT For the Financial Year Ended 30 June 2008

Note	Consolidated Group Parent Entity 30 June 2008 $ 30 June 2007 $ 30 June 2008 $ 30 June 2007 $	Consolidated Group Parent Entity 30 June 2008 $ 30 June 2007 $ 30 June 2008 $ 30 June 2007 $
Revenue Sales of services 4(a) Cost of providing services 5 Gross Profit Other revenue 4(b) Expenses Marketing expenses Consultants Occupancy expenses Professional fees Administration expenses Employment expenses Corporate expenses Depreciation and amortisation Legal expenses Finance costs Provision for impairment of goodwill and investments Share based payments expensed Franchise expense Provision for impairment of receivables Other expenses (Loss) before Income Tax Income tax expense 6 (Loss) for the year Profit attributable to minority equity interest (Loss) attributable to Members of the parent entity Earnings per Share: Basic (cents per share) 30 Diluted (cents per share) 30	19,626,045 19,973,197 - - (16,551,419) (17,693,984) - -
	3,074,626 2,279,213 - - 315,063 143,803 41,982 9,012 (1,009,067) (504,298) - - (1,175,808) (1,131,596) - - (430,304) (363,535) - - (187,190) (153,445) - - (685,897) (287,385) - - (1,031,611) (759,758) - - (67,381) (20,192) - - (219,848) (270,067) - - (40,826) (6,639) - - (212,035) (169,902) (483) - (1,000,697) - - - (1,313,661) - (1,313,661) - (200,000) - - - - - (4,381,402) (12,217) (91,096) - -
	(4,196,853) (1,334,897) (5,653,564) 9,012 (74,539) (18,972) - -
	(4,271,392) (1,353,869) (5,653,564) 9,012 (245,035) (187,544) - -
	(4,516,427) (1,541,413) (5,653,564) 9,012
	(2.63) (0.11) (2.41) (0.10)	- - - -

Notes to financial statements are included on pages 22-42

Page 18 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

BALANCE SHEET As at 30 June 2008

Note	Consolidated Group Parent Entity 30 June 2008 $ 30 June 2007 $ 30 June 2008 $ 30 June 2007 $
CURRENT ASSETS Cash and cash equivalents 7 Trade and other receivables 8 Inventories 9 Other current assets 10 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Other receivables 11 Plant and equipment 12 Financial assets 13 Other non-current assets 14 Intangible assets 16 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 17 Financial liabilities 18 Current tax liabilities 19 TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 20 Reserves 21 Retained losses Parent entity interest Minority equity interests TOTAL EQUITY	2,618,985 2,066,069 305,836 1,102,541 3,844,378 2,519,150 - 150,000 10,374 4,672 - - 1,668,604 2,287,639 - -
	8,142,341 6,877,530 305,836 1,252,541
	279,040 247,360 606,250 1,998,992 376,437 620,683 - - - - 4,062,999 3,900,004 415,422 180,531 - - 2,240,626 3,240,616 - -
	3,311,525 4,289,190 4,669,249 5,898,996
	11,453,866 11,166,720 4,975,085 7,151,537
	3,377,176 4,134,132 - 612,000 3,631,905 2,084,400 1,000,000 1,000,000 56,573 1,460 - -
	7,065,654 6,219,992 1,000,000 1,612,000
	7,065,654 6,219,992 1,000,000 1,612,000
	4,388,212 4,946,728 3,975,085 5,539,537
	43,100,003 39,010,891 43,100,003 39,010,891 (686,321) (310,084) - - (39,710,917) (35,194,491) (39,124,918) (33,471,354)
	2,702,765 3,506,316 3,975,085 5,539,537 1,685,447 1,440,412 - -
	4,388,212 4,946,728 3,975,085 5,539,537

Notes to financial statements are included on pages 22-42

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

STATEMENT OF CHANGES IN EQUITY For the Financial Year Ended 30 June 2008 Consolidated Group

Consolidated Group
	Share capital ordinary Retained losses Foreign currency translation reserve Minority equity interest Total $ $ $ $ $
Balance at 1/7/2006 Shares issued during the year Share issue costs Minority interest recognised on acquisition Lost attributable to members of parent entity Profit attributable to minority shareholders Revaluation increment Balance at 30/6/2007 Balance at 1/7/2007 Shares issued during the year Share issue costs Lost attributable to members of parent entity Profit attributable to minority shareholders Revaluation increment Balance at 30/6/2008	37,596,291 (33,653,078) - - 3,943,213 1,540,000 - - - 1,540,000 (125,400) (125,400) - - - 1,252,868 1,252,868 - (1,541,413) - - (1,541,413) - - - 187,544 187,544 (310,084) (310,084)
	39,010,891 (35,194,491) (310,084) 1,440,412 4,946,728
	39,010,891 (35,194,491) (310,084) 1,440,412 4,946,728 4,660,111 - - - 4,660,111 (570,999) - - - (570,999) - (4,516,427) - - (4,516,427) - - - 245,035 245,035 - - (376,237) (376,237)
	43,100,003 (39,710,917) (686,321) 1,685,447 4,388,212

Parent Entity

Parent Entity
	Share Capital Ordinary Retained Profits Foreign currency translation reserve Minority equity interest Total $ $ $ $ $
Balance at 1/7/2006 Shares issued during the year Share issue costs Profit attributable to minority shareholders Balance at 30/6/2007 Balance at 1/7/2007 Shares issued during the year Share issue costs Loss attributable to members of parent entity Balance at 30/6/2008	37,596,291 (33,480,366) - - 4,115,925 1,540,000 - - - 1,540,000 (125,400) - - - (125,400) - 9,012 - - 9,012
	39,010,891 (33,471,354) - - 5,539,537
	39,010,891 (33,471,354) - - 5,539,537 4,660,111 - - - 4,660,111 (570,999) - - - (570,999) - (5,653,564) - - (5,653,564)
	43,100,003 (39,124,918) - - 3,975,085

Notes to financial statements are included on pages 22-42

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

CASH FLOW STATEMENT For the Financial Year Ended 30 June 2008

		Consolidated Group	Consolidated Group	Parent	Entity
		30 June 2008	30 June 2007	30 June 2008	30 June 2007
	Note	$	$	$	$
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers		18,488,958	16,913,540	150,000		-
Sundry income received		209,116	55,446	-		-
Payments to suppliers and employees		(20,429,670)	(16,017,791)	(1,183,482)	(355,743)
Interest received		105,947	88,357	41,982	9,012
Interest paid		(129,242)	(169,902)	-	-
Income tax paid		(19,426)	(18,286)	-	-
Net cash(used in)/ provided by operating activities	29	(1,774,317)	851,364	(991,500)	(346,731)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration expenditure		(234,891)	(180,531)	-	-
Purchase of plant and equipment		(23,148)	(39,551)	-	-
Proceeds from sale of non-current assets		-	91	-	139,176
Investment in associates		(706)	-	-	-
Investment in subsidiaries		-	-	(162,995)	-
Net cash ( used in)/ provided by investing activities		(258,745)	(219,991)	(162,995)	139,176
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares		2,775,451	1,414,600	3,346,450	1,414,600
Proceeds from borrowing		-	-	-	1,000,000
Repayment of borrowings		(356,976)	(1,986,096)	-	(1,271,336)
Loan to related parties - subsidiaries		-	-	(2,988,660)		-
Net cash provided by/ (used in) financing activities		2,418,475	(571,496)	357,790	1,143,264
Net increase/(decrease) in cash held		385,413	59,877	(796,705)	935,709
Cash acquired on acquisition of controlled entities		-	1,196,812	-	-
		385,413	1,256,689	(796,705)	-
Cash at the beginning of the financial year		981,669	166,842	1,102,541	166,832
Effect of foreign exchange rates on cash holdings in
foreign currencies		(330,257)	(441,862)	-	-
Cash at the end of the financial year	7	1,036,825	981,669	305,836	1,102,541

Notes to financial statements are included on pages 22-42

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ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for ASF Group Limited as an individual entity and the consolidated entity consisting of ASF Group Limited and its subsidiaries.

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

Compliance with IFRS

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

Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss, certain classes of property, plant and equipment and investment property.

Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 1(y).

(b) Financial report prepared on a Going concern basis

The financial statements have been prepared on the going concern basis of accounting, which assumes the continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

The net loss after income tax for the consolidated entity for the financial year ended 30 June 2008 was $4,516,427 (2007: $1,541,413).

The Directors nevertheless believe that it is appropriate to prepare the financial report on a going concern basis because:-

a) included in financial liabilities in current liabilities is an amount owed to Goldchoice Investment Limited of $1 million which matures on 31 December 2008 under a Convertible Loan Facility established on 1 July 2006. Goldchoice has given notice that it intends to convert all of the outstanding loan to equity in the Company based on the issue price set by the Facility of 7.5 cent per share by 31 December 2008.
b) an agreement is in place for investors to subscribe for up to $2.8 million in the Company’s shares and take a financial interest in the Group’s resources sector.
c) the ability to meet operating expenditure is also dependent upon future fundraising or the company business opportunities generating positive cash flows.

The Company is projected to require further capital raising in future prior to the time it becomes operational cash flow positive.

In the event that the consolidated entity is unable to raise sufficient funds there is a significant uncertainty whether it will be able to continue as a going concern and therefore whether the Company and the consolidated entity can realise its assets and extinguish its liabilities at the amounts stated in the statement of balance sheet. In this situation, the going concern basis would not be appropriate.

However, at this time the accounts are being prepared on a going concern basis.

(c) Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of ASF Group Limited (“company” or “parent entity”) as at 30 June 2008 and the results of all subsidiaries for the year then ended. ASF Group Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.

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

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

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

Investments in subsidiaries are accounted for at cost in the individual financial statements of the Group

Page 22 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continue

(d) Segment reporting

A business segment is identified for a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is identified when products or services are provided within a particular economic environment subject to risks and returns that are different from those of segments operating in other economic environments

(e) Foreign currency translation

(I) Functional and presentation currency

[Items included in the financial statements of each of the Group’s entities are measured using the currency of the ] primary economic environment in which the entity operates (the functional currency’). The consolidated financial statements are presented in Australian dollars, which is ASF Group Limited’s functional and presentation currency.

(ii) Transactions and balance

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Translation differences on financial assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss.

(iii) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences are recognised in the income statement, as part of the gain or loss on sale where applicable.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entities and translated at the closing rate.

(f) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is recognised for the major business activities as follows:-

Revenue from the disposal of assets is recognised when the Consolidated Group has passed control of the asset to the buyer.

Revenue from investment properties is recognised when a contract is exchanged and settlement has taken place.

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Revenue from the rendering of a service is recognised upon the delivery of the service to the customer.

Dividend revenue is recognised when the right to receive a dividend has been established.

All revenue is stated net of the amount of goods an services tax (GST).

(g) Income tax

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

Page 23 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

ASF Group Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.

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

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

(h) Exploration and development expenditure

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

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

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

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

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

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

(i) Operating leases

Lease payments for operating leases, where substantially all the risks remain with the lessor, are charged as expenses in the periods in which they are incurred

(j) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date

(k) Cash and cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of twelve months or less, and bank overdrafts. Bank overdrafts are shown with short-term borrowings in current liabilities on the balance sheet.

(l) Trade receivables

Trade receivables are recognised initially at fair value and less provision for impairment. Trade receivables are generally due for settlement within 30 days.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised in the income statement. 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

Page 24 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(m) Inventories

Finished goods are stated at the lower of cost and net realisable value. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(n) Financial instruments

Recognition

The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Current loans and receivables are included in trade and other receivables (Note 8) in the balance sheet.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated as such or that are not classified in any of the other categories. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. If the Group were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available-for-sale. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the reporting date, which are classified as current assets.

Recognition and derecognition

Regular purchases and sales of financial assets are recognised on trade-date - the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the income statement as gains and losses from investment securities.

Subsequent measurement

Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statement within other income or other expenses in the period in which they arise. Dividend income from financial assets at fair value through profit and loss is recognised in the income statement as part of revenue from continuing operations when the Group’s right to receive payments is established.

Impairment

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

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the items will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

(o) Plant and equipment

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

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

At each reporting date, the group reviews the carrying values of its tangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the assets, being the higher of the asset’s fair value less costs to sell and value is use is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.

Page 25 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Depreciation

Depreciation is provided on plant and equipment and leasehold improvements. Depreciation is calculated on a diminishing value or straight line basis over the useful lives to the consolidated entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the expired period of the lease or the estimated useful lives of the improvements. The following estimated useful lives are used in the calculation of depreciation:

Parent and Australian registered subsidiaries Plant and equipment – Diminishing value 37.5% Leasehold improvements – prime cost 37.5% Furniture, fittings and office equipment – diminishing value 37.5% Motor vehicles – diminishing value 37.5% Overseas subsidiaries Furniture, fixtures and office equipment – prime cost 10-20% Motor vehicles – prime cost 15-20%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

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

Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These gains and losses are included in the income statement. When re-valued assets are sold, amounts included in the revaluation reserve relating to those assets are transferred to retained earnings.

(p) Intangible assets

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units represents the Group’s investment in each country of operation by each primary reporting segment (note 16).

(q) Trade and other payables

Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to make future payments resulting from the purchase of goods and services.

(r) Provisions

Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured at management’s best estimate of the expenditure required to settle the present obligation at the reporting date.

(s) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

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

(t) Employee benefits

Wages and salaries and annual leave

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in current provisions in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled, plus related on-costs.

Long-service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Page 26 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(u) Contributed equity

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. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.

(v) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except, where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense. Receivables and payables in the balance sheet, are shown inclusive of GST. The net amount of GST recovrable from, or payable to, the taxation authority is included with other receivables or payables in the blance sheet.

Cash flows are included in the statement of cash flows on a gross basis except for the GST component of cash flows arising from investing and financing activities which are disclosed as operating cash flows.

(w) Cost of sales

Cost of sales includes direct costs associated with income earned by the travel agency subsidiaries in Macau and China.

(x) Comparative figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

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

Key estimates – Impairment

The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

A$1,000,697 impairment has been recognised in respect of intangible assets for the financial year ended 30 June 2008.

Key judgements – impairment of other receivables

The directors have reviewed outstanding debtors as at 30 June 2008 and have formed the opinion that not all debtors outstanding are collectible and have therefore decided that a provision for impairment of other receivables should be made in the accounts of $4,381,402 being a debt owing by a subsidiary to the parent entity.

(z) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2008 reporting periods. The Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below.

(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8

AASB 8 and AASB 2007-3 are effective for annual reporting periods commencing on or after 1 January 2009. AASB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a ‘management approach’ to reporting on financial performance. The information being reported will be based on what the key decision makers use internally for evaluating segment performance and deciding how to allocate resources to operating segments. The Company is currently evaluation the effect on the Group.

(ii) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [ 1,AASB 101,AASB 107,AASB 111,AASB 116&AASB 138 and Interpretations 1 & 12]

The revised AASB 123 is applicable to annual reporting periods commencing on or after 1 January 2009. It has removed the option to expense all borrowing costs and - when adopted - will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. This revised standard is not expected to have an effect on the Company and the Group as borrowings are used principally to provide working capital.

(iii ) AASB Interpretation 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

AASB Interpretation14 will be effective for annual reporting periods commencing on or after 1 January 2008. It provides guidance on the maximum amount that may be recognised as an asset in relation to a defined benefit plan and the impact of minimum funding requirements on such an asset. None of the Group’s defined benefit plans are subject to minimum funding requirements and none of them is in a surplus position. This will have no impact on the Group which does not have a defined benefit fund.

(iv ) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101

A revised AASB 101 was issued in September 2007 and is applicable for annual reporting periods beginning on or after 1 January 2009. It requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. If an entity has made a prior period adjustment or has reclassified items in the financial statements, it will need to disclose a third balance sheet (statement of financial position), this one being as at the beginning of the comparative period.

Page 27 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2: FINANCIAL RISK MANAGEMENT

The Groups activities expose it to a variety of financial risks: market risk (including interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include analysing the effect of interest rate rises, and other price risks, aging analysis for credit risk and comparison of the investment portfolios against the ASX All Ordinaries Index to determine market risk.

Risk management is carried out by management under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as policies covering specific areas including interest rate risk, credit risk, ,and investment of excess liquidity. The groups functional currencies are the Australian dollar, the Chinese CNY and the Macau MOP. The presentation currency is the Australian dollar. The Group is therefore subject to foreign exchange risk.

The following tables reflect the undiscounted contractual settlement terms for financial instruments of a fixed period of maturity, as well as management’s expectations of the settlement period for all other financial instruments.

30 June 2008 Fixed Interest Rate Maturing Average Interest Rate % Variable Interest Rate $ Less than 1 Year $ 1 to 5 Years $ More than 5 Years $ Non-interest Bearing $ Total $	30 June 2008 Fixed Interest Rate Maturing Average Interest Rate % Variable Interest Rate $ Less than 1 Year $ 1 to 5 Years $ More than 5 Years $ Non-interest Bearing $ Total $
Financial Assets Cash 7.25% 2,618,985 - - - - 2,618,985 Trade and other receivables - - - - - 3,844,378 3,844,378 Total financial assets 2,618,985 - - - 3,844,378 6,463,363 Trade and other payables - - - - - 3,377,176 3,377,176 Bank overdraft and loan 7.5% 1,582,160 - - - - 1,582,160 Goldchoice loan 7.0% - 1,000,000 - - - 1,000,000 Directors/shareholder’s loan 10.0% 1,048,209 - - - 1,536 1,049,745 Total financial liabilities 2,630,369 1,000,000 - - 3,378,712 7,009,081 30 June 2007 Fixed Interest Rate Maturing Average Interest Rate % Floating Interest Rate $ Less than 1 Year $ 1 to 5 Years $ More than 5 Years $ Non-interest Bearing $ Total $	2,618,985 - - - - 2,618,985 - - - - 3,844,378 3,844,378
	2,618,985 - - - 3,844,378 6,463,363
	- - - - 3,377,176 3,377,176 1,582,160 - - - - 1,582,160 - 1,000,000 - - - 1,000,000 1,048,209 - - - 1,536 1,049,745
	2,630,369 1,000,000 - - 3,378,712 7,009,081
Financial Assets Cash 5.25% Trade and other receivables - Total financial assets - Trade and other payables Bank overdraft and loan 6.5% Goldchoice loan 7.0% Total financial liabilities	2,066,069 - - - - 2,066,069 - - - - 2,519,150 2,519,150
	2,066,069 - - - 2,519,150 4,585,219
	- - - - 4,134,132 4,134,132 1,084,400 - - - - 1,084,400 - 1,000,000 - - - 1,000,000
	1,084,400 1,000,000 - - 4,134,132 6,218,532

(a) Market risk

(i) Foreign exchange risk

The Group and the parent entity operate internationally and are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the CNY (Chinese currency) and MOP (Macau currency).

Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency and net investments in foreign operations. The risk is measured using sensitivity analysis and cash flow forecasting.

Management has set up a policy requiring group companies to manage their foreign exchange risk against their functional currency.

The Group’s exposure to foreign currency risk at the reporting date was as follows:

Cash Trade receivables Loans Trade payables Total net exposure	30 June 2008 MOP in A$ CNY in $ MOP A$ CNY A$ 12,493,290 1,642,868 1,521,276 231,082 36,990,997 4,864,316 4,695,530 713,251 (9,069,323) (1,192,616) (1,654,304) (251,289) (17,298,806) (2,274,793) (4,012,079) (609,435)
	23,116,158 (3,039,775) 550,423 83,609

Page 28 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2: FINANCIAL RISK MANAGEMENT (continued)

Cash Trade receivables Loans Trade payables Total net exposure	30 June 2007 MOP in A$ CNY in $ MOP A$ MOP A$ 5,191,459 777,681 797,902 123,356 28,753,625 4,307,293 2,735,896 422,970 (8,464,883) (1,268,039) (1,152,090) (178,113) (10,171,679) (1,523,718) (3,026,568) (467,907)
	15,308,522 2,293,217 (644,860) (99,694)

Group sensitivity

Based on the financial instruments held at 30 June 2008, had the Australian dollar weakened/strengthened by 5% against the CNY and the MOP with all other variables held constant, the Group’s equity for the year would have been $158,588 lower/ higher (2007 $109,676 higher/ lower), mainly as a result of foreign exchange gains/losses on translation of CNY and MOP denominated financial instruments as detailed in the above table.

The Group’s exposure to other foreign exchange movements is not material.

Parent entity sensitivity

The carrying amounts of the parent entity’s financial assets and liabilities are denominated wholly in Australian dollars and the parent has no foreign exchange dealings.

(Ii) Price risk

The Group and the parent entity are not exposed to equity securities price risk as no investments are held by the Group and classified on the balance sheet either as available-for-sale or at fair value through profit or loss.

As the Group and the parent entity are only selling services they are not exposed to commodity price risk but are exposed to service price risk in relation to travel agency services and real estate businesses. If the price of these services provided by the group were to increased/decreased by 2% the group and the parent entity’s post tax profit would have increased/decreased by $392,521 (2007:$399,464).

(ii) Cash flow and fair value interest rate risk

The Groups main interest rate risk arises from borrowings, particularly long-term. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. During 2008 and 2007, the Group’s borrowings at variable rate were denominated in Australian Dollars and MOP (Macau).

As at the reporting date, the Group had the following variable rate borrowings and interest rate swap contracts outstanding:-

Bank overdraft Goldchoice loan Net exposure to cash flow interest rate risk	30 June 2008 30 June 2007 Weighted average interest rate % Balance $ Weighted average interest rate % Balance $ 7.5 1,582,160 6.5 1,081,400 7.0 1,000,000 7.0 1,000,000
	2,582,160 2,081,400

Group sensitivity

At 30 June 2008, if interest rates had changed by -/+50 basis points from the year-end rates with all other variables held constant, post-tax profit for the year would have been $12,911 lower/higher (2007 - $10,407 lower/higher), mainly as a result of higher/lower interest income from cash and cash equivalents.

Parent sensitivity analysis

The parent entity’s main interest rate risk arises from a fixed interest short-term loan from Goldchoice in Australian dollars. At 30 June 2008, if interest rates had changed by -/+50 basis points from the year-end rates with all other variables held constant, post-tax loss for the year would have been $12,911 lower/higher (2007 -: $10,407 lower/higher).

Page 29 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2: FINANCIAL RISK MANAGEMENT (continued)

(b) Credit risk

Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as credit exposures to customers as outstanding receivables. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Group. The compliance with credit limits by customers is regularly monitored by line management. Sales to customers are required to be settled in cash, mitigating credit risk.

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised in Note 2 on page 29.

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates:

Trade receivables Counterparts without external credit rating Group 1 Group 2 Total trade receivables Cash at bank and short-term bank deposits AAA	Consolidated Parent entity 2008 $ 2007 $ 2008 $ 2007 $ 781,558 325,255 - - 2,056,497 1,166,563 - -
	2,838,055 1,491,818 - -
	2,838,055 1,491,818 - -
	2,618,985 2,066,069 305,836 1,102,541

[Group 1 — customers (more than 6 months) with no defaults in the past ]

Group 2 — customers (more than 6 months) with some defaults in the past. All defaults were fully recovered

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash ‘and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Surplus funds are generally only invested in instruments that are tradeable in highly liquid markets.

Financing arrangements

The Group and the parent entity had access to the following undrawn borrowing facilities at the reporting date:

	Consolidated	Consolidated		Parent entity
	2008	2007	2008	2007
	$	$	$	$
- Expiring within one year (bank overdraft )	-	713,200	-	-

The overdraft and loan facility was granted to Multinational Youth Travel Agency Company Limited (MYTA) a subsidiary of ASF Macau Multinational Holdings Limited, the parent entity’s subsidiary in Macau, details of which can be viewed in Note 18.

The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice.

Maturities of financial liabilities

The Group’s and the parent entity’s financial liabilities consist of an unsecured convertible loan from Goldchoice of $1 million which matures on 31 December 2008 with an option to covert to ordinary shares of the Company at 7.5 cents per share.

(d) Fair value estimation

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

The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the closing price at balance date.

The fair value of financial instruments that are not traded in an active market such as investments in unlisted subsidiaries is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date.

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

For disclosure purposes financial liabilities which expire within twelve months are recorded at the principal amount owing on settlement.

Page 30 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3: SEGMENT INFORMATION

(a) Description of segments

Business segments

The Company continued its strategy of activities in four business segments - Mineral Resources, Property Services, travel services and Investments. Details of developments in these segments are set out in the Director’s Report on page 10. Primary reporting format – business segments

30 June 2008	Property marketing and services Mineral and resources Travel Services Venture and financial services	Eliminations Total
Segment revenue Sales Total sales revenue Other revenue Total segment revenue Segment result Segment assets Segment liabilities 30 June 2007 Segment revenue Sales Total sales revenue Other revenue Total segment revenue Segment result Total assets Total liabilities	554,625 - 19,064,352 7,068	- 19,626,045
	554,625 - 19,064,352 7,068 2,776 992 255,150 56,145	- 19,626,045 315,063
	557,401 992 19,319,502 63,213	- 19,941,109
	(614,902) (624,228) 408,392 (2,440,665)	(1,245,025) (4,516,427)
	(1,298,610) (984,429) 7,547,378 8,011,486	(1,821,959) 11,453,866
	(120,531) (8,725) (5,659,004) (2,121,969)	844,575 (7,065,654)
	344,863 - 19,625,134 3,200 - 19,973,197 652 - 115,224 27,927 - 143,803 345,515 - 19,740,358 31,127 - 20,117,000 (704,154) (369,129) 312,574 (593,160) (187,544) (1,541,413) (811,087) (362,168) 6,207,158 6,792,208 (659,391) 11,166,720 (13,055) (6,957) (4,345,138) (1,854,842) - (6,219,992)

Secondary reporting format – geographical segments

	Segment revenues from sales	Segment revenues from sales	Segment	assets
	to external customers
	2008	2007	2008	2007
Australia	561,693	376,642	5,641,103	5,618,953
Asia	19,064,352	19,740,358	7,633,722	6,207,158
Eliminations	-	-	(1,820,959)	(659,391)
TOTAL	19,626,045	20,117,000	11,453,866	11,166,720

NOTE 4: REVENUE

NOTE 4: REVENUE
	Consolidated Group Parent Entity 2008 $ 2007 $ 2008 $ 2007 $
(a) Revenue from continuing operations - Services (i) (b) Other revenue - Interest received – other entities - Other revenue - Gains on foreign exchange	19,626,046 19,973,197 - -
	105,947 88,357 41.982 9,012 129,279 55,446 - - 79,837 - - -
	315,063 143,803 41.982 9,012
	19,941,109 20,117,000 41,982 9,012

Page 31 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS NOTE 5: EXPENSES

NOTE 5: EXPENSES
	Consolidated Parent 2008 $ 2007 $ 2008 $ 2007 $
Loss before income tax includes the following specific expenses: Cost of services Finance costs - external - related parties Rental expenses on operating leases - minimum lease payments Net loss on disposal of plant and equipment Impairment losses - Goodwill - Investment in associates - Receivables Depreciation and amortisation expense Franchise expense Share based payments expensed NOTE 6: INCOME TAX	16,551,419 17,693,984 - - 173,196 88,266 - - 38,839 35,839 - - 340,638 280,850 - - - 1,396 - - 999,990 - - - 706 - - - - - 4,381,402 - 219,848 270,067 - - 200,000 - - - 1,313,661 - 1,313,661 -

(a) income tax expense Current tax 74,539 (526,606) - - Deferred tax (659,786) 50,672 1,301,971 2,703 Deferred tax assets not recognised 659,786 544,504 (1,301,971) (2,703) Deferred tax liabilities not recognised - (49,598) - - 74,539 18,972 - - (b) Numerical reconciliation of income tax expense to prima facie tax payable Profit from continuing operations before income tax expense at 30% (2007:30%) (1,259,056) (462,295) (1,696,069) 2,703 Add tax effect of: Non deductible share based payments 394,098 - 394,098 - Other non-allowable items 326,964 5,026 - - Less tax effect of: Non-assessable debt written off - (18,665) - - Overseas income subject to tax at different rates (47,254) - - Deferred tax assets not recognised 659,786 544,504 1,301,971 (2,703) Deferred tax liabilities not recognised - (49,598) - - Income tax expense 74,539 18,972 - - NOTE 7: CASH AND CASH EQUIVALENTS Cash at bank and in hand 2,618,985 2,066,069 305,836 1,102,541 Reconciliation of cash Cash at the end of the financial year as shown in the cash flow statement is reconciled to items in the balance sheet as follows: Cash at bank and in hand 2,618,985 2,066,069 305,836 1,102,541 Bank overdrafts and loans (1,582,160) (1,084,400) - - Balance per statement of cash flows 18 1,036,825 981,669 305,836 1,102,541 Interest rate exposure The Group and the parent entitiy’s expousre to interest rate risk is disclosed in Note 2.	74,539 (526,606) - - (659,786) 50,672 1,301,971 2,703 659,786 544,504 (1,301,971) (2,703) - (49,598) - -
	74,539 18,972 - -
	(1,259,056) (462,295) (1,696,069) 2,703 394,098 - 394,098 - 326,964 5,026 - - - (18,665) - - (47,254) - - 659,786 544,504 1,301,971 (2,703) - (49,598) - -
	74,539 18,972 - -

Page 32 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8: CURRENT ASSETS - TRADE AND OTHER RECEIVABLES

	Consolidated Parent 2008 $ 2007 $ 2008 $ 2007 $
Trade receivables Other receivables Amounts recoverable from related entities	2,838,055 1,491,818 - - 116,449 276,139 - 150,000 889,874 751,193 - - 3,844,378 2,519,150 - 150,000

(a) Impaired trade receivables

As at 30 June 2008 none of the trade receivables of the Group or the parent entity were impaired (2007:$0)

(b) Past due but not impaired

As at 30 June 2008, trade receivables of $2,056,497 (2007:$1,166,563) were past due but not impaired.

(c) Interest rate risk

Information about the Group’s and the parent entity’s exposure to interest rate risk in relation to trade and other receivables is disclosed in Note 2.

(d) Credit terms

Credit terms which apply to travel agency customers are payment within 30 days from date of invoice and for real estate customers from 30-90 days.

(e) Fair value and credit risk

Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. Refer to Note 2 for further information on the risk management policy of the Group and the credit quality of the entity’s trade receivables.

NOTE 9: CURRENT ASSETS - INVENTORIES

Finished goods at cost NOTE 10: CURRENT ASSETS – OTHER	10,374 4,672	- -
	CURRENT ASSETS
Prepayments 1,668,604 2,287,639 NOTE 11: NON-CURRENT ASSETS – OTHER RECEIVABLES	1,668,604 2,287,639	- -

Amounts owing by controlled entities Provision for impairment of receivables Deposits	875,427 875,427 (875,427) (875,427) 279,040 247,360 279,040 247,360	5,863,079 2,874,419 (5,256,829) (875,427) - -
		606,250 1,998,992

(a) Impaired receivables and receivables past due

At 30 June 2008 $5,256,829 (2007:$875,427) owing by controlled entities was impaired with $875,427 provided for in the 2006 financial year and $4,381,402 provided for in 2008.

(b) Fair values

After provisioning for impairment for the amount owing by a controlled entities of $5,256,829, the carrying amount is assumed to approximate the fair value of the other receivable. Information about the Group’s and the parent entity’s exposure to credit risk, foreign exchange and interest risk is provided in Note 2.

NOTE 12: NON-CURRENT ASSETS - PLANT AND EQUIPMENT

	Plant & Equipment at cost Leasehold Improvements at cost Motor vehicles at cost TOTAL
Gross carrying amount Balance at 30 June 2007 at cost or fair value Additions Disposals Balance at 30 June 2008	$ $ $ $ 189,320 124,231 1,455,902 1,769,453 23,148 - - 23,148 (62,195) - - (62,195)
	150,273 124,231 1,455,902 1,730,406

Page 33 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 12: NON-CURRENT ASSETS - PLANT AND EQUIPMENT (continued)

	Plant & Equipment at cost Leasehold Improvements at cost	Motor vehicles at cost TOTAL
Accumulated depreciation/amortisation Balance at 30 June 2007 Exchange differences Depreciation/amortisation expense Write back on disposal Balance at 30 June 2008 Net Book Value As at 30 June 2007 As at 30 June 2008	(140,320) (46,564) - - (25,778) (29,125) 60,628 -	(961,886) (1,148,770) (45,979) (45,979) (164,945) (219,848) - 60,628
	(105,470) (75,689)	(1,172,810) (1,353,969)
	49,000 77,667	494,016 620,683
	44,804 48,542	283,092 376,437

Plant and equipment has been tested for impairment at 30 June 2008 resulting in no impairment loss.

NOTE 13: NON-CURRENT ASSETS – FINANCIAL ASSETS

NOTE 13: NON-CURRENT ASSETS – FINANCIAL ASSETS	NANCIAL ASSETS
Consolidated Parent 2008 $ 2007 $ 2008 $ 2007 $ Available for sale financial assets - - 4,062,999 3,900,004 Available for sale financial assets comprise shares in controlled entities, disclosed in note 27.are carried at cost. NOTE 14: OTHER NON-CURRENT ASSETS	Consolidated Parent 2008 $ 2007 $ 2008 $ 2007 $ - - 4,062,999 3,900,004
Exploration and development costs Accumulated amortisation and impairment	415,422 180,531 - - - - - -
	415,422 180,531 - -

The ultimate recoupment of balances carried forward in relation to areas of interest still in the exploration or valuation phase is dependent on successful development and commercial exploitation, or alternatively sales of the respective areas.

The Company’s tenements E04/1428, E04/1433, E04/1434, E04/1435 and E04/1436 reached their third anniversary date in April 2008 and each tenement faces a compulsory drop-off in area under the Mining Act of W.A unless an exemption from such area reduction is granted. The Company believes that it has reasonable grounds to be granted such exemptions and has made applications for exemptions to the W.A Department of Industry and Resources in May 2008

Capitalised costs amounting to $234,891 (2007: $180,531) have been included in cash flows from investing activities in the cash flow statement

NOTE 15: NON-CURRENT ASSETS – DEFERRED TAX ASSETS

Deferred tax assets not brought to account the benefit of which will only be realised if the conditions for deductibility set out in Note 1(g) are satisfied.

tax losses, operating losses at 30% not brought to account $1,236,316 (2007: $619,706).

Page 34 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 16: NON-CURRENT ASSETS - INTANGIBLE ASSETS

	Consolidated Parent 2008 $ 2007 $ 2008 $ 2007 $
Goodwill Accumulated impairment loss Closing net book value	3,240,616 3,240,616 - - (999,990) - - -
	2,240,626 3,240,616 - -

Intangible assets have been tested for impairment at 30 June 2008 resulting in no further impairment loss.

(a) Impairment tests for goodwill

Goodwill is allocated to the Groups cash-generating units (CGUs) identified according to business segment and country of operation.

A segment-level summary of the goodwill as at reporting date is presented below.

2008 Real estate business Travel services 2007 Real estate business Travel services	Australia Asia Total 1,600,010 - 1,600,010 - 640,616 640,616
	1,600,010 640,616 2,240,626
	Australia Asia Total 2,600,000 - 2,600,00 - 640,616 640,616
	2,600,000 640,616 3,240,616

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five year period. Cash flows beyond the fiveyear period are extrapolated using a terminal value of the year’s cash flow projection and a multiplier of 3 for property businesses and 4.5 for travel businesses. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.

(b) Key assumptions used for value-in-use

CGU	Growth rate	Discount rate
Travel services - Asia	5% p.a.	15%
Real estate business - Australia	20% p.a.	30%

(c) Impact of possible changes in key assumptions

Travel services – Macau (China)

The recoverable amount of the goodwill with respect to the Group’s 40% interest in ASF Macau Multinational Holdings Limited is estimated to be $1,485,709. This exceeds the carrying amount of the CGU’s goodwill at 30 June 2008 by $845,093. If a discount rate of 44% instead of 15% were used the recoverable amount of the CGU’s goodwill would equal its carrying amount. Management does not consider a change in any of the key assumptions to be reasonably possible.

Real estate business –Australia

The recoverable amount of the goodwill with respect to ASF Properties Pty Ltd is estimated to be $2,953,287. This exceeds the carrying amount of the CGU’s goodwill at 30 June 2008 by $1,353,277. If a discount rate of 49% instead of 30% were used the recoverable amount of the CGU’s goodwill would equal its carrying amount.

(d) Impairment charge

During the second half of the financial year the directors resolved to write down the carrying amount of goodwill for the real estate business by $999,990.

Page 35 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 17: CURRENT LIABILITIES - TRADE AND OTHER PAYABLES

==> picture [460 x 132] intentionally omitted <==

----- Start of picture text -----

||||||
|---|---|---|---|---|
|Consolidated|Parent|
|2008|2007|2008|2007|
|Note|$|$|$|$|
|Trade payables|2,141,088|1,418,996|-|-|
|Sundry payables and accrued expenses|971,680|847,096|-|12,000|
|Share subscription money received in advance|-|600,000|-|600,000|
|Deposits received|264,408|-|-|-|
|Amounts payable to related parties|1,042,806|-|-|
|Amounts payable to directors|-|225,234|-|-|
|3,377,176|4,134,132|-|612,000|

----- End of picture text -----

Included in trade and other payables are trade security deposits amounting to CNY 790,000 (A$120,001), in 2007 CNY554,000 (A$85,648) which were collected from licensed companies for the usage of Guangdong Great Scenery International Travel Service Co. Limited’s business name.

Risk Exposure

Information about the Group’s and the parent entity’s exposure to foreign exchange risk is provided in Note 2.

NOTE 18 CURRENT LIABILITIES – FINANCIAL LIABILITIES

==> picture [460 x 78] intentionally omitted <==

----- Start of picture text -----

|||||||
|---|---|---|---|---|---|
|Secured|
|Bank overdraft and loans – secured|7|1,582,160|1,084,000|-|-|
|Goldchoice loan - unsecured|1,000,000|1,000,000|1,000,000|1,000,000|
|Director/shareholder loan- unsecured|1,049,745|-|-|-|
|Total current financial liabilities|3,631,905|2,084,000|1,000,000|1,000,000|
|(a) Security|

----- End of picture text -----

The banking facility was granted to the parent entity’s subsidiary in Macau, Multinational Youth Travel Agency Limited on the following securities provided by Mr Alex Lau, a director of the parent company and Managing Director of Multinational Youth Travel Agency Limited:

Properties owned by Mr Alex Lao with a fair value as at 30 June 2008 of HKD35,500,000 (A$4,731,315) as per a valuation carried out on that date by an independent qualified professional valuer not connected with the Group.
Fixed deposits provided by Mr Alex Lao of MOP4,515,790 (A$593,826); and
Personal guarantees given by Mr Alex Lao to the bank to the extent of HKD13,200,000 (A$1,759,249)

At balance date, letters of guarantee issued by the bank to its trade creditors as security for settlement of the trade debts amounted to MOP 4,329,950 (A$569,388). All these guarantees were pledged by the relevant fixed deposits placed at the bank.

The Goldchoice loan is unsecured but has been provided with an option to convert to ordinary shares of the company. For further details see Note 1 (b).

(b) Risk exposures

Details of the Group’s exposure to interest rate and foreign currency change risks arising from current borrowings are disclosed in Note 2.

NOTE 19: TAX

Current Liabilities

Income tax 56,873 1,460 - -

Deferred tax liabilities not brought to account and which will only be offset against non-current tax assets and the net benefit brought to account if the conditions for deductibility set out in Note 1(g) are realised

Deferred tax assets are disclosed in Note 15 including details of tax losses not brought to account.

Page 36 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20: CONTRIBUTED EQUITY

		Consolidated	Consolidated	Parent	entity
		2008	2007	2008	2007
181,188,230 fully paid ordinary shares (2007:
158,081,116)		43,100,003	39,010,891	43,100,003	39,010,891
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
(a)Movements in ordinary share capital
Date	Details		No of shares	Issue price	$
1 July 2006	Opening balance		1,426,811,168	-	37,596,291
12 Jun 2007	Shares issued		154,000,000	0.01	1,540,000
	Less transaction costs arising on share
	issued		-	-	(125,400)
30 June 2007	Balance		1,580,811,168	-	39,010,891
18 July 2007	Share issued		60,000,000	0.10	600,000
8 Nov 2007	Share based payment		50,000,000	0.25	1,250,000
8 Nov 2007	After Share consolidation 10:1		169,081,119
29 Jan 2008	Shares issued		10,185,800	0.25	2,546,450
20 Jun 2008	Share issued		1,666,666	0.12	200,000
23 Jun 2008	Share based payments		254,645	0.25	63,661
	Less transaction costs arising on shares
	issued		-	-	(570,999)
30 June 2008	Balance		181,188,230	-	43,100,003

(b) Ordinary shares

On 8 November 2008 there were 1,690,811,168 fully paid shares before consolidation of issued shares in the ration of 10 to 1 as approved by shareholders at the 2007 Annual General Meeting.

During the financial year the company issued 6,000,000 shares at $0.10 each; 15,440,445 shares at $0.25 each and 1,666,666 at $0.12 each.

The company has a loan from Goldchoice Investment Limited of $1 million which matures on 31 December 2008 and which gives the provider the right to convert this loan to equity in the Company based on an issue price 7.5 cent per share.

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.

At the shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

(c) Capital risk management

The Group and the parent entity’s objective when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns to shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group and the parent entity monitor capital on the basis of the gearing ratio.

Consistently with others in the industry, the Group and the parent entity monitor capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘borrowings’ and ‘trade and other payables’ as shown in the balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the balance sheet (including minority interest) plus net debt

During 2008. the Group’s strategy, which was unchanged from 2007, was to maintain a gearing ratio within 10% to 50%. The gearing ratios at 30 June 2008 and 30 June 2007 were as follows:

Total borrowings Less cash and cash equivalents Net debt Total equity Total capital Gearing ratio	Consolidated Parent entity 2008 2007 2008 2007 7,009,081 6,218,532 1,000,000 1,612,000 (2,618,985) (2,066,069) (305,836) (1,102,541)
	4,390,096 4,152,463 694,164 509,459 4,388,212 4,946,728 3,975,085 5,539,537
	8,778,308 9,099,191 4,669,249 6,048,996
	50.01% 45.64% 14.87% 8.42%

The increase in the gearing ratio during 2008 resulted primarily from an increase in loans provided by a director/shareholder.

Page 37 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 21: RESERVES

The foreign currency transaction reserve records exchange difference arising on translation of balances of a foreign controlled subsidiaries.

NOTE 22: KEY MANAGEMENT PERSONNEL DISCLOSURES

The following persons were directors of ASF Group Limited during the financial year: -

(a) Directors

(a)	Directors
	Chairman - executive	Min Yang
	Executive directors	Quan (David) Fang
	Non-executive directors	Alex Lao, Vice Chairman
		Geoff Baker
		Alan Humphris		From 5 September 2007
		Tony Sin Pyng Teng		From 1 July 2007-31 August	2007
(b)	Key management personnel compensation:
		Consolidated	Group	Parent Entity
		2008	2007	2008	2007
		$	$	$0	$
Fees	and commission paid to related parties	1,678,600	276,200	-	-

Details of directors remuneration are included in the remuneration report on page 12.

(d) Shareholdings of key management personnel

The number of shares in the company held during the financial year by each director of ASF Group Limited and other key management personnel of the Group, including their personally related parties are set out below. There were no shares granted during the reporting period as compensation.

2008	Balance at start of the year Changes during the year Balance at the end of the year
*Directors of ASF Group Limited* Min Yang David Fang Tony S.P. Teng Alex Lau Wai Seng Ho Geoff Baker	32,500,000 (11,403,500) 21,096,500 32,500,000 (11,680,000) 20,820,000 179,161 - 179,161 12,928,000 - 12,928,000 8,333,333 - 8,333,333 234,517 5,000,000 5,234,517 700,000 700,000
	87,375,011 (18,082,500) 69,291,511

2007	Balance at start of the year Changes during the year Balance at the end of the year
*Directors of ASF Group Limited* Min Yang David Fang Tony S.P. Teng Alex Lau Wai Seng Ho Geoff Baker Alan Humphris	32,500,000 - 32,500,000 32,500,000 - 32,500,000 179,161 - 179,161 12,928,000 - 12,928,000 8,333,333 - 8,333,333 234,517 - 234,517 700,000 700,000
	86,675,011 700,000 87,375,011

Page 38 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 22: KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)

(f) Other transactions with key management personnel

During the year, properties owned by Mr. Alex Lao were used as the head office of Multinational Youth Travel Agency Limited free of charge. One of the branch offices was leased from Alex Lao at a total rental charges of MOP24,000 (A$3,382) in the year.

In addition, properties owned by and assets of Alex Lao were pledged as security for a banking facility granted to the parent entity’s subsidiary in Macau Multinational Youth Travel Agency Limited. Details of the security provided are set out in Note 18(a).

NOTE 23: REMUNERATION OF AUDITORS

	Consolidated Group Parent Entity 2008 $ 2007 $ 2008 $ 2007 $
Auditor to the parent company Auditing or reviewing the financial report Other services: - taxation services - corporate advisory services Other auditors of subsidiaries Auditing or reviewing the financial report of subsidiaries Corporate advisory services	75,247 55,500 - 55,500 12,500 4,350 - 4,350 108,020 7,300 - 7,300 31,912 26,325 - - 26,691 6,310 - -
	254,370 99,785 - 67,150

NOTE 24: CONTINGENT LIABILITIES

There were no contingent liabilities at balance date.

NOTE 25: COMMITMENTS

Non-cancellable operating leases

The property lease is a non-cancellable lease with a 3 years term, with rent payable monthly in advance. Contingent rental provisions within the lease agreement require the minimum lease payments shall be increased by the lower of CPI or 5% per annum. An option exists to renew the lease at the end of the 3 year term for an additional term of 3 years.

Non-cancellable operating leases contracted but

not capitalised in the financial statements

- Payable not later than one year - Longer than 1 year and not longer than three years Minimum lease payments Exploration and Development	230,263 158,820 - - 488,968 159,863 - -
	719,231 318,683 - -

- Payable not later than one year	572,250 433,370 - -

NOTE 26: RELATED PARTY TRANSACTIONS

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

(a) Parent entity

The parent entity within the Group is ASF Group Limited

(b) Subsidiaries

Interests in sbsidiaries are set out in Note 27

(c) Key management personnel

Disclosures in relation to key management personnel are set out in Note 22 and on page 12 of the Directors’ Report..

Page 39 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 26: RELATED PARTY TRANSACTIONS (continued)

(e) Outstanding balances arising from transactions with the Group

The Group includes the ultimate parent entity and its wholly owned and partly owned subsidiaries. The ultimate parent entity in the Group is ASF Group Limited. Amounts receivable from entities in the Group are disclosed in note 8, 11, 17 and 18 in the financial statements.

and 18 in the financial statements.
	Consolidated	Group	Parent Entity
	2008	2007	2008	2007
	$	$	$	$
Amounts receivable from related entities	889,874	751,193	-	-
Amounts owing by controlled entities	875,427	875,427	5,863,078	2,874,419
Provision for impairment of amounts owing by
controlled entities	(875,427)	(875,427)	(5,256,829)	(875,427)
Amounts payable to related parties	-	1,042,806	-	-
Amounts payable to Alex Lao, Director	-	225,234	-	-
Loans from director/shareholder	1,049,745	-	-	-

$889,874 is receivable from and $1,049,745 is payable by related companies of Alex Lau as set out in Note 8 and 17 respectively.

A provision for impairment of debtors of $4,381,402 was raised in the 2008 financial year (2007:$875,427) in relation to

outstanding balances owing by a related entity and an expense was recognised with respect to this impairment.

(f) Guarantees

A director of the company has given guarantees with respect to a bank overdraft provided to a subsidiary as set out in Note 18(a).

NOTE 27: SUBSIDIARIES

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 1(c).

with the accounting policy described in Note 1(c).
Name of entity	Country of	Class of Shares	Ownership	Interest
	Incorporation
			2008	2007
*Parent entity*
ASF Group Limited	Australia	Ordinary	100%	100%
*Controlled entities*
ASF Corporate Pty Ltd	Australia	Ordinary	100%	100%
ASF Properties Pty Ltd	Australia	Ordinary	100%	100%
ASF Resources Pty Ltd	Australia	Ordinary	100%	100%
ASF CRCC Resource Pty Ltd	Australia	Ordinary	100%	-
Aushome China Pty Ltd	Australia	Ordinary	100%	100%
ASF Mongolia Resources Pty Ltd	Australia	Ordinary	100%	-
ASF China Property Fund Pty Ltd	Australia	Ordinary	100%	-
ASF China Holdings Limited	BVI	Ordinary	100%	100%
ASF Multinational Holdings Limited	Macau	Ordinary	40%	40%
Multinational Youth Travel Agency Limited	Macau	Ordinary	40%	40%
Guangdong Great Scenery International Travel Service Co.
Limited	China	Ordinary	-	-
ASF (Beijing) Investment Consulting Co Ltd	China	Ordinary	100%	-
ASF Properties (Guangzhou) Co Ltd	China	Ordinary	100%	-

ASF Group Limited has a 40% controlling interest in ASF Macau Multinational Holdings Limited which owns 100% of the Multinational Youth Travel Agency Company Limited (MYTA) and Guangdong Great Scenery International Travel Service Limited (GGSIT) through a management agreement between MYTA and GGSIT which stipulates that MYTA has full power and authority to manage and control all the business and activities of GGSIT. These entities were consolidated effective 1 July 2006 on the basis of board control and majority voting power. As from 1 July 2008 as a result of a change of control arrangements the ASF Group will be equity accounting its effective 40% interest.

Page 40 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 28: SUBSEQUENT EVENTS

On 8 July 2008 the company announced the following changes in relation to its 40% holding in ASF Macau Multinational Limited (ASF MML) which in turn owns 100% of the Macau based travel company, Multinational Youth Travel Agency Limited (MYTA). As a result of streamlined changes to the board and management arrangements of the travel business, ASF Group Limited relinquished board control of ASF MML effective on and from 1 July 2008 but retains its 40% shareholding. The Company’s coshareholder in this business, Mr Alex Lao, who is currently Chairman of MYTA and who is an experienced travel business operator, has assumed board and management control of ASF MML.

As a result of the change of control arrangements, ASF Group Limited has been equity accounting its effective 40% interest in MYTA from 1 July 2008. Previously MYTA was consolidated in ASF Group Limited accounts as a controlled entity. In accordance with the agreement signed in June 2008 Zhongsai subscribe an additional $1.09 million in the Company’s shares during September 2008.

There are no other matters or circumstances that have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

NOTE 29: RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH INFLOW FROM OPERTING ACTIVITIES

OPERTING ACTIVITIES

Consolidated Group
Parent Entity
2008
$
2007
$
2008
$
2007
$

(Loss)/Profit from ordinary activities after income tax
Add/(less) non-cash items:
-
Provision for impairment of goodwill and
investments
-
Provision for impairment of receivables
-
Share based payment expense
-
Depreciation and amortisation
-
Disposal of plant and equipment
-
Loss on sales plant and equipment
Change in assets and liabilities
(Increase)/decrease in inventories
(Increase)/decrease in receivables
Decrease in deposits and prepayments
(Decrease)/increase in payables
(Decrease) in provisions
Increase in income tax payable
Net cash used in operating activities

(4,271,392)
(1,353,869)
(5,653,564)
9,012
-
1,000,697
-
-
-
-
-
4,381,402
-
1,313,661
-
1,313,661
219,848
270,067
-
-
1,567
-
-
-
-
1,396
-
-
(5,702)
528
-
-
(1,186,547)
477,306
150,000
(353,609)
851,763
-
-
-
246,675
1,457,384
(1,182,999)
-
-
(2,134)
-
(2,134)
55,113
686
-
-
(1,774,317)
851,364
(991,500)
(346,731)

NOTE 30: EARNINGS PER SHARE

NOTE 30: EARNINGS PER SHARE
	Consolidated Group
	2008	2007
	Cents per	Cents per
	Share	Share
Basic earnings per share	(2.63)	(0.11)
Diluted earnings per share	(2.41)	(0.10)
*Basic earnings per share*
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as
follows:-

Earnings (i) Weighted average number of ordinary shares (ii)	2008 $ 2007 $
	(4,516,427) (1,541,413)
	No. No 171,751,323 1,439,638,565

Page 41 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

NOTES TO THE FINANCIAL STATEMENTS

NOTE 30: EARNINGS PER SHARE (continued)

(i) Earnings used in the calculation of basic earnings per share are net profit after tax attributable to members of the parent entity (after deducting minority equity interest) as per the income statement.
(ii) On 8 November 2008 ordinary shares were consolidated 10:1 with basic earnings per share in 2008 calculated using consolidated share numbers.

Diluted earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:-

Earnings (i) Weighted average number of ordinary shares (ii)	2008 $ 2007 $
	(4,451,476) (1,503,540)
	No. No 185,084,660 1,452,971,899

(i) Earnings used in the calculation of diluted earnings per share are net profit after tax attributable to members of the parent entity (after deducting minority equity interest) and adding back interest payable after tax on convertible loans as per the income statement.
(ii) On 8 November 2008 ordinary shares were consolidated 10:1 with diluted earnings per share in 2008 calculated using consolidated share numbers.
(iii) The 13,333,333 ordinary shares issuable on conversion of the Gold choice convertible loan as per notes 1(b) and 18(a) are considered as potential shares which are dilutive and have been included in the weighted number of ordinary shares for the calculation of diluted earnings per share.

NOTE 31: PRIOR PERIOD ERRORS

In accordance with AASB 108 “Accounting Policies, Changes in Accounting Estimates and Errors”, the prior period errors in the Group’s 30 June 2007 financial report have been corrected retrospectively in the 2007 comparatives in the current report.

The prior period error was the classification of retained earnings of one of the consolidated group’s subsidiaries as a reserve resulting in reserves being overstated and retained earnings understated.

Correction of the error does not affect the profit for the year or change total equity, nor does it change Parent entity figures.

This correction resulted in the following changes to the Consolidated Group figures in the 2007 financial report:-

BALANCE SHEET AT 30 JUNE 2007

EQUITY Issued capital Reserves – foreign exchange Accumulated losses Parent Entity Interest Minority Equity Interests TOTAL EQUITY	Consolidated Group Previously stated Amended Restated $ $ $ 39,010,891 - 39,010,891 (441,863) 131,779 (310,084) (35,141,779) (52,712) (35,194,491)
	3,427,249 79,067 3,506,316 1,519,479 (79,067) 1,440,412
	4,946,728 - 4,946,728

NOTE 32: SHARE-BASED PAYMENTS

The following share based payments were made during the financial year in payment for services rendered to the Group:-

Grant Date 08/11/2007 23/06/2008	No of Shares Fair Value per share Total Fair Value 5,000,000 $0.25 $1,250,000 254,645 $0.25 63,661
	5,254,645 $0.25 $1,313,661

(a) Fair value Share-based payments have been valued at 25 cents which was the company’s prospectus price for their shares on relisting and prior to the availability of an independent market price for the company’s shares.
(b) Expense arising from share-based payment transactions

Total expense arising from share-based transactions during the period charged against income was $1,313,661 with a corresponding amount credited to contributed equity.

Page 42 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

STOCK EXCHANGE INFORMATION

Statement of quoted securities as at 15 September 2008

There are 3,808 shareholders holding a total of 181,188,230 ordinary fully paid shares on issue by the Company.
The twenty largest shareholders between them hold 74.83% of the total issued shares on issue.
The voting rights attaching to the ordinary shares, set out in Article 62 of the Company’s Articles of Association, are: “Subject to these Articles and to any special conditions attaching to any class of shares a member shall be entitled either personally or by proxy or by attorney or by representative to be present at any general meeting of the Company and to vote on any question on a show of hands and upon a poll and to be reckoned in a quorum”.

Distribution of quoted securities as at 15 September 2008

Ordinary fully paid shares

Range of holding 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over Total holders	Number of holders 1,460 1,229 472 548 99
	3,808

Substantial shareholdings as at 15 September 2008 of Fully Paid Ordinary Shares


Ordinary shareholder	Total relevant interest	% of total voting rights
	notified
FY Holdings Limited	41,620,000	22.97%
Goldchoice Investments Limited	24,350,000	13.44%
Goldenray Consortium(s) Pte Ltd	15,000,000	8.28%
Alex (Nga Fong) Lao	12,928,000	7.14%
CITIC International Assets
Managements Limited	8,380,000	4.63%
Wai Sang Ho	8,333,333	4.60%

On-market buy-backs

There is no on-market buy back currently in place in relation to the securities of the company.

Restricted unquoted securities

estricted unquoted securities
		Number	Number of
		on issue	holders
Ordinary shares under escrow until	29/1/2010*	92,522,498	21

including 41,620,000 shares under escrow held by FY Holdings Ltd being 22.9% of ordinary issued shares

There are unquoted restricted securities on issue by the Company of which 3,480,000 under escrow until 17/7/2008 and 92,522,495 are under escrow until 29/1/2010.

Material differences to Appendix 4E

There are no material differences to the financial statements set out in this report when compared to the information set out in the Company’s Appendix 4E preliminary final statement released to the ASX on 30 August 2008.

Page 43 of 44

ASF Group Limited and Controlled Entities A.B.N. 50 008 924 570

STOCK EXCHANGE INFORMATION

TOP TWENTY SHAREHOLDERS (as at 15 September 2008)

Shareholder name	Number of ordinary	% of total ordinary
	fully paid shares held	shares on issue
FY HOLDINGS LIMITED	41,620,000	22.97
GOLDCHOICE INVESTMENTS LIMITED	24,350,000	13.44
GOLDENRAY CONSORTIUM(S)PTE LTD	15,000,000	8.28
NGA FONG LAO	12,928,000	7.14
CITIC INTERNATIONAL ASSETS MANAGEMENT LIMITED	8,380,000	4.63
WAI SANG HO	8,333,333	4.60
GOLD STAR INDUSTRY LIMITED	5,234,517	2.89
CHANCELLOR MANAGEMENT PTY LTD	2,000,000	1.10
ZHONGRUI INVESTMENT GROUPS CO LTD	2,000,000	1.10
MR ZHONG LIN ZHANG	1,666,666	0.92
MR JIARONG HE	1,067,605	0.59
FORTITUDE ASSET MANAGEMENT SDN BHD	1,009,101	0.56
MS CHOO KHENG YEOH	1,000,000	0.55
DR MARC LAVAL KOO SIN LIN	1,000,000	0.55
CHUN FAT LAW	1,000,000	0.55
LIJUN HE	1,000,000	0.55
MR STUART TURNER	1,000,000	0.55
ORTEGA HOLDINGS PTY LIMITED	1,000,000	0.55
MR MALCOLM KUVEKALOVIC	1,000,000	0.55
J H KILROY INVESTMENTS PTY LTD	1,000,000	0.55
CYBER CITY INTERNATIONAL LTD	1,000,000	0.55
MS ETHEL TI SOO WOO	1,000,000	0.55
PEI LAN SONG	1,000,000	0.55
MS KAIZHI CAI	1,000,000	0.55
TOTAL HELD BY TOP TWENTY SHAREHOLDERS	135,589,222	74.83%

Page 44 of 44

www.asfgroupltd.com

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AI assistant

ASF GROUP LIMITED — Annual Report 2008

64323_rns_2008-10-28_59b9eeb4-b7e1-493a-b6ca-527d5ca10596.pdf

2008 annual report

CORPORATE DIRECTORY

Directors

Company secretary

Registered office and principal place of business

Share Registry

Home Exchange

Auditors

Solicitors

Bankers

CHAIRMAN’S REPORT TO SHAREHOLDERS

CORPORATE GOVERNANCE STATEMENT

CORPORATE GOVERNANCE STATEMENT (continued)

Notes

CORPORATE GOVERNANCE STATEMENT (continued)

CORPORATE GOVERNANCE STATEMENT (continued)

CORPORATE GOVERNANCE STATEMENT (continued)

DIRECTORS’ REPORT

The directors of ASF Group Limited present their report on the Company and its controlled entities for the financial year ended 30 June 2008.

Directors

Ms Min Yang

Mr Alex Lao

Vice Chairman/Non-Executive Director

Mr Quan (David) Fang

Director

Mr Wai Sang Ho

Non - Executive Director

Experience: Appointed a Non–Executive director on 30 November 2006.

Mr Geoff Baker

Non - Executive Director

Mr Alan Humphris

Director

Company Secretary

Mr Tony Sin Pyng Teng

Earnings per share

Corporate structure

Principal activities

Significant changes in state of affairs

Dividends

Review of operations, financial position, business strategies and prospects

Mineral Resources

Property Services

Travel Services

Investment

After balance date events

Environmental regulations

Indemnifying and insurance of directors and officers

Remuneration report

Remuneration philosophy

Remuneration structure

Details of remuneration

Amounts of Remuneration

Key management personnel of the Group

Group performance

Options

Directors’ meetings

Auditor Independence declaration

Proceedings on behalf of the Company

DIRECTORS’ DECLARATION

INCOME STATEMENT For the Financial Year Ended 30 June 2008

BALANCE SHEET As at 30 June 2008

STATEMENT OF CHANGES IN EQUITY For the Financial Year Ended 30 June 2008 Consolidated Group

Parent Entity

CASH FLOW STATEMENT For the Financial Year Ended 30 June 2008

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

Compliance with IFRS

Historical cost convention

Critical accounting estimates

(b) Financial report prepared on a Going concern basis

(c) Principles of consolidation

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continue

(d) Segment reporting

(e) Foreign currency translation

(I) Functional and presentation currency

ASF GROUP LIMITED Annual Report 2008