LEFROY EXPLORATION LIMITED — Annual Report 2007

Aug 30, 2007

U.S. MASTERS HOLDINGS LIMITED ABN 052 123 930

Appendix 4E

Preliminary Final Report
For the year ending 30 June 2007

Results for announcement to the market			30 June 2007 \$2000s	30 June 2006 \$2000s
Revenues from ordinary activities	Down	24.24%	50	66.
Profit/(loss) from ordinary activities	Down	275%	(7)
after tax attributable to members
Net profit/(loss) for the year attributable to members	Down	275%

Dividends (distributions)	Amount per security	Franked amount per security
Final dividend
Interim dividend

Review of Operations For the year ended 30 June 2007 Expressed in U.S. Doilars

The NAV of U.S. Masters Holdings Limited was \$992,905 as at 30 June 2007.

NAV per share was \$0,41 as at 30 June 2007.

The loss for the year was \$6,748, a loss of 0.68%.

There was no dilution, and no share buybacks during the year.

The expenses associated with operating the Fund continued to be the most significant feature contributing to the operating performance, as well as our perception that the U.S. stock market remains overvalued.

The fund has been invested in equities up to 100% of assets during the period. We have recently been using a trading model that has produced returns historically to attempt to capture profits from swings in market volatility. Also, shares of selected companies have been purchased when a significant price decline occurs, due to factors we believe to be relatively temporary. Both of these strategies have been modestly profitable.

We continue to anticipate a significant decline in U.S. share prices, and would hope to purchase shares cheaply should such an event occur.

J. Randolph Updyke Investment Advisor Director

Directors' Report for the year ended 30 June 2007 Expressed in U.S. Dollars

The directors present their report together with the financial statements of U.S. Masters Holdings Limited (the "Fund") for the financial year ended 30 June 2007.

Board of Directors

J. Randolph Updyke B.A. P.R.L. (CEO)

Mr Updyke has been engaged in the investment advisory business for over twenty-five years. He is general partner and investment advisor of Updyke Associates, an investment partnership.

M Carol Updyke

Mrs Updyke is a principal of the Clayworks, a pottery operation in Charleston, South Carolina.

Hubert R. Marleau (Chairman)

Mr Marleau is president of Palos Capital Corporation.

Corporate Governance

The board of directors of the Fund are as stated above.

The criteria for board membership and the selection of appropriate members of the board is considered by the board itself. Election and rotation of directors is governed by the Articles of Association of the Fund.

Directors have the right to seek independent professional advice in the furtherance of their duty, and this may be at the Fund's expense, subject to prior approval by the board.

The board has no remuneration, audit or other committees as, given the size of the Fund and board, this is not thought appropriate.

The board reviews risks associated with the Fund and implements procedures to manage such risks. It develops policies regarding the establishment and maintenance of appropriate ethical standards.

Audit Committee

The Fund does not have an audit committee as at the date of this directors' report. Given the size of the Fund and the board, a separate committee cannot be justified on a cost benefit analysis or otherwise.

Principal Activity

The principal activity of the Fund during the financial year was investment, and no significant change in the nature of that activity has occurred during the year.

Directors' Report for the year ended 30 June 2007 Expressed in U.S. Dollars

Result

The operating loss of the Fund after income tax for the year was \$6,748 (2006: profit: \$4,252).

Dividends

No dividends were paid during the year and no dividend is recommended.

Significant Changes in State of Affairs

During the year, the Fund purchased Nil (2006: Nil) shares pursuant to its buy-back programme. At the balance sheet date, the number of shares held in treasury as a result of the share buy-back programme was 50,606,684.

Significant Post Balance Sheet Events

No event has occurred since the balance sheet date that will materially affect the operations of the Fund in future years. This scheme has ceased and is no longer effective.

Directors' Benefits and Interests in Contracts or Proposed Contracts with the Fund

Since the end of the previous financial year, no director of the Fund has received or become entitled to receive a benefit, other than a benefit included in the aggregate amount of directors' remuneration shown in the financial statements, by reason of a contract made by the Fund or a related corporation with a director or with a firm of which he is a member or with a company in which he has a substantial financial interest.

Directors' Interests in Shares of the Fund

__ _______ _________ -------------------------------	__ Beneficial ______	--------------------------------------- Non-Beneficial
______ ______ --------------------------------------	-------------------------------------- ----------	.
______ ______ _________	_________	- ---------------------------------------
Arc _________ -------------------------	$\sim$ $\sim$ --------------------------------------	$\rightarrow$ ---------------------------------------

Currency and Rounding

The financial statements are expressed in U.S. Dollars and have been rounded to the nearest thousand Dollars.

This report is made in accordance with a resolution of the Board and is signed for and on behalf of the directors.

J. Randolph Undy

Director

nol Updyke M. Carol Updyke

Director

Statement of Operations and Accumulated Deficit for the year ended 30 June 2007 Expressed in thousand of U.S. Dollars

2006 Note 2007 \$000 \$000 Investment income Net realised gain/(loss) on sale of 35 $(10)$ investments Net change in unrealised gain on $\overline{3}$ 38 18 investments Interest and dividend income (net of $\overline{4}$ 13 22 withholding taxes) 50 66 Total investment income $= 12.5$ $\frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{$ Expenses Directors' fees $\mathbf{1}$ $\mathbf{1}$ Legal and professional fees 52 58 Sundry expenses 3 $\overline{4}$ Total expenses 57 62 Profit/(loss) for the year $(7)$ $\overline{4}$ Opening accumulated deficit $(11, 870)$ $(11, 874)$ Closing accumulated deficit $(11, 877)$ $(11, 870)$ --------------------------------------- $\frac{1}{2}$ and $\frac{1}{2}$ are start contained Profit/(loss) per share (Dollars) Negligible Negligible -------------------------------------- $m = m = m$

Statement of Net Assets and Shareholders' Interests At 30 June 2007

Expressed in thousands of U.S. Dollars

	Note	2007 \$000	2006 \$000
Assets
Cash and cash equivalents		335	99
Investments		677	921
Total assets		1,012	1.020
Liabilities
Accrued expenses		19	20
Total liabilities		19	20
			___
Net assets		993	1,000
Total shareholders' interests
2,429,826 (2006:2,429,826) ordinary
shares with a par value of \$0.50 per share	5		1,215
Share premium reserve	6	1,215 11,655	11,655
Accumulated deficit		(11, 877)	(11, 870)
Total shareholders' interests		993	1,000
		mand come added mans commented	$\frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{1}{2} \frac{$
Net asset value per share (Dollars
excluding treasury stock)		0.41	0.41
		Patro Agres Anno Bana Announce	=======

$\frac{1}{2}$

È.

Statement of Cash Flows for the year ended 30 June 2007
Expressed in thousands of U.S. Dollars

	2007	2006
	\$000	\$000
Operating activities
Purchase of investments	(474)	(1,311)
Proceeds from sale of investments	746	1,022
Interest and dividends received	22	13
Expenses paid	(58)	(57)
Cash flows from operating activities	236	(333)
Net (decrease) in cash and cash equivalents	236	(333)
Cash and cash equivalents at beginning of year	99	432
Cash and cash equivalents at end of year	335	99
Cash and cash equivalents comprise:
Money market funds	335	99
Cash and cash equivalents	335	99
	=====	====

ł.

Statement of Investments

at 30 June 2007 Expressed in thousands of U.S. Dollars

	Nominal	Market Value \$3000	Average Cost \$'000
Equities
Winmill & Co Inc-CL A	2,000	13	3
Greyhawk Partners Fund	468,590	547	480
W.P. Stewart & Co. Ltd.	700	8	10
Alliance Berstein Holding LP	120	10	10
Cenveo Inc	400	9	10
Ishares di us broker dealers	600	33	30
Legg Mason Inc	500	49	50
Templeton Dragon Fund Inc	300	8
Total Equities/Marketable Securities		677	600

Notes to and forming part of the Financial Statements for the year ended 30 June 2007 Expressed in thousands of U.S. Dollars

1. THE FUND

(a) General information

U.S. Masters Holdings Limited (the "Fund") was incorporated under the laws of the British Virgin Islands on 14 May 1990 under the International Business Companies Act (Cap. 291). The liability of the members is limited by shares. The Fund maintains its Registered office in the British Virgin Islands. The Fund is a closed-end investment company.

The financial statements are presented in thousands of United States Dollars.

The Fund was formed as an investment company to permit shareholders to participate in the accumulation of capital on a pooled basis from the professionally managed trading of predominantly United States investments.

(b) Investment advisory fees

Under the terms of an Investment Advisory Agreement dated 1 January 1998, J. Randolph Updyke has agreed to provide investment advisory services to the Fund.

As compensation for his services, J. Randolph Updyke receives from the Fund:

• $i)$ a management fee payable semi-annually equal to 0.5% (1% annualised) of the Fund's Net Asset Value at the end of such semi-annual period; and,
• an incentive fee payable equal to 20% of the appreciation, if any, in Net Asset $ii)$ Value on a fiscal year basis.

However Mr J. Randolph Updyke has agreed to waive his management fees effective 1 July 2004.

2. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of the Fund's financial statements are set out below:

(a) Basis of preparation

The financial statements of U.S. Masters Holdings Limited, have been prepared in accordance with International Financial Reporting Standards. They have been prepared under the historical cost accounting convention and, except where stated, do not take into account changes in either the general purchasing power of the Dollar or in the prices of specific assets.

The accounting policies have been consistently applied by the Fund and are consistent with those of the previous year.

Notes to and forming part of the Financial Statements for the year ended 30 June 2007 Expressed in thousands of U.S. Dollars

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

(b) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and balances with banks and brokers with maturities of three months or less.

(c) Investments

Investments are carried at market value. Any increases or decreases in carrying values are recognised in the statement of operations and accumulated deficit as an unrealised gain or loss.

Investments in securities and securities sold short traded on a United States national securities exchange are valued at the last reported sales price on the day of valuation or, if there has been no sale on such exchange on the date on which valuation is being made, then at the mean between the closing bid and asked prices on such exchange on such date.

Securities traded in the over-the-counter market are valued at the last sales price if the security is reported by NASDAQ's System, or, if not reported, at the mean between the last bid and asked prices. Restricted securities and other securities for which quotations are not readily available are valued at fair value as determined in good faith by the Investment Manager.

(d) Investment transactions and income recognition

Investment transactions are accounted for on the trade date (the date on which the order to buy or sell is executed). Gains or losses arising from the sale of investments are determined using the average cost basis. Income from investments is recorded on the accrual basis. Interest income is recorded as earned and dividend income is recorded on the ex-dividend date.

(e) Foreign currency

Transactions in currencies other than the Fund's reporting currency are converted at the rate of exchange ruling at the transaction date. Foreign currency monetary assets and liabilities, other than those covered by forward exchange contracts, are translated at the rate of exchange ruling at the reporting date. Resulting exchange differences are recognised in the result for the year.

Notes to and forming part of the Financial Statements for the year ended 30 June 2007 Expressed in thousands of U.S. Dollars

3. NET CHANGE IN UNREALISED GAIN ON INVESTMENTS

	2007 \$000	2006 \$000
Market value of investments Investments at average cost	677 600	921 882
Closing unrealised gain on investments	77	39
Opening unrealised gain on investments	39	21
Net change in unrealised gain/(loss) on investments	38	18
	------------

4. TAXATION

The Fund is exempt from all forms of taxation in the British Virgin Islands and Australia including income, capital gains and withholding taxes. United States withholding tax has been deducted at source on certain dividends and interest paid, with respect to securities of United States issuers, at the rate of 30% of gross income. There are no other taxes applicable to the Fund.

Notes to and forming part of the Financial Statements
for the year ended 30 June 2007 Expressed in thousands of U.S. Dollars

5. SHARE CAPITAL

	2007 \$000	2006 \$000
Authorised
2,000,000,000 ordinary shares of \$0.50 par value each	1,000,000	1,000,000
Issued and fully paid
53,036,510 (2006: 53,036,510) ordinary shares of \$0.50	26,518	26,518
Treasury stock:
Opening balance (50,606,684 shares, 2006: 50,606,684 shares)	25,303	25,303
Acquired during the year (Nil shares, 2006:Nil shares)	0	0
Closing balance (50,606,684 shares, 2006:50,606,684 shares)	25,303	25,303
Net share capital (2,429,826 shares, 2006: 2,429,826 shares)	1,215	1,215

2009/02/20

Each ordinary share carries the right to one vote at annual and general meetings and is entitled to participate in any dividends or other distributions of the Fund.

6. SHARE PREMIUM RESERVE

	2007 \$000	2006 \$000
Gross premium on issue of shares	37,965	37,965
Transfer to Redomicile Reserve - 1991	(25,000)	(25,000)
Net premium on purchase of treasury stock	(1,310)	(1,310)
Opening balance	11,655	11,655
Discount on purchase of treasury stock during the year	0	∩
Closing balance	11,655	11.655

Notes to and forming part of the Financial Statements for the year ended 30 June 2007 Expressed in thousands of U.S. Dollars

7. TREASURY STOCK

The Fund holds treasury stock in itself which was purchased pursuant to an on-market buy-back scheme on the Australian Stock Exchange.

	2007 \$000	2006 \$000
50,606,684 (2006:50,606,684) ordinary shares at cost	26.613	26,613
	Agrees Scotch Linksh Scholar Robert

8. RELATED PARTY TRANSACTIONS

The Fund had the following commercial dealings with its directors and their associates:

• (a) One of the directors earned fees of $$1,000$ (2006: $$1,000$ ) during the year.
• (b) J. Randolph Updyke and M. Carol Updyke, directors of the Fund, each held 1,370,250 (2006: 1,317,250) and 55,000 (2006:55,000) shares in the Fund, respectively, at the end of the year.

9. CONTINGENT LIABILITIES

The directors are not aware of any contingent liabilities of the Fund at the year-end. The Fund has given a guarantee in respect of the creditors of its former subsidiaries as at 9 May 1991 pursuant to the Schemes of Arrangement to redomicile the former group to the British Virgin Islands.

Notes to and forming part of the Financial Statements for the year ended 30 June 2007 Expressed in thousands of U.S. Dollars

10. FINANCIAL INSTRUMENTS

Financial assets of the Fund include cash and cash equivalents, investments and interest and dividends receivable.

Financial liabilities comprise accrued expenses.

Accounting policies for financial assets and liabilities are set out in note 2.

(a) Fair values

The carrying amounts of cash and cash equivalents, interest and dividends receivable and accrued expenses approximate their fair value due to the relatively short period to maturity of these instruments. Investments are carried at market value.

(b) Credit risk

Substantially all securities transactions are cleared through, and held in custody by two financial institutions. The Fund is subject to credit risk to the extent that these institutions may be unable to return the Fund's securities or to repay amounts owed.

Securities Insurance Protection Corporation (SIPC) provides insurance on bank and security balances in the event a U.S. Broker files for bankruptcy, but given their high credit ratings, management does not expect any counterparty to fail to meet its obligations.

At the year end there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset.

(c) Interest rate risk

The interest rates on the bonds held are disclosed in the statement of investments. There is an inherent risk that during the period to maturity these rates, to the extent that they are fixed, may be lower than the prevailing market rate.

11. STATUS OF REPORT

This report is based on accounts that have been audited.