CODEIFAI LIMITED — Annual Report 2014

Mar 30, 2015

ASX ANNOUNCEMENT

31 March 2015

YPB Group Ltd (ASX:YPB), (ASX:YPBO)

ANNUAL REPORT

Attached is the Company’s Annual Report for its adjusted financial year ending 31 December 2014.

It is noted that the results herein differ from the Appendix 4E as the Company inadvertently neglected in include in the Appendix 4E the impairment of goodwill amounting $2,206,000 that was incurred as a result of the reverse takeover transaction wherein YPB Ltd was acquired.

Shareholders should note that this report covers the period only from 1 July 2014 and includes the transactions that resulted from the restructure of the company and the acquisition of the shares in YPB Limited.

The company’s first full year annual report will not be issued until post 31 December 2015.

Yours faithfully

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Robert Whitton Company Secretary

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YPB Group Ltd. GLOBAL LEADER IN ANTI COUNTERFEIT TECHNOLOGY ABN 68108 649 421 Level 29, 66 Goulburn Street. Sydney NSW 2000 ASX code: YPB Ti+61282634000 F:+61282634111

YPB Group Limited

ACN 108 649 421

Annual Report 31 December 2014

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YPB Group Limited Report 2014

Contents

Chairman's Letter	3
Directors' Report	4
Auditor's Independence Declaration	14
Corporate Governance Statement	15
Financial Report	22
Directors' Declaration	58
Independent Auditor's Report	59
Sliareholder Information	61
Corporate Directory	63

YPB Group Limited Report 2014

Chairman's Letter

Dear fellow shareholder,

YPB's first Annual Report as a listed ASX Company comes after a full and productive "first 180" days of trading.

Firstly I thank all shareholders, the Board of Directors and the YPB team for their support and shared belief in my vision to create a Company that will lead the way to fight counterfeit for the benefit of Brands and Consumers, eventually all over the world. Our shareholders' belief has been rewarded with an impressive increase in the IPO share price since our launch in August 2014.

YPB has managed several significant milestones since IPO including (in no particular order):

• Acquisition of Brand Reporter and establishment of YPB in the USA.

• Establishment of a strong relationship with several Chinese Government agencies and associated contract success

• Signing of significant contracts with substantial Chinese Companies which lead in their respective fields

• Launching of a new scanner (T2) and associated Patents being lodged with the Chinese SIPO

• An LOI with Impact Media Services, which will see YPB distributed in Indonesia and India

• Opening of a Thailand operation and closer ties to Intellectual Property Protection in that Country

• Signing of an agreement with Crime Stoppers International and preferred status with the Global organization

• A significant re-launch of the Brand Reporter platform with many added features and multilanguage support

• Strengthening of YPB's Intellectual Property position

• Completion of a 1 for 4 loyalty option scheme

• Launching of a Share Purchase Plan for existing shareholders

YPB now has a solid platform for revenue generation through a mix of direct and distributor based sales, product enhancement to cater for customer needs, back up support and ability to scale as demand increases.

My thanks to my fellow Board members and to the dedicated staff of YPB for their efforts in creating the platform to allow YPB to provide Real Protection for Quality Brands - globally.

Yours faithfully

John Houston Executive Chairman CEO

YPB Group Limited Report 2014

Directors' Report

The directors present their report and the financial statements of YPB Group Limited (formerly AUV Enterprises Limited, the "Company") and its controlled entities (the "Consolidated Entity") for the company's changed financial year end of December. The results therefore represent the period commencing 1 July 2014 to 31 December 2014. The transaction to acquire YPB (HK) was finalised with the requotation of the Company's shares on 7 August 2014.

1 . Directors & Secretary

For the period under review and covered by this report, the following persons were directors of the Company. Directors have been in office since the start of the financial year to the date of this report unless othenwise stated.

thenwise stated.
	Date Appointed	Date Resigned
Executive Ctiairman and CEO
John Houston	31 July 2014
Non-Executive Director
Robert Whitton	3 August 2012
Geoffrey Raby	31 July 2014
Su (George) Su	31 July 2014
Anthony Damianos	6 April 2004	31 July 2014
Peter Dykes	3 August 2012	31 July 2014

Mr Peter Dykes resigned as Company Secretary 31 July 2014 and Mr Robert Whitton was appointed to such role on the same date.

2. Principal Activities

The principal activity of the Company during the financial period was as an anti-counterfeiting technology developer and provider.

3. Review of Operations

YPB Group (ASX: YPB) in Chinese means "you pin bao" or in English "excellent brand protection" and is an anti-counterfeiting technology developer and provider. YPB has a unique, cost effective, invisible and indestructible anti-counterfeit solution that allows companies and governments to protect the value of their brands and minimise loss of earnings from counterfeiting. YPB and is certified and licensed in The People's Republic of China.

YPB Group's core products include:

Covert Forensic Tracers - Patented - These are hidden, invisible particles fused into a product or packaging during or after the manufacture process. The Tracers are inexpensive and can be used in all key product manufacturing and packaging industries including plastics, paper, inks, textiles and coatings. They cannot be seen or removed, are non-toxic and meet Food Contact specifications. They consist of infrared, UV light energy and X-ray sensitive particles detectable only by YPB's scanner technology.

YPB owns two patents over its Tracer products and is the only Company currently licensed in China to supply invisible tracers.

Scanner - YPB's proprietary scanner detects YPB's Forensic Tracers. They are low cost and can be used at any point in the supply chain - from manufacture through to point-of-sale.

Brand Reporter - A Patent Pending technology platform designed for Governments, Brands and consumers to identify, manage, track and report counterfeit of divergent products within supply chains or at point of sale in a simple and easily deployed application suite available on all popular smartphones.

YPB Group Limited Report 2014

The 6 months to December 2014 has seen significant operational capability developed within YPB plus in this period we have added distribution 'footprint' and sale pipeline opportunities. Sale pipeline opportunities growth over this period has resulted in the winning of major deals with potential revenues of $39M AUD.

YPB's solid reputation as a professional provider of anti-counterfeit solutions has been further enhanced by working with the Chinese Government and gaining their trust with the execution of contracts to protect Government buildings and Tax invoice documents, with many more opportunities to come.

Additionally, during this period we have developed patents which are now accepted by China's SIPO and delivered our next generation of the YPB scanner named the "T2", plus an exciting range of products can now be built upon the platform YPB had in place at IPO. New products will be rolled out through the remainder of calendar year 2015 opening access to new customers and markets for YPB in both the tracer / scanner area and also Brand Reporter.

Since IPO in August 2014, YPB has also added strength and depth to its management team with senior recruits in Management and Sales. 2015 will see YPB significantly stronger in Sales especially in China, Thailand and USA.

A key factor for success is scalability and in the 6 months to December 2014, YPB has worked with our R&D team to ensure that we can scale our revenues through the ensuing years with developments in tracer production, scanner production, and software development for the Brand Reporter platform and material delivery of anti-counterfeit master batch.

4. Operating Results

The consolidated loss of the Consolidated Entity, after providing for income tax, amounted to $4,478,000 (2013: loss $1,201,000) for the financial period.

5. Significant Changes in State of Affairs

The YPB Acquisition was successfully completed:

• On 6 August 2014 the ASX confirmed to the market that on 7 August 2014 the Company would be re-instated to Official Quotation on 7 August 2014.

• On 6 August 2014 the Company lodged on the ASX all documents relevant to its reinstatement.

• On 7 August 2014 the Company was re-instated to Official Quotation on the ASX.

• On 7 August 2014 the Company unveiled its new website, www.ypbsvstems.com and announced the appointment of Paul Eveleigh as its Chief Operating Officer who will be based in Beijing, China.

• On 11 August 2014 the Company announced a supply contract with China's largest shirt manufacturer to use the Company's anti-counterfeit fibre and T1 scanner product. Additionally the Company advised of the commencement of shipments for anti-counterfeit stamp pads.

• On 18 August 2014 the Company advised the execution of a binding Letter of Intent (LOI) to acquire the US based anti-counterfeit App and online business, Brand Reporter.

• On 19 August 2014 the Company advised the market that to harmonise the balance dates of its various entities it would be changing its Balance date to 31 December. As a result the 31 December 2014 Annual Report is for the 6 months ending 31 December 2014.

• On 8 September 2014 the Company completed the acquisition of the assets of US based anticounterfeit App and online business, Brand Reporter

YPB Group Limited Report 2014

• On 23 September 2014 the Company announced that its technology had won an Excellent Application Award at the 9* Security Document Summit (SDS).

• On 31 October 2014 the Company announced the launch of its Brand Ambassador Program to promote YPB market development worldwide. The first Brand Ambassador being James Moddhe, former Nike Marketing Director.

• On 5 November 2014 the Company signed a Letter of Intent with Impact Media Solutions for distribution of the Company's products in Indonesia and India.

• On 24 November 2014 expanded distribution into Thailand and appointed a General ManagerThailand.

• On 4 December 2014 the Company announced the completion of a $1.65m placement to institutional and sophisticated investors.

• On 24 December 2014 the Company announced a non-renounceable pro-rata options rights issue of up to 27,230,420 options priced at $0.01 with an exercise price of $0.20 and an expiry date of 31 October 2017.

6. Financial Position

The net assets of YPB were $10,725,000 as at 31 December 2014. This increase was as a result of completion of the YPB transaction including the associated capital raise.

7. Future Developments, Prospects and Business Strategies

YPB is now in a position to become a dominant player globally in the field of Product authentication and anti-counterfeit technologies due to our ASX listing and existing product lineup and distribution footprint. In the future YPB can add to the existing footprint and capability by selected strategic acquisitions, having demonstrated our ability to do so with the Brand Reporter acquisition in 2014 and by bringing additional depth and skill into the management team.

YPB also has demonstrated our ability to innovate in products and services and we plan to keep increasing our product portfolio with relevant product development and associated IP protection. We see opportunities for product development especially in the online space where counterfeit is set to increase as more consumers buy online and require additional authentication tools either from existing online merchants or from trusted third parties such as YPB.

YPB will specifically focus on development in the tracer and scanner areas with increase in tracer manufacturing capability and innovation in the scanner field with smaller, lower cost scanners and interface to smartphones.

YPB will continue to seek out major global Brands and provide them with our solutions and at the same time build on our China business by targeting the huge volume opportunities that especially exist there.

8. Dividends Paid

No dividends have been paid or been recommended for payment in respect of the financial period ended 31 December 2014 and 2013.

9. Events Subsequent to Balance Date

On 7 January 2015 the Company dispatched to Shareholders a Non-Renounceable Issue Prospectus, wherein to honour a commitment made at the time of the requotation, to offer to shareholders 27,230,420 $0.01 Options exercisable at $0.20 no later than 31 October 2017. The rights issue closed on 16 January 2015 significantly oversubscribed, with entitlement requests of 22,777,119 and shortfall requests of approximately 53,000,000. A total of approximately $272,000 was raised as a result.

YPB Group Limited Report 2014

On 13 January 2015 the Company announced the signing of a 5 year supply contract with Shenzhen Shensaier Ltd for the provision of anti-counterfeit invisible tracer and T1 scanner.

On 30 January 2015 the Company entered into a further supply contract with Hicap Closures to supply its anti-counterfeit traces product and T1 scanners.

On 12 February the Company signed a Letter of Intent with Hidali Electronics Technology Ltd a major Chinese supplier of RFID and NFC technology to apply YPB anti-counterfeit technology.

On 16 February 2015 the Company entered into a printing solutions contract with Guangdong Renmin Printing for the protection of tax invoices (Fapiao's) for Guangdong Provincial Tax Bureau.

On 19 February 2015 the Company advised of the commencement of its China Government building security passes contract

On 23 February 2015 the Company announced that it had completed a share placement of 10,000,000 shares at $0.30 and 10,000,000 options at $0.01, exercisable at $0.20 prior to 31 October 2017 raising $3.1 M. At the same time the Company announced a Share Purchase Plan to raise up to $6M wherein shareholders could subscribe for up to $15,000 of new shares at $0.30 per share together with 1 attached option for each 4 new shares at $0.01 per option, such options being exercisable at $0.20 prior to 31 October 2017. The Company will apply for quotation on the ASX of the aforementioned shares and options.

On 26 February 2015 the Company announced that it had lodged with the State Intellectual Property Office (SIPO) of the Peoples Republic of China three (3) patent applications for its anti-counterfeiting scanner.

On 4 IVIarch 2015 the Company announced that it had received stocks of its upgraded anti-counterfeit T2 Scanner, replacing its discontinued T1 scanner which had been sold out in calendar year 2014.

On 6 March 2015 the Company provided to the market its Prospectus and Securities Purchase Plan Offer Booklet for the share purchase plan announced 23 February 2015, where in shareholders at the record date could acquire up $15,000 in shares at $0.30/share and attaching options on a 1 for 4 basis at a cost of $0.01/option, such options having an exercise price of $0,20 and an expiry date of 31 October 2017.

On 10 March 2015 the Company announced that it had formed an alliance with Crime Stoppers International to co-operate in fighting counterfeiting globally.

On 16 March 2015 the Company announced that it had entered into an binding Letter of Intent with Intellectual Product Protection to acquire 100% of its assets. The Intellectual Product Protection group is a leading security consultancy operating in Asia and the US based in Thailand and the USA.

10. Directors' & Secretary Experience and Special Responsibilities

John Houston

Executive Chairman and Chief Executive Officer Appointed 31 July 2014

John Houston has over 20 years of international business experience in countries including Australia, New Zealand, Sri Lanka, Thailand, Switzerland and Singapore.

John's experience includes being Chairman of an ASX listed Company, building a USD $2 billion "Greenfield" mobile phone operation in Thailand, running a USD $350m EBITDA mobile Company in Switzerland, and selling an international Broadband Company for a 70x multiple of EBITDA.

YPB Group Limited Report 2014

Dr Geoffrey Raby MAICD Non-Executive Director Appointed 31 July 2014

Dr Raby was the Australian Ambassador to China from February 2007 to August 2011 and Deputy Secretary of the Department of Foreign Affairs and Trade from November 2002 to November 2006. He is a former Australian Ambassador to the World Trade Organisation and also to APEC (Asia Pacific Economic Co-operation).

Dr. Raby lives in Beijing, China. As well as being CEO of Geoff Raby & Associates, a Beijing-based business advisory firm, he sits on a number of listed ASX Company boards (Fortescue Metals Group Limited, SmartTrans Holdings Ltd, OceanaGold Corporation, iSentia Group Limited, Yancoal Australia Ltd). Dr. Raby has BEc (Hons) MEc and PhD degrees from La Trobe University Melbourne.

George (Su) Su Non-Executive Director Appointed 31 July 2014

Mr Su headed CITIC Securities Australian operation between 2009 and 2013 with special focus on cross border transactions between Australia and China and continues to represent the Chinese investment bank in Australia as its business partner. He was born and educated in Beijing before continuing his education in the USA. He holds a Bachelor of Arts Degree in Business Administration.

Mr Su has lived and worked in China, Hong Kong, Singapore and Australia and now resides in Sydney. He has held senior positions in a Chinese government controlled Investment Company, has been the managing director of a Singapore based venture group, is a non-executive director of an ASX listed company (Oriental Technologies Investment Limited) and was an Independent director of Macquarie Bank's China property fund.

Robert Whitton

Non-Executive Director and Company Secretary

Robert has a longstanding and successful career as a Chartered Accountant and Business Advisor. A specialist in business reconstruction services, Robert is a Fellow of the Institute of Chartered Accountants and a Fellow of the Institute of Company Directors. Robert has in excess of 30 years' experience gained across a range of accountancy firms, most recently as a Director of William Buck, Chartered Accountants & Advisors in Sydney, Australia. Robert is a Certified Fraud Examiner. He also is an Associate Fellow of the Australian Institute of Management and a member of Australian Restructuring Insolvency & Turnaround Association.

Robert is also a Director of The Australian Wine Co-Operative Society Ltd ("The Wine Society"). He was appointed Company Secretary of the Company on 31 July 2014 having previously been appointed non-executive Director on 3 August 2012.

YPB Group Limited Report 2014

Former Directors

Peter Dykes Non-Executive Director and Company Secretary

Mr Dykes has more than 20 years' experience in the technology industry, beginning his career as a founding member of KPMG's technology advisory practice in both Sydney and Melbourne. He subsequently co-founded a boutique technology advisory business and advised some of Australia's largest corporate clients including BHP, Boral, Telstra and General Motors Holden.

Mr Dykes was an Executive Director, CFO and Company Secretary of Nexbis Ltd and played a key role during its rise from a market capitalisation of $4 million until its successful sale for $80 million. Mr Dykes resigned as both a non-executive Director and Company Secretary on 31 July 2014.

Anthony M. Damianos Non-Executive Director

Mr. Damianos has been involved in all aspects of the precious and semi-precious gem industry which included roles in mining, marketing and administration. He has extensive experience in sapphire, chrysoprase, emerald and tiger iron mining operations within Australasian. Mr. Damianos was the Chief Operations Officer of the Company's operating subsidiary for 5 years prior to its acquisition. In that role he was responsible for project planning, the construction and commissioning of the largest sapphire processing plant in the southern hemisphere as well as the day-to-day operations including environmental regulation compliance, rough sapphire classification and order fulfillment.

Mr Damianos resigned on 31 July 2014.

11 . Meetings of Directors

During the period under review, 3 formal board meetings of directors were held. During the period the full Board dealt with all relevant matters and no separate meetings of either the Remuneration or Audit Committees of the Board were held. Attendances by each director during the period were:

	Board Meetings
	Number eligible Number	Attended
	to attend
Robert Whitton	3	3
John Houston	3	3
Geoffrey Raby	3	3
George Su	3	3

YPB Group Limited Report 2014

12. Remuneration Report (Audited)

This section presents the nature and amount of remuneration for each director of the Company, and for the executives receiving the highest remuneration.

Remuneration Policy

The remuneration policy of the Company has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and a variable (at risk) component. The Board of the Company believes the remuneration policy is appropriate for the current stage of development of the Company.

The Board's policy for determining the nature and amount of remuneration for Board members and senior executives of the Entity is as follows:

• The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by the Board. All executives receive an agreed mix of fixed salary (which is based on factors such as experience and level of responsibilities), superannuation, fringe benefits and an annual cash performance incentive. The Company's Remuneration Committee will review and make recommendations to the Board in respect of executive packages on an annual basis. Reference will be made to the Entity's performance, executive performance and comparable information from industry sectors and other listed companies in similar industries.

• The performance of executives is measured against criteria agreed annually with each executive. Performance criteria include factors relating to the responsibilities of each position as well as company-wide factors such as the forecast growth of the Entity's profits. All bonuses are linked to predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and can recommend changes to the committee's recommendations. The policy is designed to attract the highest caliber of executives and reward them for performance that results in long-term growth in shareholder wealth.

• The executive directors and executives receive a superannuation guarantee contribution required by the government and do not receive any other retirement benefits.

• All remuneration paid to directors and executives is valued at the cost to the Company and expensed. There are no share or options schemes as part of directors' or executive remuneration.

• The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The remuneration committee determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability.

The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the Entity. However, to align directors' interests with shareholder interests, the directors are encouraged to hold shares in the Company.

Where non-executive directors provide additional services to the Company, this must be approved in advance by the remuneration committee chair.

YPB Group Limited Report 2014

Performance Based Remuneration

As part of each executive director and executive's remuneration package there is a performancebased component, which is paid on achievement of key performance indicators ("KPIs"). The program seeks to align goals of directors and executives with that of the Company and its shareholders. The KPIs are reviewed annually by the Board in consultation with executives.

The measures are tailored to the areas each executive has a level of control over. The KPIs target areas the Board believes hold greater potential for group expansion and profit, covering financial and non-financial as well as short- and long-term goals. The level set for each KPI is based on budgeted figures for the group and respective industry standards.

Performance in relation to the KPIs is assessed annually, with bonuses being awarded depending on the number and deemed difficulty of the KPIs achieved. Following the assessment, the KPIs are reviewed by the remuneration committee in light of the desired and actual outcomes, and their efficiency is assessed in relation to the group's goals and shareholder wealth, before the KPIs are set for the following year.

Company Performance, Shareholder Wealth and Directors' and Executives' Remuneration

There were no KPIs set for the period under review being the six months ended 31 December 2014 and as a result no performance payments were paid or are payable.

Details of Remuneration for the Period Ended 31 December 2014

The remuneration for each key management personnel is set out in the tables below.

	Short-term	Equity-based
	Benefits	Payments
Group KMP	Feasor
	Remuneration	Shares	Total
	$	$	$
John Houston	154,704	-	154,704
Robert Whitton	13,333	27,500	40,833
Geoffrey Raby	17,842	-	17,842
George (Su) Su	13,333	-	13,333
Paul Eveleigh (Chief Operating Officer)	50,000	-	50,000
Colin Turner (Chief Financial Officer)	142,000	-	142,000
Randall Griffis (Chief IVIarketing Officer)	55,000	55,000	110,000
Anthony Damianos	8,250	-	8,250
Peter Dykes	-	-	-
	454,462	82,500	536,962

There were no remuneration expenses paid or payable to each member of key management personnel for the period ended 31 December 2013.

YPB Group Limited Report 2014

KMP Shareholdings and Options Granted as Remuneration

The number of ordinary shares and options in YPB Group Limited held by each KMP of the Group during the financial period is as follows:

Group KMP	Ordinary	Options
	shares
John Houston	60,318,453		-
Robert Whitton	175,000
Geoffrey Raby	250,000
George (Su) Su	5,496,716
Paul Eveleigh (Chief Operating Officer)	135,000		-
Colin Turner (Chief Financial Officer)	125,000		-
Randall Griffis (Chief Marketing Officer)	262,200

Other Equity-related KMP Transactions

There have been no other transactions involving equity instruments other than those described in the tables above relating options, rights and shareholders.

Employment Contracts of Directors and Senior Executives

The terms of employment for all directors and senior executives are formalised in contracts of employment. The key terms of the contracts with Directors and specified executives except the CEO are:

• none of the contracts have fixed terms;

• resignation period or termination by the Company is six months' notice

• termination or redundancy payments by the Company are not specifically provided for in the contracts, however, will be payable in accordance with relevant Federal or State legislation; and

• no termination payments are payable in respect of resignation or dismissal for serious misconduct. In the instance of serious misconduct the Company can terminate employment at any time.

• The services of the CEO are provided pursuant to a Contract with a Service Company:

• The contract has a term of 36 months from 23 May 2014

• Resignation period or termination by the Company is twelve months' notice.

• Termination or redundancy payments by the Company are not specifically provided for in the contracts, however, will be payable in accordance with relevant Federal or State legislation; and

• No termination payments are payable in respect of resignation or dismissal for serious misconduct. In the instance of serious misconduct the Company can terminate employment at any time.

13. indemnification of Directors, Officers and Auditor

Pursuant to Article 103 of its Constitution, the Company insures and indemnifies its current and former directors and officers, against liabilities to another person (other than the Company or a related body corporate) that may arise from their position as directors and officers of the Company and its controlled entities, except where the liability arises out of conduct involving lack of good faith.

YPB Group Limited Report 2014

14. Insurance Premiums

The Company has paid an insurance premium in respect of a contract insuring against liability of Directors and Officers in accordance with the Company's Constitution and the Corporations Act 2001.

The contract of insurance prohibits disclosure of the amount of the premium and the nature of the liability insured against. The Company has paid the insurance premium in respect of cover which may apply in relation to liabilities of the type referred to in Section 199B of the Corporations Act 2001.

15. Non-audit Services

The Board is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor's independence for the following reasons:

• ail non-audit services are reviewed and approved by the Board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and

• the nature of the services provided does 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.

Due diligence investigations amounting to $30,000 were paid or payable to the Company for non-audit services provided during the period ended 31 December 2014.

16. Compliance with Listing Rule 4.10.19

The company confirms that it has since reinstatement used the cash and assets in a form readily converted into cash that it had at the time of reinstatement in a manner consistent with its business objectives.

17. Auditor's Independence Declaration

The auditor's independence declaration for the period ended 31 December 2014 will be included on page 14 of this Annual Report.

18. Proceedings on Behalf of Company

Other than as set out below, 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.

19. Rounding of Amounts

The Company is an entity to which ASIC Class Order 98/100 applies and, accordingly, amounts in the financial statements and directors' report have been rounded to the nearest thousand dollars.

Signed in accordance with a resolution of the Board of Directors

John Houston Executive Chairman

Dated this 27'^ of March 2015

Chartered Accountants and Business Advisers

HALL CHADWICKtf (NSW)

YPB GROUP LIMITED ACN 108 649 421 AND CONTROLLED ENTITIES

AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF YPB GROUP LIMITED AND CONTROLLED ENTfTIES

I declare that, to the best of my knowledge and belief, during the period ended 31 December 2014 there have been no contraventions of:

SYDNEY

Level 40 2 Park Street Sydney NSW 2000 Australia

GPO Box 3555 Sydney NSW 2001

Ph: (612) 9263 2600 Fx: (612) 9263 2800

1. the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

2. ii. any applicable code of professional conduct in relation to the audit.

l4 dA Cdn^M^t^

HALL CHADWICK Level 40,2 Park Street SYDNEY NSW 2000

dJ^tJ/^

GRAHAM WEBB

Partner Dated: 27 March 2015

A member of AGN International Ltd, a worldwide association of separate and Independent accounting and consulting Arms

www.hailchadw^lck.com.au

SYDNEY •• NEWCASTLE • PARRAMATTA • PENRITH • MELBOURNE • PERTH • BRISBANE • GOLD COAST • DARWIN Liability linnited by a scheme approved under Professional Standards Legislation.

YPB Group Limited Report 2014

YPB Group Ltd ("YPB Group") is a company limited by shares, incorporated and domiciled in Australia. Its registered office is Level 29, 66 Goulburn Street, Sydney NSW 2000 its main place of business is in China.

Corporate Governance Statement

Background

The Board of Directors of YPB Group are responsible for the Corporate Governance of YPB Group and its controlled entities. The Board guides and monitors the business and affairs of the group on behalf of the shareholders by whom they are elected and to whom they are accountable.

The YPB Group Corporate Governance Statement on the governance practices adopted by the Company is structured with reference to the ASX Corporate Governance Council's Principles and Recommendations. The practice are summarised below.

The Board is committed to improving its corporate governance practices and embracing the principles put out by the ASX Corporate Governance Council, however the Board is of a view that the adoption of the practices and principles should be in line with the growth in size, changes in the nature and increase in complexity of the Company's business.

The Board aims to achieve all of the Best Practice Recommendations in stages as the Company grows and its circumstances change over time. As reported in the current years' and previous years' annual report, the Company has been concentrating on its efforts to restore the financial position of the Company and does not have sufficient resources to adopt and improve its corporate governance practices at present.

It is the new Board's intention to apply all principals previously adopted on the resumption of quotation on the ASX and achieve all of the Best Practice Recommendations in stages as the Company grows and its circumstances change over time.

Principle 1: Lay solid foundations for management and oversight.

On resumption of quotation of YPB Group's securities on the ASX, it is the Board's intention to ensure the Company is structured such that there are clearly defined roles, segregation of duties and responsibilities and approved levels of authority between the management and the governance of the Company. The Board will set the overall corporate governance policy for the Company including determining the strategic direction, establishing policies and goals for management and monitoring the achievement of them. The Board will delegate responsibility for the day to day management of the Company to the Chief Executive Officer and the senior executive team.

The key responsibilities of the Board will include:

• setting the long-term strategy and annual business plan including objectives and milestones to be achieved;

• evaluating capital, cash and operating risk budgets and making appropriate recommendations on an annual basis;

• reviewing and approving the Company's financial, strategic and operational goals and assessing key business developments as formulated by management in line with the objectives and goals set by the Board;

• monitoring the performance of the Company against the financial objectives and operational goals set by the Board and reviewing the implementation of Board approved strategies;

YPB Group Limited Report 2014

• assessing the appropriateness of the skill sets and the levels of experience of the members of the Board, individually and as a whole and selecting new members to join the Board when a vacancy exists;

• appointing, removing and determining the terms of engagement of the Directors, Chief Executive Officer and Company Secretary;

• overseeing the delegation of authority for the day to day management of the Company;

• ensuring that the risk management systems, financial reporting and information systems, personnel, policies and procedures are all operating efficiently and effectively by establishing a framework of internal controls and compliance;

• reviewing major contracts, goods or services on credit terms, acceptance of counter-party risks and issuing guarantees on behalf of the Company;

• approving the capital structure and major funding requirements of the Company;

• making recommendations as to the terms of engagement, independence and the appointment and removal of the external auditors;

• setting the Code of Conduct for the Company and ensuring that appropriate standards of corporate governance and ethics are effectively communicated throughout the Company and complied with;

• reviewing the adherence by each director to the Directors' Code of Ethics;

• establishing policies to ensure that the Company complies with the ASX Continuous Disclosure Policy;

• approving the Company's half year and full year reports to the shareholders, ASX and ASIC; and

• ensuring that recruitment, retention, termination, remuneration, performance review and succession planning policies and procedures are in place and complied with.

Principle 2: Structure the Board to add value

The Board is presently structured to maximise value to the Company and the shareholders. The Board is of a size and composition that is conducive to making decisions expediently, with the benefit of a variety of perspectives, experiences and skills.

Board composition

The Board subsequent to 1 August 2014 is composed of four directors. The skills, experience and expertise relevant to the position of Director held of each Director in office at the date of the annual report are included in the Directors Report.

It is noted that the Company's board composition may not be in keeping with the commentary and guidance to Best Practice Recommendations 2.1. The Board is of the opinion that the current stage of uncertainty in relation to the future operations of the Company requires the Company to have a board, which has more of a hands-on and technical experience in order to stabilise the Company. However, the board is committed to follow the guidance to Best Practice Recommendations 2.1 by appointing independent directors to the Board once the future direction of the Company is resolved.

The Board has determined that there are sufficient appropriate alternative governance measures in place to ensure that noncompliance with the recommendations does not give rise to undue risk or other material concerns relating to the management and oversight of the Company.

YPB Group Limited Report 2014

Term of office

The members of the Board are elected by the shareholders to ensure that the Board has the appropriate mix of expertise and experience.

In accordance with the Corporations Act 2001, if a person is appointed as Director during the year, the Company must confirm appointment by resolution at the Company's next Annual General Meeting.

One-third of the Board retires and make themselves available for re-election at the following AGM, with the exception of the Chief Executive Officer. No Director, with the exception of the Chief Executive Officer, is allowed to retain office for more than 3 years without submitting himself or herself for re-election.

When a vacancy exists on the Board, the Board appoints the most suitable candidate from a panel of candidates, who then must stand for election at the next Annual General Meeting if he or she wishes to continue as a member of the Board in the following year.

Personal interests & conflicts

Directors must not take advantage of their position as Directors and must not allow their personal interests, or the interests of any associated person to interfere or exert undue influence on their conduct or decisions as a Director.

Directors also have a duty to avoid conflicts of interest between the best interests of the Company and their own personal or commercial interests. Conflicts of interest can be either actual or potential. If a conflict of interest arises, Directors must disclose their interests to the Board immediately. The Directors concerned must not be present at the meeting while the matter is being considered and must not be allowed to vote on the matter either.

Independent professional advice

There are procedures in place, agreed by the Board, to enable directors in furtherance of their duties to seek independent professional advice at the Company's expense.

Board Standing Committees

Due to the size of the Company and present uncertainties the Board has decided not to formally establish a Nomination Committee.

The board has yet to establish an Audit and Risk Management Committee, at the date of this report, and as such, the responsibilities and duties of this Committee were taken up by the Board during the period. The small size and the hands on approach of the Board enable it to handle particular issues relevant to verifying and safeguarding the integrity of the Company's financial reporting with the same efficiency as an Audit and Risk Management Committee.

Consequently, the Company does not comply with Best Practice Recommendations. However the Board will keep this position under review and it is intended to comply with such recommendations in the current financial period.

YPB Group Limited Report 2014

Summary

In summary, the Company does meet the requirements of Principle 2 of the Corporate Governance Guidelines in that:

• (i) The Board does comprise a majority of independent Directors;

The Chairman however is not an Independent Director.

As explained throughout this section, the Board feels that at the present time each of the recommendations is not cost effective for adoption in a small public company such as YPB Group Ltd. However the Board will constantly monitor and review the situation.

Principle 3 and 10: Promote ethical and responsible decision-making and recognise the legitimate interests of stal<eholders

Code of Conduct & Ethics

The Company had a Code of Conduct, which sets the standards in accordance with which each director, manager and employee of the Company Is expected to act. The code is communicated to all levels of the Company and deals with areas such as professional conduct, customers/consumers, suppliers, advisers/regulators, competitors, the community and the employees.

In addition to the Code of Conduct, the Company also had a Directors' Code of Ethics, which sets out particular issues relevant to directors' obligations to the Company.

Share trading policy

The constitution permits directors, senior executives and other officers of the Company to trade in Company shares as long as they comply with the Company's Share Trading Policy. The Share Trading Policy is a code that is designed to minimise the potential for insider trading.

Directors must notify the Chairman of the Board, before they buy or sell shares in the Company. If the Chairman of the Board intends to trade in the Company shares, the Chairman of the Board must give prior notice to the Chairman of the Audit & Risk Management Committee or the whole Board if there is no Audit & Risk Management Committee. The details of the share trading must be given to the Company Secretary who must lodge such details of such changes in with the ASX.

Senior executives must give prior notice to the Chief Executive Officer, while other officers must notify the Company Secretary, before trading in the Company shares and details of all such transactions must be given, in writing, to the Company Secretary within 7 business days.

Any changes in substantial shareholding of the Directors, senior executives or other officers must be reported to the ASX within 2 business days of such trading. The policy also recommends that trading in the Company shares only occur in the following trading windows:

• 30 days after the announcement of the Company's half year results; and

• 30 days after the announcement of the Company's full year results.

It is the Board's responsibility to ensure an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information as well as non-financial considerations such as benchmarking of operational key performance indicators.

YPB Group Limited Report 2014

Executive Certification

Historically the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) are required to and have provided assurance to the Board stating that the financial statements and reports of the Company:

• Present a true and fair view, in all material respects, of the operating results and financial condition in accordance with the Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001;

• Are founded on a system of risk management and internal compliance and control, and these are operating efficiently and effectively in all material aspects.

It is the Boards intention to apply all principles previously adopted on the resumption of quotation on the ASX - including the requirement to obtain assurances from the CEO and the CFO in relation to the financial statements, systems of risk management and internal controls - in stages as the Company grows and its circumstances change over time.

Audit & Risk R/lanagement Committee - audit responsibilities

The Company currently does not have an audit committee. Historically the board believes a separate audit committee in a company of this size with the absence of independent Directors would be of little value. The small size of the company and the hands on approach of the Board enable it to handle particular issues relevant to verifying and safeguarding the integrity of the Company's financial reporting with the same efficiency as an audit committee.

The board is committed to following the Best Practice Recommendation 4.3, and will establish an independent Audit & Risk Management Committee once independent Directors are appointed and the Company increases in size.

Principle 5: Make timely and balanced disclosure

Historically, the Company's market disclosure policy is to ensure that shareholders and the market are fully informed of the Company's strategy, performance and details of any information or events that could be material to the value of the Company's securities. The Company is committed to ensuring that all information that may have a material impact on the Company's share value is disclosed to the market in a timely and balanced manner.

The Chief Executive Officer and the Company Secretary, in consultation with the Board, are responsible, for the review, authorisation and disclosure of information to the ASX and for overseeing and coordinating information disclosures to the ASX, shareholders, brokers, analysts, the media and the public.

The Company ensures that it also complies with the requirements of the Listing Rules of the Australian Stock Exchange ("ASX") and the Corporations Act in providing information to shareholders through:

• The half-yearly report to the ASX;

• The annual Report which is distributed to the ASX and to shareholders prior to the AGM;

• The AGM and other meetings called to obtain approval from shareholders where appropriate;

• Ad-hoc releases to the ASX as required under the ASX Listing Rules.

YPB Group Limited Report 2014

It is the Board's intention to apply all principles previously adopted in a timely manner on the resumption of quotation on the ASX and achieve all of the Best Practice Recommendations in stages as the Company grows and its circumstances change over time.

Principle 6: Respect the rights of shareholders

Communication to shareholders

The Company recognises the rights of its shareholders and other interested stakeholders to have easy access to balanced, understandable and timely information concerning the operations of the Group. The Chief Executive Officer and the Company Secretary are primarily responsible of ensuring communications with shareholders are delivered in accordance with this strategy and with our policy of continuous disclosure.

The Company strives to communicate with shareholders and other stakeholders in a regular manner as outlined in Principle 5 of this statement.

The Board encourages participation of shareholders at the Annual General Meeting or any other shareholder meetings to ensure a high level of accountability and identification with the Company's strategy and goals. Shareholders are requested to vote on the appointment and aggregate remuneration of Directors, the granting of options and shares to Directors, issue of shares and changes to the constitution.

Annual General Meeting

Historically, the Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Company's strategy and goals.

The Board has also requested representatives from Hall Chadwick, the Company's external auditor, to be present at the Annual General Meeting to answer questions that shareholders might have about the scope and conduct of the audit, the preparation and content of the auditor's report, the accounting policies adopted by the Company and the independence of the auditor.

It is the Boards intention to apply all principles previously adopted on the resumption of quotation on the ASX and implement all of the Best Practice Recommendations in stages as the Company grows and its circumstances change.

Principle 7: Recognise and manage risk

Risl( management responsibilities

The Company's risk management framework is designed to identify, assess, monitor and manage material business risks, both financial and non-financial, to minimise their impact on the achievement of organisational goals.

As no member has been appointed to the Audit & Risk Management Committee, the Board is responsible for reviewing and ratifying the system of risk management, internal compliance and control, codes of conduct and legal compliance.

Historically, the Board delegates to the Chief Executive Officer and the Chief Financial Officer the responsibilities for the establishment, implementation and maintenance of the system of risk management including measures of its effectiveness.

It is the Boards intention to apply all principles previously adopted on the resumption of quotation on the ASX and achieve all of the Best Practice Recommendations in stages as the Company grows and its circumstances change over time.

YPB Group Limited Report 2014

Principle 8: Encourage enhanced performance

Performance evaluation

The Board has responsibility with respect to the following functions:

• develop policies and procedures to identify, assess and enhance the skills, expertise and competencies of the Directors individually and the Board as a whole; and

• develop a process and establish the criteria for evaluating the performance of the Directors and the Board as a whole.

iUlonthly financial results

Historically, the Chief Financial Officer distributed the financial results of the Company to members of the Board before each Board meeting. This ensures the Board is kept up to date with all the necessary information to effectively discharge their duties in its discussions and deliberations. The Board is also free to meet and question individual members of management to clarify issues on any matter pertaining to the Company.

It is the Board's intention to apply all principles previously adopted - including distribution of results before each board meeting - on the resumption of quotation on the ASX and implement all of the Best Practice Recommendations in stages as the Company grows and its circumstances change.

Director induction and training

New Directors will be provided with an induction program to introduce them to the Company structure, culture and business operations.

Directors are also encouraged to undertake continuous professional development, at the Company's expense, to keep their skills up to date.

Principle 9: Remunerate fairly and responsibly

Remuneration responsibilities

The Company's remuneration policy is disclosed in the Directors' Report. The policy has been set out to ensure that the performance of Directors, key executives and staff reflect each person's accountabilities, duties and their level of performance, and to ensure that remuneration is competitive in attracting, motivating and retaining staff of the highest quality. A program of regular performance appraisals and objective setting for key executives and staff is in place. These annual reviews take into account individual and company performance, market movements and expert advice.

The Board determines any changes to the remuneration of key executives on an annual basis.

The Board determines and reviews compensation arrangements for the Directors and the executive team.

YPB Group Limited Report 2014

Financial Report

31 December 2014

22

YPB Group Limited Report 2014

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the 6 months period ended 31 December 2014

		Consolidated Entity	Consolidated Entity
		6 months	6 months
		ended 31	ended 31
		December	December
		2014	2013
	Note	$000	$000
Revenue	2	85	515
Consulting fees		(258)	(99)
Depreciation and amortisation expense		(315)	(412)
Directors' fees		(56)	-
Employee benefits expense		(293)	(374)
Finance costs		(68)	-
Impairment of goodwill		(2,206)	-
Rental expenses		(89)	(137)
Research and development		(506)	(453)
Options expense		(97)	-
Share-based payments		(113)	-
Other expenses		(562)	(241)
Loss before Income tax	3	(4,478)	(1,201)
Income tax expense	4	-	-
Loss for the period		(4,478)	(1,201)
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations		1,060	163
Other comprehensive income for the period		1,060	163
Total comprehensive income for the period		(3,418)	(1,038)
Earnings per share
Basic earnings per share (cents per share)	7	(4.32)	(1.06)
Diluted earnings per share (cents per share)	7	(4.31)	(1.06)

The accompanying notes form part of these financial statements

YPB Group Limited Report 2014

STATEMENT OF FINANCIAL POSITION As at 31 December 2014

		Consolidated Entity	Consolidated Entity
		31 December	31 December
		2014	2013
	Note	$000	$000
CURRENT ASSETS
Cash and cash equivalents	8	2,405	281
Trade and other receivables	9	174	59
Inventories	10	136	117
TOTAL CURRENT ASSETS		2,715	457
NON-CURRENT ASSETS
Intangible assets	11	11,096	10,191
Plant and equipment	12	26	9
TOTAL NON-CURRENT ASSETS		11,122	10,200
TOTAL ASSETS		13,837	10,657
CURRENT LIABILITIES
Trade and other payables	13	364	52
TOTAL CURRENT LIABILITIES		364	52
NON-CURRENT LIABILITIES
Borrowings	14	2,748	2,265
TOTAL NON-CURRENT LIABILITIES		2,748	2,265
TOTAL LIABILITIES		3,112	2,317
NET ASSETS		10,725	8,340
EQUITY
Issued capital	15	17,449	10,399
Reserves	16	1,932	1,198
Accumulated losses		(8,656)	(3,257)
TOTAL EQUITY		10.725	8,340

The accompanying notes form part of these financial statements

YPB Group Limited Report 2014

STATEMENT OF CHANGES IN EQUITY For the 6 months period ended 31 December 2014

				Foreign
				Currency
		Share	Accumulated	Translation	Option
		Capital	Losses	Reserve	Reserve		Total
	Note	$000	$000	$000	$000		$000
Consolidated Entity
Balance at 1 July 2013		9,559	(2,056)	1,035			8,538
Loss for the period			(1,201)				(1,201)
Other comprehensive income for the period		_		163		_	163
Total comprehensive income for the period		-	(1,201)	163		-	(1,038)
Transactions with owners, In their capacity as owners and
other transfers
Shares issued, net of transaction costs	15	840					840
Total transactions with owners and other transfers		840	-	-		-	840
Balance at 31 December 2013		10,399	(3,257)	1,198		-	8,340
Balance at 1 July 2014		10,399	(4,178)	775			6,996
Loss for the period			(4,478)				(4,478)
Other comprehensive income for the period				1,060			1,060
Total comprehensive Income for the period			(4,478)	1,060			(3,418)
Transactions with owners, in their capacity as owners and
other transfers
Shares issued, net of transaction costs	15	7,050	"				7,050
Options recognised during the period	16a			_		97	97
Total transactions with owners and other transfers		7,050	-	-		97	7,147
Balance at 31 December 2014		17,449	(8,656)	1,835		97	10,725

The accompanying notes form part of these financial statements

YPB Group Limited Report 2014

STATEMENT OF CASH FLOWS For the 6 months period ended 31 December 2014

		Consolidated	Entity
		2014	2013
	Note	$000	$0(X)
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers		6	461
Payments to suppliers and employees		(2,081)	(1,461)
Interest received		11	-
Finance costs		(1)	-
Net cash (used in) operating activities	21	(2,065)	(1,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment		(17)	(36)
Proceeds from sale of plant and equipment		-	71
Purchase of intellectual property	23b	(163)	(64)
Net cash (used in) / provided by investing activities		(180)	29
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares (net of costs)		4,900	841
Proceeds from related party loans		-	244
Repayment of related party loans		(394)	-
Net cash provided by financing activities		4,506	1,085
Net increase in cash and cash equivalents		2,261	56
Cash and cash equivalents at1July		125	225
Cash on acquisition	23a	19	-
Cash and cash equivalents at 31 December	8	2,405	281

The accompanying notes form part of these financial statements

26

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

These consolidated financial statements and notes represent those of YPB Group Limited and Controlled Entities (the "consolidated entity" or "group"). The company is a listed public company, incorporated and domiciled in Australia.

The separate financial statements of the parent entity, YPB Group Limited, have not been presented within this financial report as permitted by the Corporations Act 2001.

The financial statements were authorised for issue on 27* March 2015 by the directors of the company.

1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

These general purpose financial statements have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board and International Financial Reporting Standards as issued by the International Accounting Standards Board. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated othenwise.

Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected noncurrent assets, financial assets and financial liabilities.

a. Going Concern

The group incurred an operating loss after income tax of $4,478,000 and has a deficiency of operating cash flows of $2,065,000. The loss is impacted by a one-off impairment of goodwill amounting to $2,206,000.

The financial statements have been prepared on a going concern basis as the group's cash flow forecast indicates that after meeting all of its commitments, and with the capital raising undertaken since 31 December 2014, the Group will be cash flow positive for at least the next 12 months from the date of this report.

Subsequent to the end of the financial period the company has successfully raised approximately $3.4M via the renounceable rights issue in January 2015 of $272,000 and a share placement in February 2015 of $3.1M. In addition, the company has currently open a Share Purchase Plan (SPP) which closes on 17 April 2015 wherein an additional up to $6.0M may be raised. Since opening, $342,000 has been raised under the SPP.

The directors are also confident that the forecasted sales growth will be achieved. The forecasted sales growth assumes that from the four significant sales contracts signed to date and other pipeline opportunities, the Group will generate revenue in excess of $38,500,000 over a period of 5 years. If the forecasted sales growth is not achieved, the company will manage its overhead costs accordingly in order to remain cash flow positive.

On this basis the directors are of the opinion that the financial statements can be prepared on a going concern basis and the group will be able to pay for its debts as and when they fall due and payable.

b. Principles of Consolidation

The consolidated financial statements incorporate all of the assets, liabilities and results of the parent YPB Group Limited and all of the subsidiaries. Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 19.

The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group.

27

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

b. Principles of Consolidation

Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as "noncontrolling interests". The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary's net assets on liquidation at either fair value or at the non-controlling interests' proportionate share of the subsidiary's net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income.

The consolidated financial statements have been prepared using reverse acquisition accounting. In reverse acquisition accounting, the cost of the business combination is deemed to have been incurred by the legal subsidiary YPB Limited (HK) (the acquirer for accounting purposes) in the form of equity instruments issued to the owners of the legal parent, YPB Group Limited (formerly AUV Enterprises Limited) (the acquiree for accounting purposes).

Business combinations

Business combinations occur where an acquirer obtains control over one or more businesses.

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exemptions).

When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability is remeasured in each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date.

All transaction costs incurred in relation to business combinations, other than those associated with the issue of a financial instrument, are recognised as expenses in profit or loss when incurred.

The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.

Goodwill

Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the sum of:

• (i) the consideration transferred;

• (ii) any non-controlling interest (determined under either the full goodwill or proportionate interest method); and

• (iii) the acquisition date fair value of any previously held equity interest;

over the acquisition date fair value of net identifiable assets acquired.

The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements.

Fair value remeasurements in any pre-existing equity holdings are recognised in profit or loss in the period in which they arise. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss.

28

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

b. Principles of Consolidation

The amount of goodwill recognised on acquisition of each subsidiary in which the Group holds less than a 100% interest will depend on the method adopted in measuring the non-controlling interest. The Group can elect in most circumstances to measure the non-controlling interest in the acquiree either at fair value (full goodwill method) or at the non-controlling interest's proportionate share of the subsidiary's identifiable net assets (proportionate interest method). In such circumstances, the Group determines which method to adopt for each acquisition and this is stated in the respective notes to these financial statements disclosing the business combination.

Under the full goodwill method, the fair value of the non-controlling interests is determined using valuation techniques which make the maximum use of market information where available. Under this method, goodwill attributable to the non-controlling interests is recognised in the consolidated financial statements.

Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates.

Goodwill is tested for impairment annually and is allocated to the Group's cash-generating units or groups of cash-generating units, representing the lowest level at which goodwill is monitored being not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity disposed of.

Changes in the ownership interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions and do not affect the carrying amounts of goodwill.

c. Income Tax

The income tax expense/(income) for the period comprises current income tax expense/(income) and deferred tax expense/(income).

Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities/(assets) are measured at the amounts expected to be paid to/(recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the period as well as unused tax losses.

Current and deferred income tax expense/(income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss.

Except for business combinations, no deferred income tax is recognised from the Initial recognition of an asset or liability, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. With respect to non-depreciable items of property, plant and equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

c. Income Tax

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

YPB Group Limited and its wholly owned subsidiaries. Brand Reporter Pty Limited and YPB Ltd will be consolidated for tax purposes under the Tax Consolidation System. YPB Group Limited is responsible for recognising the current and deferred tax assets and liabilities for the consolidated group. The tax consolidated group has entered a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the taxable profit of the tax consolidated group.

Tax consolidation

The Company and its wholly owned subsidiaries have formed a tax-consolidated group with effect from 6 April 2004 and are therefore taxed as a single entity from that date. The head entity of the taxconsolidated group is YPB Group Limited. YPB Group Limited is responsible for recognising the current and deferred tax assets and liabilities for the consolidated group. The tax-consolidated group has entered a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the taxable profit of the tax-consolidated group.

d. Fair Value of Assets and Liabilities

The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard.

Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (ie unforced) transaction between independent, knowledgeable and willing market participants at the measurement date.

As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data.

To the extent possible, market information is extracted from either the principal market for the asset or liability (ie the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (ie the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs).

For non-financial assets, the fair value measurement also takes into account a market partidpant's ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use.

The fair value of liabilities and the entity's own equity instruments (excluding those related to sharebased payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instrument, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

e. Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate proportion of variable and fixed overheads.

f. Plant and Equipment

Plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses.

Plant and equipment

Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 1(h) for details of impairment).

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 asset's employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

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 item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss during the financial period in which they are incurred.

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over the asset's useful life to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

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

Class of Fixed Asset Depreciation Rate Plant and equipment 10% - 25%

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

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

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

g. Financial Instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either the purchase or sale of the asset (ie trade date accounting is adopted).

Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified "at fair value through profit or loss", in which case transaction costs are expensed to profit or loss immediately.

Classification and subsequent measurement

Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost.

Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest metliod.

The effective interest mettiod is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) over the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or expense item in profit or loss.

(i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active marl<et and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through tlie amortisation process and when the financial asset is derecognised.

(v) Financial liabilities

Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised.

Impairment

A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a "loss event") having occurred, which has an impact on the estimated future cash flows of the financial asset(s).

In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter banl^ruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults.

For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

g. Financial Instruments

When the terms of financial assets that would othenwise have been past due or impaired have been renegotiated, the Group recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that have occurred are duly considered.

Derecognition

Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised when the related obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

h. Leases

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

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the lease term.

!. Impel rment of Assets

At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or joint ventures deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset's fair value less costs of disposal and value in use, to the asset's carrying amount. Any excess of the asset's carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (eg in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Impaimrient testing is performed annually for goodwill, intangible assets with indefinite lives and intangible assets not yet available for use.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

j. Intangibles Other than Goodwill

Intellectual property

Intellectual property is recognised at cost of acquisition. Intellectual property has a finite life and is carried at cost less any accumulated amortisation and any impairment losses. Intellectual property is amortised over a period of 20 years.

Research and development

Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project is expected to deliver future economic benefits and these benefits can be measured reliably.

Capitalised development costs have a finite useful life and are amortised on a systematic basis based on the future economic benefits over the useful life of the project.

k. Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of each of the Group's entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent entity's functional currency.

Transactions and balances

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

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

Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income; othenwise the exchange difference is recognised in profit or loss.

Group companies

The financial results and position of foreign operations, whose functional currency is different from the Group's presentation currency, are translated as follows:

assets and liabilities are translated at exchange rates prevailing at the end of the reporting period;

• income and expenses are translated at average exchange rates for the period; and

• retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. The cumulative amount of these differences is reclassified into profit or loss in the period in which the operation is disposed of.

34

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

I. Employee Benefits

Short-term employee benefits

Provision is made for the Group's obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled.

The Group's obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as a part of current trade and other payables in the statement of financial position. The Group's obligations for employees' annual leave and long service leave entitlements are recognised as provisions in the statement of financial position.

Equity-settled compensation

The Group operates an employee share and option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortised over the vesting periods. Sharebased payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using the Black-Scholes pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest.

m. Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits available on demand with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are reported within short-term borrowings in current liabilities in the statement of financial position.

n. Revenue and Other Income

Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods.

Interest revenue is recognised using the effective interest method.

All revenue is stated net of the amount of goods and services tax.

0. Trade and Other Receivables

Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets.

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment.

p. Trade and Other Payables

Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

q.

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

r.

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position.

Gash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers.

s.

Comparative Figures

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

t.

Rounding of Amounts

The parent entity has applied the relief available to it under ASIC Class Order 98/100. Accordingly, amounts in the financial statements and directors' report have been rounded off to the nearest $1 ,000.

u.

Critical Accounting Estimates and Judgements

The directors evaluate estimates and judgements incorporated into the financial statements 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

Intellectual property

The Group assesses the carrying value of intellectual property at the end of each reporting period by evaluating conditions and events specific to the Group that may be indicative of impairment triggers. The Directors have assessed the carrying value of intellectual property at 31 December 2014 and determined that no impairment is required.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

	Consolidated Entity	Consolidated Entity
	2014	2013
	$000	$000
2. REVENUE
Revenue
- sale of goods		74	117
- sale of services			327
- interest income		11
- gain on sale of plant and equipment			71
Total revenue		85	515
3. LOSS FOR THE PERIOD
The loss for the period includes the following expenses:
Finance costs		68	-
Research and development costs		506	453
Depreciation and amortisation		315	412
Impairment of goodwill		2,206	-
Rental expense on operating leases
- minimum lease payments		89	137

37

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

		Consolidated	Entity
		2014	2013
		$000	$000
4.	INCOIME TAX EXPENSE
a.	The prima facie tax on loss from ordinary activities before income tax
	is reconciled to income tax as follows:
	Prima facie tax payable on loss from ordinary activities before	(1,343)	(360)
	income tax at 30% (2013:30%)
	Add:
	Tax effect of:
	- impairment of goodwill	662
	- offshore expenses not deductible	164
	- non-allowable expenses	2
	- share options expensed during period	29
	- tax losses not recognised	404	231
		(82)	(129)
	Less:
	Tax effect of:
	timing differences not recognised	(27)
	Difference in overseas tax rate	109	129
	Income tax attributable to entity
b.	Deferred tax assets have not been recognised in respect of the
	following items:
	Deductible temporary differences	109
	Tax losses	635	231
		744	231

Deferred tax assets have not recognized in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

5. KEY MANAGEMENT PERSONNEL COMPENSATION

Refer to the remuneration report contained in the directors' report for details of the remuneration paid or payable to each member of the Group's key management personnel (KMP) for the period ended 31 December 2014.

The totals of remuneration paid to KMP of the company and the Group during the period are as follows:

	Consolidated Entity	Consolidated Entity
	2014	2013
	$000	$000
Short-term employee benefits		454
Share-based payments		83
Total KMP compensation		537

Short-term employee benefits

These amounts include fees and benefits paid to the executive and non-executive directors as well as all salary, paid leave benefits, fringe benefits and cash bonuses awarded to other KMP.

Share-based payments

These amounts represent the expense related to the participation of KMP in equity-settled benefit schemes as measured by the fair value of the options, rights and shares granted on grant date.

Further information in relation to KMP remuneration can be found in the directors' report.

		Consolidated	Entity
		2014	2013
		$	$
6.	AUDITORS' REMUNERATION
Hall	Chadwick Australia
-	Auditing or reviewing of financial report	35,000
-	Corporate services	30,000
Total remuneration of Hall Chadwick Australia		65,000	-
Component auditors
-	Auditing or reviewing of financial report	2,400	10,500
Total remuneration of component auditors		2,400	10,500
Total auditors' remuneration		67,400	10,500

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

		Consolidated Entity	Consolidated Entity
		2014	2013
		$000	$000
7.	EARNINGS PER SHARE
a.	Reconciliation of earnings to profit or loss:
	Earnings used to calculate basic EPS and dilutive EPS	(4,478)	(1,201)
		No.	No.
	Weighted average number of ordinary shares outstanding
	during the period used in calculating basic EPS	103,739,417	113,178,034
	Weighted average number of dilutive options outstanding	188,703
	Weighted average number of ordinary shares outstanding
	during the period used in calculating dilutive EPS	103,928,120	113,178,034
		Consolidated Entity
		2014	2013
		$000	$000
8.	CASH AND CASH EQUIVALENTS
Cash at bank		2,405	281
Reconciliation of Cash
Cash and cash equivalents at the end of the financial period as shown in the statement of cash flows is
reconciled to the Statement of Financial Position as follows:
Cash		2,405	281
9.	TRADE AND OTHER RECEIVABLES
CURRENT
Trade debtors		46	6
Sundry receivables		128	53
Total trade and other receivables		174	59
10.	INVENTORIES
CURRENT
Finished goods - at cost		136	117

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

	Consolidated Entity	Consolidated Entity
	2014	2013
	$000	$000
11. INTANGIBLE ASSETS
INTELLECTUAL PROPERTY:
Cost	12,779	11,415
Accumulated amortisation	(1,683)	(1,224)
Net carrying amount	11,096	10,191
GOODWILL:
Cost	2,206
Accumulated impairment losses	(2,206)
Net carrying amount		^
Total intangible assets	11,096	10,191
	Intellectual
	property	Goodwill
	$000	$000
Period ended 31 December 2014
Balance at beginning of the period	9,435	_
Acquisition through business combinations (Note 23)	548	2,206
Amortisation charge	(306)	-
Impairment charges	-	(2,206)
Exchange differences	1,419	-
Closing net book value	11,096	-
Period ended 31 December 2013
Balance at beginning of the period	10,290
Additions	64
Amortisation charge	(375)	-
Exchange differences	212	-
Closing net book value	10,191	-

Intangible assets, other than goodwill, have finite useful lives. The current period amortisation charge for intangible assets is included under depreciation and amortisation expense in the statement of profit or loss and other comprehensive income. Goodwill of $2,206,000 resulting from the reverse acquisition of YPB Group Limited has been written-off in the period.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

11. INTANGIBLE ASSETS

The recoverable amount of intellectual property is determined based on the relief from royalty methodology. The royalty relief methodology is based on the principle that the owner of an intangible asset would be prepared to pay a royalty for the right use the intangible asset if someone else owned it. The relief from royalty methodology is based on the present value of a notional royalty stream that the company would be relieved from paying as a result of owning the intellectual property over a 20-year period. The notional royalty streams are discounted using the weighted average cost of capital of the company.

The following key assumptions were used in the royalty relief calculations are as follows: Growth rate (from 2019 based on revenue forecasts up until that date) 5<%, Royalty rate 8% Discount rate 18.5%

Impact of possible changes in l<ey assumptions

If the budgeted growth rate used in the royalty relief methodology for the intellectual property had been 1% lower than management's estimates at 31 December 2014, the group would have recognised an impairment against the carrying amount of intellectual property of $235,000.

If the budgeted sales revenue used in the royalty relief method calculation for the intellectual property had been 5% lower than management's estimates at 31 December 2014, the group would have recognised an impartment against the carrying amount of intellectual property of $553,000.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

	Consolidated Entity	Consolidated Entity
	2014	2013
	$000	$000
12. PLANT AND EQUIPiWENT
PLANT AND EQUIPIVIENT:
Cost		67
Accumulated depreciation		(4-
Total plant and equipment		26

Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial period:

the end of the current financial period:
		Plant and
		equipment
		$000
Period ended 31 December 2014
Balance at beginning of the period		8
Additions		17
Depreciation charges		(9)
Exchange differences		lO
Closing net book value		26
Period ended 31 December 2013
Balance at beginning of the period		i-I
Additions		36
Depreciation charges		(37)
Exchange differences		(i)
Closing net book value		9
13. TRADE AND OTHER PAYABLES
CURRENT
Trade payables	334	45
Sundry payables and accruals	30	7
Total trade and other payables	364	52

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

	Consolidated	Entity
	2014	2013
	$000	$000
14. BORROWINGS
NON-CURRENT
Loans from related entities	2,748	2,265
Total borrowings	2,748	2,265

The loans were provided by related entities of John Houston. The loans attract interest at a rate of 8%, are unsecured and repayable in full on or after 1 April 2016.

15. CONTRIBUTED EQUITY

• a. Issued capital

108,921,678	(2013: 98,920,921) fully paid ordinary
shares		17,449	10,399
		No.	$000
Movements in ordinary share capital:
I Jul 14	Opening balance	113,178,034	10,399
22 Jul 14	Elimination of YPB Limited (HK) shares	(113,178,034)
	on issue of acquisition
7 Aug 14	Shares of YPB Group Limited (formerly	8,257,125
	AUV Enterprises Limited)
7 Aug 14	Shares issued to formal shareholders of	74,250,000	1,652
	YPB Limited (HK)
7 Aug 14	Issued under share-based payments	187,500	30
7 Aug 14	Share placement	18,750,000	3,750
9 Sept 14	Shares issued on acquisition of Brand	1,752,055	385
	Reporter
14 Oct 14	Issued under share-based payments	250,000	55
18 Nov 14	Issued under share-based payments	125,000	28
I I Dec 14	Issued under share-based payments	120,670	36
11 Dec 14	Share placement	5,229,328	1,569
	Less:Transaction costs on shares issued,	-	(455)
	net of tax
31 Dec 14	Closing balance	108,921,678	17,449

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

15. CONTRIBUTED EQUITY

			No.	$000
b.	Movements i	n ordi nary share capital:
	1 Jul13	Opening balance	98,920,921	9,559
	22 Jul 14	Share issued	14,257,103	840
	31 Dec 13	Closing balance	113,178,024	10,399

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 Management

Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio, generate long-term shareholder value and ensure that the Group can fund its operations and continue as a going concern.

The Group's debt and capital include ordinary share capital, redeemable preference shares, convertible preference shares and financial liabilities, supported by financial assets.

The Group is not subject to any externally imposed capital requirements.

Management effectively manages the Group's capital by assessing the Group's financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.

The gearing ratios for the periods ended 31 December 2014 and 31 December 2013 are as follows:

	Note	Consolidated	Entity
		2014	2013
		$000	$0(X)
Total borrowings	14	2,748	2,265
Less cash and cash equivalents	8	(2,405)	(281)
Net debt		343	1,984
Total equity		10,725	8,340
Total capital		11,068	10,324
Gearing ratio		3%	19%

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

16. RESERVES

a. Option Reserve

The option reserve records items recognised as expenses on valuation of share options issued. The option reserve consists of 750,000 options granted to promoters of the Company's capital raisings.

The options vest immediately; expire on 31 October 2017; have an exercise price of $0.20 and have a fair value at grant date of $97,000 based on the share price at grant date of $0.20; a risl<-free rate of 2.50%; a dividend yield of nil and a volatility of 100%.

b. Foreign Currency Translation Reserve

The foreign currency translation reserve records exchange differences arising on translation of foreign controlled subsidiaries.

17. RELATED PARTY TRANSACTIONS

a. The Group's main related parties are as follows:

Key management personnel:

Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity, are considered key management personnel.

For details of disclosures relating to l^ey management personnel, refer to Note 5 and the Remuneration Report.

b. Transactions with related parties:

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

The following transactions occurred with related parties:

c.

The following transactions occurred with related parties:
	Consolidated	Entity
	2014	2013
	$000	$000
Other related parties: Consulting fees payable to William Buck,
of which Robert Whitton is a director	178
Amounts payable to related parties:
Loans from other key management personnel related entity:
Beginning of the period	2,701	1,963
Loan advanced	-	244
Interest charged	67	-
Loan acquired through business combinations (Note 23a)	255	-
Loan repayment	(394)	-
Exchange differences	119	58
End of period	2,748	2,265

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

18. SEGMENT REPORTING

a. Identification of reportable segments

The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Board considers the business from both a product and a geographic perspective and has identified three reportable segments. These operating segments are monitored by the Board and strategic decisions are made on the basis of segment operating results.

b. Type of products and services by segment

(i) Covert Forensic Tracers

These are patented hidden, invisible particles fused into a product or packaging during or after the manufacture process. The Tracers are inexpensive and can be used in all key product manufacturing and packaging industries including plastics, paper, inks, textiles and coatings. They cannot be seen or removed, are non-toxic and meet Food Contact specifications. They consist of infrared, UV light energy and X-ray sensitive particles detectable only by YPB's scanner technology.

YPB owns two patents over its Tracer products and is the only Company currently licensed in China to supply invisible tracers.

(ii) Scanner

YPB's proprietary scanner detects YPB's Forensic Tracers. They are low cost and can be used at any point in the supply chain - from manufacture through to point-of-sale.

(iii) Brand Reporter

A patent pending technology platform designed for governments, brands and consumers to identify, manage, track and report counterfeit of divergent products within supply chains or at point of sale in a simple and easily deployed application suite available on all popular smartphones.

c. Segment information

c.	Segment information
				Brand
		Tracers	Scanner	Reporter	Corporate	Total
		$'000	$'000	$'000	$'0(K)	$'000
(i)	Segment performance
	31 December 2014
	External sales	20	13	37	4	74
	Interest income	-	-	-	11	11
	Total segment revenue	20	13	37	15	85
	Segment net loss before tax	(403)	(263)	(171)	(1,120)	(1,957)
	Reconciliation of segment result to
	group net loss before tax
	- Depreciation and amortisation	(5)	(3)	-	(307)	(315)
	- Impairment of goodwill	-	-	-	(2,206)	(2,206)
	Net loss before tax					(4,478)

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

18. SEGMENT REPORTING

18.	SEGMENT REPORTING
				Brand
		Tracers	Scanner	Reporter		Corporate		Total
		$'000	$'000	$'000		$'000		$'000
(!)	Segment performance
	31 December 2013
	External sales	266	178				71	515
	Interest income
	Total segment revenue	266	178				71	515
	Segment net loss before tax	(3)	(2)				(784)	(789)
	Reconciliation of segment result to
	group net loss before tax
	- Depreciation and amortisation	(3)	(2)				(407)	(412)
	Net loss before tax							(1,201)
(ii)	Segment assets/liabilities
	31 December 2014
	Total segment assets	228	152		623	12,834		13,837
	Total segment liabilities	(446)	(298)	'	(794)	(1,574)		(3,112)
	31 December 2013
	Total segment assets	163	109		-	10,385		10,657
	Total segment liabilities	(29)	(19)		-	(2,269)		(2,317)
(iii)	Revenue by geographical region
	Revenue based on the location of the external customers is disclosed below:
					31 December		31 December
					2014			2014
					$000			$000
	- Australia					52
	- Peoples Republic of China and HK					33		515
	Total revenue					85		515
(iv)	Assets by geographical region
	The location of segment assets by geographical location of the assets is				disclosed	below:
	- Australia					1,172
	- Peoples Republic of China and HK					12,665		10,657
	Total assets					13,837		10,657

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

19. INTERESTS IN SUBSIDIARIES

Information about Principal Subsidiaries

The subsidiaries listed below have share capital consisting solely of ordinary shares. The proportion of ownership interests held equals the voting rights held by the Group. Each subsidiary's principal place of business is also its country of incorporation.

business is also its country of incorporation.
Name of Subsidiary	Principal Place	Ownership Interest	Held by the
	of Business	Group
		2014	2013
		%	%
YPB Limited (HK)	Hong Kong	100%	-
YPB Technology (Beijing) Limited	PRC China	100%	-
Product ID & Quality Systems (Beijing) Ltd	PRC China	100%	-
Brand Reporter Pty Ltd	Australia	100%	-
YPB Group (USA) Inc	USA	100%	-

Subsidiary financial statements used in the preparation of these consolidated financial statements have also been prepared as at the same reporting date as the Group's financial statements; except for YPB Limited (HK) which has a reporting date of 31 March.

20. COMMITMENTS AND CONTINGENT LIABILITIES a. Operating Lease Commitments

		Consolidated Entity	Consolidated Entity
		2014	^13
		$0(X)	$000
Non-cancellable operating leases contracted for but not
recognised in the financial statements
Payable - minimum lease payments:
-	not later than 12 months		192	68
-	between 12 months and give years		501
			693	68

b. The Group had no contingent liabilities as at 31 December 2014 and 2013.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

21. CASH FLOW INFORMATION

1.	CASH FLOW INFORMATION
		Consolidated	Entity
		2014	2013
		$000	$000
a.	Reconciliation of Cash Flow from Operations with Loss after
	Income Tax
	Loss after income tax	(4,478)	(1,201)
	- Accrued interest on borrowings	67	-
	- Depreciation and amortisation expense	315	412
	- Impairment of goodwill	2,206	-
	- Gain on sale of plant and equipment	-	(71)
	- Options expense	97	-
	- Share-based payments	113	-
	Changes in assets and liabilities, net of the effects of
	purchase and disposal of subsidiaries:
	(lncrease)/decrease in trade and other receivables	(108)	17
	(Increase) in inventories	(28)	(115)
	(Decrease) in trade and other payables	(249)	(42)
	Cash flow from operations	(2,065)	(1,000)

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

22. PARENT ENTITY DISCLOSURE

The following information has been extracted from the books and records of the parent and has been prepared in accordance with Australian Accounting Standards.

accordance with Australian Accounting Standards.
	2014	2013
	$000	$000
Statement of Financial Position
ASSETS
Current assets	2,193	49
Non-current assets	2,170	-
TOTAL ASSETS	4,363	49
LIABILITIES
Current liabilities	287	22
TOTAL LIABILITIES	287	22
EQUITY
Issued capital	22,488	16,571
Reserves	97	-
Accumulated losses	(18,509)	(16,544)
TOTAL EQUITY	4,076	27
Statement of Profit or Loss and Other Comprehensive Income
Loss for the period	(864)	(150)
Total comprehensive income	(864)	(150)

Guarantees

There have been no guarantees entered into by the parent entity in relation to the debts of its subsidiaries.

Contingent liabilities

There were no contigent liabilities at 31 December 2014 and 2013 which related to the parent entity.

Contractual commitments

There were no contractual commitments at 31 December 2014 and 2013 which related to the parent entity.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

23. BUSINESS COMBINATIONS

a. Acquisition of AUV Enterprises Limited

On 7 August 2014, the Company (formerly AUV Enterprises Limited and referred to in this note as "AUV") acquired 100% of the issued capital of YPB Limited (HK), an anti-counterfeit technology and product provider incorporated in Hong Kong.

The acquisition was achieved by issuing 74,250,000 ordinary shares in AUV to existing shareholders of YPB Limited (HK). Following completion the previous shareholders of AUV held 10% and holders of YPB Limited held 90% of the Group respectively. As a consequence of this and other factors, for accounting purposes the acquisition is treated as a reverse acquisition.

acquisition is treated as a reverse acquisition.
	Fair Value
	$000
Purchase consideration	1,652
Less:
Cash at bank	19
Trade and other receivables	8
Trade and other payables	(326)
Borrowings - related party	(255)
Identifiable assets acquired and liabilities assumed	(554)
Goodwill on acquisition	2,206

(i) The acquisition resulted in goodwill of $2,206,000 which has been written off in the period. Goodwill represents the value to AUV of having an immediate ASX listed company status with all of the capital raising avenues available to this type of company.

• (ii) Receivables, payables and borrowings have been included at their fair value. The Directors are of the opinion that receivables are fully recoverable and that no impairment of these is required.

Revenue of YPB Group Limited (formerly AUV Enterprises Limited) included in the consolidated revenue of the Group since the acquisition date on 7 August 2014 amounted to $15,000. Loss of YPB Group Limited (formerly AUV Enterprises Limited) included in the consolidated profit or loss statement of the Group since the acquisition date amounted to $864,000.

Had the results of YPB Group Limited (formerly AUV Enterprises Limited) been consolidated from 1 July 2014, revenue of the consolidated group would have been $85,000 and the consolidated loss would have been $4,804,394 for the period ended 31 December 2014.

b. Acquisition of Brand Reporter

On 8 September 2014, the Company acquired business is comprised of mobile device applications, database, software and related technologies operated under the name "Brand Reporter") from Metro Enterprises Inc for a consideration of $548,000 (US$485,000) of which $163,000 was paid in cash and the balance by the issue of shares in YPB Group Limited as disclosed in Note 15b.

The asset recognised as a result of the business acquisition is intellectual property amounting to $548,000. No other assets were acquired or liabilities assumed.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

24. EVENTS SUBSEQUENT TO REPORTING DATE

On 7 January 2015, the Company dispatched to Shareholders a Non-Renounceable Issue Prospectus, wherein to honour a commitment made at the time of the requotation, to offer to shareholders 27,230,420 $0.01 Options exercisable at $0.20 no later than 31 October 2017. The rights issue closed on 16 January 2015 significantly oversubscribed, with entitlement requests of 22,777,119 and shortfall requests of approximately 53,000,000. A total of approximately $272,000 was raised as a result.

On 13 January 2015 the Company announced the signing of a 5 year supply contract with Shenzhen Shensaier Ltd for the provision of anti-counterfeit invisible tracer and T1 scanner.

On 30 January 2015 the Company entered into a further supply contract with Hicap Closures to supply its anticounterfeit traces product and T1 scanners.

On 12 February the Company signed a Letter of Intent with Hidali Electronics Technology Ltd a major Chinese supplier of RFID and NFC technology to apply YPB anti-counterfeit technology.

On 16 February 2015 the Company entered into a printing solutions contract with Guangdong Renmin Printing for the protection of tax invoices (Fapiao's) for Guangdong Provincial Tax Bureau.

On 19 February 2015 the Company advised of the commencement of its China Government building security passes contract

On 23 February 2015 the Company announced that it had completed a share placement of 10,000,000 shares at $0.30 and 10,000,000 options at $0.01, exercisable at $0.20 prior to 31 October 2017 raising $3.1 M. At the same time the Company announced a Share Purchase Plan to raise up to $6M wherein shareholders could subscribe for up to $15,000 of new shares at $0.30 per share together with 1 attached option for each 4 new shares at $0.01 per option, such options being exercisable at $0.20 prior to 31 October 2017. The Company will apply for quotation on the ASX of the aforementioned shares and options.

On 26 February 2015 the Company announced that it had lodged with the State Intellectual Property Office (SIPO) of the Peoples Republic of China three (3) patent applications for its anti-counterfeiting scanner.

On 4 March 2015 the Company announced that it had received stocks of its upgraded anti-counterfeit T2 Scanner, replacing its discontinued T1 scanner which had been sold out in calendar year 2014.

On 6 March 2015 the Company provided to the market its Prospectus and Securities Purchase Plan Offer Booklet for the share purchase plan announced 23 February 2015, where in shareholders at the record date could acquire up $15,000 in shares at $0.30/share and attaching options on a 1 for 4 basis at a cost of $0.01/option, such options having an exercise price of $0,20 and an expiry date of 31 October 2017.

On 10 March 2015 the Company announced that it had formed an alliance with Crime Stoppers International to co-operate in fighting counterfeiting globally.

On 16 March 2015 the Company announced that it had entered into an binding Letter of Intent with Intellectual Product Protection to acquire 100% of its assets. The Intellectual Product Protection group is a leading security consultancy operating in Asia and the US based in Thailand and the USA.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

25. FINANCIAL INSTRUMENTS

The Group's financial instruments consist mainly of deposits with banks, accounts receivable and payable and loans from related parties.

The totals for each category of financial instruments, measured in accordance with AASB 139: Financial Instruments: Recognition and Measurement as detailed in the accounting policies to these financial statements, are as follows:

_Instruments: Recognition and Measurement_as de are as follows:	tailed in the accounting p	olicies to these finan	cial statements
	Note	Consolidated	Entity
		2014	2013
		$000	$000
Financial assets
Cash and cash equivalents	8	2,405	281
Loan and receivables	9	174	59
Total financial assets		2,579	340
Financial liabilities
Financial liabilities at amortised cost:
- Trade and other payables	13	364	52
- Loan from a related entity	14	2,748	2,265
Total financial liabilities		3,112	2,317

Fair Values

Net fair values of financial assets and liabilities are equal to their carrying amounts at balance date.

The main risks the Group is exposed to through its financial instruments have been addressed below.

lUlarket risk

• (i) Foreign exchange risk

Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group.

With instruments being held by overseas operations, fluctuations in the Renminbi and US dollar may impact on the Group's financial results.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

27. FINANCIAL INSTRUMENTS

The following table shows the foreign currency risk on the financial assets and liabilities of the Group's operations denominated in currencies other than the functional currency of the operations. The foreign currency risk in the books of the parent entity is considered immaterial and is therefore not shown.

		2014			2013
	RMB		USD	RMB		USD
Consolidated Entity	$000		$000	$000		$000
Cash and cash equivalents		729	79		474	172
Trade and other receivables		24	-		30
Trade and other payables		(245)	-		(228)	(4)
Borrowings		-	(2,254)		-	(2,020)

(ii) Sensitivity analysis

Based on the financial instruments held at 31 December 2014, had the Australian dollar weakened/strengthened by 10% against US dollar with all other variables held constant, the Group's post-tax profit for the period would have been $265,000 lower/ higher (2013: $208,000 lower/higher). Had the Australian dollar weakened/strengthened by 10% against Renminbi with all other variable held constant, the Group's post-tax profit for the period would have been $10,000 higher/lower (2013: $5,000 higher/lower).

Liquidity rlsl(

Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms:

• preparing fonward-looking cash flow analyses in relation to its operating, investing and financing activities; obtaining funding from a variety of sources;

maintaining a reputable credit profile;

managing credit risk related to financial assets;

only investing surplus cash with major financial institutions; and

comparing the maturity profile of financial liabilities with the realisation profile of financial assets.

The table below reflects an undiscounted contractual maturity analysis for financial liabilities. Cash flows realised from financial assets reflect management's expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liattlities reflects the earliest contractual settlement dates and does not reflect management's expectations that banking facilities will be rolled f onward.

YPB Group Limited Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

27. FINANCIAL INSTRUMENTS

	Effective	Effective	Interest	bearing	Non-interest	Non-interest	Tota	1	Contractual Maturity Analysis	Contractual Maturity Analysis	Contractual Maturity Analysis	Contractual Maturity Analysis
	Interest	rate			bearing
									Within 1 Year		1 to 5	years
	2014	2013	2014	2013	2014	2013	2014	2013	2014	2013	2014	2013
	%	%	$000	$000	$000	$000	$000	$000	$000	$000	$000	$000
Financial assets - cash flows
realisable
Cash and cash equivalents	2.50%	0.35%	2,405	281			2,405	281	2,405	281	-	-
Trade and other receivables					174	59	174	59	174	59
Total anticipated inflows			2,405	281	174	59	2,579	340	2,579	340	-	-
Financial liabilities - due for
payment
Trade and other payables					364	52	364	52	364	52
Borrowings	8.00%		2,748	2,265			2,748	2,265			2,748	2,265
Total contractual outflows			2,748	2,265	364	52	3,112	2,317	364	52	2,748	2,265
Net (outf low)/inflow on
financial instruments									2,215	288	(2,748)	(2,265)

YPB Group Lrmtted Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the 6 months period ended 31 December 2014

28. COMPANY DETAILS

Tlie registered office of the company is:

YPB Group Limited

Level 29, 66 Goulburn Street

Sydney, NSW, Australia

The principal places of business are:

YPB Technology (Beijing) Limited & Product ID & Quality Systems (Beijing) Ltd

1" Floor, 50 Building

No.14 Jiuxianqiao Road

Chaoyang District Beijing China

Brand Reporter Ry Ltd

Level 29, 66 Goulburn Street

Sydney, NSW, Australia

YPB Limited

Unit 505, 5/F, Bonham Trade Centre 50 Bonham Strand East Street Sheung Wan, Hong Kong

YPB Group (USA) Inc Suite 210,1149 3rd Street Santa Monica, California, USA

YPB Group Limited Report 2014

Directors' Declaration

The directors of the Company declare that:

1. the financial statements and notes, as set out on pages 22 to 57, are in accordance with the Corporations Act 2001 and:

2. a. comply with Accounting Standards and the Corporations Regulations 2001; and b. give a true and fair view of the financial position as at 31 December 2014 and of the performance for the year ended on that date of the Company and the Consolidated entity;

3. the Chief Executive Officer and Chief Financial Officer have each declared that:

4. a. the financial records of the Company for the financial year have been properly maintained in accordance with section 268 of the Corporations Act 2001;

5. b. the financial statements and notes for the financial year comply with the Accounting Standards; and

6. c. the financial statements and notes for the financial year give a true and fair view;

7. in the directors' opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the directors.

John Houston Executive Chairman

Robert Whitton Company Secretary

Dated this 27* day of March 2015 at Sydney

Chartered Accountants and Business Advisers

HALL CHADWICKa* (NSW)

YPB GROUP LIMITED ACN 108 649 421 AND CONTROLLED ENTITIES

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF YPB GROUP LIMITED

Report on the Financial Report

We have audited the accompanying financial report of YPB Group Limited, which comprises the consolidated statement of financial position as at 31 December 2014, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash fbws for the period then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the period's end or from time to time during the financial period.

SYDNEY

Level 40 2 Park Street Sydney NSW 2000 Australia

GPO Box 3555 Sydney NSW 2001 Ph: (612) 9263 2600 Fx: (612) 92632800

Directors' Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparatbn of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1 the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards (IFRS).

Auditor's Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves perfomiing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers Internal control relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal controL An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

A member of AGN International Ltd, a worldwide association of separate and independent accounting and consulting flims

wwv/.hallchadv/ick.com.au

SYDNEY • NEWCASTLE • PARRAMATTA • PENRITH • MELBOURNE • PERTH • BRISBANE • GOLD COAST • DARWIN

Liability limited by a scheme approved under Professional Standards Legislation.

HALL CHADWICKa' (NSW)

YPB GROUP LIMITED ACN 108649 421 AND CONTROLLED ENTITIES

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF YPB GROUP LIMITED

Auditor's Opinion

In our opinion:

• a. the financial report of YPB Group Limited is in accordance with the Corporattons Act 2001 including:

• i. giving a true and fair view of the consolidated entity's financial position as at 31 December 2014 and of its perfonnance for the period erded on that date; and

• ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; and

• b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the remuneration report included in pages 10 to 12 of the directors' report for the perfod ended 31 December 2014. The directors of the company are responsible for the preparation and presentatfon of the remuneratton report in accordance with s300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor's Opinion

In our opinion the remuneration report of YPB Group Limited for the period ended 31 December 2014 complies with s300A of the Corporations Act 2001.

l4 dA Civ« Xt^4t.

HALL CHADWICK Level 40,2 Park Street SYDNEY NSW 2000

^2vt€A

GRAHAM WEBB Partner Dated: 27 March 2015

YPB Group Llmtted Report 2014

Shareholder Information

Distribution of iioiders

The number of holders and amount of holdings by a range of holding sizes of the ordinary shares and options as at 24 March 2015 are detailed below.

Holding Size	Ordinary	Shares
	No. of holders	Shares Held
1-1,000	458	89,867
1,001-5,000	134	366,913
5,001 -10,000	151	1,373,018
10,001-100,000	263	9,765,937
100,001 -and over	75	107,439,251
	1,081	119,034,986

Number of holdings less than a marketable parcel of 480

Substantial Shareholders

The names of substantial shareholders listed in the Company's register as at 24 March 2015 are:

	Number of
	Shares Held
THE BIMM CORPORATION PTY LTD	60,318,453
Votlr^ Rights

The voting rights attached to each class of equity security are as follows:

(a) Each ordinary share holder is entitled to one vote when a poll is called, otherwise each memtier present at a meeting or by proxy has one vote on a show of hands.

$0.20 options expiring 31 October 2017

Holding Size	Options
	No. of holders	Options Held
1-1,000	40	14,743
1,001-5,000	90	272,349
5,001 -10,000	45	348,442
10,001-100,000	106	3,571,458
100,001 -and over	30	33,733,453
	311	37,940,445

YPB Group Limited Report 2014

Top 20 Ordinary Shareholders as at 24 March 2015
Holder Name	Number
THE BIMM CORPORATION PTY LTD	60,318,453
HIGH ALTITUDE INVESTMENTS LIMITED	5,496,716
PERLE VENTURES PTY LTD <877 CAP INVESTMENTS 2 A/C>	5,000,000
MR RONALD LANGLEY & MRS RHONDA LANGLEY	3,333,333
MS DAN LIU	3,098,092
SILK ROAD CORPORATE FINANCE PTY LTD	2,398,624
MR VICTOR JOHN PLUMMER	2,000,000
XETERA LIMITED	1,640,116
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	1,344,473
MR DAVID KINSMAN	1,297,933
METRO ENTERPRISES INC	1,258,852
GLENCO PROPERTIES PTY LTD	1,250,000
SLADE TECHNOLOGIES PTY LTD	1,000,000
MR RUSSELL NEIL CREAGH	980,240
MCNEIL NOMINEES PTY LIMITED	911,614
IHODS SUPER FUND PTY LTD	890,000
CITICORP NOMINEES PTY LIMITED	838,000
MR GERARD FRANCIS MALOUF	750,000
CUCHULAINN ADVISORY SERVICES PTY LTD	710,282
CLEAR CHANNEL PTY LTD	556,293
Sub Total	95,073,021
Balance of register	23,961,965
Total	119,034,986
Top 20 Option Holders as at 24 March 2015
THE BIMM CORPORATION PTY LTD	15,076,913
PERLE VENTURES PTY LTD <877 CAP INVESTMENTS 2 A/C>	5,000,000
MR RONALD LANGLEY & MRS RHONDA LANGLEY	3,333,333
MR VICTOR JOHN PLUMMER	2,000,000
SHEARER-SMITH HOLDINGS PTY LTD	808,333
MS DAN LIU	774,523
DOLSTART PTY LTD	628,500
SILK ROAD CORPORATE FINANCE PTY LTD	599,656
MR BROCK LACHLAN RODWELL	599,500
SHIPLEY NOMINEES PTY LTD	500,000
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	469,489
GREGORY J WOOD & ASSOCIATES PTY LTD	414,400
SLADE TECHNOLOGIES PTY LTD	357,500
IHODS SUPER FUND PTY LTD	331,250
CLEAR CHANNEL PTY LTD	306,250
MR NEIL ATHERTON DAY & DR PAUL MELVILLE DAY <NEIL ATHERTON DAY
SUPER A/C>	284,544
B2B HOLDINGS PTY LIMITED	240,000
DR PAUL ANTHONY PORTER & DR TI-WAN NG	240,000
FERNHILL INVESTMENTS PTY LTD	230,000
MR RAJESH RAMESH MELWANI	200,000
Sub Total	32,394,191
Balance of register	5,546,254
Total	37,940,445
On-Marl(et Buy Bacl(

There is currently no on-market buy back.

YPB Group Limited Report 2014

Corporate Directory

REGISTERED OFFICE

Level 29, 66 Goulburn Street Sydney NSW 2060 ABN 68 108 649 421 Telephone: +612 8263 4000 Facsimile: +612 8263 4111 Website: www.vpbsvstems.com

SHARE REGISTRY

Boardroom Pty Limited Level 7, 207 Kent Street Sydney NSW 2000 Telephone: 1300 737 760 Facsimile: 1300 653 459 Email: enquiries@boardroomlimited.com.au Web site: www.boardroomlimited.com.au

DIRECTORS John Houston Geoffrey Raby George (Su) Su Robert Whitton

COMPANY SECRETARY

Robert Whitton

AUDITORS

Hall Chadwick Level 40, 2 Park Street Sydney NSW 2000 Telephone: +612 9263 2600 Facsimile: +612 9263 2800

STOCK EXCHANGE LISTING

The shares of YPB Group Ltd are listed on the Australian Stock Exchange. ASX Code: Ordinary Shares YPB 31 October 2017 Options YPBO Web site: www.asx.com.au