CODEIFAI LIMITED — Annual Report 2014

Feb 26, 2015

ASX ANNOUNCEMENT

27 February 2015

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

APPENDIX 4E

Attached is the Appendix 4E and accompanying preliminary financial report for the company’s adjusted financial year ending 31 December 2014.

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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Appendix 4E

Preliminary final report

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YPB Group Limited

ACN 108 649 421

Annual Report 31 December 2014

For 6 Months commencing 1 July 2014

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YPB Group Limited Annual Report 2014

Contents

Chairman’s Letter .................................................................................................................................... 3 Directors’ Report ..................................................................................................................................... 4 Corporate Governance Statement ........................................................................................................ 13 Financial Report ................................................................................................................................... 20

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YPB Group Limited Annual 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

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YPB Group Limited Annual Report 2014

Directors’ Report

The directors present their report and the financial statements of YPB Group Limited (the “Company”) and its controlled entities (the “Consolidated Entity”) for the company’s adjusted financial year ended 31 December 2014, such results being for the six months commencing 1 July 2014. Noting that the transactions to acquire/backdoor list YPB were finalised with the requotation of the Company 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 otherwise stated.

therwise stated.
	Date Appointed	Date Resigned
Executive Chairman and CEO
John Houston	31 July 2014
Non-Executive Director
Robert Whitton	2 August 2012
Geoffrey Raby	31 July 2014
Su (George) Su	31 July 2014
Anthony Damianos	6 April 2004	31 July 2014
Peter Dykes	2 August 2012	31 July 2014

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

2. Principal Activities

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

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 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.

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YPB Group Limited Annual Report 2014

3. Operating Results

The consolidated loss of the Consolidated Entity, after providing for income tax, amounted to $XXX for the financial period.

4. Significant Changes in State of Affairs

The YPB Acquisition was successfully completed:

• On 31 July 2014 Messrs. Dykes and Damianos resigned as Directors and Messrs. Houston, Raby and Su were appointed to the roles they had been elected to at the General Meeting held 8 May 2014.

• 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.ypbsystems.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 would be 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

• On 23 September 2014the Company announced that its technology had won an Excellent Application Award at the 9[th] 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 expands distribution into Thailand and appoints General ManagerThailand

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

• 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.

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YPB Group Limited Annual Report 2014

5. Review of Operations

The 6 months to December 2014 has seen significant Operational capability developed within YPB plus in this period we have added distribution ‘footprint’ and sales pipeline opportunities. Sales pipeline opportunity growth over this period has resulted in winning of major deals with potential revenues of $26M 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 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 it's 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.

6. Financial Position

The net assets of YPB were $13,375,000 at year ended 31 December2014. This increase was as a result of completion of the YPB transaction including the relevant 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 year ended 31 December 2014.

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YPB Group Limited Annual Report 2014

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.

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 $3.1M placement of 10,000,000 shares at $0.30 and at $0.01 10,000,000 31 October 2017 options, exercisable at $0.20. At the same time the Company announced a Share Purchase Plan 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 aforementioned shares and options.

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.

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.

Dr. Raby has BEc (Hons) MEc and PhD degrees from La Trobe University Melbourne.

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YPB Group Limited Annual Report 2014

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, has served as managing director of an ASX listed company and was aN Independent director of Macquarie Bank's China property fund between 2006 and 2014. Mr Su currently serves as a non-executive director of Oriental Technology Investment Co Ltd, which is listed on the ASX.

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 and 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.

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.

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YPB Group Limited Annual Report 2014

11. Meetings of Directors

During the period under review, 3 Formal Board meetings of directors were held additionally where necessary and appropriate Board matters were dealt with by telephone conference and circular resolution. During the year 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 year were:

Robert Whitton John Houston Geoffrey Raby George Su Anthony Damianos Peter Dykes	Board Meetings Number eligible to attend Number Attended
	3 3 3 3 3 3 3 3 1 1 1 1

12. Directors’ equity participation

As at 25 February 2015, the Current Directors’ relevant interests in the equity securities of the Company were as follows:

John Houston Geoffrey Raby George (Su) Su Robert Whitton	Ordinary shares	Options
	60,384,453 250,000 5,466,716 175,000	15,076,913 62,500 1,374,719 43,750

13. Remuneration Report

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.

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YPB Group Limited Annual Report 2014



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.

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 year and as a result no performance payments were paid or are payable.

Details of Remuneration for the Period Ended 31December 2014

The remuneration for each director and each of the executive officers of the Consolidated Entity receiving the highest remuneration during the year is set out in the tables below.

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YPB Group Limited Annual Report 2014

Name	Fees or Remuneration
Robert Whitton John Houston Geoffrey Raby George Su Anthony Damianos Peter Dykes	13,333,36 154,704.07 17,841.68 13,333.36 8250 Nil

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 28 April 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.

14. 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.

Each Director and Secretary named in the Directors and Secretary section of this report and any past director or secretary, has entered into a Deed of Indemnity with the Company on these terms. No indemnity has been provided to the Company’s auditor.

15. 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.

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YPB Group Limited Annual Report 2014

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.

16. 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:

• all 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 do not compromise the general principles relating to auditor independence as set out in the Institute of Chartered Accountants in Australia and CPA Australia’s Professional Statement F1: Professional Independence.

17.

Auditor’s Independence Declaration

The auditor’s independence declaration for the period ended 31 December 2014 will be included.

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.

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YPB Group Limited Annual 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;

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YPB Group Limited Annual 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.

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YPB Group Limited Annual 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.

Although the board established an Audit and Risk Management Committee, at the date of this report, the Company has only appointed one member to the Committee and as such, the responsibilities and duties of this Committee were taken up by the Board during the year. 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 Year.

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YPB Group Limited Annual 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 stakeholders

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.

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YPB Group Limited Annual 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 Management 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.

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YPB Group Limited Annual 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

Risk 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.

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YPB Group Limited Annual 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.

Monthly 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.

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YPB Group Limited Annual Report 2014

Financial Report

31 December 2014

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YPB Group Limited Annual Report 2014

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the half-year ended 31 December 2014

Revenue Cost of sales Depreciation and amortisation expense Employee benefits expense Finance costs Other expenses Loss before income tax Income tax expense Loss for the year Other comprehensive income Overall Operations: Basic earnings per share (cents per share) Diluted earnings per share (cents per share)	Note	Consolidated Entity 2014 2013 $000 $000
	2 3 3 7 7	88 5 (40) - (3) - - - (74) - (2,282) (150)
		(2,311) (145) - -
		(2,311) (145)
		- -
		(0.0226) (0.0024) (0.0226) (0.0024)

The accompanying notes form part of these financial statements

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YPB Group Limited Annual Report 2014

STATEMENT OF FINANCIAL POSITION As at 31 December 2014

CURRENT ASSETS Cash and cash equivalents Receivables Inventories Other current assets TOTAL CURRENT ASSETS NON CURRENT ASSETS Property, plant and equipment Intangibles TOTAL NON CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Borrowings Other TOTAL CURRENT LIABILITIES NON CURRENT LIABILITIES Long-term borrowings TOTAL NON CURRENT LIABILITIES TOTAL LIABILITIES (DEFICIENCY)/NET ASSETS EQUITY Issued capital Retained losses Current year earnings (DEFICIENCY)/TOTAL EQUITY	Note	Consolidated Entity 2014 2013 $000 $000
	7 8 9 10 12 13 14 14	2,408 49 87 - 138 - 87
		2,720 49
		26 - 13,751 -
		13,777 -
		16,497 49
		338 - - 22 26 -
		364 22
		2,758 -
		2,758 -
		3,122 22
		13,375 27
		19,454 16,571 (3,768) (16,544) (2,311) (2,311)
		13,375 27

The accompanying notes form part of these financial statements

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YPB Group Limited Annual Report 2014

STATEMENT OF CASH FLOWS For the half-year ended 31 December 2014

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Finance costs Net cash provided by (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Payment for intangibles Development expenditure Exploration expenditure Proceeds from sale of property, plant and equipment Net cash provided by (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Advances of loans Repayment of related party loans Payments for performance bond Repayment of borrowings Advances to controlled entities Proceeds from issue of shares (net of costs) Net cash provided by (used in) financing activities Net increase/(decrease) in cash and cash equivalents held Cash and cash equivalents at 1 July Cash and cash equivalents at 30 June	Note	Consolidated Entity 2014 2013 $000 $000
	7	39 5 (2,622) (152) - - - -
		(2,646) (147)
		(24) - (1,459) - - - - - -
		(1,483) -
		2,503 22 - - - - - - - - 4,015 142
		6,518 164
		2,389 17 19 10
		2,408 27

The accompanying notes form part of these financial statements

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YPB Group Limited Annual Report 2014

STATEMENT OF CHANGES IN EQUITY For the half-year ended 31 December 2014

Consolidated Entity Balance at 1 July 2013 Loss attributable to members of parent entity Shares issued during period Balance 31 December 2013 Balance at 1 July 2014 Loss attributable to members of parent entity Share issues, net of transaction costs Reverse acquisition Balance 31 December 2014	Share Capital Accumulated Losses Total $000 $000 $000
	16,404 (16,394) 10 - (150) (150) 167 - 167
	16,571 (16,544) 27
	17,090 (17,318) (228) (2,311) (2,311) 4,015 (1,651) (13,550) 11,899
	19,454 (6,079) 13,375

The accompanying notes form part of these financial statements

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YPB Group Limited Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 30 31 December 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial report is a general purpose financial report that has been prepared in accordance with Accounting Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001 .

The financial report covers AUV Enterprises Limited and controlled entities (the Consolidated Entity ), and AUV Enterprises Limited as an individual parent entity (the Company or Parent Entity ). The Company is a listed public company, incorporated and domiciled in Australia.

The financial report of the Consolidated Entity and the Parent Entity comply with all Australian equivalents to International Financial Reporting Standards ( AIFRS ) in their entirety.

The following is a summary of the material accounting policies adopted by the Consolidated Entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

Basis of Preparation

Reporting Basis and Conventions

The financial report has been prepared on an accruals basis and is based on historical costs and does not take into account changing money values or, except where stated, current valuations of noncurrent assets. Cost is based on the fair values of the consideration given in exchange for assets.

Accounting Policies

• (a) Going Concern Basis of Accounting

The financial statements have been prepared on a going concern basis notwithstanding that the company incurred an operating loss after income tax of $2,311,000 and net assets of $13,375,000 as at 31 December 2014 and that the company incurred significant losses and generated negative cash flows from operations and subsequent over a number of years.

The Directors are of the opinion that the financial statements be prepared on a going concern basis.

• (b) Principles of consolidation

A controlled entity is any entity controlled by the Company. Control exists where the Company has the capacity to dominate the decision-making in relation to the financial and operating policies of another entity so that the other entity operates with the Company to achieve the objectives of the Company. Details of the controlled entities are contained in Note 12.

All inter-company balances and transactions between entities in the Consolidated Entity, including any unrealised profits or losses, have been eliminated on consolidation.

Where a controlled entity has entered (or left) the Consolidated Entity during the year its operating results have been included (or excluded) from the date control was obtained or until the date control ceased.

• (c) Income tax

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YPB Group Limited Annual Report 2014

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

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

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

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

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

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.

(d) Inventories

Inventories are measured at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity.

• (e) Property, plant and equipment

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

Property

Freehold land and buildings are shown at their fair value, being the amount for which an asset could be exchanged between knowledgeable willing parties in an arm’s length transaction. It is the policy of the Consolidated Entity to have an independent valuation every three years, with annual appraisals being made by the directors.

Plant and equipment

Plant and equipment are measured on a fair value basis, except for office equipment, which is measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows, which will be received from the assets employment and subsequent disposal. The expected net cash flows have not been discounted to present values in determining the recoverable amount. An annual appraisal of the fair value is made by the directors.

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YPB Group Limited Annual Report 2014

The cost of plant constructed by the consolidated entity includes the cost of all materials used in construction, direct labour on the project and an appropriate proportion of variable and fixed overhead expenditure. Output produced during commissioning of plant has been valued at cost and deducted from the costs of construction.

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, are depreciated on a straight line basis over their useful lives to the Company commencing from the time the asset is held ready for use. Properties held for investment purposes are not subject to a depreciation charge. 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 asset are:

Class of fixed asset	Depreciation rate
Buildings	25%
Plant and equipment	10% - 25%

• (f) Intangibles Other than Goodwill

Patents and trademarks

Patents and trademarks are recognised at cost of acquisition. They have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their useful lives ranging from 15 to 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.

• (g) Leases

Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to the entities within the Consolidated Entity, are classified as finance leases. Finance leases are capitalised, recording an asset and a liability equal to the present value of the minimum lease payments, including any guaranteed residual values. Leased assets are depreciated on a straight line basis over their estimated useful lives where it is likely that the Consolidated Entity will obtain ownership of the asset or over the term of the lease. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

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

(h) Investments

Non-current investments are recognised at cost. The carrying amount of investments is reviewed annually by directors to ensure it is not in excess of the recoverable amount of these investments. The recoverable amount is assessed from the underlying net assets for non-

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YPB Group Limited Annual Report 2014

listed companies. The expected net cash flows from investments have been discounted to their present value in determining the recoverable amounts.

(i) Foreign currency transactions and balances

Foreign currency transactions during the year are converted to Australian currency at the rates of exchange applicable at the dates of the transactions. Amounts receivable and payable in foreign currencies at balance date are converted at the rates of exchange ruling at that date.

(j) Employee benefits

Provisions are made for the Company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits expected to be settled within one year together with benefits arising from wages and salaries, annual leave and sick leave which will be settled after one year, have been measured at the amounts expected to be paid when the liability is settled plus related on-costs. Other employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

Contributions are made by the Consolidated Entity to an employee superannuation fund and are charged as expenses when incurred.

• (k) Revenue

Revenue from the sale of goods is recognised upon the delivery of goods to customers.

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

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

Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.

• (l) 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 Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Statement of Financial Position are shown inclusive of GST.

(m) Rounding of Amounts

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

(n) Comparative Figures

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

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YPB Group Limited Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 31 December 2014

2. REVENUE Revenue from operating and non-operating activities comprises: Operating Activities - sale of goods - interest received – other persons Non operating activities - sale of equipment Total Revenue 3. LOSS (a) Expenses Cost of goods sold Finance costs: - external - related entities - other related parties Total finance costs Depreciation of non-current assets - buildings - plant and equipment - leased plant and equipment Less capitalisation of depreciation charges Amortisation of non-current assets - mine development Less capitalisation of amortisation charges Total depreciation and amortisation	Consolidated Entity 2014 2013 $000 $000
	77 5 11 -
	88 5
	- -
	88 5
	40 -
	- - - - - -
	- -
	- - 3 - - -
	- - - -
	- -
	- - - -
	- -
	3 -

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YPB Group Limited Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 31 December 2014

4. KEY MANAGEMENT PERSONNEL COMPENSATION

• (a) Names and positions held of the Company and Consolidated Entity key management personnel in office at any time during the financial year were (all personnel held office for the entire year unless otherwise noted):

Parent Entity Directors:

Executive Chairman, Chief Executive Officer Appointed 31 July 2014

John Houston

Non-Executive Director Appointed 3 August 2012 and Company Secretary Appointed 31 July 2014

Robert Whitton Appointed 31 July 2014 George Su Non-Executive Director Appointed 31 July 2014 Geoff Raby Non-Executive Director Appointed 31 July 2014 Anthony Damianos Non-Executive Director Resigned 31 July 2014 Peter Dykes Non-Executive Director Resigned 31 July 2014

(b) Key Management Personnel Compensation

2014 Name	Short-termbenefits Post-Employment Performance Related Salary & Fees $000 Non-cash Benefits $000 Superannuation Contributions $000 Total Package $000
John Houston George Su Geoff Raby Robert Whitton Anthony Damianos Peter Dykes	155 - - 155 0% 13 - - 13 0% 18 - - 18 0% 13 - - 13 0% 8 - - 8 0% - - - - 0%
	0%

2013 Name	Short-term benefits Post-Employment Performance Related Salary & Fees $000 Non-cash Benefits $000 Superannuation Contributions $000 Total Package $000
Robert Whitton Anthony Damianos Peter Dykes	- - - - 0% - - - - 0% - - - - 0%
	0%

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YPB Group Limited Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 31 December 2014

(c) Shareholdings

The number of shares and options held by key management personnel as at 31 December 2014 is detailed below.

	Balance		Balance
Name	31 December 2013	31 December 2014
		Shares	Options
Robert Whitton	-	175,000	-
John Houston	-	60,384,453	-
Geoffrey Raby	-	250,000	-
George Su	-	5,466,716	-
Colin Turner	-	125,000	-
Paul Eveleigh	-	135,000	-

(d) Compensation Practices

The Company’s policy for determining the nature and amount of compensation of key management personnel of the Company is as follows:

The compensation structure for key management personnel, is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of the Company. The contracts for service between the Company and key management personnel are on a continuing basis the terms of which are not expected to change in the immediate future. Upon retirement key management personnel are paid employee benefit entitlements accrued to date of retirement.

The Company may terminate the contracts without cause by providing 1 month written notice or making payment in lieu of notice based on the individual’s annual salary component together with any applicable redundancy payment as recommended by State-based legislation. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the Company can terminate employment at any time.

The group seeks to emphasize payment for results through a cash bonus scheme. The scheme provides for payment of a cash bonus upon achievement of key performance indicators (“KPIs”) such as return on equity. Bonuses were not paid or provided for in the 2006 financial year as the KPIs were not met. The objective of the reward schemes is to both reinforce the short and long-term goals of the Company and to provide a common interest between management and shareholders.

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YPB Group Limited Annual Report 2014

5. AUDITORS REMUNERATION Remuneration of the auditor of the parent entity Auditing and reviewing of financial reports Other services Total fees 6. EARNINGS PER SHARE Basic earnings per share (cents per share) Diluted earnings per share(cents per share) Loss after tax has been used as earnings in calculation of earnings per share		Consolidated Entity 2014 2013 $000 $000 30 22 - - 30 22 Consolidated Entity 2014 2013 $000 $000
		(.0226) (.0024) (.0226) (.0024) (2,311) (145)

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YPB Group Limited Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 31 December 2014

7. CASH AND CASH EQUIVALENTS Cash at bank Reconciliation of Cash Cash and cash equivalents at the end of the financial year as shown in the statement of cash flows is reconciled to the Statement of Financial Position as follows: Cash 8. RECEIVABLES Current Amounts receivable from ultimate parent entity & subsidiaries Sundry receivables Non-current Amount receivable from controlled entity 9. INVENTORY Current Inventory – at cost 10. OTHER FINANCIAL ASSETS Deposits 11. CONTROLLED ENTITIES YPB Limited Incorporated in Hong Kong 100% Brand Reporter Pty Ltd Incorporated in Australia 100%	Consolidated Entity 2014 2013 $000 $000
	2,408 49
	2,408 49
	- - 87 -
	87 -
	- -
	138 -
	87 -
	- -

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YPB Group Limited Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 31 December 2014

12. PROPERTY, PLANT AND EQUIPMENT LAND AND BUILDINGS Freehold Land Directors’ valuation Cost Total Land Buildings Cost Accumulated depreciation Total Buildings Total Land and Buildings PLANT AND EQUIPMENT Plant and equipment: At cost Directors’ valuation Accumulated depreciation Total plant and equipment Leased plant and equipment: At cost Accumulated depreciation Total leased plant and equipment Total Plant and Equipment Total Property, Plant and Equipment In adopting the valuation that is disclosed above, the Directors have had regard to an independent market appraisal of the plant and equipment prepared.	Consolidated Entity 2014 2013 $000 $000
	- - - -
	- -
	- - - -
	- -
	- -
	68 - - - (42) -
	26 -
	- - - -
	- -
	- -
	26 -

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YPB Group Limited Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 31 December 2014

13. TRADE AND OTHER PAYABLES Current, unsecured liabilities Trade payables Sundry creditors and accrued expenses Amounts payable to - key management personnel 14. BORROWINGS Current Loan(1) 22 Lease liability – secured 20 Non Current Loan Lease liability – secured 20 (1) The loan from John Houston’s related entities. (a) Total current and non-current secured liabilities Lease liability 20 (b) The carrying amounts of non-current assets pledged as security Assets subject to lease First Mortgage: Receivables Freehold land and buildings Plant and equipment Exploration and development Total assets pledged as security		Consolidated Entity 2014 2013 $000 $000
		334 - 4 - - -
		338 -
		- 22 - -
		- 22
		2,758 - - -
		2,758 -
		- -
		- -
		- - - - - - - - - - - -
		- -

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YPB Group Limited Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 31 December 2014

Consolidated	Entity
2014	2013
$000	$000

15. RELATED PARTY DISCOVERIES

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

16 . 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.

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 $3.1M placement of 10,000,000 shares at $0.30 and at $0.01 10,000,000 31 October 2017 options, exercisable at $0.20. At the same time the Company announced a Share Purchase Plan 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 aforementioned shares and options.

17. SEGMENT REPORTING

The Company operates in Australia, the Peoples Republic of China and the United States of America.

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YPB Group Limited Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS For the Year Ended 31 December 2014

Consolidated	Entity
2014	2013
$000	$000

18. FINANCIAL INSTRUMENTS

(a) Interest Rate Risk

The Consolidated Entity's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is detailed in the table below:

(b) Credit Risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount, net of any provisions for doubtful debts of those assets, as disclosed in the statement of financial position and notes to the financial statements

The Consolidated Entity does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the Consolidated Entity.

(c) Net Fair Values

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

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