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1 ABN Annual report 31 December 2014

2 TABLE OF CONTENT CORPORATE INFORMATION... 1 DIRECTORS REPORT... 2 AUDITOR S INDEPENDENCE DECLARATION CORPORATE GOVERNANCE STATEMENT FINANCIAL STATEMENT INDEPENDENT AUDITOR S REPORT SHAREHOLDER INFORMATION... 73

3 CORPORATE INFORMATION This annual report covers both ( BOP or the Company) (ABN ) as an individual entity ( the Company) and the consolidated Group comprising B&P Design Pty Ltd and Birch and Prestige Holdings (Hong Kong) Limited ( the group ). Directors Company Secretary Huan Wang, Managing Director, Chief Executive Officer, Chair Xianghua He Non-executive Director Yanhua Chen Non-executive Director Guangpeng Wang, Executive Director Zhixing Cai Executive Director, Operations Manager, Resigned on 1 December 2014 Chu Li Notice of annual general meeting The annual general meeting of Birch and Prestige Investment Group Limited will be held at Suite 2, Level 8, 303 Collins Street Melbourne VIC 11am date Friday 29 May 2015 A formal notice of meeting is enclosed. Registered Office Principal Place of Business Legal Advisors Share Registry Auditors Stock exchange listings Suite 2, Level 8, 303 Collins Street, Melbourne VIC 3000 B&P Design Pty Ltd 253 Wickham Road, Moorabbin VIC 3189 Norton Rose Fulbright Australia Level 15, RACV Tower, 485 Bourke Street Melbourne Victoria 3000 Link Market Level 12, 680 George Street, Sydney NSW 2000 BDO Audit (WA) Pty Ltd 38 Station Street, Subiaco WA 6008 Birch and Prestige Holdings Limited share are listed on the Australian Securities Exchange (ASX). 1

4 DIRECTORS REPORT The directors present their report together with the consolidated financial statements of the consolidated entity comprising (the Company) and its subsidiaries for the financial year ended 31 December The Company was founded by China Winway, which is owned and controlled by Executive Chairman and CEO Mr Huan Wang. Directors The following information is current as at the date of this report. The key management personnel of the consolidated entity consisted of the following directors of Birch and Prestige Investment Group Limited: Huan Wang - Managing Director, Chief Executive and Chairman Appointed 07/05/2013 Xianghua He - Non-Executive Director Appointed 07/05/2013 Yanhua Chen Non-Executive Director Appointed 06/10/2014 And the following person: Zhixing Cai - Executive Director, Operations Manager Resigned as director 01/12/2014 and operations manager Huan Wang, 42, Chief Executive Officer, Executive Director, Chairman Experience and 20 years experience in finance, investing and business management expertise Co-founder, with Non-Executive Director Xianghua He, of two Chinese companies specialised in the sales of national branded integrated kitchen and household appliances Previous manager of the investment department of a large securities investment company in Henan province, China Other current Nil directorships Former directorships in Nil last 3 years Special responsibilities Executive Director Chief Executive Officer Chairman Interests in shares and 3,146,525 options 2

5 DIRECTORS REPORT (continued) Xianghua He, 43, Non-Executive Director Experience and Previous manager of the investment department of a large securities investment company expertise in Henan province, China Co-Founder, with Executive Chairman and CEO Huan Wang, of two Chinese companies specialised in the sales of national branded integrated kitchen and household appliances Founder of a specialised funds management business based in Henan province, China Other current Nil directorships Former directorships in Nil last 3 years Special responsibilities Non-Executive Director Interests in shares and 1,090,000 options Yanhua Chen, 30, Non-Executive Director Experience and Master of Professional Accounting/ Master of Commerce, specialising Finance from expertise Deakin University. Business Development Executive of AFS Investment Holdings Pty Ltd. High network in Australian Chinese communities. Other current Nil directorships Former directorships in Nil last 3 years Special responsibilities Non-Executive Director Interests in shares and options Nil Zhixing Cai, 26, Operations Manager, Executive Director (Resigned as director on 1 December 2014) Experience and Master degree of Commerce specialising in accounting and finance from Deakin expertise University. Bachelor degree of Business specialising in accounting from Monash University. Fluent in both English and Chinese. N Other current Nil directorships Former directorships in Nil last 3 years Special responsibilities Executive Director Interests in shares and options Nil 3

6 DIRECTORS REPORT (continued) Principal Activities The principal activity of the consolidated entity in the course of the year to 31 December 2014 was in retail sale and wholesale of kitchen and bathroom furniture, and retail sale of bathroom, wardrobe and laundry products and accessories in the first half of the year, and Global Purchasing for its clients in the second half of the year. Dividends No dividends had been paid or recommended by the directors relating to the year ended 31 December 2014 (31 December 2013: nil). Review of Operations The Company was listed on the Australia Securities Exchange (ASX) on 19 August 2013 following its initial public offering (IPO) of its shares which raised a sum of $4,099,600. The capital raised from the IPO was to be used primarily to pursue the business objectives set out in the Prospectus being the kitchen components business conducted by B&P Design Pty Ltd. As at 31 December 2014, the net loss from the ordinary activities of, comprising the Company as the parent entity and controlled entities, after tax from ordinary activities attributable to members, was $191,706 (as compared to the net loss of $151,467 as at 31 December 2013). Revenue declined during the period as the management undertook significant business and strategic repositioning of the business model of the consolidated entity. Revenues for the period were primarily derived from interest and sales under the GP Agreement referred to below. Note that other income stated on the Statement of Profit or Loss and Other Comprehensive Income is from realised foreign exchange gains. The Company s wholly owned subsidiary, B&P Design Pty Ltd s business operations have struggled due to prevailing conditions in the Australian market. Income generated from this area has decreased significantly this year and is much lower than expected. The consolidated entity is revising its business plan and is likely to focus its business strategies along the following direction: To horizontally align its business by becoming a wholesale importer and distributor of kitchen, cabinet and accessories in Australia and China, the consolidated entity will work with developers, builders and alliance partners in the kitchen and construction industry collaboratively; To establish retail outlets in Australia in order to grow its sales volume; To further develop its Australian designed kitchen cabinet series in 2014 with the view for the Australia, China and overseas markets; and To continue explore vertical integration including establishing procurement, logistics and design centre in Australia and China for its core products, including to be third party procurement and supplier for the Australian and China markets. 4

7 DIRECTORS REPORT (continued) Significant Changes in State of Affairs Birch and Prestige Holdings (Hong Kong) Limited, a wholly owned subsidiary of the Company, made a loan and advance amounting to $3,667,000 to Runx Trade Co., Ltd in October The loan was funded by an inter-company loan from the Company. The Loan was fully repaid in November 2014 and it is currently held on behalf of the Company by Henan Bump Trade Co., Ltd ( Bump ), a private Chinese company. On 17 November 2014, the Company s wholly owned subsidiary, B&P Design Pty Ltd ( B&P ) and Henan Tianze Import and Export Co., Ltd ( Tianze ) entered into a Global Purchasing Agreement ( GP Agreement ). Under the GP Agreement B&P acts as purchasing agent for Tianze. B&P paid a $680,573 deposit to Tianze to commence the agreement. This amount will be repaid to B&P when the agreement is completed. This deposit was paid by the amounts held on behalf of the Company by Bump. Under the agreement B&P is paid a commission at the rate of 0.3% of the purchase price for the goods acquired for Tianze. Matters Subsequent to the End of the Financial Year No other matters or circumstance have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated entity, the result of those operations, or the state of affairs of the consolidated entity in subsequent financial years. Likely Developments and Expected Results Likely developments in the operations of the consolidated entity and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information would be likely to result in unreasonable prejudice to the consolidated entity. Environmental Regulation The consolidated entity 's operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory. 5

8 DIRECTORS REPORT (continued) Company secretary The following person held the position of company secretary at the end of the financial year. Ms Chu Li was appointed as company secretary on 30 October She holds Master of Banking and Finance degree of Monash University. Ms Li has extensive experience in financial companies, providing corporate client services to large and medium sized companies in both China and Australia. Ms Chu Li is an employee of AFS Investment Holdings Pty Ltd. Meetings of directors The number of meetings of the Company's Board of Directors ('the Board') and of each board committee held during the year ended 31 December 2014, and the number of meetings attended by each director were: Full Board Attended Held Huan Wang 9 9 Zhixing Cai 2 9 Yanhua Chen 2 9 Xianghua He 9 9 Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. No formal committee meeting has been held during this financial year. Remuneration report (audited) The remuneration report, which has been audited, outlines the key management personnel remuneration arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations. The remuneration report is set out under the following main headings: A. Principles used to determine the nature and amount of remuneration B. Details of remuneration C. Service agreements D. Share-based compensation E. Additional information 6

9 DIRECTORS REPORT (continued) A. Principles used to determine the nature and amount of remuneration The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders. The Board of Directors ("the Board") has not formalised the process of the appointment of the Nomination and Remuneration Committee. When the Nomination and Remuneration Committee formalised will be responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the consolidated entity depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. Non-executive directors remuneration The current fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors and their overall responsibilities. Non-executive directors' fees and payments will also be reviewed annually by the Nomination and Remuneration Committee. The chairman's fees are determined independently to the fees of other non-executive directors based on comparative roles in the external market. The chairman is not present at any discussions relating to determination of his own remuneration. Non-executive directors do not receive share options or other incentives. ASX listing rules require the aggregate non-executive directors remuneration be determined periodically by a general meeting. The most recent determination was at the Annual General Meeting held on 30 May 2014, where the shareholders approved the remuneration report that non-executive directors will not be more than the aggregate fixed sum of $300,000 per annum. Executive remuneration The consolidated entity aims to reward executives with a level and mix of remuneration based on their position and responsibility, which is both fixed and variable. The executive remuneration and reward framework has four components: base pay and non-monetary benefits short-term performance incentives other remuneration such as superannuation and long service leave The combination of these comprises the executive's total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits will be reviewed annually by the Nomination and Remuneration Committee, based on individual and business unit performance, the overall performance of the consolidated entity and comparable market remunerations. Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the executive. 7

10 DIRECTORS REPORT (continued) Use of remuneration consultants During the financial year ended 31 December 2014, the consolidated entity has not engaged any remuneration consultants. B. Details of remuneration Amounts of remuneration Details of the remuneration of the key management personnel of consolidated entity are set out in the following tables. The key management personnel of the consolidated entity consisted of the following directors of Birch and Prestige Investment Group Limited: Huan Wang - Managing Director, Chief Executive and Chairman Appointed 07/05/2013 Xianghua He - Non-Executive Director Appointed 07/05/2013 Yanhua Chen Non-Executive Director Appointed 06/10/2014 And the following person: Zhixing Cai - Executive Director, Operations Manager Resigned as director 01/12/2014 and operations manager 2014 Name Non-Executive Directors: Xianghua He Yanhua Chen Short-term benefits Cash salary and fees $ 23,077 - Postemployment benefits Superannuation $ - - Total $ 23,077 - Executive Directors: Huan Wang 66,706 8,521 75,227 Zhixing Cai 30,576 2,817 33, Short-term benefits Cash salary Name and fees $ 8 120,359 11, ,697 Postemployment benefits Superannuation $ Non-Executive Directors: Xianghua He 13,077-13,077 Executive Directors: Huan Wang 45,000 4,163 49,163 Zhixing Cai 51,519 4,712 56,231 Other Key Management Personnel: Wenli Li 31,000 2,868 33,868 Total $ 140,596 11, ,339

11 DIRECTORS REPORT (continued) C. Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Name: Huan Wang Title: Managing Director, Chief Executive Officer and Chairman Agreement commenced: 1 July 2013 Details of agreement: Pursuant to an employment contract between Mr Huan Wang and the Company dated 1 July 2013, BOP agrees to employ Mr Huan Wang as CEO of the Company for a period of up to 5 years. Mr Wang's total annual remuneration is $75,227 (including superannuation) for the year 2014 and thereafter is subject to annual review. Either party may terminate the employment contract by giving four months prior written notice. The Company may additionally terminate the employment contract if Mr Wang materially breaches the contract, is negligent, or engages in fraudulent or criminal activity. In addition, the Company may, at its discretion, make payment in lieu of all or part of the notice period required to be given. There is a restraint clause in the employment contract to the effect that Mr Wang is restrained from engaging in certain competitive activities during and after his employment with the Company. Name: Xianghua He Title: Non-Executive Director Details of agreement: No formal agreement for the directorship. The Board has resolved Mr He's total annual remuneration is $ 23,077 for the year Name: Zhixing Cai Title: Executive Director and Operations Manager Agreement commenced: 1 January 2013 Details of agreement: Pursuant to an employment contract between Mr Zhixing Cai and B&P Design dated 1 Jan 2013, B&P Design agrees to employ Mr Zhixing Cai as its Executive Director and Operations Manager to the Director. Mr Zhixing Cai s annual remuneration is $ 33,393 for the year Mr Zhixing Cai has resigned as a director in December Name: Yanhua Chen Title: Non-Executive Director Agreement commenced: 17 September 2014 Details of agreement: The Company has entered an agreement with AFS Investment Holdings Pty Ltd who will provide certain general support services, including corporate governance and secretary services for the Company. AFS Investment Holdings Pty Ltd will be paid a fixed annual fee of $100,000 plus GST. Mr Yanhua Chen is an employee of AFS Investment Holdings Pty Ltd and will act Company Non-Executive Director. He will not receive any remuneration for his role other than the fee to be paid by the Company to AFS Investment Holdings Pty Ltd. Mr Yanhua Chen has been appointed as Company Non-Executive Director on 6 October

12 DIRECTORS REPORT (continued) D. Share-based compensation Issue of shares No shares issued to directors and other key management personnel as part of compensation during the year ended 31 December Options No options granted over ordinary shares affecting remuneration of directors and other key management personnel during the year ended 31 December 2014 or future reporting years. 10

13 DIRECTORS REPORT (continued) Equity instrument held by key management personnel (1) Share Holdings 2014 Name Balance at the start of the year Balance at the end of the year Ordinary Shares Huan Wang 3,146,525 3,146,525 Xianghua He 1,090,000 1,090,000 None of the shares above are held nominally by the directors or any of the other key management personnel. (2) Loan to key management personnel No loan has been made to the director of the consolidated entity and other key management personnel of the consolidated entity, including their close family members and entities related to them for year ended 31 December (3) Other transactions with key management personnel The Company has made repayments amounting $13,349 to Director Huan Wang during the year ended 31 December Amounts recognised as assets and liabilities Current Liability 31 December December 2013 $ $ Balance at beginning of the period 49,466 - Advances from directors - 428,921 Repayments to directors (13,349) (221,455) Loans forgiven by directors - (158,000) Balance at end of period 36,117 49,466 The advances were unsecured and interest free from the directors, which was for the purpose of corporate operating expenses. E. Additional information The earnings of the consolidated entity from 31 December 2013 to 31 December 2014 are summarised below: $ $ Sales revenue 2,039, ,669 EBITDA (191,706) (106,787) EBIT (191,706) (151,467) Profit / (Loss) after income tax (191,706) (151,467) The factors that are considered to affect total shareholders return ('TSR') are summarised below: Share price at financial year end $0.41 $0.41 Total dividends declared - - Basic earnings/(loss) per share ($0.01) ($0.03) This concludes the remuneration report, which has been audited. 11

14 DIRECTORS REPORT (continued) Share Options No options over issued shares or interests in the consolidated entity were granted during or since the end of the financial year and there were no options outstanding at the date of this report. Indemnity and insurance of officers The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against a liability to the extent permitted by the Corporations Act The contract of insurance prohibits disclosure of the nature of liability and the amount of the premium. 12

15 DIRECTORS REPORT (continued) Non-audit service Details of the amounts paid or payable to the auditor (BDO Audit (WA) Pty Ltd) for non-audit services provided during the year are set out below. The board of directors has considered the position and, in accordance with advice received from the audit committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity: BDO Audit (WA) Pty Ltd Consolidated Consolidated 31 Dec Dec months 12 months $ $ (i) Taxation service Tax compliance services - 5,610 Total remuneration for taxation services - 5,610 (ii) Other services Other Professional service Total remuneration for other services Total remuneration for non-audit services 248 5,865 13

16 DIRECTORS REPORT (continued) Auditor s Independence Declaration The lead auditor s independence declaration for the period ended 31 December 2014 has been received and can be found on page 14 of the financial report. Proceedings on Behalf of Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to 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 part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act Signed in accordance with a resolution of Directors. Mr. Huan Wang Dated this 24 th day of April

17 Tel: Fax: Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY WAYNE BASFORD TO THE DIRECTORS OF BIRCH AND PRESTIGE INVESTMENT GROUP LIMITED As lead auditor of for the year ended 31 December 2014, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of and the entities it controlled during the period. Wayne Basford Director BDO Audit (WA) Pty Ltd Perth, 31 March 2015 BDO Audit (WA) Pty Ltd ABN is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN , an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.

18 CORPORATE GOVERNANCE STATEMENT Background The Board is committed to principles of best practice in corporate governance. The Board has relied on the Revised Principles of Corporate Governance Principles and Recommendations, developed by the ASX Corporate Governance Council, in formulating its corporate governance policies and practices. The Board seeks, where appropriate, to adopt without modification, the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations. However, given the size of the Board and the management team, and the need to finalise the restructure and focus on rebuilding the Company's operations, the Board considered it appropriate to modify some of those Principles and Recommendations. The Board continues to monitor the situation, and where appropriate will in future adopt without modification those Principles and Recommendations. Principle 1: Lay Solid Foundations for Management and Oversight The Board and management have agreed on their respective roles and responsibilities, and the functions reserved to the Board and to management. The functions and responsibilities of the Board are set out in the Company's policies, and its Constitution and the Corporations Act (refer to Principle 2). The Board is committed to protecting shareholders interests and keeping investors fully informed about the performance of the Company s businesses. The Directors have undertaken to perform their duties with honesty, integrity, care and diligence, according to the law and in a manner that reflects the highest standards of governance. The Chief Executive Officer (who is also an Executive Director) is responsible to the Board for the day-to-day management of the Company. The relationship between the Board and management is a partnership that is crucial to the Company s long term success. The separation of responsibilities between the Board and management is clearly understood and respected. The Board has established a Nomination and Remuneration Committee, which among other things evaluates the performance of senior executives, as discussed below. 16

19 CORPORATE GOVERNANCE STATEMENT (CONTINUED) Principle 2: Structure the Board to add Value The Board ultimately takes responsibility for corporate governance, and will be accountable to the shareholders for the performance of the Company. The functions and responsibilities of the Board are set out in the Company's policies, and its Constitution and the Corporations Act, and include: one third of the Board retiring and being subject to election at each annual general meeting of the Company (AGM); subsequent Directors being initially appointed by the Board and then subject to election by Shareholders at each AGM; the Board is to be comprised of a majority of independent Directors this is currently not the case. However the Board is monitoring this situation and acknowledges that it would be desirable to have the Board comprised of a majority of independent Directors, once the Company's circumstances make that appropriate; the Chair of the Board is to be elected by the Board, and the performances of the Directors are to be reviewed on an ongoing basis; the Chair is to be an independent Director, and separate from the Managing Director/Chief Executive Officer - this is currently not the case. However the Board is monitoring this situation and acknowledges that it would be desirable to have the Chair be an independent Director, and separate from the Chief Executive Officer, once the Company's circumstances make that appropriate; Directors having the right, in connection with their duties and responsibilities as Directors, to seek independent professional advice at the Company's expense. Prior approval of the Chairman is required, which will not be unreasonably withheld; Directors having the right, in connection with their duties and responsibilities as Directors, to delegate any of their powers and discretions to committees responsible to the Board, which ensures an effective and efficient Board; the Board has established a Nomination and Remuneration Committee; the Board approving the strategic direction and related objectives of the Company, and monitoring management performance in the achievement of these objectives; 17

20 CORPORATE GOVERNANCE STATEMENT (CONTINUED) the Board will adopt budgets and monitor the financial performance of the Company; the Board ensuring that all major business risks are identified and effectively managed; the Board being responsible for ensuring that the Company meets its legal and statutory obligations; the Board being responsible for establishing and maintaining adequate internal control procedures and effective monitoring systems. Compliance with these procedures covering financial reporting, quality and integrity of personnel and operational control will be regularly monitored; and the Board schedules meetings on a regular basis, and other meetings as and when required. Composition of the Board The composition of the Board is reviewed on an annual basis to ensure that the Board has the appropriate mix of expertise and experience, given the structure of the Company's management team, and the international nature of the Company's operations. The Board currently comprises the following members: Mr Huan Wang, an Executive Chair, Executive and not independent; Mr Xianghua He, Non-executive Director, Independent; Mr Yanhua Chen Non-executive Director, Independent; Mr Guangpeng Wang, Executive and not independent. Independent Directors have no relationship with management or the Company that would interfere with the exercise of their independent judgment and are free from any interest and any business or other relationship which could materially interfere with their ability to act in the best interests of the Company. The Board as currently constituted has the range of skills, knowledge and experience necessary to govern the Company and understand the economic sectors in which the Company operates. All Directors details are set out in the Directors Report. Board Process and Performance Review It is not appropriate to disclose the process for performance evaluation of the Board, its committees and individual Directors, and key executives. Rather than a formal review procedure, the Board has adopted a self-evaluation process to measure its own performance, which is overseen by the Nomination and Remuneration Committee. 18

21 CORPORATE GOVERNANCE STATEMENT (CONTINUED) Independent Professional Advice All Directors have the right of access to relevant Company information and the Company s executives and, subject to prior consultation with the Chair, may at the Company s expense, seek independent professional advice regarding their responsibilities. Principle 3: Promote Ethical and Responsible Decision Making All Directors, managers and employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the Company. The Board is establishing a code of conduct to guide the Directors, the Chief Executive Officer and other key executives, as discussed below. The Board has not yet established a diversity policy. The Board is monitoring this situation and acknowledges that it would be desirable to establish a policy concerning diversity, once the Company's circumstances make that appropriate. Information provided to the Board includes material information on: operations, budgets, cash flows, funding requirements, shareholder movements, broker activity in the Company s securities, assets and liabilities, disposals, financial accounts, external audits, internal controls, risk assessments and new venture proposals. Directors Meetings The number of Directors meetings (including Board sub-committee meetings) and number of meetings attended by each of the Directors of the Company during the financial year are set out in the Directors Report. Share Trading The Company has adopted a Share Trading Policy. A copy of Securities Trading Policy is available from company secretary on request. Code of Conduct The Board is establishing its own Code of Conduct, and in the interim continues to be guided by the Code developed by the Australian Institute of Company Directors, with some modifications to suit the Company's circumstances and the size of the Board. This Code of Conduct for Directors establishes guidelines for their conduct in matters such as ethical standards and conflicts of interests. This document sets out standards of professional behaviour in areas such as conflicts of interests, professional integrity and use of information (confidentiality). It also has guidelines that are intended to 19

22 CORPORATE GOVERNANCE STATEMENT (CONTINUED) assist Directors in complying with the core principles of the Code, including the duties to the Company, Shareholders, Creditors and Stakeholders. In addition, Directors are prohibited from buying or selling the Company's shares at any time if they are aware of price sensitive information that has not been made public. In accordance with the Corporations Act and the ASX Listing Rules, Directors advise the Company of any transactions conducted by them in shares in the Company, which then informs the ASX of the details of the transaction. Related Party Matters Directors and senior management will be required to advise the Chair of any related party contract or potential conflict. The Chair will inform the Board, and the reporting party will be required to remove himself/herself from all discussions and decisions involving the matter. Principle 4: Safeguard Integrity in Financial Reporting The Directors require the Chief Executive Officer/Managing Director and any chief financial officer (or equivalent) to state in writing to the Board that the Company's financial reports present a true and fair view, in all material respects, of the Company's financial condition and operational results, and are in accordance with relevant accounting standards. Audit and Risk Committee has not been formed The Audit and Risk Committee provides advice and assistance to the Board in fulfilling the Board's responsibilities relating to the Company's financial statements, financial reporting processes, continuous disclosure, internal accounting control systems, internal audit, external audit, risk management and such other matters as the Board may request from time to time. The Committee may also undertake any other special duties as requested by the Board. The responsibilities of the Audit and Risk Committee include assisting the Board to fulfil its fiduciary responsibilities by: considering the effectiveness of the Company's accounting and internal control systems and management reporting, which are designed to safeguard Company assets; serving as an independent and objective party to review the financial information; reviewing the accounting policies adopted within the Group; reviewing the quality of the internal and external audit functions; and reviewing and approving internal audit plans including identified risk areas. The Board and the Audit and Risk Committee review the Audit and Risk Committee s Charter annually. 20

23 CORPORATE GOVERNANCE STATEMENT (CONTINUED) The Audit and Risk Committee is responsible for recommending to the Board the appointment and dismissal of the external auditors and their remuneration. While the Company recognizes the importance and functions of this committee, as at the date of this report, the Audit and Risk Committee has not been formally constituted. The Company anticipate and will advise when the Audit and Risk Committee is formally constituted. External auditors The company policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs. BDO was appointed as the external auditor in An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in the directors report. It is the policy of the external auditors to provide an annual declaration of their independence to the audit committee. The external auditor will attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report. Principle 5: Make Timely and Balanced Disclosure The Directors are committed to keeping the market fully informed of material developments, to ensure compliance with the ASX Listing Rules and the Corporations Act. At each Board meeting, specific consideration is given as to whether any matters should be disclosed under the Company's disclosure policy and professional legal advice is sought as required to ensure compliance. Continuous Disclosure Policy The Company has a policy that all shareholders and investors have equal access to the Company s information. The Board ensures that all price sensitive information is disclosed to the ASX in accordance with the continuous disclosure requirements of the Corporations Act and ASX Listing Rules. Principle 6: Respect the Rights of Shareholders The Directors have established a communications strategy to promote effective communication with shareholders, and encourage effective participation at general meetings. This strategy includes ensuring timely and appropriate access to information for all investors via announcements to the ASX. Shareholder Relations The Directors aim to ensure that shareholders are informed of all major developments affecting the 21

24 CORPORATE GOVERNANCE STATEMENT (CONTINUED) Company's affairs. Information will be communicated to shareholders through the annual report, AGMs, half-yearly announcements, ASX announcements and as appropriate through the Company's website, As noted above, the Company intends to implement the following policies and procedures, to the extent required: statement of Board and management functions; policy and procedures for the election and appointment of new Directors; code of conduct for Directors and key executives; diversity policy; risk management policy; and process for performance evaluation of the Board, Board Committees and individual Directors and key executives. The Directors will request the external auditor to attend AGMs, and be available to answer questions from the shareholders about the conduct of the audit and the preparation and content of the auditor's report. Principle 7: Recognise and Manage Risk The Company s Audit and Risk Committee is responsible for establishing policies on risk oversight and management, and risk management and internal control systems, including non-financial risks, which must be approved by the Board. These responsibilities are summarised below. While the Company recognizes the importance and functions of this committee, as at the date of this report, the Audit and Risk Committee has not been formally constituted. The Company anticipate and will advise when the Audit and Risk Committee is formally constituted. The Committee must regularly report to the Board on compliance with any risk and audit policies and protocols in place at the time. Internal Control and Risk Management by Audit and Risk Committee Assess the internal processes for determining, managing and reporting on key risk areas. Ensure that the Company has an effective risk management system and that macro risks to the Company are reported at least annually to the Board. Address the effectiveness of the Company s internal control and risk management systems with management and the internal and external auditors. Assess whether management has controls in place for unusual types of transactions and/or any potential transactions that may carry more than an acceptable degree of risk. Meet periodically with key management, internal and external auditors and compliance staff to understand and discuss the Company's control environment. 22

25 CORPORATE GOVERNANCE STATEMENT (CONTINUED) The Directors require the Chief Executive Officer/Managing Director and any chief financial officer (or equivalent) to state in writing to the Board that: the statement given in accordance with the recommendation of Principle 4 (the integrity of financial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies established by the Board; and the Company s risk management and internal compliance and control system is operating efficiently and effectively in all material respects. Principle 8: Remunerate Fairly and Responsibly The Board has previously provided disclosure in relation to the Company's remuneration policies, to enable investors to understand: the costs and benefits of those policies; and the link between remuneration paid to Directors and key executives and corporate performance. The Company's Remuneration Report, which forms part of the Directors' Report, gives further disclosure to investors annually, in accordance with the ASX Listing Rules and the Corporations Act. As discussed below, the Board has established the Nomination and Remuneration Committee. Nomination and Remuneration Committee The Nomination and Remuneration Committee recommends appropriate remuneration packages for senior executives and Directors, and advises the Board on the appointment and retirement of Directors. The Committee s responsibilities include: reviewing the appropriateness of the size and composition of the Board and the criteria for Board membership, given the structure of the Company's management team, and the international nature of the Company's operations; ensuring that a proper succession plan is in place and nominating a panel of candidates with appropriate expertise and experience for consideration by the Board. The services of an independent external consultant may be sought in this process if deemed appropriate; reviewing remuneration arrangements for the Chief Executive Officer and her direct reports; and reviewing the remuneration of the non-executive members of the Board. The Committee seeks independent external advice on the structure of remuneration packages, in order to retain and attract executives of sufficient calibre to facilitate the efficient and effective management of the Company s operations. The Board's policy is to clearly distinguish the structure of non-executive directors' remuneration from that of executives. Board composition will also be reviewed periodically by the Committee, either when a vacancy arises, or 23

26 CORPORATE GOVERNANCE STATEMENT (CONTINUED) if it is considered the Board would benefit from the services of a new Director, given the existing mix of skills and experience of the Board, which should match the strategic demands of the Company. Once it has been agreed that a new Director is to be appointed, a search will be undertaken, and the services of external consultants may be used for this purpose. Nominations would then be received and reviewed by the Board. The Nomination and Remuneration Committee may obtain information from and consult with management and external advisers, if it considers appropriate. During the year, the responsibilities of this Committee were undertaken by Xianghua He, Yanhua Chen and Guangpeng Wang. Due to the size and composition of the Board, it is not currently possible for the Committee to be structured so that it complies with all of the relevant Principles and Recommendations (ie a nomination committee should consist of a majority of independent directors, have at least three members, and be chaired by an independent director). The Board is monitoring this situation and acknowledges that it would be desirable to do so, once the Company's circumstances make that appropriate. 24

27 FINANCIAL STATEMENT CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE CONSOLIDATED DECLARATION BY DIRECTORS INDEPENDENT AUDITOR S REPORT

28 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Consolidated Consolidated Note 31 Dec Dec 2013 $ $ Revenue 3 279, ,218 Cost of goods sold (30,848) (473,602) Gross profit 248, ,616 Other income 4 299, ,341 Marketing expenses (5,422) (95,357) Occupancy expenses (57,736) (90,183) Administration expenses (509,615) (598,522) Provision for impairment of receivables - (19,685) Provision for impairment of assets (165,094) - Finance costs (1,480) (2,499) Other expenses (762) (2,178) Loss before income tax 4 (191,706) (151,467) Income tax expense Loss after income tax for the period (191,706) (151,467) Other comprehensive income for the year, net of tax - - Total comprehensive Loss for the year (191,706) (151,467) Loss per share for the year attributable to 6 the members of Birch and Prestige Investment Group Limited Basic Earnings/(loss) per share ($0.01) ($0.03) Diluted Earnings/(loss) per share ($0.01) ($0.03) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 26

29 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014 Consolidated Consolidated Note 31 Dec Dec 2013 $ $ Current Assets Cash and cash equivalents 9 40, ,227 Trade and other receivable 10 3,453, ,079 Short term loans 11-3,674,131 Inventories 12-73,109 Other current assets , ,265 Total Current Assets 4,321,813 4,300,811 Non Current Assets Property, plant & equipment 14-93,708 Intangible assets 15-1,977 Total Non Current Assets - 95,685 Total Assets 4,321,813 4,396,496 Current Liabilities Trade and other payables , ,666 Other current liabilities 17 10,249 30,965 Total Current Liabilities 309, ,631 Non Current Liabilities Provisions 18-8,000 Total Non Current Liabilities - 8,000 Total Liabilities 309, ,631 Net Assets 4,012,159 4,203,865 Equity Contributed equity 19 4,666,609 4,666,609 Accumulated losses (654,450) (462,744) Total Equity 4,012,159 4,203,865 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 27

30 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Contributed Accumulated Total equity losses Equity $ $ $ Consolidated Balance at 1 Jan ,714 (311,277) 363,437 Total comprehensive loss for the period Loss for the period - (151,467) (151,467) Total comprehensive loss for the period - (151,467) (151,467) Transactions with equity holders in their capacity as equity holders Contributions of equity, net of transaction costs 3,991,895-3,991,895 Total transactions with equity holders 3,991,895-3,991,895 Balance at 31 Dec ,666,609 (462,744) 4,203,865 Total comprehensive loss for the year Loss for the year - (191,706) (191,706) Total comprehensive loss for the period - (191,706) (191,706) Balance at 31 Dec ,666,609 (654,450) 4,012,159 The above Consolidated Statement of Change in Equity should be read in conjunction with the accompanying notes. 28

31 CONSOLIDATED STATEMENT OF CASH FLOWS Consolidated Consolidated Note 31 Dec Dec months 12 months $ $ Net cash flows from operating activities Receipts from customers 2,006, ,172 Payments to suppliers & employees (2,400,793) (1,108,676) Interest received 280,976 12,639 Income taxes paid 1,823 (1,810) Net cash (used in) operating activities 23 (111,511) (251,675) Cash flows from investing activities Purchase of property, plant & equipment - (8,591) Loans to other entities - (3,492,520) Repayment of loan by parent entity 25,933 - Payments on behalf of parent entity - (125,043) Net cash used in investing activities 25,933 (3,626,154) Cash flows from financing activities Issues of shares (net of costs) - 3,991,891 Net cash provided by financing activities - 3,991,891 Net increase / (decrease) in cash & cash equivalents (85,578) 114,062 Cash & cash equivalents at the beginning of the financial period 130,227 23,423 Effect of exchange rate changes on the balance of cash & cash equivalents in foreign currencies (4,180) (7,258) Cash and cash equivalents at the end of the 9 financial period 40, ,227 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 29

32 NOTES TO THE CONSOLIDATED (the Company) is a company limited by shares, incorporated and domiciled in Australia. The consolidated financial statements of the Company for the year ended 31 December 2014 comprise the Company and its subsidiaries (together referred to as the consolidated entity). The consolidated financial statements of the consolidated entity for the year ended 31 December 2014 were authorised for issue in accordance with a resolution of the directors on 31 March The financial statements are presented in Australian dollars. Note 1. Summary of significant accounting policies a) Basis of Preparation The financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act The consolidated entity is a for-profit entity for the purpose of preparing the financial statements. The financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The financial statements have also been prepared on a historical cost basis. The following is a summary of the material accounting policies adopted in the preparation of the financial statements. The accounting policies have been consistently applied, unless otherwise stated. New and amended standards adopted by the company None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 January 2014 affected any of the amounts recognised in the current period or any prior period and are not likely to affect future periods. The following significant accounting policies have been adopted in the preparation and presentation of the financial statements: b) Basis of Consolidation The consolidated financial statements comprise the financial statements of Birch and Prestige Investment Group Limited and its subsidiaries at 31 December Subsidiaries are all entities (including structured entities) over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity 30

33 NOTES TO THE CONSOLIDATED Note 1. Summary of significant accounting policies (continued) b) Basis of Consolidation (continued) is exposed to, or has right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are deconsolidated from the date that control ceases. All intercompany balances and transactions, including unrealised profits arising from intragroup transactions have been eliminated. Unrealised losses are also eliminated unless costs cannot be recovered unless the transaction provides evidence of the impairment of the asset transferred. c) Going Concern The financial statements of the consolidated entity have been prepared on a going concern basis, which contemplates continuity of normal business activities and realisation of assets and settlement of liabilities in the ordinary course of business. The consolidated entity made a net loss after tax of $191,706 and had a net cash outflow of $85,578 for the year ended 31 December At 31 December 2014, the consolidated entity has cash and cash equivalents of $40,649. The $3,982,008 loan ($3,701,032 in principal and $280,976 in interest) was repaid by Runx during the year ended 31 December 2014, and is currently held by Henan Bump Trade Co., Ltd ( Bump ), a private Chinese company on behalf of the Company. In addition, on 17 November 2014, the Company s wholly owned subsidiary B&P Design Pty Ltd ( B&P ) and Henan Tianze Import and Export Co., Ltd ( Tianze ) entered into a Global Purchasing Agreement ( GP Agreement ). Under the GP Agreement B&P acts as purchasing agent for Tianze, B&P paid a $680,573 deposit to Tianze to commence the agreement. This amount will be repaid to B&P when the agreement is completed. This deposit was paid by the amounts held on behalf of the Company by Bump. The remaining amount held by Bump is $3,301,435. In addition, $130,247 remains outstanding from China Winway Investment Holdings at the date of this report and due for repayment on 31 December The ability of the consolidated entity to continue as a going concern is dependent upon Bump and Tianze s ability to repay the $3,301,435 and $680,573 respectively back to the consolidated entity, and the receipt of $130,247 from China Winway Investment Holding Limited. The directors are confident that they will receive the amounts in full. These amounts are required to fund the consolidated entity s future investment strategy, and to enable it to meet its obligations as and when they fall due. Should the consolidated entity be unable to continue as a going concern it may be required to realise its assets and discharge its liabilities other than in the normal course of business and at amounts different to those stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount of liabilities that might result should the consolidated entity be unable to continue as a going concern and meet its debts as and when they fall due. 31

34 NOTES TO THE CONSOLIDATED Note 1. Summary of significant accounting policies (continued) d) Revenue recognition Revenue is recognised at the fair value of consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. The following specific recognition criteria must also be met before revenue is recognised: Sale of goods Revenue from sale of goods is recognised when the significant risks and rewards of ownership have passed to the buyer and can be reliably measured. Risks and rewards are considered passed to buyer when goods have been delivered to the customer. Revenue excludes value added tax or other sales taxes. Commission income Commission income of agent sales is recognised when the corresponding service is provided. In the sales the entity acting as an agency, the amounts are collected on behalf of the principal and the entity received commission income on the transactions. Interest Revenue is recognised as interest accrues using the effective interest method. The effective interest method uses the effective interest rate which is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial asset. e) Income tax The income tax expense for the period is the tax payable on the current period's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for all temporary differences, between carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases, at the tax rates expected to apply when the assets are recovered or liabilities settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. Exceptions are made for certain temporary differences arising on initial recognition of an asset or a liability if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit. Deferred tax assets are only recognised for deductible temporary differences and unused tax losses if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. 32

35 NOTES TO THE CONSOLIDATED Note 1. Summary of significant accounting policies (continued) e) Income tax (continued) Current and deferred tax balances relating to amounts recognised directly in other comprehensive income or equity are also recognised directly in other comprehensive income or equity. f) Impairment of assets At the end of each reporting period the consolidated entity assesses whether there is any indication that individual assets are impaired. Where impairment indicators exist, recoverable amount is determined and impairment losses are recognised in profit or loss where the asset's carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purpose of assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where it is not possible to estimate recoverable amount for an individual asset, recoverable amount is determined for the cash-generating unit to which the asset belongs. g) Cash and cash equivalents For the purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on hand and at bank, deposits held at call with financial institutions, other short term, highly liquid investments with maturities of three months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts. h) Trade receivables Trade receivables are recognised at original invoice amounts less an allowance for uncollectible amounts. Collectability of trade receivables is assessed on an ongoing basis. Debts which are known to be uncollectible are written off. An allowance is made for doubtful debts where there is objective evidence that the company will not be able to collect all amounts due according to the original terms. Objective evidence of impairment includes financial difficulties of the debtor, default payments or debts overdue for a long time. On confirmation that the trade receivable will not be collectible the gross carrying value of the asset is written off against the associated provision. The amount of the impairment loss is recognised in profit or loss. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss. 33

36 NOTES TO THE CONSOLIDATED Note 1. Summary of significant accounting policies (continued) i) Inventories Inventories are stated at the lower of cost and net realizable value. Cost includes all purchase related rebates, settlement discounts and other costs incurred to bring inventory to its present condition and location for sale. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. j) Financial instruments Financial assets Recognition and de-recognition Regular purchases and sales of financial assets are recognised on the trade date - the date on which the company commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or losses are initially recognised at fair value and transaction costs are expensed in profit or loss. Financial assets are derecognised when rights to receive cash flows from the financial assets have expired or have been transferred and the company has transferred substantially all the risks and rewards of ownership. Classification Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate. The company determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at the end of each reporting period. Financial assets of the consolidated entity are classified in one category as following: Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method, less any impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired. These are included in current assets, except for those with maturities greater than 12 months after the end of the reporting period, which are classified as non-current. Impairment of financial assets At the end of each reporting period, the company assesses whether there is objective evidence that a financial instrument has been impaired. Impairment losses are recognised in profit or loss. Financial liabilities Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. 34

37 NOTES TO THE CONSOLIDATED Note 1. Summary of significant accounting policies (continued) j) Financial instruments (continued) Fair value Fair values may be used for financial asset and liability measurement as well as for sundry disclosures. Fair values for financial instruments traded in active markets are based on quoted market prices at the end of the reporting period. The quoted market price for financial assets is the current bid price and the quoted market price. The fair values of financial instruments that are not traded in an active market are determined using valuation techniques. Assumptions used are based on observable market prices and rates at the end of the reporting period. The fair value of long-term debt instruments is determined using quoted market prices for similar instruments. Estimated discounted cash flows are used to determine fair value of the remaining financial instruments. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the company for similar financial instruments. k) Plant and equipment Plant and equipment is stated at historical cost, including costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, less depreciation and any impairment. The depreciable amounts of all fixed assets are depreciated on a straight-line basis over their estimated useful lives to the economic entity commencing from the time the assets are held ready for use. Assets are depreciated over their useful lives as follows: Motor vehicles 3-7 years Furniture, fittings and equipment 2-10 years Leasehold improvements 3 years The assets' residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period. Gains and losses on disposals are calculated as the difference between the net disposal proceeds and the asset's carrying amount and are included in profit or loss in the period that the item is derecognised. 35

38 NOTES TO THE CONSOLIDATED Note 1. Summary of significant accounting policies (continued) l) Intangible Assets Software Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 3 years. m) Trade and other payables Trade and other payables represent liabilities for goods and services provided to the company prior to the period end and which are unpaid. These amounts are unsecured and have days payment terms. n) Employee benefit provisions Wages and Salaries, Annual Leave and Sick Leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the end of the reporting period are recognised in other liabilities in respect of employees' services rendered up to the end of the reporting period and are measured at amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when leave is taken and measured at the actual rates paid or payable. Long Service Leave Liabilities for long service leave are recognised as part of the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees to the end of the reporting period using the projected unit credit method. Consideration is given to the expected future salaries and wages levels, experience of employee departures and periods of service. Expected future payments are discounted using national government bond rates at the end of the reporting period with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Bonus The company recognizes an expense and a liability for bonuses when the entity is contractually obliged to make such payments or where there is past practice that has created a constructive obligation. Retirement Benefit Obligations The employees of Australian entities participate in those entities defined contribution superannuation fund. Contributions are recognised as expenses as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. o) Contributed equity Contributions by shareholders are classified as equity. Costs directly attributable to capital raising are shown as a deduction from the equity proceeds. p) Dividends Provision is made for dividends declared and no longer at the discretion of the company, on or before the end of the reporting period but not distributed at the end of the reporting period. 36

39 NOTES TO THE CONSOLIDATED Note 1. Summary of significant accounting policies (continued) q) Taxation Goods and services tax (GST) Revenues, expenses of Australian entities are recognised net of GST except where GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. r) Earnings per Share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to owners of the company, adjusted for the after-tax effect of preference dividends on preference shares classified as equity, by the weighted average number of ordinary shares outstanding during the financial period, adjusted for bonus elements in ordinary shares during the period. The weighted average number of issued shares outstanding during the financial period does not include shares issued as part of the Employee Share Loan Plan that are treated as in-substance options. Diluted earnings per share Earnings used to calculate diluted earnings per share are calculated by adjusting the basic earnings by the after-tax effect of dividends and interest associated with dilutive potential ordinary shares. The weighted average number of shares used is adjusted for the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. s) Critical accounting estimates & judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. 37

40 NOTES TO THE CONSOLIDATED Note 1. Summary of significant accounting policies (continued) s) Critical accounting estimates & judgements(continued) Income taxes The consolidated entity has recognised deferred tax assets relating to carried forward tax losses to the extent there are sufficient taxable temporary differences (deferred tax liabilities). In addition, the consolidated entity has not recognised deferred tax assets in excess of the deferred tax liabilities because it is not currently probable that future taxable profit will be available against which the consolidated entity can utilise these benefits. Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation charges for its property, plant and equipment. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Long service leave provision As discussed in note 1m), the liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. Lease makes good provision A provision has been made for the present value of anticipated costs for future restoration of leased premise. The provision includes future cost estimates associated with closure of the premises. The calculation of this provision requires assumptions such as application of closure dates and cost estimates. The provision recognised is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for sites are recognised in the statement of financial position by adjusting the asset and the provision. Reductions in the provision that exceed the carrying amount of the asset will be recognised in profit or loss. t) Leases Leases in which a significant portion of the risks and rewards of ownership are not transferred to the consolidated entity as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. 38

41 NOTES TO THE CONSOLIDATED Note 1. Summary of significant accounting policies (continued) u) Foreign currency translation i) Functional and presentation currency Items included in the financial statements of each of the consolidated entity s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in Australian dollars, which is Birch and Prestige Holding Limited s functional and presentation currency. ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Foreign exchange gains and losses that relate to borrowings are presented in the income statement, within finance costs. All other foreign exchange gains and losses are presented in the income statement on a net basis within other income or other expenses. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognised in other comprehensive income. iii) consolidated entity companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet income and expenses for each income statement and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. 39

42 NOTES TO THE CONSOLIDATED Note 1. Summary of significant accounting policies (continued) v) Accounting standards issued, not yet effective The following new/amended accounting standards have been issued, but are not mandatory for the year ended 31 December They have not been adopted in preparing the financial statements for the year ended 31 December 2014 and may impact the consolidated entity in the period of initial application. In all cases the consolidated entity intends to apply these standards from the mandatory application date as indicated in the table below. 40

43 NOTES TO THE CONSOLIDATED Note 1. Summary of significant accounting policies (continued) v) Accounting standards issued, not yet effective (continued) Standards likely to have a financial impact Reference Title Summary Application date of standard Application date for consolidated entity AASB 9 Financial Instruments AASB 9 (December 2014) is a new Principal standard which replaces AASB 139. This new Principal version supersedes AASB 9 issued in December 2009 (as amended) and AASB 9 (issued in December 2010) and includes a model for classification and measurement, a single, forward-looking expected loss impairment model and a substantially-reformed approach to hedge accounting. AASB 9 is effective for annual periods beginning on or after 1 January However, the Standard is available for early application. The own credit changes can be early applied in isolation without otherwise changing the accounting for financial instruments. 1 January January 2018 The final version of AASB 9 introduces a new expected-loss impairment model that will require more timely recognition of expected credit losses. Specifically, the new Standard requires entities to account for expected credit losses from when financial instruments are first recognised and to recognise full lifetime expected losses on a more timely basis. Amendments to AASB 9 (December 2009 & 2010 editions )(AASB ) issued in December 2013 included the new hedge accounting requirements, including changes to hedge effectiveness testing, treatment of hedging costs, risk components that can be hedged and disclosures. AASB 9 includes requirements for a simpler approach for classification and measurement of financial assets compared with the requirements of AASB

44 NOTES TO THE CONSOLIDATED Reference Title Summary Application date of standard Application date for consolidated entity The main changes are described below. a. Financial assets that are debt instruments will be classified based on (1) the objective of the entity's business model for managing the financial assets; (2) the characteristics of the contractual cash flows. b. Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument. c. Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases. d. Where the fair value option is used for financial liabilities the change in fair value is to be accounted for as follows: The change attributable to changes in credit risk are presented in other comprehensive income (OCI) The remaining change is presented in profit or loss AASB 9 also removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value. This change in accounting means that gains caused by the deterioration of an entity s own credit risk on such liabilities are no longer recognised in profit or loss. Consequential amendments were also made to other standards as a result of AASB 9, introduced by AASB and superseded by AASB , AASB and AASB Part E. AASB incorporates the consequential amendments arising from the issuance of AASB 9 in Dec AASB limits the application of the existing versions of AASB 9 (AASB 9 (December 2009) and AASB 9 (December 2010)) from 1 February 2015 and applies to annual reporting periods beginning on after 1 January

45 NOTES TO THE CONSOLIDATED Reference Title Summary Application date of standard Application date for consolidated entity AASB Amendments to Australian Accounting AASB amends AASB 11 to provide guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business. The amendments require: (a) the acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in AASB 3 1 January January 2016 Standards Business Combinations, to apply all of the principles on business combinations accounting in AASB 3 and other Australian Accounting for Accounting Standards except for those principles that conflict with the guidance in AASB 11; and Acquisitions of Interests in Joint (b) the acquirer to disclose the information required by AASB 3 and other Australian Accounting Standards for business combinations. Operations [AASB 1 & This Standard also makes an editorial correction to AASB 11 AASB 11] AASB Amendments to Australian AASB 2014-Part B makes amendments in relation to the requirements for contributions from employees or third parties that are set out in the formal terms of the benefit plan and linked to service. 1 July January 2015 Part B Amendments Accounting Standards - The amendments clarify that if the amount of the contributions is independent of the number of years of service, an entity to AASB 119 Part B Defined is permitted to recognise such contributions as a reduction in the service cost in the period in which the related service is rendered, instead of attributing the contributions to the periods of service. Benefit Plans: Employee Contributions 43

46 NOTES TO THE CONSOLIDATED Reference Title Summary Application date of standard Application date for consolidated entity (Amendments to AASB 119) AASB 15 Revenue from Contracts with Customers In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers, which replaces IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations (IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC-31 Revenue Barter 1 January January 2017 Transactions Involving Advertising Services). The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: (a) Step 1: Identify the contract(s) with a customer (b) Step 2: Identify the performance obligations in the contract (c) Step 3: Determine the transaction price (d) Step 4: Allocate the transaction price to the performance obligations in the contract (e) Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation Early application of this standard is permitted. AASB incorporates the consequential amendments to a number Australian Accounting Standards (including Interpretations) arising from the issuance of AASB 15. All other pending standards have no material application to the consolidated entity. 44

47 NOTES TO THE CONSOLIDATED Note 2. Segment Reporting The consolidated entity segment information is presented using a 'management approach', i.e. segment information is provided on the same basis as information used for internal reporting purposes by the chief operating decision maker (the board of directors that make strategic decisions). The consolidated entity has two operating segments: global purchase which commences from the second half year of 2014 and Australian kitchen and bathroom furniture business operation, which has been has divested in July The segment information for the year ended 31 December 2014 is as follows: Statement of Financial Performance Furniture Global Purchase Business Operation Others China Australia Total Revenue 24,707 95, , ,757 Cost of goods sold - (30,848) - (30,848) Gross Profit 24,707 64, , ,909 Exchange gain or loss (11,699) - 311, ,494 Marketing expenses - (5,422) - (5,422) Occupancy expenses - (57,736) - (57,736) Administration expenses - - (509,615) (509,615) Impairment Losses - (165,094) - (165,094) Finance costs - - (1,480) (1,480) Other expenses - - (762) (762) Loss before income tax expenses 13,008 (163,753) (40,961) (191,706) Income tax expenses Net profit (Loss) for the period 13,008 (163,753) (40,961) (191,706) Total Assets 680,573 5,751 3,635,489 4,321,813 Total Assets includes Trade Debtor - 5,751-5,751 Deposit to Client 680, ,573 Total Liabilities - 6, , ,654 Total Liabilities includes Deferred revenue - 6,327-6,327 45

48 NOTES TO THE CONSOLIDATED Note 2. Segment Reporting (continued) The segment information for the year ended 31 December 2013 is as follows: Statement of Financial Performance Furniture Global Purchase Business Operation Others China Australia Total Revenue - 829, , ,218 Cost of goods sold - (473,602) - (473,602) Gross Profit - 356, , ,616 Exchange gain or loss , ,341 Marketing expenses - (95,357) - (95,357) Occupancy expenses - (90,183) - (90,183) Administration expenses - - (598,522) (598,522) Impairment Losses - (19,685) - (19,685) Finance costs - - (2,499) (2,499) Other expenses - - (2,178) (2,178) Loss before income tax expenses - 150,842 (302,309) (151,467) Income tax expenses Net profit (Loss) for the period - 150,842 (302,309) (151,467) Total Assets - 394,456 4,002,040 4,396,496 Total Assets includes Cash and Cash Equivalent - 128,018 2, ,227 Trade and other receivables - 44, , ,079 Inventory - 73,109-73,109 Other current assets - 53,573 99, ,265 Property, Plant and Equipment 93,708-93,708 Intangible Assets - 1,977-1,977 Short Term Loans - - 3,674,131 3,674,131 Total Liabilities - 6, , ,631 Total Liabilities includes Trade and Other Payables 36, , ,666 Other Current Liabilities 12,558 18,407 30,965 Provisions - 8,000-8,000 Note 3. Revenue Consolidated Consolidated 46

49 NOTES TO THE CONSOLIDATED $ $ Sales revenue Furniture Sales 95, ,669 Global Purchase 24,707 - Interest revenue 159, , , ,218 On 17 November 2014, the Company s wholly owned subsidiary, B&P Design Pty Ltd ( B&P ) and Henan Tianze Import and Export Co., Ltd ( Tianze ) entered into a Global Purchasing Agreement ( GP Agreement ). Under the GP Agreement B&P acts as purchasing agent for Tianze. B&P paid a $680,573 deposit to Tianze to commence the agreement (note 13). This amount will be repaid to B&P when the agreement is completed. Under the agreement B&P is paid a commission at the rate of 0.3% of the purchase price for the goods acquired for Tianze. Note 4. Expenses and other income Loss from continuing operations before income tax includes the following specific income and expenses: Consolidated Consolidated $ $ Other income Realised foreign exchange gain 299, ,341 Depreciation expense Leasehold improvement - (35,312) Motor vehicles - (126) Furniture, fittings and equipment - (8,153) - (43,591) Amortisation of intangibles - (1,089) Employee benefits expense Salary and wages (200,249) (413,802) Superannuation (16,621) (34,777) Others (3,364) (4,175) (220,234) (452,754) Note 4. Expenses and other income (continued) Consolidated Consolidated

50 NOTES TO THE CONSOLIDATED $ $ Impairment expense Impairment Losses on assets (165,094) - Impairment Losses on receivables - (19,685) (165,094) (19,685) Finance costs Bank charges (1,371) (2,499) Operating leases minimum lease payments (57,306) (87,683) Note 5. Income Tax Expense Consolidated Consolidated $ $ Major components of income tax expense are: Current tax expense Current tax expense Deferred tax expense Origination and reversal of temporary differences - - Total income tax expense in profit or loss - - Reconciliation of the effective tax rate Profit/ (loss) before income tax expense (191,706) (151,467) Tax at the Australian tax rate of 30% (31 December 2013: 30%) (57,512) (45,440) Utilisation of previously unrecognised tax losses - - Deferred tax assets not recognised 57,512 51,242 Income tax expense at effective rate of 0% (31 December 2013: 0%) - - Note 5. Income Tax Expense (continued) Unrecognised temporary differences and tax losses 48

51 NOTES TO THE CONSOLIDATED Unused tax losses and temporary differences for which no deferred tax asset has been recognised 459, ,411 Potential tax 30% 137,975 99,423 Note 6. Earnings per share Consolidated Consolidated $ $ (a) Basic loss per share Loss attributable to owners of the company used to calculate basic earnings per share: Loss after income tax (191,706) (151,467) (b) Diluted loss per share Loss attributable to owners of the company used to calculate basic earnings per share: Loss after income tax (191,706) (151,467) Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 13,395,525 5,282,098 Weighted average number of ordinary shares used as the denominator in calculating diluted earnings per share 13,395,525 5,282,098 Diluted earnings per share are equal to basic earnings per share as the Company has not issued dilutive instruments. Note 7. Auditor s Remuneration 49

52 NOTES TO THE CONSOLIDATED During the year the following fees were paid or payable for services provided by the auditor of the parent entity: Consolidated Consolidated $ $ BDO Audit (WA) Pty Ltd (i) Audit and other assurance service Audit and review of financial statements 45,300 30,000 Total remuneration for audit and other assurance service 45,300 30,000 (ii) Taxation service Tax compliance services - 5,610 Total remuneration for taxation services - 5,610 (iii) Other services Other Professional service Total remuneration for other services Total remuneration of BDO Audit (WA) Pty Ltd 45,548 35,865 Note 8. Dividends No dividend for the full year ended 31 December 2014 has been declared or paid to shareholders by the Company (31 December 2013: nil). Note 9. Cash and Cash Equivalents Consolidated Consolidated 31 Dec Dec 2013 $ $ Cash on hand Cash at bank 40, ,357 Cash and cash equivalents 40, ,227 Cash on hand is non-interest bearing. Cash at bank bears 0% to 2.50% of interest rate (31 December 2013: 0% to 2.75%). The consolidated entity s exposure to credit risk and the risk management is disclosed in note 20 (b). Note 10. Trade and Other Receivables 50

53 NOTES TO THE CONSOLIDATED Consolidated Consolidated 31 Dec Dec 2013 $ $ Trade receivables 25,436 19,685 Interest receivables - 113,898 Receivables from parent 130, ,181 Receivables from Henan Bump Trade Co., Ltd (note 11) 3,301,435 - Other Receivables from Director 16,235-3,473, ,764 Provision for impairment of trade receivables (19,685) (19,685) Total net trade and other receivables 3,453, ,079 (a) Age analysis of trade receivable that are past due but not impaired at the reporting date Year ended 31 Dec 2014 Amount not impaired Amount Impaired Total Past due >3 months - 19,685 19,685 Past due <3 months Total - 19,685 19,685 As at 31 December 2014, no trade receivables (31 December 2013: nil) were past due but not impaired. The other classes within trade and other receivables do not contain impaired assets and are not past due. The consolidated entity has procedures in place to assess whether to enter into once-off transaction with third parties, including mandatory credit checks. Movements in the provision for impairment of receivables are: Consolidated Balance at 1 January ,685 Provision for impairment recognised during the year - Balance at 31 December ,685 The consolidated entity does not hold ay collateral in relation to the receivables (31 December 2013: nil). (b) Fair values of trade and other receivables Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their fair value. There were no non-current receivables as at 31 December 2014 and 31 December

54 NOTES TO THE CONSOLIDATED Note 11. Loan Receivable Consolidated Consolidated 31 Dec Dec 2013 $ $ Short term Loans - 3,674,131 The amount was a short term loan and advance at arm's length basis with interest bearing, at the rate of 1% per month, made by to Birch and Prestige Holdings (Hong Kong) Limited ( BOPHK ) (a wholly owned subsidiary of the Company) to Runx Trade Co., Ltd ( Runx ). The $3,982,008 loan ($3,701,032 in principal and $280,976 in interest (AU$ equivalent)) was repaid by Runx during the year ended 31 December 2014, and is currently held on behalf of the Company by Henan Bump Trade Co., Ltd ( Bump ), a private Chinese company. On 17 November 2014, the Company s wholly owned subsidiary, B&P Design Pty Ltd ( B&P ) and Henan Tianze Import and Export Co., Ltd ( Tianze ) entered into a Global Purchasing Agreement ( GP Agreement ). Under the GP Agreement B&P acts as purchasing agent for Tianze. B&P paid a $680,573 deposit to Tianze to commence the agreement (note 13). This amount will be repaid to B&P when the agreement is completed. This deposit was paid by the amounts held on behalf of the Company by Bump. The remaining amount held by Bump is $3,301,435 and classified as other receivables (note 10). (a) Fair values of trade and other receivables Due to the short-term nature of the loan receivables, their carrying amount is assumed to be the same as their fair value. The full balance was received during the year ended 31 December Note 12. Inventories Consolidated Consolidated 31 Dec Dec 2013 $ $ At cost: Finished goods - 73,109-73,109 The Company has decided to divest the Australian kitchen and bathroom furniture business operations. Due to the plan of closure or sale of B&P Design Pty Ltd, the Company has written off the inventories of B&P Design Pty Ltd resulting in a loss on the books (note 4) 52

55 NOTES TO THE CONSOLIDATED Note 13. Other Assets Consolidated Consolidated 31 Dec Dec 2013 $ $ Current Rental bond 11,462 11,462 Prepayments 67,681 58,496 Tax assets 67,960 83,307 Deposit to Client (i) 680, , ,265 (i) On 17 November 2014, the Company s wholly owned subsidiary, B&P Design Pty Ltd ( B&P ) and Henan Tianze Import and Export Co., Ltd ( Tianze ) entered into a Global Purchasing Agreement ( GP Agreement ). Under the GP Agreement B&P acts as purchasing agent for Tianze. B&P paid a $680,573 deposit to Tianze to commence the agreement. This amount will be repaid to B&P when the agreement is completed. 53

56 NOTES TO THE CONSOLIDATED Note 14. Property, Plant and Equipment Consolidated Consolidated 31 Dec Dec 2013 $ $ Leasehold improvements At cost - 119,590 Accumulated depreciation - (42,645) - 76,945 Motor vehicles At cost - 9,106 Accumulated depreciation - (9,106) - - Furniture, fittings and equipment At cost - 47,239 Accumulated depreciation - (30,476) - 16,763 Capital works in progress at cost - - Total property, plant and equipment At cost - 175,935 Accumulated depreciation - (82,227) - 93,708 The Company has decided to divest the Australian kitchen and bathroom furniture business operations. Due to the plan of closure or sale of B&P Design Pty Ltd, the Company has written off the plant and equipment of B&P Design Pty Ltd resulting in a loss on the books of $93,

57 NOTES TO THE CONSOLIDATED Note 14. Property, Plant and Equipment (continued) Movement in the carrying amounts for each class of plant and equipment between the beginning and the end of the current financial period is as follows: Leasehold Motor Furniture, Capital Total improvements vehicles fittings works in and progress equipment $ $ $ $ $ Cost 1 January ,000 9,106 46, , ,344 Additions 7, ,591 Transfers 103, (103,800) - 31 December ,590 9,106 47, ,935 1 January ,590 9,106 47, ,935 Impairment (119,590) (9,106) (47,239) - (175,935) 31 December Accumulated Depreciation 1 January ,333 8,980 22,323-38,636 Additions 35, ,153-43, Dec ,645 9,106 30,476-82,227 1 January ,645 9,106 30,476-82,227 Impairment (42,645) (9,106) (30,476) - (82,227) 31 Dec Net book value 31 Dec ,945-16,763-93, Dec

58 NOTES TO THE CONSOLIDATED Note 15. Intangible Assets Consolidated Consolidated 31 Dec Dec 2013 $ $ At cost - 3,266 Accumulated depreciation - (1,289) - 1,977 Movement in the carrying amounts for each class of intangible assets between the beginning and the end of the current financial period is as follows: Software $ Carrying amount at 1 January ,066 Amortisation expense (1,089) Carrying amount at 31 December ,977 Impairment (1,977) Carrying amount at 31 December Note 16 Trade and Other Payables Consolidated Consolidated 31 Dec Dec 2013 $ $ Trade payables 57,655 18,997 Other payables and accruals 189,398 85,203 Advances from directors 52,352 49, , ,666 The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to their short-term nature. Note 17. Other liabilities Consolidated Consolidated 31 Dec Dec 2013 $ $ Current Deferred revenue 6,327 6,327 Annual leave 3,922 5,659 Others - 18,979 10,249 30,965 56

59 NOTES TO THE CONSOLIDATED Note 18. Provisions Consolidated Consolidated 31 Dec Dec 2013 $ $ Non-Current Make good provision - 8,000-8,000 The company was required under the terms of their lease to restore the leased premises at the end of the lease to its original condition. A provision was recognised for the present value of the estimated expenditure required to demolish any leasehold improvements at the end of the lease. These costs have been capitalised as part of the cost of leasehold improvements and are fully amortised over the lease life of the assets. Note 19. Contributed Equity Consolidated Consolidated 31 December December 2013 Shares $ Shares $ Ordinary shares fully paid a) 13,395,525 4,109,604 13,395,525 4,109,604 Capital raising costs capitalised (265,709) (265,709) Other contributed equity b) 822, ,714 4,666,609 4,666,609 57

60 NOTES TO THE CONSOLIDATED Note 19. Contributed Equity (continued) a) Movements in ordinary share capital Date Details Number of Issue price $ shares 1 July 2012 Opening Balance 10,000 10, December 2012 Balance 10,000 10, May 2013 Formation of the Company July 2013 Cancellation of original shares in B&P Design (10,000) - 12 July 2013 Acquisition of B&P Design 3,146, August 2013 Initial public offering 10,249, ,099, December 2013 Closing balance 13,395,525 4,109, December 2014 Closing balance 13,395,525 4,109,604 Ordinary shares Ordinary shareholders are entitled to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. Every ordinary shareholder present at a meeting in person or by proxy is entitled to one vote on a show of hands or by poll. b) Other contributed equity Consolidated Consolidated 31 Dec Dec 2013 $ $ Opening balance for the period 822, ,714 Contributions by current parent entity - 158,000 Closing balance for the period 822, ,714 c) Capital risk management The consolidated entity s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The consolidated entity is not subject to externally imposed capital requirements. 58

61 NOTES TO THE CONSOLIDATED Note 20. Financial Risk Management (a) General objectives, policies and processes In common with all other businesses, the consolidated entity is exposed to risks that arise from its use of financial instruments. This note describes the consolidated entity s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the consolidated entity s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. Activities undertaken by the consolidated entity may expose the consolidated entity to credit risk and liquidity risk. The Board has overall responsibility for the determination of the consolidated entity s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority to its finance team, for designing and operating processes that ensure the effective implementation of the objectives and policies of the consolidated entity. The consolidated entity's risk management policies and objectives are therefore designed to minimise the potential impacts of these risks on the results of the consolidated entity where such impacts may be material. The Board receives monthly reports from the consolidated entity Financial Manager through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the consolidated entity s competitiveness and flexibility. As at 31 December 2014, the consolidated entity held the following financial instruments: Consolidated Consolidated Note 31 December December 2013 $ $ Current Cash and cash equivalent 9 40, ,227 Short-term loan receivable 11-3,674,131 Trade and other receivables 10 3,453, ,079 Cash, loans and receivables 3,494,137 4,074,437 Current Trade and other payables , ,666 Financial liabilities measured at amortised cost 299, ,666 Cash and cash equivalents, trade and other receivables and trade and other payables are short-term instruments in nature whose carrying value is equivalent to fair value. 59

62 NOTES TO THE CONSOLIDATED Note 20. Financial Risk Management (continued) (b) Credit risk Credit risk is the risk that the other party to a financial instrument will fail to discharge their obligation resulting in the consolidated entity incurring a financial loss. This usually occurs when debtors or counterparties to derivative contracts fail to settle their obligations owing to the consolidated entity. Receivable balance is monitored on an ongoing basis. To mitigate the credit risk associated with cash and cash equivalents, cash and term deposits are only deposited with reputable financial institutions. Management considers the credit risk in respect of cash and bank deposits with financial institutions is relatively minimal as each counter party either bears a high credit rating or are major Australia banks. Management believes the Australian banks are able to maintain a relative stable credit level in the event of a crisis. Credit risk further arises in relation to loans to third parties and funds held in trust with third parties (note 11). Such loans and funds held in trust are only provided in exceptional circumstances and are subject to specific board approval. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets. Refer to the summary of financial instruments table above for the total carrying amount of financial assets. The consolidated entity does not hold any collateral. (c) Liquidity Risk Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Remaining contractual maturities The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. 60

63 NOTES TO THE CONSOLIDATED Note 20. Financial Risk Management (continued) Remaining contractual maturities (continued) Note Carrying Contractual 6-12 < 6 months Amount Cash flows months $ $ $ $ 31 December 2014 Non-derivatives Non-interest bearing Trade and other payables , , , , , , December 2013 Non-derivatives Non-interest bearing Trade and other payables , , , , , ,666 - (d) Foreign currency risk The consolidated entity s subsidiary resides in Hong Kong undertakes transactions in Hong Kong Dollars (HK$) and the consolidated entity is mainly exposed to foreign exchange risk arising from currency exposure to the Hong Kong dollar. The consolidated entity s policy of managing this risk is to constantly monitor its exposure to trends and fluctuations in foreign exchange rates. The consolidated entity s major exposure to foreign currency risk is as follows: HK$ HK$ Cash at bank 2,399 (335) Other receivables - 790,283 Short term borrowings - 25,492,959 2,399 26,282, RMB RMB Other receivables (i) 21,003,734-21,003,734 - (i) This represents the receivable balance held on behalf of Birch & Prestige Holdings (Hong Kong) Ltd by Henan Bump Trade Co., Ltd. 61

64 NOTES TO THE CONSOLIDATED Note 20. Financial Risk Management (continued) (d) Foreign currency risk (continued) US$ US$ Cash at bank 4,901-4,901 - Cash and cash equivalents, other receivables are short-term instruments in nature whose carrying value is equivalent to fair value. Sensitivity Analysis The following table demonstrates the sensitivity to a reasonably possible change in the foreign currency exchange rate, with all other variables held constant, of the consolidated entity s profit after tax (due to changes in fair value of monetary assets) % -10% +10% -10% (HKD/AUD) (HKD/AUD) (HKD/AUD) (HKD/AUD) $ $ $ $ Cash at bank 38 (38) (5) 5 Other receivables ,390 (11,390) Short term loans ,413 (367,413) Tax charge at 16.5% (6) 6 (62,502) 62,502 After tax increase/(decrease) (32) ,296 (316,296) % -10% +10% -10% (USD/AUD) (USD/AUD) (USD/AUD) (USD/AUD) $ $ $ $ Cash at bank 77 (77) - - Tax charge at 16.5% (13) After tax increase/(decrease) 64 (64) % -10% +10% -10% (RMB/AUD) (RMB/AUD) (RMB/AUD) (RMB/AUD) $ $ $ $ Other receivables 418,387 (418,387) - - Tax charge at 16.5% (69,034) 69, After tax increase/(decrease) 349,353 (349,353)

65 NOTES TO THE CONSOLIDATED Note 21. Related party transactions (a) Key management Compensation The aggregate compensation made to directors and other members of key management personnel of the Company is set out below: 31 December December 2013 $ $ Short-term employee benefits 120, ,596 Post-employment benefits 11,338 11, , ,339 (b) Transactions with related parties Advances from directors Consolidated Consolidated 31 December December 2013 $ $ Balance at beginning of the period 49,466 - Advances from directors - 428,921 Repayments to directors (13,349) (221,455) Loans forgiven by directors - (158,000) Balance at end of period 36,117 49,466 The advances were unsecured and interest free from the directors, which was for the purpose of corporate operating expenses. Payments made on behalf of parent Consolidated Consolidated 31 December December 2013 $ $ Balance at beginning of the period 156,181 10,168 Payments made on behalf of parent (i) - 146,013 Repayment from parent (ii) (25,934) - Balance at end of period 130, ,181 (i) (ii) The Company entered into an agreement with China Winway Investment Holdings Limited ( CWHL ) that in the event that the IPO exercise of the Company is successful, CWHL will pay part of the IPO expense. The payment on behalf of parent mainly represents the IPO costs the Company paid on behalf of CWHL. In 2014, CWHL started repaying the Company for the payments made on behalf of parent. 63

66 NOTES TO THE CONSOLIDATED Note 22. Cash Flow Information (a) Reconciliation of (loss) after income tax to net cash inflow from operating activities: $ $ Reconciliation of the loss after tax to the net cash flows from operations: (Loss)/profit for the period (191,706) (151,467) Impairment loss on assets 95,685 - Depreciation of non-current assets - 43,591 Amortisation of non-current assets - 1,089 Impairment loss on trade receivables - 19,685 Effects of foreign exchange differences (299,494) (174,353) Changes in Operating Assets and Liabilities: Increase in trade and other receivables 125,369 (109,948) Decrease/(increase) in inventory 73, ,105 (Increase)/decrease in other assets (9,185) (118,194) (Decrease)/increase in trade and other payables 123,427 69,505 (Decrease)/increase in other liabilities (20,716) 4,312 (Decrease)/increase in provisions (8,000) - Net cash flow (used in) operating activities (111,511) (251,675) (b) Non-cash investing and financing activities 2014 $ 2013 $ The loan receivable was repaid by Runx Trade Co., Ltd during 2014 and is currently held on behalf of the Company by Henan Bump Trade Co., Ltd (note 11) 3,982,008 - Deposit paid to Henan Tianze Import and Export Co., Ltd with the amount received from Runx Trade Co., Ltd, which is currently held by Henan Bump Trade Co., Ltd (note 13) (680,573) - In 2013, The Company issued shares to China Winway Investment Holdings Limited to acquire 100% of the share capital of B&P Design Pty Ltd with no consideration. 64

67 NOTES TO THE CONSOLIDATED Note 23. Commitments Non-cancellable operating leases Consolidated Consolidated 31 December December 2013 $ $ As lessee Payable within one year 28,061 78,781 Later than 1 year but not later than 5 years 4,817 32,879 32, ,660 The continued operation of the company leases various premises under non-cancellable operating leases expiring between 1 and 3 years. All leases have annual CPI escalation clauses. The above amounts do not include amounts for any renewal options on leases. Lease terms usually run for 1 and 3 years with a 1 and 3 year renewal option. Note 24. Contingent liability The consolidated entity did not have any contingent liability during the year. Note 25. Events occurring after the reporting period No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated entity, or the results of those operations. 65

68 NOTES TO THE CONSOLIDATED Note 26. Parent entity financial information The individual financial statements for the parent entity show the following aggregate amounts: $ $ Current assets 3,569,588 3,715,923 Non-current assets 1,258,606 1,258,606 Total assets 4,828,194 4,974,529 Current liabilities 378, ,785 Non-current liabilities - - Total liabilities 378, ,785 Contributed equity 5,092,501 5,092,501 Accumulated losses (643,157) (257,757) Total Equity 4,449,344 4,834,744 Profit or loss for the period (385,400) (257,757) Other comprehensive income - - Total comprehensive income (385,400) (257,757) 66

69 NOTES TO THE CONSOLIDATED Note 27. Subsidiaries The consolidated financial statements of incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1. Place of business/ country of incorporation Ownership interest held by the Company Ownership interest held by non-controlling interests Principal activities Name of entity % % % % Bond & Prestige Pty - - No business Ltd Australia conducted since it registered B&P Design Pty Ltd Australia Design and sale of kitchen products, accessories and bathroom products Birch & Prestige Hong Kong Investment Holdings(Hong Kong) Limited Zhengzhou Bangrong Hong Kong IT Services Zhengzhou Bangrong Business Services Limited was registered on 22 Jan Birch & Prestige Holdings(Hong Kong) Limited holds 70% of its shares and the remaining 30% is held Henan Bump Enterprise Mnagement Consulting Co., Ltd. The Capital has not been paid, no transactions occurred during 2014 and the NCI is nil. Note 28. Change of results from 4E On 28 February 2015 the consolidated entity announced to the market its preliminary financial results for the financial year ended 31 December 2014 for a revenue of $2,198,894 and cost of goods sold of $1,949,985. The audited revenue of the consolidated entity for relevant period was $279,757 and Cost of goods sold was $30,848, both $1,919,136 less than the preliminary financial results. The changes were caused by adjustments in revenue from the Global Purchase Agreement. The revenue and cost of goods sold presented on preliminary financial results were gross amount. The adjusted amount in annual report was the net revenue incurred from the Global Purchase Agreement. In the preliminary financial results for the financial year ended 31 December 2014, the consolidated entity announced an investment in financial position of $454,440. The audited amount for investment is nil and the investment has been reclassified to other receivables. 67

70 NOTES TO THE CONSOLIDATED Note 29. Company Details (a) Registered Office AFS Capital Securities Ltd Level 8, 303 Collins Street, Melbourne VIC 3000 (b) Principal Place of Business B&P Design Pty Ltd Level 8, 303 Collins Street, Melbourne VIC

71 DECLARATION BY DIRECTORS In the directors' opinion: the attached financial statements and notes thereto comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes thereto comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; the attached financial statements and notes thereto give a true and fair view of the consolidated entity 's financial position as at 31 December 2014 and of its performance for the financial period ended on that date; and there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of directors made pursuant to section 295(5) of the Corporations Act On behalf of the directors Huan Wang Director 24 th April 2015 Zhengzhou, P.R. China 69