SAY NO JUST GROUP LIMITED (ACN ) REJECT THE TAKEOVER OFFER FROM PREMIER

Transcription

1 just. SAY NO JUST GROUP LIMITED (ACN ) Target s Statement This Target s Statement has been issued in response to the takeover offer made by Premier Investments Limited for all the ordinary shares in Just Group Limited. REJECT THE TAKEOVER OFFER FROM PREMIER This is an important document and requires your immediate attention. If you are in any doubt about how to deal with this document, you should contact your broker, financial adviser or legal adviser immediately. ACN Financial Adviser Legal Adviser

2 KEY DATES Date of Premier s Offer 19 May 2008 Date of this Target s Statement 2 June 2008 Close of Premier s Offer Period (unless extended or withdrawn) 7.00pm (AEST) on 20 June 2008 Just Group shareholder information Just Group has established a Shareholder Information Line which Just Group shareholders may call if they have any queries in relation to Premier s Offer. The telephone number for the Shareholder Information Line is (for calls made from within Australia) or (for calls made from outside Australia). Just Group notifies shareholders that calls to the Shareholder Information Line may be tape recorded, indexed and stored. Further information relating to Premier s Offer can be obtained from Just Group s website at Important notices Nature of this document This document is a Target s Statement issued by Just Group under Part 6.5 Division 3 of the Corporations Act in response to Premier s Bidder s Statement and Offer. Defined terms A number of defined terms are used in this Target s Statement. These terms are explained in Section 7 of this Target s Statement. No account of personal circumstances This Target s Statement does not take into account your individual objectives, financial situation or particular needs. It does not contain personal advice. You should seek independent financial and taxation advice before making a decision as to whether or not to accept the Offer. Disclaimer as to forward looking statements Further, some of the statements appearing in this Target s Statement may be in the nature of forward looking statements. You should be aware that such statements are only predictions and are subject to inherent risks and uncertainties. Those risks and uncertainties include factors and risks specific to the industry in which Just Group operates as well as general economic conditions, prevailing exchange rates and interest rates and conditions in the financial markets. Actual events or results may differ materially from the events or results expressed or implied in any forward looking statement. None of Just Group, Just Group s officers, any persons named in this Target s Statement with their consent or any person involved in the preparation of this Target s Statement, makes any representation or warranty (express or implied) as to the accuracy or likelihood of fulfilment of any forward looking statement, or any events or results expressed or implied in any forward looking statement, except to the extent required by law. You are cautioned not to place undue reliance on any forward looking statement. The forwarding looking statements in this Target s Statement reflect views held only as at the date of this Target s Statement. Risks There are a number of risks which may affect the future performance of Just Group. These are discussed in Section 4. ASIC disclaimer A copy of this Target s Statement has been lodged with ASIC. Neither ASIC nor any of its officers take any responsibility for the content of this Target s Statement. CONTENTS Chairman s Letter to Shareholders 1 How to Reject Premier s Offer 3 Section 1 Why You Should Reject Premier s Offer 4 Section 2 Frequently Asked Questions 30 Section 3 Financial Information and Directors Pro-forma Forecast 33 Section 4 Risk Factors 47 Section 5 Taxation Consequences 51 Section 6 Important Matters for Just Group Shareholders to Consider 54 Section 7 Glossary and Interpretation 62 Section 8 Authorisation 64 Annexure A Investigating Accountant s Report 66 Annexure B Independent Expert s Report 72

3 CHAIRMAN S LETTER TO SHAREHOLDERS 2 June 2008 Dear Just Group Shareholder Reject Premier S Offer You should have recently received an offer from Premier to acquire your Just Group Shares for $2.095 cash and 0.25 Premier shares for every Just Group Share you hold ( Premier s Offer ). This document is our Target s Statement, which sets out the recommendation of your Special Board Committee and the reasons for that recommendation. As I indicated in my letter to you dated 7 April 2008, Just Group has taken steps to ensure the independence of Just Group s response and has formed a Special Board Committee to assess and consider Premier s Offer. The two Directors who recently joined the Just Group Board as nominees of Metrepark Pty Ltd (which may be considered an associate of Premier for the purposes of Premier s Offer), are not members of the Special Board Committee. Your Special Board Committee unanimously recommends that you REJECT the unsolicited and opportunistic Premier Offer. Your Special Board Committee believes there are a number of key reasons why you should REJECT Premier s unsolicited Offer: 1. Just Group is a unique Australian retail company; 2. Premier s Offer is materially inadequate and undervalues your shareholding; 3. Premier s Offer is highly opportunistic and your outcome is uncertain if you accept the Offer; 4. Premier appears to need Just Group (but Just Group doesn t need Premier); 5. An investment in Premier represents a fundamental change in your investment profile; and 6. You should consider Premier s corporate governance framework. Lonergan Edwards, the Independent Expert, has concluded the Premier Offer is neither fair nor reasonable. The Independent Expert has assessed the value of: your Just Group Shares to be between $4.78 and $5.28 per Share on a 100% controlling interest basis; Premier s Offer consideration to be between $3.97 and $4.23 per Share. The Independent Expert s assessed value of Premier s Offer consideration is between $0.81 and $1.05 per Share below its assessed value of Just Group s Shares. Detailed reasons for reaching our conclusion are set out in this document. You should read these reasons carefully. The Independent Expert s Report is also included. TO REJECT THE PREMIER OFFER, SIMPLY IGNORE ALL DOCUMENTATION SENT TO YOU BY PREMIER. Each member of the Special Board Committee of Just Group who holds Just Group Shares intends to REJECT the Premier Offer in relation to those Shares. Just Group is two years into a four year strategic plan that is designed to generate continued long term, sustainable growth. We have an exceptional management team, with outstanding experience and skills in retailing, that has delivered seven years of continuous sales and profit growth and strong financial returns. Our management team remains focused on delivering returns to all shareholders within the context of a strong board and governance framework. On the basis set out on page 10, your Board has adopted a goal of delivering at least 40 cents earnings per share ( EPS ) in FY2010. If achieved, this will represent double-digit EPS growth on average for the remaining two years of the strategic plan. We are committed to ensuring that shareholders benefit fully from Just Group s underlying value and growth potential. We also remain dedicated to our objective of being one of the world s most exciting retailers. Your Special Board Committee will continue to keep you updated on developments as they occur. In the meantime, if you have any questions in relation to this Target s Statement or your shareholding in Just Group, please call our Shareholder Information Line on (within Australia) or (outside Australia) Monday to Friday between 9.00am and 5.00pm (AEST). All company announcements are available on our website, Yours sincerely Ian Pollard Chairman Target s Statement JUST GROUP 1

4 Your Special Board Committee Recommends that you REJECT Premier s offer Do nothing IGNORE PREMIER S OFFER

5 Why How You to REJECT Should Premier s REJECT Premier s Offer Offer 1. To REJECT Premier s Offer, DO NOTHING. Ignore all documents sent to you by Premier 2. You should read this Target s Statement, which contains your Special Board Committee s recommendation to REJECT Premier s Offer and the reasons for this recommendation 3. If you have any questions, please call the Shareholder Information Line on: (within Australia); or (outside Australia) which is available Monday to Friday between 9.00am and 5.00pm (AEST) To REJECT Premier s Offer, DO NOTHING and ignore all documents sent to you by Premier Target s Statement JUST GROUP 3

6 1 Why You Should REJECT Premier s Offer 1. Just Group is a unique Australian retail company Just Group is Australia s leading fast fashion retailer Just Group is a growth company 2. Premier s Offer is materially inadequate and undervalues your shareholding Premier s Offer does not reflect the value of Just Group The Independent Expert has concluded that Premier s Offer is NEITHER FAIR NOR REASONABLE 3. Premier s Offer is highly opportunistic and your outcome is uncertain if you accept the Offer Premier s Offer is well below the price Just Group s Shares have traded at for much of the past 12 months Premier s Offer conditions create uncertainty and the Offer may have adverse capital gains tax consequences The future value and liquidity of Premier s shares is uncertain 4 JUST GROUP Target s Statement

7 1 Why You You Should REJECT Premier s Offer 4. Premier appears to need Just Group (but Just Group doesn t need Premier) The Premier Offer is structured to suit Premier s objectives, not the interests of Just Group shareholders Premier has endorsed Just Group s management It is not clear if Premier will add any value to Just Group 5. An investment in Premier represents a fundamental change in your investment profile Premier s strategy appears to lack focus and detail and may expose Just Group shareholders to additional risks Your interests may become subordinated to interests associated with Premier s Chairman and you will dilute your exposure to Just Group s future performance Premier s shares trade at a substantial discount to net tangible assets and have significantly lower liquidity than Just Group Shares 6. You should consider Premier s corporate governance framework Premier s corporate governance framework is inconsistent with ASX best practice Premier is silent on how it will manage potential conflicts Target s Statement JUST GROUP 5

8 JUST GROUP MANAGEMENT TEAM David Bull Glenys Shearer Wai Tang Jason Murray Anita Muller Ashley Gardner Rachel Kelly Janice Payne David Bull Merchandising Director Casualwear David joined the Group in May 1999 and has over 20 years experience in fashion retail, having previously held positions at Esprit and Sportsgirl. Glenys Shearer Commercial and Merchandising Womenswear Director Glenys has over 25 years experience in the retail industry (primarily with Just Group). Glenys was the 2005 Australian Telstra Business Woman of the Year in the category of Australian Government Private and Corporate Sector. 6 JUST GROUP Target s Statement Wai Tang Director of Operations and Peter Alexander Sleepwear Wai has over 18 years experience in operations and general management, having previously held positions at Pacific Brands (formerly a division of Pacific Dunlop Ltd) and IBM Management Consulting. Wai holds a Bachelor and Master of Science from the Royal Melbourne Institute of Technology, an MBA from Melbourne Business School and is a certified Company Director with a Diploma from AICD. Jason Murray Managing Director and CEO Jason has been at Just Group for almost five years, having previously been at McKinsey and Company for 10 years, working mainly with retail companies. Jason has a University Medal in Economics from Sydney University and an MBA (Hons) from IMD in Lausanne, Switzerland. Anita Muller Human Resources Director Anita has been with Just Group since June Anita has over 20 years experience in human resources, having previously held HR management positions at Foster s Group Ltd, CSR Ltd and ICI Australia Ltd. Ashley Gardner Chief Financial Officer Ashley joined Just Group in January Ashley has strong finance, retail and fashion credentials, having most recently been CFO and an executive director at Country Road. Ashley holds a Bachelor of Commerce (Hons) from the University of Melbourne and is also a Chartered Accountant. Rachel Kelly Retail Director Australia and New Zealand Rachel has been with Just Group for 10 years in various retail leadership positions. Rachel holds a Bachelor of Business from the University of South Australia. Janice Payne Corporate Affairs Director and Company Secretary Janice has been with Just Group since June Janice previously spent 10 years with Evans Partners (now Howarth Chartered Accountants). Janice holds a Bachelor of Commerce from the University of Melbourne and is also a Chartered Accountant.

9 1 Why You You Should REJECT Premier s Offer 1. Just Group is a unique Australian retail company Just Group is Australia s leading fast fashion retailer Just Group s vision is to become one of the world s most exciting retailers Just Group has a formidable portfolio of clearly segmented and continuously refreshed retail fashion brands. ESTABLISHED BRANDS GROWTH BRANDS EMERGING BRANDS Just Group s brands leverage a highly capable and diverse fast fashion retail machine, including: 885 stores across Australia and New Zealand by July 2008; expansion into North America, with two Peter Alexander stores open and a third store opening in August with additional store expansion in other countries in due course; a joint venture in South Africa with 23 stores; an award-winning supply chain capability, with stock turns amongst the best in the industry; an acquisition strategy which has contributed to the growth and profitability of Just Group and which has helped build a brand portfolio that provides resilience to shifts in the economy and customer behaviour; and outstanding corporate, product and brand leadership. Just Group has delivered exceptional returns: seven consecutive years of sales and profit growth; return on capital employed (measured as EBITA/average capital employed) in excess of 67% per annum for the 12 months to January 2008; and total shareholder return since listing of c. 24% per annum (assuming dividends reinvested). Target s Statement JUST GROUP 7

10 1 Why You Should REJECT Premier s Offer Just Group is a growth company Just Group is two years into a four year strategic plan that is designed to generate continued long term sustainable growth Just Group has forecast 1 continued growth for FY2008: sales of $824 million 1, representing growth of 8.5% on FY ; EPS of 33.4 cents 1, representing growth of 14.4% on FY ; and EBITA of $107.0 million 1, representing growth of 11.0% on FY JUST GROUP S EPS GROWTH A,B,C JUST GROUP S EBITA GROWTH A,B,C 35 14% yoy growth 120 EARNINGS PER SHARE (C) % yoy growth % yoy growth EBITA (A$M) % yoy growth 107 9% yoy growth 97 21% yoy growth 89 0 FY2005 FY2006 FY2007 FY2008 Pro-forma Forecast 0 FY2005 FY2006 FY2007 FY2008 Pro-forma Forecast Source: Just Group Notes: A FY2008 based on Directors Pro forma Forecast as defined in Section 3. Note EBITA is stated on a consistent basis to Just Group s reporting standards and includes interest income of $1.1 million. Adjusting for the interest income EBITA would be $106 million B Based on adjusted historical results as defined in Section 3; FY2005 and FY2006 adjusted for timing of foreign exchange gain (loss) on ineffective cash flow hedges as per that applied to FY2007 and FY2008 refer to Section 3 C While Just Group has prepared the Directors Pro-forma Forecast with due care and attention, it is subject to inherent risks and uncertainties facing Just Group s operations. These risks are discussed in further detail in Section 4 The Directors Annualised Pro forma Forecast EBITA for FY2008 is $111 million 3. This represents the underlying profitability of Just Group based on the forecast stores expected to be operating as at the end of FY2008, restated on the basis they had traded for 52 weeks. Notes: 1 As per Directors Pro-forma Forecast detailed in Section 3 2 Adjusted historical results for FY2007 as defined in Section 3 3 As per Directors Annualised Pro-forma Forecast detailed in Section 3 8 JUST GROUP Target s Statement

11 1 Why You Should REJECT Premier s Offer Just Group s business continues to grow despite market trading conditions softening in the second half of FY2008 (notably since the 5 March 2008 interest rate rise). Just Group s full year result is underpinned by: continued sales and profit growth in Dotti and Peter Alexander; an improvement in the performance of Jacqui.E and Portmans; the profit earned from the recently acquired Smiggle brand; and the ongoing benefits of the stronger Australian dollar, especially for the casualwear brands of Just Jeans and Jay Jays. JUST GROUP SALES H2, 2008 Total Sales Same-Store Sales Brand 17 weeks Last 8 weeks A 17 weeks Last 8 weeks A AUSTRALIA (2.2)% (1.0)% (0.6)% 0.7% 3.2% 5.1% (1.3)% 1.0% 6.7% 8.8% 5.1% 7.3% 0.2% 7.3% (5.0)% 1.5% 23.4% 15.5% 7.7% 3.2% 42.1% 42.9% 26.8% 30.9% TOTAL AUST. (excl. Smiggle) 5.2% 7.4% 1.0% 3.8% 81.7% 71.3% 5.4% 0.9% TOTAL AUST. (incl. Smiggle) 6.3% 8.1% 1.0% 3.8% New Zealand (NZ$) (1.4)% 0.9% (8.0)% (6.2)% GROUP TOTAL B 4.1% 6.0% (1.4)% 1.2% Source: Just Group Notes: A Since Premier s Offer announced up to 24 May 2008 B Excludes South African joint venture and Peter Alexander USA Target s Statement JUST GROUP 9

12 1 Why You Should REJECT Premier s Offer Just Group s strategic goal is to deliver at least 40 cents EPS in FY2010 Just Group has previously outlined a strategic goal of delivering EPS in FY2010 of at least 38.4 cents, which would represent double digit annual EPS growth on average over the life of Just Group s FY2006 FY2010 strategic plan. Just Group has recently undertaken a review of its strategic plan, as a result of which it has now adopted the goal of delivering at least 40 cents EPS in FY2010. This represents double-digit EPS growth on average for the remaining two years of the strategic plan. This goal has been derived having regard to the factors set out in Section 3 with respect to Just Group s FY2008 Directors Pro forma Forecast and expectations beyond FY2008. These factors include: an expectation that the AUD:USD exchange rate will remain above 90 cents; that Australian GDP growth remains positive; and the investment into and operating results from Just Group s international strategy. While Just Group believes it has a reasonable basis for adopting this goal, it is a goal, not a forecast, and, accordingly, does not carry the same level of certainty of achievement as would a forecast. It is made subject to a number of assumptions and risks which are referred to in Section 3 and Section 4 of this Target s Statement you should read these sections carefully. Just Group has adopted this goal with due care and attention, but no guarantee or assurance can be given that it will be achieved. Actual events or results may differ materially. Just Group s strategic plan is supported by four key elements, specifically: 1. continued growth in Australasia; 2. international expansion; 3. continued investment into Just Group s fast fashion retail machine; and 4. scope for selected acquisitions. Element One Continued growth in Australasia Sales and earnings in Australasia are expected to continue to grow between FY2008 and FY2010, largely supported by: an ongoing increase in the number and size of stores, particularly in Jay Jays, Dotti, Peter Alexander and Smiggle. Just Group expects to have close to 1,000 stores across Australia and New Zealand by the end of FY2010; continued improvement in the trading of Dotti and Jacqui.E, which have achieved same store sales growth in the first 17 weeks of 2H2008 of 26.8% and 5.1%; a continuation of the improvements currently being achieved in Portmans; the higher Australian dollar secured through our forward currency purchases and options. Assuming a spot rate of 90 cents, the expected achieved AUD:USD rate is cents in FY2009 and 90 cents in FY2010, versus an expected achieved rate in FY2008 of c cents; a reduction in import duties on clothing into New Zealand from 15% to 12.5% (which becomes effective on 1 July 2008) and from 12.5% to 10% (which becomes effective on 1 July 2009); and a reduction in import duties on clothing into Australia from 17.5% to 10.0% (which becomes effective on 1 January 2010). 10 JUST GROUP Target s Statement

13 1 Why You Should REJECT Premier s Offer Element Two International expansion International expansion represents a substantial growth option for Just Group, as: the scale and profitability of the South African joint venture increase: this market offers 15 million potential consumers aged between 15 and 29 years with rising average disposable incomes; and Just Group s current investment in South Africa is limited to the Jay Jays brand, which has been rolled out in a measured way. Same-store sales growth year to date for stores open for at least a year is 17.8% as at 24 May 2008; Just Group continues its international rollout of the Peter Alexander concept: if the initial sites prove to be successful, Just Group will continue its store rollout into the US as appropriate and explore the potential for other stores in other international markets; the rollout of Smiggle stores internationally is initiated, taking advantage of the infrastructure being built for the Peter Alexander expansion and of proposals that have been received from major retail players in a number of regions: early analysis indicates that the potential exists for a substantial number of company owned stores outside Australia and New Zealand, plus scope for franchised and licensed opportunities; and resources will be deployed in FY2009 to further scope this growth option and then to progress it as quickly as is appropriate. Element Three ContinueD investment into Just Group s fast fashion retail machine The FY2010 strategic plan is underpinned by ongoing investment into, and improvement of, the fast fashion retail machine the talent, infrastructure, systems and skills that makes the Just Group model successful: a new distribution centre will be opened in Auckland in September 2008 which will increase the distribution capacity of Just Group in New Zealand; Just Group s e commerce platform has recently been upgraded and new investment is planned to further upgrade the point-of-sale system and to streamline and improve the core merchandising system; work has started that will further diversify Just Group s sourcing base, both within China and in other countries such as India, Bangladesh, and Vietnam. Collaboration has increased with core vendors within each region, and in Melbourne, to improve speed to market and to mitigate product cost pressures; and a comprehensive and rigorous system for the identification and management of talent will continue to be rolled out throughout Just Group. Target s Statement JUST GROUP 11

14 1 Why You Should REJECT Premier s Offer Element Four Scope for selected Acquisitions Further acquisitions capitalise on Just Group s fast fashion retail machine: Just Group s fast fashion retail machine provides a competitive advantage and enhanced growth options as it enables Just Group to successfully add value to acquisitions made; and since 2000, Just Group has undertaken four major acquisitions, all of which have added significant value for shareholders. BRAND STORE GROWTH A annual REVENUE GROWTH B strategic OUTCOME (Acquired January 2000) (Acquired June 2002) (Acquired October 2004) 1 to 24 25% 87 to 133 7% 10 to 70 52% Catalogue to multi channel Margin and scale expansion Brand turnaround and store rollout (Acquired August 2007) 20 to 35 77% Store rollout Source: Just Group Notes: A From time of acquisition to position estimated at July 2008 B Compounded annual growth rate from full year prior to acquisition to position estimated to year ending July 2008 including estimated revenue from the end of May 2008 through to the end of July 2008 Just Group has clear criteria for considering acquisitions, based on portfolio fit, operational fit and financial returns and is regularly considering opportunities. A FORMIDABLE PORTFOLIO OF RETAIL Fashion BRANDS WITH ADDITIONAL POTENTIAL FOR NEW BRANDS Casualwear Womenswear Lifestyle 30s/Lifestyle Mature Women AGE Contemporary Fashion Intimates Footwear Accessories Other Kids KEY: Established Brands Potential New Brands Source: Just Group LEVERAGING fast fashion retail machine 12 JUST GROUP Target s Statement

15 1 Why You Should REJECT Premier s Offer 2. Premier s Offer is materially inadequate and undervalues your shareholding Premier s Offer does not reflect the value of Just Group The Independent Expert has stated that Just Group is worth significantly more than what Premier is offering Your Special Board Committee commissioned Lonergan Edwards to undertake an independent assessment of Premier s Offer. The Independent Expert s Report is provided in Annexure 2 of this Target s Statement. The Independent Expert has assessed that the value of Just Group on a 100% controlling interest basis ranges from $4.78 to $5.28 per Just Group Share. The Independent Expert has also assessed that the value of Premier s Offer consideration ranges from $3.97 to $4.23 per Just Group Share. The mid point of the Independent Expert s assessed value of Premier s Offer consideration ($4.10 per Share) is at a substantial discount (being 18.5% or 93 cents per Share) to its assessed mid-point value of Just Group on a 100% controlling interest basis ($5.03 per Share). PREMIER S OFFER IS BELOW THE INDEPENDENT EXPERT S VALUATION A 5.50 $ PER JUST GROUP SHARE $4.78 $5.28 $5.03 Discount of 18.5% or 93 cents per Share 4.00 $ Independent Expert s Valuation of Just Group (Low) A Independent Expert s Valuation of Just Group (High) A Independent Expert s Valuation of Just Group (Mid-Point) A Source: Independent Expert s Report Notes: A The Independent Expert has assessed the value of Just Group on a 100% controlling interest basis Mid-Point Independent Expert s Assessment of Premier s Offer consideration Target s Statement JUST GROUP 13

16 1 Why You Should REJECT Premier s Offer Takeover offers for control of listed companies typically include a significant premium to prices at which shares normally trade in the market The premia implied by the Premier Offer are well below typical control premia paid in Australia. The Independent Expert has stated that takeover premia paid to acquire 100% of a company are generally priced at a premium of between 30% to 35% above the pre bid stock market price (assuming the pre bid price does not reflect speculation of the bid). THE PREMIUM FOR CONTROL IMPLIED BY PREMIER S OFFER IS INADEQUATE Premium for control implied by Independent Expert s Assessment of Premier s Offer A,B Typical takeover premium relative to the pre-bid stock market price C 40% 30% 30% 35% IMPLIED PREMIUM/(DISCOUNT) 20% 10% 0% 16% 8% 10% 9% 20% Just Group Day Prior to Announcement Just Group s 3 Month VWAP Just Group s 6 Month VWAP Typical Premium Low Typical Premium High Prior to Announcement Source: IRESS, Independent Expert s Report Notes: A Premier s Offer price is based on the mid point of the Independent Expert s assessment of the value of Premier s Offer consideration ($4.10). Just Group s share prices the day prior to announcement, three month and six month VWAPs (prior to announcement) are $3.52, $3.80 and $4.50 respectively (on a cum-dividend basis). Just Group began trading ex 10.5 cent dividend on 5 May If Premier s share prices the day prior to announcement ($7.90), three month ($8.17) and six month ($8.03) VWAPs (prior to announcement), are used to calculate the value of Premier s Offer consideration, the implied premium/(discount) for control of Just Group would be 18.6%, 11.7% and (6.5)% respectively B Just Group s share price not adjusted for Just Group s 10.5 cent dividend which was paid on 22 May Just Group began trading ex-dividend on 5 May 2008 C See Section VI of the Independent Expert s Report. Analysis assumed the pre-bid price does not reflect speculation of a bid The Independent Expert notes (in paragraph 22 of its report), The premium for control implied by our assessed value of the Offer consideration is significantly less than the average premiums paid in successful takeovers generally. 14 JUST GROUP Target s Statement

17 1 Why You Should REJECT Premier s Offer The Independent Expert has concluded that Premier s Offer is NEITHER FAIR NOR REASONABLE The Independent Expert has concluded that Premier s Offer is NEITHER FAIR NOR REASONABLE. The Independent Expert has made a number of important comments in its Report including: As our assessed value of the consideration offered by Premier is significantly less than our assessed value for 100% of the Shares in Just Group, in our opinion, the Offer is not fair (paragraph 20) Our valuation range represents a premium of 25.8% and 38.9% above the VWAP of Just Group Shares in the three months prior to the announcement of the Offer. This range is broadly consistent with the empirical evidence on premiums paid in successful takeovers in Australia. (paragraph 179) Further, we note our assessed value of the Offer consideration ($3.97 to $4.23 per share) is only consistent with the high end of our assessed value of Just Group Shares on a portfolio basis ($3.59 to $4.22 per share). Consequently, in our opinion, the Offer does not provide Just Group shareholders with a sufficient premium for control. (paragraphs 221 and 222) a large component of the Offer consideration effectively comprises (on a look through basis) Shares in Just Group. Existing Just Group shareholders are therefore being offered in respect of around half the Offer consideration what they already own, but under the Offer their ongoing interest in Just Group will be held indirectly (through Premier). (paragraph 22) Premier is effectively controlled by interests associated with its Chairman (Mr Solomon Lew). Accordingly, Just Group shareholders accepting the Offer will be minority shareholders in a company (Premier) which is: (a) controlled by a large shareholder who has not given any indication of seeking to acquire a 100% interest in the company (b) unlikely to receive a takeover offer from a third party (at least in the short to medium term) (paragraph 228) Target s Statement JUST GROUP 15

18 1 Why You Should REJECT Premier s Offer 3. Premier s Offer is highly opportunistic and your outcome is uncertain if you accept the Offer Premier s Offer is well below the price Just Group s Shares have traded at for much of the past 12 months Your Special Board Committee believes the timing of the Premier Offer is highly opportunistic Premier s Offer comes during a period when Just Group s share price is close to its 52 week low: Premier s Offer is below Just Group s six month ($4.50) and 12 month ($4.46) VWAPs immediately prior to Premier s Offer (Just Group commenced trading ex its 10.5 cent FY2008 interim dividend on 5 May 2008); and Premier s Offer (at the Independent Expert s assessed mid-point of the value of Premier s Offer consideration of $4.10), represents a 30% discount to Just Group s all time closing high of $5.88 per Just Group Share on 1 November 2007, only seven months ago. Since Premier announced its Offer on 31 March 2008, the S&P/ASX 200 Index has increased by 7% (as at Monday 26 May 2008) which further highlights the opportunistic nature of Premier s Offer. PREMIER S OFFER IS HIGHLY OPPORTUNISTIC Closing high of $5.88 JUST GROUP SHARE PRICE ($) A Mid-point Independent Expert s assessment of the control value of Just Group: $5.03 Mid-point Independent Expert s assessment of the value of Premier s Offer consideration: $4.10 Date of Premier s Offer 12 month closing low of $ May 07 Jul 07 Sep 07 Nov 07 Jan 08 Mar 08 Source: IRESS Notes: A Just Group s share price not adjusted for Just Group s 10.5 cent dividend which was paid on 22 May Just Group began trading ex-dividend on 5 May 2008 The opportunistic nature of the acquisition was reinforced by commentary from PMV [Premier] implying the acquisition was driven by share price performance, as they were happy with the operational performance of the company and current management. Credit Suisse equities report, 1 April JUST GROUP Target s Statement May 08

19 1 Why You Should REJECT Premier s Offer Premier is trying to encourage Just Group shareholders to accept its Offer by emphasising weak prevailing economic conditions It is unclear why Premier would make an Offer for Just Group if it didn t believe Just Group has attractive future prospects: Premier must believe that Just Group s medium long term outlook is strong, and that by buying Just Group on the cheap Premier will transfer significant value to its existing shareholders; and Premier s comments regarding current economic and retail sector conditions appear self serving. Indeed, prevailing economic conditions, especially in Australia, are not preventing Just Group from growing sales and profits. Just Group has delivered same store sales growth in Australia of 1.0% thus far for the winter season and 3.8% in the eight weeks since Premier announced their Offer. Inventory is well controlled and gross margins are up on the corresponding period last year. As per the Directors Pro forma Forecast contained in Section 3, total sales and EPS are forecast to grow by 8.5% and 14.4% in FY2008. Premier issued a Replacement Bidder s Statement reflecting extensive changes that Premier agreed to make in order to clarify serious concerns Just Group had with the original Bidder s Statement. Premier s Offer conditions create uncertainty and the Offer may have adverse capital gains tax consequences Premier s Offer is subject to a number of conditions and as such is uncertain In particular, Premier s Offer is conditional on acquiring at least 50% of Just Group Shares: there is no certainty that Premier will acquire 50% of Just Group Shares. Premier s Offer is also conditional on there being no change of control consequences for material contracts: the condition requires that Just Group confirms that neither Just Group nor a subsidiary of Just Group is party to a material contract under which the other party could terminate or vary that contract as a result of Premier making the Offer, acquiring Shares under the Offer or Premier obtaining control of 50% or more of Just Group; and Just Group has identified one contract, a Just Group financial facility, that Just Group may be required to repay if Premier obtains more than 50% of Just Group (see Section 6.5 for more information). Therefore, unless Premier waives the condition, the condition may not be satisfied and the Offer may not proceed. Target s Statement JUST GROUP 17

20 1 Why You Should REJECT Premier s Offer In the event that Premier gains control of Just Group, Just Group shareholders remain subject to uncertainty Premier must end up with at least 80% of Just Group Shares for eligible Just Group shareholders who accept Premier s Offer to receive capital gains tax ( CGT ) scrip for scrip rollover relief: if the 80% threshold is not reached, Just Group shareholders who make a capital gain from their disposal of Just Group Shares will be liable to pay CGT on their scrip consideration (in addition to CGT payable on the cash component). Premier may face additional risks if it does not acquire all of Just Group s Shares: Premier will remain unable to access Just Group s cash flows unless it acquires all of Just Group s Shares. Its ability to access Just Group s cash flows will be limited to dividends declared by the Just Group Board; and in its Bidder s Statement, Premier noted the risks of Just Group not becoming a wholly owned subsidiary and additional costs associated with Just Group remaining an ASX listed company. The future value and liquidity of Premier s shares is uncertain The future value of Premier s shares is uncertain. Premier s share price is currently materially below net tangible assets per share. The market does not seem to currently regard net tangible assets as an appropriate basis for valuing Premier s shares. Premier is a very illiquid stock. 18 JUST GROUP Target s Statement

21 1 Why You Should REJECT Premier s Offer 4. Premier appears to need Just Group (but Just Group doesn t need Premier) The Premier Offer is structured to suit Premier s objectives, not the interests of Just Group shareholders Premier does not fully own any operating businesses: Premier is a listed cash box. Its only material non cash investment is a 21.8% shareholding in ASX listed wholesale group Housewares International (with a market value of c. $39 million). Just Group already has the management team, the business operations and the trading liquidity that Premier appears to need. JUST GROUP PREMIER Management Team Leading retail management team that Premier wants to retain Currently no CEO and a number of functions outsourced to Century Plaza Trading A Business Operations 100% ownership of seven leading fast fashion brands Only current material non cash investment is a stake in Housewares International (which is not a retail business) Liquid Share Register c. 7,500 shareholders c. 360 shareholders Notes: A A company associated with Premier s Chairman, Mr Solomon Lew Target s Statement JUST GROUP 19

22 1 Why You Should REJECT Premier s Offer Premier has endorsed Just Group s management Just Group has an outstanding management team, with deep experience and skills in retailing, focused on delivering returns to all shareholders within a strong board and governance framework. PREMIER HAS SIGNIFICANT RESPECT FOR JUST S MANAGEMENT TEAM. p 16, Bidder s Statement Premier has endorsed Just Group s capabilities: Premier appears to need Just Group s expertise and experience not the other way around; and Premier has publicly recognised the strength of Just Group s team. Premier has stated its desire to retain Just Group Chairman Ian Pollard, Managing Director Jason Murray and the members of the management team: in the interest of preserving the independence of Just Group s process for reviewing Premier s Offer, Ian Pollard has indicated that he does not intend to join Premier s board. Just Group s management continuity may be affected by Premier s Offer and Premier has highlighted this in its Bidder s Statement. Integrating Just [Group] into Premier s business may produce some risks, including the retention of senior management of Just and the fulfilment of Premier s intentions... If one or more of Just [Group] s senior management leave their employment, this may adversely affect the ability of Just to manage its business and, accordingly, may adversely affect the financial performance of Premier. p 49, Bidder s Statement 20 JUST GROUP Target s Statement

23 1 Why You Should REJECT Premier s Offer It is not clear if Premier will add any value to Just Group Your current Board and management have a clear strategic vision for the future of Just Group and detailed plans in place Premier has not adequately explained its strategic vision for Just Group Premier has not provided any compelling justification to conclude that Premier is better placed to deliver the benefits of Just Group s existing strategy than the existing Just Group Board and management team: Premier has not provided details of how it would modify, supplement or accelerate any of Just Group s existing strategies, saying it needs to conduct a strategic review ; Premier has acknowledged in the Bidder s Statement that there would be no synergies or any other special value created if it controlled Just Group; and Premier has also acknowledged as an integration risk that one or more of Just Group s experienced and well regarded management team may leave. There is a lack of direct relevant retail experience across Premier s board and management team Premier s Bidder s Statement does not provide details of the performance of any business operated or managed by any of its directors which is similar to Just Group s business. The only retail management experience identified in the Bidder s Statement is experience on the Coles Myer board. Premier is an investment company with no management executives apart from a company secretary/financial controller 4. The fact that Premier is seeking to appoint a CEO and currently outsources certain functions to Century Plaza Trading, highlights Premier s lack of management Premier s proposed appointment of an unidentified CEO may create additional risks: Premier has not specified what skills and experience the CEO will have; and Premier has not indicated how the CEO will interact with the current Just Group management team. Century Plaza Trading, an associate of Premier s Chairman Mr Solomon Lew, acts as Premier s de facto management: Century Plaza Trading provides investment sourcing services to Premier; Premier relies on Century Plaza Trading to provide financial, legal and accounting services; and in its Bidder s Statement, Premier highlighted its dependence on Century Plaza Trading, stating: If Premier were required to engage a different service provider or perform these services directly, there is a risk that the costs associated with the provision of such services would significantly increase and there may be disruption to Premier s business and ability to operate. p 48, Bidder s Statement Notes: 4 Based on Premier s 2007 Annual Report Target s Statement JUST GROUP 21

24 1 Why You Should REJECT Premier s Offer 5. An investment in Premier represents a fundamental change in your investment profile Premier s strategy appears to lack focus and detail and may expose Just Group shareholders to additional risks Your current investment gives you full, direct exposure to Australia s leading specialty fashion retail platform. Premier s investment strategy lacks focus and detail: Premier is an investment company rather than a pure retail company (unlike Just Group); and Premier may further expand its investments beyond retail. Premier intends to invest only in sectors in which it has substantial experience and skills, being the retail, wholesaling, distribution and retail property sectors. p 28, Bidder s Statement The nature of Premier s operations as an investment company may expose Just Group shareholders who accept Premier s Offer to additional risks compared to holding Just Group Shares. the risk profiles of retail investments are different to the risk profiles of wholesaling, distribution and retail property investments. p 50, Bidder s Statement The Bidder s Statement (pages 48 to 50) identifies additional risks that Just Group shareholders may be exposed to if they accept Premier s Offer, including: the customer bases of wholesaling and distribution businesses could be more consolidated than those of retail businesses; wholesaling and distribution businesses may be particularly impacted by exchange rate fluctuations; local real estate conditions, such as the level of demand for and supply of retail space, may impact the value and performance of any retail property investments made by Premier; movements in the value of property or in the property market in general may impact the performance of any retail property investments made by Premier; and the potential default by tenants under the terms of their lease or the potential insolvency of a tenant may impact the performance of any retail property investments made by Premier. 22 JUST GROUP Target s Statement

25 1 Why You Should REJECT Premier s Offer Your interests MAY become subordinated to interests associated with Premier s Chairman and you will dilute your exposure to Just Group s future performance If the Premier Offer proceeds, depending on the level of acceptances achieved, interests associated with Mr Solomon Lew will hold between 51% and 42% of Premier (assuming 50% and 100% acceptances respectively) Other Just Group shareholders would hold between only 12% and 27% of Premier (assuming 50% and 100% acceptances respectively). Other Just Group shareholders risk being subordinated to the associated interests of Mr Solomon Lew. Other current Premier shareholders 37% D PRO-FORMA PREMIER SHARE OWNERSHIP STRUCTURE ASSUMING 50% ACCEPTANCE BY JUST GROUP SHAREHOLDERS A Unassociated Just Group shareholders 12% B Other current Premier shareholders 31% D ASSUMING 100% ACCEPTANCE BY JUST GROUP SHAREHOLDERS E Unassociated Just Group shareholders 27% B Interests related to Solomon Lew 51% C Interests related to Solomon Lew 42% C Source: Company announcements Notes: A Based on million Just Group Shares. At 50% acceptance the total number of Just Group Shares of million less 1.85 million held by Premier would convert into 24.7 million Premier shares (assume 0.25 Premier share for one Just Group Share). The pro-forma Premier would have total shares outstanding of million (90.2 million of current Premier shares outstanding plus 24.7 million new shares issued to Just Group shareholders). Interests associated with Mr Lew have voting power over 45.8 million Just Group Shares (this holding comprises 41.2 million shares held by Metrepark Pty Ltd, and 4.6 million shares held by Springsand Investments Pty Ltd) which, assuming Metrepark and Springsand Investments Pty Ltd accept Premier s Offer for all their Shares, would convert into 11.5 million Premier shares B Current Just Group shareholders excluding Premier, Metrepark Pty Ltd and Springsand Investments Pty Ltd (47.7 million Shares) C Century Plaza Investments, Playcorp Pty Ltd, Metrepark Pty Ltd and Springsands Investments Pty Ltd D Current Premier shareholders excluding Century Plaza Investments and Playcorp Pty Ltd E Based on million Just Group Shares. At 100% acceptance the total number of Just Group Shares of million less 1.85 million held by Premier would convert into 49.9 million Premier shares (assume 0.25 Premier share for one Just Group Share). The pro-forma Premier would have total shares outstanding of million (90.2 million of current Premier shares outstanding plus 49.9 million new shares issued to Just Group shareholders). Interests associated with Mr Lew have voting power over 45.8 million as outlined in Note A, which assuming acceptance of Premier s Offer for these Shares, would convert into 11.5 million Premier shares If you accept the Premier Offer (and it proceeds), you would forego a significant portion of any future value potential of your Just Group Shares and reduce your exposure to the retail sector You will dilute your economic interest in Just Group. By diluting your economic interest in Just Group, your exposure to future improvements in the retail environment and benefits which arise from Just Group s existing strategy would be lower. Target s Statement JUST GROUP 23

26 1 Why You Should REJECT Premier s Offer Premier s Shares trade at a substantial discount to net tangible assets and have significantly lower liquidity than Just Group shares Premier is currently trading at a substantial discount to its net tangible assets ( NTA ) and there is a significant risk that Premier will continue to trade at a discount following an acquisition of your Just Group Shares Premier is encouraging shareholders to value Premier with reference to its NTA. Your Special Board Committee believes it is more appropriate to value Premier s Offer with reference to Premier s market price: the market does not currently consider NTA as an appropriate basis for valuing Premier s shares, given Premier s trading discount. The Independent Expert has stated Premier shares, at least in the short term, are likely to continue to trade at a discount to their NTA if Premier s Offer is successful. Guinness Peat Group sold a c. 12.5% stake in Premier in December 2007 at a c. 12% discount to NTA. Comparable listed investment companies currently trade at an average 23% discount to net assets, highlighting the risk that Premier may continue to trade at a significant discount in the future. COMPARABLE LISTED INVESTMENT COMPANIES A,B 10% SHARE PRICE DISCOUNT TO NET ASSETS PER SHARE B 0% 10% 20% 30% 40% 38% Macquarie Capital Alliance Group 19% Average discount (ex Premier): 23% Babcock & Brown Capital 16% Premier 13% Guinness Peat Group Source: Company announcements, IRESS, Bloomberg Notes: A Share prices as at 26 May Allco Equity Partners trades at a 63% discount to its net assets and has been excluded as an outlier B As a number of the comparable listed companies have minimal/negligible net tangible assets, the chart above illustrates the discount to net assets. Premier currently does not have any intangible assets, so net assets are equivalent to NTA 24 JUST GROUP Target s Statement

27 1 Why You Should REJECT Premier s Offer Premier is a very illiquid stock, with less than 1% of its shares having traded in the three months prior to the announcement of Premier s Offer By contrast, 24% of Just Group s Shares traded in the three months prior to that announcement. COMPARISON OF JUST GROUP AND PREMIER TRADING VOLUMES 25% Premier Just Group 24.2% VOLUME TRADED AS A % OF OUTSTANDING SHARES 20% 15% 10% 9.2% 5% 0% Source: IRESS 0.3% 0.8% 1 month volume 3 month volume Prior to Announcement Since Premier announced its Offer on 31 March 2008, only 2.8% of Premier s shares have traded whilst 19.2% of Just Group s Shares have traded. Given the likely shareholding structure of Premier, with interests related to Mr Solomon Lew holding between 42% and 51%, Premier s limited free float and illiquidity are likely to be an ongoing issue: this may impact shareholders ability to sell Premier shares at a given point in time at the prevailing market price; and it is uncertain that Premier will be included in the key S&P/ASX 200 Index given its limited free float and illiquidity. A number of Just Group s current shareholders are unlikely to be able to, or want to, hold Premier shares: this may create a significant overhang in Premier s stock which may depress Premier s share price and further negatively impact the realisable price of Premier s shares. IN THE SHORT-TERM THERE MAY BE AN OVERSUPPLY OF PREMIER SHARES FROM THOSE JUST GROUP SHAREHOLDERS NOT WISHING TO RETAIN THE PREMIER SHARES RECEIVED AS CONSIDERATION. Independent Expert s Report, paragraph 15(d) Target s Statement JUST GROUP 25

28 1 Why You Should REJECT Premier s Offer 6. You should consider Premier s corporate governance framework Premier s corporate governance framework is inconsistent with ASX best practice Just Group believes that a robust corporate governance framework is crucial to ensure: the interests of all shareholders are protected and enhanced; the confidence of the investment market is maintained; and the interests of all stakeholders are considered, including customers, employees, suppliers and local communities. Premier appears to have a materially different approach to corporate governance. JUST GROUP PREMIER Currently complies with ASX Corporate Governance Council s recommendations Believes independence of directors is important for Board effectiveness A Independent directors Majority Notes: A As indicated in Premier s Annual Report for the years 2004, 2005, 2006 and 2007 None identified Premier s claimed intention to add additional independent directors is uncertain: it is not consistent with Premier s approach to date; it is uncertain as to whether Premier currently has any independent directors on its board, so it is questionable whether any new appointments would be additional ; and it is not clear that independent directors would comprise a majority of directors (as set out in ASX Corporate Governance Council s recommendations). Interests associated with Mr Solomon Lew will hold between 42% and 51% of Premier, highlighting the need for a robust corporate governance framework and independent directors. 26 JUST GROUP Target s Statement

29 1 Why You Should REJECT Premier s Offer Century Plaza Trading acts as Premier s de facto management, although it doesn t have a fiduciary duty to act in the best interests of Premier shareholders as a whole: it is not clear how Century Plaza Investments /Century Plaza Trading s potential conflicts of interest will be managed, particularly around interests associated with Mr Solomon Lew; and Premier has indicated in its Bidder s Statement that Century Plaza Trading employees are entitled to receive incentive payments from Premier, but has failed to disclose the basis on which these are provided. Premier is silent on how it will manage potential conflicts There is potential for the interests of Premier, Lew family interests and Just Group interests to conflict in the future. This may arise given that: Century Plaza Trading, a Lew family company, provides a number of services to Premier. In particular, Century Plaza Trading is required to source, develop and assess opportunities for investments by Premier; Just Group understands that Lew family companies and retailing and distribution interests include Nine West, Seed, FCUK, the rights to the Zara business, Voyager Solo, Playcorp and a shareholding in API; and Just shareholders who accept Premier s Offer will receive shares in Premier; Premier has confirmed that not every opportunity identified by Century Plaza Trading will be offered exclusively to Premier. However, apart from stating that Premier has no current intention for Premier or Just Group to acquire any business with which Mr Lew and his family are involved, Premier s Bidder s Statement does not address how it will manage the potential conflicts identified above. This may be of particular concern when new business opportunities, retail sites or experienced retailers become available. The services provided by Century Plaza Trading, a company associated with Mr Lew, are not exclusive to Premier and there is a risk that, in the future, Premier will not be presented with every opportunity identified by Century Plaza Trading. p 48, Bidder s Statement Target s Statement JUST GROUP 27

30 1 Why You Should REJECT Premier s Offer It is not clear if Premier will add any value to Just Group PREMIER S STRATEGY Retain Just Group management Appoint a new CEO for Premier Pay fees to Century Plaza Trading for business support (including incentives) Acquisitions in wholesale, distribution and/or retail property sectors Add retail brands that offer synergies Identify and assess opportunities for accelerating revenue growth Help with sourcing Review existing foreign exchange policy Expand internationally Review New Zealand strategy Review South Africa strategy IMPLICATIONS FOR JUST GROUP SHAREHOLDERS Highlights strength of Just Group s management and strategy Retention of Just Group management has been acknowledged by Premier as an integration risk Lack of Premier management Management uncertainty Value leakage given fees are paid away Potential for conflicts Undermines the purity of your current investment in Just Group Additional risks and uncertainties Just Group already undertaking this successfully (including the acquisitions of Peter Alexander in 2000, Portmans in 2002, Dotti in 2004 and Smiggle in 2007) and continuously considering acquisition opportunities Just Group already undertaking this successfully No need for fee leakage to Century Plaza Trading Potential for conflicts with other interests of Century Plaza Investments and its affiliates Just Group has industry leading sourcing capability and already selectively sources product from Voyager, which is associated with Premier s major shareholder Potential for conflicts Just Group Board and management already manage exchange risk effectively Just Group already undertaking this successfully (including the recent launch of Peter Alexander in North America) New Zealand is a highly profitable business, with Just Group having a large presence in this market South African investment is a small recent investment that is currently trading well and has strong long term growth potential 28 JUST GROUP Target s Statement

31 Smiggle Portmans Jacqui.E Just Jeans Jay Jays Dotti Peter Alexander

32 2 frequently asked questions This section answers some questions you may have about the Offer. It is not intended to address all relevant issues for Just Group shareholders. This section should be read together with all other parts of this Target s Statement. Question What is Premier s Offer for my Just Group Shares? What is the Special Board Committee? Answer Premier is offering $2.095 cash plus 0.25 Premier shares for each Just Group Share held by you. A committee of the Just Group Board formed to consider the Offer. It comprises all of the directors of Just Group other than Terrence McCartney and Michael McLeod. They are not members of the committee as they were nominated for appointment to the Board of Just Group by Metrepark Pty Ltd, which may be considered an associate of Premier. What is the Special Board Each director on the Special Board Committee Committee recommending? recommends that you reject the Offer. What choices do I have as a Just Group shareholder? Are there adverse consequences of accepting the Offer? Can acceptances be withdrawn? You have the following choices in respect of your Shares: do nothing (as recommended by the Special Board Committee); accept the Offer; or sell your Shares on the ASX (unless you have previously accepted the Offer and you have not validly withdrawn your acceptance). Shareholders should note that, if Premier and its associates have a relevant interest in at least 90% of the Shares during or at the end of the Offer Period, Premier will be entitled to compulsorily acquire the Shares that it does not already own. See Section 6 for more information. If you accept the Offer, you will limit your right to sell your Shares on the ASX or otherwise deal with your Shares while the Offer remains open. The effect of acceptance of the Offer is set out in Section 12.6 of the Bidder s Statement. Just Group shareholders should read these provisions in full to understand the effect that acceptance will have on their ability to exercise the rights attaching to their Shares and the representations and warranties which they give by accepting the Offer. You only have limited rights to withdraw your acceptance of the Offer. You may only withdraw your acceptance if Premier varies the Offer in a way that postpones the time when Premier is required to satisfy its obligations by more than one month. This will occur if Premier extends the Offer Period by more than one month and the Offer is still subject to conditions. When does the Offer close? The Offer is presently scheduled to close at 7.00pm (AEST) on 20 June JUST GROUP Target s Statement

33 2 frequently asked questions Question Can the Offer Period be extended? What are the conditions to the Offer? Answer In summary, Premier may extend the Offer Period at any time before the end of the Offer Period. In addition, there will be an automatic extension of the Offer Period if, within the last seven days of the Offer Period: Premier improves the consideration offered under the Offer; or Premier s voting power in Just Group increases to more than 50%. If either of these two events occurs, the Offer Period is automatically extended so that it ends 14 days after the relevant event occurs. The conditions to the Offer are set out in Section 12.9 of the Bidder s Statement. In summary, the conditions to the Offer are: minimum acceptance of more than 50% of Just Shares; no material acquisitions or disposals; disclosure that no material contracts terminate/change due to the Offer; no material adverse change; no prescribed occurrences; and the S&P/ASX 200 Index not falling below What happens if the conditions of the Offer are not satisfied or waived? If the conditions are not satisfied or waived before the Offer closes, the Offer will lapse. You would then be free to deal with Just Group Shares even if you had accepted the Offer. How long will I have to wait for my consideration if I accept the Offer? If you accept the Offer, you will receive your consideration only if the Offer becomes unconditional. You will be issued your consideration by Premier on or before the later of: one month after the date the Offer becomes or is declared unconditional; and one month after the date you accept the Offer if the Offer is, at the time of acceptance, unconditional, but, in any event (assuming the Offer becomes or is declared unconditional), no later than 21 days after the end of the Offer Period. However, there are certain exceptions. Full details of when you will be issued your consideration are set out in Section 12.7 of the Bidder s Statement. Target s Statement JUST GROUP 31

34 2 frequently asked questions Question What are the tax implications of accepting the Offer? What if I am an overseas shareholder? Is there a number that I can call if I have further queries in relation to the Offer? Answer A general outline of the tax implications of accepting the Offer is set out in Section 5 of this Target s Statement. As the outline is a general outline only, shareholders are encouraged to seek their own specific professional advice as to the taxation implications applicable to their circumstances. Any Just Group shareholder whose address (as recorded in the register of members of Just Group provided by Just Group to Premier) is in a place outside Australia may not be issued with Premier s shares under the Offer. Instead, the relevant Premier shares (that would otherwise be transferred to such foreign holders) will be allotted to a nominee approved by ASIC who will sell the Premier shares and will distribute to each of those foreign holders their proportion of the proceeds of sale net of expenses. See Section 12.8 of the Bidder s Statement for further details. If you have any further queries in relation to the Offer, you can call (for calls made from inside Australia) or (for calls made from outside Australia). These calls may be recorded. 32 JUST GROUP Target s Statement

35 3 Financial Information and Directors Pro forma Forecast 3.1 Introduction This section provides relevant financial information for Just Group shareholders to consider when assessing their response to Premier s Offer: adjusted historical income statement for the 52 weeks ended 28 July 2007; Directors Pro forma Forecast income statement for the 52 weeks ending 26 July 2008; Directors Annualised Pro forma Forecast income statement for the 52 weeks ending 26 July 2008; and Just Group balance sheets as at 26 January 2008 and 28 July (Collectively, the Financial Information.) The Financial Information in this section should be read in conjunction with the risks described in Section 4 and other information contained in this Target s Statement. Certain financial information in this section has been reviewed by PricewaterhouseCoopers Securities Ltd, whose Investigating Accountant s Report is included with this Target s Statement. Just Group shareholders should note the scope and limitations of that report. The Financial Information in this section is presented in an abbreviated form and does not contain all of the disclosures that would be required to be presented in an annual report in accordance with the Corporations Act. Basis of forward looking information The Directors Pro forma Forecast should be read in conjunction with the assumptions upon which it is based (as detailed in Section 3.3), sensitivities (as detailed in Section 3.8) and the risks surrounding forward looking statements (set out on the inside cover of this Target s Statement). 3.2 Just Group Financial Information BASIS OF PREPARATION OF THIS FINANCIAL INFORMATION (a) Just Group s accounting policies The accounting policies adopted by Just Group in the preparation of the Financial Information for the years ended 28 July 2007 and ending 26 July 2008 are consistent with those set out in Just Group s annual financial report for the year ended 28 July 2007 and half-year financial report for the 26 weeks ended 26 January 2008 respectively ( with the exception of the adjustments and pro forma adjustments referred to below. Earnings figures are stated on a consistent basis with Just Group s reporting standards and as such include interest income (which is included in other income ). (b) Adjusted Historical Information Audited financial statements of Just Group for the 52 weeks ended 28 July 2007 have been adjusted to: 1 exclude the net gain on disposal of Just Group s strategic investment in Colorado Limited which is considered to be a non recurring transaction; 2 exclude sales to the joint venture entity in South Africa and the Company s share of the loss from the joint venture, which is in its initial start-up phase; and 3 align the unrealised foreign exchange loss on ineffective cash flow hedges at year end to the period in which the underlying inventory purchases were made as the Directors consider that this better reflects the underlying purpose of the hedging instruments and the performance of the Company. A reconciliation between Just Group s audited financial statements for the 52 weeks ended 28 July 2007 has been included in Table 8. Target s Statement JUST GROUP 33

36 3 Financial Information and Directors Pro forma Forecast (c) Directors Pro forma Forecast The Directors Pro forma Forecast for the 52-week period ending 26 July 2008 has been prepared on the following basis: 1 unaudited actual sales results for the 42 weeks ended 17 May 2008 plus forecast for the remaining 10 weeks of FY2008; 2 unaudited actual operating costs and other income for the 38 weeks ended 19 April 2008 plus forecast operating costs and other income for the remaining 14 weeks of FY2008; 3 an assessment of the forecast results for the remainder of FY2008 based on the Directors best estimate assumptions, outlined in Section 3.3, which take into account present economic and operating conditions; 4 exclude the forecast initial start-up costs associated with the commencement of international businesses in South Africa and the United States of America; 5 exclude all actual and forecast sales by Peter Alexander USA Inc. and sales to the joint venture entity in South Africa; 6 align the unrealised foreign exchange loss on ineffective cash flow hedges at year end to the period in which the underlying inventory purchases were made as the Directors consider that this better reflects the underlying purpose of the hedging instruments and performance of Just Group; and 7 exclude any provision for costs related to the defence of Premier s Offer as these would be considered to be non recurring in nature. The Directors Pro forma Forecast differs from the expected reported results of Just Group in FY2008 as the Directors Pro forma Forecast has been adjusted for non recurring items and certain timing differences in order to present the underlying performance of the Company on a consistent basis. A reconciliation of the Directors Pro forma Forecast to the expected reported financial results for the 52 weeks ending 26 July 2008 is included in Table 9 in Section 3.5. (d) Directors Annualised Pro forma Forecast The Directors Annualised Pro forma Forecast for the 52-week period ending 26 July 2008 is based on the Directors Pro forma Forecast for that period adjusted for the annualised net trading impact of new stores opened or planned to open/stores closed or planned to close in FY2008, and the annualised impact of Smiggle which was acquired during FY JUST GROUP Target s Statement

37 3 Financial Information and Directors Pro forma Forecast JUST GROUP SUMMARY INCOME STATEMENTS The Adjusted Historical, Directors Pro forma Forecast and Directors Annualised Pro forma Forecast income statements are summarised in Table 1. Table 1 Historical and Forecast Just Group Income Statements DIRECTORS Directors Annualised Adjusted Pro-forma Pro-forma Historical Forecast Forecast ($ 000) FY07 A FY08 B FY08 C Revenue from sale of goods 759, , ,891 Gross profit 438, , ,562 Gross margin % 57.8% 59.8% 59.9% Operating expenses (328,663) (366,494) (371,528) Fair value adjustment to cash flow hedges (476) (1,825) (1,825) Other income D 6,716 5,542 5,542 EBITDA 116, , ,750 Depreciation (19,832) (22,663) (23,010) EBITA 96, , ,740 % sales 12.70% 13.00% 13.20% Amortisation (179) (161) (161) EBIT 96, , ,580 Interest expense (6,929) (10,676) Profit before tax 89,398 96,249 Income tax expense (26,814) (28,939) Net profit after tax 62,584 67,310 Earnings per share (EPS) Notes: A Refer Table 8 for reconciliation of audited Reported Historical Results to Adjusted Historical Results B Refer Table 9 for reconciliation of Directors Pro forma Forecast to expected Reported results for FY2008 C Refer Table 11 for reconciliation between Directors Annualised Pro forma Forecast and Directors Pro forma Forecast D Directors Pro-forma Forecast and Directors Annualised Pro forma Forecast are stated on a consistent basis with Just Group s reporting standards. As such, other income includes interest income of $1.1 million (Adjusted Historical FY2007 $1.6 million) Table 2 Geographic Segment Information DIRECTORS Directors Annualised Adjusted Pro-forma Pro-forma Historical Forecast Forecast Sales revenue ($ 000) FY07 FY08 FY08 Australia 650, , ,576 New Zealand 108, , ,315 Total sales revenue 759, , ,891 Management discussion and analysis (a) Directors Pro forma Forecast Total sales for FY2008 are forecast to be 8.5% higher than FY2007, with sales from the Australian operations up 9.6% and New Zealand operations up 1.9%. The number of stores is forecast to increase by 9.3% to 885 stores by the end of FY2008, including 20 Smiggle stores acquired in August Gross margin is forecast to improve by 201 basis points ( bps ), with the benefits of reduced markdowns in Dotti and Jacqui.E, a stronger Australian dollar (refer Table 7) and the strong contributions from Smiggle and Peter Alexander. Target s Statement JUST GROUP 35

38 3 Financial Information and Directors Pro forma Forecast Other income consists of interest income, deferred income related to lease incentives received from landlords, fees from the Just Shop loyalty program and unconditional lease incentives. Operating expenses are forecast to increase by 11.5% in FY2008, representing an increase of 121 bps as a percentage of sales. Costs are forecast to increase by more than sales growth due to a significant increase in advertising and marketing costs (due to a low spend in FY2007), insufficient sales growth in New Zealand to compensate for increases in operating costs in that country, and additional investment in management teams and group support functions to support the Company s growth aspirations. Depreciation is forecast to increase due to increased investment in new stores, ongoing refurbishments of existing stores and the investment in the fast fashion retail machine in areas such as distribution and IT systems. The Directors Pro forma Forecast excludes costs associated with the defence of Premier s Offer (refer Section 3.5). Directors Pro forma Forecast EBITA of $107.1 million represents an increase of 11.0% on Adjusted FY2007, and an EBITA margin of 13.0% of sales, an increase of 30 bps on Adjusted FY2007. Interest costs are forecast to increase by $3.7 million due to higher costs of finance, and higher average borrowings in FY2008 following the off market share buy back in April 2007 and the acquisition of Smiggle in August Directors Pro forma Forecast profit before tax is forecast to increase by 7.7% to $96.2 million, with pro forma net profit after tax forecast to increase by 7.6% to $67.3 million. Directors Pro forma Forecast EPS is forecast to be 33.4 cents per share, an increase of 14.4% on Adjusted FY2007, with the Directors Pro forma Forecast benefiting from strong underlying profitability and the off market share buy back completed in April (b) Directors Annualised Pro forma Forecast The Directors Annualised Pro forma Forecast includes the results of stores that are forecast to be open as of the end of FY2008, that have not traded for a full 12-month period under Just Group ownership, including 20 Smiggle stores acquired (in August 2007). The annualisation adjustment assumes the current run rate for each store based on actual months traded continues for the balance of the period, adjusted for variable costs and seasonal influences, such as whether the store was open prior to or after Christmas and other peak trading periods. The trading results of stores closed or scheduled to close during FY2008 have been excluded from the Annualised Pro forma Forecast. The Directors Annualised Pro forma Forecast gross margin is slightly higher than the Directors Forecast gross margin predominantly due to the contribution of Smiggle stores not open for a full year. Smiggle stores achieve a higher gross margin than the group average. Directors Pro forma Forecast fixed costs have not been increased in the annualisation calculation on the assumption that these do not vary materially with the forecast number of stores or sales revenue. Directors Annualised Pro forma EBITA is $110.7 million, representing the underlying profitability of the Company based on the stores operating or expected to be operating at the end of FY2008, restated on the basis that they had traded for 52 weeks. 36 JUST GROUP Target s Statement

39 3 Financial Information and Directors Pro forma Forecast 3.3 Key Best Estimate Assumptions Underlying the Directors Pro forma Forecast The Directors Pro forma Forecast has been prepared on a comparable basis to the Adjusted Historical FY2007 results so as to eliminate the impacts of non recurring items, costs related to the commencement of international operations and certain timing differences. The Directors Pro forma Forecast is based on various best estimate assumptions, including those set out below, and should be read in conjunction with the business and investment risks set out in Section 4. This information is intended to assist shareholders in assessing the reasonableness of the Directors Pro forma Forecast and its likelihood of being achieved, and is not intended to be a representation that the assumptions will occur. Shareholders should be aware that the timing of events and the magnitude of their impact may differ from that assumed, and this may have a material positive or negative impact on the Directors Pro forma Forecast financial performance of Just Group. Furthermore, the expected reported results for the 52 weeks ending 26 July 2008 are likely to differ from the Directors Pro forma Forecast results as the latter have been adjusted as described in Section 3.2. A reconciliation of the Directors Pro forma Forecast to the expected reported results for FY2008 is included at Table 9. Shareholders should review the key assumptions detailed below. SPECIFIC ASSUMPTIONS (a) Sales Revenue Assumptions The Directors Pro forma Forecast sales revenue is based on actual trading for the 42 weeks to 17 May 2008, and Directors Pro forma Forecast sales for the remaining 10 weeks of FY2008. The Directors Pro forma Forecast includes a further six store openings in the remaining 10 weeks. However, sales from the Peter Alexander USA stores that opened in April/May 2008 and the South African joint venture have not been included in the Directors Pro forma Forecast or Annualised Directors Pro forma Forecast. Table 3 Sales Revenue DIRECTORS Directors Annualised Adjusted Pro-forma Pro-forma Historical Forecast Forecast ($ 000) FY07 FY08 FY08 Just Jeans 224, , ,704 Jay Jays 226, , ,208 Dotti 46,020 61,840 64,109 Portmans 136, , ,054 Jacqui.E 88,973 92,137 93,036 Peter Alexander 36,195 47,368 49, , , ,462 Smiggle 18,545 21,429 Total sales revenue pro-forma 759, , ,891 Sales growth 8.8% 8.5% Target s Statement JUST GROUP 37

40 3 Financial Information and Directors Pro forma Forecast Table 4 Stores by brand DIRECTORS Pro-forma Historical forecast included in directors pro-forma FY07 FY08 Just Jeans Jay Jays Dotti Portmans Jacqui.E Peter Alexander Smiggle 35 Group Excluded Peter Alexander USA 2 South Africa joint venture A Jay Jays Notes: A South Africa joint venture accounted for on an equity basis (b) Gross Profit The Directors Pro forma Forecast gross profit increases by 201 bps compared to FY2007 due to: improved trading from Dotti and Jacqui.E, with reduced markdowns in each business; the benefits of the stronger Australian dollar, with the average exchange rate for US dollar purchases for FY2008 forecast to be , compared to in FY2007; and growth from Smiggle and Peter Alexander that achieve above group average gross margins. Table 5 Gross Profit Table DIRECTORS Directors Annualised Adjusted Pro-forma Pro-forma Historical FORECAST Forecast ($ 000) FY07 FY08 FY08 Gross profit 438, , ,562 Gross profit margin 57.8% 59.8% 59.9% (c) Expenses The primary operating expenses relating to the Directors Pro forma Forecast comprise: salaries, rent, depreciation, advertising and direct marketing, store operating costs and overheads. The Directors Pro forma Forecast takes into account the actual costs for the 38 weeks to 19 April 2008, being the most recently completed monthly accounts. The Directors Pro forma Forecast incorporates most recent run rates and known changes resulting from store openings, closures and other expected seasonal factors and planned expenditure. The Directors Annualised Pro forma Forecast includes all operating expenses associated with those stores that form part of the annualisation calculation. Fixed costs are not materially affected by the additional stores and, as such, there has been no annualisation adjustment required for these costs. Neither the Directors Pro forma Forecast nor the Directors Annualised Pro forma Forecast for FY2008 includes any expenses associated with the defence of Premier s Offer. 38 JUST GROUP Target s Statement

41 3 Financial Information and Directors Pro forma Forecast (d) Interest Rates Interest on Just Group s Core Debt Facility has been calculated in accordance with the terms of the Facility Agreement and the most recent Selection Notices. The average interest rate for the core debt facility was 7.8% in the 38 weeks to April The average interest rate is forecast to be 8.8% for the remaining 14 weeks of FY2008. (e) Taxation The forecast effective corporate tax rate for the year ending 26 July 2008 is 30.1%. This is higher than the prevailing Australian corporate tax rate of 30.0% due to the higher New Zealand corporate tax rate of 33.0%. The Directors Pro forma Forecast does not contemplate any adjustment to reflect the reduction in the New Zealand corporate tax rate from 33% to 30% in FY2009. (f) Exchange Rates Just Group is exposed to exchange rate movements as follows: Translation of New Zealand operations from NZD to AUD The financial results of Just Group s wholly-owned subsidiary in New Zealand, Kimbyr Investments Limited, are required to be translated from New Zealand dollars to Australian dollars for presentation in the consolidated financial statements of Just Group. Changes in the AUD:NZD exchange rate will therefore result in changes in the AUD value of revenue, expenses, assets and liabilities consolidated in Just Group s results. Just Group does not use financial instruments to hedge its exposure to translation of the financial results of its New Zealand operations. The Directors Pro forma Forecast assumes an average exchange rate for translation of the New Zealand operations for the period May 2008 to July 2008 to be 1.20NZD:1.00AUD. The Directors estimate the impact on net profit after tax for each 1 cent change in the NZD:AUD exchange rate for the remaining 14 weeks of FY2008 to be approximately A$50,000, as detailed in Table 13. Purchases of Inventory in USD Just Group is directly exposed to movements in the value of the USD on approximately 50% of the value of its inventory purchases, and as such, changes in the AUD:USD and NZD:USD exchange rates have a direct impact on the cost of goods purchased. In order to reduce the Company s exposure to these movements, Just Group adopts a hedging policy that is designed to effectively offset any changes in the underlying AUD and NZD cost of the inventory purchases with the use of either forward exchange contracts or foreign currency options. As at the date of this Target s Statement, Just Group has hedged 100% of its purchase commitments for the balance of FY2008 using forward exchange contracts ( FECs ) and foreign currency options. These hedging instruments will ensure that the AUD or NZD cost of inventory denominated in USD will not significantly affect the Directors Pro forma Forecast cost of goods for the remainder of FY2008 (refer to Table 7). Table 6 provides a summary of Just Group s outstanding hedge position and the instruments used. Target s Statement JUST GROUP 39

42 3 Financial Information and Directors Pro forma Forecast Table 6 Outstanding Hedging Position A AUD:USD AUD:USD AUD:USD NZD:USD ($ 000) FECs PUT Options Collared Options B FECs Strike Strike USD Rate C USD Strike C USD (Floor) C (Cap) C USD Rate C May July , , , FY , , , FY , , Notes: A As of 26 May 2008 B A collared option consisting of a purchased AUD put option ( floor ) and a corresponding sold AUD call option ( cap ) of equivalent value and expiry date C Calculated on a weighted average basis Table 7 details the forecast exchange rates underlying the Directors Pro forma Forecast together with historical exchange rates for comparative purposes. Table 7 Foreign Exchange Rates Table DIRECTORS Adjusted Pro-forma Historical Forecast FY07 FY08 AUD:USD D NZD:USD E NZD:AUD Notes: D 100% of purchases for the remainder of FY2008 are hedged, with no exposure to movements in the AUD:USD exchange rate above If the AUD:USD were to decrease below 0.91, the negative impact on NPAT would approximate $0.075 million per 1 cent change to 0.85, and nil thereafter E 100% of purchases for the remainder of FY2008 are hedged, with no exposure to movements in the NZD:USD exchange rate Fair Value of Financial Instruments Cash Flow Hedges The directors believe Just Group s hedging policy effectively manages the Company s exposure to movements in exchange rates, and ensures that actual and/or forecast inventory purchases are costed accurately such that retail prices and gross margins can be set appropriately. However, AASB139 Financial Instruments: Recognition and Measurement requires these hedging instruments to be tested for effectiveness 5 at each balance date, and to the extent they are not considered effective, any changes in fair value should be recognised in the income statement. The accounting adjustments arising from this fair value assessment represent changes in the timing of recognition of the income/expense relative to the underlying liabilities being hedged (i.e. stock purchases). Notwithstanding this accounting treatment, the directors have adjusted the Directors Pro forma Forecast to align the income/expense associated with the fair value adjustments of the hedging instruments to the years in which the underlying inventory purchases occurs and the inventory is sold, so as to better reflect the underlying purpose and impact of the hedging instruments. Table 8 illustrates the impact on the Adjusted Historical FY2007 results, and Table 9 illustrates the impact on the Directors Pro forma Forecast results for FY2008. Notes: 5 Effectiveness as defined by AASB139 Financial Instruments: Recognition and Measurement whereby a hedge is considered to be highly effective if the actual results of the hedge are within a range of % AASB139 Appendix A para AG JUST GROUP Target s Statement

43 3 Financial Information and Directors Pro forma Forecast GENERAL ASSUMPTIONS Set out below are the general best estimate assumptions that have been adopted in preparing the Directors Pro-forma Forecast for the year ending 26 July 2008: no significant change in the economic conditions or consumer sentiment in Australia and New Zealand from those which prevail at the date of this Target s Statement; retention of key personnel; no material acquisitions or disposals; no material industrial strikes or other disturbances, environmental costs or legal claims; no significant change in the legislative regimes and regulatory environments in the jurisdictions in which Just Group or its key customers or suppliers operate which will materially impact on the forecast results; no changes in accounting standards or other mandatory professional reporting requirements or the Corporations Act which would have a material effect on Just Group s financial performance; no material beneficial or adverse effects arising from the actions of competitors; no change in the Company s capital structure; no material adverse changes to Just Group s offshore product sourcing capabilities and costs; no significant amendment to any significant agreement or arrangement relating to Just Group s businesses. The parties to those agreements and arrangements are assumed to continue to comply with the terms of all significant agreements and arrangements; no impacts from changes in control; and no costs have been included in relation to Premier s Offer. 3.4 Reconciliation of Just Group s Reported Results to Adjusted Historical Results for the Year Ended 28 July 2007 The FY2007 Adjusted NPAT contained in Table 1 enables Just Group shareholders to compare the adjusted historical results of Just Group to the forecast financial information contained in this Target s Statement on a consistent basis. Table 8 reconciles Just Group s Reported Results to the Adjusted Historical Results for the year ended 28 July 2007 as stated in Table 1. Table 8 Reconciliation of Just Group s Reported Results to Adjusted Historical Results for the Year Ended 28 July 2007 ($ 000 except for EPS) EBita npat eps (cents) Reported (Audited) A 97,420 63, Adjustments Less: Dividend income Colorado Limited B (2,433) (2,433) (1.1) Less: Net capital gain on sale of shares in Colorado Limited C (40) (28) (0.0) Add: Share of loss of Associate South Africa Add: Fair value adjustment for ineffective cash flow hedges FY07 D 1,825 1, Less: Fair value adjustment for ineffective cash flow hedges FY06 E (476) (333) (0.2) Adjusted Historical 96,506 62, Notes: A Based on Just Group Limited 2007 audited annual financial statements (EBITA includes $1.6 million of interest income) B Special fully franked dividend received from Colorado Limited as part consideration for sale of shares C Profit on sale of shares, net of costs incurred and tax D Fair value adjustment arising from the mark to market valuation of ineffective cash flow hedges as at 28 July 2007 these hedging instruments were purchased to hedge inventory commitments in FY2008 E Fair value adjustment arising from the mark to market valuation of ineffective cash flow hedges as at 29 July 2006 these hedging instruments were purchased to hedge inventory commitments in FY2007 Target s Statement JUST GROUP 41

44 3 Financial Information and Directors Pro forma Forecast 3.5 Reconciliation of Directors Pro forma Forecast Results to expected reported results for the Year Ending 26 July 2008 The Directors Pro forma Forecast has been prepared to present the underlying performance of the Company, and accordingly, a number of adjustments to the expected reported results have been made as described in Section 3.2(c). The Directors Pro forma Forecast is based on the Directors best estimate assumptions outlined in Section 3.3. Table 9 reconciles the Directors Pro forma Forecast results to the expected reported results for the year ending 26 July Table 9 Reconciliation of Directors Pro forma Forecast Results to expected reported results for the Year Ending 26 July 2008 ($ 000) EBITA NPAT EPS Directors Pro-forma Forecast Results 107,086 67, Pro-forma adjustments Less: Fair value adjustment for ineffective cash flow hedges FY08 A (2,539) (1,777) (0.9) Add: Fair value adjustment for ineffective cash flow hedges FY07 B 1,825 1, Less: Net start-up costs for Peter Alexander USA C (1,721) (1,205) (0.6) Less: Share of Joint Venture loss South Africa C (716) (716) (0.4) Expected reported results (before provision for takeover defence costs) D 103,935 64, Notes: A Forecast fair value adjustment arising from the mark to market valuation of ineffective cash flow hedges expected to be recognised as at 26 July 2008 these hedging instruments were purchased to hedge inventory commitments in FY2009. Refer to discussion below for further discussion regarding sensitivity of this estimate B Fair value adjustment arising from the mark to market valuation of ineffective cash flow hedges recognised as at 28 July 2007 these hedging instruments were purchased to hedge inventory commitments in FY2008 C Start up costs associated with the commencement of international operations in South Africa and the United States of America D Excludes provision for takeover defence costs which the Directors estimate to be between $7.5 million and $9.0 million, as discussed below Cash Flow Hedge Fair Value Assumptions Sensitivity of Expected Reported Results Table 6 summarises Just Group s outstanding hedging profile. At year end, Just Group will assess the fair value of these financial instruments, with any adjustments to their carrying value recognised in equity (cash flow hedge reserve) to the extent the instruments are considered effective. The change in the fair value of ineffective cash flow hedges will be recognised in the income statement. The Just Group Board believes the outstanding forward exchange contracts will qualify as effective hedges as at 26 July However, based on a current estimate of the fair value of the foreign currency options, the Directors believe it is unlikely these options will qualify as effective hedges at year end, and as such, an estimated fair value adjustment has been included in the expected reported results as presented in Table 9. The fair value of the foreign currency options is dependent on a number of variables as at 26 July 2008, including Australian and US interest rates, option volatility and the actual level of the AUD:USD exchange rate on this date. Table 10 summarises the sensitivity of the estimated fair value adjustment at different AUD:USD exchange rates at 26 July 2008, assuming all other variables remain unchanged. 42 JUST GROUP Target s Statement

45 3 Financial Information and Directors Pro forma Forecast The estimated impact on the expected reported income statement has been determined by assuming the following conditions apply as at 26 July 2008: the spot AUD:USD exchange rate is ; Australian and US interest rates and option volatility remain unchanged; outstanding forward exchange contracts qualify as effective hedges, with any fair value adjustments recognised in equity and brought to account in the income statement when the underlying stock to which the hedging instrument relates is sold; and outstanding foreign currency options (call and collared options) do not qualify as effective hedges. Based on these assumptions, the expected reported results for FY2008 includes an estimated fair value adjustment (expense) to cash flow hedges as at 26 July 2008 of $2,539,000. Table 10 Foreign Currency Option Valuation Sensitivity on Expected Reported Results EBITA NPAT EPS Estimated aud:usd as ($ 000) ($ 000) (cents) at 26 july / +/ +/ ,025 2, ,351 2, ,735 1, ,174 1, ,663 1, , (347) (242) (0.12) 0.95 (676) (470) (0.23) 0.96 (988) (688) (0.34) 0.97 (1,288) (897) (0.45) 0.98 (1,577) (1,099) (0.55) Takeover defence costs The costs incurred and to be incurred by the Company in relation to its defence of Premier s Offer have not been included in the Directors Pro forma Forecast as these are considered to be non recurring costs. However, the expected reported results of the Company for FY2008 will include costs associated with this defence. The total cost of the takeover defence depends on the outcome of the takeover bid, the duration of the bid and required response activities, and the complexity of the issues addressed in the defence process. Therefore, it is difficult to estimate the likely total cost to Just Group, however, as at the date of this Target s Statement, the Directors estimate the total defence costs could be between $7.5 million and $9.0 million. In determining the FY2008 final dividend, the impact of takeover defence costs on the after tax profit will be ignored. Notes: 6 Average of a survey of bank forecasts taken on 26 May 2008 Target s Statement JUST GROUP 43

46 3 Financial Information and Directors Pro forma Forecast 3.6 Reconciliation of Directors Pro forma Forecast EBITA to Directors Annualised Pro forma Forecast EBITA for the Year Ending 26 July 2008 The reconciliation of the Directors Annualised Pro forma Forecast EBITA to the Directors Pro forma Forecast EBITA has been presented in Table 11. The adjustments to the Directors Pro forma Forecast EBITA include the annualised net impact of new stores opened or planned to open/stores closed or planned to close in FY2008 (including the annualised impact of Smiggle acquired during FY2008). Table 11 Reconciliation of Directors Pro forma Forecast EBITA to Directors Annualised Pro-forma EBITA ($ 000) EBITA Directors Pro-forma Forecast 107,086 Annualisation adjustments Add: Net contribution from stores not trading for 12 months 3,654 Directors Annualised Pro-forma EBITA 110, Just Group Historical and Directors Pro forma Forecast EPS Set out below is a summary of the actual EPS achieved for Just Group for the year ended 28 July 2007, the adjusted EPS for the year ended 28 July 2007 and the anticipated EPS for the year ending 26 July 2008 based on the Directors Pro forma Forecast and the expected reported results. The EPS calculation for the year ending 26 July 2008 should be read in conjunction with the Directors best estimate assumptions set out in Section 3.3 and the associated investment risks as detailed inside the cover of this Target s Statement. Table 12 Historical and Forecast EPS Directors Adjusted Pro-forma expected Historical Historical Forecast reported FY07 FY07 FY08 FY08 C Net profit after tax 63,891 62,584 67,310 64,889 EPS (cents) Weighted average number of issued shares A,B 214,072, ,072, ,330, ,330,882 Notes: A Outstanding performance rights issued to certain Company Executives are not considered dilutive as the Company plans to continue to fulfil any obligations arising upon vesting of the rights by purchasing shares on market, as has been the case in prior periods B The Company completed an off market share buy-back on 30 April 2007 which resulted in the buy-back of 16.7 million shares C Excluding takeover defence costs 44 JUST GROUP Target s Statement

47 3 Financial Information and Directors Pro forma Forecast 3.8 Directors Pro forma Forecast Sensitivity Analysis The Directors Pro forma Forecast is sensitive to variations in certain assumptions used in its preparation. The table below summarises the sensitivity of forecast NPAT to variations in a number of key assumptions. The sensitivities have been determined by reference to the potential impact of each sensitivity, in isolation, on group operating results for the remaining 10 trading weeks of FY2008 for sales and gross margin, and the remaining 14 trading weeks of FY2008 for sensitivities to exchange rates and expenses. Care should be taken in interpreting these sensitivities. Just Group operates seven brands across a diverse geographic and demographic customer base. These sensitivities treat each movement in the variables in isolation whereas, in reality, the movements will vary by brand, and could be interdependent and management may take corrective action. The effects of movements may offset each other or may be additive. The effects on forecast NPAT presented for each sensitivity in isolation are not intended to be indicative or predictive of the likely range of outcomes that may occur with respect to each sensitivity. Table 13 Sensitivity Analysis Impact on directors pro-forma sensitivity FORECAST npat for year ending 26 july / 1% change in sales increases/decreases by $1.0 million +/ 1% change in gross profit margin increases/decreases by $1.6 million +/ 1c change in NZD:AUD exchange rate decreases/increases by $0.05 million +/ 1% change in expenses decreases/increases by $0.7 million The Just Group Board does not believe there is any material sensitivity to changes in the AUD:USD or NZD:USD exchange rate in relation to purchases of inventory denominated in USD. Refer to Table 7 for USD:AUD and USD:NZD exchange rate assumptions and sensitivity to inventory purchases. Table 10 provides details of the sensitivity of the expected reported results to changes in the spot exchange rate as at 26 July 2008 in relation to fair value adjustments for ineffective cash flow hedges. Target s Statement JUST GROUP 45

48 3 Financial Information and Directors Pro forma Forecast 3.9 Balance Sheet Since the date of this report, there have been no transactions or events that have materially changed the financial position of the Company. The consolidated balance sheets of Just Group as at 26 January 2008 (and 28 July 2007) are presented in Table 14. Table 14 Consolidated Balance Sheets as at 26 January 2008 and 28 july JANUARY JULY 2007 $ 000 $ 000 Assets Current assets Cash and cash equivalents 23,464 38,134 Trade and other receivables 2,904 2,512 Inventories 62,861 61,250 Derivative financial instruments 2,226 Other 3,143 2,795 Total current assets 94, ,691 Non current assets Trade and other receivables 1,256 1,256 Other financial assets Plant and equipment 69,257 62,751 Intangible assets 105,492 79,084 Deferred tax assets 9,316 8,782 Investment in an associate 1,627 1,959 Total non current assets 187, ,916 Total Assets 281, ,607 Liabilities Current liabilities Trade and other payables 47,971 50,415 Interest-bearing liabilities Derivative financial instruments 2,450 1,825 Income tax payable 7,738 6,391 Provisions 11,288 10,680 Other 2,191 2,240 Total current liabilities 71,856 71,695 Non current liabilities Interest-bearing liabilities 121, ,651 Deferred tax liabilities 2,489 2,354 Provisions 1, Other 13,745 8,723 Total non current liabilities 138, ,614 Total Liabilities 210, ,309 Net Assets 71,201 53,298 Equity Contributed equity 13,720 13,720 Reserves (6,353) (3,406) Retained profits 63,834 42,984 Total Equity 71,201 53, JUST GROUP Target s Statement

49 4 Risk factors There are a number of risks, both company specific to Just Group and general investment risks, which may materially and adversely affect the future operating and financial performance and financial condition of Just Group and the value of the Shares. Many of these risks are outside the control of Just Group and its Directors. There can be no guarantee Just Group will achieve its stated objectives or that any forward looking statements will eventuate. This section describes risks associated with an investment in Just Group Shares. Just shareholders should note that this list of risks might not be exhaustive. Just shareholders should read this Target s Statement in its entirety and carefully consider the following risk factors. Specific risks 4.1 Competitive environment The Australian, New Zealand, South African and United States specialty apparel retail markets are highly competitive with a large number of market participants and few barriers to entry. Just Group s concepts compete for both target customers and store locations with a wide range of retail formats including local, national and international specialty apparel retail chains, full service national department stores, discount department stores and single store operations. Although Just Group has demonstrated an ability to compete effectively in Australia and New Zealand, there can be no assurance that the actions of Just Group s existing or new competitors or changes in consumer preferences will not have a material adverse effect on Just Group s performance. Certain Just Group brands have only recently been introduced to the United States and South Africa and there are risks in establishing these brands in those markets. 4.2 Brands and fashion trends The apparel retail industry is subject to rapid and occasionally unpredictable changes in customer preferences. Just Group s success in each of its brands depends upon Just Group s ability to identify and respond to movements in fashion trends, and to develop appealing merchandise on a timely basis. If Just Group misjudges consumer trends or fails to sell stock at anticipated prices, lower sales and margins could result. In addition, customers perceptions that one or more of Just Group s formats is no longer able to offer fashionable products and reasonable prices, may also adversely impact the reputation of Just Group s brands. 4.3 Supply chain and product sourcing Just Group has established an extensive and reliable supply chain that allows it to procure and deliver products to customers in a timely and efficient manner. The efficiency of Just Group s supply chain management assists in managing working capital levels, in particular, inventory levels and the reliability of delivery to customers. Disruption to any aspect of Just Group s supply chain could have a material adverse effect on its operational and financial performance. Approximately 50% of the value of the products purchased by Just Group are sourced internationally, predominantly using one sourcing agent based in China. The concentration of Just Group s suppliers in China makes the Company vulnerable to the political and economic environments in this country, including movements in the Chinese yuan/united States dollar exchange rate, which could have a material adverse effect on the Company s ability to source product at competitive prices. Target s Statement JUST GROUP 47

50 4 Risk factors Material increases in production costs in these locations could lead to higher costs and therefore impact Just Group s gross margins, or require it or its agents to source product from alternative locations. In this event, there can be no guarantee that the existing gross margins will be maintained. In addition, any delays in lead times on orders from suppliers could expose Just Group to the risk of changes in fashion and consumer behaviour and generate constraints on Just Group s cash flow. 4.4 Relationships with landlords Just Group operates its stores, distribution centres, regional offices and head office on a leasehold basis. While leases are distributed across multiple landlords, maintenance of strong relationships with landlords is an important aspect of the Company s business. Given that Just Group s future growth prospects depend in part upon its ability to increase sales at existing stores, refurbish existing stores, open new stores at new locations, develop new concepts and continue to operate stores on a profitable basis, any adverse change in Just Group s relationships with landlords could increase its costs or adversely impact the ability of Just Group to operate stores in preferred locations. Whilst Just Group generally enters into medium term leases typically for a period of five years, Just Group can give no assurance that it will be able to renew leases on acceptable terms. Failure to renew leases on acceptable terms could result in the loss of revenue and profitability. As is common in retail leases, a number of store leases held by Just Group and its subsidiaries are subject to change of control or similar provisions which might be triggered if Premier becomes the owner of more than 50% of Just Group Shares. These provisions usually require the landlord s consent to the change of control, though often limitations apply to require the landlord to act reasonably. If the provisions in one or more leases are triggered, Just Group intends to discuss this issue with each relevant landlord with a view to minimising any possible disruption to Just Group s business. 4.5 Foreign exchange rates Approximately 50% of the value of Just Group s products are currently sourced offshore, mainly in United States dollars, and consequently Just Group is exposed to movements in exchange rates, in particular the AUD:USD and NZD:USD exchange rates. The competitive environment, strength of Just Group s product offering and management skill determine how much of any appreciation in the Australian dollar or New Zealand dollar is captured by the business, and the extent to which any depreciation may be recovered through vendors, supply chain initiatives or from customers. In the year ended July 2007, approximately 14% of Just Group s sales were in New Zealand dollars. However, Just Group s financial statements are maintained in Australian dollars. Due to the potential volatility of exchange rates, Just Group cannot reliably predict the impact of exchange rates on future operating results. While Just Group engages in foreign exchange hedging to manage foreign currency exposure, adverse movements in exchange rates may have a material adverse impact on the operating results of Just Group in the future. 48 JUST GROUP Target s Statement

51 4 Risk factors 4.6 Loss of key personnel Just Group s success depends to a large extent on its key personnel who play an important role in the business, in particular the senior management team discussed in Section 1. Whilst efforts are made to retain the services of key employees, the loss of key personnel could have a material adverse effect on Just Group s earnings or growth prospects. Just Group may not be able to recruit replacements within a short timeframe. 4.7 Interest rates Just Group, as a borrower of money, is potentially exposed to adverse interest rate movements that may increase the financial risk inherent in its business. Upon expiration of the current facility in June 2009, there is no guarantee that Just Group will be able to secure borrowings on the same terms and conditions as currently exist, or be able to refinance its borrowings on similar terms in the future. Any material change to borrowing arrangements may adversely impact Just Group s future profitability. Furthermore, as discussed in relation to macroeconomic factors below, interest rates may also affect the level of consumer spending and therefore an increase in interest rates could be expected to have a negative impact on the Company and its operating results. 4.8 Expansion plans The continued growth of Just Group, its revenue and profitability is to a certain extent dependent upon opening new stores and upgrading existing ones. This expansion is dependent upon Just Group s ability to successfully identify suitable sites, negotiate acceptable lease terms and open new stores on time. Additionally, although Just Group employs strict financial criteria prior to committing to the opening of new stores and the refurbishment of existing stores, there can be no assurance that these stores will meet established targets. Part of Just Group s strategy also includes undertaking acquisitions and developing new concepts to add to its existing formats. Just Group can give no assurance that any new concepts or acquisitions will be profitable, nor that they will generate sales sufficient to cover the costs of acquisition or start up. Further, the terms on which any acquisition or new concept development is funded may impact Just Group s operations and financial position. 4.9 Seasonality Just Group s sales are subject to some seasonal fluctuations. There is typically increased demand in the period leading up to Christmas and the winter sales period in June/July. Any significant decrease in sales during these periods could have a material adverse effect on the Group s financial performance Reliance on third party brands Just Group sells third party brands (including Calvin Klein, Levi s, LeeRider and Blend) through Just Jeans pursuant to licence agreements with the relevant brand owners. A relatively small number of licensed products are also sold throughout the group. As Just Group is not the owner of the brands there is a risk that Just Group may lose the right to use these brands, either as a result of non compliance by it with the licence terms or as a result of an action by the licensor. A loss of right to use a brand may have an adverse impact on Just Group s trading performance. Just Group is not aware of any non compliance by it with any licence terms or any detrimental action by a licensor. Target s Statement JUST GROUP 49

52 4 Risk factors 4.11 Information technology Just Group has invested significantly in the development of information systems. While the Company will make every effort to ensure that these systems are maintained and improved to best meet the demands of the market, system failures may negatively impact on the Company s performance Tariff Reduction in australia and new zealand A program of phased annual reduction in tariffs has been occurring in Australia since the mid 1980s. The Australian Government has announced that tariffs will be further reduced from 17.5% to 10% on 1 January Similarly, the New Zealand Government also has a program for the reduction of tariffs on imported clothing and footwear with a reduction in the tariffs on clothing into New Zealand from 15% to 12.5% to become effective on 1 July 2008 and from 12.5% to 10% to become effective from 1 July The extent to which any future planned or announced tariff reductions in Australia and New Zealand are not enacted may adversely impact Just Group s margins in the future. General Risks 4.13 Macroeconomic factors Just Group, like most other retailers, is affected by general business cycles and economic conditions including interest rates, inflation, disposable income levels, consumer sentiment, population growth and population demographics. Changes in general macroeconomic factors may result in consumers changing spending patterns or their level of consumption, which may have a material adverse impact on Just Group and its earnings. 50 JUST GROUP Target s Statement

53 5 Taxation consequences 5.1 General Your Special Board Committee recommends you reject Premier s Offer. If you accept Premier s Offer, there are likely to be taxation consequences. The Australian income tax consequences are summarised in this section. The comments set out below are relevant only to those Just Group shareholders who hold their Just Group Shares as capital assets for the purposes of investment, and not for the purposes of speculation or a business of dealing in securities (e.g. as trading stock) or acquired them pursuant to an employee share or option plan. The following description is based upon taxation law and practice in effect at the date of this Target s Statement. It is not intended to be an authoritative or complete analysis of the taxation laws of Australia applying to the specific circumstances of any particular shareholder. Each Just Group shareholder is advised to consult his or her own professional adviser regarding the Australian tax consequences of acquiring, holding or disposing of Just Group Shares and Premier shares in light of that shareholder s particular circumstances. 5.2 Australian resident shareholders (a) Capital Gains Tax on disposal of Just Group Shares The disposal of Just Group Shares following acceptance of the Offer will generally have CGT implications. The CGT implications of a disposal of Just Group Shares pursuant to acceptance of the Offer will depend upon a number of factors, including whether scrip-for-scrip rollover relief is available and chosen, the taxpayer status of the shareholder and the date on which they acquired their Shares for CGT purposes. The CGT implications are set out below. (1) General position A capital gain will arise for the shareholder if the cash consideration of $2.095 ( Cash Consideration ) per Just Group Share together with the market value of the Premier shares received, calculated at the time the Offer is accepted, exceeds the cost base of the shareholder s Just Group Shares. For CGT purposes, the cost base of the Just Group Shares would generally include the amount paid to acquire those Shares plus any incidental costs of acquisition (for example, brokerage fees and stamp duty). If an individual, trust or complying superannuation fund has held the Just Group Shares for at least 12 months, they may be eligible to treat the gain as a discount capital gain: for an individual or trust include in assessable income, only one half of the net realised nominal gain, being the difference between the capital proceeds and the cost base of the Just Group Shares; for a complying superannuation fund include in assessable income, two thirds of the net realised nominal gain. Under the discount capital gain rules, any available capital losses of the shareholder will be applied to reduce the realised nominal gain before reducing the gain by one half (or one third for complying superannuation funds) to calculate the amount included in assessable income. A capital loss will result if the capital proceeds received are less than the cost base of the Just Group Shares. A capital loss may be used to offset capital gains derived in the same or subsequent years of income. A capital loss cannot be offset against ordinary income. Target s Statement JUST GROUP 51

54 5 Taxation consequences (2) Scrip-for-scrip rollover relief Partial scrip-for-scrip rollover relief will be available if Premier ends up holding at least 80% of Just Group Shares as a result of the Offer. Where a shareholder chooses scrip-for-scrip rollover relief the shareholder will make a capital gain to the extent that the cash consideration that the shareholder received exceeds a proportionate part of the cost base for the shareholder s Just Group Shares. The capital gain will be calculated as follows: CAPITAL GAIN ON EXCHANGING JUST GROUP SHARES ( CASH CONSIDERATION CASH = CONSIDERATION CASH CONSIDERATION + MARKET VALUE X OF PREMIER ORDINARY SHARES AT THE DATE THE OFFER IS ACCEPTED COST BASE OF JUST GROUP SHARES ( Rollover is not available if a capital loss arises on the exchange of the Just Group Shares. (b) Implications of holding Premier shares As a consequence of accepting the Offer, a Just Group shareholder will cease to be a shareholder of Just Group and will become a shareholder of Premier. Dividends (and any attaching franking credits) received by an Australian resident shareholder of Premier would generally be required to be included in the assessable income of such a shareholder. (c) CGT on subsequent disposal of Premier shares A subsequent disposal of Premier shares will generally result in Australian CGT implications as described above. These will differ depending upon whether or not scrip-for-scrip rollover relief was claimed in relation to the disposal of Just Group Shares pursuant to the Offer. Where scrip-for-scrip rollover relief was not claimed or was not available in relation to the disposal of the Just Group Shares, the cost base of each Premier share would include the market value of the Just Group Shares disposed of under the Offer at the time the Offer is accepted less the cash consideration. Where a shareholder chooses scrip-for-scrip rollover relief the cost base for the Premier shares will equal the cost base of the Just Group Shares that the shareholder exchanged for them, i.e. excluding the proportion of the Just Group Shares exchanged for the cash consideration. The cost base for the Premier shares will be calculated as follows: COST BASE OF PREMIER SHARES = COST BASE OF JUST GROUP SHARES X MARKET VALUE OF PREMIER SHARES CASH CONSIDERATION + MARKET VALUE OF PREMIER SHARES The cost base of the Premier shares may change, for example by any incidental costs to sell the Premier shares. Where a shareholder chooses scrip-for-scrip rollover relief the shareholder will be taken to have acquired the Premier shares at the time the Just Group Shares were acquired for CGT purposes. Where scrip-for-scrip rollover relief was not claimed or was not available in relation to the disposal of the Just Group Shares, a shareholder will be taken to have acquired the Premier shares at the time the Offer is accepted. 52 JUST GROUP Target s Statement

55 5 Taxation consequences 5.3 Shareholders who are not Australian residents The tax implications for a non resident shareholder who holds Just Group Shares through a permanent establishment in Australia are generally the same as set out in Section 5.2 above. (a) CGT on disposal of Just Group Shares For a Just Group shareholder who is: not a resident of Australia for Australian tax purposes; and does not hold the Just Group Shares through an Australian permanent establishment, Australian CGT implications on the disposal of the Just Group Shares pursuant to the acceptance of the Offer will only arise if: (1) that shareholder, together with its associates held 10% or more of the Shares of Just Group at the time of disposal or for any continuous 12-month period within two years preceding the disposal; and (2) more than 50% of Just Group s value is due to direct or indirect interests in Australian real property, which is defined to include mining and exploration leases and licences. Just Group does not expect that the requirement as to relative value of its Australian land assets in paragraph 5.3(a)(2) above will be satisfied. Therefore, a non resident shareholder should not have any Australian CGT implications arising on sale of its Just Group Shares under the Offer. However, a non resident shareholder that satisfies the requirements in paragraph 5.3(a)(1) above should obtain independent advice as to the tax implications of sale. (b) Implications of holding and disposing of Premier shares Tax implications similar to those outlined in 5.2(c), subject to considerations mirroring the matters addressed in 5.3(a) above, should apply on any disposal of Premier shares. 5.4 GST On the basis of current GST law, each of the following transactions: the disposal of Just Group Shares pursuant to the Offer; the payment of dividends on Premier shares; and a subsequent disposal of Premier shares; would not be subject to GST. Target s Statement JUST GROUP 53

56 6 Important matters for Just Group shareholders to consider 6.1 Just Group Board The Just Group Board comprises: Ian Pollard Independent Chairman and Non Executive Director Ian Pollard was appointed Chairman of Just Group Board on 19 July 2007 and has held the position of Non Executive Director since 22 March Ian was also the Chairman of the Audit and Risk Committee from 22 March 2004 to 24 July He has extensive experience in corporate finance, strategic investment and public company governance. He was previously Managing Director of Development Finance Corporation Limited and Development Capital of Australia Limited. Ian is also a current director of Corporate Express Australia Limited (from 1 July 2004, and Chairman from 1 January 2005), and Milton Corporation Limited (from 6 August 1998). Previously, Ian held the role of non executive director of OPSM Group Limited (from 28 January 1992 to 23 September 2003) and of DCA Group Limited (from 17 August 1984 to 12 December 2006). Ian, an actuary and Rhodes Scholar, holds a Bachelor of Arts from Macquarie University, a Master of Arts (First Class Honours) from Oxford University and a Doctor of Philosophy from the International Management Centre. Jason Murray Managing Director Jason Murray was appointed Managing Director of Just Group on 18 September 2006 and has held the position of Executive Director since 14 September Jason has been with the Company since July 2003 and was appointed Chief Financial Officer in March Jason has over 10 years experience as a management consultant with McKinsey and Company, working mainly with retail companies. Jason holds a Bachelor of Economics (Honours) from the University of Sydney and an MBA (Honours) from IMD in Lausanne, Switzerland. Laura Anderson Independent Non Executive Director Laura Anderson became a Non Executive Director of Just Group in September 2004 and became the Chairman of the Risk Committee on 5 March Laura is also a member of the Audit Committee. Laura was the National Partner in Charge of Strategy and Development for KPMG Australia and founding Partner of KPMG s Risk and Advisory Services for Industry Practice. Laura is a Director and Victorian Chairman of the Starlight Children s Foundation. Laura is also a Member of the Board of the Australian Grand Prix Corporation and a Director of Eastern Health. She is a Governor of the American Chamber of Commerce and was Strategic Advisor to the National Defense University in Washington D.C. on global supply chains, technology and strategy. Laura was the founding Chairman and President of the Council of Supply Chain Management Professionals Australasia and is a Fellow of the Chartered Institute of Logistics and Transport. She is a selected member of the Women Chiefs of Enterprise International, the Australian Institute of Company Directors and the National Association of Corporate Directors in Washington D.C. Educated in the United States, Laura holds a Bachelor s Degree with concentrations in Applied Mathematics and English from Southern Methodist University. She has completed advanced studies at Northwestern University in Evanston, Illinois USA and at The University of Melbourne, Melbourne Australia. 54 JUST GROUP Target s Statement

57 6 Important matters for Just Group shareholders to consider Bronwyn Constance Independent Non Executive Director Bronwyn Constance became a Non Executive Director of Just Group and the Chairman of the Audit Committee on 11 April Bronwyn is currently a director and Chairman of the Audit Committees of Plantic Technologies Limited and the Cooperative Research Centre for Advanced Automotive Technologies. She is also a director of The Melbourne Markets Authority. Bronwyn s 30 years of financial and accounting experience include Chief Financial Officer (or equivalent) roles at Austrim Nylex, Pasminco and Kraft. Bronwyn brings a depth of financial, accounting and commercial experience to the Just Group Board. She is a Fellow of Australian Institute of Company Directors, a Fellow of Australian Society of Certified Practising Accountants, and a Fellow of the Chartered Institute of Secretaries. Ian Dahl Independent Non Executive Director Ian Dahl became a Non Executive Director of Just Group on 19 July 2007 and was appointed Chairman of the Remuneration and Nomination Committee on 24 July Ian has a lifetime of experience in retailing in Australia and the United Kingdom. He was formerly CEO of Sportsgirl Australia, United Kingdom Chief Executive of listed jewellery retailer Signet Group PLC and Chairman and Group Chief Executive of Asprey International, the leading United Kingdom retailer of luxury goods. His retail experience also includes roles at House of Fraser PLC, Myer Stores Ltd and Marks & Spencer PLC. He is currently company director and co owner of La Senza Lingerie, Australia. Terrence McCartney Non Executive Director Terry McCartney became a Non Executive Director of Just Group on 4 March 2008 and is a member of the Audit Committee and the Risk Committee. Terry has had a comprehensive career in retailing spanning more than 25 years especially with the Coles Myer group culminating in his roles as Managing Director of Kmart Australia and New Zealand and Myer Grace Bros. Subsequently, Terry has been involved in consultancy assignments in Australia and overseas, for corporations including BHP Billiton and Sual Holdings, a global aluminium producer, private equity investors and expert witness submissions. Michael McLeod Non Executive Director Michael McLeod became a Non Executive Director of Just Group on 4 March 2008 and is a member of the Remuneration and Nomination Committee. Michael is an Executive Director of the Century Plaza group of companies. He has been associated with Century Plaza since 1996 as an adviser in relation to corporate strategy, investment and public affairs. He is also a non executive director of Premier and has previously been a non executive director of Zurich Scudder, a large funds manager. Michael holds a Bachelor of Arts (First Class Honours and University Medal) from the University of NSW. Susan Oliver Independent Non Executive Director Susan Oliver became a Non Executive Director of Just Group on 19 July 2007 and a member of the Audit and Risk Committee on 24 July Susan has extensive experience as a listed company board director. She has been on the Board of Transurban Group Ltd since 1997, where she chairs the Risk Committee and, until recently, chaired the Corporate Social Responsibility Committee. She has also been a director of Programmed Maintenance Services Ltd since 1999, and is a governor of The Smith Family. Susan is an Executive Director of wwite Pty Ltd, a company providing e business applications. Previously she was a director of MBF Australia (1998 to 2008), a senior manager at Andersen Consulting Target s Statement JUST GROUP 55

58 6 Important matters for Just Group shareholders to consider (now Accenture) and Managing Director of the Australian Commission for the Future. Susan has held senior management positions at Invetech Pty Ltd (now part of Danaher Corporation) and in the Victorian public sector. Susan holds a Bachelor of Building (QS) (now Property and Construction) from the University of Melbourne, a certificate of Financial Management from the Australian Institute of Management, Victoria, and is a fellow of the Australian Institute of Company Directors. 6.2 Special Board Committee In order to ensure the independence of Just Group s response, the Board has formed a special committee to consider this Offer ( Special Board Committee ). The members of the Special Board Committee are all of the directors of Just Group who are independent of Premier and interests associated with Premier s major shareholder. They are: Name Ian Pollard Jason Murray Laura Anderson Bronwyn Constance Ian Dahl Susan Oliver Position Independent Chairman and Non Executive Director Managing Director Independent Non Executive Director Independent Non Executive Director Independent Non Executive Director Independent Non Executive Director The two other directors of Just Group, Terrence McCartney and Michael McLeod, were both nominated for appointment to the Just Group Board by Metrepark Pty Ltd, which may be considered an associate of Premier, and Mr McLeod is also a director of Premier. For these reasons, Mr McCartney and Mr McLeod have not participated in the consideration of the Offer, nor in the preparation or approval of this Target s Statement and each declines to make any recommendation on whether the Offer should be accepted. ASIC has granted an exemption under the Corporations Act so that this Target s Statement need not contain information known to Mr McCartney or Mr McLeod. 6.3 Directors Interests and dealings in Just Group securities (a) Interests in Just Group Shares and Performance Rights As at the date of this Target s Statement, your Directors had the following relevant interests in Shares and Performance Rights: Number of Number of Just Group Director Just Group Shares Performance Rights Ian Pollard 109,452 Jason Murray 615, ,776 Laura Anderson 41,363 Bronwyn Constance Ian Dahl 3,923 Terrence McCartney Michael McLeod 1,883 Susan Oliver Total 772, , JUST GROUP Target s Statement

59 6 Important matters for Just Group shareholders to consider (b) Dealings in Just Group Shares and Performance Rights No director of Just Group has acquired or disposed of a relevant interest in any Shares or Performance Rights in the four months before this Target s Statement, other than four directors who acquired Shares under the non executive director share plan on 12 March 2008 at $3.57 per Share, as follows: Director Number of Just Group Shares Ian Pollard 4,446 Laura Anderson 4,079 Ian Dahl 2,295 Michael McLeod 1,883 The non executive director share plan is summarised at Section 6.8(b) of this Target s Statement. 6.4 No other benefits and agreements As a result of the Offer, no person has been or will be given any benefit (other than a benefit which can be given without member approval under the Corporations Act) in connection with the retirement of that person, or someone else, from a board or managerial office of Just Group or related body corporate of Just Group. There are no agreements made between any member of the Special Board Committee and any other person in connection with, or conditional upon, the outcome of the Offer, other than in their capacity as a holder of Shares. None of the members of the Special Board Committee: have agreed to receive, or are entitled to receive, any benefit from Premier which is conditional on, or is related to, the Offer; or have any interest in any contract entered into by Premier. 6.5 Effect of the takeover on Just Group s material contracts Under Section 12.9(c) of Premier s Bidder s Statement, the Offer is conditional upon the following: before the end of the Offer Period, either an announcement by Just to ASX or the target s statement by Just in response to the Offer contains a statement, expressed to be made with the approval of the directors of Just, which confirms that, after due enquiry, none of Just or any of its subsidiaries is party to, bound by or subject to any material contracts under which any other party to such contracts could: (i) terminate; (ii) vary, amend or modify; or (iii) exercise any right, as a result of: (iv) Premier making the Offer; (v) Premier acquiring Just Shares pursuant to the Offer; or (vi) premier obtaining a relevant interest in more than 50% of the number of Just Shares then on issue, and the statement is not materially varied, revoked or qualified prior to the close of the Offer. Target s Statement JUST GROUP 57

60 6 Important matters for Just Group shareholders to consider Just Group has undertaken a review of its material contracts in light of this condition as part of preparing this Target s Statement. Having regard to the nature of Just Group s business, the review has identified one contract which may be considered material. Just Group s financing facility includes a provision under which the financiers may call for all outstanding monies to be due and payable following the agent for the financiers becoming aware that Premier has obtained 50.1% or more of Just Group. Currently $121.5 million is outstanding under the facility. Accordingly, Just Group cannot provide the statement required by this condition to Premier s Offer. In addition, as set out in Section 4.4, a number of store leases held by Just Group and its subsidiaries are subject to change of control or similar provisions which might be triggered if Premier becomes the owner of more than 50% of Just Group Shares. No single lease is considered by Just Group to be a material contract under clause 12.9(c) of Premier s Bidder s Statement. 6.6 Major holders in Just Group As at the date of this Target s Statement, the following persons held interests in Just Group of more than 5%. Substantial holder Holding Premier Investments Limited, Metrepark Pty Ltd, and Springsand Investments Pty Ltd % A AXA Asia Pacific Holdings Limited 11.78% Barclays Global Investors Australia Limited 10.59% Notes: A This holding comprises 1,850,000 shares held by Premier, 41,200,925 shares held by Metrepark Pty Ltd, and 4,606,812 shares held by Springsand Investments Pty Ltd 6.7 Minority ownership consequences and risks If Premier acquires more than 50% but less than 90% of the Just Group Shares then, assuming all other conditions to the Offer are fulfilled or freed, Premier will acquire a majority shareholding in Just Group. Accordingly, shareholders who do not accept the Offer will become minority shareholders in Just Group. This has a number of possible implications, including: Premier will be in a position to cast the majority of votes at a general meeting of Just Group. This will enable it to control the composition of Just Group s Board of Directors and senior management, and control the strategic direction of the businesses of Just Group and its subsidiaries; the Just Group Share price may fall immediately following the end of the Offer Period although this may be mitigated by the underlying attractiveness of Just Group s business; liquidity of Just Group Shares may be lower than at present, and there is a risk that Just Group could be fully or partially removed from certain S&P/ASX market indices due to lack of free float and/or liquidity; if the number of Just Group shareholders is less than that required by the ASX Listing Rules to maintain an ASX listing then Premier may seek to have Just Group removed from the official list of the ASX. If this occurs, Just Group Shares will not be able to be bought or sold on the ASX; if Premier acquires 75% or more of the Just Group Shares it will be able to pass a special resolution of Just Group. This would enable Premier to, among other things, change Just Group s constitution; and 58 JUST GROUP Target s Statement

61 6 Important matters for Just Group shareholders to consider Premier would be in a position to determine Just Group s dividend policy. This may vary significantly from current Just Group dividend policy as Premier has stated that, if it gains control of more than 50% but less than 90% of Just Group, it will seek to review Just Group s dividend policy. Premier has stated that the review will be undertaken with a view to paying out an appropriate yield while having regard to ensuring that sufficient resources are available within Just [Group] to fund its ongoing activities and capital requirements (including business acquisition opportunities). It is important to note that Premier has not indicated what it considers (i) an appropriate yield or (ii) sufficient resources for ongoing activities and capital requirements, so it is unclear whether Just Group s current policy will be maintained. 6.8 Effect of Offer on Just Group s employee incentive schemes and securities issued under those schemes (a) Performance Rights Plan Under the Performance Rights Plan (PRP), participants are offered Performance Rights which automatically vest upon the satisfaction of conditions specified in the terms of offer. Upon vesting of a Performance Right, a number of shares (each a Performance Share) calculated in accordance with the terms of offer are issued to the relevant participant. If Premier (and its associates) obtains a relevant interest in 50% or more of Just Group Shares, the PRP rules provide that any performance right granted (or that Just Group is contractually obliged to grant) will vest, where in the Just Group Board s absolute discretion, pro rata performance is in line with any condition applicable to those Performance Rights over the period from the date of grant to the date the bidder (and its associates) acquires the relevant interest. There are currently 598,383 unvested Performance Rights on issue. If Premier and its associates obtain a relevant interest in 50% or more of Just Group Shares, the Just Group Board will consider the extent to which the Performance Rights are to vest. In addition, there are 813,642 Performance Shares on issue. Holders of Performance Shares are restricted from dealing with Performance Shares until the earlier of: 10 years after the grant of the relevant Performance Right; the date on which the participant ceases to be employed by the Just Group (or a group company); or such other date as the Just Group Board determines. If there is a change of control, the Just Group Board will determine whether or not it is appropriate for the restrictions on transfer to be lifted. (b) Non executive director share plan Under the non executive director share plan, directors may elect to sacrifice a percentage of their annual directors fees for Just Group Shares. There are currently 72,336 Just Group Shares which are restricted under the plan. Those Just Group Shares may not be dealt with by a director until the earlier of: the date on which the director ceases to be a director of Just Group; the date which is 10 years after the Shares were allocated; a change in control of the Company; or if the Just Group Board so determines (in its discretion). The transfer restriction therefore ceases to apply upon control passing to Premier. Target s Statement JUST GROUP 59

62 6 Important matters for Just Group shareholders to consider (c) Employee share acquisition plan Under the employee share acquisition plan, employees are able to acquire shares. There are currently 136,809 Just Group Shares which, in accordance with the terms of the plan, are subject to transfer restrictions until September If a takeover bid is made, the Board may, in its discretion, determine that any restrictions cease to apply there is no requirement for a bidder to have acquired a specific number of Just Group Shares or for control to have passed. At this stage, the Just Group Board has not determined to lift the restrictions. It will continue to monitor the progress of the Offer and consider if the restrictions should be lifted. 6.9 Compulsory acquisition Premier has indicated in Section 3.2 of its Bidder s Statement that if it satisfies the required thresholds it intends to compulsorily acquire any outstanding Just Group Shares. Premier will be entitled to compulsorily acquire any Just Group Shares in respect of which it has not received an acceptance of its Offer on the same terms as the Offer if, during or at the end of the Offer Period: Premier and its associates have a relevant interest in at least 90% (by number) of the Just Group Shares; and Premier and its associates have acquired at least 75% (by number) of the Just Group Shares that Premier offered to acquire (excluding Just Group Shares in which Premier or their associates had a relevant interest at the date of the Offer and also excluding any Just Group Shares issued to an associate of Premier during the Offer Period). If this threshold is met, Premier will have one month after the end of the Offer Period within which to give compulsory acquisition notices to Just Group shareholders who have not accepted the Offer. Just Group shareholders have statutory rights to challenge the compulsory acquisition, but a successful challenge will require the relevant shareholder to establish to the satisfaction of a court that the terms of the Offer do not represent fair value for their Just Group Shares. If compulsory acquisition occurs, Just Group shareholders who have their Just Group Shares compulsorily acquired are likely to be issued their consideration approximately five to six weeks after the compulsory acquisition notices are dispatched to them. It is also possible that Premier will, at some time after the end of the Offer Period, become the beneficial holder of 90% of the Shares. Premier would then have rights to compulsorily acquire Shares not owned by it within six months of becoming the holder of 90%. Premier price for compulsory acquisition under this procedure would have to be considered in a report of an independent expert Third party statements and consents The Special Board Committee has assumed, for the purposes of preparing this Target s Statement, that the information in the Bidder s Statement is accurate (unless expressly indicated otherwise in this Target s Statement). However, the Directors of Just Group do not take any responsibility for the contents of the Bidder s Statement and are not to be taken as endorsing, in any way, any of the statements contained in it. 60 JUST GROUP Target s Statement

63 6 Important matters for Just Group shareholders to consider Each of the following persons have consented to the inclusion of each statement they have made in the form and context in which the statements appear and have not withdrawn that consent at the date of this Target s Statement: Credit Suisse Equities (Australia) Limited; Lonergan Edwards & Associates Limited; and PricewaterhouseCoopers Securities Limited. As permitted by ASIC Class Order 01/1543, this Target s Statement contains statements which are made, or based on statements made, in documents lodged by Premier with ASIC or given to the ASX, or announced on the Company Announcements Platform of the ASX, by Premier. Pursuant to the Class Order, the consent of Premier is not required for the inclusion of such statements in this Target s Statement. Any Just Group shareholder who would like to receive a copy of any of those documents may obtain a copy (free of charge) during the Offer Period by contacting the Just Group Shareholder Line on (for calls made from within Australia) or (for calls made from outside Australia). (Any telephone calls to these numbers may be tape recorded, indexed and stored.) In addition, as permitted by ASIC Class Order 03/635, this Target s Statement may include or be accompanied by certain statements: fairly representing a statement by an official person; or from a public official document or a published book, journal or comparable publication. Neither Caliburn nor Freehills should be regarded as having made any statements in this Target s Statement, nor as having authorised the issue of it. Target s Statement JUST GROUP 61

64 7 Glossary and interpretation 7.1 Glossary Term Meaning $, A$ or AUD Australian dollar. ASIC ASX Bidder s Statement Board Australian Securities and Investments Commission. ASX Limited. the replacement bidder s statement of Premier dated 13 May 2008 containing an offer dated 19 May the board of Just Group. Century Plaza Century Plaza Investments Pty Limited ACN Investments Century Plaza Trading Century Plaza Trading Pty Limited ACN CGT capital gains tax. CHESS Holding Corporations Act Director Independent Accountant s Report Independent Expert s Report a number of Shares which are registered on Just Group s Share register being a register administered by ASX Settlement and Transfer Corporation Pty Limited and which records uncertificated holdings of shares. the Corporations Act 2001 (Cth) (as modified or varied by ASIC). a director of Just Group. the independent accountant s report prepared by PricewaterhouseCoopers and dated 30 May 2008 which is included with this Target s Statement. the independent expert s report prepared by Lonergan Edwards and dated 30 May 2008 which is included with this Target s Statement. Just/Just Group Just Group Limited ACN Just Group Shares fully paid ordinary shares in Just Group. Lonergan Edwards Lonergan Edwards & Associates Ltd ACN NZ$ or NZD New Zealand dollar. Offer or Premier s Offer Offer Period the offer by Premier for the Just Group Shares dated 19 May 2008, which is contained in Section 12 of the Bidder s Statement. the period during which the Offer will remain open for acceptance in accordance with Section 12.3 of the Bidder s Statement. Performance Rights performance rights described in Section 6.7. Premier Premier Investments Limited ACN JUST GROUP Target s Statement

65 7 Glossary and interpretation Term Premier shares Meaning fully paid ordinary shares of Premier. PricewaterhouseCoopers PricewaterhouseCoopers Securities Ltd ACN Pro forma Forecast Rights Shares a pro forma financial forecast prepared by the Just Group Board, as outlined in Section 3. has the meaning given in Section 13 of the Bidder s Statement. ordinary shares in Just Group. Special Board Committee a committee of the Just Group Board comprising all of the directors of Just Group other than Michael McLeod and Terrence McCartney (see Section 6). Target s Statement US$ or USD VWAP 7.2 Interpretation this document (including the attachments), being the statement of Just Group under Part 6.5 Division 3 of the Corporations Act. US dollar. volume weighted average price. In this Target s Statement: (1) Other words and phrases have the same meaning (if any) given to them in the Corporations Act. (2) Words of any gender include all genders. (3) Words importing the singular include the plural and vice versa. (4) An expression importing a person includes any company, partnership, joint venture, association, corporation or other body corporate and vice versa. (5) A reference to a section, clause, attachment and schedule is a reference to a section of, clause of and an attachment and schedule to this Target s Statement as relevant. (6) A reference to any legislation includes all delegated legislation made under it and amendments, consolidations, replacements or re-enactments of any of them. (7) Headings and bold type are for convenience only and do not affect the interpretation of this Target s Statement. (8) A reference to time is a reference to Melbourne time. (9) A reference to dollars, $, A$, AUD, cents, and currency is a reference to the lawful currency of the Commonwealth of Australia. Target s Statement JUST GROUP 63

66 8 Authorisation This Target s Statement has been approved by a resolution of the Special Board Committee. Signed for and on behalf of Just Group: Ian Pollard Chairman 64 JUST GROUP Target s Statement

67 Just Jeans Smiggle Jay Jays Peter Alexander Dotti Jacqui.E Portmans Annexure A

68 investigating accountant s report PricewaterhouseCoopers Securities Ltd ACN ABN Holder of Australian Financial Services Licence No The Directors Just Group Limited 658 Church Street Richmond VIC 3121 Australia Freshwater Place 2 Southbank Boulevard SOUTHBANK VIC 3006 GPO Box 1331L MELBOURNE VIC 3001 DX 77 Telephone Facsimile Website: 30 May 2008 Subject: Investigating Accountant s Report on Forecast Financial Information Dear Sirs We have prepared this report on forecast financial information of Just Group Limited and controlled entities (the Company) for inclusion in a Target s Statement dated on or about 2 June 2008 (the Target s Statement) relating to the takeover offer by Premier Investments Limited. Expressions defined in the Target s Statement have the same meaning in this report. The nature of this Report is such that it should be given by an entity which holds an Australian Financial Services licence under the Corporations Act 2001 (Cwlth). PricewaterhouseCoopers Securities Ltd is wholly owned by PricewaterhouseCoopers and holds the appropriate Australian Financial Services licence. Background The purpose of this report is to provide an opinion on the forecast financial information in respect of the year ending 26 July 2008, as set out in Section 3.2 of the Target Statement. Scope You have requested PricewaterhouseCoopers Securities Ltd to prepare an Investigating Accountant s Report (the Report) covering the following information: Forecast financial information (a) forecast financial performance of the Company for the year ending 26 July 2008 adjusted for certain pro forma adjustments (the Pro-forma 66 JUST GROUP Target s Statement

69 investigating accountant s report Adjustments ) described in section 3.2 (the Directors Pro-forma Forecast ); and (b) annualised pro forma forecast financial performance of the Company for the year ending 26 July 2008 which is based upon the Director s Pro-forma Forecast and then allows for certain annualisation adjustments described in section 3.2 (the Annualisation Adjustments ) (the Directors Annualised Pro-forma Forecast ). (collectively the Forecast Financial Information ) This Report has been prepared for inclusion in the Target s Statement. We disclaim any assumption of responsibility for any reliance on this Report or on the Forecast Financial Information to which it relates for any purposes other than for which it was prepared. Scope of review of Forecast Financial Information The Directors are responsible for the preparation and presentation of the Forecast Financial Information, including the best estimate assumptions, the Pro-forma Adjustments and the Annualisation Adjustments on which they are based. Our review of the best estimate assumptions underlying the Directors Pro-forma Forecast was conducted in accordance with Australian Auditing Standards applicable to review engagements. Our procedures consisted primarily of enquiry and comparison and other analytical review procedures we considered necessary so as to adequately evaluate whether the best estimate assumptions and pro-forma adjustments provide a reasonable basis for the preparation and presentation of the Forecast Financial Information. These procedures included discussion with the Directors and management of the Company and have been undertaken to form an opinion whether anything has come to our attention which causes us to believe that the best estimate assumptions, Pro-Forma Adjustments and the Annualisation Adjustments do not provide a reasonable basis for the preparation of the Forecast Financial Information and whether, in all material respects, the Forecast Financial Information is properly prepared on the basis of the assumptions and is presented fairly in accordance with the recognition and measurement principles prescribed in Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies of the Company referred to in Section 3.2 of the Target s Statement so as to present a view of the Company which is consistent with our understanding of the Company s past, current and future operations. The Forecast Financial Information has been prepared by the Directors to provide investors with a guide to the Company s potential future financial performance based upon the achievement of certain economic, operating, development and trading assumptions about future events and actions that have not yet occurred and may not necessarily occur. There is a considerable degree of subjective judgement involved in the preparation of forecasts. Actual results may vary materially from the Forecast Financial Information and the variation may be materially positive or negative. Accordingly, investors should have regard to the investment risks set out in Section 4 of the Target s Statement. Target s Statement JUST GROUP 67

70 investigating accountant s report Our review of the Forecast Financial Information is substantially less in scope than an audit examination conducted in accordance with Australian Auditing and Assurance Standards. A review of this nature provides less assurance than an audit. We have not performed an audit and we do not express an audit opinion on the Forecast Financial Information included in the Target s Statement. Review statement on the Forecast Financial Information Based on our review of the Forecast Financial Information, which is not an audit, nothing has come to our attention which causes us to believe that: (a) (b) (c) (d) (e) the best estimate assumptions set out in Section 3.3 of the Target s Statement and the Pro-forma Adjustments set out in Section 3.5 do not provide a reasonable basis for the preparation of the Directors Pro-forma Forecast;, the Annualisation Adjustments set out in Section 3.6 of the Target s Statement do not provide a reasonable basis for the preparation of the Directors Annualised Pro-forma Forecast; the Directors Pro-forma Forecast is not properly prepared on the basis of the best estimate assumptions and the Pro-forma Adjustments and presented fairly in accordance with the recognition and measurement principles prescribed in Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies adopted by the Company; the Annualised Pro-forma Forecast is not properly prepared on the basis of the Directors Pro-forma Forecast and the Annualisation Adjustments, and presented fairly in accordance with the recognition and measurement principles prescribed in Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies adopted by the Company; and the Forecast Financial Information is unreasonable. The underlying assumptions are subject to significant uncertainties and contingencies often outside the control of the Company. If events do not occur as assumed, actual results and distributions achieved by the Company may vary significantly from the Forecast Financial Information. Furthermore, the expected reported results for the year ending 26 July 2008 are likely to differ from the Director s Pro-forma Forecast as the latter has been adjusted for certain non-recurring items and timing differences. Accordingly, we do not confirm or guarantee the achievement of the Forecast Financial Information, as future events, by their very nature, are not capable of independent substantiation. Subsequent events Apart from the matters dealt with in this Report, and having regard to the scope of our Report, to the best of our knowledge and belief no material transactions or events outside 68 JUST GROUP Target s Statement

71 investigating accountant s report of the ordinary business of the Company have come to our attention that would require comment on, or adjustment to, the information referred to in our Report or that would cause such information to be misleading or deceptive. Independence or Disclosure of Interest Neither PricewaterhouseCoopers nor PricewaterhouseCoopers Securities Ltd has any interest in the outcome of this issue other than the preparation of this Report and participation in due diligence procedures for which normal professional fees will be received. Financial Services Guide We have included our Financial Services Guide as Appendix 1 to our Report. The Financial Services Guide is designed to assist retail clients in their use of any general financial product advice in our Report. Yours faithfully John Grouios Authorised Representative of PricewaterhouseCoopers Securities Ltd Target s Statement JUST GROUP 69

72 investigating accountant s report PRICEWATERHOUSECOOPERS SECURITIES LTD FINANCIAL SERVICES GUIDE This Financial Services Guide is dated 30 May About us PricewaterhouseCoopers Securities Ltd (ABN , Australian Financial Services Licence no ) ("PwC Securities") has been engaged by Just Group Limited ( Just Group ) to provide a report in the form of an Investigating Accountant's Report in relation to the pro-forma forecast and annualised pro-forma forecast financial information (the Report ) for inclusion in the Target s Statement dated 2 June You have not engaged us directly but have been provided with a copy of the Report as a retail client because of your connection to the matters set out in the Report. 2 This Financial Services Guide This Financial Services Guide ("FSG") is designed to assist retail clients in their use of any general financial product advice contained in the Report. This FSG contains information about PwC Securities generally, the financial services we are licensed to provide, the remuneration we may receive in connection with the preparation of the Report, and how complaints against us will be dealt with. 3 Financial services we are licensed to provide Our Australian financial services licence allows us to provide a broad range of services, including providing financial product advice in relation to various financial products such as securities, interests in managed investment schemes, derivatives, superannuation products, foreign exchange contracts, insurance products, life products, managed investment schemes, government debentures, stocks or bonds, and deposit products. 4 General financial product advice The Report contains only general financial product advice. It was prepared without taking into account your personal objectives, financial situation or needs. PricewaterhouseCoopers Securities Ltd ACN ABN Holder of Australian Financial Services Licence No Freshwater Place 2 Southbank Blvd SOUTHBANK VIC 3006 GPO BOX 1331L MELBOURNE VIC 3001 DX 77 Australia Telephone Facsimile Fees, commissions and other benefits we may receive PwC Securities charges fees to produce reports, including this Report. These fees are negotiated and agreed with the entity who engages PwC Securities to provide a report. Fees are charged on an hourly basis or as a fixed amount depending on the terms of the agreement with the person who engages us. In the preparation of this Report our fees are based on an hourly basis. Directors or employees of PwC Securities, PricewaterhouseCoopers, or other associated entities, may receive partnership distributions, salary or wages from PricewaterhouseCoopers. 6 Associations with issuers of financial products PwC Securities and its authorised representatives, employees and associates may from time to time have relationships with the issuers of financial products. For example, PricewaterhouseCoopers may be the auditor of, or provide financial services to, the issuer of a financial product and PwC Securities may provide financial services to the issuer of a financial product in the ordinary course of its business. 7 Complaints If you have a complaint, please raise it with us first, using the contact details listed below. We will endeavour to satisfactorily resolve your complaint in a timely manner. In addition, a copy of our internal complaints handling procedure is available upon request. If we are not able to resolve your complaint to your satisfaction within 45 days of your written notification, you are entitled to have your matter referred to the Financial Industry Complaints Service ("FICS"), an external complaints resolution service. You will not be charged for using the FICS service. You should consider your own objectives, financial situation and needs when assessing the suitability of the Report to your situation. You may wish to obtain personal financial product advice from the holder of an Australian Financial Services Licence to assist you in this assessment. 8 Contact Details PwC Securities can be contacted by sending a letter to the following address: Mr John Grouios Freshwater Place 2 Southbank Blvd Southbank, Vic JUST GROUP Target s Statement

73 Design Select fabric Order Make Distribute Merchandise Annexure B