JUST GROUP LIMITED ABN FINANCIAL REPORT FOR THE PERIOD COMMENCING 30 JULY 2006 TO 28 JULY 2007 CONTENTS DIRECTORS REPORT 2 AUDITOR S IN

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1 FINANCIAL REPORT 07

2 JUST GROUP LIMITED ABN FINANCIAL REPORT FOR THE PERIOD COMMENCING 30 JULY 2006 TO 28 JULY 2007 CONTENTS DIRECTORS REPORT 2 AUDITOR S INDEPENDENCE DECLARATION 18 CORPORATE GOVERNANCE STATEMENT 19 INCOME STATEMENT 22 BALANCE SHEET 23 CASH FLOW STATEMENT 24 STATEMENT OF CHANGES IN EQUITY 25 NOTES TO THE FINANCIAL STATEMENTS 27 DIRECTORS DECLARATION 64 INDEPENDENT AUDIT REPORT TO MEMBERS OF JUST GROUP 65 JUST GROUP ANNUAL REPORT

3 T DIRECTORS REPORT The directors present their report together with the financial report of Just Group Limited (the company ), and the consolidated financial report of the consolidated entity, being the company and its controlled entities, for the 52 weeks commencing 30 July 2006 to 28 July 2007, together with the independent audit report to the members thereon. DIRECTORS The names and details of the company s directors in office during the financial year and until the date of the report are as follows: IAN POLLARD CHAIRMAN AND NON-EXECUTIVE DIRECTOR Ian Pollard was appointed Chairman of the 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. JONATHAN PINSHAW CHAIRMAN AND NON-EXECUTIVE DIRECTOR (Resigned 19 July 2007) Jonathan Pinshaw has held the position of Chairman of the company since 1 August 2003 and resigned on 19 July 2007 to focus on his private company interests. Jonathan has over 20 years experience in retailing, including holding the positions of Chief Executive Officer of OPSM Group Limited (being director from 4 January 2001 to 7 October 2003), Managing Director of Freedom Furniture Limited and Vice President/regional director of McDonald s Australia Limited. Jonathan has held a number of non-executive director roles for Australian public companies, including John Fairfax Holdings Limited (from 29 May 1998 to 12 February 2003) where he was Deputy Chairman; Australian Consolidated Investments Limited where he was Chairman; and Country Road Limited, Rabbit Photo Limited and James Hardie Industries Limited, as a non-executive director. Jonathan holds a Bachelor of Business Science (Honours) from the University of Cape Town and a Bachelor of Commerce (Honours) from the University of South Africa. 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 Group 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 focusing on the retail industry. Jason holds a Bachelor of Economics (Honours) from the University of Sydney and an MBA (Honours) from IMD in Lausanne, Switzerland. HOWARD MCDONALD MANAGING DIRECTOR (Resigned 18 September 2006) Howard McDonald held the position of Managing Director of the company from December 1997 and resigned on 18 September 2006 to pursue a career as a non-executive director. Howard has over 17 years experience in the clothing and textile industry, having previously held the position of Managing Director of Pacific Brands Clothing Group. Howard held a number of senior positions with Pacific Dunlop Limited, and previously at Hoechst Australia and ACI in the area of marketing and sales. Howard holds a Bachelor of Economics from Monash University. 2 JUST GROUP ANNUAL REPORT 2007

4 DIRECTORS REPORT (CONTINUED)T LAURA ANDERSON NON-EXECUTIVE DIRECTOR Laura Anderson became a non-executive director of Just Group on 1 September 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 member of the board of the Australian Grand Prix Corporation, is a director on the National Board of Starlight Children s Foundation and is President of Starlight Victoria. She is also a director of the Eastern Health Board. She is a governor of the American Chamber of Commerce and was previously a member of the Victorian Advisory Board for the American Chamber of Commerce. Laura was the founding president of the Council of Logistics Management Australasia (now CSCMP), is a fellow of the Chartered Institute of Logistics and Transport and 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 in Applied Mathematics and English from Southern Methodist University. She has completed advanced studies at Northwestern University in Evanston, Illinois and Melbourne University in Melbourne, Australia. IAN DAHL 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. SUSAN OLIVER 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 for 11 years, where she chairs the Risk Committee and, until recently, chaired the Corporate Social Responsibility Committee. She is also a director of MBF Australia, and Programmed Maintenance Services Ltd. Susan is an executive director of Wwite Pty Ltd, a company providing e-business applications for the United States market. Previously she was Managing Director of the Australian Commission for the Future and the Centre for International Research in Communication and Information Technology Ltd and was a senior manager for Andersen Consulting (Australia) now Accenture. Susan holds a Bachelor of Building (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. ALISON WATKINS NON-EXECUTIVE DIRECTOR Alison Watkins became a non-executive director of Just Group on 22 March 2004, was appointed Chair of the Audit and Risk Committee on 24 July 2007 and was Chair of the Remuneration and Nomination Committee from 22 March 2004 to 24 July Alison is also currently a director of Woolworths Limited (appointed 30 January 2007). Alison was formerly Chief Executive Officer of Berri Limited from 2002 to 30 September Previously, Alison has held senior roles with ANZ Banking Group Limited, including Managing Director, Regional Banking and Group General Manager Strategy and Mergers and Acquisitions. Alison also represented ANZ Banking Group Limited on the board of ETRADE Australia Securities Limited. She has over 10 years of experience as a management consultant with McKinsey and Company, where retailing was an area of focus. Alison holds a Bachelor of Commerce from the University of Tasmania, and is a member of the Institute of Chartered Accountants of Australia and a fellow of the Financial Services Institute of Australia. JUST GROUP ANNUAL REPORT

5 DIRECTORS REPORT (CONTINUED)T COMPANY SECRETARY JANICE PAYNE Janice Payne has been with the company since June In addition to her role as Company Secretary (since April 2000), she held the position of General Manager of Finance until January 2007, and currently holds the role of Corporate Affairs Director. Janice previously spent 10 years with Evans Partners Chartered Accountants. Janice holds a Bachelor of Economics from the University of Melbourne and is a member of the Institute of Chartered Accountants of Australia. COMMITTEE MEMBERSHIP Members acting on the committees of the board during the year were: AUDIT AND RISK REMUNERATION AND NOMINATION Alison Watkins (Chairman) 1 Alison Watkins (Chairman) 5 Ian Pollard (Chairman) 2 Ian Dahl (Chairman) 1 Laura Anderson Jason Murray Susan Oliver 3 Laura Anderson Jonathan Pinshaw 4 Ian Pollard Jonathan Pinshaw 4 Howard McDonald 6 1 Appointed Chairman 24 July Resigned 19 July Chairman up to 24 July Chairman up to 24 July Appointed 24 July Resigned 18 September MEETINGS OF DIRECTORS The number of directors meetings (including meetings of committees of directors) and the number of meetings attended by each of the directors of the company during the financial year are: BOARD MEETINGS AUDIT AND RISK COMMITTEE REMUNERATION AND NOMINATION COMMITTEE DIRECTOR NUMBER ATT MEETINGS HELD WHILE A DIRECTOR NUMBER ATT MEETINGS HELD WHILE A DIRECTOR NUMBER ATT MEETINGS HELD WHILE A DIRECTOR Ian Pollard Jason Murray Jonathan Pinshaw Howard McDonald Laura Anderson Ian Dahl Susan Oliver Alison Watkins Resigned 19 July Resigned 18 September Appointed 19 July JUST GROUP ANNUAL REPORT 2007

6 DIRECTORS REPORT (CONTINUED)T INTERESTS IN THE SHARES AND PERFORMANCE RIGHTS OF THE COMPANY AND RELATED BODIES CORPORATE As at the date of this report, the interests of the directors in the shares and performance rights of Just Group Limited were: NUMBER ORDINARY SHARES NUMBER PERFORMANCE RIGHTS Ian Pollard 101,852 - Jason Murray 509, ,219 Laura Anderson 33,678 - Ian Dahl - - Susan Oliver - - Alison Watkins 148,613 - EARNINGS PER SHARE 2007 CENTS 2006 CENTS Basic earnings per share Diluted earnings per share DIVIDENDS Two fully franked dividends were paid during the financial year, $18,530,000 (8.5 cents per share) on 15 November 2006 (2005: 6.0 cents per share) and $19,126,434 (9.5 cents per share) on 24 May 2007 (2006: 8.5 cents per share). The directors declared a final fully franked dividend of 10.0 cents per share on 12 September This dividend is scheduled to be paid on 14 November CORPORATE INFORMATION CORPORATE STRUCTURE Just Group Limited is a company limited by its shares that is incorporated and domiciled in Australia. NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES The consolidated entity operates a number of specialty retail fashion chains within the retail fashion markets in Australia and New Zealand. On 1 March 2007, Just Kor Fashion Group Pty (Ltd) (Just Kor), a company jointly owned by Just Jeans Group Pty Ltd, a subsidiary of Just Group Limited and Pepkor Retail Limited, commenced trading in South Africa with the Jay Jays business. OPERATING AND FINANCIAL REVIEW Just Group is a leading specialty fashion retailer in Australia and New Zealand, with a portfolio of well recognised retail brands, offering latest fashion at value price points. Just Group currently has 810 (2006: 775) stores across Australia and New Zealand. The emphasis is on a range of brands that provide diversification through breadth of target demographic and sufficiently broad appeal to enable a national footprint. Over 90% of Just Group s product range is designed, sourced and sold under its own brands. The Group continually invests in its brands to ensure they remain relevant to changing consumer tastes and at the forefront of their respective target markets. This investment includes national advertising campaigns and over five kilometres of store window displays, most of which are updated every two weeks. JUST GROUP ANNUAL REPORT

7 DIRECTORS REPORT (CONTINUED)T OPERATING AND FINANCIAL REVIEW (CONTINUED) Net profit after income tax for the year ended 28 July 2007 was $63.9 million (2006: $57.2 million), which reflects an 11.7% increase compared to last year. In the 12 months to 28 July 2007 EBITA (earnings before interest, tax and amortisation) increased by 10.4% to $97.4 million (2006: $88.3 million). The Group is highly cash generative, which allows the payment of strong dividends, continuous investment in the business and the ongoing repayment of debt. Total capital expenditure for the year was $26.9 million (2006: $25.4 million). The company has a sound capital structure. Net debt as at 28 July 2007 is less than the company s EBITDA for the year ended 28 July 2007 and all debt covenants have been satisfied throughout the year. The Group has sufficient funds to finance its operations and maintains a working capital facility primarily to allow the Group to manage the inter-month and intra-month fluctuations in cash flow inherent in the business. The company s working capital facility is $20,000,000, which was unused at 28 July SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS In May 2007, the company completed an off-market share buy-back. The company purchased 16,669,118 of its own shares for total consideration of $65.7 million, including associated costs. As a result of the buy-back, share capital was reduced by $1.7 million, and retained earnings was reduced by $64.0 million. SIGNIFICANT EVENTS AFTER THE BALANCE DATE On 19 July 2007, the company entered into a conditional agreement for the purchase of 100% of Smiggle Pty Ltd for total consideration of at least $29.0 million. On 27 August 2007, this acquisition was completed. The company is required to make an initial upfront payment of at least $23.2 million, with the balance of at least $5.8m payable in 2010 based on average earnings of the Smiggle business for 2009 and On 12 September 2007, the board of directors declared a fully franked dividend of 10.0 cents per share to be paid on 14 November LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS Certain likely developments in the operations of the consolidated entity and the expected results of those operations in financial years subsequent to the period ended 28 July 2007 are referred to in the preceding operating and financial review. No additional information is included on the likely developments in the operations of the economic entity and the expected results of those operations as the directors reasonably believe that the disclosure of such information would be likely to result in unreasonable prejudice to the economic entity if included in this report, and it has therefore been excluded in accordance with section 299(3) of the Corporations Act INDEMNIFICATION AND INSURANCE OF DIRECTORS, OFFICERS AND AUDITORS To the extent permitted by law, the company indemnifies every person who is or has been a director or officer of the company or of a wholly-owned subsidiary of the company against liability for damages awarded or judgments entered against them and legal defence costs and expenses, arising out of a wrongful act, incurred by that person whilst acting in their capacity as a director or officer provided there has been no admission, or judgment, award or other finding by a court, tribunal or arbitrator which establishes improper use of position, or committing of any criminal, dishonest, fraudulent or malicious act. The officers include the directors, as named earlier in this report, the company secretary and other officers, being the executive senior management team. Details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors and officers liability insurance contracts are not disclosed as such disclosure is prohibited under the terms of the contracts. The company has also entered into deeds of access, insurance and indemnity with all the directors of the company. No indemnification has been provided for the company s auditors. 6 JUST GROUP ANNUAL REPORT 2007

8 DIRECTORS REPORT (CONTINUED)T REMUNERATION REPORT (AUDITED) This Remuneration Report outlines the director and executive remuneration arrangements of the company and the Group in accordance with the requirements of the Corporations Act 2001 and its regulations. It also provides the remuneration disclosures required by paragraphs Aus 25.4 to Aus of AASB 124 Related Party Disclosures, which have been transferred to the Remuneration Report in accordance with Corporations Regulation 2M For the purposes of this report Key Management Personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company, the managing director and the six executives in the parent and the Group receiving the highest remuneration. For the purposes of this report, the term 'executive' encompasses the chief executive, senior executives and secretaries of the parent and the Group. REMUNERATION PHILOSOPHY The performance of the company depends upon the quality of its directors and executives. To prosper, the company must attract, engage and retain highly skilled directors and executives. To this end, the company embodies the following principles in its remuneration framework to: provide competitive rewards to attract and retain high calibre executives; link executive rewards to shareholder value; ensure a significant portion of executive remuneration is 'at risk', dependent upon meeting predetermined benchmarks; establish appropriate, demanding performance hurdles in relation to variable executive remuneration; and provide directors with the option to take a portion of their fees in the form of shares in the company at market price. REMUNERATION AND NOMINATION COMMITTEE The company s Remuneration and Nomination Committee is responsible for determining and reviewing compensation arrangements for the directors, the Managing Director (MD) and the senior management team. The Remuneration and Nomination Committee assesses the appropriateness of the nature and amount of remuneration of directors and senior managers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. REMUNERATION STRUCTURE In accordance with best practice corporate governance, the structure of non-executive director and senior manager remuneration is separate and distinct. JUST GROUP ANNUAL REPORT

9 DIRECTORS REPORT (CONTINUED)T REMUNERATION REPORT (AUDITED) (CONTINUED) NON-EXECUTIVE DIRECTOR REMUNERATION OBJECTIVE The board seeks to set aggregate remuneration at a level consistent with market practice and sufficient to attract and retain directors of the highest calibre. STRUCTURE The Constitution and the Australian Stock Exchange listing rules specify that the maximum aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting of shareholders. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was at a general meeting of shareholders held on 23 November 2006 when shareholders approved an aggregate remuneration of $900,000 per year. The amount of aggregate remuneration for approval by shareholders and the manner in which any part thereof is apportioned amongst directors is reviewed annually. The board considers advice from external consultants as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process. Each director receives a fee of $83,600 (2007) for being a director of the company. An additional fee is also paid to the Chair of the Audit and Risk Committee and the Chair of the Remuneration and Nomination Committee of $36,575 and $10,450 (2007) respectively recognising the additional time commitment required by directors chairing these committees. Non-executive directors are encouraged to hold shares in the company (purchased by the director on market). It is considered good corporate governance for directors to have a stake in the company. The non-executive directors of the company can participate in the non-executive director share plan, which entitles the director to take a portion of their annual fee in the form of shares, acquired at market price. The remuneration of non-executive directors for the period ended 28 July 2007 is detailed on page 15 of this report. SENIOR MANAGER AND EXECUTIVE DIRECTOR REMUNERATION OBJECTIVE The company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the company by: rewarding executives for company, business unit and individual performance against targets set by reference to appropriate benchmarks; aligning the interests of executives to those of shareholders; linking reward with the strategic goals and performance of the company; and ensuring total remuneration is competitive by market standards. 8 JUST GROUP ANNUAL REPORT 2007

10 DIRECTORS REPORT (CONTINUED)T REMUNERATION REPORT (AUDITED) (CONTINUED) STRUCTURE In determining the level and make-up of executive remuneration the Remuneration and Nomination Committee periodically engages an external consultant to provide independent advice detailing market levels of remuneration for comparable executive roles. This provides input to the Committee, which after feedback from management, makes its recommendations to the board. It is the Remuneration and Nomination Committee s policy that service agreements are entered into with the Managing Director and other executives. Details of these agreements are provided on page 14. Remuneration consists of the following key elements: Fixed Remuneration Variable Remuneration - Short-Term Incentive (STI) - Long-Term Incentive (LTI) The proportion of fixed and variable remuneration is established for each executive by the Remuneration and Nomination Committee. Details of the variable component of the executives remuneration are on page 16 of this report. FIXED REMUNERATION OBJECTIVE The level of fixed remuneration is set so as to provide a base level of remuneration, which is both appropriate to the position and competitive in the market. Fixed remuneration is reviewed annually by the Remuneration and Nomination Committee and the process consists of a review of company-wide, business unit and individual performance, relevant comparative remuneration in the market and, where appropriate, independent external advice on policies and practices. STRUCTURE Executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash and fringe benefits such as motor vehicles and expense payments. It is intended that the manner of payment chosen will be optimal for the recipient without changing the after tax cost to the company. The fixed remuneration component for the executives is detailed on page 16 of this report. JUST GROUP ANNUAL REPORT

11 DIRECTORS REPORT (CONTINUED)T REMUNERATION REPORT (AUDITED) (CONTINUED) VARIABLE REMUNERATION SHORT-TERM INCENTIVE (STI) OBJECTIVE The objective of the STI program is to link the achievement of the company s operational targets with the remuneration received by the executives charged with meeting those targets. The total potential STI available is set at a level so as to provide sufficient incentive to the executives to achieve the operational targets and such that the cost to the company is reasonable in the circumstances. STRUCTURE Actual STI payments granted to each executive depend on the extent to which specific targets set at the beginning of the financial year are met. The 2007 STI consists of a number of Key Performance Indicators (KPIs) including sales, ROCE and profit for the Group in total and individual brands. In future years the STI payment will be calculated according to the growth in Capital Adjusted Return (CAR) (being Group EBITA less a capital charge). The company has predetermined benchmarks, which must be met in order to trigger payments under the short-term incentive scheme. On an annual basis, performance is measured against KPIs to determine the STI payments, which is subject to approval of the Remuneration and Nomination Committee. VARIABLE REMUNERATION LONG-TERM INCENTIVE (LTI) OBJECTIVE The objective of the LTI plan is to reward senior managers in a manner aligned with the creation of shareholder wealth. STRUCTURE LTI grants to executives are delivered in the form of performance rights. The company uses relative Total Shareholder Return (TSR) as the performance hurdle for the long-term incentive plan. TSR is the return to shareholders provided by share price appreciation plus reinvested dividends, expressed as a percentage of investment. The use of a relative TSR-based hurdle is widely considered market best practice as it ensures an alignment between comparative shareholder return and reward for executives. The company receives independent assessment of whether the performance criteria are met. PERFORMANCE RIGHTS The company has a long-term incentive plan known as Performance Rights Plan (PRP). The PRP provides a remuneration element designed to attract and retain key senior employees and link rewards with the company s long-term performance and maximisation of shareholder wealth. The initial grant under the PRP to senior executives was made on 28 July 2004 and subsequent grants have been made on 1 October 2004, 1 October 2005, 21 November 2005 and 1 October All offers are made subject to the terms of the PRP rules, which confer various powers to the board to add to or vary any of the plan rules, subject to the requirements of the Australian Stock Exchange. An offer under the PRP grants an individual the right to a certain number of ordinary shares in the company. This right may vest and be convertible into shares, conditional on the satisfaction of the 'Total Shareholder Return' performance condition. 10 JUST GROUP ANNUAL REPORT 2007

12 DIRECTORS REPORT (CONTINUED)T REMUNERATION REPORT (AUDITED) (CONTINUED) VARIABLE REMUNERATION LONG-TERM INCENTIVE (LTI) PERFORMANCE RIGHTS (CONTINUED) The actual number of shares, if any, finally provided to participants will depend on the extent to which the performance condition has been met. It is possible for each participant to be allocated either no shares (if the performance condition is not met) or anywhere between 50% and 200% of their initial offered amount, depending on the level of achievement against the performance condition as detailed below. Target Conversion ratio of rights to shares available to vest under the TSR Performance Condition Just Group TSR does not meet performance of the median company in ASX 200 Industrials (excluding property trusts) 0% Just Group TSR equals performance of the median company in ASX 200 Industrials (excluding property trusts) 50% Just Group TSR ranked in top or second quartile of companies in the ASX 200 Industrials (excluding property trusts) Pro rata between 50% and 200% (3% increase for each higher ranking) Just Group TSR equals the performance of the best company in the ASX 200 Industrials (excluding property trusts) 200% The rights may vest over a three-year period as follows: a. 25% of rights granted are eligible to vest one year from date of grant; b. 30% of rights granted are eligible to vest two years from date of grant; and c. 45% of rights granted are eligible to vest three years from date of grant. Any rights which do not vest following the relevant vesting date will be retested annually after the date of the initial grant until the last vesting date. Once allocated, disposal of performance shares is subject to restrictions whereby board approval is required to sell shares granted within 10 years under this plan. An unvested performance right will lapse if it fails to meet the TSR performance condition over the prescribed three-year period. No employees, other than those listed below, have been granted performance rights at the date of this report. Holders of performance rights are not entitled to vote or receive dividends or other distributions. If an executive resigns from the company, all outstanding unvested rights are forfeited. During the year the company introduced a policy prohibiting the hedging of securities. Executives are prohibited from entering into transactions to hedge or limit the economic risk of the securities allocated to them under the PRP, either before vesting or after vesting while the securities are held subject to restriction. Executives are only able to hedge securities that have vested and continue to be subject to a trading restriction and a ten-year lock, with the prior consent of the board. No employees have any hedging arrangements in place. JUST GROUP ANNUAL REPORT

13 DIRECTORS REPORT (CONTINUED)T REMUNERATION REPORT (AUDITED) (CONTINUED) RIGHTS GRANTED PricewaterhouseCoopers (PwC) has performed an independent valuation of the rights granted to executives under the PRP. PwC has used an option pricing model utilising Monte Carlo simulation and has assessed the fair value of the rights at grant date to be: $2.14 for the 253,809 performance rights granted on 28 July $2.46 for the 439,847 performance rights granted on 1 October $2.42 for the 507,371 performance rights granted on 1 October $2.23 for the 79,681 performance rights granted on 21 November $3.53 for the 263,658 performance rights granted on 1 October BALANCE 30 JULY 2006 RIGHTS GRANTED RIGHTS VESTED RIGHTS LAPSED/ FORFEITED BALANCE 28 JULY 2007 DIRECTORS Howard McDonald 438,447 - (189,751) (248,696) - Jason Murray 164,957 97,084 (66,822) - 195,219 EXECUTIVES David Bull 49,801 41,436 (12,450) - 78,787 Ashley Gardner - 19, ,337 Anita Muller 82,698 28,729 (34,727) - 76,700 Jacqueline Naylor 172,697 - (71,677) (101,020) - Janice Payne 91,778 28,729 (39,004) - 81,503 Glenys Shearer 160,809 - (65,437) - 95,372 Wai Tang 119,521 48,343 (48,406) - 119,458 TOTAL 1,280, ,658 (528,274) (349,716) 666,376 TERMS AND CONDITIONS FOR EACH GRANT FIRST VESTING DATE LAST VESTING DATE Grant 1 - Rights granted 28 July September September 2007 Grant 2 - Rights granted 1 October September September 2007 Grant 3 - Rights granted 1 October September September 2008 Grant 4 - Rights granted 21 November September September 2008 Grant 5 - Rights granted 1 October September September JUST GROUP ANNUAL REPORT 2007

14 DIRECTORS REPORT (CONTINUED)T REMUNERATION REPORT (AUDITED) (CONTINUED) GROUP PERFORMANCE AND VESTING (A) 2006/2007 TOTAL SHAREHOLDER RETURN (TSR) For indicative purposes, Link Market Services Limited has calculated the Total Shareholder Return (TSR) for this year s testing period up to 28 July The table below shows the performance of the Just Group (as measured by TSR) and its percentile ranking against its peer group, being the Australian Stock Exchange 200 Industrials (excluding property trusts). TSR MEASURE FOR THE PERIOD: 1 OCTOBER 2006 TO 28 JULY 2007 TSR % 29% Percentile* 68% *100% = Top ranked company according to TSR measure. If the above situation prevails on 30 September 2007 then the following performance rights would vest and executives would receive the following shares purchased on-market by the company: DATE OF GRANT: 28 JULY OCTOBER OCTOBER 2005 & 21 NOVEMBER OCTOBER 2006 TOTAL % of grant available for vesting at 30 September % 45% 30% 25% Performance rights vesting 52,286 96, ,414 65, ,511 Shares to be purchased on-market if shares vest 54, , ,485 69, ,336 (B) EARNINGS PER SHARE The company s earnings per share were cents for the year ended 28 July 2007, cents for the year ended 29 July 2006 and cents for the year ended 30 July (C) 2005/2006 TSR AND VESTING 0n 30 September 2006, 528,274 Performance Rights vested in accordance with the plan rules and 833,474 Just Group shares were purchased on market for executives at a cost of $3,263,217. Tranche 1 of Grants 1 and 2 did not vest on 30 September 2005 and were retested from the date of the initial grant and subsequently vested on 30 September The table below shows the TSR measure and peer group percentile ranking at the test date: 28 JULY 2004 TO 30 SEPTEMBER OCTOBER 2004 TO 30 SEPTEMBER OCTOBER 2005 TO 30 SEPTEMBER 2006 TSR MEASURE FOR THE PERIOD: GRANT 1 GRANT 2 GRANTS 3 & 4 TSR % 108% 56% 57% Percentile* 79% 64% 94% *100% = Top ranked company according to TSR measure. JUST GROUP ANNUAL REPORT

15 DIRECTORS REPORT (CONTINUED)T REMUNERATION REPORT (AUDITED) (CONTINUED) SERVICE AGREEMENTS Remuneration and other terms of employment for the Managing Director and executives are formalised in service agreements. Major provisions of the agreements are set out below. EXECUTIVE TERM OF AGREEMENT REVIEW PERIOD PERIOD OF WRITTEN NOTICE REQUIRED FROM COMPANY UPON COMPANY INITIATED* TERMINATION BENEFITS UPON DIMINUTION OF ROLE PERIOD OF WRITTEN NOTICE REQUIRED FROM EMPLOYEE David Bull Open Annual 3 Mths 3 Mths TFR minus notice period Ashley Gardner Open Annual 3 Mths 3 Mths TFR minus notice period Anita Muller Open Annual 3 Mths 3 Mths TFR minus notice period Jason Murray Open Annual 12 Mths 12 Mths TFR minus notice period Janice Payne Open Annual 3 Mths 12 Mths TFR minus notice period Glenys Shearer Open Annual 3 Mths 12 Mths TFR minus notice period Wai Tang Open Annual 3 Mths 12 Mths TFR minus notice period TFR: Total Fixed Remuneration. 12 Mths TFR minus notice period 12 Mths TFR minus notice period 12 Mths TFR minus notice period 12 Mths TFR minus notice period 12 Mths TFR minus notice period 12 Mths TFR minus notice period 12 Mths TFR minus notice period 3 Mths 3 Mths 3 Mths 6 Mths 3 Mths 3 Mths 3 Mths *Unless termination is without notice for a specified cause, in which case there are no termination benefit entitlements. 14 JUST GROUP ANNUAL REPORT 2007

16 DIRECTORS REPORT (CONTINUED)T REMUNERATION REPORT (AUDITED) (CONTINUED) REMUNERATION OF DIRECTORS Details of the nature and amount of each element of the emolument of each director for the financial year are as follows: SHORT-TERM POST EMPLOYMENT SHARE BASED PAYMENT PERFORMANCE RELATED SALARY AND FEES $ CASH BONUS $ NON- MONETARY REMUNERATION $ SUPER- ANNUATION $ OTHER $ LSL $ LONG-TERM INCENTIVES $ TOTAL $ % DIRECTORS 2007 Executive Jason Murray 646, ,420 46,837 13, ,205 1,261, % Howard McDonald 1 184,384-11,327 99,602-24, ,079 - Non-executive Ian Pollard 38,757-2,904 91, ,738 - Jonathan Pinshaw 2 80, , ,783 - Laura Anderson 41,800-41,800 7, ,124 - Ian Dahl 3 3, ,653 - Susan Oliver 3 2, ,252 - Alison Watkins 47, , ,515 - TOTAL ,045, , , ,393-24, ,205 2,091, % DIRECTORS 2006 Executive Howard McDonald 733, ,800 66,152 66, ,457 1,826, % Jason Murray 348, ,000 38,968 12, , , % Non-executive - Jonathan Pinshaw 2 151, , ,400 - Laura Anderson 40,000-40,000 7, ,200 - Ian Pollard 79,260-21,563 24, ,350 - Alison Watkins 45,000-33,750 19, ,100 - TOTAL ,397, , , , ,057 3,120, % 1 Left the company on 18 September Left the company on 19 July Joined the company 19 July Under the Non-Executive Director Share Plan, non-executive directors are entitled to take a portion of their annual fee in the form of shares. JUST GROUP ANNUAL REPORT

17 DIRECTORS REPORT (CONTINUED)T REMUNERATION REPORT (AUDITED) (CONTINUED) REMUNERATION OF EXECUTIVE OFFICERS OF THE COMPANY AND CONSOLIDATED ENTITY Details of the nature and amount of each element of the remuneration of each of the executive officers of the company and the consolidated entity for the financial year are as follows: SHORT-TERM POST EMPLOYMENT SHARE BASED PAYMENT PERFORMANCE RELATED SALARY AND FEES $ CASH BONUS $ NON- MONETARY REMUNERATION $ SUPER- ANNUATION $ OTHER $ LSL $ LONG-TERM INCENTIVES $ TOTAL $ % EXECUTIVES 2007 David Bull 251, ,500 25,331 22, , , % Ashley Gardner 2 133,394 79,380 28,513 12, , , % Anita Muller 214, ,184-45, , , % Jacqueline Naylor 3 82, , , , ,077 - Janice Payne 224, ,184 13,894 21, , , % Glenys Shearer 397, ,800 8,583 44, ,031 1,073, % Wai Tang 305, ,550-44, , , % Total ,610,694 1,203,598 76, , , , ,964 4,020, % EXECUTIVES 2006 David Bull 205, ,000 24,353 18, , , % Anita Muller 195, ,050-27, , , % Jacqueline Naylor 270, ,900 59,767 57, , , % Janice Payne 194, ,120 28,145 17, , , % Glenys Shearer 308, ,425 41,000 35, , , % Wai Tang 252, ,100-37, , , % TOTAL ,426,113 1,133, , , ,574 3,485, % 1 The elements of remuneration have been determined on the basis of the cost to the company and the consolidated entity. The terms 'director' and 'officer' have been treated as mutually exclusive for the purposes of this disclosure. 2 Joined the executive team during the 2007 financial year. 3 Left the company during the 2007 financial year. 16 JUST GROUP ANNUAL REPORT 2007

18 DIRECTORS REPORT (CONTINUED)T REMUNERATION REPORT (AUDITED) (CONTINUED) AUDITOR S INDEPENDENCE DECLARATION A copy of the Auditor s Independence Declaration in relation to the audit for the financial year is provided on page 18 of this report. NON-AUDIT SERVICES The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act The nature and scope of each type of non-audit service provided means that independence was not compromised. Details of non-audit services provided by the entity s auditor, Ernst & Young, can be found in Note 25 of the Financial Report. ROUNDING The amounts contained in this report and financial statements have been rounded off to the nearest thousand dollars under the option available to the company under Australian Securities and Investments Commission (ASIC) Class Order 98/0100. The company is an entity to which the Class Order applies. Signed in accordance with a resolution of the board of directors. Ian Pollard Chairman 12 September 2007 JUST GROUP ANNUAL REPORT

19 Auditor s Independence Declaration to the Directors of Just Group Limited In relation to our review of the financial report of Just Group Limited for the 52 weeks ended 28 July 2007, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young Rob Perry Partner Date: 12 September 2007 Liability limited by the Accountants Scheme, approved under the Professional Standards Act 1994 (NSW). 18 JUST GROUP ANNUAL REPORT 2007

20 T CORPORATE GOVERNANCE STATEMENT This statement sets out Just Group s corporate governance principles and practices. The policies and practices of the company are in accordance with Australian Stock Exchange (ASX) Corporate Governance Council recommendations. ROLE OF THE BOARD The role of the board is to provide effective governance over the Group s affairs to ensure the interests of shareholders are protected and enhanced and the confidence of the investment market is maintained whilst having regard for the interests of all stakeholders, including customers, employees, suppliers and local communities. The board s key responsibilities are set out in its board charter and include to: ratify, monitor and modify financial objectives and to ratify and monitor the company s strategies; appoint, evaluate the performance of, determine the remuneration of, plan for the successor of and, where appropriate, remove the Managing Director (MD); ensure that the board continues to have the mix of skills and experience necessary to conduct the company s activities, and to this end ensure that appropriate directors are selected and appointed as required; oversee the conduct of Just Group business in order to evaluate whether the business is being properly managed; monitor financial results; ensure that appropriate risk management systems, internal controls and reporting systems and compliance frameworks are in place and operating effectively and efficiently; approve and monitor the progress of major capital expenditure, capital management and acquisitions and divestments; ensure responsible corporate governance; and monitor the performance of Just Group management. COMPOSITION OF THE BOARD The board currently comprises six directors, five non-executive directors, and the MD. The names of the directors, details of their experience, expertise and qualifications are set out in the Directors Report. The board charter specifies: a majority of the board will be comprised of independent directors; and the Chairman will be an independent director and a person cannot hold the positions of both Chairman and MD. The company considers the non-executive directors and Chairman of the board to be independent directors. INDEPENDENCE OF DIRECTORS The board adopted a number of criteria in relation to a non-executive director s independence. A non-executive director is considered to be independent when that director is not a member of management and: is not a substantial shareholder of the company or an officer of or otherwise associated directly with a substantial shareholder of the company; within the last three years has not been employed in an executive capacity by the company or another Group member, or been a director after ceasing to hold any such employment; within the last three years has not been a principal of a material professional advisor or a material consultant to the company or another Group member or an employee materially associated with the service provider; JUST GROUP ANNUAL REPORT

21 CORPORATE GOVERNANCE STATEMENT (CONTINUED)T INDEPENDENCE OF DIRECTORS (CONTINUED) is not a material supplier or customer of the company or other Group member or an officer of or otherwise associated directly or indirectly with a material supplier or customer; has no material contractual relationship with the company or another Group member other than as a director of the company; has not served on the board for a period which could, or could reasonably be perceived to, materially interfere with the directors ability to act in the best interests of the company; and is free from any interest and any business or other relationship, which could, or could reasonably be perceived to, materially interfere with the directors ability to act in the best interests of the company. Materiality thresholds will be determined in light of the individual context. TERM OF OFFICE The company s Constitution specifies that all directors (with the exception of the MD) must retire from office at no later than the third annual general meeting following their last election. Where eligible, a director may stand for re-election. INDEPENDENT ADVICE Directors are free to take independent professional advice on matters pertaining to their roles and responsibilities as directors of Just Group. The company will pay the reasonable costs incurred by a director in doing so, provided that before the advice is obtained the director discusses the requirement for the advice with the Chairman. PERFORMANCE REVIEW The board undertakes an annual self-assessment of its performance. BOARD COMMITTEES The board has established two committees of directors, the Remuneration and Nomination Committee and the Audit and Risk Committee. REMUNERATION AND NOMINATION COMMITTEE The Remuneration and Nomination Committee supports and advises the board in relation to the remuneration and nomination policies and practices of the company. The majority of members are independent directors and the Chairman of the Committee is also an independent director. Details of directors qualifications, experience and attendance at meetings are set out in the Directors Report. The Remuneration and Nomination Committee s purpose is to: discharge the board s responsibilities relating to the compensation of the company s executives and directors; establish coherent and transparent remuneration policies and practices, which will enable the company to attract, retain and motivate executives and directors who will create value for shareholders; fairly and responsibly reward executives; and establish and maintain a formal and transparent procedure for the selection and appointment of new directors to the board. The Committee undertakes an annual self-assessment of its performance and periodically reviews the composition of the board to ensure its size, composition and skill set meet the ongoing needs of the company. 20 JUST GROUP ANNUAL REPORT 2007

22 CORPORATE GOVERNANCE STATEMENT (CONTINUED)T AUDIT AND RISK COMMITTEE The Audit and Risk Committee supports and advises the board in fulfilling its corporate governance and oversight responsibilities in relation to the company s financial reporting, internal control structure, ethical standards and risk management framework and systems. Risk oversight management encompasses operational, financial reporting, compliance and strategic risk. All members are independent non-executive directors and the Chairman of the Committee is also an independent director. Details of directors qualifications, experience and attendance at meetings are set out in the Directors Report. The Committee undertakes an annual self-assessment of its performance. CONTINUOUS DISCLOSURE POLICY The board aims to ensure that shareholders are informed of all major developments affecting the company s state of affairs and share price. The company has procedures and practices to ensure compliance with the continuous disclosure requirements of Australian Stock Exchange listing rules and to ensure that price-sensitive information is publicly released through the stock exchange. All information provided to the Australian Stock Exchange is immediately posted on the company s website. Information is communicated to shareholders through: the annual report; interim and final results announcement; disclosures made to the Australian Stock Exchange; notices and explanatory memoranda of the annual general meeting (AGM); the AGM; and occasional letters from the board chair and MD to specifically inform shareholders of key matters of interest. SHARE TRADING GUIDELINES The company has established guidelines regarding trading in Just Group Limited shares. These guidelines prohibit directors, members of senior management and other employees from dealing in the company s shares while in possession of price sensitive information. Directors and officers are permitted to buy and sell securities at all times other than: from 1 December until two days after the half-yearly announcement; and from 1 July until two days after the preliminary full year announcement. Two days is defined as the day of the announcement plus one day. Outside of these periods, directors must receive clearance from the Chairman for any proposed dealing in shares and senior management must advise the MD, in advance of the transaction. Executives are also prohibited from entering into transactions to hedge or limit the economic risk of the securities allocated to them under the company s Performance Rights plan, either before vesting or after vesting while the securities are held subject to restriction. Executives are only able to hedge securities that have vested and continue to be subject to a trading restriction and a 10- year lock, with prior consent of the board. POLICIES AND PRACTICES The company s codes of ethics, governing ethical clothing practice, privacy, equal opportunity and occupational health and safety can be found on the company s website. Details of the company s policies and practices, and the charters for the board and each of its committees may be found at JUST GROUP ANNUAL REPORT

23 INCOME STATEMENT FOR THE FINANCIAL PERIOD 28 JULY 2007 CONSOLIDATED THE COMPANY NOTES 28 JULY JULY JULY JULY 2006 Revenue from sale of goods 3 762, , Other revenue 3 4,938 1, ,693 38,539 Total revenue 3 767, , ,693 38,539 Other income 3 4,211 2,767 26,273 25,250 Total income 3 771, , ,966 63,789 Changes in inventories of finished goods and work in progress and raw materials used 4 (323,661) (295,790) - - Employee expenses (142,047) (131,362) (15,808) (15,367) Operating lease rental expense (132,842) (116,779) (3,433) (2,997) Depreciation, impairment and amortisation 4 (20,011) (17,397) (1,238) (1,051) Advertising and direct marketing (17,917) (17,550) - - Borrowing costs 4 (6,929) (6,153) (5,460) (6,017) Auditor s remuneration (audit and other services) 25 (324) (426) (324) (426) Other expenses (37,318) (35,309) (6,989) (6,705) Total expenses (681,049) (620,766) (33,252) (32,563) Share of profit/(loss) of associate 12 (210) Profit before income tax expense 90,312 81, ,714 31,226 Income tax (expense)/benefit 5 (26,421) (24,677) (44) 235 Profit after income tax expense 19 63,891 57, ,670 31,461 Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Dividends paid per share (cents per share) The above income statement should be read in conjunction with the accompanying notes. 22 JUST GROUP ANNUAL REPORT 2007

24 BALANCE SHEET AS AT 28 JULY 2007 CONSOLIDATED THE COMPANY ASSETS Current assets NOTES Cash and cash equivalents 26 38,134 19,984 24,107 10,409 Trade and other receivables 6 2,512 1, Inventories 7 61,250 65, Other 8 2,795 2, Total current assets 104,691 89,338 25,016 11,027 Non-current assets Trade and other receivables 6 1,256-12,385 - Plant and equipment 10 62,751 55,202 3,968 2,394 Intangible assets 11 79,084 79, Deferred tax assets 5 8,782 7, Investment in an associate 12 1, Other financial assets ,416 91,307 91,307 Total non-current assets 153, , ,296 94,548 TOTAL ASSETS 258, , , ,575 LIABILITIES Current liabilities Trade and other payables 13 50,415 47,787 4,956 3,932 Interest-bearing liabilities Derivative financial instruments 29 1, Income tax payable 6,391 5,686 8,632 7,548 Provisions 15 10,680 8, Other 16 2,240 3, Total current liabilities 71,695 65,495 13,670 11,480 Non-current liabilities Trade and other payables ,065 Interest-bearing liabilities ,651 79, ,715 63,258 Deferred tax liabilities 5 2,354 1, Provisions , Other 16 8,723 7, Total non-current liabilities 133,614 90, ,026 76,453 TOTAL LIABILITIES 205, , ,696 87,933 NET ASSETS 53,298 97,295 15,616 17,642 EQUITY Contributed equity 17 13,720 15,405 13,720 15,405 Reserves 18 (3,406) 1,091 (635) 1,670 Retained profits 19 42,984 80,799 2, TOTAL EQUITY 53,298 97,295 15,616 17,642 The above balance sheet should be read in conjunction with the accompanying notes JUST GROUP ANNUAL REPORT

25 CASH FLOW STATEMENT FOR THE FINANCIAL PERIOD 28 JULY 2007 CONSOLIDATED THE COMPANY NOTES 28 JULY JULY JULY JULY 2006 CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts in the course of operations 759, , Cash payments in the course of operations (640,797) (591,731) (30,393) (25,168) Income taxes (paid)/refunded (25,787) (21,471) 1, Interest received 1, , Borrowing costs paid (5,095) (5,811) (3,999) (5,684) NET CASH INFLOW/(OUTFLOW) FROM 26(b) OPERATING ACTIVITIES 89,760 81,132 (31,967) (29,893) CASH FLOWS FROM INVESTING ACTIVITIES Dividends received 2, Payment for investments (2,169) (18,876) - - Proceeds from sale of plant and equipment Advances to related parties - - (494,117) (471,379) Repayment of advances to related parties , ,406 Proceeds from disposal of available-for-sale 19, investments Advances to associate (1,256) Payment for plant and equipment and leasehold premiums (26,933) (25,425) (2,565) (567) NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES (8,105) (44,156) 109,166 84,542 CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid 20 (37,656) (31,610) (37,656) (31,610) Share buy-back (65,735) - (65,735) - Proceeds from borrowings 39,916 47,871 39,916 31,629 Repayment of borrowings - (58,371) - (58,371) Lease payments (30) (48) (26) - NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES (63,505) (42,158) (63,501) (58,352) NET INCREASE/(DECREASE) IN CASH HELD 18,150 (5,182) 13,698 (3,703) Cash at the beginning of the financial period 19,984 25,166 10,409 14,112 CASH AT THE END OF THE FINANCIAL PERIOD 26(a) 38,134 19,984 24,107 10,409 The above cash flow statement should be read in conjunction with the accompanying notes. 24 JUST GROUP ANNUAL REPORT 2007

26 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD 28 JULY 2007 CONSOLIDATED NOTES CONTRIBUTED EQUITY PERFORMANCE RIGHTS RESERVE FOREIGN CURRENCY TRANSLATION RESERVE FAIR VALUE RESERVE RETAINED PROFITS At 30 July , (558) - 55,204 70,630 Net profit for the period ,205 57,205 Translation of overseas subsidiary 18(b) - - (2,478) - - (2,478) Revaluation of available-for-sale investments to fair value 18(c) ,457-2,457 Amortisation of performance rights 18(a) - 1, ,091 Dividends paid (31,610) (31,610) At 29 July ,405 1,670 (3,036) 2,457 80,799 97,295 Net profit for the period ,891 63,891 Translation of overseas subsidiary 18(b) Disposal of available-for-sale investments 18(c) (2,457) - (2,457) Amortisation of performance rights 18(a) After tax cost of on market share purchase 18(a) - (2,583) (2,583) Reversal of amortisation of forfeited performance rights 18(a) - (329) (329) Share buy-back 17(b),19 (1,685) (64,050) (65,735) Dividends paid (37,656) (37,656) At 28 July ,720 (635) (2,771) - 42,984 53,298 The above statement of changes in equity should be read in conjunction with the accompanying notes. TOTAL JUST GROUP ANNUAL REPORT

27 STATEMENT OF CHANGES IN EQUITY NOTES CONTRIBUTED EQUITY PERFORMANCE RIGHTS RESERVE THE COMPANY FOREIGN CURRENCY TRANSLATION RESERVE FAIR VALUE RESERVE RETAINED PROFITS TOTAL At 30 July , ,700 Net profit for the period ,461 31,461 Amortisation of performance rights 18(a) - 1, ,091 Dividends paid (31,610) (31,610) At 29 July ,405 1, ,642 Net profit for the period , ,670 Amortisation of performance rights 18(a) After tax cost of onmarket share purchase 18(a) - (2,583) (2,583) Reversal of amortisation of forfeited rights 18(a) - (329) (329) Share buy-back 17(b),19 (1,685) (64,050) (65,735) Dividends paid (37,656) (37,656) At 28 July ,720 (635) - - 2,531 15,616 The above statement of changes in equity should be read in conjunction with the accompanying notes. 26 JUST GROUP ANNUAL REPORT 2007

28 FOR THE FINANCIAL PERIOD 28 JULY CORPORATE INFORMATION The financial report of Just Group Limited for the period ended 28 July 2007 was authorised for issue in accordance with a resolution of the directors on 12 September Just Group is a leading specialty fashion retailer in Australia and New Zealand, with a portfolio of well recognised retail brands, offering latest fashion at value price points. Just Group Limited is the ultimate parent company of the Group. Just Group Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange. 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The consolidated and company financial report is prepared for the period commencing 30 July 2006 to 28 July (a) (b) BASIS OF PREPARATION The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. Set out below is a summary of the significant accounting policies adopted in the preparation of this financial report. The financial report has also been prepared on a historical cost basis, except for derivative financial instruments and available-for-sale investments, which have been measured at fair value. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars () unless otherwise stated under the option available to the company under Australian Securities and Investments Commission (ASIC) Class Order 98/0100. The company is an entity to which the Class Order applies. STATEMENT OF COMPLIANCE The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). The financial report also complies with International Financial Reporting Standards (IFRS). The following standards, amendments to standards or interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 28 July 2007, but have not been applied in preparing this financial report. Amendment/ New Title New AASB 7 Financial Instruments: Disclosures New AASB 8 Operating Segments Application date of standard* Impact on Group financial report 1 January 2007 AASB 7 is a disclosure standard so will have no direct impact on the amounts included in the Group s financial statements. However, the amendments will result in changes to the financial instrument disclosures included in the Group s financial report. 1 January 2009 AASB 8 is a disclosure standard so will have no direct impact on the amounts included in the Group s financial statements. However the amendments may have an impact on the Group s segment disclosures. Application date for Group* July 2007 August 2009 JUST GROUP ANNUAL REPORT

29 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Amendment/ New Title New AASB Interpretation 10 Interim Financial Reporting and Impairment New AASB Interpretation 11 AASB 2 Group and Treasury Share Transactions New IFRIC Interpretation 13 Customer Loyalty Programmes Amendment Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments [AASB 1, 2, 3, 4, 5, 6, 7, 102, 107, 108, 110, 112, 114, 116, 117, 118, 119, 120, 121, 127, 128, 129, 130, 131, 132, 133, 134, 136, 137, 138, 139, 141, 1023 & 1038] Application date of standard* Impact on Group financial report 1 November 2006 The prohibitions on reversing impairment losses in AASB 136 and AASB 139, which are to take precedence over the more general statement in AASB 134, are not expected to have any impact on the Group s financial report. 1 March 2007 This is consistent with the Group's existing accounting policies for share-based payments, so the amendments are not expected to have any impact on the Group's financial report. 1 July 2008 The Group operates The Just Shop loyalty program within its Just Jeans business. The impact of this interpretation when applied is not expected to be material. 1 July 2007 These amendments are expected to reduce the extent of some disclosures in the Group s financial report. Application date for Group* July 2007 July 2007 August 2008 July 2007 *Designates the beginning of the applicable annual reporting period. (c) BASIS OF CONSOLIDATION Subsidiaries The consolidated financial statements comprise the financial statements of Just Group Limited ('the parent entity') and its subsidiaries ('the Group') as at the end of each financial year. A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities as at the end of the financial year. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all inter-company balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition. 28 JUST GROUP ANNUAL REPORT 2007

30 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d) (e) (f) (g) FOREIGN CURRENCY TRANSLATION Both the functional and presentation currency of Just Group Limited and its Australian subsidiaries is Australian dollars. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All exchange differences in the consolidated financial report are taken to the income statement. The functional currency of the overseas subsidiaries is New Zealand dollars. As at the reporting date the assets and liabilities of these overseas subsidiaries are translated into the presentation currency of Just Group Limited at the rate of exchange ruling at the balance sheet date and the income statements are translated at the weighted average exchange rates for the period. The exchange differences arising on the retranslation are taken directly to the foreign currency translation reserve. CASH AND CASH EQUIVALENTS Cash and cash equivalents in the balance sheet comprise cash at bank and on hand and short-term deposits with an original maturity of three months or less. For the purposes of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. TRADE AND OTHER RECEIVABLES Trade receivables, which generally have 30 to 60-day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. Collectibility of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off when identified. An allowance for doubtful debts is raised when there is objective evidence that the group will not be able to collect the debt. INVENTORIES Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: - Raw materials - purchase cost on a first-in, first-out basis; - Finished goods and work-in-progress - purchase cost plus a proportion of the purchasing department, freight, handling and warehouse costs incurred to deliver the goods to the point of sale. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale. JUST GROUP ANNUAL REPORT

31 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (h) (i) PLANT AND EQUIPMENT Plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows: - Store plant and equipment 3 to 8 years - Leased plant and equipment 2 to 5 years - Other plant and equipment 2 to10 years The carrying values of plant and equipment are reviewed for impairment annually for events or changes in circumstances that may indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. If an indication of impairment exists, and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessments of the time value of money and the risks specific to the assets. GOODWILL Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business combination over the acquirer s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated losses. Goodwill is not amortised. Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash-generating units. This generally means an assessment at the store level. However, if cash inflows cannot be separately identified, the impairment assessment is performed at the business unit or group level. As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination s synergies. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. In conducting the impairment testing for goodwill, a pre-tax discount rate of 10.4% is used to discount future net cash flows for each cash-generating unit. The assessment is conducted over the lesser of the remainder of the lease term or useful life of the cash-generating unit, or five years. Future cash inflows are projected to grow at an average rate of 4.1% over the relevant assessment period, based on current and historical growth patterns. 30 JUST GROUP ANNUAL REPORT 2007

32 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (j) INTANGIBLE ASSETS Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets are tested for impairment where an indicator of impairment exists, and in the case of intangibles with indefinite lives annually, either individually or at the cash-generating unit level. Where the carrying amount of an intangible asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Recoverable amount is the greater of fair value less costs to sell and value-in-use. It is determined for an individual asset, unless the asset s value-in-use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time-value of money and the risks specific to the asset. A summary of the policies applied to the Group s intangible assets is as follows: Trademarks Premiums paid on acquisition of leaseholds Useful life Indefinite Finite Method used Not amortised or revalued Amortised over the term of the lease. Internally generated / Acquired Acquired Acquired Impairment test / Recoverable amount testing Annually; for indicator of impairment Amortisation method reviewed at each financial year-end; Reviewed annually for indicator of impairment. (k) OTHER FINANCIAL ASSETS (i) Available-for-sale investments After initial recognition, available-for-sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in the profit or loss. Fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. (ii) Non-derivative financial assets Loans and receivables are non-derivative financial assets with fixed or determinable repayments that are not quoted in an active market. Such assets are recognised at cost and amortised using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process. JUST GROUP ANNUAL REPORT

33 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (l) INVESTMENTS IN ASSOCIATE The Group s investment in its associate is accounted for using the equity method of accounting in the consolidated financial statements. Under the equity method, investment in the associate is carried in the consolidated balance sheet at cost plus post-acquisition changes in the Group's share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. After application of the equity method, the Group determines whether it is necessary to recognise any impairment loss with respect to the Group s net investment in the associate. The Group s share of its associate s post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from the associate is recognised in the parent entity s income statement, while in the consolidated financial statements they reduce the carrying amount of the investment. When the Group s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long-term receivables and loans, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The reporting date of the associate is currently 30 June and is in the process of being aligned to that of the company. The associate s accounting policies conform to those used by the Group for like transactions and events in similar circumstances. (m) LEASES Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. (n) TRADE AND OTHER PAYABLES Liabilities for trade creditors and other amounts are recognised and carried at original invoice cost, which is the fair value of the consideration to be paid in the future for goods and services received whether or not billed to the consolidated entity. Trade liabilities are normally settled on terms of between seven and 45 days. (o) INTEREST BEARING LIABILITIES All loans, borrowings and interest-bearing payables are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, such items are subsequently measured at amortised cost using the effective interest method. Borrowing costs are expensed as incurred. 32 JUST GROUP ANNUAL REPORT 2007

34 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (p) (q) PROVISIONS Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the obligation. If the effect of the time-value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time-value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. A provision for dividends is not recognised as a liability unless the dividends are declared on or before the reporting date. EMPLOYEE BENEFITS (i) (ii) (iii) Wages, salaries and annual leave The provisions for employee entitlements to wages, salaries and annual leave represent the amount which the consolidated entity has a present obligation to pay, resulting from employees services provided up to the balance date. The provisions have been calculated at nominal amounts based on current wage and salary rates, and include related on-costs. Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Related on-costs have also been included in the liability. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity that match as closely as possible the estimated cash outflow. Superannuation fund The company and other controlled entities contribute to eligible employee superannuation funds. Contributions are charged against income as they are made. Further information is set out in Note 23. (r) (s) DEFERRED INCOME Lease incentives are capitalised in the financial statements when received and credited to revenue over the term of the store lease to which they relate. REVENUE RECOGNITION Revenue is recognised to the extent that it is probable that the economic benefit will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. (i) (ii) Sale of goods Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. Risks and rewards are considered passed to the buyer at the point-of-sale in retail stores and at the time of delivery to catalogue and wholesale customers. Interest Revenue is recognised as interest accrues using the effective interest method. (iii) Dividends Revenue is recognised when a right to receive consideration for the investment in assets is attained. JUST GROUP ANNUAL REPORT

35 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (s) (t) REVENUE RECOGNITION (CONTINUED) (iv) Lay-by sales The company has a history of most lay-by sales in retail stores being completed following receipt of an initial deposit. Therefore, the company has elected to recognise revenue on lay-by sales upon receipt of a deposit. This change in accounting policy has not had a material effect on the financial performance or financial position of the company for the 52 weeks ended 28 July 2007 and has therefore not been applied retrospectively to prior year financial results. INCOME TAX Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the balance sheet date. Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: - when the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or - when the taxable temporary difference is associated with investments in subsidiaries, associates and interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry forward or unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses, can be utilised except: - when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or - when the deductible temporary difference is associated with investments in subsidiaries, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. 34 JUST GROUP ANNUAL REPORT 2007

36 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (t) (u) (v) INCOME TAX (CONTINUED) Tax consolidation Just Group Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 August The head entity, Just Group Limited, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, Just Group Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. OTHER TAXES Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) except: - when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and - receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies in Note 22 are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING (i) Forward exchange contracts The consolidated entity enters into forward exchange contracts where it agrees to buy or sell specified amounts of foreign currencies in the future at a predetermined exchange rate. The objective is to match the contract with anticipated future cash flows from purchases in foreign currencies, to protect the consolidated entity against the possibility of loss from future exchange rate fluctuations. Forward exchange contracts are stated at fair value and, as they do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to the income statement. (ii) Interest rate swaps The consolidated entity enters into interest rate swap agreements from time to time that are used to convert the variable interest rate of its short-term borrowings to medium-term fixed interest rates. The swaps are entered into with the objective of reducing the risk of rising interest rates. The swaps are stated at fair value with any gains or losses on remeasurement recognised in the income statement. JUST GROUP ANNUAL REPORT

37 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (w) (x) (y) SHARE-BASED REMUNERATION SCHEMES The Group provides benefits to certain employees (including senior executives) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). There are currently two plans in place to provide these benefits: - a senior leaders reward scheme (SLRS); and - a long-term incentive plan known as the Performance Rights Plan (PRP). The SLRS provides a remuneration element designed to attract and retain key senior employees and link rewards with company performance and achievement of individual KPIs. The rewards include a cash bonus for meeting individual KPIs and shares in the company (purchased on market) for meeting company performance targets. Any shares allocated under this plan have a one or two-year trading restriction. The cost of the purchase of shares is expensed to the income statement. The PRP provides a remuneration element designed to attract and retain key senior executives and link rewards with the company s performance and maximisation of shareholder wealth. An offer under the PRP grants an individual the right to a certain number of ordinary shares in the company. This right may vest and be convertible into shares, conditional on the satisfaction of the 'Total Shareholder Return' performance condition. Refer to the Remuneration Report, designated as audited, within the Directors Report on pages 2 to 17 for further details. The cost of these share-based transactions with employees is measured by reference to the fair value at the date at which they are granted. The cost of share-based transactions is expensed over the period in which the performance conditions may be fulfilled, ending on the date on which the relevant employees become fully entitled to the award ( vesting date ). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects: (i) the extent to which the vesting period has expired; and (ii) the Group s best estimate of the number of equity instruments that will ultimately vest. Upon vesting, the Company purchases shares on-market to fulfill its obligations under the PRP. The cost of the purchase of shares, net of tax, is charged to the performance rights reserve. COMPARATIVES The current reporting period 30 July 2006 to 28 July 2007 represents 52 weeks and the comparative reporting period 31 July 2005 to 29 July 2006 also represents 52 weeks. EARNINGS PER SHARE Basic earnings per share is calculated as net profit divided by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated as net profit divided by the weighted average number of ordinary shares and dilutive potential ordinary shares outstanding as at the end of the reporting period. 36 JUST GROUP ANNUAL REPORT 2007

38 CONSOLIDATED THE COMPANY 28 JULY JULY JULY JULY REVENUE REVENUE Revenue from sale of goods 759, , Revenue from sale of goods to associate 2, Revenue from sale of goods 762, , OTHER REVENUE Membership program fees 879 1, Interest Other persons 1, , Associate Wholly-owned controlled entity - - 5,446 6,017 Total Interest 1, ,693 6,539 Dividends Wholly-owned controlled entity ,000 32,000 Other companies 2, Total Dividends 2, ,000 32,000 TOTAL OTHER REVENUE 4,938 1, ,693 38,539 TOTAL REVENUE 767, , ,693 38,539 OTHER INCOME Amortisation of deferred income 2,678 1, Gain on disposal of financial assets Realised foreign exchange gain Bad debts recovered Other Management charges wholly-owned group ,129 25,245 TOTAL OTHER INCOME 4,211 2,767 26,273 25,250 TOTAL INCOME 771, , ,966 63,789 JUST GROUP ANNUAL REPORT

39 CONSOLIDATED THE COMPANY NOTES 28 JULY JULY JULY JULY EXPENSES AND LOSSES Profit before income tax expense includes the following specific net losses and expenses: Costs of goods sold 323, , DEPRECIATION AND IMPAIRMENT OF NON-CURRENT ASSETS Depreciation of plant and equipment 10 19,523 16,964 1,220 1,051 Depreciation of plant and equipment under lease Impairment of plant and equipment TOTAL DEPRECIATION AND IMPAIRMENT OF NON-CURRENT ASSETS 19,832 17,160 1,238 1,051 AMORTISATION OF NON-CURRENT ASSETS Amortisation of leasehold premiums TOTAL AMORTISATION OF NON-CURRENT ASSETS TOTAL DEPRECIATION, IMPAIRMENT AND AMORTISATION 20,011 17,397 1,238 1,051 BORROWING COSTS EXPENSED Finance charges on capitalised leases Interest charges on bank loans and overdraft 6,909 6,144 5,446 6,017 TOTAL BORROWING COSTS 6,929 6,153 5,460 6,017 Bad debts Realised foreign exchange loss Unrealised foreign exchange loss forward exchange contracts 1, Net loss on disposal of plant and equipment JUST GROUP ANNUAL REPORT 2007

40 CONSOLIDATED THE COMPANY 28 JULY JULY JULY JULY INCOME TAX The major components of income tax expense are: INCOME STATEMENT CURRENT INCOME TAX Current income tax charge 26,535 24,059 (866) (248) Adjustments in respect of current income tax of previous years (59) DEFERRED INCOME TAX Relating to origination and reversal of temporary differences (27) 72 Imputation credits on dividends received (1,043) Other 685 (10) INCOME TAX EXPENSE/(BENEFIT) REPORTED IN THE INCOME STATEMENT 26,421 24, (235) A reconciliation between tax expense and the accounting profit before tax multiplied by the Group s applicable income tax rate is as follows: Accounting profit before income tax 90,312 81, ,714 31,226 Income tax at the statutory income tax rate of 30% (2006: 30%) 27,094 24,565 31,114 9,368 Adjustments in respect of current income tax of previous years (27) (59) Expenditure not allowable for income tax purposes Income not assessable for tax purposes (346) (314) (31,200) (9,600) Gross up income for franking credits Franking credits (1,043) Effect of tax rates in foreign jurisdictions Other INCOME TAX EXPENSE/(BENEFIT) REPORTED IN THE INCOME STATEMENT 26,421 24, (235) JUST GROUP ANNUAL REPORT

41 CONSOLIDATED THE COMPANY 28 JULY JULY JULY JULY INCOME TAX (CONTINUED) DEFERRED INCOME TAX DEFERRED TAX LIABILITIES BALANCE SHEET Plant and equipment (895) (792) (219) (276) Intangibles (1,066) (983) - - Foreign exchange gains and losses Expenditure deductible for tax purposes over five years Other receivables and prepayments (362) - (1) - Leased plant and equipment (129) - (129) - Other 3 (3) - - TOTAL DEFERRED TAX LIABILITIES (2,354) (1,541) (296) (124) DEFERRED TAX LIABILITIES INCOME STATEMENT (MOVEMENTS) Plant and equipment (56) 61 Intangibles Foreign exchange gains and losses 10 (289) 1 (96) Expenditure deductible for tax purposes over five years 79 (98) 98 (98) Other receivables and prepayments Leased plant and equipment Other (277) 172 (133) 40 JUST GROUP ANNUAL REPORT 2007

42 CONSOLIDATED THE COMPANY 28 JULY JULY JULY JULY INCOME TAX (CONTINUED) DEFERRED TAX ASSETS BALANCE SHEET Plant and equipment (130) Deferred gains and losses on foreign exchange contracts Foreign exchange gains and losses Revaluation of interest rate swap Inventory provisions Deferred rent gain 1, Deferred lease incentive income 1,943 2, Employee provisions 3,490 3, Intangibles Capital expenditure deductible over five years Performance rights Other Lease liability TOTAL DEFERRED TAX ASSETS 8,782 7, DEFERRED TAX ASSETS INCOME STATEMENT (MOVEMENTS) Plant and equipment Deferred gains and losses on foreign exchange contracts (405) (181) - - Foreign exchange gains and losses (322) Revaluation of interest rate swap Inventory provisions Deferred rent gain (679) 580 (2) 18 Deferred lease incentive income 213 (573) - - Provision for doubtful debts Employee provisions (401) (157) Intangibles Capital expenditure deductible over five years (124) 498 (125) 399 Performance rights 212 (327) 212 (327) Other provisions 314 (63) 126 (85) Lease liability (130) - (131) - (561) JUST GROUP ANNUAL REPORT

43 5 INCOME TAX (CONTINUED) TAX CONSOLIDATION Effective 1 August 2004 for the purposes of income taxation, Just Group Limited and its 100% Australian-owned subsidiaries formed a tax consolidated group. Members of the group have a tax-sharing arrangement in order to allocate income tax expense to the wholly-owned subsidiaries on a pro rata basis. In addition, the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At balance date the possibility of default is remote. The head entity of the tax consolidated group is Just Group Limited. CONSOLIDATED THE COMPANY NOTES 28 JULY JULY JULY JULY TRADE AND OTHER RECEIVABLES CURRENT Sundry debtors 2,070 1, Related party receivables Associate Carrying amount of trade and other receivables 2,512 1, NON-CURRENT Wholly-owned entities ,385 - Related party receivables Loans to associate 27 1, Carrying amount of trade and other receivables 1,256-12,385-7 INVENTORIES The valuation policy adopted in respect of the following is set out in Note 2(g) Raw materials (at cost) 5,051 3, Finished goods (at net realisable value) 56,199 62, TOTAL INVENTORIES AT THE LOWER OF COST AND NET REALISABLE VALUE 61,250 65, OTHER ASSETS CURRENT Deposits and prepayments 2,795 2, JUST GROUP ANNUAL REPORT 2007

44 CONSOLIDATED THE COMPANY OTHER FINANCIAL ASSETS NON-CURRENT Shares in listed entities at fair value (available-for-sale) 84 21, Shares in controlled entities at cost ,307 91,307 TOTAL OTHER FINANCIAL ASSETS 84 21,416 91,307 91, PLANT AND EQUIPMENT Plant and equipment at cost 117, ,760 7,481 5,117 Less: Accumulated depreciation and impairment (54,832) (52,661) (3,943) (2,723) Total 62,260 55,099 3,538 2,394 Capitalised leased assets Less: Accumulated depreciation (57) (97) (18) - Total TOTAL PLANT AND EQUIPMENT 62,751 55,202 3,968 2,394 RECONCILIATIONS Reconciliations of the carrying amounts for each class of plant and equipment are set out below: Plant and equipment Carrying amount at beginning of period 55,099 47,643 2,394 2,963 Additions in normal course of business 26,870 25,361 2, Disposals (515) (329) (201) (85) Movement in carrying value due to foreign currency translation 600 (445) - - Impairment (271) (167) - - Depreciation (19,523) (16,964) (1,220) (1,051) Carrying amount at end of period 62,260 55,099 3,538 2,394 Leased plant and equipment Carrying amount at beginning of period Additions Depreciation (38) (29) (18) - Carrying amount at end of period TOTAL 62,751 55,202 3,968 2, INTANGIBLES Goodwill 90,562 90, Less: Accumulated amortisation (15,500) (15,500) - - Total 75,062 75, Trademark 3,594 3, Leasehold premiums 1, Less: Accumulated amortisation (596) (472) - - Total TOTAL INTANGIBLES 79,084 79, JUST GROUP ANNUAL REPORT

45 NOTES INVESTMENT IN ASSOCIATE Investment in associate 1,959 - Just Jeans Group Pty Ltd, a subsidiary of Just Group Limited has a 50% interest in a joint venture entity Just Kor Fashion Group (Pty) Ltd, which is involved in retailing of the Jay Jays concept in South Africa. Just Kor Fashion Group (Pty) Ltd is a small proprietary company incorporated in South Africa. Its functional currency is South African rand. There were no impairment losses relating to the investment in the associate and no capital commitments or other commitments relating to the associate. The Group s share of the loss in its investment in the associate for the year was $210,202 (2006: $0). The following table illustrates summarised financial information relating to the Group s investment in Just Kor Fashion Group (Pty) Ltd: SHARE OF ASSOCIATE S BALANCE SHEET Current assets 2,460 - Non-current assets 1,070 - Total assets 3,530 Current liabilities (476) - Non-current liabilities (1,224) - Total liabilities (1,700) - Exchange differences arising from translation of associate s net assets NET ASSETS 1,959 - SHARE OF ASSOCIATE S PROFIT OR LOSS Revenue Profit/(loss) before income tax (210) - Income tax expense - - Profit/(loss) after income tax (210) - 44 JUST GROUP ANNUAL REPORT 2007

46 CONSOLIDATED THE COMPANY NOTES TRADE AND OTHER PAYABLES CURRENT Trade creditors 29,373 30, Other creditors and accruals 21,042 17,323 4,816 3,654 TOTAL CURRENT 50,415 47,787 4,956 3,932 NON-CURRENT Wholly-owned entities , INTEREST-BEARING LIABILITIES CURRENT Lease liability TOTAL CURRENT NON-CURRENT Bank loans* unsecured 103,469 63, ,464 63,464 Bank loans* unsecured (NZ$20.0 million) 17,935 16, (d) 121,404 79, ,464 63,464 Less directly attributable borrowing costs (107) (216) (103) (206) Net bank loans 121,297 79, ,361 63,258 Lease liability TOTAL NON-CURRENT 121,651 79, ,715 63,258 *Bank loans are subject to a negative pledge and cross guarantee. 15 PROVISIONS CURRENT Employee benefits 23 10,680 8, NON-CURRENT Employee benefits , OTHER LIABILITIES CURRENT Deferred income 2,240 3, TOTAL CURRENT 2,240 3, NON-CURRENT Deferred income 8,723 7, TOTAL NON-CURRENT 8,723 7, JUST GROUP ANNUAL REPORT

47 CONSOLIDATED THE COMPANY CONTRIBUTED EQUITY (a) ISSUED AND PAID UP CAPITAL Ordinary shares paid in full 13,720 15,405 13,720 15,405 Ordinary shares have the right to receive dividends as declared and, in the event of winding up of the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company NUMBER OF SHARES NUMBER OF SHARES (b) MOVEMENTS IN SHARES ON ISSUE Ordinary shares on issue at beginning of the financial year 218,000,000 15, ,000,000 15,405 Share buy-back (16,669,118) (1,685) - - Total shares on issue at end of the financial year 201,330,882 13, ,000,000 15,405 The company completed an off-market share buy-back in May This resulted in the company buying back 16,669,118 (7.65% of issued shares) for total consideration of $65.0 million. The purchase price for each share bought back was $3.90, with 10.0 cents allocated to share capital and $3.80 paid as a fully franked dividend. Directly attributable costs of $0.7 million were incurred in relation to the share buy-back. These costs have been apportioned between share capital and retained earnings on the same basis as the share purchase price allocation. 46 JUST GROUP ANNUAL REPORT 2007

48 CONSOLIDATED THE COMPANY RESERVES Performance rights reserve (635) 1,670 (635) 1,670 Foreign currency translation reserve (2,771) (3,036) - - Fair value reserve - 2, TOTAL RESERVES (3,406) 1,091 (635) 1,670 (a) PERFORMANCE RIGHTS RESERVE (i) Nature and purpose of reserve This reserve is used to record the cumulative amortised value of performance rights issued to key senior employees under the performance rights plan. (ii) Movements in the reserves Opening balance 1, , Amortisation of performance rights 607 1, ,091 After tax cost of on-market share purchase (2,583) - (2,583) - Reversal of amortisation of forfeited rights (329) - (329) - CLOSING BALANCE (635) 1,670 (635) 1,670 (b) FOREIGN CURRENCY TRANSLATION RESERVE (i) Nature and purpose of reserve This reserve is used to record differences arising from the translation of the financial statements. (ii) Movements in the reserve Opening balance (3,036) (558) - - Profit/(loss) on translation arising on consolidation of overseas subsidiary 265 (2,478) - - CLOSING BALANCE (2,771) (3,036) - - (c) FAIR VALUE RESERVE (i) Nature and purpose of reserve This reserve is used to record gains and losses on revaluation to fair value of available-for-sale investments (ii) Movements in the reserve Opening balance 2, Revaluation of available-for-sale investments to fair value - 2, Disposal of available-for-sale investments (2,457) CLOSING BALANCE - 2, JUST GROUP ANNUAL REPORT

49 CONSOLIDATED THE COMPANY RETAINED PROFITS Opening balance 80,799 55, Net profit attributable to members of the company 63,891 57, ,670 31,461 Dividends paid (37,656) (31,610) (37,656) (31,610) Share buy-back (64,050) - (64,050) - CLOSING BALANCE 42,984 80,799 2, DIVIDENDS PAID AND PROPOSED DIVIDENDS PAID DURING THE YEAR Final 2006 franked dividend paid 15 November cents per share (2005: 6.0 cents per share) Interim 2007 franked dividend paid 24 May cents per share (2006: 8.5 cents per share) 18,530 13,080 18,530 13,080 19,126 18,530 19,126 18,530 TOTAL DIVIDENDS PAID 37,656 31,610 37,656 31,610 PROPOSED DIVIDEND Final 2007 franked dividend payable 14 November cents per share (2006: 8.5 cents per share) 20,133 18,530 20,133 18,530 FRANKING CREDIT BALANCE The amount of franking credits available for the subsequent financial period are: Franking account balance as at the end of the financial period at 30% (2006: 30%) 15,853 38,700 15,853 38,700 Franking credits that will arise from the payment of income tax payable as at the end of the financial period 8,632 7,548 8,632 7,548 TOTAL FRANKING CREDIT BALANCE 24,485 46,248 24,485 46,248 The tax rate at which paid dividends have been franked is 30% (2006: 30%). Dividends proposed will be franked at the rate of 30% (2006: 30%). 48 JUST GROUP ANNUAL REPORT 2007

50 21 STATEMENT OF OPERATIONS BY GEOGRAPHIC SEGMENT (A) BUSINESS SEGMENTS The consolidated entity operates in one business segment, being specialty retailing. (B) GEOGRAPHIC SEGMENTS AUSTRALIA NEW ZEALAND ELIMINATIONS CONSOLIDATED REVENUE Sale of goods 653, , , , , ,002 Other revenue and income 8,493 3, ,149 4,646 Segment income 662, , , , , ,648 RESULT Segment result 81,777 71,021 7,589 9, ,419 90,312 81,882 Income tax expense (26,421) (24,677) Net profit for the year ,891 57,205 ASSETS AND LIABILITIES Segment assets 238, ,845 30,109 35,002 (10,499) (19,963) 258, ,884 Segment liabilities (202,458) (151,013) (12,931) (24,120) 10,080 19,544 (205,309) (155,589) OTHER SEGMENT INFORMATION Capital expenditure 23,609 21,462 3,324 3, ,933 25,425 Depreciation and amortisation 16,813 14,695 2,927 2, ,740 17,230 Impairment loss recognised JUST GROUP ANNUAL REPORT

51 CONSOLIDATED THE COMPANY NOTES EXPENDITURE COMMITMENTS CAPITAL EXPENDITURE COMMITMENTS Plant and equipment Payable within one year 8,397 9, TOTAL CAPITAL EXPENDITURE 8,397 9, LEASE EXPENDITURE COMMITMENTS (i) Operating leases Payable within one year 115, ,794 2,504 2,574 Payable within one to five years 230, ,323 2,059 4,545 Payable in more than five years 13,369 14, Total operating leases 359, ,800 4,563 7,119 (ii) Finance leases Total lease liability current Total lease liability non-current Total finance leases Finance lease commitments Payable within one year Payable within one to five years Minimum lease payments Less future finance charges (185) (11) (180) - TOTAL LEASE LIABILITY Operating leases have an average lease term of five years. Assets, which are the subject of operating leases, include motor vehicles, premises and computers. Finance leases have an average lease term of four years with the option to purchase the asset at the completion of the lease term for the asset s market value. The average discount rate implicit in the leases is 8.44% (2006: 7.06%). 50 JUST GROUP ANNUAL REPORT 2007

52 CONSOLIDATED THE COMPANY NOTES EMPLOYEE BENEFITS EMPLOYEE BENEFITS The aggregate employee entitlement liability is comprised of: Accrued wages, salaries and on-costs 6,288 7,426 1,975 2,682 Provisions current 15 10,680 8, Provisions non-current , TOTAL 17,854 17,604 1,975 2,682 Number of employees at year-end (FTE) 3,326 3,323 SUPERANNUATION COMMITMENTS Superannuation payments have been made by the company to complying superannuation plans for the provision of benefits to employees of the Group on retirement, death or disability. Benefits provided under the plan are based on contributions for each employee. Employees contribute various percentages of their gross income. There is no legally enforceable obligation on Group companies to contribute to the superannuation plans above the minimum statutory requirement of 9%. EMPLOYEE SHARE PLANS (a) Australian Employee Share Plan Australian employees were issued shares on 11 May 2004 under the plan established in accordance with Division 13A and Part III of the Income Tax Assessment Act 1936, enabling employees to utilise the tax free exemption available under that division. This issue was not applicable to directors and existing management shareholders. No recipient of these shares was permitted to dispose of their shares before the earlier of either three years from the issue date or cessation of employment. The shares were held in a CHESS holding lock until the earlier of these events occurring. The three-year holding lock expired on 11 May (b) New Zealand Employee Share Plan New Zealand employees were issued shares on 28 May 2004 under the Just Group Limited Employee Share Acquisition Plan (NZ). The plan established was approved by the Commissioner of Inland Revenue in accordance with section DF7 of the Income Tax Act The plan operates through a trust. The shares are held by the Trustee (Just Group Trustee Limited) for the benefit of participating employees for a restrictive period of three years which expired on 28 May In accordance with New Zealand tax laws, an employee forfeited their shares if they ceased to be employed during the restrictive period, other than for reasons of sickness, accident, redundancy or retirement at normal retirement age. At the plan s last financial year-end (31 March 2007) the number of shares forfeited was 36,176. Employee shares carry the same rights as ordinary shares listed on the Australian Stock Exchange, including full voting and dividend rights. In 2004 under both the Australian and New Zealand Employee share schemes the company issued a total of 773,500 shares to each of the eligible full-time, part-time and casual employees. Fair value at issue date per share was $2.10, the issue price of shares of the company at listing date 7 May JUST GROUP ANNUAL REPORT

53 24 DIRECTOR AND EXECUTIVE DISCLOSURES (a) DETAILS OF DIRECTORS AND EXECUTIVES Directors Ian Pollard, Director (Non-Executive, Chairman) Jason Murray, Director (Managing Director) Howard McDonald (Managing Director, resigned 18 September 2006) Laura Anderson, Director (Non-Executive) Ian Dahl, Director (Non-Executive) Susan Oliver, Director (Non-Executive) Jonathan Pinshaw (Non-Executive, resigned 19 July 2007) Alison Watkins, Director (Non-Executive) Executives David Bull (Merchandising Director Casualwear ) Ashley Gardner (Chief Financial Officer) Anita Muller (Human Resources Director) Janice Payne (Company Secretary and Corporate Affairs Director) Glenys Shearer (Commercial and Merchandising Womenswear Director) Wai Tang (Director Operations and Peter Alexander Sleepwear) Jacquie Naylor (Merchandising Director, resigned 22 September 2006) (b) REMUNERATION OF DIRECTORS AND EXECUTIVES The company has applied the exemption under Corporations Amendments Regulation 2006 which exempts listed companies from providing remuneration disclosures in relation to their key management personnel in their annual financial reports by Accounting Standard AASB 124 Related Party Disclosures. These remuneration disclosures are provided in the Remuneration Report within the Directors Report, designated as audited, on pages 2 to 17. (c) SHAREHOLDINGS OF DIRECTORS AND EXECUTIVES The shareholdings and share transactions during the period of directors and executives in office as at the end of the period are: JUST GROUP ANNUAL REPORT 2007 BALANCE 29 JULY 2006 ORDINARY SHARE PURCHASE ORDINARY SHARE DISPOSAL ORDINARY BALANCE 28 JULY 2007 ORDINARY DIRECTORS Ian Pollard 91,852 10, ,852 Jason Murray 403, , ,308 Laura Anderson 20,202 13,476-33,678 Susan Oliver Ian Dahl Alison Watkins 148, ,613 EXECUTIVES David Bull 211,441 22,659 2 (100,000) 134,100 Ashley Gardner Anita Muller 9,523 54, ,972 Janice Payne 489,922 61,047 2 (250,000) 300,969 Glenys Shearer 1,069, , ,173,307 Wai Tang 752,325 76,624 2 (350,000) 478,949 TOTAL 3,197, ,368 (700,000) 2,944,748 1 Joined the company on 19 July Shares acquired 11 October 2006 when performance rights vested under the LTI plan rules, as detailed in the Remuneration Report. 3 Joined the company on 03 January 2007.

54 24 DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED) (c) SHAREHOLDINGS OF DIRECTORS AND EXECUTIVES (continued) 2006 BALANCE 30 JULY 2005 ORDINARY SHARE PURCHASE ORDINARY SHARE DISPOSAL ORDINARY BALANCE 29 JULY 2006 ORDINARY DIRECTORS Ian Pollard 84,194 7,658-91,852 Jason Murray 657,735 - (254,000) 403,735 Howard McDonald 1 6,011,347 - (2,000,000) 4,011,347 Jonathan Pinshaw 2 1,219, ,219,715 Laura Anderson 9,069 11,133-20,202 Alison Watkins 137,322 11, ,613 EXECUTIVES David Bull 367,441 - (156,000) 211,441 Anita Muller 9, ,523 Jacqueline Naylor 3 1,469,767 - (500,000) 969,767 Janice Payne 734,883 - (244,961) 489,922 Glenys Shearer 1,469,767 - (400,000) 1,069,767 Wai Tang 1,102,325 - (350,000) 752,325 TOTAL 13,273,088 30,082 (3,904,961) 9,398,209 1 Left the company on 18 September Left the company on 19 July Left the company on 22 September (d) OTHER TRANSACTIONS AND BALANCES WITH DIRECTORS AND EXECUTIVES The directors and the executives purchase goods from the consolidated entity through retail stores. These purchases are at a discount on the retail price, but are on the same terms and conditions as those available to other employees. From time to time the company purchases goods and/or services from director-related entities on normal commercial terms and conditions. JUST GROUP ANNUAL REPORT

55 25 AUDITOR S REMUNERATION CONSOLIDATED THE COMPANY 28 JULY 2007 $ 29 JULY 2006 $ 28 JULY 2007 $ 29 JULY 2006 $ Amounts received or due and receivable by the auditor for audit services: Audit and review of financial reports 200, , , ,000 Amounts received or due and receivable by the auditor for other services: Taxation advice 120, , , ,310 Workers compensation certificates 3,500-3,500 - Other - 44,200-44,200 Total Other services 123, , , ,510 TOTAL AUDITOR S REMUNERATION 323, , , , JUST GROUP ANNUAL REPORT 2007

56 CONSOLIDATED THE COMPANY NOTES TO THE CASH FLOW STATEMENT (a) RECONCILIATION OF CASH AND CASH EQUIVALENTS Cash at bank and in hand 14,634 19, ,409 Short-term deposits 23,500-23,500 - TOTAL CASH ASSETS AND CASH EQUIVALENTS 38,134 19,984 24,107 10,409 (b) RECONCILIATION OF NET CASH FLOWS FROM OPERATIONS TO NET PROFIT Net profit 63,891 57, ,670 31,461 Adjustments for: Amortisation Depreciation and impairment 19,832 17,160 1,278 1,051 Share of associate s net (profit)/loss Finance charges on capitalised leases Loss on sale of non-current assets Gain on disposal of financial assets (477) Management charges - - (26,129) (25,245) Bad debts Movement in performance rights reserve (2,307) 1,091 (2,307) 1,091 Net exchange differences 1,151 (2,678) - - Dividend income classified as investing cash flow (2,436) (2) (104,000) (32,000) Inter-company interest - - (5,446) (6,017) Changes in assets and liabilities net of the effects from acquisition and disposal of businesses: Increase/(decrease) in employee benefits 1, Increase/(decrease) in deferred tax liabilities 813 (187) 172 (133) Increase/(decrease) in trade and other payables 2,628 12,734 1,024 2,088 Increase/(decrease) in derivative financial instruments 1, Increase/(decrease) in income tax payable 705 2,143 (193) (646) Increase/(decrease) in deferred income 648 (346) 9 (61) Increase/(decrease) in other liabilities - (1,379) - (1,379) (Increase)/decrease in trade and other receivables (1,486) (418) 10 - (Increase)/decrease in prepayments (327) (323) (301) (311) (Increase)/decrease in inventories 4,609 (6,524) - - (Increase)/decrease in deferred tax assets (883) 1, NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 89,760 81,132 (31,967) (29,893) JUST GROUP ANNUAL REPORT

57 26 NOTES TO THE CASH FLOW STATEMENT (CONTINUED) (c) NON-CASH FINANCING AND INVESTING ACTIVITIES Finance lease transactions: During the financial period the consolidated entity acquired $447,931 new plant and equipment (2006: $nil) by means of finance lease. CONSOLIDATED THE COMPANY (d) FINANCE FACILITIES Working capital facility Used Unused 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Finance facility Used 121,404 79, ,464 63,464 Unused* 20,000 60,284 18,595 60, , , , ,748 Leasing facility Used Unused Total facilities Used 121,902 79, ,900 63,464 Unused 40,000 80,284 38,595 80,284 TOTAL 161, , , ,748 *The unused portion of the finance facility may only be used to fund permitted acquisitions, in accordance with the banking subscription agreement. This facility was fully drawn down on 24 August 2007 to finance the acquisition of Smiggle Pty Ltd. Refer Note JUST GROUP ANNUAL REPORT 2007

58 27 RELATED PARTY DISCLOSURES The consolidated financial statements include the financial statements of Just Group Limited and the subsidiaries listed in the following table: (a) SUBSIDIARIES INTEREST HELD COUNTRY OF INCORPORATION CLASS OF SHARE 2007 % 2006 % Just Jeans Group Pty Limited Australia Ordinary Just Jeans Pty Limited Australia Ordinary Jay Jays Trademark Pty Limited Australia Ordinary Just-Shop Pty Limited Australia Ordinary Peter Alexander Sleepwear Pty Limited Australia Ordinary Old Blues Pty Limited Australia Ordinary Kimbyr Investments Limited New Zealand Ordinary Underground Fashions Limited New Zealand Ordinary Skelton Manufacturing (1995) Limited New Zealand Ordinary Jacqui E Pty Limited Australia Ordinary Jacqueline-Eve Fashions Pty Limited Australia Ordinary Jacqueline-Eve (Hobart) Pty Limited Australia Ordinary Jacqueline-Eve (Retail) Pty Limited Australia Ordinary Jacqueline-Eve (Leases) Pty Limited Australia Ordinary Sydleigh Pty Limited Australia Ordinary Old Favourites Blues Pty Limited Australia Ordinary Urban Brands Pty Ltd Australia Ordinary Portmans Pty Limited Australia Ordinary Dotti Pty Ltd Australia Ordinary Peter Alexander USA Inc* United States Ordinary *Not trading. (b) TRANSACTIONS WITH SUBSIDIARIES Just Group Limited is the ultimate parent company. (i) (ii) (iii) During the year Just Group Limited received interest of $5,446,284 (2006: $6,016,705) from entities within the wholly-owned Group. Just Group Limited charges a management fee to entities within the wholly-owned Group for services provided. The management fee is based on costs incurred by Just Group Limited. Amounts charged are shown in Note 3. During the year Just Group Limited received dividends totalling $104,000,000 (2006: $32,000,000) from subsidiary Just Jeans Group Pty Ltd. (iv) Loans receivable and payable from wholly-owned entities are disclosed in Notes 6 and 13. JUST GROUP ANNUAL REPORT

59 27 RELATED PARTY DISCLOSURES (CONTINUED) (c) TRANSACTIONS WITH ASSOCIATES (i) During the year associate, Just Kor Fashion Group (Pty) Ltd purchased goods from the Group in the amount of $2,805,449 (2006: $ nil). Transactions are priced on an arm s-length basis. (i) The Group charged Just Kor Fashion Group (Pty) Ltd a management fee for services provided in the amount of $94,802 (2006: $ nil). (ii) As a result of the above transactions the Group has a receivable of $442,210 from Just Kor Fashion Group (Pty) Ltd at year-end as disclosed in Note 6. (iii) During the year the Group provided a loan of ZAR7.5 million ($1,255,969) to Just Kor Fashion Group (Pty) Ltd. The loan is denominated in South African Rand currency. Interest is charged at a commercial rate and payable quarterly. Total interest paid on the loan for the financial year was $45,801 as disclosed in Note 3. (d) DIRECTORS AND EXECUTIVES Details relating to directors and executives including remuneration paid are included in Note DEED OF CROSS GUARANTEE Pursuant to Class Order 98/1418, relief has been granted to the wholly-owned subsidiaries listed below from the Corporations Law requirements for preparation, audit and lodgement of financial reports. As a condition of the Class Order, the company and each of the controlled entities listed below (the 'Closed Group') entered into a Deed of Cross Guarantee. The effect of the Deed is that the company guarantees to each creditor payment in full of any debt in the event of winding up of any of the controlled entities under certain provisions of the Corporations Law. If a winding up occurs under other provisions of the law, the company will only be liable in the event that after six months any creditor has not been paid in full. The controlled entities have also given similar guarantees in the event that the company is wound up. The subsidiaries, which are members of the Closed Group, are: Just Jeans Group Pty Limited Just Jeans Pty Limited Sydleigh Pty Limited Old Favourites Blues Pty Limited Jay Jays Trademark Pty Limited Just-Shop Group Pty Limited Jacqui E Pty Limited Jacqueline-Eve Fashions Pty Limited Jacqueline-Eve (Hobart) Pty Limited Jacqueline-Eve (Retail) Pty Limited Jacqueline-Eve (Leases) Pty Limited Urban Brands Pty Ltd Portmans Pty Limited. A consolidated income statement and consolidated balance sheet of the entities, which are members of the Closed Group, are set out on the following page. 58 JUST GROUP ANNUAL REPORT 2007

60 DEED OF CROSS GUARANTEE (CONTINUED) INCOME STATEMENT Profit before income tax 90,312 66,781 Income tax expense (28,296) (20,068) Profit after income tax 62,016 46,713 Retained profits at beginning of period 66,958 51,855 Dividends provided for or paid (37,656) (31,610) Share buy-back (64,050) - Retained profits at end of period 27,268 66,958 BALANCE SHEET Cash and cash equivalents 28,019 14,320 Trade and other receivables 55,458 32,351 Inventories 47,640 53,000 Other 2,267 1,813 Total current assets 133, ,484 Other financial assets 5,301 3,341 Plant and equipment 44,014 40,558 Intangible assets 79,705 79,736 Deferred tax assets 6,219 6,020 Total non-current assets 135, ,655 TOTAL ASSETS 268, ,139 Trade and other payables 95,658 57,581 Interest-bearing liabilities Income tax payable 8,103 7,237 Provisions 10,026 7,801 Other 1,674 2,587 Total current liabilities 115,605 75,234 Interest-bearing liabilities 103,716 63,336 Deferred tax liabilities 1,639 1,264 Provisions 859 1,822 Other 6,453 5,450 Total non-current liabilities 112,667 71,872 TOTAL LIABILITIES 228, ,106 NET ASSETS 40,351 84,033 Contributed equity 13,718 15,405 Reserves (635) 1,670 Retained profits 27,268 66,958 TOTAL EQUITY 40,351 84,033 JUST GROUP ANNUAL REPORT

61 29 FINANCIAL INSTRUMENTS The Group s principal financial instruments, other than derivatives, comprise bank loans and overdrafts, finance leases and cash and short-term deposits. The main purpose of these financial instruments is to raise finance for the Group s operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The Group also enters into derivative transactions from time to time, principally interest rate swaps, forward exchange contracts and foreign currency options. The purpose is to manage the interest rate and currency risks arising from the Group s operations and its sources of finance. Speculative trading in derivatives is prohibited by the Group s financial risk management policies. The main risks arising from the Group s financial instruments are cash flow interest rate risk, liquidity risk, foreign currency risk and credit risk. The board reviews and agrees policies for managing each of these risks as summarised below. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument, are disclosed in note 2 to the financial statements. CASH FLOW INTEREST RATE RISK The Group s exposure to the risk of changes in market interest rates relates primarily to the Group s long-term debt obligations with a floating interest rate. The Group enters into interest rate swaps from time to time to convert all or a portion of the variable interest rate component of the long-term debt obligations to fixed. The criteria used to determine whether a variable interest rate commitment should be converted to a fixed interest rate are based on an assessment of the Group s future cash flows and investment requirements. The Group has not entered into any interest rate swaps in the past 12 months. The interest on the Group s finance facilities is charged at the bank bill rates plus the bank s margin. The consolidated entity s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities are as follows: 2007 NOTES FLOATING INTEREST RATE 1 YEAR OR LESS 1 5 YEARS MORE THAN 5 YEARS TOTAL WEIGHTED AVERAGE EFFECTIVE INTEREST RATE FINANCIAL ASSETS Cash 26 38, , % FINANCIAL LIABILITIES Bank loans AUD , , % Bank loans NZD20.0 million 14 17, , % Lease liabilities % Interest rate swap NOTES FLOATING INTEREST RATE 1 YEAR OR LESS 1 5 YEARS MORE THAN 5 YEARS TOTAL WEIGHTED AVERAGE EFFECTIVE INTEREST RATE FINANCIAL ASSETS Cash 26 19, , % FINANCIAL LIABILITIES Bank loans AUD 14 25,974-37,500-63, % Bank loans NZD 14 16, , % Lease liabilities % Interest rate swap* - (14) - - (14) N/A *The company entered into an interest rate swap agreement on a portion of the principal debt outstanding until the final repayment date being 16 November The fair value of the interest rate swap is included in the 'Other Creditors and Accruals' amount at balance date. 60 JUST GROUP ANNUAL REPORT 2007

62 29 FINANCIAL INSTRUMENTS (CONTINUED) FOREIGN CURRENCY RISK The Group has a significant operation in New Zealand. As a result, significant movements in the AUD/NZD affect the Group s balance sheet and results from operations. The Group does not hedge this exposure. The Group has an investment and long-term receivables denominated in South African rand (ZAR) arising from its investment in South Africa. As a result of these transactions, movements in the AUD:ZAR exchange rates can affect the Group s balance sheet. The Group does not consider this risk to be material and, as such has not sought to hedge this exposure. The Group also has transactional currency exposures. Such exposure arises principally from purchases by an operating entity in currencies other than the functional currency. Approximately 60% of the Group s purchases are denominated in currencies other than the functional currency of the operating entity. The Group considers its exposure to USD arising from the purchase of inventory to be a long-term and ongoing exposure. As such, the Group s foreign currency risk management policy provides guidelines for the term over which foreign currency hedging will be undertaken for part or all of the risk. This term cannot exceed two years. Factors taken into account include: - the implied market volatility for the currency exposure being hedged and the cost of hedging, relative to long-term indicators; - the level of the AUD and NZD against the currency risk being hedged, relative to long term indicators; - the company s strategic decision-making horizon. The policy requires periodic reporting to the Audit & Risk Committee, and its application is subject to oversight from the Chairman of the Audit and Risk Committee. The policy allows the use of forward exchange contracts and foreign currency options. The Group s hedging policy and procedures do not meet the requirements for hedge accounting under AASB 139 and, as such, gains or losses arising from mark to market valuations of the outstanding hedging instruments at each reporting date are recognised in the income statement. CURRENT LIABILITIES NOTES Cash flow hedges 1, FORWARD EXCHANGE CONTRACTS CASH FLOW HEDGES The company enters into forward exchange contracts for purchases of inventory denominated in US dollars. These contracts are considered economic hedges by the company, although they do not meet the conditions for hedge accounting as required by AASB 139: Financial Instruments: Recognition and Measurement, and as such any gain or loss arising from the contracts has been recognised in the income statement. At year-end, details of the outstanding forward exchange contracts are as follows: US$000 s AVERAGE EFFECTIVE RATE Buy USD/Sell AUD Buy USD maturity less than 12 months 46,395 30, Buy USD/Sell NZD Buy USD maturity less than 12 months 1, JUST GROUP ANNUAL REPORT

63 29 FINANCIAL INSTRUMENTS (CONTINUED) CREDIT RISK The Group trades only with recognised, creditworthy third parties. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group s exposure to bad debts is not significant. There are no significant concentrations of credit risk within the Group and financial instruments are spread amongst a number of financial institutions. With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, available-for-sale financial assets and certain derivative instruments, the Group s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Since the Group trades only with recognised creditworthy third parties, there is no requirement for collateral. LIQUIDITY RISK The Group s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, finance leases and hire purchase contracts. 30 EARNINGS PER SHARE The following reflects the income and share data used in the calculation of basic and diluted earnings per share Net profit 63,891 57,205 NUMBER OF SHARES NUMBER OF SHARES Weighted average number of ordinary shares used in calculating basic and diluted earnings per share 214,072, ,000,000 The performance rights do no have a dilutive effect for the purposes of the calculation of the diluted earnings per share. There have been no other conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of this financial report. 62 JUST GROUP ANNUAL REPORT 2007

64 31 SUBSEQUENT EVENTS On 27 August 2007, the acquisition of Smiggle Pty Ltd was completed. Total consideration paid for the purchase of 100% of the shares in Smiggle Pty Ltd will be at least $29.0 million, with $23.2 million payable initially, and at least a further $5.8m payable in 2010 subject to an earn-out arrangement based on the average earnings of Smiggle Pty Ltd for 2009 and As at the date of this report, it is not possible to reliably allocate the purchase price to the identifiable tangible and intangible assets of the company due to such information not being available. The company used an existing finance facility of $20.0m to fund the initial payment with the balance paid from available cash reserves. On 12 September 2007, the board of directors declared a fully franked dividend of 10.0 cents per share to be paid on 14 November CONTINGENT LIABILITIES The consolidated entity has trading guarantees totalling $1,571,748 (2006: $1,521,161). Under the terms of the shareholder agreement Just Kor Fashion Group (Pty) Ltd, the company s associate operating in South Africa, has the right to call on each shareholder for additional funding of up to ZAR25.0 million each. The company has not provided for this obligation in this financial report. The company has entered into a confidential agreement for the purchase of certain trademarks currently used under licence by the company. The agreement requires the company to purchase the trademark for US$2.5 million on or prior to 31 October 2007 if certain conditions precedent have been met by the licensor. The company has already paid a deposit of US$0.25 million, with the balance of US$2.25 million outstanding. This liability has not been recognised as at 28 July 2007 because there continues to be a reasonable degree of uncertainty as to whether the conditions precedent will be met. JUST GROUP ANNUAL REPORT

65 DIRECTORS DECLARATION In accordance with a resolution of the directors of Just Group Limited we state that: (1) In the opinion of the directors: (a) the financial report and the additional disclosures included in the Directors Report, designated as audited, of the company and of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the company s and consolidated entity s financial positions as at 28 July 2007 and of their performance for the period ended on that date; and (ii) complying with Accounting Standards and Corporations Regulations 2001; and (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. (2) This declaration has been made after receiving the declarations required to be made to the directors in accordance with sections 295A of the Corporations Act 2001 for the financial period ended 28 July (3) In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in Note 28 will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee. On behalf of the board Ian Pollard Chairman 12 September 2007 Jason Murray Managing Director 64 JUST GROUP ANNUAL REPORT 2007

66 INDEPENDENT AUDIT REPORT TO MEMBERS OF JUST GROUP Independent audit report to members of Just Group Limited We have audited the accompanying financial report of Just Group Limited and the entities it controlled during the year, which comprises the balance sheet as at 28 July 2007, and the income statement, statement of changes in equity and cash flow statement for the 52 weeks ended on that date, a summary of significant accounting policies, other explanatory notes and the directors declaration. The company has disclosed information about the remuneration of directors and executives ( remuneration disclosures ), as required by Accounting Standard AASB 124 Related Party Disclosures, under the heading remuneration report in the directors report, as permitted by Corporations Regulation 2M These remuneration disclosures are identified in the directors report as being subject to audit. The remuneration report also contains information not subject to audit, which has been identified as such. Directors Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 2, the directors also state that the financial report, comprising the financial statements and notes the consolidated financial statements and notes, complies with International Financial Reporting Standards. The directors are also responsible for the remuneration disclosures contained in the directors report. Auditor s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement and that the remuneration disclosures comply with Accounting Standard AASB 124 Related Party Disclosures. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Liability limited by a scheme approved under Professional Standards Legislation JUST GROUP ANNUAL REPORT

67 INDEPENDENT AUDIT REPORT TO MEMBERS OF JUST GROUP Independence In conducting our audit we have met the independence requirements of the Corporations Act We have given to the directors of the company a written Auditor s Independence Declaration, a copy of which is included in the directors report. In addition to our audit of the financial report and the remuneration disclosures, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence. Auditor s Opinion In our opinion: 1. the financial report of Just Group Limited is in accordance with: (a) the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the financial position of Just Group Limited and the consolidated entity at 28 July 2007 and of their performance for the 52 weeks ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations); and (b) other mandatory financial reporting requirements in Australia. 2. the consolidated financial statements and financial report also complies with International Financial Reporting Standards as disclosed in Note the remuneration disclosures that are contained in the directors report comply with Accounting Standard AASB 124 Related Party Disclosures. Ernst & Young Rob Perry Partner Melbourne Date: 12 September JUST GROUP ANNUAL REPORT 2007

68 SHAREHOLDER INFORMATION top 20 holders of fully paid ordinary shares as at 20 September 2007 NAME total UNITS % IC RANK METREPARK PTY LTD 36,493, % 1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 25,783, % 2 J P MORGAN NOMINEES AUSTRALIA LIMITED 25,589, % 3 NATIONAL NOMINEES LIMITED 17,534, % 4 ANZ NOMINEES LIMITED <CASH INCOME A/C> 17,095, % 5 CITICORP NOMINEES PTY LIMITED 7,116, % 6 COGENT NOMINEES PTY LIMITED <SMP ACCOUNTS> 6,202, % 7 RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED <PIPOOLED A/C> 3,905, % 8 COGENT NOMINEES PTY LIMITED 3,855, % 9 AMP LIFE LIMITED 3,759, % 10 AUSTRALIAN REWARD INVESTMENT ALLIANCE 2,442, % 11 UBS NOMINEES PTY LTD 2,091, % 12 UCA GROWTH FUND LIMITED 1,500, % 13 CITICORP NOMINEES PTY LIMITED <CFS FUTURE LEADERS FUND A/C> 1,402, % 14 CITICORP NOMINEES PTY LIMITED <CFSIL CFS WS SMALL COMP A/C> 1,160, % 15 RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED <PIIC A/C> 1,099, % 16 MILTON CORPORATION LIMITED 1,074, % 17 GLENYS JOY SHEARER 1,023, % 18 CREDIT SUISSE SECURITIES (EUROPE) LTD <COLLATERAL A/C> 1,000, % 19 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED <BPB A/C> 932, % 20 TOTAL FOR TOP 20: 161,062, % Substantial Holders of 5% or more of fully paid ordinary shares as at 20 september 2007 NAME total UNITS % IC Metrepark Pty Ltd 42,907, % AXA Asia Pacific Holdings Limited 28,241, % Barclays Global Investors Australia Limited ( BGIA ) 21,313, % AMP Limited 12,977, % RANGE of fully paid ordinary shares as at 20 september ,001 5,001 10, ,001 to to to to to 1,000 5,000 10, ,000 (MAX) TOTAL Holders 2,449 3, ,967 Shares 1,451,055 8,493,741 6,548,147 11,445, ,392, ,330,882 The number of investors holding less than a marketable parcel of 105 securities ($4.80 on 20 September 2007) is 31 and they hold 1,427 securities. Voting rights All ordinary shares carry one vote per share without restriction. Just Group Annual Report

69 CORPORATE DIRECTORY ABN DIRECTORS Ian Pollard (Chairman) Jason Murray (Managing Director) Laura Anderson Ian Dahl Susan Oliver Alison Watkins COMPANY SECRETARY Janice Payne BANKERS Commonwealth Bank of Australia National Australia Bank Westpac Banking Corporation AUDITOR Ernst & Young 8 Exhibition Street Melbourne VIC 3000 AUSTRALIA EXECUTIVE MANAGEMENT TEAM David Bull (Merchandising Director Casualwear) Ashley Gardner (Chief Financial Officer) Anita Muller (Human Resources Director) Janice Payne (Corporate Affairs Director) Glenys Shearer (Commercial and Merchandising Womenswear Director) Wai Tang (Director Operations and Peter Alexander Sleepwear) REGISTERED OFFICE 658 Church Street Richmond VIC 3121 AUSTRALIA T: F: WEBSITE justgroup@jjh.com.au LAWYERS Freehills Level Collins Street Melbourne VIC 3000 AUSTRALIA SHARE REGISTRY Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 AUSTRALIA T: (within Australia) T: F: E: registrars@linkmarketservices.com.au W: STOCK EXCHANGE Just Group Limited shares are listed on Australian Stock Exchange. The home branch is Melbourne. Ticker: JST 68 JUST GROUP ANNUAL REPORT 2007

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71 FINANCIAL REPORT 07