Premier Investments Limited
Annual Report 2014

Plain-text annual report

Annual Report 2014 A Premier Investments Limited The official opening of the group’s first UK store at Westfield Stratford in February, 2014. John Cheston Managing Director, Smiggle Solomon Lew Chairman Mark McInnes CEO Premier Retail FRONT COVER: Features Jessica Hart, International model and Portmans Brand Ambassador. Chairman’s Report The Directors of Premier Investments Limited (“Premier’) have pleasure in submitting to shareholders the Group’s Annual Report for the financial year ended 26 July 2014 (“FY14”). STRONG FINANCIAL PERFORMANCE Premier reported consolidated underlying net profit before tax (NPBT) of $106.0 million for the year1, up 10.3% on the previous financial year, despite continued international and domestic economic uncertainty and consequent volatility in consumer confidence. Premier’s reported net profit after tax (NPAT) was $73.0 million, an increase of 5.3% on last year after adjusting for a one-off reclassification gain incurred during the 2013 financial year. This result is largely attributable to the continued strong performance of Premier Retail. In an increasingly competitive marketplace Premier Retail continues to outperform its peers. MANAGEMENT FOCUS Premier Retail’s underlying profit before tax (PBT) increased 13.4% to $87 million2, reflecting Management’s relentless focus on the continued successful implementation of Premier Retail’s six-point transformation strategy which spans both core business and growth initiatives. Total sales for the group were up 6.2% to $888.4 million3 and like-for-like (LFL) sales were up 4.7% across the group, with all seven brands experiencing positive LFL sales in the second half. Premier Retail reported underlying earnings before interest and tax (EBIT) of $92.8 million, up 10.9% on FY132 Underlying EBIT margin improved 44 basis points to 10.4%3. Premier Retail’s gross margin of 62%3 continues to be very strong despite a highly competitive market. Cost of doing business (as a percentage of sales) reduced by 38 basis points as a result of Management’s ongoing cost efficiency program. 1 Underlying NPBT excludes the one off gain due to the reclassification of Breville Group in FY13 and the non-recurring investment costs in FY14 associated with Smiggle UK market entry and supply chain transformation. 2 Underlying EBIT and PBT excludes the non-recurring investment costs associated with Smiggle UK entry and supply chain transformation. 3 Sales and cost of sales exclude sales to South African Joint Venture. DELIVERING ON GROWTH BRANDS During the year, Premier Retail continued to implement its growth plans with a focus on Smiggle’s entry into the large UK market, growing Peter Alexander in Australia and New Zealand and investing further in the continuing growth of our online businesses. Your Directors are pleased to note the following achievements for the financial year: » Delivered record sales at Smiggle with sales growth of 17.4% and revenue surpassing $100 million for the first time » Successfully launched Smiggle UK, with eight stores currently trading and very pleasing consumer acceptance. A total of 18 stores to be open by Christmas 2014 » Opened five new Smiggle stores in Australia and two new Smiggle stores in Singapore » Delivered sales growth of 21.4% at Peter Alexander » Opened eight new Peter Alexander stores in Australia and nine concession stores » Expanded the Peter Alexander range into childrenswear » Launched peteralexander.co.nz with local NZ fulfillment » Delivered online sales growth of 30.5% (with 2H14 growth of 37.5%) across the portfolio, with Dotti and Portmans achieving outstanding online sales performance » Launched a “store to door” multichannel offer across the portfolio » Transformation underway of a fit-for-purpose, Premier owned, Australian distribution centre to support our growth strategies and aspirations Annual Report 2014 1 Chairman’s Report continued CORE BUSINESS REJUVENATION There remains a great deal of potential upside in Premier’s existing portfolio of iconic brands and the Premier Retail team remains committed to realising this value for shareholders. The Board believes that each brand now has outstanding leadership and management teams capable of delivering this objective. On behalf of the Board and all Shareholders, I would like to thank Mark McInnes, his senior team and our more than 6,000 talented employees across Australia, New Zealand, Singapore and the United Kingdom for delivering a strong result in a challenging environment which tested the broader retail industry and our competitors. All of Premier Retail’s brands delivered positive like-for-like growth in the second half of the year, demonstrating your group’s continued investment in core brands, product offering and store experience. During FY14, Management undertook targeted capital investment in 322 stores to support continued sales growth. FINANCIAL STRENGTH At the end of the financial year, Premier had free cash on hand of $313.3 million and Premier’s equity accounted investment in Breville appears on the balance sheet at an accounted for value of $187.1 million whilst the market value was $264.9 million. Due to the continued strength of the balance sheet and the strong performance of Premier Retail, your Board has declared a final fully franked dividend of 20 cents per share, bringing the full year dividend to 40 cents per share – an increase of 2 cents per share over the previous year. The final dividend will be payable on 20 November 2014. Premier continues to use its strong balance sheet to fund the expansion of its growth brands, while still retaining the flexibility to pursue other opportunities that may arise in the future. Your Board takes a patient and disciplined approach to assessing growth opportunities and will only act on acquisitions where there is a clear and long-term benefit for shareholders. I would also like to thank my fellow directors for their dedication and service during the past year and for the experience, support and guidance they provide. Finally and most importantly, I would like to thank all shareholders for their continued support and investment. As I have said previously, the Premier Board fully understands that our shareholders are the owners of the company who have entrusted to us at risk capital which they expect to be managed prudently to achieve strong investment returns and long term wealth creation. I encourage all shareholders to attend the Annual General Meeting on 5 December 2014 and I look forward to updating you on the performance of your company in that forum. Solomon Lew Chairman and Non-Executive Director 2 Premier Investments Limited The Directors Solomon Lew Chairman and Non-Executive Director Frank W. Jones FCA, CPA, ACIS Deputy Chairman and Non-Executive Director Timothy Antonie Non-Executive Director David M. Crean Non-Executive Director Lindsay E. Fox AC Non-Executive Director Sally Herman Non-Executive Director Henry D. Lanzer B. COM., LLB (Melb) Non-Executive Director Mark McInnes Executive Director Michael R.I. McLeod Non-Executive Director Gary H. Weiss LLM, J.S.D. Non-Executive Director Annual Report 2014 3 Chairman’s Report continued Solomon Lew Mr. Lew was appointed as Non-Executive Director and Chairman of Premier on 31 March 2008. For many years, Mr. Lew has been a director of Century Plaza Investments Pty. Ltd., the largest shareholder in Premier and was previously Chairman of Premier from 1987 to 1994. Mr. Lew has over 40 years’ experience in the manufacture, importation, wholesaling and retailing of textiles, apparel and general merchandise. Mr. Lew’s success in the clothing industry has been largely due to his ability to read fashion trends and interpret them in the Australian market and to efficiently and cost-effectively produce quality garments. Property development and the acquisition and disposal of equity investments have proven to be a profitable and consistent activity for Mr. Lew’s family entities. He has, through those family entities, made a number of investments in publicly listed companies over the years, including investments in Coles Myer Limited, Colorado Group Limited and Country Road Limited to name a few. Where these investments have been sold, it has resulted in substantial profits. He is the past Chairman of the Mount Scopus College Foundation, a current member of the Prime Minister’s Business Advisory Council, Board of Trustees of the Sport and Tourism Youth Foundation, a life member of The Duke of Edinburgh’s Award World Fellowship, a Patron of Opera Australia and a Chairman or director of several philanthropic organisations. Mr. Lew was a director of Coles Myer Limited from 1985 to 2002, serving as Vice Chairman from 1989, Chairman from 1991 to 1995, Executive Chairman in 1995 and Vice Chairman in 1995 and 1996. He was also a director of the Reserve Bank of Australia from 1992 to 1997. Frank W. Jones FCA, CPA, ACIS Mr. Jones is a Fellow of Chartered Accountants Australia and New Zealand and an Associate of CPA Australia and the Governance Institute of Australia. Mr. Jones has extensive experience as a financial and general advisor to some of Australia’s leading importing and retailing companies. Mr. Jones served as Chairman of Premier from 1999 to 2002 and, more recently, from 2007 to 2008. He is a member of the Audit and Risk Committee of Premier and was the Committee’s chairman until 31 July 2010. Timothy Antonie Mr. Antonie was appointed to the Board of Directors on 1 December 2009. He holds a Bachelor of Economics degree from Monash University and qualified as a Chartered Accountant with Price Waterhouse. He has 20 years’ experience in investment banking and formerly held positions of Managing Director from 2004 to 2008 and Senior Adviser in 2009 at UBS Investment Banking, with particular focus on large scale mergers and acquisitions and capital raisings in the Australian retail, consumer, media and entertainment sectors. Mr Antonie is also a non-executive director of Village Roadshow Limited and Breville Group Limited. David M. Crean Dr. Crean was appointed Chairman of the Hydro Electric Corporation (Hydro Tasmania) in September 2004. He is also Chairman of the Business Risk Committee at Hydro Tasmania, member of the Audit Committee and Chairman of the Corporate Governance Committee. David was Tasmania’s State Treasurer from August 1998 to his retirement from the position in February 2004. He was also Minister for Employment from July 2002 to February 2004. He was a Member for Buckingham in the Legislative Council from 1992 to February 1999, and then for Elwick until May 2004. From 1989 to 1992 he was the member for Denison in the House of Assembly. From 1993-1998 he held Shadow Portfolios of State Development, Public Sector Management, Finance and Treasury. David graduated from Monash University in 1976 with a Bachelor of Medicine and Bachelor of Surgery. Dr. Crean was appointed to the position of Chairman of the Audit and Risk Committee as from 1 August 2010. Lindsay E. Fox A.C. Mr. Fox has extensive experience in all aspects of the transport, distribution and warehousing industries. He is the founder of the Linfox Group of Companies. Today, the Linfox Group is one of the largest supply chain services groups with operations in 10 countries. The Linfox Group employs over 23,000 people, operates 4.8 million square metres of warehouses and a fleet of more than 5,000 vehicles and carries out distribution operations for leading companies across the Asia-Pacific region. The Linfox Group includes operations in the areas of transport and logistics, airport operations, property development and cash management services. Mr. Fox has extensive involvement in Australian and international circles and, apart from his business interests, is well recognised and active in sport and charity work. In 2010, Victoria University admitted Mr. Fox to the degree of Doctor of the University honoris causa for his outstanding achievements in the transport industry, for his contribution to the community through his sustained efforts to reduce unemployment and his campaign against youth suicide. In January 2008, Mr Fox was awarded a Companion of the Order of Australia (AC) for continued service to the transport and logistics industries, to business through the development and promotion of youth traineeships and to the community through a range of philanthropic endeavours. 4 Premier Investments Limited He was awarded an Officer of the Order of Australia (AO) in 1992 for his contribution to the transport industry and the community and he received a Centenary Medal for services to the transport industry in 2001. From September 1992 to December 1993, Mr. Fox together with Mr. Bill Kelty introduced a national campaign called ‘Work for Australia’. This campaign encouraged companies and local communities to generate jobs for unemployed with the aid of government subsidies and programs. More than 60,000 jobs were pledged through their efforts and Mr. Fox and Mr. Kelty were awarded ‘Victorians of the Year’ by the Sunday Age. Sally Herman Ms. Sally Herman has more than 25 years’ executive experience in financial services in both Australia and in the United States, including 16 years with the Westpac Group running major business units in almost every operation division of the Group. Ms Herman ran Corporate Affairs and Sustainability for Westpac during the merger with St. George. Prior to Westpac, she held senior roles at Macquarie Bank. Ms. Herman now is a company director and consultant, and sits on the board of Breville Group Limited, ME Bank Pty Limited, FSA Group Limited, and is the Chairman of Urbis Pty Ltd, a large urban planning and property advisory firm. She also sits on several not for profit boards. Ms. Herman holds a BA from the University of NSW and is a Graduate of the Australian Institute of Company Directors. Henry D. Lanzer B. COM., LLB (Melb) Mr. Lanzer is Managing Partner of Arnold Bloch Leibler–a leading Australian commercial law firm–and has over 30 years’ experience in providing legal and strategic advice to some of Australia’s leading companies. He is a Director of Just Group Limited, a Director of Thorney Opportunities Limited and also a director of the TarraWarra Museum of Art. He is a Life Governor of the Mount Scopus College Council. Mr. Lanzer is Chairman of the Remuneration and Nomination Committee for Premier Investments Limited. Mark McInnes Mr. McInnes is a career retailer with a long track record of success in every role he has occupied. Like many great retailers, Mark started his career from the shop floor as a company cadet for Grace Brothers. Mark has been directly responsible for some of Australia’s greatest retail success stories – including as a co-founder of the Officeworks concept which is today Australia’s largest office supply superstore. 13 years at David Jones – 6 years as Merchandise & Marketing Director and 7 years as CEO. From 2003 to 2010, Mark as CEO and Executive Director of David Jones turned the company into a fashion and financial powerhouse, creating in excess of $2 billion of shareholder value. Mark was appointed CEO of Premier Retail in April 2011, and has set about transforming the company to compete in an industry under great structural pressure. Premier Retail today has a clear path and a clear focus. In December 2012, Mark was appointed as an Executive Director of Premier Investments Limited. Mark holds an MBA from the University of Melbourne. Michael R.I. McLeod Mr. McLeod is a former Executive Director of the Century Plaza Group and has been involved with the Group since 1996 as an advisor in the areas of corporate strategy, investment, public affairs and is a director of a number of associated companies. He has been a Non-Executive Director of Premier Investments Limited since 2002 and a Non-Executive Director of Just Group Limited from 2007 to 2013. Past experience includes the Board of a fund manager (Scudder, Stevens and Clark Australia Limited), chief of staff to a Federal Cabinet Minister and statutory appointments including as a Commission Member of the National Occupational Health and Safety Commission. He holds a Bachelor of Arts (First Class Honours and University Medal) from the University of New South Wales. Gary H. Weiss LL.M, J.S.D. Dr. Weiss holds the degrees of LL.B (Hons) and LL.M (with dist.) from Victoria University of Wellington, as well as a Doctor of Juridical Science (JSD) from Cornell University, New York. Dr Weiss has extensive international business experience and has been involved in numerous cross-border mergers and acquisitions. Dr Weiss is Chairman of Clearview Wealth Limited and Secure Parking Pty Ltd, Executive Director of Ariadne Australia Ltd, and a director of Premier Investments Limited, Ridley Corporation Ltd, Mercantile Investment Company Limited, Pro-Pac Packaging Limited, Tag Pacific Limited, Thorney Opportunities Limited and The Straits Trading Company Ltd. He was Chairman of Coats Plc from 2003 until April 2012 and executive director of Guinness Peat Group Plc from 1990 to April 2011 and has held directorships of numerous companies, including Westfield Group, Tower Australia Ltd, Australian Wealth Management Limited, Tyndall Australia Ltd (Deputy Chairman), Joe White Maltings Ltd (Chairman), CIC Ltd, Whitlam Turnbull & Co Ltd and Industrial Equity Ltd. Prior to joining Premier, Mark led David Jones to its most successful time as a public listed company. Mark spent He has authored numerous articles on a variety of legal and commercial topics. Annual Report 2014 5 Strategic Review Premier Retail Management continued the rigorous implementation of the six key initiatives outlined in the 2011 Strategic Review. Focus Area Status 1 Rejuvenate and reinvigorate all five core apparel brands. 2 Organisation-wide cost efficiency program. 3 4 Two phase gross margin expansion program. Expand and grow the internet business. 5 Grow Peter Alexander significantly. 6 Grow Smiggle significantly. 6 Premier Investments Limited Continued solid results were achieved in all five core brands in FY14. The group delivered +4.7% LFL growth in FY14 with all brands delivering positive LFL growth in 2H14. The turnaround at Just Jeans continues under Matthew McCormack’s leadership, Jay Jays delivered three out of four quarters of positive LFL growth, whilst Dotti, Portmans and Jacqui E all delivered solid growth. The group continues to invest in upgrading its existing store network through targeted investment that deliver returns to shareholders. Cost of doing business continued to improve in FY14 and the group reduced its cost of doing business by 38 basis points in FY14. Rent expense decreased by 31 basis points despite landlord pressure for rent increases. Salaries continued to be tightly controlled with improved labour productivity offsetting most of the EBA increase. Our DC transformation is underway with three brands now operating out of the Premier Investments owned new facility based at Truganina on the outskirts of Melbourne. Premier Retail’s gross margin of 62% continues to be very strong in a highly competitive market. Despite a sharp slowdown post the federal budget in May 2014 and trading through one of the warmest Winters on record, the management team cleared the inventory to ensure we started the new year with fresh merchandise. All brands have implemented detailed strategies to offset the fall in the Australian Dollar in FY15. Total online sales grew 30.5% in FY14 well above the industry growth of 8.6%. Pleasingly in 2H14, our online growth was 37.5%. We have maintained local leadership by offering global best practice websites to our customers. Premier Retail will continue to invest in IT, people, processes, marketing and supply chain initiatives to achieve our aspirational goal of 10% of total group sales being achieved from our multi-channel platform. Peter Alexander achieved outstanding growth of 21% in FY14. As part of our FY13 result, we announced plans to increase our business by 40-50% by FY16. The company remains on track for this result. Smiggle global sales grew by 17.4% in FY14. Pleasingly, the company achieved LFL growth in all core countries (Australia, New Zealand and Singapore) whilst expanding to the UK. The company opened its first UK store in February 2014 and aims to have 18 stores up and operating by this Christmas. The UK market has enormous potential with the personal stationery market valued at $2.4 billion. Brand Performance Premier Retail Peter Alexander delivered outstanding growth of 21% in FY14. Judy Coomber, Managing Director Peter Alexander and Peter Alexander, Creative Director have forged a strong partnership to deliver on our three year plan objectives. Smiggle achieved exceptional growth of 17.4% in FY14. John Cheston, Managing Director of Smiggle has built a strong team and delivered an outstanding result in Australia, New Zealand and Singapore whilst launching Smiggle UK. Management remains confident in the size of the opportunity available to Smiggle and our capability to achieve it. Dotti, led by David Bull, delivered another strong result in a highly competitive market. The brand has a world class digital offering and continues to lead the way in the local market, offering customers a world class multi-channel experience. Jade Holgate and team delivered another strong result with total sales up 3.9% in FY14 and LFL significantly higher. The group continues to invest in refurbishing the chain whilst ensuring our multi-channel capability is world class. Jacqui E has continued to deliver material sales and profit growth in FY14 under Karen Russell’s strong leadership and product focus. The focus on product excellence, supported by a strong brand campaign, led by our ambassador Tara Moss, has continued to deliver exceptional results. Under Matthew McCormack’s leadership, the brand has rebounded in FY14. Total sales were up 5.4% in the full year with the winter half delivering sales growth of 7.8%. Maintaining strong product focus has delivered a change in the brands momentum and our aim is to restore Just Jeans to its rightful place as the iconic jeans destination in Australia, New Zealand and online. The Jay Jays turnaround is on track and pleasingly we achieved positive LFL sales growth in three of the four quarters in FY14 whilst significantly improving margin throughout the year. Chris Thomas was appointed Group General Manager in March this year with a long track record of success in the Youth Apparel market. Premier Retail is confident in the turnaround of the brand. Annual Report 2014 7 Internet » Online sales up 30.5% for FY14; 2H14 online sales up 37.5%. Portmans and Dotti online sales grew by 40% and 60% respectively. » Online channel is very profitable and continuing to grow. » Mobile optimised, enhanced sites and emails deployed for all brands. » We will continue to invest in IT, people, processes, marketing, and supply chain initiatives to achieve our 10% of total sales aspirations from our multi-channel platform. 8 Premier Investments Limited Ethical Sourcing Statement for Premier Retail (“Group”) OUR COMMITMENT The Premier Retail Group (“Group”) has 40 years history of Ethical Sourcing. We use three models for sourcing all of our product: » Via Li & Fung (largest global public sourcing company) » Via importers » Direct with factories The Group operate with strict principles which are outlined below. The Group Ethical Sourcing and Supply Code (“The Code”) supports the commitment to sourcing merchandise that is produced according to our strict principles regardless of origin. That is, in safe working conditions where human rights are respected and people have free right of association. The Group complies with all laws in the countries in which product is sourced. Our sourcing framework supports adherence, identifies non-compliance and supports corrective action and continuous improvement. All suppliers are trained in The Code. Along with factory inspections, understanding and adherence to The Code is regularly monitored. The contracts we issue make it legally binding on manufacturers and suppliers to adhere to The Code. PRINCIPLES 1. The Group complies with all relevant laws in the countries in which we source and operate. 2. Thorough background and ongoing checks for compliance in factories are conducted by Li & Fung, the world’s largest global sourcing agent and a publicly listed company. ACTIVITIES TO SUPPORT PRINCIPLES & ASSURANCES Our activities support our Principles and Assurances generally. However, we have a particular focus on audit and compliance in Bangladesh where the Ready Made Garment Industry is approximately 80% of all export earnings, a major contributor to GDP and employing 4.2 million workers, most of whom are women. Whilst Bangladesh is a very minor portion of our overall sourcing mission we have created a sourcing framework with strict guidelines and checks for that market. We joined the Alliance for Bangladesh Worker Safety (www. bangladeshworkersafety.org) in October 2013, together with some of the world’s biggest and best known retailers including Nordstrom, Macy’s, Gap, Sears and JC Penney with whom we work to improve workplace safety in a results oriented, measurable and verifiable way in Bangladesh. Audit & Compliance in Bangladesh Labour Factories with which we do business are inspected by independent Qualified Assessment Firms for social compliance, wages, hours and training. » Personnel records including age contracts, leave 2. The Group insists upon workers legal rights including register and infirmary logs worker empowerment and free association. » Shifts, operating hours, breaks and average hours 3. The Group has zero tolerance for child labour. 4. The Group has zero tolerance for bribery and corruption. ASSURANCES 1. The Group inspects all factories who manufacture for us. » Personal visits to all factories are conducted by senior management prior to commencing business and regularly thereafter to ensure our principles are strictly administered. » Internationally recognised independent Qualified Assessment and Audit Firms verify all local laws and safety conditions - including labour, fire and building integrity - are complied with. worked » Emergency preparedness » Payroll audit Worker representatives are invited to participate in factory inspections and shadow assessments. The Group supports the worker’s right to refuse unsafe work and the right to free association. Safety All factories are inspected by independent Qualified Assessment Firms to ensure they are compliant with agreed international standards for occupational health and safety for workers. All factories undergo relevant training. Follow up is conducted to ensure a safe environment is maintained. Annual Report 2014 9 Ethical Sourcing Statement for Premier Retail (“Group”) (Continued) Fire ONGOING FOCUS 2015 Re-audit, Remediation and Training in Bangladesh » The Group will focus on the annual audit and compliance programme as well as active participation in the CAP meetings where remediation is required. » The Group will continue to work with The Alliance and Alliance Members on the training initiatives around fire and safety. » We will also continue our regular senior management and executive factory inspections and programme building, as well as the development of our Bangladesh team and mission in country. Whilst Bangladesh will remain a small portion of our overall sourcing we will continue the heightened level of process to ensure adherence and compliance. All factories are inspected and audited for appropriate fire equipment and training. Sprinkler systems, egress and hydrants are all audited. Extensive training for all workers is scheduled and followed up to ensure it takes place. To increase fire and safety awareness, The Alliance has ensured over 1,000,000 workers and managers have been trained, with 100% of the Group’s factories included in the training. Building Integrity All factories are inspected and audited by independent Qualified Assessment Firms. Certificate of occupancy are reviewed along with structural engineering and documentation for conformance with applicable international model codes, compliance with wind loading and storm surge loadings, expansion and extension integrity and approval, and structural configuration. The Alliance for Bangladesh Worker Safety has developed and implemented the country’s first harmonised Fire Safety and Structural Integrity Standard. Operational Processes in Bangladesh » In keeping with our own principles and assurances we have, as noted above, joined The Alliance for Bangladesh Worker Safety with some of the world’s largest international retailers including Nordstrom, Macy’s, Gap, Sears and JC Penney among others with whom we work to improve the transparency of conditions and safety of workers in Bangladesh. This is done through the inspections, training, audits, Corrective Action Plans and continuous improvement in the Bangladesh Ready Made Garment Factories. » The Group has its own office in Bangladesh which reports to Australia and is operated on the same ethical principles as Australia. We employ a team of expatriates and Bangladeshi nationals. Strict supervision and a rotating staff management system is used to prevent conditions for corruption arising. » Corrective Action Plan (CAP) meetings are held between factory, The Alliance and the Group. These CAPs are rigorous in the follow up. 10 Premier Investments Limited Premier Investments Limited A.C.N. 006 727 966 Financial Report For the Period 28 July 2013 To 26 July 2014 Annual Report 2014 A Contents Directors’ Report Auditor’s Independence Declaration Statement of Comprehensive Income Statement of Financial Position Statement of Cash Flows Statement of Changes In Equity Notes to the Financial Statements Directors’ Declaration Independent Audit Report to the Members of Premier Investments Limited Corporate Governance Statement 2 27 28 29 30 31 32 95 96 99 ASX Additional Information 111 DIRECTORS’ REPORT The Board of Directors of Premier Investments Limited (A.C.N. 006 727 966) has pleasure in submitting its report in respect of the financial period ended 26 July 2014. The directors present their report together with the consolidated financial report of Premier Investments Limited (the “Company”) and its controlled entities for the period 28 July 2013 to 26 July 2014, 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 period and until the date of the report are as follows. Directors were in office for this entire period unless otherwise stated. Solomon Lew Chairman and Non-Executive Director Mr. Lew was appointed as Non-Executive Director and Chairman of Premier on 31 March 2008. For many years, Mr. Lew has been a director of Century Plaza Investments Pty. Ltd., the largest shareholder in Premier and was previously Chairman of Premier from 1987 to 1994. Mr. Lew has over 40 years’ experience in the manufacture, importation, wholesaling and retailing of textiles, apparel and general merchandise. Mr. Lew’s success in the clothing industry has been largely due to his ability to read fashion trends and interpret them in the Australian market and to efficiently and cost-effectively produce quality garments. Property development and the acquisition and disposal of equity investments have proven to be a profitable and consistent activity for Mr. Lew’s family entities. He has, through those family entities, made a number of investments in publicly listed companies over the years, including investments in Coles Myer Limited, Colorado Group Limited and Country Road Limited to name a few. Where these investments have been sold, it has resulted in substantial profits. He is the past Chairman of the Mount Scopus College Foundation, a current member of the Prime Minister’s Business Advisory Council, Board of Trustees of the Sport and Tourism Youth Foundation, a life member of The Duke of Edinburgh’s Award World Fellowship, a Patron of Opera Australia and a Chairman or director of several philanthropic organisations. Mr. Lew was a director of Coles Myer Limited from 1985 to 2002, serving as Vice Chairman from 1989, Chairman from 1991 to 1995, Executive Chairman in 1995 and Vice Chairman in 1995 and 1996. He was also a director of the Reserve Bank of Australia from 1992 to 1997. Frank W. Jones FCA, CPA, ACIS, Deputy Chairman and Non-Executive Director Mr. Jones is a Fellow of Chartered Accountants Australia and New Zealand and an Associate of CPA Australia and the Governance Institute of Australia. Mr. Jones has extensive experience as a financial and general advisor to some of Australia’s leading importing and retailing companies. Mr. Jones served as Chairman of Premier from 1999 to 2002 and, more recently, from 2007 to 2008. He is a member of the Audit and Risk Committee of Premier and was the Committee’s chairman until 31 July 2010. 1 Premier Investments Limited 2 DIRECTORS’ REPORT The Board of Directors of Premier Investments Limited (A.C.N. 006 727 966) has pleasure in submitting its report in respect of the financial period ended 26 July 2014. The directors present their report together with the consolidated financial report of Premier Investments Limited (the “Company”) and its controlled entities for the period 28 July 2013 to 26 July 2014, 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 period and until the date of the report are as follows. Directors were in office for this entire period unless otherwise stated. Solomon Lew Chairman and Non-Executive Director Mr. Lew was appointed as Non-Executive Director and Chairman of Premier on 31 March 2008. For many years, Mr. Lew has been a director of Century Plaza Investments Pty. Ltd., the largest shareholder in Premier and was previously Chairman of Premier from 1987 to 1994. Mr. Lew has over 40 years’ experience in the manufacture, importation, wholesaling and retailing of textiles, apparel and general merchandise. Mr. Lew’s success in the clothing industry has been largely due to his ability to read fashion trends and interpret them in the Australian market and to efficiently and cost-effectively produce quality garments. Property development and the acquisition and disposal of equity investments have proven to be a profitable and consistent activity for Mr. Lew’s family entities. He has, through those family entities, made a number of investments in publicly listed companies over the years, including investments in Coles Myer Limited, Colorado Group Limited and Country Road Limited to name a few. Where these investments have been sold, it has resulted in substantial profits. He is the past Chairman of the Mount Scopus College Foundation, a current member of the Prime Minister’s Business Advisory Council, Board of Trustees of the Sport and Tourism Youth Foundation, a life member of The Duke of Edinburgh’s Award World Fellowship, a Patron of Opera Australia and a Chairman or director of several philanthropic organisations. Mr. Lew was a director of Coles Myer Limited from 1985 to 2002, serving as Vice Chairman from 1989, Chairman from 1991 to 1995, Executive Chairman in 1995 and Vice Chairman in 1995 and 1996. He was also a director of the Reserve Bank of Australia from 1992 to 1997. Frank W. Jones FCA, CPA, ACIS, Deputy Chairman and Non-Executive Director Mr. Jones is a Fellow of Chartered Accountants Australia and New Zealand and an Associate of CPA Australia and the Governance Institute of Australia. Mr. Jones has extensive experience as a financial and general advisor to some of Australia’s leading importing and retailing companies. Mr. Jones served as Chairman of Premier from 1999 to 2002 and, more recently, from 2007 to 2008. He is a member of the Audit and Risk Committee of Premier and was the Committee’s chairman until 31 July 2010. Annual Report 2014 2 2 DIRECTORS’ REPORT DIRECTORS’ REPORT (CONTINUED) (CONTINUED) DIRECTORS’ REPORT (CONTINUED) Mark McInnes Executive Director Mark McInnes Executive Director Mr. McInnes is a career retailer with a long track record of success in every role he has occupied. Like many great retailers, Mark started his career from the shop floor as a company cadet for Grace Brothers. Mark has Mr. McInnes is a career retailer with a long track record of success in every role he has occupied. Like many been directly responsible for some of Australia’s greatest retail success stories – including as a co-founder of great retailers, Mark started his career from the shop floor as a company cadet for Grace Brothers. Mark has the Officeworks concept which is today Australia’s largest office supply superstore. been directly responsible for some of Australia’s greatest retail success stories – including as a co-founder of the Officeworks concept which is today Australia’s largest office supply superstore. Prior to joining Premier, Mark led David Jones to its most successful time as a public listed company. Mark spent 13 years at David Jones – 6 years as Merchandise & Marketing Director and 7 years as CEO. From Prior to joining Premier, Mark led David Jones to its most successful time as a public listed company. Mark 2003 to 2010, Mark as CEO and Executive Director of David Jones turned the company into a fashion and spent 13 years at David Jones – 6 years as Merchandise & Marketing Director and 7 years as CEO. From financial powerhouse, creating in excess of $2 billion of shareholder value. 2003 to 2010, Mark as CEO and Executive Director of David Jones turned the company into a fashion and financial powerhouse, creating in excess of $2 billion of shareholder value. Mark was appointed CEO of Premier Retail in April 2011, and has set about transforming the company to compete in an industry under great structural pressure. Premier Retail today has a clear path and a clear Mark was appointed CEO of Premier Retail in April 2011, and has set about transforming the company to focus. compete in an industry under great structural pressure. Premier Retail today has a clear path and a clear focus. In December 2012, Mark was appointed as an Executive Director of Premier Investments Limited. Mark holds an MBA from the University of Melbourne. In December 2012, Mark was appointed as an Executive Director of Premier Investments Limited. Mark holds an MBA from the University of Melbourne. Timothy Antonie Non-Executive Director Timothy Antonie Non-Executive Director Mr. Antonie was appointed to the Board of Directors on 1 December 2009. He holds a Bachelor of Economics degree from Monash University and qualified as a Chartered Accountant with Price Waterhouse. He has 20 Mr. Antonie was appointed to the Board of Directors on 1 December 2009. He holds a Bachelor of Economics years’ experience in investment banking and formerly held positions of Managing Director from 2004 to 2008 degree from Monash University and qualified as a Chartered Accountant with Price Waterhouse. He has 20 and Senior Adviser in 2009 at UBS Investment Banking, with particular focus on large scale mergers and years’ experience in investment banking and formerly held positions of Managing Director from 2004 to 2008 acquisitions and capital raisings in the Australian retail, consumer, media and entertainment sectors. Mr and Senior Adviser in 2009 at UBS Investment Banking, with particular focus on large scale mergers and Antonie is also a non-executive director of Village Roadshow Limited and Breville Group Limited. acquisitions and capital raisings in the Australian retail, consumer, media and entertainment sectors. Mr Antonie is also a non-executive director of Village Roadshow Limited and Breville Group Limited. David Crean Non-Executive Director David Crean Non-Executive Director Dr. Crean was appointed Chairman of the Hydro Electric Corporation (Hydro Tasmania) in September 2004. He is also Chairman of the Business Risk Committee at Hydro Tasmania, member of the Audit Committee Dr. Crean was appointed Chairman of the Hydro Electric Corporation (Hydro Tasmania) in September 2004. and Chairman of the Corporate Governance Committee. David was Tasmania’s State Treasurer from August He is also Chairman of the Business Risk Committee at Hydro Tasmania, member of the Audit Committee 1998 to his retirement from the position in February 2004. He was also Minister for Employment from July and Chairman of the Corporate Governance Committee. David was Tasmania’s State Treasurer from August 2002 to February 2004. He was a Member for Buckingham in the Legislative Council from 1992 to February 1998 to his retirement from the position in February 2004. He was also Minister for Employment from July 1999, and then for Elwick until May 2004. From 1989 to 1992 he was the member for Denison in the House of 2002 to February 2004. He was a Member for Buckingham in the Legislative Council from 1992 to February Assembly. From 1993-1998 he held Shadow Portfolios of State Development, Public Sector Management, 1999, and then for Elwick until May 2004. From 1989 to 1992 he was the member for Denison in the House of Finance and Treasury. David graduated from Monash University in 1976 with a Bachelor of Medicine and Assembly. From 1993-1998 he held Shadow Portfolios of State Development, Public Sector Management, Bachelor of Surgery. Dr. Crean was appointed to the position of Chairman of the Audit and Risk Committee Finance and Treasury. David graduated from Monash University in 1976 with a Bachelor of Medicine and as from 1 August 2010. Bachelor of Surgery. Dr. Crean was appointed to the position of Chairman of the Audit and Risk Committee as from 1 August 2010. Sally Herman Non-Executive Director Sally Herman Non-Executive Director Ms. Sally Herman has more than 25 years’ executive experience in financial services in both Australia and in the United States, including 16 years with the Westpac Group running major business units in almost every Ms. Sally Herman has more than 25 years’ executive experience in financial services in both Australia and in operation division of the Group. Ms Herman ran Corporate Affairs and Sustainability for Westpac during the the United States, including 16 years with the Westpac Group running major business units in almost every merger with St. George. Prior to Westpac, she held senior roles at Macquarie Bank. operation division of the Group. Ms Herman ran Corporate Affairs and Sustainability for Westpac during the merger with St. George. Prior to Westpac, she held senior roles at Macquarie Bank. Ms. Herman now is a company director and consultant, and sits on the board of Breville Group Limited, ME Bank Pty Limited, FSA Group Limited, and is the Chairman of Urbis Pty Ltd, a large urban planning and Ms. Herman now is a company director and consultant, and sits on the board of Breville Group Limited, ME property advisory firm. She also sits on several not for profit boards. Bank Pty Limited, FSA Group Limited, and is the Chairman of Urbis Pty Ltd, a large urban planning and property advisory firm. She also sits on several not for profit boards. Ms. Herman holds a BA from the University of NSW and is a Graduate of the Australian Institute of Company Directors. Ms. Herman holds a BA from the University of NSW and is a Graduate of the Australian Institute of Company Directors. Lindsay E. Fox A.C. Non-Executive Director Mr. Fox has extensive experience in all aspects of the transport, distribution and warehousing industries. He is the founder of the Linfox Group of Companies. Today, the Linfox Group is one of the largest supply chain services groups with operations in 10 countries. The Linfox Group employs over 23,000 people, operates 4.8 million square metres of warehouses and a fleet of more than 5,000 vehicles and carries out distribution operations for leading companies across the Asia-Pacific region. The Linfox Group includes operations in the areas of transport and logistics, airport operations, property development and cash management services. Mr. Fox has extensive involvement in Australian and international circles and, apart from his business interests, is well recognised and active in sport and charity work. In 2010, Victoria University admitted Mr. Fox to the degree of Doctor of the University honoris causa for his outstanding achievements in the transport industry, for his contribution to the community through his sustained efforts to reduce unemployment and his campaign against youth suicide. In January 2008, Mr Fox was awarded a Companion of the Order of Australia (AC) for continued service to the transport and logistics industries, to business through the development and promotion of youth traineeships and to the community through a range of philanthropic endeavours. He was awarded an Officer of the Order of Australia (AO) in 1992 for his contribution to the transport industry and the community and he received a Centenary Medal for services to the transport industry in 2001. From September 1992 to December 1993, Mr. Fox together with Mr. Bill Kelty introduced a national campaign called ‘Work for Australia’. This campaign encouraged companies and local communities to generate jobs for unemployed with the aid of government subsidies and programs. More than 60,000 jobs were pledged through their efforts and Mr. Fox and Mr. Kelty were awarded ‘Victorians of the Year’ by the Sunday Age. Henry D. Lanzer B. COM., LLB (Melb), Non-Executive Director Mr. Lanzer is Managing Partner of Arnold Bloch Leibler - a leading Australian commercial law firm - and has over 30 years’ experience in providing legal and strategic advice to some of Australia’s leading companies. He is a Director of Just Group Limited, a Director of Thorney Opportunities Limited and also a director of the TarraWarra Museum of Art. He is a Life Governor of the Mount Scopus College Council. Mr. Lanzer is Chairman of the Remuneration and Nomination Committee for Premier Investments Limited. Michael R.I. McLeod Non-Executive Director Mr. McLeod is a former Executive Director of the Century Plaza Group and has been involved with the Group since 1996 as an advisor in the areas of corporate strategy, investment, public affairs and is a director of a number of associated companies. He has been a Non-Executive Director of Premier Investments Limited since 2002 and a Non-Executive Director of Just Group Limited from 2007 to 2013. Past experience includes the Board of a fund manager (Scudder, Stevens and Clark Australia Limited), chief of staff to a Federal Cabinet Minister and statutory appointments including as a Commission Member of the National Occupational Health and Safety Commission. Wales. He holds a Bachelor of Arts (First Class Honours and University Medal) from the University of New South 3 Premier Investments Limited 3 3 4 DIRECTORS’ REPORT (CONTINUED) Lindsay E. Fox A.C. Non-Executive Director Mr. Fox has extensive experience in all aspects of the transport, distribution and warehousing industries. He is the founder of the Linfox Group of Companies. Today, the Linfox Group is one of the largest supply chain services groups with operations in 10 countries. The Linfox Group employs over 23,000 people, operates 4.8 million square metres of warehouses and a fleet of more than 5,000 vehicles and carries out distribution operations for leading companies across the Asia-Pacific region. The Linfox Group includes operations in the areas of transport and logistics, airport operations, property development and cash management services. Mr. Fox has extensive involvement in Australian and international circles and, apart from his business interests, is well recognised and active in sport and charity work. In 2010, Victoria University admitted Mr. Fox to the degree of Doctor of the University honoris causa for his outstanding achievements in the transport industry, for his contribution to the community through his sustained efforts to reduce unemployment and his campaign against youth suicide. In January 2008, Mr Fox was awarded a Companion of the Order of Australia (AC) for continued service to the transport and logistics industries, to business through the development and promotion of youth traineeships and to the community through a range of philanthropic endeavours. He was awarded an Officer of the Order of Australia (AO) in 1992 for his contribution to the transport industry and the community and he received a Centenary Medal for services to the transport industry in 2001. From September 1992 to December 1993, Mr. Fox together with Mr. Bill Kelty introduced a national campaign called ‘Work for Australia’. This campaign encouraged companies and local communities to generate jobs for unemployed with the aid of government subsidies and programs. More than 60,000 jobs were pledged through their efforts and Mr. Fox and Mr. Kelty were awarded ‘Victorians of the Year’ by the Sunday Age. Henry D. Lanzer B. COM., LLB (Melb), Non-Executive Director Mr. Lanzer is Managing Partner of Arnold Bloch Leibler - a leading Australian commercial law firm - and has over 30 years’ experience in providing legal and strategic advice to some of Australia’s leading companies. He is a Director of Just Group Limited, a Director of Thorney Opportunities Limited and also a director of the TarraWarra Museum of Art. He is a Life Governor of the Mount Scopus College Council. Mr. Lanzer is Chairman of the Remuneration and Nomination Committee for Premier Investments Limited. Michael R.I. McLeod Non-Executive Director Mr. McLeod is a former Executive Director of the Century Plaza Group and has been involved with the Group since 1996 as an advisor in the areas of corporate strategy, investment, public affairs and is a director of a number of associated companies. He has been a Non-Executive Director of Premier Investments Limited since 2002 and a Non-Executive Director of Just Group Limited from 2007 to 2013. Past experience includes the Board of a fund manager (Scudder, Stevens and Clark Australia Limited), chief of staff to a Federal Cabinet Minister and statutory appointments including as a Commission Member of the National Occupational Health and Safety Commission. He holds a Bachelor of Arts (First Class Honours and University Medal) from the University of New South Wales. Annual Report 2014 4 4 DIRECTORS’ REPORT (CONTINUED) Gary H. Weiss LL.M, J.S.D., Non-Executive Director Dr. Weiss holds the degrees of LL.B (Hons) and LL.M (with dist.) from Victoria University of Wellington, as well as a Doctor of Juridical Science (JSD) from Cornell University, New York. Dr Weiss has extensive international business experience and has been involved in numerous cross-border mergers and acquisitions. Dr Weiss is Chairman of Clearview Wealth Limited and Secure Parking Pty Ltd, Executive Director of Ariadne Australia Ltd, and a director of Premier Investments Limited, Ridley Corporation Ltd, Mercantile Investment Company Limited, Pro-Pac Packaging Limited, Tag Pacific Limited, Thorney Opportunities Limited and The Straits Trading Company Ltd. He was Chairman of Coats Plc from 2003 until April 2012 and executive director of Guinness Peat Group Plc from 1990 to April 2011 and has held directorships of numerous companies, including Westfield Group, Tower Australia Ltd, Australian Wealth Management Limited, Tyndall Australia Ltd (Deputy Chairman), Joe White Maltings Ltd (Chairman), CIC Ltd, Whitlam Turnbull & Co Ltd and Industrial Equity Ltd. He has authored numerous articles on a variety of legal and commercial topics. COMPANY SECRETARY Kim F. Davis Non-Executive Alternate Director Mr. Davis was appointed as Alternate Director on 10 July 2008 for Mr. Jones. Mr. Davis has been the Company Secretary of Premier Investments Limited for 20 years. Prior to holding this position, Mr Davis had 15 years’ experience within the accounting industry as a tax and financial advisor. DIRECTORS’ REPORT (CONTINUED) PRINCIPAL ACTIVITIES The consolidated entity operates a number of specialty retail fashion chains within the specialty retail fashion markets in Australia, New Zealand, Singapore, United Kingdom and via a joint venture entity in South Africa. The Group also has significant investments in listed securities and money market deposits. DIVIDENDS Final Dividend recommended for 2014 Dividends paid in the year: Interim for the half-year Final for 2013 shown as recommended in the 2013 report OPERATING AND FINANCIAL REVIEW Group Overview: CENTS 20.00 20.00 19.00 $’000 31,143 31,063 29,499 The Company acquired a controlling interest in Just Group Limited the (“Just Group”), a listed company on the Australian Securities Exchange in August 2008. Just Group is a leading speciality fashion retailer in Australia, New Zealand, Singapore and the United Kingdom and operates in South Africa through a joint venture. The Just Group has a portfolio of well-recognised retail brands, consisting of Just Jeans, Jay Jays, Jacqui E, Portmans, Dotti, Peter Alexander and Smiggle. Currently, these seven unique brands are trading from more than 990 stores throughout four countries and online. During the year, the Smiggle brand commenced operations in the United Kingdom, opening eight stores during the second half of the financial year. The Group’s 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 the product range is designed, sourced and sold under its own brands. There is a continuing investment in these brands to ensure they remain relevant to changing customer tastes and remain at the forefront of their respective target markets. Group Operating Results: The Group’s reported revenue from the sale of goods, total income and net profit after income tax for the 52 week period ended 26 July 2014 (2013: 27 July 2013) are summarised below: 2014 $’000 2013 $’000 % CHANGE Revenue from the sale of goods Total other income Total income 892,570 17,400 909,970 843,172 175,072 1,018,244 5.9% (90.1%) (10.6%) Net profit after income tax 73,000 174,473 (58.2%) 5 Premier Investments Limited 5 6 DIRECTORS’ REPORT (CONTINUED) PRINCIPAL ACTIVITIES The consolidated entity operates a number of specialty retail fashion chains within the specialty retail fashion markets in Australia, New Zealand, Singapore, United Kingdom and via a joint venture entity in South Africa. The Group also has significant investments in listed securities and money market deposits. DIVIDENDS Final Dividend recommended for 2014 Dividends paid in the year: Interim for the half-year Final for 2013 shown as recommended in the 2013 report OPERATING AND FINANCIAL REVIEW Group Overview: CENTS 20.00 20.00 19.00 $’000 31,143 31,063 29,499 The Company acquired a controlling interest in Just Group Limited the (“Just Group”), a listed company on the Australian Securities Exchange in August 2008. Just Group is a leading speciality fashion retailer in Australia, New Zealand, Singapore and the United Kingdom and operates in South Africa through a joint venture. The Just Group has a portfolio of well-recognised retail brands, consisting of Just Jeans, Jay Jays, Jacqui E, Portmans, Dotti, Peter Alexander and Smiggle. Currently, these seven unique brands are trading from more than 990 stores throughout four countries and online. During the year, the Smiggle brand commenced operations in the United Kingdom, opening eight stores during the second half of the financial year. The Group’s 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 the product range is designed, sourced and sold under its own brands. There is a continuing investment in these brands to ensure they remain relevant to changing customer tastes and remain at the forefront of their respective target markets. Group Operating Results: The Group’s reported revenue from the sale of goods, total income and net profit after income tax for the 52 week period ended 26 July 2014 (2013: 27 July 2013) are summarised below: 2014 $’000 2013 $’000 % CHANGE Revenue from the sale of goods Total other income Total income 892,570 17,400 909,970 843,172 175,072 1,018,244 5.9% (90.1%) (10.6%) Net profit after income tax 73,000 174,473 (58.2%) Annual Report 2014 6 6 DIRECTORS’ REPORT (CONTINUED) DIRECTORS’ REPORT (CONTINUED) OPERATING AND FINANCIAL REVIEW (CONTINUED) Group Operating Results (continued): OPERATING AND FINANCIAL REVIEW (CONTINUED) Retail Segment (continued): The main components of total other income for the current and prior financial years are presented below: During the financial year, the Retail Segment incurred non-recurring investment costs associated with the Total interest income Total dividend income Fair value gain on available-for-sale financial assets reclassified from equity to profit and loss Other revenues Total other income 2014 $’000 11,139 - - 6,261 17,400 2013 $’000 13,856 3,862 149,803 7,551 175,072 % CHANGE (19.6 %) (100%) (100%) (17.1 %) The Group’s other income for the 2013 financial year included a reclassification adjustment of $149,803,000. The net impact of the reclassification adjustment on the Group’s net profit after income tax was $105,151,000. The non-cash adjustment related to the cumulative fair value gain on available-for-sale financial assets, which were reclassified from equity to profit and loss. The reclassification was as a result of a change in accounting for the Group’s investment in Breville Group Limited, whereby the Group commenced equity accounting for its 25.7% interest in Breville Group Limited as of the 1st of March 2013. Prior to the 1st of March 2013, the investment was classified as an available-for-sale financial asset, and was accounted for at fair value as at the relevant reporting date, with gains or losses on fair value movements recognised as a separate component of equity. As a result of equity accounting, as of the 1st of March 2013, the Group recognises dividend income from its investment in Breville Group Limited as a reduction to the carrying amount of the investment. Excluding the net reclassification adjustment, the Group’s net profit after income tax for the 2013 financial year was $69,322,000. Retail Segment: As Premier’s core business, the Just Group was the key contributor to the Group’s operating results for the financial year. Key financial indicators for the retail segment are highlighted below: RETAIL SEGMENT Sale of goods Total segment revenue 2014 $’000 2013 $’000 % CHANGE 892,570 899,265 843,172 847,886 5.9% 6.1% Supply chain transformation expense 4,482 - 100% Segment net profit before income tax 79,299 76,686 3.4% Capital expenditure 48,164 19,231 The Retail Segment contributed $79.3 million to the Group’s net profit before income tax, up 3.4% on the prior financial year. The increase in profit before income tax is a reflection of the Group’s continued efforts to transform its core brands, the implementation of its organisation-wide cost efficiency program, as well as the focus on its growth initiatives, both locally and internationally. Group’s supply chain transformation as well as the Smiggle UK market entry. These investment costs are further detailed below. Adjusting for these non-recurring investment costs, the Retail Segment’s net profit before tax increased 13.4% on the prior financial year. Supply Chain Transformation The Group announced its intention to consolidate its Australian Distribution Centres into one National Distribution Centre during the 2013 calendar year. The development and purchase of the new Distribution Centre was completed during the 2014 financial year, and a one-off capital expense of $18.2 million was incurred to acquire the land and buildings. A further capital investment of $8 million was incurred in relation to plant and equipment for the new Distribution Centre. The internal fit-out of the new Distribution Centre is expected to be completed in early 2015. The Group is currently in the process of transitioning all brands to the new National Distribution Centre. As a consequence, the Group incurred non-recurring transformation expenses amounting to $4.5 million during the 2014 financial year. The existing distribution centre at Huntingwood, New South Wales, have closed and the existing distribution centre in Altona, Victoria, is expected to close in early 2015. Smiggle UK Expansion During the financial year, the Smiggle brand expanded its operations into the United Kingdom, with the first store opening in February 2014. As at the reporting date, the Group operates eight Smiggle stores within the United Kingdom, with a further ten stores expected to open in the first half of the 2015 financial year. Included in the Retail Segment’s profit before income tax are initial market entry investment expenses, amounting to $3.1 million. The Smiggle brand has operations across four countries – Australia, New Zealand, Singapore and the United Kingdom. GROUP PERFORMANCE The Group is pleased to report that despite tough economic conditions, it continued to generate strong returns to shareholders. The dividends declared for the year reaffirm the confidence the directors have in the future performance and underline Premier’s commitment to enhancing shareholder value through capital management and business investment. 2014 2013 2012 2011 2010 Basic earnings per share (cents) 47.0 112.4 Dividend paid per share (cents) 39.0 37.0 44.0 36.0 26.1 36.0 52.8 66.0 Return on equity (%) 5.6% 13.4% 5.5% 3.4% 6.6% Net debt/equity ratio (%) (14.9%) (16.2%) (13.7%) (14.6%) (17.8%) 7 Premier Investments Limited 7 8 DIRECTORS’ REPORT (CONTINUED) OPERATING AND FINANCIAL REVIEW (CONTINUED) Retail Segment (continued): During the financial year, the Retail Segment incurred non-recurring investment costs associated with the Group’s supply chain transformation as well as the Smiggle UK market entry. These investment costs are further detailed below. Adjusting for these non-recurring investment costs, the Retail Segment’s net profit before tax increased 13.4% on the prior financial year. Supply Chain Transformation The Group announced its intention to consolidate its Australian Distribution Centres into one National Distribution Centre during the 2013 calendar year. The development and purchase of the new Distribution Centre was completed during the 2014 financial year, and a one-off capital expense of $18.2 million was incurred to acquire the land and buildings. A further capital investment of $8 million was incurred in relation to plant and equipment for the new Distribution Centre. The internal fit-out of the new Distribution Centre is expected to be completed in early 2015. The Group is currently in the process of transitioning all brands to the new National Distribution Centre. As a consequence, the Group incurred non-recurring transformation expenses amounting to $4.5 million during the 2014 financial year. The existing distribution centre at Huntingwood, New South Wales, have closed and the existing distribution centre in Altona, Victoria, is expected to close in early 2015. Smiggle UK Expansion During the financial year, the Smiggle brand expanded its operations into the United Kingdom, with the first store opening in February 2014. As at the reporting date, the Group operates eight Smiggle stores within the United Kingdom, with a further ten stores expected to open in the first half of the 2015 financial year. Included in the Retail Segment’s profit before income tax are initial market entry investment expenses, amounting to $3.1 million. The Smiggle brand has operations across four countries – Australia, New Zealand, Singapore and the United Kingdom. GROUP PERFORMANCE The Group is pleased to report that despite tough economic conditions, it continued to generate strong returns to shareholders. The dividends declared for the year reaffirm the confidence the directors have in the future performance and underline Premier’s commitment to enhancing shareholder value through capital management and business investment. 2014 2013 2012 2011 2010 Basic earnings per share (cents) 47.0 112.4 Dividend paid per share (cents) 39.0 37.0 44.0 36.0 26.1 36.0 52.8 66.0 Return on equity (%) 5.6% 13.4% 5.5% 3.4% 6.6% Net debt/equity ratio (%) (14.9%) (16.2%) (13.7%) (14.6%) (17.8%) Annual Report 2014 8 8 DIRECTORS’ REPORT (CONTINUED) DIRECTORS’ REPORT (CONTINUED) SHARES ISSUED DURING THE FINANCIAL YEAR INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS A total of 454,396 shares (2013: nil) were issued during the year pursuant to the Group’s Performance Rights Plan. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There have been no significant changes in the state of affairs of the Group during the financial period ended 26 July 2014. SIGNIFICANT EVENTS AFTER THE REPORTING DATE During September 2014, the Group’s core debt facility relating to its unsecured bank loans was refinanced for a further three years. Subsequent to year-end, Premier Investments Limited increased its shareholding in Breville Group Limited from 25.7% to 27.3% by purchasing a further 2.1 million shares for $15.2 million. On 16 September 2014, the directors of Premier Investments Limited declared a final dividend in respect of the 2014 financial year. The total amount of the dividend is $31,143,000 (2013: $29,499,000) which represents a fully franked dividend of 20 cents per share (2013: 19 cents per share). The dividend has not been provided for in the 26 July 2014 financial statements. LIKELY DEVELOPMENTS AND EXPECTED RESULTS Certain likely developments in the operations of the Group and the expected results of those operations in financial years subsequent to the period ended 26 July 2014 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 2001. ENVIRONMENTAL REGULATION AND PERFORMANCE The Group’s operations are not subject to any significant environmental obligations or regulations. SHARE OPTIONS Unissued Shares: As at the date of this report, there were 1,849,080 unissued ordinary shares under options/performance rights (1,849,080 at the reporting date). Refer to the remuneration report for further details of the options outstanding. Shares Issued as a Result of the Exercise of Options: No shares were issued as a result of the exercise of options during the financial year and to the date of this report. 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. INDEMNIFICATION OF AUDITORS To the extent permitted by law, the company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial INTERESTS IN SHARES AND OPTIONS OF THE COMPANY At the date of this report, the interests of the directors in the shares and options of the company were: year. S. Lew F.W. Jones L.E. Fox S. Herman H.D. Lanzer G. H. Weiss M. McInnes 4,437,699 ordinary shares** 207,592 ordinary shares 2,577,014 ordinary shares 8,000 ordinary shares 27,665 ordinary shares 6,000 ordinary shares 800,000 performance rights M.R.I. McLeod 28,186 ordinary shares **Mr. Lew is an associate of Century Plaza Investments Pty. Ltd. and Metrepark Pty. Ltd (Associated Entities). The Associated Entities, collectively, have a relevant interest in 59,804,731 shares in the company. However, Mr. Lew does not have a relevant interest in the shares of the company held by the Associated Entities. 9 Premier Investments Limited 9 10 DIRECTORS’ REPORT (CONTINUED) INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS 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. INDEMNIFICATION OF AUDITORS To the extent permitted by law, the company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. INTERESTS IN SHARES AND OPTIONS OF THE COMPANY At the date of this report, the interests of the directors in the shares and options of the company were: S. Lew F.W. Jones L.E. Fox S. Herman H.D. Lanzer 4,437,699 ordinary shares** 207,592 ordinary shares 2,577,014 ordinary shares 8,000 ordinary shares 27,665 ordinary shares M.R.I. McLeod 28,186 ordinary shares G. H. Weiss M. McInnes 6,000 ordinary shares 800,000 performance rights **Mr. Lew is an associate of Century Plaza Investments Pty. Ltd. and Metrepark Pty. Ltd (Associated Entities). The Associated Entities, collectively, have a relevant interest in 59,804,731 shares in the company. However, Mr. Lew does not have a relevant interest in the shares of the company held by the Associated Entities. Annual Report 2014 10 10 DIRECTORS’ REPORT (CONTINUED) DIRECTORS’ MEETINGS The number of meetings of the Board of Directors during the financial year, and the number of meetings attended by each director were as follows: BOARD MEETINGS AUDIT AND RISK COMMITTEE REMUNERATION AND NOMINATION COMMITTEE DIRECTOR MEETINGS HELD WHILE A DIRECTOR NUMBER ATTENDED MEETINGS ATTENDED AS COMMITTEE MEMBER NUMBER ATTENDED MEETINGS ATTENDED AS COMMITTEE MEMBER NUMBER ATTENDED Mr S Lew Mr F W Jones Mr M McInnes Mr T Antonie Dr D Crean Mr L E Fox Ms S Herman Mr H D Lanzer Mr M R I McLeod Dr G H Weiss ROUNDING 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 - 4 - - 4 - - - - 4 - 4 - 3 4 - 4 2 1 4 2 - - - - - - 2 - 2 2 - - - - - - 2 - 2 The company is a company of the kind specified in Australian Securities and Investment Commission’s class order 98/0100. In accordance with that class order amounts in the financial statements and the Directors’ Report have been rounded to the nearest thousand dollars unless specifically stated to be otherwise. AUDITOR INDEPENDENCE The directors received the declaration on page 27 from the auditor of Premier Investments Limited. 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 2001. 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 24 of the Financial Report. DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) The remuneration report for the 52 weeks ended 26 July 2014 outlines the director and executive remuneration arrangements of the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. This information has been audited as required by section 308 (3C) of the Act. 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 Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company. For the purposes of this report, the term “executive” encompasses the chief executive, senior executives, general managers and secretaries of the Group. DETAILS OF KEY MANAGEMENT PERSONNEL (i) Non-Executive Directors Mr. S. Lew Mr. F.W. Jones Mr. T. Antonie Dr. D. Crean Mr. L.E. Fox Ms. S. Herman Mr. H.D. Lanzer Mr. M.R.I. McLeod Dr. G.H. Weiss (ii) Executive Directors Mr. M. McInnes (iii) Executives Mr. K.F. Davis Mr. A. Gardner Ms. C. Garnsey Chairman and Non-Executive Director Deputy Chairman and Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Executive Director and Chief Executive Officer Premier Retail Company Secretary and Non-Executive Alternate Director Chief Financial Officer, Just Group Limited Core Brand Director, Just Group Limited There were no changes to key management personnel after the reporting date and before the date the financial report was authorised for issue. REMUNERATION AND NOMINATION COMMITTEE The remuneration and nomination committee of the Board of Directors of the Group is responsible for determining and reviewing remuneration arrangements for the directors and executives. The remuneration and nomination committee comprises of three Non-Executive Directors. The remuneration and nomination committee assesses the appropriateness of the nature and amount of remuneration of directors and executives 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, high performing directors and executive team. 11 Premier Investments Limited 11 12 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) The remuneration report for the 52 weeks ended 26 July 2014 outlines the director and executive remuneration arrangements of the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. This information has been audited as required by section 308 (3C) of the Act. 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 Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company. For the purposes of this report, the term “executive” encompasses the chief executive, senior executives, general managers and secretaries of the Group. DETAILS OF KEY MANAGEMENT PERSONNEL (i) Non-Executive Directors Mr. S. Lew Mr. F.W. Jones Mr. T. Antonie Dr. D. Crean Mr. L.E. Fox Ms. S. Herman Mr. H.D. Lanzer Mr. M.R.I. McLeod Dr. G.H. Weiss (ii) Executive Directors Mr. M. McInnes (iii) Executives Mr. K.F. Davis Mr. A. Gardner Ms. C. Garnsey Chairman and Non-Executive Director Deputy Chairman and Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Executive Director and Chief Executive Officer Premier Retail Company Secretary and Non-Executive Alternate Director Chief Financial Officer, Just Group Limited Core Brand Director, Just Group Limited There were no changes to key management personnel after the reporting date and before the date the financial report was authorised for issue. REMUNERATION AND NOMINATION COMMITTEE The remuneration and nomination committee of the Board of Directors of the Group is responsible for determining and reviewing remuneration arrangements for the directors and executives. The remuneration and nomination committee comprises of three Non-Executive Directors. The remuneration and nomination committee assesses the appropriateness of the nature and amount of remuneration of directors and executives 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, high performing directors and executive team. Annual Report 2014 12 12 DIRECTORS’ REPORT (CONTINUED) DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) REMUNERATION PHILOSOPHY The Group operates in the Retail Industry with revenues mainly earned in its traditional domestic markets of Australia and New Zealand whilst currently increasing its revenues from international growth. The industry in Australia in New Zealand has seen significant structural change over recent years from changes in technology, increased international competitors entering the Australian and New Zealand Retail Industry and significant changes in the general consumer sentiment. At the same time, the market for skilled and experienced executives in the industry has become increasingly competitive and international in nature. The Board believe that, given these structural changes and growth of the Group’s international business, it is critical and in the best interests of shareholders to attract and retain the best possible executive team by offering appropriate remuneration packages. REMUNERATION STRUCTURE In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct. NON-EXECUTIVE DIRECTOR REMUNERATION Objective The Board seeks to set aggregate remuneration at a level which provides the Group with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. Structure The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was at the Annual General Meeting held on 25 November 2008 when shareholders approved an aggregate remuneration of an amount not exceeding $1,000,000 per year. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned among directors is reviewed annually. Current total remuneration for non-executive directors remains below the shareholder approved limit. The Chairman of the Group, consistent with his past practice, has declined to accept any remuneration for his role as a director. EXECUTIVE REMUNERATION Objective The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the company by: - - - - rewarding executives for Group, 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 Group; and ensuring total remuneration is competitive by market standards. EXECUTIVE REMUNERATION (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 Committee’s policy that service agreements are entered into with the Board by Directors and Executives. Remuneration consists of the following key elements: - - - Fixed Remuneration Short-Term Incentives (STI) Long-Term Incentives (LTI) - Discretionary bonuses FIXED REMUNERATION Objective The proportion of fixed remuneration and variable remuneration (potential short term and long term incentives) for each executive is set out on pages 17 and 18 of this report. Fixed remuneration is reviewed annually by the committee. The process consists of a review of Group, business unit and individual performance, relevant comparative remuneration externally and internally and, where appropriate, external advice on policies and practices. As noted above, the committee has access to external advice independent of management. During the 2011 financial year the Board reviewed the structural issues and opportunities facing the Group and the industry in which it operates. The Board made a key strategic decision to appoint Mr McInnes as CEO of Premier Retail. Mr McInnes has a long track record of success in every role he has occupied. He was directly responsible for some of Australia’s greatest retail success stories – including as co-founder of the Officeworks concept. Prior to being appointed as CEO of Premier Retail, Mr McInnes led David Jones to its most successful time as a public listed company. From 2003 to 2010, he was CEO and executive Director of David Jones turning David Jones into a fashion and financial powerhouse, creating in excess of $2 billion of shareholder value. The Board believes that Mr McInnes’ remuneration package is appropriate for an executive of his skills and 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 creating any additional cost for the Group. experience. Structure SHORT-TERM INCENTIVE (STI) Objective The objective of the STI program is to link the achievement of the Group’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 Group is reasonable in the circumstances. 13 Premier Investments Limited 13 14 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) EXECUTIVE REMUNERATION (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 Committee’s policy that service agreements are entered into with the Board by Directors and Executives. Remuneration consists of the following key elements: Fixed Remuneration Short-Term Incentives (STI) Long-Term Incentives (LTI) - - - - Discretionary bonuses The proportion of fixed remuneration and variable remuneration (potential short term and long term incentives) for each executive is set out on pages 17 and 18 of this report. FIXED REMUNERATION Objective Fixed remuneration is reviewed annually by the committee. The process consists of a review of Group, business unit and individual performance, relevant comparative remuneration externally and internally and, where appropriate, external advice on policies and practices. As noted above, the committee has access to external advice independent of management. During the 2011 financial year the Board reviewed the structural issues and opportunities facing the Group and the industry in which it operates. The Board made a key strategic decision to appoint Mr McInnes as CEO of Premier Retail. Mr McInnes has a long track record of success in every role he has occupied. He was directly responsible for some of Australia’s greatest retail success stories – including as co-founder of the Officeworks concept. Prior to being appointed as CEO of Premier Retail, Mr McInnes led David Jones to its most successful time as a public listed company. From 2003 to 2010, he was CEO and executive Director of David Jones turning David Jones into a fashion and financial powerhouse, creating in excess of $2 billion of shareholder value. The Board believes that Mr McInnes’ remuneration package is appropriate for an executive of his skills and experience. 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 creating any additional cost for the Group. SHORT-TERM INCENTIVE (STI) Objective The objective of the STI program is to link the achievement of the Group’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 Group is reasonable in the circumstances. Annual Report 2014 14 14 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) SHORT-TERM INCENTIVE (STI) (CONTINUED) 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 STI targets were based on growth in Segment EBIT and a number of individual KPI’s. DISCRETIONARY BONUSES Bonuses are payable at the discretion of the board of directors upon the recommendation of the committee. These discretionary bonuses can be paid by way of cash or performance rights. It is the intention that discretionary bonuses only be given in exceptional circumstances when in the best interest of the Group. No discretionary bonuses were paid during the 2014 financial year. LONG-TERM INCENTIVE (LTI) Objective The objective of the LTI plan is to reward executives in a manner aligned with the creation of shareholder wealth. Structure LTI grants to executives are delivered in the form of performance rights, through the Group’s Performance Rights Plan (“PRP”). The PRP provides a remuneration element designed to attract and retain key senior executives and employees and link rewards with the Group’s long-term performance and maximisation of shareholder wealth. During the current financial period, grants were made on 11 December 2013. 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 Securities 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’ (TSR) performance condition and that the TSR over the testing period is positive. The Group 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. Relative TSR is to be compared to a group of companies consisting of those in the S&P/ASX 200 Industrials, excluding overseas and resource companies. The Group receives an independent assessment of whether the performance criteria are met. The actual number of shares, if any, provided to participants will depend on the extent to which the performance condition has been met. The first condition required for any shares to vest is that the TSR over the testing period is positive. It is possible for each participant to be allocated either no shares (if the performance condition is not met) or anywhere between 25% and 100% of their initial offered amount, depending on the level of achievement against the performance condition as detailed in the following table. 15 Premier Investments Limited 15 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) LONG-TERM INCENTIVE (LTI) (CONTINUED) Target Below 50th percentile 50th percentile Between 50th and 62.5th percentile 62.5th percentile Between 62.5th and 75th percentile 75th percentile and above Conversion ratio of rights to shares available to vest under the TSR Performance Condition 0% 25% Pro Rata 50% Pro Rata 100% Generally the rights are eligible to vest three years from the date of the grant, with the exception of grants given to Mr Mark McInnes and Ms Colette Garnsey. The performance rights issued on 10 May 2011 to Mr McInnes are eligible to vest in three tranches, on 4 April 2014, 4 April 2015 and 4 April 2016. The performance rights issued to Ms Garnsey on 18 April 2013 were issued to replace certain performance rights that she was entitled to in her previous employment. The performance rights issued to Ms Garnsey are eligible to vest in three tranches on 20 June 2015, 20 June 2016 and 20 June 2017. Any rights which do not vest but the TSR was between the 40th and 50th percentile, may be retested once, 12 months after the initial vesting date. Once rights have been allocated, disposal of performance shares is subject to restrictions whereby board approval is required to sell shares granted within 7 years under this plan. An unvested performance right will lapse if it fails to meet the TSR performance condition over the prescribed period. Holders of performance rights are not entitled to vote or receive dividends or other distributions. Generally, all outstanding unvested rights are forfeited upon an executive resigning from the company. In the event of Mr. McInnes resigning such that his contractual notice period would expire within a 14 day period prior to a particular vesting date, those performance rights issued on 10 May 2011 to Mr. McInnes which would have been eligible to vest on that vesting date will be unaffected by the resignation. All other outstanding unvested rights are forfeited. 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 seven-year lock, with the prior consent of the board. No employees have any hedging arrangements in place. PERFORMANCE RIGHTS TESTED DURING THE 2014 FINANCIAL YEAR During the 2014 financial year, two tranches of LTI performance rights issued were tested. In October 2013, a tranche of 515,242 LTI performance rights issued during the 2011 financial year was tested. 380,332 of these performance rights lapsed due to the respective executives no longer being employed by the company. The testing period began on 1 October 2010. At this date, Premier Investments’ share price was $7.08 per share. During the three year testing period, Premier Investments declared a total of $1.09 fully franked dividends per share. The historical data concerning the Group in respect of the 2014 financial period and the four previous financial periods is set out on page 8 of the Directors’ Report under the heading “Group Performance”. The testing period ended on 1 October 2013 when the share price was $8.65 per share. Annual Report 2014 16 16 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) PERFORMANCE RIGHTS TESTED DURING THE 2014 FINANCIAL YEAR (CONTINUED) The Group received an independent assessment of the performance over the three year testing period. The assessment concluded that Premier Investments’ TSR was both positive and between the 50th and 62.5th percentile of the comparator group. As a result, 54,396 performance rights vested and converted into 54,396 newly issued ordinary shares. This is in line with the LTI scheme rules and represents a 40.3% conversion ratio for those individual executives. The balance of 80,514 performance rights lapsed. In April 2014, a first tranche of 600,000 LTI performance rights issued to Mr McInnes in May 2011 were tested. The testing period began on 24 March 2011, being the day prior to the announced appointment of Mr McInnes. At this date, Premier Investments’ share price was $5.88 per share. During the three year testing period, Premier Investments declared a total of $1.11 fully franked dividends per share. The historical data concerning the Group in respect of the 2014 financial period and the four previous financial periods is set out on page 8 of the Directors’ Report under the heading “Group Performance”. The testing period ended on 3 April 2014 when the share price was $9.84 per share. The Group received an independent assessment of the performance over the three year testing period. The assessment concluded that Premier Investments’ TSR was both positive and above the 75th percentile of the comparator group. Under the LTI scheme rules, a test above the 75th percentile would have resulted in 100% conversion and vesting into 600,000 ordinary shares. However, in terms of Mr McInnes’ contract in relation to this tranche of performance rights, one third of the performance rights had an additional 12 month retention clause. As a result, 400,000 performance rights vested and converted into 400,000 newly issued ordinary shares. The balance of 200,000 performance rights, in relation to this specific tranche, having already passed the 100% qualifying TSR test, will now be subject to a retention test to be performed in March 2015. . 17 Premier Investments Limited 17 % - - - - - - - - - - 7 1 4 5 . 0 9 4 1 . 6 1 4 1 . 8 1 t d e a e r l e c n a m r o f r e P s a e r a r a e y l i a c n a n i f e h t r o f p u o r G e h t f o s e v i t u c e x e d n a l e n n o s r e p t n e m e g a n a m y e k r o f i s e c v r e s r o f n o i t a s n e p m o c f o t n e m e e l h c a e f o t n u o m a d n a e r u t a n e h t f o s l i t a e D ) I D E U N T N O C ( ) I D E T D U A ( T R O P E R N O T A R E N U M E R I L E N N O S R E P T N E M E G A N A M Y E K F O N O T A R E N U M E R I T R O P E R ’ S R O T C E R D I ) I D E U N T N O C ( $ - 0 0 0 0 2 1 , 0 0 0 0 8 , 0 0 0 0 2 1 , 0 0 0 0 8 , 0 0 0 0 8 , 0 0 0 , 0 8 0 0 0 , 0 8 0 0 0 0 2 1 , 0 0 0 0 6 7 , 0 0 0 0 4 4 , 3 0 4 6 4 6 , 8 4 2 1 5 9 , , 0 9 0 4 6 3 4 , , 1 4 7 1 0 4 6 , , 1 4 7 1 6 1 7 , $ - - - - - - - - - - - 0 9 0 4 6 5 , 9 1 3 6 9 , 2 1 7 4 3 1 , 1 2 1 5 9 7 , 1 2 1 5 9 7 , $ - - - - - - - - - - - - - - - - $ - - 1 1 4 , 0 1 7 8 7 , 6 1 8 1 , 0 1 7 8 7 , 6 7 8 7 , 6 7 8 7 , 6 4 3 3 , 9 1 4 7 0 , 7 6 7 1 4 , 5 2 5 7 7 , 7 1 9 5 8 , 7 1 9 5 8 , 7 1 0 1 9 , 8 7 4 8 9 , 5 4 1 $ - - - - - - - - - - - - 5 6 2 , 4 5 0 6 7 , 3 2 5 2 0 , 8 7 5 2 0 , 8 7 $ - - - - - - - - - - $ - 9 8 5 , 9 0 1 3 1 2 , 3 7 9 1 8 , 9 0 1 3 1 2 , 3 7 3 1 2 , 3 7 0 0 0 , 0 8 3 1 2 , 3 7 6 6 6 , 0 0 1 6 2 9 , 2 9 6 2 0 0 0 , 0 0 8 , 1 3 8 5 , 4 7 9 , 1 - - - 0 0 0 , 0 0 8 , 1 0 0 0 , 0 0 8 , 1 5 2 2 , 2 2 4 0 6 9 , 7 7 4 7 1 9 , 4 7 7 5 8 6 , 9 4 6 , 3 1 1 6 , 2 4 3 , 4 d e s a b e r a h S m r e t - g n o L l t n e m y o p m e - t s o P m r e t t r o h S y r a t e n o M - n o N l t a o T s e v i t n e c n i n o i t i a n m r e T n o i t a u n n a r e p u S s t i f e n e B h s a C e e F / y r a a S l s r o t c e r i d e v i t u c e x e - n o N s e n o J . W . F . r M w e L . S . r M : s w o l l o f 4 1 0 2 d o e L c M . I . R . M . r M i s s e W . H . G . r D 1 r e z n a L . D . H . r M n a m r e H S . s M n a e r C . D . r D x o F . E . L . r M e v i t u c e x e - n o n l t a o T t n e m e g a n a m y e K s r o t c e r i d s e n n I c M . M . r M i s v a D . F . K . r M r e n d r a G . A . r M y e s n r a G . C . s M l e n n o s r e p e v i t u c e x e l t a o T 4 1 0 2 L A T O T i e n o n A t . T . r M I T B E l i a t e R i r e m e r P n i h t w o r g o t e u d d a p i s a w I T S ’ s e n n I c M r M l i l r e b e L h c o B d o n r A o t d a p i l e r e w s e e f s ’ r o t c e r i d s ’ r e z n a L r M 1 2 Annual Report 2014 18     % - - - - - - - - - - 9 4 5 . 6 3 4 2 . 7 4 1 1 . 6 6 3 . 9 1 e c n a m r o f r e P d e s a b e r a h S m r e t - g n o L l t n e m y o p m e - t s o P m r e t t r o h S y r a t e n o M - n o N t d e a e r l l t a o T s e v i t n e c n i n o i t i a n m r e T n o i t a u n n a r e p u S s t i f e n e B h s a C e e F / y r a a S l $ - 0 0 0 0 8 , 0 0 0 0 2 1 , 0 0 0 0 2 1 , 0 0 0 0 8 , 0 0 0 0 8 , 0 0 0 0 8 , 0 0 0 , 0 8 0 0 0 , 0 8 0 0 0 0 2 7 , , 3 4 9 3 4 6 2 , 5 8 3 5 5 4 , 0 5 5 4 2 8 , 6 9 4 9 1 9 , 7 2 0 9 3 6 , , 1 0 4 2 8 4 5 , , 1 0 4 2 0 2 6 , $ - - - - - - - - - - - - 9 4 5 4 9 , 8 7 6 3 3 , 3 4 9 3 4 6 , 0 7 1 2 7 7 , 0 7 1 2 7 7 , $ - - - - - - - - - - - - - - 0 0 0 0 0 2 , 0 0 0 0 0 2 , 0 0 0 0 0 2 , $ - 4 4 4 , 4 9 1 6 , 6 9 2 9 , 9 9 1 6 , 6 9 1 6 , 6 - 9 1 6 , 6 9 1 6 , 6 8 6 4 , 7 4 0 0 0 , 5 2 0 8 5 , 6 1 9 7 5 , 6 1 6 8 8 , 0 2 2 2 4 , 1 1 7 6 4 , 0 9 5 3 9 , 7 3 1 $ - - - - - - - - - - - - - - 5 2 9 , 7 5 5 2 9 , 7 5 5 2 9 , 7 5 $ - - - - - - - - - - - 0 0 0 , 5 2 2 0 0 0 , 0 8 1 4 0 0 0 , 0 0 2 - 0 0 0 , 5 0 4 0 0 0 , 5 0 4 $ - 1 8 3 , 3 7 6 5 5 , 5 1 1 1 7 0 , 0 1 1 1 8 3 , 3 7 1 8 3 , 3 7 0 0 0 , 0 8 1 8 3 , 3 7 1 8 3 , 3 7 2 3 5 , 2 7 6 5 0 8 , 3 1 4 7 9 4 , 5 7 4 2 3 9 , 4 6 6 5 0 6 , 7 2 4 0 0 0 , 5 7 9 , 1 9 3 8 , 6 5 9 , 3 1 7 3 , 9 2 6 , 4 s r o t c e r i d e v i t u c e x e - n o N s e n o J . 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T . r M e v i t u c e x e l t a o T 3 1 0 2 L A T O T . r e y o p m e l r o i r p r e h m o r f o t d e l t i t n e n e e b e v a h l d u o w e h s s t i f e n e b r o f n o i t a s n e p m o c t r a p s a e d a m s a w t n e m y a p e h T . p u o r G e h t h t i w t c a r t n o c r e h f o i i g n n g s n o 0 0 0 , 0 0 2 $ f o t n e m y a p f f o - e n o a i d e v e c e r y e s n r a G s M . 3 1 0 2 l i r p A 2 1 d e n g s e R i 4 5 . 2 1 0 2 r e b m e t p e S 0 2 d e t n o p p A 3 i . t c a r t n o c i s h f o e g n a h c a r o f n o i t a s n e p m o c s a t n e m y a p h s a c a i d e v e c e r r e n d r a G l l i . r e b e L h c o B d o n r A o t d a p i l e r e w s e e f s ’ r o t c e r i d s ’ r e z n a L r M r M 1 2 ) D E U N T N O C I ( L E N N O S R E P T N E M E G A N A M Y E K F O N O T A R E N U M E R I ) I D E U N T N O C ( ) I D E T D U A ( T R O P E R N O T A R E N U M E R I T R O P E R ’ S R O T C E R D I ) I D E U N T N O C ( 19 Premier Investments Limited     s t h g i r f o r e b m u n e h t s a l l e w s a , 4 1 0 2 y u J l 6 2 d e d n e d o i r e p l i a c n a n i f e h t r o f n o i t a r e n u m e r s a s e v i t u c e x e o t d e t n a r g s t h g i r e r a h s f o r e b m u n e h t l i s e s o c s d w o e b l l e b a t e h T d e s p a l d n a d e t s e v s t h g R i r a e y e h t g n i r u d s t h g R i d e s p a l s t h g R i d e t s e v e h t g n i r u d e h t g n i r u d r a e y . o N r a e y . o N i e s c r e x e t s a L i e s c r e x e t s r i F s n o i t i d n o c d n a s m r e T e u a v l r i a F t a t h g i r r e p e t a d d r a w a t e a d e t a d e t a d y r i p x E $ e t a d t n a r G s t h g R i d e d r a w a e h t g n i r u d r a e y . o N r a e Y d e t n a r g : r a e y e h t g n i r u d d e s p a l d n a d e t s e v r a e y e h t g n i r u d d e s p a l d n a d e t s e v , d e d r a w a s t h g R i ) a 4 1 0 2 i s e r a h S d n a s t h g R o t g n i t a l e r s e r u s o l c s i d l a n o i t i d d A ) I D E U N T N O C ( ) I D E T D U A ( T R O P E R N O T A R E N U M E R I T R O P E R ’ S R O T C E R D I ) I D E U N T N O C ( 0 2 2 5 3 7 3 , 5 3 2 5 2 , - - - - 7 1 0 2 - t c O - 1 0 0 0 0 0 4 , - 4 1 0 2 - r p A - 4 0 - 6 1 0 2 - t c O - 1 3 1 0 2 - t c O - 1 - 7 1 0 2 - t c O - 1 - - 8 2 . 4 1 1 0 2 - y a M - 0 1 - 0 1 0 2 - v o N - 2 2 - 3 1 0 2 - c e D - 1 1 4 5 2 , 4 6 1 1 0 2 4 1 0 2 1 1 0 2 t n e m e g a n a m y e K l e n n o s r e p s e n n I c M . M . r M r e n d r a G . A . r M Annual Report 2014 20   DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) Additional disclosures relating to Rights and Shares (Continued) b) Value of options awarded, exercised and lapsed during the year 2014 Key management personnel Mr. M. McInnes Mr. A. Gardner Value of rights granted during the year $ Value of rights exercised during the year $ Value of rights lapsed during the year $ Remuneration consisting of rights for the year % - 275,007 3,944,000 197,085 - 323,095 12.93 14.90 There were no alterations to the terms and conditions of rights awarded as remuneration since their award date. c) Shares issued on exercise of options 2014 Key management personnel Mr. M. McInnes Mr. A. Gardner Shares issued No Paid per share $ Unpaid per share $ 400,000 25,235 - - - - There were no alterations to the terms and conditions of rights awarded as remuneration since their award date. 21 Premier Investments Limited 21   i l e b a s c r e x e t o N l i e b a s c r e x E 4 1 0 2 y u J l 6 2 t A l t a o T t a e c n a a B l 4 1 0 2 y u J 6 2 l s t h g R i d e s p a l s t h g R i i d e s c r e x e s a d e t n a r G t a e c n a a B l n o i t a r e n u m e r 3 1 0 2 y u J 8 2 l l e n n o s r e p t n e m e g a n a m y e k f o i s g n d o h l s t h g R i ) d 4 1 0 2 0 0 0 0 0 8 , 3 5 4 5 4 2 , 0 0 0 0 4 2 , - - - 0 0 0 0 0 8 , 3 5 4 5 4 2 , 0 0 0 0 4 2 , 0 0 0 0 0 8 , 3 5 4 5 4 2 , 0 0 0 0 4 2 , - - ) 2 5 3 , 7 3 ( - ) 5 3 2 , 5 2 ( ) 0 0 0 , 0 0 4 ( - - 4 5 2 , 4 6 6 8 7 , 3 4 2 0 0 0 , 0 4 2 0 0 0 , 0 0 2 , 1 t n e m e g a n a m y e K l e n n o s r e p s e n n I c M . M . r M r e n d r a G . A . r M y e s n r a G C . s M ) d e u n i t n o C i ( s e r a h S d n a s t h g R o t g n i t a l e r s e r u s o c s d l i l a n o i t i d d A . l i n a P s t h g R e c n a m r o f r e P s p u o r G e h t ’ f o i s n o s v o r p i e h t h t i w e c n a d r o c c a n i e d a m e r e w l e n n o s r e p t n e m e g a n a m y e k o t d e t n a r g s t h g R i 2 2 Annual Report 2014 22 ) I D E U N T N O C ( ) I D E T D U A ( T R O P E R N O T A R E N U M E R I T R O P E R ’ S R O T C E R D I ) I D E U N T N O C (   DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) Additional disclosures relating to Rights and Shares (Continued) e) Number of Shares held in Premier Investments Limited BALANCE 28 JULY 2013 ORDINARY SHARE PURCHASE ORDINARY SHARES ACQUIRED UNDER PERFORMANCE RIGHTS PLAN ORDINARY 4,437,699 197,592 - - 5,577,014 - 27,665 28,186 10,000 - - 84,763 - - 10,000 - - - 8,000 - - - - - - - - - - - - - - - 400,000 - 25,235 - NET CHANGE OTHER ORDINARY BALANCE 26 JULY 2014 ORDINARY - - - - 4,437,699 207,592 - - (3,000,000) 2,577,014 - - - - - - - - 8,000 27,665 28,186 10,000 400,000 - 109,998 - 10,362,919 18,000 425,235 (3,000,000) 7,806,154 2014 NON-EXECUTIVE DIRECTORS Mr. S. Lew** Mr. F.W. Jones Mr. T. Antonie Dr. D. Crean Mr. L.E. Fox Ms. S. Herman Mr. H.D. Lanzer Mr. M.R.I. McLeod Dr. G.H. Weiss EXECUTIVES Mr. M. McInnes Mr. K.F. Davis Mr. A. Gardner Ms. C. Garnsey TOTAL 2014 ** Mr. Lew is an associate of Century Plaza Investments Pty. Ltd. and Metrepark Pty. Ltd (Associated Entities). The Associated Entities, collectively, have a relevant interest in 59,804,731 (2013: 59,804,731) shares in the company. However, Mr. Lew does not have a relevant interest in the shares in the company held by the Associated Entities. Additional disclosures relating to transactions and balances with key management personnel f) Other transactions and balances with key management personnel Details and terms and conditions of other transactions with key management personnel and their related parties: Mr. Lanzer is a partner of the legal firm Arnold Bloch Leibler. Group companies use the services of Arnold Bloch Leibler from time to time. Legal services totalling $1,216,100 (2013: $1,022,348), including Mr. Lanzer's directors fees, GST and disbursements were invoiced by Arnold Bloch Leibler to the consolidated group. The fees paid for these services were all at arm's length and on normal commercial terms. 23 Premier Investments Limited 23   DIRECTORS’ REPORT (CONTINUED) DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) Additional disclosures relating to Rights and Shares (Continued) Additional disclosures relating to transactions and balances with key management personnel (continued) e) Number of Shares held in Premier Investments Limited f) Other transactions and balances with key management personnel (continued) BALANCE 28 JULY 2013 ORDINARY SHARE PURCHASE ORDINARY NET CHANGE OTHER ORDINARY BALANCE 26 JULY 2014 ORDINARY SHARES ACQUIRED UNDER PERFORMANCE RIGHTS PLAN ORDINARY 4,437,699 197,592 5,577,014 27,665 28,186 10,000 - - - - - - 84,763 10,000 8,000 - - - - - - - - - - - - - - - - - - - - - 400,000 25,235 (3,000,000) 2,577,014 - - - - - - - - - - - - 4,437,699 207,592 - - 8,000 27,665 28,186 10,000 400,000 109,998 - - 10,362,919 18,000 425,235 (3,000,000) 7,806,154 2014 NON-EXECUTIVE DIRECTORS Mr. S. Lew** Mr. F.W. Jones Mr. T. Antonie Dr. D. Crean Mr. L.E. Fox Ms. S. Herman Mr. H.D. Lanzer Mr. M.R.I. McLeod Dr. G.H. Weiss EXECUTIVES Mr. M. McInnes Mr. K.F. Davis Mr. A. Gardner Ms. C. Garnsey TOTAL 2014 ** Mr. Lew is an associate of Century Plaza Investments Pty. Ltd. and Metrepark Pty. Ltd (Associated Entities). The Associated Entities, collectively, have a relevant interest in 59,804,731 (2013: 59,804,731) shares in the company. However, Mr. Lew does not have a relevant interest in the shares in the company held by the Associated Entities. Additional disclosures relating to transactions and balances with key management personnel f) Other transactions and balances with key management personnel Details and terms and conditions of other transactions with key management personnel and their related parties: terms. Mr. Lanzer is a partner of the legal firm Arnold Bloch Leibler. Group companies use the services of Arnold Bloch Leibler from time to time. Legal services totalling $1,216,100 (2013: $1,022,348), including Mr. Lanzer's directors fees, GST and disbursements were invoiced by Arnold Bloch Leibler to the consolidated group. The fees paid for these services were all at arm's length and on normal commercial Mr. Lanzer is a director of Loch Awe Pty Ltd. During the year operating lease payments totalling $378,629 (2013: $364,067) including GST was paid to Loch Awe Pty Ltd. The payments were at arm’s length and on normal commercial terms. Mr. Lew is a director of Voyager Distributing Company Pty Ltd and family companies associated with Mr. Lew have a controlling interest in Playcorp Pty Ltd and Sky Chain Trading Limited. During the year, purchases totalling $20,332,905 (2013: $20,250,393) including GST have been made by Group companies from Voyager Distributing Co. Pty Ltd, Playcorp Pty Ltd and Sky Chain Trading Limited, with $1,436,941 (2013: $1,430,634) remaining outstanding at year-end. The purchases were all at arm’s length and on normal commercial terms. Additionally, fabric sales of $nil (2013: $276,687), inclusive of GST, have been made by Group companies to Voyager Distributing Co. Pty Ltd. Sales were at arm’s length and on normal commercial terms. Mr. Lew is a director of Century Plaza Trading Pty. Ltd. The company and Century Plaza Trading Pty Ltd are parties to a Services Agreement to which Century Plaza Trading agrees to provide certain services to the company to the extent required and requested by the company. The company is required to reimburse Century Plaza Trading for costs it incurs in providing the company with the services under the Service Agreement. The company reimbursed a total of $412,718 (2013: $352,570) costs including GST incurred by Century Plaza Trading Pty Ltd. Amounts recognised in the financial report at the reporting date in relation to other transactions: i) Amounts included within Assets and Liabilities Current Liabilities Trade and other payables ii) Amounts included within Profit or Loss Expenses Purchases/ Cost of goods sold Operating lease rental expense Legal fees Other expenses Total expenses 2014 $’000 1,437 1,437 2014 $’000 18,724 344 1,100 413 20,581 23 Annual Report 2014 24 24     DIRECTORS’ REPORT (CONTINUED) DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) AUDITOR INDEPENDENCE SERVICE AGREEMENTS Remuneration and other terms of employment for key management personnel and other executives are formalised in written service agreements (with the exception of Mr. Kim Davis, whose relevant terms of employment are set out below). Major provisions of the agreements are set out below: Termination benefits A copy of the Auditor’s Independence Declaration in relation to the audit for the financial year is provided on page 27 of this report. Signed in accordance with a resolution of the board of directors. Start date Term of agreement Review period Period of written notice required from the company Upon company initiated Upon diminution of role Open Annual 12 months 12 months Nil TFR including notice Period of written notice required from employee 6 months (in first 12 months of employment) 12 months thereafter Solomon Lew Chairman 17 October 2014 Mr. M. McInnes 04-Apr- 2011 Mr. K. F. Davis Mr. A. Gardner 17-Nov- 1993 02-Jan- 2007 Ms. C. Garnsey 20-Sep- 2012 Open Annual 3 months Nil Nil 3 months Open Annual 12 months 12 months Nil 12 months TFR including notice Open Annual 12 months 12 months Nil 12 months TFR including notice 25 Premier Investments Limited 25 26     DIRECTORS’ REPORT (CONTINUED) DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT (AUDITED) (CONTINUED) AUDITOR INDEPENDENCE A copy of the Auditor’s Independence Declaration in relation to the audit for the financial year is provided on page 27 of this report. Signed in accordance with a resolution of the board of directors. Period of written notice required from employee 6 months (in first 12 months of employment) 12 months thereafter Solomon Lew Chairman 17 October 2014 SERVICE AGREEMENTS Remuneration and other terms of employment for key management personnel and other executives are formalised in written service agreements (with the exception of Mr. Kim Davis, whose relevant terms of employment are set out below). Major provisions of the agreements are set out below: Termination benefits Term of Start date agreement Review period Upon company initiated Upon diminution of role Period of written notice required from the company Mr. M. McInnes Open Annual 12 months 12 months Nil 04-Apr- 2011 1993 02-Jan- 2007 2012 Mr. K. F. Davis 17-Nov- Open Annual 3 months Nil Nil 3 months Mr. A. Gardner Open Annual 12 months 12 months Nil 12 months Ms. C. Garnsey 20-Sep- Open Annual 12 months 12 months Nil 12 months TFR including notice TFR including notice TFR including notice 25 Annual Report 2014 26 26     8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au STATEMENT OF COMPREHENSIVE INCOME FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 Auditor’s Independence Declaration to the Directors of Premier Investments Limited In relation to our audit of the financial report of Premier Investments Limited for the financial year ended 26 July 2014 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 Brent Simonis Partner 17 October 2014 27 Premier Investments Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation CONSOLIDATED NOTES 2014 $’000 2013 $’000 892,570 11,624 904,194 5,776 909,970 (341,078) (225,716) (186,061) (21,941) (12,193) (6,311) (4,482) (26,608) (824,390) 12,785 98,365 (25,365) 73,000 - - (21,436) 728 (896) 6,431 (15,173) Changes in inventories of finished goods and work in progress and Continuing operations Revenue from sale of goods Other revenue Total revenue Other income Total income raw materials used Employee expenses Operating lease rental expense Depreciation, impairment and amortisation Advertising and direct marketing Finance costs Supply chain transformation Other expenses Total expenses Share of profit of associates Profit from continuing operations before income tax Income tax expense Net profit for the period attributable to owners Other comprehensive income Items that may be reclassified subsequently to profit or loss Net fair value gains on available-for-sale financial assets Fair value gain on available-for-sale financial assets reclassified from equity to profit and loss Cash flow hedges Foreign currency translation Net movement in other comprehensive income of associates Income tax on items of other comprehensive income Other comprehensive loss for the period, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO THE OWNERS Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the parent: - basic for profit for the year (cents per share) - diluted for profit for the year (cents per share) 4 4 4 5 5 5 5 13 6 19 19 19 19 19 19 30 30 The accompanying notes form an integral part of this Statement of Comprehensive Income. 843,172 18,239 861,411 156,833 1,018,244 (321,813) (210,775) (178,343) (19,187) (12,481) (6,988) - (25,815) (775,402) 3,114 245,956 (71,483) 174,473 32,115 (149,803) 18,270 1,211 1,219 29,589 (67,399) 28 57,827 107,074 46.98 46.36 112.37 111.07   STATEMENT OF COMPREHENSIVE INCOME FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 CONSOLIDATED NOTES 2014 $’000 2013 $’000 Continuing operations Revenue from sale of goods Other revenue Total revenue Other income Total income Changes in inventories of finished goods and work in progress and raw materials used Employee expenses Operating lease rental expense Depreciation, impairment and amortisation Advertising and direct marketing Finance costs Supply chain transformation Other expenses Total expenses Share of profit of associates Profit from continuing operations before income tax Income tax expense Net profit for the period attributable to owners Other comprehensive income Items that may be reclassified subsequently to profit or loss Net fair value gains on available-for-sale financial assets Fair value gain on available-for-sale financial assets reclassified from equity to profit and loss Cash flow hedges Foreign currency translation Net movement in other comprehensive income of associates Income tax on items of other comprehensive income Other comprehensive loss for the period, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO THE OWNERS Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the parent: - basic for profit for the year (cents per share) - diluted for profit for the year (cents per share) 4 4 4 5 5 5 5 13 6 19 19 19 19 19 19 30 30 The accompanying notes form an integral part of this Statement of Comprehensive Income. 892,570 11,624 904,194 5,776 909,970 (341,078) (225,716) (186,061) (21,941) (12,193) (6,311) (4,482) (26,608) (824,390) 12,785 98,365 (25,365) 73,000 843,172 18,239 861,411 156,833 1,018,244 (321,813) (210,775) (178,343) (19,187) (12,481) (6,988) - (25,815) (775,402) 3,114 245,956 (71,483) 174,473 - 32,115 - (21,436) 728 (896) 6,431 (15,173) (149,803) 18,270 1,211 1,219 29,589 (67,399) 57,827 107,074 46.98 46.36 112.37 111.07 Annual Report 2014 28 28   STATEMENT OF FINANCIAL POSITION AS AT 26 JULY 2014 AND 27 JULY 2013 STATEMENT OF CASH FLOWS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 NOTES CONSOLIDATED 2014 $’000 ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Other financial instruments Other current assets Total current assets Non-current assets Trade and other receivables Property, plant and equipment Intangible assets Deferred tax assets Investments in associates Other financial instruments Total non-current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables Interest-bearing liabilities Other financial instruments Income tax payable Provisions Other current liabilities Total current liabilities Non-current liabilities Interest-bearing liabilities Deferred tax liabilities Provisions Other financial instruments Other Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Retained earnings TOTAL EQUITY 25 8 9 29 10 8 11 12 6 13 29 14 15 29 16 17 15 6 16 29 17 18 19 20 2013 $’000 313,157 6,858 83,959 13,625 4,676 422,275 1,929 83,402 854,529 10,928 185,534 3,417 313,308 12,155 98,496 1,517 5,215 430,691 1,004 109,028 854,572 12,147 188,418 79 1,165,248 1,595,939 1,139,739 1,562,014 62,520 100,529 6,798 24,642 16,558 4,221 215,268 19,014 52,586 1,462 3 9,077 82,142 297,410 1,298,529 608,615 2,514 687,400 54,514 48 28 13,463 16,764 4,771 89,588 101,920 58,295 1,467 159 10,219 172,060 261,648 1,300,366 608,615 16,789 674,962 1,298,529 1,300,366 NET CASH FLOWS FROM OPERATING ACTIVITIES 25(b) CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Dividends received Interest received Borrowing costs paid Income taxes paid CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of financial instruments Dividends received from associates Payment for trademarks Proceeds from sale of property, plant and equipment Payment for property, plant and equipment and leasehold premiums ACTIVITIES NET CASH FLOWS (USED IN) FROM INVESTING CASH FLOWS FROM FINANCING ACTIVITIES Equity dividends paid Proceeds from borrowings Repayment of borrowings Payment of finance lease liabilities NET CASH FLOWS USED IN FINANCING ACTIVITIES NET INCREASE IN CASH HELD Cash at the beginning of the financial period CASH AT THE END OF THE FINANCIAL PERIOD 25(a) The accompanying notes form an integral part of this Statement of Cash Flows. NOTES CONSOLIDATED 2014 $’000 985,643 (894,487 - 11,692 (5,815) (13,653) 83,380 8,698 (106) - - (60,562) 83,000 (67,000) (55) (44,617) 151 313,157 313,308 2013 $’000 931,411 (844,709) 3,862 13,404 (6,386) (8,474) 89,108 20,247 4,683 (96) 7 (57,446) 22,000 (45,000) (107) (80,553) 18,989 294,168 313,157 (47,204) (14,407) (38,612) 10,434 The accompanying notes form an integral part of this Statement of Financial Position. 29 Premier Investments Limited 29 30     STATEMENT OF CASH FLOWS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) NOTES Dividends received Interest received Borrowing costs paid Income taxes paid NET CASH FLOWS FROM OPERATING ACTIVITIES 25(b) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of financial instruments Dividends received from associates Payment for trademarks Proceeds from sale of property, plant and equipment Payment for property, plant and equipment and leasehold premiums NET CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Equity dividends paid Proceeds from borrowings Repayment of borrowings Payment of finance lease liabilities NET CASH FLOWS USED IN FINANCING ACTIVITIES NET INCREASE IN CASH HELD Cash at the beginning of the financial period CASH AT THE END OF THE FINANCIAL PERIOD 25(a) The accompanying notes form an integral part of this Statement of Cash Flows. CONSOLIDATED 2014 $’000 985,643 (894,487 - 11,692 (5,815) (13,653) 83,380 - 8,698 (106) - 2013 $’000 931,411 (844,709) 3,862 13,404 (6,386) (8,474) 89,108 20,247 4,683 (96) 7 (47,204) (14,407) (38,612) 10,434 (60,562) 83,000 (67,000) (55) (44,617) 151 313,157 313,308 (57,446) 22,000 (45,000) (107) (80,553) 18,989 294,168 313,157 Annual Report 2014 30 30   STATEMENT OF CHANGES IN EQUITY FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 STATEMENT OF CHANGES IN EQUITY FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 CONSOLIDATED CONTRIBUTED EQUITY $’000 CAPITAL PROFITS RESERVE $’000 PERFORMANCE RIGHTS RESERVE $’000 CONSOLIDATED CASH FLOW HEDGE RESERVE $’000 FOREIGN CURRENCY TRANSLATION RESERVE $’000 FAIR VALUE RESERVE $’000 RETAINED PROFITS $’000 TOTAL $’000 CONTRIBUTED EQUITY $’000 608,615 CAPITAL PROFITS RESERVE $’000 - PERFORMANCE RIGHTS RESERVE $’000 464 - CASH FLOW HEDGE RESERVE $’000 - 2,383 11,440 FOREIGN CURRENCY TRANSLATION RESERVE $’000 - 2,502 FAIR VALUE RESERVE $’000 - RETAINED PROFITS $’000 - TOTAL $’000 674,962 1,300,366 - - 73,000 73,000 - (15,173) 674,962 1,300,366 73,000 - 73,000 73,000 57,827 - (15,173) 73,000 57,827 - - - - 898 (60,562) (60,562) 687,400 1,298,529 - 898 (60,562) (60,562) 82,618 557,935 1,249,806 687,400 - 1,298,529 174,473 174,473 - - - - - - - At 28 July 2013 Net Profit for the period Other comprehensive loss At 28 July 2013 Total comprehensive 608,615 Net Profit for the period income for the period Other comprehensive loss Transactions with owners Total comprehensive in their capacity as income for the period owners: Transactions with owners Performance rights issued in their capacity as Dividends Paid - - - - - - - - - (15,005) (168) 11,440 2,502 - (15,005) - (168) (15,005) (168) 2,383 - - - (15,005) (168) 898 - - - - - 464 3,281 (3,565) 2,334 - - - - 464 - - - - - owners: Balance as at 26 July 2014 608,615 Performance rights issued Dividends Paid At 29 July 2012 Balance as at 26 July 2014 Net Profit for the period - - 608,615 898 - - - - - 464 1,451 (1,349) 608,615 464 3,281 (3,565) 2,334 - 72 - - - - 1,451 - - - 464 - - - - - - - - - - - - - - - - Other comprehensive income At 29 July 2012 (loss) 608,615 Net Profit for the period Total comprehensive Other comprehensive income income for the period (loss) Transactions with Total comprehensive owners in their capacity income for the period as owners: Transactions with Performance rights issued owners in their capacity Dividends Paid as owners: Balance as at 27 July 2013 Performance rights issued Dividends Paid 932 - - - - - 608,615 464 2,383 11,440 2,502 - - - - 932 - - - - - 2,502 - - - (1,349) 12,789 72 2,430 82,618 (82,618) 557,935 1,249,806 - (67,399) - - - 174,473 174,473 12,789 2,430 (82,618) 174,473 107,074 12,789 2,430 (82,618) - (67,399) 12,789 2,430 (82,618) 174,473 107,074 Balance as at 27 July 2013 464 The accompanying notes form an integral part of this Statement of Changes in Equity 608,615 11,440 2,383 The accompanying notes form an integral part of this Statement of Changes in Equity 31 Premier Investments Limited - - - - 932 (57,446) (57,446) 674,962 1,300,366 - 932 (57,446) (57,446) 674,962 1,300,366 31 31 NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 1 CORPORATE INFORMATION The financial report of Premier Investments Limited for the 52 weeks ended 26 July 2014 was authorised for issue in accordance with a resolution of the directors on 17 October 2014. Premier Investments Limited is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the Directors’ Report. 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial report is prepared for the 52 weeks beginning 28 July 2013 to 26 July 2014. (a) 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, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has been prepared on a historical cost basis, except for other financial instruments, which have been measured at fair value as explained in the accounting policies below. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) under the option available to the company under Australian Securities and Investments Commission (ASIC) Class Order 98/0100. The Group is an entity to which the Class Order applies. (b) STATEMENT OF COMPLIANCE The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (c) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS Changes in accounting policies, disclosures, standards and interpretations The accounting policies adopted are consistent with those of the previous financial year except as follows: As of the beginning of the financial year, the Group has adopted the following new and amended Australian Accounting Standards and AASB Interpretations that are relevant to the Group and its operations and that are effective for the current annual reporting period. (i) AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements: This amendment deletes from AASB 124 Related Party Disclosures individual key management personnel disclosure requirements for all disclosing entities in relation to equity holdings, loans and other related party transactions. In the current year, individual key management personnel disclosure relating to equity holdings and other related party transactions is now disclosed in the Remuneration Report, due to an amendment to the Corporations Regulations 2001 issued in June 2013. 32       NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 1 CORPORATE INFORMATION The financial report of Premier Investments Limited for the 52 weeks ended 26 July 2014 was authorised for issue in accordance with a resolution of the directors on 17 October 2014. Premier Investments Limited is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the Directors’ Report. 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial report is prepared for the 52 weeks beginning 28 July 2013 to 26 July 2014. (a) 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, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has been prepared on a historical cost basis, except for other financial instruments, which have been measured at fair value as explained in the accounting policies below. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) under the option available to the company under Australian Securities and Investments Commission (ASIC) Class Order 98/0100. The Group is an entity to which the Class Order applies. (b) STATEMENT OF COMPLIANCE The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (c) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS Changes in accounting policies, disclosures, standards and interpretations The accounting policies adopted are consistent with those of the previous financial year except as follows: As of the beginning of the financial year, the Group has adopted the following new and amended Australian Accounting Standards and AASB Interpretations that are relevant to the Group and its operations and that are effective for the current annual reporting period. (i) AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements: This amendment deletes from AASB 124 Related Party Disclosures individual key management personnel disclosure requirements for all disclosing entities in relation to equity holdings, loans and other related party transactions. In the current year, individual key management personnel disclosure relating to equity holdings and other related party transactions is now disclosed in the Remuneration Report, due to an amendment to the Corporations Regulations 2001 issued in June 2013. Annual Report 2014 32 32   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONTINUED) (c) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONTINUED) (vii) AASB 13 Fair Value Measurements: The standard establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted. AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. The standard requires prospective application from 1 January 2013. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard. In accordance with these provisions, the Group has not made any new disclosures required by AASB 13 for the comparative period ending 27 July 2013. Other than the expanded disclosure requirements, AASB 13 does not have any material impact on the amounts recognised in the consolidated financial statements. The Group has elected to early adopt the following New Standards or amendments for this financial year: (i) AASB 2013-3 Amendments to AASB 136 – Recoverable amount disclosures for Non- Financial Assets: These amendments remove the unintended consequences of AASB 13 Fair Value Measurements on the disclosure required under AASB 136 Impairment of Assets. In addition, these amendments require disclosure of the recoverable amounts for the assets or cash-generating units for which impairment losses have been recognised or reversed during the period. These amendments are effective retrospectively for annual reporting periods beginning on or after 1 January 2014 with earlier application permitted, provided AASB 13 is also applied. The Group has early adopted these amendments to AASB 136 in the current period. Accordingly, these amendments have been incorporated in the disclosures for non-financial assets in Note 12. The amendments will continue to be applicable for future disclosures. Adoption of these new and revised Standards did not have any effect on the financial position or performance of the Group. (ii) (iii) (iv) (v) (vi) AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities: The Standard principally amends AASB 7 Financial Instruments: Disclosures to require disclosure of the effect or potential effect of set-off arrangements. As the Group does not have any offsetting arrangements in place, the application of the amendment does not have any material impact on the consolidated financial statements. AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009 – 2011 Cycle: Key amendments include the clarification of the requirements of comparative information as well as interim reports and segment information for total assets and total liabilities. AASB 2012-9 Amendments to AASB 1048 arising from the withdrawal of Australian Interpretation 1039: The amendments evidence the withdrawal of Australian Interpretation 1039 Substantive Enactment of Major Tax Bills in Australia. The adoption of this amending standard does not have any material impact on the consolidated financial statements. AASB 119 Employee Benefits: The revised standard distinguishes between short term and other long term employee benefits based on whether the benefits are expected to be settled wholly within 12 months after reporting date. The application of the revised standard does not have any material impact on the consolidated financial statements. New and revised Standards on consolidation, joint arrangements, associates and disclosures: In August 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued comprising AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, AASB 127 (as revised in 2011) Separate Financial Statements, and AASB 128 (as revised in 2011) Investments in Associates and Joint Ventures. Subsequent to the issue of these standards, amendments to AASB 10, AASB 11 and AASB 12 were issued to clarify certain transitional guidance on the first-time application of the standards. In the current year, the Group has applied for the first time AASB 10, AASB 11, AASB 12 and AASB 127 (as revised in 2011) together with the amendments to AASB 10, AASB 11 and AASB 12 regarding transitional guidance. AASB 127 (as revised in 2011) is not applicable to the Group as it only relates to separate financial statements. AASB 10 establishes a new control model that applies to all entities. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations. AASB 11 uses the principle of control in AASB 10 to define joint control. It further removes the option to account for jointly controlled entities using proportionate consolidation. The application of these standards have not had an impact on the current composition of the Group. AASB 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements and associates. The application of AASB 12 has not materially impacted the disclosures presented in the consolidated financial statements. 33 Premier Investments Limited 33 34     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONTINUED) (vii) AASB 13 Fair Value Measurements: The standard establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted. AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. The standard requires prospective application from 1 January 2013. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard. In accordance with these provisions, the Group has not made any new disclosures required by AASB 13 for the comparative period ending 27 July 2013. Other than the expanded disclosure requirements, AASB 13 does not have any material impact on the amounts recognised in the consolidated financial statements. The Group has elected to early adopt the following New Standards or amendments for this financial year: (i) AASB 2013-3 Amendments to AASB 136 – Recoverable amount disclosures for Non- Financial Assets: These amendments remove the unintended consequences of AASB 13 Fair Value Measurements on the disclosure required under AASB 136 Impairment of Assets. In addition, these amendments require disclosure of the recoverable amounts for the assets or cash-generating units for which impairment losses have been recognised or reversed during the period. These amendments are effective retrospectively for annual reporting periods beginning on or after 1 January 2014 with earlier application permitted, provided AASB 13 is also applied. The Group has early adopted these amendments to AASB 136 in the current period. Accordingly, these amendments have been incorporated in the disclosures for non-financial assets in Note 12. The amendments will continue to be applicable for future disclosures. Adoption of these new and revised Standards did not have any effect on the financial position or performance of the Group. Annual Report 2014 34 34   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONTINUED) (c) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONTINUED) Accounting Standards and Interpretations issued but not yet effective Accounting Standards and Interpretations issued but not yet effective Recently issued or amended Australian Accounting Standards and Interpretations that have been identified as those which may be relevant to the Group in future reporting periods, but are not yet effective and have not been adopted by the Group for the reporting period ending 26 July 2014, are outlined in the table below: Recently issued or amended Australian Accounting Standards and Interpretations that have been identified as those which may be relevant to the Group in future reporting periods, but are not yet effective and have not been adopted by the Group for the reporting period ending 26 July 2014, are outlined in the table below: Title Summary Title Summary AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities AASB 2012-3 adds application guidance to AASB 132 Financial Instruments: Presentation to address inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of “currently has a legally enforceable right to set-off” and that some gross settlement systems may be considered equivalent to net settlement. AASB 2012-3 adds application guidance to AASB 132 Financial Instruments: Presentation to address inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of “currently has a legally enforceable right to set-off” and that some gross settlement systems may be considered equivalent to net settlement. AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities AASB 2013-4 Amendments AASB 2013-4 to Australian Amendments Accounting to Australian Standards – Accounting Novation of Standards – Derivatives Novation of and Derivatives Continuation of and Hedge Continuation of Accounting Hedge Accounting AASB 2013-4 amends AASB 139 Financial Instruments: Recognition and AASB 2013-4 amends AASB 139 Measurement to permit the Financial Instruments: Recognition and continuation of hedge accounting in Measurement to permit the specified circumstances where a continuation of hedge accounting in derivative, which has been designated specified circumstances where a as a hedging instrument, is novated derivative, which has been designated from one counterparty to a central as a hedging instrument, is novated counterparty as a consequence of laws from one counterparty to a central or regulations. counterparty as a consequence of laws or regulations. AASB 1031 Materiality AASB 1031 Materiality AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments The revised AASB 1031 is an interim standard that cross-references to other The revised AASB 1031 is an interim Standards and the Framework (issued standard that cross-references to other December 2013) that contain guidance Standards and the Framework (issued on materiality. AASB 1031 will be December 2013) that contain guidance withdrawn when references to AASB on materiality. AASB 1031 will be 1031 in all Standards and withdrawn when references to AASB Interpretations have been removed. 1031 in all Standards and Interpretations have been removed. The standard contains 3 main parts and makes amendments to a number of other Standards and Interpretations:  Part A makes consequential amendments arising from the issuance of AASB CF 2013-1 Amendments to the Australian Conceptual Framework.  Part B makes amendments to The standard contains 3 main parts and makes amendments to a number of other Standards and Interpretations:  Part A makes consequential amendments arising from the issuance of AASB CF 2013-1 Amendments to the Australian Conceptual Framework.  Part B makes amendments to particular Australian Accounting Standards to delete references to particular Australian Accounting AASB 1031 Materiality and also Standards to delete references to makes minor editorial amendments AASB 1031 Materiality and also to various other standards. makes minor editorial amendments  Part C makes amendments to a to various other standards. number of Australian Accounting  Part C makes amendments to a Standards, including incorporating number of Australian Accounting Chapter 6 Hedge Accounting into Standards, including incorporating AASB 9 Financial Instruments. Chapter 6 Hedge Accounting into AASB 9 Financial Instruments. Impact on Group financial report Impact on Group financial report Effective for annual reporting Effective for periods beginning annual reporting on or after periods beginning on or after 1 January 2014 1 January 2014 Expected to be initially applied by the Group for the financial year beginning 27 July 2014 Expected to be initially applied by the Group for the financial year beginning 27 July 2014 The Group has not yet determined the potential effects of the standard. The Group has not yet determined the potential effects of the standard. 1 January 2014 27 July 2014 1 January 2014 27 July 2014 The Group does not expect the amendment to have a significant impact on the current reported results position of the Group. The Group does not expect the amendment to have a significant impact on the current reported results position of the Group. 1 January 2014 27 July 2014 1 January 2014 27 July 2014 The Group has not yet determined the potential effects of the standard. The Group has not yet determined the potential effects of the standard. The application of Part A does not have any The application of Part material impact on the A does not have any consolidated financial material impact on the statements. consolidated financial statements. The application dates of AASB 2013-9 for the Group are as follows: The application dates of AASB 2013-9 for the Group are as follows: Part A: 28 July The Group has not yet 2013 determined the Part A: 28 July potential effects of Part 2013 B or part C of the amendment. Part B: 27 July 2014 Part B: 27 July 2014 The Group has not yet determined the potential effects of Part B or part C of the amendment. Part C: 26 July 2015 Part C: 26 July 2015 Part A: periods ending on or after 20 December 2013 The application dates of AASB 2013-9 are as follows: The application dates of AASB 2013-9 are as follows: Part A: periods ending on or after 20 December 2013 Part B: periods beginning on or after 1 January 2014 Part B: periods beginning on or after 1 January 2014 Part C: periods beginning on or after 1 January 2015 Part C: periods beginning on or after 1 January 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Title Summary Effective for Impact on Group annual reporting financial report periods beginning on or after Expected to be initially applied by the Group for the financial year beginning Interpretation This interpretation confirms that a 1 January 2014 The Group has not yet 27 July 2014 21 Levies liability to pay a levy is only recognised when the activity that triggers the payment occurs. Applying the going concern assumption does not create a constructive obligation. determined the potential effects of the standard. Annual This Standard sets out amendments to 1 July 2014 The Group has not yet 27 July 2014 Improvements International Financial Reporting to IFRS 2010 – Standards and the related bases for 2012 Cycle conclusions and guidance made during determined the potential effects of the standard. the IASB Annual Improvements Process. These amendments have not yet been adopted by the AASB. Key amendments, applicable to the Group, include:   IFRS 2: Clarifies the definition of a “vesting condition” and “market condition”. IFRS 8: Requires entities to disclose factors used to identify the entity’s reportable segments when operating segments have been aggregated.  IAS 16 and IAS 38: Clarifies that the determination of accumulated depreciation does not depend on the selection of valuation technique and that it is calculated as the difference between gross and net carrying amounts.  IAS 24: Defines a management entity providing Key Management Personnel (KMP) services as a related party of the reporting entity. Payments made to a management entity in respect of KMP services should be separately disclosed. the IASB Annual Improvements Process. These amendments have not yet been adopted by the AASB. Key amendments, applicable to the Group, include:  IFRS 13: Clarifies that the portfolio exception in par 52 of IFRS 13 applies to all contracts within the scope of IAS 39 or IFRS 9. Annual This standard sets out amendments to 1 July 2014 The Group has not yet 27 July 2014 Improvements International Financial Reporting to IFRS 2011 – Standards and the related bases for 2013 Cycle conclusions and guidance made during determined the potential effects of the standard. 35 Premier Investments Limited 35 35 36       NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Title Title Summary Summary Interpretation 21 Levies Interpretation 21 Levies Annual Improvements to IFRS 2010 – 2012 Cycle Annual Improvements to IFRS 2010 – 2012 Cycle Impact on Group financial report Impact on Group financial report Effective for Effective for annual reporting annual reporting periods beginning periods beginning on or after on or after 1 January 2014 1 January 2014 Expected to be initially applied by the Group for the financial year beginning 27 July 2014 Expected to be initially applied by the Group for the financial year beginning 27 July 2014 The Group has not yet The Group has not yet determined the determined the potential effects of the potential effects of the standard. standard. 1 July 2014 1 July 2014 This interpretation confirms that a This interpretation confirms that a liability to pay a levy is only recognised liability to pay a levy is only recognised when the activity that triggers the when the activity that triggers the payment occurs. Applying the going payment occurs. Applying the going concern assumption does not create a concern assumption does not create a constructive obligation. constructive obligation. This Standard sets out amendments to This Standard sets out amendments to International Financial Reporting International Financial Reporting Standards and the related bases for Standards and the related bases for conclusions and guidance made during conclusions and guidance made during the IASB Annual Improvements the IASB Annual Improvements Process. These amendments have not Process. These amendments have not yet been adopted by the AASB. Key yet been adopted by the AASB. Key amendments, applicable to the Group, amendments, applicable to the Group, include: include:   IFRS 2: Clarifies the definition of a IFRS 2: Clarifies the definition of a “vesting condition” and “market “vesting condition” and “market condition”. condition”.  IFRS 8: Requires entities to IFRS 8: Requires entities to disclose factors used to identify the disclose factors used to identify the entity’s reportable segments when entity’s reportable segments when operating segments have been operating segments have been aggregated. aggregated.  IAS 16 and IAS 38: Clarifies that IAS 16 and IAS 38: Clarifies that the determination of accumulated the determination of accumulated depreciation does not depend on depreciation does not depend on the selection of valuation technique the selection of valuation technique and that it is calculated as the and that it is calculated as the difference between gross and net difference between gross and net carrying amounts. carrying amounts. IAS 24: Defines a management IAS 24: Defines a management entity providing Key Management entity providing Key Management Personnel (KMP) services as a Personnel (KMP) services as a related party of the reporting entity. related party of the reporting entity. Payments made to a management Payments made to a management entity in respect of KMP services entity in respect of KMP services should be separately disclosed. should be separately disclosed.     This standard sets out amendments to This standard sets out amendments to International Financial Reporting International Financial Reporting Standards and the related bases for Standards and the related bases for conclusions and guidance made during conclusions and guidance made during the IASB Annual Improvements the IASB Annual Improvements Process. These amendments have not Process. These amendments have not yet been adopted by the AASB. Key yet been adopted by the AASB. Key amendments, applicable to the Group, amendments, applicable to the Group, include: include:   IFRS 13: Clarifies that the portfolio exception in par 52 of IFRS 13 applies to all contracts within the scope of IAS 39 or IFRS 9. IFRS 13: Clarifies that the portfolio exception in par 52 of IFRS 13 applies to all contracts within the scope of IAS 39 or IFRS 9. Annual Improvements to IFRS 2011 – 2013 Cycle Annual Improvements to IFRS 2011 – 2013 Cycle 1 July 2014 1 July 2014 The Group has not yet The Group has not yet determined the determined the potential effects of the potential effects of the standard. standard. 27 July 2014 27 July 2014 The Group has not yet The Group has not yet determined the determined the potential effects of the potential effects of the standard. standard. 27 July 2014 27 July 2014 Annual Report 2014 36 36 36     NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Impact on Group financial report Impact on Group financial report Effective for Effective for annual reporting annual reporting periods beginning periods beginning on or after on or after 1 January 2018 1 January 2018 Expected to be initially applied by the Group for the financial year beginning 29 July 2018 Expected to be initially applied by the Group for the financial year beginning 29 July 2018 The Group has not yet The Group has not yet determined the determined the potential effects of the potential effects of the standard. standard. Retrospective Retrospective application is generally application is generally required. required. Title Title Summary Summary AASB 9 AASB 9 Financial Financial Instruments, Instruments, AASB 2009-11 AASB 2009-11 Amendments Amendments to Australian to Australian Accounting Accounting Standards Standards arising from arising from AASB 9, AASB AASB 9, AASB 2010-7 2010-7 Amendments Amendments to Australian to Australian Accounting Accounting Standards Standards arising from arising from AASB 9, AASB AASB 9, AASB 2012-6 2012-6 Amendments Amendments to Australian to Australian Accounting Accounting Standards – Standards – Mandatory Mandatory Effective Date Effective Date of AASB 9 and of AASB 9 and Transition Transition Disclosures Disclosures AASB 9 introduces new requirements for classifying and measuring financial assets. It was further amended by AASB 2010-7 to reflect amendments to the accounting for financial liabilities. These measures improve and simplify the approach for classification and measurement of financial assets. The main changes are described below:  Debt instruments will be classified AASB 9 introduces new requirements for classifying and measuring financial assets. It was further amended by AASB 2010-7 to reflect amendments to the accounting for financial liabilities. These measures improve and simplify the approach for classification and measurement of financial assets. The main changes are described below:  Debt instruments will be classified based on the objective of the entity’s based on the objective of the entity’s business model for managing the business model for managing the financial asset, and the financial asset, and the characteristics of the contractual characteristics of the contractual cash flows. cash flows.  Allows an irrevocable election on  Allows an irrevocable election on initial recognition to present gains initial recognition to present gains and losses on investments in equity and losses on investments in equity instruments that are not held for instruments that are not held for trading in other comprehensive trading in other comprehensive income. Dividends in respect of income. Dividends in respect of these investments that are a return these investments that are a return on investment can be recognised in on investment can be recognised in profit or loss and there is no profit or loss and there is no impairment or recycling on disposal impairment or recycling on disposal of the instrument. of the instrument.  Financial assets can be designated  Financial assets can be designated and measured at fair value through and measured at fair value through profit or loss at initial recognition if profit or loss at initial recognition if doing so eliminates or significantly doing so eliminates or significantly reduces a measurement or reduces a measurement or recognition inconsistency that would recognition inconsistency that would arise from measuring assets or arise from measuring assets or liabilities, or recognising the gains liabilities, or recognising the gains and losses on them, on different and losses on them, on different bases. bases.  New requirements apply where an  New requirements apply where an entity chooses to measure a liability entity chooses to measure a liability at fair value through profit or loss. In at fair value through profit or loss. In these cases, the portion of the these cases, the portion of the change in fair value related to change in fair value related to changes in the entity’s own credit changes in the entity’s own credit risk is presented in other risk is presented in other comprehensive income rather than comprehensive income rather than within profit or loss. within profit or loss. The AASB issued a revised version of The AASB issued a revised version of AASB 9 (AASB 2013-9) during AASB 9 (AASB 2013-9) during December 2013. The revised standard December 2013. The revised standard incorporates three primary changes: incorporates three primary changes:  New hedge accounting  New hedge accounting requirements including changes to requirements including changes to hedge effectiveness testing, hedge effectiveness testing, treatment of hedging costs, risk treatment of hedging costs, risk components that can be hedged components that can be hedged and disclosures. and disclosures.  Entities may elect to apply only the  Entities may elect to apply only the accounting for gains and losses accounting for gains and losses from own credit risk without from own credit risk without applying the other requirements of applying the other requirements of AASB 9 at the same time. AASB 9 at the same time. In February 2014, the IASB In February 2014, the IASB tentatively decided that the tentatively decided that the mandatory effective date for AASB mandatory effective date for AASB 9 will be 1 January 2018. 9 will be 1 January 2018.   2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2 Title Title Summary Summary Effective for Effective for annual reporting annual reporting periods beginning periods beginning on or after on or after Impact on Group Impact on Group financial report financial report Expected to be Expected to be initially applied initially applied by the Group by the Group for the financial for the financial year beginning year beginning 1 January 2017 1 January 2017 The Group has not yet The Group has not yet 30 July 2017 30 July 2017 IFRS 15 IFRS 15 Revenue from Revenue from Contracts with Contracts with Customers Customers IFRS 15 establishes principles for IFRS 15 establishes principles for reporting useful information to users of reporting useful information to users of financial statements about the nature, financial statements about the nature, timing and uncertainty of revenue and timing and uncertainty of revenue and determined the determined the potential effects of the potential effects of the standard. standard. cash flows arising from an entity’s cash flows arising from an entity’s contracts with customers. The core contracts with customers. The core principle of IFRS 15 is that an entity principle of IFRS 15 is that an entity recognises revenue to depict the recognises revenue to depict the transfer of promised goods or services transfer of promised goods or services to customers in an amount that reflects to customers in an amount that reflects the consideration to which the entity the consideration to which the entity expects to be entitled in exchange for expects to be entitled in exchange for those goods or services. IFRS 15 those goods or services. IFRS 15 supersedes IAS 18 Revenue and supersedes IAS 18 Revenue and IFRIC 13 Customer Loyalty IFRIC 13 Customer Loyalty Programmes. Programmes. (d) (d) SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the Group’s consolidated financial statements requires management to The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgement and estimates on historical experience and on other various factors it believes its judgement and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. values of assets and liabilities that are not readily apparent from other sources. Management has identified the following critical accounting policies for which significant Management has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made. Actual results may differ from those judgements, estimates and assumptions are made. Actual results may differ from those estimated under different assumptions and conditions and may materially affect financial estimated under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. results or the financial position reported in future periods. Further details of the nature of these assumptions and conditions may be found in the Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements. relevant notes to the financial statements. (i) Significant accounting judgements Significant accounting judgements (i) Recovery of deferred tax assets Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences as Deferred tax assets are recognised for deductible temporary differences as management considers that is it probable that future taxable profits will be available to management considers that is it probable that future taxable profits will be available to utilise those temporary differences. Significant management judgement is required to utilise those temporary differences. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits over the next two years together with likely timing and the level of future taxable profits over the next two years together with future tax planning strategies. future tax planning strategies. Classification of assets and liabilities as held for sale Classification of assets and liabilities as held for sale The Group classifies assets and liabilities as held for sale when the carrying amount The Group classifies assets and liabilities as held for sale when the carrying amount will be recovered through a sale transaction. The assets and liabilities must be will be recovered through a sale transaction. The assets and liabilities must be available for immediate sale and the Group must be committed to selling the asset available for immediate sale and the Group must be committed to selling the asset either through entering into a contractual sale agreement or through the activation and either through entering into a contractual sale agreement or through the activation and commitment to a program to locate a buyer and dispose of the assets and liabilities. commitment to a program to locate a buyer and dispose of the assets and liabilities. 37 Premier Investments Limited 37 37 38 38         NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2 Impact on Group financial report Impact on Group financial report Effective for Effective for annual reporting annual reporting periods beginning periods beginning on or after on or after 1 January 2017 1 January 2017 Expected to be initially applied by the Group for the financial year beginning 30 July 2017 Expected to be initially applied by the Group for the financial year beginning 30 July 2017 The Group has not yet The Group has not yet determined the determined the potential effects of the potential effects of the standard. standard. Title Title Summary Summary IFRS 15 Revenue from Contracts with Customers IFRS 15 Revenue from Contracts with Customers IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 supersedes IAS 18 Revenue and IFRIC 13 Customer Loyalty Programmes. IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 supersedes IAS 18 Revenue and IFRIC 13 Customer Loyalty Programmes. (d) (d) SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgement and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgement and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Management has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made. Actual results may differ from those estimated under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. Management has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made. Actual results may differ from those estimated under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements. Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial statements. (i) Significant accounting judgements (i) Significant accounting judgements Recovery of deferred tax assets Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences as management considers that is it probable that future taxable profits will be available to utilise those temporary differences. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits over the next two years together with future tax planning strategies. Deferred tax assets are recognised for deductible temporary differences as management considers that is it probable that future taxable profits will be available to utilise those temporary differences. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits over the next two years together with future tax planning strategies. Classification of assets and liabilities as held for sale Classification of assets and liabilities as held for sale The Group classifies assets and liabilities as held for sale when the carrying amount will be recovered through a sale transaction. The assets and liabilities must be available for immediate sale and the Group must be committed to selling the asset either through entering into a contractual sale agreement or through the activation and commitment to a program to locate a buyer and dispose of the assets and liabilities. The Group classifies assets and liabilities as held for sale when the carrying amount will be recovered through a sale transaction. The assets and liabilities must be available for immediate sale and the Group must be committed to selling the asset either through entering into a contractual sale agreement or through the activation and commitment to a program to locate a buyer and dispose of the assets and liabilities. Annual Report 2014 38 38 38     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d)  SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED) (d)  SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED) Impairment of non-financial assets other than goodwill and indefinite life intangibles Share-based payment transactions The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. These include product and manufacturing performance, technology, economic and political environments and future product expectations. If an impairment trigger exists, the recoverable amount of the asset is determined. Given the current uncertain economic environment, management considered that the indicators of impairment were significant enough and as such these assets have been tested for impairment in this financial period. Taxation The Group's accounting policy for taxation requires management's judgement as to the types of arrangements considered to be a tax on income in contrast to an operating cost. Judgement is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised in the statement of financial position. Deferred tax assets, including those arising from un-recouped tax losses, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities arising from temporary differences in investments, caused principally by retained earnings held in foreign tax jurisdictions, are recognised unless repatriation of retained earnings can be controlled and are not expected to occur in the foreseeable future. Assumptions about the generation of future taxable profits and repatriation of retained earnings depend on management's estimates of future cash flows. These depend on estimates of future production and sales volumes, operating costs, restoration costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the statement of financial position and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the statement of comprehensive income. (ii) Significant accounting estimates and assumptions Estimated impairment of goodwill and intangibles with indefinite useful lives The Group tests whether goodwill and intangibles with indefinite useful lives have suffered any impairment annually, in accordance with the accounting policies stated in note 2(n) and note 2(o). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions. Refer to note 12 for details of these assumptions and the potential impact of changes to the assumptions. The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined at grant date using the Black-Scholes Model and taking into account the terms and conditions upon which the instruments were granted. The related assumptions are detailed in note 27. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity. Estimation of useful lives of assets The estimation of the useful lives of assets has been based on historical experience as well as manufacturers' warranties (for plant and equipment), lease terms (for leased equipment) and turnover policies (for motor vehicles). In addition, the condition of the assets is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary. Depreciation charges are included in note 5. Estimated gift card redemption rates The key assumption in measuring the liability for gift cards and vouchers is the expected redemption rates by customers. Expected redemption rates are reviewed annually, and adjustments are made to the expected redemption rates when considered necessary. Onerous lease provisions The Group provides for onerous contracts when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The Group considers whether a lease is potentially onerous by reference to the profitability and projected profitability of a store, and whether the store has been identified for closure prior to lease expiry. The Group estimates the present value of the future lease payments that the Group is presently obligated to make under non-cancellable onerous lease contracts. Supply chain transformation provisions The Group’s consolidation process of its Australian Distribution Centres into one national distribution centre in Truganina, Victoria have resulted in a supply chain transformation provision in which judgements and estimations were made. The Group follows the guidance of AASB 137 Provisions, Contingent Liabilities and Contingent Assets to determine whether a provision is required. A restructuring provision is recognised when a detailed formal plan about the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs, and appropriate time lines have been established. The people affected have a valid expectation that the restructuring is being carried out or the implementation has been initiated already. 39 Premier Investments Limited 39 40     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d)  SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED) Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined at grant date using the Black-Scholes Model and taking into account the terms and conditions upon which the instruments were granted. The related assumptions are detailed in note 27. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity. Estimation of useful lives of assets The estimation of the useful lives of assets has been based on historical experience as well as manufacturers' warranties (for plant and equipment), lease terms (for leased equipment) and turnover policies (for motor vehicles). In addition, the condition of the assets is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary. Depreciation charges are included in note 5. Estimated gift card redemption rates The key assumption in measuring the liability for gift cards and vouchers is the expected redemption rates by customers. Expected redemption rates are reviewed annually, and adjustments are made to the expected redemption rates when considered necessary. Onerous lease provisions The Group provides for onerous contracts when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The Group considers whether a lease is potentially onerous by reference to the profitability and projected profitability of a store, and whether the store has been identified for closure prior to lease expiry. The Group estimates the present value of the future lease payments that the Group is presently obligated to make under non-cancellable onerous lease contracts. Supply chain transformation provisions The Group’s consolidation process of its Australian Distribution Centres into one national distribution centre in Truganina, Victoria have resulted in a supply chain transformation provision in which judgements and estimations were made. The Group follows the guidance of AASB 137 Provisions, Contingent Liabilities and Contingent Assets to determine whether a provision is required. A restructuring provision is recognised when a detailed formal plan about the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs, and appropriate time lines have been established. The people affected have a valid expectation that the restructuring is being carried out or the implementation has been initiated already. Annual Report 2014 40 40   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d)  SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED) (e)  BASIS OF CONSOLIDATION (CONTINUED) Fair value of financial instruments Some of the Group’s assets and liabilities are measured at fair value for financial reporting purposes. In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent possible, but where this is not feasible, a degree of judgement is required in establishing fair values. The fair value disclosures are detailed in note 3. (e) BASIS OF CONSOLIDATION The consolidated financial statements are those of the consolidated entity, comprising Premier Investments Limited (the parent entity) and its subsidiaries ('the Group') as at the end of each financial year. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has: - - - Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); Exposure, or rights, to variable returns from its involvement with the investee, and The ability to use its power over the investee to affect its returns. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: - - - The contractual arrangement with the other vote holders of the investee; Rights arising from other contractual arrangements; The Group’s voting rights and potential voting rights. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interest, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. (f) INVESTMENT IN ASSOCIATES Investments in subsidiaries held by Premier Investments Limited are accounted for at cost in the separate financial statements of the parent entity less any impairment losses. Dividends received from subsidiaries are recorded as a component of other revenues in the separate income statement of the parent entity, and do not impact the recorded cost of the investment. A change in ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: - - - - - - De-recognises the assets (including goodwill) and liabilities of the subsidiary; De-recognises the carrying amount of any non-controlling interests; De-recognises the cumulative translation differences recorded in equity; Recognises the fair value of the consideration received and of any investment retained, Recognises the surplus or deficit in profit or loss; Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities. An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries. The Group’s investments in its associates are accounted for using the equity method of accounting in the consolidated financial statements. Under the equity method, investments in the associates are initially recognised at deemed cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate since the acquisition date. 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 profit or loss of an associate is recognised in the statement of comprehensive income and represents profit or loss after tax and non-controlling interest in the subsidiaries of the associate. When there has been a change recognised directly in the equity of the associate, the Group recognises its share of any change, when applicable, in the statement of changes in equity. Dividends receivable from the associate is recognised in the parent entity’s statement of comprehensive income, 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. 41 Premier Investments Limited 41 42     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (e)  BASIS OF CONSOLIDATION (CONTINUED) Investments in subsidiaries held by Premier Investments Limited are accounted for at cost in the separate financial statements of the parent entity less any impairment losses. Dividends received from subsidiaries are recorded as a component of other revenues in the separate income statement of the parent entity, and do not impact the recorded cost of the investment. A change in ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: - - - - - - De-recognises the assets (including goodwill) and liabilities of the subsidiary; De-recognises the carrying amount of any non-controlling interests; De-recognises the cumulative translation differences recorded in equity; Recognises the fair value of the consideration received and of any investment retained, Recognises the surplus or deficit in profit or loss; Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities. (f) INVESTMENT IN ASSOCIATES An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries. The Group’s investments in its associates are accounted for using the equity method of accounting in the consolidated financial statements. Under the equity method, investments in the associates are initially recognised at deemed cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate since the acquisition date. 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 profit or loss of an associate is recognised in the statement of comprehensive income and represents profit or loss after tax and non-controlling interest in the subsidiaries of the associate. When there has been a change recognised directly in the equity of the associate, the Group recognises its share of any change, when applicable, in the statement of changes in equity. Dividends receivable from the associate is recognised in the parent entity’s statement of comprehensive income, 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. Annual Report 2014 42 42   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (f)  INVESTMENT IN ASSOCIATE (CONTINUED) After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in associates. At each reporting period, the Group determines whether there is objective evidence that the investment in associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, then recognises the loss in the statement of comprehensive income. Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any differences between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. The reporting date of the associates are currently 30 June and the associates’ accounting policies materially conform to those used by the Group for like transactions and events in similar circumstances. (g) BUSINESS COMBINATIONS Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition-date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, and the amount of any non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition- related costs are expensed as incurred. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating and accounting policies and other pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 139 either in profit or loss or in other comprehensive income. If the contingent consideration is to be classified as equity, it should not be remeasured until it is finally settled within equity. (h) CURRENT VERSUS NON-CURRENT CLASSIFICATION The Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is: - - Expected to be realised or intended to be sold in the normal operating cycle, or primarily held for the purpose of trading, or is expected to be realised within twelve months after the reporting period, or; Cash and cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. (h) CURRENT VERSUS NON-CURRENT CLASSIFICATION (CONTINUED) All other assets are classified as non-current. A liability is current when it is: - - Expected to be settled in the normal operating cycle, or primarily held for the purpose of trading, or is due to be settled within twelve months after the reporting period, or; There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non-current. (i) OPERATING SEGMENTS (j) FOREIGN CURRENCY TRANSLATION The Group determines and presents operating segments based on the information that is internally provided and used by the chief operating decision maker in assessing the performance of the entity and in determining the allocation of resources. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discreet financial information is available. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly of corporate assets, head office expenses and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill. Both the functional and presentation currency of Premier Investments Limited and its Australian subsidiaries is in Australian dollars. 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 reporting date. All exchange differences in the consolidated financial report are taken to the statement of comprehensive income. The New Zealand subsidiaries’ functional currency is New Zealand Dollars. The Singapore subsidiaries’ functional currency is Singapore Dollars. The United Kingdom subsidiaries’ functional currency is Pound Sterling. Just Kor Fashion Group (Pty) Ltd, the South African joint venture, has a functional currency of South African Rand. As at the reporting date the assets and liabilities of the overseas subsidiary are translated into the presentation currency of Premier Investments Limited at the rate of exchange ruling at the reporting date and the statements of comprehensive incomes are translated at the weighted average exchange rates for the period. Exchange variations resulting from the translation are recognised in the foreign currency translation reserve in equity. 43 Premier Investments Limited 43 44     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (h) CURRENT VERSUS NON-CURRENT CLASSIFICATION (CONTINUED) All other assets are classified as non-current. A liability is current when it is: - - Expected to be settled in the normal operating cycle, or primarily held for the purpose of trading, or is due to be settled within twelve months after the reporting period, or; There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non-current. (i) OPERATING SEGMENTS The Group determines and presents operating segments based on the information that is internally provided and used by the chief operating decision maker in assessing the performance of the entity and in determining the allocation of resources. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discreet financial information is available. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly of corporate assets, head office expenses and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill. (j) FOREIGN CURRENCY TRANSLATION Both the functional and presentation currency of Premier Investments Limited and its Australian subsidiaries is in Australian dollars. 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 reporting date. All exchange differences in the consolidated financial report are taken to the statement of comprehensive income. The New Zealand subsidiaries’ functional currency is New Zealand Dollars. The Singapore subsidiaries’ functional currency is Singapore Dollars. The United Kingdom subsidiaries’ functional currency is Pound Sterling. Just Kor Fashion Group (Pty) Ltd, the South African joint venture, has a functional currency of South African Rand. As at the reporting date the assets and liabilities of the overseas subsidiary are translated into the presentation currency of Premier Investments Limited at the rate of exchange ruling at the reporting date and the statements of comprehensive incomes are translated at the weighted average exchange rates for the period. Exchange variations resulting from the translation are recognised in the foreign currency translation reserve in equity. Annual Report 2014 44 44   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (k) CASH AND CASH EQUIVALENTS (n) GOODWILL Cash and cash equivalents in the statement of financial position comprise cash on hand and in banks, money market investments readily convertible to cash within two working days and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. (l) INVENTORIES Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and conditions are accounted for as follows: - - Raw materials - purchase cost on a first-in, first-out basis; Impairment losses recognised for goodwill are not subsequently reversed. 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. (o) INTANGIBLE ASSETS (excluding goodwill) Net realisable value is the estimated selling price in the ordinary course of business, less the estimated direct costs necessary to make the sale. (m) PROPERTY, PLANT AND EQUIPMENT Property, Plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows: - - - - Buildings 40 years Store plant and equipment 3 to 8 years Leased plant and equipment 2 to 5 years Other plant and equipment 2 to 20 years Freehold land is not depreciated. The carrying values of property, 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 property, 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 discount rate that reflects current market assessments of the time value of money and the risks specific to the assets. Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. 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, goodwill acquired in a business combination is, from the date of acquisition, allocated to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination. 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. 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. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets are tested for impairment where an indicator of impairment exists, and in the case of intangibles with indefinite lives impairment is tested annually or where an indicator of impairment exists, 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. The recoverable amount 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 post-tax discount rate that reflects current market assessments of the time- value of money and the risks specific to the asset. 45 Premier Investments Limited 45 46     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (n) GOODWILL Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. 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, goodwill acquired in a business combination is, from the date of acquisition, allocated to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination. 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. Impairment losses recognised for goodwill are not subsequently reversed. (o) INTANGIBLE ASSETS (excluding goodwill) 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. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets are tested for impairment where an indicator of impairment exists, and in the case of intangibles with indefinite lives impairment is tested annually or where an indicator of impairment exists, 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. The recoverable amount 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 post-tax discount rate that reflects current market assessments of the time- value of money and the risks specific to the asset. Annual Report 2014 46 46   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (o) INTANGIBLE ASSETS (excluding goodwill) (CONTINUED) (q) OTHER FINANCIAL LIABILITIES A summary of the policies applied to the Group’s intangible assets is as follows: Brands Premiums paid on acquisition of leaseholds Trademarks & Licences Useful life Indefinite Finite Finite Method used Internally generated/acquired Impairment test/recoverable amount testing Not amortised or revalued Amortised over the term of the lease Amortised over the estimated useful life Acquired Acquired Acquired Annually; for indicators of impairment Amortisation method reviewed at each financial year end; reviewed annually for indicators of impairment Amortisation method reviewed at each financial year end; reviewed annually for indicators of impairment (p) OTHER FINANCIAL ASSETS (iii) Offsetting of financial instruments A financial instrument is any contract that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. (i) Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, 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. (ii) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments as defined by AASB 139. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in profit or loss. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. (i) 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 7 and 90 days. (ii) Loans and borrowings All loans, borrowings and interest-bearing payables are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, such items are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Fees paid on the establishment of loan facilities are amortised over the life of the facility. On-going borrowing costs are expensed as incurred. Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously. (r) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING The Group uses derivative financial instruments (including forward currency contracts and foreign exchange options) to hedge its risks associated with foreign currency fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently re-measured at fair value. Any derivative financial instruments acquired through business combinations are re-designated. Derivatives are carried as financial assets when their fair value is positive and as financial liabilities when their fair value is negative. Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges, are taken directly to profit or loss for the period. Cash flow hedges Cash flow hedges are hedges of the Group’s exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability that is a firm commitment and that could affect the statement of comprehensive income. The Group’s cash flow hedges that meet the strict criteria for hedge accounting are accounted for by recognising the effective portion of the gain or loss on the hedging instrument directly in equity, while the ineffective portion is recognised in profit or loss. Amounts taken to equity are transferred out of equity and included in the measurement of the hedge transaction (finance costs or inventory purchases) when the forecast transaction occurs. 47 Premier Investments Limited 47 48     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (q) OTHER FINANCIAL LIABILITIES All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. (i) 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 7 and 90 days. (ii) Loans and borrowings All loans, borrowings and interest-bearing payables are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, such items are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Fees paid on the establishment of loan facilities are amortised over the life of the facility. On-going borrowing costs are expensed as incurred. (iii) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously. (r) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING The Group uses derivative financial instruments (including forward currency contracts and foreign exchange options) to hedge its risks associated with foreign currency fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently re-measured at fair value. Any derivative financial instruments acquired through business combinations are re-designated. Derivatives are carried as financial assets when their fair value is positive and as financial liabilities when their fair value is negative. Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges, are taken directly to profit or loss for the period. Cash flow hedges Cash flow hedges are hedges of the Group’s exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability that is a firm commitment and that could affect the statement of comprehensive income. The Group’s cash flow hedges that meet the strict criteria for hedge accounting are accounted for by recognising the effective portion of the gain or loss on the hedging instrument directly in equity, while the ineffective portion is recognised in profit or loss. Amounts taken to equity are transferred out of equity and included in the measurement of the hedge transaction (finance costs or inventory purchases) when the forecast transaction occurs. Annual Report 2014 48 48   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (r) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING (CONTINUED) (v) ONEROUS LEASE PROVISIONS The Group tests each of the designated cash flow hedges for effectiveness on an ongoing basis both retrospectively and prospectively using the ratio offset method. If the testing falls within the 80% to 125% range, the hedge is considered to be highly effective and continues to be designated as a cash flow hedge. At each reporting date, the Group measures ineffectiveness using the ratio offset method. For foreign currency cash flow hedges if the risk is over-hedged, the ineffective portion is taken immediately to other income/expense in the statement of comprehensive income. If the forecast transaction is no longer expected to occur, amounts recognised in equity are transferred to the statement of comprehensive income. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked (due to being ineffective), amounts previously recognised in equity remain in equity until the forecast transaction occurs. (s) 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. Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense and reduction of the liability. (t) BORROWING COSTS Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of the funds. (u) PROVISIONS Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation 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 finance cost. A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from the contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with the contract. (w) SUPPLY CHAIN TRANSFORMATION PROVISIONS Restructuring provisions are only recognised when general recognition criteria for provisions are fulfilled. Additionally, the Group needs to follow a detailed formal plan about the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs, and appropriate time line. The people affected have a valid expectation that the restructuring is being carried out or the implementation has been initiated already. (x) EMPLOYEE BENEFITS (i) Wages, salaries and annual leave The provisions for employee entitlements to wages, salaries and annual leave represent the amount which the Group has a present obligation to pay, resulting from employees’ services provided up to the reporting date. The provisions have been calculated at nominal amounts based on current wage and salary rates, and include related on-costs. (ii) 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. (iii) Retirement benefit obligations All employees of the Group are entitled to benefits from the Group’s superannuation plan on retirement, disability or death. The Group operates a defined contribution plan. Contributions to the plan are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payment is made available. (y) DEFERRED INCOME (i) Lease Incentives 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. 49 Premier Investments Limited 49 50     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (v) ONEROUS LEASE PROVISIONS A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from the contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with the contract. (w) SUPPLY CHAIN TRANSFORMATION PROVISIONS Restructuring provisions are only recognised when general recognition criteria for provisions are fulfilled. Additionally, the Group needs to follow a detailed formal plan about the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs, and appropriate time line. The people affected have a valid expectation that the restructuring is being carried out or the implementation has been initiated already. (x) EMPLOYEE BENEFITS (i) Wages, salaries and annual leave The provisions for employee entitlements to wages, salaries and annual leave represent the amount which the Group has a present obligation to pay, resulting from employees’ services provided up to the reporting date. The provisions have been calculated at nominal amounts based on current wage and salary rates, and include related on-costs. (ii) 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. (iii) Retirement benefit obligations All employees of the Group are entitled to benefits from the Group’s superannuation plan on retirement, disability or death. The Group operates a defined contribution plan. Contributions to the plan are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payment is made available. (y) DEFERRED INCOME (i) Lease Incentives 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. Annual Report 2014 50 50   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (y) DEFERRED INCOME (CONTINUED) (ii) Deferred rent Operating lease expenses are recognised on a straight-line basis over the lease term, which includes the impact of annual fixed rate percentage increases. (z) REVENUE RECOGNITION Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. (i) Sale of goods Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the customer. Risks and rewards are considered passed to the customer at the point-of-sale in retail stores and at the time of delivery to catalogue and wholesale customers. (ii) Interest revenue Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. (iii) Dividends Revenue is recognised when the Group’s right to receive the payment is established. (iv) Lay-by sales The Group has a history of most lay-by sales in retail stores being completed following receipt of an initial deposit. Therefore, the Group has elected to recognise revenue on lay-by sales upon receipt of a deposit. (v) Gift cards Revenue from the sale of gift cards is recognised upon redemption of the gift card, or when the card is no longer expected to be redeemed, based on analysis of historical non-redemption rates. (aa) 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 based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the reporting date. Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. (aa) INCOME TAX (CONTINUED) Deferred income tax is provided on all temporary differences at the reporting 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; and 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 differences 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 of unused tax credits and 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 credits 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; and - Where the deductible temporary difference is associated with investments in subsidiaries, associates and interest in joint ventures, 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 reporting 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. Unrecognised deferred income tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. 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 reporting 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. 51 Premier Investments Limited 51 52     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (aa) INCOME TAX (CONTINUED) Deferred income tax is provided on all temporary differences at the reporting 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; and 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 differences 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 of unused tax credits and 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 credits 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; and Where the deductible temporary difference is associated with investments in subsidiaries, associates and interest in joint ventures, 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 reporting 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. Unrecognised deferred income tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. 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 reporting 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. Annual Report 2014 52 52   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (ee) SHARE-BASED REMUNERATION SCHEMES The Group provides benefits to its employees in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The plans in place to provide these benefits are a long-term incentive plan known as the performance rights plan (PRP). The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instrument at the date at which they are granted. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date). At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive income is the product of: (i) The grant date fair value of the award; (ii) The extent to which the vesting period has expired; and (iii) The current best estimate of the number of awards that will vest as at the grant date. The charge to profit and loss for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding entry to equity. No expense is recognised for awards that do not ultimately vest, except for equity settled transactions for which vesting is conditional upon a market or non-vesting condition. These are treated as vested, irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and service conditions are met. (ff) COMPARATIVES The current reporting period, 28 July 2013 to 26 July 2014, represents 52 weeks and the comparative reporting period is from 29 July 2012 to 27 July 2013 which also represents 52 weeks. From time to time, management may change prior year comparatives to reflect classifications applied in the current year. (aa) INCOME TAX (CONTINUED) Tax consolidation Effective 1 July 2003, Premier Investments Limited and its wholly owned Australian controlled entities implemented a tax consolidation group. The head entity, Premier Investments Limited and the controlled entities continue to account for their own current and deferred tax amounts. The Group has applied the Group allocation approach to determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At reporting date the possibility of default is remote. In addition to its own current and deferred tax amounts, Premier Investments 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. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group. (bb) 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 statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (cc) CONTRIBUTED EQUITY Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (dd) EARNINGS PER SHARE Basic earnings per share are calculated as net profit attributable to members of the parent divided by the weighted average number of ordinary shares. Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for costs of servicing equity, the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses, and other non- discretionary changes in revenue or expenses during the period that would result from the dilution of potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares. 53 Premier Investments Limited 53 54     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (ee) SHARE-BASED REMUNERATION SCHEMES The Group provides benefits to its employees in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The plans in place to provide these benefits are a long-term incentive plan known as the performance rights plan (PRP). The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instrument at the date at which they are granted. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date). At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive income is the product of: (i) The grant date fair value of the award; (ii) The extent to which the vesting period has expired; and (iii) The current best estimate of the number of awards that will vest as at the grant date. The charge to profit and loss for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding entry to equity. No expense is recognised for awards that do not ultimately vest, except for equity settled transactions for which vesting is conditional upon a market or non-vesting condition. These are treated as vested, irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and service conditions are met. (ff) COMPARATIVES The current reporting period, 28 July 2013 to 26 July 2014, represents 52 weeks and the comparative reporting period is from 29 July 2012 to 27 July 2013 which also represents 52 weeks. From time to time, management may change prior year comparatives to reflect classifications applied in the current year. Annual Report 2014 54 54   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 3 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES 3 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES The Group’s principal financial instruments comprise cash and short-term deposits, derivative financial instruments, receivables, payables, bank overdraft, interest-bearing liabilities and finance leases. RISK EXPOSURES AND RESPONSES The Group manages its exposure to key financial risks in accordance with Board-approved policies which are reviewed annually including, liquidity risk, foreign currency risk, interest rate risk and credit risk. The objective of the policy is to support the delivery of the Group’s financial targets whilst protecting future financial security. The Group uses different methods to measure and manage different types of risks to which it is exposed. These include, monitoring levels of exposure to interest rate and foreign exchange risk and assessment of market forecasts for interest rate and foreign exchange prices. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk, liquidity risk is monitored through development of future cash flow forecast projections. 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 of the financial statements. Interest rate risk The Group’s exposure to market interest rates relates primarily to its cash and cash equivalents that it holds and long term debt obligations. At reporting date, the Group had the following mix of financial assets and liabilities exposed to variable interest rate risk that are not designated in cash flow hedges: Financial Assets Cash Other receivables Financial Liabilities Finance lease liability Bank loans AUD Bank loans (NZD 20.0 million) Net Financial Assets NOTES 25 8 22 15 15 CONSOLIDATED 2014 $’000 313,308 3,596 316,904 66 101,000 18,477 119,543 197,361 2013 $’000 313,157 4,321 317,478 113 85,000 17,240 102,353 215,125 (CONTINUED) RISK EXPOSURES AND RESPONSES (CONTINUED) Interest rate risk (Continued) The Group’s objective of managing interest rate risk is to minimise the entity’s exposure to fluctuations in interest rates that might impact its interest revenue and cash flow. To manage this risk, the Group locks a portion of the Group’s cash and cash equivalents into term deposits. The maturity of term deposits is determined based on the Group’s cash flow forecast. The Group has conducted a sensitivity analysis of the Group’s exposure to interest rate risk. The sensitivity analysis below has been determined based on the exposure to interest rates from financial instruments at the reporting date and the stipulated change taking place at the beginning of the financial year and being held constant throughout the reporting period, holding all other variables constant. A 100 (2013:100) basis point increase and decrease in Australian interest rates represents management's assessment of the possible change in interest rates. A positive number indicates an increase in profit after tax and equity, whilst a negative number indicates a reduction in profit after tax and equity. POST-TAX PROFIT OTHER COMPREHENSIVE INCOME HIGHER/(LOWER) HIGHER/(LOWER) 2014 $000 1,357 (1,357) 2013 $000 1,476 (1,476) 2014 $000 - - 2013 $000 - - Judgements of reasonably possible movements: CONSOLIDATED +1.0% (100 basis points) -1.0% (100 basis points) cash balances. The movement in profits are due to lower interest cost revenue from variable rates and net Significant assumptions used in the interest rate sensitivity analysis include:    Reasonably possible movements in interest rates were determined based on the Group’s current credit rating and mix of debt in Australian and foreign countries, relationships with financial institutions, the level of debt that is expected to be renewed as well as a review of the last two year’s historical movements and economic forecasters expectations. The net exposure at reporting date is representative of what the Group was and is expecting to be exposed to in the next twelve months. The effect on other comprehensive income is the effect on the cash flow hedge reserve. 55 Premier Investments Limited 55 56     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 3 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) RISK EXPOSURES AND RESPONSES (CONTINUED) Interest rate risk (Continued) The Group’s objective of managing interest rate risk is to minimise the entity’s exposure to fluctuations in interest rates that might impact its interest revenue and cash flow. To manage this risk, the Group locks a portion of the Group’s cash and cash equivalents into term deposits. The maturity of term deposits is determined based on the Group’s cash flow forecast. The Group has conducted a sensitivity analysis of the Group’s exposure to interest rate risk. The sensitivity analysis below has been determined based on the exposure to interest rates from financial instruments at the reporting date and the stipulated change taking place at the beginning of the financial year and being held constant throughout the reporting period, holding all other variables constant. A 100 (2013:100) basis point increase and decrease in Australian interest rates represents management's assessment of the possible change in interest rates. A positive number indicates an increase in profit after tax and equity, whilst a negative number indicates a reduction in profit after tax and equity. POST-TAX PROFIT OTHER COMPREHENSIVE INCOME HIGHER/(LOWER) HIGHER/(LOWER) Judgements of reasonably possible movements: CONSOLIDATED +1.0% (100 basis points) -1.0% (100 basis points) 2014 $000 1,357 (1,357) 2013 $000 1,476 (1,476) 2014 $000 - - 2013 $000 - - The movement in profits are due to lower interest cost revenue from variable rates and net cash balances. Significant assumptions used in the interest rate sensitivity analysis include:    Reasonably possible movements in interest rates were determined based on the Group’s current credit rating and mix of debt in Australian and foreign countries, relationships with financial institutions, the level of debt that is expected to be renewed as well as a review of the last two year’s historical movements and economic forecasters expectations. The net exposure at reporting date is representative of what the Group was and is expecting to be exposed to in the next twelve months. The effect on other comprehensive income is the effect on the cash flow hedge reserve. Annual Report 2014 56 56   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 3 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) 3 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) RISK EXPOSURES AND RESPONSES (CONTINUED) Credit risk The overwhelming majority of the Group’s sales are on cash or cash equivalent terms with settlement within 24 hours. As such, the Group’s exposure to credit risk is minimal. 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 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 by either party. Credit risk for the Group also arises from financial guarantees that members of the Group act as guarantor. At 26 July 2014, the maximum exposure to credit risk of the Group is the amount guaranteed as disclosed in note 33. Foreign operations The Group has operations in New Zealand. As a result, movements in the Australian Dollar and New Zealand Dollar (“AUD/NZD”) exchange rate affect the Group’s statement of financial position and results from operations. The Group has obtained New Zealand Dollar denominated financing facilities from a financial institution to provide a natural hedge of the Group’s exposure to movements in the AUD/NZD on translation of the New Zealand statement of financial position. In addition, the Group, on occasion, hedges its cash flow exposure to movements in the AUD/NZD. The Group has an investment and long-term receivables denominated in South African Rand (ZAR) arising from its investment in Just Kor Fashion Group (Pty) Ltd. As a result of these transactions, movements in the AUD/ZAR exchange rates can affect the Group’s statement of financial position. The Group does not consider this risk to be material and, as such, has not sought to hedge this exposure. The Group also has operations in Singapore. As a result, movement in the Australian Dollar and Singapore Dollar (“AUD/SGD”) exchange rates can affect the Group’s statement of financial position and results from operations. The Group does not consider this risk to be material, and as such, has not sought to hedge this exposure. Operations in the United Kingdom commenced in this current financial year. Movement in the Australian Dollar and Pound Sterling (“AUD/GBP”) exchange rates can affect the Group’s statement of financial position and results from operations. The Group does not consider this risk to be material, and as such, has not sought to hedge this exposure. Foreign currency transactions The Group has exposures to foreign currencies principally arising from purchases by operating entities in currencies other than the functional currency. Approximately 60% of the Group’s purchases are denominated in USD, which is not the functional currency of the Australian, New Zealand, Singapore or United Kingdom operating entities. RISK EXPOSURES AND RESPONSES (CONTINUED) Foreign currency transactions (Continued) The Group considers its exposure to USD arising from the purchases 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 Australian Dollar and New Zealand Dollar against the currency risk being hedged, relative to long-term indicators; the company’s strategic decision-making horizon; and - other factors considered relevant by the board. - - - The policy requires periodic reporting to the Audit and Risk Committee, and its application is subject to oversight from the Chairman of the Audit and Risk Committee or the Chairman of the Board. The policy allows the use of forward exchange contracts and foreign currency options. At reporting date, the Group had the following exposures to movements in the United States Dollar, Singapore Dollar, South African Rand and Pound Sterling: USD EXPOSURE SGD EXPOSURE ZAR EXPOSURE GBP EXPOSURE CONSOLIDATED CONSOLIDATED CONSOLIDATED CONSOLIDATED 2014 $’000 2013 $’000 2014 $’000 2013 $’000 2014 $’000 2013 $’000 2014 $’000 2013 $’000 FINANCIAL ASSETS Cash and cash equivalents Trade and other receivables 648 340 5 36 Derivative financial assets (cash flow hedges) 1,596 17,042 1,750 1,106 - 4,044 2,157 2,399 - - - - 2,584 17,083 1,750 1,106 2,157 2,399 4,044 Trade and other payables (20,765) (20,537) (111) (202) FINANCIAL LIABILITIES Derivative financial liabilities (cash flow hedges) (6,801) (187) - - (27,566) (20,724) (111) (202) Net exposure (24,982) (3,641) 1,639 904 2,157 2,399 4,031 The Group has forward currency contracts and foreign currency options designated as cash flow hedges that are subject to movements through equity and profit and loss respectively as foreign exchange rates move (refer to Note 29). - - - - - - - (13) - (13) - - - - - - - - - - - - 57 Premier Investments Limited 57 58       NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 3 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) RISK EXPOSURES AND RESPONSES (CONTINUED) Foreign currency transactions (Continued) The Group considers its exposure to USD arising from the purchases 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 Australian Dollar and New Zealand Dollar against the currency risk being hedged, relative to long-term indicators; the company’s strategic decision-making horizon; and - other factors considered relevant by the board. The policy requires periodic reporting to the Audit and Risk Committee, and its application is subject to oversight from the Chairman of the Audit and Risk Committee or the Chairman of the Board. The policy allows the use of forward exchange contracts and foreign currency options. At reporting date, the Group had the following exposures to movements in the United States Dollar, Singapore Dollar, South African Rand and Pound Sterling: USD EXPOSURE SGD EXPOSURE ZAR EXPOSURE GBP EXPOSURE CONSOLIDATED CONSOLIDATED CONSOLIDATED CONSOLIDATED 2014 $’000 2013 $’000 2014 $’000 2013 $’000 2014 $’000 2013 $’000 2014 $’000 2013 $’000 FINANCIAL ASSETS Cash and cash equivalents Trade and other receivables 648 340 5 36 Derivative financial assets (cash flow hedges) 1,596 17,042 1,750 1,106 - - 4,044 - - - - 2,157 2,399 - - - - 2,584 17,083 1,750 1,106 2,157 2,399 4,044 FINANCIAL LIABILITIES Trade and other payables (20,765) (20,537) (111) (202) Derivative financial liabilities (cash flow hedges) (6,801) (187) - - (27,566) (20,724) (111) (202) - - - - - - (13) - (13) Net exposure (24,982) (3,641) 1,639 904 2,157 2,399 4,031 - - - - - - - - The Group has forward currency contracts and foreign currency options designated as cash flow hedges that are subject to movements through equity and profit and loss respectively as foreign exchange rates move (refer to Note 29). Annual Report 2014 58 58     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 3 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) 3 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) RISK EXPOSURES AND RESPONSES (CONTINUED) RISK EXPOSURES AND RESPONSES (CONTINUED) Foreign currency risk The following sensitivity is based on the foreign exchange risk exposures in existence at the reporting date: Judgements of reasonably possible movements: CONSOLIDATED AUD/USD + 2.5% AUD/USD – 10.0% AUD/ZAR + 2.5% AUD/ZAR – 10.0% AUD/SGD + 2.5% AUD/SGD –10.0% AUD/GBP + 2.5% AUD/GBP –10.0% POST-TAX PROFIT HIGHER/(LOWER) OTHER COMPREHENSIVE INCOME HIGHER/(LOWER) 2014 $000 401 (1,829) (53) 240 (40) 182 (98) 448 2013 $000 361 (1,628) (59) 267 (22) 100 - - 2014 $000 (4,063) 18,417 - - - - - - 2013 $000 (4,488) 21,010 - - - - - - Significant assumptions used in the foreign currency exposure sensitivity analysis include:     Reasonably possible movements in foreign exchange rates were determined based on a review of the last two years historical movements and economic forecaster’s expectations. The net exposure at reporting date is representative of what the Group was and is expecting to be exposed to in the next twelve months from reporting date. The effect on other comprehensive income is the effect on the cash flow hedge reserve, and/or the foreign currency translation reserve. The sensitivity does not include financial instruments that are non-monetary items as these are not considered to give rise to currency risk. Liquidity risk Liquidity risk refers to the risk of encountering difficulties in meeting obligations associated with financial liabilities. Liquidity risk management is associated with ensuring that there are sufficient funds available to meet financial commitments in a timely manner and planning for unforeseen events which may curtail cash flows and cause pressure on liquidity. The Group keeps its short, medium and long term funding requirements under constant review. Its policy is to have sufficient committed funds available to meet medium term requirements, with flexibility and headroom to make acquisitions for cash in the event an opportunity should arise. Liquidity risk (Continued) The Group has at balance date $27 million (2013: $31 million) cash held in deposit with 11am at call term and the remaining $286 million (2013: $282 million) cash held in deposit with maturity terms ranging from 30 to 180 days. Hence management believe there is no significant exposure to liquidity risk at 26 July 2014 and 27 July 2013. The Group aims to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and finance leases with a variety of counterparties. The remaining contractual maturities of the Group’s financial liabilities are: Maturity < 6 months Maturity 6–12 months * Maturity 12–24 months Maturity > 24 months CONSOLIDATED 2014 $’000 170,086 203,773 27,565 19,000 420,424 2013 $’000 147,931 99,329 186,087 14 433,361 * Refer to Note 32 for details regarding the subsequent to year end extension of the Group’s core debt facility. Fair value of financial assets and liabilities The Group measures financial instruments, such as derivatives, at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place in either the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability, which is accessible to the Group. The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. The fair value of financial assets and financial liabilities is based on market prices (where a market exists) or using other widely accepted methods of valuation. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, as described below, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 – the fair value is calculated using quoted price in active markets. Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data. 59 Premier Investments Limited 59 60     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 3 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) RISK EXPOSURES AND RESPONSES (CONTINUED) Liquidity risk (Continued) The Group has at balance date $27 million (2013: $31 million) cash held in deposit with 11am at call term and the remaining $286 million (2013: $282 million) cash held in deposit with maturity terms ranging from 30 to 180 days. Hence management believe there is no significant exposure to liquidity risk at 26 July 2014 and 27 July 2013. The Group aims to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and finance leases with a variety of counterparties. The remaining contractual maturities of the Group’s financial liabilities are: Maturity < 6 months Maturity 6–12 months * Maturity 12–24 months Maturity > 24 months CONSOLIDATED 2014 $’000 170,086 203,773 27,565 19,000 420,424 2013 $’000 147,931 99,329 186,087 14 433,361 * Refer to Note 32 for details regarding the subsequent to year end extension of the Group’s core debt facility. Fair value of financial assets and liabilities The Group measures financial instruments, such as derivatives, at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place in either the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability, which is accessible to the Group. The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. The fair value of financial assets and financial liabilities is based on market prices (where a market exists) or using other widely accepted methods of valuation. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, as described below, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 – the fair value is calculated using quoted price in active markets. Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data. Annual Report 2014 60 60   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 3 FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (CONTINUED) Fair value of financial assets and liabilities (Continued) The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below. CONSOLIDATED FINANCIAL PERIOD ENDED 26 JULY 2014 FINANCIAL PERIOD ENDED 27 JULY 2013 QUOTED MARKET PRICE VALUATION TECHNIQUE – MARKET OBSERVABLE INPUTS VALUATION TECHNIQUE – NON MARKET OBSERVABLE INPUTS TOTAL QUOTED MARKET PRICE VALUATION TECHNIQUE – MARKET OBSERVABLE INPUTS VALUATION TECHNIQUE – NON MARKET OBSERVABLE INPUTS TOTAL (LEVEL 1) (LEVEL 2) (LEVEL 3) (LEVEL 1) (LEVEL 2) (LEVEL 3) $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 - - - - 1,596 1,596 6,801 6,801 - - - - 1,596 1,596 6,801 6,801 - - - - 17,042 17,042 - 17,042 - 17,042 187 187 - - 187 187 Financial Assets Foreign Exchange Contracts Financial Liabilities Foreign Exchange Contracts There have been no transfers between Level 1 and Level 2 during the financial period. At 26 July 2014 and 27 July 2013 the fair value of cash and cash equivalents, short-term receivables and payables approximates their carrying value. The carrying value of interest bearing liabilities is assumed to approximate the fair value, being the amount at which the liability could be settled in a current transaction between willing parties. Foreign exchange contracts are initially recognised in the statement of financial position at cost, and subsequently remeasured to fair value. Accordingly, the carrying amounts of forward exchange contracts approximate their fair values at the reporting date. Foreign exchange contracts are measured based on observable spot exchange rates, the yield curves of the respective currencies as well as the currency basis spread between the respective currencies. 4 REVENUE REVENUE Revenue from sale of goods Revenue from sale of goods to associate TOTAL REVENUE FROM SALE OF GOODS OTHER REVENUE Membership program fees Other sundry revenue INTEREST Other persons Associate Total Interest DIVIDENDS Other listed companies Total Dividends TOTAL OTHER REVENUE TOTAL REVENUE OTHER INCOME Amortisation of deferred income Gain on ineffective cash flow hedges Net gain on financial instruments Royalty and licence fees Other persons Associate Insurance proceeds Other TOTAL OTHER INCOME TOTAL INCOME Fair value gain on available-for-sale financial assets reclassified from equity to profit and loss CONSOLIDATED 2014 $’000 2013 $’000 888,426 4,144 892,570 465 20 10,848 291 11,139 11,624 904,194 3,836 - - - - - 821 266 427 426 5,776 909,970 836,454 6,718 843,172 521 - 13,520 336 13,856 3,862 3,862 18,239 861,411 2,539 632 3,350 149,803 377 - - 132 156,833 1,018,244 61 Premier Investments Limited 61 62     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 4 REVENUE REVENUE Revenue from sale of goods Revenue from sale of goods to associate TOTAL REVENUE FROM SALE OF GOODS OTHER REVENUE Membership program fees Other sundry revenue INTEREST Other persons Associate Total Interest DIVIDENDS Other listed companies Total Dividends TOTAL OTHER REVENUE TOTAL REVENUE OTHER INCOME Amortisation of deferred income Gain on ineffective cash flow hedges Net gain on financial instruments Fair value gain on available-for-sale financial assets reclassified from equity to profit and loss Royalty and licence fees Other persons Associate Insurance proceeds Other TOTAL OTHER INCOME TOTAL INCOME CONSOLIDATED 2014 $’000 2013 $’000 888,426 4,144 892,570 465 20 10,848 291 11,139 - - 11,624 904,194 3,836 - - - 821 266 427 426 836,454 6,718 843,172 521 - 13,520 336 13,856 3,862 3,862 18,239 861,411 2,539 632 3,350 149,803 377 - - 132 5,776 909,970 156,833 1,018,244 Annual Report 2014 62 62   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) CONSOLIDATED NOTES 2014 $’000 2013 $’000 CONSOLIDATED 2014 $’000 2013 $’000 5 EXPENSES AND LOSSES EXPENSES 11 11 11 12 DEPRECIATION AND IMPAIRMENT OF NON-CURRENT ASSETS Depreciation of property, plant and equipment Amortisation of property, plant and equipment under lease Impairment of property, plant and equipment TOTAL DEPRECIATION AND IMPAIRMENT OF NON-CURRENT ASSETS AMORTISATION OF NON-CURRENT ASSETS Amortisation of leasehold premiums TOTAL AMORTISATION OF NON-CURRENT ASSETS TOTAL DEPRECIATION, IMPAIRMENT AND AMORTISATION FINANCE COSTS Finance charges payable under finance leases Interest on bank loans and overdraft Provision for discount adjustment on onerous leases TOTAL FINANCE COSTS OPERATING LEASE EXPENSES Minimum lease payments – operating leases Contingent rentals TOTAL OPERATING LEASE EXPENSES OTHER EXPENSES INCLUDES Share-based payments expense Foreign exchange losses Loss on ineffective cash flow hedges Net loss on disposal of property, plant and equipment 21,132 18,804 47 697 53 262 21,876 19,119 Deferred income tax reclassified from equity to profit 65 65 68 68 21,941 19,187 25 6,245 41 6,311 158,415 27,646 186,061 898 345 625 426 36 6,198 754 6,988 152,533 25,810 178,343 932 243 - 352 MARKET ENTRY COSTS During the financial year, Smiggle commenced operations in the United Kingdom. As a consequence, included in other expenses are costs amounting to $3.1 million incurred as a result of the Group’s entry into the UK market. SUPPLY CHAIN TRANSFORMATION The Group is currently in the process of consolidating its Australian Distribution Centres into one national distribution centre in Truganina, Victoria. As a result of this transformation, expenses totalling $4.5 million have been incurred in the 2014 financial year. As a consequence of this transformation, the existing distribution centre at Huntingwood, NSW closed in June 2014. The existing distribution centre in Altona, Victoria, is expected to close in early 2015. 63 Premier Investments Limited 63 6 INCOME TAX The major components of income tax expense are: (a) INCOME TAX RECOGNISED IN PROFIT AND LOSS CURRENT INCOME TAX Current income tax charge previous years DEFERRED INCOME TAX Adjustment in respect of current income tax of Relating to origination and reversal of temporary differences and loss INCOME TAX EXPENSE REPORTED IN THE STATEMENT OF COMPREHENSIVE INCOME (b) STATEMENT OF CHANGES IN EQUITY Deferred income tax related to items charged (credited) directly to equity: Net deferred income tax on movements on cash- flow hedges profit and loss Unrealised gain on available-for-sale investments Deferred income tax reclassified from equity to AGGREGATE TAX EXPENSE RECOGNISED IN THE STATEMENT OF COMPREHENSIVE INCOME AND TAX EXPENSE CALCULATED PER THE STATUTORY INCOME TAX RATE A reconciliation between tax expense and the product of accounting profit before tax multiplied by the Group’s applicable income tax rate is as follows: Accounting profit before income tax At the Parent Entity’s statutory income tax rate of 30% (2013: 30%) previous years Adjustment in respect of current income tax of Items not recognised in deferred tax balances Expenditure not allowable for income tax purposes Income not assessable for tax purposes AGGREGATE INCOME TAX EXPENSE INCOME TAX BENEFIT REPORTED IN EQUITY (6,431) (c) NUMERICAL RECONCILIATION BETWEEN 25,936 (74) (497) - 25,365 (6,431) - - 98,365 29,510 (74) (179) 39 (3,931) 25,365 21,111 (279) 5,999 44,652 71,483 5,481 9,582 (44,652) (29,589) 245,956 73,787 (279) (447) 424 (2,002) 71,483 64     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) CONSOLIDATED 2014 $’000 2013 $’000 6 INCOME TAX The major components of income tax expense are: (a) INCOME TAX RECOGNISED IN PROFIT AND LOSS CURRENT INCOME TAX Current income tax charge Adjustment in respect of current income tax of previous years DEFERRED INCOME TAX Relating to origination and reversal of temporary differences Deferred income tax reclassified from equity to profit and loss INCOME TAX EXPENSE REPORTED IN THE STATEMENT OF COMPREHENSIVE INCOME (b) STATEMENT OF CHANGES IN EQUITY Deferred income tax related to items charged (credited) directly to equity: Net deferred income tax on movements on cash- flow hedges Unrealised gain on available-for-sale investments Deferred income tax reclassified from equity to profit and loss 25,936 (74) (497) - 25,365 (6,431) - - INCOME TAX BENEFIT REPORTED IN EQUITY (6,431) (c) NUMERICAL RECONCILIATION BETWEEN AGGREGATE TAX EXPENSE RECOGNISED IN THE STATEMENT OF COMPREHENSIVE INCOME AND TAX EXPENSE CALCULATED PER THE STATUTORY INCOME TAX RATE A reconciliation between tax expense and the product of accounting profit before tax multiplied by the Group’s applicable income tax rate is as follows: Accounting profit before income tax At the Parent Entity’s statutory income tax rate of 30% (2013: 30%) Adjustment in respect of current income tax of previous years Items not recognised in deferred tax balances Expenditure not allowable for income tax purposes Income not assessable for tax purposes AGGREGATE INCOME TAX EXPENSE 98,365 29,510 (74) (179) 39 (3,931) 25,365 21,111 (279) 5,999 44,652 71,483 5,481 9,582 (44,652) (29,589) 245,956 73,787 (279) (447) 424 (2,002) 71,483 Annual Report 2014 64 64   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 6 (d) INCOME TAX (CONTINUED) RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES DEFERRED TAX RELATES TO THE FOLLOWING: Intangibles Foreign currency balances Potential capital gains tax on financial investments Deferred gains and losses on foreign exchange contracts Inventory provisions Deferred income Employee provisions Other receivables and prepayments Property, plant and equipment R&D depreciation equipment Leased plant and equipment Other Lease liability CONSOLIDATED 2014 $’000 2013 $’000 (969) 204 (44,637) 1,589 468 3,962 4,874 (96) (6,539) (33) (18) 736 20 (943) (4,998) (44,637) - 235 4,465 5,211 (316) (7,134) (113) (32) 861 34 NET DEFERRED TAX LIABILITIES (40,439) (47,367) REFLECTED IN THE STATEMENT OF FINANCIAL POSITION AS FOLLOWS: Deferred tax assets Deferred tax liabilities NET DEFERRED TAX LIABILITIES 12,147 (52,586) (40,439) 10,928 (58,295) (47,367) 7 DIVIDENDS PAID AND PROPOSED RECOGNISED AMOUNTS Declared and paid during the year Interim franked dividends for 2014: 20 cents per share (2013: 19 cents) Final franked dividends for 2013: 19 cents per share (2012: 18 cents) UNRECOGNISED AMOUNTS Final franked dividend for 2014: FRANKING CREDIT BALANCE The amount of franking credits available for the subsequent financial year are: - - franking account balance as at the end of the financial year at 30% (2013: 30%) franking credits that will arise from the payment of income tax payable (receivable) as at the end of the financial year - franking debits that will arise from the payment of dividends as at the end of the financial year  TOTAL FRANKING CREDIT BALANCE CONSOLIDATED 2014 $’000 2013 $’000 31,063 29,499 29,499 27,947 204,477 213,809 23,035 13,141 (13,347) 214,165 (12,642) 214,308 20 cents per share (2013: 19 cents) 31,143 29,499 The tax rate at which paid dividends have been franked is 30% (2013: 30%). Dividends proposed will be franked at the rate of 30% (2013: 30%). 65 Premier Investments Limited 65 66     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 7 DIVIDENDS PAID AND PROPOSED RECOGNISED AMOUNTS Declared and paid during the year Interim franked dividends for 2014: 20 cents per share (2013: 19 cents) Final franked dividends for 2013: 19 cents per share (2012: 18 cents) UNRECOGNISED AMOUNTS Final franked dividend for 2014: CONSOLIDATED 2014 $’000 2013 $’000 31,063 29,499 29,499 27,947 20 cents per share (2013: 19 cents) 31,143 29,499 FRANKING CREDIT BALANCE The amount of franking credits available for the subsequent financial year are: - - - franking account balance as at the end of the financial year at 30% (2013: 30%) franking credits that will arise from the payment of income tax payable (receivable) as at the end of the financial year franking debits that will arise from the payment of dividends as at the end of the financial year  TOTAL FRANKING CREDIT BALANCE 204,477 213,809 23,035 13,141 (13,347) 214,165 (12,642) 214,308 The tax rate at which paid dividends have been franked is 30% (2013: 30%). Dividends proposed will be franked at the rate of 30% (2013: 30%). Annual Report 2014 66 66   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 8 TRADE AND OTHER RECEIVABLES CURRENT Sundry debtors Associate Carrying amount of trade and other receivables NON-CURRENT Associate Carrying amount of trade and other receivables (a) Impairment losses CONSOLIDATED 2014 $’000 2013 $’000 11,002 1,153 12,155 1,004 1,004 6,388 470 6,858 1,929 1,929 Receivables are non-interest-bearing and are generally on 30 to 60 day terms. A provision for impairment loss is recognised where there is objective evidence that an individual receivable balance is impaired. No impairment loss has been recognised by the Group during the financial period ended 26 July 2014 (2013: $nil). During the year, a bad debt expense of $nil (2013: $nil) was recognised. Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due. (b) Related party receivables For terms and conditions of related party receivables refer to Note 26. (c) Fair value and credit risk Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value. (d) Foreign exchange and interest rate risk Detail regarding foreign exchange and interest rate risk is disclosed in Note 3. 9 INVENTORIES The valuation policy adopted in respect of the following is set out in Note 2(l) Raw materials Finished goods TOTAL INVENTORIES AT THE LOWER OF COST AND NET REALISABLE VALUE 67 Premier Investments Limited CONSOLIDATED 2014 $’000 2013 $’000 491 98,005 98,496 989 82,970 83,959 67 10 OTHER ASSETS CURRENT Deposits and prepayments TOTAL OTHER CURRENT ASSETS 11 PROPERTY, PLANT AND EQUIPMENT Land – at cost Buildings – at cost Less: accumulated depreciation and impairment Plant and equipment – at cost Less: accumulated depreciation and impairment Capitalised leased assets – at cost Less: accumulated depreciation and impairment Total Total Total Capital works in progress TOTAL PROPERTY, PLANT AND EQUIPMENT RECONCILIATIONS Reconciliations of the carrying amounts for each class of plant and equipment are set out below: At beginning of the financial period Net carrying amount at end of financial period At beginning of financial period Transferred from capital works in progress Land Additions Buildings Additions Depreciation Net carrying amount at end of financial period Plant and equipment At beginning of the financial period Additions Disposals Exchange differences Impairment – plant and equipment Impairment – supply chain transformation Depreciation Net carrying amount at end of financial period 5 5 5 5 CONSOLIDATED NOTES 2014 $’000 2013 $’000 5,215 5,215 4,676 4,676 3,203 14,985 (57) 14,928 192,492 (101,654) 90,838 343 (284) 59 - 109,028 3,203 3,203 - - 2,173 12,812 (57) 14,928 81,123 32,149 (845) 433 (697) (250) (21,075) 90,838 169,726 (88,603) 81,123 343 (237) 106 2,173 83,402 - - - - - - - - - - - - 80,083 19,231 (360) 1,235 (262) - (18,804) 81,123 68     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) CONSOLIDATED NOTES 2014 $’000 2013 $’000 5,215 5,215 4,676 4,676 10 OTHER ASSETS CURRENT Deposits and prepayments TOTAL OTHER CURRENT ASSETS 11 PROPERTY, PLANT AND EQUIPMENT Land – at cost Buildings – at cost Less: accumulated depreciation and impairment Total Plant and equipment – at cost Less: accumulated depreciation and impairment Total Capitalised leased assets – at cost Less: accumulated depreciation and impairment Total Capital works in progress TOTAL PROPERTY, PLANT AND EQUIPMENT RECONCILIATIONS Reconciliations of the carrying amounts for each class of plant and equipment are set out below: Land At beginning of the financial period Additions Net carrying amount at end of financial period Buildings At beginning of financial period Transferred from capital works in progress Additions Depreciation Net carrying amount at end of financial period Plant and equipment At beginning of the financial period Additions Disposals Exchange differences Impairment – plant and equipment Impairment – supply chain transformation Depreciation Net carrying amount at end of financial period 5 5 5 5 3,203 14,985 (57) 14,928 192,492 (101,654) 90,838 343 (284) 59 - 109,028 - 3,203 3,203 - 2,173 12,812 (57) 14,928 81,123 32,149 (845) 433 (697) (250) (21,075) 90,838 - - - - 169,726 (88,603) 81,123 343 (237) 106 2,173 83,402 - - - - - - - - 80,083 19,231 (360) 1,235 (262) - (18,804) 81,123 Annual Report 2014 68 68   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) CONSOLIDATED 12 INTANGIBLES NOTES 2014 $’000 2013 $’000 RECONCILIATION OF CARRYING AMOUNTS AT THE BEGINNING AND END OF THE PERIOD 11 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) RECONCILIATIONS (CONTINUED) Leased plant and equipment At beginning of the financial period Disposals Amortisation Net carrying amount at end of financial period Capital works in progress At beginning of the financial period Additions Transferred to Buildings Net carrying amount at end of financial period TOTAL PROPERTY PLANT AND EQUIPMENT 5 106 - (47) 59 2,173 - (2,173) - 109,028 243 (84) (53) 106 - 2,173 - 2,173 83,402 LAND AND BUILDINGS During the year ending 27 July 2013, the Group entered into an agreement to acquire a property in Truganina Victoria, to establish a National Distribution Centre. As at 27 July 2013, the Group recognised capital works in progress amounting to $2,173,000 in relation to the Distribution Centre. Settlement of the Distribution Centre occurred on 16 January 2014, and the internal fit-out of the property was completed in May 2014. The land and buildings with a combined carrying amount of $18,131,000 have been pledged to secure certain interest-bearing borrowings of the Group (refer to note 15). IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT On an individual store basis, identified to be the cash-generating units (CGU) of the Group’s retail segment, the recoverable amount was estimated for certain items of plant and equipment. The recoverable amount estimation was based on a value in use calculation and was determined at the CGU level. These calculations use cash flow projections based on financial budgets approved by management, covering a three year period. Cash flows beyond the three year period are extrapolated using the growth rate stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates. The post-tax discount rate applied to the cash flow projections is 10.5% (2013: 10.5%) and the cash flows beyond the five year period are extrapolated using a growth rate of 3%. The discount rate used reflects management’s estimate of the time value of money and risks specific to each unit not already reflected in the cash flow. In determining the appropriate discount rate, regard has been given to the weighted average cost of capital for the retail segment. When considering the recoverable amount, the net present value of cash flows has been compared to reasonable earnings multiples for comparable companies. An impairment review was conducted based on a store by store review. As a result, a net impairment loss of $697,000 was recognised during the financial year (2013: $262,000). YEAR ENDED 26 JULY 2014 As at 28 July 2013 net of accumulated amortisation and impairment Trademark registrations Amortisation Exchange differences As at 26 July 2014 net of accumulated amortisation and impairment AS AT 26 JULY 2014 Cost (gross carrying amount) Accumulated amortisation and impairment Net carrying amount YEAR ENDED 27 JULY 2013 As at 29 July 2012 net of accumulated amortisation and impairment Trademark registrations Amortisation Exchange differences As at 27 July 2013 net of accumulated amortisation and impairment AS AT 27 JULY 2013 Cost (gross carrying amount) Accumulated amortisation and impairment Net carrying amount CONSOLIDATED GOODWILL $’000 BRAND NAMES $’000 TRADEMARK $’000 LEASEHOLD PREMIUMS $’000 TOTAL $’000 477,085 376,179 89 - (65) 2 854,529 106 (65) 2 477,085 376,179 1,282 26 854,572 477,085 376,179 797 855,343 477,085 376,179 (771) (771) 26 854,572 477,085 376,179 146 - (68) 11 854,490 96 (68) 11 477,085 376,179 1,176 89 854,529 477,085 376,179 768 855,208 477,085 376,179 (679) (679) 89 854,529 - - - - - - - - 1,176 106 - 1,282 - 1,282 1,080 96 - - 1,176 - 1,176 - - - - - - - - GOODWILL AND BRAND NAMES After initial recognition, goodwill and indefinite-life brand names acquired in a business combination are measured at cost less any accumulated impairment losses. Goodwill and brand names are not amortised but are subject to impairment testing on an annual basis or whenever there is an indication of impairment. Brand names with a carrying value of approximately $376,179,000 are assessed as having an indefinite useful life. The indefinite-useful life reflects management’s intention to continue to operate these brands to generate net cash inflows into the foreseeable future. 69 Premier Investments Limited 69 70     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 12 INTANGIBLES RECONCILIATION OF CARRYING AMOUNTS AT THE BEGINNING AND END OF THE PERIOD YEAR ENDED 26 JULY 2014 As at 28 July 2013 net of accumulated amortisation and impairment Trademark registrations Amortisation Exchange differences As at 26 July 2014 net of accumulated amortisation and impairment AS AT 26 JULY 2014 Cost (gross carrying amount) Accumulated amortisation and impairment Net carrying amount YEAR ENDED 27 JULY 2013 As at 29 July 2012 net of accumulated amortisation and impairment Trademark registrations Amortisation Exchange differences As at 27 July 2013 net of accumulated amortisation and impairment AS AT 27 JULY 2013 Cost (gross carrying amount) Accumulated amortisation and impairment Net carrying amount CONSOLIDATED GOODWILL $’000 BRAND NAMES $’000 TRADEMARK $’000 LEASEHOLD PREMIUMS $’000 TOTAL $’000 477,085 - 376,179 - - - - - 1,176 106 - 89 - (65) 2 854,529 106 (65) 2 477,085 376,179 1,282 26 854,572 477,085 376,179 - - 477,085 376,179 477,085 - 376,179 - - - - - 1,282 - 1,282 1,080 96 - - 797 855,343 (771) (771) 26 854,572 146 - (68) 11 854,490 96 (68) 11 477,085 376,179 1,176 89 854,529 477,085 376,179 - - 477,085 376,179 1,176 - 1,176 768 855,208 (679) (679) 89 854,529 GOODWILL AND BRAND NAMES After initial recognition, goodwill and indefinite-life brand names acquired in a business combination are measured at cost less any accumulated impairment losses. Goodwill and brand names are not amortised but are subject to impairment testing on an annual basis or whenever there is an indication of impairment. Brand names with a carrying value of approximately $376,179,000 are assessed as having an indefinite useful life. The indefinite-useful life reflects management’s intention to continue to operate these brands to generate net cash inflows into the foreseeable future. Annual Report 2014 70 70   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 12 INTANGIBLES (CONTINUED) IMPAIRMENT TESTING OF GOODWILL 12 INTANGIBLES (CONTINUED) IMPAIRMENT TESTING OF BRAND NAMES (CONTINUED) Impairment of goodwill acquired in a business combination is determined by assessing the recoverable amount of the cash-generating units (CGU) to which it relates. When the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognised. The key factors contributing to the goodwill relate to the synergies existing within the acquired business and also synergies expected to be achieved as a result of combining Just Group Limited with the rest of the Group. Accordingly, goodwill is assessed at a retail segment level. The recoverable amount of the CGU has been determined based upon a value in use calculation, using cash flow projections as at July 2014 for a period of five years plus a terminal value. The cash flow projections are based on financial estimates approved by the senior management and the Board for the 2015 financial year and are projected for a further four years based on estimated growth rates of 3.4% to 3.5% (2013: 3.4% to 3.6%). As part of the annual impairment test for goodwill, management assesses the reasonableness of growth rate assumptions by reviewing historical cash flow projections as well as future growth objectives. Cash flows beyond the five year period are extrapolated using a growth rate of 3% which reflects the long-term growth expectation beyond the five year projection. The post-tax discount rate applied to these cash flow projections is 10.8% (2013: 11.1%). The discount rate has been determined using the weighted average cost of capital which incorporates both the cost of debt and the cost of capital. Management has considered the possible change in expected sales growth, forecast Earnings Before Interest, Tax and Amortisation (EBITA) and discount rates applied within the CGU to which goodwill relate, each of which have been subject to sensitivities. A reasonably possible adverse change in these key assumptions on which the recoverable amount is based would not cause the carrying amount of the CGU to exceed its recoverable amount. IMPAIRMENT TESTING OF BRAND NAMES Brand names acquired through business combinations have been allocated to the following CGU groups ($’000) as no individual brand name is considered significant:  Casual wear - $188,975  Women’s wear - $137,744  Non Apparel - $49,460 The recoverable amounts of brand names acquired in a business combination are determined on an individual brand basis based upon a value in use calculation. The value in use calculation has been determined based upon the relief from royalty method using cash flow projections as at July 2014 for a period of five years plus a terminal value. The cash flow projections are based on financial estimates approved by senior management and the Board for the 2015 financial year and are projected for a further four years based on estimated growth rates. Casual wear Women’s wear Non Apparel objectives. The extrapolated growth rates at which cash flows have been discounted or the individual brands within each of the CGU groups have been summarised below: CGU AVERAGE GROWTH RATES APPLIED TERMINAL VALUE GROWTH TO PROJECTED CASH FLOWS RATE 3% to 4% 3% to 11% 4% to 8% 3% 3% 3% As part of the annual impairment test for brand names, management assesses the reasonableness of growth rate assumptions by reviewing historical cash flow projections as well as future growth Cash flows beyond the five year period are extrapolated using a growth rate of 3%, which reflects the long-term growth expectation beyond the five year projection. The post-tax discount rate applied to the cash flow projections for each of the three CGU groups is 9.8% (2013: 10.1%). The discount rate has been determined using the weighted average cost of capital which incorporates both the cost of debt and cost of capital. Royalty rates have been determined for each brand within the CGU groups by considering the brand’s history and future expected performance. Factors such as the profitability of the brand, market share, brand recognition and general conditions in the industry have also been considered in determining an appropriate royalty rate for each brand. Consideration is also given to the industry norms relating to royalty rates by analysing market derived data for comparable brands and by considering the notional royalty payments as a percentage of the divisional earnings before interest and taxation generated by the division in which the Brand names are used. Net royalty rates applied across the three CGU groups range between 3.5% and 8.5%. Management has considered reasonable possible adverse changes in key assumptions applied to brands within the relevant CGU groups, each of which have been subjected to sensitivities. In particular, one brand within the Women’s Wear CGU group with a carrying value of $31.6 million, which approximates its recoverable amount, indicated sensitivity to a reasonably possible adverse change in forecast sales growth, as well as indicating sensitivity to a reasonably possible adverse change to the post-tax discount rate applied to the cash flow projections. It is estimated that a 5% reduction in forecast sales growth could result in a decrease in the recoverable amount of the brand within the particular CGU group leading to a potential impairment of $2.8 million. Similarly, an estimated 50 basis point increase in the 9.8% post-tax discount rate applied to the cash flow projections could result in a decrease in the recoverable amount of the brand within the CGU group leading to a possible impairment of $3.4 million. The potential impairment losses as a result of the reasonably possible adverse changes to these key assumptions are not considered material to the overall recoverable amount of the CGU group to which the brand relates. 71 Premier Investments Limited 71 72     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 12 INTANGIBLES (CONTINUED) IMPAIRMENT TESTING OF BRAND NAMES (CONTINUED) The extrapolated growth rates at which cash flows have been discounted or the individual brands within each of the CGU groups have been summarised below: CGU AVERAGE GROWTH RATES APPLIED TERMINAL VALUE GROWTH TO PROJECTED CASH FLOWS RATE Casual wear Women’s wear Non Apparel 3% to 4% 3% to 11% 4% to 8% 3% 3% 3% As part of the annual impairment test for brand names, management assesses the reasonableness of growth rate assumptions by reviewing historical cash flow projections as well as future growth objectives. Cash flows beyond the five year period are extrapolated using a growth rate of 3%, which reflects the long-term growth expectation beyond the five year projection. The post-tax discount rate applied to the cash flow projections for each of the three CGU groups is 9.8% (2013: 10.1%). The discount rate has been determined using the weighted average cost of capital which incorporates both the cost of debt and cost of capital. Royalty rates have been determined for each brand within the CGU groups by considering the brand’s history and future expected performance. Factors such as the profitability of the brand, market share, brand recognition and general conditions in the industry have also been considered in determining an appropriate royalty rate for each brand. Consideration is also given to the industry norms relating to royalty rates by analysing market derived data for comparable brands and by considering the notional royalty payments as a percentage of the divisional earnings before interest and taxation generated by the division in which the Brand names are used. Net royalty rates applied across the three CGU groups range between 3.5% and 8.5%. Management has considered reasonable possible adverse changes in key assumptions applied to brands within the relevant CGU groups, each of which have been subjected to sensitivities. In particular, one brand within the Women’s Wear CGU group with a carrying value of $31.6 million, which approximates its recoverable amount, indicated sensitivity to a reasonably possible adverse change in forecast sales growth, as well as indicating sensitivity to a reasonably possible adverse change to the post-tax discount rate applied to the cash flow projections. It is estimated that a 5% reduction in forecast sales growth could result in a decrease in the recoverable amount of the brand within the particular CGU group leading to a potential impairment of $2.8 million. Similarly, an estimated 50 basis point increase in the 9.8% post-tax discount rate applied to the cash flow projections could result in a decrease in the recoverable amount of the brand within the CGU group leading to a possible impairment of $3.4 million. The potential impairment losses as a result of the reasonably possible adverse changes to these key assumptions are not considered material to the overall recoverable amount of the CGU group to which the brand relates. Annual Report 2014 72 72   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) CONSOLIDATED 2014 $’000 2013 $’000 13 INVESTMENTS IN ASSOCIATES (CONTINUED) Breville Group Limited 13 INVESTMENTS IN ASSOCIATES Movements in carrying amounts Carrying amount at the beginning of the financial year Fair value of investment in Breville Group Limited at commencement of equity accounting Share of profit after income tax Share of other comprehensive income Foreign currency translation of investment Dividends received Investments in associates Just Kor Fashion Group (Pty) Ltd 185,534 1,484 - 12,785 (896) (307) (8,698) 188,418 184,326 3,114 1,219 74 (4,683) 185,534 Just Jeans Group Pty Ltd, a subsidiary of Premier Investments 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 profit in its investment in the associate for the year was $247,215 (2013: loss of $132,554). The following table illustrates summarised financial information relating to the Group’s investment in Just Kor Fashion Group (Pty) Ltd: GROUP’S SHARE OF THE ASSOCIATE’S STATEMENT OF FINANCIAL POSITION Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities NET ASSETS Share of associates net assets GROUP’S SHARE OF THE ASSOCIATE’S STATEMENT OF COMPREHENSIVE INCOME Revenue Profit (Loss) after income tax 2014 $’000 4,211 1,359 5,570 (2,833) (1,381) (4,214) 1,356 2014 $’000 12,744 247 73 Premier Investments Limited 2013 $’000 3,373 1,539 4,912 (1,436) (2,050) (3,486) 1,426 2013 $’000 12,663 (133) 73 As at 26 July 2014, Premier Investments Limited holds 25.7% (2013: 25.7%) of Breville Group Limited, a company incorporated in Australia whose shares are quoted on the Australian Stock Exchange. The principal activities of Breville Group Limited involves the innovation, development, marketing and distribution of small electrical appliances. The Group commenced equity accounting for its investment in Breville Group Limited on 1 March 2013, which was considered the date that the Group gained significant influence. The fair value of the Group’s investment in Breville Group Limited on 1 March 2013 amounted to $184,325,534. As at 26 July 2014, the fair value of the Group’s interest in Breville Group Limited as determined based on the quoted market price was $264,947,047 (2013: $248,889,650). There were no impairment losses relating to the investment in associate and no capital commitments or other commitments relating to the associate. The Group’s share of the profit in its investment in associate for the year was $12,537,482 (2013: apportioned from 1 March 2013 $3,246,659). The financial year end date of Breville Group Limited is 30 June. For the purpose of applying the equity method of accounting, the financial statements of Breville Group Limited for the year ended 30 June 2014 have been used. The following table illustrates summarised financial information relating to the Group’s investment in GROUP’S SHARE OF THE ASSOCIATE’S STATEMENT OF Breville Group Limited: FINANCIAL POSITION Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities NET ASSETS Share of associates net assets 54,775 51,728 APPORTIONED FROM 1 MARCH 2013 GROUP’S SHARE OF THE ASSOCIATE’S STATEMENT OF COMPREHENSIVE INCOME Revenue Profit after income tax Other comprehensive (loss) income 2014 $’000 63,593 22,860 86,453 (25,172) (6,506) (31,678) 2014 $’000 139,249 12,538 (886) 2013 $’000 63,863 23,152 87,015 (30,351) (4,936) (35,287) $’000 39,976 3,247 1,219 74     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 13 INVESTMENTS IN ASSOCIATES (CONTINUED) Breville Group Limited As at 26 July 2014, Premier Investments Limited holds 25.7% (2013: 25.7%) of Breville Group Limited, a company incorporated in Australia whose shares are quoted on the Australian Stock Exchange. The principal activities of Breville Group Limited involves the innovation, development, marketing and distribution of small electrical appliances. The Group commenced equity accounting for its investment in Breville Group Limited on 1 March 2013, which was considered the date that the Group gained significant influence. The fair value of the Group’s investment in Breville Group Limited on 1 March 2013 amounted to $184,325,534. As at 26 July 2014, the fair value of the Group’s interest in Breville Group Limited as determined based on the quoted market price was $264,947,047 (2013: $248,889,650). There were no impairment losses relating to the investment in associate and no capital commitments or other commitments relating to the associate. The Group’s share of the profit in its investment in associate for the year was $12,537,482 (2013: apportioned from 1 March 2013 $3,246,659). The financial year end date of Breville Group Limited is 30 June. For the purpose of applying the equity method of accounting, the financial statements of Breville Group Limited for the year ended 30 June 2014 have been used. The following table illustrates summarised financial information relating to the Group’s investment in Breville Group Limited: GROUP’S SHARE OF THE ASSOCIATE’S STATEMENT OF FINANCIAL POSITION Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities NET ASSETS 2014 $’000 63,593 22,860 86,453 (25,172) (6,506) (31,678) 2013 $’000 63,863 23,152 87,015 (30,351) (4,936) (35,287) Share of associates net assets 54,775 51,728 GROUP’S SHARE OF THE ASSOCIATE’S STATEMENT OF COMPREHENSIVE INCOME Revenue Profit after income tax Other comprehensive (loss) income 2014 $’000 139,249 12,538 (886) APPORTIONED FROM 1 MARCH 2013 $’000 39,976 3,247 1,219 Annual Report 2014 74 74   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 14 TRADE AND OTHER PAYABLES CURRENT Trade creditors Other creditors and accruals TOTAL CURRENT (a) Fair values CONSOLIDATED NOTES 2014 $’000 2013 $’000 35,118 27,402 62,520 34,808 19,706 54,514 Due to the short-term nature of these payables, their carrying value is equal to their fair value. (b) Interest rate, foreign exchange rate and liquidity risk Detail regarding interest rate, foreign exchange and liquidity risk is disclosed in Note 3. 15 INTEREST-BEARING LIABILITIES CURRENT Lease liability 22 Bank loans* unsecured ^ Bank loans* unsecured (NZ$20.0 million) ^ Net bank loans TOTAL CURRENT 52 82,000 18,477 100,477 100,529 48 - - - 48 ^ Details regarding the subsequent to year end extension of the Just Group Ltd finance facilities is disclosed in Note 32. 22 NON-CURRENT Lease liability Bank loans ** secured Bank loans* unsecured Bank loans* unsecured (NZ$20.0 million) Less directly attributable borrowing costs Net bank loans TOTAL NON-CURRENT 14 19,000 - - 19,000 - 19,000 19,014 65 - 85,000 17,240 102,240 (385) 101,855 101,920 * Bank loans are subject to a negative pledge and cross guarantee within the Just Group Ltd group. Premier Investments Limited is not a participant or guarantor of the Just Group Ltd financing facilities. ** Premier Investments Limited obtained a bank borrowing amounting to $19 million. The borrowing is secured by a mortgage over the newly acquired National Distribution Centre in Truganina, Victoria. The proceeds from the loan were used to facilitate settlement of the Distribution Centre. The borrowing is repayable in full at the end of 5 years. (a) Fair values The carrying value of the Group’s current and non-current borrowings approximates their fair value. (b) Interest rate, foreign exchange rate and liquidity risk Detail regarding interest rate, foreign exchange and liquidity risk is disclosed in Note 3. (c) Defaults and breaches During the current and prior years, there were no defaults or breaches on any of the loans. 75 Premier Investments Limited 75 Employee entitlements – Long Service Leave 1,462 1,467 Supply chain transformation, onerous lease and employee entitlements provisions Refer to note 2(u), 2(v), 2(w) and 2(x) for the relevant accounting policy and a discussion of significant estimations and assumptions applied in the measurement of these provisions. 16 PROVISIONS CURRENT Employee entitlements – Annual Leave Employee entitlements – Long Service Leave Supply chain transformation Onerous leases TOTAL CURRENT NON-CURRENT MOVEMENTS IN PROVISIONS Supply chain transformation Opening balance Charged to Profit and Loss Utilised during the period Closing balance Onerous leases Opening balance Charged (credited) to Profit and Loss Utilised during the period Closing balance NATURE AND TIMING OF PROVISIONS 17 OTHER LIABILITIES CURRENT Deferred income TOTAL CURRENT NON-CURRENT Deferred income TOTAL NON-CURRENT CONSOLIDATED 2014 $’000 2013 $’000 10,011 4,906 1,100 541 16,558 - 4,482 (3,382) 1,100 1,551 248 (1,258) 541 4,221 4,221 9,077 9,077 10,137 5,076 - 1,551 16,764 - - - - 4,739 (927) (2,261) 1,551 4,771 4,771 10,219 10,219 76     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 16 PROVISIONS CURRENT Employee entitlements – Annual Leave Employee entitlements – Long Service Leave Supply chain transformation Onerous leases TOTAL CURRENT NON-CURRENT CONSOLIDATED 2014 $’000 2013 $’000 10,011 4,906 1,100 541 16,558 10,137 5,076 - 1,551 16,764 Employee entitlements – Long Service Leave 1,462 1,467 MOVEMENTS IN PROVISIONS Supply chain transformation Opening balance Charged to Profit and Loss Utilised during the period Closing balance Onerous leases Opening balance Charged (credited) to Profit and Loss Utilised during the period Closing balance NATURE AND TIMING OF PROVISIONS - 4,482 (3,382) 1,100 1,551 248 (1,258) 541 - - - - 4,739 (927) (2,261) 1,551 Supply chain transformation, onerous lease and employee entitlements provisions Refer to note 2(u), 2(v), 2(w) and 2(x) for the relevant accounting policy and a discussion of significant estimations and assumptions applied in the measurement of these provisions. 17 OTHER LIABILITIES CURRENT Deferred income TOTAL CURRENT NON-CURRENT Deferred income TOTAL NON-CURRENT 4,221 4,221 9,077 9,077 4,771 4,771 10,219 10,219 Annual Report 2014 76 76   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 18 CONTRIBUTED EQUITY 19 RESERVES Ordinary shares 608,615 608,615 CONSOLIDATED 2014 $’000 2013 $’000 (a) MOVEMENTS IN SHARES ON ISSUE Shares on issue 28 July 2013 Shares issued during the year (i) Shares on issue at 26 July 2014 Shares on issue 29 July 2012 Shares issued during the year (i) Shares on issue at 27 July 2013 NO. (‘000) $‘000 155,260 454 155,714 155,260 - 155,260 608,615 - 608,615 608,615 - 608,615 Fully paid ordinary shares carry one vote per share and carry the rights to dividends. (i) A total of 454,396 shares (2013: nil) were issued in relation to the performance rights plan. (b) CAPITAL MANAGEMENT The Group’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders The Group also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. The capital structure of the Group consists of debt which includes borrowings as disclosed in Note 15, cash and cash equivalents as disclosed in Note 25 and equity attributable to the equity holders of the parent comprising of issued capital, reserves and retained profits as disclosed in Notes 18, 19 and 20 respectively. The Group operates primarily through its two business segments, investments and retail. The investments segment is managed and operated through the parent company. The retail segment operates through subsidiaries established in their respective markets and maintains a central borrowing facility through a subsidiary, to meet the retail segment’s funding requirements and to enable the Group to find the optimal debt and equity balance. The Group’s capital structure is reviewed on a periodic basis in the context of prevailing market conditions, and appropriate steps are taken to ensure the Group’s capital structure and capital management initiatives remain in line with the Board’s objectives. The Group maintains that the dividend paid will represent at least 65% of net profit after tax. (c) EXTERNALLY IMPOSED CAPITAL REQUIREMENTS Just Group Ltd, a subsidiary of Premier Investments Limited, is subject to a number of financial undertakings as part of its financing facility agreement. These undertakings have been satisfied during the period. The Group is not subject to any capital requirements imposed by regulators or other prudential authorities. 77 Premier Investments Limited 77 RESERVES COMPRISE: Capital profits reserve (a) Fair value reserve (b) Foreign currency translation reserve (c) Cash flow hedge reserve (d) Performance rights reserve (e) TOTAL RESERVES (a) CAPITAL PROFITS RESERVE (i) Nature and purpose of reserve The capital profits reserve is used to accumulate realised capital profits. There were no movements through the capital profits reserve.  (b) FAIR VALUE RESERVE (i) Nature and purpose of reserve This reserve is used to record gains and losses on revaluation to fair value of non-current assets.  (ii) Movements in the reserve Opening balance Increment on revaluation of available-for-sale financial assets Net deferred income tax movement on financial assets Fair value gain on available-for-sale financial assets reclassified from equity to profit and loss Net deferred income tax reclassified from equity to profit and loss CLOSING BALANCE (c) FOREIGN CURRENCY TRANSLATION RESERVE (i) Nature and purpose of reserve This reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. (ii) Movements in the reserve Opening balance Foreign currency translation of overseas subsidiaries Net movement in associate entity’s reserves CLOSING BALANCE CONSOLIDATED 2014 $’000 2013 $’000 464 - 2,334 (3,565) 3,281 2,514 464 - 2,502 11,440 2,383 16,789 - - - - - - 2,502 728 (896) 2,334 82,618 32,115 (9,582) (149,803) 44,652 - 72 1,211 1,219 2,502 78     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 19 RESERVES RESERVES COMPRISE: Capital profits reserve (a) Fair value reserve (b) Foreign currency translation reserve (c) Cash flow hedge reserve (d) Performance rights reserve (e) TOTAL RESERVES (a) CAPITAL PROFITS RESERVE (i) Nature and purpose of reserve The capital profits reserve is used to accumulate realised capital profits. There were no movements through the capital profits reserve.  (b) FAIR VALUE RESERVE (i) Nature and purpose of reserve This reserve is used to record gains and losses on revaluation to fair value of non-current assets.  (ii) Movements in the reserve Opening balance Increment on revaluation of available-for-sale financial assets Net deferred income tax movement on financial assets Fair value gain on available-for-sale financial assets reclassified from equity to profit and loss Net deferred income tax reclassified from equity to profit and loss CLOSING BALANCE (c) FOREIGN CURRENCY TRANSLATION RESERVE (i) Nature and purpose of reserve This reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. (ii) Movements in the reserve Opening balance Foreign currency translation of overseas subsidiaries Net movement in associate entity’s reserves CLOSING BALANCE CONSOLIDATED 2014 $’000 2013 $’000 464 - 2,334 (3,565) 3,281 2,514 464 - 2,502 11,440 2,383 16,789 - - - - - - 82,618 32,115 (9,582) (149,803) 44,652 - 2,502 728 (896) 2,334 72 1,211 1,219 2,502 Annual Report 2014 78 78   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) CONSOLIDATED 2014 $’000 2013 $’000 21 OPERATING SEGMENTS Identification of reportable segments 19 RESERVES (CONTINUED) (d) CASH FLOW HEDGE RESERVE (i) Nature and purpose of reserve This reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge. (ii) Movements in the reserve Opening balance Net losses on cash flow hedges Transferred from statement of financial position/comprehensive income Net deferred income tax movement on cash flow hedges CLOSING BALANCE (e) 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 net of the value of performance shares acquired under the performance rights plan. (ii) Opening balance Movements in the reserve Performance rights expense for the year CLOSING BALANCE 20 RETAINED EARNINGS Opening balance Net profit for the period attributable to owners Dividends paid CLOSING BALANCE 11,440 (5,355) (1,349) (1,712) (16,081) 19,982 6,431 (3,565) (5,481) 11,440 2,383 898 3,281 674,962 73,000 (60,562) 687,400 1,451 932 2,383 557,935 174,473 (57,446) 674,962 The Group has identified its operating segments based on the internal reports that are reviewed and used by the chief operating decision maker in assessing the performance of the company and in determining the allocation of resources. The operating segments are identified by management based on the nature of the business conducted. Discrete financial information about each of these operating businesses is reported to the chief operating decision maker on at least a monthly basis. The reportable segments are based on aggregate operating segments determined by the similarity of the business conducted, as these are the sources of the Group’s major risks and have the most effect on the rate of return. Types of products and services Retail Investment dividend income and interest. Accounting policies Income tax expense effective income tax rate. The retail segment represents the financial performance of a number of speciality retail fashion chains. The investments segment represents investments in securities for both long and short term gains, The accounting policies used by the Group in reporting segments internally are the same as those contained in note 2 to the accounts and in the prior periods. Income tax expense is calculated based on the segment operating net profit using the Group’s It is the Group’s policy that if items of revenue and expense are not allocated to operating segments then any associated assets and liabilities are also not allocated to the segments. This is to avoid asymmetrical allocations within segments which management believe would be inconsistent. The following table presents revenue and profit information for reportable segments for the period ended 26 July 2014 and 27 July 2013. 79 Premier Investments Limited 79 80     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 21 OPERATING SEGMENTS Identification of reportable segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the chief operating decision maker in assessing the performance of the company and in determining the allocation of resources. The operating segments are identified by management based on the nature of the business conducted. Discrete financial information about each of these operating businesses is reported to the chief operating decision maker on at least a monthly basis. The reportable segments are based on aggregate operating segments determined by the similarity of the business conducted, as these are the sources of the Group’s major risks and have the most effect on the rate of return. Types of products and services Retail The retail segment represents the financial performance of a number of speciality retail fashion chains. Investment The investments segment represents investments in securities for both long and short term gains, dividend income and interest. Accounting policies The accounting policies used by the Group in reporting segments internally are the same as those contained in note 2 to the accounts and in the prior periods. Income tax expense Income tax expense is calculated based on the segment operating net profit using the Group’s effective income tax rate. It is the Group’s policy that if items of revenue and expense are not allocated to operating segments then any associated assets and liabilities are also not allocated to the segments. This is to avoid asymmetrical allocations within segments which management believe would be inconsistent. The following table presents revenue and profit information for reportable segments for the period ended 26 July 2014 and 27 July 2013. Annual Report 2014 80 80   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 21 (a) OPERATING SEGMENTS (CONTINUED) OPERATING SEGMENTS RETAIL INVESTMENT ELIMINATION TOTAL 2014 $’000 2013 $’000 2014 $’000 2013 $’000 2014 $’000 2013 $’000 2014 $’000 2013 $’000 REVENUE Sale of goods 892,570 843,172 - - Interest revenue Other revenue Other income 449 470 510 524 10,690 13,346 45,015 45,859 (45,000) (42,000) 485 4,383 - - - - 892,570 843,172 11,139 13,856 5,776 3,680 - 153,153 - - 5,776 156,833 Total Segment Revenue 899,265 847,886 55,705 212,358 (45,000) (42,000) 909,970 1,018,244 Total revenue per the statement of comprehensive income RESULTS Depreciation and amortisation Impairment of property plant and equipment 21,244 18,925 697 262 Interest expense 6,311 6,988 Supply chain transformation expense 4,482 - - - - - - - - - Share of profit (loss) of associates Segment result Income tax expense Net profit after tax per the statement of comprehensive income ASSETS AND LIABILITIES 909,970 1,018,244 - - - - - - - - - - 21,244 18,925 697 262 6,311 6,988 4,482 - 12,785 3,114 (25,365) (71,483) 73,000 174,473 247 (133) 12,538 3,247 79,299 76,686 64,066 211,270 (45,000) (42,000) 98,365 245,956 Segment assets 378,808 345,484 1,279,885 1,269,010 (62,754) (52,480) 1,595,939 1,562,014 Segment liabilities 247,203 210,913 68,298 58,551 (18,091) (7,816) 297,410 261,648 Capital expenditure 48,164 19,231 - 2,173 - - 48,164 21,404 81 Premier Investments Limited 81   3 1 0 2 ’ 0 0 0 $ 3 1 0 2 0 0 0 $ ’ 4 1 0 2 ’ 0 0 0 $ 4 1 0 2 0 0 0 $ ’ D E T A D I L O S N O C D E T A D I L O S N O C I S N O T A N M I L E I I S N O T A N M I L E I L A T O T L A T O T I M O D G N K D E T N U I I M O D G N K D E T N U I E R O P A G N S I E R O P A G N S I D N A L A E Z W E N D N A L A E Z W E N A I L A R T S U A I A L A R T S U A S T N E M G E S C H P A R G O E G I S T N E M G E S C H P A R G O E G I ) I D E U N T N O C ) I D E U N T N O C ( T N E M G E S G N T A R E P O ( T N E M G E S G N T A R E P O I I 1 2 1 2 ) b ( ) b ( 3 1 0 2 ’ 0 0 0 $ 3 1 0 2 0 0 0 $ ’ 4 1 0 2 ’ 0 0 0 4 $ 1 0 2 0 0 0 $ ’ 3 1 0 2 ’ 0 0 0 3 $ 1 0 2 0 0 0 $ ’ 4 1 0 2 ’ 0 0 0 4 $ 1 0 2 0 0 0 $ ’ 3 1 0 2 0 0 0 3 $ 1 0 2 ’ 0 0 0 $ ’ 4 1 0 2 0 0 0 4 1 $ 0 2 ’ 0 0 0 $ ’ 3 1 0 2 0 0 3 0 1 $ 0 2 ’ 0 0 0 $ ’ 4 1 0 2 0 0 4 0 1 $ 0 2 ’ 0 0 0 $ ’ 3 1 0 2 0 0 3 0 1 $ 0 2 ’ 0 0 0 $ ’ 4 1 0 2 0 0 4 0 1 0 $ 2 ’ 0 0 0 $ ’ 3 1 0 2 0 3 0 1 0 0 $ 2 ’ 0 0 0 $ ’ 4 1 0 2 0 4 0 1 0 0 $ 2 ’ 0 0 0 $ ’ E U N E V E R E U N E V E R ) I D E U N T N O C ( I I S T N E M E T A T S L A C N A N F E H T O T S E T O N 3 1 S 0 2 T Y N L U E J M 7 2 E D T N A A T 4 S 1 0 2 L Y A L U C J N 6 2 A D N E D F N E E S H K T E E O W T 2 5 S E E H T T R O O N F I I ) I D E U N T N O C ( 3 1 0 2 Y L U J 7 2 D N A 4 1 0 2 Y L U J 6 2 D E D N E S K E E W 2 5 E H T R O F 2 8 2 8 2 7 1 , 3 4 8 2 7 1 , 3 4 8 0 7 5 , 2 9 8 0 7 5 , 2 9 8 2 7 0 , 5 7 1 2 7 0 , 5 7 1 0 0 4 , 7 1 0 0 4 , 7 1 4 4 2 , 8 1 0 , 1 4 4 2 , 8 1 0 , 1 0 7 9 , 9 0 9 0 7 9 , 9 0 9 - - - - - - - - - - - - 2 7 1 , 3 4 8 2 7 1 , 3 4 8 0 7 5 , 2 9 8 0 7 5 , 2 9 8 2 7 0 , 5 7 1 2 7 0 , 5 7 1 0 0 4 , 7 1 0 0 4 , 7 1 4 4 2 , 8 1 0 , 1 4 4 2 , 8 1 0 , 1 0 7 9 , 9 0 9 0 7 9 , 9 0 9 4 0 4 , 1 2 4 0 4 , 1 2 9 4 1 , 2 3 9 4 1 , 2 3 - - - - 4 0 4 , 1 2 4 0 4 , 1 2 9 4 1 , 2 3 9 4 1 , 2 3 9 3 7 , 9 3 1 , 1 9 3 7 , 9 3 1 , 1 8 4 2 , 5 6 1 , 1 8 4 2 , 5 6 1 , 1 ) 5 0 8 , 6 8 ( ) 5 0 8 , 6 8 ( ) 5 9 4 , 4 5 ( ) 5 9 4 , 4 5 ( 4 4 5 , 6 2 2 , 1 4 4 5 , 6 2 2 , 1 3 4 7 , 9 1 2 , 1 3 4 7 , 9 1 2 , 1 - - - - - - - - - - 5 6 4 , 4 5 6 4 , 4 9 9 2 , 4 9 9 2 , 4 6 2 1 , 2 6 2 1 , 2 8 4 8 3 1 , 8 4 8 , 3 1 7 0 4 8 1 , 7 0 4 , 8 1 2 2 6 6 0 1 , 2 2 6 , 6 0 1 8 3 1 0 2 1 , 8 3 1 , 0 2 1 4 7 7 , 7 9 8 4 7 7 7 9 8 , 9 9 2 , 9 6 7 9 9 2 9 6 7 , e m o c n e m o c n i i 1 1 1 , 2 1 1 1 , 2 4 4 8 3 1 , 4 4 8 , 3 1 3 9 3 8 1 , 3 9 3 , 8 1 4 3 1 6 0 1 , 4 3 1 , 6 0 1 1 6 5 9 1 1 , 1 6 5 , 9 1 1 4 9 1 , 3 2 7 4 9 1 3 2 7 , 5 0 5 , 2 5 7 5 0 5 2 5 7 , s d o o g s d o o g f o f o l l e a S e a S 5 1 5 1 4 4 4 1 4 1 8 8 4 8 8 4 7 7 5 7 7 5 0 8 5 , 4 7 1 0 8 5 4 7 1 , 4 9 7 , 6 1 4 9 7 6 1 , d n a d n a e u n e v e r e u n e v e r r e h t O r e h t O e m o c n e m o c n i i 7 1 5 , 3 7 1 5 , 3 8 6 8 , 2 8 6 8 , 2 5 7 9 , 9 5 7 9 , 9 0 3 7 , 8 0 3 7 , 8 2 5 0 , 3 1 2 , 1 2 5 0 3 1 2 , , 1 0 8 6 , 3 0 2 , 1 0 8 6 3 0 2 , , 1 t t n e r r u c - n o n n e r r u c - n o n 5 0 1 , 1 5 0 1 , 1 0 7 2 0 7 2 6 3 8 6 3 8 0 8 9 0 8 9 3 6 4 , 9 1 3 6 4 9 1 , 0 0 6 , 6 2 0 0 6 6 2 , e r u t i d n e p x e e r u t i d n e p x e l l a t i p a C a t i p a C Annual Report 2014 82 t n e m g e S t n e m g e S t n e m g e S t n e m g e S s t e s s a s t e s s a     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) CONSOLIDATED NOTES 2014 $’000 2013 $’000 22 EXPENDITURE COMMITMENTS CAPITAL EXPENDITURE COMMITMENTS Plant and equipment Payable within one year Capital works in progress Payable within one year TOTAL CAPITAL EXPENDITURE LEASE EXPENDITURE COMMITMENTS (i) Operating leases Payable within one year Payable within one to five years Payable in more than five years Total operating leases (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 TOTAL LEASE LIABILITY 15 15 - - - 101,646 138,965 13,554 254,165 52 14 66 55 14 69 (3) 66 - 15,615 15,615 106,685 156,937 4,540 268,162 48 65 113 55 69 124 (11) 113 The Group has entered into commercial operating leases on certain land and buildings, motor vehicles and items of plant and equipment. These leases have an average life of five years. The Group has finance leases for various items of plant and equipment. These leases have an average term of four years with the option to purchase the asset at the completion of the lease term for the asset’s market value. 23 KEY MANAGEMENT PERSONNEL COMPENSATION FOR KEY MANAGEMENT PERSONNEL Short-term employee benefits Post-employment benefits Termination benefits Share-based payments TOTAL Information regarding individual key management personnel compensation, shareholdings of key management personnel, as well as other transactions and balances with key management personnel and their related parties, as required by Regulation 2M.3.03 of the Corporations Regulations 2001 is provided in the Remuneration Report section of the Directors’ Report. 24 AUDITOR’S REMUNERATION The auditor of Premier Investments Limited is Ernst and Young. Amounts received, or due and receivable, by Ernst and Young (Australia) for: - An audit or review of the financial report of the entity and any other entity in the consolidated group. Other services in relation to the entity and any other entity in the consolidated group: - Taxation advice - Other Total – Other services TOTAL AUDITOR’S REMUNERATION 477,428 558,963 CONSOLIDATED 2014 $ 2013 $ 6,220,636 145,984 - 795,121 5,092,296 137,935 200,000 772,170 7,161,741 6,202,401 CONSOLIDATED 2014 $ 2013 $ 431,210 519,709 - 46,218 46,218 906 38,348 39,254 83 Premier Investments Limited 83 84     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 23 KEY MANAGEMENT PERSONNEL COMPENSATION FOR KEY MANAGEMENT PERSONNEL Short-term employee benefits Post-employment benefits Termination benefits Share-based payments TOTAL CONSOLIDATED 2014 $ 2013 $ 6,220,636 145,984 - 795,121 5,092,296 137,935 200,000 772,170 7,161,741 6,202,401 Information regarding individual key management personnel compensation, shareholdings of key management personnel, as well as other transactions and balances with key management personnel and their related parties, as required by Regulation 2M.3.03 of the Corporations Regulations 2001 is provided in the Remuneration Report section of the Directors’ Report. 24 AUDITOR’S REMUNERATION The auditor of Premier Investments Limited is Ernst and Young. Amounts received, or due and receivable, by Ernst and Young (Australia) for: - An audit or review of the financial report of the entity and any other entity in the consolidated group. Other services in relation to the entity and any other entity in the consolidated group: - Taxation advice - Other Total – Other services CONSOLIDATED 2014 $ 2013 $ 431,210 519,709 - 46,218 46,218 906 38,348 39,254 TOTAL AUDITOR’S REMUNERATION 477,428 558,963 Annual Report 2014 84 84   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 25 (a) NOTES TO THE STATEMENT OF CASH FLOWS RECONCILIATION OF CASH AND CASH EQUIVALENTS Cash at bank and in hand Short-term deposits TOTAL CASH ASSETS AND CASH EQUIVALENTS (b) RECONCILIATION OF NET CASH FLOWS FROM OPERATIONS TO NET PROFIT AFTER INCOME TAX Net profit for the period Adjustments for: Fair value gain on available-for-sale financial assets reclassified from equity to profit and loss, net of tax Net gain on financial instruments Amortisation Depreciation Impairment and write-off of non-current assets Foreign exchange losses Share of profit of associates Finance charges on capitalised leases Borrowing costs Net loss on disposal of property, plant and equipment Share-based payments expense Movement in cash flow hedge reserve Net exchange differences Changes in assets and liabilities net of the effects from acquisition and disposal of businesses: Decrease in income tax receivable Decrease in provisions Increase (decrease) in deferred tax liabilities Increase in trade and other payables Increase (decrease) in other financial liabilities Decrease in deferred income Increase in trade and other receivables Increase in other current assets Increase in inventories Decrease (increase) in other financial assets (Increase) decrease in deferred tax assets Increase in income tax payable NET CASH FLOWS FROM OPERATING ACTIVITIES 85 Premier Investments Limited CONSOLIDATED 2014 $’000 2013 $’000 27,187 286,121 313,308 31,445 281,712 313,157 73,000 174,473 - - 112 21,132 947 345 (12,785) 25 387 426 898 (15,005) (276) - (211) (5,709) 12,086 6,614 (1,692) (7,244) (539) (14,537) 15,446 (1,219) 11,179 83,380 (114,733) (3,350) 121 18,804 372 243 (3,114) 36 233 352 932 12,790 1,335 3,413 (3,176) 14,351 7,185 (2,114) (2,976) (722) (384) (12,867) (16,789) 1,230 13,463 89,108 85 CONSOLIDATED 2014 $’000 2013 $’000 25 NOTES TO THE STATEMENT OF CASH FLOWS (CONTINUED) (c) FINANCE FACILITIES Working capital and bank overdraft facility Used Unused Used Unused Used Unused Used Unused Finance facility ^ Bank guarantee facility Interchangeable facility Leasing facility Used Unused Total facilities Used Unused TOTAL ^ Details regarding the subsequent to year end extension of the Just Group Ltd finance facilities are disclosed in Note 32. 122,284 58,782 181,066 104,293 57,820 162,113 - 12,000 12,000 119,477 39,523 159,000 607 1,393 2,000 2,134 5,866 8,000 66 - 66 - 12,000 12,000 102,240 37,760 140,000 538 1,462 2,000 1,402 6,598 8,000 113 - 113 86     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 25 NOTES TO THE STATEMENT OF CASH FLOWS (CONTINUED) (c) FINANCE FACILITIES Working capital and bank overdraft facility Used Unused Finance facility ^ Used Unused Bank guarantee facility Used Unused Interchangeable facility Used Unused Leasing facility Used Unused Total facilities Used Unused TOTAL CONSOLIDATED 2014 $’000 2013 $’000 - 12,000 12,000 119,477 39,523 159,000 607 1,393 2,000 2,134 5,866 8,000 66 - 66 - 12,000 12,000 102,240 37,760 140,000 538 1,462 2,000 1,402 6,598 8,000 113 - 113 122,284 58,782 181,066 104,293 57,820 162,113 ^ Details regarding the subsequent to year end extension of the Just Group Ltd finance facilities are disclosed in Note 32. Annual Report 2014 86 86   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 26 RELATED PARTY DISCLOSURES The consolidated financial statements include the financial statements of Premier Investments Limited and the subsidiaries listed in the following table: (a) SUBSIDIARIES COUNTRY OF INCORPORATION 2014 INTEREST HELD 2013 INTEREST HELD Kimtara Investments Pty Ltd Premfin Pty Ltd Springdeep Investments Pty Ltd Prempref Pty Ltd Metalgrove Pty Ltd Just Group Limited Just Jeans Group Pty Limited Just Jeans Pty Limited Jay Jays Trademark Pty Limited Just-Shop Pty Limited Peter Alexander Sleepwear Pty Limited Old Blues Pty Limited Kimbyr Investments 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 Sydleigh Pty Limited Old Favourites Blues Pty Limited Urban Brands Pty Ltd Portmans Pty Limited Dotti Pty Ltd Smiggle Pty Limited Just Group International Pty Limited ** Smiggle Singapore Pte Ltd Just Group International HK Limited** Smiggle HK Limited** Just Group USA Inc.** Peter Alexander USA Inc.** Smiggle USA Inc.** Just UK International Limited** Smiggle UK Limited Peter Alexander UK Limited** ETI Holdings Limited** RSCA Pty Limited** RSCB Pty Limited** Just Group Singapore Private Ltd ** Peter Alexander Singapore Private Ltd ** Smiggle Stores Malaysia SDN BHD ** Smiggle Japan KK ** ** Not trading as at the date of this report. Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia New Zealand Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Singapore Hong Kong Hong Kong USA USA USA UK UK UK New Zealand Australia Australia Singapore Singapore Malaysia Japan 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 87 Premier Investments Limited 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 87 26 26 (b) (b) (c) (c) (d) (d) RELATED PARTY DISCLOSURES (CONTINUED) RELATED PARTY DISCLOSURES (CONTINUED) GROUP TRANSACTIONS WITH ASSOCIATES GROUP TRANSACTIONS WITH ASSOCIATES The Group has a 50% interest in Just Kor Fashion Group (Pty) Ltd. The Group has a 50% interest in Just Kor Fashion Group (Pty) Ltd. (i) (i) (ii) (ii) (iii) (iii) (iv) (iv) (v) (v) Sale of inventory in the amount of $4,143,973 (2013: $6,717,618). Sale of inventory in the amount of $4,143,973 (2013: $6,717,618). Management fee charged for services provided in the amount of $70,901 Management fee charged for services provided in the amount of $70,901 (2013: $71,451). (2013: $71,451). Royalty income of $266,180 (2013: $nil) is due for the financial year. Royalty income of $266,180 (2013: $nil) is due for the financial year. Information regarding outstanding balances with the associate at year end is disclosed in Information regarding outstanding balances with the associate at year end is disclosed in Note 8. Note 8. The Group provided a loan to the associate. The loan is denominated in South African The Group provided a loan to the associate. The loan is denominated in South African Rand. Interest is charged at a commercial rate and payable monthly. Interest earned on the Rand. Interest is charged at a commercial rate and payable monthly. Interest earned on the loan is disclosed in Note 4. loan is disclosed in Note 4. KEY MANAGEMENT PERSONNEL KEY MANAGEMENT PERSONNEL TERMS AND CONDITIONS TERMS AND CONDITIONS Details relating to remuneration paid to key management personnel are included in Note 23. Details relating to remuneration paid to key management personnel are included in Note 23. Outstanding balances at year-end are unsecured, interest free and settlement occurs in cash with Outstanding balances at year-end are unsecured, interest free and settlement occurs in cash with the exception of the loan provided to the associate as disclosed above. the exception of the loan provided to the associate as disclosed above. (e) (e) ULTIMATE PARENT ULTIMATE PARENT Premier Investments Limited is the ultimate parent entity. Premier Investments Limited is the ultimate parent entity. 88 88       NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 26 26 (b) (b) (c) (c) (d) (d) (e) (e) RELATED PARTY DISCLOSURES (CONTINUED) RELATED PARTY DISCLOSURES (CONTINUED) (v) (v) (iii) (iii) (iv) (iv) GROUP TRANSACTIONS WITH ASSOCIATES GROUP TRANSACTIONS WITH ASSOCIATES The Group has a 50% interest in Just Kor Fashion Group (Pty) Ltd. The Group has a 50% interest in Just Kor Fashion Group (Pty) Ltd. (i) (i) (ii) (ii) Sale of inventory in the amount of $4,143,973 (2013: $6,717,618). Sale of inventory in the amount of $4,143,973 (2013: $6,717,618). Management fee charged for services provided in the amount of $70,901 Management fee charged for services provided in the amount of $70,901 (2013: $71,451). (2013: $71,451). Royalty income of $266,180 (2013: $nil) is due for the financial year. Royalty income of $266,180 (2013: $nil) is due for the financial year. Information regarding outstanding balances with the associate at year end is disclosed in Information regarding outstanding balances with the associate at year end is disclosed in Note 8. Note 8. The Group provided a loan to the associate. The loan is denominated in South African The Group provided a loan to the associate. The loan is denominated in South African Rand. Interest is charged at a commercial rate and payable monthly. Interest earned on the Rand. Interest is charged at a commercial rate and payable monthly. Interest earned on the loan is disclosed in Note 4. loan is disclosed in Note 4. KEY MANAGEMENT PERSONNEL KEY MANAGEMENT PERSONNEL Details relating to remuneration paid to key management personnel are included in Note 23. Details relating to remuneration paid to key management personnel are included in Note 23. TERMS AND CONDITIONS TERMS AND CONDITIONS Outstanding balances at year-end are unsecured, interest free and settlement occurs in cash with Outstanding balances at year-end are unsecured, interest free and settlement occurs in cash with the exception of the loan provided to the associate as disclosed above. the exception of the loan provided to the associate as disclosed above. ULTIMATE PARENT ULTIMATE PARENT Premier Investments Limited is the ultimate parent entity. Premier Investments Limited is the ultimate parent entity. Annual Report 2014 88 88 88     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 27 (a) SHARE-BASED PAYMENT PLANS RECOGNISED SHARE-BASED PAYMENT EXPENSES The expense recognised for employee services received during the year is shown in the table below: Total Expense arising from equity-settled share-based payment transactions (b) TYPE OF SHARE-BASED PAYMENT PLAN Performance rights CONSOLIDATED 2014 $’000 898 2013 $’000 932 The company grants performance rights to executives, thus ensuring that the executives who are most directly able to influence the company performance are appropriately aligned with the interests of shareholders. A performance right is a right to acquire one fully paid ordinary share of the company after meeting a maximum three year performance period, provided specific performance hurdles are met. The number of performance rights to vest is determined by a vesting schedule based on the performance of the company. These performance hurdles have been discussed in the Remuneration Report on pages 12 - 24. The fair value of the performance rights has been calculated as at the respective grant dates using the Black Sholes European option pricing model. In determining the share-based payments expenses for the period, the number of instruments expected to vest has been adjusted to reflect the number of executives expected to remain with the group until the end of the performance period, as well as the probability of not meeting the TSR performance hurdles. The following share-based payment arrangements were in existence during the current and prior reporting periods: NUMBER GRANT DATE FAIR VALUE AT GRANT DATE The weighted average fair value of performance rights granted during the year was $4.28 (2013: The weighted average fair value of performance rights granted during the year was $4.28 (2013: Granted on 18 December 2009 Granted on 28 June 2010 Granted on 22 November 2010 Granted on 10 May 2011 Granted on 25 May 2012 Granted on 12 April 2013 Granted on 18 April 2013 Granted on 11 December 2013 115,708 24,281 134,910 1,200,000 185,201 304,386 240,000 319,493 18/12/2009 28/06/2010 22/11/2010 10/05/2011 25/05/2012 12/04/2013 18/04/2013 11/12/2013 89 Premier Investments Limited $4.17 $4.17 $3.60 $3.00 $2.62 $2.88 $4.20 $4.28 89 NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 27 27 SHARE-BASED PAYMENT PLANS (CONTINUED) SHARE-BASED PAYMENT PLANS (CONTINUED) The following table shows the factors which were considered in determining the fair value of the The following table shows the factors which were considered in determining the fair value of the performance rights granted during the current period: performance rights granted during the current period: GRANT DATE SHARE PRICE GRANT DATE SHARE PRICE OPTION LIFE OPTION LIFE DIVIDEND DIVIDEND YIELD YIELD VOLATILITY VOLATILITY RISK-FREE RISK-FREE RATE FAIR VALUE FAIR VALUE 18/12/2009 18/12/2009 28/06/2010 28/06/2010 22/11/2010 22/11/2010 10/05/2011 10/05/2011 25/05/2012 25/05/2012 12/04/2013 12/04/2013 18/04/2013 18/04/2013 11/12/2013 11/12/2013 $8.34 $8.34 $8.34 $8.34 $7.19 $7.19 $6.00 $6.00 $5.24 $5.24 $5.77 $5.77 $8.40 $8.40 $8.56 $8.56 3.3 years 3.3 years 3.3 years 3.3 years 3.8 years 3.8 years 4-5 years 4-5 years 3.4 years 3.4 years 3.5 years 3.5 years 4.2 years 4.2 years 3.8 years 3.8 years 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% RATE 4.50% 4.50% 4.50% 4.50% 5.23% 5.23% 5.10% 5.10% 2.39% 2.39% 2.81% 2.81% 2.71% 2.71% 2.98% 2.98% (c) (c) SUMMARY OF RIGHTS GRANTED UNDER PERFORMANCE RIGHTS PLANS SUMMARY OF RIGHTS GRANTED UNDER PERFORMANCE RIGHTS PLANS The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, performance rights issued during the year: and movements in, performance rights issued during the year: Balance at beginning of the year Balance at beginning of the year Granted during the year Granted during the year Forfeited during the year Forfeited during the year Exercised during the year Exercised during the year Expired during the year Expired during the year Balance at the end of the year Balance at the end of the year 2014 2014 No. No. 2,212,962 2,212,962 319,493 319,493 (148,465) (148,465) (454,396) (454,396) (80,514) (80,514) 1,849,080 1,849,080 2014 2014 WAEP WAEP - - - - - - - - - - - - 2013 2013 No. No. 1,808,565 1,808,565 544,386 544,386 - - - - (139,989) (139,989) 2,212,962 2,212,962 Since the end of the financial year and up to the date of this report, no performance rights have been Since the end of the financial year and up to the date of this report, no performance rights have been exercised, no performance rights have been issued, no performance rights have been forfeited and exercised, no performance rights have been issued, no performance rights have been forfeited and no performance rights have expired. no performance rights have expired. (d) (d) WEIGHTED AVERAGE FAIR VALUE WEIGHTED AVERAGE FAIR VALUE $3.46). $3.46). reports. reports. 28 28 DEED OF CROSS GUARANTEE DEED OF CROSS GUARANTEE Pursuant to Class Order 98/1418, relief has been granted to the wholly-owned subsidiaries listed 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 below from the Corporations law requirements for preparation, audit and lodgement of financial As a condition of the class order, Just Group Limited, a subsidiary of Premier Investments Limited, As a condition of the class order, Just Group Limited, a subsidiary of Premier Investments Limited, and each of the controlled entities of Just Group Limited entered into a Deed of Cross Guarantee as and each of the controlled entities of Just Group Limited entered into a Deed of Cross Guarantee as at 25 June 2009. Premier Investments Limited is not a party to the Deed of Cross Guarantee. at 25 June 2009. Premier Investments Limited is not a party to the Deed of Cross Guarantee. $4.17 $4.17 $4.17 $4.17 $3.60 $3.60 $3.00 $3.00 $2.62 $2.62 $2.88 $2.88 $4.20 $4.20 $4.28 $4.28 2013 2013 WAEP WAEP - - - - - - - - - - - - 90 90       NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 27 27 SHARE-BASED PAYMENT PLANS (CONTINUED) SHARE-BASED PAYMENT PLANS (CONTINUED) The following table shows the factors which were considered in determining the fair value of the The following table shows the factors which were considered in determining the fair value of the performance rights granted during the current period: performance rights granted during the current period: GRANT DATE SHARE PRICE GRANT DATE SHARE PRICE $8.34 18/12/2009 $8.34 18/12/2009 $8.34 28/06/2010 $8.34 28/06/2010 $7.19 22/11/2010 $7.19 22/11/2010 $6.00 10/05/2011 $6.00 10/05/2011 $5.24 25/05/2012 $5.24 25/05/2012 $5.77 12/04/2013 $5.77 12/04/2013 $8.40 18/04/2013 $8.40 18/04/2013 $8.56 11/12/2013 $8.56 11/12/2013 OPTION LIFE OPTION LIFE 3.3 years 3.3 years 3.3 years 3.3 years 3.8 years 3.8 years 4-5 years 4-5 years 3.4 years 3.4 years 3.5 years 3.5 years 4.2 years 4.2 years 3.8 years 3.8 years DIVIDEND DIVIDEND YIELD YIELD 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% VOLATILITY VOLATILITY 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% RISK-FREE RISK-FREE RATE RATE 4.50% 4.50% 4.50% 4.50% 5.23% 5.23% 5.10% 5.10% 2.39% 2.39% 2.81% 2.81% 2.71% 2.71% 2.98% 2.98% FAIR VALUE FAIR VALUE $4.17 $4.17 $4.17 $4.17 $3.60 $3.60 $3.00 $3.00 $2.62 $2.62 $2.88 $2.88 $4.20 $4.20 $4.28 $4.28 (c) (c) SUMMARY OF RIGHTS GRANTED UNDER PERFORMANCE RIGHTS PLANS SUMMARY OF RIGHTS GRANTED UNDER PERFORMANCE RIGHTS PLANS The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, performance rights issued during the year: and movements in, performance rights issued during the year: Balance at beginning of the year Balance at beginning of the year Granted during the year Granted during the year Forfeited during the year Forfeited during the year Exercised during the year Exercised during the year Expired during the year Expired during the year Balance at the end of the year Balance at the end of the year 2014 2014 No. No. 2,212,962 2,212,962 319,493 319,493 (148,465) (148,465) (454,396) (454,396) (80,514) (80,514) 1,849,080 1,849,080 2014 2014 WAEP WAEP - - - - - - - - - - - - 2013 2013 No. No. 1,808,565 1,808,565 544,386 544,386 - - - - (139,989) (139,989) 2,212,962 2,212,962 2013 2013 WAEP WAEP - - - - - - - - - - - - (d) (d) 28 28 Since the end of the financial year and up to the date of this report, no performance rights have been Since the end of the financial year and up to the date of this report, no performance rights have been exercised, no performance rights have been issued, no performance rights have been forfeited and exercised, no performance rights have been issued, no performance rights have been forfeited and no performance rights have expired. no performance rights have expired. WEIGHTED AVERAGE FAIR VALUE WEIGHTED AVERAGE FAIR VALUE The weighted average fair value of performance rights granted during the year was $4.28 (2013: The weighted average fair value of performance rights granted during the year was $4.28 (2013: $3.46). $3.46). DEED OF CROSS GUARANTEE DEED OF CROSS GUARANTEE Pursuant to Class Order 98/1418, relief has been granted to the wholly-owned subsidiaries listed 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 below from the Corporations law requirements for preparation, audit and lodgement of financial reports. reports. As a condition of the class order, Just Group Limited, a subsidiary of Premier Investments Limited, As a condition of the class order, Just Group Limited, a subsidiary of Premier Investments Limited, and each of the controlled entities of Just Group Limited entered into a Deed of Cross Guarantee as and each of the controlled entities of Just Group Limited entered into a Deed of Cross Guarantee as at 25 June 2009. Premier Investments Limited is not a party to the Deed of Cross Guarantee. at 25 June 2009. Premier Investments Limited is not a party to the Deed of Cross Guarantee. Annual Report 2014 90 90 90     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) CONSOLIDATED 2014 $’000 2013 $’000 29 (a) OTHER FINANCIAL INSTRUMENTS (CONTINUED) INSTRUMENTS USED BY THE GROUP (CONTINUED) (i) Forward currency contracts – cash flow hedges (continued) 29 OTHER FINANCIAL INSTRUMENTS CURRENT ASSETS Derivatives designated as hedging instruments Forward currency contracts – cash flow hedges NON -CURRENT ASSETS Derivatives designated as hedging instruments Forward currency contracts – cash flow hedges CURRENT LIABILITIES Derivatives designated as hedging instruments Forward currency contracts – cash flow hedges NON -CURRENT LIABILITIES  Derivatives designated as hedging instruments Forward currency contracts – cash flow hedges 1,517 1,517 79 79 6,798 6,798 3 3 13,625 13,625 3,417 3,417 28 28 159 159 (a) INSTRUMENTS USED BY THE GROUP Derivative financial instruments are used by the Group in the normal course of business in order to hedge exposure to fluctuations in foreign exchange rates in accordance with the Group’s financial risk management policies. (i) Forward currency contracts – cash flow hedges The majority of the Group’s inventory purchases are denominated in US Dollars. In order to protect against exchange rates movements, the Group has entered into forward exchange contracts to purchase US Dollars. These contracts are hedging highly probable forecasted purchases and they are timed to mature when payments are scheduled to be made. The cash flows are expected to occur between one to twenty four months from 26 July 2014 and the profit and loss within cost of sales will be affected over the next couple of years as the inventory is sold. At reporting date, the details of the outstanding contracts are: CONSOLIDATED 2014 $’000 2013 $’000 2014 2013 Buy USD / Sell AUD Maturity < 6 months Maturity 6 – 12 months Maturity 12 – 24 months Buy USD / Sell NZD Maturity < 6 months Maturity 6 – 12 months Maturity 12 – 24 months NOTIONAL AMOUNTS $AUD AVERAGE EXCHANGE RATE 80,467 98,823 14,085 16,685 15,844 15,839 79,021 85,944 77,801 12,539 13,361 5,994 0.9237 0.9006 0.9230 0.7943 0.7822 0.8208 0.9906 0.9978 0.9333 0.8042 0.8167 0.8206 NOTIONAL AMOUNTS $NZD AVERAGE EXCHANGE RATE The forward currency contracts are considered to be highly effective hedges as they are matched against forecast inventory purchases and any gain or loss on the contracts attributable to the hedge risk is taken directly to equity. When the cash flows occur, the Group adjusts the initial measurement of the component recognised in the statement of financial position by the related amount deferred in equity.  (b) INTEREST RATE RISK (c) CREDIT RISK Information regarding interest rate exposure is set out in Note 3. Information regarding credit risk exposure is set out in Note 3. 91 Premier Investments Limited 91 92     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 29 (a) OTHER FINANCIAL INSTRUMENTS (CONTINUED) INSTRUMENTS USED BY THE GROUP (CONTINUED) (i) Forward currency contracts – cash flow hedges (continued) The cash flows are expected to occur between one to twenty four months from 26 July 2014 and the profit and loss within cost of sales will be affected over the next couple of years as the inventory is sold. At reporting date, the details of the outstanding contracts are: CONSOLIDATED 2014 $’000 2013 $’000 2014 2013 Buy USD / Sell AUD Maturity < 6 months Maturity 6 – 12 months Maturity 12 – 24 months Buy USD / Sell NZD Maturity < 6 months Maturity 6 – 12 months Maturity 12 – 24 months NOTIONAL AMOUNTS $AUD AVERAGE EXCHANGE RATE 80,467 98,823 14,085 79,021 85,944 77,801 0.9237 0.9006 0.9230 0.9906 0.9978 0.9333 NOTIONAL AMOUNTS $NZD AVERAGE EXCHANGE RATE 16,685 15,844 15,839 12,539 13,361 5,994 0.7943 0.7822 0.8208 0.8042 0.8167 0.8206 The forward currency contracts are considered to be highly effective hedges as they are matched against forecast inventory purchases and any gain or loss on the contracts attributable to the hedge risk is taken directly to equity. When the cash flows occur, the Group adjusts the initial measurement of the component recognised in the statement of financial position by the related amount deferred in equity.  (b) INTEREST RATE RISK Information regarding interest rate exposure is set out in Note 3. (c) CREDIT RISK Information regarding credit risk exposure is set out in Note 3. Annual Report 2014 92 92   NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) CONSOLIDATED 2014 $’000 2013 $’000 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 for the period 73,000 174,473 subsidiaries amounting to $nil (2013: $nil). Weighted average number of ordinary shares used in calculating: - basic earnings per share - diluted earnings per share NUMBER OF SHARES ‘000 NUMBER OF SHARES ‘000 155,384 157,455 155,260 157,083 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. 31 PARENT ENTITY INFORMATION The accounting policies of the parent entity, which have been applied in determining the financial information shown below, are the same as those applied in the consolidated financial statements. Refer to note 2 for a summary of the significant accounting policies of the Group. The individual financial statements for the parent entity show the following aggregate amounts: (a) Summary financial information Statement of financial position Current assets Total assets Current liabilities Total liabilities Shareholders’ equity Issued capital Reserves - Foreign currency translation reserve - Performance rights reserve Retained earnings Net profit for the year Total comprehensive income 93 Premier Investments Limited 2014 $’000 2013 $’000 312,461 1,360,447 23,189 86,759 302,903 1,331,978 14,038 121,187 608,615 608,615 333 3,281 661,459 123,447 (886) 1,219 2,383 598,574 163,557 82,158 93 2014 $’000 2013 $’000 31 PARENT ENTITY INFORMATION (CONTINUED) (b) Guarantees entered into by the parent entity Carrying amount included in current liabilities - - - - The parent entity has provided financial guarantees in respect of bank overdrafts and loans of The parent entity has also given unsecured guarantees in respect of: (i) Finance leases of subsidiaries amounting to $nil (2013: $nil). (ii) The bank overdraft of a subsidiary amounting to $nil (2013: $nil). (c) Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 26 July 2014 or 27 July 2013. (d) Contractual commitments for the acquisition of property, plant or equipment The parent entity did not have any contractual commitments to purchase property, plant and equipment as at 26 July 2014. During the year ending 27 July 2013, Premier Investments Limited entered into an agreement to acquire a property in Truganina, Victoria, to establish a National Distribution Centre. As at 27 July 2013, capital works in progress amounting to $2,173,000 was recognised by the parent entity. The balance of the purchase price, being $15,615,000, was paid upon settlement, which occurred on 16 January 2014. 32 EVENTS AFTER THE REPORTING DATE During September 2014, the Group’s core debt facility relating to its unsecured bank loans was refinanced for a further three years. Subsequent to year-end, Premier Investments Limited increased its shareholding in Breville Group Limited from 25.7% to 27.33% by purchasing a further 2.1 million shares for $15.2 million. On 16 September 2014, the directors of Premier Investments Limited declared a final dividend in respect of the 2014 financial year. The total amount of the dividend is $31,143,000 (2013: $29,499,000) which represents a fully franked dividend of 20 cents per share (2013: 19 cents per share). 33 CONTINGENT LIABILITIES Under the terms of the shareholder agreement Just Kor Fashion Group (Pty) Ltd, the Group’s associate operating in South Africa, has the right to call on each shareholder for additional funding of up to ZAR15.0 million each. The Group has not provided for this obligation in this financial report. The Group has bank guarantees totalling $2,740,170 (2013: $1,940,687). 94     NOTES TO THE FINANCIAL STATEMENTS FOR THE 52 WEEKS ENDED 26 JULY 2014 AND 27 JULY 2013 (CONTINUED) 2014 $’000 2013 $’000 31 PARENT ENTITY INFORMATION (CONTINUED) (b) Guarantees entered into by the parent entity Carrying amount included in current liabilities - - - - The parent entity has provided financial guarantees in respect of bank overdrafts and loans of subsidiaries amounting to $nil (2013: $nil). The parent entity has also given unsecured guarantees in respect of: (i) Finance leases of subsidiaries amounting to $nil (2013: $nil). (ii) The bank overdraft of a subsidiary amounting to $nil (2013: $nil). (c) Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 26 July 2014 or 27 July 2013. (d) Contractual commitments for the acquisition of property, plant or equipment The parent entity did not have any contractual commitments to purchase property, plant and equipment as at 26 July 2014. During the year ending 27 July 2013, Premier Investments Limited entered into an agreement to acquire a property in Truganina, Victoria, to establish a National Distribution Centre. As at 27 July 2013, capital works in progress amounting to $2,173,000 was recognised by the parent entity. The balance of the purchase price, being $15,615,000, was paid upon settlement, which occurred on 16 January 2014. 32 EVENTS AFTER THE REPORTING DATE During September 2014, the Group’s core debt facility relating to its unsecured bank loans was refinanced for a further three years. Subsequent to year-end, Premier Investments Limited increased its shareholding in Breville Group Limited from 25.7% to 27.33% by purchasing a further 2.1 million shares for $15.2 million. On 16 September 2014, the directors of Premier Investments Limited declared a final dividend in respect of the 2014 financial year. The total amount of the dividend is $31,143,000 (2013: $29,499,000) which represents a fully franked dividend of 20 cents per share (2013: 19 cents per share). 33 CONTINGENT LIABILITIES Under the terms of the shareholder agreement Just Kor Fashion Group (Pty) Ltd, the Group’s associate operating in South Africa, has the right to call on each shareholder for additional funding of up to ZAR15.0 million each. The Group has not provided for this obligation in this financial report. The Group has bank guarantees totalling $2,740,170 (2013: $1,940,687). Annual Report 2014 94 94   DIRECTORS’ DECLARATION In accordance with a resolution of the directors of Premier Investments Limited, I state that: DIRECTORS’ DECLARATION In the directors’ opinion: (a) the financial statements and notes of Premier Investments Limited for the financial year ended 26 July 2014 are in accordance with the Corporations Act 2001, including: In accordance with a resolution of the directors of Premier Investments Limited, I state that: In the directors’ opinion: complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (i) (a) (b) the financial statements and notes of Premier Investments Limited for the financial year ended (ii) 26 July 2014 are in accordance with the Corporations Act 2001, including: giving a true and fair view of the consolidated entity’s financial position as at 26 July 2014 and of its performance for the financial year ended on that date, and (i) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (c) giving a true and fair view of the consolidated entity’s financial position as at 26 July 2014 and of its performance for the financial year ended on that date, and (ii) 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 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. there are reasonable grounds to believe that the Company will be able to pay its debts as and when (b) they become due and payable. Note 2(b) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. (c) The directors have been given the declaration by the Chief Financial Officer required by section 295A of the Corporations Act 2001. 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 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. Note 2(b) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. On behalf of the Board The directors have been given the declaration by the Chief Financial Officer required by section 295A of the Corporations Act 2001. On behalf of the Board Solomon Lew Chairman 17 October 2014 Solomon Lew Chairman 17 October 2014 95 Premier Investments Limited 95 95         8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Independent auditor's report to the members of Premier Investments Limited Report on the financial report Independent auditor's report to the members of Premier Investments Limited We have audited the accompanying financial report of Premier Investments Limited, which comprises the consolidated statement of financial position as at 26 July 2014, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement Report on the financial report of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the We have audited the accompanying financial report of Premier Investments Limited, which comprises the company and the entities it controlled at the year's end or from time to time during the financial year. consolidated statement of financial position as at 26 July 2014, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement Directors' responsibility for the financial report of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the The directors of the company are responsible for the preparation of the financial report that gives a true company and the entities it controlled at the year's end or from time to time during the financial year. and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the financial Directors' responsibility for the financial report report that is free from material misstatement, whether due to fraud or error. In Note 2 (b), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that The directors of the company are responsible for the preparation of the financial report that gives a true the financial statements comply with International Financial Reporting Standards. and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the financial Auditor's responsibility report that is free from material misstatement, whether due to fraud or error. In Note 2 (b), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that Our responsibility is to express an opinion on the financial report based on our audit. We conducted our the financial statements comply with International Financial Reporting Standards. audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain Auditor's responsibility reasonable assurance about whether the financial report is free from material misstatement. Our responsibility is to express an opinion on the financial report based on our audit. We conducted our An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in audit in accordance with Australian Auditing Standards. Those standards require that we comply with the financial report. The procedures selected depend on the auditor's judgment, including the assessment relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain of the risks of material misstatement of the financial report, whether due to fraud or error. In making reasonable assurance about whether the financial report is free from material misstatement. those risk assessments, the auditor considers 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 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's the financial report. The procedures selected depend on the auditor's judgment, including the assessment internal controls. An audit also includes evaluating the appropriateness of accounting policies used and of the risks of material misstatement of the financial report, whether due to fraud or error. In making the reasonableness of accounting estimates made by the directors, as well as evaluating the overall those risk assessments, the auditor considers internal controls relevant to the entity's preparation and presentation of the financial report. 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 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for internal controls. An audit also includes evaluating the appropriateness of accounting policies used and our audit opinion. the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. Independence We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for In conducting our audit we have complied with the independence requirements of the Corporations Act our audit opinion. 2001. 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. Independence In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Annual Report 2014 96 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au 2 Independent auditor's report to the members of Premier Investments Limited Opinion In our opinion: Report on the financial report a. the financial report of Premier Investments Limited is in accordance with the Corporations Act 2001, including: We have audited the accompanying financial report of Premier Investments Limited, which comprises the consolidated statement of financial position as at 26 July 2014, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement giving a true and fair view of the consolidated entity's financial position as at 26 July 2014 of cash flows for the year then ended, notes comprising a summary of significant accounting policies and and of its performance for the year ended on that date; and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year. i ii complying with Australian Accounting Standards and the Corporations Regulations 2001; and Directors' responsibility for the financial report b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2 (b). The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the financial Report on the remuneration report report that is free from material misstatement, whether due to fraud or error. In Note 2 (b), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that We have audited the Remuneration Report included in the directors' report for the year ended 26 July the financial statements comply with International Financial Reporting Standards. 2014. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is Auditor's responsibility to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with Opinion relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. In our opinion, the Remuneration Report of Premier Investments Limited for the year ended 26 July 2014, complies with section 300A of the Corporations Act 2001. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's 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, the auditor considers 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 Ernst & Young the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence Brent Simonis Partner In conducting our audit we have complied with the independence requirements of the Corporations Act Melbourne 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a 17 October 2014 copy of which is included in the directors’ report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 97 Premier Investments Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation This page has been left blank intentionally. Annual Report 2014 98 CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT The committee consists of three members, who as at the date of this report are: The Board of Premier Investments Limited (“Premier”) is responsible for the corporate governance of the Group. The Board guides and monitors the business of Premier and its subsidiaries on behalf of its shareholders. Name David Crean Frank Jones Gary Weiss Date Appointed 1 August 2010 Premier and its Board continue to be fully committed to achieving and demonstrating the highest standards of accountability and transparency in their reporting and see the continued development of a cohesive set of corporate governance policies and practices as fundamental to Premier’s successful growth. Position in Committee Chairperson Non‑Executive Director Non‑Executive Director 7 September 1995 1 August 2010 Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. The Board has included in its corporate governance policies those matters contained in the Australian Securities Exchange Corporate Governance Council’s Corporate Governance Principles and Recommendations (“ASX Recommendations”) where applicable. However, the Board also recognises that full adoption of the ASX Recommendations may not be practical or provide the optimal result given the particular circumstances of Premier. The composition of the Audit and Risk Committee satisfies ASX Recommendation 4.2. The committee comprises a majority of independent directors and the chair of the committee is also independent. 4.2. Composition This corporate governance statement outlines Premier’s corporate governance policies and practices The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. During the 2010/11 for the 2013/14 financial year. financial year, the Audit and Risk Committee met three times. The CEO is invited to attend each scheduled meeting of the Audit and Risk Committee and a standing invitation is issued to the external auditors. In addition to the policies set out in this statement, Premier’s wholly‑owned subsidiary, Just Group Limited, has in place its own stringent corporate governance practices. 1 PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend meetings of the Audit and Risk Committee. The Audit and Risk Committee may request management and/or others to provide such input and advice as required. Role of the Board 1.1 The Board has received a written statement from the CEO of Premier Retail and Company Secretary that Premier’s The directors are responsible for protecting the rights and interests of Premier, its shareholders and financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results other stakeholders, including creditors and employees. and in accordance with relevant accounting standards. 5 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE The Board’s key responsibilities are set out in its Board Charter, a summary of which is disclosed on Premier’s website, and include:  protecting and enhancing the value of the assets of Premier; During the 2010/11 financial year, Premier maintained a policy to ensure that it complied with its continuous disclosure obligations under the ASX Listing Rules, the ASX Recommendations and the Corporations Act, and to ensure that all investors have equal and timely access to material and price sensitive information. This policy is contained in Premier’s Board Charter which is summarised on the Company’s website. setting strategies, directions and monitoring and reviewing against these strategic objectives;  6 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS overseeing the conduct of Premier’s business in order to evaluate whether Premier is adequately managed;    identifying, assessing, monitoring and managing risk and identifying material changes in Premier endeavours to encourage and promote effective communication with its shareholders, as prescribed by ASX Recommendation 6.1. Premier’s Constitution sets out the procedures to be followed regarding: Premier’s risk profile to ensure it can take advantage of potential opportunities while managing potential adverse effects; • the convening of meetings; • the form and requirements of the notice; • the chairperson and quorums; and • the voting procedures, proxies, representations and polls. Premier’s strategy is to ensure that shareholders, regulators and the wider investment community are informed of all major approval of transactions relating to acquisitions, divestments and capital expenditure above developments affecting Premier in a timely and effective manner. Information is communicated in a number of ways delegated authority limits; including: ensuring the significant risks facing Premier have been identified and adequate control monitoring and reporting mechanisms are in place; monitoring Premier’s financial results;   • annual and half‑yearly reports; determining Premier’s investment policy;   approval of financial statements and dividend policy; and • market disclosures in accordance with the continuous disclosure protocol; • updates on operations and developments; • announcements on Premier’s website; and • market briefings and presentations at general meetings. ensuring responsible corporate governance.  Shareholders are encouraged to attend and participate at general meetings. To facilitate this, meetings are held during normal business hours and at a place convenient for the greatest possible number of shareholders to attend. The full text of notices and accompanying materials are included on Premier’s website. Information is presented in a clear and concise manner designed to provide shareholders and the market with full and accurate information. 99 Premier Investments Limited CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) 1.1 Role of the Board (continued) The Board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risks identified by the board. The Board has a number of mechanisms in place to ensure this is achieved, including: The committee consists of three members, who as at the date of this report are:  Name David Crean  Frank Jones Gary Weiss Board approval of strategic plans designed to meet stakeholder’s needs and manage business risk; and Date Appointed 1 August 2010 ongoing development of the strategic plans and approving initiatives and strategies designed to ensure continued growth. 7 September 1995 Position in Committee Chairperson Non‑Executive Director Non‑Executive Director 1 August 2010 Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. To assist in the execution of the above responsibilities, the Board had in place, throughout the financial year, an Audit and Risk Committee and a Remuneration and Nomination Committee. Both Committees have direct access to significant internal and external resources, including direct access to Premier’s advisers, both internal and external, and are authorised to seek independent professional or other advice if required. The roles and responsibilities of these committees are discussed throughout this corporate governance statement. The composition of the Audit and Risk Committee satisfies ASX Recommendation 4.2. The committee comprises a majority of independent directors and the chair of the committee is also independent. 4.2. Composition The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. During the 2010/11 financial year, the Audit and Risk Committee met three times. The CEO is invited to attend each scheduled meeting of the Audit and Risk Committee and a standing invitation is issued to the external auditors. The Board has delegated the responsibility for compliance with the ASX’s disclosure requirements and for shareholder communication to the Company Secretary. The Company Secretary uses information provided by the ASX and consults Premier’s professional legal advisers in ensuring compliance with Premier’s obligations with respect to the ASX Listing Rules and Corporate Governance Principles. Premier communicates with shareholders through announcements to the ASX (which are also posted on Premier’s website), general meetings of shareholders, the annual report, and through written and electronic correspondence from the Company Secretary from time to time. Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend meetings of the Audit and Risk Committee. The Audit and Risk Committee may request management and/or others to provide such input and advice as required. The Board has received a written statement from the CEO of Premier Retail and Company Secretary that Premier’s financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results and in accordance with relevant accounting standards. The Company Secretary is accountable directly to the Board and provides support to the Board and its committees on all matters to do with the proper functioning of the Board. The role of the Company Secretary includes: 5 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE advising the Board and its committees on governance matters;   coordinating the timely completion and dispatch of board and committee papers; During the 2010/11 financial year, Premier maintained a policy to ensure that it complied with its continuous disclosure obligations under the ASX Listing Rules, the ASX Recommendations and the Corporations Act, and to ensure that all investors have equal and timely access to material and price sensitive information. This policy is contained in Premier’s Board Charter which is summarised on the Company’s website. ensuring that the business at board and committee meetings are accurately captured in the minutes; and  6 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS helping to organise and facilitate the induction of directors.  1.2 Evaluating the Performance of Senior Executives Each director is able to communicate directly with the Company Secretary. The decision to appoint or remove the Company Secretary is made by the Board. Premier endeavours to encourage and promote effective communication with its shareholders, as prescribed by ASX Recommendation 6.1. Premier’s Constitution sets out the procedures to be followed regarding: • the convening of meetings; • the form and requirements of the notice; • the chairperson and quorums; and • the voting procedures, proxies, representations and polls. Premier’s strategy is to ensure that shareholders, regulators and the wider investment community are informed of all major developments affecting Premier in a timely and effective manner. Information is communicated in a number of ways including: Until such time that a CEO is appointed, the Board will continue to delegate the responsibilities allocated to the CEO to other persons, such as: the Chief Executive Officer of Premier Retail, Mark McInnes; the Chairman;   external service providers including, without limitation, Century Plaza Trading Pty Ltd; and   • annual and half‑yearly reports; the existing management team at Just Group. • market disclosures in accordance with the continuous disclosure protocol; • updates on operations and developments; • announcements on Premier’s website; and • market briefings and presentations at general meetings. Shareholders are encouraged to attend and participate at general meetings. To facilitate this, meetings are held during normal business hours and at a place convenient for the greatest possible number of shareholders to attend. The full text of notices and accompanying materials are included on Premier’s website. Information is presented in a clear and concise manner designed to provide shareholders and the market with full and accurate information. Annual Report 2014 100 CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) 1.2 Evaluating the Performance of Senior Executives (continued) Under the Premier Board Charter, the CEO’s responsibilities are: The committee consists of three members, who as at the date of this report are: the day‑to‑day leadership and management of Premier;   Name David Crean  Frank Jones  Gary Weiss managing and overseeing the interfaces between Premier and the public and to act as the principal representative for Premier; and assisting the Board with the strategy and long-term direction of Premier; Position in Committee Chairperson Non‑Executive Director Non‑Executive Director to report annually to the Board on succession planning and management development. Date Appointed 1 August 2010 7 September 1995 1 August 2010 As such, these responsibilities have been delegated to the above people by the Board of Premier. Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. The performance of senior executives is reviewed against specific measurable and qualitative indicators, which include: 4.2. Composition  financial measure of the company’s performance; The composition of the Audit and Risk Committee satisfies ASX Recommendation 4.2. The committee comprises a majority of independent directors and the chair of the committee is also independent. achievement of strategic objectives; and   The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. During the 2010/11 financial year, the Audit and Risk Committee met three times. achievement of key operational targets. The CEO of Premier Retail and the Board of the relevant subsidiary are responsible for the review of the performance of senior executives, in line with their respective key performance indicators. The CEO is invited to attend each scheduled meeting of the Audit and Risk Committee and a standing invitation is issued to the external auditors. The Group has an induction process for all senior executives and directors. All new directors are provided with the key policies and procedures affecting the Group. Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend meetings of the Audit and Risk Committee. The Audit and Risk Committee may request management and/or others to provide such input and advice as required. 1.3 Performance Assessments 5 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE The Board has received a written statement from the CEO of Premier Retail and Company Secretary that Premier’s The Board continuously evaluates the performance of those carrying out the responsibilities of CEO in financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results accordance with the Board Charter. The evaluation is based on criteria that include the performance of and in accordance with relevant accounting standards. the business, the accomplishment of long-term strategic objectives and other non-quantitative objectives established at the beginning of each year. A performance evaluation was undertaken on senior executives during the 2013/14 financial year in accordance with the process disclosed above. During the 2010/11 financial year, Premier maintained a policy to ensure that it complied with its continuous disclosure obligations under the ASX Listing Rules, the ASX Recommendations and the Corporations Act, and to ensure that all investors have equal and timely access to material and price sensitive information. This policy is contained in Premier’s Board Charter which is summarised on the Company’s website. PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE 6 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS The Board of Premier comprises ten directors. The skills, experience and expertise relevant to the position of director held by each director in office at the date of this report are included in the Directors’ Report. The members of the Board and their positions as at the date of this report are: 2 Director Appointed Non-Executive Timothy Antonie Solomon Lew (Chairman) March 2008 Premier endeavours to encourage and promote effective communication with its shareholders, as prescribed by ASX Recommendation 6.1. Premier’s Constitution sets out the procedures to be followed regarding: • the convening of meetings; • the form and requirements of the notice; David Crean • the chairperson and quorums; and Lindsay Fox • the voting procedures, proxies, representations and polls. Premier’s strategy is to ensure that shareholders, regulators and the wider investment community are informed of all major developments affecting Premier in a timely and effective manner. Information is communicated in a number of ways including: December 2011 December 2009 December 2009 Henry Lanzer Sally Herman Independent Frank Jones March 2008 April 1987 April 1987 Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No Mark McInnes December 2012 No • annual and half‑yearly reports; Michael McLeod August 2002 Yes Gary Weiss • market disclosures in accordance with the continuous disclosure protocol; • updates on operations and developments; • announcements on Premier’s website; and • market briefings and presentations at general meetings. March 1994 Yes No No Yes Shareholders are encouraged to attend and participate at general meetings. To facilitate this, meetings are held during normal business hours and at a place convenient for the greatest possible number of shareholders to attend. The full text of notices and accompanying materials are included on Premier’s website. Information is presented in a clear and concise manner designed to provide shareholders and the market with full and accurate information. 101 Premier Investments Limited 1.2 Evaluating the Performance of Senior Executives (continued) Under the Premier Board Charter, the CEO’s responsibilities are: the day‑to‑day leadership and management of Premier;        assisting the Board with the strategy and long-term direction of Premier; managing and overseeing the interfaces between Premier and the public and to act as the principal representative for Premier; and to report annually to the Board on succession planning and management development. As such, these responsibilities have been delegated to the above people by the Board of Premier. The performance of senior executives is reviewed against specific measurable and qualitative indicators, which include: financial measure of the company’s performance; achievement of strategic objectives; and achievement of key operational targets. The CEO of Premier Retail and the Board of the relevant subsidiary are responsible for the review of the performance of senior executives, in line with their respective key performance indicators. The Group has an induction process for all senior executives and directors. All new directors are provided with the key policies and procedures affecting the Group. 1.3 Performance Assessments The Board continuously evaluates the performance of those carrying out the responsibilities of CEO in accordance with the Board Charter. The evaluation is based on criteria that include the performance of the business, the accomplishment of long-term strategic objectives and other non-quantitative objectives established at the beginning of each year. A performance evaluation was undertaken on senior executives during the 2013/14 financial year in accordance with the process disclosed above. 2 PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE The Board of Premier comprises ten directors. The skills, experience and expertise relevant to the position of director held by each director in office at the date of this report are included in the Directors’ Report. The members of the Board and their positions as at the date of this report are: Director Appointed Non-Executive Independent Solomon Lew (Chairman) March 2008 Timothy Antonie David Crean Lindsay Fox Sally Herman Frank Jones Henry Lanzer Mark McInnes Michael McLeod Gary Weiss December 2009 December 2009 April 1987 December 2011 April 1987 March 2008 December 2012 August 2002 March 1994 Yes Yes Yes Yes Yes Yes Yes No Yes Yes No Yes Yes Yes Yes No No No No Yes CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) 2 PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE (CONTINUED) Mr Frank Jones will retire as non-executive director of Premier at the conclusion of the 2015 financial year. The committee consists of three members, who as at the date of this report are: Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report on page 2. 2.1 Name David Crean Director Independence Date Appointed 1 August 2010 Position in Committee Chairperson Non‑Executive Director Non‑Executive Director Gary Weiss Frank Jones 7 September 1995 ASX Recommendation 2.1 recommends that the Board comprise a majority of independent directors. Premier has adopted the definition of independence set out in the commentary to ASX Recommendation 2.1 as disclosed in the Director Independence Policy on Premier’s website. Directors are assessed as independent where they are independent of management and free of any business or other relationship that could materially interfere, or be perceived to materially interfere, with the exercise of their unfettered and independent judgement. Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. 1 August 2010 4.2. Composition The composition of the Audit and Risk Committee satisfies ASX Recommendation 4.2. The committee comprises a majority of independent directors and the chair of the committee is also independent. During the 2013/14 financial year, the Board considered that 5 of its 10 directors were independent. In previous years, Mr Fox has not been considered an independent director due to his previous substantial shareholding in Premier. However, Mr Fox and companies associated with Mr Fox are no longer substantial shareholders of Premier, and since sufficient time has passed since Mr Fox ceased to be a substantial shareholder, the Board elected to consider Mr Fox as an independent director during this financial year. The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. During the 2010/11 financial year, the Audit and Risk Committee met three times. The CEO is invited to attend each scheduled meeting of the Audit and Risk Committee and a standing invitation is issued to the external auditors. Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend meetings of the Audit and Risk Committee. The Audit and Risk Committee may request management and/or others to provide such input and advice as required. The Board is aware of ASX Recommendation 2.1 and is confident that proper processes are in place, as outlined in its Board Charter, to address needs and expectations with respect to decision-making and the management of conflicts of interest. The directors on the Board of Premier all add significant value and expertise in a variety of fields. Given Premier’s unique circumstances and history, a majority independent Board is not the most appropriate means for achieving Premier’s strategic objectives and promoting shareholder value. Regardless of whether directors are defined as independent, all directors are expected to bring independent judgements and views to board deliberations. The Board has received a written statement from the CEO of Premier Retail and Company Secretary that Premier’s financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results and in accordance with relevant accounting standards. 5 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE Premier permits individual directors to engage separate independent counsel or advisors at the expense of the Group in appropriate circumstances, with the approval of the Chairman or by resolution of the Board. During the 2010/11 financial year, Premier maintained a policy to ensure that it complied with its continuous disclosure obligations under the ASX Listing Rules, the ASX Recommendations and the Corporations Act, and to ensure that all investors have equal and timely access to material and price sensitive information. This policy is contained in Premier’s Board Charter which is summarised on the Company’s website. Chairman of the Board 2.2 6 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS Mr Lew is Chairman of the Board, which does not comply with ASX Recommendation 2.2 that the chair should be an independent director. The Board believes that Mr Lew’s position as a director of Premier’s major shareholder, Century Plaza Investments Pty Ltd, does not prevent him from carrying out his responsibilities as Chairman of the Board. Given Mr Lew’s industry experience, skills, expertise and reputation, and his relationship with Premier as its founder, the Board feels that Mr Lew adds the most value to the Board as its Chairman and that he is the most appropriate person for the position. Premier endeavours to encourage and promote effective communication with its shareholders, as prescribed by ASX Recommendation 6.1. Premier’s Constitution sets out the procedures to be followed regarding: • the convening of meetings; • the form and requirements of the notice; • the chairperson and quorums; and • the voting procedures, proxies, representations and polls. Premier’s strategy is to ensure that shareholders, regulators and the wider investment community are informed of all major developments affecting Premier in a timely and effective manner. Information is communicated in a number of ways including: In October 2014, the Board appointed Mr Antonie as lead independent director. The Board considers the appointment of a lead independent director as an important step in providing support to the Chairman in facilitating effective contributions of all directors, and to promote constructive relations between directors, and between the Board and management. • annual and half‑yearly reports; • market disclosures in accordance with the continuous disclosure protocol; • updates on operations and developments; • announcements on Premier’s website; and • market briefings and presentations at general meetings. Shareholders are encouraged to attend and participate at general meetings. To facilitate this, meetings are held during normal business hours and at a place convenient for the greatest possible number of shareholders to attend. The full text of notices and accompanying materials are included on Premier’s website. Information is presented in a clear and concise manner designed to provide shareholders and the market with full and accurate information. Annual Report 2014 102 CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) 2.3 Role of Chairman and CEO The committee consists of three members, who as at the date of this report are: As evidenced from its Board Charter, Premier’s Board supports the separation of the role of the Chairman from that of the Chief Executive Officer (“CEO”) in accordance with ASX Recommendation 2.3. The Board Charter provides that the Chairman must be a non-executive director, and defines the key roles of the Chairman as: Name David Crean  Frank Jones   Gary Weiss Date Appointed managing the Board effectively; 1 August 2010 providing leadership to the Board; and 7 September 1995 interfacing with the CEO. 1 August 2010 Position in Committee Chairperson Non‑Executive Director Non‑Executive Director 2.4 Nomination Committee Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. During the 2013/14 year, Premier maintained a nomination committee in accordance with ASX Recommendation 2.4. 4.2. Composition The composition of the Audit and Risk Committee satisfies ASX Recommendation 4.2. The committee comprises a majority of independent directors and the chair of the committee is also independent. The Remuneration and Nomination Committee supports and advises the Board on the nomination policies and practices of Premier. The roles and responsibilities of the Remuneration and Nomination Committee are set out in Premier’s Board Charter, a summary of which is provided on Premier’s website. The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. During the 2010/11 financial year, the Audit and Risk Committee met three times. The CEO is invited to attend each scheduled meeting of the Audit and Risk Committee and a standing invitation is issued to the external auditors. The Remuneration and Nomination Committee consists of the following three members: Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend meetings of the Audit and Risk Committee. The Audit and Risk Committee may request management and/or others to provide such input and advice as required. Name Henry Lanzer Solomon Lew Gary Weiss Appointed September 2008 September 2008 September 2008 Position in Committee Chairperson Non-Executive Director Non-Executive Director The Board has received a written statement from the CEO of Premier Retail and Company Secretary that Premier’s financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results and in accordance with relevant accounting standards. All of the members of the committee are non-executive directors, one of whom is an independent director. 5 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE The nomination purposes of the committee include:  During the 2010/11 financial year, Premier maintained a policy to ensure that it complied with its continuous disclosure reviewing and providing recommendations of plans of succession for executives, non‑ obligations under the ASX Listing Rules, the ASX Recommendations and the Corporations Act, and to ensure that all investors have equal and timely access to material and price sensitive information. This policy is contained in Premier’s executive directors and Premier’s Chief Executive Officer (when appointed); Board Charter which is summarised on the Company’s website. 6 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS establishing and maintaining a formal procedure for the selection and appointment of directors to the Board;    undertaking regular reviews of the structure and size of the Board to ensure that the Board continues to have a mix of skills and experience necessary to conduct Premier’s business and to make any consequential recommendations to the Board; and Premier endeavours to encourage and promote effective communication with its shareholders, as prescribed by ASX Recommendation 6.1. Premier’s Constitution sets out the procedures to be followed regarding: • the convening of meetings; • the form and requirements of the notice; • the chairperson and quorums; and • the voting procedures, proxies, representations and polls. Premier’s strategy is to ensure that shareholders, regulators and the wider investment community are informed of all major developments affecting Premier in a timely and effective manner. Information is communicated in a number of ways including: identifying, assessing the suitability of, and investigating the backgrounds of, individuals qualified to become directors and making recommendations to the Board about potential nominees. The Remuneration and Nomination Committee intends to maintain the diversity of knowledge, skills and experience on the Premier Board across the areas of retailing and manufacturing, accounting, finance, transport, government and law. • annual and half‑yearly reports; The Remuneration and Nomination Committee met twice during the year. The meeting was attended by all three members. • market disclosures in accordance with the continuous disclosure protocol; • updates on operations and developments; • announcements on Premier’s website; and • market briefings and presentations at general meetings. Shareholders are encouraged to attend and participate at general meetings. To facilitate this, meetings are held during normal business hours and at a place convenient for the greatest possible number of shareholders to attend. The full text of notices and accompanying materials are included on Premier’s website. Information is presented in a clear and concise manner designed to provide shareholders and the market with full and accurate information. 103 Premier Investments Limited CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) 2.3 Role of Chairman and CEO 2.5 Term of Office and Performance Evaluation Premier’s Constitution specifies that all directors must retire from the office at no later than the third Annual General Meeting following their last election. Where eligible, a director may stand for re- The committee consists of three members, who as at the date of this report are: election. The Board shall undertake regular performance evaluation of itself that:  Name  David Crean Frank Jones  Gary Weiss  evaluates the effectiveness of the Board as a whole, and that of individual directors; Date Appointed 1 August 2010 compares the performance of the Board with the requirements of its Charter; Position in Committee Chairperson Non‑Executive Director Non‑Executive Director effects any improvements to the Board Charter deemed necessary or desirable. sets the goals and objectives of the Board for the upcoming year; and 7 September 1995 1 August 2010 The performance evaluation shall be conducted in such a manner as the Board deems appropriate and may involve the use of an external consultant. Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. 2.6 4.2. Composition Appointment of New Directors and Re-Election of Directors The composition of the Audit and Risk Committee satisfies ASX Recommendation 4.2. The committee comprises a majority of independent directors and the chair of the committee is also independent. The responsibilities of Premier’s Remuneration and Nomination Committee include advising the Board on: The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. During the 2010/11 financial year, the Audit and Risk Committee met three times. criteria for appointment and identification of candidates for appointment as a director;   The CEO is invited to attend each scheduled meeting of the Audit and Risk Committee and a standing invitation is issued to the external auditors. the candidates it considers appropriate for appointment as a director; and the re-appointment of any non-executive director at the conclusion of their term of office.  Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend meetings of the Audit and Risk Committee. The Audit and Risk Committee may request management and/or others to provide such input and advice as required. PRINCIPLE 3 – PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING Code of Conduct 3 3.1 5 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE The Board has received a written statement from the CEO of Premier Retail and Company Secretary that Premier’s financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results and in accordance with relevant accounting standards. The Board insists on the highest ethical standards from all officers and employees of Premier and is vigilant to ensure appropriate corporate professional conduct at all times. As such, the Board has adopted a Code of Conduct to provide a set of guiding principles which are to be observed by all directors, senior executives and employees of Premier. The Code of Conduct is based on five principles that define the responsibility of Premier and all directors and employees. These principles require that all directors and employees: During the 2010/11 financial year, Premier maintained a policy to ensure that it complied with its continuous disclosure obligations under the ASX Listing Rules, the ASX Recommendations and the Corporations Act, and to ensure that all investors have equal and timely access to material and price sensitive information. This policy is contained in Premier’s Board Charter which is summarised on the Company’s website. foster a culture in which all stakeholders are treated with respect;   act to ensure there is no conflict of interest between work and private affairs;        As evidenced from its Board Charter, Premier’s Board supports the separation of the role of the Chairman from that of the Chief Executive Officer (“CEO”) in accordance with ASX Recommendation 2.3. The Board Charter provides that the Chairman must be a non-executive director, and defines the key roles of the Chairman as: managing the Board effectively; providing leadership to the Board; and interfacing with the CEO. 2.4 Nomination Committee Recommendation 2.4. During the 2013/14 year, Premier maintained a nomination committee in accordance with ASX The Remuneration and Nomination Committee supports and advises the Board on the nomination policies and practices of Premier. The roles and responsibilities of the Remuneration and Nomination Committee are set out in Premier’s Board Charter, a summary of which is provided on Premier’s website. The Remuneration and Nomination Committee consists of the following three members: Name Henry Lanzer Solomon Lew Gary Weiss Appointed September 2008 September 2008 September 2008 Position in Committee Chairperson Non-Executive Director Non-Executive Director All of the members of the committee are non-executive directors, one of whom is an independent director. The nomination purposes of the committee include: reviewing and providing recommendations of plans of succession for executives, non‑ executive directors and Premier’s Chief Executive Officer (when appointed); establishing and maintaining a formal procedure for the selection and appointment of directors to the Board; undertaking regular reviews of the structure and size of the Board to ensure that the Board continues to have a mix of skills and experience necessary to conduct Premier’s business and to make any consequential recommendations to the Board; and identifying, assessing the suitability of, and investigating the backgrounds of, individuals qualified to become directors and making recommendations to the Board about potential nominees. The Remuneration and Nomination Committee intends to maintain the diversity of knowledge, skills and experience on the Premier Board across the areas of retailing and manufacturing, accounting, finance, transport, government and law. The Remuneration and Nomination Committee met twice during the year. The meeting was attended by all three members.   are honest, legal, fair and trustworthy in dealings and relationships; and develop a culture where professional integrity and ethical behaviour is valued in rewarded. Premier endeavours to encourage and promote effective communication with its shareholders, as prescribed by ASX Recommendation 6.1. Premier’s Constitution sets out the procedures to be followed regarding: • the convening of meetings; • the form and requirements of the notice; • the chairperson and quorums; and • the voting procedures, proxies, representations and polls. Premier’s strategy is to ensure that shareholders, regulators and the wider investment community are informed of all major developments affecting Premier in a timely and effective manner. Information is communicated in a number of ways including: Premier is committed to the safe and ethical manufacture, sourcing and supply of goods and services. As such, Premier is committed to sourcing merchandise that is produced according to the Group’s strict principles of safe working conditions, where human rights are respected and people have free right of association. Premier will only deal with vendors who at least provide the working conditions and benefits stipulated by law and whose workers (employees and contractors) are treated and compensated fairly and not exposed to physical harm. Also refer to pages 9 – 10 of the Annual Report for the group’s Ethical Sourcing Statement. • annual and half‑yearly reports; 6 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS provide a safe workplace for employees and visitors;  A copy of the Code of Conduct is provided to all new directors and employees upon joining Premier. • market disclosures in accordance with the continuous disclosure protocol; • updates on operations and developments; • announcements on Premier’s website; and • market briefings and presentations at general meetings. Shareholders are encouraged to attend and participate at general meetings. To facilitate this, meetings are held during normal business hours and at a place convenient for the greatest possible number of shareholders to attend. The full text of notices and accompanying materials are included on Premier’s website. Information is presented in a clear and concise manner designed to provide shareholders and the market with full and accurate information. Annual Report 2014 104 CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) 3.1 Code of Conduct (continued) The committee consists of three members, who as at the date of this report are: Additionally, standards by which all officers, employees and directors are expected to act are contained in the Board Charter and in Premier’s share trading policy. These include standards and expectations relating to:  Name David Crean  insider trading and employee security trading; Date Appointed 1 August 2010 conflicts of interest; Frank Jones  Gary Weiss  confidentiality; and 7 September 1995 privacy. 1 August 2010 Position in Committee Chairperson Non‑Executive Director Non‑Executive Director Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. Under the Group’s share trading policy, an officer or executive must not trade in securities of the Company at any time while in possession of unpublished, price-sensitive information in relation to those securities. Before commencing to trade, an executive or officer must first obtain the approval of the Company Secretary or the Chairman. 4.2. Composition The composition of the Audit and Risk Committee satisfies ASX Recommendation 4.2. The committee comprises a majority of independent directors and the chair of the committee is also independent. Premier’s share trading policy permits key management personnel and their associates to trade in the Company’s securities during the following window periods: The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. During the 2010/11 financial year, the Audit and Risk Committee met three times. within 6 weeks after the release of the Company’s half year results to the ASX;  The CEO is invited to attend each scheduled meeting of the Audit and Risk Committee and a standing invitation is issued within 6 weeks after the release of the Company’s preliminary final report to the ASX; and to the external auditors.   the rights trading period when the Company has issued a prospectus for those rights. Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend meetings of the Audit and Risk Committee. The As required by the ASX listing rules, the Company notifies the ASX of any transaction conducted by Audit and Risk Committee may request management and/or others to provide such input and advice as required. directors in the securities of the Company. 5 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE The Board has received a written statement from the CEO of Premier Retail and Company Secretary that Premier’s Consistent with the Corporations Act, Premier’s conflict of interest policy requires that where an item of financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results business is proposed to be discussed at any meeting of directors, and discussion of that matter may and in accordance with relevant accounting standards. give rise to a conflict of interest on the part of a director, that director must not be present while the matter is being considered and must not vote on that matter (unless the other directors pass a During the 2010/11 financial year, Premier maintained a policy to ensure that it complied with its continuous disclosure resolution permitting that director to be present or vote). The Board Charter permits directors who may obligations under the ASX Listing Rules, the ASX Recommendations and the Corporations Act, and to ensure that all be in a position of conflict to request that the meeting be postponed or temporarily adjourned to enable investors have equal and timely access to material and price sensitive information. This policy is contained in Premier’s him or her to seek legal advice on whether he or she can be present while the matter in question is Board Charter which is summarised on the Company’s website. being considered and vote on the matter in question. 3.2 Diversity Policy 6 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS ASX Recommendation 3.1 recommends that a company disclose its code of conduct or a summary of that code. Premier has implemented a formal code of conduct and this code, as well as Premier’s share trading policy, is available on Premier’s website. Premier endeavours to encourage and promote effective communication with its shareholders, as prescribed by ASX Recommendation 6.1. Premier’s Constitution sets out the procedures to be followed regarding: • the convening of meetings; • the form and requirements of the notice; • the chairperson and quorums; and • the voting procedures, proxies, representations and polls. Premier’s strategy is to ensure that shareholders, regulators and the wider investment community are informed of all major developments affecting Premier in a timely and effective manner. Information is communicated in a number of ways including: The Group is an equal opportunity employer, and recognises the value contributed to the organisation by employing people with varying skills, cultural backgrounds, gender, ethnicity and experience. Premier believes its diverse workforce is the key to its continued growth, improved productivity and performance. • annual and half‑yearly reports; We actively value and embrace the diversity of our employees and are committed to creating an inclusive workplace where everyone is treated equally and fairly, and where discrimination, harassment and inequity are not tolerated. We aim to maintain appropriate standards of behaviour throughout the organisation, to create a safe workplace free from harassment and discrimination of any kind, to treat all team members fairly and equitably, and to evaluate employees based on their performance, skills and abilities. • market disclosures in accordance with the continuous disclosure protocol; • updates on operations and developments; • announcements on Premier’s website; and • market briefings and presentations at general meetings. Shareholders are encouraged to attend and participate at general meetings. To facilitate this, meetings are held during normal business hours and at a place convenient for the greatest possible number of shareholders to attend. The full text of notices and accompanying materials are included on Premier’s website. Information is presented in a clear and concise manner designed to provide shareholders and the market with full and accurate information. 105 Premier Investments Limited        Additionally, standards by which all officers, employees and directors are expected to act are contained in the Board Charter and in Premier’s share trading policy. These include standards and expectations relating to: insider trading and employee security trading; conflicts of interest; confidentiality; and privacy. Under the Group’s share trading policy, an officer or executive must not trade in securities of the Company at any time while in possession of unpublished, price-sensitive information in relation to those securities. Before commencing to trade, an executive or officer must first obtain the approval of the Company Secretary or the Chairman. Premier’s share trading policy permits key management personnel and their associates to trade in the Company’s securities during the following window periods: within 6 weeks after the release of the Company’s half year results to the ASX; within 6 weeks after the release of the Company’s preliminary final report to the ASX; and the rights trading period when the Company has issued a prospectus for those rights. As required by the ASX listing rules, the Company notifies the ASX of any transaction conducted by directors in the securities of the Company. Consistent with the Corporations Act, Premier’s conflict of interest policy requires that where an item of business is proposed to be discussed at any meeting of directors, and discussion of that matter may give rise to a conflict of interest on the part of a director, that director must not be present while the matter is being considered and must not vote on that matter (unless the other directors pass a resolution permitting that director to be present or vote). The Board Charter permits directors who may be in a position of conflict to request that the meeting be postponed or temporarily adjourned to enable him or her to seek legal advice on whether he or she can be present while the matter in question is being considered and vote on the matter in question. ASX Recommendation 3.1 recommends that a company disclose its code of conduct or a summary of that code. Premier has implemented a formal code of conduct and this code, as well as Premier’s share trading policy, is available on Premier’s website. 3.2 Diversity Policy The Group is an equal opportunity employer, and recognises the value contributed to the organisation by employing people with varying skills, cultural backgrounds, gender, ethnicity and experience. Premier believes its diverse workforce is the key to its continued growth, improved productivity and performance. We actively value and embrace the diversity of our employees and are committed to creating an inclusive workplace where everyone is treated equally and fairly, and where discrimination, harassment and inequity are not tolerated. We aim to maintain appropriate standards of behaviour throughout the organisation, to create a safe workplace free from harassment and discrimination of any kind, to treat all team members fairly and equitably, and to evaluate employees based on their performance, skills and abilities. CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) 3.1 Code of Conduct (continued) 3.2 Diversity Policy (continued) The following steps have been taken to achieve the Board’s diversity objectives:  The committee consists of three members, who as at the date of this report are: the appointment of Ms Sally Herman in the 2011/12 financial year as an independent non- executive director; and 4 4.1  Name David Crean the appointment of Ms Colette Garnsey in the 2012/13 financial year as the Core Brand Director, Premier Retail. Date Appointed 1 August 2010 Frank Jones At year end, women represented 10% of Premier’s board, 41% of senior executives, 69% at senior management level and 91% of the Groups’ workforce. 1 August 2010 Gary Weiss 7 September 1995 Position in Committee Chairperson Non‑Executive Director Non‑Executive Director In accordance with the requirements of the Workplace Gender Equality Act 2012, a subsidiary company of Premier Investments Limited, Just Group Limited lodged its annual compliance report with the Workplace Gender Equality Agency. Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. 4.2. Composition The composition of the Audit and Risk Committee satisfies ASX Recommendation 4.2. The committee comprises a majority of independent directors and the chair of the committee is also independent. The Board is aware of ASX Recommendations 3.2 and 3.3. Given the high proportion of senior executives, senior managers and employees of the Group that are women, the Board has determined not to impose measurable objectives relating to diversity at this stage. The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. During the 2010/11 financial year, the Audit and Risk Committee met three times. PRINCIPLE 4 – SAFEGUARD INTEGRITY IN FINANCIAL REPORTING The CEO is invited to attend each scheduled meeting of the Audit and Risk Committee and a standing invitation is issued Audit Committee to the external auditors. Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend meetings of the Audit and Risk Committee. The Audit and Risk Committee may request management and/or others to provide such input and advice as required. In accordance with ASX Recommendation 4.1, the Board has established an Audit and Risk Committee. This committee’s role and responsibilities, as well as composition, structure and membership requirements, are set out in a formal charter approved by the Board, in accordance with ASX Recommendation 4.3. A summary of this Charter can be found on Premier’s website. The Board has received a written statement from the CEO of Premier Retail and Company Secretary that Premier’s financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results and in accordance with relevant accounting standards. Premier’s Audit and Risk Committee supports and advises the Board in fulfilling its corporate governance and oversight responsibilities in relation to Premier’s financial reporting, internal control structures, ethical standards and risk management framework and systems. 5 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE The Audit and Risk Committee’s prime responsibilities include:  During the 2010/11 financial year, Premier maintained a policy to ensure that it complied with its continuous disclosure obligations under the ASX Listing Rules, the ASX Recommendations and the Corporations Act, and to ensure that all investors have equal and timely access to material and price sensitive information. This policy is contained in Premier’s Board Charter which is summarised on the Company’s website. reviewing the appropriateness of the accounting policies and principles, any changes to those policies and principles and the methods of applying them to ensure that they are in accordance with Premier’s stated financial reporting framework;  6 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS reviewing the nomination, performance, independence and competence of the external auditor;   meeting periodically with key management, external auditors and compliance staff to understand Premier’s control environment; and Premier endeavours to encourage and promote effective communication with its shareholders, as prescribed by ASX Recommendation 6.1. Premier’s Constitution sets out the procedures to be followed regarding: • the convening of meetings; • the form and requirements of the notice; • the chairperson and quorums; and • the voting procedures, proxies, representations and polls. Premier’s strategy is to ensure that shareholders, regulators and the wider investment community are informed of all major developments affecting Premier in a timely and effective manner. Information is communicated in a number of ways including: examining and evaluating the effectiveness of the internal control system with management and external auditors. The composition of the Audit and Risk Committee satisfies ASX Recommendation 4.2. The committee comprises a majority of independent directors, consists of only non-executive directors and the chair of the committee is also independent. Composition • annual and half‑yearly reports; 4.2 • market disclosures in accordance with the continuous disclosure protocol; • updates on operations and developments; • announcements on Premier’s website; and • market briefings and presentations at general meetings. Shareholders are encouraged to attend and participate at general meetings. To facilitate this, meetings are held during normal business hours and at a place convenient for the greatest possible number of shareholders to attend. The full text of notices and accompanying materials are included on Premier’s website. Information is presented in a clear and concise manner designed to provide shareholders and the market with full and accurate information. Annual Report 2014 106 CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) 4.2 Composition (continued) The Audit and Risk Committee Charter requires the committee to be structured so that: The committee consists of three members, who as at the date of this report are: all members are financially literate, that is, are able to read and understand financial statements;   Name David Crean Frank Jones  Gary Weiss at least one member has financial expertise, that is, is an accountant or financial professional with experience of financial and accounting matters; and Date Appointed 1 August 2010 some members have an understanding of the industry in which the Group operates. 7 September 1995 Position in Committee Chairperson Non‑Executive Director Non‑Executive Director The committee consists of three members: 1 August 2010 Name Appointed Position in Committee Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. August 2010 David Crean Chairperson September 1995 (retired October 2014) Non-Executive Director 4.2. Composition Frank Jones Gary Weiss The composition of the Audit and Risk Committee satisfies ASX Recommendation 4.2. The committee comprises a majority of independent directors and the chair of the committee is also independent. Non-Executive Director Timothy Antonie October 2014 August 2010 (retired October 2014) Non-Executive Director Sally Herman October 2014 Non-Executive Director The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. During the 2010/11 financial year, the Audit and Risk Committee met three times. The CEO is invited to attend each scheduled meeting of the Audit and Risk Committee and a standing invitation is issued to the external auditors. The Audit and Risk Committee met on four occasions during the year. Each of the meetings was attended by all three members of the Committee. Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend meetings of the Audit and Risk Committee. The Audit and Risk Committee may request management and/or others to provide such input and advice as required. The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. The The Board has received a written statement from the CEO of Premier Retail and Company Secretary that Premier’s CEO (when appointed) will have a standing invitation to attend each scheduled meeting of the Audit financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results and Risk Committee and a standing invitation has also been extended to Premier’s external auditors. and in accordance with relevant accounting standards. 5 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend During the 2010/11 financial year, Premier maintained a policy to ensure that it complied with its continuous disclosure meetings of the Audit and Risk Committee. The Audit and Risk Committee may request management obligations under the ASX Listing Rules, the ASX Recommendations and the Corporations Act, and to ensure that all and/or others to provide such input and advice as required. investors have equal and timely access to material and price sensitive information. This policy is contained in Premier’s Board Charter which is summarised on the Company’s website. External Audit 4.3 6 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS Under the Audit and Risk Committee Charter, the committee is responsible for establishing procedures and making Board recommendations regarding external auditors, monitoring the effectiveness and independence of the external auditor, reviewing the scope of the external audit, discussing with the external auditor any significant disagreements with management, and meeting with the external auditor without management present at least twice a year. Premier endeavours to encourage and promote effective communication with its shareholders, as prescribed by ASX Recommendation 6.1. Premier’s Constitution sets out the procedures to be followed regarding: • the convening of meetings; • the form and requirements of the notice; In accordance with the Corporations Act, the external audit engagement partner is required to rotate at • the chairperson and quorums; and least once every five financial years. Ernst & Young was appointed as Premier’s external auditor in • the voting procedures, proxies, representations and polls. May 2002. The external auditor attends Premier’s annual general meetings and is available to respond Premier’s strategy is to ensure that shareholders, regulators and the wider investment community are informed of all major to questions from Premier’s members about its independence as auditor, the preparation and content developments affecting Premier in a timely and effective manner. Information is communicated in a number of ways of the Auditor’s Report and Premier’s accounting policies adopted in relation to the financial including: statements. • annual and half‑yearly reports; • market disclosures in accordance with the continuous disclosure protocol; • updates on operations and developments; • announcements on Premier’s website; and • market briefings and presentations at general meetings. Shareholders are encouraged to attend and participate at general meetings. To facilitate this, meetings are held during normal business hours and at a place convenient for the greatest possible number of shareholders to attend. The full text of notices and accompanying materials are included on Premier’s website. Information is presented in a clear and concise manner designed to provide shareholders and the market with full and accurate information. 107 Premier Investments Limited CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) 4.2 Composition (continued) 5 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE The Audit and Risk Committee Charter requires the committee to be structured so that:    all members are financially literate, that is, are able to read and understand financial statements; at least one member has financial expertise, that is, is an accountant or financial professional with experience of financial and accounting matters; and some members have an understanding of the industry in which the Group operates. The committee consists of three members: Name David Crean Frank Jones Gary Weiss Appointed August 2010 Position in Committee Chairperson September 1995 (retired October 2014) Non-Executive Director August 2010 (retired October 2014) Non-Executive Director Timothy Antonie October 2014 Sally Herman October 2014 Non-Executive Director Non-Executive Director The Audit and Risk Committee met on four occasions during the year. Each of the meetings was attended by all three members of the Committee. Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. The CEO (when appointed) will have a standing invitation to attend each scheduled meeting of the Audit and Risk Committee and a standing invitation has also been extended to Premier’s external auditors. Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend meetings of the Audit and Risk Committee. The Audit and Risk Committee may request management and/or others to provide such input and advice as required. 4.3 External Audit Under the Audit and Risk Committee Charter, the committee is responsible for establishing procedures and making Board recommendations regarding external auditors, monitoring the effectiveness and independence of the external auditor, reviewing the scope of the external audit, discussing with the external auditor any significant disagreements with management, and meeting with the external auditor without management present at least twice a year. In accordance with the Corporations Act, the external audit engagement partner is required to rotate at least once every five financial years. Ernst & Young was appointed as Premier’s external auditor in May 2002. The external auditor attends Premier’s annual general meetings and is available to respond to questions from Premier’s members about its independence as auditor, the preparation and content of the Auditor’s Report and Premier’s accounting policies adopted in relation to the financial statements. The committee consists of three members, who as at the date of this report are: During the 2013/14 financial year, Premier maintained a policy to ensure that it complied with its continuous disclosure obligations under the ASX Listing Rules, the ASX Recommendations and the Corporations Act, and to ensure that all investors have equal and timely access to material and price sensitive information. A copy of Premier’s Continuous Disclosure Policy has been disclosed on Premier’s website. Name David Crean Date Appointed 1 August 2010 Frank Jones Under this policy, the Board will, as soon as it becomes aware of information concerning Premier that would be likely to have a material effect on the price or value of Premier’s securities, ensure that information is notified to the ASX. 7 September 1995 1 August 2010 Gary Weiss Position in Committee Chairperson Non‑Executive Director Non‑Executive Director Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. Premier has appointed a Compliance Officer to accept reports from personnel relating to price sensitive information. The Compliance Officer is primarily responsible for ensuring that Premier complies with its disclosure obligations under the Corporations Act and the ASX Listing Rules, and for deciding what information will be disclosed. Additionally, all managers are required to keep up to date with all matters within their responsibility which may be or become material to Premier in this respect. The composition of the Audit and Risk Committee satisfies ASX Recommendation 4.2. The committee comprises a majority of independent directors and the chair of the committee is also independent. 4.2. Composition 6 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. During the 2010/11 financial year, the Audit and Risk Committee met three times. Premier endeavours to encourage and promote effective communication with its shareholders, as prescribed by ASX Recommendation 6.1. Premier’s Constitution sets out the procedures to be The CEO is invited to attend each scheduled meeting of the Audit and Risk Committee and a standing invitation is issued followed regarding: to the external auditors.  the convening of meetings; Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend meetings of the Audit and Risk Committee. The Audit and Risk Committee may request management and/or others to provide such input and advice as required. the form and requirements of the notice;   the chairperson and quorums; and The Board has received a written statement from the CEO of Premier Retail and Company Secretary that Premier’s financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results and in accordance with relevant accounting standards. the voting procedures, proxies, representations and polls.  5 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE Premier’s strategy is to ensure that shareholders, regulators and the wider investment community are informed of all major developments affecting Premier in a timely and effective manner. Information is communicated in a number of ways including: During the 2010/11 financial year, Premier maintained a policy to ensure that it complied with its continuous disclosure obligations under the ASX Listing Rules, the ASX Recommendations and the Corporations Act, and to ensure that all investors have equal and timely access to material and price sensitive information. This policy is contained in Premier’s Board Charter which is summarised on the Company’s website. market disclosures in accordance with the continuous disclosure protocol; annual and half yearly reports;   6 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS updates on operations and developments;    announcements on Premier’s website; and market briefings and presentations at general meetings. Premier endeavours to encourage and promote effective communication with its shareholders, as prescribed by ASX Recommendation 6.1. Premier’s Constitution sets out the procedures to be followed regarding: • the convening of meetings; • the form and requirements of the notice; • the chairperson and quorums; and • the voting procedures, proxies, representations and polls. Premier’s strategy is to ensure that shareholders, regulators and the wider investment community are informed of all major developments affecting Premier in a timely and effective manner. Information is communicated in a number of ways including: Shareholders are encouraged to attend and participate at general meetings. To facilitate this, meetings are held during normal business hours and at a place convenient for the greatest possible number of shareholders to attend. The full text of notices and accompanying materials are included on Premier’s website. Information is presented in a clear and concise manner designed to provide shareholders and the market with full and accurate information. PRINCIPLE 7 – RECOGNISE AND MANAGE RISK 7 • annual and half‑yearly reports; The Board has overall responsibility to ensure that there is a sound system of risk management and internal controls across the business. One of the primary responsibilities of the Board is to identify, • market disclosures in accordance with the continuous disclosure protocol; assess, monitor and manage risk. Additionally, the Board is responsible for identifying material • updates on operations and developments; changes in Premier’s risk profile to ensure that Premier can take advantage of potential opportunities • announcements on Premier’s website; and while managing potential adverse effects. • market briefings and presentations at general meetings. Shareholders are encouraged to attend and participate at general meetings. To facilitate this, meetings are held during normal business hours and at a place convenient for the greatest possible number of shareholders to attend. The full text of notices and accompanying materials are included on Premier’s website. Information is presented in a clear and concise manner designed to provide shareholders and the market with full and accurate information. Annual Report 2014 108 CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) 7.1 Audit and Risk Committee The committee consists of three members, who as at the date of this report are: The Board has delegated responsibility for the identification, assessment and management of risks relating to both Premier’s internal and external controls to Premier’s Audit and Risk Committee. The risk management functions of the Audit and Risk Committee include:  Name David Crean Frank Jones  Gary Weiss  examining and evaluating the effectiveness of the internal control system with management and external auditors; Date Appointed 1 August 2010 assessing existing controls that management has in place for unusual transactions or transactions that may carry more than an accepted level of risk; 7 September 1995 Position in Committee Chairperson Non‑Executive Director Non‑Executive Director 1 August 2010 meeting periodically with key management, external auditors and compliance staff to understand Premier’s control environment; Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. receiving reports concerning all suspected and actual frauds, thefts, breaches of the law and key risk areas; and 4.2. Composition  The composition of the Audit and Risk Committee satisfies ASX Recommendation 4.2. The committee comprises a majority assessing and ensuring that there are internal processes for determining and managing key of independent directors and the chair of the committee is also independent. areas, such as important judgments and accounting estimates.  The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. During the 2010/11 financial year, the Audit and Risk Committee met three times. The Audit and Risk Committee has the authority to: The CEO is invited to attend each scheduled meeting of the Audit and Risk Committee and a standing invitation is issued request management or others to attend meetings and to provide any information or advice to the external auditors. that the Committee requires;    access the Company’s documents and records; Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend meetings of the Audit and Risk Committee. The obtain the advice of special or independent counsel, accountants or other experts, without Audit and Risk Committee may request management and/or others to provide such input and advice as required. seeking approval of the Board or management; and The Board has received a written statement from the CEO of Premier Retail and Company Secretary that Premier’s financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results and in accordance with relevant accounting standards. approach management and external auditors for information.  5 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE During the 2013/2014 year, the Audit and Risk Committee met with an external consultant to independently evaluate the risk management and internal control processes throughout the Group. During the 2010/11 financial year, Premier maintained a policy to ensure that it complied with its continuous disclosure obligations under the ASX Listing Rules, the ASX Recommendations and the Corporations Act, and to ensure that all investors have equal and timely access to material and price sensitive information. This policy is contained in Premier’s Board Charter which is summarised on the Company’s website. As outlined above in section 4.1, a summary of Premier’s Audit and Risk Committee charter can be found on Premier’s website. This summary addresses Premier’s policies for the oversight and management of material business risks. 7.2 Management 6 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS 7.3 CEO and CFO certification The responsibility for managing risk on a day-to-day basis lies with the management of each business Premier endeavours to encourage and promote effective communication with its shareholders, as prescribed by ASX operation. Additionally, independent risk management audits of site operations are carried out Recommendation 6.1. Premier’s Constitution sets out the procedures to be followed regarding: regularly and a quarterly report is prepared for the Board which reviews the risk management and • the convening of meetings; insurances of the Group. The Board received four of these reports during the 2013/14 financial year. • the form and requirements of the notice; • the chairperson and quorums; and • the voting procedures, proxies, representations and polls. Premier’s strategy is to ensure that shareholders, regulators and the wider investment community are informed of all major developments affecting Premier in a timely and effective manner. Information is communicated in a number of ways including: In accordance with section 295A of the Corporations Act, the Company Secretary, who performs the CFO functions, has provided a written statement to the Board that: Premier’s financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results and in accordance with relevant accounting standards; • annual and half‑yearly reports;   • market disclosures in accordance with the continuous disclosure protocol; • updates on operations and developments; • announcements on Premier’s website; and • market briefings and presentations at general meetings. the view provided on the Group’s financial report is founded on a sound system of risk management and internal compliance and control which implements the financial policies adopted by the Board; and the Group’s risk management and internal compliance and control system is operating effectively in all material aspects.  Shareholders are encouraged to attend and participate at general meetings. To facilitate this, meetings are held during normal business hours and at a place convenient for the greatest possible number of shareholders to attend. The full text of notices and accompanying materials are included on Premier’s website. Information is presented in a clear and concise manner designed to provide shareholders and the market with full and accurate information. 109 Premier Investments Limited CORPORATE GOVERNANCE STATEMENT (CONTINUED) 7.1 Audit and Risk Committee The Board has delegated responsibility for the identification, assessment and management of risks relating to both Premier’s internal and external controls to Premier’s Audit and Risk Committee. The risk management functions of the Audit and Risk Committee include: examining and evaluating the effectiveness of the internal control system with management and external auditors; assessing existing controls that management has in place for unusual transactions or transactions that may carry more than an accepted level of risk; understand Premier’s control environment; receiving reports concerning all suspected and actual frauds, thefts, breaches of the law and key risk areas; and assessing and ensuring that there are internal processes for determining and managing key areas, such as important judgments and accounting estimates. The Audit and Risk Committee has the authority to: request management or others to attend meetings and to provide any information or advice that the Committee requires; access the Company’s documents and records; obtain the advice of special or independent counsel, accountants or other experts, without seeking approval of the Board or management; and approach management and external auditors for information. During the 2013/2014 year, the Audit and Risk Committee met with an external consultant to independently evaluate the risk management and internal control processes throughout the Group. As outlined above in section 4.1, a summary of Premier’s Audit and Risk Committee charter can be found on Premier’s website. This summary addresses Premier’s policies for the oversight and management of material business risks. 7.2 Management The responsibility for managing risk on a day-to-day basis lies with the management of each business operation. Additionally, independent risk management audits of site operations are carried out regularly and a quarterly report is prepared for the Board which reviews the risk management and insurances of the Group. The Board received four of these reports during the 2013/14 financial year. 7.3 CEO and CFO certification In accordance with section 295A of the Corporations Act, the Company Secretary, who performs the CFO functions, has provided a written statement to the Board that: Premier’s financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results and in accordance with relevant accounting standards; the view provided on the Group’s financial report is founded on a sound system of risk management and internal compliance and control which implements the financial policies adopted by the Board; and the Group’s risk management and internal compliance and control system is operating effectively in all material aspects.             CORPORATE GOVERNANCE STATEMENT (CONTINUED) CORPORATE GOVERNANCE STATEMENT (CONTINUED) 7.3 CEO and CFO certification (continued) The committee consists of three members, who as at the date of this report are: The Board agrees with the views of the ASX on this matter and notes that due to its nature, internal control assurance from the Company Secretary can only be reasonable rather than absolute. This is due to such factors as the need for judgement, the use of testing on a sample basis, the inherent limitations in internal control and because much of the evidence available is persuasive rather than conclusive and therefore is not and cannot be designed to detect all weaknesses in control Position in Committee procedures. Chairperson Non‑Executive Director Non‑Executive Director In response to this, internal control questions are required to be completed by key management 7 September 1995 personnel of all significant business units in support of these written statements. Date Appointed 1 August 2010 Name David Crean Frank Jones 1 August 2010 Gary Weiss meeting periodically with key management, external auditors and compliance staff to 8 PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY 8.1 Remuneration Committee Details of the respective directors’ qualifications, skills, directorships and experience are set out in the Directors’ Report at page 2. 4.2. Composition During the 2013/14 financial year, Premier maintained a formal remuneration committee in accordance with ASX Recommendation 8.1. The Remuneration and Nomination Committee supports and advises the Board on the remuneration policies and practices of Premier. The remuneration purposes of the committee include: The composition of the Audit and Risk Committee satisfies ASX Recommendation 4.2. The committee comprises a majority of independent directors and the chair of the committee is also independent.   The Audit and Risk Committee will meet as frequently as required to undertake its role effectively. During the 2010/11 financial year, the Audit and Risk Committee met three times. review and make recommendations to the Board on remuneration packages and policies applicable to senior executives and directors; The CEO is invited to attend each scheduled meeting of the Audit and Risk Committee and a standing invitation is issued to the external auditors. define levels at which the Chief Executive Officer must make recommendations to the committee on proposed changes to remuneration and employee benefit policies; Directors who are not members of the Audit and Risk Committee are notified of all meetings and may attend if they wish. Other senior managers and external advisers may also be invited to attend meetings of the Audit and Risk Committee. The Audit and Risk Committee may request management and/or others to provide such input and advice as required. ensure that remuneration packages and policies attract, retain and motivate high calibre executives; and   The Board has received a written statement from the CEO of Premier Retail and Company Secretary that Premier’s ensure that remuneration policies demonstrate a clear relationship between key executive financial reports present a true and fair view in all material respects of Premier’s financial condition and operational results performance and remuneration. and in accordance with relevant accounting standards. The roles and responsibilities of the Remuneration and Nomination Committee are set out in Premier’s 5 PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE Board Charter, a summary of which is provided on Premier’s website. 8.2 6 PRINCIPLE 6 – RESPECT THE RIGHTS OF SHAREHOLDERS Composition During the 2010/11 financial year, Premier maintained a policy to ensure that it complied with its continuous disclosure obligations under the ASX Listing Rules, the ASX Recommendations and the Corporations Act, and to ensure that all investors have equal and timely access to material and price sensitive information. This policy is contained in Premier’s Board Charter which is summarised on the Company’s website. The Remuneration and Nomination Committee consists of three members, all of whom are non- executive directors. The members of the Remuneration and Nomination Committee are outlined in section 2.4 of this corporate governance statement. Although ASX Recommendation 8.2 suggests that the committee should consist of a majority of independent directors and be chaired by an independent director, Premier believes that the current members of the committee are most appropriate to achieve its objectives given their skill set and experience. Premier endeavours to encourage and promote effective communication with its shareholders, as prescribed by ASX Recommendation 6.1. Premier’s Constitution sets out the procedures to be followed regarding: • the convening of meetings; The Remuneration and Nomination Committee met twice during the year, and both meetings were • the form and requirements of the notice; attended by all three committee members. • the chairperson and quorums; and • the voting procedures, proxies, representations and polls. Premier’s strategy is to ensure that shareholders, regulators and the wider investment community are informed of all major developments affecting Premier in a timely and effective manner. Information is communicated in a number of ways including: Premier’s remuneration policies are both reasonable and responsible, and they establish a link between remuneration and performance. Further details regarding Premier’s remuneration practices are set out in the remuneration report on pages 12 to 25. Remuneration policy 8.3 • annual and half‑yearly reports; Premier clearly distinguishes the structure of non-executive directors’ remuneration from that of • market disclosures in accordance with the continuous disclosure protocol; executive directors and senior executives. Non-executive directors’ remuneration is capped at a • updates on operations and developments; maximum of $1,000,000 per annum. During the 2013/14 financial year a total of $760,000 was paid by • announcements on Premier’s website; and way of remuneration to Premier’s non-executive directors. • market briefings and presentations at general meetings. Premier has not established any schemes for retirement benefits for non-executive directors (other than superannuation). Shareholders are encouraged to attend and participate at general meetings. To facilitate this, meetings are held during normal business hours and at a place convenient for the greatest possible number of shareholders to attend. The full text of notices and accompanying materials are included on Premier’s website. Information is presented in a clear and concise manner designed to provide shareholders and the market with full and accurate information. Annual Report 2014 110 TOTAL % IC RANK % IC RANK ASX ADDITIONAL INFORMATION AS AT 3 OCTOBER 2014 ASX ADDITIONAL INFORMATION AS AT 3 OCTOBER 2014 TWENTY LARGEST SHAREHOLDERS NAME TWENTY LARGEST SHAREHOLDERS CENTURY PLAZA INVESTMENTS PTY LTD NAME J P MORGAN NOMINEES AUSTRALIA LIMITED CENTURY PLAZA INVESTMENTS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED CITICORP NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED METREPARK PTY LTD CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED METREPARK PTY LTD RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD ) NATIONAL NOMINEES LIMITED RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD UBS NOMINEES PTY LTD ) HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED UBS NOMINEES PTY LTD DANCETOWN PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED LINFOX SHARE INVESTMENT PTY LTD DANCETOWN PTY LTD SPRINGSAND INVESTMENTS PTY LTD LINFOX SHARE INVESTMENT PTY LTD ARGO INVESTMENTS LIMITED SPRINGSAND INVESTMENTS PTY LTD BNP PARIBAS NOMS PTY LTD ARGO INVESTMENTS LIMITED BNP PARIBAS NOMINEES PTY LTD BNP PARIBAS NOMS PTY LTD RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED BNP PARIBAS NOMINEES PTY LTD QIC LIMITED RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD QIC LIMITED MILTON CORPORATION LIMITED MR CON ZEMPILAS MILTON CORPORATION LIMITED TOTAL FOR TOP 20: MR CON ZEMPILAS TOTAL FOR TOP 20: SUBSTANTIAL SHAREHOLDERS NAME SUBSTANTIAL SHAREHOLDERS CENTURY PLAZA INVESTMENTS PTY LTD AND ASSOCIATES NAME PERPETUAL LIMITED AND ITS SUBSIDARIES CENTURY PLAZA INVESTMENTS PTY LTD AND ASSOCIATES AUSTRALIANSUPER PTY LTD PERPETUAL LIMITED AND ITS SUBSIDARIES AIRLIE FUNDS MANAGEMENT PTY LTD AUSTRALIANSUPER PTY LTD 51,569,400 TOTAL 22,831,014 51,569,400 11,937,685 22,831,014 8,428,649 11,937,685 8,235,331 8,428,649 6,939,577 8,235,331 33.12% 14.66% 33.12% 7.67% 14.66% 5.41% 7.67% 5.29% 5.41% 4.46% 5.29% 6,939,577 5,300,536 3,462,934 5,300,536 3,462,934 3,348,428 4.46% 3.40% 2.22% 3.40% 2.22% 2.15% 3,000,000 3,348,428 2,577,014 3,000,000 1,437,699 2,577,014 1,250,000 1,437,699 1,228,465 1,250,000 1,028,886 1,228,465 684,767 1,028,886 633,270 684,767 605,589 633,270 590,250 605,589 500,000 590,250 135,589,494 500,000 1.93% 2.15% 1.65% 1.93% 0.92% 1.65% 0.80% 0.92% 0.79% 0.80% 0.66% 0.79% 0.44% 0.66% 0.41% 0.44% 0.39% 0.38% 0.41% 0.39% 0.32% 0.38% 87.07% 0.32% 135,589,494 87.07% TOTAL UNITS % IC 58,552,420 TOTAL UNITS 22,076,038 58,552,420 8,871,777 22,076,038 8,322,930 8,871,777 42.43% 14.18% % IC 42.43% 5.70% 14.18% 5.36% 5.70% AIRLIE FUNDS MANAGEMENT PTY LTD DISTRIBUTION OF EQUITY SHAREHOLDERS 8,322,930 5.36% DISTRIBUTION OF EQUITY SHAREHOLDERS 1 TO 1,000 4,575 1 TO 1,000 4,575 1,001 TO 5,000 2,328 1,001 TO 5,000 2,328 5,001 TO 10,000 5,001 TO 361 10,000 361 10,001 TO 100,000 10,001 TO 180 100,000 100,001 TO (MAX) 100,001 TO 42 (MAX) 7,486 TOTAL 1,783,793 5,454,711 2,664,166 4,354,864 141,457,340 155,714,874 180 42 7,486 Holders Shares Holders Shares 141,457,340 The number of investors holding less than a marketable parcel of 50 securities ($10.00 on 3 October 2014) is 228 and they hold 2,899 securities. 1,783,793 5,454,711 2,664,166 4,354,864 155,714,874 The number of investors holding less than a marketable parcel of 50 securities ($10.00 on 3 October 2014) is 228 and they hold 2,899 securities. VOTING RIGHTS All ordinary shares carry one vote per share without restriction. VOTING RIGHTS All ordinary shares carry one vote per share without restriction. 111 Premier Investments Limited 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 TOTAL TOTAL % IC RANK ASX ADDITIONAL INFORMATION AS AT 3 OCTOBER 2014 TWENTY LARGEST SHAREHOLDERS NAME CENTURY PLAZA INVESTMENTS PTY LTD J P MORGAN NOMINEES AUSTRALIA LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED METREPARK PTY LTD NATIONAL NOMINEES LIMITED RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD ) UBS NOMINEES PTY LTD CORP A/C> DANCETOWN PTY LTD LINFOX SHARE INVESTMENT PTY LTD SPRINGSAND INVESTMENTS PTY LTD ARGO INVESTMENTS LIMITED BNP PARIBAS NOMS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED QIC LIMITED UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD MILTON CORPORATION LIMITED MR CON ZEMPILAS TOTAL FOR TOP 20: SUBSTANTIAL SHAREHOLDERS NAME CENTURY PLAZA INVESTMENTS PTY LTD AND ASSOCIATES PERPETUAL LIMITED AND ITS SUBSIDARIES AUSTRALIANSUPER PTY LTD AIRLIE FUNDS MANAGEMENT PTY LTD DISTRIBUTION OF EQUITY SHAREHOLDERS 51,569,400 22,831,014 11,937,685 8,428,649 8,235,331 6,939,577 5,300,536 3,462,934 3,348,428 3,000,000 2,577,014 1,437,699 1,250,000 1,228,465 1,028,886 684,767 633,270 605,589 590,250 500,000 TOTAL UNITS 58,552,420 22,076,038 8,871,777 8,322,930 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 33.12% 14.66% 7.67% 5.41% 5.29% 4.46% 3.40% 2.22% 2.15% 1.93% 1.65% 0.92% 0.80% 0.79% 0.66% 0.44% 0.41% 0.39% 0.38% 0.32% % IC 42.43% 14.18% 5.70% 5.36% 135,589,494 87.07% Holders Shares 1 TO 1,000 4,575 1,001 TO 5,000 2,328 5,001 TO 10,000 361 10,001 TO 100,000 180 100,001 TO (MAX) 42 TOTAL 7,486 1,783,793 5,454,711 2,664,166 4,354,864 141,457,340 155,714,874 The number of investors holding less than a marketable parcel of 50 securities ($10.00 on 3 October 2014) is 228 and they hold 2,899 securities. VOTING RIGHTS All ordinary shares carry one vote per share without restriction. CORPORATE DIRECTORY CORPORATE DIRECTORY A.C.N. 006 727 966 A.C.N. 006 727 966 DIRECTORS Solomon Lew (Chairman) DIRECTORS Frank W. Jones (Deputy Chairman) Solomon Lew (Chairman) Timothy Antonie Frank W. Jones (Deputy Chairman) Dr David M. Crean Timothy Antonie Lindsay E. Fox Dr David M. Crean Sally Herman Lindsay E. Fox Henry D. Lanzer Sally Herman Mark McInnes Henry D. Lanzer Michael R.I. McLeod Mark McInnes Dr Gary H. Weiss Michael R.I. McLeod Dr Gary H. Weiss COMPANY SECRETARY Kim Davis COMPANY SECRETARY Kim Davis REGISTERED OFFICE Level 53 REGISTERED OFFICE 101 Collins Street Level 53 Melbourne Victoria 3000 101 Collins Street Telephone (03) 9650 6500 Melbourne Victoria 3000 Facsimile (03) 9654 6665 Telephone (03) 9650 6500 Facsimile (03) 9654 6665 WEBSITE www.premierinvestments.com.au WEBSITE www.premierinvestments.com.au EMAIL info@premierinvestments.com.au EMAIL info@premierinvestments.com.au AUDITOR Ernst & Young AUDITOR 8 Exhibition Street Ernst & Young Melbourne Victoria 3000 8 Exhibition Street Melbourne Victoria 3000 SHARE REGISTER Computershare Investor Services Pty SHARE REGISTER Limited Computershare Investor Services Pty Yarra Falls Limited 452 Johnston Street Yarra Falls Abbotsford Victoria 3067 452 Johnston Street Telephone (03) 9415 5000 Abbotsford Victoria 3067 Telephone (03) 9415 5000 LAWYERS Arnold Bloch Leibler LAWYERS Level 21 Arnold Bloch Leibler 333 Collins Street Level 21 Melbourne Victoria 3000 333 Collins Street Telephone (03) 9229 9999 Melbourne Victoria 3000 Telephone (03) 9229 9999 About this report This report has been printed on Monza Satin Recycled, Certified Carbon Neutral. Monza Recycled contains 55% recycled fibre (25% post consumer and 30% pre consumer) plus FSC certified virgin pulp. All virgin pulp is derived from well-managed forests and controlled sources. It is manufactured by an ISO 14001 certified mill. The printer is also FSC, ISO 9001 and ISO 14001 accredited. These certifications specify the requirements for quality and environmental management systems. Designed and produced by walterwakefield.com.au Annual Report 2014 112 This page has been left blank intentionally. 113 Premier Investments Limited Smiggle International Growth » Premier Retail launched its first UK store at Westfield Stratford in February 2014. » The company plans to have 25-30 stores operating by the end of FY15. » The management team continues to believe that the potential exists for 200 stores and $200 million in sales over the next five years. » John Cheston, Managing Director of Smiggle has a proven track record of success in all four countries we operate in. Smiggle Westfield Stratford Brighton, Churchill Square Reading, Oracle Kingston, Bentall Centre Peter Alexander remains a market leader in innovative product, marketing and multi-channel initiatives. 

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