COMPLII FINTECH SOLUTIONS LTD — Annual Report 2004

Nov 9, 2004

The Manager Company Announcements Office Australian Stock Exchange Level 6, 20 Bridge Street SYDNEY NSW 2000

10 November 2004

Dear Sirs

Annual Report

Please find enclosed of copy of the Gowings Retail Limited Annual Report for 2004.

Yours faithfully

Laneson

Chris Charleson Company Secretary

Gowings Retail Limited

ACN 098 238 585

ANNUAL REPORT

2004

Contents

Chairman's Report	Ť
Directors' Report	$\overline{4}$
Corporate Governance	9
Statements of Financial Performance	13
Statements of Financial Position	14
Statements of Cash Flows	15
Notes to the Financial Statements	16
Directors' Declaration	33
Independent Audit Report to the Members	34
Shareholder Information	35

Chairman's Report

Dear Shareholder

On behalf of the Directors of Gowings Retail Limited - past and present - I wish to sincerely apologise for the performance of your investment over the past three years.

You must be wondering – how do the shares of a financially ungeared iconic retail enterprise lose three quarters of their value over this period of virtually unprecedented buoyancy in the local retailing sector?

What Went Wrong?

Gowings Retail Limited ("the Company") has lost \$13.24 million before tax since its spin off from the erstwhile parent -Gowing Brothers Limited ("Brothers") in late 2001. These losses are the result of two key factors:

• a collective inability to properly implement and see through plans to address weaknesses in the business;
• . poor structuring of the Company at the time of the spin off.

Lack of proper implementation – best described as vacillation - has not been sensible policy in a retail environment where our major competitors, and the industry giants, pride themselves on the processes and sheer consistency of their platforms that underlie the ability to be flexible at the store itself.

A good example is contained in the CEO's report for the 2003 year, which noted 11 action items for enactment through the 2004 fiscal year. Of the ten internal fixes, only four – product lines $(#4)$ , layout $(#5)$ , upgraded reordering system (#8) and concessions $(#11)$ were performed to any degree. The appropriate resources were simply not made available to management to enable them to execute. When the Company's financial performance started to flag, existing strategies were supplanted by short term tactics - price cutting - designed to boost sales. This volte face killed the gross dollar margin of the business. Allied to a high fixed cost base of rent and head office, it cruelled the pre tax profit of the Company.

At the time of the spin off from Brothers, many of the Company's systems and facilities remained collectively shared with the former parent. This has failed to provide the Company with the requisite independence needed to develop its own future. For example, Brothers still owns the "Gowings" brands, though has agreed in principle to transfer them to the Company. A part of this agreement requires the Company to change its corporate company name, and accounts for the motion at the AGM to change our corporate name to G Retail Limited. This is only one component of providing proper separation which the Board are addressing.

Shareholders have not been the only victims of these failures. Our loyal employees have had to put up with inadequate tools with which to do the job. In 2004, our people should not be subjected to performing manual stocktakes at times they would rather be out enjoying themselves socially. Moreover, why should staff have to perform these anachronisms as a necessity ahead of serving customers? To our employees - past and present we also wish to profoundly apologise for the travails you have been forced to endure.

From Assets to Liabilities

These factors would eventually lead to a cathartic experience.

Aside from poor trading, its origins lie in the most fundamental aspect of the separation of the Company from Brothers late in 2001. As part of Brothers, the Company was a component of an asset rich, property owning concern, with two small leases. Once cut loose, the Company took on long term property and lease liabilities. Note 27 to the financial statements is the place you should look to see their quantum, even after the events documented below - \$4.4 million in the fiscal 2005 year and a combined \$32.5 million (at undiscounted values) into the future. At the time of writing, the Company.

Chairman's Report (continued)

has an equity market value, at \$0.27 per share, of \$6.86 million. This is real leverage - real commitments to folks who expect to be paid on time, and have plenty of alternatives. It means that we have to be extraordinarily careful as Directors not to load pure financial debt on top of this.

The day of reckoning finally came on 5 August 2004. The format of the Company's Parramatta store - 1,300 square metres on a single level within the confines of a mall - did not permit the business to pay the fully documented rent to the fandlord, and still earn a return on our investment. It was in the best interests of the Company, and the landlord, that the lease be transferred on mutually agreed grounds, and the space turned over to a more promising tenant. Not surprisingly, the negotiations were protracted, given the remaining unexpired thirteen years of a fifteen year lease. We would like to thank Jeff Zulman for his assistance in these negotiations, and Westfield for the commendable and commercial approach they displayed.

The necessity to find external capital to fund the exit of Parramatta, in the absence of financial support from the erstwhile parent, led to the board approaching the second and third largest investors in the Company at that time, to ask for their support. This duly resulted in Tony Young and Trent Capital putting money into the Company.

The \$650,000 investment we made is being supplemented by unsecured standby loan facilities which, if drawn upon, will be repaid from the proceeds of the 1-2 rights issue, which we announced at the time of the final results. A company associated with Tony is the underwriter of the issue, with Trent Capital a partial subunderwriter, to ensure that the Company receives the approximate \$3 million injection of new equity capital.

Tradition Dies Easily

Many people characterise their company as being in some way akin to a football team. If that's the case, your company represents

the rugby league club whose (real) home is closest to our office - South Sydney Rabbitohs.

Souths have won 20 first grade premierships, the first being the inaugural season of 1908, the last being in 1971. In 1999, the club were unceremoniously bundled out of the NRL based on a number of financial and supported based criteria. From an average crowd of 12,347 in its 1999 NRL season, the loss of tradition brought two enormous rallies in the city $-$ 40,000 strong in October 1999 and the mammoth 80,000 in November 2000.

By July 2001, amid a welter of support from luminaries all around town, the Rabbitohs were readmitted to the NRL. Since readmission, Souths have won just 13 and drawn two of 72 NRL games. On the field^t, they've finished bottom in each of the past three years. Within the second year back, average crowds were a meagre 9,524.

So where are most of the luminaries and the 80,000? Obviously decided they have better things to do on a Sunday afternoon than watch a dedicated, hard working but under resourced bunch of blokes being generally beaten.

We're not trying to be amusing in suggesting that the Company faces the same issues. We consistently hear people say how much they used to enjoy going to Gowings, but hadn't been in the stores for ages. In other words, we've somehow lost our relevance to them. Would they be sad if we weren't around? Yes. Will they come back just for the sake of spending a bit of time with us? No. As with the Rabbitohs, the public want exciting, winning fare and flair.

One of the great things about a new football season is that everyone starts equal, and there is unbridled optimism by every team in the competition. They've trained hard over the close season and have some new exciting players to watch. So have we.

Over the past few months, the level of staff training has been increased significantly across a range of skills. The range and selection of products has improved in a

wide variety of areas. As shareholders you have a vested interest in the success of our efforts. Go visit the stores and see for yourself, talk to the staff, utilise their expertise, spend up big and have a fun experience. And then tell us about it. Good and bad.

It's early days vet and there's a long way to go. As Rachel Hunter used to say about the Pantene effect - "It won't happen overnight, but it will happen".

Where to From Here?

Like our rugby league friends - who are probably hoping to bump into Rachel Hunter - , we've also had a change of coach. Paolo Gnecchi-Ruscone has stepped down as CEO to return to his career as a consultant; Paolo does include Gowings as a client. Paolo's successor is Tony Gattari, who ran Harvey Norman Computers for much of the 1990's, helping to grow sales from \$12 million to over \$560 million before his departure in 2000.

Tony brings a multitude of attributes in people management and motivation, as well as a strong retail skill-set. He has an infectious enthusiasm for the task. He'll need one, because this is a massive challenge.

The management team, supported by the Directors' patience and money, need to restore the retail platform of this business. Modern supply chain management, improved supplier relationships, more relevant advertising and promotion. A proper recognition of the interplay between stock turn and margin, more inventive use of the hectares of expensive space the business rents and a systematic approach to loss prevention. Gowings has, at times, taken on the air of Ali Baba's cave, without the need to request the assistance of Sesame. Pilferage - external and unfortunately, internal - together with poor paperwork cost your company around \$1 million last year. Rest assured a more contemporary version of Morgiana and her boiling oil are being deployed.

Building this platform will ensure that the Company will run less efficiently in fiscal 2005 than we hope in future years. The Board has already sanctioned the hiring of new senior people in the areas of Operations and Human Resources and a restructuring of the Product Development/Buying areas is taking place. It means that our Support Centre overheads will continue to be high relative to the size of the business for at least another two years or so.

Such a strategy will also dictate that the Company will run at a loss for at least the fiscal 2005 year, and most likely into 2006 as well. This is not a projection that the Company will turn at that time - we are simply too early into the rehabilitation of the Company to make such forecasts. What we can say is that without the human and technology investment the Board has planned, there won't be a company around for the future.

I would love to be able to provide more certainty on future profits to you as investors. Whilst unable to do this, I can promise one thing - a massive effort from a group of highly motivated Directors, senior management and employees new and old. We are passionate about turning this company around. Only time will tell whether we have greater enthusiasm, skills and resolve than that of the competition, who would dearly love to kill us off. I can assure you, that unlike Darcy Dugan, we won't have "Gone to Gowings". We thank you, as supportive shareholders, for not doing so either.

Andlew J. Slang

Andrew Brown CHAIRMAIN

1: In 2002, Canterbury would have finished top but were deducted 37 of their 45 points for salary cap breaches and hence finished bottom of the NRI's 15 team competition.

Directors' Report

Your Directors present their report on the consolidated financial report for Gowings Retail Limited for the 52 weeks ended 1 August 2004 and in accordance with the Corporations Act 2001 report as follows:

Directors

The names of the Directors in office during the financial period and at the date of this report are:

Andrew Brown

CHAIRMAN (APPOINTED 2 AUGUST 2004) MEMBER AUDIT COMMITTEE & CHAIRMAN OF REMUNERATION COMMITTEE

Andrew Brown (age 45) is the Managing Director of Trent Capital Limited and the former Head of Equities at Rothschild Australia Asset Management. Andrew is a Director of a number of smaller companies in which Trent Capital is an investor.

Tony Young

DEPUTY CHAIRMAN (APPOINTED 2 AUGUST 2004)

CEMBRANAN OF AUDIT COMMITTEE & MEMBER OF REMUNERATION COMMITTEE

Tomy Young (age 48) is a former Head of Research at the investment bank, Credit Suisse First Boston. Since then Tony has concentrated on expanding his business interests in publishing, stockmarket data/research, property and retail.

Duncan Shaw

ANDEPENDENT NON-EXECUTIVE DIRECTOR)

MEMBER REMUNERATION COMMITTEE

Duncan Shaw (age 63) is currently the Executive Director of the Australian Retailers Association of New South Wales and has over 40 years experience in the retail industry. He commenced at Grace Bros. as a management trainee and attained the role of Group General Manager Retail Operations and a member of the Managerial Board.

Tony Gattari

MANAGING DIRECTOR (APPOINTED 22 OCTOBER 2004)

Tony Gattari (age 40) joined Harvey Norman in 1991, becoming GM of Harvey Norman Computers which grew sales from \$12 million to over \$550 million when Tony left in 2000. Tony subsequently founded on-line retailer smartbuy.com.au, which merged with Unique World in May 2001. Since stepping down as CEO of the merged entity in March 2002, Tony has run his own coaching and business advisory company, The Achievers Group.

The following served as directors during the period:

18 AUGUST 2003
1 AUGUST 2004
24 AUGUST 2004
22 OCTOBER 2004
$15$ JUNE 2004

Principal activities

The principal activities of the consolidated entity during the period consisted of retail operations in recreational products and general merchandise. The consolidated entity has 4 retail stores in and around Sydney, NSW.

Review of operations

Gowings Retail Limited recorded a trading loss (before individually significant items) of \$3.3 million for the 52 week period ended 1 August 2004. This compares to a loss of \$1.6 million for the previous corresponding period. Sales revenues amounted to \$30.0 million (2002/03 \$33.9 million), down 11.6% on the previous year. The decrease is primarily due to poor Christmas trading combined with a deferment of the annual Warehouse Sale from July to August.

The Company's gross margin has reduced to 38.5% following a critical review of stock holdings and the significant reduction in the number of stock lines held. While this has had an adverse effect on gross margin, there has been a \$1.8 million or 18% reduction in stock held. The effect of this stock reduction programme has been to free up working capital.

Trading and administrative expenses (before individually significant items) have decreased 4% to \$15.9 million (2002/03: \$16.6 million).

Individually significant items amount to \$9.7 million and comprise a \$4.4 million goodwill write-down, \$2.0 million plant and equipment write-down, \$1.5 million store exit costs, \$1.5 million provision for onerous lease commitments and \$0.3 million of restructuring costs.

The loss after taxation for the 52 week period ended 1 August 2004 is \$13.0 million (2002/03: \$1.7 million).

The Company is part way through a significant change process; the focus of this process is:

• Strengthening management and store teams;
• Investing in staff through training and performance-based remuneration;
• Investing in systems (principally stock and automated reordering) and a loss prevention programme;
• Careful review, and where necessary renegotiation, of the remaining store leases;
• Taking control of the brands and other intellectual property that the Company trades on.

Dividends

No dividend has been proposed for the 52 week period ended 1 August 2004.

Significant changes in the state of affairs

In August 2004 the consolidated entity surrendered its lease over its retail store at Westfield Parramatta.

Except for the matters noted above or disclosed elsewhere in the financial report, there were no other significant changes in the state of affairs of the consolidated entity.

Matters subsequent to the end of the financial period

On 4 August 2004, the Company announced:

• that it had reached an agreement with its landlord to exit the Parramatta lease;
• that a share placement would be undertaken whereby 3 million shares would be placed and \$750,000 raised to part fund the Parramatta exit;
• that a Shareholder Share Purchase Plan ("SSPP") would be undertaken to allow existing shareholders to purchase up to \$5,000 worth of additional shares; and
• the appointment of Mr Andrew Brown as Chairman of the Company and Mr Anthony Young as Deputy Chairman.

The Company vacated the Parramatta store on 20 August 2004. The share placement was

Directors' Report (continued)

completed on 17 August 2004 and the proceeds applied to part fund the Parramatta exit. The details of the SSPP were announced on 14 September 2004 and the amount to be raised under the SSPP was set at \$500,000; this amount was subscribed for by 6 October 2004. At the same time as the SSPP details were announced, the Company advised that it intended to sell unmarketable parcels of shares to assist with the administration of the Company's share register. The Company will sell unmarketable parcel of shares (i.e. with a value of less than \$500) on behalf of shareholders unless the shareholder notifies to the contrary by 8 November 2004.

On 27 September 2004, the Company announced that it was to undertake a 1 for 2 renounceable rights issue at a price of 25 cents per share. The rights issue will be underwritten and is expected to be completed by mid-December 2004. Approximately \$3 million will be raised through the rights issue.

On 22 October 2004, the Company accepted the resignation of Mr Paolo Gnecchi-Ruscone as Chief Executive Officer and appointed Mr Tony Gattari as Managing Director.

Except for the matters noted above, at the date of this report, no matters or circumstances have arisen since balance date that have significantly affected or may significantly affect:

the operations in future financial periods; or

the results of those operations; or

the consolidated entity's state of affairs in future financial periods.

Likely developments

Certain comments on likely developments in the operations of the consolidated entity and the expected results of those operations are included in the Review of Operations above. Further information has not been included in this report because, in the opinion of the Directors, it is likely to prejudice the interests of the consolidated entity.

Environment

The operations of the consolidated entity are not subject to any particular and significant environmental regulation under a law of the Commonwealth of Australia or any of its States or Territories.

The consolidated entity is committed to a policy of environmental responsibility in all its business dealings. This policy ensures that when the consolidated entity can either directly or indirectly influence decisions which impact upon the environment, that influence is used responsibly.

The consolidated entity, continues to support the Gowings Whale Trust, a trust devoted to raising funds to foster research that will lead to a healthier environment for whales and other sea creatures. All proceeds from the sale of nominated merchandise within our stores is donated to the Trust.

Directors' and officers' indemnity/insurance

The constitution of the Company provides an indemnity (to the extent permitted by law) to each person who is or has been a director, alternate director or executive officer of the Company and, if the Directors so determine, to any auditor or former auditor of its related bodies corporate for all losses or liabilities incurred as an officer or, if the directors so determine, an auditor of the company including, but not limited to, a liability for negligence or for legal costs on a full indemnity basis.

The Company paid a premium in respect of a contract of insurance insuring Directors and Officers against certain liability incurred in that capacity. Disclosure of the amount of the premium and the nature of the liabilities in respect of such insurance is prohibited by the contract of insurance.

Directors' interests

The relevant interest in share capital and options of the company as at the date of this report are:

Director	Fully Paid
	Ordinary Shares
	Number
Andrew Brown
Tony Young	3,240,456
Duncan Shaw	52,500

1. Andrew Brown is a director of Loftus Lane Investments Pty Limited. Loftus Lane Investments Pty Limited holds 2,906,217 shares in the Company. Mr Brown is a director and shareholder of Trent Capital Limited, the parent company of Loftus Lane Investments Pty Limited.

Remuneration of Directors and Executives Officers

Remuneration of Directors and senior executives is determined annually by the Non-Executive directors based on recommendations from the Remuneration Committee. Remuneration levels are based on market conditions and consolidated entity performance. Remuneration during the 52 week period ended 1 August 2004 was as follows:

		Primary Benefits		Post Employ- ment	Equity Compen- sation	Other Compen- sation	Total
Name	Cash salary and fees	Cash bonuses	Non- monetary benefits 1	Superan- nuation	Options	Term- ination benefits
	S	S	S	S	Ŝ	S	S
Non-executive directors
f Gowing	30,000	÷.					30,000
D Shaw	25,000	÷	÷.	÷	v,	÷	25,000
M Alscher	w	÷	÷	21,875	v.		21,875
K Terry	33,333	÷	w		w		33,333
Executive directors
P Sillick	11,538	÷.		8,894		85,058	105,490
P Gnecchi-
Ruscone	225,839		4,000	20,326			250,165
Executive Officers
C Charleson	146,299	÷,	9,070	13,167	9,664		178,200
∫ McLay	90,000	÷	34,602	8,100	÷		132,702

1. Non-monetary benefits include motor vehicles and parking benefits inclusive of FBT

Directors' Report (continued)

Meetings of Directors

There were 15 Director's meetings and 1 meeting of the Audit Committee during the period. The attendance by each Director of the Company during the period was:

Director	Board Meetings Attended/Held	Meetings of the Audit Committee
John Gowing	12/15	1/1
Duncan Shaw	13/15
Michael Alscher	13/14	1/1
Paolo Gnecchi-Ruscone	15/15
Ken Terry	11/14

No meetings of the Remuneration committee have been held.

Rounding of Amounts to Nearest Thousand Dollars

The Company is of a kind referred to in Class Order 98/0100 issued by the Australian Securities & Investments Commission relating to the "rounding off" of amounts in the directors' report and financial report. Amounts in the directors' report and financial report have been rounded off to the nearest thousand dollars in accordance with that Class Order or, in certain cases, to the nearest dollar.

Signed in accordance with a Resolution of the Directors of Gowings Retail Limited.

Andlew J. Blam

Andrew Brown CHAIRMAN

Sydney, NSW 29 October 2004

Corporate Governance

In March 2003 the ASX Corporate Governance Council issued the Principles of Good Corporate Governance and Best Practice Recommendations as a guide to the top 500 ASX listed companies. The guidelines were reviewed as at 31 March 2004 by the Implementation Review Group and some relaxations agreed particularly in respect to non top 300 ASX listed companies.

During the latter part of the financial year and in the early part of 2004/05 the Company has gone through a significant reorganisation. Three Non-Executive Directors, including the Chairman, have resigned from the Board and two new Directors have been appointed as Chairman and Deputy Chairman. Additionally, after the end of the financial year the Company accepted the resignation of the Chief Executive Officer and he was replaced with a Managing Director. As shareholders are well aware, the Company has incurred significant losses over the last 18 months and as a result is part way through a significant change process. Further, in view of the small size of the Company and its focus on cost containment, it is difficult to fully attain all of the recommended corporate governance principles.

The Board and Senior Management are experienced company officers and are well aware of their responsibilities to the Company, to the shareholders and to all other stakeholders. The Directors are conscious of the ASX Principles of Good Corporate Governance and Best Practice Recommendations. Having regard to the size of the Company, the nature of its enterprise and despite the lack of formal policies during the year, it is nevertheless considered that the Company has complied as far as possible with the spirit and intentions of the ASX guidelines as appropriate and in a manner and form that suits the size and structure of the Company.

ASX Principles of Good Corporate Governance

The following is a summary of the 10 Principles of Good Corporate Governance together with comments on the policies and procedures adopted by the Company which demonstrate how compliance will be achieved.

Principle 1: Lay Solid Foundations for Management and Oversight

The Board are responsible for all aspects of the management of the Company. The Board guides and monitors the businesses and affairs of the Company on behalf of the shareholders and is committed to achieving and demonstrating the highest suitable standards of corporate governance commensurate with the size of the Company and the nature of its business.

At the date of this report, the Board comprises a Chairman, Deputy Chairman, an independent Non-Executive Director and a Managing Director. The Directors' Report provides biographical details together with the experience, expertise and qualifications of the Directors in office at the date of this report and brief details of those Directors who served during the year. The Directors do not see any advantage in appointing additional Directors or restructuring the Board at this time.

Non-Executive Directors are independent of management, do not have a substantial shareholding (i.e. less than 5%) but do have other relationships with management and the Company which result in them being required to stand aside from certain deliberations as a result of a conflict of interest.

Independent Directors are independent of management, do not have a substantial shareholding (i.e. less than $5\%$ ) and are free from any business or other relationship which could materially interfere with the exercise of their judgement.

Corporate Governance (continued)

Board Responsibilities

As the Board acts on behalf of shareholders and is accountable to the shareholders, the Board seeks to satisfy the financial and management expectations of the shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks.

The Board appoints a Managing Director and the responsibility for the operation and administration of the Company is delegated to that person. The Board has in place proper procedures to assess the performance of the Managing Director and to ensure that the person is appropriately equalified and experienced to discharge their responsibilities.

The Board is responsible for ensuring that management's objectives, activities and outcomes are aligned to the expectations, vision and business risks identified by the Board. The Board has a number of mechanisms in place to ensure that this is achieved, including detailed reports to, and reviews by, the Board.

Board Committees

Establishment of Board Committees is commensurate with the size of the Company and is as follows:

Audit Committee

At the date of this statement, the members of the Audit Committee are Tony Young (Chairman) and Andrew Brown. The Chief Financial Officer and External Auditor are also invited to attend meetings of the Audit Committee.

Full compliance with the ASX guidelines (requires three members including an independent Chairman) will not be achieved unless the Board resolves to appoint another Independent Director. The Directors do not see any advantage in appointing additional directors or restructuring the Board at this time.

Remuneration Committee

At the date of this statement, the members of the Remuneration Committee are Andrew Brown (Chairman), Tony Young and Duncan Shaw.

Nomination Committee

Having regard to the small size of the Company, the duties of a Nomination Committee are handled by the full Board.

Principle 2: Structure the Board to Add Value

The composition of the Board is determined in accordance with the following principles and guidelines:

• The Board shall comprise not less than three directors and no more than 12 at any time
• The Board shall comprise directors with a diverse and appropriate range of qualifications and expertise
• The Board shall meet at least monthly and follow meeting guidelines established to ensure that all directors are made aware of, and have available all necessary information in a timely manner, to participate in an informed discussion of all agenda items

The Directors in office at the date of this report are set out in the Directors' Report.

Any Director (excluding the Managing Director) appointed during the year must retire from office at the next Annual General Meeting following their appointment, although each being eligible, may stand for re-election.

At each Annual General Meeting, one third of the Directors (excluding the Managing Director) must retire from office, although each being eligible, may stand for re-election.

Chairman and Managing Director

The Chairman is responsible for leading the Board, ensuring Directors are properly briefed in all matters relevant to their role and responsibilities, facilitating Board discussions, managing the Board's relationship with shareholders and

managing the Board's relationship with the Company's senior executives.

The Managing Director is responsible for implementing the Company strategies and policies, achieving the Company objectives and managing the business of the Company.

The Company's Chairman, Andrew Brown, does not qualify as an Independent Director, by virtue of the shareholding held by Trent Capital Limited, according to the ASX Corporate Governance Council's prescriptive definitions. Further, the majority of the Board are not considered independent. In view of the size of the Company and its current financial position the Board does not consider it is in the best interest of shareholders to increase the size or composition of the Board.

Principle 3: Promote Ethical and Responsible Decision

The Company has a Code of Conduct, the terms of which detail procedures dealing with dishonest practices, confidentiality of information, conflict of interests, harassment and anti-discrimination and a number of other matters. All staff, executives and the Board are expected to comply with the Code of Conduct.

The Company has a policy which restricts the times and circumstances in which Directors and Executive Officers may buy or sell shares in the Company.

Principle 4: Safeguard Integrity in Financial Reporting

As noted above, the Company has an Audit Committee.

The Company Auditor is invited to attend the Annual General Meeting and be available to answer any questions the shareholders may care to ask in respect to the financial statements of the Company.

The Company's Chief Financial Officer, reports in writing to the Board that, to the best of his knowledge and belief, the financial reports present a true and fair view, in all material effects, of the Company's financial condition and

operational results, and are in accordance with relevant accounting standards.

Principle 5: Make Timely and Balanced Disclosure

The Directors and Executive Officers are conscious of the Company's disclosure obligations. The Executive Officers of the Company perform their duties in accordance with terms and procedural guidelines approved by the Board.

The Managing Director and Chief Financial Officer/Company Secretary work with the Chairman in dealing with media contact and any external communications. Communication with the ASX is the responsibility of the Company Secretary.

Principle 6: Respect the Rights of Shareholders

The Board is committed to ensuring that shareholders are at all times provided with information sufficient to allow effective monitoring of the Company's performance by means of:

• The Annual Report which is distributed to all shareholders
• The Half Yearly Report distributed to all shareholders
• Periodic reports and special reports when matters of material interest arise
• The Annual General Meeting and other meetings called to obtain approval of any Board action as required
• Continuous disclosure

Information on the Company, including recent ASX announcements, financial reports and Directors and management biographical details, is available on the Company's website, www.gowings.com.

Principle 7: Recognise and Manage Risk The Board is responsible for the oversight of the Company's risk management and control framework. The Managing Director is ultimately responsible to the Board for risk management and control framework.

Corporate Governance (continued)

In view of the recent appointment of the Managing Director, it would not be appropriate for him to make a statement on the operation of risk management and internal compliance and control systems at the date of this report or during the last financial year. However, commencing with the 2005 financial year, the Managing Director will provide a written statement to the Board in respect of the effective operation of the risk management and internal compliance and control systems.

Principle 8: Encourage Enhanced Performance

In order to ensure that the Board continues to discharge its responsibilities in an appropriate manner, the performance of all Directors is reviewed annually by the Chairman. The Board reviews the performance of the Chairman.

The Board will review the performance of the Managing Director on an annual basis.

Key executives are performance appraised by the Managing Director on an annual basis and their remuneration is structured to reward enhanced performance.

Principle 9: Remunerate Fairly and Responsibly

It is the Company's objective to provide maximum shareholder benefit from the retention of a high quality Board and

executive team by remunerating them fairly and appropriately by reference to relevant employment market conditions.

The remuneration of Directors and Executive Officers is set out in the Directors' Report.

The provision of equity based executive remuneration is made in accordance with the Company's constitution, the Employee Share and Option Plan and the ASX Listing Rules. Director's equity based remuneration must be approved by the Company at a General Meeting.

The maximum aggregate amount of Non-Executive Director's fees must be approved by the Company in a General Meeting in accordance with the remuneration provisions of the Company's constitution.

Principle 10: Recognise Legitimate Interests of Stakeholders

The Company has an established Code of Conduct that deals with the way all staff are expected to engage with the Company, fellow employees, customers and suppliers. The Company is in the process of widening this Code of Conduct to guide compliance with legal and other obligations to all stakeholders.

Once finalised, this Code of Conduct will be available on the Company's website, www.gowings.com.

Statements of Financial Performance

For the 52 week period ended 1 August 2004

			Consolidated		Parent Entity
	Note	2004 \$'000	2003 \$'000	2004 \$'000	2003 \$'000
Sales revenue (sales of goods)	$\overline{2}$	30,003	33,939	28,912	32,857
Cost of sales		(18, 464)	(20, 024)	(17,755)	(19, 813)
Gross profit		11,539	13,915	11,157	13,044
Other revenue from ordinary activities 2		1,082	1,014	1,242	1,538
Selling expenses		(6,655)	(6,985)	(6, 510)	(6, 691)
Occupancy expenses		(4,633)	(4,277)	(4,633)	(4,277)
Marketing expenses		(1,280)	(1, 546)	(1,255)	(1, 525)
Distribution expenses		(691)	(611)	(691)	(611)
Administration expenses		(12, 367)	(3, 135)	(12, 367)	(3, 125)
Borrowing costs		(21)	(23)	(21)	(23)
Profit/(loss) from ordinary activities
before income tax expense	3	(13,026)	(1,648)	(13,078)	(1,670)
Income tax expense	4	15	(49)	60	(27)
Net profit/(loss) after tax		(13, 011)	(1,697)	(13,018)	(1,697)
Net profit attributable to
outside equity interests		(13)	(10)
Net profit/(loss) attributable to
members of the parent entity	21	(13, 024)	(1,707)	(13,018)	(1,697)
Total changes in equity other than
those resulting from transactions
with owners as owners	23	(13, 024)	(1,707)	(13,018)	(1,697)
Basic earnings/(loss) per share	34	$(63.5)$ ¢	$(8.3)\varphi$
Basic earnings/(loss) per share (before individually significant items)	34	$(16.2)$ ¢	$(8.3)$ ¢
Diluted earnings per share	34	$(63.5)$ ¢	$(8.3)$ ¢

The above statements of financial performance should be read in conjunction with the accompanying notes.

Profit/(loss) before individually significant items

	Consolidated			Parent Entity
	2004 \$'000	2003 \$'000	2004 \$'000	2003 \$'000
Profit/(loss) before tax and individually significant items	(3,317)	(1,648)	(3,369)	(1,670)
Individually significant items	(9,709)	$\mathbf{v}$	(9,709)
Taxation	15	(49)	60	(27)
Net profit/(loss) after tax	(13, 011)	(1.697)	(13,018)	(1,697)

Statements of Financial Position as at 1 August 2004

MANAGERIA DE LA PERSONA DE LA PERSONA DE

		Consolidated		Parent Entity
	Note	2004 \$'000	2003 \$'000	2004 \$'000	2003 \$'000
Current assets
Cash and deposits	5	523	3,341	505	3,199
Receivables	6	236	377	243	316
Inventories	7	8,407	10,253	8,031	9,933
Other	8	456	456	449	453
Total current assets		9,622	14,427	9,228	13,901
Non-current assets
Receivables	9	114	703	114	862
Investments in controlled entities	30			245	245
Property, plant and equipment	10	1,921	4,132	1,905	4,104
Intangible assets	11		4,481		4,481
Øther	12	63	134	63	134
Total non-current assets		2,098	9,450	2,327	9,826
Total assets		11,720	23,877	11,555	23,727
Current liabilities
Payables	13	5,300	4,757	5,204	4,672
Interest bearing liabilities	14	4	503	4	503
Carrent tax liabilities	15	16	55		48
Provisions	16	290		290
Other	17	301	353	293	346
Total current liabilities		5,911	5,668	5,791	5,569
Non-current liabilities
Interest bearing liabilities	18	9	15	9	15
Provisions	19	1,296	117	1,296	117
Total non-current liabilities		1,305	132	1,305	132
Total liabilities		7,216	5,800	7,096	5,701
Net assets		4,504	18,077	4,459	18,026
Equity
Parent equity interest
Contributed equity	20	18,661	19,210	18,661	19,210
Retained profits/(losses)	21	(14,218)	(1, 194)	(14,202)	(1, 184)
Total parent equity interest		4,443	18,016	4,459	18,026
Outside equity interest in
controlled entities	22	61	61
Total equity	23	4,504	18,077	4,459	18,026

The above statements of financial position should be read in conjunction with the accompanying notes.

Statements of Cash Flows

For the 52 week period ended 1 August 2004

			Consolidated		Parent Entity
	Note	2004 \$'000	2003 \$'000	2004 \$'000	2003 \$'000
Cash flows from operating activities
Receipts from customers		33,077	38,452	31,895	37,764
Payments to suppliers and employees		(35, 236)	(37, 278)	(34,004)	(36,722)
Dividends received					45
Interest and bill discount received		72	108	77	122
Income tax (paid)/received		(38)	(242)	$12 \overline{ }$	(198)
Borrowing costs		(21)	(23)	(21)	(23)
Net cash provided by/(used in)
operating activities	32	(2, 146)	1,017	(2,041)	988
Cash flows from investing activities
Payments for property, plant and equipment		(246)	(1, 161)	(246)	(1, 153)
Proceeds from sale of property, plant and equipment		28		28
Net cash outflow from investing activities		(218)	(1, 161)	(218)	(1, 153)
Cash flows from financing activities
Loan proceeds received			500		500
Repayment of borrowings		(504)	(4)	(504)	(4)
Proceeds from repayments of loans		50	39	69	39
Dividends paid			(373)		(373)
Net cash provided by/(used in) financing
activities		(454)	162	(435)	162
Net increase/(decrease) in cash held		(2,818)	18	(2,694)	(3)
Cash at the beginning of the
financial period		3,341	3,323	3,199	3,202
Cash at the end of the financial period	5	523	3,341	505	3,199

Financing arrangements

Non-cash financing and investing activities $33\,$

The above statements of cash flows should be read in conjunction with the accompanying notes.

Notes to the Financial Statements

1. Summary of Significant Accounting Policies

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

It is prepared in accordance with the historical cost convention. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous period.

(a) Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Gowings Retail Limited ("company" or "parent entity") as at 1 August 2004 and the results of all controlled entities for the period then ended. Gowings Retail Limited and its controlled entities together are referred to in this financial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full. Outside equity interests in the results and equity of controlled entities are shown separately in the consolidated statement of financial performance and statement of financial position respectively.

Where control of an entity is obtained during a financial period, its results are included in the consolidated statement of financial performance from the date on which control commences. Where control of an entity ceases during a financial period its results are included for that part of the period during which control existed.

(b) Going Concern basis of preparation

In the year ended 1 August 2004, the consolidated entity incurred a loss after taxation of \$13,924,000 (2002/03: \$1,707,000). Of this loss \$9,709,000 is attributable to individually significant items, principally in connection with the non-cash writedowns of goodwill and property plant and equipment. Accordingly the loss before individually significant items and taxation recorded by the consolidated entity is \$3,317,000. It is likely that the consolidated entity will also record an operating loss in the 2004/05 financial year.

Subsequent to the end of the financial year, the Company has been successful in exiting its loss making Parramatta store and has raised \$750,000 through a placement to certain existing shareholders to part fund the exit. The Company has also raised \$500,000 through a shareholder share purchase plan which was fully subscribed on 6 October 2004 and has announced that it will undertake an underwritten renounceable rights issue to raise \$3 million.

The continuing viability of the Company and the consolidated entity and their ability to continue as going concerns and meet their debts and commitments as they fall due, are dependent on the successful completion of the rights issue and the ongoing reduction of operating losses. The rights issue is to be underwritten by an entity associated with Tony Young and partially sub-underwritten by Trent Capital Limited. The Company is part way through a process of significant change aimed at stemming the losses of the Company and consolidated entity and return them to profitability.

Accordingly, the Directors have prepared the financial statements on a going concern basis in the belief that the Company and the consolidated entity will realise their assets and settle their liabilities and commitments in the normal course of business and for at least the amounts stated in the financial report.

$(c)$ Income Tax

Tax effect accounting procedures are followed whereby the income tax expense in the statement of financial performance is matched with the accounting profit after allowing for permanent differences. The future tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of realisation. Income tax on cumulative timing differences is set aside to the deferred income tax or the future income tax benefit accounts at the rates which are expected to apply when those timing differences reverse.

(d) Revenue Recognition

Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. Retail sales are recognised when possession of the goods has passed to the customer. Rental and concession income is recognised in accordance with the underlying agreement.

(e) Receivables

All trade debtors are recognised at the amounts receivable as they are due for settlement no more than 90 days from the date of recognition.

Collectibility of trade debtors is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off. A provision for doubtful debts is raised when some doubt as to collection exists.

(f) Inventories

Inventories are valued using the retail inventory method. This method involves valuing inventories at current selling prices and then reducing the amount to cost through application of mark-up ratios. This method results in the inventories being valued at an amount that approximates the lower of cost and net realisable value.

(g) Depreciation of Property, Plant and Equipment

Depreciation is calculated on a straight line basis to write off the net cost of each item of plant and equipment over its expected useful life to the consolidated entity. Estimates of remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items. The expected useful lives of plant and equipment are 2-15 years.

(h) Leasehold Improvements

The cost of improvements to or on leasehold properties is amortised over the unexpired period of the lease or the estimated useful life of the improvement to the consolidated entity, whichever is the shorter. Leasehold improvements held at the reporting date are being amortised over periods ranging from 1 to 15 years.

(i) Leased Non-Current Assets

A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incident to ownership of leased noncurrent assets, and operating leases, under which the lessor effectively retains substantially all such risks and benefits.

Finance leases are capitalised. A lease asset and liability are established at the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the interest expense.

The lease asset is amortised on a straight line basis over the term of the lease, or where it is likely that the consolidated entity will obtain ownership of the asset, the life of the asset. Lease assets held at the reporting date are being amortised over 6 years.

Other operating lease payments are charged to the statement of financial performance in the periods in which they are incurred, as this represents the pattern of benefits derived from the leased assets.

Notes to the Financial Statements (continued)

(i) Intangible Assets - Goodwill

Where an entity or operation is acquired, the identifiable net assets acquired are measured at fair value. The excess of the fair value of the cost of acquisition over the fair value of the identifiable net assets acquired, including any liability for restructuring costs, is brought to account as goodwill and amortised on a straight line basis over 20 years.

(k) Recoverable Amount of Non-Current Assets

The recoverable amount of an asset is the net amount to be recovered through the cash inflows and outflows arising from its continued use and subsequent disposal.

Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is written down to its recoverable amount. Where net cash inflows are derived from a group of assets working together, recoverable amount is determined on the basis of the relevant group of assets. The decrement in the carrying amount is recognised as an expense in net profit or loss in the reporting period in which the recoverable amount writedown occurs.

The expected net cash flows included in determining recoverable amounts of non-current assets are not discounted to their present values using a market-determined, risk-adjusted discount rate.

(I) Irade and Other Creditors

These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial period and which are unpaid.

(m) Interest Bearing Liabilities

Loans are carried at their principal amounts which represent the present value of future cash flows associated with servicing the debt. Interest is accrued over the period it becomes due and is recorded as part of other creditors.

(n) Employee Benefits

Wages and salaries, annual leave and sick leave $(i)$

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other creditors in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

(ii) long service leave

The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in the provision for employee benefits and is measured in accordance with (i) above. The liability for long service leave expected to be settled more than 12 months from the reporting date 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. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

(iii) employee benefit on-costs

Employee benefit on-costs, including payroll tax, are recognised and included in employee benefit liabilities and costs when the employee benefits to which they relate are recognised as liabilities.

$(o)$ Cash

For purposes of the statement of cash flows, cash includes deposits at call which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts.

(p) Earnings Per share

(i) Basic Earnings Per Share

Basic earnings per share is determined by dividing the operating profit after income tax attributable to members of the Company by the weighted average number of ordinary shares outstanding during the period.

(ii) Diluted Earnings Per Share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(q) Rounding of Amounts

The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.

Notes to the Financial Statements (continued)

		Consolidated		Parent Entity
	2004 \$'000	2003 \$'000	2004 \$'000	2003 \$'000
2. Revenue
Revenue from sales of goods	30,003	33,939	28,912	32,857
Other revenue from ordinary activities
Interest income	81	108	77	103
Rental and concession income	779	607	910	737
Dividends – controlled entities	$\sim$		-54	45
Supplier discount and rebates received	171	92	151	73
Service fees	M		$\sim$	377
Other	51	207	50	203
	1,082	1,014	1,242	1,538
Total revenue from ordinary activities	31,085	34,953	30,154	34,395

3. Profit/(loss) from ordinary activities before income tax expense

Profit/(loss) from ordinary activities before

income tax expense has been determined

after charging/(crediting) the following specific items:

Depreciation of plant and equipment	296	438	284	432
Loss on disposal of non-current assets	2		2
Amortisation:
Leasehold improvements	63	55	63	55.
Plant and equipment under finance leases	3	4	3	4
Goodwill	123	246	123	246
Total amortisation	189	305	189.	305.
Net bad and doubtful debts	(48)	88	(46)	88
Rental expense relating to operating leases	4,942	4.585	4,942	4,585
Individually significant items:
- Writedown of goodwill	4,358		4,358
- Writedown of property, plant and equipment	2,065		2,065
- Parramatta store exit costs	1,539		1,539
- Provision for onerous rent commitments	1,470		1,470
- Restructuring costs	277		277
	9,709		9,709

	Consolidated			Parent Entity
	2004 \$'000	2003 \$'000	2004 \$'000	2003 \$'000
4. Income tax
(a) The income tax expense for the financial
period differs from the amount calculated
on the profit. The differences are reconciled
as follows:
Profit/(loss) from ordinary activities before
income tax expense	(13,026)	(1,648)	(13,078)	(1,670)
Income tax calculated @ 30%	(3,908)	(494)	(3,923)	(501)
Tax effect of permanent differences:
Non-assessable income			(16)	(13)
Amortisation of goodwill	37	74.	37	74.
Goodwill writedown	1,308		1,308
Disallowable expenses and
other permament differences	470	5.	470	5.
Income tax adjusted for permanent differences	(2,093)	(415)	(2, 124)	(435)
Losses not recognised	1,598	437.	1,575	435
Timing differences not recognised	441	27	441	27.
Over provision from prior years	39		48
Income tax expense/(credit)	(15)	49	(60)	27

(b) The Directors estimate that the potential

			future income tax benefit at 1 August 2004 in

future mcome tax benefit at 1 August 2004 in
respect of tax losses not brought to account is $2,035$	-437 -	- 2.010	-435 -

This benefit for tax losses will only be obtained if:

(i) the entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised; or

(ii) the losses are transferred to an eligible entity in the consolidated entity;

(iii) the entity continues to comply with the conditions for deductibility imposed by tax legislation; and

(iv) no changes in tax legislation adversely affect the entity in realising the benefit from the deductions for the losses.

The franking account balance of the Company at 1 August 2004 is \$28,457 (2003: \$28,457)

5. Cash and deposits
Cash at bank and on hand	150	2,270	132	2,128
Deposits at call	373	1,071	373	1,071
	523	3,341	505	3,199
6. Receivables
Trade debtors	296	363	213	296
Less: provision for doubtful debts	(91)	(176)	(91)	(162)
	205	187	122	134
Other receivables	31	190	121	182
	236	377	243	316

Notes to the Financial Statements (continued)

		Consolidated		Parent Entity
	2004 \$'000	2003 \$'000	2004 \$'000	2003 \$'000
7. Inventories
Finished goods	8,227	10,171	7,851	9,851
Stock in transit	180	82	180	82
	8,407	10,253	8,031	9,933
8. Other assets
Prepayments	456	456	449	453
9. Receivables (non-current)
Loans to directors	9	460	9	460
Loans to associate companies	105	108	105	267
Other debtors		135		135
	114	703	114	862
10. Property, plant and equipment Leaschold improvements
At cost	456	387	456	387
Less: accumulated amortisation	(108)	(45)	(108)	(45)
Po tal leasehold improvements	348	342	348	$\overline{342}$
Plant and Equipment
At cost	4,606	4,472	4,572	4,428
Less: accumulated depreciation	(3,048)	(700)	(3,030)	(684)
	1,558	3,772	1,542	3,744
Plant and equipment under finance lease
At cost Less: accumulated amortisation	24	24	24	24
	(9) 15	(6) 18	(9) 15	(6) 18
Total plant and equipment	1,573	3,790	1,557	3,762
Total	1,921	4,132	1,905	4,104

Movements in property, plant and equipment

Consolidated Entity	Leaschold Improvements \$`000	Plant & Equipment \$'000	Plant & Equipment Under Finance Lease \$000	Total \$'000
Opening balance	342	3,772	18	4,132
Additions	69	177	×.	246
Disposals	$\sim$	(30)	v.	(30)
Writedown	$\overline{\phantom{a}}$	(2,065)	$\mathbf{v}$	(2,065)
Depreciation/amortisation	(63)	(296)	(3)	(362)
Closing Balance	348	1.558		1.921

Parent Entity	Leasehold Improvements \$'000	Plant & Equipment \$'000	Plant & Equipment Under Finance Lease \$000	Total \$'000
Opening balance	342	3.744	18	4,104
Additions	69	177	$\mathbf{v}$	246
Disposals	$\sim$	(30)	w.	(30)
Writedown	$\overline{\phantom{a}}$	(2,065)	v.	(2,065)
Depreciation/amortisation	(63)	(284)	(3)	(350)
Closing Balance	348.	1,542	15	1,905

	Consolidated			Parent Entity
	2004 \$'000	2003 \$'000	2004 \$'000	2003 \$'000
11. Intangible assets
Goodwill on acquisition	4,914	4,914	4,914	4,914
Less: Accumulated amortisation	(4,914)	(433)	(4, 914)	(433)
		4,481		4,481
12. Other assets (non-current)
Prepayments	63	134	63	134
13. Payables
Trade creditors	3,247	3,799	3,141	3,700
Other creditors	2,053	958.	2,063	972
	5,300	4,757	5,204	4,672
14. Interest bearing liabilities
Lease liabilities (note 27)	4	3	4	3
Bank loans - secured	٠	500	$\tilde{\phantom{a}}$	500
	4	503	4	503

The Company has a \$1 million commercial bill facility. At 1 August 2004 the facility was unutilised. The facility is secured by a fixed and floating charge over the assets of the Company and it's wholly owned subsidiaries and is repayable within one year. Interest on the facility is 5.8%.

15. Current tax liabilities

Income tax	16	55		48
16. Provisions
Provisions for onerous rent commitments	290.		290.
17. Other liabilities
Employee entitlements	301	353.	293	346
18. Interest bearing liabilities (non-current)
Lease liabilities (note 27)	9	15	9	15
19. Provisions (non-current)
Employee entitlements	116	117	116	117
Provisions for onerous rent commitments	1,180		1,180
	1,296	117	1,296	117

Notes to the Financial Statements (continued)

		Consolidated			Parent Entity
		2004 \$'000	2003 \$'000	2004 \$'000	2003 \$'000
20. Contributed equity
Share capital (a)
Ordinary shares (notes $b,c$ )		19,897	20,446	19,897	20,446
Less cost of capital raising		(1, 236)	(1,236)	(1,236)	(1,236)
Contributed equity	18,661		19,210	18,661	19,210
(b)	Movements in ordinary share capital:
Date	Details			No. of Shares	\$'000
4 August 2003	Balance			20,600,093	20,446
₫ January 2004	Cancellation of shares			(167,000)	(161)
				20,433,093	20,285
1 August 2004	Allowance for cancellation of shares			n/a	(388)
1 August 2004	Balance			20,433,093	19,897

On 1 january 2004, 167,000 shares, previously issued under the Company's employee share plan, were cancelled. Loans to former executives amounting to \$161,000 were forgiven in exchange for the cancellation of these shares. In addition, allowance has been made for 417,000 shares, previously issued under that share plan to former Directors and executives, that are to be cancelled after the balance date. At the same time, loans of

\$388,000 are to be forgiven.

$(c)$ Ordinary Shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held.

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote, and upon a poll each share is entitled to one vote.

$(d)$ Dividend Reinvestment Plan

The company has a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash. Shares are issued under the plan at a price determined as the weighted average market price of shares traded during the period commencing 15 trading days before the record date and ending five trading days after the record date, less a discount of up to 10% at the discretion of the Directors.

$(e)$ Options

At 1 August 2004 there are 582,000 (3 August 2003: 468,000) options over unissued shares outstanding. 200,000 options were issued and 86,000 expired (due to employees resigning) in the 52 week period. The remaining options have the following conditions:

Number	Exercise price	Expiry date
382,000	\$1.00	31 November 2006
70,000	\$1.00	30 November 2008
65,000	\$0.80	31 May 2008
65,000	\$0.60	31 May 2007

The market value of Gowings Retail Limited shares at 1 August 2004 was \$0.30 (2003: \$0.42)

		Consolidated	Parent Entity
	2004 \$'000	2003 \$'000	2004 \$'000	2003 \$'000
21. Retained Profits
Retained profits/(losses) at the beginning
of the financial period	(1, 194)	1,119	(1, 184)	1,119
Net profit/(loss) attributable to members
of Gowings Retail Limited	(13, 024)	(1,707)	(13,018)	(1,697)
Dividend paid		(606)		(606)
Retained profits/(losses) at the end of the
financial period	(14,218)	(1, 194)	(14,202)	(1, 184)
22. Outside Equity Interests in Controlled Entities Interest in:
Share capital	61	61
Retained profits
	61	61
23. Equity
Total equity at the beginning of the
financial period	18,077	20,157	18,026	20,096
Total changes in equity recognised in the
statement of financial performance	(13, 024)	(1,707)	(13,018)	(1,697)
Shares issued, net of transaction costs		233		233
Cancellation of shares (note 20b)	(549)		(549)
Dividend paid		(606)		(606)
Total equity at the end of the financial period	4,504	18,077	4,459	18,026

A fully franked final dividend of 3 cents per ordinary share was paid on 7 November 2002.

24. Financial Instruments

(a) Accounting policies

The consolidated entity's accounting policies with respect to financial instruments are set our in-Note 1.

(b) Interest rate risk exposures

The consolidated entity's exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities are as follows:

		Floating interest rate	Fixed interest maturing in 1 year or less	1-5 years	Non-interest bearing	Total
2004	Notes	\$000	\$000	\$000	\$000	\$000
Financial assets
Cash and deposits	.5	481		v.	42	523
Receivables	6,9	Ÿ.		$\sim$	350	350
		481			392	873
Weighted average interest rate		4.50%	٠	$\mathbf{v}$	$\blacksquare$
Financial liabilities
Payables	13	v.		$\mathbf{v}$	5,300	5,300
Lease liabilities	14, 18	$\mathbf{v}$	4	9	÷	13
			4	9	5,300	5,313
Weighted average interest rate			$6.80\%$	$6.80\%$	÷
Net financial assets/(liabilities)		481	(4)	(9)	(4,908)	(4, 440)

Notes to the Financial Statements (continued)

24. Financial Instruments (continued)

2003
Financial assets
Cash and deposits	5	1,071		$\sim$	2,270	3,341
Receivables	6,9	$\mathbf{v}$	٠	$\mathbf{v}$	1,080	1,080
		1,071			3,350	4,421
Weighted average interest rate		4.70%	۰	$\sim$	$\blacksquare$
Financial liabilities
Payables	13	÷			4,757	4,757
Commercial bills	14	500		$\sim$	÷	500
Lease liabilities	14, 18	Ÿ.	3	15	÷	18
		500	3	15	4,757	5,275
Weighted average interest rate		5.14%	6.80%	$6.80\%$	÷
Net financial assets/(liabilities)		571	(3)	(15)	(1, 407)	(854)

(c) Off balance sheet financial assets and liabilities

The consolidated entity has no off balance sheet financial assets or liabilities.

(d) Credit risk exposures

The consolidated entity's maximum exposure to credit risk at the balance date in relation to each class of recognised financial asset is the carrying amount of those assets in the balance sheet.

(e) Net fair value of financial assets and liabilities

The net fair value of financial assets and liabilities of the consolidated entity approximates their carrying value.

25. Directors and Specified Executives

The names and positions held by Directors and Specified Executives of the parent entity who have held office during the financial year are:

Directors
John Gowing	Chairman and Non-executive director	Resigned 24 August 2004
Duncan Shaw	Non-executive director
Michael Alscher	Non-executive director	Resigned 15 June 2004
Ken Terry	Deputy Chairman and Non-executive director
	(appointed 1 September 2003)	Resigned 1 August 2004
Peter Sillick	Managing Director - Executive	Resigned 18 August 2003
Paolo Gnecchi-Ruscone	Chief Executive Officer (appointed 18 August 2003)	Resigned 22 October 2004
Specified Executives
Chris Charleson	Company Secretary and Chief Financial Officer
John McLay	Head of Product Development	Resigned 25 October 2004

Andrew Brown, Tony Young and Tony Gattari were appointed as directors after the end of the financial year.

	Primary Benefits			Post Employ- ment	Equity Compen- sation	Other Compen- sation	Total
Name	Cash salary and fees	Cash bonuses	Non- monetary benefits 1	Superan- nuation	Options	Term- ination benefits
	S	\$	S	S	Ŝ	S	S
Non-executive directors
∫ Gowing	30,000	÷	$\mathbf{r}$	÷	v.	٠	30,000
D Shaw	25,000	$\blacksquare$	$\ddot{\phantom{1}}$	÷	v.	۰	25,000
M Alscher	$\tilde{ }$	$\blacksquare$	$\mathbf{v}$	21,875	$\mathbf{r}$	$\overline{ }$	21,875
K Terry	33,333		w				33,333
Executive directors
P Sillick	11,538	÷	w	8,894	w	85,058	105,490
P Gnecchi-
Ruscone	225,839	÷	4,000	20,326	Ÿ.		250,165
Executive Officers
C Charleson	146,299	÷	9,070	13,167	9,664		178,200
∬ McLay	90,000		34,602	8,100			132,702

25. Directors and Specified Executives (continued)

1. Non-monetary benefits include motor vehicles and parking benefits inclusive of FBT

Remuneration Policy

The Non Executive Directors annually review and recommend the remuneration packages of senior management. The payment of bonuses, options and other incentive payments are annually reviewed by the Non Executive Directors as part of the review of Executive Directors and Specified Executives. The Non Executive Directors can exercise their discretion in relation to approving bonuses, options and incentives but will do so by reference to measurable performance criteria, and are able to seek independent advice on the appropriateness of remuneration packages.

Remuneration for Executive Directors and Specified Executives is divided into three parts:

• a fixed remuneration which is made up of basic salary, benefits (such as a motor vehicle and car parking) superannuation and other salary sacrifices;

• short term incentives - paid in cash, directly earned at the discretion of the Non Executive Directors; and

• long term incentives - include issuing senior management with shares and/or options.

The remuneration limit for non executive directors is set by resolution of shareholders in general meting. This amount of remuneration includes all monetary and non-monetary components. There are no schemes for retirement benefits for non-executive directors.

Notes to the Financial Statements (continued)

25. Directors and Specified Executives (continued)

Options and Shares held by Executive Directors and Specified Executives

During the year 200,000 options were issued to Chris Charleson, the terms of those options is set out below:

Options issued	Vesting Date	Exercise price	Expiry date
65,000	31 May 2004	\$0.60	31 May 2007
65,000	31 May 2005	\$0.80	31 May 2008
70.000	30 November 2005	\$1.00	31 May 2008

No other Executive Director or Specified Executive held options at 1 August 2004.

John McLay held 67,000 shares in the Company at 1 August 2004. No other Executive Director or Specified Executive held shares in the Company at 1 August 2004.

	Consolidated	Parent Entity
2004	2003	2004	2003
\$'000	\$'000	\$'000	\$'000

26. Remuneration of Auditors

Remuneration for audit or review of the financial reports of the parent entity or any entity in the consolidated entity:

		96
Other services
Audit Services . .	÷÷	↔ ست ک

It is the consolidated entity's policy to employ HLB Mann Judd on assignments additional to their statutory audit duties where their expertise and experience with the consolidated entity are important. These assignments principally relate to tax advice.

27. Commitments for expenditure

		Consolidated	Parent Entity
	2004 \$'000	2003 \$'000	2004 \$'000	2003 \$'000
Lease Commitments
Commitments in relation to leases contracted
for at the reporting date but not recognised
as liabilities, payable:
Within one year	4,421	4,946	4,421	4,946
Later than one year but not later than
5 years	16,957	20,849	16,957	20,849
Later than 5 years	11,164	21,063	11,164	21,063
	32,542	46,858	32,542	46,858
Representing:
Non-cancellable operating leases	32,540	46,856	32,540	46,856
Future finance charges on finance leases	2	2	2	2
	32,542	46,858	32,542	46,858
Operating Leases
Commitments for minimum lease payments
(excluding GST) in relation to non-cancellable
operating leases are payable as follows:
Within one year	4,421	4.946	4,421	4,946
Later than one year but not later than
5 years	16,955	20,847	16,955	20,847
Later than 5 years	11,164	21,063	11,164	21,063
Commitments not recognised in the
financial statements	32,540	46,856	32,540	46,856
Finance Leases
Commitments in relation to finance leases
(excluding GST) are payable as follows:
Within one year	4	3	4	3
Later than one year but not later than 5 years	11 $\overline{15}$	17 20	11 $\overline{15}$	17 20
Minimum lease payments Less: Future finance charges	(2)	(2)	(2)	(2)
Total lease liabilities	13	$1\overline{8}$	13	18
Representing lease liabilities:
Current (note $15$ )	4	3	4	3
Non-current (note 18)	9	15	9	15
	13	18	13	18
The weighted average interest rate implicit in the leases is 6.8%
28. Employee entitlements

-- ------------------------
Employee Entitlement Liabilities
Provision for employee entitlements
Current (note 14)	301	353	293	346
Non-current (note 17)	116	117	116	117
Aggregate employee entitlement liability	417	470	409	463
Employee numbers	No.	No.	No.	No.
Average number of employees
during the financial period	243	253	238	248

For details of the Gowings Retail Employee Option Plan refer note 20(e)

Notes to the Financial Statements (continued)

29. Related parties

Directors

The names of persons who were directors of Gowings Retail Limited at any time during the financial period are as follows: John Gowing, Michael Alscher, Duncan Shaw, Peter Sillick, Paolo Gnecchi-Ruscone and Ken Terry. Andrew Brown, Tony Young and Tony Gattari were appointed as directors after the end of the period.

Remuneration and Retirement Benefits

Information on remuneration of directors is disclosed in note 25.

Loans to Directors and Director-Related Entities

Loans to directors of entities in the consolidated entity and their director-related entities disclosed in note 9 comprise:

					Consolidated		Parent Entity
				2004 \$'000	2003 \$'000	2004 \$'000	2003 \$'000
Secured share loans					460		46U
indicated the main beauty				$-1$	$\blacksquare$		--

Directors share loans are issued under the terms of the Executive and Director share plan. The loans are provided to the Directors on a limited recourse basis and are issued interest free.

Other Transactions with Directors and Director-related Entities

a.Gowings Bros. Limited - John Gowing is Managing Director and holds directly or indirectly approximately 8,495,114 shares. Michael Alscher is also a Non-Executive Director and holds 233,986 shares.

The Company has a lease for the retail property at 45 Market Street with Gowing Bros. Limited. The terms of the lease are normal commercial terms. The gross amount of rent paid during the period amounted to \$2,380,000 (2003: \$2,300,000).

b. York Corporate Advisory Pty Limited - a company associated with Michael Alscher. In 2003, the Company paid \$4,400 fees to York Corporate Advisory Pty Limited for advisory services. All fees paid to York Corporate Advisory Pty Limited have been charged on a commercial basis.

c. Creative Licence – a Director-related entity to John Gowing. During the year to 1 August 2004, the Company incurred fees amounting to \$123,000 (2003: \$137,000) from Creative Licence for services rendered in creative production of the Company's advertising journals and printed documentation. All fees charged were on a commercial basis.

30. Investments in controlled entities

			Equity Holding			Cost of Parent Entity's Investment
Name of Entity	Country of Incorporation	Class of Shares%	2004 %	2003 $\%$	2004	2003
Gowings Pty Limited	Australia	Ordmarv	100	100	100	100
Gowings Hardware Pty Limited	Australia	Ordmary	80	80	245,154	245,154
Gowings Wholesale Pty Limited	Australia	Ordinary	100	100	100.	100

31. Segment information

The consolidated entity operates in one business, namely the general retailing of menswear and men's products, and in one geographical market, Australia

	Consolidated		Parent Entity
	2004 \$'000	2003 \$'000	2004 \$'000	2003 \$'000
32. Reconciliation of operating profit after income tax to net cash inflow from operating activities
Operating profit after income tax	(13,011)	(1,697)	(13,018)	(1,697)
Depreciation and amortisation of non-current assets	6,908	743	6,896	737
Loss on disposal of property,
plant and equipment	$\overline{2}$	16	2	16
Increase/(decrease) in provision for
income taxes payable	(52)	(220)	(48)	(171)
Decrease/(increase) in deferred tax balances		27	m
Decrease/(increase) in receivables	201	11	56	1,284
Decrease/(increase) in inventories	1,846	1,133	1,902	(202)
Increase in other current assets		(21)	4
Increase/(decrease) in trade creditors	543	1,003	749	999
Increase/(decrease) in provisions	1,417	22	1,416	22
Net cash inflow/(outflow) from
operating activities	(2, 146)	1,017	(2,041)	988

33. Non-cash financing and investing activities

On 7 November 2002, 387,592 shares were issued under the Company's dividend reinvestment plan.

Notes to the Financial Statements (continued)

34. Earnings per share

	Consolidated 2004	Consolidated 2003
	Cents	Cents
Basic earnings/(loss) per share	(63.5)	(8.3)
Basic earnings per share
(before individually significant items)	(16.2)	(8.3)
Difuted earnings/(loss) per share	(63.5)	(8.3)

Basic earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

\$2000
(1,707)
(1.707)

Diluted earnings per share

Options over ordinary shares of the Company have not been taken into account in calculation of diluted earnings per share as their exercise price is significantly above the current trading price of the shares.

35. Adoption of Australian Equivalents to International Financial reporting Standards ("IFRS")

The Australian Accounting Standards Board (AASB) is adopting IFRS for application to reporting periods beginning on or after 1 January 2005. The AASB has issued Australian equivalents to IFRS, and the Urgent Issues Group will issue abstracts corresponding to IASB interpretations originated by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee. The adoption of Australian equivalents to IFRS will be first reflected in the consolidated entity's financial statements for the half year ending 31 January 2006 and the year ending 31 July 2006.

Entities complying with Australian equivalents to IFRS for the first time will be required to restate their comparative financial statements to amounts reflecting the application of IFRS to that comparative period. Most adjustments required on transition to IFRS will be made, retrospectively, against opening retained earnings as at 1 August 2004.

The Company is in the process of establishing a small project team to manage the transition to Australian equivalents to IFRS chaired by the Chief Financial Officer and reporting to the Audit Committee. The Company will inform key stakeholders of the impact of these new standards as they are finalised.

Work has commenced in gathering information in the following areas where key differences may arise:

Income tax

Under AASB 12 Income Taxes, deferred tax balances are determined using the balance sheet method which calculates temporary differences based on the carrying amounts of an entity's assets and liabilities in the statement of financial position and their associated tax bases. In addition, current and deferred taxes attributable to amounts recognised directly in equity are also recognised directly in equity.

EP.

35. Adoption of Australian Equivalents to International Financial reporting Standards ("IFRS") (continued)

This will result in a change to the current accounting policy, under which deferred tax balances are determined using the income statement method, items are only tax-effected if they are included in the determination of pre-tax accounting profit or loss and/or taxable income or loss and current and deferred taxes cannot be recognised directly in equity.

Share-based payments

The present policy of potentially providing share-based compensation to employees will, under AASB 19 Employee Benefits, result in the recognition of an expense and an equivalent increase in equity.

Impairment of assets

Under AASB36 Impairment of Assets the recoverable amount of an asset is determined as the higher of net selling price and value in use. This will result in a change in the Company's current accounting policy which determined the recoverable amount of an asset on the basis of undiscounted cash flows. Under the new accounting policy it is likely that impairment of assets will be recognised sooner than under the existing policy and that the amount of write-downs will be greater. Reliable estimation of the future financial effects of this change in accounting policy is impracticable because the conditions under which impairment will be assessed are not yet known.

The above should not be regarded as a complete list of changes in accounting policies that will result from the transition to Australian equivalents to IFRS, as not all standards have been analysed as yet, and some decisions have not yet been made where choices of accounting policies are available. For these reasons it is not yet possible to quantify the impact of the transition to Australian equivalents to IFRS on the consolidated entity's financial position and reported results

Directors' Declaration

The Directors declare that the financial statements and notes set out on pages 13 to 33:

• (a) comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
• (b) give a true and fair view of the Company's and consolidated entity's financial position as at 1 August 2004 and of their performance, as represented by the results of their operations and their cash flows, for the 52 week period ended on that date.

In the Directors' opinion:

• (a) the financial statements and notes are in accordance with the Corporations Act 2001; and
• (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Directors.

Adden J. Slang

Chairman

Sydney, NSW 29 October, 2004

Independent Audit Report

To the members of Gowings Retail Limited:

Scope

The financial report and directors' responsibility

The financial report comprises the statement of financial position as at 1 August 2004, and the statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors' declaration for the 52 week period ended 1 August 2004 for both Gowings Retail Limited ("the company") and the consolidated entity as set out on pages 13 to 33. The consolidated entity comprises both the company and the entities it controlled during that period.

The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls designed to prevent and detect fraud and error, for the accounting policies and for the accounting estimates within the financial report.

Audit approach

We conducted an independent audit in order to express an opinion to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance that the financial report is free of material misstatement. The nature of an and it is influenced by several factors including the use of professional judgement, selective testing, the infierent limitations of internal control and the availability of audit evidence which may be persuasive rather than conclusive. Accordingly, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to assess whether, in all material respects, the financial report presents carrly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company's and the consolidated entity's financial position, and of their performance as represented by the results of their operations and cash flows.

We formed our audit opinion on the basis of these procedures, which included:

• examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and
• assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors.

When determining the nature and extent of our procedures we considered the effectiveness of management's internal controls over financial reporting. Our audit was not designed to provide assurance in relation to internal controls.

Independence

In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Audit opinion

In our opinion, the financial report of Gowings Retail Limited is in accordance with:

(a) the Corporations Act 2001, including:

(i) giving a true and fair view of the company's and consolidated entity's financial position as at 1 August 2004 and of their performance for the 52 week period ended on that date; and

(ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and

(b) other mandatory financial reporting requirements in Australia.

$ALB$ $P$ $_{\text{mrg}}$

HLB MANN JUDD (NSW Partnership) Chartered Accountants

Sydney, NSW 29 October, 2004.

agay //LL/

D K SWINDELLS Partner

Shareholder Information

The shareholder information set out below was applicable as at 30 September 2004.

Distribution of securities

Range of fully paid ordinary shares			Number of Shareholders
	۰	1,000	1,050
1,001	۰	5,000	508
5,001	۰	10,000	170
10,001	$\tau$	100,000	146
100,001	۰.	and over	14

Voting rights

On show of hands, at a General Meeting of the Company each member present in person or by proxy has one vote and upon a poll each person present or by proxy shall have one vote for each ordinary share held.

Substantial Shareholders

The substantial shareholders as defined by Section 708 of the Corporations Act 2001 are:

Gowing Bros. Limited	7,350,001	ordinary shares
Mr Anthony Kieron Young/
Strategic Value Pty Limited	3,240,466	ordinary shares
Trent Capital Limited	2,906,217	ordinary shares

20 Largest shareholders

The names of the 20 largest holders of shares are listed below:

		Fully paid	Percentage of
	Name	ordinary shares	issued capital
1.	Gowing Bros Limited	7,350,001	31.9%
2	Loftus Lane Investments P/L	2,906,217	12.6%
3	Mr Anthony Kieron Young	2,854,353	12.4%
4	Cogent Nominees Pty Limited	619,205	2.7%
S	Mr Edward John Gowing	456,253	2.0%
6	Strategic Value Pty Ltd	386,103	1.7%
7.	Mr John Edward Gowing	353,837	1.5%
8	Warwick Pty Limited	319,845	1.4%
9	Carlton Hotel Limited	286,342	1.2%
10	Berzins Asset Management	200,000	0.9%
11	Dalla Properties Pty Limited	144,000	$0.6\%$
12	Woodside Pty Limited	135,288	$0.6\%$
13	Mrs Mollie Gowing	118,908	0.5%
14	Wes Hughes Pty Limited	101,000	$0.4\%$
15	Mr Robert Stephen Ackerman & Mrs Sheila June Ackerman	100,000	0.4%
16	AUSA International Pty Ltd	100,000	0.4%
17	Mr Alister John Forsyth	100,000	0.4%
18	Hampden Consultants Pty Limited	100,000	0.4%
19	Malla Pty Ltd	100,000	$0.4\%$
20	Mr Mark Kamper	90,000	0.4%

Marketable parcels

The number of shareholdings held in less than marketable parcels is 1,250.

On 14 September2004, the Company commenced a corporate action to sell parcels of unmarketable shares on behalf of the shareholders.

Notes

.......................................

Corporate Directory

Gowings Retail Limited

ABN 71 098 238 585

Registered Office

Level 8 45 Market Street SYDNEY NSW 2000 Telephone: 02 9287 6394 Facsimile: 02 9261 3020 Website: www.gowings.com.au

Company Secretary

Chris Charleson

Share Registry

Computershare Investor Services Pty Ltd Level 3 60 Carrington St SYDNEY NSW 2000 Telephone: 02 8234 5000 Facsimile: 02 8234 5050

Auditors

HLB Mann Judd (NSW Partnership) Mann Judd House 207 Kent Street SYDNEY NSW 2000

Gowings Retail Limited ACN 098 238 585

www.gowings.com.au