COMPLII FINTECH SOLUTIONS LTD — Annual Report 2005

Oct 30, 2005

G Retail Limited ACN 098 238 585

Level 6, 15 Castlereagh Street Sydney NSW 2000
Phone: 02 9287 6394
Fax: 02 8915 1148

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

31 October 2005

Dear Sir

Please find enclosed a copy of the G Retail Limited Annual Report for 2005.

Yours faithfully

$\log_{2}$

Chris Charleson Company Secretary

G Retail Limited

(formerly Gowings Retail Limited) ACN 098 238 585

Contents

Chairman's Report	1
Directors' Report	$\overline{2}$
Corporate Governance	7
Statements of Financial Performance	10
Statements of Financial Position	11
Statements of Cash Flows	12 1
Notes to the Financial Statements	13
Directors' Declaration	30 °
Independent Audit Report to the Members	3 1
Shareholder Information	32

Chairman's Report

The ironic phrase "may you live in interesting times" can certainly be applied to your company over the past twelve months. However, the greatest interest for shareholders may be yet to come.

The change of board and management which occurred between August and December 2004 saw a focus during the year on:

• Attempting to restructure leases to be more appropriate to our scale of business:
• Integration of our new buying team;
• Improvements to our inventory management system, placing more suppliers on electronic interfaces;
• The benefit this last feature brought to reducing our level of inventory and rationalising the range of line items to a more manageable level:
• Ensuring the company was fully separated from its owner prior to 2001, and licensor of the rights to the "Gowing" name, Gowing Bros. Limited; and
• Raising new equity.

All of these measures were designed to place G Retail in a position where it could consider the existing four store operation, and commence the process of finding suitable locations at which to open new outlets.

We achieved a number of the key objectives:

• Inventory has been reduced from \$8.4 million to \$6.2 million over the year;
• We have rationalised supplier numbers and line items, without compromising the "Gowings" and the quintessential nature thereof;
• Most of our suppliers are now on EDI interfaces;
• We moved the Support Office to a new CBD location in April 2005;
• We raised a total of \$4.2 million in new equity (after costs) via a placement, Share Purchase Plan and the 1-2 underwritten rights issue at the turn of the year; and
• Renegotiated the lease at Westfield Hornsby from two floors to one, providing an area more conducive to the sale levels at the store, whilst enabling the landlord to attract an exciting new tenant to the centre.

In other words, we did a great deal to restructure the Company. There were however, issues that negatively impacted the Company:

• We didn't foresee the level of discounting amidst a downturn in retail conditions, especially in our Sydney CBD locations - we had (and still have) an excessive exposure to this "micro" sector, which at times is extraordinarily competitive $-$ and were not able to sufficiently diversify;
• We didn't get it right at our Market Street store, which accounts for over half our sales $-$ by trying to set the business up for easier replication at new

outlets, we didn't sufficiently cater for the unique application required for this iconic store;

• We didn't achieve a lengthening of the Intellectual Property Agreement with Gowing Bros. contained in the agreement;
• We built the support office to support a vision of store expansion into Sydney and NSW country regions, this vision involved an increase in infrastructure in the short term, allowing us to rapidly systemise the business. In doing this, our support office cost increased by more that \$500,000 for the period, mainly in salaries. Due to our current inability to fund this vision and the general lack of sales performance over the last 4 months, the board have decided to suspend this strategy. Accordingly, it has been decided that the support office should be resourced to support a 4 store business. In undertaking this new strategy we have unfortunately had to retrench a number of employees and are actively looking at further reducing our support office costs; and
• We didn't raise enough capital to see us through this tough period - reductions to inventory which should have assisted in freeing up working capital to cash, were consumed in a rapid pay down of creditors and accruals

This latter factor led us to deploy Baron Partners (on a contingency basis) in August 2005 to source a strategic partner to try to take us to the next stage of development, through the provision of additional finance and/or retail synergies. At this stage, we have attracted a conditional proposal from an unrelated third party which could result in a sale of the business or takeover of the company. We are working diligently to relax or meet the conditions of the offer, albeit the process is taking longer than we expected or desire. We regard the party concerned as highly credible and have accordingly signed a "no-shop" agreement and not seek other potential participants until offer is finalised or dropped.

There are contingency plans if this offer $-$ or any other strategic initiative is not formalised - but we refer you to the going concern basis under which these accounts are prepared, which is spelled out in Note 1 to the Financial Statements.

It has been a tough year for employees - we have asked a lot of them, the environment has been tough, and we have had a greater level of staff turnover that we desired. Many of our senior management have put in a phenomenal amount of work, and lived the emotional ups and downs of the past twelve months. Our key task remains to ensure their efforts can provide a more stable future.

Andlew J. Blam

Andrew Brown CHAIRMAN

Directors' Report

Your Directors present their report on the consolidated financial report for G Retail Limited for the 52 weeks ended 31 July 2005 and in accordance with the Corporations Act 2001 report as follows:

Change of Name

On the 23 December 2004 the Company changed it name from Gowings Retail Limited to G Retail Limited.

Direciors

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 OF AUDIT COMMITEE & CHAIRMAN OF REMUNERATION COMMITEE

Andrew Brown (age 46) 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) CHAIRMAN OF AUDIT COMMITEE & MEMBER OF REMUNERATION COMMITEE

Tony Young (age 49) 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.

Tony Gattari

MANAGING DIRECTOR (APPOINTED 22 OCTOBER 2004)

Tony Gattari (age 41) joined Harvey Norman in 1991, becoming GM of Harvey Norman Computers which grew sales from \$12 million to over \$550 million before 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, Achievers Group.

The following also served as directors during the period:

		Resigned
J Gowing	CHAIRMAN	24 AUGUST 2004
P Gnecchi-Ruscone	CHIEF EXECUTIVE OFFICER	22 OCTOBER 2004
D Shaw	INDEPENDENT NON-EXECUTIVE DIRECTOR	$\zeta$ AUGUST 2005

Princinal 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

The consolidated entity recorded a loss after taxation of \$3,411,000 in the 52 week period ended 31 July 2005 $(2004 \text{ $13,011,000})$ . Individually significant items amounted to \$544,000 compared to \$9,709,000 in 2004. The loss before tax and individually significant items was \$2,847,000 a 14.2% improvement over the \$3,317,000 loss before tax and individually significant items recorded in 2004. Sales revenue decreased 10.7% to \$26,779,000 $(2004 \t330.003.000).$

A review of operations is contained in the Chairman's Report.

Dividends

No dividend has been proposed for the 52 week period ended 31 July 2005.

Sionificant changes in the state of affairs

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

In August 2004 \$650,000 was raised through an equity placement. A further \$500,000 was raised under a Shareholder Share Purchase Plan in October 2004 and a further placement raised \$100,000 in December 2004. A rights issue was completed in January 2005 which raised \$3,129,000.

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 subsenuent to the end of the financial neriod

On 20 August 2005, the Company announced that it had received an approach from a non-related third party which could lead to an offer for the company, but which was subject to a number of conditions. At the date of this report the directors advise that discussions are progressing, however there is no agreement in place.

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 Chairman's Report.

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.

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' Report (continued)

Directors' Interests

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

	Fully Paid	Options 2
Director	Ordinary Shares Number	Number
Andrew Brown 1	7,013,501	2,000,000
Tony Young	10,057,229	2,000,000
Tony Gattari	۰	3,000,000

1. Andrew Brown is a director of Loftus Lane Investments Pty Limited. Loftus Lane Investments Pty Limited holds 7,013,501 shares in the Company. Mr Brown is a director and shareholder of Trent Capital Limited, the parent company of Loftus Lane Investments Pty Limited.

2. Details of Directors options are set out in Note 25 to the Financial Statements.

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 of the Directors and Senior Executives during the 52 week period ended 31 July 2005 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
	\$	\$	\$	\$	\$	\$	\$
Non-executive directors
Andrew Brown	24,794	$\overline{\phantom{a}}$	$\overline{\phantom{0}}$	$\overline{\phantom{a}}$	1,875	$\omega$	26,669
Tony Young	25,000	$\overline{\phantom{a}}$	-	2,250	1,875	J.	29,125
Duncan Shaw	25,000	$\overline{\phantom{a}}$	L.	$\overline{a}$		÷.	25,000
John Gowing	2,500	$\overline{\phantom{a}}$	$\overline{a}$	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$	÷.	2,500
Executive directors
Tony Gattari	224,545		÷.	8,875	2,438	٠	235,858
Paolo Gnecchi-Ruscone	58,433	$\overline{a}$	462	5,259	$\overline{\phantom{a}}$	146,736	210,890
Executive Officers
Chris Charleson	178,631	$\overline{\phantom{a}}$	5,669	16,077		$\omega$	200,377
Robert Savli	80,039	$\overline{\phantom{a}}$	15,962	7,204	244	$\tilde{\phantom{a}}$	103,449
Lili Sinden	76,731	$\overline{\phantom{a}}$		6,906	$\sim$	٠	83,637
John McLay	24,923	$\overline{\phantom{a}}$	11,534	2,243	$\overline{\phantom{a}}$	٠	38,700

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

Remuneration Report

The Remuneration Report can be found in Note 25 to the Financial Statements.

Meetings of Directors

There were 19 Director's meetings and 2 meetings 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 Commitee
Andrew Brown	18/18	2/2
Tony Young	18/18	2/2
Duncan Shaw	17/19
Tony Gattari	13/13
Paolo Gnecchi-Ruscone	6/6
John Gowing	3/3

No meetings of the Remuneration Committee have been held.

Company Secretary

Chris Charleson is the Company Secretary. He was appointed to the position of Chief Financial Officer and Company Secretary in June 2003. Before joining G Retail Limited, Chris was director at PricewaterhouseCoopers where he was involved with many listed companies and developed extensive experience in retail. Chris is a member of the Institute of Chartered Accountants in England and Wales.

Non-Audit Services

Details of the fees paid to the Company's auditors for non-audit services and the information concerning the nature of work undertaken is set out in note 26 to the Financial Statements.

Auditors Indenendence Declaration

A copy of the Independence Declaration given to the Directors by the lead auditor for the audit undertaken by HLB Mann Judd is included in page 6.

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 G Retail Limited.

Ardley J. Flam

Andrew Brown CHAIRMAN

Sydney, NSW 31 October 2005

Auditor's Independence Declaration

To the Directors of G Retail Limited:

As lead auditor for the audit of G Retail Limited for the year ended 31 July 2005, I declare that, to the best of my knowledge and belief, there have been:

• no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation $(a)$ to the audit; and
• no contraventions of any applicable code of professional conduct in relation to the audit. $(b)$

This declaration is in respect of G Retail Limited and the entities it controlled during the period.

any //LL/

D K Swindells Partner

Sydney, NSW 31 October 2005

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.

The Company is part way through a significant reorganisation. As shareholders are well aware, the Company has incurred significant losses over the last 2 years and is part way through a significant change process. 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 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 is 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 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.

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 qualified 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) and Tony Young.

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 Managing Director and it's Chief Financial Officer report in writing to the Board that, to the best of their 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 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
• 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.

The Managing Director provides 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 reviews 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 Directors' fees must be approved by the Company in a General Meeting in accordance with the remuneration provisions of the Company's constitution.

Recognise Legitimate Interests of Principle 10: 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 31 July 2005

		Consolidated		Parent Entity
	Note	2005 \$'000	2004 \$°000	2005 \$°000	2004 \$'000
Sales revenue (sales of goods)	$\overline{2}$	26,779	30,003	25,677	28,912
Cost of sales		(15, 348)	(18, 464)	(14, 653)	(17,755)
Gross profit		11,431	11,539	11,024	11,157
Other revenue from ordinary activities	$\overline{2}$	677	1,082	821	1,242
Selling expenses		(5,925)	(6, 655)	(5,714)	(6, 510)
Occupancy expenses		(4,108)	(4,633)	(4,108)	(4,633)
Marketing expenses		(1,068)	(1,280)	(1,044)	(1,255)
Distribution expenses		(684)	(691)	(684)	(691)
Administration expenses		(3,705)	(12, 367)	(3,705)	(12, 367)
Borrowing costs		(9)	(21)	(9)	(21)
Profit/(loss) from ordinary activities
before income tax expense	3	(3,391)	(13,026)	(3, 419)	(13, 078)
Income tax expense	4	(20)	15	(1)	60
Net profit/(loss) after tax		(3, 411)	(13,011)	(3, 420)	(13, 018)
Net profit attributable to outside equity interests		(9)	(13)
Net profit/(loss) attributable to
members of the parent entity	21	(3, 420)	(13, 024)	(3, 420)	(13, 018)
Total changes in equity other than those resulting
from transactions with owners as owners	23	(3, 420)	(13, 024)	(3, 420)	(13, 018)
Basic earnings/(loss) per share	33	$(10.6)$ ¢	$(61.2)$ ¢
Basic earnings/(loss) per share (before individually
significant items)	33	$(8.9)$ ¢	$(15.6)$ ¢
Diluted earnings per share	33	$(10.6)$ ¢	$(61.2)$ ¢

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

Profit/(loss) before individually significant items

	Consolidated		Parent Entity
	2005 \$'000	2004 \$'000	2005 \$'000	2004 \$'000
Profit/(loss) before tax and individually significant items	(2, 847)	(3,317)	(2,875)	(3,369)
Individually significant items	(544)	(9,709)	(544)	(9,709)
Taxation	(20)	15	11	60
The contract of the contract of the contract of . Net profit/(loss) after tax	(3, 411)	Protect Address (13.011)	. (3, 420)	$\sim$ The Story of the Story 13,018)

Statements of Financial Position

as at 31 July 2005

	Consolidated		Parent Entity
	Note	2005 \$'000	2004 \$'000	2005 \$'000	2004 \$'000
Current assets
Cash and deposits	S	1,235	523	1,164	505
Receivables	6	306	236	373	243.
Inventories	7	6,207	8,407	5,852	8,031
Other	8	239	456	220	449
Total current assets		7,987	9,622	7,609	9,228
Non-current assets
Receivables	9	9	114	9	114
Investments in controlled entities	30			351	245
Property, plant and equipment	10	1,776	1,921	1,766	1,905
Intangible assets	11	45
Other	12	62	63	62	63
Total non-current assets		1,892	2,098	2,188	2,327
Total assets		9,879	11,720	9,797	11,555
Current liabilities
Payables	13	3,077	5,300	3,004	5,204
Interest bearing liabilities	14	8	4	8	4
Current tax liabilities	15	17	16
Provisions	16	428	290	428	290
Other	17	249	301	241	293
Total current liabilities		3,779	5,911	3,681	5,791
Non-current liabilities
Interest bearing liabilities	18	14	9	14	9
Provisions	19	901	1,296	901	1,296
Total non-current liabilities		915	1,305	915	1,305
Total liabilities		4,694	7,216	4,596	7,096
Net assets		5,185	4,504	5,201	4,459
Equity
Contributed equity	20	22,823	18,661	22,823	18,661
Retained profits/(losses)	21	(17, 638)	(14,218)	(17, 622)	(14,202)
Total parent equity interest		5,185	4,443	5,201	4,459
Outside equity interest in controlled entities	22		61
Total equity	23	5,185	4,504	5,201	4,459

The above statements of financial position should be read in conjunction with the accompanying notes. $27\,$

Contingent liabilities

Statements of Cash Flows

For the 52 week period ended 31 July 2005

		Consolidated			Parent Entity
	Note	2005 \$'000	2004 \$'000	2005 \$'000	2004 \$'000
Cash flows from operating activities
Receipts from customers		30,241	33,077	29,119	31,895
Payments to suppliers and employees		(33, 452)	(35,236)	(32, 445)	(34,004)
Dividends received				36
Interest and bill discount received		88	72	86	77
Income tax (paid)/received		(18)	(38)		12
Borrowing costs		(16)	(21)	(16)	(21)
Net cash provided by/(used in) operating activities	32	(3,157)	(2, 146)	(3,220)	(2,041)
Cash flows from investing activities
Payments for property, plant and equipment		(300)	(246)	(300)	(246)
Proceeds from sale of property, plant and equipment		27	28	27	28
Proceeds from loan repayments				10
Net cash outflow from investing activities		(273)	(218)	(263)	(218)
Cash flows from financing activities
Proceeds from the issue of shares		4,162		4,162
Repayment of borrowings		(20)	(504)	(20)	(504)
Proceeds from repayments of loans			50		69
Net cash provided by/(used in) financing activities		4,142	(454)	4,142	(435)
Net increase/(decrease) in cash held		712	(2,818)	659	(2,694)
Cash at the beginning of the financial period		523	3,341	505	3,199
Cash at the end of the financial period	\$	1,235	523	1,164	505

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 G Retail Limited ("Company" or "parent entity") as at 1 August 2004 and the results of all controlled entities for the period then ended. G 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 period ended 31 July 2005, the consolidated entity incurred a loss after taxation of \$3,411,000 (2003/04: \$13,011,000). Of this loss \$544,000 (2003/04: \$9,709,000) is attributable to individually significant items. The loss before individually significant items and taxation recorded by the consolidated entity is \$2,847,000 (2003/04: \$3,317,000). While the 2004/05 loss is a significant improvement over 2004/05 it is still a substantial figure in the context of the consolidated entity. It is expected that the consolidated entity will continue to record operating losses in 2005/06.

As a result of the continued trading losses there is significant uncertainty whether the Company and the consolidated entity will continue as a going concern and, therefore, whether they will realise their assets and extinguish their liabilities in the normal course of business and at the amounts stated in the financial report.

During 2004/05 the Company was successful in raising a net \$4,162,000 of new equity. This in part went to fund the Company's exit from its loss making store at Parramatta.

The Company has recently appointed corporate advisors to assist in restructuring the Company's finances. 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 raising of additional funds and the ongoing reduction of operating losses. A conditional proposal from an unrelated third party, which could lead to an offer for all of the shares in G Retail Limited, or the sale of the company's business, is currently being evaluated, but there is no certainty that a formal and agreed proposal will be forthcoming. Further, the Company is part way through a process of significant change aimed at stemming losses of the Company and consolidated entity and return them to profitability.

If the proposal is not forthcoming, the Company may not be able to pay its debts as and when they fall due, and therefore may not realise their assets and extinguish their liabilities in the normal course of business and at the amounts stated in the financial report.

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.

Notes to the Financial Statements (continued)

(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) Leaschold 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.

(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 its estimated useful economic life up to a maximum of 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. Any 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.

(I) Trade 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

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

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the 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.

Notes to the Financial Statements (continued)

(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.

	Consolidated		Parent Entity
	2005 \$'000	2004 \$'000	2005 \$'000	2004 \$'000
2. Revenue
Revenue from sales of goods	26,779	30,003	25,677	28,912
Other revenue from ordinary activities
Interest income	98	81	96	77
Rental and concession income	406	779	536	910
Dividends – controlled entities			36	54
Supplier discount and rebates received	124	171	104	151
Other	49	51	49	50.
	677	1,082	821	1,242
Total revenue from ordinary activities	27,456	31,085	26,498	30,154

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	356	296	350	284
Loss on disposal of non-current assets	22	2	22	2
Amortisation:
Leasehold improvements	64	63	64	63
Plant and equipment under finance leases	4	3	4	3
Goodwill		123		123
Total amortisation	68	189	68	189
Net bad and doubtful debts	(21)	(48)	(21)	(46)
Rental expense relating to operating leases	4,311	4,942	4,311	4,942
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	544	277	544	277
	544	9,709	544	9,709

Notes to the Financial Statements (continued)

	Consolidated		Parent Entity
	2005 \$'000	2004 \$'000	2005 \$'000	2004 \$'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	(3,391)	(13,026)	(3, 419)	(13,078)
Income tax calculated @ 30%	(1,017)	(3,908)	(1,026)	(3, 923)
Tax effect of permanent differences:
Non-assessable income			(10)	(16)
Amortisation of goodwill		37		37
Goodwill writedown		1.308		1,308
Disallowable expenses and other permament differences	(64)	470	(64)	470
Income tax adjusted for permanent differences	(1,081)	(2,093)	(1,100)	(2, 124)
Losses not recognised	1,030	1.598	1.030	1,575
Timing differences not recognised	70	441	70.	441
Over provision from prior years	1	39		48
Income tax expense/(credit)	20	(15)	1	(60)
(b) The Directors estimate that the potential future income tax benefit at 31 July 2005 in respect of tax losses not brought to
account is	3.064	2,035	3.039	2,010

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 31 July 2005 is \$28,457 (2004: \$28,457)

5. Cash and deposits

Cash at bank and on hand	745	150	674	132
Deposits at call	490	373	490	373
	1,235	523	1,164	505
6. Receivables
Trade debtors	153	296	85	213
Less: provision for doubtful debts	(24)	(91)	(24)	(91)
	129	205	61	122
Other receivables	177	31	312	121
	306	236	373	243
7. Inventories
Finished goods	6,147	8,227	5,792	7,851
Stock in transit	60	180.	60	180
	6,207	8,407	5,852	8,031

	Consolidated		Parent Entity
	2005	2004	2005	2004
	\$'000	\$'000	\$'000	\$'000
8. Other assets
Prepayments	239	456	220	449
9. Receivables (non-current)
Loans to directors	9	9	9	9
Loans to associate companies		105		105
Total	9	114	9	114
10. Property, plant and equipment
Leasehold improvements
At cost	508	456	508	456
Less: accumulated amortisation	(173)	(108)	(173)	(108)
Total leasehold improvements	335	348	335	348
Plant and Equipment
At cost	4,774	4,606	4,740	4,572
Less: accumulated depreciation	(3,360)	(3,048)	(3,336)	(3,030)
	1,414	1,558	1,404	1,542
Plant and equipment under finance lease
At cost	28	24	28	24
Less: accumulated amortisation	(1)	(9)	(1)	(9)
	27	15	27	15
Total plant and equipment	1,441	1,573	1,431	1,557
Total	1,776	1,921	1,766	1,905

Movements in property, plant and equipment

	Leasehold Improvements \$'000	Plant & Equipment \$'000	Plant & Equipment Under Finance Lease \$'000	Total \$'000
Question Constitution
Opening balance	348	1,558	15	1,921
Additions	51	249	28	328
Disposals		(37)	(12)	(49)
Depreciation/amortisation	(64)	(356)	(4)	(424)
Closing Balance	335	1,414	27	1,776
Partna Konsy
Opening balance	348	1,542	15	1,905
Additions	51	249	28	328
Disposals		(37)	(12)	(49)
Depreciation/amortisation	(64)	(350)	(4)	(418)
Closing Balance	335	1,404	27	1,766

Notes to the Financial Statements (continued)

		Consolidated		Parent Entity
	2005 \$'000	2004 \$'000	2005 \$'000	2004 \$'000
11. Intangible assets
Goodwill on acquisition	4,959	4,914	4,914	4,914
Less: Accumulated amortisation	(4, 914)	(4, 914)	(4, 914)	(4, 914)
Total	45
Goodwill of \$45,000 arose on the acquisition of the remaining 20% of Gowings Hardware Pty Limited (see Note 30)
12. Other assets (non-current)
Prepayments	62	63	62	63
13. Payables
Trade creditors	1,755	3,247	1,676	3,141
Other creditors	1,322	2,053	1,328	2,063
Total	3,077	5,300	3,004	5,204
14. Interest bearing Habilities
Lease liabilities (note 27)	9			4
15. Current tax liabilities
Income tax	17	16
16. Provisions
Provisions for onerous rent commitments	428	290	428	290
17. Other Habilities
Employee entitlements	249	301	249	293
18. Interest bearing Habiliti
Lease liabilities (note 27)	14	9	14	9
19. Provisions (non-current)
Employee entitlements	53	116	53	116
Provisions for onerous rent commitments	848	1,180	848	1,180
Total	901	1,296	901	1,296
20. Contributed equity
(a) Share capital
Ordinary shares (notes b,c)	24,275	19,897	24,275	19,897
Less cost of capital raising	(1,452)	(1,236)	(1, 452)	(1,236)
Contributed equity	22,823	18,661	22,823	18,661

\$213,000 of capital raising costs were incurred in the period.

20. Contributed equity (continued)

(b) Movements in ordinary share capital:

Date	Details.	No of Shares	\$'000
2 August 2004	Balance	20,433,093	19,897
25 August 2004	Share Placement	2,600,000	650
		23,033,093	20,547
29 October 2004	Shareholder Share Purchase Plan	1,998,000	499
		25,031,093	21,046
23 December 2004	Share Placement	400,000	100
		25,431,093	21,146
5 January 2005	2:1 Rights Issue	12,515,660	3,129
		37,946,753	24,275
$20$ January $2005$	Cancellation of Shares	(417,000)	n/a
31 July 2005	Balance	37,529,753	24,275

The number of fully paid shares on issue at 31 July 2005 was 37,529,753 (1 August 2004: 20,433,093). On 25 August 2004, 2,600,000 shares were issued under a share placement; on 29 October 2004 1,998,000 shares were issued under a Shareholder Purchase Plan; and on 23 December 2004, a further 400,000 shares were issued via a share placement. On 5 January 2005 the Company completed a fully underwritten 2:1 rights issue, 12,515,660 shares were issued in connection with this matter. On 20 January 2005 417,000 previously issued shares under the Company's Employee Share Plan were cancelled. Loans to former directors and executives amounting to \$388,083 were forgiven in exchange for the cancellation of these shares. Provision for this redemption was made in the previous financial year.

(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 31 July 2005 there were 7,811,000 (1 August 2004: 582,000) options over unissued shares outstanding, 7,300,000 options were issued and 71,000 expired (due to employees resigning) in the 52 week period. The remaining options have the following conditions:

Number	Exercise price	Conditions	Expiry date
311,000	\$1.00		31 November 2006
70,000	\$1.00		31 May 2008
65,000	\$0.80		31 May 2008
65,000	\$0.60		31 May 2007
1,100,000	\$0.25	\$0.35 VWAP for 1 month	15 December 2009
1,100,000	\$0.25	\$0.40 VWAP for 1 month	15 December 2009
1,100,000	\$0.25	\$0.45 VWAP for 1 month	15 December 2009
1,333,334	\$0.261		15 December 2009
1,333,334	\$0.287		15 December 2010
1.333.334	\$0.314		15 December 2011

The marker value of G Retail Limited shares at 31 July 2005 was \$0.12 (2004: \$0.30).

Notes to the Financial Statements (continued)

	Consolidated		Parent Entity
	2005 \$'000	2004 \$7000	2005 \$000	2004 \$'000
21. Retained Profits
Retained profits/(losses) at the beginning of the financial period	(14,218)	(1.194)	(14,202)	(1, 184)
Net profit/(loss) attributable to members of G Retail Limited	(3,420)	(13,024)	(3.420)	(13,018)
. Retained profits/(losses) at the end of the financial period	(17, 638)	The company (14.218)	The company (17.622)	Property States (14,202)

22. Outside Equity Interests in Controlled Entitles

Interest in:
Share capital		-61
Retained profits	$\rightarrow$
		61
23. Equity
Total equity at the beginning of the financial period	4.504	18,077	4.459	18,026
Total changes in equity recognised in the statement of financial performance	(3,420)	(13,024)	(3,420)	(13,018)
Shares issued, net of transaction costs	4.162		4.162
Cancellation of shares (note 20b)		(549)		(549)
Purchase of Outside Equity Interest	(61)	٠
Total equity at the end of the financial period	5,185	4.504	5,201	. 4.459

24. Financial Instruments

(a) Accounting policies

The consolidated entity's accounting policies with respect to financial instruments are set out 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	Fixed interest maturing in		Non-interest
2005	Notes	interest rate \$'000	1 year or less \$000	$1-5$ years \$000	bearing \$'000	Total \$'000
Financial assets
Cash and deposits	5.	1,194	$\tilde{\phantom{a}}$		41	1,235
Receivables	6,9		$\tilde{\phantom{a}}$		315	315
		1,194			356	1,550
Weighted average interest rate		4.8%	$\tilde{\phantom{a}}$	-
Financial liabilities
Payables	13		٠		3,077	3,077
Lease liabilities	14,18		8	14		22
			8	14	3,077	3,099
Weighted average interest rate			6.8%	6.8%
Net financial assets/(liabilities)		1,194	(8)	(14)	(2,721)	. (1, 549)

		Floating	Fixed interest maturing in		Non-interest
2004	Notes	interest rate \$'000	1 year or less \$'000	$1-5$ years \$000	bearing \$'000	Total \$'000
Financial assets
Cash and deposits	5	481			42	523
Receivables	6,9				350	350
		481	٠		392	873
Weighted average interest rate		4.50%	÷	$\overline{\phantom{a}}$	۰
Financial liabilities
Payables	13				5,300	5,300
Lease liabilities	14,18		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)	Parameter Administration (4, 440)

(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	Resigned 5 August 2004
Andrew Brown	Chairman and Non-executive director	Appointed 2 August 2004
Tony Gattari	Managing Director - Executive	Appointed 22 October 2004
	Paolo Gnecchi-Ruscone Chief Executive Officer - Executive	Resigned 22 October 2004
Specified Executives
Chris Charleson	Company Secretary and Chief Financial Officer
Robert Savli	Deputy Managing Director and Operating Director	Appointed 22 November 2004
Lili Sinden	HR Manager	Appointed 8 November 2004
John McLay	Head of Product Development	Resigned 25 October 2004

Notes to the Financial Statements (continued)

25. Directors and Snecified Executives (continued)

Remuneration Report

(a) 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 (including consideration of the Company's earnings and the effect of the Company's performance on shareholder wealth), 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 shares with 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.

		Primary Benefits		Post Employment	Equity Compensation	Other Compensation	Total
	Cash salary and fees S	Cash bonuses S	Non-monetary benefits 1 \$	Super- annuation s	Options 2 \$	Termination benefits \$	S.
Non-executive directors
Andrew Brown	24,794				1,875	$\tilde{\phantom{a}}$	26,669
Tony Young	25,000	$\omega$		2,250	1,875	÷	29,125
Duncan Shaw	25,000	÷.		÷.	$\tilde{\phantom{a}}$	÷	25,000
John Gowing	2,500		÷.		$\tilde{\phantom{a}}$	÷	2,500
Executive directors
Tony Gattari	224,545			8,875	2,438		235,858
Paolo Gnecchi- Ruscone	58,433		462	5,259	$\sim$	146,736	210,890
Executive Officers
Chris Charleson	178,631		5,669	16,077		$\tilde{\phantom{a}}$	200,377
Robert Savli	80,039		15,962	7,204	244		103,449
Lili Sinden	76,731			6,906	٠	÷	83,637
John McLay	24,923		11,534	2,243			38,700

(b) Details of Remuneration

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

2 The percentage of total remuneration represented by equity compensation is as follows:

Andrew Brown	7.0%
Tony Young	6.4%
Tony Gattari	1.0%
Robert Savli	$0.2\%$

25. Directors and Specified Executives (continued)

(c) Service Agreements

Executive directors and officers are employed under employment contracts that provide for fixed remuneration, and where applicable, define bonus criteria and equity compensation. The contracts also provide for notice periods by the company on termination as follows:

Director/ Executive Officer	Termination Notice Period
Tony Gattari	3 months
Chris Charleson	6 months
Rob Savli	3 months
Lili Sinden	1 month

There are no termination payments provided under these contracts other than as required by statute.

(d) Share based compensation and Directors Interests

During the year 7,300,000 options were in issue to Directors and Specified Executives. The terms of options held at 31 July 2005 held by Directors and Executive Officers are set out below:

Director/ Specified Executive	Options issued	Vesting Date	Exercise price	Conditions	Expiry date
Chris Charleson	65,000	31 May 2004	\$0.60		31 May 2007
Chris Charleson	65,000	31 May 2005	\$0.80	$\overline{\phantom{a}}$	31 May 2008
Chris Charleson	70,000	30 November 2005	\$1.00		31 May 2008
Tony Gattari	1,000,000	14 December 2005	\$0.25	\$0.35 VWAP for 1 month	15 December 2009
Tony Gattari	1,000,000	14 December 2006	\$0.25	\$0.40 VWAP for 1 month	15 December 2009
Tony Gattari	1,000,000	14 December 2007	\$0.25	\$0.45 VWAP for 1 month	15 December 2009
Rob Savli	100,000	14 December 2005	\$0.25	\$0.35 VWAP for 1 month	15 December 2009
Rob Savli	100,000	14 December 2006	\$0.25	\$0.40 VWAP for 1 month	15 December 2009
Rob Savli	100,000	14 December 2007	\$0.25	\$0.45 VWAP for 1 month	15 December 2009
Andrew Brown	666,667	14 December 2005	\$0.261	$\overline{\phantom{a}}$	15 December 2009
Andrew Brown	666,667	14 December 2006	\$0,287	$\overline{\phantom{a}}$	15 December 2009
Andrew Brown	666,666	14 December 2007	\$0,314	$\overline{\phantom{a}}$	15 December 2009
Tony Young	666,667	14 December 2005	\$0.261	$\overline{\phantom{a}}$	15 December 2009
Tony Young	666,667	14 December 2006	\$0,287	$\overline{\phantom{a}}$	15 December 2009
Tony Young	666,666	14 December 2007	\$0,314		15 December 2009.
NTA maaliyaa maaa maaaalada dagdaa aku wadadkaad ama kaaaa kaasad

No options were exercised during the period and none lapsed.

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 1	7,350,001
Tony Young	10,057,229
Tony Gattari

1 Andrew Brown is a director of Loftus Lane Investments Pty Limited. Loftus Lane Investments Pty Limited holds 7,013,501 shares in the Company. Mr Brown is a director and shareholder of Trent Capital Limited, the parent company of Loftus Lane Investments Pty Limited.

Notes to the Financial Statements (continued)

		Consolidated		Parent Entity
	2005 \$'000	2004 \$000	2005 \$'000	2004 \$'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:
Audit Services	-52	50	52	50.
Other services	28	Χ	28	Χ
	the company 80	58	. 80	. $\sim$ $\sim$ 58

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

Lease Commitments

Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities, payable:

Within one year	4.494	4.421	4.494	4,421
Later than one year but not later than 5 years	15,650	16,957	15,650	16,957
Later than 5 years	2,864	11.164	2.864	11,164
	23,008	32,542	23.008	32,542
Representing:
Non-cancellable operating leases	23,006	32.540	23,006	32,540
Future finance charges on finance leases	2			2
	23,008	32.542	23.008	32.542

Operating Leases

Commitments for minimum lease payments (excluding GST) in relation to non-cancellable operating leases are payable as follows:

Within one year	4.485	4.421	4.485	4.421
Later than one year but not later than 5 years	15.635	16.955	15.635	16.955
Later than 5 years	2,864	11.164	2.864	11.164
Commitments not recognised in the financial statements	22.984	32.S40	22.984	32.540

Finance Leases

Commitments in relation to finance leases (excluding GST) are payable as follows:

Within one year
Later than one year but not later than 5 years	15	11
Minimum lease payments	24	15	24
Less: Future finance charges	'2'	(2)
Total lease liabilities	22	13	22	13
Representing lease liabilities:
Current (note 14)			х
Non-current (note 18)	14		14
		13

The weighted average interest rate implicit in the finance leases is 6.8%

The Company has a contingent liability of up to \$175,000 which may be payable to the third party referred to in the Chairman's Report, in the event that negotiations to sell the business or takeover the Company do not proceed and the event that causes the negotiations to be suspended is one of the defined trigger events in the "no shop" agreement.

	Consolidated		Parent Entity
	2005 \$'000	2004 \$'000	2005 \$'000	2004 \$'000
28. Employee entitlements
Emplovee Entitlement Liabilities
Provision for employee entitlements
Current (note 17)	249	301	249	293
Non-current (note 19)	53	116	53	116
Aggregate employee entitlement liability	302	417	302	409
Employee numbers	No.	No.	No.	No.
Average number of employees during the financial period	196	243	191	238

For details of the options held by employees refer note 20(e).

29. Related narties

Directors

The names of persons who were Directors of G Retail Limited at any time during the financial period are as follows: Andrew Brown, Tony Young, Duncan Shaw, John Gowing, Tony Gattari and Paolo Gnecchi-Ruscone.

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
	2005	2004	2005	2004
	\$'000	- 1000	\$'000	\$'000
. . Secured share loans		the second contract of the second contract of the second contract of the second contract of the second contract of the second contract of the second contract of the second contract of the second contract of the second cont		The company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company

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 8,147,589 shares.

The Company has a lease for the retail property at 45 Market Street with Gowing Bros. Limited. The terms of the lease are commercial terms. The gross amount of rent paid during the period amounted to \$2,531,000 $(2004, $2,386,000).$

b. XL Capital Pty Limited – a company of which Tony Young is a director and shareholder. In 2005 the company paid \$91,500 in gross fees to XL Capital Pty Limited for the underwriting of the rights issue made during the year.

c. Achievers Group Pty Limited – a company in which Tony Gattari is a director and proprietor. In 2005 the company paid \$16,300 in fees to Achievers Group Pty Limited in relation to training services.

30. Investments in controlled entities

			Equity Holding		Cost of Parent Entity's Investment
Name of Entity	Country of Incorporation	Class of Shares	2005 %	2004 %	2005	2004 \$
Gowings Ptv Limited	Australia	Ordinary	100	100	100	100
Gowings Hardware Pty Limited	Australia	Ordinary	100	80	351.463	245,154
Gowings Wholesale Pty Limited	Australia	Ordinarv	100	100	100.	100.

$\sim$

On 31 July 2005 the company acquired the remaining 20% of Gowings Hardware Pty Limited that it did not already own for consideration of \$106,309

31. Seament information

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

32. Reconciliation of onerating profit after income tax to net cash inflow from onerating activities

	Consolidated		Parent Entity
	2005 \$'000	2004 \$'000	2005 \$'000	2004 \$'000
Operating profit after income tax	(3, 411)	(13,011)	(3,420)	(13,018)
Depreciation and amortisation of non-current assets	424	6,908	418	6,896
Loss on disposal of property, plant and equipment	22	2	22	2
Increase/(decrease) in provision for income taxes payable		(52)		(48)
Decrease/(increase) in receivables	(4)	201	(74)	56.
Decrease/(increase) in inventories	2,199	1,846	2,180	1,902
Increase in other current assets	220		229	4
Increase/(decrease) in trade creditors	(2,197)	543	(2,162)	749
Increase/(decrease) in provisions	(410)	1,417	(413)	1,416
Net cash inflow/(outflow) from operating activities	(3, 157)	(2, 146)	(3.220)	(2.041)

33. Earninus ner share

	Consolidated 2005 Cents	Consolidated 2004 Cents
Basic earnings/(loss) per share	(10.6)	(61.2)
Basic earnings per share (before individually significant items)	78.9ì	(15.6)
Diluted earnings/(loss) per share	(10.6)	(61.2)

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:

	\$'000	\$'000
Earnings/(loss)	(3.420)	(13,024)
Earnings/ (loss) before individually significant items	(2,876)	(3,315)
number number	Number	Number
Weighted average number of ordinary shares	32,412,099	21,332,014
.

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.

34. Adoption of Australian Equivalents to International Financial reporting Standards ("AlfRS")

The Australian Accounting Standards Board (AASB) has adopted AIFRS for application to reporting periods beginning on or after 1 January 2005. The adoption of AIFRS 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 AIFRS for the first time will be required to restate their comparative financial statements to amounts reflecting the application of AIFRS to that comparative period. Most adjustments required on transition to AIFRS will be made, retrospectively, against opening retained earnings as at 1 August 2004.

The Company has established a small project team to manage the transition to AIFRS chaired by the Chief Financial Officer and reporting to the Audit Committee. To date, the project team has analysed all of the relevant AIFRS and has identified a number of account policy changes that will be required. The known or reliably estimatable impacts on the financial report for the 52 week period ended 31 July 2005 had it been prepared using AIFRS are set out below.

Income tax

Under AASB112 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.

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 pretax accounting profit or loss and/or taxable income or loss and current and deferred taxes cannot be recognised directly in equity.

Had the policy required by AASB112 been applied in the current period there would have been no impact on the tax balances.

Share-based payments

The present policy of potentially providing share-based compensation to employees will, under AASB119 Employee Benefits, result in the recognition of an expense and an equivalent increase in equity. Had the policy required by AASB119 been adopted, accumulated losses at 1 August 2004 would have been \$10,000 higher, salary expense for the period ended 31 July 2005 would have been \$6,000 higher, reserves would have been \$10,000 higher at 2 August 2004 and \$16,000 higher at 31 July 2005. These would be no charge to total equity.

Impairment of assets

Under AASB136 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. Had the policy required by AASB136 been adopted no impact on the carrying value of assets would be expected.

Directors' Declaration

In the Directors' opinion:

• the financial statements and notes set out on pages 10 to 29 are in accordance with the Corporations $(a)$ Act 2001, including:
• complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory $(i)$ professional reporting requirements; and
• giving a true and fair view of the company's and consolidated entity's financial position as at 31 $(ii)$ July 2005 and of their performance, as represented by the results of their operations and their cash flows, for the financial year ended on that date; and
• there are reasonable grounds to believe that the company will be able to pay its debts as and when they $(b)$ become due and payable.

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

Andlew J. Blanz

Andrew Brown Chairman

Sydney, NSW 31 October 2005

Independent Audit Report

To the members of G Retail Limited:

Scope

The financial report and directors' responsibility

The financial report comprises the statement of financial position as at 31 July 2005, 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 31 July 2005 for both G 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 audit is influenced by several factors including the use of professional judgement, selective testing, the inherent 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 fairly, 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.

The Directors Report attached to the financial statements includes a copy of the Independence Declaration dated 31 October 2005 given to the Directors by the lead auditor for the audit. That Declaration would be in the same terms if it had been given to the Directors at the time this audit report was made.

Audit opinion

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

(a) the Corporations Act 2001, including:

• giving a true and fair view of the company's and consolidated entity's financial position as at 31 $(i)$ July 2005 and of their performance for the 52 week period ended on that date; and
• complying with Accounting Standards in Australia and the Corporations Regulations 2001; and $(ii)$

(b) other mandatory financial reporting requirements in Australia.

Inherent Uncertainty Regarding Continuation as a Going Concern

Without qualification to the opinion expressed above, attention is drawn to the following matter. As a result of the matters described in Note 1(b), there is significant uncertainty whether G Retail Limited and the consolidated entity will be able to continue as a going concern and therefore whether they will realise their assets and extinguish their liabilities in the normal course of business and at the amounts stated in the financial report.

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Marie Sandar

HLB MANN JUDD (NSW Partnership) Chartered Accountants

D K SWINDELLS

Partner

Sydney, NSW 31 October, 2005

Shareholder Information

The shareholder information set out below was applicable as at 30 September 2005.

Distribution of securities

				Range of fully paid ordinary shares
--	--	--	--	-------------------------------------	--

Range of fully paid ordinary shares		Number of Shareholders
1	$\overline{\phantom{a}}$	1,000	123
1,001	$\overline{\phantom{a}}$	5,000	315
5,001	$\overline{\phantom{a}}$	10,000	130
10,001	$\overline{\phantom{a}}$	100,000	277
100,001	$\overline{\phantom{a}}$	and over	23

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:

Mr Anthony Kieron Young	10,057,229	ordinary shares
Gowing Bros. Limited		7,350,001 ordinary shares
Trent Capital Limited (Loftus Lane Investments P/L)	7,013,501	ordinary shares
20 Lorgeot charabolders

20 Largest shareholders

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

	Name	Fully paid Ordinarv Shares	Percentage of issued capital
1	Mr Anthony Kieran Young	10,057,229	26.8%
2	Gowing Bros. Limited	7,350,001	19.6%
3	Loftus Lane Investments	7,013,501	18.7%
4	Mrs Ann Gowing	619,967	1.7%
5	Warwick Pty Limited	479,845	$1.3\%$
6.	Cogent Nominees Pty Limited	386,002	$1.0\%$
7	Berzins Asset Management	330,000	$0.9\%$
8	Mr Gregory Mark Atkinson	300,000	$0.8\%$
9	Carlton Hotel Limited	286,342	$0.8\%$
10	Mr Gerald Francis Pauley & Mr Michael James Pauley	234,178	$0.6\%$
11	Dalla Properties Pty Limited	230,000	$0.6\%$
12	Woodside Pty Limited	215,288	$0.6\%$
13	Mr Mark Kamper	215,000	$0.6\%$
14	Mr Robert Stephen Ackerman & Mrs Sheila June Ackerman	180,000	$0.5\%$
15	AUSA International Pty Ltd	180,000	$0.5\%$
16	Locope Pty Ltd	165,000	$0.4\%$
17	Adding Up Pty Limited	130,000	$0.3\%$
18	Dr Gordon Bradley Elkington	128,684	$0.3\%$
19	Mr Alan James Paterson	122,853	$0.3\%$
20	SBA Management Services Pty Limited	120,000	$0.3\%$

Marketable parcels

The number of shareholdings held in less than marketable parcels is 366.

Corporate Directory

G Retail Limited ABN 71 098 238 585

Registered Office Level 6 15 Castlereagh Street SYDNEY NSW 2000 Telephone: 02 9287 6394 Facsimile: 02 8915 1118 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) Level 19 207 Kent Street SYDNEY NSW 2000

G Retail Limited

WWW.gowings.com.au

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