JOYCE CORPORATION LTD - Annual Report 2012

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Joyce Corporation Ltd AND CONTROLLED ENTITIES Annual Report 2012 Celebrating 126 Years in Business

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Joyce Corporation Ltd AND CONTROLLED ENTITIES

ABN: 80 009 116 269 Annual Report 2012

Joyce Corporation Ltd 2012 Annual Report I PAGE 1

Corporate Directory

Directors

Directors D A Smetana Chairman M A Gurry T R Hantke A Mankarios Secretary K Gray Notice of annual general meeting The Annual General Meeting of Joyce Corporation Ltd will be held at Royal Freshwater Bay Yacht Club Athol Hobbs Room Keane's Point Hobb's Place PEPPERMINT GROVE 6011 Western Australia PERTH, WA 6000 time: 10:30am date: 22 November 2012 Principal registered office 14 Collingwood Street, OSBORNE PARK, WA, AUSTRALIA, 6017 Tel: +61 8 9445 1055 Share register Computershare Investor Services Pty Limited Level 2, Reserve Bank Building, 45 St Georges Terrace PERTH, WA 6000 Auditors Grant Thornton Audit Pty Ltd Level 1 10 Kings Park Road West Perth WA 6005 Australia Solicitors Norton Rose BankWest Tower, 108 St Georges Terrace Perth WA 6000 Australia Bankers St George Bank Level 2 Westralia Plaza 167 St Georges Terrace Perth WA 6000 Australia Stock exchange listings Joyce Corporation Ltd shares are listed on the Australian Securities Exchange (ASX ticker: JYC). Website address www.joycecorp.com.au ABN: 80 009 116 269

Joyce Corporation Ltd 2012 Annual Report I PAGE 2

ANNUAL REPORT CONTENTS

CORPORATE DIRECTORY............................................................................................................................ 2	CORPORATE DIRECTORY............................................................................................................................ 2
ANNUAL REPORT CONTENTS.......................................................................................................... ...........3
CHAIRMAN’S REPORT.................................................................................................................................. 4
EXECUTIVE DIRECTOR’S REPORT............................................................................................................. 5
DIRECTORS’ REPORT.................................................................................................................................. 7
AUDITOR'S INDEPENDENCE DECLARATION........................................................................................... 17
CORPORATE GOVERNANCE STATEMENT............................................................................................... 18
STATEMENT OF COMPREHENSIVE INCOME........................................................................................... 33
STATEMENT OF FINANCIAL POSITION..................................................................................................... 34
STATEMENT OF CASHFLOWS................................................................................................................... 35
STATEMENT OF CHANGES IN EQUITY..................................................................................................... 36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.................................................................. 37
1.	CORPORATE INFORMATION.......................................................................................................... 37
2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES............................................................ 37
3.	GOING CONCERN....................................................................................................................... 49
4.	FINANCIAL RISK MANAGEMENT................................................................................................ 49
5.	CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS...................................................... 55
6.	SEGMENT INFORMATION........................................................................................................... 55
7.	REVENUE, INCOME AND EXPENSES........................................................................................ 58
8.	INCOME TAX................................................................................................................................ 59
9.	DISCONTINUED OPERATIONS................................................................................................... 62
10.	EARNINGS PER SHARE.............................................................................................................. 63
11.	CASH AND CASH EQUIVALENTS............................................................................................... 64
12.	TRADE AND OTHER RECEIVABLES.......................................................................................... 64
13.	INVENTORIES.............................................................................................................................. 65
14.	OTHER ASSETS........................................................................................................................... 65
15.	NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE.................................................... 66
16.	OTHER FINANCIAL ASSETS....................................................................................................... 66
17.	PLANT AND EQUIPMENT............................................................................................................ 66
18.	INVESTMENT PROPERTY........................................................................................................... 67
19.	INTANGIBLE ASSETS.................................................................................................................. 68
20.	TRADE AND OTHER PAYABLES................................................................................................ 69
21.	INTEREST BEARING LOANS AND BORROWINGS.................................................................... 70
22.	PROVISIONS................................................................................................................................ 72
23.	CONTRIBUTED EQUITY.............................................................................................................. 73
24.	RESERVES................................................................................................................................... 74
25.	CAPITAL AND LEASING COMMITMENT..................................................................................... 74
26.	CONTINGENT LIABILITIES.......................................................................................................... 76
27.	RELATED PARTY DISCLOSURES.............................................................................................. 76
28.	EVENTS AFTER REPORTING DATE........................................................................................... 77
29.	AUDITORS’ REMUNERATION..................................................................................................... 77
30.	DIVIDENDS................................................................................................................................... 77
31.	DIRECTOR AND EXECUTIVE DISCLOSURES........................................................................... 78
32.	RECONCILIATION OF NET LOSS AFTER TAX TO NET CASH FLOWS FROM OPERATIONS81
33.	PARENT ENTITY DISCLOSURES................................................................................................ 82
DIRECTORS’ DECLARATION................................................................................................................... 83
INDEPENDENT AUDITOR'S REPORT...................................................................................................... 84
ASX	ADDITIONAL INFORMATION............................................................................................................ 87

Joyce Corporation Ltd 2012 Annual Report I PAGE 3

CHAIRMAN’S REPORT

I am pleased to announce a robust profit for Joyce Corporation Ltd to 30[th] June 2012 of $3.035 million. This compares with a profit of $2.91 million for last year to 30[th] June 2011.

This equates to earnings per share of 12.6 cents which is down on the comparative year due to the early conversions of convertible notes during the year.

The company’s Net Asset Value per share as at 30 June 2012 is 81 cents excluding partly paid shares.

Accordingly Directors will consider an appropriate Dividend policy and communicate with shareholders post our recently announced business review. The review outcome is expected in October 2012.

The company’s Franchise business Bedshed performed well and above expectations, whilst the challenging retail environment did not herald the same result in some company stores with less than optimal performance in regional areas. As a result the Directors have decided to take up a one-off provision to deal with the exit of some stores. The closure costs have been accounted for at 30 June 2012.

I am pleased to confirm we received 100% support to convert all the Convertible Notes during the year. This has enhanced equity and improved shareholders’ funds by an additional $2.18M in this reporting period.

The group has a very valuable asset with its 41,000 m2 industrial property site at Bridges Road Moorebank. This is in South West Sydney and adjoins the Georges River. This property is currently rented to the leading Australian Foam manufacturer at sub-economic market rents.

The valuation received by the bank registered panel valuers was recorded with the financial report at $15M based on the sub-economic rent and under current fair value for investment property. We anticipate, based on advice received, this value will continue to improve over the next few years. We also anticipate the recent announcement by the NSW Government to enhance port distribution potential by creating a freight inter-modal site nearby will likely enhance demand for commercial land in the area in coming years to aid and facilitate distribution hubs for sea freight containers.

The group is now in a financially conservative gearing position, consisting of a debt to equity of 24.5% at 30 June 2012 and may seek to leverage its strong balance sheet in the near future to improve the returns to shareholders.

It is important to note the company has $4.2M of inventory tied up in company stores which will reduce as underperforming company stores are closed.

I would like to recognise the efforts and achievements of the Board and Management in addressing and resolving outstanding issues and placing our Group in a far stronger position to undertake sustained renewed growth.

I commend the Group’s prospects to you.

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Dan Smetana Chairman

Joyce Corporation Ltd 2012 Annual Report I PAGE 4

EXECUTIVE DIRECTOR’S REPORT

Joyce Corporation Ltd made a consolidated net profit of $3.035 million after tax to 30 June 2012. This was up 4.1% on the previous reporting year.

Total revenue recorded was $19.9M down from $24.4M as a consequence of closure and franchising of some company owned stores in the previous period.

The Bedshed Franchising business recorded annual network written sales for the 2012 financial year in line with the 2011 financial year on a like for like basis. The global economic environment and uncertainty continue to impact retail conditions in Australia.

Retailers in general reported worsening conditions during the course of the year. The Bedshed brand remains very strong with a steady flow of enquiries for new Franchises, a growth of Franchise income and strong import activities.

During the course of the year Bedshed engaged experts in retail store concept design. Management completed a new evolution store fit-out model that will greatly enhance our customer shopping experience aided by technology and innovations in display. This is due to start rolling-out into stores during the 2013 year. We anticipate this along with new ranging and attractive pricing will maintain Bedshed at the forefront of the Bedding retail industry.

The Company ended up with reported Earnings before Interest Tax, Depreciation and Amortisation (EBITDA) of $3.83 million. The net shareholders’ funds increased consistently over the course of the last two and a half years aided by the very valuable property asset at Moorebank and the 100% conversion of $2.18 Million of Convertible Notes into equity. Net Shareholder’s funds ended the year at $22.3 Million up from $17.91M in 2011 and $15.69M in 2010.

The accounts for this period included a one-off provision of $950,000. This is recorded to cover the closure, in the next accounting period, of some less than optimal performing company owned stores. This we believe will help re-position the group for growth in Franchising.

The Company seeks to enhance its cash flow generating business units in the mid-term to deliver improved returns to shareholders. As previously announced the Company will undertake a review with external input to explore all opportunities and options. It will review the potential of mergers and acquisitions as well as possible asset sales to achieve this goal.

The Company has recently commissioned a national franchisee survey, by an independent company, to assist Bedshed in benchmarking its brand and delivering superior service initiatives to franchise holders. This is in line with the Bedshed Vision of becoming the most successful specialist Bedroom Franchise by 2015.

Review of Operations

Management focused on further re-structuring planning and in achieving improvements to overall efficiency.

For provisioned store closures the lease surrender costs had reduced over time making it commercial to now close underperforming stores. The company prefers to continue focus on Franchisee store growth. One additional franchise store was opened during the year by an existing Franchisee, which in a difficult trading environment supports the successful franchise model of Bedshed. The improvement in operating profit is directly attributable to the Company's change in strategy and focus.

The Company maintains its valuable Investment Property at Moorebank in Sydney’s busy south- west, near the M5 Motorway exit/entry ramp and the Georges River.

The property was recently valued by an independent bank panel valuer for $17.4M. The Company took up $15M for its investment value on the basis of the sub-economic rent earned from its preexisting lease, which is due to end in 2015.

Joyce Corporation Ltd 2012 Annual Report I PAGE 5

EXECUTIVE DIRECTOR’S REPORT (CONTINUED)

Future Outlook

The current economic outlook and global economic conditions prohibit any accurate forecasts of activity to be presented with any certainty. As a result the board has decided to refrain from giving any outlook toward the group's 2013 results.

The Company plan is to have its Bedshed business continue to grow through the franchise business; we will investigate opportunities to reach a stronger market position and work to improve general performance.

Joyce Corporation Limited has the opportunity to leverage its strong balance sheet to grow its size from its present “micro- cap” company status, whilst taking a relatively low risk approach. The Board has undertaken to continue to review opportunities as they present themselves.

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Anthony Mankarios Executive Director

Joyce Corporation Ltd 2012 Annual Report I PAGE 6

DIRECTORS’ REPORT

Your Directors present their report on the Consolidated Entity, consisting of Joyce Corporation Ltd (“the Company”) and the entities it controlled at the end of, or during, the year ended 30 June 2012.

DIRECTORS

The names of the Company’s Directors in office during the year ended 30 June 2012 and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated.

Mr D A Smetana Chairman (non-executive) Mr T R Hantke Non-executive Director Mr M A Gurry Non-executive Director Mr A Mankarios Executive Director

SECRETARY

Mr K Gray

PRINCIPAL ACTIVITIES

During the year the principal continuing activities of the Consolidated Entity consisted of being:

(a) The franchisor of the Bedshed chain of retail bedding stores; and
(b) An owner of a number of Bedshed retail stores.
(c) Property Investment

No significant changes in the nature of the activities of the Consolidated Entity occurred during the year.

REVIEW AND RESULTS OF OPERATIONS

During the year ended 30 June 2012 (“the Financial Year”) the Consolidated Entity, achieved revenue from continuing operations of $16,052,000 (2011: $16,549,000) and a profit from continuing operations after taxation of $4,689,000 (2011: $3,979,000) and a net profit after tax of $3,035,000 (2011: $2,914,000). The reduction in revenue primarily resulted from the reduced number of stores and a weaker consumer market.

Profit was maintained with revaluation of the investment property at Moorebank in NSW. Further valuation increases are expected from the expiration of subsidised rental period out to November 2015.

Closure of Company-owned stores

During the year ended 30 June 2012, the Consolidated Entity provided for the closure of a number of underperforming company owned stores.

Settlement of legal actions with franchisees

During the year ended 30 June 2012, the Consolidated Entity completed the settlement with franchisees of all outstanding legal cases which was signed on 20 September 2010. The Consolidated Entity has made all outstanding payments during the financial year in accordance with the settlement agreements.

Financial Position

At 30 June 2012 the Consolidated Entity had equity of $22,313,000 (2011: $17,918,000); cash and cash equivalents of $3,774,000 (2011: $3,780,000) and unutilised debt facilities of $620,000 (2011: $58,000) (refer to note 4 for further details).

Bank Facility

The Board is pleased to advise that the Consolidated Entity has successfully extended its debt funding facility with St George Bank from March 2013 to 30 June 2014. This outcome is indicative of St George Bank’s understanding and support of the Consolidated Entity’s strategy. A $1.6m facility which is subject to annual review was also extended.

Joyce Corporation Ltd 2012 Annual Report I PAGE 7

DIRECTORS’ REPORT (CONTINUED)

REVIEW AND RESULTS OF OPERATIONS (CONTINUED)

FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES

The Consolidated Entity will look to further develop the Bedshed business through the expansion of its network of franchised stores whilst seeking to improve the financial performance of Company-owned and operated stores. The Board is completing a strategic review of all businesses to ensure maximum return on shareholders’ funds.

DIVIDENDS

Dividends declared or paid during the financial year are as follows:

Distributions paid or payable Final unfranked ordinary dividend of Nil (2011: 2.0 cents) cents per share (Paid – 18 November 2011) Interim unfranked ordinary dividend of 1.5 (2011: Nil) cents per share (Paid – 02 July 2012)	2012 2011 $000 $000
	406 406 414 -
	820 406

The Board will continue to review the Company’s ability to pay dividends and expects to proceed with the payments of regular dividends as soon as certain financial milestones are achieved.

SIGNIFICANT AFTER REPORTING DATE EVENTS

After the reporting date, agreement on closing two regional company owned stores has been executed. These were fully provisioned at the reporting date.

An unfranked dividend of 1.5 cents per share was paid on 2 July 2012.

Other than disclosed above no event has occurred since the reporting date to the date of this report that has significantly affected, or may significantly affect:

(a) the Consolidated Entity’s operations, or
(b) the results of those operations, or
(c) the Consolidated Entity’s state of affairs.

Joyce Corporation Ltd 2012 Annual Report I PAGE 8

DIRECTORS’ REPORT (CONTINUED)

INFORMATION ON DIRECTORS

Mr D A Smetana Chairman - Non-executive. Age 68. Dip Comm FCPA FAIM FAICD

Experience and expertise

Mr Smetana has been Chairman of Joyce Corporation Ltd since 1984. He is also the Chairman of Bedshed Franchising Pty Ltd. He is a past President of the Industrial Foundation for Accident Prevention and remains a Director. Director of Edge Employment Solutions Inc, Director of Poly Metallica Minerals Ltd, a Director of St John of God Foundation and Chairman of the St John of God Comprehensive Cancer Centre Fundraising Committee.

His past board memberships include: Deputy Chairman of Youth Focus Inc (1998 - 2007), Deputy Chairman Western Power Corporation and Chairman of its Finance Committee until 2003, Chairman and National Councillor of the Defence Reserves Support Council - WA (1997 - 2006), Director of WA Symphony Orchestra until 2003. Vice President and Councillor of the WA Federation of Police and Community Youth Centres (Inc.),

His awards include the 2003 Centenary Medal for Service to Commerce and the Community, the 2007 Ian Chisholm Award for Distinguished Service to Occupational Health & Safety and the 1998 WA Business Executive of the Year award.

Other current Directorships of listed companies

None

Former Directorships of listed companies in last 3 years

None

Special responsibilities

Chairman of the Board

Interests in shares and options

9,798,705 beneficial fully paid ordinary shares in Joyce Corporation Ltd.
380,000 partly paid (issued at $1.955 and paid to $1.315) ordinary shares in Joyce Corporation Ltd.

Mr M A Gurry. – Independent, Non-executive Director. Age 65. Bachelor of Science Dip AICD FAICD FAIM SF Fin

Experience and expertise

Mr Gurry was Managing Director of HBF from 1995 to 2007 and prior to that he was President Asia Pacific of the DMR Group Ltd, an international consulting firm. From 1996 to 1999 he was Vice President of the Asian Association of Management Organizations, from 1997 to 1999 National President of the Australian Institute of Management and from 1999 to 2008 Chairman of United Way WA Inc. Mr Gurry is Chairman of Foundation Housing Limited, Chairman of the Forest Products Commission, and Chairman of Reignite Pty Ltd, a councilor of HBF Ltd and has served on numerous Boards including the Australian Health Insurance Association, The Australian Information Industry Association, The West Australian Ballet and Integrated Group Ltd.

Other current Directorships of listed companies

None

Former Directorships of listed companies in last 3 years

None

Special responsibilities

Chairman of the Audit Committee Member of the Remuneration Committee

Interests in shares and options

None

Joyce Corporation Ltd 2012 Annual Report I PAGE 9

DIRECTORS’ REPORT (CONTINUED)

INFORMATION ON DIRECTORS (CONTINUED)

Mr T R Hantke. – Independent, Non-executive Director. Age 64. Bachelor of Commerce, FAIM, FAICD

Experience and expertise

Mr Hantke is Managing Director of his own consulting practice, Franchising Solutions Pty Ltd. Prior to this he was the CEO of Snap Franchising from 1988 - 2001. He has been a Director of Bedshed Franchising Pty Ltd since February 2002 and was appointed to the Joyce Board in June 2006. He was a board member of the Franchise Council of Australia 1989 - 1996; Member of the Franchise Policy Council 1997 - 2002; is currently a Member of the ACCC's Franchise Consultative Committee; and Chairman of Co-operative Purchasing Services Pty Ltd. Mr Hantke has extensive managerial experience in both small and large organizations and in various industries.

Other current Directorships of listed companies

None

Former Directorships of listed companies in last 3 years

None

Special responsibilities

Chairman of the Remuneration Committee Member of the Audit Committee

Interests in shares and options

None

Mr A Mankarios. – Executive Director. Age 45.

MBA, FAICD, CFTP, Cer OH&S

Experience and expertise

Anthony Mankarios was appointed in March 2010, after a board decision was made to restructure the executive. He was a Non- Executive prior, appointed in Feb 2008. He has over 26 years of Business experience in a diverse range of industries specialising in M&A's and financial restructuring. He has been involved in both private and Listed Companies as CEO and as Non -Executive director. He previously worked as CEO of Oldfields Holdings Limited since 2002 and prior for an aggregate 16 years with Companies within the paint and surface coating industry.

Other current Directorships of listed companies

None

Former Directorships of listed companies in last 3 years

Oldfields Holdings Ltd

Special responsibilities

Executive Director since March 2010. Member of the Remuneration Committee

Interests in shares and options

694,884 fully paid ordinary shares in Joyce Corporation Ltd.

COMPANY SECRETARY

The Company Secretary is Mr K Gray.

Mr Gray was appointed to the position of Chief Financial Officer and Company Secretary on 19 January 2010. Mr Gray holds a Bachelor of Economics and is a qualified CPA. An experienced Chief Financial Officer and Company Secretary having acted in these roles with a number of listed companies in mining services, industrial and retail in the past.

Joyce Corporation Ltd 2012 Annual Report I PAGE 10

DIRECTORS’ REPORT (CONTINUED)

INFORMATION ON DIRECTORS (CONTINUED)

MEETINGS OF DIRECTORS

The numbers of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2012, and the numbers of meetings attended by each Director were:

Meetings Full meeting of Directors Audit A B A B	of committees Remuneration A B
D A Smetana 11 11 4 4 M A Gurry 11 11 4 4 T R Hantke 11 11 4 4 A Mankarios 11 11 4 4	- - 8 7 8 8 8 5

A = Number of meetings attended B = Number of meetings held during the time the Director held office or was a member of the committee during the year

A Mankarios did not attend three meetings of the remuneration Committee as these meetings related to his contract and remuneration.

REMUNERATION REPORT - AUDITED

The remuneration report is set out under the following main headings:

A. Principles used to determine the nature and amount of remuneration.
B. Service agreements
C. Details of remuneration
D. Share-based compensation
E. Link between remuneration policy and Company performance

The information provided in this remuneration report is also included in the financial report which has been audited as required by section 308(3C) of the Corporations Act 2001.

A. Principles used to determine the nature and amount of remuneration

Remuneration Committee

The Remuneration Committee Charter establishes the role of the Remuneration Committee which is to review and make recommendations on Board and Executive Director remuneration: senior management remuneration; executive share plan participation; human resource and remuneration policies; and senior management succession planning, appointments and terminations.

The main responsibilities of the Remuneration Committee includes reviewing and making recommendations on remuneration policies for the company including, in particular, those governing the directors, Executive Director and senior management.

The Remuneration Committee comprises a majority of non-executive directors and at least three members. The Chairman of the committee is appointed by the Board and must be a non-executive director.

The Remuneration Committee is required to meet as and when required by the Chairman. The committee may invite persons deemed appropriate to attend meetings and may take such independent advice as it considers appropriate. Any committee member may request the Chairman call a meeting.

Joyce Corporation Ltd 2012 Annual Report I PAGE 11

DIRECTORS’ REPORT (CONTINUED)

REMUNERATION REPORT – AUDITED (CONTINUED)

The Remuneration Committee is required to assess its effectiveness periodically. In addition the Charter is required to be revised annually and updated as required.

Remuneration Policies

The objective of the Consolidated Entity’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms to market practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:

competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of executive compensation;
transparency; and
capital management.

In consultation with external remuneration consultants, where appropriate, the Consolidated Entity has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation.

A. Principles used to determine the nature and amount of remuneration (continued)

Alignment to shareholders’ interests:

has economic profit as a core component of plan design;
focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant return on assets as well as focusing the executive on key non-financial drivers of value; and
attracts and retains high calibre executives.

Alignment to program participants’ interests:

rewards capability and experience;
reflects competitive reward for contribution to growth in shareholder wealth;
provides a clear structure for earning rewards; and
provides recognition for contribution.

Non-executive Directors

Fees and payments to non-executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. Non-executive Directors’ fees and payments are reviewed annually by the Board. The Board considers, where appropriate, the advice of independent remuneration consultants to ensure non-executive Directors’ fees and payments are appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of non-executive Directors based on comparative roles in the external market. The Chairman is not present at any discussions relating to determination of his own remuneration.

The current base remuneration was last reviewed with effect from 30 June 2011. The Chairman's remuneration is inclusive of committee fees and other non-executive Directors who are members of a committee do not receive additional yearly fees.

Non-executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $400,000 per annum and was approved by shareholders at the Annual General Meeting on 20 November 2006.

Joyce Corporation Ltd 2012 Annual Report I PAGE 12

DIRECTORS’ REPORT (CONTINUED)

REMUNERATION REPORT - AUDITED (CONTINUED)

Executive pay

Fixed Remuneration

The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Fixed remuneration is reviewed annually by the Remuneration Committee and the process involves the review of Consolidated Entity and individual performance, and relevant comparative remuneration in the market.

Variable Remuneration - Short Term Incentives

The goals consist of a number of key performance indicators (KPI's) covering both financial and non-financial, corporate and individual measures of performance. Included in the measures are contributions to net profit before tax, cash targets and departmental functional KPI's. At the end of the financial year the remuneration committee assesses the actual performance of the Consolidated Entity, the relevant segment and individual against the KPIs set at the beginning of the financial year. Should the Consolidated Entity, or the relevant segment, achieve the set KPIs, the Board will reward the key management personnel with a bonus during the salary review. A percentage of a predetermined maximum amount is awarded depending on results. No bonus is awarded where performance falls below the minimum.

B. Service Agreements

This remuneration report outlines the director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations.

For the purposes of this report, Key Management Personnel (“KMP”) of the Consolidated Entity are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Consolidated Entity, directly or indirectly, including any Director (whether executive or otherwise) of the Company and includes the executives in the Consolidated Entity receiving the highest remuneration.

For the purposes of this report, the term "executive" encompasses the Executive Director, Senior Executives and Company Secretary of the Consolidated Entity.

Details of key management personnel (including the Senior Executives of the Consolidated Entity):

Mr D A Smetana Director and Chairman Mr M A Gurry Director - Chairman of Audit Committee Mr T R Hantke Director - Chairman of Remuneration Committee Mr A Mankarios Executive Director Mr G Culmsee Chief Operating Officer Mr K Gray Chief Financial Officer & Company Secretary Ms S Freedman National Marketing Manager

The employment conditions of all specified executives are formalised in contracts of employment. Other than the NonExecutive Directors, the Executive Director and the Company Secretary, who were engaged by Joyce Corporation Ltd all other executives are permanent employees of Bedshed Franchising Pty Ltd or Sierra Bedding Pty Ltd.

Joyce Corporation Ltd 2012 Annual Report I PAGE 13

DIRECTORS’ REPORT (CONTINUED)

REMUNERATION REPORT – AUDITED (CONTINUED)

Other Executives

All executives have rolling contracts. The Consolidated Entity can terminate each contract by providing from two months to six months written notice or providing payment in lieu of the notice period (based on the fixed component of the executives’ remuneration). The Consolidated Entity may terminate an executive for serious misconduct without notice. Where termination with cause occurs the executive is only entitled to that portion of remuneration that is fixed up to the date of termination.

C. Details of remuneration

	Short-term Post-Employment Share based payment Total Salary & Fees Cash Bonus Non- Monetary benefits Superann uation Retirement benefits Options $000 $000 $000 $000 $000 $000 $000
30 June 2012
Mr D A Smetana	122 - - 50 - - 172
Mr T R Hantke	44 - - 25 - - 69
Mr M A Gurry	- - - 69 - - 69
Mr A Mankarios	155 65 - - - - 220
Mr G Culmsee	211 40 - 22 - - 273
Mr K Gray	137 32 28 18 - - 215
Ms S Freedman	143 13 - 14 - - 170

Total Remuneration: 30 June 2011	812 150 28 198 - - 1,188
Mr D A Smetana	119 - - 50 - - 169
Mr T R Hantke	38 - - 29 - - 67
Mr M A Gurry	52 - - 15 - - 67
Mr A Mankarios	157 - - - - - 157
Mr G Culmsee	183 - 17 18 - - 218
Mr K Gray	124 - 36 14 - - 174
Ms S Freedman	90 - - 8 - - 98

Total Remuneration:	763 - 53 134 - 950

D. Share-based compensation

There was no share-based compensation of Key Management Personnel during the year ended 30 June 2012 (2011: Nil).

Joyce Corporation Ltd 2012 Annual Report I PAGE 14

DIRECTORS’ REPORT (CONTINUED)

REMUNERATION REPORT – AUDITED (CONTINUED)

E. Link between remuneration policy and Company performance

The Consolidated Entity provided executives with variable remuneration in the form of short-term incentives as described in Part A of the Remuneration Report. These incentives are payable upon the achievement of certain goals covering both financial and non-financial, corporate and individual measures of performance. Included in the measures are contributions to net profit before tax, cash targets and departmental functional KPI's.

The following table shows the gross revenue, profits and dividends for the last five years for the Consolidated Entity, as well as the share price at the end of the respective financial years.

	2012	2011	2010	2009	2008
	$000	$000	$000	$000	$000
Revenue (a)	19,956	24,441	28,089	27,906	18,068
Net Profit (a)	3,035	2,914	(8,147)	(1,329)	2,066
Share Price at Year-end $	0.42	0.45	0.40	0.41	1.08
Dividends (Cents) Paid	2.00	2.00	2.00	4.50	9.00

(a) Revenue and net profit in respect of the 2012 and 2011 financial years include discontinued operations. The 2012 financial performance has been impacted by a non-recurring provision for stores that are to be closed during the financial year ending 30 June 2013.

F. Voting at the 2011 Annual General Meeting on the Remuneration report

The Remuneration report in the 2011 Annual Report to shareholders was approved by 99.5% of shareholders at the 2011 Annual General Meeting. No specific feedback was received at the Annual General Meeting or throughout the year.

G. Independent Salary and Incentive Review

During the year the company undertook an independent salary and incentive review so as to benchmark existing salary and incentive policies and levels. The Review was undertaken by the independent professional firm of Gerard Daniels Australia. In general the company policies and remuneration levels were found to be consistent with the markets in which we operate, although some changes have been made to ensure greater consistency in some aspects of our remuneration practices.

End of Remuneration Report.

LOANS TO DIRECTORS AND EXECUTIVES

There were no loans outstanding to Directors and executives as at 30 June 2012.

INSURANCE OF OFFICERS

During the financial year, Joyce Corporation Ltd paid a premium to insure the Directors and secretaries of the Company and its Australian-based controlled entities, and senior executives of the Consolidated Entity. A clause in the relevant insurance policy prevents the disclosure of the amount of the premium.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Consolidated Entity, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a willful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

Joyce Corporation Ltd 2012 Annual Report I PAGE 15

DIRECTORS’ REPORT (CONTINUED)

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001.

PERFORMANCE IN RELATION TO ENVIRONMENTAL REGULATION

Joyce Corporation holds licences issued by the Environmental Protection Authority and various other authorities throughout Australia. These licences regulate the management of air and water quality, the storage and carriage of hazardous materials and disposal of wastes associated with the Consolidated Entity’s properties. There have been no material known breaches associated with the Consolidated Entity’s licence conditions.

NON-AUDIT SERVICES

The Board of Directors, in accordance with advice from the audit committee, is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons:

all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional Ethical Standards Board.

The following fees for non-audit services were paid / payable to the external auditors during the year ended 30 June 2012:

012:
Taxation services Other assurance-related services	$ 45,064 26,038
	71,102

AUDITOR'S INDEPENDENCE DECLARATION

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 17.

AUDITORS

Grant Thornton Audit Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001 .

Signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the Corporations Act 2001.

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D A Smetana Chairman

Perth, 28 September 2012

Joyce Corporation Ltd 2012 Annual Report I PAGE 16

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Grant Thornton Audit Pty Ltd ABN 91 130 913 594 ACN 130 913 594

10 Kings Park Road West Perth WA 6005 PO Box 570 West Perth WA 6872

T +61 8 9480 2000 F +61 8 9322 7787 E [email protected] W www.grantthornton.com.au

Auditor’s Independence Declaration To the Directors of Joyce Corporation Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Joyce Corporation Limited for the year ended 30 June 2012, I declare that, to the best of my knowledge and belief, there have been:

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

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GRANT THORNTON AUDIT PTY LTD Chartered Accountants

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M J Hillgrove Partner - Audit & Assurance

Perth, 28 September 2012

Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.

Liability limited by a scheme approved under Professional Standards Legislation

Joyce Corporation Ltd 2012 Annual Report I PAGE 17

CORPORATE GOVERNANCE STATEMENT

The Board of Directors of Joyce Corporation Ltd (“the Company”) is responsible for the corporate governance of the Company. The Board monitors the business affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable.

The Company has made it a priority to adopt systems of control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures are summarised in this statement. Commensurate with the spirit of the August 2007 ASX Corporate Governance Council's Corporate Governance Principles and Recommendations ("Principles & Recommendations"), the Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices. Where the Company's corporate governance practices follow a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. Where, after due consideration, the Company's corporate governance practices depart from a recommendation, the Board has offered full disclosure and reason for the adoption of its own practice.

Further information about the Company's charters, policies and procedures may be found at the Company's website at www.joycecorp.com.au, under the section marked Governance.

The Company has not established (and therefore has not made publicly available) a formal Nomination Committee Charter, Policy and Procedure for Selection and (Re) Appointment of Directors, or Procedure for Selection, Appointment and Rotation of External Auditor. Where applicable, the Company's "If Not, Why Not" disclosure for each of the Recommendations to which this charter and the policies and procedures relate, is provided below.

Disclosure – Principles & Recommendations

The Company reports below on how it has followed (or otherwise departed from) each of the Principles & Recommendations during the year ended 30 June 2012 ("Reporting Period").

Principle 1: Lay Solid Foundation for Management and Oversight

Recommendation 1.1:

Companies should establish the functions reserved to the Board and those delegated to senior executives and disclose those functions.

Disclosure:

The Board and senior management of the Company are committed to acting responsibly, ethically and with high standards of integrity as the Company strives to create shareholder value. The Board accepts responsibility for the overall corporate governance of the Company and has consequently developed and adopted corporate governance practices and policies that have been implemented throughout management and governance.

The Company has established the functions reserved to the Board and is in the process of formalising these functions in a Board Charter. The Board's primary role is the optimisation of Company performance and protection and enhancement of shareholder value. Its functions and responsibilities includes setting strategic and policy direction, monitoring performance against strategy, identifying principal risks and opportunities and ensuring risk management systems are established and reviewed, approving and monitoring financial reports, capital management, compliance, significant business transactions and investments, appointing senior management and monitoring performance, remuneration, development and succession, adopting procedures to ensure the business of the Company is consistent with Company values, continuous disclosure compliance, ensuring effective shareholder communication, ensuring the Board remains appropriately skilled, reviewing and approving corporate governance systems and enhancing and protecting the Company's reputation.

The Board is also governed by the Company's constitution, and on appointment each Director is provided with a formal letter of appointment setting out key terms and conditions of the appointment their duties and responsibilities, the role of the Board and committees, the Company's constitution and the Company's policies.

Joyce Corporation Ltd 2012 Annual Report I PAGE 18

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Principle 1: Lay Solid Foundation for Management and Oversight (continued)

The Company has established the functions delegated to senior executives and will set out these functions in its Board Charter. Senior executives are responsible for supporting the Executive Director and assisting the Executive Director in implementing the running of the general operations and financial business of the Company, in accordance with the delegated authority of the Board.

Recommendation 1.2:

Companies should disclose the process for evaluating the performance of senior executives.

Disclosure:

Evaluation of the Executive Director is carried out by the Remuneration Committee each year together with the ongoing monitoring of management and Company performance, with informal discussions undertaken as required. The Executive Director conducts a formal review each year assessing the performance of Senior Executives and reports back to the Board.

Recommendation 1.3:

Companies should provide the information indicated in the “Guide to reporting on Principle 1.”

Disclosure:

The Remuneration Committee conducted an evaluation of the Executive Director in June 2012. The remuneration committee conducted an evaluation of Senior Executives in June 2012. The performance evaluation was undertaken in accordance with the process disclosed above.

Principle 2: Structure the Board to add value

Recommendation 2.1:

A majority of the Board should be independent Directors.

Disclosure:

The Board is currently comprised of four Directors with three being non-executive Directors, including the Chairman and one executive Director. The Company does not comply with this recommendation, as two of the four Directors are considered independent.

The independent Directors of the Company are:

Mr M Gurry (Non-Executive Director and Chairman of the Audit Committee)
Mr T Hantke (Non-Executive Director and Chairman of the Remuneration Committee)

The Board regularly assesses the independence of each Director with the intention to have a majority of Directors being independent. Each Director is required to provide to the Board all relevant information to assist the Board in this regard.

The Board will continue to monitor developments and consider any guidelines that may be issued with respect to the maximum tenure of Directors in order to meet ‘independence’ guidelines.

Joyce Corporation Ltd 2012 Annual Report I PAGE 19

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Principle 2: Structure the Board to add value (continued)

Recommendation 2.2:

The Chair should be an independent Director.

Disclosure:

The Chairman is not considered independent due to the size of the shareholding in his control.

Explanation for Departure:

The Board has decided to continue with Mr D Smetana as Chairman in recognition of his considerable experience with the Company and expertise that complements the skills and experience of the other Board members. The Company deals with the lack of independence of the Chairman by ensuring that conflicts of interest are adequately disclosed and the Chairman abstains from voting on matters where they have, or it is perceived they have, a beneficial interest in the outcome of the matters.

Recommendation 2.3:

The roles of the Chair and Managing Director should not be exercised by the same individual.

Disclosure:

The Executive Director (Anthony Mankarios) has taken over all operational and corporate supervision responsibility.

Recommendation 2.4:

The Board should establish a Nomination Committee.

Disclosure:

The Company has not established a separate Nomination Committee.

Explanation for Departure:

The Board considers the present Directors are able to discharge the responsibilities of a Director, having regards to the law and the highest standards of governance. Should a vacancy exist, for whatever reason, or where considered that the Board would benefit from the services of a new Director, the Board will select appropriate candidates with relevant qualifications, skills and experience. The Board has not established a separate Nomination Committee as, due to the Company's size, the simplicity of its operations, the Board's size and the cost effectiveness of the Board's current operations, the Board considers such a separate Nomination Committee is not warranted or commercially viable and its functions and responsibilities can be adequately and efficiently discharged by the Board as a whole. The Board assesses the experience, knowledge and expertise of potential Directors before any appointment is made.

Items that are usually required to be discussed by a Nomination Committee are marked as separate agenda items at Board meetings when required. The Board deals with any conflicts of interest that may occur when convening in the capacity of Nomination Committee by ensuring the Director with conflicting interests is not party to the relevant discussions.

Recommendation 2.5:

Companies should disclose the process for evaluating the performance of the Board, its committees and individual Directors.

Disclosure:

The Company has adopted self-evaluation processes to measure Board performance. The performance of all Directors is assessed through analysis and review by, and discussion with, the Chair on issues relating to individual Directors' attendance at and involvement in Board meetings, interaction with management, performance of allocated tasks and any other matters identified by the Chair or other Directors. Evaluation of any Board committees is conducted on a similar basis. Due to the Board's assessment of the effectiveness of these processes, the Board has not formalised qualitative performance indicators to measure individual Director’s performance.

Joyce Corporation Ltd 2012 Annual Report I PAGE 20

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Principle 2: Structure the Board to add value (continued)

Recommendation 2.6:

Companies should provide the information indicated in the “Guide to reporting on Principle 2.”

Disclosure:

Skills, Experience, Expertise and Term of Office of each Director

The composition of the Board has been determined on the basis of providing the Company with the benefit of a broad range of commercial, administrative and financial skills, combined with an appropriate level of experience at a senior corporate level. The names and further information regarding the skills, experience, qualifications, relevant expertise and term of office of the Directors are set out in the most recent Directors’ Report.

Board Access to Information and Independent Advice

All Directors have access to employees and, subject to the law, access to all Company records and information held by employees and external advisers. The Board receives regular detailed financial and operational reports from senior management to enable it to carry out its duties.

Consistent with ASX Principle 2, the Company allows each Director to seek individual external advice at the expense of the Company.

Committees of the Board

The Board has established an Audit Committee and a Remuneration Committee to assist the Board in the discharge of its responsibilities.

Further information about the Audit Committee is provided in the statement under Principal 4: Safeguard Integrity in Financial Reporting .

Further information about the Remuneration Committee is provided in the statement under Principal 8: Remunerate Fairly and Responsibility .

Identification of Independent Directors

The policy on Director Independence defines an independent Director as a non-executive Director (not a member of management) and free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with the independent exercise of their judgment.

In determining the independent status of a Director the Board considers whether the Director:

is a substantial shareholder of the Company or an officer of, or otherwise associated directly or indirectly with, a substantial shareholder the Company;
is employed, or has previously been employed in an executive capacity by the Company or another group member, and there has not been a period of at least three years between ceasing such employment and serving on the Board;
has within the last three years been a principal of a material professional adviser or a material consultant to the Company, or another group member, or an employee materially associated with the service provider;
is a material supplier or customer of the Company, or another group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer;
has a material contractual relationship with the Company or another group member, other than as a Director of the Company.

Materiality for these purposes is determined on both a quantitative and qualitative bases. An amount of over 5% of annual turnover or 5% of the individual Director’s net assets is considered material for these purposes.

Joyce Corporation Ltd 2012 Annual Report I PAGE 21

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Principle 2: Structure the Board to add value (continued)

Nomination Matters

The full Board carries out the role of the Nomination Committee. The full Board did not officially convene as a Nomination Committee during the Reporting Period; however the Board discusses nominated-related matters from time to time during the year as required. The explanation for departure set out under Recommendation 2.4 above explains how the functions of the Nomination Committee are performed.

Performance Evaluation

During the Reporting Period no review or evaluation of the performance of the Board, individual Directors and applicable Committees was undertaken in accordance with the process disclosed at Recommendation 2.5.

Selection and (Re)/Appointment of Directors

The Company has not established (and therefore has not made publicly available) a formal Policy and Procedure for Selection and (Re)/Appointment of Directors.

In determining candidates for the Board, the Nomination Committee (or equivalent) considers the balance of independent Directors on the Board as well as the skills and qualifications of potential candidates that will best enhance the Board's effectiveness.

The Board recognizes that Board renewal is critical to performance and the impact of Board tenure on succession planning. Under the Company's constitution, at every annual general meeting one third of the Directors (except the Managing Director) must retire from office and are eligible for re-election at that meeting. The Directors to retire must be those who have been longest in office since their last election and, in any event, Directors cannot hold office for more than three years without submitting themselves for reelection. Re-appointment of Directors is not automatic.

Principle 3: Promote Ethical and Responsible Decision Making

Recommendation 3.1:

Companies should establish a Code of Conduct and disclose the code or a summary of the code as to the practices necessary to maintain confidence in the Company's integrity, the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders and the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

Disclosure:

The Board has adopted a Code of Conduct for Directors to promote ethical and responsible decision making by Directors. The Code is based on a code of conduct for Directors prepared by the Australian Institute of Company Directors and embraces the values of honesty, integrity, enterprise, excellence, accountability, justice, independence and equality of shareholder opportunity.

The principles of the Code are:

A Director must act honestly, in good faith and in the best interests of the Company as a whole.
A Director has a duty to use due care and diligence in fulfilling the functions of office and exercising the powers attached to that office.
A Director must use the powers of office for a proper purpose, in the best interests of the Company as a whole.
A Director must not take improper advantage of the position of Director.
A Director must not allow personal interests, or the interests of any associated person, to conflict with the interests of the Company.
A Director has an obligation to be independent in judgment and actions and to take all reasonable steps to be satisfied as to the soundness of all decisions taken by the Board.
Confidential information received by a Director in the course of the exercise of directional duties remains the property of the Company and it is improper to disclose it, or allow it to be disclosed, unless that disclosure has been authorised by the Company, or the person from whom the information is provided, or is required by law.
A Director should not engage in conduct likely to bring discredit upon the Company.

Joyce Corporation Ltd 2012 Annual Report I PAGE 22

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Principle 3: Promote Ethical and Responsible Decision Making (continued)

A Director has an obligation at all times, to comply with the spirit, as well as the letter of the law and with the principles of the Code.

The Executive Director is responsible to the Board for the day-to-day management of the Company.

The Company has adopted a Code of Ethics and Conduct for all employees and Directors of the Company which details policies, procedures and guidelines aimed at maintaining high ethical standards, corporate behavior and accountability. The Directors of the Company are also obliged to comply with the Code of Conduct for Directors.

Objective

The code of Ethics and Conduct confirms that the Company’s primary objective is to provide a satisfactory return to shareholders. The Company aims to achieve this by:

Satisfying the needs of the customers and Franchisees through the provision of goods and services on a competitive and professional basis;
Providing a safe and fulfilling working environment for employees, rewarding good performance and providing opportunities for advancement;
Conducting existing operations in an efficient manner and by seeking out opportunities for expansion;
Responding to the attitudes and expectations of the communities in which the Company operates;
Acting with integrity and honesty in dealings both inside and outside the group.

Values

All employees are expected to:

Respect the law and act in accordance with it;
Respect confidentiality and not misuse information, assets or facilities;
Value and maintain professionalism;
Avoid real or perceived conflicts of interest;
Act in the best interests of shareholders;
By their actions contribute to the Company’s reputation as a good corporate citizen which seeks the respect of the communities and environments in which it operates;
Perform their duties in ways that minimise environmental impacts and maximise workplace safety;
Exercise fairness, courtesy, respect, consideration and sensitivity in all dealings within their workplace and with Franchisees, customers, suppliers, and the public generally; and
• Act with honesty, integrity, decency and responsibility at all times.

Under the Code of Ethics and Conduct, all employees are required to comply with the letter and spirit of all applicable laws and regulations in performance of their duties and their dealings with fellow employees, customers, Franchisees, suppliers and all third parties with whom they have contact in the performance of their duties. In addition, all employees have a responsibility to adhere to the Code and ensure that no breaches occur. An employee who breaches the Code may face disciplinary action.

If an employee suspects that a breach of the Code has occurred or will occur, he or she must report that breach to the appropriate Company manager.

No employee will be disadvantaged or prejudiced if he or she reports in good faith a suspected breach. All reports will be acted upon and kept confidential. In addition, the whistleblower provisions of the Corporations Act 2001 provide specific protection to employees who report breaches or suspected breaches of Corporations Legislation under certain circumstances.

Responsibility for the administration, implementation and periodic review of the Code of Ethics and Conduct lies with the Company Secretary, in consultation with the Managing Director/Executive Director.

Joyce Corporation Ltd 2012 Annual Report I PAGE 23

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Principle 3: Promote Ethical and Responsible Decision Making (continued)

Recommendation 3.2:

Companies should establish a policy concerning trading in Company securities by Directors, senior executives and employees, and disclose the policy or a summary of that policy.

Disclosure:

Apart from observing all legal requirements, it is the policy of the Board that all Directors and Senior Executives advise the Board before dealing in Joyce Corporation Ltd shares. In order to encourage as active a market as possible in Company shares Directors and Senior Executives are encouraged to trade in Company shares except during periods when they are aware of material matters or activities which are not yet known by the market in general. For example during the period from the finalisation of the annual and half yearly results and their release, The Board will not authorise trading in Joyce Corporation Ltd shares by Directors or Senior Executives if, in its opinion, that Director or Executive has knowledge of any fact that may affect the share price. The Board also accepts responsibility for reviewing any transactions between the Company and Directors or any interest associated with Directors, to ensure the structure and the terms of the transaction is in compliance with the Corporations Act 2001 and is properly disclosed.

Recommendation 3.3:

Companies should provide the information indicated in the “Guide to reporting on Principle 3.”

Disclosure:

Please refer to the disclosure in Recommendation 3.1 and Recommendation 3.2 above for a summary of the Code of Conduct and Trading Policy.

Principle 4: Safeguard Integrity in Financial Reporting

Recommendation 4.1:

The Board should establish an Audit Committee.

Disclosure:

The Company has established an Audit Committee.

Recommendation 4.2:

The Audit Committee should be structured so that it:

consists only of non-executive Directors
consists of a majority of independent Directors
is chaired by an independent Chair, who is not Chair of the Board
has at least three members.

Disclosure:

The Company considers that it complies with this requirement.

The Audit Committee comprises of:

Mr M A Gurry (Chairman of the Audit Committee)
Mr T R Hantke
Mr D Smetana

Recommendation 4.3:

The Audit Committee should have a formal charter.

Disclosure:

The Company has adopted an Audit Committee Charter.

Joyce Corporation Ltd 2012 Annual Report I PAGE 24

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Principle 4: Safeguard Integrity in Financial Reporting (continued)

Recommendation 4.4:

Companies should provide the information indicated in the “Guide to reporting on Principle 4.”

Disclosure:

Details of each of Director's qualifications and attendance at the Audit Committee meetings are set out in the Directors' Report. All Directors are financially literate and have an understanding of the industry in which the Company operates.

Appointment of Auditor

The effectiveness, performance and independence of the external auditor are reviewed by the Audit Committee. If it becomes necessary to replace the external auditors for performance or independence reasons, the Audit Committee will formalise the procedure and policy for selecting a new external auditor.

Audit Committee

The Audit Committee monitors internal control policies and procedures designed to safeguard Company assets and to maintain the integrity of financial reporting, which is consistent with ASX Principle 4. A copy of the Audit Committee Charter is available on the Company’s website under Governance.

The Audit Committee has the following responsibilities as set out in its Charter:

the main responsibilities include oversight and making recommendations on internal and external reporting, the oversight of risk management activities, and external audit; as well as communication between the external auditors and the Board
the Audit Committee will comprise only non-executive Directors and at least three members. The Chairman of the Committee is appointed by the Board and cannot be the Chairman of the Board
the Audit Committee may invite any person deemed appropriate to attend meetings and may take such independent advice as it considers appropriate.
The Audit Committee is required to meet as and when required by the Chairman of the Committee. Any member of the Committee may request the Chairman to call a meeting.
The Audit Committee is required to assess its effectiveness periodically. In addition the Charter is required to be revised annually and updated as required.

Principle 5: Make Timely and Balanced Disclosure

Recommendation 5.1:

Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.

Disclosure:

The Company has established procedures to ensure there is timely disclosure to the ASX of price sensitive information which may have a material effect on the price or value of the entity’s securities.

The Company also posts announcements on its web site to complement the official release of information to the market.

Recommendation 5.2:

Companies should provide the information indicated in the “Guide to reporting on Principle 5.”

Disclosure:

A copy of the Continuous Disclosure Policy is available on the Company’s website in the Governance section.

Joyce Corporation Ltd 2012 Annual Report I PAGE 25

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Principle 6: Respect the Right of Shareholders

Recommendation 6.1:

Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy.

Disclosure:

The Company has an effective shareholder communication procedure. Communication of information to shareholders is through the distribution of an annual report and half yearly report, announcements through the ASX and the media regarding changes in its business.

The Company’s annual general meeting is a major forum for shareholders to ask questions about the Company performance and the external auditors also are invited to attend the annual general meeting and answer shareholder questions.

The Company maintains a web site which includes copies of all Corporate Governance policies and procedures as well as all shareholder communications both current and historical.

Recommendation 6.2:

Companies should provide the information indicated in the “Guide to reporting on Principle 6.”

Disclosure:

A copy of the Shareholders Communications Policy is available on the Company’s website in the Governance section.

Principle 7: Recognise and Manage Risk

Recommendation 7.1:

Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.

Disclosure:

The Company has developed a Risk Management and Oversight Policy, which sets out systems for risk oversight, management and internal control. A copy of this policy is available on the Company website.

Recommendation 7.2:

The Board requires management to design and implement the risk management and internal control system to manage the Company's material business risks and report to it on whether those risks are being managed effectively. The Board discloses that management has reported to it as to the effectiveness of the Company's management of its material business risks.

Disclosure:

The Company has completed the formalisation of its risk management system and reporting on identified material business risks.

Following the development of the Risk Management and Oversight Policy the Board has determined to review, the management of its material business risks each year. This system includes the preparation of a risk register by management to identify the Company's material business risks and risk management strategies for these risks. In addition, the process of management of material business risks has been allocated to members of senior management. The risk register is formally reviewed at least annually and updated as required.

During this process the Board will continue to monitor the Company’s risk management through ongoing monitoring of management and operational performance, a comprehensive system of budgeting, forecasting and reporting to the Board, regular presentations to the Board by management on the management of risks associated with pending and existing legal issues, approval procedures for significant expenditures, the functioning of the Audit Committee, comprehensive written policies on specific activities and corporate governance, and regular communication between Directors on compliance and risk.

Joyce Corporation Ltd 2012 Annual Report I PAGE 26

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Principle 7: Recognise and Manage Risk (continued)

Recommendation 7.3:

The Board should disclose whether it has received assurance from the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

Disclosure:

The Board requires assurance from the Executive Director and Chief Financial Officer that the declaration in relation to section 295A of the Corporations Act is founded in a sound system of risk management and internal control and that the system is operating effectively in all material aspects in relation to financial reporting risks.

Recommendation 7.4:

Companies should provide the information indicated in the “Guide to reporting on Principle 7.”

Disclosure:

The Board has not received the report from management under Recommendation 7.2. Additional information regarding this departure and the departure from Recommendation 7.2 is detailed above.

The Board has received the assurance from the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) under Recommendation 7.3.

A copy of the Risk Management and Oversight Policy is available on the Company’s website in the Governance section.

Principle 8: Remunerate Fairly and Responsibly

Recommendation 8.1:

The Board should establish a Remuneration Committee.

Disclosure:

The Company has established a Remuneration Committee.

Recommendation 8.2:

Companies should clearly distinguish the structure of non-executive Directors’ remuneration from that of executive Directors and senior executives.

Disclosure:

Non-executive Directors are remunerated at a fixed fee for time, commitment and responsibilities. Remuneration for non-executive Directors is not linked to the performance of the Company.

Pay and rewards for executive Directors and senior executives consists of a base salary and performance incentives. Executives are offered a competitive level of base pay at market rates and are reviewed annually to ensure market competitiveness.

Recommendation 8.3:

Companies should provide the information indicated in the “Guide to reporting on Principle 8.”

Disclosure:

Details of remuneration, including the Company’s policy on remuneration, are contained in the “Remuneration Report” which forms a part of the Directors’ Report. The Company's remuneration policies are reflected in the Company's Remuneration Committee Charter.

Joyce Corporation Ltd 2012 Annual Report I PAGE 27

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Principle 8: Remunerate Fairly and Responsibly (continued)

These policies are to establish competitive remuneration, including performance incentives, consistent with long term development and success, to ensure remuneration is fair and reasonable, taking into account all relevant factors, and within appropriate controls or limits, ensure performance and remuneration are appropriately linked, that all remuneration packages are reviewed annually or on an ongoing basis in accordance with management's remuneration packages and that retirement benefits or termination payments (other than notice periods) will not be provided or agreed other than in exceptional circumstances.

A copy of the Remuneration Committee Charter is available on the Company’s website under Governance.

The Remuneration Committee held eight meetings during the Reporting Period. The Remuneration Committee comprises of the following Directors:

Mr T R Hantke (Chairman of the Remuneration Committee) Mr A Mankarios

Mr M A Gurry

Details of each of the Director's attendance at the Remuneration Committee meeting are set out in the Directors' Report. There are no termination or retirement benefits for non-executive Directors (other than superannuation).

During the Reporting Period the Company did not publicly disclose its policy on prohibiting transactions in associated products which limit the risk of participating in unvested entitlements under any equity based remuneration schemes. However, the Company's position is that such transactions are prohibited.

The Remuneration Committee is responsible for the performance review process for both the Board and the Managing Director.

The Board undertakes an ongoing review in relation to its composition and skills mix of the Directors of the Company.

Joyce Corporation Ltd 2012 Annual Report I PAGE 28

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Disclosure of Corporate Governance Practices Summary Statement

No.	Recommendation	Disclosure
1.1:	Companies should establish the functions reserved to the	Comply
	Board and those delegated to senior executives and
	disclose those functions.
1.2	Companies should disclose the process for evaluating the	Comply
	performance of senior executives.
1.3	Companies should provide the information indicated in the	Comply
	“Guide to reporting on Principle 1.”
2.1	A majority of the Board should be independent Directors.	Departure from the recommendation. Refer
		to Corporate Governance Statement
2.2	The Chair should be an independent Director.	Departure from the recommendation. Refer
		to Corporate Governance Statement
2.3	The roles of the Chair and Managing Director should not	Comply
	be exercised by the same individual.
2.4	The Board should establish a Nomination Committee.	Departure from the recommendation. Refer
		to Corporate Governance Statement
2.5	Companies should disclose the process for evaluating the	Comply
	performance of the Board, its committees and individual
	Directors.
2.6	Companies should provide the information indicated in the	Comply
	“Guide to reporting on Principle 2.”
3.1	Companies should establish a Code of Conduct and	Comply
	disclose the code or a summary of the code as to the
	practices necessary to maintain confidence in the
	Company's integrity, the practices necessary to take into
	account their legal obligations and the reasonable
	expectations of their stakeholders and the responsibility
	and accountability of individuals for reporting and
	investigating reports of unethical practices.
3.2	Companies should establish a policy concerning trading in	Comply
	Company securities by Directors, senior executives and
	employees, and disclose the policy or a summary of that
	policy.
3.3	Companies should provide the information indicated in the	Comply
	“Guide to reporting on Principle 3.”
4.1	The Board should establish an Audit Committee.	Comply

Joyce Corporation Ltd 2012 Annual Report I PAGE 29

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Disclosure of Corporate Governance Practices Summary Statement

No.	Recommendation	Disclosure
4.2	The Audit Committee should be structured so that it:	Comply
	- consists only of non-executive Directors
	- consists of a majority of independent Directors
	- is chaired by an independent Chair, who is not Chair of the Board
	- has at least three members.
4.3	The Audit Committee should have a formal charter.	Comply
4.4	Companies should provide the information indicated in the “Guide to reporting	Comply
	on Principle 4.”
5.1	Companies should establish written policies designed to ensure compliance	Comply
	with ASX Listing Rule disclosure requirements and to ensure accountability at
	a senior executive level for that compliance and disclose those policies or a
	summary of those policies.
5.2	Companies should provide the information indicated in the “Guide to reporting	Comply
	on Principle 5.”
6.1	Companies should design a communications policy for promoting effective	Comply
	communication with shareholders and encouraging their participation at
	general meetings and disclose their policy or a summary of that policy.
6.2	Companies should provide the information indicated in the “Guide to reporting	Comply
	on Principle 6.”
7.1	Companies should establish policies for the oversight and management of	Comply
	material business risks and disclose a summary of those policies.
7.2	The Board requires management to design and implement the risk	Comply
	management and internal control system to manage the Company's material
	business risks and report to it on whether those risks are being managed
	effectively. The Board discloses that management has reported to it as to the
	effectiveness of the Company's management of its material business risks.
7.3	The Board should disclose whether it has received assurance from the Chief	Comply
	Executive Officer (or equivalent) and the Chief Financial Officer (or
	equivalent) that the declaration provided in accordance with section 295A of
	the Corporations Act is founded on a sound system of risk management and
	internal control and that the system is operating effectively in all material
	respects in relation to financial reporting risks.

Joyce Corporation Ltd 2012 Annual Report I PAGE 30

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

Disclosure of Corporate Governance Practices Summary Statement

No.	Recommendation	Disclosure
7.4	Companies should provide the information indicated in the “Guide to	Comply
	reporting on Principle 7.”
8.1	The Board should establish a Remuneration Committee.	Comply
8.2	Companies should clearly distinguish the structure of non-executive	Comply
	Directors’ remuneration from that of executive Directors and senior
	executives.
8.3	Companies should provide the information indicated in the “Guide to	Comply
	reporting on Principle 8.”

Joyce Corporation Ltd 2012 Annual Report I PAGE 31

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012

Joyce Corporation Ltd 2012 Annual Report I PAGE 32

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2012

Notes	Consolidated 30 June 2012 30 June 2011 $000 $000
Continuing operations Revenue 7 Cost of sales 7 Gross Profit Other income 7 Revaluation of Investment Property 7 Expenses from continuing operations Distribution expenses Marketing expenses Occupancy expenses	16,052 16,549 (6,019) (6,076)
	10,033 10,473 1,038 1,076 3,553 103 (976) (1,061) (723) (620) (2,136) (1,962) (5,418) (5,728) (1) (109) (711) (730) - 300 (75) (41)
Administration expenses
Loss on disposal of assets 7 Finance costs 7 Restructuring provisions 7 Other expenses Profit from continuing operations before income tax 7 Income tax benefit 8 Profit from continuing operations after tax Discontinued operations Loss for the year from discontinued operations 9 Net profit attributable to the members of Joyce Corporation Ltd Other comprehensive income for the year net of tax Total Comprehensive Income attributable to the members of Joyce Corporation Ltd Overall Operations Basic earnings per share (cents per share) 10 Diluted earnings per share (cents per share) 10 Continuing Operations Basic earnings per share (cents per share) 10 Diluted earnings per share (cents per share) 10
	4,584 1,701 105 2,278
	4,689 3,979 (1,654) (1,065)
	3,035 2,914
	- -
	3,035 2,914
	12.6 14.3 12.4 10.4 19.5 19.6 19.2 14.2

The statement of comprehensive income is to be read in conjunction with the notes to the consolidated financial statements set out on pages 37 to 82.

Joyce Corporation Ltd 2012 Annual Report I PAGE 33

STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2012

Notes	Consolidated 30 June 2012 30 June 2011 $000 $000
ASSETS Current Assets Cash and cash equivalents 11 Trade and other receivables 12 Inventories 13 Other assets 14 Total Current Assets Non-current assets classified as held for sale 15 Total Current Assets Non-Current Assets Trade and other receivables 12 Other financial assets 16 Deferred tax asset 8 Plant and equipment 17 Investment property 18 Intangible assets 19 Total Non-Current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables 20 Interest-bearing loans and borrowings 21 Provisions 22 Total Current Liabilities Non-Current Liabilities Interest bearing loans and borrowings 21 Convertible Notes 21 Deferred tax liabilities 8 Provisions 22 Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 23 Reserves 24 Retained earnings / (Accumulated losses) TOTAL EQUITY	3,774 3,780 572 1,166 4,223 4,275 410 560
	8,979 9,781 204 -
	9,183 9,781
	420 480 57 39 2,112 1,120 463 922 15,000 11,100 10,222 10,225
	28,274 23,886
	37,457 33,667
	5,918 5,266 61 635 1,465 1,194
	7,444 7,095
	5,402 4,869 - 2,180 2,007 1,120 291 485
	7,700 8,654
	15,144 15,749
	22,313 17,918
	17,814 15,634 2,678 2,678 1,821 (394)
	22,313 17,918

The statement of financial position is to be read in conjunction with the notes to the consolidated financial statements set out on pages 37 to 82.

Joyce Corporation Ltd 2012 Annual Report I PAGE 34

STATEMENT OF CASHFLOWS

FOR THE YEAR ENDED 30 JUNE 2012

Notes	Consolidated 30 June 2012 30 June 2011 $000 $000
Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Operating cash flow Franchisee settlement paid Store closure costs Net cash flows from/ (used in) operating activities 32 Cash flows from investing activities Proceeds from sale of investment property Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Net cash (used in)/provided by investing activities Cash flows from financing activities Proceeds from issue of Convertible Notes Proceeds from borrowings Repayment of borrowings Dividends paid 30 Net cash (used in) financing activities Net (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 11 Reconciliation of cash Cash at bank and in hand	21,591 26,783 (19,800) (23,606) 202 79 (716) (752)
	1,277 2,504 (601) (1,875) - (2,828)
	676 (2,199) - 7,350 48 136 (283) (77)
	(235) 7,409 - 2,180 600 - (641) (7,384) (406) (406)
	(447) (5,610) (6) (400) 3,780 4,180
	3,774 3,780
	3,774 3,780
	3,774 3,780

The statement of cash flows is to be read in conjunction with the notes to the consolidated financial statements set out on pages 37 to 82.

Joyce Corporation Ltd 2012 Annual Report I PAGE 35

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012

CONSOLIDATED Note	CONSOLIDATED Note	Contributed Equity Retained Earnings / (Accumulated Asset Revaluation Reserve Financial Assets Reserve Total Equity Losses) $000 $000 $000 $000 $000
At 1 July 2010 Total comprehensive income Transfer to & from reserves - Asset revaluation - Financial assets Dividends paid or provided for 30 At 30 June 2011 At 1 July 2011 Issued Shares Total comprehensive income Dividends paid or provided for 30 At 30 June 2012		15,634 (4,637) 1,735 2,959 15,691
		- 2,914 - - 2,914 - 1,735 (1,735) - - - - - (281) (281) - (406) - - (406)
		15,634 (394) - 2,678 17,918
		15,634 (394) - 2,678 17,918
		2,180 - - - 2,180 - 3,035 - - 3,035 - (820) - - (820)
		17,814 1,821 - 2,678 22,313

The statement of changes in equity is to be read in conjunction with the notes to the consolidated financial statements set out on pages 37 to 82.

Joyce Corporation Ltd 2012 Annual Report I PAGE 36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

The consolidated financial statements of Joyce Corporation Ltd (“the Company”) for the year ended 30 June 2012 were authorised for issue in accordance with a resolution of the directors of the Company dated 23 September 2012. Joyce Corporation Ltd is a Company incorporated in Australia and limited by shares which are publicly traded on the Australian Securities Exchange.

The nature of the operation and principal activities of the Company and its controlled entities are described in note 6.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements comprise the financial statements of Joyce Corporation Ltd and its controlled subsidiaries (‘the Consolidated Entity’).

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board (including Australian Accounting Interpretations) and the Corporations Act 2001.

The Consolidated Entity has implemented the Corporations Amendment Regulations 2010 (No 6) regarding the requirement to disclose parent entity information as a note to the consolidated financial statements. Parent entity information is presented in note 33.

Compliance with IFRS

Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (“AIFRS”). Compliance with AIFRS ensures that the financial report of the Consolidated Entity complies with International Financial Reporting Standards (“IFRS”).

Historical cost convention

These financial statements have been prepared under the historical cost convention.

Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires Management to exercise judgement in the process of applying the Consolidated Entity’s accounting policies. Areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 5.

(b) Principles of consolidation

Subsidiaries are all those entities (including special purpose entities) over which the Company has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Consolidated Entity controls another entity.

A list of controlled entities is contained in Note 27 to the financial statements."

The consolidation accounting method used for the consolidated financial statements that include the financial statements made up to the reporting date each year of the Company and its subsidiaries is disclosed under the note on 'Business Combinations' below. Consolidated financial statements are the financial statements of the Consolidated Entity presented as those of a single economic entity. The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances.

Joyce Corporation Ltd 2012 Annual Report I PAGE 37

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b) Principles of consolidation (continued)

All significant intra-Consolidated Entity balances and transactions, including income, expenses and dividends, are eliminated in full on consolidation. The results of the investees acquired or disposed of during the financial year are accounted for from the respective dates of acquisition or up to the dates of disposal. On disposal, the attributable amount of goodwill, if any, is included in the determination of the gain or loss on disposal.

Minority interests, being that portion of the profit or loss and net assets of subsidiaries attributable to equity interests held by persons outside the group, are shown separately within the Equity section of the consolidated Statement of Financial Position and in the consolidated Statement of Comprehensive Income.

(c) Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Consolidated Entity in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant accounting standards. Changes in the fair value of contingent consideration classified as equity are not recognised.

Where a business combination is achieved in stages, the Consolidated Entity’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Consolidated Entity attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such a treatment would be appropriate if that interest were disposed of.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 (2008) are recognised at their fair value at the acquisition date, except that:

deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with AASB 112 Income Taxes and AASB 119 Employee Benefits respectively;
liabilities or equity instruments related to the replacement by the Consolidated Entity of an acquiree’ share-based payment awards are measured in accordance with AASB 2 Share-based Payment; and
assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 Noncurrent Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Consolidated Entity reports provisional amounts for the terms for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of that date.

The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum of one year.

Joyce Corporation Ltd 2012 Annual Report I PAGE 38

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) Segment reporting

Operating segments are identified on the basis of internal reports about components of the Consolidated Entity that are regularly reviewed by the chief operating decision makers in order to allocate resources to the segments and to assess their performance.

(e) Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Consolidated Entity’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian Dollars, which is the Consolidated Entity’s presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation, at year end exchange rates, of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.

Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available for sale financial assets are included in the fair value reserve in equity.

All companies of the Consolidated Entity have Australian Dollars as a functional currency.

(f) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Consolidated Entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Sale of goods

Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods.

Rendering of services

Revenue from the rendering of a service is recognised upon completion of the service to customers.

Interest income

Interest income is recognised using the effective interest rate method, which, for floating rate financial assets is the rate inherent in the instrument.

Dividend income

Dividend income is recognised when the right to receive a dividend has been established.

Franchise revenue

Revenue from franchising activities is recognised based on business written sales from franchised stores.

Rental revenue

Rental revenue is recognised monthly as defined in the relevant lease agreements.

All revenue is stated net of the amount of goods and services tax (GST).

Joyce Corporation Ltd 2012 Annual Report I PAGE 39

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(g) Income tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting, nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Tax Consolidation

Joyce Corporation Ltd and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under tax consolidation legislation. Each entity in the group recognises its own current and deferred tax assets and liabilities. Such taxes are measured using the ‘stand-alone taxpayer’ approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are immediately transferred to the head entity.

The group notified the Australian Tax Office that it had formed an income tax consolidated group to apply from 1 July 2003. The tax consolidated group has entered a tax funding arrangement whereby each company in the group contributes to the income tax payable by the group in proportion to their contribution to the group’s taxable income. Differences between the amounts of net tax assets and liabilities derecognised and the net amounts recognised pursuant to the funding arrangement are recognised as either a contribution by, or distribution to the head entity.

Joyce Corporation Ltd 2012 Annual Report I PAGE 40

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(h) Hire purchases and leases

Hire purchases and leases of property, plant and equipment where the Consolidated Entity, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short term and long term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the asset’s useful life and the lease term.

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Consolidated Entity as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight line basis over the period of the lease.

Lease income from operating leases where the Consolidated Entity is a lessor is recognised as income on a straight line basis over the lease term.

(i) Impairment of non-financial assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

(j) Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

(k) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less a provision for impairment. Trade receivables are generally due for settlement within 30 days.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impairment of trade receivables is established when there is objective evidence that the Consolidated Entity will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired.

Joyce Corporation Ltd 2012 Annual Report I PAGE 41

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Trade receivables (Continued)

The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short term receivables are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the statement of comprehensive income in other expenses.

(l) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises expenditure incurred in acquiring the inventories and in bringing them to their existing condition and location.

Costs are assigned to individual items of inventory on a basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(m) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Consolidated Entity for similar financial instruments.

(n) Investments and other financial assets

Classification

The Consolidated Entity classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets.

The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.

(i) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the statement of financial position.

(iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Consolidated Entity’s management has the positive intention and ability to hold to maturity. If the Consolidated Entity were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available-for-sale. Held-tomaturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the reporting date, which are classified as current assets.

Joyce Corporation Ltd 2012 Annual Report I PAGE 42

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(n) Investments and other financial assets (Continued)

(iv) Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long term.

Recognition and derecognition

Regular purchases and sales of financial assets are recognised on trade-date - the date on which the Consolidated Entity commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss, are initially recognised at fair value and transaction costs are expensed in the statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Consolidated Entity has transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the statement of comprehensive income as gains and losses from investment securities.

Subsequent measurement

Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.

Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in the statement of comprehensive income within other income or other expenses in the period in which they arise. Dividend income from financial assets at fair value through profit and loss is recognised in the statement of comprehensive income as part of revenue from continuing operations when the Consolidated Entity’s right to receive payments is established.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in equity. Changes in the fair value of other monetary and non-monetary securities classified as available-for-sale are recognised in equity.

Impairment

The Consolidated Entity assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-forsale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in the statement of comprehensive income. Impairment losses recognised in the statement of comprehensive income on equity instruments classified as available-for-sale are not reversed through the statement of comprehensive income.

Joyce Corporation Ltd 2012 Annual Report I PAGE 43

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(n) Investments and other financial assets (Continued)

Financial Guarantees

Where material, financial guarantees issued, which requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due, are recognised as a financial liability at fair value on initial recognition.

The guarantee is subsequently measured at the higher of the best estimate of the obligation and the amount initially recognised less, when appropriate, cumulative amortisation in accordance with AASB 118: Revenue . Where the entity gives guarantees in exchange for a fee, revenue is recognised under AASB 118.

The fair value of financial guarantee contracts has been assessed using a probability weighted discounted cash flow approach. The probability has been based on:

the likelihood of the guaranteed party defaulting in a year period;
the proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and
the maximum loss exposed if the guaranteed party were to default.

(o) Derivatives and hedging activities

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Consolidated Entity designates certain derivatives as either:

hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges),
hedges of the cash flows of recognised assets and liabilities and highly probable forecast transactions (cash flow hedges), or
hedges of a net investment in a foreign operation (net investment hedges).

The Consolidated Entity documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Consolidated Entity also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.

(p) Property, plant and equipment

Land and buildings are shown at fair value, based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Consolidated Entity and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of comprehensive income during the reporting period in which they are incurred.

Depreciation is calculated over the estimated useful life of the asset as follows:

Plant and equipment - 1 to 20 years;
Leased plant and equipment - over 5 to 6 years; and
Leasehold improvements – 3 to 20 years.

Joyce Corporation Ltd 2012 Annual Report I PAGE 44

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(p) Property, plant and equipment (continued)

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the statement of comprehensive income. When revalued assets are sold, it is the Consolidated Entity’s policy to transfer the amounts included in other reserves in respect of those assets to retained earnings.

(q) Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation (including property under construction for such purposes), is measured initially at its cost, including transaction costs. Subsequent to initial recognition, investment property is measured at fair value. Gains and losses arising from changes in the fair value of investment property are included in profit or loss in the period in which they arise.

(r) Intangible assets

Acquired both separately and from a business combination

Intangible assets acquired separately are capitalised at cost. Following initial recognition, the cost model is applied to the class of intangible assets. Where amortisation is charged on assets with finite lives, this expense is taken to the statement of comprehensive income through the ‘amortisation expenses’ line item.

Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is charged against profits in the period in which the expenditure is incurred intangible assets are tested for impairment where an indicator of impairment exists and in the case of indefinite lived intangibles annually, either individually or at the cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.

(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Consolidated Entity’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cashgenerating units represents the Consolidated Entity’s investment in each country of operation by each operating segment. Cash-generating units to which goodwill is allocated is as follows:

Bedshed Franchising cash generating unit
Bedshed Claremont cash generating unit
Bedshed Joondalup cash generating unit

(ii) IT development and software

Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials and service, direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a straight-line basis over periods generally ranging from 3 to 5 years. IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the Consolidated Entity has an intention and ability to use the asset.

Joyce Corporation Ltd 2012 Annual Report I PAGE 45

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(s) Trade and other payables

These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the reporting date which are unpaid. The amounts are unsecured and are usually paid within 45 days of recognition.

(t) Provisions

Provisions for legal claims, service warranties and make good obligations are recognised when the Consolidated Entity has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of Management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

(u) Employee benefits

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

Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables 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.

(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. 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) Profit-sharing and bonus plans

The Consolidated Entity recognises a liability and an expense for bonuses and profit-sharing based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The Consolidated Entity recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

(iv) Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Consolidated Entity recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after reporting date are discounted to present value.

Joyce Corporation Ltd 2012 Annual Report I PAGE 46

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(v) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw-down of the facility, are recognised as prepayments and amortised on a straight-line basis over the term of the facility. Bank loans are carried at amortised cost. Transaction costs are deducted against the outstanding principal amount at amortised cost using the effective interest rate method.

(w) Convertible notes

Convertible notes are compound financial instruments with separate liability and equity components identified on initial recognition. Transaction costs are deducted against the liability component of these financial instruments at amortised cost using the effective interest rate method.

(x) Contributed equity

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.

If the entity reacquires its own equity instruments, e.g. as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.

(y) Dividends

Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the financial year but not distributed at reporting date.

(z) Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

(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 additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

(aa) Comparatives

When required by applicable accounting standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

(bb) Rounding of Amounts

The Company has applied the relief available to it under ASIC Class Order 98/100 and accordingly, amounts in the financial report and directors' report have been rounded off to the nearest $1,000.

Joyce Corporation Ltd 2012 Annual Report I PAGE 47

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(cc) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.

(dd) Standards and Interpretations adopted with no effect on the financial statements

Adoption of new and revised accounting standards

During the current year the Group adopted all of the new and revised Australian Accounting Standards and Interpretations applicable to its operations which became mandatory.

The adoption of these standards has impacted the recognition, measurement and disclosure of certain transactions. The following is an explanation of the impact the adoption of these standards and interpretations has had on the financial statements of Joyce Corporation Ltd.

Adoption of AASBs and improvements to AASBs 2011 – AASB 1054 and AASB 2011-1

The AASB has issued AASB 1054 Australian Additional Disclosures and AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project and made several minor amendments to a number of AASBs. These standards eliminate a large portion of the differences between the Australian and New Zealand accounting standards and IFRS and retain only additional disclosures considered necessary. These changes also simplify some current disclosures for Australian entities and removes others.

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Company

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Company.

Management anticipates that all of the relevant pronouncements will be adopted in the Company’s accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Company’s financial statements is provided below. Certain other new standards and interpretations have been issued but are not expect to have a material impact on the Company’s financial statements.

AASB 9 Financial Instruments (effective from 1 January 2013)

The AASB aims to replace AASB 139 Financial Instruments: Recognition and Measurement in its entirety. The replacement standard (AASB 9) is being issued in phases. To date, the chapters dealing with recognition, classification, measurement and derecognition of financial assets and liabilities have been issued. These chapters are effective for annual periods beginning 1 January 2013. Further chapters dealing with impairment methodology and hedge accounting are still being developed. Management have yet to assess the impact that this amendment is likely to have on the financial statements of the Company. However, they do not expect to implement the amendments until all chapters of AASB 9 have been published and they can comprehensively assess the impact of all changes.

Consolidation Standards

A package of consolidation standards encompassing AASB 10 Consolidated Financial Statements , AASB 11 Joint Venture Arrangements , AASB 12 Disclosure of Interest in Other Entities and consequential amendments to AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and Joint Ventures , are effective for annual periods beginning, or after, 1 January 2013. The Group’s management have yet to assess the impact of these new and revised standards on the Group’s consolidated financial statements.

AASB 13 Fair Value Measurement

AASB 13 is applicable to annual periods beginning on or after 1 January 2013. The standard clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. The Group’s management have yet to assess the impact of this new standard.

Joyce Corporation Ltd 2012 Annual Report I PAGE 48

AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements (AASB 124 Amendments)

AASB 2011-4 makes amendments to AASB 124 Related Party Disclosure to achieve consistency with the international equivalent (which includes requirements to disclose aggregate (rather than individual) amounts of key management personnel compensation) and remove duplication with the Corporations Act 2011. The amendments are applicable for annual periods beginning on or after 1 July 2013. The Group’s management have yet to assess the impact of these amendments.

3. GOING CONCERN

At 30 June 2012, the Consolidated Entity has recorded a profit before tax of $4,584k for continuing operations and $4,689k after tax before including discontinued operations and reported an overall profit after tax of $3,035k with positive operating cash flows totalling $1,277k before franchisee legal settlement payments and store closure costs.

There were no breaches of bank lending covenants (refer Note 21) at reporting date and no breaches up to the date of this report.

Subsequent to the year end the Consolidated Entity has continued to service the loan facilities to the date of these financial statements in accordance with the terms of that facility. Existing working capital resources are expected to be sufficient to cover the Consolidated Entity’s funding requirements for a period of not less than twelve months from the date of these financial statements to the date of signature of the next financial statements.

The Directors have prepared a budget for the Consolidated Entity that indicates that it will be profitable for the year ending 30 June 2013.

Based on the Directors’ cash flow forecasts and the understanding that St George Bank will continue to provide the current loan facility to the Consolidated Entity and the Parent Entity, the Directors are satisfied that, the going concern basis of preparation is appropriate. These financial statements have therefore been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

4 FINANCIAL RISK MANAGEMENT

The Consolidated Entity's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Consolidated Entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Consolidated Entity.

The Consolidated Entity makes occasional use of derivative financial instruments such as foreign exchange contracts to manage foreign currency risk. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The Consolidated Entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and aging analysis for credit risk.

Risk management is carried out by the CFO under the supervision of the Board of Directors. The Board provides principles for overall risk management, as well as policies and supervision covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

Joyce Corporation Ltd 2012 Annual Report I PAGE 49

4. FINANCIAL RISK MANAGEMENT (CONTINUED)

The Consolidated Entity holds the following financial instruments:

Notes	Consolidated 30 June 2012 30 June 2011 $000 $000
Financial assets Cash and cash equivalents 11 Trade and other receivables 12 Other financial assets 16 Financial liabilities Trade and other payables 20 Interest-bearing loans and borrowings 21	3,774 3,780 992 1,646 57 39
	4,823 5,465
	5,918 5,266 5,463 7,684
	11,381 12,950

(a) Market risk

(i) Foreign exchange risk

The Consolidated Entity makes purchases some of which are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, in the ordinary course of business. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Consolidated Entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.

Management has a standard policy for dealing with foreign currency risk in the purchasing function of the Consolidated Entity in order to manage foreign exchange risk against the Consolidated Entity’s functional currency. Material purchase contracts which are denominated in foreign currency are regularly reviewed by management and when it is considered necessary the currency risk exposure may be managed via the use of foreign currency contracts. The current policy is to forward buy USD contracts equivalent to fifty percent of six months forward US dollar denominated orders.

The Consolidated Entity’s had no exposure to foreign currency risk with respect to the US Dollar at the reporting date or at 30 June 2011

(ii) Cash flow and fair value interest rate risks

The Consolidated Entity's main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Consolidated Entity to cash flow interest rate risk. Borrowings issued at fixed rates expose the Consolidated Entity to fair value interest rate risk. The Consolidated Entity policy is to manage both risks as appropriate in conjunction with considerations about minimising the Consolidated Entity’s liquidity risk (see below), the current state of the yield curve and expectations about interest rates in the medium term and the need for flexibility so as to minimise the Consolidated Entity’s interest expense.

Joyce Corporation Ltd 2012 Annual Report I PAGE 50

FINANCIAL RISK MANAGEMENT (CONTINUED)

(a) Market risk (continued)

(ii) Cash flow and fair value interest rate risk (continued)

As at the reporting date, all of the Consolidated Entity had the following variable and fixed rate borrowings:

borrowings:
Weighted Average Interest rate %	30 June 2012 Weighted Average Interest rate $000 %	30 June 2011 $000
Financial liabilities Overdraft – secured (i) 8.65% Commercial bill –secured – variable n/a Commercial bill –secured – fixed (ii) 7.88% Convertible Notes – unsecured (iv) 8.00% Bank guarantees (contingent liabilities) (iii) 1.65%	1 9.30% - n/a 5,400 7.88% - 8.00% 5,401 956 1.65% 6,357	530 - 4,800 2,180
		7,510
		1,080
		8,590

(i) The overdraft facility pays interest at variable interest rates plus a line fee is renewed annually.
(ii) The Commercial bill facility (fixed) debt attracts interest at a fixed annual interest rate to 31 March 2013 and the facility has a term which is approved to 30 June 2014. The facility has a secured deposit of $2.6 million netted off which accrues and interest income at 5.6% fixed until October 2012.
(iii) Bank guarantees attract a variable interest rate plus a line fee and have a term of 1 year from the first draw down date.
(iv) Convertible notes attracted a monthly in arrears interest of 8% fixed. The notes were all converted during the financial year to shares in Joyce Corporation Ltd at a rate of $0.30 per share.

An analysis by maturities is provided in (c) below.

The Consolidated Entity analyses its interest rate exposure on a dynamic basis. Various scenarios are modelled taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Consolidated Entity calculates the impact on profit and loss of a defined interest rate shift. The scenarios are run only for liabilities that represent the major interestbearing positions.

Based on the various scenarios, the Consolidated Entity manages its cash flow interest rate risk adopting an appropriate mix of fixed versus variable rate debt and also an appropriate mix of debt maturities

to provide it with flexibility to repay debt as quickly as possible whilst having liquidity available to take advantage of business opportunities as they arise.

Consolidated Entity sensitivity

The major debt facility drawn at 30 June 2012 is a fixed interest rate (see above). Variable interest rates apply to the overdraft and cash and cash equivalents. On balances at 30 June 2012, if interest rates had changed by -/+ 100 basis points from the year-end rates with all other variables held constant, post-tax profit for the year would have been nil higher/lower (2011 - $38,577 higher/lower), mainly as a result of a higher/lower interest expense arising from borrowings offset by lower/higher interest income from cash and cash equivalents. Equity would have been nil higher/lower (2011 - $38,577 higher/lower) for the same reasons as above.

Joyce Corporation Ltd 2012 Annual Report I PAGE 51

4. FINANCIAL RISK MANAGEMENT (CONTINUED)

(b) Credit risk

Credit risk is limited to high credit quality financial institutions with which deposits are held and high credit quality wholesale customers with which the Consolidated Entity trades.

Credit risk is managed on a Consolidated Entity basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of 'A' are accepted. If wholesale customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set internally. The compliance with credit limits by wholesale customers is regularly monitored by line management.

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised in each applicable note. For wholesale customers without credit rating the Consolidated Entity generally retains title over the goods sold until full payment is received. For some trade receivables the Consolidated Entity may also obtain security in the form of guarantees, deeds of undertaking or letters of credit which can be called upon if the counterparty is in default under the terms of the agreement. The Consolidated Entity does not hold any credit derivatives to offset its credit exposure. The Consolidated Entity trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Consolidated Entity's policy to securitise its trade and other receivables.

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates:

Cash and cash equivalents AA Trade and other receivables Non-rated Other financial assets Non-rated	CONSOLIDATED 2012 2011 $000 $000
	3,774 3,780 992 1,646 57 39
	4,823 5,465

Joyce Corporation Ltd 2012 Annual Report I PAGE 52

4. FINANCIAL RISK MANAGEMENT (CONTINUED)

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Consolidated Entity manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Due to the dynamic nature of the underlying businesses, the Consolidated Entity aims at maintaining flexibility in funding by keeping committed credit lines available and, where possible, with a variety of counterparties. Surplus funds are generally only invested in overnight deposits or used to repay debt.

Maturities of financial assets and financial liabilities

The tables below analyse the Consolidated Entity’s financial liabilities, net and gross settled derivative financial instruments into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Consolidated disclosures

Year ended 30 June 2012 Consolidated financial assets Cash and cash equivalents Trade and other receivables Other financial assets Consolidated financial liabilities Trade and other payables Interest bearing loans & borrowings Net maturity Year ended 30 June 2011 Consolidated financial assets Cash and cash equivalents Trade and other receivables Other financial assets Consolidated financial liabilities Trade and other payables Interest bearing loans & borrowings Net maturity	≤6 months 6-12 months 1-5 years >5 years Total $000 $000 $000 $000 $000
	3,774 - - - 3,774 572 - 420 - 992 - - 57 - 57
	4,346 - 477 - 4,823
	5,918 - - - 5,918 44 17 5,402 - 5,463
	5,962 17 5,402 - 11,381
	(1,616) (17) (4,925) - (6,558)
	≤6 months 6-12 months 1-5 years >5 years Total $000 $000 $000 $000 $000
	3,780 - - - 3,780 1,166 - 480 - 1,646 - - 39 - 39
	4,946 - 519 - 5,465
	5,266 - - - 5,266 583 52 7,048 - 7,683
	5,849 52 7,048 - 12,949
	(903) (52) (6,529) - (7,484)

Joyce Corporation Ltd 2012 Annual Report I PAGE 53

4. FINANCIAL RISK MANAGEMENT (CONTINUED)

(c) Liquidity risk (continued)

Financing arrangements

The Consolidated Entity had access to the following undrawn bank borrowing facilities at the reporting date:

date:	date:	date:	date:
30 June 2011 Facility limit $000 Used $000 Available $000
Consolidated 6,400 6,342 58

30 June 2012
Consolidated	6,042	5,402	640

The Consolidated Entity had $640,000 of available overdraft facilities to manage its liquidity as at 30 June 2012 (2011: $58,000) represented by an $8,000,000 fixed facility and an overdraft facility of $642,000 offset by a secured deposit of $2,600,000. The consolidated entity had $875,022 cash at bank as at the reporting date excluding funds held in trust set out at note 11. In addition the Consolidated Entity had a net investment in inventories of $4,223,000 as at 30 June 2012 (2011: $4,275,000). The Consolidated Entity has additional non cash facilities for bank guarantees.

(d) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Consolidated Entity for similar financial instruments. The fair value of forward exchange contracts is determined using forward exchange market rates at the reporting date.

(e) Capital risk management

Management controls the capital of the Consolidated Entity in order to maintain a good debt to equity ratio, provide the shareholders with adequate returns and ensure that the Consolidated Entity can fund its operations and continue as a going concern. The Consolidated Entity’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets. The Consolidated Entity is not subject to any externally imposed capital requirements other than as disclosed in note 21 (f).

Management effectively manages the Consolidated Entity’s capital by assessing the Consolidated Entity’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. There have been no changes in the strategy adopted by management to control the capital of the Consolidated Entity since the prior year. This strategy is to ensure that the Consolidated Entity’s gearing ratio remain below 40%. The gearing ratio for the year ended 30 June 2012 and 30 June 2011 is as follows:

Note Total borrowings 21 Less cash and cash equivalents 11 Net debt Total equity Gearing ratio	CONSOLIDATED 2012 2011 $000 $000
	5,463 7,684 (3,774) (3,780)
	1,689 3,904 22,313 17,918
	8% 22%

The decrease in gearing ratio is attributable significantly to the issue of shares on conversion of $2,180,000 of convertible notes.

Joyce Corporation Ltd 2012 Annual Report I PAGE 54

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

The Consolidated Entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Impairment testing of goodwill

The Consolidated Entity assesses impairment at each reporting date by evaluating conditions specific to the Consolidated Entity that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. No impairment has been recognised in respect of goodwill for the year ended 30 June 2012 (2011: nil).

Valuation of investment property

The Consolidated Entity assesses investment property values at each reporting date by obtaining certificates of valuations from licensed valuers in accordance with applicable accounting standards. During the year ended 30 June 2012 the investment property values increased by $3,553,000 (2011: $102,544) and this value was bought to account to reflect the current market value of the properties in the financial statements.

Recognition of deferred taxation assets

The Consolidated Entity has deferred tax assets at 30 June 2012 of $347,000 (2011: $1,070,000) which were not brought to account, associated with tax losses arising in Australia the benefits of which will only be realised if the conditions for deductibility are met.

Restructuring costs

The Consolidated Entity brought to account a provision associated with closure of some underperforming company owned stores. The remaining lease terms have reduced to allow commercial negotiations to be available for surrender of leases. A total closure provision of $950k (2011: nil) has been made in the reporting period. A review of operations was announced by the Board of Joyce Corporation Ltd which is expected to be completed in October 2012.

6. SEGMENT INFORMATION

(a) AASB 8 Operating segments

Operating Segments are identified on the basis of internal reports about components of the Consolidated Entity that are regularly reviewed by the chief operating decision makers (The Board of Directors) in order to allocate resources to the segments and to assess their performance.

The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.

The Consolidated Entity has the following three operating segments:

The Bedshed retail bedding franchise operation;
The operation of Consolidated Entity owned Bedshed stores in Western Australia, Victoria, New South Wales and Queensland; and
The property in New South Wales which is leased under the sale agreement of the Foam Business.

Refer to note 9 for a description of discontinued operations. Transfer prices between operating segments are set at an arms-length basis in a manner similar to transactions with third parties.

Joyce Corporation Ltd 2012 Annual Report I PAGE 55

6. SEGMENT INFORMATION (CONTINUED)

Operating segments

The following table presents revenue and profit information and certain asset and liability information regarding operating segments for the year ended 30 June 2012.

	Continuing Operations	Total $000	Discontinued Operations Store Closures Total $000 $000
	Bedshed Franchising Bedshed Stores Investment Properties / Joyce $000 $000 $000
Year ended 30 June 2012 Revenue Sales to external customers Inter-segment sales Total segment revenue Inter-segment elimination Unallocated revenue – Interest received Total consolidated revenue Result Segment result Unallocated expenses net of unallocated income Profit (loss) before tax and finance costs Finance costs Profit (loss) before income tax Income tax benefit Net profit (loss) for the year Assets and liabilities Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information Capital expenditure Depreciation and amortisation Other non-cash segment expenses/revaluations	4,797 11,255 794 - - -	16,846 -	3,904 20,750 - -
	4,797 11,255 794 - - - - - - 1,646 139 3,266	16,846 - 244	3,904 20,750 - 244
		17,090	3,904 20,994
		5,051 244	(1,649) 3,402 244
	10,220 7,659 15,616 4,077 1,378 6,062 6 18 297 15 122 - - - 3,553	5,295 (711)	(1,649) 3,646 (5) (716)
		4,584 105	(1,654) 2,930 - 105
		4,689	(1,654) 3,035
		33,495 2,112	1,850 35,345 - 2,112
		35,607	1,850 37,457
		11,517 2,264	1,363 12,880 - 2,264
		13,781	1,363 15,144
		321 137 -	24 345 56 193 - 3,553

Joyce Corporation Ltd 2012 Annual Report I PAGE 56

6. SEGMENT INFORMATION (CONTINUED)

Operating segments (continued)

The following table presents revenue and profit information and certain asset and liability information regarding operating segments for the year ended 30 June 2011.

	Continuing Operations	Sub-total $000	Discontinued Operations Store Closures Total $000 $000
	Bedshed Franchising Bedshed Stores Investment Properties / Joyce $000 $000 $000
Year ended 30 June 2011 Revenue Sales to external customers Inter-segment sales Total segment revenue Inter-segment elimination Unallocated revenue Total consolidated revenue Result Segment result Unallocated expenses net of unallocated income Profit (loss) before tax and finance costs Finance costs Profit (loss) before income tax Income tax benefit Net profit (loss) for the year Assets and liabilities Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information Capital expenditure Depreciation and amortisation Other non-cash segment expenses	4,574 12,001 823 - - -	17,398 -	7,790 25,188 - -
	4,574 12,001 823 - - - - - - 1,956 459 (70)	17,398 - 227	7,790 25,188 - - - 227
		17,625	7,790 25,415
		2,345 108	(1,065) 1,280 - 108
	10,455 8,140 11,811 4,644 935 7,778 8 7 62 33 143 - - - -	2,453 (752)	(1,065) 1,388 - (752)
		1,701 2,278	(1,065) 636 - 2,278
		3,979	(1,065) 2,914
		30,406 1,327	1,934 32,340 - 1,327
		31,733	1,934 33,667
		13,357 2,006	386 13,743 - 2,006
		15,363	386 15,749
		77 176 -	- 77 131 307 - -

(b) Geographic segments

The Consolidated Entity operates in one principal geographical area namely that of Australia (country of domicile).

(c) Information about major customers

No single customer of the Consolidated Entity generated more than 10% of the Consolidated Entity’s revenue during the year ended 30 June 2012 (2011: None).

Joyce Corporation Ltd 2012 Annual Report I PAGE 57

7. REVENUE, INCOME AND EXPENSES

(a) Revenue, Income and Expenses from Continuing Operations

Revenue Sale of goods 11,484 12,283 Provision of services 4,568 4,266 Total revenue 16,052 16,549 Other income Interest received 244 227 Rental income 793 822 Profit on disposal of assets - - Other 1 27 Total other income 1,038 1,076 Gain on revaluation of investment property 3,553 103 Finance costs Bank loans and overdrafts 703 705 Finance charges payable under finance leases and hire purchase contracts 8 25 Total finance costs 711 730 Depreciation, costs of sales and other significant items of expenditure included in statement of comprehensive income Included in expenses: Depreciation and amortisation 137 176 Loss on disposal of assets 1 109 Cost of sales 6,019 6,076 Restructuring Provisions Other Costs – provision write back - 300 Total 6,019 6,076 (b) Lease payments and other expenses included in the statement of comprehensive income – overall operations Minimum lease payments - operating lease 3,021 3,574 (c) Employee benefits expense – overall operations Wages and salaries 4,002 4,882 Defined contribution superannuation expense 388 453 Other employee benefits expense 401 212 4,791 5,547 CONSOLIDATED 2012 2011 $000 $000 CONSOLIDATED 2012 2011 $000 $000	CONSOLIDATED 2012 2011 $000 $000	CONSOLIDATED 2012 2011 $000 $000
	11,484 12,283 4,568 4,266
	16,052 16,549
	244 227 793 822 - - 1 27
	1,038 1,076

	3,553 103
	703 705 8 25
	711 730
		3,021 3,574
		4,002 4,882 388 453 401 212
		4,791 5,547

Joyce Corporation Ltd 2012 Annual Report I PAGE 58

8. INCOME TAX

The major components of income tax expense for the year ended 30 June 2012 are:

Consolidated Statement of comprehensive income – continuing operations Current Income tax Current income tax expense Deferred income tax Relating to origination and reversal of temporary differences Under provision in respect of prior years Income tax benefit relating to continuing operations Consolidated Statement of comprehensive income – discontinued operations Deferred income tax Relating to origination and reversal of temporary differences Income tax benefit relating to discontinued operations Income tax benefit relating to overall operations	CONSOLIDATED 2012 2011 $000 $000
	- - (105) (2,194) - (84)
	(105) (2,278)
	- -
	- -

	(105) (2,278)

A reconciliation of income tax expense applicable to accounting profit before income tax at the statutory income tax rate to income tax expense at the Consolidated Entity’s effective income tax rate for the years ended 30 June 2012 and 30 June 2011 is as follows:

ended 30 June 2012 and 30 June 2011 is as follows:
	CONSOLIDATED 2012 2011 $000 $000
Profit before income tax Income tax expense /(benefit) calculated at the statutory income tax rate of 30% (2010: 30%) Expenditure not allowable for income tax purposes Recoupment of prior-year tax losses not previously brought to account Deferred tax asset not brought to account Deferred tax asset temporary differences not previously brought to account Deferred tax asset losses not previously brought to account Under provision in respect of prior years Income tax benefit recognised in profit or loss – continuing operations	2,930 636
	879 191 2 2 - (193) - - (6) (1,961) (980) (233) - (84)
	(105) (2,278)
	(105) (2,278)

Joyce Corporation Ltd 2012 Annual Report I PAGE 59

8. INCOME TAX (CONTINUED)

Tax consolidation

Joyce Corporation Ltd and its 100% owned subsidiaries are a tax Consolidated Entity. Members of the Consolidated Entity have not entered into any tax sharing or tax funding arrangements. At the reporting date, the possibility that the head entity will default on its tax payment obligations is remote. The head entity of the tax Consolidated Entity is Joyce Corporation Ltd.

Measurement method adopted under UIG 1052 Tax Consolidation Accounting

The head entity and the controlled entities in the tax Consolidated Entity continue to account for their own current and deferred tax amounts. The Consolidated Entity has applied the Consolidated Entity allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax Consolidated Entity. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes.

In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax Consolidated Entity.

Tax consolidation contributions/ (distributions)

The Consolidated Entity has recognised no consolidation contribution adjustments.

Taxation of financial arrangements (TOFA)

Legislation is in place which changes the tax treatment of financial arrangements including the tax treatment of hedging transactions. The Consolidated Entity has assessed the potential impact of these changes on the Consolidated Entity's tax position. No impact has been recognised and no adjustments have been made to the deferred tax and income tax balances at 30 June 2012 (2011: Nil).

Joyce Corporation Ltd 2012 Annual Report I PAGE 60

8. INCOME TAX (CONTINUED)

Deferred income tax

Deferred income tax at 30 June relates to the following:

Deferred tax liabilities	Opening balance Charged to income Charged directly to Equity Changes in tax rate Exchange differences Closing balance, 30 June 11 $000 $000 $000 $000 $000 $000
Investment property Plant and equipment Fair value gain Other Balance at 30 June 2012 Deferred tax assets	(768) (962) - - - (1,730) (47) 47 - - - - (260) - - - (260) (45) 28 - - - (17)
	(1,120) (887) - - - (2,007)
	$000 $000 $000 $000 $000 $000
Plant & Eqipment Other Losses Balance at 30 June 2012	- 52 - - - 52 887 (40) - - 847 233 980 - - - 1213
	1,120 992 - - - 2,112

The Consolidated Entity has deferred tax assets of $347,000 (2011: $1,070,000) which were not brought to account, associated with tax losses arising in Australia the benefits of which will only be realised if the conditions for deductibility set out in note 1(b) occur.

At 30 June 2012, there is no recognised or unrecognised deferred income tax liability (2011: Nil) for taxes that would be payable on the unremitted earnings of certain of the Consolidated Entity’s subsidiaries, as the Consolidated Entity has no liability for additional taxation should such amounts be remitted.

Joyce Corporation Ltd 2012 Annual Report I PAGE 61

9. DISCONTINUED OPERATIONS

(a) Plan to close some unprofitable Company owned stores

During the year ended 30 June 2012, the Consolidated Entity became committed to the closure of some unprofitable company owned stores. In consequence, the Directors have provisioned $950k for closure of some underperforming company owned stores.

(b) Analysis of loss for the year from discontinued operations

The combined results of the discontinued operations (i.e. all the stores committed to the closure) included in the statement of comprehensive income are set out below. The comparative profit or loss and cash flows from discontinued operations have been re-presented to include those operations classified as discontinued in the current period

Loss for the year from discontinued operations

Revenue Cost of sales Gross profit Other income Expenses Store Closure Provision Loss from discontinued operations before tax Attributable income tax benefit Other comprehensive income Loss for the year from discontinued operations (attributable to owners of Joyce Corporation Ltd). *Cash flows from discontinued operations* Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities Net cash flows	2012 2011 $000 $000
	3,904 7,790 (2,257) (4,804)
	1,647 2,986 1 17 (2,352) (4,068) (950) -
	(1,654) (1,065) - -
	(1,654) (1,065)
	- -
	(1,654) (1,065)
	(648) (491) - - - -
	(648) (491)

Joyce Corporation Ltd 2012 Annual Report I PAGE 62

10. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary shareholders (after deducting interest on the convertible redeemable preference shares) by the weighted average number of ordinary shares outstanding during the year (adjusted for the effects of dilutive options and dilutive convertible non-cumulative redeemable preference shares).

The following reflects the income and share data used in the total operations basic and diluted earnings per share computations:

Net profit/(loss) attributable to equity holders from continuing operations for basic earnings per share Effect of dilutive equity instruments Net profit attributable to equity holders from continuing operations for diluted earnings per share Profit/(loss) attributable to equity holders from discontinued operations Net profit attributable to ordinary shareholders for basic earnings per share Effect of dilutive equity instruments Net profit attributable to ordinary shareholders for diluted earnings per share Weighted average number of ordinary shares for basic earnings per share including partly paid Assuming Convertible Notes on issue of $2,180,000 are converted to ordinary shares on their first anniversary at $0.30 cents per share. Conversion is not mandatory and after the first anniversary Convertible Notes are converted at the an average market price (VWAP) prior to notice of conversion. Where not converted notes are redeemable at the end of five years from issue Adjusted weighted average number of ordinary shares for diluted earnings per share Weighted average number of converted, lapsed or cancelled potential ordinary shares included in diluted earnings per share Weighted average number of partly paid ordinary shares (issued at $1.955 and paid to $1.215) included in basic and diluted earnings per share.	CONSOLIDATED 2012 2011
	$000 $000 4,689 3,979 - -
	4,689 3,979
	(1,654) (1,065)
	3,035 2,914
	- -
	3,035 2,914
	Number of shares Number of shares 24,421,496 20,701,623 - 7,266,632
	24,421,496 27,968,255
	- - 380,000 380,000

Earnings per share are included at the foot of the Statement of Comprehensive Income

Joyce Corporation Ltd 2012 Annual Report I PAGE 63

11. CASH AND CASH EQUIVALENTS

For the purposes of the statement of cash flows, cash and cash equivalents are comprised of the following:

following:
Cash at bank and in hand (a)	CONSOLIDATED 2012 2011 $000 $000
	3,774 3,780
	3,774 3,780

(a) Amounts held in trust for Bedshed marketing and other funds

Included within the cash and cash equivalents balance are funds allocated for the specific use of the Bedshed marketing and other funds on behalf of the Consolidated Entity’s franchise owned and Company owned stores. At 30 June 2012 the total of this balance was $2,899,251 (30 June 2011: $2,838,682). The funds held in trust are specifically excluded and released from the registered charge over the entity held by St George bank. Refer to note 20 for further information.

12. TRADE AND OTHER RECEIVABLES

Current Trade receivables Allowance for impairment loss (a) Non-current Trade receivables (a) Allowance for impairment loss	592 1,186 (20) (20)
	572 1,166
	420 480
	420 480

Trade receivables are non-interest bearing and are generally on 30 day terms. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. An impairment provision of $20,248 (2011: $20,248) has been recognised by the Consolidated Entity.

At 30 June, the ageing analysis of current trade receivables is as follows:

			0-30	31-60	61-90	61-90	+91	+91
		Total	Days	Days	Days	Days	Days	Days
					PDNI*	CI*	PDNI*	CI*
		$000	$000	$000	$000	$000	$000	$000
2012	Consolidated	592	351	162	9	-	50	20
2011	Consolidated	1,186	510	380	244	-	32	20

Past due not impaired ('PDNI') Considered impaired ('CI')

Receivables past due but not considered impaired are: Consolidated Entity: $58,940 (2011: $276,000). Payment terms on these amounts have not been re-negotiated however credit has been stopped until full payment is made. Each operating unit has been in direct contact with the relevant debtor and is satisfied that payment will be received in full. Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due.

Joyce Corporation Ltd 2012 Annual Report I PAGE 64

12. TRADE AND OTHER RECEIVABLES (CONTINUED)

Movement in the provision for impairment of receivables is as follows:

Movement in the provision for impairment of receivables is as follows:
Opening balance at 1 July Charge for the year Amounts written-off Closing balance at 30 June	CONSOLIDATED 2012 2011 $000 $000
	20 65 - - - (45)
	20 20

(b) Fair value and credit risk

Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security, nor is it the Consolidated Entity's policy to transfer (on-sell) receivables to special purpose entities.

(c) Foreign exchange and interest rate risk

Detail regarding foreign exchange and interest rate risk exposure is disclosed in note 4.

13. INVENTORIES

13. INVENTORIES
Stock on hand at cost Provision for impairment (a)	CONSOLIDATED 2012 2011 $000 $000
	4,256 4,370 (33) (95)
	4,223 4,275

(a) Provision for impairment

Write-downs of inventories to net realisable value recognised as an expense during the year ended 30 June 2012 amounted to $33,255(2011: $94,943). The reduction in provision has been written back to cost of goods sold as losses were realised.

14. OTHER ASSETS

14. OTHER ASSETS
Current Interest receivable Prepayments Other receivables	CONSOLIDATED 2012 2011 $000 $000
	42 152 77 69 291 339
	410 560

Joyce Corporation Ltd 2012 Annual Report I PAGE 65

15. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE

15. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
Current At 1 July 2011, Plant and equipment Disposals At 30 June 2012	CONSOLIDATED 2012 2011 $000 $000
	- 7,350 204 - - (7,350)
	204 -

The Plant and equipment at 30 June 2012 related to stores provisioned for closure at the reporting date.

16. OTHER FINANCIAL ASSETS

Current Investments in listed shares at fair value through profit or loss	CONSOLIDATED 2012 2011 $000 $000
	57 39
	57 39

17. PLANT AND EQUIPMENT

	CONSOLIDATED Leasehold improvements Plant and equipment Leased Plant and Equipment Total $000 $000 $000 $000
Year ended 30 June 2012 At 1 July 2011, Net of accumulated depreciation Additions Disposals Transfer to assets held for sale Transfers Transfer to investment properties Depreciation charge for the year At 30 June 2012, Net of accumulated depreciation At 1 July 2011 Cost Accumulated depreciation and impairment Net carrying amount At 30 June 2012	17 707 198 922 - 48 - 48 - (11) (37) (48) (13) (150) (41) (204) - 18 (18) - - (62) - (62) (4) (125) (64) (193)
	- 425 38 463
	21 1,211 482 1,714 (4) (504) (284) (792)
	17 707 198 922
	- 949 182 1,131 - (524) (144) (668)
Cost
Accumulated depreciation and impairment
Net carrying amount	- 425 38 463

The carrying value of plant and equipment held under finance leases and hire purchase contracts at 30 June 2012 is $78,474 (2011: $197,845). Leased assets and assets under hire purchase contracts are pledged as security for the related finance lease and hire purchase liabilities.

For assets pledged as collateral for the Consolidated Entity’s banking facilities refer to note 21.

Joyce Corporation Ltd 2012 Annual Report I PAGE 66

17. PLANT AND EQUIPMENT (CONTINUED)

	CONSOLIDATED Leasehold improvements Plant and equipment Leased Plant and Equipment Total $000 $000 $000 $000
Year ended 30 June 2011 At 1 July 2010, Net of accumulated depreciation Additions Disposals Transfers Transfer from investment property Depreciation charge for the year At 30 June 2011, Net of accumulated depreciation At 1 July 2010 Cost Accumulated depreciation and impairment Net carrying amount At 30 June 2011	- 1,181 424 1,605 21 77 - 98 - (579) (118) (697) - 18 (18) - - 223 - 223 (4) (213) (90) (307)
	17 707 198 922
	16 2,217 721 2,954 (16) (1,036) (297) (1,349)
	- 1,181 424 1,605

Cost	21 1,211 482 1,714
Accumulated depreciation and impairment	(4) (504) (284) (792)
Net carrying amount	17 707 198 922

18. INVESTMENT PROPERTY

	CONSOLIDATED 2012 2011 $000 $000
Year ended 30 June 2012 Balance at 1 July 2011 Additions Transfer to plant and equipment Fair value adjustments Balance at 30 June 2012	11,100 11,190 285 30 62 (223) 3,553 103
	15,000 11,100

The fair value model is applied to all investment properties. The investment property was valued by registered independent valuers as at 30 June 2012 and at 30 June 2011. The gross valuation at 30 June 2012 was $15,000,000. Joyce Corporation Ltd leases its property to Joyce Foam Pty Ltd (the Company which acquired the foam businesses in November 2005) at a rental less than the current market value.

An independent valuer arrived at the above property valuation after deducting an amount of $2,963,000 because the existing lease attracts rent at approximately 50% of current market rental yields and the lease has another 3.4 years to run.

Joyce Corporation Ltd 2012 Annual Report I PAGE 67

19. INTANGIBLE ASSETS

19. INTANGIBLE ASSETS
Goodwill (a) An analysis of intangible assets is presented below: Year ended 30 June 2012 At 1 July, net of accumulated amortisation Additions Amortisation At 30 June 2012, net of accumulated amortisation At 1 July Cost (gross carrying amount) Accumulated amortisation and impairment Net carrying amount At 30 June Cost (gross carrying amount) Accumulated amortisation and impairment Net carrying amount		CONSOLIDATED 2012 2011 $000 $000
		10,222 10,225 10,222 10,225 CONSOLIDATED 2012 2011 $000 $000 10,225 10,225 - - (3) - 10,222 10,225 10,569 10,569 (344) (344) 10,225 10,225 10,569 10,569 (347) (344) 10,222 10,225

(a) Goodwill

Intangible assets as at 30 June 2012 reflects the value of the Bedshed activities for the Bedshed Joondalup store which was purchased in May 2007, the Bedshed Claremont store that was purchased in October 2008 and the remaining 51% of Bedshed Franchising Pty Ltd purchased in 2006.

(b) Impairment Disclosures

Goodwill is allocated to cash-generating units which are based on the Consolidated Entity’s operating segments

Bedshed Franchising segment Bedshed Stores segment Total	CONSOLIDATED 2012 2011 $000 $000 6,306 6,306 3,916 3,919
	10,222 10,225

The recoverable amount of each cash-generating unit above is determined based on value-in-use calculations. Value-in-use is calculated based on the present value of cash flow projections over a 5-year period with the period extending beyond existing budgets for the 2012/13 and 2013/14 financial years extrapolated using estimated growth rates. The cash flows are discounted using risk-adjusted pre-tax discount rates.

Joyce Corporation Ltd 2012 Annual Report I PAGE 68

19. INTANGIBLE ASSETS (CONTINUED)

(b) Impairment Disclosures (continued)

The following assumptions were used in the value-in-use calculations:

		Sales	Expense
	Discount	Growth	Growth
	Rate	Rate	Rate
Bedshed Franchising segment	12%	5%	3-10%
Bedshed Stores segment	12%	5-7%	3-4%

The Consolidated Entity’s value-in-use calculations incorporated a terminal value component beyond the 5 year projection period for both the Bedshed Franchising and Bedshed Stores operating segments. The principal assumption used to estimate the terminal value of each operating segment was a multiple of 3 times earnings before interest, taxation, depreciation and amortisation for the year ended 30 June 2011.

There has been no impairment of Goodwill for the year ended 30 June 2012 (2011: Nil).

(c) Impact of possible changes in key assumptions

Sensitivity analysis is conducted on changes to discount factors and growth, which do not highlight any material impairment.

20. TRADE AND OTHER PAYABLES

Current Unsecured liabilities Trade payables Accruals and other payables Amounts held in trust for Bedshed marketing and other funds (a)	CONSOLIDATED 2012 2011 $000 $000
	1,780 1,864 1,538 563 2,600 2,839
	5,918 5,266

(a) Amounts held in trust for Bedshed marketing and other funds

(b) Risk exposure

Information about the Consolidated Entity's exposure to foreign exchange risk is provided in note 4.

Joyce Corporation Ltd 2012 Annual Report I PAGE 69

21 . INTEREST BEARING LOANS AND BORROWINGS

Interest bearing loans and borrowings are comprised of the following:

Interest bearing loans and borrowings are comprised of the following:
Current Finance leases Bank overdrafts – secured (a) Non-current Secured liabilities Finance leases Bank loans – secured (b) Convertible Notes	CONSOLIDATED 2012 2011 $000 $000
	60 105 1 530
	61 635
	2 69 5,400 4,800 - 2,180
	5,402 7,049

	5,463 7,684

(a) Bank overdraft - secured

The overdraft facility attracts interest at variable interest rates plus a line fee is renewed annually.

(b) Bank loans - secured

The Commercial bill facility (fixed) debt attracts interest at a fixed annual interest rate and has a term which expires on 30 June 2014. The outstanding is $8,000,000 less a $2,600,000 secured deposit.

(c) Collateral provided

The available St George bank cash and guarantee facility is $1,600,000 (2011: $1,600,000). The unused cash facility at 30 June 2012 is $640,000 (2011: $58,000) with as cash and cash equivalents held of $875,022. Further details on the facility are provided in note 4. There is first registered real property mortgage over the investment property owned by the Consolidated Entity, together with a fixed and floating charge over the Consolidated Entity assets and cross guarantees from operating subsidiaries as security over the facility.

The carrying amounts of non-current assets pledged as security are: Freehold land and buildings Assets held for sale Plant and equipment	CONSOLIDATED 2012 2011 $000 $000
	15,000 11,100 204 - 463 922
	15,667 12,022

Joyce Corporation Ltd 2012 Annual Report I PAGE 70

21. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)

(e) Debt covenants

The covenants with St George bank includes:

an interest rate cover ratio of a minimum of 2.00 times where the cover is earnings before interest, tax, depreciation, amortisation divided by interest charged.
a gearing ratio of a maximum of 2.0 times where gearing is Total Liabilities divided by Total Equity; and
a limit on dividend payments made where these cannot be greater than 60% of net profit before interest, tax, depreciation, amortisation and abnormal or one off transactions.

Lease liabilities are secured by the underlying leased assets.

Financial assets that have been pledged as part of the total collateral for the benefit of the bank debt are as follows:

as follows:
Cash and cash equivalents Trade receivables	CONSOLIDATED 2012 2011 $000 $000
	3,774 3,780 572 1,166
	4,346 4,946

(f) Debt classification

There was no breach of the Company’s interest cover and gearing ratio debt covenants at 30 June 2012. As a result, the Consolidated Entity’s bank debt which is due on 30 June 2014 has been classified as non-current at 30 June 2012, in accordance with applicable accounting standards. A $1,600,000 facility is available for issue of bank guarantees and overdraft. At the reporting date the overdraft component was $642,000 with $640,000 undrawn.

(g) Risk exposure

Details of the Consolidated Entity's exposure to risks arising from current and non-current borrowings are set out in note 4.

(h) Fair values

The carrying amount of the Consolidated Entity’s current and non-current borrowings approximate their fair value.

Joyce Corporation Ltd 2012 Annual Report I PAGE 71

22. PROVISIONS

Provisions are comprised of the following:

22. PROVISIONS Provisions are comprised of the following:
*Current* Employee benefits (a) South Australia rental shortfall (b) Franchise settlement (e) Store closure provision (c) Other Total Current *Non-current* Employee benefits (a) South Australia rental shortfall (b) Environmental testing (d) Other Total Non-Current	CONSOLIDATED 2012 2011 $000 $000
	260 309 195 200 - 601 950 - 60 84 1,465 1,194 45 5 243 421 3 3 - 56 291 485 1,756 1,679

(a) Provision for employee benefits

A provision has been recognised for employee benefits relating to long service leave and annual leave. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on historical data. The measurement and recognition criteria relating to employee benefits have been included in note 2 to this report.

(b) Provision for rental shortfall

A provision continues for the payment of rental shortfall following the closure of a company owned store as at 30 June 2010 and this arrangement continues to October 2014.

(c) Store Closure Provision

At the 30 June 2012, the Consolidated Entity provisioned for the closure of some unprofitable company owned stores. The provision is for the estimated cost of lease surrender or sub-letting stores and any loss on realisation of assets.

(d) Environmental Testing

A provision has been made for ground water testing at the Moorebank property in Sydney as required by the NSW state authority.

(e) Franchisee Settlement Provision

A provision for payment of amount due under a settlement with franchisees in 2010 was completed during the year in accordance with the settlement agreement.

Joyce Corporation Ltd 2012 Annual Report I PAGE 72

22. PROVISIONS (CONTINUED)

Consolidated Group Opening balance at 1 July 2011 Additional provisions Amounts used Balance at 30 June 2012	Sub-let provision Store Closure Stock Provision Long- term Employee Benefits Franchisee Settlement Other Total $000 $000 $000 $000 $000 $000 $000 621 - - 314 601 143 1,679 - 950 - 286 - - 1,236 (183) - - (295) (601) (80) (1,159)
	438 950 - 305 - 63 1,756

(d) Provision for environmental testing

As part of the ongoing testing of Joyce Corporation owned sites it was found that traces of a chemical used by Joyce Foam Products was detected in the groundwater at the South Australian and New South Wales properties. The levels found were not high and to be prudent the Department of Environment and Conservation were notified. Confirmation has been received from the Department of Environment and Protection that no remediation work is required due to the low risk of harm to the environment; however an ongoing monitoring program has been established to monitor the nature, extent and movement of the chemical found.

23. CONTRIBUTED EQUITY

Ordinary shares carry one vote per share and carry the right to dividends.

	CONSOLIDATED 2012 2011 $000 $000
27,588,255 (2011: 20,321,623) Issued and fully paid ordinary shares (a) 380,000 (2011: 380,000) Partly paid ordinary shares, issued at $1.955 and paid to $1.215 (2011: $1.215) (b) Movement in ordinary shares on issue At 1 July 2011 Issued shares: Conversion of $2,180,000 convertible notes at $0.30 per share At 30 June 2012	17,347 15,167 467 467
	17,814 15,634
	Number $000
	20,321,623 15,634 7,266,632 2,180
	27,588,255 17,814

Joyce Corporation Ltd 2012 Annual Report I PAGE 73

23. CONTRIBUTED EQUITY (CONTINUED)

(a) Par value

The ordinary shares have no par value.

(b) Partly-paid ordinary shares

Partly paid ordinary shares are unquoted until they become fully paid. Partly paid ordinary shares carry voting rights and rights to participate in entitlement issues although any ordinary shares acquired under a rights issue cannot be quoted until the partly paid ordinary shares become fully paid.

24. RESERVES

The reserve is a financial asset reserve that resulted from the acquisition of the remaining 51% of the Bedshed Trust in 2006.

25. CAPITAL AND LEASING COMMITMENTS

(a) Finance lease and hire purchase commitments

The Consolidated Entity has finance leases and hire purchase contracts for various items of plant and machinery, these leases have no terms of renewal or purchase options and escalation clauses.

Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the net minimum lease payments are as follows:

CONSOLIDATED Within one year After one year but not more than five years Total minimum lease payments Less amounts representing finance charges Present value of minimum lease payments	2012 2011 Minimum payments Present value of payments Minimum payments Present value of payments $000 $000 $000 $000
	63 - 118 - 2 - 72 -
	65 - 190 - (3) - (16) -
	62 62 174 174

(b) Property lease receivable – Consolidated Entity as lessor

Within one year After one year but not more than five years	CONSOLIDATED 2012 2011 $000 $000
	790 689 1,799 2,356 - -
More than five years

	2,589 3,045

Joyce Corporation Ltd 2012 Annual Report I PAGE 74

25. CAPITAL AND LEASING COMMITMENTS (CONTINUED)

The property leases are non-cancellable leases expiring 2015 for a property New South Wales, with rent receivable monthly in advance. Contingent rental provisions within the lease agreement require the minimum lease payments to be increased by CPI per annum and or in accordance with a formula linked to turnover of the lessee.

(c) Property lease payable – Consolidated Entity as lessee

Within one year After one year but not more than five years	CONSOLIDATED 2012 2011 $000 $000
	2,891 3,118 4,913 7,724 - 49
More than five years

	7,804 10,891

Property leases are non-cancellable leases and have remaining terms of up to five years, with rent payable monthly in advance. Provisions within the lease agreements require that the minimum lease payments shall be increased by the CPI per annum. An option exists for most of the leases to renew the lease at the end of the lease term for an additional term equal to the period of the original lease. If the lease is renewed the rental rate is adjusted to market value.

(d) Motor vehicle lease payable – Consolidated Entity as lessee

Within one year After one year but not more than five years	CONSOLIDATED 2012 2011 $000 $000
	54 42 19 73 - -
More than five years

	73 115

Motor vehicle leases are non-cancellable leases for Consolidated Entity motor vehicles.

(e) Capital expenditure commitments

Capital expenditure commitment for investment property - plant and equipment	CONSOLIDATED 2012 2011 $000 $000
	68 290 68 290
Payable:
-within one year
	68 290

Joyce Corporation Ltd 2012 Annual Report I PAGE 75

26. CONTINGENT LIABILITIES

(a) Rental Guarantees

Joyce Corporation Ltd has provided guarantees to third parties in relation to property leases for Bedshed Company owned stores. These guarantees will be required while the stores remain company operated and currently total $956,130 (2011: $1,012,109).

27. RELATED PARTY DISCLOSURES

The consolidated financial statements include the financial statements of Joyce Corporation Ltd and the subsidiaries listed in the following table.

	Country of	% Equity	interest
	incorporation	2012	2011
Joyce Rural Pty Ltd	Australia	100	100
Bedding Investments Pty Ltd	Australia	100	100
Joyce Industries Pty Ltd	Australia	100	100
Furniture World Marketing Pty Ltd	Australia	100	50
Sierra Bedding Pty Ltd	Australia	100	100
Joyce Indpac Limited	Australia	100	100
Votraint No. 611 Pty Ltd	Australia	100	100
Joyce Asia Pty Ltd	Singapore	100	100
Bedshed Franchising Pty Ltd	Australia	100	100
Furniture World (HK) Pty Ltd	Hong Kong	50	50

Joyce Corporation Ltd is the ultimate parent of the Consolidated Entity.

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

Transactions with related parties:

(i) Disclosures relating to directors:-

Those Directors or their Director-related entities received dividend payments, which were made on the same basis as those made to other shareholders, during the year ended 30 June 2012.

(ii) Transactions entered into during the year between the Company and its controlled entities and Directors of the Company and their Director-related entities were within normal customer or employee relationships on terms and conditions no more favourable than those available to other customers or employees.
(iii) The Executive directors fees for Mr A Mankarios are paid to Starball Pty Ltd, a company in which Mr Mankarios has significant influence - $220,106 (2011: $157,920). As at year end the amount owing to this related party was nil (2011: Nil). Interest payment of $1,272.28 on Convertible Notes was paid during the year to Starball Pty Ltd (2011: $811.59) and $526.15 to Mr Mankarios for Convertible Notes (2011: $1,962.47). The convertible notes were fully converted to shares in the Joyce Corporation Ltd during the year.
(vi) A receivable from Pynland Pty Ltd, a company owned by Dan Smetana, for $19,700.26 owing to Joyce Corporation Ltd for amounts paid on behalf of Pynland Pty Ltd(2011: $13,402.54).
(vii) Mr Smetana has earned interest from Convertible notes during the year of $26,943.40. (2011 $46,417.82). Interest is payable monthly at 8% per annum. The convertible notes were fully converted to shares in the Joyce Corporation Ltd during the first half of the reporting year.

Joyce Corporation Ltd 2012 Annual Report I PAGE 76

28. EVENTS AFTER REPORTING DATE

An unfranked dividend of 1.5 cents per share was declared during the reporting period for shares held at record date of 15 June 2012 and paid 2 July 2012..

After the reporting date, agreement on closing two regional company owned stores has been executed. These were fully provisioned at the reporting date.

Other than disclosed above no event has occurred since the reporting date to the date of this report that has significantly affected, or may significantly affect:

(a) the Consolidated Entity’s operations, or
(b) the results of those operations, or
(c) the Consolidated Entity’s state of affairs.

29 AUDITORS’ REMUNERATION

Amounts received or due and receivable by the auditor, Grant Thornton Audit Pty Ltd for: • an audit or review of the financial report of the Consolidated Entity • other services in relation to the Parent Entity and any other entity in the Consolidated Entity (a) tax compliance (b) assurance related 30. DIVIDENDS Distributions paid or payable Final unfranked ordinary dividend of Nil (2011: 2.0 cents) cents per share (Paid – 18 November 2011) Interim unfranked ordinary dividend of 1.5 (2011: Nil) cents per share (Paid – 02 July 2012)	CONSOLIDATED 2012 2011 $000 $000
	79 103 45 53 26 10
	150 166
	2012 2011 $000 $000
	406 406 414 -
	820 406

To date the directors have not declared the payment of a final dividend out of retained profits at 30 June 2012 and will continue to monitor performance and review resources to determine when a dividend will be paid.

Joyce Corporation Ltd 2012 Annual Report I PAGE 77

31. DIRECTOR AND EXECUTIVE DISCLOSURES

(a) Details of key management personnel

(i)Specified directors

Mr D A Smetana Chairman (non-executive) Mr T R Hantke Non-executive Director Mr M A Gurry Non-executive Director Mr A Mankarios Executive Director

(ii)Specified executives

Mr G Culmsee Chief Operating Officer Mr K Gray Chief Financial Officer & Company Secretary Ms S Freedman National Marketing Manager

(b) Remuneration of key management personnel

(i) Remuneration Policy

The Remuneration Committee of the Board of Directors of the Company is responsible for determining and reviewing compensation arrangements for the directors, the Managing Director and the executive team. The Remuneration Committee assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms including cash and fringe benefits such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company.

It is the Remuneration Committee’s policy that employment agreements shall be entered into with the Executive Director and all other executives.

Joyce Corporation Ltd 2012 Annual Report I PAGE 78

31 DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED)

(ii)Remuneration of key management personnel

	Short-term Post-Employment Share based payment Total Salary & Fees Cash Bonus Non- Monetary benefits Superann uation Retirement benefits Options $000 $000 $000 $000 $000 $000 $000
30 June 2012
Mr D A Smetana	122 - - 50 - - 172
Mr T R Hantke	44 - - 25 - - 69
Mr M A Gurry	- - - 69 - - 69
Mr A Mankarios	155 65 - - - - 220
Mr G Culmsee	211 40 - 22 - - 273
Mr K Gray	137 32 28 18 - - 215
Ms S Freedman	143 13 - 14 - - 170

Total Remuneration:	812 150 28 198 - - 1,188
30 June 2011 Mr D A Smetana Mr T R Hantke Mr M A Gurry Mr A Mankarios Mr G Culmsee Mr K Gray Ms S Freedman Total Remuneration:	119 - - 50 - - 169 38 - - 29 - - 67 52 - - 15 - - 67 157 - - - - - 157 183 - 17 18 - - 218 124 - 36 14 - - 174 90 - - 8 - - 98 763 - 53 134 - 950

(c) Remuneration options: Granted and vested during the year

During the financial year ended 30 June 2012 no options (2011: Nil) were granted or vested as equity compensation benefits to any director or executive of the Consolidated Entity.

(d) Shares issued on exercise of remuneration options

During the financial year ended 30 June 2012 no shares (2011: Nil) were issued on exercise of remuneration options to any director or executive of the Consolidated Entity.

Joyce Corporation Ltd 2012 Annual Report I PAGE 79

31. DIRECTOR AND EXECUTIVE DISCLOSURES (CONTINUED)

(e) Shareholdings of key management personnel

Ordinary Shares held in Joyce Corporation Ltd

2012	Balance 01-Jul-11 Granted as Remuneration On Exercise of Options Ord Ord Ord	Net Change Other Balance 30-June-12 Ord Ord
Mr D A Smetana Mr T R Hantke Mr M A Gurry Mr A Mankarios Mr G Culmsee Mr K Gray Ms S Freedman Total 2011*	7,082,932 - - - - - - - - 516,119 - - - - - - - - - - -	2,715,733 9,798,705 - - - - 178,765 694,884 - - 66,666 66,666 - -
	7,599,051 - -	2,961,204 10,560,255
	Balance 01-Jul-10 Granted as Remuneration On Exercise of Options Net Change Other Balance 30-June-11 Ord Ord Ord Ord Ord
Mr D A Smetana Mr T R Hantke Mr M A Gurry Mr A Mankarios Mr G Culmsee Mr K Gray Ms S Freedman Total*	7,082,932 - - 3,000 7,082,932 - - - - - - - - - - 505,289 - - 10,830 516,119 - - - - - - - - - - - - - - -
	7,585,221 - - 13,830 7,599,051

Beneficial holding only. Mr Smetana controls 10,893,438 fully-paid ordinary shares (2011: 7,960,359).

All equity transactions with specified directors and specified executives have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm’s length.

Mr D A Smetana also holds 380,000 partly paid (issued at $1.955 and paid to $1.315) ordinary shares of the Company.

Partly paid shares are unquoted until they become fully paid. Partly paid shares carry voting rights and rights to participate in entitlement issues although any shares acquired under a rights issue cannot be quoted until the partly paid shares become fully paid.

(f) Loans to key management personnel

At 30 June 2012 or at any time during the financial year there were no loans (2011: Nil) outstanding to specified directors and specified executives.

Joyce Corporation Ltd 2012 Annual Report I PAGE 80

32. RECONCILIATION OF NET PROFIT AFTER TAX TO NET CASH FLOWS FROM OPERATIONS

Reconciliation of net profit (loss) after tax to the net cash
flows from operations
Net profit/(loss) after taxation
Adjustments for:
Depreciation and amortisation
Interest receivable
Impairment of plant & equipment
Revaluations of investment properties including those classified
as held for sale
Net loss / (profit) on disposal of property, plant and equipment
Franchisee settlement paid
Changes in assets and liabilities
(increase)/decrease in inventories
(increase)/decrease in trade and other receivables
(increase)/decrease in other assets
(increase)/decrease in net deferred income tax assets and
liabilities
(decrease)/increase in income taxes payable
(decrease)/increase in trade and other payables
(decrease)/increase in provisions
Net cash flows used in operating activities

CONSOLIDATED
2012
2011
$000
$000
3,035
2,914
193
307
(42)
(151)
-
359
(3,553)
(133)
1
122
(601)
(1,875)
114
1,611
654
1,367
132
14
(105)
(1,934)
-
(83)
170
(1,622)
678
(3,095)

676
(2,199)

Joyce Corporation Ltd 2012 Annual Report I PAGE 81

33. PARENT ENTITY DISCLOSURES

(a) Financial position

Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net Assets Equity Issued capital Retained earnings Net Equity (b) Financial performance Profit/(Loss) for the year Other comprehensive income Total comprehensive profit/(loss)	As at 30 June 2012 2011
	$000 $000 187 271 20,972 20,877
	21,159 21,148
	654 819 5,620 6,977
	6,274 7,796

	14,885 13,352
	17,814 15,634 (2,929) (2,282)
	14,885 13,352
	Year ended 30 June 2012 2011
	$000 $000 173 (660) - -
	173 (660)

(c) Guarantees entered into by the parent entity in relation to the debts of its subsidiaries

No such guarantees existed at 30 June 2012, other than security arrangement with St George Bank in respect of interest bearing liabilities discussed in note 21.

(d) Contingent liabilities of the parent entity.

No contingent liabilities existed within the parent entity as at 30 June 2012 (30 June 2011: Nil).

(e) Commitments for the acquisition of property plant and equipment by the parent entity

Commitments for the acquisition of property plant and equipment by the parent entity existed as at 30 June 2012 for the value of $68,000 (30 June 2011: $290,000).

Joyce Corporation Ltd 2012 Annual Report I PAGE 82

DIRECTORS’ DECLARATION

In accordance with a resolution of the Directors of Joyce Corporation Ltd, I state that:

(a) in the Directors’ opinion the financial statements and notes thereto of the Consolidated Entity has been prepared in accordance with the Corporations Act 2001, including that they:
(i) comply with Australian Accounting Standards and Corporations Regulations 2001; and
(ii) give a true and fair view of the financial position of the Consolidated Entity as at 30 June 2012 and of its performance as represented by the results of its operations and its cash flows for the year ended on that date; and
(b) the Directors have been given the declarations by the Executive Director and Chief Financial Officer required by Section 295A;
(c) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and
(c) the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a).

Signed in accordance with a resolution of the Directors made pursuant to s.295 (5) of the Corporations Act 2001.

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D A Smetana Chairman

Perth, 28 September 2012

Joyce Corporation Ltd 2012 Annual Report I PAGE 83

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Grant Thornton Audit Pty Ltd ABN 91 130 913 594 ACN 130 913 594

10 Kings Park Road West Perth WA 6005 PO Box 570 West Perth WA 6872

Independent Auditor’s Report To the Members of Joyce Corporation Limited

T +61 8 9480 2000 F +61 8 9322 7787 E [email protected] W www.grantthornton.com.au

Report on the financial report

We have audited the accompanying financial report of Joyce Corporation Limited (the “Company”), which comprises the consolidated statement of financial position as at 30 June 2012, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view of the financial report in accordance with Australian Accounting Standards and the Corporations Act 2001. This responsibility includes such internal controls as the Directors determine are necessary to enable the preparation of the financial report to be free from material misstatement, whether due to fraud or error. The Directors also state, in the notes to the financial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the

Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards which require us to comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

Liability limited by a scheme approved under Professional Standards Legislation

Joyce Corporation Ltd 2012 Annual Report I PAGE 84

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An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error.

In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s opinion

In our opinion:

a the financial report of Joyce Corporation Limited is in accordance with the Corporations Act 2001, including:
i giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its performance for the year ended on that date; and
ii complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b the financial report also complies with International Financial Reporting Standards as disclosed in the notes to the financial statements.

Report on the remuneration report

We have audited the remuneration report included in pages 11 to 15 of the directors’ report for the year ended 30 June 2012. The Directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.

Joyce Corporation Ltd 2012 Annual Report I PAGE 85

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Auditor’s opinion on the remuneration report

In our opinion, the remuneration report of Joyce Corporation Limited for the year ended 30 June 2012, complies with section 300A of the Corporations Act 2001.

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GRANT THORNTON AUDIT PTY LTD Chartered Accountants

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M J Hillgrove Partner - Audit & Assurance

Perth, 28 September 2012

Joyce Corporation Ltd 2012 Annual Report I PAGE 86

ASX ADDITIONAL INFORMATION AS AT 24 SEPTEMBER 2012

Additional information required by the Australian Securities Exchange Limited‘s Listing Rules and not disclosed elsewhere in this report. The information is provided below:

(a) Distribution of Shareholders

Category As at 24 September 2012 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over Total Holding less than a marketable parcel	Holders Fully Paid Ordinary Shares % 217 70,943 0.26 172 439,858 1.59 63 480.482 1.74 119 4,071,200 14.76 31 22,525,772 81.65
	602 27,588,255 100.0
	239 95,789 0.35

(b) Shareholdings - Substantial Shareholdings

The number of shares held or controlled at the report date by substantial shareholders was as follows:

Ordinary Shareholder 1. Mr D A Smetana 2. John Roy Westwood Total*	Fully Paid Ordinary Shares % 10,893,438 39.5 2,700,000 9.8
	12,498,705 45.3

Mr Smetana has beneficial interest in 8,764,902 fully-paid ordinary shares (2011: 7,082,932).

(c) Voting Rights

The voting rights attached to each class of equity security are as follows:

Ordinary shares

Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands.

Joyce Corporation Ltd 2012 Annual Report I PAGE 87

ASX ADDITIONAL INFORMATION (CONTINUED)

AS AT 24 SEPTEMBER 2012

(d) Shareholdings - Twenty Largest Holders of Quoted Equity Securities - ungrouped

The number of shares held at the report date by the twenty largest holders of quoted equity securities:

Ordinary Shareholder
1.
Adamic Pty Ltd
2.
UFBA Pty Ltd
3.
Peduncle Pty Ltd
4.
Mr Keith Knowles
5.
Wallbay Pty Ltd
6.
Trafalgar Place Nominees Pty Ltd
7.
Mr Donald Teo
8.
Parks Australia Pty Ltd
9.
Mr Daniel Alexander Smetana
10.
Mr Richard Hamilton Bartlett
11.
Conard Holdings Pty Ltd
12.
Mr A Mankarios and Mrs Chiara Mankarios
13.
ASB Nominees Limited <130368 – ML A/C>
14.
Mrs Edna Knowles
15.
PBL Investments Pty Ltd
16.
Mr Keith Knowles
17.
Mr Dan Smetana
18.
Mr John Martin Wright
19.
Bellpam Pty Limited

20.
Argus Clothing Pty Ltd
Total

Fully Paid
Ordinary
Shares
%
7,711,568
27.95
2,700,000
9.79
1,948,312
7.06
1,079,648
3.91
998,356
3.62
990,233
3.59
990,000
3.59
782,965
2.84
563,726
2.04
355,400
1.29
347,940
1.26
342,376
1.24
326,256
1.18
318,885
1.16
270,203
0.98
259,380
0.94
243,492
0.88
229,463
0.83
207,500
0.75
196,050
0.71

20,861,753
75.62%

(e) Unquoted Partly Paid Shares holdings greater than 20%

Ordinary Shareholder Mr D A Smetana Total	Partly Paid Ordinary Shares % 380,000 100 380,000 100

Joyce Corporation Ltd 2012 Annual Report I PAGE 88

ASX ADDITIONAL INFORMATION (CONTINUED) AS AT 24 SEPTEMBER 2012

(f) Company Secretary

Mr Keith Gray

(g) Registered Office

14 Collingwood Street, OSBORNE PARK, WA, AUSTRALIA, 6017

Tel: +61 8 9445 1055

(h) Share Registry

Computershare Investor Services Pty Limited Level 2, Reserve Bank Building, 45 St Georges Terrace PERTH, WA 6000

Tel: 1300 557 010

Joyce Corporation Ltd 2012 Annual Report I PAGE 89

AI assistant

JOYCE CORPORATION LTD — Annual Report 2012

65167_rns_2012-10-18_321e56cf-dfa4-45b5-b569-714c0af681c8.pdf

Joyce Corporation Ltd AND CONTROLLED ENTITIES

Corporate Directory

ANNUAL REPORT CONTENTS

CHAIRMAN’S REPORT

EXECUTIVE DIRECTOR’S REPORT

Review of Operations

EXECUTIVE DIRECTOR’S REPORT (CONTINUED)

Future Outlook

DIRECTORS’ REPORT

DIRECTORS

SECRETARY

PRINCIPAL ACTIVITIES

REVIEW AND RESULTS OF OPERATIONS

Closure of Company-owned stores

Settlement of legal actions with franchisees

Financial Position

Bank Facility

DIRECTORS’ REPORT (CONTINUED)

REVIEW AND RESULTS OF OPERATIONS (CONTINUED)

FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES

DIVIDENDS

SIGNIFICANT AFTER REPORTING DATE EVENTS

DIRECTORS’ REPORT (CONTINUED)

INFORMATION ON DIRECTORS

Mr D A Smetana Chairman - Non-executive. Age 68. Dip Comm FCPA FAIM FAICD

Experience and expertise

Other current Directorships of listed companies

Former Directorships of listed companies in last 3 years

Special responsibilities

Interests in shares and options

Mr M A Gurry. – Independent, Non-executive Director. Age 65. Bachelor of Science Dip AICD FAICD FAIM SF Fin

Experience and expertise

Other current Directorships of listed companies

Former Directorships of listed companies in last 3 years

Special responsibilities

Interests in shares and options

DIRECTORS’ REPORT (CONTINUED)

INFORMATION ON DIRECTORS (CONTINUED)

Experience and expertise

Other current Directorships of listed companies

Former Directorships of listed companies in last 3 years

Special responsibilities

Interests in shares and options

Experience and expertise

Other current Directorships of listed companies

Former Directorships of listed companies in last 3 years

Special responsibilities

Interests in shares and options

COMPANY SECRETARY

DIRECTORS’ REPORT (CONTINUED)

INFORMATION ON DIRECTORS (CONTINUED)

MEETINGS OF DIRECTORS

REMUNERATION REPORT - AUDITED

A. Principles used to determine the nature and amount of remuneration

Remuneration Committee

DIRECTORS’ REPORT (CONTINUED)

REMUNERATION REPORT – AUDITED (CONTINUED)

Remuneration Policies

A. Principles used to determine the nature and amount of remuneration (continued)

Non-executive Directors

DIRECTORS’ REPORT (CONTINUED)

REMUNERATION REPORT - AUDITED (CONTINUED)

Executive pay

Fixed Remuneration

Variable Remuneration - Short Term Incentives

B. Service Agreements

DIRECTORS’ REPORT (CONTINUED)

REMUNERATION REPORT – AUDITED (CONTINUED)

Other Executives

C. Details of remuneration

D. Share-based compensation

DIRECTORS’ REPORT (CONTINUED)

REMUNERATION REPORT – AUDITED (CONTINUED)

E. Link between remuneration policy and Company performance

F. Voting at the 2011 Annual General Meeting on the Remuneration report

G. Independent Salary and Incentive Review

LOANS TO DIRECTORS AND EXECUTIVES

JOYCE CORPORATION LTD Annual Report 2012