1086 AnnRep-Investment S04-3 - Pumpkin Patch investor relations

PUMPKIN PATCH LIMITED & SUBSIDIARIESNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE 12 MONTHS ENDED 31 JULY 2004 (CONTINUED)5. Treasury Stock2,000,000 shares have been issued under the DF7 Scheme but at balance date have not beenallocated and paid for by employees. The shares are held in trust by Pumpkin Patch Nominees Limited.The terms of the Trust Deed between the Company and the Trustee gives the Company the right toappoint trustees and to benefit from any surplus funds held by the Trust.Therefore the Company has consolidated the DF7 Scheme as an in substance subsidiary at 31 July 2004and as such has recognised unallocated DF7 Scheme shares as Treasury Stock.The value of Treasury Stock as at 31 July 2004 is $1,875,000 (2003: nil).6. Pre-listing Employee Share Ownership SchemesIn the period from 1999 to prior to listing in June 2004 the Company established a number of employeeshare ownership schemes which allowed employees (including Executive Directors) to purchase sharesin the Company. These share purchases were funded by interest free loans from the Company.Immediately prior to listing loans totalling $1,720,740 (2003: $1,647,240) were outstanding.Prior to listing and the allotment of shares under the share offer in June 2004 the Company restructuredall pre-listing employee share ownership schemes. The effect of the restructuring was:• All shares allocated under these schemes were fully paid, and the Company provided additionalinterest free loans of $5,710,750 to employees to pay for any shares under the schemes not alreadypurchased in cash• The Company committed to pay grossed up bonuses to employees, in some cases over a threeyear period and in some cases prior to listing, to fully or substantially discharge the amount ofthe loans.• The total net tax cost of restructuring the pre-listing employee share ownership schemes of$7,431,490 was fully provided for prior to listing. This consisted $7,220,411 for the provision of bonusesto employees, including Executive Directors, to fully or substantially discharge their loans and$211,079 for the discharge of a loan outstanding from the pre-listing Pumpkin Patch Employee ShareScheme Trust.• Approximately one third of each employees shares issued under the schemes are held by a Trusteeas security for the payment of the loans owing to the Company and will be released to employeesprogressively over three years as their loans are progressively discharged.• Should an employee’s employment cease they are required to forfeit to the Company anyremaining shares held as security.• Employees retain full voting and dividend rights attached to their shares while held as security.• As at 31 July 2004 the Trustee holds 3,800,847 shares as security.42