annual report 2005 - Pumpkin Patch investor relations

Pumpkin Patch Limited & Subsidiaries notes to and forming part of the financial statements
for the 12 months ended 31 July 2005
employee share option plan
Prior to listing in 2004 the Company established a Share Option Plan for selected senior employees, including
Executive Directors, under the following terms:
• One option entitles the employee to purchase one ordinary share in the Company
• The exercise price of the 2004 options issued was the price per share paid by investors upon initial listing on
9 June 2004, being $1.25. In the case of the 2005 options the exercise price of $2.75 was the volume weighted
average selling price of the Company’s shares traded on the New Zealand Stock Exchange during the 10 working
days prior to issue date, being 9 June 2005.
• Options can only be exercised:
- in the exercise period commencing three years after issue date and ending 5 years after issue date or in other
extraordinary circumstances, for example if a person or group of associated persons acquire an interest in at least
50% of the total voting rights in the Company, and
- if, on the day of exercise, the market price of the ordinary shares is equal to or greater than the benchmark price.
• The benchmark price is calculated by taking the exercise price and adjusting for the required weighted average cost
of capital, as determined by independent advisors, and expected annual dividends over the period from the issue
date to the commencement of the exercise period.
• Options will lapse if not exercised within the exercise period.
In the current period 2,427,000 (2004: 2,274,000) options were granted under the Share Option Plan
Options:
Number Issued
Exercise
Price
Exercise
Period Starts
Exercise
Period Ends
Options issued in June 2004 2,274,000 $1.25
Opening balance 2,274,000
Options issued in June 2005 2,427,000 $2.75
Closing balance 4,701,000
9 June
2007
9 June
2008
9 June
2009
9 June
2010
Under the Scheme Executive Directors were issued with the following options: Chrissy Conyngham 290,000, Greg Muir 150,000, and Maurice Prendergast
150,000.
The value of these options was independently assessed using a binominal option pricing model and was at the time of issue: Chrissy Conyngham $176,610;
Greg Muir $91,350; Maurice Prendergast $91,350, and $1,118,733 for all other employees. No compensation expense is recognised in the statements of
financial performance.
5. treasury stock
1,494,733 shares (2004: 2,000,000) have been issued under the DF7 Scheme but at balance date have not been
allocated to 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 to appoint 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 and as such has recognised
unallocated DF7 Scheme shares as Treasury Stock.
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The value of balance of Treasury Stock as at 31 July 2005 is $1,401,312 (2004: $1,875,000).