pumpkinpatch annual report 2012

playing our part! 03

table of contents

financial summary chairperson’s letter chief executive officer’s report directors corporate governance

07 08 13 20 24

general disclosures group financial statements auditors’ report shareholder information corporate directory

32 41 100 102 104

05

financial summary
Key results Trading Results Group operating revenue - Continuing operations - Discontinued operations Earnings before interest and tax (1) Net Profit After Tax Net Loss After tax
(1) (2)

2012 NZ $000

2011 NZ $000

Change %

300,609 30,192 19,203 10,128 (27,527)

291,520 65,302 21,877 12,641 (1,876)

3.1% (53.8%) (12.2%) (19.9%)

Financial Position at Year End Total equity Total assets Net bank debt Number of stores Australia New Zealand Ireland Total Company operated online markets Pumpkin Patch Charlie & Me Wholesale/ franchise operations Markets in operation Number of locations
(1) (2)

33,457 155,558 54,657

32,451 205,007 60,970

129 51 3 183 8 2 19 369

130 54 3 187 5 19 367

Before reorganisation costs After reorganisation costs

07

chairperson’s letter
DEAR ShAREhOLDERS
While 2012 was another very challenging year for us as we continued to face volatile retail conditions across all of our markets, I look back on the year with a great deal of satisfaction with the changes we have been implementing, the strategic initiatives we have introduced, and with the focus moving back to our core strengths. During the year we embarked on a major change process aimed at better preparing the business for the future, simplifying our overseas operations, and refocusing on our core business units. Of course the most noticeable changes were the closures of the underperforming United Kingdom and United States retail stores in January. There were also a number of changes to management structures and head Office functions. Our long serving Chief Executive Officer Maurice Prendergast stood down to become a non-executive director and handed over the reins to Neil Cowie. Since Neil became CEO he has implemented a series of initiatives to build on the immense capability that exists within the Company and drive improved financial results into the future. The team that Neil leads is as motivated as ever and is determined to make Pumpkin Patch the company they all know it can be. We also welcomed Rod Duke and Peter Schuyt as directors. Between the two of them they have a wide range of experience that will assist us deal with the current challenging retail environment and execute a series of growth strategies across our local and international markets. At the upcoming annual shareholders meeting we will be saying goodbye to David Jackson who has been a director since we listed on the stock exchange back in 2004. I would like to thank David for his dedication and service to the Company over the last 8 years and wish him well for the future. A major highlight for me in 2012 was the growth in our online sales and earnings. Over the last financial year our online operation generated higher earnings than all of our New Zealand retail stores combined. This is an amazing achievement; a sign of the online capability we have and the potential that exists for us online not only in our ‘home markets’ of Australia and New Zealand but also in our newer international online markets. We now sell Pumpkin Patch product online in 8 markets around the world and during the year launched dedicated Charlie & Me websites in Australia and New Zealand. Earlier in the year we launched the Patch General Store, an extension of our existing websites through which our customers can access a huge range of the everyday items parents need for their children, from nappies through to bed linen. While many of the brands sold through

Patch General Store are well known international brands we are excited about giving a number of lesser known yet very exciting New Zealand brands exposure to our very large customer database. Patch General Store is yet another example of us using our existing online and supply chain capabilities to develop new business opportunities. If you haven’t already been on our websites I encourage you to take a look; we think we are ahead of the pack in the online space and are proud of what we are doing. Most retailers are struggling with setting up online operations and trying to come to terms with just how the online future will impact their traditional retail models. Instead we have proactively moved forward, embraced it, and started to leverage our well developed online and supply chain capabilities to drive significant increases in sales and earnings. It has also been exciting to see how we have increased the use of technology both online and at store level to come up with innovative new ways for our customers to shop with us. One of the latest initiatives is called ‘click and collect’ which allows customers to buy online and arrange for pick up to be made via one of our stores. The customer reaction to ‘click and collect’ has well and truly exceeded our expectations which reinforces the need to constantly evolve the customer shopping experience whether it be in store or online. We are working on a number of other exciting things in the multi-channel area which we hope to roll out across 2013. Despite the currently challenging retail environment Neil and the team are looking to the future and implementing strategies that the Board are confident will deliver our shareholders improved returns in the years to come. As Chairperson I look to the future with increasing confidence in the direction the business is heading. The Annual Shareholders Meeting is being held in Auckland on Tuesday 20 November 2012. I would like to personally invite you to attend the meeting to hear about the changes that have occurred over the last year but more importantly hear about the some of the initiatives we are putting in place. On behalf of the shareholders and the Board of Directors I would like to thank Neil and his team for their hard work and the dedication they have shown during what has been a very tough year and for the effort I know they are currently putting in to developing strategies for the future.

Jane Freeman

JANE FREEMAN ChAIRPERSON

09

GROUP TURNOvER*
(NZ$m)

International 11% *SALES International 11% Group Turnover (NZ$m)

BY REGION
International 11%

$323.4 $323.4

$330.3 Group Turnover (NZ$m) $310.4 $300.6 $330.3 $291.5 Group Turnover (NZ$m) $310.4 $300.6 $291.5 $330.3 $323.4 $310.4

New Zealand 20% New Zealand $300.6 $291.5 20% New Zealand 20%

Australia 69% Australia 69% FY08 FY08 FY09 FY09 FY10 FY10 FY08 FY11 FY11 FY09 FY12 FY12 FY10 FY11 FY12
*Sales from continuing operations *Sales from continuing operations *Turnover from continuing operations *Turnover from continuing operations

Australia 69%

*Turnover from continuing operations

*Sales from continuing operations

GROUP
(NZ$m)

NPAT *

Group NPAT(NZ$m)* Group NPAT(NZ$m)* $25.5 $25.5 Group NPAT(NZ$m)* $25.5

$17.1 $17.1 $14.5 $14.5 $12.6 $17.1 $12.6 $14.5 $10.1 $10.1 $12.6 $10.1

FY08 FY08

FY09 FY09

FY10 FY10 FY08

FY11 FY11 FY09

FY12 FY12 FY10 FY11 FY12

*Before non-recurring items and reorganisation costs *Before non-recurring items and reorganisation costs

*Before non-recurring items and reorganisation costs

11

ith the challenging trading conditions we encountered in 2012, we embarked upon some significant changes across the business. While these changes impacted a large number of our team members and required significant reorganisation costs to be recognised the changes were necessary for us to refocus ourselves on our core markets, our core strengths, and to focus on developing initiatives that will deliver improved financial results for shareholders into the future. Despite the challenging environment our Australian sales were up 4% and New Zealand sales were up 3% driven by very strong online sales growth and positive sales growth from our retail stores. We encountered increased promotional activity and higher product costs, mostly cotton related, and as a result gross margins were impacted. however later in the year margins improved due to lower product costs and higher import exchange rates. A major highlight for me in 2012 was the growth seen from our global online business. Sales exceeded $30m and earnings exceeded the EBIT generated by all of our New Zealand retail stores combined. This is a major milestone and a sign of the growth potential and scalability of our online model. Our online sales in Australia are the equivalent of around 11% of our retail sales which is approximately twice that of the average Australian retailer. One of our key focus areas is the development of multi-channel strategies. The merging of the traditional retail and online models is only just beginning however we believe we are ahead of the pack and will retain that position as we continue to invest in technology and supply chain capability. These multi-channel strategies are very much aligned with the changing consumer demands and will ultimately lead to us servicing our customers better. While we are expecting increased revenue from most International markets in local currency terms in the coming year the continued high NZ dollar will negate much of this growth. We are currently looking at a number of new international franchise and online opportunities for both Pumpkin Patch and Charlie & Me brands however any new markets will take time to generate noticeable earnings. We are becoming a true multi-channel operator. having a strong Australasian retail presence, a rapidly growing international online operation, and the opportunities for our international wholesale/franchise business model gives us so much flexibility when looking at growth options. Couple this with the dual brand Pumpkin Patch/ Charlie & Me strategy and you open up a lot more opportunities. During 2012 we managed inventory a lot better and we were disciplined with capital expenditure. As a result inventory was considerably lower than last year at $61m and net bank debt is also lower at $55m. With better trading performances in 2013, good control over inventory, costs, and capital expenditure we are forecasting bank debt to further reduce over the coming year.

W

chief executive officer’s report

Neil Cowie

13

AUSTRALIA
2012 Turnover EBIT
NZ $’000

NEW ZEALAND
2011 198,786 34,874 17.5% Stores 105 15 9 129 107 17 8 132 Online trading websites ✔ ✔ 30 33 ✔ Pumpkin Patch Charlie & me ✔ ✔ ✔ Pumpkin Patch Outlet Charlie & me 35 12 4 51 37 14 3 54 4.4% 0.2% Turnover EBIT
NZ $’000 NZ $’000

2012 59,246 9,566 16.1%

2011 57,529 10,705 18.6% 3.0% (10.6%)

207,630 34,953 16.8%

NZ $’000

Stores Pumpkin Patch Outlet Charlie & me Online trading websites Pumpkin Patch Charlie & me Wholesale ‘doors’

Although trading conditions in Australia were challenging total sales were up 4.4% to $207.6m, driven by strong growth in online sales and higher retail sales. The market continued to be characterised by higher than normal levels of promotional activity which impacted gross margins. When coupled with higher product costs, especially in 1h12, overall segment margins fell below FY11 levels. however our margins did improve in 2h12 with lower products costs and an improving average import exchange rate. Despite the lower margins and the challenging trading conditions segment EBIT increased 0.2% to $35.0m. At year end we had 129 Company operated stores in Australia with our product sold through another 30 wholesale partner ‘doors’. During the year we launched a dedicated Charlie & Me website adding to the online presence we have with the Pumpkin Patch website. The response to Charlie & Me online has been very strong. We have had considerable success at reducing rent costs by taking a very disciplined approach to negotiating more appropriate lease terms during lease renewal periods. Should we be unable to negotiate suitable lease terms that better reflect current market conditions we will close stores. Although we are expecting trading conditions in Australia to remain challenging across 2013 our brand strength remains very strong and we are well positioned for when the market begins to recover. We continue to see long term online and retail growth opportunities in the market for both Pumpkin Patch and Charlie & Me brands. The multichannel initiatives that are in development will bring an exciting new dimension to our online and retail models which we believe our customers will embrace.

While trading conditions across the year remained soft total New Zealand sales increased 3.0% to $59.2m. This was mostly driven by higher online sales with a smaller increase coming from retail stores. As with Australia the market continued to be influenced by higher than normal levels of promotional activity. This combined with higher product costs impacted margins which were down on last year. New Zealand also experienced improved margins in 2h12 due to lower product costs and better import exchange rates. At year end we had 51 stores open (Pumpkin Patch 47, Charlie & Me 4) and dedicated Pumpkin Patch and Charlie & Me websites operating. We are also expecting New Zealand trading conditions to remain challenging in the near term. however like Australia we see retail and online growth opportunities for both Pumpkin Patch and Charlie & Me in New Zealand including a number of multichannel initiatives in development.

15

INTERNATIONAL
2012 Turnover EBIT
NZ $’000

2011 35,205 6,625 18.8% 18 334 3 3 (4.2%) (6.3%)

33,733 6,210 18.4%

NZ $’000

Wholesale/franchise: Markets ‘Doors’ Online markets being serviced via company owned sites Stores - Ireland 18 339 6 3

Total sales for the year were $33.7m, down 4.2% on last year. While sales in most wholesale markets increased in local currency terms the continued high NZ dollar exchange rate impacted the translation of international sales. Strong sales growth was seen across all online markets. Margins were impacted by higher product costs and the high NZ dollar export exchange rate. Online margins were impacted by short term stock clearance promotions that were run in the United States and United Kingdom while the retail stores in those markets were being closed. The International segment currently consists of 3 retail stores in Ireland and Company operated websites selling product in 6 markets, with product also being sold through 339 partner ‘doors’ across 18 markets. In the first half of FY13 we will deliver the first shipments of Pumpkin Patch to Mexico and Charlie & Me to the Middle East. These new markets offer some exciting possibilities for us however they will take some time to generate noticeable earnings. We are currently exploring a number of new markets for both brands including franchise and online opportunities.

CENTRAL SUPPORT FUNCTIONS
We have directed a lot of effort over the last 18 months to realigning our central support overheads to better match the current environment and our future strategic direction. Excluding reorganisation costs and foreign exchange losses, actual underlying central support overheads were down $5.1m on last year. We are determined to keep overhead cost structures at appropriate levels as the business grows into the future.

17

other financial information
REORGANISATION COSTS Full recognition was made for all expected costs relating to the closure of the United Kingdom and United States retail business units and the reorganisation of head office functions across FY12. An impairment and onerous lease charge of $1.5m was made in relation to 6 marginal Australian stores which are underperforming and have upcoming lease renewals. Should appropriate lease reductions not be negotiated with landlords the stores will be closed. Total reorganisation costs recognised in FY12 were $39.8m before tax of which $34.3m are non-cash in nature. CASh FLOWS AND BALANCE ShEET Net bank debt at July was $54.7m down 10% on last year. Based on current trading conditions and the continued control over working capital, overheads, and capital expenditure bank debt is expected to further reduce over the coming year. At the end of July we had $100m of total available bank facilities in place. We have commenced the scheduled annual facility review and are expecting to soon have in place funding facilities for another three years. Capital expenditure for the year totalled $7.8m considerably lower than last year (FY11: $17.1m) reflecting the lower number of new stores opened this year and the new store mix moving towards the smaller and lower cost Charlie & Me stores. The international and online growth strategies are not expected to lead to any material capital expenditure requirements in the foreseeable future. Inventory levels were 27% lower at $61.4m. Inventory holdings are well matched to current trading conditions and maintaining that position is a key focus area for us in the coming year.

DIvIDEND While no dividends were paid for FY12 we will review dividend payments at the completion of 1h13. SUMMARY Although trading conditions across all markets were challenging in 2012 we generated sales growth across our core local and international markets while at the same time undertaking a major reorganisation of our operations. The reorganisation means we are a much simpler and more agile business which can now focus on our core strengths such as product design and online capabilities, and start implementing longer term strategic initiatives that will deliver benefits for shareholders in years to come, and allow us and our shareholders to look more confidently into the future. I would like to thank the entire Pumpkin Patch team for their hard work and ongoing dedication to the future of our brands. I have been very impressed by the way the team stood up to the challenges the markets through their way while at the same time they were implementing a major reorganisation of our business. It has been a privilege to have worked with them over the last year and I look forward with much excitement to seeing them take advantage of the international opportunities that await the business in the future.

NEIL COWIE ChIEF ExECUTIvE OFFICER

19

directors
JANE FREEMAN Chairperson Independent Non-Executive Director Member of the Remuneration and Nomination Committee and the Audit and Risk Committee Jane has held senior marketing and management positions at Telecom’s e-solutions, BankDirect, Clear Communications and ASB Bank Ltd. Jane is currently a director of ASB Bank Limited, & Delegats Group Limited.

ROD DUKE Non-Executive Director Rod has spent all his working life in the retail sector having held senior executive roles with a number of retail organisations in both Australia and New Zealand. Rod is currently the Deputy Chairman and Group Managing Director of Briscoe Group Limited.

BRENT IMPEY Independent Non-Executive Director Chair of the Remuneration and Nomination Committee Brent was most recently the CEO of MediaWorks NZ Limited and prior to this role he held a number of legal, corporate advisory, consultancy and media related roles. Brent is also a Director of New Zealand Rugby Union, Yellow Pages Group, Finzsoft NZ, hutchwilco NZ Limited, Devon Funds Management and Fred hollows Australia.

MAURICE PRENDERGAST Non-Executive Director Maurice Prendergast was the Chief Executive Officer of Pumpkin Patch from 1993 to 2011. Maurice has held executive positions in accounting, distribution and property development in both New Zealand and Australian companies. Maurice is currently a director of Comvita Limited.

DAvID JACKSON Independent Non-Executive Director Chair of the Audit and Risk Committee and member of the Remuneration and Nomination Committee David is currently a director of Nuplex Industries Limited, Fonterra Co Operative Group Limited and Chairman of the New Zealand Refining Company Limited. David formerly was a Senior Audit Partner and Chairman of Ernst & Young.

PETER SChUYT Independent Non-Executive Director Member of the Audit and Risk Committee. Peter is currently a director of a number of organisations including Tatua Co-operative Dairy Company Limited, Port Nelson Limited, and Landcare Research New Zealand Limited. Prior to this he held a variety of senior executive roles with a diverse range of organisations many of which operated international sales and distribution models.

SALLY SYNNOTT Non-Executive Director Member of the Remuneration and Nomination Committee and the Audit and Risk Committee Sally Synnott founded Pumpkin Patch in 1990 and held an executive role within the Company until 1993. Since then Sally has undertaken specialist assignments for the company and has been a non-executive Director.

21

23

corporate governance
The Board of Directors have the overall responsibility for ensuring the Company is properly managed to enhance and protect shareholders’ interests. The Directors take this responsibility seriously and to this end, the Board has in place what it believes to be appropriate corporate governance policies and practices. The Board has undertaken to regularly review the corporate governance policies to ensure the Company’s responsibilities and obligations are met.

REMUNERATION AND NOMINATION COMMITTEE The Committee provides assistance to the Board to ensure that the Company adopts remuneration policies that:- attract, retain and motivate high calibre executives and directors so as to encourage enhanced performance by the Company - motivate directors and management to pursue the long-term growth and success of the Company within an appropriate control framework, and - demonstrate a clear relationship between key executive performance and remuneration. The committee comprises a minimum of three non-executive Directors, the majority of which must be independent directors. The current members of the Committee are Brent Impey (appointed Chair September 2012), Jane Freeman, David Jackson, and Sally Synnott. BOARD AND COMMITTEE MEETINGS hELD DURING ThE YEAR
Board Meetings Audit, Compliance and Risk Management Committee 2 2 2 2 Remuneration and Nomination Committee 6 5 4 5 6

COMMITTEES
The Board has an Audit and Risk Committee and a Remuneration and Nomination Committee. The objectives, composition and responsibilities of each committee are set out in its charter. These charters are available on the Company’s corporate and investor relations website www.pumpkinpatch.biz AUDIT AND RISK COMMITTEE The Committee provides assistance to the Board in fulfilling their oversight responsibility to shareholders, potential shareholders, the investment community, and others relating to:- the Company’s financial statements and the financial reporting process - the systems of internal accounting and financial controls - the internal audit function - the annual independent audit of the Company’s financial statements, and - the legal compliance and ethics programs as established by management and the Board. The Committee comprises a minimum of three non-executive Directors, the majority of which must be independent directors. The current members of the Committee are David Jackson (Chair), Jane Freeman, Peter Schuyt and Sally Synnott. Following David Jackson stepping down as a Director of the Company, Peter Schuyt shall assume the role of Chair of the Committee.

Jane Freeman Rod Duke (1) Brent Impey David Jackson Maurice Prendergast Peter Schuyt (2) Sally Synnott Chrissy Conyngham (3) Total Meetings held
(1) (2)

16 1 14 14 13 12 4 16

(3)

Rod Duke was appointed a Director in June 2012. Peter Schuyt was appointed a Director in August 2012 and did not attend any meetings during the current financial year. Chrissy Conyngham ceased being a Director in November 2012.

25

INDEPENDENT DIRECTORS
The Company considers that four of the current seven Directors are independent directors, namely Jane Freeman, David Jackson, Brent Impey and Peter Schuyt. The remaining three directors are deemed not to be independent due to disqualifying relationships as defined in NZx Listing Rules; Rod Duke, Maurice Prendergast and Sally Synnott due to having a beneficial interest in securities held by a substantial security holder. The Company notes that it has a minimum of two independent Directors as required by the NZx Listing Rules. having reviewed the composition of the Board, the Company considers the Directors hold an appropriate mix of skills, expertise, and independence.

ShAREhOLDER RELATIONS
The Company has a formal Shareholder Relations policy. The purpose of this Policy is to promote effective communication with shareholders and to encourage active participation at General Meetings. A copy of this policy is available on the Company’s website www.pumpkinpatch.biz

CONTINUOUS DISCLOSURE POLICY
The Board has adopted a Market Disclosure Policy to provide a framework to assist the Company to meet its obligations under the NZx continuous disclosure rules. A copy of this policy is available on the Company’s website www.pumpkinpatch.biz. In the period 1 August 2011 to 31 July 2012 the Company made the following disclosures to the market: - 27 September 2011: Release of the audited result for the full year ended 31 July 2011; - 27 September 2011: Announce resignation of Maurice Prendergast as CEO and appointment of Neil Cowie as CEO; - 3 November 2011: Announce Chrissy Conyngham stepping down as a Director of the Company; - 19 January 2012: Announce result of United Kingdom operation review and appointment of administrators to the United Kingdom subsidiary; - 6 March 2012: Announce two new international partnerships; - 14 March 2012: Release of the unaudited result for the half year ended 31 January 2012; - 4 April 2012: Announce new international relationship with Amazon; - 31 May 2012: Announce appointment of two new Directors; - 28 June 2012: Announce resignation of Chrissy Conyngham as Design Director. The Company believes it has met its obligations under the NZx continuous disclosure rules.

ShARE TRADING BY DIRECTORS AND OFFICERS
The Company has formal procedures Directors and Officers are required to follow when trading in Pumpkin Patch Limited shares. Directors and selected senior officers must notify and obtain the consent of the Remuneration and Nominations Committee prior to trading. Other officers and other selected employees deemed to be restricted persons must notify and obtain the consent of the Company Secretary prior to trading. Restricted persons cannot trade shares during two blackout periods. The first blackout period commences 1 January and ends the day after the Company publically releases its half Year financial result. The second blackout period commences 1 July and ends the day after the Company publically releases its Full Year financial result. A copy of this policy is available on the Company’s website www.pumpkinpatch.biz

CODE OF EThICS
The Company has a formal Code of Conduct and Ethics Policy. This policy provides guidance to all Directors, managers, employees and contractors of Pumpkin Patch Limited and it subsidiaries on how it expects them to conduct themselves when undertaking business on behalf of the Pumpkin Patch Group. A copy of this policy is available on the Company’s website www.pumpkinpatch.biz

27

ExTERNAL AUDITOR INDEPENDENCE
To ensure the independence of the Company’s external auditor is maintained the Board has agreed the external auditor should not provide any services not permitted under IFAC (International Federation of Accountants) auditor independence regulations. The Audit and Risk Management Committee review services provided by the external auditor to ensure the company complies with this policy.

- There is regular assessment by the Board of strategic risks affecting the Group’s operations and the establishment of controls to reduce their impact. This includes maintaining all relevant registrations and approvals in relation to business operations. On a regular basis the Board also reviews the Group’s internal controls and risk management practices to ensure that they are adequate and reflect the Group’s risk profile; - Risk assessments are conducted for all major work initiatives, where new projects are undertaken; - There is periodic verification of risk controls at various levels across the Group’s operations; - The Group has established a range of policies and procedures aimed at assisting in the management of risk across the Group’s operations; - The Board satisfies itself that adequate external insurance cover is in place appropriate for the Group’s size and risk profile; - The Board satisfies itself that adequate health, Safety and Environmental Protection Policies and hazard assessments are in place and monitors performance; - The CEO and Chief Financial Officer also provide a declaration that the financial statements of the Group present a true and fair view, in all material respects of the Group’s financial position and operating results. The CEO and Chief Financial Officer are able to make this declaration having regard to the Group’s sound system of risk management and control. The Board considers that the corporate governance principles followed by the Group do not materially differ from the NZx Corporate Governance Best Practice Code.

RISK MANAGEMENT
The Company recognises that in order to achieve its business plans and strategic goals, there must be a thorough understanding across the Group of the risks that may affect the ability of the Group to achieve those plans and goals. Throughout all of its business operations the Group has in place processes and systems which are designed to identify, assess, monitor and manage risk. The Board has ultimate responsibility for internal control and compliance across the Group. Accordingly, the Board manages risk in the following ways: - The Board of Directors has oversight of risk management initiatives, policies and practices and is assisted in this regard by the Audit and Risk Committee in identifying risks which may have a material impact on the Company’s business; - The Chief Executive Officer (CEO) and Senior Executives of the Group are responsible for designing and implementing risk management and internal control systems which identify material risks that the Group faces as well as managing risk across the Group, and are required to report to the Board through the CEO. This includes the identification, assessment, reduction, management and monitoring of risk, as well as identifying any material changes to the Group’s risk profile. These are required to be reported to the Board at regular intervals;

29

31

general disclosures
DIRECTORS’ REMUNERATION
In November 2011, the Directors elected to reduce base Director fees by 33% in response to the difficult trading conditions and the overall financial performance of the Company. Remuneration of the Directors of the company and other benefits received, or due and receivable during the financial year was as follows:
$000 Non Executive Directors Jane Freeman Rod Duke
(2) (1)

DIRECTORS ShAREhOLDINGS
31 July 2012 Jane Freeman Beneficially or directly owned Rod Duke Beneficially or directly owned Brent Impey Beneficially or directly owned David Jackson Beneficially or directly owned Maurice Prendergast Beneficially or jointly owned Employee Share Entitlements (1) Not beneficially owned (2) Peter Schuyt Beneficially or directly owned Sally Synnott Beneficially or directly owned Not beneficially owned (2)
(1)

31 July 2011 11,284 16,674,086 4,000 50,000 11,070,000 565,000 722,940 9,506,800 722,940

11,284 16,674,086 4,000 50,000 11,070,000 1,186,569 9,506,800 1,186,569

$000 2011 128 75 85 629 75 43

2012 113 8 58

Brent Impey David Jackson Peter Schuyt Sally Synnott Greg Muir
(1)

(3) (4)

68 935 58 -

Maurice Prendergast
(5)

(6)

Includes fees for holding the position of Chair of the Board of Directors and Chair of the Remuneration and Nominations Committee during 2012. Rod Duke was appointed as a Director on 1 June 2012. Includes fees for holding the position of Chair of the Audit and Risk Committee. Includes salary and other benefits received while Chief Executive Officer, payments to extinguish all employment contract obligations upon resigning from his executive role in December 2011 and base Director fees since that time. Peter Schuyt was appointed as a Director in August 2012 and did not receive any remuneration during financial year to 31 July 2012. Greg Muir ceased being a Director in November 2010 and did not receive any fees from that date.

(2) (3) (4)

All rights to Share Options, Partly Paid shares and Long Term Incentive Shares previously held by Maurice Prendergast were forfeited following his resignation as Chief Executive Officer in December 2011. Maurice Prendergast and Sally Synnott are Directors and shareholders of Pumpkin Patch Nominees Limited which acts as Trustee for various employee share ownership plans.

(2)

(5)

(6)

ShARE DEALINGS BY DIRECTORS
The Board has received disclosures from the Directors named below of changes in relevant interests in the Company during the period 1 August 2011 and 31 July 2012. Particulars of such disclosures are: - 19 December 2011: 110,000 2007 share options, 375,000 Redeemable Ordinary Shares (Partly Paid Shares) and 80,000 Ordinary Shares (issued under the 2010 LTI share scheme) were forfeited by Maurice Prendergast following his resignation as Chief Executive Officer of the Company; - 8 June 2012: Initial disclosure of Rod Duke’s beneficial shareholding of 16,674,086 shares in the company.

33

DISCLOSURE OF INTERESTS BY DIRECTORS
TThe Directors named below have made a general disclosure of interest to the Board and entered the interest in the Company’s interest register. Jane Freeman Director of: Direct shareholder in: Rod Duke Beneficial shareholder in: Brent Impey Director of: Beneficial shareholder in: David Jackson Beneficial shareholder in: maurice Prendergast Director of: Beneficial and joint shareholder in: Sally Synnott Beneficial and direct shareholder in: Pumpkin Patch Limited Espies NZ Limited Pumpkin Patch Limited Espies NZ Limited Pumpkin Patch Limited Man Cave Consulting Limited Pumpkin Patch Limited Pumpkin Patch Limited Jane Freeman Consulting Limited Pumpkin Patch Limited

DIvERSITY DISCLOSURE
A summary of the Company’s current Director and Officer gender composition is provided below: MALE DIRECTORS OFFICERS 5 71% 5 45% FEMALE 2 29% 6 55% 11 TOTAL 7

SUBSIDIARY COMPANY DIRECTOR DISCLOSURES
In relation to Pumpkin Patch Limited’s subsidiary companies, the Companies Act 1993 requires Pumpkin Patch Limited to disclose, during the year to 31 July 2012, particulars of entries in the Interests Register, the total remuneration and value of other benefits paid to subsidiary directors, the number of employees who received more than $100,000 and donations made by the subsidiaries and amounts paid to auditors. No wholly owned subsidiary has directors who are not employees of the Pumpkin Patch group. No employee appointed as a Director of a subsidiary receives any remuneration or other benefits in his/her role as a director. Audit fees are paid on behalf of the Group as disclosed in the financial statements, as are any donations made. During the financial year, there were no entries in any Pumpkin Patch Limited subsidiary company Interest Register pursuant to section 140 of the Companies Act 1993.

Peter Schuyt has disclosed that he has no relevant interests requiring entry in the Company’s interest register.

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REMUNERATION OF EMPLOYEES
The number of employees (not including Directors) whose remuneration exceeded $100,000 is disclosed in the following table. Remuneration may include salary, redundancy payments paid as part of the reorganisation process undertaken during the year, performance based short term incentive payments, the value of performance based long term incentive benefits, provision of a motor vehicle, and other miscellaneous employment related benefits. $000 100 - 110 110 - 120 120 - 130 130 - 140 140 - 150 150 - 160 United States Chrissy Conyngham; Neil Cowie; Glenys hoffmann; & Matthew Washington. Pumpkin Patch Wholesale LLC. United States Chrissy Conyngham; Neil Cowie; Dominique De Give; & Matthew Washington. Chrissy Conyngham; Neil Cowie; Glenys hoffmann; Matthew Washington; & Trish Watt. Pumpkin Patch Ireland Limited. Ireland Neil Cowie; Pamela March; Glenys hoffmann; & Matthew Washington. Pumpkin Patch Europe Brands Limited. United Kingdom Chrissy Conyngham; Neil Cowie; Dominique De Give; & Matthew Washington. Pumpkin Patch Limited. Company was placed into administration on 18 January 2012 United Kingdom Chrissy Conyngham; Neil Cowie; Maurice Prendergast; & Matthew Washington. 160 - 170 170 - 180 180 - 190 190 - 200 200 - 210 210 - 220 230 - 240 240 - 250 250 - 260 260 - 270 270 - 280 280 - 290 290 - 300 300 - 310 310 - 320 320 - 330 330 - 340 340 - 350 360 - 370 380 - 390 390 - 400 410 - 420 430 - 440 480 - 490 500 - 510 520 - 530 570 - 580 760 - 770 2012 9 6 5 4 4 3 1 2 2 1 2 1 2 1 1 2 1 1 1 1 1 2011 12 11 6 5 2 8 3 2 1 2 2 1 1 3 2 1 1 1 1 1 2 1 1 1 -

Subsidiary Company Torquay Enterprises Limited; Pumpkin Patch Originals Limited; Patch Kids Limited; Pumpkin Patch Direct Limited; Pumpkin Patch Asia Limited; Urban Angel Girls Limited; & Pumpkin Patch ShareTrust Management Limited. Pumpkin Patch LLC.

Country of Registration New Zealand

Directors Chrissy Conyngham; Neil Cowie; Glenys hoffmann; & Matthew Washington.

Pumpkin Patch (Australia) Pty Limited; The Catalogue Studio Pty Limited; & Pumpkin Patch Australia Properties Pty Limited.

Australia

Australian, United Kingdom, and United States remuneration has been converted into New Zealand dollars at $0.7704, $0.5119, and $0.8028 respectively.

37

39

pumpkin patch limited & subsidiaries financial statements for the year ended 31 July 2012

41

PUMPKIN PATCh LIMITED & SUBSIDIARIES FINANCIAL STATEMENTS FOR ThE YEAR ENDED 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES STATEMENTS OF COMPREhENSIvE INCOME FOR ThE YEAR ENDED 31 JULY 2012

INCOME STATEMENTS For the year ended 31 July 2012
Consolidated - Year ended
31 July 2012
Notes

STATEMENTS OF COMPREhENSIvE INCOME For the year ended 31 July 2012
Parent - Year ended
31 July 2012 31 July 2011

Consolidated - Year ended
31 July 2012
Notes

Parent - Year ended
31 July 2012 31 July 2011

31 July 2011

31 July 2011

$’000 300,609 (137,144) 163,465 177

$’000 291,520 (113,844) 177,676 192 (128,930) (3,856) (22,872) 22,210 (2,120) 20,090 (3,939) 16,151 (18,027) (1,876)

$’000 29,886 (2,062) (37,236) (9,412) (9,412) 1,663 (7,749) (7,749)

$’000 110,941 (5,479) (43,615) 61,847 (56,153) 5,694 122 5,816 5,816 (Loss)/profit for the year Other comprehensive income Exchange differences on translation of foreign operations Net movement on cash flow hedges Mark to market (losses) on foreign currency portfolio restructure Income tax relating to components of other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive income for the year, net of tax Total comprehensive income for the year is attributable to: Equity holders of Pumpkin Patch Limited

$’000 (27,527)

$’000 (1,876) (6,825) (29,274) (9,079) 11,012 (34,166) (36,042)

$’000 (7,749) (7,749)

$’000 5,816 5,816

Sales revenue Cost of goods sold Gross profit Other operating income Expenses Selling expenses Finance expenses Administrative and general expenses Profit from continuing operations before non-recurring items and income tax Non-recurring items Profit/(loss) from continuing operations before income tax Income tax (expense)/credit Net profit from continuing operations (Loss) from discontinuing operations (net of tax) (Loss)/profit for the year Earnings per share for profit attributable to shareholders: Basic earnings per share Diluted earnings per share Attributable to continuing operations: Basic earnings per share Diluted earnings per share Attributable to discontinuing operations: Basic earnings per share Diluted earnings per share 22 22 22 22 22 22 4 6 4 3

20

1,516 29,368 (8,335) 22,549 (4,978)

(123,673) (3,765) (21,916) 14,288 14,288 (3,871) 10,417 (37,944) (27,527)

(4,978) (4,978)

(36,042) (36,042)

(7,749) (7,749)

5,816 5,816

The above statements of comprehensive income should be read in conjunction with the accompanying notes.

Cents (16.4) (16.4) 6.2 6.2 (22.6) (22.6)

Cents (1.1) (1.1) 9.7 9.6 (10.8) (10.8)

The above income statements should be read in conjunction with the accompanying notes.

Jane Freeman Chairperson 27 September 2012

David Jackson Director 27 September 2012

43

PUMPKIN PATCh LIMITED & SUBSIDIARIES BALANCE ShEETS AS AT 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES STATEMENTS OF ChANGES IN EQUITY FOR ThE YEAR ENDED 31 JULY 2012

BALANCE ShEETS As at 31 July 2012
Consolidated at 31 July 2012 Notes ASSETS Current assets Cash and cash equivalents Trade and other receivables Derivative financial instruments Inventories Current tax receivables Total current assets Non current assets Property, plant and equipment Intangible assets Other financial assets Trade and other receivables Derivative financial instruments Deferred tax assets Total non current assets Total assets LIABILITIES Current liabilities Trade and other payables Interest bearing liabilities Provisions Derivative financial instruments Deferred landlord contributions Total current liabilities Non current liabilities Interest bearing liabilities Provisions Deferred landlord contributions Derivative financial instruments Deferred tax liabilities Total non current liabilities Total liabilities Net assets EQUITY Share capital Reserves Retained earnings / (deficit) Total equity 18 20 20 10 13 17 16 15 17 16 10 34,197 45,000 352 19,381 1,349 100,279 15,000 159 2,861 3,802 21,822 122,101 33,457 59,012 (12,090) (13,465) 33,457 34,466 20,000 2,114 34,117 2,365 93,062 51,000 789 5,846 21,859 79,494 172,556 32,451 58,660 (35,149) 8,940 32,451 255,022 52 255,074 255,074 21,990 59,150 1,629 (38,789) 21,990 246,955 159 247,114 635 635 247,749 29,063 58,834 6,391 (36,162) 29,063 10 13 11 12 14 7 8 10 9 5,343 18,386 1,393 61,448 6,361 92,931 44,450 8,572 394 9,211 62,627 155,558 10,030 18,196 1,747 84,375 4,882 119,230 54,133 9,452 4 4,224 17,964 85,777 205,007 36 242,235 3,390 245,661 8,683 8,134 13,522 1,064 31,403 277,064 25 248,731 3,666 252,422 11,272 9,023 4,091 4 24,390 276,812 $’000 31 July 2011 $’000 Parent at 31 July 2012 $’000 31 July 2011 $’000

STATEMENTS OF ChANGES IN EQUITY For the year ended 31 July 2012
Attributable to equity holders of the Company Share capital Consolidated Balance at 1 August 2010 Comprehensive income Profit or loss Other comprehensive income Total comprehensive income Movement in treasury stock Shares issued Movement in share based payment reserve Dividends paid Balance at 31 July 2011 Balance at 1 August 2011 Comprehensive income Profit or loss Other comprehensive income Total comprehensive income Movement in treasury stock Shares issued Movement in share based payments reserve Realisation of Foreign Currency Translation Reserve on discontinued operations Dividends paid
Balance at 31 July 2012 Notes

Reserves $’000 (1,544) (34,166) (34,166) -

Treasury stock $’000 (33) (141) (141) (174) (174) 36 (138)

Retained earnings $’000 24,013 (1,876) (1,876) (13,197) (13,197) 8,940 8,940 (27,527) (27,527) 5,122 (13,465)

Total equity $’000 80,867 (1,876) (34,166) (36,042) (141) 403 561 (13,197) (12,374) 32,451 32,451 (27,527) (22,549) (4,978) 36 316 360

$’000 58,431 -

18 20 21

403 403 58,834 58,834 -

561 561 (35,149) (35,149) 22,549 22,549 (4,762)

18 20

316 -

5,272 (12,090)

5,272 33,457

20 21

59,150

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

45

PUMPKIN PATCh LIMITED & SUBSIDIARIES STATEMENTS OF ChANGES IN EQUITY FOR ThE YEAR ENDED 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES STATEMENTS OF CASh FLOWS FOR ThE YEAR ENDED 31 JULY 2012

STATEMENTS OF ChANGES IN EQUITY

continued

STATEMENTS OF CASh FLOWS For the year ended 31 July 2012
Consolidated - Year ended Total equity $’000 35,480 5,816 5,816 403 561 (13,197) (12,233) 29,063 29,063 (7,749) (7,749) 316 360 21,990 Cash flows from operating activities Cash was provided from: Receipts from customers Interest received Other operating income Cash was applied to: Payments to suppliers and employees Interest paid Sales tax paid Income taxes paid Net cash inflow / (outflow) from operating activities Cash flows from investing activities Cash was applied to: Purchase of property, plant and equipment Purchase of intangibles Net cash (outflow) from investing activities Cash flows from financing activities Cash was provided from: Advances from group companies Proceeds of borrowings Cash was applied to: Repayment of borrowings Dividends paid Net cash (outflow) / inflow from financing activities Net (decrease)/ increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at end of year 7 21 (11,000) (11,000) (4,687) 10,030 5,343 (13,197) 24,803 3,085 6,945 10,030 (107) 44,116 11 25 36 (13,197) 45,878 (6) 31 25 38,000 44,223 58,944 131 (5,169) (2,671) (7,840) (12,793) (4,351) (17,144) (511) (2,480) (2,991) (878) (4,258) (5,136) 24 3 (307,495) (4,566) (1,816) (3,232) 14,153 (352,460) (4,033) (2,389) (5,979) (4,574) (40,025) (2) 13 (1,100) (41,114) (40,657) (2) (704) 615 (40,748) 3 330,389 696 177 359,836 259 192 31 July 2012
Notes

Attributable to equity holders of the Company Share capital Parent Balance at 01 August 2010 Comprehensive income Profit or loss Other comprehensive income Total comprehensive income Shares issued Movement in share based payments reserve Dividends paid Balance at 31 July 2011 Balance at 1 August 2011 Comprehensive income Profit or loss Other comprehensive income Total comprehensive income Shares issued Movement in share based payments reserve Dividends paid
Balance at 31 July 2012 Notes

Parent - Year ended 31 July 2012 $’000 31 July 2011 $’000

Reserves $’000 5,830 561 561 6,391 6,391 (4,762) 1,629

Retained earnings/ (deficit) $’000 (28,781) 5,816 5,816 (13,197) (13,197) (36,162) (36,162) (7,749) (7,749) 5,122 (38,789)

31 July 2011 $’000

$’000 58,431 -

$’000

18 20 21

403 403 58,834 58,834 -

18 20 21

316 59,150

The above statements of changes in equity should be read in conjunction with the accompanying notes.

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

47

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

1 GENERAL INFORMATION
Pumpkin Patch Limited (“Company” or “Parent”) together with its subsidiaries (the “Group”) is a leading designer, marketer, retailer and wholesaler of children’s clothing. The Company is a limited liability company incorporated and domiciled in New Zealand. The address of its registered office is 439 East Tamaki Road, East Tamaki, Auckland, New Zealand. These financial statements were authorised for issue on 27 September 2012 by the Board of Directors who have the power to amend after issue.

Critical accounting estimates The Group 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 addressed below: (i) Impairment of Property, Plant and Equipment The Group undertakes to annually review its assets for indicators that their value is impaired. Testing for impairment involves judgements and estimates in relation to the recoverability of asset values. (B) PRINCIPLES OF CONSOLIDATION (i) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Group 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 group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition by acquisition basis, the Group recognises any non controlling interest in the acquiree either at fair value or at the non controlling interest’s proportionate share of the acquiree’s net assets. The excess of the consideration transferred, the amount of any non controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (A) BASIS OF PREPARATION The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). They comply with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS), and other applicable New Zealand Financial Reporting Standards, as appropriate for profit oriented entities. The financial statements comply with International Financial Reporting Standards (IFRS). The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the periods presented, unless otherwise stated. The reporting currency used in the preparation of these consolidated financial statements is New Zealand dollars, rounded where necessary to the nearest thousand dollars. To ensure consistency with the current year, comparative figures have been restated where appropriate. Entities reporting The financial statements for the Group are the consolidated financial statements comprising the economic entity Pumpkin Patch Limited and its subsidiaries. The financial statements of the Parent are for the company as a separate legal entity. Statutory base The Company is listed on the New Zealand Exchange (NZx). It is registered under the Companies Act 1993 and is an issuer in terms of the Securities Act 1978. The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the Companies Act 1993. Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities, including derivative instruments.

49

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(C) SEGMENT REPORTING

continued

(ii) Sales of goods - wholesale Wholesale sales are recognised in accordance with the terms of sales when the title has transferred and the benefits of ownership and risk pass to the customer. This is dependent on customer specific terms of trade. (iii) Interest income Interest income is recognised using the effective interest method. (iv) Dividend income Dividend income is recognised when the right to receive payment is established. (F) COST OF GOODS SOLD Cost of goods sold represent expenses associated with the design, purchase and all other costs incurred in getting the inventory to the point of sale. (G) INCOME TAx The income tax expense or revenue for the period is the total of the current period’s taxable income based on the income tax rate for each jurisdiction plus/minus any prior years’ under/over provisions, plus/minus movements in the deferred tax balance except where the movement in deferred tax is attributable to a movement in reserves. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or loss or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only to the extent that is probable that future taxable amounts will be available to utilise those temporary differences and losses. The income tax expense or revenue attributable to amounts recognised directly in equity are also recognised directly in equity. (h) GOODS AND SERvICES TAx (GST) The Income Statement has been prepared so that all components are stated exclusive of GST. All items in the balance sheet are stated net of GST, with the exception of receivables and payables, which include GST invoiced. (I) LEASES AND DEFERRED LANDLORD CONTRIBUTIONS Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Income Statement on a straight line basis over the period of the lease.

An operating segment is a component of an entity that engages in business activities which earns revenue and incurs expenses on which the chief operating decision maker reviews the operating results on a regular basis and makes decisions on resource allocation. The Group is organised into four operating segments, depicting the three geographical regions the Group operates in and the centralised support function. (D) FOREIGN CURRENCY TRANSLATION (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated and parent financial statements are presented in New Zealand dollars, which is the Group’s presentation currency. (ii) 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 income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. (iii) Foreign operations The results and balance sheets of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows: - assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; - income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and - all resulting exchange differences are recognised as a separate component of equity. (E) REvENUE RECOGNITION Revenue comprises the fair value for the sale of goods and services, net of sales tax and discounts and after eliminating sales within the Group. Revenue is recognised as follows: (i) Sales of goods - retail Sales of goods are recognised when a Group entity sells a product to the customer. Retail sales are usually in cash or by credit card.

51

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

continued

(N) DERIvATIvES Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either; (a) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or (b) hedges of highly probable forecast transactions (cash flow hedges). The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group 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. (i) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the Income Statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. (ii) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are recycled in the Income Statement in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). however, when the forecast transaction that is hedged results in the recognition of a non financial asset (for example, inventory) or a non financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability. When a hedging instrument expires, is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the Income Statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the Income Statement. (iii) Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the Income Statement.

Where a landlord makes a contribution to the initial setup cost of a store, the contribution is capitalised. The contribution is amortised on a straight line basis over the life of the lease offsetting the lease payments made. (J) IMPAIRMENT OF NON FINANCIAL ASSETS Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation 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 flows. (K) 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. Bank overdrafts are shown within interest bearing liabilities in current liabilities on the balance sheet. (L) TRADE RECEIvABLES Trade receivables are recognised initially at fair value and subsequently at amortised cost less provision for doubtful debts. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows. The amount of the provision is recognised in the Income Statement. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. (M) INvENTORIES Work in progress and finished goods are stated at the lower of cost and net realisable value. Costs are assigned to individual items of inventory on the basis of weighted average costs, and includes expenditure incurred in acquiring the assets and bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business.

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(O) FINANCIAL ASSETS

continued

(Q) PROPERTY, PLANT AND EQUIPMENT All property, plant and equipment is stated at historical cost less depreciation and impairment. 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 Group and the cost of the item can be measured reliably. All repairs and maintenance are charged to the Income Statement during the financial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their costs, net of their residual values, over their estimated useful lives, as follows: - Shop fit out ........................................................................................5-10 years - Office equipment (including furniture and fittings (F&F)) .................................5-10 years - Computer equipment (including point of sale equipment (POS)) ......................3-5 years - Plant and machinery ............................................................................3-7 years - vehicles ............................................................................................4-5 years - Leasehold improvements .......................................................................6-7 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet 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 carrying amount. These are included in the Income Statement. (R) INTANGIBLE ASSETS (i) Trademarks Trademarks have a finite useful life and are carried at cost less accumulated amortisation and impairment losses. Amortisation is calculated using the straight line method to allocate the cost of trademarks and licences over their estimated useful lives (three to five years). (ii) Software costs Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives (three to five years). Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably

The Group classifies its financial assets in the following categories: “financial assets at fair value through profit or loss” and “loans and receivables”. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its investments at initial recognition. (i) Financial assets at fair value through profit or loss This category has two sub categories: financial assets held for trading, and those designated at fair value through profit or loss on initial recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the balance sheet date. (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 balance sheet date which are classified as non current assets. Loans and receivables are included in receivables in the balance sheet (note 8). Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transactions costs are expensed in the Income Statement. Loans and receivables are initially recognised at fair value plus transaction costs, and are subsequently carried at amortised cost using the effective interest method. Financial assets are recognised on trade dates, being the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial asset have expired or have been transferred and the Group has transferred substantially all risk and rewards of ownership. (P) 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 of cash and cash equivalents, trade receivables, trade payables, and short term liabilities is equivalent to their fair value due to their short term nature. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance date. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. Gains or losses arising from changes in the fair value of the financial assets category are presented in the Income Statement in the period in which they arise.

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

continued

(iii) Employee share based payments The Group operates an equity settled, share based compensation plan. The fair value of the instruments granted is recognised as an employee expense in the Income Statement with a corresponding increase in the share based payments reserve. The total amount to be expensed over the vesting period is determined by reference to the fair value of the instruments granted, excluding the impact of any non market vesting conditions (for example, profitability and sales growth targets). Non market vesting conditions are included in assumptions about the number of instruments that are expected to become exercisable. At each balance sheet date, the entity revises its estimates of the number of instruments that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the Income Statement, and a corresponding adjustment to equity over the remaining vesting period. When instruments are exercised the amount in the share based payment reserve relating to those options, together with the exercise price paid by the employee, is transferred to share capital. (W) ShARE CAPITAL Ordinary shares are classified as capital. Incremental costs directly attributable to the issue of new shares or instruments are shown in equity as a deduction, net of tax, from the proceeds. Where any Group company purchases or controls the Company’s equity share capital (treasury stock), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the Group’s equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received (net of any directly attributable incremental transaction costs and the related income tax effects) is included in equity attributable to the Group’s equity holders. (x) DIvIDENDS Provision is made for the amount of any dividend declared on or before the end of the financial year but not distributed at balance date. (Y) EARNINGS PER ShARE Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, by the weighted average number of ordinary shares on issue during the year. Diluted earnings per share is calculated by dividing the profit by the weighted average number of ordinary shares on issue during the year adjusted to include the potential dilutive effect as a result of the issue of share options.

generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include the software development employee costs. Computer software development costs recognised as assets are amortised over their estimated useful lives (three to five years). (S) TRADE AND OThER PAYABLES Trade and other payables are initially recognised at fair value and subsequently at amortised costs. These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. (T) 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 Income Statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. The classification of borrowings reflects the underlying bank facility agreement. (U) PROvISIONS Provisions are recognised when the Group 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. (v) EMPLOYEE BENEFITS (i) Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in the provision for employee benefits in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. (ii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to experience of employee departures and periods of service.

57

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Z) STATEMENT OF CAShFLOWS The following are definitions of the terms used in the Statement of Cash flows: i) Cash comprises cash and bank balances.

continued

ii) Investing activities are those activities relating to the acquisition, holding and disposal of Property, Plant and Equipment, Intangible assets and investments. iii) Financing activities are those activities which result in changes in the size and composition of the capital structure of the Group. This includes both equity and debt not falling within the definition of cash. Dividends paid are included in financing activities. iv) Operating activities include all transactions and other events that are not investing or financing activities. (AA) NEW AND AMENDED STANDARDS ADOPTED BY ThE GROUP There are no IFRS’s or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 August 2011 that would be expected to have a material impact on the Group. (AB) STANDARDS, AMENDMENTS AND INTERPRETATIONS TO ExISTING STANDARDS ThAT ARE NOT YET EFFECTIvE Below is a list of new standards, amendments and interpretations to existing standards which have been published that are mandatory for the Group’s accounting periods beginning on or after 1 August 2012 or later periods but which the Group has not early adopted. The standards listed are expected to effect the Group but are not expected to have a material impact on the Group’s financial statements. - NZ IFRS 9 Financial Instruments (Mandatory for annual periods commencing on or after 1 January 2015). It is the intention of the IASB to replace IAS 39 with IFRS 9. The first phase of the implementation of IFRS 9 relates to the classification and measurement of financial assets and financial liabilities, including some hybrid contracts. Management have not yet ascertained the impact which the implementation of this standard will have on the Group financial statements nor assessed when it will be adopted.

- NZ IFRS 13 Fair Value measurement (effective 1 January 2013). NZ IFRS 13 explains how to measure fair value and aims to enhance fair value disclosures. The group has yet to determine which, if any, of its current measurement techniques will have to change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the new rules on any of the amounts recognised in the financial statements. however, application of the new standard will impact the type of information disclosed in the notes to the financial statements. The group does not intend to adopt the new standard before its operative date. - NZ IAS 27 Separate Financial Statements (effective 1 January 2013). NZ IAS 27 is renamed Separate Financial Statements and is now a standard dealing solely with separate financial statements. Application of this standard by the group and parent entity will not affect any of the amounts recognised in the financial statements, but may impact the type of information disclosed in relation to the parent’s investments in the separate parent entity financial statements.

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

3 INCOME AND ExPENSES
Consolidated - Year ended $’000 Profit from continuing operations before income tax includes the following specific income/(expenses): Interest received Dividends received Management fees Rental and operating lease expenses Depreciation of property, plant & equipment Impairment of store assets Gain/(loss) on disposal of assets Amortisation of intangibles Onerous lease provision expense Write down of investment in subsidiary Net gains/(losses) on financial assets or liabilities designated as fair value through profit and loss Interest expense
Bad debts written off Director’s fees Donations

Parent - Year ended $’000 $’000

31 July 2012 31 July 2011 31 July 2012 31 July 2011 $’000

4 REORGANISATION OF GROUP OPERATIONS
(A) REORGANISATION OF UNITED STATES OPERATIONS On 15th June 2011 the Group announced its intention to close the remaining 20 retail stores operated by the wholly owned United States registered subsidiary company, Pumpkin Patch LLC. As a result of this, the Group implemented a managed store closure program which resulted in the closure of all 20 stores, the last store ceased trading on 21st January 2012. The trading results of the United States retail trading operations have been included in the financial statements of the Pumpkin Patch Group as a discontinued operation. Financial information relating to the discontinued operation is set out in section (D) below. (B) ABANDONMENT OF UNITED KINGDOM SUBSIDIARY On 19th January 2012, following the completion of an extensive review of trading operations and longer term market strategies, the United Kingdom subsidiary was placed into administration. As a result of this, the Pumpkin Patch Limited (UK) assets and operations were no longer controlled by the Pumpkin Patch Group from 19th January 2012. The trading results of the United Kingdom retail trading operations up to the 18th January have been included in the financial statements of the Pumpkin Patch Group as a discontinued operation. The net assets held by Pumpkin Patch Limited (UK) have been written off and recognised as a non recurring cost to the Pumpkin Patch Group. Financial information relating to the discontinued operation is set out in section (D) below. A summary of the non recurring costs associated with the abandonment of the United Kingdom subsidiary can be seen in section (D) below. The carrying value of the investment in the United Kingdom subsidiary was fully impaired in the results of the Parent during the 2011 financial year. (C) REvIEW OF hEAD OFFICE OPERATIONS On 15th June 2011 the Company announced that as a result of the Group restructure, a review and consultation process would be undertaken in order to ensure the head Office function better matched the reorganised store network. As a result of this process a number of positions within the Group were made redundant at a total cost of $2,120,000 to the Group and $2,055,000 to the Parent. These costs were fully recognised in the 2011 financial year result.

801 (50,375) (7,079) (1,020) (12) (3,551) (512) -

259 (47,759) (6,761) (3,334) 6

13,661 29,710 (3,288) (1,565) 905 (3,373) -

9,502 65,046 45,703 (3,110) (1,632) (3,103) (54,098) -

(4,566)
(58) (323) (45)

(4,033) (18) (406) (278) (65,675) (537) (2,697) (68,909) (216) (18) (234)

(15,723) (323) (17,427) (367) (1,053) (18,847) (171) (171)

(14,982) (412) (20,142) (572) (2,055) (22,769) (167) (167)

Employee benefit expenses Salaries & wages Share based payments Employee related reorganisation costs Fees paid to Auditors - Statutory audit - Other professional services (171) (65) (236) (60,754) (360) (3,071) (64,185)

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

(D) SUMMARY OF DISCONTINUING OPERATIONS continued

4 REORGANISATION OF GROUP OPERATIONS
(D) SUMMARY OF DISCONTINUING OPERATIONS
United States Retail $’000 Year ended 31 July 2012 Total Revenue (Loss) from discontinued trading operations Reorganisation (costs) /credits relating to discontinued operations Income tax credit relating to discontinued operations Profit /(loss) from discontinued operations Operating cash flows from discontinued operations Total assets Total non-current assets Loss from discontinued operations before income tax includes the following specific expenses: Rental and operating lease expenses Salaries and wages Depreciation Reorganisation costs relating to discontinued operations: Asset write off costs Net gains / (losses) on financial assets or liabilities designated as fair value through profit and loss relating to discontinuing operations Redundancy costs Gain / (loss) on realisation of Foreign Currency Translation Reserve Other Costs (2,771) 301 (868) (2,233) 8,872 (2,205) 1,647 879 321 (2,205) -

continued
Total Discontinued Operations $’000 30,192 (4,219) (35,266) 1,541 (37,944)
(4,047)

United States Retail $’000 Year ended 31 July 2011 Total Revenue (Loss) from discontinued trading operations Reorganisation (costs) /credits relating to discontinued operations
Income tax credit / (expense) relating to discontinued operations

United Kingdom Retail $’000 46,862 (1,680) (6,192) (697) (8,569) (440) 23,567 5,621

Total Discontinued Operations $’000 65,302 (4,366) (13,483) (178) (18,027) (3,126) 27,393 5,934

United Kingdom Retail $’000 21,320 (2,014) (36,913) 662 (38,265) (1,842)

18,440 (2,686) (7 ,291) 519 (9,458) (2,686) 3,826 313

(Loss) from discontinued operations Operating cash flows from discontinued operations Total assets Total non-current assets Loss from discontinued operations before income tax includes the following specific expenses: Rental and operating lease expenses Salaries and wages Depreciation Reorganisation costs relating to discontinued operations: Asset impairment / write down costs Net gains / (losses) on financial assets or liabilities designated as fair value through profit and loss relating to discontinuing operations Redundancy costs Lease exit costs / onerous lease provision Other Costs

(5,115) (3,582) (272) (5,983) (5,815) (272) (14,609) (9,148) (17,380) (8,847)

(2,735) (4,968) -

(13,867) (10,306) (1,133)

(16,602) (15,274) (1,133)

(1,349) (3,300)

(3,863) -

(5,212) (3,300)

(574) (667) (1,401) (7 ,291)

(2,329) (6,192)

(574) (2,996) (1,401) (13,483)

(159) 4,648 (372)
1,647

(676) (9,920) (2,560) (36,913)

(835) (5,272) (2,932) (35,266)

(E) SUMMARY OF NON RECURRING ExPENSES
Consolidated - Year ended 31 July 2012 $’000 head Office Redundancy costs Impairment of investment in subsidiary 31 July 2011 $'000 (2,120) (2,120) Parent - Year ended 31 July 2012 $'000 31 July 2011 $'000 (2,055) (54,098) (56,153)

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

5 SEGMENT INFORMATION
Management has determined the operating segments based on the business activities of the Group together with the information and the manner in which decisions regarding performance and resource allocation are made by the Senior Management Team. The “Chief Operating Decision Maker” is considered to be the Senior Management team who consider the business from a geographic and support function perspective, being New Zealand, Australia and other International markets while the performance of the centralised support function is assessed separately. The International segment includes the results of continuing operations in the United States, Europe, the Middle East and South Africa. The following is an analysis of the Group’s revenue and results by operating segment. Revenue reported below represents the sale of children’s clothing products to external customers. Revenue is allocated based on the country where the sale is generated. There were no inter segment sales in the year (2011: nil). The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 2. Geographic segment profit represents the profit earned by each segment without allocation of central administration costs, finance costs and income tax expense. Comparative information has been restated to reflect the segments reported in 2012 following changes to the internal organisation of the Group during the period.

5 SEGMENT INFORMATION

continued
Centralised Support Function $’000

Australia New Zealand 2012 Total revenue Total expenses Total segment result before income tax Income tax (Loss) from discontinuing operations (net of tax) Profit/(Loss) for the year Segment total assets Segment non current assets Acquisitions of property, plant and equipment, intangibles and other non current segment assets Depreciation and amortisation expense Interest expense 2011 Total revenue Total expenses Total segment result before income tax Income tax (Loss) from discontinuing operations net of tax (Loss) for the year Segment total assets Segment non current assets Acquisitions of property, plant and equipment, intangibles and other non current segment assets Depreciation and amortisation expense Interest expense $’000 $’000

International $’000

Group $’000 300,609

207 ,630 172,677 34,953

59,246 49,680 9,566

33,733 27 ,523 6,210

36,441 (36,441)

286,321 14,288 (3,871) (37 ,944) (27 ,527)

55,296 24,370 2,189

23,440 6,766 2,189

25,702 767 66

51,120 30,724 3,581

155,558 62,627 8,025

(4,185)

(1,057)

(97)

(5,291)

(10,630) (4,566)

198,786 163,912 34,874

57 ,529 46,824 10,705

35,205 28,580 6,625

32,114 (32,114)

291,520 271,430 20,090 (3,939) (18,027) (1,876)

71,240 26,213 8,757

25,589 9,456 2,131

19,990 47 3,020

60,795 44,127 4,714

177 ,614 79,843 18,622

(4,109)

(986)

(56)

(4,944)

(10,095) (4,033)

The Group’s assets for the 2011 financial year relate to the continuing operations. Refer to note 4(d) for the assets relating to the discontinued operations. The Group’s liabilities are not analysed on a segmental basis and therefore have not been reported.

65

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

6 INCOME TAx ExPENSE/(CREDIT)
Consolidated - Year ended $’000 $’000 Parent - Year ended $’000 $’000 31 July 2012 31 July 2011 31 July 2012 31 July 2011

7 CASh AND CASh EQUIvALENTS
Consolidated at
31 July 2012

Parent at
31 July 2011

31 July 2011 31 July 2012

$’000 Cash at bank - NZD balances 5,079 264 5,343 Cash on hand

$’000 9,781 249 10,030

$’000 36 36

$’000 25 25

(A) INCOME TAx ExPENSE/(CREDIT)
Current tax expense/(credit) Prior period adjustment Deferred tax (note 13) Effect of change in tax rate

1,813 (28) 2,086 3,871

1,726 (548) 2,466 295 3,939

(1,376) 18 (305) (1,663)

(1,646) 1,363 116 45 (122)

The carrying amount for cash and cash equivalents equals the fair value.

8 TRADE AND OThER RECEIvABLES
Consolidated at
31 July 2012

(B) NUMERICAL RECONCILIATION OF INCOME TAx ExPENSE TO PRIMA FACIE TAx PAYABLE
Profit/(loss) before income tax expense Tax expense/(credit) at average jurisdictions tax rate of 28% (2011-30%) Adjustments to taxation for: Non deductible expenses Prior period adjustment Foreign tax credits not utilised Effect of change in tax rate from 30% to 28% Tax asset written off Income tax expense/(credit) (182) (28) 80 3,871 (1,882) (548) 47 295 3,939 954 18 (1,663) (3,223) 1,348 45 (122) 14,288 14,288 4,001 20,090 20,090 6,027 (9,412) (9,412) (2,635) 5,694 5,694 1,708

Parent at
31 July 2011

31 July 2011 31 July 2012

$’000 Trade receivables Amounts owed from subsidiaries Prepayments Sales tax receivable Employee share scheme receivable Other receivables 7,618 2,652 3,714 28 4,374 18,386

$’000 7,554 5,180 2,429 100 2,933 18,196

$’000 1 238,995 622 172 28 2,417 242,235

$’000 2 247,603 528 185 100 313 248,731

The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
NZD USD AUD GBP EUR 9,899 5,253 2,261 536 437 18,386 3,797 6,865 2,728 4,094 712 18,196 239,773 1,712 2 748 242,235 219,007 25,110 32 4,441 141 248,731

(C) UNRECOGNISED TAx LOSSES The Group has estimated tax losses to carry forward from: (i) Pumpkin Patch LLC USD 25,034,000 (NZD 31,184,000) (2011: USD 18,777 ,000; NZD 21,568,000) which expire between 2026 and 2030. (ii) As a result of Pumpkin Patch Limited (UK) being placed into administration on 19th January 2012, the Group no longer has any tax losses from the United Kingdom operations available to be offset against future profits (2011: GBP 1,593,000; NZD 2,985,000). The Group operates in a number of tax jurisdictions where the tax rates range from 28% - 34% (2011: 28% - 34%). (D) IMPUTATION CREDIT ACCOUNT The Parent is part of an imputation credit group, therefore the imputation credits available to the Group and ultimately to the shareholders of the Parent Company for use in subsequent reporting periods are $3,479,000 (2011: $1,489,000). Australian Franking credits available to the Group, and ultimately to the shareholders of the Parent Company, for use in subsequent reporting periods are AUD$1,596,000 (2011: AUD$205,000).

As at 31 July 2012, trade receivables of $892,000 (2011: $762,000) were between 90 and 120 days past due but not considered doubtful. These relate to a number of accounts for which there is no recent history of default. All other balances are considered current. Carrying amounts of trade receivables are equivalent to their fair value.

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

9 INvENTORIES
Consolidated at
31 July 2012

Parent at
31 July 2011

31 July 2011 31 July 2012

$’000 Finished Goods - at cost 61,448

$’000 84,375

$’000 -

$’000 -

Inventory provisions of $198,000 (2011: $181,000) have been provided for at year end for stock obsolescence.

10 DERIvATIvE FINANCIAL INSTRUMENTS
31 July 2012 Assets Consolidated at Current Foreign currency forward exchange contracts Interest rate swaps Non current Foreign currency forward exchange contracts Interest rate swaps 394 1,787 (3,785) (17) (23,183) 4,224 5,971 (21,859) (55,976) 1,391 2 (19,381) 1,747 (34,117) $’000 Liabilities $’000 31 July 2011 Assets $’000 Liabilities $’000

The above table shows the Group’s financial derivative holdings at year end. The Parent does not enter into any financial derivatives. The Group hedge accounts for all foreign exchange forward contracts and interest rate swaps, and all fair value movements in these contracts are recorded in a cash flow hedge reserve. Refer to note 2(n) for information on the calculation of fair values.

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

11 PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements Consolidated Year ended 31 July 2012 Opening net book amount Exchange differences Additions Disposals Abandonment of UK assets Impairment charge recognised in income statement Depreciation charge Closing net book amount At 31 July 2012 Cost Accumulated depreciation & impairment Net book amount At 1 August 2010 Cost Accumulated depreciation Net book amount Year ended 31 July 2011 Opening net book amount Exchange differences Additions Disposals Impairment charge recognised in profit and loss Depreciation charge Closing net book amount At 31 July 2011 Cost Accumulated depreciation & impairment Net book amount 1,300 (1,229) 71 114,835 (82,359) 32,476 14,991 (9,812) 5,179 26,662 (14,842) 11,820 6,559 (5,320) 1,239 3,348 3,348 167,695 (113,562) 54,133 107 (2) (34) 71 33,029 (1,477) 9,551 (285) (3,863) (4,479) 32,476 5,326 (16) 720 (5) (846) 5,179 9,764 371 3,962 (18) (2,259) 11,820 1,522 (7) (276) 1,239 3,348 3,348 53,096 (1,124) 14,233 (315) (3,863) (7,894) 54,133 1,406 (1,299) 107 112,286 (79,257) 33,029 8,851 (3,525) 5,326 23,615 (13,851) 9,764 6,338 (4,816) 1,522 3,348 3,348 155,844 (102,748) 53,096 524 (481) 43 84,618 (58,876) 25,742 14,038 (9,568) 4,470 22,090 (11,405) 10,685 6,614 (5,342) 1,272 2,238 2,238 130,122 (85,672) 44,450 71 (2) (10) (16) 43 32,476 (38) 2,678 (591) (3,237) (1,020) (4,526) 25,742 5,179 (1) 179 (92) (87) (708) 4,470 11,820 (2) 1,723 (427) (556) (1,873) 10,685 1,239 1 260 (228) 1,272 3,348 (1,110) 2,238 54,133 (40) 4,840 (2,222) (3,890) (1,020) (7,351) 44,450 $’000 Shop fitout $’000 Computer equipment and POS $’000 Office equipment and F&F $’000 Plant and machinery $’000 Land Total

$’000

$’000

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

11 PROPERTY, PLANT AND EQUIPMENT
Computer equipment and POS Parent Year ended 31 July 2012 Opening net book amount Additions Disposals Depreciation charge Closing net book amount At 31 July 2012 Cost Accumulated depreciation Net book amount At 01 August 2010 Cost Accumulated depreciation Net book amount Year ended 31 July 2011 Opening net book amount Additions Disposals Depreciation charge Closing net book amount At 31 July 2011 Cost Accumulated depreciation Net book amount 9,201 (4,767) 4,434 4,603 349 (518) 4,434 8,851 (4,248) 4,603 8,969 (5,002) 3,967 4,434 110 (74) (503) 3,967 $’000

continued
Plant and machinery $’000 1,013 238 (222) 1,029 5,848 (4,819) 1,029 5,585 (4,332) 1,253 1,253 27 (267) 1,013 5,589 (4,576) 1,013 Land $’000 3,348 (1,110) 2,238 2,238 2,238 3,348 3,348 3,348 3,348 3,348 3,348 Total $’000 11,272 370 (1,394) (1,565) 8,683 23,771 (15,088) 8,683 24,185 (12,159) 12,026 12,026 878 (1,632) 11,272 25,042 (13,770) 11,272

12 INTANGIBLE ASSETS
Trademarks Consolidated Year ended 31 July 2012 Opening net book amount Additions Disposals Amortisation charge Closing net book amount At 31 July 2012 Cost Accumulated amortisation Net book amount At 01 August 2010 Cost Accumulated amortisation Net book amount Year ended 31 July 2011 Opening net book amount Additions Disposals Amortisation charge Closing net book amount At 31 July 2011 Cost Accumulated amortisation Net book amount $’000 451 179 (200) 430 1,842 (1,412) 430 1,544 (980) 564 564 118 (231) 451 1,663 (1,212) 451 Software $’000 9,001 3,006 (514) (3,351) 8,142 21,377 (13,235) 8,142 15,735 (7,864) 7,871 7,871 4,271 (38) (3,103) 9,001 19,945 (10,944) 9,001 Total $’000 9,452 3,185 (514) (3,551) 8,572 23,219 (14,647) 8,572 17,279 (8,844) 8,435 8,435 4,389 (38) (3,334) 9,452 21,608 (12,156) 9,452

Office equipment and F&F $’000 2,477 22 (210) (840) 1,449 6,716 (5,267) 1,449 6,401 (3,579) 2,822 2,822 502 (847) 2,477 6,904 (4,427) 2,477

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

12 INTANGIBLE ASSETS
Parent Year ended 31 July 2012 Opening net book amount Additions Disposals Amortisation charge Closing net book amount At 31 July 2012 Cost Accumulated amortisation Net book amount At 01 August 2010 Cost Accumulated amortisation Net book amount Year ended 31 July 2011 Opening net book amount Additions Amortisation charge Closing net book amount At 31 July 2011 Cost Accumulated amortisation Net book amount

continued
Software $’000 9,023 2,997 (513) (3,373) 8,134 21,283 (13,149) 8,134 15,597 (7,728) 7,869 7,869 4,257 (3,103) 9,023 19,869 (10,846) 9,023 Total $’000 9,023 2,997 (513) (3,373) 8,134 21,283 (13,149) 8,134 15,597 (7,728) 7,869 7,869 4,257 (3,103) 9,023 19,869 (10,846) 9,023

13 DEFERRED TAx ASSETS/ (LIABILITIES)
Consolidated at 31 July 2012 $’000 The balance comprises temporary differences attributable to: Non deductible provisions Property, plant and equipment Trade and other receivables Derivatives Other Items Total deferred tax assets Movements: Opening balance at 1 August Credited (charged) to the income statement relating to continuing operations (note 6) Credited/(charged) to equity (Cash flow hedge Reserve) Prior year adjustment Tax losses recognised Closing balance at 31 July 8 1,660 9,211 885 17,964 (18) 1,412 1,064 285 (635) (8,335) 10,384 17,964 (2,086) 9,161 (2,466) (635) 305 (804) (116) 2,171 (1,324) (33) 5,991 2,406 9,211 3,655 (1,052) (39) 14,001 1,399 17,964 518 (1,056) (35) 1,637 1,064 692 (1,597) 270 (635) 31 July 2011 $’000 Parent at 31 July 2012 $’000 31 July 2011 $’000

Deferred income tax assets are recognised for provisions, financial derivatives and fixed assets to the extent that the realisation of the related tax benefit through future taxable profit is deemed to be probable. The majority of the deferred income tax balances are expected to be settled in the next 12 months.

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

14 INvESTMENTS IN SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following significant subsidiaries in accordance with the accounting policy described in note 2(b): Name of entity Principal Activity Country of incorporation Equity holding 2012 2011 %
Torquay Enterprise Limited Pumpkin Patch Originals Limited Pumpkin Patch (Australia) Pty Limited Pumpkin Patch Limited* Pumpkin Patch LLC Pumpkin Patch Wholesale LLC Pumpkin Patch Direct Limited Pumpkin Patch Ireland Limited Investment company Clothing retailer and wholesaler holding/admin company Clothing retailer and wholesaler Clothing retailer Clothing wholesaler Clothing retailer Clothing retailer New Zealand New Zealand Australia United Kingdom United Kingdom United States United States New Zealand Ireland 100 100 100 100 100 100 100 100 100 100 100 100 100

15 TRADE AND OThER PAYABLES
Consolidated at $’000
Trade payables Amounts due to subsidiaries Sundry accruals Employee benefits 14,944 13,557 5,696 34,197

Parent at $’000
379 251,890 743 2,010 255,022

31 July 2012 31 July 2011 31 July 2012 31 July 2011 $’000
11,898 16,144 6,424 34,466

$’000
180 243,047 1,654 2,074 246,955

%
100 100 100 100

Pumpkin Patch Europe Brands Limited** Clothing wholesaler

The carrying amounts of the Group’s and parent entity’s trade and other payables are denominated in the following currencies:
NZD USD AUD GBP EUR 9,996 14,096 9,811 294 34,197 10,783 12,366 8,565 2,654 98 34,466 255,022 255,022 246,955 246,955

*On 18th January 2012 financial year Pumpkin Patch Limited (UK) was placed into administration. As such the results and net assets of the subsidiary have not been consolidated into the Pumpkin Patch Group since that date on the basis that the Group has no control over the company. Refer to note 4 for further details. **Pumpkin Patch Europe Brands Limited was incorporated during the 2012 financial year.

All subsidiary entities have a balance date of 31 July and are audited by PricewaterhouseCoopers.
Parent at 31 July 2012 $’000 Investment in subsidiaries 13,522 31 July 2011 $’000 4,091

The fair value of trade and other payables approximates their carrying value.

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

16 PROvISIONS
Consolidated at
31 July 2012 31 July 2011

17 INTEREST BEARING LIABILITIES
Parent at
31 July 2012 31 July 2011

Consolidated at
31 July 2012 31 July 2011

Parent at
31 July 2012 31 July 2011

$’000 Current Provisions Restructuring Provision Onerous Lease Provision 352 352 Non-Current Provisions Onerous Lease Provision 159 159 RESTRUCTURING PROvISION

$’000 574 1,540 2,114

$’000 -

$’000 Current interest bearing liabilities Bank overdrafts Bank loans Total current interest bearing liabilities Non current interest bearing liabilities Bank loans Total non current interest bearing liabilities Total interest bearing borrowings

$’000 45,000 45,000

$’000 20,000 20,000

$’000 52 52

$’000 159 159

789 789

-

15,000 15,000 60,000

51,000 51,000 71,000

52

159

Following the announcement on 15th June 2011, the Company implemented a staggered store closure plan which resulted in the 20 remaining United States stores closing by 21st January 2012. A provision of $574,000, based on forecast redundancy costs expected to be incurred over the closure period, was recognised at the end of the 2011 financial year. The provision has been fully utilised during the 2012 financial year and no further associated costs are anticipated. ONEROUS LEASE PROvISION Under NZ IAS 37 (Provisions, Contingent Liabilities and Contingent Assets) management are required to recognise a provision for any onerous contracts. The standard defines an onerous contract as a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The value of the provision represents the lesser of the discounted future lease payments or the estimated costs to exit the lease. The stores are deemed to be onerous on the basis that the forecast future profit of the stores was not sufficient to cover the contracted costs of leasing the store. The onerous lease provision held at the beginning of the year related to leases held for stores in the United Kingdom. This provision was abandoned by the group when the United Kingdom subsidiary was placed into administration on 19th January 2012. During the 2012 financial year a provision of $512,000 was recognised for leases relating to Australian stores identified as being onerous.

The bank loans are provided under the terms of an ANZ National Bank Limited Revolving Advances Facility Agreement dated 24 June 2009. The bank facilities outlined in this agreement expire in December 2013. The annual review of these facilities is scheduled for October 2012 and the directors are expecting that the tenure of the facilities will be extended for periods between two and three years. The Group draws down on its bank facility as required via short term loans which are required to be disclosed under current liabilities for external financial reporting purposes. These borrowings have been aged in accordance with the repayment terms of the facilities. At year end the weighted average interest rate is 3.97% (2011: 3.60%). As at 31 July 2012, the Group had $42,000,000 of unused lines of credit (2011: $35,000,000). FAIR vALUE The fair value of interest bearing liabilities approximates their carrying value. SECURITY The Company has guaranteed, together with subsidiary companies, the indebtedness of Pumpkin Patch Limited and subsidiaries at 31 July 2012, together with, in all cases, interest thereon under a cross guarantee deed dated 18 April 1996 and a guarantee and indemnity dated 11 July 2005. At 31 July 2012 the total indebtedness guaranteed by the deed amounted to $58,360,000 (2011: $68,668,000). Included in this are other guarantees held by the ANZ National Bank Limited of: - Rent guarantees to certain landlords amount to $2,438,000 (2011: $2,720,000); - Guarantees provided to the UK Customs Department, amounting to $820,000 (2011: $787,000); & - A guarantee of $75,000 (2011:$75,000) to the NZx.

79

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

18 ShARE CAPITAL
Consolidated 31 July 2012 31 July 2011 $’000 $’000 Parent 31 July 2012 $’000 31 July 2011 $’000

18 ShARE CAPITAL
(D) PARTLY PAID ShARES

continued

As at 31 July 2012 there were 1,865,000 (2011: 2,335,000) partly paid shares on issue. Partly paid redeemable shares are offered to selected senior executives at market value, who are initially required to pay 1 cent per share to participate in the scheme. Partly paid shares are held by a Trust for the benefit of the employees until they are fully paid. The trustee will exercise voting rights, and vote as directed by the Board, whilst the shares are held by the Trust. Employees are entitled to participate in any dividend pro rata to the extent the share is paid up. Legal title of the shares is not transferred to the participating employees until the shares are fully paid. Employees can request shares to be transferred by the holder three years after the date of issue, and lapse after five years if not exercised, as long as the market price of the ordinary shares is equal or greater than the benchmark performance target specified by the Board.

Opening balance of issued and paid up capital Issues of ordinary shares during the year Shares held as Treasury stock

58,834 316 (138) 59,012

58,431 403 (174) 58,660

58,834 316 59,150

58,431 403 58,834

31 July 2012 Shares

31 July 2011 Shares

Opening balance of ordinary shares issued Employee share scheme issues Closing balance of ordinary shares issued (A) ORDINARY ShARES

167,786,408 166,814,799 500,000 971,609 ,786,408 168,286,408 167

As at 31 July 2012 there were 168,286,408 ordinary shares on issue (2011: 167 ,786,408). All ordinary shares are fully paid and rank equally with one vote attaching to each share. (B) TREASURY STOCK As at 31 July 2012 there were 406,295 shares (2011: 135,389) which have been issued under the DF7 (Income Tax Act 1994) Scheme but at balance date have not been allocated to employees. The shares are held in trust by Pumpkin Patch Nominees Limited. (C) EMPLOYEE ShARE SChEME Pumpkin Patch Nominees Limited acts as a Trustee for the Group’s employee share purchase plans. The Group advanced the Trustee an interest free loan to enable it to purchase the shares issued to it for the plans. The Group has agreed that the Trustee is, in turn, entitled to allocate a portion of that loan to individual employees to assist them to purchase shares under the plans. At regular intervals the Trustee offers shares to those permanent employees of the Company with in excess of six months continuous service. The shares are offered at a discount to market price. Employees purchasing shares are provided financial assistance on an interest free basis, repayable in regular instalments. Dividends paid on allocated shares during the qualifying period are paid to employees.

81

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

19 ShARE-BASED PAYMENTS
EMPLOYEE OPTION PLAN During the financial year the Company issued no new share options (2011: nil). The Company has recognised a compensatory expense in the income statement of $14,000 (2011: $51,000). Set out below are summaries of options granted under the plan:
Grant Date Expiry date Expired/ Balance at start of the Lapsed during the year year 000s 000s Balance at end of the year 000s Exercisable at end of the year $000

19 ShARE BASED PAYMENTS

continued

LONG TERM INCENTIvE EMPLOYEE ShARE SChEME The shares issued under this scheme are held in Trust by Pumpkin Patch Nominees Limited for a vesting period of three years from the issue date. At the end of the vesting period, subject to the participants still being employed by the Group, the Company will issue a bonus to the participants to the value of their interest free loan, grossed up for each participants personal income marginal tax rate. The bonus issued can only be used by the participants to repay their interest free loan. During the current financial year the Company issued no new Long Term Incentive (LTI) shares (2011: 701,609 shares). The Company has recognised a compensatory expense in the income statement of $335,000 (2011: $408,000).
824 750 1,574 2010 LTI shares issued on 23 November 2010 at an issue price of $1.86 661,895 Opening Balance Issued during the year Lapsed during the year - (185,754) Closing Balance

Exercise price

June 2007 June 2008 June 2009 Total

9 June 2012 9 June 2013 9 June 2014

3.33 1.59 1.30

1,453 637 698 2,788 2.42

(1,453) (119) (121) (1,693) 3.06

518 577 1,095 1.44

476,141

Weighted average exercise price

PARTLY PAID ShARE SChEME During the financial year the Company issued no new partly paid redeemable shares (2011: nil). The Company has recognised a compensatory expense in the Income Statement of $11,000 (2011: $102,000). Set out below are summaries of options granted under the plan:
Grant Date Expiry date Expired/ Balance at start of the Lapsed during the year year 000s 000s Balance at end of the year 000s Exercisable at end of the year $000

Exercise price

June 2008 23 June 2013 June 2009 23 June 2014 Total
Weighted average exercise price

1.59 1.30

1,100 1,235 2,335 1.44

(155) (315) (470) 1.40

945 920 1,865 1.45

1,503 1,196 2,699

83

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

20 RESERvES AND RETAINED EARNINGS
Consolidated $’000 $’000 (33,627) 6,391 (7 ,913) (35,149) (12,642) (39,974) 8,288 (4,836) 15,537 (33,627) 5,830 561 6,391 (1,088) (6,825) (7 ,913) Parent $’000 1,629 1,629 6,391 367 (7) (5,122) 1,629 $’000 6,391 6,391 5,830 572 (11) 6,391 31 July 2012 31 July 2011 31 July 2012 31 July 2011

20 RESERvES AND RETAINED EARNINGS
(B) RETAINED EARNINGS/ (DEFICIT)

continued

Consolidated at 31 July 2012 $’000 Balance 1 August Net profit/(loss) for the year Dividends Transfer from share based payments reserve Balance 31 July 8,940 (27,527) 5,122 (13,465) 31 July 2011 $’000 24,013 (1,876) (13,197) 8,940

Parent at 31 July 2012 $’000 (36,162) (7,749) 5,122 (38,789) 31 July 2011 $’000 (28,781) 5,816 (13,197) (36,162)

(A) RESERvES hedging reserve - cash flow hedges Share based payments reserve Foreign currency translation reserve hedging reserve Balance 1 August Revaluation - gross Deferred tax Transfer to net profit - gross Transfer to inventory - gross Balance 31 July Share based payments reserve Balance 1 August Share based payment expense Transfer from Group company Transfer to retained earnings Balance 31 July Foreign currency translation reserve Balance 1 August Realisation of foreign currency translation reserve on discontinued operations Translation differences arising during the year Balance 31 July (7 ,913) 5,272 1,516 (1,125) 6,391 360 (5,122) 1,629 Interim dividend for the period ended 31 January 2011 Final dividend for the period ended 31 July 2010 Total dividends provided for or paid cash flow hedges (33,627) (2,784) (8,335) 9,368 22,784 (12,594) (12,594) 1,629 (1,125) (12,090)

21 DIvIDENDS
Consolidated and Parent - Year ended
31 July 2012 31 July 2011 31 July 2012 31 July 2011

Cents per share -

Cents per share 3.00 5.00 8.00

$’000 -

$’000 5,033 8,164 13,197

Supplementary dividends of $nil (2011: $387 ,000) were paid to shareholders not tax resident in New Zealand for which the Group received a foreign investor tax credit entitlement.

(i) Hedging reserve - cash flow hedges The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised directly in equity, as described in note 2(n). Amounts are recognised in the Income Statement when the associated hedged transaction affects the Income Statement. (ii) Share based payments reserve The share based payments reserve is used to recognise the fair value of instruments issued but not exercised. iii) Foreign currency translation reserve Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation reserve, as described in note 2(d). The reserve is recognised in the Income Statement when the net investment is disposed of.

85

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

22 EARNINGS PER ShARE
Consolidated -Year ended
31 July 2012 31 July 2011

23 RELATED PARTY TRANSACTIONS
(A) SUBSIDIARIES Interests in subsidiaries are set out in note 14. During the year the Company advanced and repaid loans to its subsidiaries by way of internal current accounts. In presenting the financial statements of the Group, the effect of transactions and balances between fellow subsidiaries and those with the parent have been eliminated. All transactions with related parties were in the normal course of business and provided on commercial terms. Material transactions between the Company and its subsidiaries were: The Company incurs logistics and group administration and management costs. These costs are recharged to subsidiaries in the form of management fees. Subsidiary companies account for these costs based on the functional nature of the expenses. Management fees charged by the Company to the subsidiaries during the financial year were $29,710,000 (2011: $45,703,000). Interest charges of $15,721,000 (2011: $9,502,000). Inter group loans are repayable on demand and attract an interest rate equivalent to that of the LIBOR rate plus 3.25% (2011: 3.25%). Dividends of $nil were received by the Company from Torquay Enterprises Limited during the financial year (2011: $65,046,000) Refer also to note 17 for the related party guarantees. (B) OThER TRANSACTIONS WITh KEY MANAGEMENT OR ENTITIES RELATED TO ThEM In addition the Group undertook transactions with Directors and their related interests as detailed below: The Group has made purchases of shop fixtures and fittings from Espies Shopfitters during the year of $629,000 (2011: $4,624,000). Espies Shopfitters is 59.6% (2011: 59.6%) beneficially owned by Kezza Family Trust a shareholder of Pumpkin Patch Limited. Kezza Family Trust is associated with Maurice Prendergast, a Director in Pumpkin Patch Limited. The balance owed to Espies Shopfitters at 31 July 2012 was $nil (2011: $56,000).

(A) BASIC EARNINGS PER ShARE (i) Group (Loss) attributable to the ordinary equity holders of the company ($'000) Basic earnings per share (cents) Diluted earnings per share (cents) (ii) Continuing operations Profit from continuing operations attributable to the ordinary equity holders of the company ($'000) Basic earnings per share (cents) Diluted earnings per share (cents) (iii) Discontinuing operations (Loss) from discontinued operations attributable to the ordinary equity holders of the company ($'000) Basic earnings per share (cents) Diluted earnings per share (cents) (37 ,944) (22.6) (22.6) (18,027) (10.8) (10.8) 10,417 6.2 6.2 16,151 9.7 9.6 (27 ,527) (16.4) (16.4) (1,876) (1.1) (1.1)

Basic earnings per share is calculated by dividing the profit by the weighted average number of ordinary shares on issue during the year, 168,036,000 shares (2011: 167 ,786,000 shares). Diluted earnings per shares is calculated by dividing the profit by the weighted average number of ordinary shares on issue during the year adjusted to assume conversion of dilutive potential of ordinary shares as a result of the issue of share options, 168,036,000 shares ,650,000 shares). Where the market price is lower that the exercise price (2011: 167 of the option, there is no effect on diluted earnings per share.

87

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

23 RELATED PARTY TRANSACTIONS

continued

(C) KEY MANAGEMENT AND DIRECTOR COMPENSATION Key management personnel compensation for the years ended 31 July 2012 and 31 July 2011 is set out below. The key management personnel comprise certain members of the executive team (including both executive and non executive directors) who have the greatest authority for the strategic direction and management of the company. The amounts disclosed below include amounts paid to personnel who held key management positions during the year. Salaries and other short term employee benefits $’000 2,593 2,059 Cash based incentive issued $’000 78 331 Fair value of share instruments issued $’000 738

24 RECONCILIATION OF PROFIT AFTER INCOME TAx TO NET CASh INFLOW FROM OPERATING ACTIvITIES
Consolidated - Year ended Parent - Year ended

31 July 2012 $’000 (Loss) / profit after tax for the year Add (deduct) non-cash items Depreciation Amortisation of intangibles 7 ,365 3,551 1,020 360 614 (1,828) 5,272 13,684 2,166 (27 ,527)

31 July 2011 $’000 (1,876) 7 ,894 3,334 3,863 561 (6) (2,345) 2,157 (6,356) -

31 July 2012 $’000 (7 ,749) 1,575 3,373 4 360 (305) (905)

31 July 2011 $’000 5,816 1,632 3,103 561 (169) 54,098 -

Directors fees $’000 2012 2011 323 406

Total $’000 2,994 3,534

Impairment charge Share based payments expense Revaluation of derivative financial instruments Fit out contributions amortised Realisation of Foreign Currency Translation Reserve Abandonment of United Kingdom non-cash assets (Increase)/decrease in deferred taxation Impairment of investment in subsidiary Foreign currency portfolio restructure reserve amortisation Net (gain) on sale of non current assets Add/(less) movements in working capital items: (Increase) in receivables and prepayments (Increase)/decrease in inventories Increase/(decrease) in payables and provisions (Decrease) in provisions Net cash inflow/(outflow) from operating activities

(D) BALANCES OUTSTANDING BETWEEN ThE COMPANY AND ITS SUBSIDIARIES Parent at
31 July 2012 31 July 2011

$’000 Amounts due from subsidiaries Amounts due to subsidiaries 238,995 (251,890) (12,895)

$’000 247,603 (243,047) 4,556

(4,775) 12,785 1,824 (358) 14,153

(707) (19,844) 8,751 (4,574)

(38,732) 1,265 (41,114)

(80,830) (24,959) (40,748)

89

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

25 FINANCIAL RISK MANAGEMENT
The Group’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 Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as foreign exchange contracts and options and interest rate swaps to manage certain risk exposures. Derivatives are exclusively used for economic hedging purposes (i.e. not as trading or other speculative instruments), however not all derivative financial instruments qualify for hedge accounting. Risk management is carried out based on policies approved by the Board of Directors. The Group treasury policy provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk. The Parent is not directly exposed to any significant financial risk. (A) MARKET RISK (i) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the United States dollar, the British pound and Australian dollar. The purpose of the Group’s foreign currency risk management activities is to protect the Group from exchange rate volatility with respect to the New Zealand dollar net cash movements resulting from the sale of products in foreign currencies to foreign customers and the purchase of products and raw materials in foreign currencies from foreign suppliers. The Group enters into foreign currency option contracts and forward foreign currency contracts within policy parameters to manage risk associated with anticipated sales or costs denominated principally in United States dollars, British pounds and the Australian dollar. The terms of the foreign currency option contracts and the forward foreign currency contracts do not exceed three years. These anticipated sales or costs qualify as highly probable forecasts for hedge accounting purposes. Refer to note 10 which shows the forward foreign exchange contracts and options held by the Group as derivative financial instruments at balance date. A sensitivity analysis of foreign exchange rate risk on the Group’s financial assets and liabilities on profit and equity is provided in the table below. (ii) Cash flow and fair value interest rate risk The Group’s main interest rate risk arises from floating rate borrowings drawn down under bank debt facilities. When deemed appropriate, the Group manages floating interest rate risk by using floating to fixed interest rate swaps. Interest rate swaps have the economic effect of converting borrowings from floating to fixed rates. Refer to note 10 for notional principal amounts and valuations of interest rate swaps outstanding at balance date. A sensitivity analysis of interest rate risk on the Group’s financial assets and liabilities on profit and equity is provided in the table below. Refer to Note 17 for further details of the Group’s borrowings.

(iii) Summarised sensitivity analysis The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk and foreign exchange risk. A sensitivity of 10% for foreign exchange risk has been selected. Despite the recent volatility in the currency markets over the past 12 months, an overall sensitivity of 10% is considered to be reasonable based upon the exchange rate volatility observed on a historic basis for the preceding five year period and market expectation for potential future movements. A sensitivity of 1% has been selected for interest rate risk. The 1% sensitivity is based on reasonably possible changes over a financial year, using the observed range of historical data for the preceding five year period. Amounts are shown net of income tax. All variables other than applicable interest rates and exchange rates are held constant.

91

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

25 FINANCIAL RISK MANAGEMENT
-1% Carrying amount Profit $’000 Equity $’000

continued
Foreign exchange risk +1% Profit $’000 Equity $’000 Profit $’000 -10% Equity $’000 Profit +10% Equity

25 FINANCIAL RISK MANAGEMENT
-1% Carrying amount Profit $’000 Equity $’000

continued
Foreign exchange risk +1% Profit $’000 Equity $’000 Profit $’000 -10% Equity $’000 Profit +10% Equity

Interest rate risk

Interest rate risk

Consolidated
31 July 2012 Financial assets Cash and cash equivalents Trade receivables Employee share scheme receivable Other receivables Derivative financial instruments Financial liabilities Trade payables Employee benefits Interest bearing liabilities Derivative financial instruments Total increase/ (decrease) 31 July 2011 Financial assets Cash and cash equivalents Trade receivables Employee share scheme receivable Other receivables Derivative financial instruments Financial liabilities Trade payables Employee benefits Interest bearing liabilities Derivative financial instruments Total increase/ (decrease)

$’000

$’000 $’000

Parent
31 July 2012 Financial assets

$’000

$’000 $’000

5,343 7 ,618 28 4,374 1,787 (14,944) (5,696) (60,000) (23,183)

6 600 606

-

(6) (600) (606)

-

431 769 2 (1,631) 1,413 210 -

(1,178) -

(353) (629) (2) 3,007

961

Amounts owed from subsidiaries 31 July 2011 Financial liabilities Amounts owed from subsidiaries

238,995

-

-

-

-

190

-

(156)

-

247 ,603

-

-

-

-

3,302

- (2,702)

-

The Parent is not sensitive to any interest rate risk, nor is it sensitive to foreign exchange risk except on amounts owed from its subsidiaries.

- (1,156) (224) 1,799 (172) 3,147 2,780

(B) CREDIT RISK Credit risk is managed on a Group basis and refers to the risk of a counterparty failing to discharge an obligation. In the normal course of business, the Group incurs credit risk from trade receivables and transactions with financial institutions. The Group places its cash, short term deposits and derivative financial instruments with only high credit quality financial institutions. Sales to retail customers are required to be settled in cash or using major credit cards, mitigating credit risk. Trade receivables arising from wholesale arrangements are individually reviewed regularly for impairment as part of normal operating procedures and provided for where appropriate. Overdue amounts that have not been provided for relate to customers that have no recent history of default. Approximately 8.4% (2011: 12.7%) of reported continuing sales give rise to trade receivables. The top five wholesale customers account for 81.1% (2011: 81.2%) of the trade receivables balance. Refer also to note 8 for further details. (C) LIQUIDITY RISK Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the underlying businesses, Management aims at maintaining flexibility in funding by keeping committed credit lines available. Management monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flow. For details of available facilities, refer note 17 for further details. The table below analyses the Group’s non derivative financial liabilities 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.

137 (3,785) 1,331 (4,963)

10,030 7 ,554 100 2,933 5,971 (11,898) (6,424) (71,000) (55,976)

39 710 749

-

(39) (710) (749)

-

896 731 36

-

(733) (766) (29)

-

- (29,239) (1,198) (395) 1,264 (7 ,381)

- 23,990 980 323 (1,197) 6,233

1,196 21,858

(972) (17 ,757)

93

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

25 FINANCIAL RISK MANAGEMENT
Less than 1 year $’000 Consolidated 31 July 2012 Trade payables Employee benefits Interest bearing liabilities Guarantees issued 31 July 2011 Trade payables Employee benefits Interest bearing liabilities Guarantees issued (11,898) (6,424) (20,000) (3,581) (41,903) (14,944) (5,696) (45,000) (3,334) (68,974)

continued
Between 1 & 2 years $’000 Between 2 & 5 years $’000 Total $’000

25 FINANCIAL RISK MANAGEMENT

continued

The Group enters into forward exchange contracts to manage the risks associated with foreign currency denominated sales and also manage the purchase of foreign currency denominated products. The table below analyses the Group’s derivative financial instruments that will be settled on a gross or net basis into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. They are expected to occur and affect profit or loss at various dates between balance date and the following five years. Less than Between 1 Between 2 1 year & 2 years & 5 years Consolidated At 31 July 2012 Forward foreign exchange contracts cash flow hedges inflow outflow At 31 July 2011 Forward foreign exchange contracts cash flow hedges inflow outflow 1,747 (34,117) 2,257 (17,239) 1,967 (4,620) (1,531) (17,409) (87) (2,557) $’000 $’000 $’000 Over 5 years $’000

(15,000) (15,000) (51,000) (51,000)

-

(14,944) (5,696) (60,000) (3,334) (83,974) (11,898) (6,424) (71,000) (3,581) (92,903)

All of the Parents financial liabilities fall due within 1 year (2011: within 1 year).

95

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

25 FINANCIAL RISK MANAGEMENT
(D) FAIR vALUE ESTIMATION

continued

25 FINANCIAL RISK MANAGEMENT
(E) FINANCIAL INSTRUMENTS BY CATEGORY Assets & liabilities as per balance sheet At 31 July 2012 Cash and cash equivalents Trade receivables Employee share scheme receivable Other receivables Derivative financial instrument assets Trade payables Employee benefits Interest bearing liabilities Derivative financial instrument liabilities 5,343 7,618 28 4,374 17,363 At 31 July 2011 Cash and cash equivalents Trade receivables Employee share scheme receivable Other receivables Derivative financial instrument assets Trade payables Employee benefits Interest bearing liabilities Derivative financial instrument liabilities 10,030 7,554 100 2,933 20,617 Loans and receivables $’000

continued Derivatives used for Measured at hedging amortised cost $’000 1,787 (23,183) (21,396) $’000 (14,944) (5,696) (60,000) (80,640)

NZ IFRS 7 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: - Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). The only assets and liabilities measured at fair value, held by the Group at 31 July 2012 and 31 July 2011, are the derivative financial instruments (as disclosed in note 10). These are classed as level 2 in the measurement hierarchy. The parent company did not have any assets or liabilities measured at fair value (2011: nil) The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the group is the current bid price. These instruments are included in level 1. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

Total $’000 5,343 7,618 28 4,374 1,787 (14,944) (5,696) (60,000) (23,183) (84,673)

5,971 (55,976) (50,005)

(11,898) (6,424) (71,000) (89,322)

10,030 7,554 100 2,933 5,971 (11,898) (6,424) (71,000) (55,976) (118,710)

97

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PUMPKIN PATCh LIMITED & SUBSIDIARIES NOTES TO ThE FINANCIAL STATEMENTS 31 JULY 2012

25 FINANCIAL RISK MANAGEMENT
(E) FINANCIAL INSTRUMENTS BY CATEGORY

continued

25 FINANCIAL RISK MANAGEMENT

continued

Loans and Derivatives used Measured at receivables for hedging amortised cost

Total

Parent At 31 July 2012 Cash and cash equivalents Trade receivables Amounts owed from subsidiaries Employee share scheme receivable Other receivables Trade payables Amounts due to subsidiaries Employee benefits Interest bearing liabilities At 31 July 2011 Cash and cash equivalents Trade receivables Amounts owed from subsidiaries Employee share scheme receivable Other receivables Trade payables Amounts due to subsidiaries Employee benefits Interest bearing liabilities

$’000

$’000

$’000

$’000

There are a number of external bank covenants in place relating to debt facilities which are also used to monitor capital internally. These covenants are calculated monthly and reported to the bank quarterly. The principal covenants relating to capital management are the earnings before interest and taxation (EBIT) fixed cover charge ratio and the cash flow gearing ratio. There have been no breaches of these covenants for the current or prior period.

36 1 238,995 28 2,417 241,477 25 2 247 ,603 100 313 248,043

-

(379) (251,890) 2,010 (52) (250,311) (180) (243,047) (2,074) (159) (245,460)

36 1 238,995 28 2,417 (379) (251,890) 2,010 (52) (8,834) 25 2 247 ,603 100 313 (180) (243,047) (2,074) (159) 2,583

26 COMMITMENTS
The Group has commitments for future capital expenditure at 31 July 2012 of $3.7 million (2011: $1.0 million). The Group leases various retail outlets under non-cancellable operating lease agreements. The leases reflect normal commercial arrangements with varying terms, escalation clauses and renewal rights. Consolidated at 31 July 2012 $’000 Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years 40,648 92,388 15,198 148,234 50,813 124,684 30,577 206,074 2,753 10,747 12,054 25,554 2,811 10,813 14,738 28,362 31 July 2011 $’000 Parent at 31 July 2012 $’000 31 July 2011 $’000

27 CONTINGENCIES
As at 31 July 2012 the parent entity and Group had no contingent liabilities or assets (2011:$Nil).

The accounting policies for financial instruments have been applied to the line items above. (f) Capital risk management The main objective of capital risk management is to ensure the Group operates as a going concern, meets debts as they fall due, maintains the best possible capital structure, and reduces the cost of capital. Group capital is regarded as equity as shown in the balance sheet. This quantifies capital as reference to the balance sheet. To maintain or alter the capital structure the Group has the ability to review the size of the dividends paid to shareholders, return capital or issue new shares, reduce or increase debt or sell assets.

28 EvENTS OCCURRING AFTER ThE BALANCE ShEET DATE
As at 27 September 2012 there have been no significant events subsequent to 31 July 2012.

99

Independent Auditors’ Report to the shareholders of Pumpkin Patch Limited

Independent Auditors’ Report Report on the Financial Statements to have audited the financial statements of Pumpkin Patch Limited (“the Company”) on pages Wethe shareholders of Pumpkin Patch Limited
42 to 99, which comprise the balance sheets as at 31 July 2012, the income statements, statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and Statements financial statements that include a summary Report on the Financial the notes to the of significant accounting policies and other explanatory information for both the Company and We have audited the financial statements of Pumpkin Patch Limited (“the Company”) on pages theto 99, which Group comprises the Company at 31the entities the income statements,2012 or 42 Group. The comprise the balance sheets as and July 2012, it controlled at 31 July from time to time during the financial statements of changes in equity and statements of cash statements of comprehensive income, year. flows for the year then ended, and the notes to the financial statements that include a summary Directors’ Responsibility for the Financial Statements of significant accounting policies and other explanatory information for both the Company and TheGroup. The Group comprises the Company and the entities it controlled at 31 accordance the Directors are responsible for the preparation of these financial statements in July 2012 or with generally accepted accounting practice in New Zealand and that give a true and fair view of from time to time during the financial year. the matters to which they relate and for such internal controls as the Directors determine are necessary to enable the preparation of financial statements that Directors’ Responsibility for the Financial Statements are free from material misstatement,are responsible for theor error. The Directors whether due to fraud preparation of these financial statements in accordance with generally accepted accounting practice in New Zealand and that give a true and fair view of Auditors’ Responsibility the matters to which they relate and for such internal controls as the Directors determine are Our responsibility isthe express an opinion on these financial statements from materialaudit. We necessary to enable to preparation of financial statements that are free based on our conducted our whether accordance with International Standards on Auditing (New Zealand) and misstatement, audit in due to fraud or error. International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about Auditors’ Responsibility whether the financialto express an opinion on these financial statements based on our audit. We Our responsibility is statements are free from material misstatement. conducted our audit in accordance with International Standards on Auditing (New Zealand) and An audit involves performing procedures to obtain audit evidence about the amounts and International Standards on Auditing. These standards require that we comply with relevant disclosures in the financial statements. The procedures selected depend on the auditors’ ethical requirements and plan and perform the audit to obtain reasonable assurance about judgement, including the assessment of the risks of material misstatement of the financial whether the financial statements are free from material misstatement. statements, whether due to fraud or error. In making those risk assessments, the auditors consider involves performing relevant to to Company and the Group’s the amounts and An audit the internal controls procedures theobtain audit evidence aboutpreparation of financial statements in the financial statements. The procedures selected they relate, in auditors’ disclosures that give a true and fair view of the matters to which depend on theorder to design audit procedures that are appropriate in the circumstances, misstatement purpose of judgement, including the assessment of the risks of materialbut not for the of the financial expressing whether due the effectiveness of making those risk assessments, the auditors statements,an opinion onto fraud or error. In the Company and the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the consider the internal controls relevant to the Company and the Group’s preparation of financial reasonableness of accounting estimates, of the matters to which they relate, in order to design statements that give a true and fair view as well as evaluating the overall presentation of the financial statements. are appropriate in the circumstances, but not for the purpose of audit procedures that expressing an opinion on the effectiveness of the Company and the Group’s internal control. An We believe that the audit evidence we have obtained is sufficient and appropriate to provide a audit also includes evaluating the appropriateness of accounting policies used and the basis for our audit opinion. reasonableness of accounting estimates, as well as evaluating the overall presentation of the financial no relationship with, or interests in, Pumpkin Patch Limited or any of its subsidiaries We have statements. other than in our capacities as auditors and providers of other assurance services. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. We have no relationship with, or interests in, Pumpkin Patch Limited or any of its subsidiaries other than in our capacities as auditors and providers of other assurance services.

Independent Auditors’ Report
Pumpkin Patch Limited
Opinion In our opinion, the financial statements on pages 42 to 99: (i) (ii) (iii) comply with generally accepted accounting practice in New Zealand; and comply with International Financial Reporting Standards; and give a true and fair view of the financial position of the Company and the Group as at 31 July 2012, and their financial performance and cash flows for the year then ended.

Report on Other Legal and Regulatory Requirements
We also report in accordance with Sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993. In relation to our audit of the financial statements for the year ended 31 July 2012: (i) (ii) we have obtained all the information and explanations that we have required; and in our opinion, proper accounting records have been kept by the Company as far as appears from an examination of those records.

Restriction on Distribution or Use
This report is made solely to the Company’s shareholders, as a body, in accordance with Section 205(1) of the Companies Act 1993. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters which we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed.

Chartered Accountants 27 September 2012

Auckland

PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz

101

shareholder information
FOR ThE YEAR ENDED 31 JULY 2012 size of holdings
1 - 1,000 1001 - 5,000 5,001 - 10,000 10,001 - 100,000 Over 100,000

SUBSTANTIAL SECURITY hOLDERS
%
0.7 4.5 4.2 10.3 80.3 100.00

number of holders
1,778 2,672 922 664 61 6,348

%
29.2 43.8 15.1 10.9 1.0 100.00

number of shares
1,132,564 7,565,901 7,072,144 17,266,709 135,249,090 167,786,408

Pursuant to Section 26 of the Securities Markets Act 1988, the following substantial security holders at 31 August 2012 were as follows:

Ordinary Shares Nigel P Smith & Wynard Wood Services (notice dated 16 June 2006) Rodney Adrian Duke and Alaister John Wall (notice dated 8 June 2012) Janet heather Cameron (notice dated 29 April 2010) Accident Compensation Corporation (notice dated 17 May 2012) 20,000,000

16,674,086

The details set out above were as at 31 August 2012.

PRINCIPAL ShAREhOLDERS
The names and holdings of the twenty largest registered shareholders as at 31 August 2012 were:
Ordinary Shares
New Zealand Central Securities Depository Limited Nigel P Smith & Wynyard Wood Services Jbwere (NZ) Nominees Limited Jbwere (NZ Nominees Limited Maurice John Prendergast & Kerry Donna Prendergast & Stuart Gavin Callender Sally Rene Synnott & Mark Joseph Synnott & The Gale Trustee Co Ltd Jbwere (NZ) Nominees Limited NZPT Custodians (Grosvenor) Limited Gregory John Muir & Debra Jane Muir & Geoffrey Alastair Lawrie Jbwere (NZ) Nominees Limited Pumpkin Patch Nominees Ltd Bruce Michael Walkley & Deborah Frances Walkley & Nigel Philip Smith Brendon Thomas & Katrina Mary Thomas & John Graham Turrall New Zealand Depository Nominee Limited Christine Conyngham Joanna hickman & John Anthony Callaghan & Kevin James hickman & John William Ryder Investment Custodial Services Limited Adrastea Limited Kay Gillard Custodial Services Limited

16,086,181

15,122,418

% 21.8 11.9

36,612,708 20,000,000

Maurice J Prendergast and Kerry D Prendergast (notice dated 17 June 2011) Mark J Synnott and Sally R Synnott (notice dated 19 October 2010) AMP Capital Investors (New Zealand) Limited (notice dated 18 July 2012)

11,070,000

17 ,078,567 10.1 16,174,086 9,620,000 9,500,000 6,000,000 1,504,712 1,461,900 1,250,000 1,157 ,814 1,130,000 1,000,000 931,862 813,510 720,000 592,596 511,168 510,289 507 ,591 9.6 5.7 5.6 3.6 0.9 0.9 0.7 0.7 0.7 0.6 0.6 0.5 0.4 0.4 0.3 0.3 0.3

9,506,800

9,321,674

103

executive team
Neil Cowie ............................................... Chief Executive Officer Chris Cardwell ................................... General Manager – Property Chrissy Conyngham .......... Group General Manager/Design Director Dominique De Give ......................... General Manager – Wholesale Brian De Gregory .................. General Manager – Human Resources Glenys Hoffmann ............................ General Manager – Operations Bronny Jacobsen .......................... General Manager – Merchandise Kate Tattersfield................................ General Manager – Marketing Zarina Thesing ............... General Manager – Information Technology Bruce Walkley ....................................... General Manager – Direct Matthew Washington ...... Chief Financial Officer/Company Secretary

corporate directory
Registered Office 439 East Tamaki Road Auckland New Zealand Contact Details Private Bag 94 310 Pakuranga Auckland New Zealand Phone: +64 9 274 7088 Facsimile: +64 9 274 1122 Website: pumpkinpatchkids.com Investor Relations E-mail: investor@pumpkinpatch.co.nz Website: www.pumpkinpatch.biz

Share Registrar Link Market Services Limited PO Box 384 Ashburton New Zealand Phone: +64 3 308 8887 Facsimile: +64 3 308 1311

Auditors PricewaterhouseCoopers Private Bag 92 162 Auckland New Zealand

Solicitors Simpson Grierson Private Bag 92 518 Shortland Street Auckland New Zealand

105

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