MOTHERCARE PLC — Proxy Solicitation & Information Statement 2018

Jul 9, 2018

THIS DOCUMENT AND ANY ACCOMPANYING DOCUMENTS ARE IMPORTANT AND REQUIRE YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other appropriate independent financial adviser duly authorised under the Financial Services and Markets Act 2000 ("FSMA") if you are in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

This document, which comprises (i) a circular prepared in accordance with Chapter 13 of the Listing Rules for the purposes of the General Meeting convened pursuant to the Notice of General Meeting set out at the end of this document; and (ii) a prospectus relating to Mothercare plc and the Capital Raising prepared in accordance with the Prospectus Rules of the Financial Conduct Authority (the "FCA") made under section 73A of FSMA, has been approved by the FCA in accordance with section 87A of FSMA and made available to the public in accordance with Rule 3.2 of the Prospectus Rules. This document can also be obtained free of charge on request from the Company's Receiving Agent, Equiniti Limited, or from www.mothercareplc.com.

Subject to the restrictions set out below, if you sell or transfer or have sold or transferred all of your Existing Ordinary Shares prior to the date the shares were marked ex-entitlement to the Open Offer you should send this document (but not any personalised Form of Proxy or Application Form) as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for onward delivery to the purchaser or transferee. This document and/or the accompanying documents and/or the Open Offer Entitlements through CREST should not, however, be distributed, forwarded to or transmitted in or into any jurisdiction where to do so might constitute a violation of local securities laws or regulations, including, but not limited to (subject to certain exceptions), the United States and any of the other Excluded Territories. Therefore persons outside of the United Kingdom into whose possession this document and/or any accompanying documents come should inform themselves about and observe any such restrictions. In particular, subject to certain exceptions, this document and the accompanying documents should not be distributed, forwarded to or transmitted in or into the United States or any of the other Excluded Territories. Any failure to comply with any such restrictions may constitute a violation of the securities laws of such jurisdictions. The New Ordinary Shares, Open Offer Entitlements and Excess Open Offer Entitlements have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "US Securities Act"), or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States.

The Existing Ordinary Shares have been admitted to the premium listing segment of the Official List and to trading on the main market for listed securities of the London Stock Exchange. An application will be made to the UK Listing Authority for the New Ordinary Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities (together "Admission"). It is expected that Admission will become effective and that dealings in the New Ordinary Shares will commence on the London Stock Exchange at 8.00 a.m. (London time) on 27 July 2018.

MOTHERCARE PLC

(Incorporated and registered in England and Wales with registered number 01950509)

PROPOSED SUBDIVISION OF ORDINARY SHARES AND AMENDMENTS TO ARTICLES OF ASSOCIATION

PROPOSED PLACING AND OPEN OFFER OF 170,871,885 NEW ORDINARY SHARES AT 19 PENCE PER SHARE

PROPOSED RELATED PARTY TRANSACTIONS FOR THE CONVERSION OF SHAREHOLDER LOANS INTO 62,684,400 NEW ORDINARY SHARES AT 19 PENCE PER SHARE

and

NOTICE OF GENERAL MEETING

Sponsor, Financial Adviser, Corporate Broker, Bookrunner and Underwriter

Numis

Corporate Broker and Underwriter

Shore Capital

The latest time and date for acceptance and payment in full for the Open Offer Shares under the Open Offer is expected to be 11.00 a.m. (London time) on 25 July 2018. The procedure for acceptance and payment is set out in Part IV (Terms and Conditions of the Capital Raising) of this document and, for Qualifying Non-CREST Shareholders only, will also be set out in the Application Form. Qualifying CREST Shareholders should refer to paragraph 4 of Part IV (Terms and Conditions of the Capital Raising) of this document.

Your attention is drawn to the letter from the Interim Executive Chairman of the Company which is set out in Part I (Letter from the Interim Executive Chairman of Mothercare plc) of this document. You should read the whole of this document, any accompanying document and any documents incorporated herein by reference. Shareholders and any other person contemplating a purchase of New Ordinary Shares should review in particular the risk factors set out in this document for a discussion of certain risks and uncertainties and other factors that should be considered when deciding on what action to take in relation to the Open Offer and deciding whether or not to purchase the New Ordinary Shares. You should not rely solely on the information summarised in the letter from the Interim Executive Chairman of the Company.

Numis which is authorised and regulated in the United Kingdom by the FCA, is acting exclusively for Mothercare and no one else in connection with the Capital Raising and will not regard any other person (whether or not a recipient of this document) as its clients in relation to the Capital Raising and will not be responsible to anyone other than Mothercare for providing the protections afforded to its clients nor for providing advice in connection with the Capital Raising or any other matter referred to herein.

Shore Capital which is authorised and regulated in the United Kingdom by the FCA, is acting exclusively for Mothercare and no one else in connection with the Capital Raising and will not regard any other person (whether or not a recipient of this document) as its clients in relation to the Capital Raising and will not be responsible to anyone other than Mothercare for providing the protections afforded to its clients nor for providing advice in connection with the Capital Raising or any other matter referred to herein.

Apart from the responsibilities and liabilities, if any, which may be imposed on each of Numis and Shore Capital by FSMA or the regulatory regime established thereunder, none of Numis, Shore Capital or any of their affiliates accepts any responsibility whatsoever or make any representation or warranty, express or implied, to any person in respect of any acts or omissions of the Company in relation to the Capital Raising for the contents of this document including its accuracy, completeness or verification or for any other statement made or purported to be made by or on behalf of it, the Company or the Directors in connection with the Company, the New Ordinary Shares or the Capital Raising and other matters referred to in this document and nothing in this document is or shall be read as a promise or representation in this respect whether as to the past or future. Each of Numis and Shore Capital accordingly disclaims all and any liability whatsoever whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of any acts or omissions of the Company in relation to the Capital Raising or this document or any such statement.

Each of Numis and Shore Capital as underwriter may engage in trading activity other than short selling for the purpose of hedging its commitments under the Placing Agreement or otherwise. Such activity may include purchases and sales of securities of the Company and related companies and other securities and instruments (including Ordinary Shares). Accordingly, references in this document to New Ordinary Shares being offered or sold should be read as including any offering or sale of New Ordinary Shares to Numis, Shore Capital or any of their affiliates acting in such capacity. None of Numis, Shore Capital or any of their affiliates intends to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so.

In making an investment decision, each investor must rely on their own examination, analysis and enquiry of the Company and the terms of the Capital Raising, including the merits and risks involved.

The investors also acknowledge that: (i) they have not relied on Numis, Shore Capital or any person affiliated with them in connection with any investigation of the accuracy of any information contained in this document or their investment decision; and (ii) they have relied only on the information contained in this document, and that no person has been authorised to give any information or to make any representation concerning the Company or its subsidiaries or the New Ordinary Shares (other than as contained in this document) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company, Numis or Shore Capital.

THE CAPITAL RAISING DESCRIBED IN THIS DOCUMENT IS NOT BEING AND WILL NOT BE MADE TO SHAREHOLDERS OR INVESTORS IN THE UNITED STATES OR ANY OF THE OTHER EXCLUDED TERRITORIES. All Excluded Shareholders and any person (including, without limitation, a nominee or trustee) who has a contractual or legal obligation to forward this document or any accompanying documents, if received, or other document to a jurisdiction outside the United Kingdom should read Part IV (Terms and Conditions of the Capital Raising) of this document.

NOTICE TO US INVESTORS

Except as otherwise provided for herein, this document does not constitute an offer of New Ordinary Shares, Open Offer Entitlements or Excess Open Offer Entitlements to any Shareholder with a registered address in, or who is resident in, the United States. None of the New Ordinary Shares, Open Offer Entitlements or, Excess Open Offer Entitlements has been or will be registered under the US Securities Act or under securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States.

This document, the New Ordinary Shares, Open Offer Entitlements and Excess Open Offer Entitlements have not been approved or disapproved by the US Securities and Exchange Commission ("SEC"), any state securities commission in the United States or any other US regulatory authority, nor have any of the foregoing authorities passed upon, or endorsed the merits of, the offering of the New Ordinary Shares, Open Offer Entitlements or Excess Open Offer Entitlements or the accuracy or adequacy of this document. Any representation to the contrary is a criminal offence in the United States.

NOTICE TO EEA INVESTORS

In relation to each EEA State (except for the United Kingdom) which has implemented the Prospectus Directive (each a "relevant member state"), no New Ordinary Shares, Open Offer Entitlements or Excess Open Offer Entitlements have been offered or will be offered pursuant to the Capital Raising to the public in that relevant member state prior to the publication of a prospectus in relation to the New Ordinary Shares, Open Offer Entitlements or Excess Open Offer Entitlements which has been approved by the competent authority in that relevant member state or, where appropriate, approved in another relevant member state and notified to the competent authority in the relevant member state, all in accordance with the Prospectus Directive, except that, with effect from and including the relevant implementation date, offers of New Ordinary Shares, Open Offer Entitlements or Excess Open Offer Entitlements may be made in that relevant member state at any time:

(A) to any legal entity which is a qualified investor as defined in the Prospectus Directive;

• (B) to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) in such relevant member state; or
• (C) in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of New Ordinary Shares, Open Offer Entitlements or Excess Open Offer Entitlements shall result in a requirement for the publication by the Company and Numis, of a prospectus pursuant to Article 3 of the Prospectus Directive or any measure implementing the Prospectus Directive in that relevant member state.

For this purpose, the expression "offer of New Ordinary Shares, Open Offer Entitlements or Excess Open Offer Entitlements to the public" in relation to any New Ordinary Shares, Open Offer Entitlements and Excess Open Offer Entitlements in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the Capital Raising and any New Ordinary Shares, Open Offer Entitlements and Excess Open Offer Entitlements to be offered so as to enable an investor to decide to subscribe for or acquire any New Ordinary Shares, Open Offer Entitlements or Excess Open Offer Entitlements, as the same may be varied in that relevant member state by any measure implementing the Prospectus Directive in that relevant member state.

NOTICE TO ALL INVESTORS

Capitalised terms have the meanings ascribed to them in the "Definitions" section starting on page 187 of this document.

Certain information in relation to the Company is incorporated by reference into this document. You should refer to Part X (Additional Information) of this document.

Any reproduction or distribution of this document, in whole or in part, and any disclosure of its contents or use of any information for any purposes other than in considering an acquisition of New Ordinary Shares, Open Offer Entitlements and Excess Open Offer Entitlements is prohibited, except to the extent such information is otherwise publicly available. By accepting delivery of, or accessing, this document, each offeree of the New Ordinary Shares, Open Offer Entitlements and Excess Open Offer Entitlements agrees to the foregoing.

No person has been authorised to give any information or make any representations other than those contained in this document and, if given or made, such information or representations must not be relied upon as having been authorised by Mothercare. Subject to FSMA, the Listing Rules, the Disclosure Guidance and Transparency Rules and the Prospectus Rules, neither the delivery of this document nor any acquisition or sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of Mothercare since the date of this document or that the information in this document is correct as at any time after this date. Without limitation, the contents of the Group's website, or any links accessible through the Group's website, do not form part of this document.

The contents of this document are not to be construed as legal, business or tax advice. Neither the Company nor Numis nor any of their respective representatives, is making any representation to any offeree or purchaser of the New Ordinary Shares regarding the legality of an investment in the New Ordinary Shares by such offeree or purchaser under the laws applicable to such offeree or purchaser. Each prospective investor should consult his, her or its own legal adviser, financial adviser or tax adviser as to the legal, financial or tax-related aspects of a purchase of the New Ordinary Shares.

INFORMATION TO DISTRIBUTORS

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the New Ordinary Shares to be issued in the Capital Raising have been subject to a product approval process, which has determined that the Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, distributors should note that: the price of the Ordinary Shares may decline and investors could lose all or part of their investment; the New Ordinary Shares to be issued in the Capital Raising offer no guaranteed income and no capital protection; and an investment in the New Ordinary Shares to be issued in the Capital Raising is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Capital Raising. Furthermore, it is noted that, notwithstanding the Target Market Assessment, Numis will only procure investors who meet the criteria of professional clients and eligible counterparties.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Ordinary Shares.

Each distributor is responsible for undertaking its own Target Market Assessment in respect of the Ordinary Shares and determining appropriate distribution channels.

The date of this document is 9 July 2018.

CONTENTS

		Page
SUMMARY
	EXPECTED TIMETABLE OF PRINCIPAL EVENTS	21
	CAPITAL RAISING STATISTICS	22
RISK FACTORS		23
	IMPORTANT INFORMATION	44
	WHERE TO FIND HELP	48
	DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS	49
PART I	LETTER FROM THE INTERIM EXECUTIVE CHAIRMAN OF MOTHERCARE PLC	50
PART II	SOME QUESTIONS AND ANSWERS ABOUT THE CAPITAL RAISING	68
PART III	INFORMATION ON THE NEW ORDINARY SHARES	75
PART IV	TERMS AND CONDITIONS OF THE CAPITAL RAISING	78
PART V	INFORMATION ON THE GROUP	102
PART VI	OPERATING AND FINANCIAL REVIEW	120
PART VII	HISTORICAL FINANCIAL INFORMATION	143
PART VIII	UNAUDITED PRO FORMA FINANCIAL INFORMATION	145
PART IX	TAXATION	149
PART X	ADDITIONAL INFORMATION	153
PART XI	DOCUMENTS INCORPORATED BY REFERENCE	186
APPENDIX I – DEFINITIONS
	NOTICE OF GENERAL MEETING	196

SUMMARY

Summaries are made up of disclosure requirements known as 'Elements'. These elements are numbered in sections A – E (A.1 – E.7). This summary contains all the Elements required to be included in a summary for this type of securities and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of 'not applicable'.

	Section A – Introduction and warnings
Element	Disclosure Requirement	Disclosure
A.1	Warning	This summary should be read as an introduction to this document. Any decision to invest in the securities should be based on consideration of this document as a whole. Where a claim relating to the information contained in this document is brought before a court, the claimant investor might, under the national legislation of the member states of the EEA, have to bear the costs of translating this document before the legal proceedings are initiated. Civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of this document or it does not provide, when read together with the other parts of this document, key information in order to aid investors when considering whether to invest in such securities.
A.2	Resale or final placement of securities through financial intermediaries	Not applicable.

Section B – Issuer
Element	Disclosure Requirement	Disclosure
B.1	Legal and commercial name	Mothercare plc ("Mothercare" or the "Company").
B.2	Domicile/legal form/legislation under which the issuer operates/country of incorporation	The Company is incorporated in England as a public limited company, limited by shares. Its registered office is situated in England and its registered number is 01950509. The principal legislation under which the Company operates is the Companies Act 2006 (the "Companies Act").
B.3	Current operations/ principal activities/ principal markets	The vision of the Company and its subsidiaries (the "Group") is to be the leading global specialist for parents and young children. Globally, the Group's products are currently sold in 1,276 mothercare and Early Learning Centre ("ELC") stores in approximately 50 countries. The Group's products are sold internationally through its network of international franchise partners (the "Franchise Partners") across four key regions, in each case under the "mothercare" or "ELC" brand. As at 31 May 2018, Franchise Partners operated 1,139 stores, with 361 stores in Europe, 352 stores in the Middle East, 385 stores in Asia and 41

		stores in Latin America. In the UK, the Group's business operates as a multi-channel retailer. As at 17 May 2018, the Group operates 137 stores in the UK, and an established online business. The Group is undertaking an accelerated transformation plan, with a targeted UK store portfolio of 77 stores by June 2019. The Group offers an extensive range of products, comprising its own brands and those of third parties, within the Clothing & Footwear, Home & Travel and Toys market segments. In selecting products and product quantities, the Group relies on historical trading data, customer orders and feedback, customer insight (based on, among other things, information sourced from the Group's loyalty scheme and Customer Relationship Management database) and product reviews to determine which products are likely to be popular. The Group's online business includes the delivery to store, home and other locations, enabling products to be delivered either to the customer's chosen address or to their chosen store for collection. In recent years, the Group has sought to improve its online offering, with a particular focus on young working parents and providing relevant information to support first-time parents, for whom this advice and guidance is most helpful.
B.4a	Most significant recent	UK
	trends affecting the Company and its industry	The market within which the Group operates is relatively stable. In the 12 months to March 2018, the Group was among the market leaders in many of its key product categories.
		The birth rate in England and Wales has remained stable over the past decade, with an average of 63 live births per 1,000 people (source: Office of National Statistics Birth Summary Tables, England and Wales 1938 to 2016), equating to around 696,271 live births in England and Wales in 2016. The average spend per child in the UK in its first year is understood to be around £12,000 which includes food, clothing, toys, equipment and childcare.
		The addressable UK market (which includes sales via store-in store and online channels) is approximately £5.1 billion in size (based on sales), which comprises approximately £2.3 billion children's clothing from ages 0-5, approximately £1.8 billion traditional toys (up to 72 months) and £1.0 billion baby and nursery equipment (excluding products such as nappies, baby food and wipes).
		The UK retail market has been challenged by a variety of factors over the past few years, as existing players have sought to expand and new entrants, particularly those in the online space, have gained market share. With the growth and increasing importance of online, smart phones and tablets, research is an increasingly critical part of the customer journey which has decreased prices and margins on branded goods and products, as market participants have failed to differentiate with unique products. Customers are increasingly visiting search engines or price comparison sites, comparing the price of a product on one retailer's website with that of a competitor or using mobile technology, such as barcode scanning apps, which enable users to check the prices of the Group's products against its competitors while in store.

		International
		The Directors believe that in the Group's key international markets of India, China, Indonesia, Russia and the Middle East, market growth continues to be strong with over 55 million births in the Group's key international markets. Within these markets, two of the Group's largest territories, India and China, are forecast to enjoy double digit growth in Childrenswear and above average growth in Toys (source: Euromonitor).
		Online
		Across the international markets of India, China, Indonesia, Russia and the Middle East, online is far less developed than in the UK and is therefore a significant untapped opportunity.
B.5	Group structure	Mothercare plc is the parent company of the Group, the principal business of which is the sale of specialist products for parents and young children. The principal trading subsidiaries of the Company, all of which are wholly owned are:
		• Mothercare UK Limited;
		• Mothercare Procurement Limited; and
		• Early Learning Centre Limited.
B.6	Notifiable interests	As at document ("the Reference Date"), in so far as it is known to the Company, the name of each person who, directly or indirectly, is interested in voting rights representing 3 per cent. or more of the total voting rights in respect of the Company's issued ordinary share capital and the amount of such person's holding, is as follows:	the latest practicable date prior to publication of this
			Percentage of issued
		Shareholder	Number of share capital shares(1) (per cent.)
		Richard Griffiths M&G Investment Management Limited UBS Asset Management DC Thomson Pensions Jupiter Asset Management Majedie Asset Management Fidelity International	27,030,148 15.82 21,652,186 12.67 17,763,725 10.40 17,695,691 10.36 16,890,892 9.88 12,000,000 7.02 6,810,534 3.99
		(1) Includes both direct and indirect shareholdings.
		Save as disclosed above, the Company is not aware of any person who, as at the Reference Date, directly or indirectly, has a holding which is notifiable under English law.
		The Company and its Directors are not aware of any persons who, as at the Reference Date, directly or indirectly, jointly or severally, exercise or could exercise control over the Company nor are they aware of any arrangements the operation of which may at a subsequent date result in a change of control of the Company.
	Different voting rights/ controlling interests	Not applicable. All Ordinary Shares have the same voting rights.

B.7	Historical key financial information for the	Selected consolidated historical financial information on the Group			AXXII, B.7
	Company and	Consolidated income statement
	significant change		For the ended 52 weeks 24 March 2018	For the ended 52 weeks 25 March 2017	For the ended 52 weeks 26 March 2016
				(£ million)
		Revenue	654.5 ––––––	667.4 ––––––	682.3 ––––––
		Cost of Sales Gross profit	(620.5) –––––– 34.0	(608.6) –––––– 58.8	(622.1) –––––– 60.2
		Administrative expenses(1)	–––––– (102.8)	–––––– (48.4)	–––––– (46.2)
		Share of results of joint ventures	–––––– –	–––––– –	–––––– (1.1)
		(Loss)/profit from operations	(68.8)	10.4	12.9
		Net finance costs	–––––– (4.0)	–––––– (3.3)	–––––– (3.2)
		(Loss)/profit before taxation	–––––– (72.8)	–––––– 7.1	–––––– 9.7
		Taxation	–––––– (3.3) ––––––	–––––– 1.1 ––––––	–––––– (3.3) ––––––
		(Loss)/profit for the period attributable to equity holders of the parent	(76.1)	8.2	6.4
			––––––	––––––	––––––
		Notes: (1) Administrative expenses for FY 2015/16 and FY 2016/17 in the summary table above includes £3.4 million and £0.5 million, respectively, of "other exceptional items".
		Results of operations
		The Group's revenue decreased to £654.5 million in FY 2017/18, from £667.4 million in FY 2016/17 and £682.3 million in FY 2015/16. This reflected a very difficult second half in FY 2017/18 in the UK with sales being impacted by a softening of store footfall and margins impacted by higher levels of discounting to stimulate sales. In addition, international markets remained challenging throughout FY 2017/18 despite a recovery in sales volumes in the Middle East towards the end of FY 2017/18 and a continued expansion of online sales volumes. The Group therefore suffered a statutory loss before tax of £72.8 million for FY 2017/18 due to restructuring, closure costs, store asset impairments and onerous leases.
		Group adjusted profit before tax increased by £0.1 million to £19.7 million in FY 2016/17, and fell by £17.4 million to £2.3 million in FY 2017/18. FY 2016/17 saw a decrease in international volumes and an increase in costs, partly offset by improvements in UK sales and margin. FY 2017/18 saw an improvement in international volumes, but a decline driven by a decrease in UK sales and margin along with inflationary pressures on costs and an increase in depreciation/amortisation following capital investments in stores, warehousing and IT infrastructure.
		There has been no significant change in the financial or trading position of the Group since 24 March 2018, the date to which the latest audited financial information of the Group was prepared, save and except for the following items:
		• the ability to draw down against the £67.5 million revised debt facilities with a final maturity extended to December 2020 and certain interim step downs to be provided by the Company's existing lenders (the "New Debt Facilities") entered into on 17 May 2018;

	• the receipt of funds from the £8 million shareholder loans from certain of the Company's largest holders of Ordinary Shares ("Shareholders", being holders of Ordinary Shares) (the "Shareholder Loans") each dated on 17 May 2018;
	• the working capital initiatives releasing up to £10 million from the Company's existing trade debtor balances (the "Debtor Financing") announced on 17 May 2018;
	• the announcement and publication of the company voluntary arrangements proposed for Mothercare UK Limited and Early Learning Centre Limited (the "CVA Proposals") on 17 May 2018;
	• the provision of a standby underwriting facility in respect of the Capital Raising (as defined below) on 17 May 2018;
	• the approvals of the CVA Proposals on 1 June 2018; and
	• the entry into administration of Childrens World Limited ("Childrens World") on 9 July 2018 as a result of which Mothercare UK Limited has been assigned or has assumed leases of 13 stores previously leased in the name of Childrens World and 9 stores previously leased by Childrens World will be closed.
	The capital raising consists of: (i) the conditional placing by Numis Securities Limited ("Numis") of the Ordinary Shares to be issued by the Company pursuant to the Capital Raising (as defined below) as agent of and on behalf of the Company, subject to clawback pursuant to the Open Offer (as subsequently defined) and subject to the conditions contained in the sponsor and placing agreement dated 9 July 2018 between the Company, Numis and Shore Capital Stockbrokers Limited (together with Numis, the "Underwriters") (the "Placing Agreement") (the "Placing") (the "Placing Shares"); and (ii) the conditional invitation to holders of Ordinary Shares on the register of members of the Company as at the close of business in London on 5 July 2018 (the "Record Date") (the "Qualifying Shareholders") to subscribe for the 170,871,885 Ordinary Shares for which they are being invited to apply, at the price at which the Ordinary Shares are being issued (the "Issue Price") on the terms and subject to the conditions set out in this document in the case of Qualifying Shareholders holding Ordinary Shares in uncertificated form ("Qualifying Non-CREST Shareholders") only, the personalised application form on which Qualifying Non-CREST Shareholders may apply for Ordinary Shares under the open offer ("Application Forms") (the "Open Offer Shares") (the "Open Offer"), (together, the "Capital Raising").
	Liquidity and Capital Resources The Group relies primarily on cash flow from operating activities, available cash and cash equivalents and liquidity under the Group's unused New Debt Facilities to finance its operations and initiatives. Following completion of the Capital Refinancing Plan, these items, together with the net proceeds of the Placing and Open Offer, will continue to be the principal sources of liquidity for the Group. The Group's liquidity requirements primarily relate to funding its working capital requirements and, to a lesser degree, the Group's capital expenditures and meeting ongoing debt service obligations. The most significant components of the

Group's working capital are product inventories, receivables, trade and other payables.
The following table presents the primary components of the Group's cash flow for the periods indicated.
	For the 52 weeks ended	For the 52 weeks ended	For the 52 weeks ended
	24 March 2018	25 March 2017 (£ million)	26 March 2016
Net cash flow from operating activities Net cash used in investing activities	1.3 (24.1)	15.3 (41.2)	21.9 (39.0)
Net cash raised in financing activities Net increase/(decrease) in cash and	25.0	12.8	(1.0)
cash equivalents (Debt)/Cash and cash equivalents at	2.2	(13.1)	(18.1)
the start of the financial year	(0.9)	13.5	31.5
Effect of foreign exchange rate changes Net (debt)/cash and cash equivalents	(2.9)	(1.3)	0.1
at the end of period	(1.6)	(0.9)	13.5
The following table presents the Group's net debt (borrowings after deducting cash and cash equivalents) position as at the dates
indicated.
	As at	As at	As at
	24 March	25 March	26 March
	2018	2017 (£ million)	2016
Borrowings(1) (Bank overdrafts)/cash and	(42.5)	(15.0)	–
cash equivalents	(1.6) ––––––	(0.9) ––––––	13.5 ––––––
Total net debt position	(44.1) ––––––	(15.9) ––––––	13.5 ––––––
Notes: (1) Borrowings include debt incurred due to restructuring, closure costs, store asset impairments and onerous leases.
As at 24 March 2018, the Group had a net debt balance of £44.1 million attributable to restructuring, closure costs, store asset impairments and onerous leases.
Current trading and prospects The performance of the Group since the start of FY 2018/19 has broadly followed a similar pattern to that seen in the second half of FY 2017/18. Conditions in the UK have remained challenging, with consumer confidence and store footfall remaining under pressure. Against a backdrop of increased promotional activity, Mothercare has delivered a UK performance in the first 14 weeks of FY 2018/19 to date with total sales down 7.0 per cent. compared with the 14 week period in FY 2017/18 and like-for-like sales down 4.6 per cent. over the same period. The Group's International business has continued to stabilise with total sales down 1.2 per cent. in the first 14 weeks of FY 2018/19 compared with total sales over the same period in FY 2017/18. The Directors expect these conditions in both the UK and the Group's international markets to continue for the foreseeable future.
The Directors currently expect performance during FY 2018/19 to be volatile and variable from month to month taking into account current conditions and uncertainties in the UK economy, annualisation of last financial year's sales patterns and the shorter term impacts of the operational changes and restructuring. Whilst the Directors are confident the changes that the Company is

		executing will deliver the planned benefits in the medium term, it is likely that there may be short term impacts on its business operations during FY 2018/19 as these changes are effected.
B.8	Key pro forma financial information	Selected unaudited pro forma financial information which illustrates the effects of the Capital Raising and the Shareholder Loans on the Group's net assets as if they had occurred on 24 March 2018 is summarised below. The unaudited pro forma financial information does not reflect other post-balance sheet events in relation to the Group. The unaudited pro forma financial information has been prepared for illustrative purposes only and, because of its nature, addresses a hypothetical situation and therefore does not represent the Group's actual financial position.
		Adjustments ––––––––––––––––––––––––––––– Group Capital as at Raising and Other 24 March Shareholder adjust- Pro forma 2018(1) Loans(2) ments(3) Total £'m £'m £'m £'m
		Total assets 276.7 – – 276.7 –––––– –––––– –––––– ––––––
		Total liabilities (272.1) 30.3 (6.3) (248.1) –––––– –––––– –––––– –––––– Net assets 4.6 30.3 (6.3) 28.6 –––––– –––––– –––––– ––––––
		Notes:
		(1) The net assets of the Group as at 24 March 2018 have been extracted without material adjustment from the Annual Report and Accounts for FY 2017/18, as incorporated by reference in Part XI (Documents Incorporated by Reference) of this document.
		(2) These adjustments reflect the net proceeds of the Capital Raising and the Shareholder Loans receivable by the Company, consisting of the following (as explained in further detail in Part I (Letter from the Interim Executive Chairman of Mothercare plc) of this document):
		(a) £8.0 million Shareholder Loans received in May 2018. The pro forma reflects £8.0 million as an adjustment to current borrowings, with the £8.0 million received reducing non-current borrowings (see note 2(b) below). Each Shareholder Loan is convertible into New Ordinary Shares at the option of the relevant shareholder, conditional upon, among other things, the approval by the Company's Shareholders of the conversion of the relevant Shareholder Loan as a related party transaction. This conversion, however, has not been reflected in the pro forma given that the Shareholder Loans are not convertible until November 2018 at the earliest and the conversion is not required.
		(b) The £38.3 million adjustment to non-current borrowings reflects:
		£8.0 million cash received from Shareholder Loans (see note 2(a) above)
		Plus: £32.5 million gross proceeds receivable from the Capital Raising
		Less: £(2.2) million expenses of the Capital Raising
		Total £38.3 million
		(3) Aside from the Capital Raising costs shown as an adjustment in note 2(b) above, £6.3 million refinancing and restructuring fees have been incurred since 24 March 2018. These costs consist of £1.8 million for refinancing (over and above £1.1 million incurred prior to 24 March 2018 which are already reflected in the audited Group balance sheet), £1.1 million for the CVAs and subsequent administration of Childrens World and £3.4 million for other restructuring advice.
		(4) The restructuring of the Group's UK store portfolio through CVAs (refer to Part I (Letter from the Interim Executive Chairman of Mothercare plc) of this document) will impact the Group's net assets, in particular, property related provisions for store closure costs and onerous leases. Given the uncertainty surrounding the timing and cost of store closures it is not

		possible to reliably estimate the value of this impact at the date of this document and therefore no adjustment has been made.
		(5) The CVA proposal in respect of Childrens World was not carried by creditors, and Childrens World was placed into administration on 9 July 2018 following the transfer of 13 of its 22 stores to other Group companies to continue trading. Given the uncertainty surrounding the timing and cost of store closures it is not possible to reliably estimate the value of this impact at the date of this document and therefore no adjustment has been made.
		(6) The unaudited pro forma financial information does not take into account trading of the Group subsequent to the period end balance sheet date of 24 March 2018.
B.9	Profit forecast and estimate	Not applicable. No profit forecast or estimate is included in this document.
B.10	Qualifications in the audit reports	Not applicable. The audit reports on the historical financial information contained in, or incorporated by reference into, this document are not qualified.
B.11	Working capital explanation	Not applicable. In the opinion of the Company, taking into account the net proceeds from the Capital Refinancing Plan, the working capital available to the Group is sufficient for its present requirements (that is, for at least the next 12 months following the date of this document).

Section C – Securities
Element	Disclosure Requirement	Disclosure
C.1	Type and class of the securities	The Company will issue 170,871,885 New Ordinary Shares of one penny each in the capital of the Company pursuant to the Capital Raising, the Related Party Transactions and on the basis of the Capital Reorganisation having taken effect. The ISIN for the New Ordinary Shares is GB0009067447. The ISIN for the entitlements to subscribe for the Open Offer Shares, allocated to a Qualifying Shareholder pursuant to the terms of the Open Offer ("Open Offer Entitlements") is GB00BFXG1T50 and Excess Open Offer Entitlements in respect of each Qualifying Shareholder holding Ordinary Shares in uncertificated form ("Qualifying CREST Shareholder") who has taken up his Open Offer Entitlement in full, the entitlement (in addition to the Open Offer Entitlement) to apply for Open Offer Shares which may be applied for in addition to Open Offer Entitlements ("Excess Shares"), up to the number of Open Offer Shares, credited to his stock account in CREST (as defined below) pursuant to the facility for Qualifying Shareholders to apply for Excess Shares in excess of their Open Offer Entitlements ("Excess Application Facility"), which may be subject to scaling down at the absolute discretion of the board of directors of the Company from time to time ("Board") in consultation with Numis ("Excess Open Offer Entitlements") is GB00BFXG1V72. "CREST" means the system for the paperless settlement of trades in securities and the holding of uncertificated securities in accordance with the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended from time to time operated by Euroclear UK & Ireland Limited.

C.2	Currency of the issue	The Existing Ordinary Shares are priced in pounds sterling, and AXXII, C.2 the New Ordinary Shares will be quoted and traded in pounds sterling.
C.3	Shares issued/value per share	As at the Reference Date, the Company had in issue AXXII, C.3 170,871,885 fully paid Ordinary Shares of 50 pence each.
C.4	Description of rights attaching to the securities	The New Ordinary Shares will be issued and credited as fully paid AXXII, C.4 and will rank pari passu in all respects with the Ordinary Shares in issue at the time the New Ordinary Shares are delivered.
		Subject to any special voting rights, restrictions or prohibitions on voting for the time being attached to Ordinary Shares (for example, in the case of joint holders of a share, the only vote which will count is of the person whose name is entered first in the register), Shareholders shall have the right to receive notice of, and to attend and vote at, general meetings of the Company.
		Subject to the provisions of the Companies Act, the Company may from time to time declare dividends and make other distributions on the New Ordinary Shares.
C.5	Restrictions on free transferability of the	Not applicable; there are no restrictions on the free transferability AXXII, C.5 of the New Ordinary Shares.
	securities	However, the making of the proposed offer of New Ordinary Shares to persons who are located or resident in or who have a registered address in countries other than the United Kingdom, may be affected by the law or regulatory requirements of the relevant jurisdiction, which may include restrictions on the free transferability of the Ordinary Shares.
C.6	Admission/regulated markets where the securities are traded	Application will be made to the UK Listing Authority and to the AXXII, C.6 London Stock Exchange plc (the "London Stock Exchange") for the New Ordinary Shares to be admitted to the premium listing segment of the UK Listing Authority (the "Official List") and to trading on the London Stock Exchange's main market for listed securities. It is expected that admission of the New Ordinary Shares to the premium listing segment of the Official List and to trading on the main market for listed securities of the London Stock Exchange ("Admission") will become effective, and that dealings in the New Ordinary Shares will commence at 8.00 a.m. on 27 July 2018.
C.7	Dividend policy	The Company has not paid a dividend since 3 February 2012. The AXXII, C.7 Directors do not expect to pay dividends until the business is returned to a sustainable and stable financial footing and in any event cannot declare or pay dividends until the Company has sufficient distributable reserves. The Board understands the importance of optimising value for Shareholders and it is the Directors' intention to return to paying a dividend as soon as they believe it is financially prudent for the Group to do so. As part of the agreement reached with the Pension Protection Fund, if the Company makes dividend payments to Shareholders then it will make cash payments to the pension scheme.

Section D – Risks
Element	Disclosure Requirement	Disclosure
D.1	Key information on the key risks that are specific to the Company or industry	• If Shareholders do not approve resolutions one to five to be proposed at the general meeting of the Company to be held at the offices of DLA Piper UK LLP at 3 Noble Street, London EC2V 7EE at 10.00 a.m. on 26 July 2018 or Numis exercises its right to terminate the Placing Agreement, the Capital Refinancing Plan (including the Capital Raising, the continued availability of the New Debt Facilities and of the Debtor Financing) and therefore the acceleration of the transformation plan cannot be implemented. Furthermore, the continued availability of the New Debt Facilities and the Debtor Financing is also conditional on the Capital Raising taking place. Due to the inter-conditionality of the respective elements of the Capital Refinancing Plan described above, if resolutions one to five are not passed or Numis exercises its right to terminate the Placing Agreement, and the Capital Raising does not proceed the New Debt Facilities, the Shareholder Loans and the Debtor Financing will become immediately re-payable on 30 September 2018 meaning that Mothercare may experience an immediate liquidity shortfall of up to £79.8 million in September 2018. The Capital Raising is not conditional on the passing of resolution six which pertains to the approval of the proposed conversion of the Shareholder Loans into New Ordinary Shares at the lower of (i) 19 pence per New Ordinary Share; and (ii) the most recent price at which any Shareholders have subscribed for newly issued equity in the Company since entry into the Shareholder Loans ("Related Party Transactions"), or resolutions seven to ten which constitute general authorities customarily tabled at the Company's annual general meeting. If the Related Party Transactions are not approved by the Shareholders at the General Meeting, the Capital Raising and Capital Refinancing Plan will still be able to proceed, the Shareholder Loans will not convert to equity but the Company will not need to repay the Shareholder Loans until their maturity on 30 June 2021. As a result, if resolutions one to five are not passed and the Capital Raising and the Capital Refinancing Plan are not successfully completed and the Group is unable to implement any alternative financing arrangements or other actions to mitigate the liquidity shortfall, the Company would be likely to enter into administration or receivership in early October 2018, at which point Shareholders would lose all or part of the value of their investment in the Company. • The Group continues the process of implementing the transformation plan which includes, among other things,
		reshaping the UK store footprint and further developing its existing online retail platform, in both the UK and internationally. The anticipated turnaround of the Group's UK business may not be achievable if it fails to generate cash due to current challenges in retail trading. Any failure to control cash, improve margins and therefore generate cash, due to an inability to overcome challenges in retail trading or to implement the transformation plan may have a material adverse effect on the Group's business. The time and commitment which are likely to be required in order to

	impact of the transformation plan on the business of the Group may result in the loss of key personnel during or after the implementation of the transformation plan. These risks, taken together or individually, could have a material adverse effect on the Group's business, results of operations or financial condition.
	• The Group's brands and reputation are key to its success both in the UK and internationally. An inability to manage the Group's brands could adversely affect the Group's ability to increase customer and/or market confidence and therefore its ability to implement its transformation plan successfully. In addition, any damage to the Group's brands, reputation or image, or any perceived or actual concerns relating to the CVAs, the Group's products (including their quality or safety), supply chain or its Franchise Partners and/or the Group's wholesale customers which may be widely disseminated online, on consumer blogs or other social media sites or via print or broadcast media, could have a material adverse effect on the Group's business both in the UK and internationally.
	• The Group is materially dependent on a small number of its Franchise Partners that make up a significant portion of its international business. In addition, the negotiation of the renewal of key franchise agreements with a small number of the Franchise Partners are close to being complete and are expected to be finalised (and sign) before September 2018. The Group is therefore subject to the risk of loss of, or damage to, the relationships with these key partners, or factors affecting such partners' ability to continue purchasing products from the Group. An inability to influence international growth, which may be further impacted by external factors may result in economic downturn, reduction in sales and pricing challenges impacting long term profitability. There are also no assurances that any of these major franchise contract renewals can be negotiated on commercially acceptable terms to the Group and any such loss of contract may have a material adverse effect on the Group's business, results of operations or financial condition including an inability to influence international growth.
	• A failure of the Group's IT infrastructure or its continued dependency on legacy IT systems could result in an inability to trade. Any potential attack or failure of the IT systems could result in electronic point of sale (EPOS), merchandising and warehousing downtime thereby negatively affecting trading capabilities. Additionally, a failure of the Group's digital platform or poor speed and/or navigation in the order process could result in lost trade and impact the Group's market share and reputation. In addition, any unauthorised access or disclosure of confidential information of confidential information stored or obtained by the Group, either by criminal cyber-attack or a speculative loner, could have a material effect on its business.
	• The Group's business is materially dependent on its ability to source products successfully from its suppliers, including from manufacturers and distributors, substantially all of which are based outside the UK. Any breakdown in, or loss of, a relationship with any one or more suppliers or distributors, or any material failure by a supplier or distributor or any failure by the Group to source attractive commercial terms or a

	replacement supplier in the event of a particular source of supply no longer being available or a new supplier in relation to new product lines could affect the Group's ability to trade and therefore could have a material adverse effect on the Group's business, results of operations or financial condition.
	• Any safety incident involving the Group's products could subject its business to product liability claims, which in turn could have a material adverse effect on the Group's business, reputation, results of operations or financial condition. If the Group's suppliers do not adhere to the agreed quality assurance standards, product safety incidents may arise resulting in damage to the Group's brand. Due to the speed at which information can be disseminated on social media platforms, any product liability issues can have a real-time impact on the reputation of the Group's business, and therefore on its financial condition and results of operations.
	• The Group may be affected by challenging economic conditions and political developments affecting the UK and international markets in which it operates. In the UK, it is expected that Brexit will result in increased costs and inflation, higher taxes and lower incomes which will further decrease the Group's customers' spending ability. Any economic and political uncertainty enveloping eastern or southern Europe, oil based economies, and those dependent on China could have a material adverse effect on the Group's business, financial conditions and results of operations.
	• The Group is subject to laws and regulations in each of the markets in which it supplies or sources its products. Any failure to comply with such laws or the increasing regulatory requirements relating to the Group's business (including GDPR or the EU Timber Regulation) may adversely affect customers' perceptions of the Group and its brand and/or result in civil or criminal sanctions, including fines, product recalls or asset seizures or revocation of licences and regulatory authorisations. In addition, the increasing regulatory pressure will require the Group to incur additional costs to ensure compliance with such additional laws and regulations and could divert management and employee time from business related activities which could have a material adverse effect on the Group's business, financial condition and results of operations.
	• The Group's current and future success in achieving its strategic objectives depends on the continued services, experience, insight and performance of key senior management and on its ability to attract, train, motivate and retain high quality and highly skilled personnel. Any failure to attract, progress and retain, due to the uncertainty created by the Capital Refinancing Plan or otherwise, key personnel to meet the Group's operational needs may delay or curtail the achievement of major strategic objectives and could have material adverse effect on the continuity of the Group's operations. Furthermore, recent changes in key members of senior management have caused, and future changes may cause, short-term disruptions and uncertainty within the Group.
	• The Group's ability to develop its product offering may not match changing customer needs meaning the Group is unable to be competitive in the retail market. An inability to provide the right

		customer experience and/or adapt to the changing retail industry may lead to a loss in market share and damage the Group's brand which in turn may have a material adverse effect on the Group's business, results of operation or financial condition.
D.3	Key information on the key risks that are specific to the securities	• The value of an investment in the New Ordinary Shares may go down as well as up. The price of the New Ordinary Shares may fall in response to a range of external factors including the results of the Group, appointments to and resignations from the Board and executive management team, speculation in the market regarding the Group's business or other events affecting the Group and general stock market conditions.
		• The public trading market price of the Ordinary Shares may decline below the Issue Price.
		• The Capital Raising and the conversion of the Shareholder Loans will, and any future non pre-emptive issue of shares will further, dilute the holdings of Shareholders and could adversely affect the market price of Ordinary Shares. For example, an additional offering, or significant sales of Ordinary Shares by major Shareholders, could have a material adverse effect on the market price of Ordinary Shares as a whole.
		• The Company has not paid dividends on the Ordinary Shares since 3 February 2012 and may not be able to declare and pay any dividends in the future. Under the agreement reached with the Pension Protection Fund, the Company will also have to make cash payments to the pension schemes if the Company makes divided payments to its Shareholders.

Section E – Offer
Element	Disclosure Requirement	Disclosure
E.1	Total net proceeds and costs of the issue	The Group expects to raise net proceeds of approximately £32.0 million through the Capital Raising and the conversion of the Shareholder Loans, if approved by Shareholders at the General Meeting, after deduction of total transaction costs in respect of the Capital Refinancing Plan of approximately £8.5 million, excluding VAT, relating to, among other things, underwriting commissions. No expenses will be charged by the Company to Shareholders who take up their entitlements in the Open Offer.
E.2a	Reasons for the offer/use of proceeds	The Capital Raising, which forms part of the Capital Refinancing Plan (as defined below), is expected to provide funding of £117.5 million in aggregate to implement the acceleration of the Group's transformation plan. The Capital Refinancing Plan (as subsequently defined) comprises the following key elements:
		(a) the New Debt Facilities of £67.5 million with a final maturity date extended to December 2020 and certain interim step downs to be provided by the Company's existing Senior Lenders;
		(b) the Shareholder Loans of £8 million, each of which is, subject to shareholder approval as a related party transaction (as defined in the Listing Rules), convertible into New Ordinary Shares at the lower of: (i) 19 pence per New Ordinary Share; and (ii) the most recent price at which, following the Company's entry into the Shareholder Loans, any Shareholders have subscribed for newly issued equity shares in the Company;

		(c) the £32.5 million Capital Raising;
		(d) the Debtor Financing;
		(e) the restructuring of the Group's UK store portfolio through company voluntary arrangements of the Company's subsidiaries, Mothercare UK Limited and Early Learning Centre Limited (the "CVA Companies") and entry into administration of Childrens World as announced on 9 July 2018 (the "UK Restructuring").
		The CVA Proposals were approved by the unsecured creditors and shareholders of the CVA Companies at the relevant creditor CVA meetings on 1 June 2018 and took effect following expiry of the statutory period, during which a challenge could be made to the relevant courts under the relevant legislation (the "Challenge Period"). The Challenge Period expired on 5 July 2018 without any such challenge having been successfully made and it is therefore expected that the CVA Proposals will complete imminently. Full implementation of the Capital Refinancing Plan is now solely conditional upon completion of the Capital Raising.
		As announced by the Company on 4 June 2018, the company voluntary arrangement proposal in connection with the Company's subsidiary, Childrens World was not approved by the necessary 75 per cent. majority of unsecured creditors by a very narrow margin at 73.3 per cent. Accordingly, the company voluntary arrangement proposal for Childrens World did not progress any further. After exploring all available options, the directors of Childrens World have decided to place Childrens World into administration. The directors of Childrens World have submitted a notice of intention to appoint administrators to the High Court and Childrens World is expected to enter formally into administration on 9 July 2018. Mothercare UK has been assigned or assumed leases of 13 stores previously leased in the name of Childrens World and 9 stores previously leased in the name of Childrens World will be closed. Mothercare UK will temporarily occupy (under a licence) the 9 stores due to be closed in order to ensure they are closed down in an orderly fashion.
		Use of Proceeds The Capital Raising is expected to raise approximately £32.5 million in total gross proceeds. The conversion of the Shareholder Loans, if approved by Shareholders at the General Meeting, would release a further £8 million from debt. Following deduction of total transaction costs in respect of the Capital Refinancing Plan of £8.5 million, this will result in approximately £32.0 million of net proceeds, which the Directors intend to use to pay down the Company's existing indebtedness under the New Debt Facilities. The Shareholder Loans will, subject to the approval by the Shareholders of the Sixth Resolution, be convertible into New Ordinary Shares at the Issue Price. The Directors intend to operate the Group with no term debt for the foreseeable future, utilising the Group's New Debt Facilities to finance its normal seasonal intra-year working capital cycle.
E.3	Terms and conditions of the offer	Numis, as agent of the Company, has also made arrangements to place all of the Placing Shares with institutional investors on behalf of the Company at the Issue Price, subject to claw back by Qualifying Shareholders in order to satisfy valid applications under the Open Offer.

Qualifying Shareholders are being given the opportunity to subscribe for New Ordinary Shares pro rata to their existing shareholdings at the Issue Price on the basis of:
1 New Ordinary Share for every 1 Existing Ordinary Share
held and registered in their name at the Record Date. Qualifying Shareholders may apply for any whole number of New Ordinary Shares. Excess applications will be satisfied only to the extent that corresponding applications by other Qualifying Shareholders are not made or are made for less than their pro rate entitlements. If there is an over-subscription resulting from excess applications, allocations in respect of such excess applications will be scaled down at the absolute discretion of the Board, in consultation with Numis.
The Issue Price of 19 pence per New Ordinary Share represents an approximately 33.6 per cent. discount to the Closing Price of 28.6 pence per Ordinary Share on the Reference Date and an 11 per cent. discount to the Closing Price of 21.3 pence per Ordinary Share on 16 May 2018, being the business day prior to the announcement of the Capital Refinancing Plan. This was set as the Issue Price as a result of the Directors' assessment of market conditions and following discussions with a number of institutional investors. The Directors are in agreement that the level of discount and method of issue are appropriate to secure the investment necessary. The last time and date for acceptance and payment in full under the Open Offer is 11.00 a.m. on 25 July 2018. The Issue Price of 19 pence per New Ordinary Share is the highest price at which the Shareholder Loans would convert into New Ordinary Shares resulting in a maximum of 62,684,400 New Ordinary Shares in aggregate being issued to these Shareholders in full discharge of all loan and interest sums due at the time of conversion, if the Related Party Transactions are approved by Shareholders at the General Meeting.
Shareholders should be aware that the Open Offer is not a rights issue. As such, Qualifying Non-CREST Shareholders should note that their Application Forms are not negotiable documents and cannot be traded. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements and Excess Open Offer Entitlements will be admitted to CREST, and be enabled for settlement, the Open Offer Entitlements and Excess Open Offer Entitlements will not be tradeable or listed and applications in respect of the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim.
Open Offer Shares for which application has not been made under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Qualifying Shareholders who do not apply to their entitlements will have no rights nor receive any benefit under the Open Offer. Any New Ordinary Shares which are not applied for under the Open Offer Entitlements and Excess Open Offer Entitlements may be allocated to any people who have conditionally agreed to subscribe for the Placing Shares or, failing which, to Numis subject to the terms and conditions of the Placing Agreement, with the proceeds ultimately accruing for the benefit of the Company.
Any fractional entitlements to Open Offer Shares will be rounded down in calculating entitlements to Open Offer Shares. Fractional

		entitlements to Open Offer Shares will be aggregated and offered with the Excess Shares pursuant to the Excess Application Facility, and will ultimately accrue for the benefit of the Company.
		The Capital Raising is conditional upon, inter alia, the following:
		• resolutions one to five being passed by Shareholders at the General Meeting (without material amendment);
		• the Placing Agreement becoming unconditional; and
		• Admission becoming effective by not later than 8.00 a.m. on 27 July 2018 or such later time and/or date as the Company and Numis may agree (being not later than 8.00 a.m. on 30 September 2018).
		Accordingly, if any of such conditions are not satisfied, or, if applicable, waived, the Capital Raising will not proceed and any Open Offer Entitlements and Excess Open Offer Entitlements admitted to CREST will thereafter be disabled.
		The Placing and Open Offer have been fully underwritten by Numis and Shore Capital on, and subject to, the terms and conditions of the Placing Agreement.
		Mothercare has received irrevocable undertakings from all Directors who hold Ordinary Shares in respect of approximately 1.2 per cent. of Mothercare's existing issued share capital to vote in favour of the Resolutions to be proposed at the General Meeting relating to the Capital Raising.
E.4	Interests that are material to the issue/ conflicting interests	Not applicable. There are no interests, known to the Company, material to the issue of New Ordinary Shares or which are conflicting interests.
E.5	Name of the	Mothercare plc.
	offeror/lock-up arrangements	Pursuant to the Placing Agreement the Company has undertaken not to issue any Ordinary Shares, subject to certain customary exceptions including (without limitation) any steps taken in relation to the Capital Raising, the conversion of the Shareholder Loans and the operation of any of the Share Schemes in existence at the date of the Placing Agreement, for a period of six months from the date of Admission.
E.6	Dilution	Qualifying Shareholders who do not take up any of their Open Offer Entitlements will suffer a dilution of:
		• approximately 57.7 per cent. to their interests in the Company pursuant to the conversion of the Shareholder Loans subject to approval of the Related Party Transactions and assuming conversion of the Shareholder Loans in full on their maturity date and the Capital Raising; or
		• approximately 50 per cent. to their interests in the Company pursuant to the Capital Raising if the Shareholder Loans are not converted.
		For these purposes, any dilution which may result from the vesting or exercise of any awards under the Share Schemes between the Reference Date and the Record Date has been disregarded.
E.7	Estimated expenses	Not applicable. No expenses will be directly charged to the
	charged to the investor	investor by the Company.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Each of the times and dates in the table below is indicative only and may be subject to change. Please read the notes to this timetable set out below.

	2018
Record Date for entitlements under the Open Offer	6.00 p.m. on 5 July 2018
Announcement of the Capital Raising	9 July 2018
Publication and posting of the Prospectus, Form of Proxy and Application Form	9 July 2018
Ex-Entitlements Date for the Open Offer	8.00 a.m. on 9 July 2018
Open Offer Entitlements and Excess Open Offer Entitlements credited to stock accounts of Qualifying CREST Shareholders in CREST	As soon as possible after 8.00 a.m. on 10 July 2018
Recommended latest time for requesting withdrawal of Open Offer Entitlements and Excess Open Offer Entitlements from CREST (i.e. if your Open Offer Entitlements and Excess Open Offer Entitlements are in CREST and you wish to convert them to certificated form)	4.30 p.m. on 19 July 2018
Latest time and date for depositing Open Offer Entitlements into CREST	3.00 p.m. on 20 July 2018
Latest time and date for splitting of Application Forms (to satisfy bona fide market claims only)	3.00 p.m. on 23 July 2018
Latest time and date for receipt of Forms of Proxy or electronic proxy appointments	10.00 a.m. on 24 July 2018
Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer or settlement of relevant CREST instruction (as appropriate)	11.00 a.m. on 25 July 2018
Results of the Capital Raising announced through a Regulatory Information Service	7.00 a.m. on 26 July 2018
General Meeting	10.00 a.m. on 26 July 2018
Results of General Meeting announced through a Regulatory Information Service	by 4.30 p.m. on 26 July 2018
Capital Reorganisation record date and time	6.00 p.m. on 26 July 2018
Capital Reorganisation effective date and time	8.00 a.m. on 27 July 2018
Admissions and commencement of dealings in New Ordinary Shares	By 8.00 a.m. on 27 July 2018
New Ordinary Shares credited to CREST accounts (uncertificated holders only)	By 8.00 a.m. on 27 July 2018
Expected dispatch of definitive share certificates (where applicable)	Within ten Business Days of Admission
Expected despatch of definitive share certificates for the New Ordinary Shares in certificated form	by no later than 10 August 2018

Notes:

(ii) Any reference to a time in this document is to London time, unless otherwise specified.

⁽i) Each of the times and dates set out in the above timetable and mentioned in this document, the Application Form and in any other document issued in connection with the Capital Raising is subject to change by the Company (with the agreement of Numis in certain circumstances), in which event details of the new times and dates will be notified to the UK Listing Authority and, where appropriate, to Shareholders.

⁽iii) The ability to participate in the Open Offer is subject to certain restrictions relating to Shareholders with registered addresses or located or resident in countries outside the UK, details of which are set out in Part IV (Terms and Conditions of the Capital Raising) of this document.

CAPITAL RAISING STATISTICS

Notes:
Estimated net proceeds of the Capital Raising (approximately)(5)	£30.3 million
Gross proceeds of the Capital Raising (approximately)(5)	£32.5 million
New Ordinary Shares as a percentage of the Enlarged Share Capital of the Company following completion of the Capital Raising and conversion of all of the Shareholder Loans in full into New Ordinary Shares(4)	57.7 per cent.
New Ordinary Shares as a percentage of the Enlarged Share Capital of the Company following completion of the Capital Raising(3)	50 per cent.
Number of Ordinary Shares in the Enlarged Share Capital(3)	341,743,770
Maximum number of New Ordinary Shares to be issued pursuant to the conversion of all of the Shareholder Loans in full(2)	62,684,400
Number of New Ordinary Shares to be issued pursuant to the Capital Raising	170,871,885
Number of Ordinary Shares after the Capital Reorganisation	170,871,885
Number of Ordinary Shares in issue at the date of this document	170,871,885
Discount of Issue Price to Closing Price(1)	33.6 per cent.
Issue Price per New Ordinary Share	19.0 pence
Closing Price of the Existing Ordinary Shares(1)	28.6 pence

⁽¹⁾ The closing price on the London Stock Exchange on 6 July 2018.

⁽²⁾ Subject to the passing of the Sixth Resolution in respect of the Related Party Transactions and on the assumption that all of the Shareholder Loans are converted in full on their maturity date of 30 June 2021.

⁽³⁾ Excluding the number of New Ordinary Shares issued to Blake Holdings, DC Thomson and Lombard Odier on the conversion of the Shareholder Loans.

⁽⁴⁾ On the assumption that no further Ordinary Shares are issued as a result of the exercise of any options or awards under the Share Schemes between the Reference Date and Admission and including New Ordinary Shares issued pursuant to the conversion of the Shareholder Loans in full on their maturity date of 30 June 2021.

⁽⁵⁾ Excluding, for the avoidance of doubt, any monies relating to the conversion of the Shareholder Loans.

RISK FACTORS

Any investment in the Company or the New Ordinary Shares is subject to a number of risks and uncertainties. Prior to investing in the New Ordinary Shares, prospective investors should carefully consider the factors, risks and uncertainties associated with any such investment, the Group's business, strategy and the industry in which it operates, together with all other information contained in this document including, in particular, the risk factors described below. Prospective investors should note that the risks and uncertainties identified in the Summary are the risks and uncertainties that the Company believes to be the most essential to an assessment by a prospective investor of whether to consider an investment in the New Ordinary Shares. However, as the risks and uncertainties which the Group faces relate to events and depend on circumstances that may or may not occur in the future, prospective investors should consider not only the information on the key risks summarised in the section of this document headed "Summary" but also, among other things, the risks and uncertainties described below.

The following is not an exhaustive list or explanation of all risks which prospective investors may face when making an investment in the Company or the New Ordinary Shares and should be used as guidance only. The order in which risks are presented is not necessarily an indication of the likelihood of the risks actually materialising, of the potential significance of the risks or of the scope of any potential harm to the Group's business, results of operations or financial condition. Additional risks and uncertainties relating to the Group that are not currently known to the Group, or that the Group currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Group's business, results of operations or financial condition and, if any such risk should materialise, the price of such securities may decline and investors could lose all or part of their investment. Prospective investors should carefully consider whether an investment in the New Ordinary Shares is suitable for them in the light of the information in this document and their personal circumstances.

The information given is as of the date of this document and, except as required by the FCA, the London Stock Exchange, the Listing Rules, the Prospectus Rules or any other applicable law, will not be updated. Any forward looking statements are made subject to the reservations specified under 'Forward Looking Statements' on page 44 of this document.

1. RISK OF THE CAPITAL RAISING NOT COMPLETING

1.1 The Group's financial position may be adversely affected if the First Resolution to Fifth Resolution are not passed and the Capital Refinancing Plan does not proceed

If Shareholders do not approve the First Resolution to Fifth Resolution at the General Meeting the Capital Raising will not proceed. The Capital Raising is not conditional on the passing of the Sixth Resolution which pertains to the approval of the Related Party Transactions, or the Seventh Resolution to Tenth Resolution which constitute general authorities customarily tabled at the Company's annual general meeting. The Directors believe that the successful completion of the Capital Raising will significantly strengthen the Group's balance sheet and this will enable the Group to deliver the accelerated transformation plan which will be important to the future success of the Group.

If the First Resolution to Fifth Resolution are not passed or Numis exercises its right to terminate the Placing Agreement and the Capital Raising therefore does not proceed the New Debt Facilities, the Shareholder Loans and the Debtor Financing will become immediately re-payable on 30 September 2018 meaning that Mothercare will experience an immediate liquidity shortfall of up to £79.8 million in September 2018. The Capital Raising is not conditional on the passing of the Sixth Resolution which pertains to the approval of the Related Party Transactions, or the Seventh to Tenth Resolution which constitute general authorities customarily tabled at the Company's annual general meeting. If the Related Party Transactions are not approved by the Shareholders at the General Meeting, the Capital Raising and Capital Refinancing Plan will still be able to proceed, the Shareholder Loans will not convert to equity but the Company will not need to repay the Shareholder Loans until their maturity on 30 June 2021. As a result, if the First Resolution to Fifth Resolution are not passed and the Capital Raising and the Capital Refinancing Plan are not successfully completed and the Group is unable to implement any of the alternative financing arrangements or other actions set out below, the Company would be likely to enter into administration or receivership in early October 2018, at which point Shareholders would lose all or a significant part of the value of their investment in the Company.

If the Capital Raising does not proceed, the Group would put in place an action plan to avoid the initial ongoing liquidity shortfall, which would first involve attempting to renegotiate the terms of the New Debt Facilities to secure further amendments of the financial covenants and increases to the amounts available under the New Debt Facilities. In order to be successful, the amendments to the New Debt Facilities would need to be in place for several months beyond the initial liquidity shortfall period to enable the Group to secure alternative funding arrangements. The Directors believe that such amendments would only be agreed by the Senior Lenders, if at all, at a significant cost to the Group in the form of additional fees payable to the Senior Lenders, increased coupon payments and/or additional restrictions on, or commitments to engage in, corporate actions (e.g. disposals), each of which would adversely affect or delay implementation of the Group's strategy. Given the conditionality required by the Senior Lenders in respect of the New Debt Facilities, the Directors do not believe that negotiating the required amendments to the New Debt Facilities has a high chance of success. Any such increase in financing costs will result in matching payments becoming due to the Group's defined benefit schemes (being (i) the Mothercare Executive Pension Scheme, and (ii) the Mothercare Staff Pension Scheme) (the "DB Schemes") as set out in Part X (Additional Information) of this document.

If the Senior Lenders were not to waive any prepayment due under the New Debt Facilities and were not to agree to commercially acceptable amendments of the Group's financial covenants and increases to the amounts available under the New Debt Facilities, the Group would then seek alternative long-term committed financing arrangements to replace or refinance the amounts outstanding under those arrangements.

The Company could also seek other forms of funding, although the Group's experience of seeking such funds in the recent financing review suggests that the terms of such other forms of funding may not be available and/or result in significant value transfer from Shareholders and/or creditors. The Directors believe that seeking alternative funds is likely to be successful, however, it may not be available at commercially acceptable terms and the Directors would need to balance the receipt of funds with the additional cost of debt. Any such alternative financing arrangement may result in matching payments becoming due to the DB Schemes as set out in paragraph 15.6 of Part X (Additional Information) of this document.

In addition to initiatives to provide additional cash headroom, the Group may take action to effect a sale of the business as a whole or the disposals of assets, such as the disposal of one or more of the Group's businesses to facilitate a reduction of the Group's outstanding indebtedness. The Directors believe they may be able to secure a transaction on such a basis in an acceptable timeframe, however, there can be no guarantee that the Directors would be able to secure a transaction at a price which they believe is reflective of the full value of the assets being disposed and the New Debt Facilities (and possibly any new financing arrangements) restrict the Group's ability to make disposals without the consent of the relevant Senior Lenders, which could be withheld. Such a transaction would restrict the Group's future growth opportunities and would likely impact the Group's ability to maintain or improve its competitive positioning.

As a result, if the Capital Raising does not proceed to completion and the Group is unable to implement any of the alternative financing arrangements or other actions set out above, the Company would be likely to enter into administration or receivership in early October 2018, at which point Shareholders would lose all or a significant part of the value of their investment in the Company.

1.2 The anticipated turnaround of the Group's UK business may not be achievable if the Group fails to implement effectively key aspects of its transformation plan

Following a strategic review of the entire business in 2014, the Board established a transformation plan, which was designed to turnaround the trading performance of Group's UK business, while continuing the profitable growth in the Group's International business. Whilst progress has been made to date, recent financial performance has been impacted by a slow down in like-for-like sales in all channels reflecting in part a loss of brand salience and weakening product offering, together with the increasing cost pressure from a number of legacy loss making stores in the UK. This has resulted in an unsustainable position for the Group, which in turn has led the Board to instigate a full financial review. The financial review concluded that delivering the Capital Refinancing Plan and the UK Restructuring represents the most viable option to establish a sustainable future for Mothercare. Please refer to paragraph 3 of Part I (Letter from the Interim Executive Chairman of Mothercare plc) of this document for further details. Key aspects of the transformation plan include further reducing the Group's UK store footprint and a disciplined focus upon cost control and cash generation throughout the business.

The Group has been undertaking a store closure programme for a number of years. The restructuring of the UK store portfolio is expected to result in a portfolio of 77 UK stores by June 2019. 60 stores have been or will be closed by June 2019, with rent reductions in 19 UK stores which will remain open and 58 UK stores will remain open on substantially unchanged terms and/or rent. In addition the CVA Proposals will also compromise certain intra-group balances owed by the companies undergoing the CVA Proposals in favour of certain entities in the Group.

The Capital Refinancing Plan together with the UK Restructuring will allow the Company to accelerate the transformation plan by:

• ultimately generating cost savings of at least £19 million per annum, including from rent reductions and store costs and central overheads with £9 million of those costs savings targeted from rightsizing the business globally; and
• cash realisations of at least £10 million through store closures and other UK and International initiatives within 18 months of the date of this document.

The Group's store closures, while aimed at reducing the Group's overall cost base may have a negative impact on customer brand perception (including in international markets) and may expose the business to default by any sub-lease tenants as well as to unplanned costs due to concession partners choosing to close space in store. Any failure by the Group to achieve further necessary store closures could give rise to ongoing costs for the Group as a result of keeping certain stores open, greater than anticipated costs of closure, a reduction in the amount of cash available for use towards other initiatives and an increased risk of leases reverting to the Group if any sub-lease tenants default on lease payments.

The Group's ability to successfully realise savings and the timing of realisation of such savings may be affected by factors such as the need to ensure continuity in the Group's operations, contracts, regulations and/or statutes governing employee/employer relationships, and other factors. Moreover, the Group may incur significant costs related to refurbishment of stores but fail to achieve the anticipated uplift in sales. Such factors could result in a significant delay in any turnaround of the Group's UK business and the Group may be unable to reduce its cost base as quickly as anticipated or at all.

Further, pursuant to the transformation plan, the Group has already made, and intends to continue to make, significant investment in its online offering, with the aim of retaining a significant proportion of sales lost through store closure by growing its e-commerce sales in the UK. This includes growing the Group's online business in the UK even further. The success of e-commerce sales and building online offering is dependent upon a positive customer online journey from browsing and selection through to check-out and purchase. Customer experience has degraded recently and the Group's ability to maintain and grow its online market share is dependent on customer experience, both online and in respect of delivery of products, and may be negatively impacted if the Group is not able to keep up with customer expectation. The Group's plans may be vulnerable to a variety of interruptions, including events beyond the Group's control, such as hardware failures, computer viruses and cyber-attack as well as the loss or destruction of material hardware or software. Any material delay in the improvement or integration of, or any material disruption or slow-down of, IT systems and infrastructure could disrupt the Group's ability to market, offer and sell its products through the online platform, and affect the Group's ability to process orders and shipments. As a result, the Group's sales and profitability may be materially adversely affected.

In addition, the acceleration of the transformation plan could divert management and employee attention from ordinary business activities which could impact the Group's ability to meet the Group's strategic objectives. There may also be an inability or unwillingness by the Group's management or employees to implement new customer and online initiatives which may result in continued inefficiencies across the business. Any failure to attract, progress and retain key personnel to meet the Group's operational needs, due to the uncertainty created by the Capital Refinancing Plan or otherwise, may delay or curtail the achievement of major strategic objectives and could have material adverse effect on the continuity of the Group's operations. Furthermore, recent changes in key members of senior management have caused, and future changes may cause, short-term disruptions and uncertainty within the Group. There is also the possibility that key talent may leave the business before, during and after the implementation of the transformation plan due to the potential for ordinary business activities to become secondary to the implementation of the transformation plan. This may negatively impact the Group's ability to achieve its strategic objectives.

Failure to accelerate key aspects of the new transformation plan as anticipated, including meeting the expected timetable, or to address successfully any unexpected risks, or any events that lead to higher than anticipated costs, could have a material adverse effect on the Group's ability to turnaround its UK business and, in turn, restore its profitability.

2. RISKS RELATING TO THE GROUP'S SECTOR

2.1 The Group operates in highly competitive markets. Any failure by the Group or its Franchise Partners to compete effectively may have a material adverse effect on the Group's business, financial condition or results of operations

The retail markets in which the Group competes, including Clothing & Footwear, Home & Travel and Toys, are highly competitive, with different competitors in each product group. The Group and the Franchise Partners, selling the Group's products under licence, compete on the basis of specialism, trust, curated product range, quality, newness and availability, price, delivery methods, convenience of store location and store design, expert support and service, customer insight and engagement, recommendations, personal shoppers, functionality and reliability of online and mobile platforms, promotional activities and events, brand recognition and product design. The Group, its Franchise Partners and Wholesale Customers compete with a range of local, national and international retailers of varying sizes and covering different product categories, including general and specialist retailers, boutique and chain retailers, discount and mass merchandisers (including supermarkets), department stores and internet-only and catalogue businesses. In addition, the Directors also believe that there has been a structural shift in the UK retail environment towards multi-channel and e-commerce pureplay operations, where online sales are representing an increasing proportion of retail sales (please refer to risk factor 2.5 of this Part (Risk Factors) of this document for further details). Furthermore, customers are becoming increasingly reliant on the internet, in particular, using search engines and mobile applications that enable customers not only to compare the price of the Group's products as against those of its competitors but also purchase such products from competitors, even when they are within a mothercare store. Major search engines have also changed their algorithms in the last 12 months to give greater 'above-the-line' presence for paid search results and include price, reviews and review volume within on-page search results. Brands are using social media more than at any time before and the growth of the online influencer community provides a new route for customers to build their wishlist. The scale and utilisation of online parenting forums such as Mumsnet, Netmums and Baby Centre also make it easier than ever to get tips and advice from other parents, meaning that customers are better informed than previously when they are researching and planning their purchases. The use of these websites and mobile applications has facilitated pricing pressure imposed by online retailers by allowing them to reach a large number of potential customers without incurring significant upfront marketing costs. The changes in the online retail dynamic also mean that both positive and negative brand perceptions can be amplified and reinforced before the customer has had an opportunity to build their own experience.

In the UK, in particular, the Group is operating in a market which in recent years has been characterised by aggressive competitive pressure from existing competitors such as Amazon, Argos, Next, Mamas & Papas, John Lewis, Halfords, Smyths, Kiddicare, supermarkets, global clothing majors including H&M, Gap, Uniqlo, Zara, Primark and online pureplay market players such as Asos and Boohoo and even some manufacturers offering their products direct to purchasers. Some of these competitors have entered the market offering pushchairs, car seats, clothing and other products at significantly lower prices, which has resulted in the Group's products being seen as relatively expensive, particularly when the Group has failed to communicate its brand messaging as a specialist retailer effectively to customers to emphasise quality and service. Competition has also increased in recent years as a result of clothing retailers expanding their product ranges to cover the children's clothing market as well.

Certain current competitors may have greater resources, lower operating costs, greater market presence and brand recognition, a larger customer base and more developed online businesses, and they may be able to respond more swiftly to changes in market conditions and consumer demand. In addition, they may be able to adopt more aggressive pricing and devote more resources to technology, infrastructure, fulfilment, inventory management and promotional activities. For example, due to their size, scalability and diversified product offering, certain competitors have in the past, and may in the future, heavily discount products or run short-term loss-making campaigns on products in order to increase sales and build traffic for other product categories. Internet-only retailers may also have greater price flexibility in light of the structure of their cost base. Given that the Directors believe that demand for the Group's products is sensitive to pricing and value considerations, any pricing pressure may have an adverse impact on the Group's ability to compete and/or force the Group to reduce prices or increase spending on promotional activities, which could reduce its revenue and profitability. If the Group fails to differentiate its products through specialisms as opposed to price, such as value or exclusive branded products, the Group's competitive position could be materially adversely affected. Competition may also intensify as the Group's competitors enter into business combinations or alliances or as established companies in other market segments expand to compete with the Group's business.

If the Group, its Franchise Partners or its Wholesale Customers are unable to compete successfully in the UK or overseas, this may have a material adverse effect on the Group's business, results of operations or financial condition.

2.2 An inability to influence international growth, which may be further impacted by external factors may result in economic downturn, reduction in sales and pricing challenges impacting long term profitability

The activity of the Franchise Partners and International sales contribute a significant amount of revenue to the Group and the Group's strategic aims include the continued growth of its International business in key markets. The Group is materially dependent on a small number of its Franchise Partners that make up a significant portion of its International business. Developing and maintaining good relationships with Franchise Partners is critical and an area which requires significant time investment. In addition, the negotiation of the renewal of key franchise agreements with a small number of the Franchise Partners are close to being complete and are expected to be finalised and signed before September 2018. The Group is therefore subject to the risk of loss of, or damage to, the relationships with these key partners, or factors affecting such partners' ability to continue purchasing products from the Group or the potential that Franchise Partners may look to renegotiate their terms. An inability to influence international growth may result in poor international sales which in turn may lead to reduced profit and increased international debt. In order to sustain long term profitability, the Group must overcome pricing challenges and deal with issues outside the Group's control such as declining birth rates in key markets and political unrest and regional conflict and uncertainty in international markets. There is a risk that, in managing these issues, the Group is seen by its Franchise Partners as exercising an unacceptable level of control and as enforcing a restrictive commercial business model resulting in the deterioration of relationships with Franchise Partners.

2.3 The Group may be materially and adversely affected by challenging economic conditions and political developments affecting the UK and international markets

The Group is affected by changes in both global economic conditions and conditions in the geographical markets in which the Group sources and supplies its products, including through its sales to Franchise Partners and its sourcing operations. Whilst many of the product categories are necessary high value purchases for expectant parents, choice of how much to spend, where to buy and whether to buy new or pre-owned products is discretionary and a customer's behaviour may be impacted by economic conditions. The Group's products are generally discretionary purchases, which are typically more likely to be made during periods of favourable economic conditions. A variety of factors may adversely affect the Group during periods of economic uncertainty or instability or political upheaval. For example, inflation, increased unemployment levels, wage stagnation, direct or indirect taxes, fuel prices, energy costs or other increases in costs of living and decreased availability of consumer credit could adversely affect consumer confidence and spending habits. Customers may spend less or seek to economise by purchasing a greater number of non-branded products, economy brands or pre-owned products or re-use products which could in turn reduce demand for the Group's products and have a material adverse effect on its sales or result in a shift in the Group's product mix from higher value to lower value product offerings. In addition, the Group may face increased pricing pressure or competing promotional activity for lower-priced products as competitors seek to maintain sales volumes. Birth rates may be impacted by a variety of factors, economic, social and medical, and if birth rates were to decrease at a significant rate, this could impact the demand for the Group's products in both the UK and internationally and have a material adverse effect on the Group's business, results of operations or financial condition.

In the UK, challenging economic conditions in recent years, particularly the difficult consumer and retail environment, have created uncertainty around the level of demand for the Group's products. Furthermore, it is expected that Brexit may result in increased costs and inflation, higher taxes and lower incomes which will further decrease the Group's customers' spending ability. In Europe, the Group's sales to Franchise Partners and their onward sales to consumers have been adversely affected by economic weakness in the Eurozone and the related effect on the availability of credit and diminished consumer confidence, particularly in Cyprus, Ireland and Greece, all of which are markets in which the Group has Franchise Partners or Wholesale Customers. Moreover, as the Group continues to focus its growth efforts on emerging market regions, which may afford potentially greater growth opportunities, its results of operations are increasingly exposed to more volatile and uncertain economic environments. For example, China, Russia and India, have experienced notable deceleration in GDP growth over the past few years.

Political and social unrest in international markets in which a Franchise Partner operates or in countries where the Group has production, sourcing and logistical operations, particularly emerging markets, may expose the Group to greater counterparty risks, including with customers, suppliers and providers of finance or financial products, on which the Group relies that may become insolvent or otherwise unable to perform their obligations, which may cause disruptions to the Group's operations and supply chain. Periods of economic and political instability may also lead to government actions, such as imposition of martial law, trade restrictions, foreign ownership restrictions, capital, price or currency controls, nationalisation or expropriation of property or other resources or changes in legal and regulatory requirements, including those resulting in potentially adverse tax consequences. Geopolitical instability, such as recent and ongoing events in Russia and the Middle East, has affected and is expected to continue to affect the Group's International business together with significant nontariffs and tariffs barriers impacting the cost of products to the Franchise Partners or limiting the production and transportation of products internationally.

2.4 The Group is subject to extensive UK, EU and international legislation and regulation and failure to comply with, or changes in, regulation, may have a material adverse effect on the Group's business, results of operations or financial condition

The Group is subject to laws and regulations in each of the markets in which it supplies or sources its products, in particular with respect to the quality and safety of products as they are primarily designed for use by parents and young children and increasingly complex employment legislation. Among other things, relevant legislation and regulation in both the UK and overseas governs product composition, product safety, manufacturing processes, packaging, labelling, advertising, consumer protection, the health, safety and working conditions of the Group's employees (including complying with local minimum wage laws which may increase costs), the provision of online payment services, privacy, data protection, content, intellectual property, taxation, the Group's pension arrangements and the Group's competitive practices and market conduct. The Group's operations and properties are also subject to local environmental laws and regulations in the jurisdictions in which the Group supplies or sources its products and owns or leases property. A number of the Group's agreements with Franchise Partners are also governed by local laws. There may also from time to time be determinations by a court of law, regulator or tribunal, in the UK or overseas, as a result of which the Group could be exposed to increased costs or liabilities and/or required to change its business practices.

The Group relies on its manufacturers, suppliers and distributors to comply with employment, environmental and other laws, such as the EU Timber Regulation. Any inability of the Group to monitor manufacturers, suppliers and distributors in relation to compliance with relevant laws, it may inadvertently result in non-compliance against Group policies and local laws and regulations.

Failure to comply with applicable laws, regulations and/or judicial and/or regulatory authority determinations may result in civil or criminal sanctions, including fines, injunctions, product recalls, asset seizures, revocation of licences and regulatory authorisations and may adversely affect customers' perception of the Group and its brand image, any of which could adversely affect the Group's business, results of operations or financial condition.

In addition, any changes in applicable laws or regulations, including as a result of changing government policy, may result in increased compliance costs, capital expenditure and other financial obligations or impose restrictions on the Group's operations, any of which could have a material adverse effect on the Group's business, results of operations or financial condition. For example, the EU General Data Protection Regulation (EU) 2016/679 ("GDPR") came into force in May 2018 which placed a higher compliance burden on the Group and which could restrict the Group's ability to collect, retain and use certain data, including by reason of enhanced requirements for informed opt-in consent by customers to the processing of personal data, granting customers a "right to be forgotten", imposing disclosure requirements of data sources to customers and imposing restrictions on the use of personal data for "profiling purposes". Given the Group's collection of customer data via its loyalty scheme and online channels, the Group relies on its ability to obtain, retain and otherwise manage customer data and these additional restrictions may therefore result in a loss of Customer Data and/or higher compliance costs.

2.5 The Group's retail market in the UK has experienced, and will continue to experience, a structural shift due to the emergence and growth of online, mobile and other non-traditional retail channels. Failure by the Group or its Franchise Partners to compete with, or to develop successfully their own online (including mobile) and other non-traditional retail channels, may have a material adverse effect on the Group's current business model, its results of operations or financial condition

The Group's retail market in the UK has experienced a structural transition following a shift in consumer purchasing habits towards online and mobile channels, which has affected, and is expected to continue to affect, sales from the Group's store portfolio as customers opt to purchase products online rather than in-store. As discussed in risk factor 2.1 of this Part (Risk Factors) of this document, online sales are representing an increasing proportion of retail sales and customers are becoming increasingly reliant on the internet, in particular, researching heavily on price and using mobile devices to research online when in store. Such websites and applications enable customers not only to compare the price of the Group's products against those of its competitors but also purchase such products from competitors. The use of these websites and mobile applications by the Group's competitors has facilitated pricing pressure by allowing them to reach a large customer base without necessarily incurring significant upfront marketing costs.

If the Group is unable to compete with other key players in the UK, including multi-channel retailers as well as internet-only businesses, many of which are able to offer competitively priced products while maintaining a substantially different cost base to the Group, the Group's in-store sales could decline (while the associated fixed costs remain constant). Furthermore, the Group may be unable to respond effectively or swiftly enough to changing customer shopping trends and/or monetise online or mobile user traffic, which would have a material adverse effect on its online sales.

The Group has encouraged its Franchise Partners to establish a multi-channel approach to their respective markets (which, in many cases, has meant that they have benefited from pioneer status for online sales in their market). The Group has achieved its goal to have online channels for each of its Franchise Partners in all of its major markets by the end of FY 2017/18. If the markets outside the UK where the Group's products are offered experience a structural shift such as has occurred in the UK and Franchise Partners are unable to develop their online channels to reflect customer preferences in a timely and effective manner, or at all, the competitive position of Franchise Partners may diminish, which may have a material adverse effect on the Group's business, results of operations or financial condition.

Moreover, the Directors believe that the Group's stores serve as an important marketing and advertising platform, both for the Group's products and services and for the third party branded goods which it sells. If the Group's customers increasingly choose to purchase products from other retailers online, the Group's ability to increase brand awareness and advertise and promote products through its in-store channel could be undermined and the Group's suppliers may decide to decrease their support of the Group's business through promotions, exclusive products and marketing support, which is in turn may have a material adverse effect on the Group's business results and operations or financial condition.

2.6 As an operator of physical retail stores in the UK and a provider of products to physical retail stores in the UK and internationally, the Group's business, revenue and profitability may be materially adversely affected by a decline in footfall in such retail stores

As at 24 March 2018, the Group had 38 high street mothercare stores, 96 out-of-town mothercare stores and 3 high street ELC stores in the UK. In FY 2017/18, 45 per cent. of the Group's revenue was generated from in-store sales in the UK (48 per cent. in FY 2016/17). The number of UK stores will reduce further following implementation of the CVA Proposals. In addition, in FY 2017/18, 33 per cent. of the Group's revenue was generated from its International business, substantially all of which was generated from sales to, and royalties received from, Franchise Partners. The Group also generates revenue from wholesale arrangements in the UK, which revenue was primarily derived from the Group's receipts from sales to Amazon, Argos and Zalando in FY 2017/18. Accordingly, the Group's revenue is dependent, to a certain extent, on the volume of consumer traffic in and around it and its Wholesale Customers' physical retail stores in the UK, its Franchise Partners' stores overseas and its online presence. The success of such stores depends in substantial part on their location. Stores that are located in town centres, retail parks, or within department stores tend to benefit from the ability of other tenants in such retail destinations to generate consumer traffic in the vicinity of those stores and to help maintain the continuing popularity of those areas as retail destinations. The Group's revenue may be adversely affected if such retail destinations decrease in popularity.

2.7 Certain segments of the Group's UK business are seasonal and, as a result, adverse factors experienced during peak selling seasons could have a disproportionate impact on the Group's business, reputation, results of operations or financial condition

While the demand for the Group's Clothing & Footwear and Home & Travel products is not particularly seasonal in nature, the Group's sales of Toys (including ELC-branded products) are relatively seasonal, particularly in the UK. The impact of a Christmas peak in Toys, and the need to offer attractive cyber deals in Home & Travel, means that the Group's cost of sales is a little higher in the third quarter. Any factors adversely affecting sales in the UK in the third quarter of any year, including weaker footfall, prolonged adverse weather conditions, outbreak of pandemic disease, labour strikes and work stoppages, terrorist acts, disruptions to the supply chain or other disruptive events, lack of supply of appropriate products for the prevailing weather conditions, incorrect stock forecasting, unfavourable economic conditions or promotional activity and trading pressures in and around peak periods, could have a disproportionately adverse effect on the Group's results of operations for the entire financial year.

Seasonality generally varies from one international territory to another and may be affected by religious or other local holidays, climatic conditions or local shopping habits. In addition, the Group's mix of product sales may vary as a result of changes in seasonal and related geographic demand for particular products.

If sales during peak periods in the UK or in international markets are lower than expected for any reason, there may be a build-up of unsold stock and the Group may need to lower its prices to reduce stock levels. Conversely, if the Group fails to order sufficient quantities of products or fails to receive delivery of such products from third parties, prior to or during peak periods, it may not have an adequate supply to meet customer demand, which could have a material adverse effect on the Group's business, reputation, results of operations or financial condition.

2.8 Changes in tax rates, tax legislation or practice by a relevant tax authority or any failure by the Group to manage tax risks adequately could have a material adverse effect on the Group's business, reputation, results of operations or financial condition

The Group currently conducts business operations in approximately 50 countries and is therefore subject to tax and intercompany pricing laws in multiple jurisdictions. The Group's effective tax rate in any given financial year reflects a variety of factors that may not be present in future financial years, and may be affected by changes in the tax laws of the jurisdictions in which the Group supplies or sources its products or receives royalty payments, or the interpretation of such tax laws. The Group is required to exercise judgement when determining its provisions for income taxes and accounting for tax-related matters. In particular, international transfer pricing is an area of taxation that depends heavily on the underlying facts and circumstances and generally involves a significant degree of judgement. Changes in the tax rates, regulations, relief or practice by a relevant tax authority, or changes in interpretation of applicable law or a relevant tax authority's practice, increasing challenges by relevant tax authorities or any failure by the Group to manage its tax risks adequately could result in increased charges, penalties, financial loss and/or reputational damage, which could have a material adverse effect on the Group's business, reputation, results of operations or financial condition.

The Group has in the past and may in the future be subject to tax audits and face challenges brought by tax authorities. The outcome of any audit, challenge or similar proceeding could result in an increase to the Group's effective tax rate or charges, penalties or other costs being incurred by the Group, which could materially adversely affect the Group's reputation, results of operations or financial condition.

3. RISKS RELATING TO THE GROUP'S BUSINESS AND OPERATIONS

3.1 Substantial harm to the Group's reputation, or the reputation of the mothercare or ELC brands, may have a material adverse effect on the Group's business, results of operations or financial condition

The Group's brands and reputation are of paramount importance to its UK and International businesses. An inability to manage the Group's brands could adversely affect the Group's ability to increase customer and/or market confidence and therefore its ability to implement its transformation plan successfully. In addition, any damage to the Group's brands or reputation, or any decline in supplier, customer or other counterparty confidence in the Group or its products could have a material adverse effect on the Group's business results of operations and/or financial position. Various factors may adversely impact the Group's brand image and reputation, including product failures and/or ineffective management of product incidents, inappropriate behaviours by the Group's employees or brand ambassadors and the methods and practices of third parties that are part of the Group's supply chain, including labour standards, health, safety and environmental standards, raw material sourcing and ethical standards in the countries in which the Group sources or supplies its products. Any perceived or actual concerns related to the CVAs, Group's services or products, third party services, supply chain or its Franchise Partners, and/or its Wholesale Customers (whether well-founded or not) may be widely disseminated online, on consumer blogs or other social media sites or via print and broadcast media. Similarly, any litigation that the Group may face could subject it to increasing negative attention in the press or on social media. This in turn could have a material adverse effect on the Group's business, results of operations or financial condition.

As a result of the Group's wide-ranging International business, it faces heightened risks associated with the licensing of its brands and its reputation. If Franchise Partners fail to maintain the Group's brand policies or if they fail to adhere to the Group's quality control standards and requirements, this could have a material adverse effect on the Group's reputation and customers may be lost to the Group's competitors. In addition, certain Franchise Partners are, and may in the future be, permitted to sell pre-approved third-party products in mothercare or ELC-branded stores and outlets, which could expose the Group to additional risks. Any issues with such products could result in confusion among consumers between the Group's products and such other brands, or association of such third party products with the Group's brand, which may have a material adverse effect on the Group's brand equity, reputation or business.

The ongoing media coverage of UK retail disruptions may negatively impact the performance of Mothercare's business.

3.2 The Group depends on key operational infrastructure, including its distribution and fulfilment centres and a variety of IT and information management systems. Any damage to, or disruption in, such facilities or systems, including third-party systems, could result in the loss of merchandise, delays in the distribution of products or an increase in the Group's operational costs

The Group's operations depend significantly on its key operational infrastructure. The Group currently relies on third-party operated distribution centres, fulfilment centres and holding warehouses. The main UK operations are at DIRFT (Daventry International Rail Freight Terminal) which supports all UK retail stores and e-commerce, as well as supporting International fulfilment and wholesale. This operation is run under contract by DHL and a small management team from Mothercare. There is a second distribution centre operated by Prolog which is located in Mansfield, which handles all furniture orders and is the national returns processing centre for the Group. E-commerce fulfilment is a large and an expanding part of the Group's business in the UK. Deliveries are made either to a home or to a store or address nominated by the customer and are generally managed by three carrier specialists (notably Yodel, Hermes and DX distribution). Overseas, the Group has fulfilment operations in both South China and India, which are both operated by Expeditors International and which support all of the Franchise Partners. The Group has warehouse and distribution operations in the UK, China and India to support its global business.

Any damage to, or disruption at, the distribution centres, fulfilment centre, distribution hubs or holding warehouses, whether due to deliberate third-party action or any other cause, including factors beyond the Group's control, could damage the Group's on-site stock, impair its ability to adequately stock its stores, fulfil online orders or fulfil Franchise Partners' and Wholesale Customers' orders. In particular, a disruption to the distribution centres, fulfilment centre, distribution hubs or holding warehouses prior to an anticipated product launch date or prior to, or during, the Christmas period, during which times the Group typically expects higher levels of sales, could affect the Group's ability to deliver sufficient quantities of a particular product to meet customer demand (including purchase orders made by Franchise Partners), which could result in customer dissatisfaction and have a material adverse effect on the Group's business, results of operations or financial condition. While the Directors believe that the Group maintains insurance coverage that is consistent with customary industry practice in the jurisdictions in which it operates, such insurance coverage may not be sufficient to cover the Group's losses in the event of damage or disruption to the distribution centres. The Group may need to obtain alternative off-site facilities, or replenish its stock, either of which would result in significant costs and delays in receiving supplies, distributing products and fulfilling customer orders, and could therefore have a material adverse effect on the Group's reputation, results of operations or financial condition.

The Group is increasingly dependent on IT and information management systems and infrastructure to support a wide variety of key business processes, including to coordinate and manage the Group's logistics and distribution functions with suppliers and customers, and to process and store both sales data and confidential data relating to customers. Certain of the Group's IT systems are legacy solutions in need of updating and thus are more vulnerable to operational failures. In addition, any upgrades to the Group's IT and information management systems to adapt to its evolving business needs and strategic objectives can create risks associated with implementing and integrating new systems. Disruption to, or failure of, this infrastructure or the systems of third parties on whom the Group relies, such as Demandware, Phoenix and EPOS, due to any number of causes, particularly if prolonged, or any failure or disruption that would impact the Group's backup or disaster recovery plans, could result in a loss of key data, and/or have a material adverse effect on the Group's trading operations, reputation or relationship with key customers and suppliers. These issues may also result from a failure of the Group's digital platform or limitations to the speed and/or navigation in the order process. To grow the Group's operations, a focus on developing the IT systems is required but the current systems negatively impact the Group's ability to do so.

3.3 The Group is materially dependent on its ability to source its products from its suppliers, including from manufacturers and distributors, most of whom are based outside the UK. Any failure to source products, whether as a result of factors outside the Group's control or otherwise, or to develop relationships with new suppliers may have a material adverse effect on the Group

The Group's business is materially dependent on its ability to source products from its suppliers, including from manufacturers and distributors, most of whom are based outside the UK. While the Group has its own sourcing operations and a large network of suppliers in countries including Bangladesh, China, India, Hong Kong, Cambodia and Vietnam, as well as long-standing relationships with many of its suppliers, there can be no assurance that this will continue to be the case. In addition, the Group does not have formal long-term agreements with most of its suppliers but relies instead on purchase orders, which increases the risks associated with loss of one or more of the Group's suppliers. A breakdown in the Group's relationship with any one or more suppliers or any disruption or other adverse event (including due to any failure or inability by any of the Group's suppliers to obtain adequate credit insurance in respect of the Group's payment obligations to the relevant suppliers and/or any late payments by the Group to its suppliers and any resulting unwillingness by any suppliers to continue to trade with the Group) affecting the Group's relationship with any of its material suppliers could have an adverse effect on the business, results of operations or financial condition of the Group. Please also see risk factor 3.9 in this section (Risk Factors) of this document for further detail.

The Group's profitability and competitiveness is substantially dependent on the business terms it can obtain from its suppliers, including competitive prices, allocation and exclusive product arrangements. For example, the Group's ability to obtain exclusivity in relation to certain products and product ranges is a growing part of the Group's efforts to provide customers with a differentiated and highly popular product offering.

If the Group is unable to secure ongoing support or attractive commercial terms from its existing suppliers, or is unable to find replacement suppliers in the event of a particular source of supply no longer being available, this could have a material adverse effect on the Group's stock management, profitability and competitiveness and may result in a loss of market share.

3.4 The Group's business is subject to product liability claims, which could have a material adverse effect on the Group's business, reputation, results of operations or financial condition

Any safety incident involving the Group's products could subject its business to product liability claims, which in turn could have a material adverse effect on the Group's business, reputation, results of operations or financial condition. If the Group's suppliers do not adhere to the agreed quality assurance standards, product safety incidents may arise resulting in damage to the Group's brand.

The Group is subject, from time to time, to legal proceedings and claims arising out of the use of its products, including as a result of unanticipated malfunctions, side effects or issues that become evident only after products are widely introduced into the marketplace. This could have a materially adverse impact on the Group's brands. Over the past five years the Group has been subject to approximately 25 product liability claims with costs and reserves totalling a sum of less than £60,000, of which the majority are still outstanding reserves rather than paid claims. In the event that the Group's products are not used in accordance with the instructions and guidance provided, there is a risk of harm that could be significant, particularly due to the young age of a large proportion of the Group's target market. Due to the speed at which information can be disseminated on social media platforms, any product liability issues can have a real-time impact on the reputation of the Group's brands, its business and therefore on its financial condition and results of operations.

If the Group's suppliers do not adhere to the agreed quality assurance standards, product safety incidents may arise resulting in damage to the Group's brands. The Group in the past has been required, and may be required in the future, to pay compensation for losses or injuries that are allegedly caused by the Group's products. Product liability claims may arise, among other things, from claims that the Group's products are defective, provide inadequate warnings or instructions or cause personal injury. Product liability claims, if resolved unfavourably, or if settled, could result in injunctions and/or may require the Group to pay substantial damages and related costs and result in the imposition of civil and criminal sanctions.

The Group in the past has been required, and may in the future be required, or may voluntarily decide to make precautionary product recalls of defective or potentially defective products and/or alter its trademarks, labels or packaging, which could result in adverse publicity and loss of revenue. For example, the Group has previously voluntarily recalled products. The Group has also issued product safety notices where products were deemed safe to use, but where customers needed to be made aware of any issues with the performance of such products. Any of these events can give rise to costs, adverse publicity and loss of customer trust as well as a heightened risk of claims for personal injury and/or damage, which in turn could have adverse financial consequences for the Group. In addition, a recall of a competitor's product that is similar to the Group's products may result in a decline in consumer confidence in the Group's products, which may consequently impact its business and results of operations.

3.5 The Group relies on the expertise of senior management and skilled employees. If the Group is unable to attract and retain such personnel, this may have a material adverse effect on its business or results of operations

The Group's current and future success depends on the continued services, experience, insight and performance of key senior management and on its ability to attract, train, motivate and retain high quality and highly skilled personnel. The Group has undergone significant changes in its senior management in the past year, including the retirement of its former Non-Executive Chairman, Alan Parker, in April 2018, and the appointment of his successor, Clive Whiley, as Interim Executive Chairman, in April 2018. In addition, Mark Newton-Jones resigned as chief executive and was replaced by David Wood on 4 April 2018, but has been re-appointed as chief executive on 18 May 2018. Both Richard Rivers and Lee Ginsberg will not stand for re-election, at the Company's next annual general meeting on 19 July 2018. These changes and any future loss of key senior management, may cause short-term disruptions and uncertainty within the Group. The successful completion of the Group's strategic objectives (including pursuant to the transformation plan) depends on the continued availability of senior management at the Group's head office and overseas and the Group's ability to recruit skilled IT, merchandising, marketing and sales and other personnel. Attracting personnel with the requisite level of knowledge and skill in the current market is challenging especially given recent media coverage and the Group may therefore incur significant costs in attracting such personnel. In addition, given the Group's multi-channel approach to serving customers and its heightened focus on customer service, the Group's staff must have technical and commercial expertise coupled with relevant online expertise.

The restructuring resulting from the transformation plan and the level of work required in order to implement the transformation plan may lead to the loss of key personnel. Any failure to attract and retain key personnel to meet the Group's operational needs may delay or curtail the achievement of major strategic objectives (including pursuant to the new transformation plan) and could have a material adverse effect on the continuity of the Group's operations. The Group may incur significant costs and require significant resources to recruit, train and successfully integrate new employees, and also in relation to the continued training and professional development of the Group's existing employees.

3.6 The Group's ability to develop its product offering may not match changing customer needs and preferences meaning the Group is unable to be competitive in the retail market which could have a material adverse effect on the Group's business results of operations or financial condition.

The Group derives its revenue from the sale of its own branded products as well as those of third parties in its three product categories, namely Clothing & Footwear, Home & Travel products and Toys, which are vulnerable to shifts in demand and changing consumer preferences. The Group's success depends in part on its ability to identify, originate and define product trends and anticipate and react to changing consumer needs and preferences, on an international scale, and in a timely manner. There are a number of trends in consumer preferences which may have an impact on the Group and the sector within which it operates, at both a local and an international level. These include, among others, increased consumer awareness of sustainability, responsibly sourced and fair trade goods and the manner and conditions in which products are manufactured. Consumer preferences are also dictated in part by fashion trends, functionality, perceived value and season. Consumer preferences in the UK may not match or follow those in the Group's international markets and the Group relies to an extent on its Franchise Partners' and Wholesale Customers' local expertise and knowledge of their markets to understand and respond to consumer preferences in such markets.

The Group's business depends to an extent on its ability to successfully and cost-effectively originate, design, launch and market new products (whether variants of existing, or newly developed, products) or identify those products from third parties that appeal to and are accepted by a broad range of consumers on a local and international scale. The launch and success of new products are inherently uncertain, and demand for, and market acceptance of, new products or variants of existing products may not be predicted with certainty and are subject to change. Any new product or line extension may not generate sufficient consumer interest and sales levels to become a profitable product or to cover the costs of its development or promotion. In addition, the Group may not be able to differentiate its product offering from other competitors, whether through quality, innovation, and marketing or otherwise, which may adversely impact consumer demand for its products or margins. Moreover, if the Group decides to pursue opportunities in new product categories and/or new category segments or in regions in which the Group has no prior experience or limited experience, it may become exposed to unexpected or greater risks and incur expenses that are not offset by sales, such as longer lead times, which may delay commercialisation of the Group's products.

Further, the Group's pricing strategy may not be sufficiently flexible to allow the Group to respond to changing customer habits, including improving customer experience and convenience and prevent it from being competitive in the market. If the Group is unable to develop an effective strategy to keep up with customer habits regarding shopping convenience and trends in the market, this may result in a loss of market share and have a negative impact on profitability.

The lead times for many of the Group's design and purchasing decisions are long and the Group often makes commitments to purchase products from suppliers several months in advance of the proposed delivery. By compressing the time available to interpret the latest trends before orders for products are made, the Group is subject to an increased risk that its products do not correspond to customer demand (including Franchise Partners' and Wholesale Customers' demand) and long lead times make it more difficult to respond rapidly to new or changing customer needs and preferences. If the Group overestimates the market for a particular product, it may be left with significant excess stock, which could result in increased storage costs and reduced margins associated with the sale of stock at greater markdowns. If Franchise Partners or Wholesale Customers overestimate the market for a particular product, this may adversely affect the Group's revenue from royalties or sales and those Franchise Partners or Wholesale Customers may choose to downsize future orders to manage excess stock. Conversely, if the Group, a Franchise Partner or wholesale customer underestimates the market for a product, it may experience stock shortages and customer dissatisfaction with lack of product availability, which could result in missed opportunities for increased sales and profits and have an adverse impact on customer retention

If the Group is unable to successfully originate, develop, launch and market new products, in a timely manner or at all, or, if the Group misjudges the market for a particular product or the products suitable for local markets or if the Group's competitors are able to respond more accurately, swiftly or economically it may be unable to compete and maintain or grow its market share, which could have a material adverse effect on the Group's business, results of operations or financial condition.

3.7 The loss of, or a significant reduction in business from, one or more key Franchise Partners, in particular Alshaya, could have a material adverse effect on the Group's business, results of operations or financial condition

The Group is materially dependent upon a small number of its Franchise Partners, particularly Alshaya, its key Franchise Partner (which has franchise arrangements for 12 territories for the Mothercare brand, including in the Middle East and Russia), for a significant amount of its income. In FY 2017/18, the Group's top ten Franchise Partners collectively accounted for approximately 89 per cent. of Worldwide Sales of the Group's International business and Alshaya accounted for 54 per cent. of the Group's reported revenue from its International business and 49 per cent. of Worldwide Sales of the Group's International business.

The Directors believe that the risk of loss of, or a significant reduction of business from, key Franchise Partners, such as Alshaya, would be expected to arise generally due to events or circumstances adversely impacting the viability of the Franchise Partners to continue to conduct business with the Group, such as the insolvency of a Franchise Partner. The negotiation of the renewal of key franchise agreements with a small number of the Franchise Partners are close to being complete and are expected to be finalised (and signed) before 30 September 2018. The Group is therefore subject to the risk of loss of, or damage to, the relationships with these key partners, or factors affecting such partners' ability to continue purchasing products from the Group. In addition, as the Group is aiming for more transparency of pricing of products in its franchise agreements, there is a risk that Franchise Partners will request price increases and/or try to negotiate lower royalty payments due to the Group pursuant to such franchise agreements which may result in lower margins for the Group. There are no assurances that any of these major franchise contract renewals can be negotiated on commercially acceptable terms to the Group and any such loss of contract may have a material adverse effect on the Group's business, results of operations or financial condition. In addition, any damage to, or loss of, the Group's relationships with Alshaya or any of its other key Franchise Partners, in particular due to adverse events or circumstances affecting such Franchise Partners and their ability to continue to purchase products from the Group, could also have a material adverse effect on the Group's business, results of operations or financial condition.

3.8 Like-for-like sales in the UK and in the Group's International business may not meet the Group's expectations or forecasts, which may have a material adverse effect on the Group's business, results of operations or financial condition

The Group relies on forecasts of like-for-like sales to manage its UK and International businesses, including its plans, working capital management and stock management. These forecasts are inherently uncertain and are based on assumptions, estimates and factors that are unpredictable, and which may be affected by various factors including the prevailing economic climate and trends, changes in the disposable income of the Group's customers, customer preferences, shopping habits and weather, the relationship between online and other retail channels, product mix and pricing, competitive environment, in-store customer service levels and continuity of supply. The Group also relies on historical information and like-for-like sales experience to prepare forecasts and inform its business decisions. Historical experience is not indicative of future results and may not provide sufficient guidance.

The Group's like-for-like sales in the UK and internationally depend, among other things, upon the extent to which sales are consistent with the assumptions that the Group and its Franchise Partners use. If the Group or its Franchise Partners fail to set prices at an appropriate level, this may have a material adverse effect on like-for-like sales. In addition, external factors such as increased competition, weakened consumer confidence, loss of supplier confidence, increased competition and declining footfall in stores may adversely affect the Group's like-for-like sales.

If the Directors make plans or decisions based on certain like-for-like sales assumptions that prove to be inaccurate, this could have a material adverse effect on the Group's business, results of operations or financial condition, which effect may otherwise not have occurred if the Directors had not relied on such assumptions. Any failure by the Group to meet anticipated like-for-like sales levels may result in significant excess stock being held by the Group or its Franchise Partners, which could result in increased storage costs and reduced margins associated with the sale of stock at greater markdowns. If Franchise Partners are left with significant excess stock, this may adversely affect the Group's revenue from sales and royalties if those Franchise Partners choose to downsize future orders to manage excess stock.

3.9 The Group's business, profitability and liquidity may be adversely affected by deterioration in the creditworthiness of, or defaults by, third parties with which it conducts business and any failure by it or such third parties to procure credit insurance

The Group's business is dependent, in part, on its ability to maintain a supply of products to it by third parties. Therefore, in common with all businesses, the Group is exposed to the credit risk of the third parties with which it conducts business, including suppliers and customers, who may default on the amounts that they owe to the Group due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions, operational failure, fraud or other reasons. A default could adversely affect the Group's level of bad debt.

In particular the Group is exposed to the risk that Franchise Partners fail to make payments or report sales income accurately to the Group, fail to pay royalties in a timely manner, or at all, whether due to financial difficulty or otherwise. The Directors believe that many of the Group's larger suppliers and other counterparties with which it does business have traditionally taken out credit insurance to protect their receivables against the risk of bad debt, insolvency or protracted default of their buyers, including the Group. As with any business, the credit insurance or other sources of credit available to the Group's suppliers are dependent on a number of factors, including general economic conditions and the Group's financial position.

If there is a significant decrease in the availability, or the withdrawal in its entirety, of credit insurance to the Group's suppliers, and such suppliers are unwilling or unable to take credit risk themselves or find alternative credit sources, they may decide to reduce their credit exposure to the Group, which could have an adverse effect on the Group's cash position if such suppliers seek to make a material change to their credit terms or refuse to do business with the Group.

3.10 The Group is subject to adverse fluctuations in currency exchange rates which may have a material adverse effect on its results of operations, cash flows or financial condition

The Group reports its financial results in pounds sterling, but a significant part of its revenue and costs, as well as certain of its assets and liabilities, are recorded in other currencies. As such, the Group's results of operations may be affected by both transactional and translational foreign exchange risk. In FY 2017/18, the impact of adverse foreign exchange movements in the value of the pound sterling against other currencies and the deterioration of the value of the pound sterling on the Group's results of operations (please refer to paragraph 2.3 of Part VI (Operating and Financial Review) of this document for further details).

Most of the Group's products are sourced from outside the UK, with payment for these products and their transport made mostly in US dollars. As such, the Group's results of operations are subject to the risk of disadvantageous or material fluctuations in currency exchange rates. In addition, the Group's royalty income from its International business may be adversely affected by exchange rate movements, as local sales are translated into pound sterling amounts on which royalties are calculated. Any significant movements in exchange rates relative to pound sterling, particularly fluctuations in the values of the US dollar against the pound sterling may have a material adverse effect on the Group's results of operations, cash flows or financial condition.

The Group engages in foreign currency hedging transactions in connection with the sourcing and distribution of its products. Following significant currency devaluation in FY 2013/14, the Group has also hedged the foreign currency risk associated with certain royalties, mitigating its exposure to exchange rate movements on the Russian rouble, Indian rupee, Indonesian rupiah, Saudi riyal and the United Arab Emirates' dirham. Hedging transactions do not eliminate the Group's exchange rate or interest rate risks entirely and may not be fully, or even partially, effective. Any significant losses on the Group's hedging positions could have a material adverse effect on the Group's business, results of operations or financial condition.

3.11 The Group plans to increase the frequency of new product launches introduced each year. There is no guarantee that the Group will be able to meet the shortened lead times, or that the increased number of products introduced throughout the year will correspond to an increase in revenue

The Group currently introduces six principal product launches a year into its Clothing & Footwear range, focusing on the first two phases in a season with a small third phase offering a high seasonal layer for the end of the season. This has been an increase from four main seasonal product drops in previous years. Competitors can utilise fast-fashion supply chains to bring in more fashionable product so are able to provide a more responsive service to customers than Mothercare. The Group has improved the number of new lines, and especially the level of exclusivity from branded suppliers in recent years. The Directors believe that this will strengthen the Group's position in both the UK and international markets. However, any increase in the number of products, frequency of product releases or the number of exclusive offerings introduced each year may not have a positive impact on the Group's competitiveness, revenue or market share. In relation to any increase in the number of new products introduced each year, the Group also faces the additional risk that it may be unable to adapt its supply chain effectively in order to meet the shortened lead times, which could have an adverse impact on its relationships with its Franchise Partners and/or Wholesale Customers.

3.12 The Group's business, reputation or results of operations may be materially adversely affected if suppliers or distributors fail to deliver products that conform to the Group's standards and requirements on a timely basis and in anticipated quantities

The Group's business is materially dependent on its suppliers and distributors to produce and/or deliver products that conform to the Group's quality control standards and other requirements on a timely basis and in anticipated quantities. Any disruption or other adverse event affecting any one or more of the Group's suppliers or distributors, particularly if significant or prolonged, or any failure by the Group's suppliers or distributors to fulfil their contractual obligations (including failure to supply the Group with products that comply with its quality control standards) in a timely manner, or at all, could in turn have a material adverse effect on the Group's ability to meet customer demand and result in product recalls, inventory shortages, reduced sales and profits, customer experience of the Group's brands and/or customer complaints. This could have a material adverse effect on the Group's business, reputation or results of operations.

Significant disruptions to suppliers' or distributors' operations, such as disruptions resulting from natural catastrophes, pandemics or other outbreaks of diseases, acts of war or terrorism, labour strikes or otherwise, may affect the Group's ability to source its products on a global basis and may adversely impact the Group's sales and costs. Whilst it may be realistic to move the supply of clothing or basic hard goods items from one factory to another, the Group would be more exposed on complex, unique items, whether own label or branded, where moving supply quickly would be challenging. Any material delay in the production or delivery of the Group's products, for whatever reason, could result in reduced sales and could adversely affect the Group's reputation. Even a minor delay in the receipt of products prior to a peak trading period could have a material adverse effect on the Group. In addition, the Group has occasionally received, and may in the future receive, shipments of products that fail to conform to the Group's quality control standards and/or specifications. In such instances, it is generally difficult to obtain replacement products in a timely and cost-effective manner, particularly because of long lead times, and the Group may lose revenue resulting from its inability to sell those products or any difficulty in remedying such defects and could incur related increased costs, such as those associated with heavy discounting, in relation to its efforts to sell the products.

3.13 The Group supplies and sources its products in a number of countries in which bribery and corruption pose significant risks, and the Group may be exposed to liability under anticorruption laws for any violations. In addition, any violation of applicable money laundering, employment, environmental or other laws by it or its suppliers or sources could also have a material adverse effect on the Group

Almost all of the Group's products are manufactured in markets outside the UK. The Group has a dedicated responsible sourcing team which works closely with suppliers in many of its markets, including but not limited to Bangladesh, China and India, in order to assist them with making improvements in the Group's supply chain. The Group is subject to anti-corruption and bribery laws and regulations that prohibit the Group and its intermediaries from making improper payments or offers of payments to foreign governments, their officials and political parties or private parties, for the purpose of gaining or retaining business, including the UK Bribery Act 2010 and similar laws worldwide. Given the extensive nature of the Group's International business, particularly in emerging markets, where bribery and corruption may be more commonplace, the Group is exposed to significant risks, particularly with respect to suppliers and Franchise Partners that are not within the Group's control. The Group may also be held liable for successor liability violations of such laws committed by companies in which the Group invests in or which it acquires. Moreover, due to the significant amounts of money involved in global supply contracts, there is also potential for suppliers to attempt to bribe the Group's employees and sourcing agents. Actual or alleged violations of anticorruption and bribery laws could result in material adverse consequences, including, but not limited to, civil and criminal sanctions, termination of contracts and arrangements by the Group's counterparties, disruptions to the Group's business, and reputational harm, all of which could have a material adverse effect on the Group's financial condition or results of operations.

The Group also deals with significant amounts of cash in its operations and is subject to various reporting and anti-money laundering regulations. Any violation of anti-money laundering laws or regulations by the Group could have a material adverse effect on its business, reputation or results of operations.

The Group is committed to reducing the risk of poor working conditions by monitoring its supply base to gain a better understanding of the issues that affect workers and the Group works with its suppliers to strive to provide better workplaces. The Group is subject to those regulations provided under the Modern Slavery Act 2015 (the "Modern Slavery Act") and has taken steps to mitigate against any risk of breaching the Modern Slavery Act, including conducting third party ethical audits to ensure its suppliers comply with the Group's code of practice, undertaking in-house factory assessments and supplier training and building internal knowledge of the Modern Slavery Act. However, there can be no assurances that manufacturers, their quality control processes or their labour practices are fully compliant with the Group's policies and procedures as well as UK or EU law. In addition, there can be no assurance that the Group's suppliers will continue to comply with all relevant laws and regulations, or that the standards of such suppliers (or companies that supply them) will not fall below what is acceptable to, and expected by, the Group and any such non-compliance could have a material adverse effect on the Group's business, reputation or results of operations.

3.14 The Group has defined benefit pension schemes which are in deficit and could give rise to increased costs for the Group. An increase in the Group's funding needs or changes to obligations in respect of its pension schemes could have an adverse impact on its business, results of operations or financial condition

The Group operates the two DB Schemes, both of which were closed to future accrual with effect from 30 March 2013. These legacy defined benefit pension schemes are the Mothercare Executive Pension Scheme and the Mothercare Staff Pension Scheme (the "DB Schemes"). The DB Schemes expose the Group to actuarial risks such as longevity, interest rate and investment risks.

The assets of the DB Schemes are held in separate trustee-administered funds to meet long-term pension liabilities to past and present employees. The trustees of the DB Schemes are required to act in the best interests of the beneficiaries of the DB Schemes.

The Group's DB Schemes undergo triennial valuations. The last triennial valuations were undertaken on 31 March 2017. Following such periodic valuations, the Group and the Pension Trustees agree the level of deficit contributions that are to be paid to the DB Schemes based on advice from the Group's and the DB Schemes' actuaries. Prolonged periods of low interest rates, such as those seen in the current environment, tend to increase the liabilities of defined benefit pension schemes because liabilities are calculated by discounting future benefits by reference to prevailing interest rates appropriate to the duration of the pension benefit payment. Adverse events in the equity and other investment markets, or increases in longevity rates may also have a negative effect on the funding positions of the DB Schemes when these valuations take place. A material increase in the deficit of the DB Schemes would require the total amount of the Group's contributions to the DB Schemes to increase and would have an adverse impact on the Group's results of operations.

The Group is required, for the purposes of its annual accounts, to make certain year-end assumptions in relation to the DB Schemes in accordance with international accounting standards. It is possible for reporting accounting values for defined benefit pension schemes to change from one reporting period to the next depending on several factors, many of which are outside the Group's control, such as changes in interest rates, inflation rates, the market performance of the investments underlying the pension schemes, actuarial data (including longevity rates) and changes in discount rates. Such changes could materially and adversely affect the Group's business, results of operations or financial condition.

The calculation of the Group's liability for the DB Schemes also requires actuarial assumptions to be made in respect of discount rates, salary and pension increases, price inflation, the long-term rate of return upon scheme assets and mortality. As actual rates of increase and mortality may differ from those assumed, actuarial gains and losses may arise which are recognised in full, in the period in which they occur, in the statement of recognised income and expense. Consequently, the Group's pension liability and net assets may fluctuate.

In the event that the market value of the assets of the DB Schemes declines, the value of the assessed liabilities increases or the Pension Trustees determine that the Group's financial position requires a different approach to contributions and deficit reduction, the Group may need to increase its contributions or to offer new or increased security over the Group assets to the Pension Trustees, or all of the above. Changes in the investment strategy of the DB Schemes may also result in a need to increase the Group's contributions. Moreover, the cost of funding the DB Schemes depends on a number of factors, including the real returns that can be obtained on the assets, future salary levels, life expectancy and inflation rates.

3.15 The Group may be subject to investigations, litigation in respect of claims outside the product liability area and potential enforcement action, which could have a material adverse effect on its business, results of operations or financial condition

Outside the product liability area, the Group is subject to legal proceedings and other claims arising out of the ordinary course of business. The Group is subject, from time to time, to reviews and inquiries by tax authorities in the various jurisdictions in which it operates. For example, as with many retailers and other organisations the Group is co-operating with the HMRC in connection with its investigation in respect of the payment of national minimum wage in the UK by HMRC as well as an income tax enquiry relating to intercompany loans and associated interest charges in China.

It is possible that the Group may be subject to regulatory investigations or additional legal and/or regulatory action from time to time that targets an industry, a set of business practices or the Group's specific operations, in any of the jurisdictions in which the Group supplies or sources its products. This may or may not arise during the ordinary course of business and could potentially have a material adverse effect on the Group's business, reputation, results of operations or financial condition. In addition, consumer groups may from time to time request or conduct reviews of the Group's products, the results of which may have a material adverse effect on the Group's business. The Group cannot predict the outcome of individual legal actions and may settle litigation or regulatory proceedings prior to a final judgment or determination of liability to avoid the cost, management effort or negative business, regulatory or reputational consequences of continuing to contest liability, even where the Directors believe that the Group has valid defences to liability. Where appropriate, the Group establishes provisions to cover potential litigation-related costs. Such provisions may turn out to be insufficient, and any insurance coverage that the Group maintains may not cover the Group's losses fully, or at all.

3.16 Increased supply chain costs, which are not matched by a commensurate increase in revenue, may have a material adverse effect on the Group's results of operations

The Group's results of operations are impacted by its ability to manage its supply chain costs. Manufacture of the Group's products requires various raw materials, including petroleum-based products (such as plastic), cotton, aluminium and steel. Significant price fluctuations or shortages of these or other raw materials, including increases in the price of transporting such materials or finished products, foreign currency fluctuations against the pound sterling and/or increases in labour rates, could increase the cost of the Group's products, which may in turn have a material adverse effect on the Group's margins (particularly if the Group is unable or chooses not to pass on cost increases to consumers) and results of operations.

3.17 The Group may be unable to secure and protect its intellectual property rights and may face challenges to its intellectual property rights, including allegations of infringement of others' rights

The Group's trademarks are central to the value of the Group's mothercare and ELC brands and the Group licenses certain of its intellectual property rights to its Franchise Partners in exchange for a royalty fee. The Group has not registered all trademarks in all of the international markets in which its Franchise Partners operate. The Group may not be able to protect its intellectual property rights in existing international markets or in additional international markets in future and, even if it succeeds in doing so, these rights may subsequently be invalidated, circumvented or challenged in future. Third parties may infringe or misappropriate the Group's rights by, for example, asserting rights in, or ownership of, its trademarks, trade dress rights, designs, copyrights or other intellectual property rights. In international markets, the Group relies, to some extent, on notification from its Franchise Partners of any actual or threatened infringement or misappropriation of the Group's rights.

If the Group fails to discover any infringements of its intellectual property rights or is otherwise unable to defend and enforce successfully its rights, the Group's business, including its existing franchise arrangements or ability to enter into new franchise or supply arrangements could be materially adversely affected. The risk is particularly heightened in emerging markets, where regimes for the protection of intellectual property may be less stringent and make enforcement more difficult. The Group is also subject to the risk that counterfeit or unauthorised versions of the Group's brands, or inferior "lookalike" brands which resemble the Group's brands, could result in confusion among consumers between the Group's products and such other brands, which may undermine the Group's reputation and brand image.

The Group also relies heavily on its ability to market and sell third-party branded products. Third parties may in the future try to challenge the validity of the ownership or use by the Group of such intellectual property. If the Group is unable to defend successfully against allegations of infringement, it may face various sanctions, including injunctions, monetary sanctions, product recalls, alterations to the Group's intellectual property rights, products and/or packaging, which could result in negative publicity, significant expense and may have a material adverse effect on the Group's financial condition and results of operations.

3.18 Any unauthorised access or disclosure of confidential information stored or obtained by the Group could have a material adverse effect on its business, reputation, results of operations or financial condition

The Group collects, stores and processes confidential information and other sensitive data with respect to its customers and its Franchise Partners, suppliers and employees, including through its loyalty scheme and Customer Relationship Management ("CRM") in the UK, as well as through its online channel. The Group's IT systems, software and networks or those of third parties with whom the Group interacts may be vulnerable to unauthorised access (from within the Group or by third parties), computer viruses or other malicious code and other cyber threats which could have a security impact and result in the unauthorised disclosure of confidential information.

Any security breach, for example a breach of the customer database, that leads to interception, misuse, mishandling or disclosure of personal, confidential or proprietary information could have a material adverse effect on the Group's reputation with irreparable consequences, given that the Group's business and brand image is predicated on consumer trust. If the Group's suppliers or Franchise Partners develop the view that the Group does not adequately protect the privacy of confidential information, this could result in the loss of current or potential suppliers and Franchise Partners. In addition, the Group may face significant financial losses and other penalties, whether due to litigation or regulatory enforcement action, resulting in increased costs and loss of revenue. The Group may be required to expend significant additional resources to modify its existing protective measures or to investigate and remediate vulnerabilities or other exposures. Moreover, the Group's ability to accept credit cards as payment in-store and online depends on it remaining compliant with standards set by the Payment Card Industry Security Standards Council, which require certain levels of system security and procedures to protect customers' credit card and other personal information. Any breach involving the exposure of credit card information may lead to enforcement action, including the possible imposition of fines, which could be significant. In the event of a severe breach, credit card companies may restrict or prevent the Group from accepting payment by credit cards.

If third parties with whom the Group interacts, such as its suppliers and Franchise Partners, online developers, payment processing firms and data matching firms, violate applicable laws or the Group's data protection policies, whether intended or not, such violations could result in legal claims or regulatory action, which may subject the Group to liability. In addition, the Group does not currently maintain general cybersecurity insurance coverage.

3.19 The Group's insurance coverage may not be adequate, which may have a material adverse effect on the Group's business, results of operations or financial condition

The Group maintains types and amounts of insurance coverage that the Directors believe are consistent with customary industry practice in the jurisdictions in which it operates. The Group's insurance policies cover, among other things, employee and customer-related accidents and injuries, theft and property damage. While the Group seeks to maintain appropriate levels of insurance, not all risks are insurable and there can be no assurance that the Group will not experience major incidents of a nature that are not covered by insurance or that exceed the financial limits of its existing insurance coverage. In addition, there can also be no assurance that the insurance that the Group currently has in place will continue to be available on commercially acceptable terms.

In addition, whilst there is no current material litigation to which the Group is a party the Group may in the future be subject to litigation and financial losses that insurers decline to cover. Any failure by the Group to defend any such claims successfully or to recover under the terms of the insurance policy could have an adverse impact on the Group's results of operations, in addition, any failure by the Group to recover material sums lost under its existing or future insurance policy could have a material adverse effect on the Group's business, results of operations or financial condition.

3.20 The Pensions Regulator in the UK has the power to intervene in scheme valuations and to issue contribution notices or financial support directions which, if issued, could result in the Group being subject to significant liabilities

The Pensions Regulator has the power to issue contribution notices or financial support directions in certain circumstances, to the Group and/or any associated company. This could potentially extend to any major Shareholders of the Group, subject to the size of their shareholdings and the satisfaction of reasonableness requirements. The Pensions Regulator may require additional contributions to be paid into a pension scheme or additional financial support to be made available in respect of such scheme. Such sanctions are extremely rare in practice, but if successfully enforced could have a material adverse impact on the Group's operating results, business prospects or financial condition.

The Pensions Regulator also has powers to set assumptions and contribution levels if the Group and the Pension Trustees cannot agree the deficit or contributions following the triennial funding valuation (although this is extremely rare in practice). In cases where the deficit and funding levels are agreed, the Pensions Regulator can still intervene, should it disagree.

4. RISKS RELATING TO THE CAPITAL RAISING AND THE ORDINARY SHARES

4.1 The price of the Ordinary Shares has fluctuated and may continue to fluctuate

Prospective investors should be aware that the value of an investment in the New Ordinary Shares may go down as well as up. The price of the New Ordinary Shares may fall in response to market appraisal if any of the Group's current strategy or results of operations, from time to time, are below the expectations of market analysts and investors. Stock markets can from time to time experience significant price and volume fluctuations which will have an impact on the market price of the New Ordinary Shares. Key factors which may affect the Company's share price include (but are not limited to):

• the Group's targeted and actual results of operations and the performance of key competitors in the markets within which the Group supplies and sources its products;
• appointments to and resignations from the Company's Board of Directors or executive management team;
• speculation in the press, media or investment community about the Group's business, mergers or acquisitions involving the Group or major divestments by the Group; and
• general stock market conditions.

Other than pursuant to the Capital Raising, the Company currently has no plans for a subsequent offering of Ordinary Shares within 12 months of the date of this document. However, it is possible that the Company may decide to offer Ordinary Shares in the future to either raise capital or for other purposes. An additional offering or significant sale of Ordinary Shares by any of the Company's major Shareholders could adversely affect the market price of the New Ordinary Shares.

4.2 The market price for New Ordinary Shares may decline below the Issue Price

The public trading market price of the New Ordinary Shares may decline below the Issue Price. Should that occur prior to the latest time and date for acceptance under the Open Offer, relevant Shareholders will suffer an immediate loss as a result. Moreover, Shareholders may be unable to sell the New Ordinary Shares at a price equal to or greater than the acquisition price for those shares. If the public trading market price of the New Ordinary Shares declines below the Issue Price, investors who have acquired any such New Ordinary Shares will likely suffer a loss as a result.

4.3 Admission of the New Ordinary Shares may not occur when expected

Application for Admission of the New Ordinary Shares is subject to the approval of the UK Listing Authority. Admission will only become effective once a dealing notice has been issued by the UK Listing Authority and the London Stock Exchange has acknowledged that the New Ordinary Shares will be admitted to trading. There can be no guarantee that the conditions for Admission will be met or that the UK Listing Authority will issue a dealing notice.

4.4 There is no guarantee that the Company will pay dividends

The Company has not paid a dividend since 3 February 2012. Under English company law, a company can only pay dividends (or make other distributions) to the extent that it has distributable reserves and cash available for the purpose. As a parent company, the Company's ability to pay dividends in the future is affected by a number of factors, including its ability to receive sufficient dividends from its subsidiaries. The payment of such dividends to the Company by its subsidiaries is in turn subject to a number of restrictions, such as certain regulatory requirements and the existence of sufficient distributable reserves and cash in those subsidiaries. These restrictions could limit the Company's ability to fund its operations or to pay a dividend to Shareholders.

4.5 Qualifying Shareholders who do not subscribe for New Ordinary Shares in the Open Offer will experience dilution in their shareholding in the Company

Qualifying Shareholders who do not take up any of their Open Offer Entitlements will suffer a dilution of:

• approximately 57.7 per cent. to their interests in the Company pursuant to the conversion of the Shareholder Loans subject to approval of the Related Party Transactions and assuming conversion of the Shareholder Loans in full on their maturity date and the Capital Raising; or
• approximately 50.0 per cent. to their interests in the Company pursuant to the Capital Raising if the Shareholder Loans are not converted.

For these purposes, any dilution which may result from the vesting or exercise of any awards under the Share Schemes between the Reference Date and the Record Date has been disregarded.

4.6 Overseas Shareholders may only have limited ability to bring actions or enforce judgments against the Company or its Directors

The ability of an Overseas Shareholder to bring an action against the Company may be limited under law. The Company is a public limited company incorporated in England and Wales and the rights of the Company's Shareholders are governed by English law and the Company's Articles of Association. These rights differ from the rights of shareholders in typical US corporations and some other non-UK corporations. It may not be possible for an Overseas Shareholder to enforce any judgments in civil or commercial matters or any judgments in securities laws of countries other than the UK against some or all or the Directors or executive officers of the Company who are resident in the UK or countries other than those in which judgment is made.

4.7 Shareholders outside the United Kingdom may not be able to participate in the Capital Raising or future issues of Ordinary Shares

Securities laws of certain jurisdictions, including Excluded Territories, may restrict the Company's ability to allow participation by shareholders in the Capital Raising. In particular, holders of existing Ordinary Shares who are located in the United States may not be able to participate in the Capital Raising unless a registration statement under the US Securities Act is effective with respect to the New Ordinary Shares or an exemption from the registration requirements is available thereunder. The Capital Raising will not be registered under the US Securities Act. Securities laws in certain other jurisdictions may restrict Mothercare's ability to allow participation by shareholders in such jurisdictions in the Capital Raising or any future issued of shares carried out by Mothercare. Qualifying Shareholders who have a registered address in or who are resident in, or who are citizens of, countries other than the UK, should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to receive New Ordinary Shares.

4.8 The issue of additional Ordinary Shares in connection with future conversions under any of the Shareholder Loans, capital raisings, share incentive or share option plans or otherwise may dilute all other shareholdings

The Group may seek to raise financing to fund future acquisitions and other growth opportunities. The Group may, for these and other purposes, such as in connection with share incentive and share option plans, issue additional equity or convertible equity securities. As a result the Company's existing Shareholders would suffer dilution in their percentage ownership.

IMPORTANT INFORMATION

Notice to prospective investors

Numis has been appointed as Sponsor in connection with the Capital Raising, and the Related Party Transactions. Numis, which is authorised and regulated by the FCA in the United Kingdom is acting exclusively for the Company and no one else in connection with the Capital Raising, will not regard any other person (whether or not a recipient of this document) as a client in relation to the Capital Raising, and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients or for providing advice in relation to the Capital Raising or any other matter referred to herein.

Apart from the responsibilities and liabilities, if any, which may be imposed on Numis by FSMA or the regulatory regime established thereunder, none of Numis or any of its affiliates accepts any responsibility whatsoever or makes any representation or warranty, express or implied, to any person in respect of any acts or omissions of the Company in relation to the Capital Raising for the contents of this document including its accuracy, completeness or verification or for any other statement made or purported to be made by or on behalf of it, the Company or the Directors in connection with the Company, the New Ordinary Shares or the Capital Raising and other matters referred to in this document and nothing in this document is or shall be read as a promise or representation in this respect whether as to the past or future. Numis accordingly disclaims all and any liability whatsoever whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of any acts or omissions of the Company in relation to the Capital Raising or this document or any such statement.

The investors also acknowledge that: (i) they have not relied on Numis or any person affiliated with any of them in connection with any investigation of the accuracy of any information contained in this document or their investment decision; and (ii) they have relied only on the information contained in this document, and that no person has been authorised to give any information or to make any representation concerning the Company or its subsidiaries or the New Ordinary Shares (other than as contained in this document) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company or Numis.

In connection with the Capital Raising, Numis and any of its affiliates acting as investors for their own accounts may subscribe for or purchase New Ordinary Shares and, in that capacity, may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in the New Ordinary Shares, any other securities of the Company or other related investments in connection with the Capital Raising or otherwise.

Accordingly, references in this document to the New Ordinary Shares being issued, subscribed, sold, purchased or otherwise dealt with should be read as including any issue, offer or sale to, or subscription, purchase or dealing by, Numis and any of its affiliates acting as an investor for its or their own account(s). Numis does not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so.

This document, including the Application Form, Open Offer Entitlements and Excess Open Offer Entitlements documents, does not constitute, or will not constitute, or does not form part of any offer or invitation to sell or issue, or any solicitation of any offer to subscribe for, purchase or acquire the New Ordinary Shares to any Shareholder with a registered address in or located in the United States. Notwithstanding the foregoing, the Company reserves the right to offer the New Ordinary Shares in the United States in transactions exempt from, or not subject to, the registration requirements of the US Securities Act.

Shareholders in the United States may not subscribe for or acquire any New Ordinary Shares in connection with the Capital Raising.

Forward-looking statements

This document contains or incorporates by reference forward-looking statements which are based on the beliefs, expectations and assumptions of the Directors and other members of senior management about the Group's businesses and the Placing and Open Offer. All statements other than statements of historical fact included in this document may be forward-looking statements. Generally, words such as "will", "may", "should", "could", "estimates", "continue", "believes", "expects", "aims", "targets", "projects", "intends", "anticipates", "plans", "prepares", "seeks" or, in each case, their negative or other variations or similar or comparable expressions identify forward-looking statements.

These forward-looking statements are not guarantees of future performance, and there can be no assurance that the expectations reflected in such forward-looking statements will prove to have been correct. Rather, they are based on the current beliefs, expectations and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of the Company and are difficult to predict, that may cause actual results, performance, plans, objectives, achievements or events to differ materially from those express or implied in such forward-looking statements. Undue reliance should, therefore, not be placed on such forward-looking statements. Any forward-looking statements contained in this document are subject to (among other things) the risk factors described in the "Risk Factors" section of this document.

New factors will emerge in the future, and it is not possible to predict which factors they will be. In addition, the impact of each factor on the Group's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those described in any forward-looking statement or statements cannot be assessed, and no assurance can therefore be provided that assumptions will prove correct or that expectations and beliefs will be achieved.

Any forward-looking statement contained in this document based on past or current trends and/or activities of the Group should not be taken as a representation that such trends or activities will continue in the future. No statement in this document is intended to be a profit forecast or to imply that the earnings of the Group for the current year or future years will match or exceed historical or published earnings of the Group.

Each forward-looking statement speaks only as at the date of this document and is not intended to give any assurance as to future results. The Company and/or its Directors expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein as a result of new information, future events or other information, except to the extent required by the Listing Rules, the Disclosure Guidance and Transparency Rules, the Prospectus Rules, the rules of the London Stock Exchange or by applicable law.

The contents of the sections of this document relating to forward-looking statements in no way seek to qualify or negate the statement relating to the Group's working capital set out in paragraph 16 of Part X (Additional Information) of this document.

Presentation of financial and other information

The Company publishes its financial statements in pounds sterling ("£" or "sterling"). The abbreviation "£m" represents millions of pounds sterling and references to "pence" and "p" represent pence in the UK.

Unless otherwise indicated in this document, all references to:

• "pounds", "pounds sterling", "pound sterling", "Sterling", "£", "pence", or "p" are to the lawful currency of the United Kingdom;
• "euro" and "€" are to the lawful currency of the EU (as adopted by certain Member States); and
• "USD", "US dollar", "\$" or "US\$" are to the lawful currency of the United States.

The financial information presented in a number of tables in this document has been rounded to the nearest whole number or the nearest decimal point. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column. In addition, certain percentages presented in the tables in this document reflect calculations based upon the underlying information prior to rounding and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers.

Financial information, unless otherwise stated, has been extracted from the Group's Annual Report and Accounts for FY 2017/18, the Group's Annual Report and Accounts for FY 2016/17 and the Group's Annual Report and Accounts for FY 2015/16 (together, the "Annual Reports and Accounts"), from which the Group's audited consolidated financial statements are incorporated by reference into this document. The Group's audited consolidated financial statements have been prepared in accordance with IFRS as adopted for use in the EU.

Where information has been extracted from Mothercare's applicable annual report and accounts, the information is audited unless otherwise stated. Where the information is unaudited, this has been stated.

The Company's internal financial reporting is based on four-week periods and the Company presents its annual accounts as of the Saturday closest to 31 March of each year, which occasionally results in a 53-week financial year. Therefore, its annual financial period generally consists of 13 four-week periods, with every sixth or seventh financial year comprising 12 four-week periods and one five-week period. In turn, the Group's interim reporting periods comprise seven four-week periods in the first half of the year and six fourweek periods in the second half of the year (with the second half of every 53-week year comprising five fourweek periods and one five-week period). Accordingly, from time to time, the Group's financial accounting period covers a 53-week period, which impacts the comparability of results. The Group's reporting periods included in this document all are 52 weeks of operations.

Parts of this document, including this Section (Important Information), contain information regarding non-IFRS measures, such as Worldwide Sales, adjusted profit before tax and like-for-like sales, which are sometimes used by investors to evaluate the performance of a company's operations. An investor should not consider such items as alternatives to the applicable IFRS measures. In particular, an investor should not consider adjusted profit before tax as a measurement of the Group's financial performance or liquidity under IFRS as an alternative to net income, operating income or any other performance measures derived in accordance with IFRS or as an alternative to cash flow from operating activities as a measure of the Company's activity. It may not therefore be comparable with similarly titled profit measurements reported by other companies. It is not intended to be a substitute for IFRS measures of profit.

Key Performance Metrics

In evaluating the Group's results of operations, the Directors refer, in parts of this document, to various key financial measures relating to the performance of the Group's business. In addition to the Group's IFRS results of operations discussed in paragraph 5 of Part VI (Operating and Financial Review), the principal non-IFRS measures used to evaluate the Group's performance include:

• Worldwide Sales, which represents total International sales plus total UK sales. Total International sales reflect the retail sales from mothercare and ELC-branded stores, outlets and online websites and sales to Wholesale Customers. International Stores refer to overseas franchise and joint venture stores;
• UK like-for-like sales are defined as sales from stores that have been trading continuously from the same selling space for at least a year and include online sales. UK online sales include both website sales and sales taken on tablet devices in store. International retail sales, including online sales, are the estimated retail sales of overseas franchisees and the joint venture and associates to their customers;
• International like-for-like sales are the estimated franchisee retail sales from stores that have been trading continuously from the same selling space for at least a year. International sales in constant currency exclude the impact of movements in foreign exchange on translation. Worldwide sales are total International sales plus total UK sales. Total International sales are International retail sales plus International wholesale sales;
• total Group sales is a statutory number and is made up of total UK sales and receipts from the Group's International partners, which includes royalty payments and the cost of goods dispatched to the Franchise Partners;
• reconciliations between these non-IFRS measures and the IFRS statutory measures are included within the Group's Annual Report and Accounts for FY 2017/18, within the financial review on pages 18 to 26, which is incorporated by reference into this document; and
• adjusted profit before tax, which is defined as profits or losses before taxation adjusted to exclude items which the Group consider to be significant in both nature and/or quantum and where treatment as an adjusted item provides stakeholders with additional useful information to assess the year-onyear trading performance of the Group.

In addition, in certain sections of this document, including Part VI (Operating and Financial Review), the Directors have, where relevant, included reference to the effect of foreign exchange movements and have provided information in "constant currency". The term "constant currency" means that the Directors have translated financial data for a period into pounds sterling using the same foreign currency exchange rates that were used to translate financial data as at the end of the most recent financial year. For purposes of calculating "constant currency" to compare data in FY 2017/18 with FY 2016/17 and FY 2016/17 to FY 2015/16, the Directors used the foreign currency exchange rates for the periods ended and as at 24 March 2018 and 25 March 2017, respectively.

These measures may not be comparable with similarly titled measures presented by other companies in the Group's industry or otherwise. Nevertheless, the Directors believe that such measures are important to understanding the Group's performance from period to period and assist with the Group's evaluation of growth trends, preparation of budgets and analysis of the effectiveness of Franchise Partners' sales and marketing efforts. When viewed together with the Group's financial results prepared in accordance with IFRS, the Directors believe that these non-IFRS measures provide a more complete understanding of factors and trends affecting the Group's historical financial performance and trends, and greater comparability of results across periods.

Definitions

Certain terms used in this document, including capitalised terms and certain technical terms, are defined and explained in the section of this document headed "Definitions". Reference to any statute or statutory provision includes a reference to that statute or statutory provision as from time to time amended, extended or reenacted.

Website

The contents of the Company's website or of any website accessible via hyperlinks from the Company's website are not incorporated into, and do not form part of, this document and investors should not rely on them, without prejudice to the documents incorporated by reference into this document which will be made available on the Company's website (www.mothercareplc.com).

Sourcing of Information

Certain information in this document has been sourced from third parties. Where information in this document has been sourced from third parties, the source of such information has been clearly stated adjacent to the reproduced information.

All information contained in this document which has been sourced from third parties has been accurately reproduced and, as far as the Company is aware and is able to ascertain from information published by the relevant third party, no facts have been omitted which would render the reproduced information inaccurate or misleading.

Unless otherwise indicated, all sources for industry data and statistics are estimates or forecasts contained in or derived from internal or industry sources that the Company believes to be reliable. Market data used throughout this document was obtained from independent experts, independent industry publications and other publicly available information. Although the Company believes that these sources are reliable, it has not independently verified and does not guarantee the accuracy and completeness of this information.

Market data and statistics are inherently predictive and speculative and are not necessarily reflective of actual market conditions. Such statistics are based on market research, which itself is based on sampling and subjective judgements by both the researchers and the respondents, including judgements about what types of products and transactions should be included in the relevant market. In addition, the value of comparisons of statistics for different markets is limited by many factors, including that (i) the markets are defined differently; (ii) the underlying information was gathered by different methods; and (iii) different assumptions were applied in compiling the data. Accordingly, the market statistics included in this document should be viewed with caution and no representation or warranty is given by any person as to their accuracy.

WHERE TO FIND HELP

If you have any questions relating to the Open Offer, please telephone the Shareholder Helpline on the numbers set out below. This Helpline is available from 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays) and will remain open until 24 August 2018.

Shareholder Helpline telephone numbers:

0333 207 6378 (from inside the UK) or +44 (0)121 415 0950 (from outside the UK)

Calls to the (0)121 415 0950 number from outside the UK are charged at applicable international rates. Please note that calls may be recorded and randomly monitored for security and training purposes.

Please note that, for legal reasons, the Shareholder Helpline will only be able to provide information contained in this document and information relating to the Company's register of members and will be unable to give advice on the merits of the Capital Raising, the Capital Refinancing Plan or to provide financial, tax or investment advice.

DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS

Directors	Clive Whiley (Interim Executive Chairman) Mark Newton-Jones (Chief Executive Officer) David Wood (Group Managing Director) Glyn Hughes (Chief Financial Officer) Lee Ginsberg (Non-executive Director) Gillian Kent (Non-executive Director) Richard Rivers (Senior Independent Non-executive Director) Nick Wharton (Non-executive Director)
Company Secretary	Lynne Medini
Registered Office	Mothercare plc Cherry Tree Road Watford Hertfordshire WD24 6SH
Website	www.mothercareplc.com
Sponsor, Financial Adviser, Corporate Broker, Bookrunner and Underwriter	Numis Securities Limited The London Stock Exchange Building 10 Paternoster Square London EC4M 7LT
Corporate Broker and Underwriter	Shore Capital Stockbrokers Limited Bond Street House 14 Clifford Street London W1S 4JU
Legal Advisers to the Company	DLA Piper UK LLP 3 Noble Street London EC2V 7EE
Legal Advisers to the Sponsor, the Underwriters and the Financial Adviser as to English Law	Simmons & Simmons LLP CityPoint One Ropemaker Street London EC2Y 9SS
Reporting Accountants	Deloitte LLP 1 New Street Square London EC4A 3HQ
Communications	MHP Communications LLP 6 Agar Street London WC2N 4HN
Registrar and Receiving Agent	Equiniti Limited Aspect House Spencer Road Lancing, West Sussex BN99 6DA

PART I

LETTER FROM THE INTERIM EXECUTIVE CHAIRMAN OF MOTHERCARE PLC

(Incorporated and registered in England and Wales with registered number 1950509)

Clive Whiley (Interim Executive Chairman) Mothercare plc Mark Newton-Jones (Chief Executive Officer) Cherry Tree Road David Wood (Group Managing Director) Watford Glyn Hughes (Chief Financial Officer) Hertfordshire Lee Ginsberg (Non-executive Director) WD24 6SH Gillian Kent (Non-executive Director) Richard Rivers (Senior Independent Non-executive Director) Nick Wharton (Non-executive Director)

Directors Registered office

9 July 2018

To the holders of Ordinary Shares and, for information only, option holders

Dear Shareholder

1. INTRODUCTION

On 17 May 2018, Mothercare announced a full refinancing of the Group and a restructuring of the Company's UK operations. This letter and document as a whole cover the specifics of, and the background to, the Capital Refinancing Plan (as defined below) and the restructuring of the Group's UK store portfolio.

As part of the Capital Refinancing Plan, the Company announced a fully underwritten placing and open offer of New Ordinary Shares to raise approximately £28 million in gross proceeds. After discussions with certain of the Company's major shareholders and in order to supplement working capital requirements, the Company has elected to increase the size of the Placing and Open Offer of New Ordinary Shares and is now conducting a fully underwritten Placing and Open Offer at an Issue Price of 19 pence per New Ordinary Share to raise approximately £32.5 million in gross proceeds (the "Capital Raising"). Pursuant to the Capital Raising the Company is offering to its Qualifying Shareholders one New Ordinary Share at an Issue Price of 19 pence for every one Existing Ordinary Share.

The Capital Raising is part of the Company's wider capital refinancing plan providing funding of £117.5 million in aggregate to implement the acceleration of the Group's transformation plan. The capital refinancing plan comprises the following key elements (together, the "Capital Refinancing Plan"):

• (a) the New Debt Facilities of £67.5 million with a final maturity extended to December 2020 and certain interim step downs to be provided by the Company's existing Senior Lenders (the "New Debt Facilities");
• (b) the new £8 million shareholder loans from certain of the Company's largest shareholders (the "Shareholder Loans"), each of which is, subject to shareholder approval as a related party transaction (as defined in the Listing Rules) convertible into New Ordinary Shares at the lower of: (i) 19 pence per New Ordinary Share; and (ii) the most recent price at which any Shareholders have subscribed for newly issued equity in the Company since entry into the Shareholder Loans (the "Related Party Transactions");
• (c) the £32.5 million Capital Raising;
• (d) working capital initiatives releasing up to £10 million from the Company's existing trade debtor balances (the "Debtor Financing"); and
• (e) the restructuring of the Group's UK store portfolio through company voluntary arrangements of the Company's subsidiaries, Mothercare UK Limited and Early Learning Centre Limited, and the entry into administration of Childrens World as announced on 9 July 2018 (the "UK Restructuring").

The CVA Proposals were approved by the unsecured creditors and shareholders of the CVA Companies at the relevant creditor CVA meetings on 1 June 2018 and took effect following expiry of the statutory period, during which a challenge could be made to the relevant courts under the relevant legislation (the "Challenge Period"). The Challenge Period expired on 5 July 2018 without any such challenge having been successfully made and it is therefore expected that the CVA Proposals will complete imminently. Full implementation of the Capital Refinancing Plan is now solely conditional upon completion of the Capital Raising set out in this document.

As announced by the Company on 4 June 2018, the company voluntary arrangement proposal in connection with the Company's subsidiary Childrens World was not approved by the necessary 75 per cent. majority of unsecured creditors by a very narrow margin at 73.3 per cent. Accordingly, the company voluntary arrangement proposal for Childrens World did not progress any further. After exploring all available options, the directors of Childrens World have decided to place Childrens World into administration. The directors of Childrens World have submitted a notice of intention to appoint administrators to the High Court and Childrens World is expected to enter formally into administration on 9 July 2018. Mothercare UK Limited has been assigned or assumed leases of 13 stores previously leased in the name of Childrens World and 9 stores previously leased in the name of Childrens World will be closed. Mothercare UK Limited will temporarily occupy (under a licence) the 9 stores due to be closed in order to ensure they are closed down in an orderly fashion.

The First Resolution to Fifth Resolution set out in the Notice of General Meeting at the end of this document must be passed in order for the Capital Raising to proceed. However, the Capital Raising is not conditional on the passing of the Sixth Resolution which pertains to the approval of the Related Party Transactions, or the Seventh to Tenth Resolution which constitute general authorities customarily tabled at the Company's annual general meeting. In the event that any of the First Resolution to Fifth Resolution are not passed and the Capital Raising does not proceed, and the Company is unable to avoid a breach of its financial covenants under its New Debt Facilities, the Company would likely have to enter into administration or receivership in early October 2018, at which point Shareholders would lose all or a significant part of the value of their investment in the Company.

The purpose of this letter is to set out the background to, and the reasons for, the Capital Raising and to recommend that you vote in favour of the Resolutions set out in the Notice of General Meeting at the end of this document.

The Capital Raising has been fully underwritten by Numis and Shore Capital on, and subject to, the terms of the Placing Agreement. The principal terms of the Placing Agreement are summarised in paragraph 15.4 of Part X (Additional Information) of this document.

2. BACKGROUND TO AND REASONS FOR THE CAPITAL REFINANCING PLAN

Since my appointment as Interim Executive Chairman on the 19 April 2018, my priority has been to act as a catalyst to galvanise support from all of the Group's stakeholders and to provide a resolution to the acute short-term cash problems that were facing the Company. In that context, the comprehensive measures set out in the announcement made on 17 May 2018 presented demonstrable evidence of a sea change in the fortunes of Mothercare. Notwithstanding the unavoidable impact the measures will have upon some of the Group's employees, we have to act with urgency to mitigate the headwinds being experienced by the UK retail sector as a whole.

This deterioration in the Company's trading performance in the second half of FY 2017/18 was exacerbated by the necessity to run the business for cash in order to operate within the Group's then available financing facilities whilst simultaneously having to bear a mounting burden of professional costs that threatened to inundate the business. The Mothercare executive team successfully managed through this process, without undue pressure on the Group's valued suppliers and trading partners. The Capital Refinancing Plan is comprehensive, harnessing support from key stakeholders and, following completion of the CVA Proposals, the Capital Raising and UK Restructuring, will present a solution to both the operational and financial deficiencies apparent as at 24 March 2018.

We have therefore concluded that there is no viable or acceptable alternative to the Capital Refinancing Plan which is expected to enable the Company to refinance fully. With the support of its key stakeholders – employees, suppliers, trade partners, shareholders, lending banks, pension fund and landlords – following completion of the Capital Refinancing Plan, we believe the Company will be well placed to accelerate completion of the Group's transformation plan launched in 2014.

We are acutely aware of the impact of the UK Restructuring and of the Capital Refinancing Plan on certain stakeholders and we have taken the opportunity, where legally appropriate, to consult with:

• the British Property Federation, as the trade body representing many of the Group's UK landlords as well as directly with individual landlords wherever possible;
• the Pension Protection Fund ("PPF"), the Pensions Regulator and the Pension Trustees of the Company's defined benefit pension schemes (being (i) the Mothercare Executive Pension Scheme; and (ii) the Mothercare Staff Pension Scheme (the "DB Schemes")), as a result of which the PPF, where appropriate, voted in favour of the CVA Proposals at the CVA meetings on 1 June 2018; and
• employees affected by the proposals.

The CVA Proposals triggered a PPF assessment period, during which the PPF assumes the rights of the Pension Trustees, including voting rights. The Company has entered into a deficit recovery contributions deed to ensure that pension scheme contributions are protected, further details of which are set out in paragraph 15.6 of Part X (Additional Information) of this document.

We anticipate that the Capital Refinancing Plan, together with completion of the UK Restructuring, will allow the Company to accelerate its transformation plan by ultimately generating cost savings of £10 million per annum and in addition, we expect cash realisations of at least £10 million through store closures and other UK and International initiatives within 18 months of the date of this document. In parallel, as part of the accelerated transformation plan, we have launched a root and branch review of every facet of the Mothercare business, which is anticipated to yield a further £9 million of annualised cost savings globally.

3. UK RESTRUCTURING

Notwithstanding the efforts of management and colleagues in the business and of the Franchise Partners, we have not moved far or fast enough to keep up with the rapidly changing dynamics and shopping patterns of customers. The continued decline of UK store footfall and the inflexible store cost base, alongside the ever growing importance of multichannel and purely e-commerce retailing has challenged the business. This is set against the context of a UK market environment of depressed consumer confidence, which has presented significant and worsening obstacles to the Group's business model burdened by the current number of stores in the UK.

Alongside Mothercare, a significant number of other store-centric UK retailers have faced unprecedented trading and profitability problems in the last year, including, to different degrees, ToysRUs / BabiesRUs, Maplin, Multiyork, Poundworld, New Look, Carpetright, House of Fraser, Debenhams, John Lewis Partnership, Marks & Spencer and Dixons Carphone. We believe that a significant proportion of the issues the Group has faced in the last year reflect broader market and consumer conditions that have impacted ourselves and many other UK retailers with legacy store estates.

The restructuring of our UK store portfolio is expected to result in a portfolio of 77 UK stores by June 2019. The restructuring of our UK store portfolio from 137 stores at the end of FY 2017/18, has been or will have been, following completion of the CVA Proposals and the entry into administration of Childrens World, implemented as follows:

• 60 stores have been or will be closed by June 2019 (instead of the 50 stores originally announced on 17 May 2018) (this comprises 58 stores closing pursuant to the CVA Proposals and the entry into administration of Childrens World together with another 2 stores closing as a result of expiring or terminated leases which have not been renewed);
• 19 stores will remain open and have had rent reductions; and
• 58 stores will remain open on substantially unchanged terms and/or rents.

In addition to the above, the CVA Proposals will also compromise certain intra-group balances owed by the companies undergoing the CVA Proposals in favour of certain entities in the Group. The CVA Proposals did not compromise claims of any creditors other than intra-group creditors and landlords. Accordingly, the claims of all suppliers, the entitlements of employees and recovery contributions to the Group's DB Schemes will continue to be paid in full.

The Capital Refinancing Plan, together with the completion of the UK Restructuring, will allow the Company to accelerate the transformation plan by:

• ultimately generating cost savings of at least £19 million per annum, including from rent reductions and store costs and central overheads with £9 million of those cost savings targeted from rightsizing the business globally; and
• cash realisations of at least £10 million through store closures and other UK and International initiatives within 18 months of the date of this document.

The completion of the CVA Proposals and the entry into administration of Childrens World are vital steps to return the Group's UK business towards financial sustainability and positive cash contribution. The Group will also improve its customer offer and product range, sharpen the in-store execution of the remaining estate and, alongside these changes, invest in its online proposition in order to support sustainable growth in the longer term. Our base plans conservatively assume a significant reduction in the sales volume from the stores that are closing notwithstanding that over recent years the growth in online sales has broadly matched the decline in store sales due to store closure. This prudent approach to our base plan creates a further opportunity. Our UK retail operations team will focus in particular on the Group's online offering in order to recapture a larger proportion of sales from these closures.

As the Group moves forward following the UK Restructuring, our long-term aim is to operate Mothercare with no term debt for the foreseeable future, utilising the Group's New Debt Facilities to finance its normal seasonal intra-year working capital cycle. We aim to achieve this by a disciplined approach to further cost cutting and working capital initiatives that are already in train, alongside definitive and challenging internal executive targets, hard-wired into the business and designed to truly transform the business. We believe nothing less is acceptable at this stage of Mothercare's development.

4. OUR STRATEGY

The Group's vision is to be the leading global specialist for parents and young children. The Group has made material progress towards becoming a digitally-led business supported by a modern store estate with appropriate IT systems and an efficient operational infrastructure. Following the implementation of the Capital Refinancing Plan, we will accelerate the transformation plan of Mothercare.

We believe that in the last few years our strategy has been broadly correct – defining the Group's vision to be the leading global specialist for parents and young children, and in the UK transitioning from a large portfolio of legacy high-street stores to a smaller portfolio of modern refurbished stores primarily situated on retail parks. These stores offer a broad mix of mother and baby products, related services and community hub activities supported by a significant and growing e-commerce business. The repositioning of our store estate will now be accelerated by the UK restructuring as we seek to invest in improving efficiency, our specialist credentials and the overall customer experience. Additionally, we will maintain a strong focus on cash generation and returns from our store estate.

There are six key elements which underpin the Group's accelerated transformation plan:

• become a digitally-led business,
• supported by a modern retail estate,
• offering style, quality and innovation in product,
• stabilise and recapture gross margin,
• running a lean organisation whilst investing for the future, and
• expanding further internationally.

Become a digitally-led business

The Group has made significant progress with its strategy to become digitally-led with enhanced multichannel retailing through development of an improved online offering and tablet enabled in-store ordering facilities. We believe there is further scope to continue to improve the online performance, both in the UK and internationally.

There is a general market trend of customers towards researching and purchasing products online and in particular using their mobile phones. Research shows that the Group's customers are amongst the fastest adopters of mobile phones for online browsing of those customers surveyed. Approximately 75 per cent. of the total Mothercare and ELC website visits (combined) were made on mobile phones. We believe that in the UK today the vast majority of customers have a digital touchpoint with Mothercare through either its online website and app or social media channels and many choose to interact entirely online without visiting a physical store. We expect that over the medium term the vast majority of the Group's global customers will engage at some point through digital means, even if they ultimately transact through one of the stores.

Mothercare intends to make further investment in its digital offering, improving the customer's experience on the website, integrating more effectively the digital and in-store customer experience through tablet devices in stores and building on the strong customer database for personalised marketing.

The UK business has built an extensive database of nearly 2.7 million customers (being active in the last 12 months), intends to extract greater value from its customer database through personalised marketing, including developing the MyMothercare membership customers (representing nearly 750,000 within that database) where we have both due date and birth date, allowing further engagement, improved personalisation and spend.

In FY17/18, approximately 43 per cent. of all the UK sales were transacted digitally, including both pure e-commerce sales and also digital orders made on tablet devices in store. The digital penetration of the UK sales increased to 49 per cent. in the fourth quarter of FY17/18. The Directors believe this sales mix can grow to more than 50 per cent. of UK turnover over the medium term, but to do so the Group will need to continue to invest in its digital offering, infrastructure and IT systems. We are seeing the same consumer trends towards online sales internationally albeit the UK is the most advanced market for Mothercare in terms of both digital engagement and purchasing behaviour.

The relative profitability of Mothercare online sales is higher than those of Mothercare store-based sales. This is unusual in UK retail and reflects a relatively low store sales density compared with many retailers, which means that store occupancy costs to sales and store payroll to sales make selling through stores relatively inefficient. The Group's returns rate for online sales is far lower than experienced by many online fashion retailers who are negatively impacted by the trend to order several sizes to try on at home. As a leader in the mother and baby market, the Group receives 52 per cent. of its traffic organically (unpaid) and, its paid traffic has an average cost per click at 20 pence. By comparison top-ranking electronics or mobile phone paid traffic typically has a cost of 100 pence per click.

We have reviewed our digital proposition and will, in particular, improve the customer experience from checkout to product delivery which is a known pain point for customers. We will upgrade the look and feel of the website and optimise the accessibility of the advisory and product content, including improving site speed. Social and content are key to the digital growth agenda and we will continue to invest in building our community engagement and influencer strategy. We have already launched a new and improved digital booking platform for in-store events and specialist services this year. With all our digital innovation and optimisation, we will continue to work with our major partners to share learnings and best practice as they accelerate their digital sales growth.

Internationally, the multi-channel offerings of Franchise Partners have increased substantially in the last four years so that the Group now operates online channels in 23 countries. We aim to continue to develop the know-how of the Franchise Partners using the experience from the UK and by increasing the content and database support to develop the international online proposition further beyond just transactional sites. We will work with our Franchise Partners to improve their insight around local digital customer behaviour, launch new websites, build extended online ranges, develop their online marketing and social media capability, develop customer databases capturing lifestage data, build customer relationship management programmes, develop in-store digital ordering capability on tablet devices and develop the capability of colleagues to grow incremental sales by leveraging tablet-based digital ordering.

Supported by a modern retail estate

The Group, with advice from KPMG LLP, the Group's financial adviser on the CVA Proposals, carried out a comprehensive review of the Group's property portfolio and has identified 71 sites that were underperforming and/or on unfavourable lease terms or, in certain cases, not expected to have significant strategic value going forward. The Group's property leases were categorised into four categories, and the CVA Proposals and entry into administration of Childrens World have been structured to effect an acceleration of the transformation plan.

To date some 90 per cent. of the investment over the last four years in refurbishing the UK store portfolio has been concentrated upon the Group's continuing store portfolio.

We believe our targeted store portfolio with fewer stores and reduced rent and cost base, but in select locations will position us in our vision to be the leading specialist for parents and young children. Through our stores we will seek to bring to life our specialist proposition, in particular through offering improved training enhancing colleague knowledge in our specialism of mother and baby, additionally, we will incentivise our staff as they become more highly trained and better skilled at selling. Our position as a specialist will be enhanced through our offering of high value specialist services, for example ultrasound scanning and antenatal services. We will also seek to establish our stores as community hubs through organising events and promotional activities for expectant parents and also new parents.

The Group has enhanced the customer experience in-store through its newly refurbished stores with improved presentation and visual merchandising standards, and online by way of improved photo and video presentation and improved delivery services enabling customers to receive products at their convenience at home, at work or in store. Recent customer research highlights that customers are less price sensitive for a retailer that excels as a specialist (for example Lush, Body Shop, Waterstone's). We know that long-term sustainability of our brand comes through our vision to be the leading global specialist for parents and young children and whilst our specialist capabilities have improved, we believe we can build on this further.

The Group has increased its spend per head on store colleague training and created specialist learning and development roles to create and deliver training, as well as leveraging training from third-party product suppliers. The Group runs regular nationwide specialist expectant parent events in its stores where approximately 90,000 customers from the Group's database of nearly 2.7 million customers (being active in the last 12 months) have attended events to learn about and purchase products. These are supported by ancillary services providers such as first aid trainers, local midwives, baby massage and the National Childbirth Trust all of which provide education and knowledge to expectant parents. All the Group's stores offer maternity bra fitting, and most of the Group's stores offer car seat fitting as well as personal shops, and the Group's larger stores offer a wider range of specialist services such as ultrasound scanning of which over 30,000 scans were completed last year in mothercare stores, Memory Makers (creating keepsakes) and Clarks infant and children's shoe shops. We are planning to continue to grow the Group's high-value specialist services which results in significant increased footfall within the stores business. We are also planning to restructure the Group's store teams to create a defined specialist career path with training, certification and enhanced rates of pay.

Using the Group's UK database of nearly 2.7 million customers (being active in the last 12 months), of whom nearly 750,000 are in the MyMothercare database (being active in the last 12 months), the Group sends out emails with product recommendations and advisory content, personalised to the customer's life stage (week of pregnancy). The Group offers specialist service through live chat, information and advisory content, the mothercare blog, the mothercare Youtube channel and content through social media including Facebook (385,000 followers), Twitter (90,000 followers) and Instagram (145,000 followers). In the Middle East the Group's social following is even more advanced with over 900,000 followers. Mothercare's '2am Club' social media concept, originally created for lonely parents up in the middle of the night feeding, now has a Facebook community of 5,000 followers engaging with each other 24/7 for support and advice on all topics of pregnancy and early parenthood. The Group runs a weekly Facebook Live chat with a qualified midwife where the '2am Club' community can check in and ask questions. The Group is continually building its library of content, developing specialist partnerships and creating innovative ways to connect with the mothercare community, building enduring relationships with its customers that over time should reflect back to brand strength and commercial performance improvements.

Offering style, quality and innovation in product

The Group aims to improve the quality and newness of the product range both in-store and online and present it more effectively to its customers. The Group has restructured its ranges into a 'Good, Better, Best' product architecture, demonstrating good value products across all price points and supplementing these with exclusive third-party products and new brands. Exclusive products have been introduced across the branded Home & Travel ranges. This has increased from approximately 5 per cent. in FY 2013/14 to approximately 40 per cent. today.

We continue to work with suppliers to introduce new brands and exclusive ranges, while adapting to the more difficult trading conditions experienced in the UK during FY 2018/19. The Group is sharpening its focus on its core markets of maternity, newborn, baby and toddler up to preschool and rationalising its ranges for older children. In Home & Travel we remain market leaders in travel and nursery furniture with a 44 per cent. share in pushchairs (FY 2016/17: 43 per cent.); 30 per cent. in car seats (FY 2016/17: 30 per cent.); 30 per cent. in bedding (FY 2016/17: 29 per cent.), and 32 per cent. in nursery furniture (FY 2016/17: 31 per cent.). The Group launched 345 new exclusive to Mothercare products in the year (FY 2016/17: 265), introducing new brands including Nuk, Safety First and Diono. In Clothing & Footwear, ranges such as My K by Myleene Klass, Little Bird by Jools Oliver, and Peter Rabbit, continued to resonate well with customers. Little Bird reached the age of five during the course of FY 2017/18 and is ranked as one of the Group's favourite brands since its launch, as voted by consumers. In Toys, the focus continued on running established brands such as Happyland and Blossom Farm, whilst growing ranges in areas of opportunity such as sports and outdoor. We plan to introduce more capsule ranges and adopt more brands exclusive to Mothercare.

Stabilise and recapture gross margin

In FY 2017/18, the Group's gross margin in the UK decreased as a result of a heavy reliance on promotional activity to drive sales and generate cash, triggered in part by the softened UK consumer environment. Gross margins grew by 34 basis points in the first half of FY 2017/18, but then went into decline in the second half of FY 2017/18 as the business saw sales of full price products fall as a result of the deteriorating consumer environment. Promotional activity was necessary to stimulate demand and in turn customers bought more heavily into the discounted items, particularly over the peak trading period.

The increase in cost of goods from the devaluation of sterling against the US dollar was partly negotiated away, but resulted in price increases for customers of 3 to 5 per cent. in FY 2017/18. These increases began to have an impact towards the end of the first half of FY 2017/18.

We finished FY 2017/18 with a margin reduction of 216 basis points and the percentage of full price product sales was 58 per cent. (FY 2016/17: 60 per cent.).

The Group intends to stabilise its gross margins and return to margin growth by:

• improved buying negotiation through better product sourcing;
• pricing for value with quality;
• repositioning of the brand back to full price, leveraging specialism; and
• marketing of quality, style and design and good value for money under the banner of "Lovingly Made, Perfectly Priced".

We believe that the Group's strong market position in the UK and the scale of its business internationally should enable it to work in partnership with suppliers to deliver on this strategy. As a result, we believe that some of the UK gross margin rate lost in FY 2017/18 can be recaptured over the medium term.

Running a lean organisation whilst investing for the future

The Group has pursued a strategy over the last three financial years to reduce its non-store operating costs and has made progress towards achieving this target, primarily through restructuring and Group reorganisation efforts intended to enforce tight management of central costs at the Group's head office and overseas sourcing offices, including a reduction in staff and improved sourcing efficiencies.

In FY 2017/18, the Group took decisive action to reduce the central cost base to become a leaner business. There remains a tight control over costs and further cost reduction initiatives have been identified in order to accelerate business simplification and to drive further central overhead savings and efficiencies. We also continued to invest in key areas such as warehousing, where the consolidation is now complete, and we can now fulfil products for both stores and online from one single site. This has led to a reduction in transportation costs. We also upgraded planning and merchandising systems to enable better management of stock and markdown, which in turn will reduce the working capital requirements of the Group.

We recognise that maintaining a lean cost organisation is an essential part of delivering the accelerated transformation plan. In maintaining a lean organisation we will focus on:

• restructure the UK to create a relationship that mirrors the international franchisor/franchisee operating model;
• review our product sourcing capabilities whilst sharpening the focus on product design;
• reducing central headcount and cost; and
• continued rationalisation of non-people costs.

Expanding further internationally

The Group expects to continue to grow its successful International business in partnership with its Franchise Partners. The Group currently has 33 Franchise Partners and operates in 50 countries and has a significant presence in the Middle East and many of the key emerging markets globally, including China, India, Indonesia and Russia. Over 80 per cent. of the international revenue is generated from these key markets. During the course of FY 2017/18, 122 stores were opened and 141 closed as part of the Group's rationalisation plan in certain territories. The 33 Franchise Partners now operate 1,139 stores in 50 countries, across 2.9 million sq. ft. of retail space. Recently Mothercare has transitioned from a joint venture in China to a franchise operation in order to maximise retailing opportunities in that particular market. The Group also entered the Vietnamese market through a franchised store and a further two stores are in development. Furthermore, the Group aims to consolidate its position in those markets where it sees significant growth opportunities whilst closing out Franchises in underperforming jurisdictions.

The Group's franchise agreement in India, a significant and growing market, is now under the ownership of the Reliance Group, one of India's largest companies and a significant retailer of local and international brands. The Mothercare brand positioning, and specialist knowledge, combined with the Reliance Group's stores and digital knowledge, is expected to enable Mothercare to enter a new phase of growth and realise the full potential of the mothercare brand in India.

Over the past few years the Group has been working together with its longstanding Franchise Partners to restructure, regularise and formalise its arrangements and contracts. We have entered into new contracts with a number of the key Franchise Partners, and will seek to repeat this across our International network. This will enable the Group over time to right size and strengthen its International business with terms of trade that incentivise the Franchise Partners to support sustainable growth and brand strength, improve direct and online operations in their markets and internationally, and enhance the cash generation and profitability of Mothercare's international territories.

In line with its intention to become a digitally-led business with a modern store estate, the Group aims to facilitate the extension of online sales with a key focus on its major markets. In both China and Russia our online business is in excess of 10 per cent. of sales, but the remaining markets, whilst having grown from 1.6 per cent. in FY 2014/15 to 3.3 per cent. in FY 2017/18, have significant room for growth.

5. MANAGEMENT AND BOARD CHANGES

I would like to thank Alan Parker, who stepped down in April 2018 after six years as Chairman, for his service to the Company. In addition, as announced on 14 June 2018, Richard Rivers and Lee Ginsberg will step down with effect from the conclusion of the Company's next annual general meeting on 19 July 2018 and I would also like to thank them for their service over the past decade. We will commence the process of searching for a Senior Independent Non-executive Director to replace Richard Rivers following the Capital Raising. On 17 May 2018, Mark Newton-Jones agreed to return as Chief Executive Officer to complete the transformation plan he started and to work in tandem with David Wood as Group Managing Director. We recognise the need for strength and depth in both retailing and change management skills, extra retail resource and an appropriate blend of skills at senior level to deliver the challenging turnaround and UK Restructuring. These changes will reinforce the Board as it addresses the significant operational execution, cash and cost management exercise which lies ahead, alongside the change to a more "customer first" culture. We now have a first-class executive team – including Glyn Hughes as Chief Financial Officer – to ensure implementation of the transformational tasks ahead of us.

We are also taking measures to ensure that our board composition is appropriate from a governance perspective for a company of this size and nature. In addition, we believe that our current Board is cohesive and wholly engaged at an Operating Board level and has the advantage of access to Non-executive Directors with deeply embedded and relevant skills in retail and business change.

6. INTER-CONDITIONALITY OF THE CAPITAL REFINANCING PLAN

The Capital Raising, the conversion of the Shareholder Loans into equity and the continued availability of the New Debt Facilities and of the Debtor Financing were all conditional (amongst other things) on the end of the Challenge Period, which has now expired. However, the continued availability of the New Debt Facilities and the Debtor Financing remains conditional on the Capital Raising taking place. Due to the inter-conditionality of the respective elements of the Capital Refinancing Plan described above, if the First Resolution to Fifth Resolution are not passed or Numis exercises its right to terminate the Placing Agreement, and the Capital Raising does not proceed the New Debt Facilities, the Shareholder Loans and the Debtor Financing will become immediately re-payable on 30 September 2018 meaning that Mothercare will experience an immediate liquidity shortfall of up to £79.8 million in September 2018. The Capital Raising is not conditional on the passing of the Sixth Resolution which pertains to the approval of the Related Party Transactions, or the Seventh to Tenth Resolution which constitute general authorities customarily tabled at the Company's annual general meeting. If the Related Party Transactions are not approved by the Shareholders at the General Meeting, the Capital Raising and Capital Refinancing Plan will still be able to proceed, the Shareholder Loans will not convert to equity but the Company will not need to repay the Shareholder Loans until their maturity on 30 June 2021. As a result, if the First Resolution to Fifth Resolution are not passed and the Capital Raising and the Capital Refinancing Plan are not successfully completed and the Group is unable to avoid a prepayment event under the New Debt Facilities and the resulting liquidity shortfall, or is unable to secure alternative long-term financing, or cut costs and capital investment throughout the Group, or dispose of certain of the Group's assets before a liquidity shortfall or a default occurs, the Company would be likely to enter into administration or receivership in early October 2018, at which point Shareholders would lose all or a significant part of the value of their investment in the Company.

7. USE OF PROCEEDS

The Capital Raising is expected to raise approximately £32.5 million in total gross proceeds. The conversion of the Shareholder Loans, if approved by Shareholders at the General Meeting, would release a further £8 million from debt. Following deduction of total transaction costs in respect of the Capital Refinancing Plan of £8.5 million, this will result in approximately £32.0 million of net proceeds, which the Directors intend to use to pay down the Company's existing indebtedness under the New Debt Facilities. As noted above, we intend to operate Mothercare with no term debt for the foreseeable future, utilising the Group's New Debt Facilities to finance its normal seasonal intra-year working capital cycle.

8. FINANCIAL IMPACT OF THE CAPITAL RAISING

We expect that the increased number of Ordinary Shares in issue following the Capital Raising will have a negative effect on the Company's earnings per share over the medium term. These statements do not constitute a profit forecast and should not be interpreted to mean that the earnings per share in any financial period will necessarily match or be lesser or greater than those for the relevant preceding period.

Your attention is also drawn to Part VIII (Unaudited Pro Forma Financial Information) of this document which contains an unaudited pro forma statement of net assets that illustrates the effect of the Capital Raising on the Group's net assets as at 24 March 2018 as if the Capital Raising had been undertaken at that date.

9. CURRENT TRADING AND PROSPECTS

The performance of the Group since the start of FY 2018/19 has broadly followed a similar pattern to that seen in the second half of FY 2017/18. Conditions in the UK have remained challenging, with consumer confidence and store footfall remaining under pressure as also set out in paragraph 3 of this Part I (Letter from the Interim Executive Chairman of Mothercare plc). Against a backdrop of increased promotional activity, Mothercare has delivered a UK performance in the first 14 weeks of FY 2018/19 to date with total sales down 7.0 per cent. compared with the 14 week period in FY 2017/18 and like-for-like sales down 4.6 per cent. over the same period. Our International business has continued to stabilise with total sales down 1.2 per cent. in the first 14 weeks of FY 2018/19 compared with total sales over the same period in FY 2017/18. We expect these conditions in both the UK and our international markets to continue for the foreseeable future.

We currently expect our performance in FY 2018/19 to be volatile and variable from month to month taking into account current conditions and uncertainties in the UK economy, annualisation of last financial year's sales patterns and the shorter term impacts of the operational changes and restructuring set out in paragraph 3 of this Part I (Letter from the Interim Executive Chairman of Mothercare plc). Whilst we are confident the changes we are executing will deliver the planned benefits in the medium term, it is likely that there may be short term impacts on our business operations during FY 2018/19 as we effect these changes.

10. DIVIDENDS AND DIVIDEND POLICY

The Company has not paid a dividend since 3 February 2012. We do not expect to pay dividends until the business is returned to a sustainable and stable financial footing. We understand the importance of optimising value for Shareholders and it is our intention to return to paying a dividend as soon as they believe it is financially prudent for the Group to do so. Under the agreement reached with the PPF, we will also have to make cash payments to the pension schemes if the Company makes dividend payments to its Shareholders.

11. OVERSEAS SHAREHOLDERS

The attention of Overseas Shareholders who have registered addresses outside the United Kingdom, or who are citizens or residents of, or are located in, countries other than the United Kingdom, is drawn to the information in Part IV (Terms and Conditions of the Capital Raising) of this document.

11.1 United States

The New Ordinary Shares have not been, and will not be, registered under the US Securities Act or under the securities laws of any state, district or other jurisdiction of the United States. Accordingly, the New Ordinary Shares may not be offered, sold, resold, delivered, distributed or otherwise transferred, directly or indirectly, within the United States unless such offer and sale is made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. The New Ordinary Shares are being offered or sold outside the United States, in reliance on Regulation S.

None of the securities referred to in this document have been approved or disapproved by the SEC, any state securities commission in the United States or any other US regulatory authority, nor have such authorities passed upon or determined the adequacy or accuracy of this document. Any representation to the contrary is a criminal offence in the United States.

11.2 Other jurisdictions

This document and any accompanying documents are not being made available to Overseas Shareholders with registered addresses in any Excluded Territory and may not be treated as an invitation to subscribe for any New Ordinary Shares by any person resident or located in such jurisdictions or any other Excluded Territory.

The New Ordinary Shares have not been, and will not be, registered under the applicable securities laws of any Excluded Territory. Accordingly, the New Ordinary Shares may not be offered, sold, delivered or transferred, directly or indirectly, in or into any Excluded Territory to or for the account or benefit of any national, resident or citizen of any Excluded Territory.

This document has been prepared to comply with English law, the Prospectus Rules and the Listing Rules, and the information disclosed may not be the same as that which could have been disclosed if this document had been prepared in accordance with the laws of jurisdictions outside the United Kingdom.

NONE OF THE SECURITIES REFERRED TO IN THIS DOCUMENT SHALL BE SOLD, ISSUED OR TRANSFERRED IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW.

12. PRINCIPAL TERMS OF THE CAPITAL RAISING

The Company is proposing to raise approximately £32.5 million (before estimated expenses of approximately £2.2 million) by way of Placing and Open Offer of up to 170,871,885 New Ordinary Shares, representing, in aggregate, 50 per cent. of the Enlarged Share Capital, at an issue price of 19 pence per New Ordinary Share. Separate to the Placing and Open Offer, the Company has entered into the Shareholder Loan Agreements (as more fully described in paragraph 15.5 of Part X (Additional Information)), pursuant to which £8 million was provided to the Company for use towards general corporate and working capital purposes of the Group. The Shareholder Loans are fully drawn down and are convertible into New Ordinary Shares, subject to, among other things, approval of the Related Party Transactions.

Both the conversion of the Shareholder Loans and the Issue Price for the Placing and Open Offer will be priced at 19 pence per New Ordinary Share. The Issue Price of 19 pence per New Ordinary Share represents an approximately 33.6 per cent. discount to the Closing Price of 28.6 pence per Ordinary Share on the Reference Date and an 11 per cent. discount to the Closing Price of 21.3 pence per Ordinary Share on 16 May 2018, being the business day prior to the announcement of the Capital Refinancing Plan. This was set as the Issue Price as a result of our assessment of market conditions and following discussions with a number of institutional investors. We are in agreement that the level of discount and method of issue are appropriate to secure the investment necessary. The Issue Price of 19 pence per New Ordinary Share is the highest price at which the Shareholder Loans would convert into New Ordinary Shares resulting in 62,684,400 New Ordinary Shares in aggregate being issued to these Shareholders in full discharge of all loan and interest sums due at the time of conversion, if the Related Party Transactions are approved by Shareholders at the General Meeting.

The Capital Raising has been fully underwritten by Numis and Shore Capital on, and subject to, the terms of the Placing Agreement. The principal terms of the Placing Agreement are summarised in paragraph 15.4 of Part X (Additional Information).

The Capital Raising is conditional upon the following:

• the First Resolution to Fifth Resolution being passed by Shareholders at the General Meeting (without material amendment);
• the Placing Agreement becoming or being declared unconditional in all respects (save in respect of Admission) and not having been terminated in accordance with its terms prior to Admission; and
• Admission becoming effective by not later than 8.00 a.m. on 27 July 2018 (or such later time and/or date as the parties to the Placing Agreement may agree, being not later than 8.00 a.m. on 30 September 2018).

Accordingly, if any of such conditions are not satisfied, or, if applicable, waived, the Capital Raising will not proceed and any Open Offer Entitlements and Excess Open Offer Entitlements admitted to CREST will thereafter be disabled and application monies will be returned to applications (at the applicant's risk) without interest as soon as possible.

Application will be made for the New Ordinary Shares to be admitted to listing on the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission of the New Ordinary Shares will become effective and dealings in the New Ordinary Shares will commence by 8.00 a.m. on 27 July 2018 (whereupon an announcement will be made by the Company to a Regulatory Information Service).

The New Ordinary Shares following completion of the Capital Raising will, in aggregate, represent approximately 50 per cent. of the Company's issued Ordinary Shares following Admission. The New Ordinary Shares issued through the Capital Raising assuming conversion of the Shareholder Loans in full on their maturity date of 30 June 2021 will represent approximately 57.7 per cent. of the Company's issued ordinary shares, on the assumption that no further Ordinary Shares are issued as the result of the exercise of any options or awards under the Share Schemes between the Reference Date and Admission. The maximum number of New Ordinary Shares which would be issued in respect of a full conversion of all Shareholder Loans would be 62,684,400, representing 15.5 per cent. of the fully Enlarged Share Capital. The above calculations assume that no Ordinary Shares are issued as a result of the exercise of any options or awards under the Share Schemes between the Reference Date and Admission.

Qualifying Shareholders who do not take up any of their Open Offer Entitlements will suffer a dilution of:

• approximately 57.7 per cent. to their interests in the Company pursuant to the conversion of the Shareholder Loans (subject to approval of the Related Party Transactions) and the Capital Raising; or
• approximately 50.0 per cent. to their interests in the Company pursuant to the Capital Raising if the Shareholder Loans are not converted.

For these purposes, any dilution which may result from the vesting or exercise of any awards under the Share Schemes between the Reference Date and the Record Date has been disregarded.

12.1 The Placing and Open Offer

Numis, as agent of the Company, has also made arrangements to conditionally place the Placing Shares with institutional investors at the Issue Price. The Placing Shares will be subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer. Subject to the waiver or satisfaction of the conditions and the Placing Agreement not being terminated in accordance with its terms, any Open Offer Shares not subscribed for under the Open Offer will be issued to Placees and/or the subscribers procured by Numis, with the net proceeds of the Placing being retained by Mothercare.

Open Offer Entitlements

Qualifying Shareholders have the opportunity under the Open Offer to subscribe for New Ordinary Shares at the Issue Price, payable in full on application and free of expenses, pro rata to their existing shareholdings, on the basis of

one New Ordinary Share for every one Existing Ordinary Share

held by them and registered in their names at the Record Date. Fractions of Ordinary Shares will not be allotted and each Qualifying Shareholder's entitlement under the Open Offer will be rounded down to the nearest whole number.

Qualifying Shareholders are also being offered the opportunity to subscribe for Excess Shares in excess of their Open Offer Entitlements pursuant to the Excess Application Facility as described below.

Fractional entitlements to New Ordinary Shares will be aggregated and offered with the Excess Shares pursuant to the Excess Application Facility, and will ultimately be sold as part of the Excess Application Facility or the Placing, in each case for the benefit of the Company.

Excess Application Facility

Qualifying Shareholders may apply to subscribe for Excess Shares using the Excess Application Facility, should they wish. Qualifying Non-CREST Shareholders wishing to apply to subscribe for Excess Shares may do so by completing the relevant sections on the Application Form. Qualifying CREST Shareholders who wish to apply to subscribe for more than their Open Offer Entitlements will have Excess Open Offer Entitlements credited to their stock account in CREST and should refer to paragraph 4.3 of Part IV (Terms and Conditions of the Capital Raising) of this document for information on how to apply for Excess Shares pursuant to the Excess Application Facility.

The Excess Application Facility will comprise Open Offer Shares that are not taken up by Qualifying Shareholders under the Open Offer pursuant to their Open Offer Entitlements, which have been clawed back from Placees and the aggregated fractional entitlements. Qualifying Shareholders' applications for Excess Shares will, therefore, be satisfied only to the extent that any fractional entitlements are aggregated and to the extent that applications by other Qualifying Shareholders are made for less than their pro rata Open Offer Entitlements. If there is an over-subscription resulting from excess applications, allocations in respect of such excess applications will be scaled down at the our absolute discretion in consultation with Numis.

Further information on the Open Offer and the terms and conditions on which it is made, including the procedure for application and payment, are set out in Part IV (Terms and Conditions of the Capital Raising) of this document and, where relevant, in the Application Form.

Shareholders should be aware that the Open Offer is not a rights issue. As such, Qualifying Non-CREST Shareholders should note that their Application Forms are not negotiable documents and cannot be traded. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements and Excess Open Offer Entitlements will be admitted to CREST, and be enabled for settlement, the Open Offer Entitlements and Excess Open Offer Entitlements will not be tradeable or listed and applications in respect of the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim. New Ordinary Shares for which application has not been made under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Qualifying Shareholders who do not apply to take up their entitlements will have no rights nor receive any benefit under the Open Offer. Any New Ordinary Shares which are not applied for under the Open Offer entitlements and Excess Open Offer Entitlements will be allocated to Placees and/or other subscribers procured by Numis or, failing which, to Numis subject to the terms and conditions of the Placing Agreement, further details of which are set out in paragraph 15.2 of Part X (Additional Information) of this document.

The Placing and Open Offer will raise gross proceeds of approximately £32.5 million.

13. DETAILS OF THE CAPITAL REORGANISATION

As the proposed Issue Price per New Ordinary Share will be below the current nominal value of the Ordinary Shares, and section 580 of the 2006 Act prohibits the allotment of shares at a discount to their nominal value, we are further proposing to implement the Capital Reorganisation so as to reduce the nominal value of the Ordinary Shares. The Capital Reorganisation will take place before Admission and is expected to be implemented after the General Meeting. Under the Capital Reorganisation, each Existing Ordinary Share of 50 pence nominal value will be subdivided into one Ordinary Share of one penny nominal value and one Deferred Share of 49 pence nominal value, with very limited rights. The Capital Raising is conditional upon (among other things) the completion of the Capital Reorganisation.

The proportion of the issued share capital of the Company held by each Shareholder immediately following the Capital Reorganisation will remain unchanged. In addition, apart from having a different nominal value, each Ordinary Share of one penny nominal value will carry the same rights as set out in the Articles that currently apply to the Existing Ordinary Shares.

All uncertificated Ordinary Shares held in Shareholders' stock accounts in CREST will be amended as soon as possible after 8.00 a.m. on 27 July 2018 to confirm the new nominal value of one penny. No new share certificates will be issued in respect of Ordinary Shares in certificated form in connection with the Capital Reorganisation and no action will, or needs to, be taken in respect of such Ordinary Shares.

The Deferred Shares created on the Capital Reorganisation becoming effective will have no voting or dividend rights and, on a return of capital on a winding up, will have no valuable economic rights. No share certificates will be issued in respect of the Deferred Shares, nor will they be listed on the Official List or admitted to trading on the London Stock Exchange or any other investment exchange.

A request will be made to the UK Listing Authority and the London Stock Exchange to reflect, on the Official List and the London Stock Exchange's main market for listed securities, respectively, the subdivision of the Existing Ordinary Shares.

14. RELATED PARTY TRANSACTIONS

The Shareholder Loans consist of separate agreements with Blake Holdings in the amount of £5 million, DC Thomson in the amount of £2 million and Lombard Odier (or affiliates thereof) in the amount of £1 million, amounting to an aggregate sum of £8 million. They comprise an unsecured three year loan carrying a compound coupon of 0.83333 per cent. per month which capitalises into the principal on a monthly basis. The Shareholder Loans include provisions that the principal amount of the loan, together with any accrued, non-capitalised interest and a redemption premium of 10 per cent., may be converted into New Ordinary Shares at the lower of: (i) 19 pence per New Ordinary Share; and (ii) the most recent price at which any Shareholders have subscribed for newly issued equity in the Company since entry into the Shareholder Loans on 17 May 2018.

Blake Holdings, DC Thomson and Lombard Odier are regarded as related parties under Chapter 11 of the Listing Rules by virtue of their (or their affiliates') shareholdings in Mothercare. Therefore, the conversions of the Shareholder Loans into New Ordinary Shares are classified as related party transactions (for the purposes of the Listing Rules).

Blake Holdings, DC Thomson and Lombard Odier (acting on behalf of its affiliates) will not vote on the Sixth Resolution in accordance with the Listing Rules and all of them have undertaken to take all reasonable steps to procure that their associates (as defined in the Listing Rules) will also not vote on such resolution.

M&G Investment Management which holds 21,652,186 Existing Ordinary Shares (approximately 12.7 per cent. of the Company's issued ordinary share capital), has agreed to subscribe for up to 34,174,377 New Ordinary Shares (resulting in M&G Investment Management being interested in not more than 16.3 per cent. of the Enlarged Share Capital, assuming no clawback).

As a consequence of the current interest of M&G Investment Management in the Company, their proposed participation (as outlined above) in the Capital Raising constitutes a related party transactions for the purposes of Chapter 11 of the Listing Rules and hence the transaction is disclosed in accordance with Listing Rule 11.1.10R and the Company has received written confirmation from Numis that the terms of the transaction are fair and reasonable as far as the Company's Shareholders are concerned.

15. LISTING, DEALINGS AND SETTLEMENT

Application will be made to the UK Listing Authority for the New Ordinary Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and that dealings in the New Ordinary Shares on the London Stock Exchange will commence at or shortly after 8.00 a.m. on 27 July 2018.

Details of further terms and conditions of the Capital Raising, including the procedure for acceptance and payment are set out in Part IV (Terms and Conditions of the Capital Raising) of this document and, where relevant, will also be set out in the Application Form.

16. UK TAXATION

Certain information about UK taxation in relation to the Capital Raising is set out in Part IX (Taxation) of this document. If you are in any doubt as to your tax position, or you are subject to tax in a jurisdiction other than the United Kingdom, you should consult your own independent tax adviser without delay.

17. GENERAL MEETING

Set out on pages 196 to 202 of this document is a notice convening the General Meeting. The General Meeting will be held at 10.00 a.m. on 26 July 2018 at the offices of DLA Piper UK LLP, 3 Noble Street, London EC2V 7EE. The General Meeting is being held for the purpose of considering and, if thought fit, passing the Resolutions.

First Resolution – Sub-division of Ordinary Shares

The First Resolution is an ordinary resolution to sub-divide each Ordinary Share of 50 pence into one Ordinary Share of one penny and one Deferred Share of 49 pence, having the rights and being subject to the restrictions set out in the Company's Articles of Association, as amended. This Resolution is important as the Issue Price is below the current nominal value of the Existing Ordinary Shares and section 580 of the Companies Act prohibits the allotment of shares at a discount to their nominal value.

Second Resolution – Amendment to the Articles of Association

The Second Resolution is a special resolution to amend the Company's Articles of Association to reflect the sub-division described above and to set out the rights and restrictions of the Deferred Shares.

Third Resolution – Authority to allot (Capital Raising)

The Third Resolution is an ordinary resolution authorising us to allot 233,556,285 Ordinary Shares, representing approximately 136.7 per cent. of the Company's current issued share capital as at 6 July 2018 (being the last Business Day prior to the announcement of the Capital Raising) at a discount of 33.6 per cent. to the Closing Price of 28.6 pence on the Reference Date. This authority will expire at the conclusion of the annual general meeting of the Company to be held in 2019. The authority granted by the Third Resolution will be in addition to the authority to allot Ordinary Shares granted to us pursuant to the Seventh Resolution.

Fourth Resolution – Disapplication of pre-emption rights (Capital Raising)

The Fourth Resolution is a special resolution that, subject to the Third Resolution being passed, authorises us to allot 170,871,885 Ordinary Shares for cash under the authority given by the Third Resolution as if section 561 of the Companies Act did not apply to such allotment. This power will be limited to the allotment of New Ordinary Shares in connection with the Capital Raising (on the terms and conditions set out in this document). This authority will expire at the conclusion of the annual general meeting of the Company to be held in 2019. The authority to be granted by this Fourth Resolution will be in addition to the authority to disapply pre-emption rights granted to us pursuant to the Eighth and Ninth Resolutions.

Fifth Resolution – Approval of Issue Price

The Fifth Resolution is an ordinary resolution to approve the Issue Price of 19 pence per New Ordinary Share as it represents a discount of more than 10 per cent. to the prevailing market price at the time of agreeing the terms of the Capital Raising.

Sixth Resolution – Related Party Transactions

The Sixth Resolution is the resolution to approve the conversion by Blake Holdings, DC Thomson and Lombard Odier of the Shareholder Loans into New Ordinary Shares under the Shareholder Loan Agreements (details of which are set out in paragraph 15.5 of Part X (Additional Information) of this document) as Related Party Transactions.

Blake Holdings, DC Thomson and Lombard Odier are regarded as related parties under Chapter 11 of the Listing Rules by virtue of their shareholding (in the case of Lombard Odier, by virtue of its shareholding on behalf of LMAP Epsilon and 1798 Volantis) in Mothercare

Accordingly, the Related Party Transactions (classified as related party transactions under the Listing Rules) are subject to prior approval by Shareholders, other than the related parties themselves and their associates (as defined in the Listing Rules). Blake Holdings, DC Thomson, Lombard Odier (acting on behalf of and for LMAP Epsilon and 1798 Volantis) will not vote on the Sixth Resolution and all of them have undertaken to take all reasonable steps to procure that their associates (as defined in the Listing Rules) will also not vote on such resolution.

Seventh Resolution – Authority to allot (general authority)

The Seventh Resolution is an ordinary resolution, that, subject to the First to Fifth Resolution being passed, would pursuant to paragraph 7.1.1 of the Seventh Resolution give the directors the authority to allot ordinary shares or grant rights to subscribe for or convert any securities into ordinary shares up to an aggregate nominal amount equal to £1,139,145.90 (representing 113,914,590 ordinary shares of one pence each). This amount represents approximately one-third (33.33 per cent.) of the Enlarged Share Capital. In line with guidance issued by the Investment Association, paragraph 7.1.2 of the Seventh Resolution would give the directors authority to allot ordinary shares or grant rights to subscribe for or convert any securities into ordinary shares in connection with a rights issue in favour of ordinary shareholders up to an aggregate nominal amount equal to £2,278,291.80 (representing 227,829,180 ordinary shares of one pence each), as reduced by the nominal amount of any shares issued under paragraph 7.1.1 of that resolution). This amount (before any reduction) represents approximately two-thirds (66.66 per cent.) of the Enlarged Share Capital. These authorities will expire at the earlier of 31 October 2019 and the conclusion of the annual general meeting of the Company held in 2019. This authorisation is typically sought at the Company's annual general meeting and is now being sought on the basis of the Enlarged Share Capital.

Eighth Resolution – Disapplication of pre-emption rights (general authority)

The Eighth Resolution is a special resolution that, subject to the Seventh Resolution being passed, authorises us to allot ordinary shares (or sell any ordinary shares which the Company elects to hold in treasury) for cash without first offering them to existing shareholders in proportion to their existing shareholdings. The authority set out in the Eighth Resolution would be limited to (a) allotments or sales in connection with pre-emptive offers and offers to holders of other equity securities if required by the rights of those shares or as we otherwise consider necessary, or (b) otherwise up to an aggregate nominal amount of £170,871.88 (representing 17,087,188 shares of one pence each). This aggregate nominal amount represents 5 per cent. of the Enlarged Share Capital. This authorisation is typically sought at the Company's annual general meeting and is now being sought on the basis of the Enlarged Share Capital.

Ninth Resolution – Disapplication of pre-emption rights (general authority)

The Ninth Resolution is a special resolution that, subject to the Seventh Resolution being passed, authorises us to allot shares up to an aggregate nominal amount of £170,871.88 (representing 17,087,188 ordinary shares of one penny each) for cash under the authority given by the Seventh Resolution as if section 561 of the Companies Act did not apply to such allotment. This power will be limited to allotments or sales of up to an aggregate nominal amount of £170,871.88 (representing 17,087,188 ordinary shares of one penny each) in addition to the authority set out in the Eighth Resolution which are used only for the purposes of financing (or refinancing, if the authority is to be used within six months after the original transaction) a transaction which we determine to be an acquisition or other capital investment of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior to the date of this Notice of the General Meeting. This authorisation is typically sought at the Company's annual general meeting and is now being sought on the basis of the Enlarged Share Capital.

Tenth Resolution – Purchase of own shares

The Tenth Resolution is a special resolution that, subject to the First to Fifth Resolution being passed, we would be granted authority to purchase up to a maximum of 34,174,377 Ordinary Shares, representing up to 10 per cent. of its Enlarged Share Capital. The Company has not purchased any Ordinary Shares in the period from the last annual general meeting to the date of this document under the existing authority. We have no present intention to exercise the authority sought under this resolution, other than pursuant to the Company's share option schemes. We will exercise this authority only when to do so would be in the best interests of the Company, and of our shareholders generally, and could be expected to result in an increase in the earnings per share of the Company. This authorisation is typically sought at the Company's annual general meeting and is now being sought on the basis of the Enlarged Share Capital.

18. ACTION TO BE TAKEN

In respect of the General Meeting

Existing Shareholders will find enclosed with this document a Form of Proxy for use at the General Meeting. Whether or not you plan to attend the General Meeting in person, you are requested to complete, sign and return the Form of Proxy in accordance with the instructions printed on it so as to be received by the Company's Registrar, Equiniti, as soon as possible and, in any event, by no later than 10.00 a.m. on 24 July 2018. You may also submit your proxy electronically at www.sharevote.co.uk using the Voting ID, Task ID and Shareholder Reference (SRN) printed on the Form of Proxy. CREST Shareholders may appoint a proxy by completing and transmitting a CREST Proxy Instruction to Equiniti (CREST participant ID RA19). Electronic proxy appointments must also be received by no later than 10.00 a.m. on 24 July 2018. The completion and return of a Form of Proxy (or the electronic appointment of a proxy) will not preclude you from attending and voting in person at the General Meeting or any adjournment thereof, if you wish to do so.

In respect of the Open Offer

If you are a Qualifying Non-CREST Shareholder and not also a Restricted Shareholder and you wish to take up your Open Offer Entitlements in whole or in part and any Excess Shares, you should complete and return the enclosed Application Form, together with your remittance for the full amount of the subscription monies for the New Ordinary Shares being taken up in accordance with the instructions printed thereon and in Part IV (Terms and Conditions of the Capital Raising) of this document, by post or by hand, to Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, so as to arrive as early as possible but in any event by no later than 11.00 a.m. on 25 July 2018 being the latest time for acceptance and payment in full. If you do not wish to apply for any Open Offer Shares nor any Excess Shares under the Open Offer you should not complete or return the Application Form.

If you are a Qualifying CREST Shareholder and not also a Restricted Shareholder, no Application Form is enclosed and you will receive a credit to your appropriate stock account in CREST in respect of the Open Offer Entitlements representing your basic entitlement under the Open Offer and a credit in respect of the Excess Open Offer Entitlements for use in connection with the Excess Application Facility.

The procedure for application and payment depends on whether, at the time at which application and payment is made, you have an Application Form in respect of your entitlement under the Open Offer or have Open Offer Entitlements and Excess Open Offer Entitlements credited to your stock account in CREST in respect of such entitlement. The latest time for applications under the Open Offer to be received is 11.00 a.m. on 25 July 2018.

If you sell or have sold or otherwise transferred all of your Existing Ordinary Shares prior to the date the shares were marked ex-entitlement to the Open Offer you should send this document (but not any personalised Form of Proxy or Application Form) at once to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for delivery to the purchaser or the transferee.

Full details of the terms and conditions of the Open Offer and the procedure for application and payment are contained in Part IV (Terms and Conditions of the Capital Raising) of this document.

If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant, fund manager or other independent financial adviser authorised under FSMA if you are in the United Kingdom or, if you are not, from another appropriately authorised independent financial adviser.

Your attention is drawn to the section of this document headed 'Risk Factors'. You should read all of the information contained in, or incorporated by reference into, this document before deciding the action to take in respect of the General Meeting or the Capital Raising (or both). If you are a Qualifying Shareholder, and, subject to certain exceptions, unless you have a registered address in, or are resident in, any of the Excluded Territories, your attention is drawn in connection with the Capital Raising to the further information contained in Part IV (Terms and Conditions of the Capital Raising) of this document.

19. IMPORTANCE OF VOTE

Your attention is again drawn to the fact that the Capital Raising is conditional and dependent upon, amongst other things, the First Resolution to Fifth Resolution being passed at the General Meeting.

Shareholders are asked to vote in favour of the First Resolution to Fifth Resolution at the General Meeting in order for the Capital Raising to proceed. We believe that the successful completion of the Capital Raising will significantly strengthen the Group's balance sheet and this will enable the Group to deliver the accelerated transformation plan which will be important to the future success of the Group.

If the First Resolution to Fifth Resolution are not passed or Numis exercises its right to terminate the Placing Agreement and the Capital Raising therefore does not proceed the New Debt Facilities, the Shareholder Loans and the Debtor Financing will become immediately re-payable on 30 September 2018 meaning that Mothercare will experience an immediate liquidity shortfall of up to £79.8 million in September 2018. The Capital Raising is not conditional on the passing of the Sixth Resolution which pertains to the approval of the Related Party Transactions, or the Seventh to Tenth Resolution which constitute general authorities customarily tabled at the Company's annual general meeting. If the Related Party Transactions are not approved by the Shareholders at the General Meeting, the Capital Raising and Capital Refinancing Plan will still be able to proceed, but the Shareholder Loans will not convert to equity. However, the Company will not need to repay the Shareholder Loans until their maturity on 30 June 2021. As a result, if the First Resolution to Fifth Resolution are not passed and the Capital Raising and therefore the rest of the Capital Refinancing Plan are not successfully completed and the Group is unable to implement any of the alternative financing arrangements or other actions set out below, the Company would be likely to enter into administration or receivership in early October 2018, at which point Shareholders would lose all or a significant part of the value of their investment in the Company.

If the Capital Raising does not proceed, the Group would put in place an action plan to avoid the initial liquidity shortfall, covenant default and ongoing liquidity shortfall, which would first involve attempting to renegotiate the terms of the New Debt Facilities to secure further amendments of the financial covenants and increases to the amounts available under the New Debt Facilities. In order to be successful, the amendments to the New Debt Facilities would need to be in place for several months beyond the initial liquidity shortfall period to enable the Group to secure alternative funding arrangements. We believe that such amendments would only be agreed by the Senior Lenders, if at all, at a significant cost to the Group in the form of additional fees payable to the Senior Lenders, increased coupon payments and/or additional restrictions on, or commitments to engage in, corporate actions (e.g. disposals), each of which would adversely affect or delay implementation of the Group's strategy. Given the conditionality required by the Senior Lenders in respect of the New Debt Facilities we do not believe that negotiating the required amendments to the New Debt Facilities has a high chance of success. Any such increase in financing costs will result in matching payments becoming due to the DB Schemes as set out in paragraph 15.6 of Part X (Additional Information) of this document.

If the Senior Lenders were not to waive any prepayment due under the New Debt Facilities and were not to agree to commercially acceptable amendments of the Group's financial covenants and increases to the amounts available under the New Debt Facilities, the Group would then seek alternative long-term committed financing arrangements to replace or refinance the amounts outstanding under those arrangements, which, if available at all, would be likely to be significantly more expensive and onerous than those which apply under the New Debt Facilities.

The Company could also seek other forms of funding, although our experience of seeking such funds in the recent financing review suggests that the terms of such other forms of funding will result in significant value transfer from Shareholders and/or creditors. We believe that seeking alternative funds is likely to be successful, however, it may not be available at commercially acceptable terms and we would need to balance the receipt of funds with the additional cost of debt. Any such alternative financing arrangement may result in matching payments becoming due to the DB Schemes as set out in paragraph 15.6 of Part X (Additional Information) of this document.

In addition to initiatives to provide additional cash headroom, the Group may take action to effect a sale of the business as whole or the disposals of assets, such as the disposal of one or more of the Group's businesses to facilitate a reduction of the Group's outstanding indebtedness. We believe they may be able to secure a transaction on such a basis in an acceptable timeframe, however, there can be no guarantee that we would be able to secure a transaction at a price which they believe is reflective of the full value of the assets being disposed and the New Debt Facilities (and possibly any new financing arrangements) restrict the Group's ability to make disposals without the consent of the Senior Lenders, which could be withheld. Such a transaction would restrict the Group's future growth opportunities and would likely impact the Group's ability to maintain or improve its competitive positioning.

As a result, if the Capital Raising does not proceed to completion and the Group is unable to implement any of the alternative financing arrangements or other actions set out above, the Company would be likely to enter into administration or receivership in early October 2018, at which point Shareholders would lose all or significant part of the value of their investment in the Company.

Accordingly, we believe that the Capital Raising is in the Shareholders' best interests, and it is very important that Shareholders vote in favour of the Resolutions so that it can proceed.

20. FURTHER INFORMATION

Your attention is drawn to the further information set out in Part IV (Terms and Conditions of the Capital Raising) of this document. Shareholders should read the whole of this document and not rely solely on the information set out in this letter. In addition, you should consider the section entitled "Risk Factors" set out on pages 23 to 43 of this document.

21. OUR INTENTIONS REGARDING THE CAPITAL RAISING

We are fully supportive of the Capital Raising and intend to take up our Open Offer Entitlements in full under the Open Offer amounting to 1,978,844 New Ordinary Shares in aggregate.

22. OUR RECOMMENDATION

We consider the Capital Raising and the passing of the Resolutions to be in the best interests of the Company and the Shareholders as a whole. Accordingly, we unanimously recommend that Shareholders vote in favour of the Resolutions to be put to the General Meeting as they intend to do, or procure, in respect of our own beneficial holdings at the time of the General Meeting, amounting to 1,978,844 Existing Ordinary Shares (representing approximately 1.2 per cent. of the Company's existing issued ordinary share capital as at the Reference Date).

Having been so advised by Numis, we consider the terms of the Related Party Transactions to be fair and reasonable as far as Shareholders as a whole are concerned. In providing this advice to us, Numis has taken into account our commercial assessments of the Related Party Transactions.

Yours sincerely,

Clive Whiley Chairman

PART II

SOME QUESTIONS AND ANSWERS ABOUT THE CAPITAL RAISING

The questions and answers set out in this Part II (Some Questions and Answers about the Capital Raising) are intended to be generic guidance only and, as such, you should read the whole of this document and in particular Part IV (Terms and Conditions of the Capital Raising) of this document for full details of what action you should take. The contents of this document should not be construed as legal, business, accounting, tax, investment or any other professional advice. If you are in any doubt about the action to be taken, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank, fund manager, solicitor, accountant or other appropriate independent financial adviser duly authorised under FSMA or, if you are in a territory outside the United Kingdom, from another appropriately authorised financial advisor. This document is for your information only and nothing in this document is intended to endorse or recommend a particular course of action. The attention of Overseas Shareholders is drawn to paragraph 7 of Part IV (Terms and Conditions of the Capital Raising) of this document.

This Part II (Some Questions and Answers about the Capital Raising) deals with general questions relating to the Capital Raising, as well as more specific questions relating to Qualifying Non-CREST Shareholders. If you hold your Ordinary Shares in uncertificated form (that is, through CREST) your attention is drawn to Part IV (Terms and Conditions of the Capital Raising) of this document which contains full details of what action you should take. If you are a CREST sponsored member, you should consult your CREST sponsor.

If you do not know whether your Ordinary Shares are held in certificated or uncertificated form, please contact Equiniti on 0333 207 6378 or +44 121 415 0950 (if calling from outside the UK). Lines are open from between 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays). Calls to the helpline from outside the UK will be charged at the applicable international rate. Please note that calls may be recorded and randomly monitored for security and training purposes. Please note that Equiniti cannot provide advice on the merits of the proposals nor give personal, business, financial, tax, investment or legal advice.

1. WHAT IS THE PLACING AND OPEN OFFER?

A placing and open offer is a way for companies to raise money. They usually do this by giving their existing shareholders a right to subscribe for further shares at a fixed price in proportion to their existing shareholdings (an open offer) and providing for new investors to subscribe for new shares in the Company (a placing). The fixed price is normally at a discount to the closing mid-market price of the existing ordinary shares prior to the announcement of the open offer.

2. WHAT IS THE COMPANY'S OPEN OFFER?

This Open Offer is an invitation by the Company to Qualifying Shareholders to apply to subscribe for an aggregate of up to 170,871,885 New Ordinary Shares at a price of 19 pence per New Ordinary Share. If you hold Ordinary Shares at the Record Date or have a bona fide market claim, and are not a Shareholder located in the United States or any other Excluded Territory (for further information on Overseas Shareholders, see paragraph 7 of Part IV (Terms and Conditions of the Capital Raising) of this document), you will be entitled to subscribe for New Ordinary Shares under the Open Offer.

The Open Offer is being made on the basis of 1 New Ordinary Share for every 1 Existing Ordinary Share held by Qualifying Shareholders (other than Restricted Shareholders) at the Record Date. Applications by Qualifying Shareholders will be satisfied in full up to their Open Offer Entitlements. In addition and subject to availability, the Excess Application Facility will enable Qualifying Shareholders to apply for any whole number of Excess Shares in excess of their Open Offer Entitlements, up to a maximum number of Excess Shares, not exceeding 170,871,885. If there is an over-subscription resulting from excess applications, allocations in respect of such Excess Shares will be scaled down at the absolute discretion of the Board in consultation with Numis.

For technical reasons Qualifying CREST Shareholders who choose to take up their Open Offer Entitlement in full, or in respect of pooled accounts, the Open Offer Entitlements of an underlying beneficial holder in full, the Excess Application Facility enables Qualifying CREST Shareholders to apply for Excess Shares up to a maximum amount equal to 10 times their total number of existing Ordinary Shares held in such Qualifying CREST Shareholder's name as at the Record Date. If however a Qualifying CREST Shareholder wishes to apply for more than 10 times the total number of existing Ordinary Shares held in such Qualifying Shareholder's name as at the Record Date, the Qualifying CREST Shareholder should contact Equiniti by telephone on the helpline number stated above who will arrange for additional Excess Shares to be credited to the relevant CREST account of the Qualifying CREST Shareholder concerned. Any such applications will be granted at the absolute discretion of the Company.

If your entitlement to New Ordinary Shares is not a whole number, your fractional entitlement will be rounded down in calculating your actual Open Offer Entitlement. If you hold fewer than two Existing Ordinary Shares, you will not receive an Open Offer Entitlement. Fractional entitlements to New Ordinary Shares will be aggregated and offered with the Excess Shares pursuant to the Excess Application Facility, and will ultimately accrue for the benefit of the Company. New Ordinary Shares are being offered to Qualifying Shareholders at a discount to the closing mid-market share price on the last Business Day before the Reference Date.

Shareholders should be aware that the Open Offer is not a rights issue. As such, Qualifying Non-CREST Shareholders should note that their Application Forms are not negotiable documents and cannot be traded. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements and Excess Open Offer Entitlements will be admitted to CREST, and be enabled for settlement, the Open Offer Entitlements and Excess Open Offer Entitlements will not be tradeable or listed and applications in respect of the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear's Claims Processing Unit.

Qualifying Shareholders who do not take up any of their Open Offer Entitlements will suffer a dilution of:

• approximately 57.7 per cent. to their interests in the Company pursuant to the conversion of the Shareholder Loans (subject to approval of the Related Party Transactions) and the Capital Raising; or
• approximately 50 per cent. to their interests in the Company pursuant to the Capital Raising if the Shareholder Loans are not converted.

For these purposes, any dilution which may result from the vesting or exercise of any awards under the Share Schemes between the Reference Date and the Record Date has been disregarded.

New Ordinary Shares for which application has not been made under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Qualifying Shareholders who do not apply to take up their entitlements will have no rights nor receive any benefit under the Open Offer. Any New Ordinary Shares which are not applied for under the Open Offer Entitlements and Excess Open Offer Entitlements will be issued to the Placees and/or other subscribers procured by Numis or, failing which, to Numis subject to the terms and conditions of the Placing Agreement, with the proceeds ultimately accruing for the benefit of the Company.

However, Shareholders should note that the Capital Raising is conditional upon: (i) the First Resolution to Fifth Resolution being passed by Shareholders at the General Meeting (without material amendment); (ii) the Placing Agreement becoming or being declared unconditional in all respects and not having been terminated in accordance with its terms prior to Admission; and (iii) Admission becoming effective by not later than 8.00 a.m. on 27 July 2018 or such later time and/or date as Numis and Mothercare may agree, being not later than 8.00 a.m. on 30 September 2018).

3. WHEN WILL THE CAPITAL RAISING TAKE PLACE?

The Capital Raising is subject to Admission of the New Ordinary Shares becoming effective by not later than 8.00 a.m. on 27 July 2018 or such later time and/or date as Numis and Mothercare may agree, being not later than 8.00 a.m. on 30 September 2018.

4. WHAT IS AN APPLICATION FORM?

It is a form sent to those Qualifying Shareholders who hold their Ordinary Shares in certificated form. It sets out your Open Offer Entitlement to subscribe for the Open Offer Shares and Excess Open Offer Entitlements to subscribe for any Excess Shares and is a form which you should complete if you want to participate in the Open Offer.

5. WHAT IF I HAVE NOT RECEIVED AN APPLICATION FORM OR I HAVE LOST MY APPLICATION FORM?

If you have not received an Application Form and you do not hold your Ordinary Shares in CREST, this probably means that you are not eligible to participate in the Open Offer. Some Qualifying Shareholders, however, will not receive an Application Form but may still be able to participate in the Open Offer, including:

• Qualifying CREST Shareholders;
• Qualifying Non-CREST Shareholders who bought Ordinary Shares before the Ex-Entitlements Date but were not registered as the holders of those Ordinary Shares at the Record Date (see question 6 below); and
• certain Overseas Shareholders.

If you have not received an Application Form but think that you should have received one, or you have lost your Application Form, please contact Equiniti Limited on 0333 207 6378 or +44 121 415 0950 (if calling from outside the UK). Lines are open from between 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays). Calls to the helpline from outside the UK will be charged at the applicable international rate. Please note that calls may be recorded and randomly monitored for security and training purposes. Please note that Equiniti Limited cannot provide advice on the merits of the proposals nor give personal, business, financial, tax, investment or legal advice.

6. IF I BOUGHT ORDINARY SHARES BEFORE 9 JULY 2018 (THE EX-ENTITLEMENTS DATE) WILL I BE ELIGIBLE TO PARTICIPATE IN THE OPEN OFFER?

If you bought Ordinary Shares before the Ex-Entitlements Date but you were not registered as the holder of those Ordinary Shares at the Record Date you may still be eligible to participate in the Open Offer. If you are in any doubt, please consult your stockbroker, bank or other appropriate financial adviser, or whoever arranged your share purchase, to ensure you claim your entitlement. You will not be entitled to the New Ordinary Shares in respect of any Ordinary Shares acquired on or after the Ex-Entitlements Date.

7. I HOLD MY ORDINARY SHARES IN UNCERTIFICATED FORM IN CREST. WHAT DO I NEED TO DO IN RELATION TO THE OPEN OFFER?

CREST members should follow the instructions set out in Part IV (Terms and Conditions of the Capital Raising) of this document. Persons who hold Ordinary Shares through a CREST member should be informed by the CREST member through which they hold their Ordinary Shares of the New Ordinary Shares which they are entitled to take up under the Open Offer and should contact them if they do not receive this information.

8. I HOLD MY ORDINARY SHARES IN CERTIFICATED FORM. HOW DO I KNOW I AM ELIGIBLE TO PARTICIPATE IN THE OPEN OFFER?

If you receive an Application Form, subject to certain exemptions, are not a Shareholder with a registered address in a Excluded Territory, and are not physically located in the United States or any other Excluded Territory, then you should be eligible to participate in the Open Offer as long as you have not sold all of your Ordinary Shares before the Ex-Entitlements Date.

Shareholders located in, or who are citizens of, or who have an address in, a jurisdiction other than the United Kingdom will be subject to the laws of that jurisdiction and their ability to participate in the Open Offer may be affected accordingly. Shareholders who are located in, or who are citizens of, or who have an address in a jurisdiction outside of the United Kingdom should read paragraph 7 of Part IV (Terms and Conditions of the Capital Raising) of this document and should take professional advice as to whether they are eligible and/or need to observe any formalities to enable them to take up the Open Offer Entitlement.

9. I HOLD MY ORDINARY SHARES IN CERTIFICATED FORM. HOW DO I KNOW HOW MANY NEW ORDINARY SHARES I AM ENTITLED TO TAKE UP?

If you hold your Ordinary Shares in certificated form and, subject to certain limited exceptions, do not have a registered address in the United States or any other Excluded Territory, you will be sent an Application Form that shows:

• in Box 1, how many Ordinary Shares you held at the Record Date;
• in Box 2, how many New Ordinary Shares are comprised in your Open Offer Entitlement; and
• in Box 3, how much you need to pay in Pounds Sterling if you want to take up your right to subscribe for all of your Open Offer Entitlement.

If you would like to apply for any or all of the New Ordinary Shares comprised in your Open Offer Entitlement, you should complete the Application Form in accordance with the instructions printed on it and the information provided in this document. Completed Application Forms should be posted, along with a cheque or banker's draft drawn in the appropriate form, in the accompanying prepaid envelope to Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA so as to be received by no later than 11.00 a.m. on 25 July 2018, after which time Application Forms will not be valid.

If you would like to apply for any Excess Shares (i.e. New Ordinary Shares in excess of your Open Offer Entitlement which have not been applied for by other Qualifying Shareholders) pursuant to the Excess Application Facility, you should complete the Application Form in accordance with the instructions printed on it and the information provided in this document.

10. WHAT IF I HOLD OPTIONS AND AWARDS UNDER THE SHARE SCHEMES?

The Company may adjust options and awards under the Share Schemes in accordance with the rules of those plans to take account of the New Ordinary Shares issued pursuant to the Capital Raising. Any adjustments to options granted under the Sharesave Scheme may require the approval of HMRC. Shareholder approval is not required for any adjustments. Participants will be contacted separately with further information if adjustments are made.

11. I HOLD MY EXISTING ORDINARY SHARES IN CERTIFICATED FORM AND AM ELIGIBLE TO RECEIVE AN APPLICATION FORM. WHAT ARE MY CHOICES IN RELATION TO THE OPEN OFFER?

11.1 If you do not want to take up your Open Offer Entitlement

If you do not want to take up your Open Offer Entitlement you do not need to do anything. In these circumstances, you will not receive any New Ordinary Shares. You will also not receive any money when the New Ordinary Shares you could have taken up are sold, as would happen under a rights issue provided the price at which they are sold exceeds the costs and expenses of effecting the sale. You cannot sell your Open Offer Entitlement or Excess Open Offer Entitlement to anyone else. If you do not return your Application Form subscribing for the New Ordinary Shares to which you are entitled by 11.00 a.m. on 25 July 2018, such New Ordinary Shares will be made available for subscription under the Excess Application Facility. Failing that, the Group has made arrangements under which the Group has agreed to issue the New Ordinary Shares comprising your Open Offer Entitlement and the balance of Excess Shares which are not taken up by Shareholders to the Placees. Shareholders are, however, encouraged to vote at the General Meeting by attending in person or completing and returning the Form of Proxy enclosed with this document. You may also submit your Form of Proxy electronically at www.sharevote.co.uk using the Voting ID, Task ID and Shareholder Reference Number (SRN) printed on the Form of Proxy. Alternatively, if you have already registered with Equiniti's online portfolio service, Shareview, you can submit your Form of Proxy at www.shareview.co.uk. Full instructions are given on both websites.

If you do not take up your Open Offer Entitlement then following the issue of the New Ordinary Shares pursuant to the Capital Raising, your interest in the Company will be diluted by approximately 50 per cent.

11.2 If you want to take up some but not all of the New Ordinary Shares under your Open Offer Entitlement

If you want to take up some but not all of the New Ordinary Shares under your Open Offer Entitlement, you should write the number of New Ordinary Shares you want to take up in Box 4 of your Application Form; for example, if you have an Open Offer Entitlement for 50 New Ordinary Shares but you only want to apply for 25 New Ordinary Shares, then you should write '25' in Box 4. To work out how much you need to pay for the New Ordinary Shares, you need to multiply the number of New Ordinary Shares you want (in this example, '25') by 19 pence (the Issue Price) giving you an amount of £4.75 in this example.

You should write this total sum in Box 7, rounding down to the nearest whole pence, and this should be the amount your cheque or banker's draft is made out for. You should then return the completed Application Form, together with a cheque or banker's draft for that amount, in the accompanying pre-paid envelope by post to Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA so as to be received by no later than 11.00 a.m. on 25 July 2018, after which time Application Forms will not be valid. If you post your Application Form by first class post, it is recommended that you allow at least four Business Days for delivery.

All payments should be in Pounds Sterling and made by cheque or banker's draft made payable to 'Equiniti Limited re Mothercare plc Open Offer' and crossed 'A/C payee only'. Cheques or banker's drafts must be drawn on an account at a bank or building society or a branch of a bank or building society which is in the UK, the Channel Islands or the Isle of Man and which is either a settlement member of the Cheque and Credit Clearing Company Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques or banker's drafts to be cleared through the facilities provided by either of those companies. Cheques and banker's drafts must bear the appropriate sorting code number in the top right-hand corner and must be for the full amount payable on application. Post-dated cheques will not be accepted.

Cheques drawn on a non-UK bank will be rejected. Third party cheques may not be accepted with the exception of building society cheques or banker's drafts where the building society or bank has inserted details of the name of the account holder and have either added the building society or bank branch stamp or have provided a supporting letter confirming the source of funds. The account name should be the same as that shown on the application. Cheques or banker's drafts will be presented for payment upon receipt. Payments via CHAPS, BACS or electronic transfer will not be accepted. The Company reserves the right to instruct Equiniti to seek special clearance of cheques and banker's drafts to allow the Company to obtain value for remittances at the earliest opportunity. No interest will be paid on payments made before they are due. It is a term of the Open Offer that cheques shall be honoured on first presentation and the Company may elect to treat as invalid acceptances in respect of which cheques are not so honoured. All documents, cheques and banker's drafts sent through the post will be sent at the risk of the sender.

A definitive share certificate will then be sent to you for the New Ordinary Shares that you take up. Your definitive share certificate for New Ordinary Shares is expected to be despatched to you within ten Business Days of Admission.

11.3 If you want to take up all of your Open Offer Entitlement

If you want to take up all of the New Ordinary Shares available to you through your Open Offer Entitlement, all you need to do is sign page 1 of the Application Form (ensuring that all joint holders sign (if applicable)) and send the Application Form, together with your cheque or banker's draft for the amount (as indicated in Box 3 of your Application Form), payable to 'Equiniti Limited re Mothercare plc Open Offer' and crossed 'A/C payee only', in the accompanying pre-paid envelope by post to Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA so as to be received by no later than 11.00 a.m. on 25 July 2018, after which time Application Forms will not be valid. If you post your Application Form by first class post, it is recommended that you allow at least four Business Days for delivery.

11.4 If you want to take up Excess Shares pursuant to the Excess Application Facility

If you want to apply for Excess Shares you may do so by completing Boxes 5, 6 and 7 of the Application Form. However, the total number of New Ordinary Shares is fixed and will not be increased in response to any applications under the Excess Applications Facility. Applications under the Excess Application Facility will therefore only be satisfied to the extent of any fractional entitlements aggregated with any Basic Entitlements not taken up by other Qualifying Shareholders.

If there is an over-subscription resulting from excess applications, allocations in respect of such excess applications will be scaled down at the absolute discretion of the Board in consultation with Numis. Excess monies in respect of applications which are not met in full will be returned to the applicant (at the applicant's risk) without interest as soon as practicable thereafter by way of cheque or CREST payment, as appropriate.

11.5 If I buy Existing Ordinary Shares after the Record Date, will I be eligible to participate in the Open Offer?

If you bought your Existing Ordinary Shares after the Record Date, you are unlikely to be able to participate in the Open Offer in respect of such Existing Ordinary Shares. If you are in any doubt, please consult your stockbroker, bank manager or other appropriate financial adviser, or whoever arranged your share purchase. If you buy Existing Ordinary Shares on or after 6.00 p.m. on 5 July 2018, you will not be able to participate in the Open Offer in respect of such Existing Ordinary Shares.

12. I AM A QUALIFYING SHAREHOLDER, DO I HAVE TO APPLY FOR ALL THE NEW ORDINARY SHARES I AM ENTITLED TO APPLY FOR UNDER MY OPEN OFFER ENTITLEMENT?

You can take up any number of the New Ordinary Shares allocated to you under your Open Offer Entitlement, however, you can also apply for Excess Shares pursuant to the Excess Application Facility. Your maximum Open Offer Entitlement is shown on your Application Form in Box 2.

Any applications by a Qualifying Shareholder for a number of New Ordinary Shares which is equal to or less than that person's Open Offer Entitlement will be satisfied, subject to the Open Offer becoming unconditional. Excess applications will be satisfied only to the extent that corresponding applications by other Qualifying Shareholders are not made or are made for less than their pro rata entitlements. If there is an over-subscription resulting from excess applications, allocations in respect of such excess applications will be scaled down at the absolute discretion of the Board in consultation with Numis. If you decide not to take up all of the New Ordinary Shares comprised in your Open Offer Entitlement, then your proportion of the ownership and voting interest in the Company will be reduced to a greater extent than if you had decided to take up your full entitlement. Please refer to the answers to questions 11.1, 11.2, 11.3, 11.4 and 11.5 for further information.

13. WILL I HAVE TO PAY ANY FEES FOR TAKING UP MY OPEN OFFER ENTITLEMENT?

There will be no fee payable by you for taking up your Open Offer Entitlement (the only payment required is payment of an amount equal to the number of New Ordinary Shares taken up by you, multiplied by the Issue Price).

14. WILL I BE TAXED IF I TAKE UP MY ENTITLEMENTS?

If you are resident in the UK for UK tax purposes, you will not have to pay UK tax when you take up your right to receive New Ordinary Shares, although the Capital Raising may affect the amount of UK tax you pay when you sell your Ordinary Shares.

Further information for Qualifying Shareholders who are resident in the UK for UK tax purposes is contained in Part IX (Taxation) of this document. Shareholders who are in any doubt as to their tax position or who are subject to tax in any jurisdiction other than the United Kingdom should consult their professional advisers immediately.

15. WHAT SHOULD I DO IF I LIVE OUTSIDE THE UNITED KINGDOM?

Your ability to apply to subscribe for New Ordinary Shares may be affected by the laws of the country in which you live and you should take professional advice as to whether you require any governmental or other consents or need to observe any other formalities to enable you to take up your Open Offer Entitlement and/or an Excess Open Offer Entitlement. Shareholders with registered addresses or who are located in the United States or any other Excluded Territory are not eligible to participate in the Open Offer. Your attention is drawn to the information in paragraph 7 of Part IV (Terms and Conditions of the Capital Raising) of this document.

16. WILL THE CAPITAL RAISING AFFECT MY DIVIDENDS ON THE EXISTING ORDINARY SHARES?

The New Ordinary Shares will, when issued and fully paid, rank equally in all respects with the Existing Ordinary Shares, including with regard to the right to receive all dividends or other distributions made, paid or declared, if any, by reference to a record date after the date of their issue.

17. WHAT IF I CHANGE MY MIND?

If you are a Qualifying Non-CREST Shareholder, once you have sent your Application Form and payment to the Registrar you cannot withdraw your application or change the number of New Ordinary Shares for which you have applied, except in very limited circumstances which are set out in paragraph 7 of Part IV (Terms and Conditions of the Capital Raising) of this document.

18. WHAT SHOULD I DO IF I NEED FURTHER ASSISTANCE?

If you have any other questions, please contact Equiniti on 0333 207 6378 or +44 121 415 0950 (if calling from outside the UK). Lines are open from between 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays). Calls to the helpline from outside the UK will be charged at the applicable international rate. Please note that, for legal reasons, Equiniti are only able to provide information contained in this document (other than information relating to the Company's register of members) and, as such, will be unable to give advice on the merits of the Capital Raising or to provide financial advice. Equiniti staff can explain the options available to you, which forms you need to fill in and how to fill them in correctly.

Your attention is drawn to the further terms and conditions of the Capital Raising set out in Part IV (Terms and Conditions of the Capital Raising).

The contents of this document or any subsequent communication from Mothercare, Numis or any of their respective affiliates, officers, directors, employees or agents are not to be construed as legal, financial or tax advice. Each prospective investor should consult his, her or its own solicitor, independent financial adviser or tax adviser for legal, financial or tax advice.

PART III

INFORMATION ON THE NEW ORDINARY SHARES

1. DESCRIPTION OF THE TYPE AND CLASS OF SECURITIES ADMITTED

The New Ordinary Shares will be Ordinary Shares with a nominal value of one penny each following the Capital Reorganisation. The ISIN of the New Ordinary Shares will be GB0009067447, being the same ISIN as that of the Existing Ordinary Shares. The New Ordinary Shares will be created under the Companies Act and the Articles of Association. Following the Capital Raising and Related Party Transactions, the Company will have one class of Ordinary Shares, the rights of which are set out in the Articles of Association.

The New Ordinary Shares will be credited as fully paid and free from all liens, equities, charges, encumbrances and other interests. The New Ordinary Shares will rank pari passu in all respects with the Existing Ordinary Shares and rank in full for all other dividends and other distributions declared in respect of the ordinary share capital of Mothercare.

2. LISTING

The Existing Ordinary Shares are currently admitted to the premium listing segment of the Official List and admitted to trading on the London Stock Exchange's main market for listed securities.

Application will be made to the UK Listing Authority for the New Ordinary Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and dealings will commence in the New Ordinary Shares by 8.00 a.m. on 27 July 2018.

Listing of the New Ordinary Shares will not be sought on any stock exchange in connection with the Capital Raising or the Related Party Transactions other than the London Stock Exchange.

3. FORM AND CURRENCY OF THE NEW ORDINARY SHARES

The New Ordinary Shares will be issued in registered form and will be capable of being held in certificated and uncertificated form.

Title to the certificated New Ordinary Shares will be evidenced by entry in the register of members of the Company and title to uncertificated New Ordinary Shares will, in respect of Shareholders, be evidenced by entry in the operator register maintained by Euroclear (which forms part of the register of members of the Company). The registrar of the Company is Equiniti of Aspect House, Spencer Road Lancing, West Sussex BN99 6DA, United Kingdom.

If any New Ordinary Shares are converted to be held in certificated form, share certificates will be issued in respect of those shares in accordance with the Mothercare Articles of Association and applicable legislation. It is expected that definitive share certificates will be posted to the shareholders who have applied for the issue of New Ordinary Shares in certificated form within ten Business Days of Admission.

No share certificates will be issued in respect of the New Ordinary Shares in uncertificated form. If any such New Ordinary Shares are converted to be held in certificated form, share certificates will be issued in respect of those New Ordinary Shares in accordance with the Mothercare Articles of Association and applicable legislation.

The New Ordinary Shares will be denominated in pence.

4. RIGHTS ATTACHED TO THE NEW ORDINARY SHARES

The New Ordinary Shares will rank pari passu in all respects with the Existing Ordinary Shares and rank in full for all other dividends and other distributions declared in respect of the ordinary share capital of Mothercare. Each New Ordinary Share will have the same voting rights, rights on a return of capital and restrictions as the other Ordinary Shares, as set out in the Mothercare Articles of Association. These rights are set out in paragraph 3 of Part X (Additional Information) of this document.

5. RESOLUTION, AUTHORISATIONS AND APPROVALS RELATING TO THE NEW ORDINARY SHARES

The New Ordinary Shares will be created, allotted and issued pursuant to the authority to be granted under the Third Resolution and the Fourth Resolution proposed at the General Meeting.

6. DATES OF ISSUE AND SETTLEMENT

The New Ordinary Shares are expected to be issued and allotted on 27 July 2018.

7. DESCRIPTION OF RESTRICTIONS ON FREE TRANSFERABILITY

Save as set out below, the New Ordinary Shares are freely transferable.

The Company may, under the Companies Act, send out statutory notices to those it knows or has reasonable cause to believe have an interest in its shares, asking for details of those who have an interest and the extent of their interest in a particular holding of shares. When a person receives a statutory notice he has 14 days to comply with it. If he does not do so or if he makes a statement in response to the notice which is false or inadequate in some way, the Company can decide to restrict the rights relating to the identified shares and send out a further notice to the holder, known as a restriction notice. The restriction notice will take effect when it is delivered and will state, amongst other things, that the identified shares no longer give the Shareholder any right to attend or vote either personally or by proxy at a Shareholders' meeting or to exercise any other right in relation to Shareholders' meetings.

The Directors may also, without giving any reason, refuse to register the transfer of any Ordinary Shares which are not fully paid.

8. MANDATORY TAKEOVER BIDS, SQUEEZE-OUT AND SELL-OUT RULES

8.1 Mandatory bids

The City Code and Chapter 3 of Part 28 of the Companies Act apply to the Company. Under the City Code, if an acquisition of interests in shares were to increase the aggregate holding of an acquirer and persons acting in concert with it to an interest in shares carrying 30 per cent. or more of the voting rights in the Company, the acquirer and, depending upon the circumstances, persons acting in concert with it, would be required (except with the consent of the Takeover Panel) to make a cash offer for the outstanding shares in the Company at a price not less than the highest price paid for any interest in shares by the acquirer or his concert parties during the previous 12 months. A similar obligation to make such a mandatory offer would also arise on the acquisition of an interest in shares by a person holding (together with any persons acting in concert) an interest in shares carrying between 30 per cent. and 50 per cent. of the voting rights in the Company if the effect of such acquisition were to increase that person's percentage of the voting rights.

8.2 Squeeze-out rules

Under the Companies Act, if a 'takeover offer' (as defined in section 974 of the Companies Act) is made for the Ordinary Shares and the offeror were to acquire, or unconditionally contract to acquire, not less than 90 per cent. in value of the shares to which the offer relates (the 'Offer Shares') and not less than 90 per cent. of the voting rights attached to the Offer Shares, within three months of the last day on which its offer can be accepted, it could acquire compulsorily the outstanding shares not assented to the offer. It would do so by sending a notice to outstanding shareholders telling them that it will acquire compulsorily their shares and then, six weeks later, it would execute a transfer of the outstanding shares in its favour and pay the consideration to the Company, which would hold the consideration on trust for outstanding shareholders. The consideration offered to the shareholders whose shares are acquired compulsorily under the Companies Act must, in general, be the same as the consideration that was available under the takeover offer.

8.3 Sell-out rules

The Companies Act also gives minority shareholders a right to be bought out in certain circumstances by an offeror who has made a takeover offer. If a takeover offer related to all the Ordinary Shares and at any time before the end of the period within which the offer could be accepted the offeror held or had agreed to acquire not less than 90 per cent. of the Ordinary Shares to which the offer relates, any holder of Ordinary Shares to which the offer related who had not accepted the offer could by a written communication to the offeror require it to acquire those Ordinary Shares. The offeror is required to give any shareholder notice of his right to be bought out within one month of that right arising. The offeror may impose a time limit on the rights of the minority shareholders to be bought out, but that period cannot end less than three months after the end of the acceptance period. If a shareholder exercises his or her rights, the offeror is bound to acquire those Ordinary Shares on the terms of the offer or on such other terms as may be agreed.

8.4 Takeover bids

No public takeover bid has been made in relation to the Company during the last financial year or the current financial year.

9. TAXATION

Please see Part IX (Taxation) of this document for information relating to UK taxation (including a discussion of UK stamp duty and SDRT which is relevant to holders of New Ordinary Shares irrespective of their tax residence).

PART IV

TERMS AND CONDITIONS OF THE CAPITAL RAISING

INTRODUCTION

As explained in Part I (Letter from the Interim Executive Chairman of Mothercare plc), the Board is proposing to raise £32.5 million (before expenses) by the issue of 170,871,885 New Ordinary Shares at the Issue Price through the Capital Raising. The Open Offer is an opportunity for Qualifying Shareholders to apply for in aggregate up to 170,871,885 New Ordinary Shares at the Issue Price in accordance with the terms of the Open Offer.

Numis, as agent of the Company, has also made arrangements to conditionally place the Placing Shares with institutional investors at the Issue Price. The Placing Shares will be subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer. Subject to the waiver or satisfaction of the conditions and the Placing Agreement not being terminated in accordance with its terms, any Open Offer Shares not subscribed for under the Open Offer will be issued to Placees and/or the subscribers procured by Numis, with the net proceeds of the Placing being retained by Mothercare.

The Issue Price of 19 pence per New Ordinary Share represents an approximately 33.6 per cent. discount to the Closing Price of 28.6 pence per Ordinary Share on the Reference Date and an 11 per cent. discount to the Closing Price of 21.3 pence per Ordinary Share on 16 May 2018, being the Business Day prior to the announcement of the Capital Refinancing Plan.

The Capital Raising is conditional upon: (i) the First Resolution to Fifth Resolution being passed by Shareholders at the General Meeting (without material amendment); (ii) the Placing Agreement becoming or being declared unconditional (save in respect of Admission); and (iii) Admission becoming effective by not later than 8.00 a.m. on 27 July 2018 or such later time and/or date as Numis and Mothercare may agree (being not later than 8.00 a.m. on 30 September 2018).

The New Ordinary Shares will be in registered form and capable of being held in certificated form or uncertificated form in CREST. The New Ordinary Shares issued pursuant to the Capital Raising will together represent approximately 50 per cent. of the Enlarged Share Capital of the Company immediately following the Capital Raising.

The New Ordinary Shares will, when issued and fully paid, rank equally in all respects with Existing Ordinary Shares, including the right to receive all dividends or other distributions declared, if any, by reference to a record date after the date of their issue.

Application will be made to the UK Listing Authority for the New Ordinary Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the New Ordinary Shares to be admitted for trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and that dealings in the New Ordinary Shares will commence at 8.00 a.m. on 27 July 2018.

The Existing Ordinary Shares are already admitted to the premium listing segment of the Official List, to trading on the London Stock Exchange's main market for listed securities and to CREST.

Any Qualifying Shareholder who has sold or transferred all or part of their registered holdings of the Existing Ordinary Shares prior to the close of business on 5 July 2018 is advised to consult with his, her or its stockbroker, bank or other agent through or to whom the sale or transfer was effected as soon as possible since the invitation to apply for New Ordinary Shares under the Open Offer may be a benefit which may be claimed from him/her by the purchaser under the Rules of the London Stock Exchange.

1. TERMS AND CONDITIONS OF THE OPEN OFFER

Subject to the terms and conditions set out below (and, in the case of Qualifying Non-CREST Shareholders, the Application Form), and pursuant to the Placing Agreement, each Qualifying Shareholder who is not a Restricted Shareholder is being given an opportunity to apply for New Ordinary Shares at the Issue Price (payable in full on application and free of all expenses) on the following pro rata basis:

1 Open Offer Share for every 1 Existing Ordinary Share

held and registered in their name at the Record Date and so on in proportion to any other number of Existing Ordinary Shares then held.

Qualifying Shareholders may apply for any whole number of New Ordinary Shares. Applications by Qualifying Shareholders will be satisfied in full up to their Open Offer Entitlements. Excess applications will be satisfied only to the extent that corresponding applications by other Qualifying Shareholders are not made or are made for less than their pro rata entitlements and to the extent any fractions are aggregated and made available pursuant to the Excess Application Facility. If there is an over-subscription resulting from excess applications, allocations in respect of such excess applications will be scaled down at the absolute discretion of the Board, in consultation with Numis. Fractional entitlements will be disregarded.

Any fractional entitlements to New Ordinary Shares will be rounded down in calculating entitlements to New Ordinary Shares. Fractional entitlements to New Ordinary Shares will be aggregated and offered with the Excess Shares pursuant to the Excess Application Facility, and will ultimately accrue for the benefit of the Company. Accordingly, Qualifying Shareholders holding fewer than two Existing Ordinary Shares will have no entitlement to subscribe under the Open Offer. Holders of Existing Ordinary Shares in certificated and uncertificated form will be treated as separate accounts for the purposes of calculating Qualifying Shareholders' entitlements under the Open Offer, as will holdings under different designations and in different accounts.

The Issue Price represents a discount of approximately 33.6 per cent. to the Closing Price per Ordinary Share of 28.6 pence on 6 July 2018. Holdings of Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating the Open Offer.

If you have sold or otherwise transferred all your Existing Ordinary Shares before the ex-entitlement date, you are not entitled to participate in the Open Offer. Shareholders should be aware that the Open Offer is not a rights issue. As such, Qualifying Non-CREST Shareholders should note that their Application Forms are not negotiable documents and cannot be traded. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements and Excess Open Offer Entitlements will be admitted to CREST, and be enabled for settlement, the Open Offer Entitlements and Excess Open Offer Entitlements will not be tradeable or listed and applications in respect of the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim.

New Ordinary Shares for which application has not been made under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Qualifying Shareholders who do not apply to take up their entitlements will have no rights nor receive any benefit under the Open Offer. Any New Ordinary Shares which are not applied for under the Open Offer Entitlements and Excess Open Offer Entitlements may be allocated to Placees or, failing which, to Numis subject to the terms and conditions of the Placing Agreement, with the proceeds ultimately accruing for the benefit of the Company.

The attention of Shareholders and any persons (including, without limitation, custodians, nominees and trustees) who have a contractual or other legal obligation to forward this document or an Application Form into a jurisdiction other than the UK is drawn to paragraph 7 of this Part IV (Terms and Conditions of the Capital Raising) relating to Overseas Shareholders, which forms part of the terms and conditions of the Capital Raising. In particular, Restricted Shareholders will not be sent this document or the Application Form. Unless instructed otherwise by the Company or Numis, if you are resident or located in, or have a registered address in the United States and receive an Application Form, please destroy the Application Form.

The New Ordinary Shares issued pursuant to the Capital Raising will rank pari passu in all respects with the Existing Ordinary Shares. The New Ordinary Shares are not being made available in whole or in part to the public except under the terms of the Open Offer.

The Capital Raising has been fully underwritten by Numis and Shore Capital on, and subject to, the terms and conditions of the Placing Agreement. The Capital Raising is conditional, inter alia, upon: (i) the First Resolution to Fifth Resolution being passed by Shareholders at the General Meeting (without material amendment); (ii) the Placing Agreement becoming unconditional (save in respect of Admission); and (iii) Admission becoming effective by not later than 8.00 a.m. on 27 July 2018 (or such later time and/or date as the Company and Numis may agree, being not later than 8.00 a.m. on 30 September 2018).

In the event that these conditions are not satisfied, the Capital Raising will not proceed. In such circumstances, application monies will be returned (at the applicant's sole risk) without payment of interest, as soon as practicable thereafter. No temporary documents of title will be issued in respect of the New Ordinary Shares held in uncertificated form. Definitive certificates in respect of New Ordinary Shares taken up are expected to be posted to the Qualifying Shareholders who have validly elected to hold their New Ordinary Shares in certificated form within ten Business Days of Admission. Following Admission, the Placing Agreement will not be subject to any condition and will not be revoked. A summary of the principal terms of the Placing Agreement is set out in paragraph 15.2 of Part X (Additional Information) of this document.

The Existing Ordinary Shares are already CREST-enabled. No further application for admission to CREST is required for the New Ordinary Shares and all of the New Ordinary Shares when issued and fully paid may be held and transferred by means of CREST. In respect of those Qualifying Shareholders who have validly elected to hold their New Ordinary Shares in uncertificated form, the New Ordinary Shares are expected to be credited to their CREST stock accounts, by 8.00 a.m. on 27 July 2018.

Subject to the conditions above being satisfied and save as provided in this Part IV (Terms and Conditions of the Capital Raising), it is expected that:

• 1.1.1 Equiniti will instruct Euroclear to credit the appropriate stock accounts of Qualifying CREST Shareholders (other than Restricted Shareholders) with such Shareholders' Open Offer Entitlements and Excess Open Offer Entitlements, with effect from 8.00 a.m. on 9 July 2018;
• 1.1.2 New Ordinary Shares in uncertificated form will be credited to the appropriate stock accounts of relevant Qualifying CREST Shareholders who validly take up their Open Offer Entitlements and, if applicable, any Excess Open Offer Entitlements by 8.00 a.m. on 9 July 2018; and
• 1.1.3 share certificates for the New Ordinary Shares will be despatched within ten Business Days of Admission to relevant Qualifying Non-CREST Shareholders who validly take up their Open Offer Entitlements and Excess Open Offer Entitlements. Such certificates will be despatched at the risk of such Shareholders.

All monies received by the Receiving Agent in respect of the Open Offer Shares will be placed on deposit in a non-interest bearing account by the Receiving Agent.

In the event that the Open Offer does not become unconditional the Open Offer will lapse and application monies will be returned, (at the applicants' risk) without interest either as a cheque by first class post to the address set out on the Application Form or returned direct to the account of the bank or building society on which the relevant cheque or banker's draft was drawn as soon as practicable. The interest earned on monies held in the separate bank account will be retained for the benefit of the Company.

A Qualifying Shareholder who does not take up their Open Offer Entitlements in full (and does not receive any other New Ordinary Shares pursuant to the Capital Raising) will have their shareholding in the Company diluted by up to 50 per cent. as a result of the Capital Raising or 57.7 per cent. as a result of the Capital Raising and the conversion of the Shareholder Loans (assuming the Related Party Transactions are approved by Shareholders and conversion of the Shareholder Loans in full on their maturity date).

All Qualifying Shareholders taking up their Open Offer Entitlements and, if applicable, any Excess Open Offer Entitlements will be deemed to have given the representations and warranties set out in paragraph 3.8 below (in the case of Qualifying Non-CREST Shareholders) and paragraph 4.12 below (in the case of Qualifying CREST Shareholders) unless, in each case, such requirement is waived in writing by the Company.

All documents and cheques posted to or by Qualifying Shareholders and/or their transferees or renouncees (or their agents, as appropriate) will be posted at their own risk.

The attention of Overseas Shareholders is drawn to paragraph 7 of this Part IV (Terms and Conditions of the Capital Raising) which forms part of the terms and conditions of the Open Offer.

References to dates and times in this document should be read as subject to adjustment. The Company will make an appropriate announcement to a Regulatory Information Service giving details of any revised dates or times.

2. ACTION TO BE TAKEN IN CONNECTION WITH THE OPEN OFFER

The action to be taken in respect of the Open Offer depends on whether, at the relevant time, a Qualifying Shareholder has received an Application Form in respect of his entitlement under the Open Offer, including the Excess Application Facility, or has had his Open Offer Entitlements and Excess Open Offer Entitlements credited to his CREST Stock account.

If you are a Qualifying Non-CREST Shareholder and you are not a Restricted Shareholder, please refer to paragraph 3 and paragraphs 5 to 14 (inclusive) of this Part IV (Terms and Conditions of the Capital Raising).

If you are a Qualifying CREST Shareholder and you are not a Restricted Shareholder, please refer to paragraphs 4 to 14 (inclusive) of this Part IV (Terms and Conditions of the Capital Raising) and to the CREST Manual for further information on the CREST procedures referred to above.

Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors, as only their CREST sponsors will be able to take the necessary actions specified below to apply under the Open Offer in respect of the Open Offer Entitlements and Excess Open Offer Entitlements of such members held in CREST. CREST members who wish to apply under the Open Offer in respect of their Open Offer Entitlements in CREST should refer to the CREST Manual for further information on the CREST procedures referred to above.

Qualifying Shareholders who do not want to take up or apply for the New Ordinary Shares under the Open Offer should take no action and should not complete or return the Application Form or follow the procedures set out in paragraph 4 below to apply for New Ordinary Shares through CREST, as the case may be. Qualifying Shareholders are, however, encouraged to vote at the General Meeting by attending in person or by completing and returning the enclosed Form of Proxy (either in hard copy or electronically) or by completing and transmitting a CREST Proxy Instruction.

3. ACTION TO BE TAKEN IN RELATION TO OPEN OFFER ENTITLEMENTS REPRESENTED BY APPLICATION FORMS

3.1 General

Save as provided in paragraph 7 of this Part IV (Terms and Conditions of the Capital Raising) below, Qualifying Non-CREST Shareholders will have received an Application Form with this document.

The Application Forms set out:

• 3.1.1 in Box 1 on the Application Form, the number of Existing Ordinary Shares registered in such person's name at the Record Date (on which a Qualifying Non-CREST Shareholder's Open Offer Entitlement to New Ordinary Shares is based);
• 3.1.2 in Box 2, the Open Offer Entitlement to New Ordinary Shares for which such persons are basically entitled to apply under the Open Offer, taking into account that any fractional entitlements to New Ordinary Shares will be rounded down in calculating entitlements, such fractional entitlements being aggregated with any other New Ordinary Shares being made available pursuant to the Excess Application Facility;
• 3.1.3 in Box 3, how much they would need to pay in Pounds Sterling if they wish to only take up their Open Offer Entitlement in full;
• 3.1.4 the procedures to be followed if a Qualifying Non-CREST Shareholder wishes to dispose of all or part of his entitlement or to convert all or part of his entitlement into uncertificated form; and
• 3.1.5 instructions regarding acceptance and payment, consolidation and splitting.

Multiple applications will not be accepted. In the event of receipt of multiple applications the Company may in its sole discretion (with the consent of Numis) determine which application is valid and binding on the person by whom or on whose behalf it is lodged. All documents and remittances sent by post by or to an applicant (or as the applicant may direct) will be sent at the applicant's own risk.

Qualifying Non-CREST Shareholders may apply for less than their maximum Open Offer Entitlement should they wish to do so.

Subject to applying to take up their Open Offer Entitlement in full, Qualifying Non-CREST Shareholders may also apply for any Excess Shares (i.e. New Ordinary Shares in excess of their Open Offer Entitlement which have not been applied for by other Qualifying Shareholders) pursuant to the Excess Application Facility.

Qualifying Non-CREST Shareholders may also hold such an Application Form by virtue of a bona fide market claim.

The instructions and other terms set out in the Application Form constitute part of the terms and conditions of the Open Offer to Qualifying Non-CREST Shareholders.

The latest time and date for acceptance of the Application Forms and payment in full will be 11.00 a.m. on 25 July 2018. The New Ordinary Shares are expected to be issued on 27 July 2018. After such date the New Ordinary Shares will be in registered form, freely transferable by written instrument of transfer in the usual common form, or if they have been issued in or converted into uncertificated form, in electronic form under the CREST system.

3.2 Bona fide market claims

Applications to acquire New Ordinary Shares may only be made on the Application Form and may only be made by the Qualifying Non-CREST Shareholder named in it or by a person entitled by virtue of a bona fide market claim in relation to a purchase of Ordinary Shares through the market prior to 8.00 a.m. on 9 July 2018 (the date upon which the Ordinary Shares were marked 'ex' the entitlement to participate in the Open Offer). Application Forms may not be assigned, transferred or split, except to satisfy bona fide market claims prior to 3.00 p.m. on 23 July 2018.

The Application Form is not a negotiable document and cannot be separately traded. A Qualifying Non-CREST Shareholder who has sold or otherwise transferred all or part of his holding of Ordinary Shares prior to the date upon which the Ordinary Shares were marked 'ex' the entitlement to participate in the Open Offer, being 8.00 a.m. on 9 July 2018, should consult his broker or other professional adviser as soon as possible, as the invitation to acquire New Ordinary Shares under the Open Offer may be a benefit which may be claimed by the transferee.

Qualifying Non-CREST Shareholders who have sold or otherwise transferred all of their registered holdings prior to 8.00 a.m. on 9 July 2018 should, if the market claim is to be settled outside CREST, complete Box 8 on the Application Form and immediately send it, together with this document, to the broker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee, or directly to the purchaser or transferee, if known. The Application Form and this document should not, however, be forwarded to or transmitted in or into any Excluded Territory, including the United States. If the market claim is to be settled outside CREST, the beneficiary of the claim should follow the procedures set out in the accompanying Application Form. If the market claim is to be settled in CREST, the beneficiary of the claim should follow the procedures set out in paragraph 4 below.

Qualifying Non-CREST Shareholders who have sold or otherwise transferred part only of their Existing Ordinary Shares shown in Box 1 of their Application Form prior to 8.00 a.m. on 9 July 2018 should, if the market claim is to be settled outside CREST, complete Box 8 of the Application Form and immediately deliver the Application Form, together with a letter stating the number of Application Forms required (being one for the Qualifying Non-CREST Shareholder in question and one for each of the purchasers or transferees), the total number of Existing Ordinary Shares to be included in each Application Form (the aggregate of which must equal the number shown in Box 1 of the Application Form) and the total number of Open Offer Entitlements to be included in each Application Form (the aggregate of which must equal the number shown in Box 2), to the broker, bank or other agent through whom the sale or transfer was effected or return it by post to Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA so as to be received by no later than 11.00 a.m. on 25 July 2018. The Receiving Agent will then create new Application Forms, mark the Application Forms 'Declaration of sale or transfer duly made' and send them, together with a copy of this document, by post to the person submitting the original Application Form. The Application Form and this document should not, however, be forwarded to or transmitted in or into any Excluded Territory, including the United States.

3.3 Application procedures

Qualifying Non-CREST Shareholders who wish to apply to subscribe for all or any of the New Ordinary Shares in respect of their Open Offer Entitlement or any Excess Shares pursuant to the Excess Application Facility must return the Application Form in accordance with the instructions thereon. Completed Application Forms should be posted in the accompanying pre-paid envelope (in the UK only) or returned by post or by hand (during normal office hours only) to Equiniti so as to be received by Equiniti at Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA by no later than 11.00 a.m. on 25 July 2018, after which time, subject to the limited exceptions set out below, Application Forms will not be valid. Applications delivered by hand will not be checked upon delivery and no receipt will be provided. Qualifying Non-CREST Shareholders should note that applications, once made, will, subject to the very limited withdrawal rights set out in this document, be irrevocable and receipt thereof will not be acknowledged. If an Application Form is being sent by first-class post in the UK, Qualifying Shareholders are recommended to allow at least four working days for delivery.

Completed Application Forms should be returned together with payment in accordance with paragraph 3.4 below. All documents and remittances sent by post by or to an applicant (or as the applicant may direct) will be sent at the applicant's own risk. If Ordinary Shares have already been quoted to a Qualifying Non-CREST Shareholder and such Qualifying Non-CREST Shareholder's cheque or banker's draft is not honoured upon first presentation or such Qualifying Non-CREST Shareholder's applications is subsequently deemed invalid, the Company will be authorised (in its absolute discretion as to manner, timing and terms) to make arrangements for the sale of such Qualifying Non-CREST Shareholder's New Ordinary Shares and for the proceeds of sale (which for this purpose shall be deemed to be payments in respect of successful applications) to be paid to and retained by the Mothercare Group. None of Equiniti, Numis or the Mothercare Group, nor any other person, shall be responsible for or have any liability for any loss, expense or damage suffered by such Qualifying Non-CREST Shareholder as a member.

3.4 Payment

All payments must be made by cheque or banker's draft in Pounds Sterling payable to 'Equiniti Limited re Mothercare plc Open Offer' and crossed 'A/C payee only'. Cheques must be for the full amount payable on acceptance, and sent by post to Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA so as to be received as soon as possible and, in any event, not later than 11.00 a.m. on 25 July 2018. A prepaid envelope for use within the UK only will be sent with the Application Form.

Cheques must be drawn on the personal account of the individual investor where they have sole or joint title to the funds. Third party cheques may not be accepted with the exception of building society cheques or banker's drafts where the building society or bank has inserted details of the name of the account holder and have either added the building society or bank branch stamp or have provided a supporting letter confirming the source of funds. The name of the building society or bank account holder must be the same as the name of the Shareholder. Cheques or banker's drafts must be drawn in Pounds Sterling and on an account at a bank or building society or a branch of a bank or building society which must be in the UK, the Channel Islands or the Isle of Man and which is either a settlement member of the Cheque and Credit Company Clearing Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques or banker's drafts to be cleared through the facilities provided by either of those companies. Cheques and banker's drafts must bear the appropriate sorting code number in the top right-hand corner. Post-dated cheques will not be accepted. Payments via CHAPS, BACS or electronic transfer will not be accepted. Please do not send cash.

The Company reserves the right to have cheques and banker's drafts presented for payment on receipt. No interest will be allowed on payments made before they are due and any interest on such payments will be paid to the Company. It is a term of the Open Offer that cheques must be honoured on first presentation and the Company may, in consultation with Numis, elect to treat as invalid any acceptances in respect of which cheques are not honoured. Return of the Application Form with a cheque will constitute a warranty that the cheque will be honoured on first presentation.

If cheques or banker's drafts are presented for payment before the conditions of the Open Offer are fulfilled, the application monies will be kept in an interest-bearing account retained for the Company until all conditions are met. If the Open Offer does not become unconditional, no New Ordinary Shares will be issued and all monies will be returned (at the applicant's sole risk), without payment of interest, to applicants as soon as practicable, following the lapse of the Open Offer. The interest earned on such monies, if any, will be retained for the benefit of the Company.

If New Ordinary Shares are allotted to a Qualifying Non-CREST Shareholder and a cheque for that allotment is subsequently not honoured or such Qualifying Shareholder's application is subsequently otherwise deemed to be invalid, the Receiving Agent shall be authorised to (in its absolute discretion as to manner, timing and terms) but after consultation with Numis and the Company) make arrangements for the sale of such shares on behalf of the Company and for the proceeds of sale (which for these purposes shall be deemed to be payments in respect of successful applications) to be paid and retained by the Company. None of the Company, Equiniti or Numis, nor any other person, shall be responsible for, or have any liability for, any loss, expenses or damage suffered by any Qualifying Shareholder as a result.

If you have any questions relating to the completion and return of your Application Forms, please contact Equiniti Limited on 0333 207 6378 or +44 121 415 0950 (if calling from outside the UK). Lines are open from between 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays). Calls to the helpline from outside the UK will be charged at the applicable international rate.

3.5 Excess Application Facility

Any fractional entitlements will be aggregated with any Open Offer Entitlement not being taken up by any Qualifying Non-CREST Shareholders in full and the Excess Application Facility enables a Qualifying Non-CREST Shareholder to apply for Excess Shares.

The total maximum number of Open Offer Shares is fixed and will not be increased save to the extent that the Directors claw back New Ordinary Shares to the Excess Application Facility from the Placing. Applications for Excess Shares will be satisfied to the extent of any fractional entitlements and to the extent that other Qualifying Shareholders do not apply for their Open Offer Entitlements and such Excess Shares are not allocated to the Placing. If applications under the Excess Application Facility are received for more than the maximum number of New Ordinary Shares available, then such applications will be scaled back in the absolute discretion of the Company, in consultation with Numis.

Qualifying Non-CREST Shareholders who wish to apply for Open Offer Shares in excess of their Open Offer Entitlement must complete the Application Form in accordance with instructions set out on the Application Form.

Qualifying Non-CREST Shareholders who make applications for Excess Shares under the Excess Application Facility which are not met in full and from whom payment in full has been made will receive a pounds sterling amount equal to the number of Open Offer Shares applied and paid for, but not allocated to, the relevant Qualifying Non-CREST Shareholder, multiplied by the Issue Price. Monies will be returned as soon as reasonably practicable thereafter, without payment of interests and at the applicant's sole risk either through CREST or as a cheque by first class post to the address set out on the Application Form or returned direct to the account of the bank or building society on which the relevant cheque or banker's draft was drawn as soon as practicable.

Fractions of Excess Shares will not be issued under the Excess Application Facility and fractions of Excess Shares will be rounded down to the nearest whole number. Fractional entitlements to New Ordinary Shares will be aggregated and offered with the Excess Shares pursuant to the Excess Application Facility, and will ultimately accrue for the benefit of the Company.

3.6 Placee participation

Each Placee subscribing for Placing Shares under the Placing may apply for, or take up, its Open Offer Entitlement and apply under the Excess Application Facility.

3.7 Discretion as to validity of acceptances

If payment is not received in full by 11.00 a.m. on 25 July 2018, the offer to subscribe for New Ordinary Shares will be deemed to have been declined and will lapse. However, after consultation with Numis, the Company may, but shall not be obliged to, treat as valid (a) Application Forms and accompanying remittances that are received through the post not later than 11.00 a.m. on 25 July 2018 (the cover bearing a legible postmark not later than 11.00 a.m. on 25 July 2018); and (b) acceptances in respect of which a remittance is received prior to 11.00 a.m. on 25 July 2018 from an authorised person (as defined in section 31(2) of FSMA) specifying the number of New Ordinary Shares to be acquired and undertaking to lodge the relevant Application Form, duly completed, by 11.00 a.m. on 25 July 2018 and such Application Form is lodged by that time.

The Company may also (in its absolute discretion, but after consultation with Numis) treat an Application Form as valid and binding on the person(s) by whom or on whose behalf it is lodged even if it is not completed in accordance with the relevant instructions or is not accompanied by a valid power of attorney where required.

The Company reserves the right to treat as invalid any application or purported application for the New Ordinary Shares pursuant to the Open Offer that appears to the Company to have been executed in, despatched from, or that provides an address for delivery of definitive share certificates for New Ordinary Shares in, a Excluded Territory, including the United States.

The Company may, but shall not be obliged to, treat an Application Form as valid if the number of New Ordinary Shares for which the application is made is inconsistent with the remittance that accompanies the Application Form. In such case, the Company will be entitled to, in its absolute discretion, deem application to have been made for: (i) where an insufficient sum is paid, the greatest whole number of Open Offer Shares as would be able to be applied for with that payment at the Issue Price; and (ii) where an excess sum is paid, the greatest number of New Ordinary Shares inserted in Boxes 2 and 4 of the Application Form.

3.8 Effect of application

All documents and remittances sent by post by or to an applicant (or as the applicant may direct) will be sent at the applicant's own risk. By completing and delivering an Application Form the applicant:

• 3.8.1 represents and warrants to each of the Company and Numis that he has the right, power and authority, and has taken all action necessary, to make the application under the Open Offer and to execute, deliver and exercise his rights, and perform his obligations, under any contracts resulting therefrom and that he is not a person otherwise prevented by legal or regulatory restrictions from applying for New Ordinary Shares or acting on behalf of any such person on a non-discretionary basis;
• 3.8.2 agrees with each of the Company and Numis that all applications under the Open Offer and any contracts resulting therefrom, and any non-contractual obligations related thereto, shall be governed by, and construed in accordance with, the laws of England;
• 3.8.3 agrees with each of the Company and Numis that the Open Offer Shares and/or Excess Shares are issued subject to, and in accordance with, the Company's Articles of Association;
• 3.8.4 agrees with each of the Company and Numis that applications, once made, will be valid and binding, and subject to the very limited withdrawal rights set out in this document, be irrevocable;

• 3.8.5 confirms to each of the Company and Numis that in making the application he is not relying on any information or representation other than that contained in (or incorporated by reference in) this document, and the applicant accordingly agrees that no person responsible solely or jointly for this document or any part thereof, or involved in the preparation thereof, shall have any liability for any information or representation not so contained and further agrees that, having had the opportunity to read this document including any documentation incorporated by reference, he will be deemed to have had notice of all information contained in this document (including information incorporated by reference);

• 3.8.6 confirms to each of the Company and Numis that in making the application he is not relying and has not relied on Numis or any other person affiliated with Numis in connection with any investigation of the accuracy of any information contained in (or incorporated by reference in) this document or his investment decision;

• 3.8.7 confirms to each of the Company and Numis that no person has been authorised to give any information or to make any representation concerning the Group and/or the New Ordinary Shares (other than as contained in this document) and, if given or made, any such other information or representation should not be, and has not been, relied upon as having been authorised by the Company or Numis;
• 3.8.8 represents and warrants to the Company and Numis that if he has received some or all of his Open Offer Entitlements from a person other than the Company, he is entitled to apply under the Open Offer in relation to such Open Offer Entitlements by virtue of a bona fide market claim;
• 3.8.9 represents and warrants that the New Ordinary Shares are acquired in an "offshore transaction" as defined in and pursuant to regulations under the US Securities Act or otherwise in a transaction exempt from, or not subject to, the registration requirements under the US Securities Act;
• 3.8.10 represents and warrants to each of the Company and Numis that he is the Qualifying Shareholder originally entitled to the Open Offer Entitlements or that he received such Open Offer Entitlements by virtue of a bona fide market claim;
• 3.8.11 represents and warrants to the Company and Numis that he is not, nor is he applying on behalf of any person who is: (a) located, a citizen or resident, or a corporation, partnership or other entity created or organised in or under any laws, in or of any Excluded Territory or any jurisdiction in which the application for New Ordinary Shares is prevented by law, and (b) he is not applying with a view to re-offering, reselling, transferring or delivering any of the New Ordinary Shares which are the subject of his application to, or for the benefit of, a person who is located, a citizen or resident, or which is a corporation, partnership or other entity created or organised in or under any laws, in or of any Excluded Territory or any jurisdiction in which the application for New Ordinary Shares is prevented by law, nor acting on behalf of any such person on a non-discretionary basis nor a person(s) otherwise prevented by legal or regulatory restrictions from applying for New Ordinary Shares under the Open Offer;
• 3.8.12 represents and warrants to each of the Company and Numis that: (a) he is not in the United States, nor is he applying for the account of any person who is located in the United States; and (b) he is not applying for the New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any New Ordinary Shares into the United States;
• 3.8.13 represents and warrants to each of the Company and Numis that he is not, and nor is he applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in section 93 (depository receipts) or section 96 (clearance services) of the Finance Act 1986;
• 3.8.14 represents and warrants to each of the Company and Numis that he is not, and nor is he applying as a nominee or agent for, a person who is a Placee; and
• 3.8.15 requests that the New Ordinary Shares to which he will become entitled be issued to him on the terms set out in this document and the Application Form and, subject to the Mothercare Articles of Association.

3.9 Money Laundering Regulations

To ensure compliance with the Money Laundering Regulations, Equiniti may require, at its absolute discretion, verification of the identity of the beneficial owner by whom or on whose behalf the Application Form is lodged with payment (which requirements are referred to below as the 'verification of identity requirements'). If an application is made by a UK-regulated broker or intermediary acting as agent and which is itself subject to the Money Laundering Regulations, any verification of identity requirements are the responsibility of such broker or intermediary and not of Equiniti. In such case, the lodging agent's stamp should be inserted on the Application Form.

The person lodging the Application Form with payment (the 'applicant'), including any person who appears to Equiniti to be acting on behalf of some other person, shall thereby be deemed to agree to provide Equiniti with such information and other evidence as Equiniti may require to satisfy the verification of identity requirements. Submission of an Application Form shall constitute a warranty that the Money Laundering Regulations will not be breached by the acceptance of remittance and an undertaking by the applicant to provide promptly to Equiniti such information as may be specified by Equiniti as being required for the purpose of the Money Laundering Regulations.

If Equiniti determines that the verification of identity requirements apply to any applicant or application, the relevant New Ordinary Shares (notwithstanding any other term of the Open Offer) will not be issued to the relevant applicant unless and until the verification of identity requirements have been satisfied in respect of that applicant or application. Equiniti is entitled, in its absolute discretion, to determine whether the verification of identity requirements apply to any applicant or application and whether such requirements have been satisfied, and neither Equiniti nor the Company will be liable to any person for any loss or damage suffered or incurred (or alleged), directly or indirectly, as a result of the exercise of such discretion.

If the verification of identity requirements applies, failure to provide the necessary evidence of identity within a reasonable time may result in delays and potential rejection of an application. If, within a reasonable period of time following a request for verification of identity, Equiniti has not received evidence satisfactory to it as aforesaid, the Company may, in its absolute discretion, after consultation with Numis, treat the relevant application as invalid, in which event the application monies will be returned (at the applicant's risk) without interest to the account of the bank or building society on which the relevant cheque or banker's draft was drawn.

The verification of identity requirements will not usually apply if:

• 3.9.1 the applicant is a regulated UK broker or intermediary acting as agent and is itself subject to the Money Laundering Regulations;
• 3.9.2 the applicant is an organisation required to comply with the EU Money Laundering Directive (No. 91/308/EEC) as amended by Directives 2001/97/EC and 2005/60/EC;
• 3.9.3 the applicant is a company whose securities are listed on a regulated market subject to specified disclosure obligations;
• 3.9.4 the applicant (not being an applicant who delivers his/her application in person) makes payment through an account in the name of such applicant with a credit institution which is subject to the Money Laundering Regulations or with a credit institution situated in a non-EEA State which imposes requirements equivalent to those laid down in that directive; or
• 3.9.5 the aggregate subscription price for the relevant New Ordinary Shares is less than €15,000 (or its Pounds Sterling equivalent).

Submission of the Application Form with the appropriate remittance will constitute a warranty to each of the Company and Numis from the applicant that the Money Laundering Regulations will not be breached by application of such remittance.

Where the verification of identity requirements apply, please note the following as this will assist in satisfying the requirements (but does not limit the right of Equiniti to require verification of an identity stated above). Satisfaction of these requirements may be facilitated in the following ways:

(i) if payment is made by cheque or banker's draft drawn on a branch of a bank or building society in the UK and bears a UK bank sort code number in the top right hand corner, the following applies. Cheques, which are recommended to be drawn on the personal account of the individual investor where they have sole or joint title to the funds, should be made payable to 'Equiniti Limited re: Mothercare plc Open Offer' and crossed 'A/C payee only'. Third party cheques may not be accepted except for building society cheques or banker's drafts where the building society or bank has inserted details of the name of the account holder and have either added the building society or bank branch stamp or have provided a supporting letter confirming the source of funds. The account name should be the same as that shown on the application;

• (ii) if the Application Form is lodged with payment by an agent which is an organisation of the kind referred to in sub-paragraph (B) above or which is subject to anti-money laundering regulations in a country which is a member of the Financial Action Task Force (the current non-EU members of which are Argentina, Australia, Brazil, Canada, members of the Gulf Co-operation Council (being Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), Hong Kong, Iceland, India, Japan, Malaysia, Mexico, New Zealand, Norway, the People's Republic of China, the People's Republic of Korea, the Russian Federation, Singapore, South Africa, Switzerland, Turkey and the US), the agent should provide written confirmation that it has that status with the Application Form(s) and written assurances that it has obtained and recorded evidence of the identity of the person for whom it acts and that it will on demand make such evidence available to Equiniti and/or any relevant regulatory or investigatory authority; or
• (iii) if an Application Form is lodged by hand by the applicant in person, he should ensure that he has with him evidence of identity bearing his photograph (for example, his passport) and evidence of his address.

To confirm the acceptability of any written assurance referred to in paragraph (ii) above, or in any other case, the applicant should contact Equiniti Limited on 0333 207 6378 or +44 121 415 0950 (if calling from outside the UK). Lines are open from between 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays). Calls to the helpline from outside the UK will be charged at the applicable international rate.

3.10 Issue of New Ordinary Shares in certificated form

Definitive share certificates in respect of the New Ordinary Shares to be held in certificated form are expected to be despatched by post within ten Business Days of Admission, at the risk of the person(s) entitled to them, to accepting Qualifying Non-CREST Shareholders or their agents or, in the case of joint holdings, to the first-named Shareholder, in each case at their registered address (unless lodging agent details have been completed on the Application Form).

4. ACTION TO BE TAKEN IN RELATION TO OPEN OFFER ENTITLEMENTS CREDITED IN CREST

4.1 General

Save as provided in paragraph 7 of this Part IV (Terms and Conditions of the Capital Raising) in relation to certain Overseas Shareholders, each Qualifying CREST Shareholder is expected to receive a credit to his CREST stock account of his Open Offer Entitlements equal to the basic number of New Ordinary Shares for which he is entitled to apply to acquire under the Open Offer and also his Excess Open Offer Entitlement (see paragraph 4.3 below). Any fractional entitlements to New Ordinary Shares will be rounded down in calculating entitlements to New Ordinary Shares. Fractional entitlements to New Ordinary Shares will be aggregated with any other New Ordinary Shares being made available pursuant to the Excess Application Facility.

The CREST stock account to be credited will be an account under the participant ID and member account ID that apply to the Ordinary Shares held at the Record Date by the Qualifying CREST Shareholder in respect of which the Open Offer Entitlements and Excess Open Offer Entitlement have been allocated.

If for any reason it is not possible to admit the Open Offer Entitlements and/or Excess Open Offer Entitlements to CREST, or it is impracticable to credit the stock accounts of Qualifying CREST Shareholders by 8.00 a.m. on 27 July 2018 or such later time and/or date as the Company (after consultation with Numis) shall decide, Application Forms shall be sent out in substitution for the Open Offer Entitlements and Excess Offer Entitlements which should have been so credited and the expected timetable as set out in this document may be adjusted as appropriate. References to dates and times in this document should be read as subject to any such adjustment. The Company will make an appropriate announcement to a Regulatory Information Service giving details of the revised dates but Qualifying CREST Shareholders may not receive any further written communication.

Qualifying CREST Shareholders who wish to take up all or part of their Open Offer Entitlements and any Excess Shares should refer to the CREST Manual for further information on the CREST procedures referred to below. If you are a CREST sponsored member, you should consult your CREST sponsor if you wish to take up your entitlement, as only your CREST sponsor will be able to take the necessary action to take up your Open Offer Entitlements and any Excess Shares. If you have any questions relating to the completion and return of your Forms of Proxy, please contact Equiniti Limited on 0333 207 6378 or +44 121 415 0950 (if calling from outside the UK). Lines are open from between 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays). Calls to the helpline from outside the UK will be charged at the applicable international rate.

In accordance with the instructions in this Part IV (Terms and Conditions of the Capital Raising), the CREST instruction must have been settled by 11.00 a.m. on 25 July 2018.

4.2 Bona fide market claims

The Open Offer Entitlements and Excess Open Offer Entitlements will constitute a separate security for the purposes of CREST and will have a separate ISIN. Although Open Offer Entitlements and Excess Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of Open Offer Entitlements and Excess Open Offer Entitlements may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim transaction. Transactions identified by the CREST Claims Processing Unit as "cum" the Open Offer Entitlement and the Excess Open Offer Entitlement will generate an appropriate market claim transaction and the relevant Open Offer Entitlement(s) and Excess Open Offer Entitlement(s) will thereafter be transferred accordingly.

4.3 Excess Application Facility

Provided Qualifying CREST Shareholders choose to take up their Open Offer Entitlement in full, the Excess Application Facility enables Qualifying CREST Shareholders to apply for New Ordinary Shares in excess of their Open Offer Entitlement.

There is no limit on the amount of New Ordinary Shares that can be applied for under the Excess Application Facility, save that the maximum amount of New Ordinary Shares to be allotted under the Excess Application Facility will be limited by the maximum size of the Capital Raising less the aggregate of the New Ordinary Shares issued under the Open Offer pursuant to the Qualifying Shareholders' Open Offer Entitlements and the Placing Shares issued pursuant to the Placing. Applications for Excess Shares will be satisfied to the extent that other Qualifying Shareholders do not apply for their Open Offer Entitlements and their Excess Shares are clawed back from the Placing. If applications under the Excess Application Facility are received for more than the maximum number of shares available, then such applications will be scaled back at the absolute discretion of the Board in consultation with Numis. Excess monies in respect of applications which are not met in full will be returned to the applicant (at the applicant's risk) without interest as soon as practicable thereafter by way of cheque.

Each Qualifying CREST Shareholder will initially be credited with Excess Open Offer Entitlements equal to 10 times its Open Offer Entitlement. If a Qualifying CREST Shareholder would like to apply for Excess Shares over and above the number of Excess Open Offer Entitlements which have been credited, such Qualifying CREST Shareholder should contact Equiniti to request that further Excess Open Offer Entitlements be credited, subject at all times to the Maximum Excess Application Number.

All enquiries in connection with the procedure for application for Excess Open Offer Entitlements should be made to Equiniti on 0333 207 6378 or +44 121 415 0950 (if calling from outside the UK). Lines are open from between 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays). Calls to the helpline from outside the UK will be charged at the applicable international rate. Please note that calls may be recorded and randomly monitored for security and training purposes. Please note that Equiniti cannot provide advice on the merits of the proposals nor give personal, business, financial, tax, investment or legal advice.

An Excess Open Offer Entitlement in CREST may not be sold or otherwise transferred. Save as provided in paragraph 7 of this Part IV (Terms and Conditions of the Capital Raising) in relation to certain Overseas Shareholders, the CREST accounts of Qualifying CREST Shareholders will be credited with an Excess Open Offer Entitlement in order for any applications for Excess Shares to be settled through CREST. The credit of such Excess Open Offer Entitlement does not in any way give Qualifying CREST Shareholders a right to the New Ordinary Shares attributable to the Excess Open Offer Entitlement as an Excess Open Offer Entitlement is subject to scaling back in accordance with the terms of this document.

To apply for Excess Shares pursuant to the Open Offer, Qualifying CREST Shareholders should follow the instructions above and must not return a paper form and cheque.

Excess Open Offer entitlements will not be subject to Euroclear's market claims process. CREST Shareholders claiming Excess Open Offer Entitlements by virtue of a bona fide market claim are advised to contact the Receiving Agent to request a credit of the appropriate number of entitlements to their CREST account

Should a transaction be identified by the CREST Claims Processing Unit as "cum" the Open Offer Entitlement can be transferred, the Excess CREST Open Offer Entitlements will not transfer with the Open Offer Entitlement claim, but will need to be claimed separately by the purchaser who is advised to contact the Receiving Agent to request a credit of the appropriate number of Excess Open Offer Entitlements to their CREST account. Please note that a separate USE Instruction must be sent in respect of any application under the Excess CREST Open Offer Entitlement.

A Qualifying CREST Shareholder who has made a valid application for Excess Shares under the Excess Application Facility which is not met in full, and from whom payment in full for Excess Shares has been received, will receive a pounds sterling amount equal to the number of Excess Shares applied and paid for, but not allocated to, the relevant Qualifying CREST Shareholder, multiplied by the Issue Price. Monies will be returned as soon as reasonably practicable thereafter, without payment of interest and at the applicant's sole risk.

Fractions of Excess Shares will not be issued under the Excess Application Facility and fractions of Excess Shares will be rounded down to the nearest whole number.

4.4 USE Instructions for all or some of the open offer entitlements

Qualifying CREST Shareholders who are CREST members and who wish to apply for New Ordinary Shares in respect of all or some of their Open Offer Entitlements in CREST must send (or, if they are CREST sponsored members, procure that their CREST sponsor sends) an USE Instruction to Euroclear which, on its settlement, will have the following effect:

• 4.4.1 the crediting of a stock account of the Receiving Agent under the participant ID and member account ID specified below, with a number of Open Offer Entitlements corresponding to the number of New Ordinary Shares applied for; and
• 4.4.2 the creation of a CREST payment, in accordance with the CREST payment arrangements in favour of the payment bank of the Receiving Agent in respect of the amount specified in the USE Instruction which must be the full amount payable on application for the number of New Ordinary Shares referred to in paragraph 4.4.1 above.

4.5 Content of USE Instructions in respect of Open Offer Entitlements

The USE Instruction must be properly authenticated in accordance with Euroclear's specifications and must contain, in addition to the other information that is required for settlement in CREST, the following details:

• 4.5.1 the number of Open Offer Shares for which application is being made (and hence the number of the Open Offer Entitlement(s) being delivered to the Receiving Agent);
• 4.5.2 the ISIN of the Open Offer Entitlement. This is GB00BFXG1T50;
• 4.5.3 the CREST participant ID of the CREST member;

• 4.5.4 the CREST member account ID of the CREST member from which the Open Offer Entitlements are to be debited;

• 4.5.5 the participant ID of the Receiving Agent in its capacity as a CREST receiving agent. This is 2RA58;

• 4.5.6 the member account ID of the Receiving Agent in its capacity as a CREST receiving agent. This is RA292301;
• 4.5.7 the amount payable by means of a CREST payment on settlement of the USE Instruction. This must be the full amount payable on application for the number of Excess Shares referred to in 4.5.1 above;
• 4.5.8 the intended settlement date. This must be on or before 11.00 a.m. on 25 July 2018;
• 4.5.9 the Corporate Action Number for the Open Offer. This will be available by viewing the relevant corporate action details in CREST;
• 4.5.10 a contact name and telephone number (in the free format shared note field); and
• 4.5.11 a priority of at least 80.

In order for an application under the Open Offer to be valid, the USE Instruction must comply with the requirements as to authentication and contents set out above and must settle on or before 11.00 a.m. on 25 July 2018. CREST members and, in the case of CREST sponsored members, their CREST sponsors, should note that the last time at which a USE Instruction may settle on 25 July 2018 in order to be valid is 11.00 a.m. on that day.

If the conditions to the Open Offer are not fulfilled on or before 8.00 a.m. on 25 July 2018, or such other time and/or date as may be agreed between the Company and Numis, the Open Offer will lapse, the Open Offer Entitlements admitted to CREST will be disabled and the Receiving Agent will refund the amount paid by a Qualifying CREST Shareholder by way of a CREST payment, without interest as soon as practicable thereafter.

The interest earned on such monies, if any, will be retained for the benefit of the Company.

4.6 USE Instructions for the Excess Open Offer Entitlements

Qualifying CREST Shareholders who are CREST members and who wish to apply for New Ordinary Shares in respect of the Excess Open Offer Entitlements in CREST must send (or, if they are CREST sponsored members, procure that their CREST sponsor sends) a USE Instruction to Euroclear which, on its settlement, will have the following effect:

• 4.6.1 the crediting of a stock account of the Receiving Agent under the participant ID and member account ID specified below, with a number of Excess Open Offer Entitlements corresponding to the number of Excess Shares applied for; and
• 4.6.2 the creation of a CREST payment, in accordance with the CREST payment arrangements in favour of the payment bank of the Receiving Agent in respect of the amount specified in the USE Instruction which must be the full amount payable on application for the number of Excess Shares referred to in (i) above.

4.7 Content of USE Instructions in respect of Excess Open Offer Entitlements

The USE Instruction must be properly authenticated in accordance with Euroclear's specifications and must contain, in addition to the other information that is required for settlement in CREST, the following details:

• 4.7.1 the number of Excess Shares for which application is being made (and hence the number of the Excess Open Offer Entitlement(s) being delivered to the Receiving Agent);
• 4.7.2 the ISIN of the Excess Open Offer Entitlement. This is GB00BFXG1V72;
• 4.7.3 the CREST participant ID of the CREST member;

• 4.7.4 the CREST member account ID of the CREST member from which the Excess Open Offer Entitlements are to be debited;

• 4.7.5 the participant ID of the Receiving Agent in its capacity as a CREST receiving agent. This is 2RA59;

• 4.7.6 the member account ID of the Receiving Agent in its capacity as a CREST receiving agent. This is RA292302;
• 4.7.7 the amount payable by means of a CREST payment on settlement of the USE Instruction. This must be the full amount payable on application for the number of Excess Shares referred to in 4.7.1 above;
• 4.7.8 the intended settlement date. This must be on or before 11.00 a.m. on 25 July 2018;
• 4.7.9 the Corporate Action Number for the Open Offer. This will be available by viewing the relevant corporate action details in CREST;
• 4.7.10 a contact name and telephone number (in the free format shared note field); and
• 4.7.11 a priority of at least 80.

In order for an application under the Open Offer to be valid, the USE Instruction must comply with the requirements as to authentication and contents set out above, and must settle on or before 11.00 a.m. on 25 July 2018. CREST members and, in the case of CREST sponsored members, their CREST sponsors, should note that the last time at which a USE Instruction may settle on 25 July 2018 in order to be valid is 11.00 a.m. that day.

If the conditions to the Open Offer are not fulfilled on or before 8.00 a.m. on 25 July 2018 or such other time and/or date as may be agreed between the Company and Numis, the Open Offer will lapse, the Excess Open Offer Entitlements admitted to CREST will be disabled, and the Receiving Agent will refund the amount paid by a Qualifying CREST Shareholder by way of a CREST payment, without interest as soon as practicable thereafter.

The interest earned on such monies, if any, will be retained for the benefit of the Company.

4.8 CREST procedures and timings

Qualifying CREST Shareholders who are CREST members and CREST sponsors (on behalf of CREST sponsored members) should note that Euroclear does not make available special procedures in CREST for any particular corporate action. Normal system timings and limitations will therefore apply in relation to the input of a USE Instruction and its settlement in connection with the Open Offer. It is the responsibility of the Qualifying CREST Shareholder concerned to take (or, if the Qualifying CREST Shareholder is a CREST sponsored member, to procure that his CREST sponsor takes) the action necessary to ensure that a valid acceptance is received as stated above by 11.00 a.m. on 25 July 2018. Qualifying CREST Shareholders and (where applicable) CREST sponsors are referred in particular to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

4.9 Validity of application

A USE Instruction complying with the requirements as to authentication and contents set out above which settles by not later than 11.00 a.m. on 25 July 2018 will constitute a valid application under the Open Offer.

4.10 Incorrect or incomplete applications

If a USE Instruction includes a CREST payment for an incorrect sum, the Company, through the Receiving Agent, reserves the right:

• 4.10.1 to reject the application in full and refund the payment to the CREST member in question (without interest);
• 4.10.2 in the case that an insufficient sum is paid, to treat the application as a valid application for such lesser whole number of New Ordinary Shares as would be able to be applied for with that payment at the Issue Price, refunding any unutilised sum to the CREST member in question (without interest); or

4.10.3 in the case that an excess sum is paid, to treat the application as a valid application for all the New Ordinary Shares referred to in the USE Instruction, refunding any unutilised sum to the CREST member in question (without interest).

4.11 Placee participation

Each Placee subscribing for Placing Shares under the Placing may apply for, or take up, its Open Offer Entitlement and apply under the Excess Application Facility.

4.12 Effect of application

A CREST member or CREST sponsored member who makes or is treated as making a valid application in accordance with the above procedures thereby:

• 4.12.1 represents and warrants to each of the Company and Numis that he has the right, power and authority, and has taken all action necessary, to make the application under the Open Offer and to execute, deliver and exercise his rights, and perform his obligations, under any contracts resulting therefrom and that he is not a person otherwise prevented by legal or regulatory restrictions from applying for New Ordinary Shares or acting on behalf of any such person on a non-discretionary basis;
• 4.12.2 agrees with each of the Company and Numis to pay the amount payable on application in accordance with the above procedures by means of a CREST payment in accordance with the CREST payment arrangements (it being acknowledged that the payment to the Receiving Agent's payment bank in accordance with the CREST payment arrangements shall, to the extent of the payment, discharge in full the obligation of the CREST member to pay the amount payable on application);
• 4.12.3 agrees with each of the Company and Numis that all applications under the Open Offer and any contracts resulting therefrom, and any non-contractual obligations relating thereto, shall be governed by, and construed in accordance with, the laws of England;
• 4.12.4 agrees with each of the Company and Numis that the Open Offer Shares and/or Excess Shares are issued subject to, and in accordance with, the Company's Articles of Association;
• 4.12.5 agrees with each of the Company and Numis that applications, once made, will, be valid and binding, and subject to the very limited withdrawal rights set out in this document, be irrevocable;
• 4.12.6 confirms to each of the Company and Numis that in making the application he is not relying on any information or representation other than that contained in (or incorporated by reference in) this document, and the applicant accordingly agrees that no person responsible solely or jointly for this document or any part thereof, or involved in the preparation thereof, shall have any liability for any such information or representation not so contained and further agrees that, having had the opportunity to read this document, including any documentation incorporated by reference, he will be deemed to have had notice of all the information contained in this document (including information incorporated by reference);
• 4.12.7 confirms to each of the Company and Numis that in making the application he is not relying and has not relied on Numis or any other person affiliated with Numis in connection with any investigation of the accuracy of any information contained in (or incorporated by reference in) this document or his investment decision;
• 4.12.8 confirms to each of the Company and Numis that no person has been authorised to give any information or to make any representation concerning the Group and/or the New Ordinary Shares (other than as contained in this document) and, if given or made, any such other information or representation should not be, and has not been, relied upon as having been authorised by the Company or Numis;

• 4.12.9 represents and warrants to the Company and Numis that if he has received some or all of his Open Offer Entitlements and Excess Open Offer Entitlements from a person other than the Company, he is entitled to apply under the Open Offer in relation to such Open Offer Entitlements and Excess Open Offer Entitlements by virtue of a bona fide market claim;

• 4.12.10 represents and warrants to each of the Company and Numis that he is the Qualifying Shareholder originally entitled to the Open Offer Entitlements and Excess Open Offer Entitlement or that he has received such Open Offer Entitlements and Excess Open Offer Entitlements by virtue of a bona fide market claim;

• 4.12.11 represents and warrants to the Company and Numis that he is not, nor is he applying on behalf of any person who is: (a) located, a citizen or resident, or a corporation, partnership or other entity created or organised in or under any laws, in or of any Excluded Territory or any jurisdiction in which the application for New Ordinary Shares is prevented by law; and (b) applying with a view to re-offering, reselling, transferring or delivering any of the New Ordinary Shares which are the subject of his application to, or for the benefit of, a person who is located, a citizen or resident or which is a corporation, partnership or other entity created or organised in or under any laws, in or of any Excluded Territory or any jurisdiction in which the application for New Ordinary Shares is prevented by law, nor acting on behalf of any such person on a non-discretionary basis nor a person(s) otherwise prevented by legal or regulatory restrictions from applying for New Ordinary Shares under the Open Offer;
• 4.12.12 represents and warrants to each of the Company and Numis that: (a) he is not in the United States, nor is he applying for the account of a person who is located in the United States, and (b) he is not applying for the New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any New Ordinary Shares into the United States;
• 4.12.13 represents and warrants to each of the Company and Numis that he is not, and nor is he applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in section 93 (depository receipts) or section 96 (clearance services) of the Finance Act 1986;
• 4.12.14 requests that the New Ordinary Shares to which he will become entitled be issued to him on the terms set out in this document, subject to the Mothercare Articles; and
• 4.12.15 represents and warrants to each of the Company and Numis that he is not, and nor is he applying as a nominee or agent for, a person who is a Placee.

4.13 Discretion as to rejection and validity of acceptances

The Company may (with the consent of Numis):

• 4.13.1 reject any acceptance constituted by a USE Instruction, which is otherwise valid, in the event of a breach of any of the representations, warranties and undertakings set out or referred to in paragraph 4.12 of this Part IV (Terms and Conditions of the Capital Raising). Where an acceptance is made as described in this paragraph 4 which is otherwise valid, and the USE Instruction concerned fails to settle by 11:00 a.m. on 25 July 2018 (or by such later time and date as the Company and Numis may determine), the Company shall be entitled to assume, for the purposes of their right to reject an acceptance as described in this paragraph 4.13.1, that there has been a breach of the representations, warranties and undertakings set out or referred to in paragraph 4.12 above unless the Company is aware of any reason outside the control of the Qualifying CREST Shareholder or CREST sponsor (as appropriate) concerned for the failure of the USE Instruction to settle;
• 4.13.2 treat as valid (and binding on the Qualifying CREST Shareholder concerned) an acceptance which does not comply in all respects with the requirements as to validity set out or referred to in this paragraph 4;
• 4.13.3 accept an alternative properly authenticated dematerialised instruction from a Qualifying CREST Shareholder or (where applicable) a CREST sponsor as constituting a valid acceptance in substitution for, or in addition to, a USE Instruction and subject to such further terms and conditions as the Company may determine;
• 4.13.4 treat a properly authenticated dematerialised instruction (in this sub-paragraph, the 'first instruction') as not constituting a valid acceptance if, at the time at which Equiniti receives a

properly authenticated dematerialised instruction giving details of the first instruction, either the Company or Equiniti has received actual notice from Euroclear of any of the matters specified in CREST Regulation 35(5)(a) in relation to the first instruction. These matters include notice that any information contained in the first instruction was incorrect or notice of lack of authority to send the first instruction; and

4.13.5 accept an alternative instruction or notification from a Qualifying CREST Shareholder or (where applicable) a CREST sponsor, or extend the time for acceptance and/or settlement of a USE Instruction or any alternative instruction or notification if, for reasons or due to circumstances outside the control of any Qualifying CREST Shareholder or (where applicable) CREST sponsor, a Qualifying CREST Shareholder is unable validly to take up all or part of his Open Offer Entitlement by means of the above procedures. In normal circumstances, this discretion is only likely to be exercised in the event of any interruption, failure or breakdown of CREST (or of any part of CREST) or on the part of facilities and/or systems operated by Equiniti in connection with CREST.

4.14 Money Laundering Regulations

If you hold your New Ordinary Shares in CREST and apply to take up all or part of your entitlement as agent for one or more persons and you are not a UK or EU regulated person or institution (e.g. a bank, a broker or another UK financial institution), then, irrespective of the value of the application, Equiniti is required to take reasonable measures to establish the identity of the person or persons on whose behalf you are making the application. Such Qualifying CREST Shareholders must therefore contact Equiniti before sending any USE Instruction or other instruction so that appropriate measures may be taken.

Submission of a USE Instruction which constitutes, or which may on its settlement constitute, a valid acceptance as described above constitutes a warranty and undertaking by the applicant to the Company and Numis to provide promptly to Equiniti any information Equiniti may specify as being required for the purposes of the Money Laundering Regulations. Pending the provision of evidence satisfactory to Equiniti as to identity, Equiniti, having consulted with the Company, may take, or omit to take, such action as it may determine to prevent or delay settlement of the USE Instruction. If satisfactory evidence of identity has not been provided within a reasonable time, Equiniti will not permit the USE Instruction concerned to proceed to settlement (without prejudice to the right of the Company to take proceedings to recover any loss suffered by it as a result of failure by the applicant to provide satisfactory evidence).

4.15 Deposit of Open Offer Entitlements into, and withdrawal from, CREST

A Qualifying Non-CREST Shareholder's entitlement under the Open Offer as shown by the number of Open Offer Entitlements set out in his Application Form including the entitlement to apply under the Excess Application Facility, may be deposited into CREST (either into the account of the Qualifying Shareholder named in the Application Form or into the name of a person entitled by virtue of a bona fide market claim). Similarly, Open Offer Entitlements and Excess Open Offer Entitlements held in CREST may be withdrawn from CREST so that the entitlement under the Open Offer and entitlements under the Excess Application Facility are reflected in an Application Form. Normal CREST procedures (including timings) apply in relation to any such deposit or withdrawal, (in the case or a deposit into CREST) as set out in the Application Form.

A Qualifying Non-CREST Shareholder who wishes to make such a deposit should sign Box 8 and complete Box 11 of their Application Form, entitled 'CREST Deposit Form' and then deposit their Application Form with the CREST Courier and Sorting Service. In addition, the normal CREST stock deposit procedures will need to be carried out, except that (a) it will not be necessary to complete and lodge a separate CREST transfer form (as prescribed under the Stock Transfer Act 1963) with the CREST Courier and Sorting Service and (b) only the Open Offer Entitlement shown in Box 2 of the Application Form may be deposited into CREST. After depositing their Open Offer Entitlement into their CREST account, CREST holders will shortly thereafter receive a credit for their Excess Open Offer Entitlement, which will be managed by Equiniti.

If you have received your Application Form by virtue of a bona fide market claim, the declaration below Box 8 must be made or (in the case of an Application Form which has been split) marked 'Declaration of sale or transfer duly made'. If you wish to take up your Open Offer Entitlement, the CREST Deposit Form in Box 11 of your Application Form must be completed and deposited with the CREST Courier and Sorting Service in accordance with the instructions above. A holder of more than one Application Form who wishes to deposit Open Offer Entitlements shown on those Application Forms into CREST must complete Box 9 of each Application Form.

In particular, having regard to normal processing times in CREST and on the part of Equiniti, the recommended latest time for depositing an Application Form with the CREST Courier and Sorting Service, where the person entitled wishes to hold the Open Offer Entitlement set out in such Application Form as an Open Offer Entitlement in CREST and the entitlement to apply under the Excess Application Facility in CREST, is 3.00 p.m. on 20 July 2018. CREST holders inputting the withdrawal of their Open Offer Entitlement and any Excess Open Offer Entitlement from their CREST account are recommended that they withdraw their Open Offer Entitlement by 4.30 p.m. on 19 July 2018.

Delivery of an Application Form with the CREST deposit form duly completed, whether in respect of a deposit into the account of the Qualifying Shareholder named in the Application Form or into the name of another person, shall constitute a representation and warranty to the Company, Numis and Equiniti by the relevant CREST member(s) that it is/they are not in breach of the provisions of the notes under the paragraph headed 'Application Letter' on page 3 of the Application Form, and a declaration to the Company and the Receiving Agent from the relevant CREST member(s) that it is/they are, not located in, or citizen(s) or resident(s) of, any Excluded Territory or any jurisdiction in which the application for New Ordinary Shares is prevented by law, and that it is/they are, not located in the United States and, where such deposit is made by a beneficiary or a market claim, a representation and warranty that the relevant CREST member(s) is/are entitled to apply under the Open Offer by virtue of a bona fide market claim.

4.16 Right to allot and issue New Ordinary Shares in certificated form

Despite any other provision of this document, the Company reserves the right to allot and to issue any New Ordinary Shares in certificated form. In normal circumstances, this right is only likely to be exercised in the event of an interruption, failure or breakdown of CREST (or of any part of CREST) or of a part of the facilities and/or systems operated by Equiniti in connection with CREST.

5. TAXATION

Information on taxation with regard to the Capital Raising for Qualifying Shareholders who are resident in the UK for UK tax purposes is set out in Part IX (Taxation) of this document. The information contained in Part IX (Taxation) is intended only as a general guide to the current tax position in the United Kingdom and Qualifying Shareholders resident in the UK for UK tax purposes should consult their own tax advisers regarding the tax treatment of the Capital Raising in light of their own circumstances. Shareholders who are in any doubt as to their tax position or who are subject to tax in any other jurisdiction should consult their professional advisers immediately.

6. WITHDRAWAL RIGHTS

Qualifying Shareholders wishing to exercise the withdrawal rights under section 87Q(4) of FSMA after the issue by the Company of a prospectus supplementing this document (if any) must do so by lodging a written notice of withdrawal, which shall not include a notice sent by facsimile or any other form of electronic communication, that must include the full name and address of the person wishing to exercise such statutory withdrawal rights and, if such person is a Qualifying CREST Shareholder, the participant ID and the member account ID of such Qualifying CREST Shareholder at Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, so as to be received no later than two Business Days after the date on which the supplementary prospectus is published. Notice of withdrawal given by any other means or which is deposited with or received by Equiniti after expiry of such period will not constitute a valid withdrawal. Furthermore, it is the Company's view that Qualifying Shareholders will not be capable of exercising their withdrawal rights after payment by the relevant person for the New Ordinary Shares applied for in full and the allotment of such New Ordinary Shares to such person becoming unconditional save to the extent required by statute. In such circumstances, any such accepting Qualifying Shareholder or renouncee, wishing to withdraw is advised to seek independent legal advice. If you have any questions relating to the completion and return of your Forms of Proxy, please contact Equiniti Limited on 0333 207 6378 or +44 121 415 0950 (if calling from outside the UK). Lines are open from between 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays). Calls to the helpline from outside the UK will be charged at the applicable international rate. Please note that calls may be recorded and randomly monitored for security and training purposes. Please note that Equiniti Limited cannot provide advice on the merits of the proposals nor give personal, business, financial, tax, investment or legal advice.

7. OVERSEAS SHAREHOLDERS

This document has been approved by the FCA, being the competent authority in the UK. It is expected that Shareholders in each EEA State other than any Excluded Territory will be able to participate in the Open Offer.

It is the responsibility of any person (including, without limitation, custodians, nominees and trustees) outside the UK wishing to participate in the Open Offer to satisfy himself as to the full observance of the laws of any relevant territory in connection therewith, including the obtaining of any governmental or other consents which may be required, the compliance with other necessary formalities and the payment of any issue, transfer or other taxes due in such territories. The comments set out in this paragraph 7 are intended as a general guide only and any Overseas Shareholder who is in doubt as to his, her or its position should consult his, her or its professional adviser without delay.

7.1 General

The distribution of this document and the Application Form and the making of the Open Offer to persons resident in, or who are citizens of, or who have a registered address in countries other than the United Kingdom may be affected by the law of the relevant jurisdiction. Those persons should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to participate in the Open Offer.

No action has been or will be taken by the Company or any other person to permit a public offer or distribution of this document or the Application Form in any jurisdiction where action for that purpose may be required, other than in the UK. This section sets out the restrictions applicable to Shareholders who have registered addresses outside the UK, who are physically located outside the UK, or who are citizens or residents of countries other than the UK, or who are persons (including, without limitation, custodians, nominees and trustees) who have a contractual or legal obligation to forward this document to a jurisdiction outside the UK, or who hold Ordinary Shares for the account or benefit of any such person.

Open Offer Entitlements and Excess Open Offer Entitlements will be issued to all Qualifying Shareholders holding Ordinary Shares at the Record Date. However, Application Forms have not been, and will not be, sent to, and neither Open Offer Entitlements nor New Ordinary Shares will be credited to CREST accounts of, Restricted Shareholders, or to their agent or intermediary.

Having considered the circumstances, the Directors have formed the view that it is necessary or expedient to restrict the ability of the Shareholders in the United States and the other Excluded Territories to participate in the Open Offer due to the time and costs involved in the registration of the document and/or compliance with the relevant local legal or regulatory requirements in those jurisdictions.

Receipt of this document and/or an Application Form or the crediting of Open Offer Entitlements and/or Excess Open Offer Entitlements to a stock account in CREST will not constitute an offer in or into any Excluded Territory, including the United States, and, in those circumstances, this document and/or an Application Form must be treated as sent for information only and should not be copied or redistributed. No person receiving a copy of this document and/or an Application Form and/or receiving a credit of Open Offer Entitlements and/or Excess Open Offer Entitlements to a stock account in CREST in any territory other than the UK may treat the same as constituting an invitation or offer to him, nor should he in any event use the Application Form or deal with Open Offer Entitlements and/or Excess Open Offer Entitlements in CREST unless, in the relevant jurisdiction (other than any Excluded Territories), such an invitation or offer could lawfully be made to him and the Application Form or Open Offer Entitlements and/ or Excess Open Offer Entitlements in CREST could lawfully be used or dealt with without contravention of any unfulfilled registration or other legal or regulatory requirements.

Accordingly, persons (including, without limitation, custodians, agents, nominees and trustees) receiving a copy of this document and/or an Application Form or whose stock account in CREST is credited with Open Offer Entitlements and/or Excess Open Offer Entitlements should not, in connection with the Capital Raising, distribute or send the same in or into, or transfer Open Offer Entitlements or Excess Open Offer Entitlements to any person in or into, any Excluded Territory, including the United States. If an Application Form or credit of Open Offer Entitlements and/or Excess Open Offer Entitlements in CREST is received by any person in any Excluded Territory, including the United States, or by their agent or nominee in any such territory, he must not seek to take up the entitlements referred to in the Application Form or in this document or renounce the Application Form or transfer the Open Offer Entitlements or Excess Open Offer Entitlements in CREST. Any person who does forward this document or an Application Form into any Excluded Territory (whether under contractual or legal obligation or otherwise) should draw the recipient's attention to the contents of this section.

None of the Company or Numis or any of their respective representatives is making any representation to any offeree or purchaser of the New Ordinary Shares regarding the legality of an investment in the New Ordinary Shares by such offeree or purchaser under the laws applicable to such offeree or purchaser.

The Company may, with the consent of Numis, treat as invalid any acceptance or purported acceptance of the offer of the Open Offer Entitlements and/or Excess Open Offer Entitlements which appears to the Company or its agents to have been executed, effected or despatched in a manner which may involve a breach of the laws or regulations of any jurisdiction or if it believes or they believe that the same may violate applicable legal or regulatory requirements or if, in the case of an Application Form, it provides an address for delivery of the definitive share certificates for New Ordinary Shares in, or, in the case of a credit of New Ordinary Shares in CREST, the Shareholder's registered address is in, a Excluded Territory, including the United States, or if the Company believes or its agents believe that the same may violate applicable legal or regulatory requirements.

Despite any other provisions of this document or the Application Form, the Company reserves the right to permit any Overseas Shareholder (other than Restricted Shareholders) to take up his entitlements if the Company in its sole and absolute discretion, after consultation with Numis, is satisfied that the transaction in question is exempt from or not subject to the legislation or regulations giving rise to the restriction in question. If the Company is so satisfied, the Company will arrange for the relevant Overseas Shareholder to be sent an Application Form if he is reasonably believed to be a Qualifying Non-CREST Shareholder or, if he is reasonably believed to be a Qualifying CREST Shareholder, arrange for the CREST Open Offer Entitlements and Excess Open Offer Entitlements to be credited to the relevant CREST stock account.

Those Overseas Shareholders who wish, and are permitted, to take up their entitlement should note that payments must be made as described in paragraphs 3 and 4 of this Part IV (Terms and Conditions of the Capital Raising).

The provisions of paragraph 7 of this Part IV (Terms and Conditions of the Capital Raising) will apply generally to Restricted Shareholders and other Overseas Shareholders who do not or are unable to take up New Ordinary Shares.

Specific restrictions relating to certain jurisdictions are set out below.

(a) Offering restrictions relating to the United States

The New Ordinary Shares have not been, and will not be, registered under the US Securities Act or under the securities laws of any state, district or other jurisdiction of the United States. Accordingly, the New Ordinary Shares may not be offered, sold, resold, delivered, distributed or otherwise transferred, directly or indirectly, within the United States unless such offer and sale is made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. The New Ordinary Shares are being offered or sold outside the United States, in reliance on Regulation S.

No offering is being made in the United States and neither this document nor the Application Form constitutes or will constitute an offer or an invitation to apply for, or an offer or an invitation to acquire or subscribe for, any New Ordinary Shares in the United States. Subject to certain limited exceptions, the Application Forms will not be sent to, and the Open Offer Entitlements and Excess Open Offer Entitlements will not be credited to a stock account in CREST of, any Shareholder with a registered address in the United States.

Application Forms should not be postmarked in the United States or otherwise despatched from the United States, and all persons acquiring New Ordinary Shares and wishing to hold such shares in registered form must provide an address for registration of the New Ordinary Shares issued upon exercise thereof outside of the United States.

Neither the New Ordinary Shares, the Form of Proxy, the Application Form, this document nor any other document connected with the Capital Raising have been or will be approved or disapproved by the SEC or by the securities commissions of any state or other jurisdiction of the United States or any other regulatory authority, nor have any of the foregoing authorities or any securities commission passed upon or endorsed the merits of the offering of the New Ordinary Shares, the Form of Proxy, the Application Form, or the accuracy or adequacy of this document or any other document connected with this Capital Raising. Any representation to the contrary is a criminal offence in the United States.

Subject to certain limited exceptions, any person who subscribes for New Ordinary Shares will be deemed to have declared, represented, warranted and agreed to, by accepting delivery of this document or the Application Form or by applying for New Ordinary Shares in respect of Open Offer Entitlements and/or Excess Open Offer Entitlements credited to a stock account in CREST, and delivery of the New Ordinary Shares, the representations and warranties set out in paragraph 8 of this Part IV (Terms and Conditions of the Capital Raising).

The Company reserves the right, with the consent of Numis, to treat as invalid any Application Form: (i) that appears to the Company or its agents to have been executed in or despatched from the United States; or (ii) where the Company believes acceptance of such Application Form may infringe applicable legal or regulatory requirements, and the Company shall not be bound to issue any New Ordinary Shares in respect of any such Application Form. In addition, the Company reserves the right, in its absolute discretion, with the consent of Numis, to reject any USE Instruction sent by or on behalf of any CREST member with a registered address in the United States in respect of the New Ordinary Shares.

(b) Other overseas territories

Application Forms will be posted to Qualifying Non-CREST Shareholders (other than those Qualifying Non-CREST Shareholders who have registered addresses in the Excluded Territories) and Open Offer Entitlements and Excess Open Offer Entitlements will be credited to the CREST stock accounts of Qualifying CREST Shareholders (other than those Qualifying CREST Shareholders who have registered addresses in the Excluded Territories). No offer of or invitation to subscribe for New Ordinary Shares is being made by virtue of this document or the Application Form into the Excluded Territories. Overseas Shareholders in jurisdictions other than the Excluded Territories may, subject to the laws of their relevant jurisdiction, accept their entitlements under the Capital Raising in accordance with the instructions set out in this document and, in the case of Qualifying Non-CREST Shareholders only, the Application Form.

Shareholders who have registered addresses in or who are resident in, or who are citizens of, countries other than the United Kingdom should consult their appropriate professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their Open Offer Entitlements and any Excess Open Offer Entitlements. If you are in any doubt as to your eligibility to accept the offer of New Ordinary Shares, you should contact your appropriate professional adviser immediately.

8. REPRESENTATIONS AND WARRANTIES RELATING TO OVERSEAS TERRITORIES

8.1 Qualifying Non-CREST Shareholders

Subject to certain limited exceptions, any person completing and returning an Application Form or requesting registration of the New Ordinary Shares comprised therein represents and warrants to the Company that: (i) such person is not completing and returning such Application Form from within the United States or any other Excluded Territory; (ii) such person is not in any territory in which it is unlawful to make or accept an offer to subscribe for New Ordinary Shares or to use the Application Form in any manner in which such person has used or will use it; (iii) such person is not acting on a non-discretionary basis for a person located within the United States or any other Excluded Territory or any territory referred to in (ii) above at the time the instruction to accept or renounce was given; and (iv) such person is not acquiring New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Ordinary Shares into the United States or any other Excluded Territory or any territory referred to in (ii) above.

The Company may, with the consent of Numis, treat as invalid any acceptance or purported acceptance of the allotment of New Ordinary Shares comprised in, or renunciation or purported renunciation of, an Application Form if it: (a) appears to the Company to have been executed in or despatched from the United States or any other Excluded Territory or otherwise in a manner which may involve a breach of the laws of any jurisdiction or if the Company believes the same may violate any applicable legal or regulatory requirement; (b) provides an address in any Excluded Territory, including the United States, for delivery of definitive share certificates for New Ordinary Shares (or any jurisdiction outside the UK in which it would be unlawful to deliver such certificates); or (c) purports to exclude the representation and warranty required by this section.

8.2 Qualifying CREST Shareholders

A Qualifying CREST Shareholder who makes a valid acceptance in accordance with the procedure set out in paragraph 4 of this Part IV (Terms and Conditions of the Capital Raising) represents and warrants to the Company and Numis that subject to certain limited exceptions: (i) he is not within any of the Excluded Territories, including the United States; (ii) he is not in any territory in which it is unlawful to make or accept an offer to acquire or subscribe for New Ordinary Shares; (iii) he is not acting on a non-discretionary basis for a person located within the United States or any other Excluded Territory or any territory referred to in (ii) above at the time the instruction to accept was given; and (iv) he is not acquiring New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Ordinary Shares into the United States or any other Excluded Territory or any territory referred to in (ii) above.

The Company may, with the consent of Numis, treat as invalid any USE Instruction which: (a) appears to the Company to have been despatched from the United States or any other Excluded Territory or otherwise in a manner which may involve a breach of the laws of any jurisdiction or which they or their agents believe may violate any applicable legal or regulatory requirement; or (b) purports to exclude the representation and warranty required by this paragraph.

9. FURTHER INFORMATION

Your attention is drawn to the further information set out in this document and also in the case of Qualifying Non-CREST Shareholders to whom the Company has sent Application Forms, to the terms, conditions and other information printed on the accompanying Application Form.

10. WAIVER

The provisions of paragraphs 7 and 8 of this Part IV (Terms and Conditions of the Capital Raising) and of any other terms of the Capital Raising relating to Restricted Shareholders may be waived, varied or modified as regards specific Shareholder(s) or on a general basis by the Company in its absolute discretion after consultation with Numis. Subject to this, the provisions of paragraphs 7 and 8 of this Part IV (Terms and Conditions of the Capital Raising) supersede any terms of the Capital Raising inconsistent herewith. References in paragraphs 7 and 8 of this Part IV (Terms and Conditions of the Capital Raising) and in this paragraph 10 of Part IV (Terms and Conditions of the Capital Raising) to Shareholders shall include references to the person or persons executing an Application Form and, in the event of more than one person executing an Application Form, the provisions of this paragraph 10 of Part IV (Terms and Conditions of the Capital Raising) shall apply jointly to each of them.

11. ADMISSION, SETTLEMENT AND DEALINGS

The result of the Open Offer is expected to be announced on 26 July 2018. The New Ordinary Shares will be issued credited as fully paid and will rank pari passu in all respects with the Existing Ordinary Shares. The New Ordinary Shares will be created under the Companies Act and the legislation made thereunder, will be issued in registered form and will be capable of being held in both certificated and uncertificated form. The other rights attached to the New Ordinary Shares are set out in paragraph 3 of Part X (Additional Information) of this document.

Application will be made for the New Ordinary Shares to be admitted to listing on the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission of the New Ordinary Shares will become effective and dealings in the New Ordinary Shares will commence by 8.00 a.m. on 27 July 2018 (whereupon an announcement will be made by the Company to a Regulatory Information Service).

12. TIMES AND DATES

The Company shall in its discretion be entitled to amend the dates that Application Forms are despatched or dealings in New Ordinary Shares commence and amend or extend the latest date for acceptance under the Open Offer and all related dates set out in this document and in such circumstances shall announce such amendments via a Regulatory Information Service and, if appropriate, notify Shareholders.

If a supplementary prospectus is issued by the Company two or fewer Business Days prior to the latest time and date for acceptance and payment in full under the Open Offer specified in this document, the latest date for acceptance under the Open Offer shall be extended to the date that is three Business Days after the date of issue of the supplementary prospectus (and the dates and times of principal events due to take place following such date shall be extended accordingly).

13. GOVERNING LAW

The terms and conditions of the Capital Raising as set out in this document and the Application Form and any non-contractual obligation related thereto shall be governed by, and construed in accordance with, the laws of England and Wales.

14. JURISDICTION

The Courts of England are to have exclusive jurisdiction to settle any dispute, whether contractual or non-contractual, which may arise out of or in connection with the Capital Raising, this document and the Application Form. By accepting entitlements under the Capital Raising in accordance with the instructions set out in this document and, in the case of Qualifying Non-CREST Shareholders only, the Application Form, Qualifying Shareholders irrevocably submit to the exclusive jurisdiction of the Courts of England and waive any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.

PART V

INFORMATION ON THE GROUP

1. Overview

The Group's vision is to be the leading global specialist for parents and young children. It aims to achieve this through the provision of a coherent suite of products, services, education and expertise through stores and online in multiple territories around the world. Globally, there are currently 1,276 mothercare and ELC stores in 50 countries offering the Group's products, together with 36 online channels, which the Directors consider to be evidence of the strength and global appeal of the Group's brands. In the UK, mothercare and ELC products are sold both in the Group's store network and online through its multi-channel retail operations and additionally to its Wholesale Customers. Internationally, the Group's products are sold through its Franchise Partners' stores and websites as well as through online market places. Mothercare and ELC also sell product through its Wholesale Customers in multiple countries.

The Group's mothercare product offering includes Clothing & Footwear, comprising maternity wear and clothing and footwear for babies and children up to preschool age; Home & Travel including nursery room sets, buggy and pushchair systems, car seats, bedding, and nurture categories such as feeding, babycare and bath items; and Toys for babies and young children. The Group's Toy range is mainly ELC-branded with a smaller range of mothercare-branded products for babies and is designed and sourced by the Group's own operations. Its Clothing & Footwear range is designed in-house or by freelancers and also sourced from third parties. In all categories mothercare also acts as a retailer of third-party branded products. Due to mothercare's brand strength in the UK and elsewhere, many third-party branded product companies develop exclusive ranges for Mothercare or offer exclusive promotions.

The Group benefits from a strong heritage and high levels of customer awareness, trust and satisfaction which the Directors believe gives the Group a competitive advantage. The Group has developed an online offering in the UK which enables customers to access the Group's brands and products using different platforms (desktop PC, tablet, mobile and app), provides flexible delivery options (home delivery or click-andcollect in stores) and provides the Group with a social media and customer database that enables it to assess its customers' buying behaviour and to identify and meet customer-specific product needs. Through its instore and online offering, the Group provides customers with specialist advice and support, which the Directors believe provides the Group with a differentiated offering to many of its competitors including other specialist and generalist retailers.

The Group's International business is profitable and expected to continue to be so into the future. It is a cash generative but capital light franchise business model (with the exception of one joint-venture business in Ukraine), bringing the mothercare and ELC brands to customers at that most special point in their families' lives. The business has developed well since it opened the first franchise store in 1984 and Mothercare has worked alongside its Franchise Partners as they have grown their businesses in existing markets and breaking ground in new territories. Despite the macroeconomic and trading headwinds experienced in some of the Group's overseas markets in recent years, its International business remains a significant part of the business with the strong support of its major Franchise Partners.

As at 31 May 2018, 33 Franchise Partners operated 1,139 stores, with 361 stores in Europe, 352 stores in the Middle East and Africa, 385 stores in Asia and 41 stores in Latin America. The Group continues to seek to support further growth by assisting its Franchise Partners in continuing to develop a multi-channel approach, similar to that which is present in the UK. Such is the scale of the Group's international reach that in FY 2017/18, sales from franchise operations outside the UK represented nearly 62 per cent. of the Group's Worldwide Sales. The Group has, for a period, been working together with its longstanding partners to restructure, regularise and formalise the arrangements and contracts with its Franchise Partners. It has entered into new contracts with a number of the key partners, and will seek to repeat this across its International network. This will enable the Group over time to right size and strengthen its International business with terms of trade that incentivise both the Group and its Franchise Partners to support sustainable growth and brand strength, improved direct and online operations in their markets and globally, and improve the cash generation and profitability of Mothercare's International business. Additionally, the Group's franchise agreement in India, a significant and growing market is now under the ownership of the Reliance Group, one of India's largest companies and a significant retailer of local and international brands. The Board's understanding of the mothercare brand positioning, specialist knowledge and business, combined with the Reliance Group's stores and digital knowledge, is expected to enable Mothercare to enter a new phase of growth and realise the full potential of the mothercare brand in India.

2. Key Strengths

The Directors believe that the Group has a number of key strengths which help to differentiate it from its competitors:

• the Group's brands are a successful British retail export and, internationally, the Group has a proven track record of strong growth and profitability underpinned by a number of key long-standing franchisee relationships with an established brand presence in some of the world's largest, and fastest growing markets and an experienced International management team;
• Mothercare's strong brand heritage and trust levels with almost universal brand recognition in the UK;
• Mothercare holds established partnerships and relationships in the UK with certain specialist product and service providers who are recognised in the Group's sector;
• Mothercare holds a database of nearly 2.7 million UK customers (being active in the last 12 months) which it can use to communicate its brand, share specialist advice and support and promote products and services; and
• the Group has an adaptable business model, with an established multi-channel offering which means it is well positioned for future growth.

The Group's brands are a successful British retail export

In 1984, the Group began to expand its business internationally by entering into relationships with select partners, who started opening their own mothercare stores in certain countries. The Group has a proven track record of strong growth and profitability underpinned by a number of key long-standing franchisee relationships which is evidenced by its network of Franchise Partners throughout four key regions, with 1,139 International franchise stores and 36 online channels in operation as at 31 May 2018.

The Group has focused on expanding internationally (other than in the United States where the Group previously had wholesale relationships) through its franchise model, enabling the Group to achieve market penetration in the markets in which its Franchise Partners operate. Under the Group's arrangements with its Franchise Partners, the Group supplies products to its Franchise Partners and receives a royalty on sales. Each Franchise Partner is responsible for any financial investment associated with its own stores and for opening the store, managing working capital and acquiring stock.

The Group has, for a period, been working together with its longstanding partners to restructure, regularise and formalise the arrangements and contracts with its Franchise Partners. It has entered into new contracts with a number of the key partners, and will seek to repeat this across its International network. It has also moved the Group's franchise agreement in India to the ownership of the Reliance Group. This will enable the Group over time to:

• right size and strengthen its International business with terms of trade that incentivise both the Group and its Franchise Partners to support sustainable growth and brand strength, improved direct and online operations in their markets and globally; and
• improve the cash generation and profitability of Mothercare's International stores. Mothercare has significant and well-established store presence in key growth markets: Middle East 353 stores, Russia 170 stores, India 116 stores, China 111 stores and Indonesia 50 stores, as at 31 May 2018.

The Directors believe that the acceleration of the turnaround of the Group's UK operations and the implementation of the new transformation plan initiatives particularly improved product and service offering online and in store, is expected to strengthen the Group's brands and improve the Group's already successful International business and thereby unlock the value of this business.

Mothercare is a leading specialist for parents and young children with strong brand heritage and trust levels

Mothercare holds leading market share in the UK in several of our key product categories and the Group is a specialist retailer of products for parents and young children. In FY 2017/18, Mothercare grew its market share performance in hard goods from 25.1 per cent. to 25.8 per cent. with at least 30 per cent. market share being achieved in travel systems, car seats, nursery furniture and bedding. The Group enjoys strong customer trust. The Directors believe that the Group's customers trust its key product ranges due to product specialism for example in respect of preschool clothing, such as sleep suits, and due to quality, for example wooden dolls houses, kitchens and garages.

Mothercare holds established partnerships and relationships in the UK

Mothercare holds established partnerships and relationships in the UK with specialist product and service providers including Clarks (shoes), Babybond (ultrasound scanning), Memory Makers (keepsakes), National Childbirth Trust (antenatal advisory support), Bliss (prematurity charity), Royal College of Midwives, Health Visitors Association, Norland College (nursery nursing), Bounty (prenatal data collection), Tommy's (pregnancy, miscarriage and stillbirth charity), Lullaby Trust (sleep safety charity), TAMBA (twins and multiple births association) and Hubbub (sustainability).

These relationships and partnerships help to define the Group as a specialist and are a key differentiator to its competitors. In addition, they provide further credibility to the mothercare brand as a specialist in the market which can, in association with such partners, deliver in-store support to young parents such the expectant parent events and the new parent meetups that are organised and attended by the National Childbirth Trust. Furthermore, they enable the Group to create exclusive products, such as the Little Bird Rainbow Baby bodysuit which was developed in partnership with Tommy's. These relationships enable the Group to acquire customers, for example young parents signing in to Bounty at an early stage in pregnancy can sign up for Mothercare's MyMothercare club at the same time. Mothercare is the only UK retailer with such a relationship and signups through Bounty now account for more than half of the Group's total MyMothercare digital new customer acquisitions. In addition, certain partnerships increase the Group's sales by way of online citations of partnerships or products from Mothercare as well as providing valuable PR opportunities, for example the Gift A Bundle campaign with Hubbub.

Mothercare holds a database of nearly 2.7 million UK customers

Mothercare holds a database of nearly 2.7 million UK customers (being active in the last 12 months) which it can use to communicate its brand, share specialist advice and support and promote products and services.

The Group has an active targeted email programme sending information, advice and product recommendations to its customers personalised to their lifestage (week of pregnancy, age of baby). Email as a marketing channel drives approximately 10 per cent. of e-commerce revenue. In addition, this enables the Group to connect its customers to their local store using email or geotargeted app push notifications and invite customers to its Expectant Parent Events and New Parent Meetups using the power of the database. This in turn increases sales, brand recognition and customer loyalty.

The Group has an adaptable business model with an established multi-channel offering which means it is well positioned for future growth

The Group has developed a business model based on a vision of being a specialist retailer, providing a combination of own brand and third party branded products across each of its three main categories of Clothing & Footwear, Home & Travel and Toys. This structure enables the Group to adapt to the changing needs of the competitive market within which it operates and to be well placed to adjust its buying and sourcing approach in order to move into growth areas. The Group seeks to utilise its relationships with suppliers to offer customers product innovation and value, by offering new and exclusive products and designs.

The Group's multi-channel approach is designed to enable the Group's customers to access the Group's products and access and receive information and advice in the channel of their choice, with each channel designed to support the others. Whilst the Group has a variety of store formats, the implementation of the CVA Proposals will further refine the UK stores towards mid-size out of town retail park stores whilst optimising the e-commerce return on space. For further details of the Group's initiatives to reshape the UK store footprint through the CVA Proposals, please refer to paragraphs 3.2 and 8.2 of this Part V (Information on the Group).

The Directors expect the Group to work with its Franchise Partners to develop a multi-channel approach across the Group's major international markets. The Directors intend to invest in making further improvements to its existing infrastructure to support the further growth of the UK e-commerce business and enable cross-border e-commerce trade.

3. History and Development

3.1 Mothercare

The Group's first mothercare store was opened in the UK in 1961, and the Group's UK mail order business was established in 1962. In 1982, the business merged with the Habitat retail group, a retail chain of household furnishing products, to form Habitat Mothercare plc. In 1986, the mothercare business was brought within the same corporate group as British Home Stores plc (under a new parent company, Storehouse plc) and, in 1996, the mothercare business acquired Childrens World from Boots plc. Following a period of rationalisation in the 1990s, mothercare became the sole brand of the Group in 2000.

The mothercare business has expanded internationally by establishing relationships in certain territories with select Franchise Partners, such as Alshaya with whom the Group first partnered in 1983 (the first Alshaya mothercare store was opened in 1984), which is today the Group's largest Franchise Partner serving the Middle East, Africa and Russia. Over the years, the Group established additional franchise arrangements with select Franchise Partners in targeted markets, initially in the Middle East and Africa, followed by Europe, Asia and Latin America, typically granting the Mothercare franchise to one Franchise Partner per market. After the joint ventures in India (in 2015) and China (in 2017) were wound down, only one joint venture remains in the Ukraine where the group has a 30 per cent. stake in the joint venture SPV for use in the Ukraine. The Ukrainian SPV is subject to a franchise development agreement. As at 31 May 2018, the Group's sales network extended across approximately 50 countries, with more than approximately 2.9 million square feet of trading space, through 33 franchise relationships.

3.2 ELC

ELC was founded in 1974, originally as a mail order business offering toys and books with educational content. The first ELC retail store was opened in Reading in the same year. In June 2007, the owner of ELC, Chelsea Stores Holdings Limited, was acquired by the Group, bringing the ELC brand within the Group.

Prior to the Group's acquisition, the ELC business had expanded internationally in 1994, with the opening of the first store in Gibraltar. The Group has pursued further international expansion of the ELC business through franchise arrangements with select Franchise Partners in targeted markets.

3.3 Development of product offering

Historically, the Group's initial focus was on the sale of core products such as pushchairs, nursery furniture and maternity clothing. Over the years, the Group has expanded its product offering to include clothing for infants and preschool children, a wide range of maternity and post-maternity wear, furniture and home furnishings, products for bedding, feeding and bathing, travel equipment, toys and other products targeted at infants and children primarily up to preschool age. The Group's products include both mothercare and ELC branded and manufactured items, as well as third party branded products. Approximately 50 per cent. of the Group's ELC toys and games range is own-brand and among which, approximately 86 per cent. is sourced through the Group's modern sourcing centre in Hong Kong.

4. Organisational Structure

The Company is the Group's ultimate holding company. The Company has three significant trading subsidiaries, all of which are wholly-owned by the Company (either directly or indirectly): Mothercare UK Limited, a UK retailing company incorporated and registered in England and Wales and the main trading company within the Group; Mothercare Procurement Limited, a sourcing company incorporated in Hong Kong; and Early Learning Centre Limited, a retailing company incorporated and registered in England and Wales.

5. Market Overview

5.1 Market dynamics

UK

The market within which the Group operates is relatively stable. In the 12 months to March 2018, the Group was among the market leaders in many of its key product categories in the UK.

The birth rate in England and Wales has remained stable over the past decade, with an average of 63 live births per 1,000 people (source: Office of National Statistics Birth Summary Tables, England and Wales 1938 to 2016), equating to around 696,271 live births in England and Wales in 2016. The average spend per child in the UK in its first year is understood to be around £12,000 which includes food, clothing, toys, equipment and childcare.

The addressable UK market (including sales via store-in-store and online channels) is approximately £5.1 billion in size (based on sales), which comprises approximately £2.3 billion children's clothing from ages 0-5, approximately £1.8 billion traditional toys (for infants up to 72 months old) and £1.0 billion baby and nursery equipment (excluding products such as nappies, baby food and wipes).

The retail market in the UK has been challenged by a variety of factors over the past few years, as existing players have sought to expand and new entrants, particularly those in the online space, have gained market share. With the growth and increasing importance of online, smart phones and tablets, research is an increasingly critical part of the customer journey and has driven down prices and margins on branded goods and products, as market participants have failed to differentiate with unique products. Customers are increasingly visiting search engines or price comparison sites, comparing the price of a product on one retailer's website with that of a competitor or using mobile technology, such as barcode scanning apps, which enable users to check the prices of the Group's products against its competitors while in store.

International

The Directors believe that in the Group's key international markets of India, China, Indonesia, Russia and the Middle East, market growth continues to be strong with over 55 million births per year in the Group's key international markets. Two of the Group's largest territories, India and China, are forecast to enjoy double digit growth in childrens Clothing & Footwear and above average growth in Toys.

Online

Across the international markets of India, China, Indonesia, Russia and the Middle East, online is far less developed than in the UK and is therefore a significant untapped opportunity.

6. NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES

6.1 Brands

The Group's brands are of paramount importance to the success of its UK and International businesses. The Directors believe that the Group has clear brand positioning in the UK, and that its franchise model provides an element of localisation relevant to its international markets, which is important in enabling the Group's brands to be not only global, but also locally relevant brands.

Mothercare is the Group's oldest and flagship brand. The brand focuses on delivering quality, reliable and safe products that cater to the needs of parents and infants and preschool children, that will support and enhance their experience and journey through parenthood and childhood. The Directors believe that mothercare remains one of the most well-known brands in the marketplace for Clothing & Footwear and Home & Travel in the UK and international markets in which Franchise Partners operate.

ELC was acquired by the Group in 2007 and is the Group's core brand for its Toys product offering. The brand focuses on delivering quality and safe educational toys, designed to help children explore the boundaries of their imaginations and creativity and develop vital skills.

The Group seeks to enhance the customer experience by investing in a variety of activities and initiatives, promotional and public relations activities, enhancement of the Group's online platform, international expansion, product innovation, remodelling of stores in the UK and continued focus on customer service designed to promote the mothercare and ELC brand image and differentiate the Group from its competitors. The Directors believe that the Group's store network in the UK offers national coverage for both the mothercare and the ELC brands and that Franchise Partners' knowledge of their markets and enthusiasm for these brands provides locally-relevant international coverage.

The Group relies upon its ability to distribute a number of third party branded products, both in-store and online. Within the Group's Home & Travel business the product offering includes a wide variety of market leading brands to support the Group's position as the number one destination in the UK for Home & Travel products in its sector. The key third party brands distributed by the Group include Silver Cross, Britax, Joie, Nuna, Bugaboo, iCandy, Cybex, Babystyle, Chicco, The Gro Company, Dorel, Graco and Tommee Tippee which supply pushchairs, car seats, feeding accessories and furniture/bedding. The suppliers of many of these products offer the Group an exclusive arrangement whereby mothercare stores and/or ELC are the only stockists of certain product ranges, usually for a limited time period. There are a number of other smaller brands who work closely with the Group to supply branded products across Home & Travel.

The Directors believe that the Group provides an important route to market for its branded goods suppliers (most of which do not have their own dedicated specialist retail stores in the UK). The Group's stores and online platforms provide an avenue for the effective promotion and marketing of third-party branded products. The Group continues to work closely with its suppliers to ensure that its stores and online platforms support and enhance brand awareness and visibility of their products.

6.2 Products

The Group offers an extensive range of Clothing & Footwear, Home & Travel and Toys. In selecting products and product quantities for sale in the UK, the Company and internationally, the Group's Franchise Partners relies on historical trading data, customer orders and feedback, customer insight (based on, among other things, information sourced from the Group's loyalty scheme and CRM database) and product reviews to determine which products are likely to be popular. The range of merchandise displayed in each store in the UK and international markets varies depending on the selling season and the size and location of the store. Stores are generally open seven days per week (where permitted by law) and most public holidays.

The Group's UK customers can purchase the Group's products both in-store (using cash, debt or credit cards and gift cards) and online on the website or using the app (using debit or credit cards, PayPal, e-gift vouchers or gift cards). The Group also offers in-store payment plans for its UK customers in conjunction with third party credit providers that enable customers to spread payments on baskets over £249 on either 6 or 12 month interest-free payment plans, subject to credit approval by Mothercare's credit finance partner Close Brothers Retail Finance. The Group is exploring plans to offer payment plans online, as part of its digitally led initiatives.

Clothing & Footwear

The Group's Clothing & Footwear product lines comprises clothing for all preschool ages, with a strong focus on Newborn/Baby products for the 0-2 age group. The ranges offered include a majority of mothercare own-label product, with the addition of exclusive internal brands to add interest at the upper levels of the "Good-Better-Best" price architecture e.g. Little Bird by Jools Oliver and My K by Myleene Klass. The Group offers a strong range of good value white-line and basic products, as well as exclusive capsule collections which have been successfully developed e.g. Peter Rabbit which first emerged on the 150th anniversary of the birth of Beatrix Potter. Whilst all these ranges originated in Clothing & Footwear, there has been strong cross-fertilisation opportunities in other product divisions e.g. Little Bird bedding & strollers in hard goods. The main Clothing & Footwear competition derives from established mid-market players e.g. Next and Mamas & Papas who compete against the Better and Best range architecture, and Primark and supermarkets who offer a strong value proposition.

The Group's clothing range competes in the UK with specialist clothing retailers for parents and young children, as well as general retailers. In addition, the Group faces competition from supermarkets and online market players, particularly Amazon.

Home & Travel

The Group's Home & Travel category covers a wide range of products, including nursery room sets, buggy and pushchair systems, car seats, bedding, and nurture categories such as feeding, babycare and bath items. These include both own-brand and third party branded products. The Group and its Franchise Partners offer popular own-brand products across all categories in Home & Travel to complement the third party branded products sold by the Group and its Franchise Partners with a view to delivering a coherent and attractive range. Approximately 36 per cent. of the Group's products are own-label, primarily furniture, bedding, bathtime, baby gift products, some of which are priced as more premium products, complemented by a broader offering online. In other categories, the Group offers products that are attractive and good value, such as the mothercare Journey travel system and bedding starter sets. The Group sells a higher proportion of branded products in its pushchair, car seat baby entertainment and feeding product offering than its other product segments.

The Group's third party branded goods are an important element of the Group's Home & Travel product offering. The Group's key products in its pushchairs category include, but are not limited Silver Cross, Nuna, Bugaboo, Joie and iCandy pushchairs. The Group also stocks a variety of third party branded feeding products, with Tommee Tippee and Philips Avent, Dr Brown and newly introduced Nuk being particularly popular.

The Group's main competitors in the Home & Travel category in the UK include equipment retailers such as Argos and Amazon, Mamas & Papas and John Lewis. In addition, the pre-owned market, and independent mother and baby specialists are significant.

Toys

The Group's Toys category is operated primarily through its ELC brand, shop-in-shops and online channels. The Toys strategy is to focus on newborn through to preschool products where the ELC and mothercare brands have the greatest relevance. Customer favourites include Happyland and Blossom Farm, dolls houses, kitchens and other role play products, and summer outdoor play where the Group has strong ranges in sand and water play, paddling pools and garden games.

Mothercare has recently exited the UK market for school age toys which is characterised by branded products and is extremely price sensitive.

The Group's percentage of sales by product category for FY 2017/18 is set out below:

	Percentage of sales (per cent.)
	Clothing &	Home &
	Footwear	Travel	Toys
International	62	23	16
UK	31	54	15

Product design

The Group currently designs and sources a variety of its own-brand products. In Clothing & Footwear, the majority of the Group's product offering is own-brand, designed by the Group and sourced primarily from China, India and Bangladesh. The Group utilises its own sourcing offices in Asia for this purpose; the sourcing offices place orders with a group of local factories that are required to comply with the Group's Corporate Responsibility (CR) guidelines. These factories are regularly visited by representatives of the Group in order to ensure conformity to quality and ethical sourcing standards.

ELC-branded products are designed in collaboration between the Group's own buying and design teams, and a selection of suppliers in Asia, each of whom specialise in the product categories which they supply.

7. GEOGRAPHICAL SPLIT AND CHANNELS TO MARKET

7.1 International

Overview

The Group's International business, which is key to the Group's future growth strategy, is operated by a network of Franchise Partners throughout four key regions. The following diagram illustrates the global reach of the Group's International business. As at 24 March 2018, the Group's International trading space has reduced to approximately 2.87 million square feet (from approximately 2.95 million square feet as at 25 March 2017) in 1,131 stores in 49 countries. As at 31 May 2018, the Group's sales network extended across 50 countries, with more than approximately 2.9 million square feet of trading space, through 33 franchise relationships.

As at 24 March 2018, 32 Franchise Partners operated 1,131 stores, with 354 stores in Europe, 354 stores in the Middle East and Africa, 382 stores in Asia and 41 stores in Latin America. The following table shows the development of the number of the Group's stores by geographical location between the end of FY 2015/16 and FY 2017/18. The Directors believe that lost trading space in these markets was due to unique circumstances, as discussed below, and as such, the exclusion of these stores provides a more meaningful basis for comparability of growth in trading space and the number of stores for the past three financial years:

	As at	As at	As at
	24 March	25 March	26 March
	2018	2017	2016
		(square feet in thousands)
Trading space by region:		–	–
Europe	1,089	1,132	1,138
Middle East & Africa	892	847	811
Asia	851	908	901
Latin America	37	59	71
Total International trading space	2,869	2,946	2,921
	––––––––	–––––––– (square feet in thousands)	––––––––
Number of stores by region:
Europe	354	369	382
Middle East & Africa	354	351	336
Asia	382	380	372
Latin America	41	50	52
Total International stores	1,131	1,150	1,142

The Group encourages its Franchise Partners to establish a multi-channel approach to their respective markets (which, in many cases, has meant that they have benefitted from pioneer status for online sales in their market). As at 24 March 2018, transactional channels exist in Belarus, Chile, China, Cyprus, Estonia, Hong Kong, India, Indonesia, Ireland, Kuwait, Latvia, Malaysia, Malta, Pakistan, the Philippines (both mothercare and ELC), Russia, Singapore, Saudi Arabia, the United Arab Emirates, Turkey, and The Ukraine, thereby increasing the potential penetration of the Group in those markets.

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The Franchise model

The Group's International model currently comprises a network of 33 Franchise Partners across each of the Group's four key territories. Franchise Partners operate their own mothercare and/or ELC stores (which are owned or leased directly by the Franchise Partner) and, in certain jurisdictions, transactional mothercare and/or ELC websites. Franchise Partners operate under the mothercare and/or ELC trademarks, which better positions the Group to achieve international brand recognition.

Franchise Partners have entered into franchise agreements and/or development agreements with the Group under which they are required to purchase mothercare and/or ELC stock from the Group and sell it in the relevant territory or territories. The Group typically awards franchises to one partner per territory, to include both the mothercare and the ELC brands, with exceptions in certain territories, in part as a result of legacy franchise partnerships inherited following the Group's acquisition of ELC in 2007. The development agreements grant development rights within a specified development area to open and operate stores and trade online as well as licensing rights to use the Group's trade name or trademarks and other industrial or intellectual property rights.

The Group works closely with its Franchise Partners to support and monitor the development and growth of their store-based and online businesses, while providing oversight in relation to the manner in which each Franchise Partner operates its mothercare and/or ELC business, as well as their performance. In order to ensure consistency and compliance with the Group's quality standards and the uniform appearance of every mothercare or ELC store and website, the Group remains actively involved in Franchise Partners' store development plans. The Group also permits third-party products to be sold in mothercare or ELC-branded stores, but only with the Group's prior approval and so long as such products comply with the standards of quality set by the Group.

Under its franchise/development arrangements with Alshaya and most of its other Franchise Partners, the Group licenses the use of its brands, trademarks, know-how and other associated information, for which it receives a royalty fee. The Group also supplies products to Franchise Partners for which it is paid the cost of these products (including costs incurred relating to the products for supply, sourcing and design). The royalty fee is calculated based on an agreed percentage of a Franchise Partner's revenue from the sale of the Group's products and pre-approved third party products in mothercare or ELC-branded stores and outlets, which can be based on sales in one or more territories. In FY 2017/18, the substantial majority of the Group's sales in its International business were obtained through franchise/development agreements featuring royalty-based arrangements. Franchise Partners are allowed to source certain products locally but this tends to be the case more for Home & Travel products, where suppliers appoint local representatives to ensure their products comply with local legal requirements, including health and safety regulations. In the remaining minority of franchise/development agreements, the Group operates a cost-plus model, featuring a mark-up to the cost of goods sold to Franchise Partners.

For strategic reasons, the Group has invested, in conjunction with the relevant Franchise Partners, in a joint venture in the Ukraine. The joint venture SPV has entered into franchise agreements with the Group's subsidiaries and is therefore also treated as a Franchise Partner.

The Group's franchise model has proved to be a particularly attractive model for international expansion. The Directors believe that the model provides a low capital-intensity way of achieving penetration in the markets within which Franchise Partners operate (compared with operating its own stores internationally) as the costs associated with setting up and maintaining the business (including advertising and promotional costs, regulatory and licensing costs) are borne by the Franchise Partners. The ongoing operational costs of stores and website(s) are also borne by the Franchise Partners. Furthermore, the Group benefits from improved purchasing power, as product orders for both UK and international markets are amalgamated before being placed with suppliers.

Significant relationships

The Group's most significant and longest standing Franchise Partner is Alshaya, with whom it first partnered in 1983 and which accounted for 54 per cent. of the Group's reported revenue from its International business and 49 per cent. of Worldwide Sales of the Group's International business in FY 2017/18. In total, Alshaya operates 344 stores as at 24 March 2018, and has mothercare operations in the Middle East, North Africa, Russia and Eastern Europe. The Group's franchise agreement in India is also significant. This franchise has now moved to the ownership of the Reliance Group, one of India's largest companies and a significant retailer of local and international brands.

Franchise Partners operate both transactional and non-transactional websites in accordance with the terms of the relevant franchise/development agreement. Although the overseas transactional websites are owned and operated by Franchise Partners, the Group provides direction and support in relation to the visual aspects of the websites and the manner in which products are marketed to customers. The Group is committed to working with its partners to launch transactional online websites as their markets evolve and mature.

The Directors believe that the development of online channels has already provided and will continue to provide significant opportunity for future sales growth for its Franchise Partners, as international markets evolve and mature, which has enabled Franchise Partners to become pioneers in developing a multi-channel strategy in their territories.

The Group expects to invest further capital expenditure in the coming years to support its International business and to ensure that its infrastructure such as IT and information management systems as well as its distribution and fulfilment capabilities are able to support the demands of its Franchise Partners and foster further growth. Please refer to paragraph 6.3 in Part VI (Operating and Financial Review) for further details.

Joint venture

As referred to above, the Group currently has a joint venture investment in the Ukraine. This joint venture has entered into franchise/development agreements and is therefore also treated as a Franchise Partner.

7.2 UK

Overview

The Group is a multi-channel retailer of Clothing & Footwear, Home & Travel and Toys in the UK. In recent years, the Group's UK business has experienced a significant decline in trading performance, suffering heavy operating losses. Part of this decline is attributable to a structural shift in consumer purchasing habits towards the online channel, to which the Group was not well placed to be able to respond enough initially. The Group's strategic priority is to further develop the multi-channel shopping experience for its customers through further investment in the Group's online platform infrastructure (to enhance digital integration, navigation and functionality of the Group's website and app), as well as other online initiatives and investment in product and service.

UK stores

Over the past ten years, the Group has reduced its store estate to the current portfolio of 137 stores which is expected to reduce to 77 UK stores by June 2019 in a targeted portfolio through the acceleration of the transformation plan by the CVA Proposals and the entry into administration of Childrens World.

Online and digital

The Group's online business includes the delivery to home and delivery to store channels, enabling products to be delivered either to the customer's home address or to their chosen store for collection. In recent years, the Group has sought to improve its online offering, by, for example, investing in infrastructure to develop and improve the performance and functionality of its online platforms, and introducing free next-day delivery through its click-and-collect service to all mothercare and ELC stores in the UK.

As part of the Group's mobile-first approach, improvements have been made to the Group's app including a redesigning in line with the website and a new home page. With online channels becoming an increasingly important sales channel and representing a greater percentage of the Group's sales in the UK, the Directors believe that the Group's strategic focus on the online business in the UK is positioned to support revenue growth. The Group continues to explore additional ways to develop its multi-channel shopping experience, including further digital integration and customer personalisation.

While the Group operates in the UK, online business operates in the UK, and the Group is committed to working with its Franchise Partners to develop their online sales channel across all of the major markets within which the Group's products are sold.

7.3 UK wholesale

The Group generates revenue from wholesale arrangements, in the UK, which revenue is primarily derived from the Group's receipts from sales to Boots. Under the Group's main UK wholesale arrangement with Boots, the Group has collaborated to develop the exclusive Mini Club range of clothing for children aged from newborn to six years. This arrangement is a strategic partnership for which the Group also receives a fee, and it is the Group's only wholesale arrangement for Clothing & Footwear in the UK. In addition, the Group has entered into a number of wholesale arrangements for ELC and mothercare both in the UK and internationally but these are not currently material in the context of the Group's sales.

During FY 2017/18, the Group's sales to Wholesale Customers in the UK increased 2.5 per cent. to £36.8 million. Although Mini Club sales were broadly flat during FY 2017/18, sales increased in FY 2017/18 for the ELC wholesale business by 13 per cent., for mothercare Clothing & Footwear by 120 per cent. and mothercare Home & Travel by 126 per cent. The Group is seeking to grow the global wholesale business in the future as it assesses the suitability of new relationships.

7.4 Marketing

Brands

The Group's mothercare brand is both established and trusted by customers and is often a first port of call for pregnant mothers. The Group promotes its core mothercare and ELC brands together with internal sub-brands such as Little Bird by Jools Oliver and My K by Myleene Klass. The Group focuses on targeted email marketing supported by other channels, for example radio has been used to ensure traction during main sale periods. Social media activity has also strengthened – a recent development has been the 2am Club, a forum of mothers awake in the middle of the night for which mothercare facilitates interaction.

CRM and loyalty

In 2014, the Group launched MyMothercare, a loyalty scheme which captures life stage data and aims to improve customer service, engage customers and increase life affinity with the Group's key brands. The Group has updated its method of collecting and processing customer data to ensure GDPR compliance.

Through MyMothercare, the Group is able to communicate with its customers by offering tips, inspiration, advice and product offers including through weekly emails targeted to the life stage (week of pregnancy) of the customer. The Group has 750,000 members of MyMothercare that have been active within the last 12 months.

Customer satisfaction

Customers see the online shopping experience as good, yet there remains opportunity to improve customer experience of the Group's delivery and aftersales care. In the UK RPI 2017, the rate of the Group's customer uptake of mobile as a browse channel is one of the highest in the entire survey, underlining its importance, and the progress the Group is making.

The Group continues to improve year on year and score highly on its in-store MyCustomer satisfaction surveys with scores consistently around 80 per cent., which represents the proportion of customers who report themselves to be highly satisfied.

8. PROCUREMENT

8.1 Suppliers

Network

The Group purchases products from a number of different distributors, wholesale suppliers and manufacturers and the Group's relationships with these suppliers are valuable to its business. The majority of the Group's own-brand mothercare and ELC products are manufactured in Asia.

The Directors believe that the Group's vision to be the leading global specialist for parents and young children in the UK retail market means that it is an important point of entry for many third party branded products both in the UK and internationally.

The Group is seeking to increase the number of new products introduced in stores each year, which will require reduced lead times and therefore negotiation with the Group's main suppliers. The Directors believe that reduced lead times and the introduction of more new product lines will help the Group maintain its competitive position in the market.

9. DISTRIBUTION AND LOGISTICS

Product development and sourcing

The Group has significant sourcing and supply chain operations in China, Bangladesh, India and Hong Kong. The sourcing and supply chain operations in Hong Kong manage the sourcing programs (around 80 per cent. of the Group's product) with the Group's supply chain operations in the UK, South China and India supporting the Group's global retail network.

Warehousing and distribution

The main UK operations are at DIRFT (Daventry International Rail Freight Terminal) which supports all UK retail stores and e-commerce, as well as supporting International fulfilment and wholesale. This operation is run under contract by DHL and a small management team from Mothercare.

There is a second operation run by Prolog out of Mansfield, which handles all furniture orders in the UK and is the national returns processing centre for the Group. E-commerce fulfilment is a large and an expanding part of the Group's business in the UK. Deliveries are made either to a home or to a store nominated by the customer and are managed by 3 carrier specialists (notably Yodel, Hermes and DX distribution).

Overseas, the Group has fulfilment operations in both South China and India. Both are run under a contract by Expeditors International. These two operations support all of the Franchise Partners.

The Group has warehouse and distribution operations in the UK, China and India to support its global business.

10. CORPORATE RESPONSIBILITY ("CR")

10.1 Strategy

In FY 2016/17 the Group concluded a strategic review with input from key stakeholders. As a result, a new CR strategy called "CR 2020" was created and launched in January 2017.

The strategy is structured based on three areas of focus:

• Products: addressing the social and environmental impacts of making and using the Group's products. Key aims include: continuing to enhance ethical sourcing programmes through investing in training, supplier partnerships and vulnerable workers; reviewing how the Group can improve the sustainability of the raw materials used in products, prioritising cotton and timber; and encouraging suppliers to reduce the environmental impacts of production.
• Environment: making the Group's operations greener. Key aims are: aiming to continue to reduce combined buildings and transport carbon emissions; identifying opportunities to reduce packaging and produce it from more sustainable materials; and putting operational waste to good use and reduce the amount of waste going to landfill.
• Communities: strengthening the Group's ties with the communities in which it works. Key aims include: further developing the Group's community strategy to identify opportunities for colleagues and customers to give back to the communities in which the Group operates and providing information and support to mums and dads on parenting through the Group's in-store events.

10.2 CR 2020 targets & Performance Highlights

In FY 2016/17, the Group: built internal capacity and capability through strengthening the CR governance approach; launched the CR 2020 programme with the senior leadership team and trained the buying teams on responsible sourcing; continued to drive commitment to responsible sourcing by creating a consolidated responsible sourcing handbook and conducting dedicated supplier conferences in all major sourcing regions; continued to reduce total CO2e emissions through buildings and transport by 17 per cent.; and had 65 per cent. of senior management positions (below Board level) filled by women.

CR 2020 targets

The Group has set ambitious targets to enable it to track and report on progress. In so doing consideration has been given to how the Group can develop targets that support the overall aims of the UN Sustainable Development Goals ("SDG"). The Group believes the CR 2020 strategy can achieve the greatest impact on the following goals:

• good health and well-being;
• gender equality;
• decent work and economic growth;

• reduced inequalities;

• sustainable cities and communities;

• responsible consumption and production; and
• climate action.

During FY 2018/19, the Group plans to review these SDGs in more detail with the objective of understanding how the underlying indicators could influence the CR2020 strategy and help make the most positive impact.

Performance Highlights

• Products

The Group's biggest impact is made through the products it sells. Products are split into three main areas: (i) responsible sourcing (ii) environmental impacts of production and (iii) raw material sustainability.

For the Group, responsible sourcing means partnering with suppliers that: provide decent, safe and fair working conditions for their employees; treat employees with dignity and respect; reduce the environmental impacts of their operations; and demonstrate a strong commitment to business ethics. The Group's approach in this regard includes: conducting third party ethical audits to ensure the supplier complies with the Group's code of practice; undertaking in-house factory assessments and supplier training; and building internal knowledge of the Modern Slavery Act. The Group has collaborated with stakeholders as shown by: the Ethical Trading Initiative programmes which aim to promote ethical trades in southern India, China and Turkey; the Bangladesh Accord on Building and Fire Safety and the Suddoku programme (a programme of collaboration between the government of Bangladesh and the governments of the UK and of Switzerland aimed at increases the skills and productivity of factory workers to help them achieve higher wages in Bangladesh); and the Gender Equality Programme in India.

With regards the environmental impact of production, the Group developed the Mothercare Environmental Scorecard in partnership with Carnstone, which was implemented in 25 factories in China. The Group has also worked with a Chinese non-governmental organisation called the Institute of Public and Environmental Affairs ("IPE") to help improve the Group's Chinese suppliers' environmental performance.

A review of the Group's products showed that cotton and timber are the most significant raw materials in terms of importance to the Group and in relation to environmental impacts. Mothercare has therefore set targets for 50 per cent. of cotton to come from sustainable sources by 2023 and for all timber and timber based product to be 100 per cent. responsibly sourced by 2023.

• Environment

FY 2017/18 continued to be a year of infrastructural change in the Group, with the on-going reconfiguration of the distribution system, store closure and refit programme.

The Group's overall CO2e emissions reduced, in absolute terms, by 17 per cent. versus FY 2016/17. While both buildings energy and transport energy consumption reduced year on year, a large factor behind the fall was the impact of the Department of Environment, Food and Rural Affairs emissions conversion factor annual changes, which saw grid electricity emissions reduce by 15 per cent.

• Communities

With regards to diversity, a quarter of board positions and 67 per cent. of senior management roles (not including executive management) are held by females. Throughout the rest of the Group 92 per cent. of UK retail staff and 73 per cent. of UK office staff are female.

Communication has continued to be important and the Group holds monthly briefing calls led by the executive team as well as operating Club Hub, the Group's intranet. An employee consultative forum has been created and in 2018, the Group introduced 'you talk, we listen' in order for staff to share thoughts and opinions on the Group.

In relation to charitable giving, the official Group charity for FY 2017/18 was Bliss, for whom the Mothercare Group Foundation made donations of £40,000. The partnership with Bliss has been extended to April 2019. The Group also runs a matching fund which matches employees' own fundraising activities up to a maximum of £250 per activity. During FY 2017/18, £5500 was donated to top up employees' fundraising. During FY 2017/18 £91,000 was donated to Trees for Cities bringing the total donations to the charity since 2015 to £293,000.

10.3 Governance

The strategic direction of the CR 2020 programme is developed by the Global Head of CR and agreed with the Board and the Operating Board.

Plc board

Through the Audit and Risk Committee, the Board was updated on the CR strategy and progress in FY 2016/17. This update takes place at least once a year.

CR 2020 steering committee

A steering committee has been established to measure progress against this strategy. It meets bi-annually and is made up of key members of the senior leadership team. In the capacity as chair of the CR 2020 steering committee, the Chief Financial Officer represents the agenda with the Operating Board.

CR 2020 operational committee

Each of the three areas of focus within the CR 2020 strategy is governed by an operational committee whose purpose is to meet quarterly to track and report on progress on the relevant priorities within each area.

CR team

The team is led by the Global Head of CR who develops the strategy and co-ordinates the implementation, measurement and reporting of the CR programme. The Global Head of CR has specific accountability for responsible sourcing and has a dedicated team of responsible sourcing professionals, based in China, India and Bangladesh. This team leads the Group's approach of continuous improvement and collaboration with partners such as suppliers, other retailers, NGOs and other advisors.

11. NUMBER OF EMPLOYEES

For the 52 weeks ended 24 March 2018, the Group directly employed an average of 4,749 people worldwide, of which an average of 4,574 people worked in the UK and 175 people worked in the Group's overseas offices in India, Bangladesh, Hong Kong and China. As at 24 March 2018, 1,135 employees were full time. These figures do not include those individuals employed by and working for the Franchise Partners. As at 24 March 2018, 546 of the Group's employees were directly managed from the head office in Watford, with the other remaining employees being the Group's UK store staff and its overseas employees.

The following table sets out the average monthly number of employees throughout the Group (including full and part-time employees and including Executive Directors), during the periods indicated:

	For the	For the	For the
	52 weeks	52 weeks	52 weeks
	ended	ended	ended
	24 March	25 March	26 March
	2018	2017	2016
No. of employees comprising
UK Stores	3,932	4,321	4,488
Head Office	642	703	682
Overseas	175	187	176
Total	4,749	5,211	5,346
Full time equivalents	2,966	3,099	3,153

There is no company-wide union supporting the workforce. The Company is a member of the British Retail Consortium.

12. INFORMATION TECHNOLOGY

The Group's IT operation, which is managed from its head office in Watford, services several sites including the Group's distribution centres and overseas sourcing offices in Bangladesh, China, Hong Kong and India. Group IT now operates multichannel commerce systems across websites, mobile application and stores in UK plus global merchandising and supply chain systems.

The Group has recently invested in the customer offering by delivering a modern merchandise planning system, implemented order management and fulfilment software that allows the Group to fulfil customer orders and store replenishment from a single campus, refreshed salesforce commerce cloud websites to optimise customer experience on mobile devices. The Group has also enhanced its supply chain capabilities to support its Franchise Partners to improve fulfilment to territories.

The Group has invested in several areas to both stabilise infrastructure, including a complete refresh of all of the Group's Wide Area Network (WAN) across the UK estate, upgrading critical merchandising systems, improving Data Centre resilience and maintaining supportable hardware.

In addition to Salesforce, the Group relies on the provision of IT services by Tata Consultancy Services (TCS), APTOS and The Daisy Group. The Group has a contract with TCS for its service operations and application support. The Daisy Group provide WAN, hosting, and telephony services. APTOS provide a managed service for store estate.

The Group owns the right to approximately 400 domain names, with its key domains being www.mothercareplc.com, and www.elc.co.uk. For further information about the Group's domain names and other key intellectual property, please see paragraph 15 of this Part V (Information on the Group) below.

13. PROPERTY, PLANT AND EQUIPMENT

13.1 UK stores

As at 24 March 2018, approximately 62 per cent. of the Group's UK stores were occupied pursuant to leases of less than five years, and the average end date of those leases was 4.5 years which, as they are under five years, are considered short leases. The remaining UK stores were either occupied pursuant to leases with longer average break clauses or freehold ownership by the Group. Although the Group does not have a standard lease for every store, lease terms are typically between 5 and 15 years from inception. As at 24 March 2018, of the Group's 137 trading stores in the UK, all of the stores occupied pursuant to short leases were subject to upwards-only rent reviews, which are typically conducted every five years and are based on an assessment of the open market rental value of the property at the time of the review. In general, the Group's store leases in the UK contain standard institutional terms, including the requirement that the Group bears the cost of repairs and insurance for the leased premises. Some of its leases impose obligations on the Group to keep its premises open during the term of the lease. In addition, some leases contain provisions requiring a proportion of turnover exceeding certain specified thresholds to be paid as rent. As at 24 March 2018, the total annual net rent for all leasehold stores in the UK was £42.5 million. In respect of its other UK property interests, the Group owns its head office in Watford and has a call option over the lease of its distribution centre in Daventry. The Group also owns the freehold to two of its UK stores; one in each of Ayr and Paisley.

As at 31 May 2018, approximately 62 per cent. of the Group's UK stores were occupied pursuant to leases of less than five years, and the average break clause of those leases was under five years. As they are under five years, are considered short leases. The remaining UK stores were either occupied pursuant to leases with longer average break clauses or freehold ownership by the Group. Although the Group does not have a standard lease for every store, lease terms are typically between 5 and 15 years from inception. As at 31 May 2018, of the Group's 137 trading stores in the UK, all of the stores occupied pursuant to short leases were subject to upwards-only rent reviews, which are typically conducted every five years and are based on an assessment of the open market rental value of the property at the time of the review. In general, the Group's store leases in the UK contain standard institutional terms, including the requirement that the Group bears the cost of repairs and insurance for the leased premises. Some of its leases impose obligations on the Group to keep its premises open during the term of the lease. In addition, some leases contain provisions requiring a proportion of turnover exceeding certain specified thresholds to be paid as rent.

13.2 International stores

Franchise Partners all own or lease from third party landlords the stores in which they sell the Group's products.

14. INTELLECTUAL PROPERTY

Mothercare considers its most important intellectual property to be its brands, other registered intellectual property rights, customer databases and domain names.

14.1 Key brands

The Group's key own brands are mothercare and ELC, both of which are protected by registered trademarks in all key territories in which the Group's products are sold. Additional brands owned by the Group include Innosense and Blooming Marvellous.

The Group enters into Direct to Retail agreements and brand endorsement and licence agreements with third parties in relation to its use of third party intellectual property. The Group's main agreements in this respect are the brand endorsement and licence agreements in relation to Myleene Klass' My K range, which covers use of the My K trademarks on some of the Group's Clothing & Footwear and Home & Travel products, and also in relation to Jools Oliver's Little Bird brand, which the Group also uses on some of its Clothing & Footwear and Home & Travel products.

14.2 Trademarks

The Group's policy is to register its core brands as trademarks in those markets that the Directors believe are, or are likely in the future to be, material to the Group's business.

The Group owns a large number of registered and unregistered trademarks in territories throughout the world, although it has not registered all trademarks in certain international markets in which the Group currently has no franchise arrangements.

The Group owns the right to the mothercare name, which is the Group's most important trademark and, together with the "M Dolly" logo, is registered in all territories where the Group and its Franchise Partners or Wholesale Customers trade. The Group also has a Chinese copyright registration to support its "M Dolly" logo in China.

The ELC name and the "ELC triangle" logo are also registered in territories where the Group and its Franchise Partners trade in ELC products. The Group has registered trademarks for its Innosense and Blooming Marvellous brands in certain territories. There is a tiered trademark filing strategy in place to ensure that the Group takes a consistent approach to trademark registrations.

Trademarks are licensed to the Franchise Partners or Wholesale Customers.

14.3 Registered designs and patents

The Group owns a number of UK and European Community registered designs for Clothing & Footwear, Home & Travel products and Toys which are registered under the mothercare name or the ELC name. The Group also has patents for Home & Travel products and patents for Toys under the ELC name.

14.4 Customer databases

The Group collects customer data both in-store and online. It has put in place systems, such as the CRM system, to capture valuable life stage data that enables targeted marketing. Customer data is collected primarily through the MyMothercare loyalty scheme, ELC Big Birthday Club, in store email capture at till, Bounty co-registration customer online purchases, online opt ins, mobile apps, competitions and other promotional activities. The Group has updated its method of collecting and processing customer data and has also implemented training and revised its systems in an effort to ensure compliance with the General Data Protection Regulation (GDPR).

14.5 Domain names

The Group registers domain names connected to its websites and the websites of its Franchise Partners. In the UK, the key domain names used by the Group's business are www.mothercare.com and www.elc.co.uk. Internationally, it is the Group's policy that Mothercare or ELC should be the registrant of all domain names connected to its Franchise Partners' branded websites which incorporate the Group's trademarks. Where a Franchise Partner or wholesale customer registers a domain name that incorporates any Group trademarks, the Franchise Partner or Wholesale Customer will be required to transfer that domain name to the relevant Group company. The Group actively pursues the transfer of domain names registered in bad faith by third parties.

15. RETIREMENT BENEFITS

All qualifying employees of the Group are eligible to participate in the Group's defined contribution pension schemes. The assets of these schemes are held separately from those of the Group in independently administered funds.

The Group previously offered employees membership of two defined benefit pension schemes which are closed to new entrants and future accrual. Due to the DB Schemes being closed to future accrual in March 2013, there will be no future service cost in future years in relation to the DB Schemes; all future service pension provision will be a on a defined contribution basis.

As at 24 March 2018, the Group's DB Schemes had a deficit of £37.7 million when measured on an IAS 19 valuation basis (please refer to paragraph 2.5 of Part VI (Operating and Financial Review) of this document for further details). The previous triennial actuarial valuations of the DB Schemes dated 31 March 2017 showed a deficit in the DB Schemes of £139 million. The nature of defined pension liabilities is such that valuations can increase or decrease significantly at each valuation

The Company ceased to be a statutory employer in the Mothercare Executive Pension Scheme on 31 January 2014 under a Deed of Amendment, Substitution and Flexible Apportionment Arrangement ("FAA"). However, under the terms of the FAA, the Company remains contractually obliged to contribute to the Mothercare Executive Pension Scheme as if it were a statutory employer for the purposes of Part 3 of the Pensions Act 2004 and remains an employer for the purposes of the Trust Deed and Rules.

The Company is the guarantor in relation to a guarantee for the benefit of the trustees of the Mothercare Executive Pension Scheme. The Company guarantees to make payments up to a maximum amount equal to the entire aggregate liability of every employer in relation to the scheme.

Both the Company and Mothercare UK Limited also act as guarantors in separate guarantees for the benefit of the Mothercare Staff Pension Scheme. Both companies guarantee separately to make payments up to a maximum amount equal to the entire aggregate liability of every employer in relation to the scheme.

16. REGULATION

The Group offers in-store payment plans in the UK in conjunction with third party credit providers that enable customers to spread payments on baskets over £249 on either 6 or 12 month interest-free payment plans, subject to credit approval by Mothercare's credit finance partner Close Brothers Retail Finance. The Group is exploring plans to offer payment plans online. The Group is authorised to perform such activities under the terms of its Consumer Credit Licence.

The Group's operations are also subject to regulation from UK, EU and other international regulatory authorities concerning, among other things, export and import quotas and other customs regulations; bribery and corruption; taxation; money laundering regulations; consumer and data protection; the advertisement, promotion and sale of merchandise; product safety, the health, safety and working conditions of the Group's employees, the safety of the Group's stores and their accessibility for the disabled; environmental matters; and the Group's competitive and marketplace conduct.

17. INSURANCE

The Group maintains types and amounts of insurance coverage that the Directors believe are consistent with industry practice in the UK and in the markets in which the Group has its own sourcing offices. The Group's UK insurance policies cover, among other things, property damage, business interruption, terrorism, employer's liability, motor vehicle damage and travel. The Group also maintains directors' and officers' liability insurance which covers the directors and officers of the Company against the costs of defending themselves in proceedings taken against them in their capacity as director or officer and in respect of damages arising from the unsuccessful defence of any proceedings.

In addition, the Group also maintains pension trustee liability insurance. The Group also maintains an international programme of insurance, including certain types of coverage for its sourcing operations in China, Hong Kong, India and Bangladesh.

PART VI

OPERATING AND FINANCIAL REVIEW

The following is a discussion of the Group's results of operations and financial condition primarily as at and for the 52 weeks ended 24 March 2018 ("FY 2017/18"), 25 March 2017 ("FY 2016/17") and 26 March 2016 ("FY 2015/16"). This discussion should be read in conjunction with the Group's audited consolidated financial statements and related notes which are incorporated into this document by reference. The audited consolidated financial statements have been prepared in accordance with IFRS as adopted for use in the EU. In this Part VI, as per the restatement in the Group's Annual Report and Accounts for FY 2016/17, the Group's trading space and number of stores figures provided for FY 2015/16 reflect that ELC store-in-store inserts had been reclassified so that they were no longer counted as being separate stores from mothercare stores with their own square footage where they were located either within, or adjacent to a mothercare store, or share a common passage way, or entrance with a mothercare store. The equivalent adjustment had been applied to prior financial years.

The following discussion contains forward-looking statements that reflect the Group's plans, estimates and beliefs, and involve risks and uncertainties. The Group's actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in this document, particularly in the section entitled "Risk Factors" and the paragraph relating to forward-looking statements in the section entitled "Important Information." Investors should read these sections for a discussion of the risks and uncertainties related to those statements and a discussion of certain factors that may affect the Group's business, results of operations or financial condition.

1. Overview

The Group's vision is to be the leading global specialist for parents and young children. It aims to achieve this by using its two principal brands, mothercare and ELC and delivering great style, quality, specialist service and innovation to its customers. Globally, as at 24 March 2018, the Group traded from 1,268 mothercare and ELC stores in 49 countries, of which 137 are in the UK, offering the Group's products, which the Directors consider to be evidence of the strength and global appeal of the Group's brands. In the UK, mothercare and ELC products are sold in the Group's store network and through its multi-channel retail operations. Internationally, the Group's products are sold primarily through its Franchise Partners' stores. The Group also brings its products to market via a wholesale channel in the UK and, to a lesser extent, overseas.

The Group specialises in the sale of products, both of its own brands and those of third parties, for parents and young children, which are marketed and sold through mothercare and ELC-branded stores and through the Group's online Direct business. The Group's mothercare product offering includes Clothing & Footwear, comprising maternity wear and clothing and footwear for up to preschool age in the UK; Home & Travel including pushchairs, car seats, furniture, bedding, feeding and bathing equipment; and Toys, mainly for preschool age. The Group's Toy range is mainly ELC-branded and is designed and sourced by the Group's own operations.

The Group benefits from a strong heritage and high levels of customer awareness, trust and satisfaction which the Directors believe gives the Group a clear competitive advantage. The Group has developed an online offering which enables customers to access the Group's brands and products using different platforms (desktop, mobile and app), and place orders in stores via tablet devices. This provides flexible delivery capability (home delivery or click-and-collect in stores) and gives the Group opportunity to reduce store stock holding, while still offering wide product choice. The online offering also provides the Group with a social media and customer database that enables it to assess its customers' buying behaviour and to identify and meet customer product needs. Through its in-store and online offering, the Group provides customers with specialist advice and support, which the Directors believe provides the Group with a differentiated offering to many of its competitors, including other retailers, supermarkets and online businesses.

Internationally, the Group has an established franchise model which has delivered a long-term track record of sales, growth in trading space cash-generation and profitability. As at 24 March 2018, 32 Franchise Partners operated 1,131 stores with 354 stores in Europe, 354 stores in the Middle East and Africa, 382 stores in Asia and 41 stores in Latin America. As at 31 May 2018, 33 Franchise Partners operated 1,139 stores, with 361 stores in Europe, 352 stores in the Middle East and Africa, 385 stores in Asia and 41 stores in Latin America. The Group is now seeking to support further growth by assisting its Franchise Partners in developing a multi-channel approach, similar to that which is present in the UK.

The International business remains a very important part of the Group's global business accounting for 62 per cent. of all Worldwide Sales. The Directors believe that the franchise model provides the Group with a low capital-intensity way for the Group to achieve market penetration in the markets in which the Franchise Partners operate (compared with operating its own stores internationally) which has a track record of being highly cash-generative and profitable. As a result, it provides the Group with a low-risk approach to accessing markets with attractive macroeconomic fundamentals and demographics such as a growing middle class, who are increasingly affluent and digitally-enabled, and increasing birth rates.

2. Factors affecting the Group's results of operations

The Group's results of operations have been affected in the periods under review, and are expected to continue to be affected, by the following principal factors relating to its business and industry.

2.1 International business

The Group does not operate stores itself outside the UK and derives its revenue and profits from its International business, principally through its arrangements with its Franchise Partners. These Franchise Partners sell products under the terms of their respective franchising and development agreements in a network of mothercare and ELC-branded stores, in 49 countries outside the UK, as at 24 March 2018 (and 50 countries outside the UK as at 31 May 2018). The Group had 32 Franchise Partners as at 24 March 2018 (and 33 as at 31 May 2018) and maintains long-standing and stable relationships with its key franchise base. In particular, the Group has benefited from its relationship since 1983 with Alshaya, which has franchise arrangements for 12 territories, including those in various countries in the Middle East, Egypt and Russia.

As at 24 March 2018 Alshaya operated 344 stores which together accounted for 54 per cent. of the Group's reported revenue from its International business and 49 per cent. of retail sales at the Group's International business in FY 2017/18.

Under its franchise arrangements with Alshaya and most of its other Franchise Partners, the Group licenses the use of its brands, trademarks, know-how and other associated information, for which it receives a royalty fee. The Group also supplies products to Franchise Partners for which it is paid the cost of these products (including costs incurred relating to the supply, sourcing and design of products). The royalty fee is calculated based on an agreed percentage of a Franchise Partner's revenue from the sale of the Group's products and pre-approved third party products in mothercare or ELC-branded stores and outlets, which can be based on sales in one or more territories. In FY 2017/18, the substantial majority of the Group's sales in its International business were obtained through franchise arrangements featuring royalty-based arrangements. Franchise Partners are allowed to source certain products locally but this tends to be the case more for Home & Travel products, where suppliers appoint local representatives to ensure their products comply with local legal requirements, including health and safety regulations. The cost of goods sourced locally by Franchise Partners is not reflected in the Group's reported revenue from its International business as it is not derived from the Group's supply chain, but is reflected in retail sales of the Group's International business, in respect of which the Group receives a royalty fee. In the remaining minority of franchise and development agreements, the Group operates a cost-plus model, featuring a markup to the cost of goods sold to Franchise Partners.

The Group's franchise and development agreements provide that Franchise Partners operate their own mothercare and/or ELC stores (which are owned or leased directly by the Franchise Partner) and, in an increasing number of jurisdictions, transactional mothercare and/or ELC websites. As at 24 March 2018, the Group traded online in 23 countries with 36 online channels. While still at low penetration levels, online is growing steadily and in some of the Group's more established markets, such as Russia and China, online penetration exceeds 10 per cent. Although the Group may incur limited costs in relation to setting up and maintaining franchise arrangements in international markets, such franchise arrangements do not require the Group to invest its own capital in International franchise operations. The cost of setting up and maintaining retail stores and other associated operational costs are borne by Franchise Partners and so the Directors believe that the franchise model provides a low capital-intensity way for the Group to achieve market penetration in the markets in which Franchise Partners operate (compared with operating its own stores internationally) which has a track record of being highly cash-generative and profitable. The model also benefits the Group by providing for improved purchasing power, as product orders for both the UK and international markets are amalgamated before being placed with suppliers. For strategic reasons, the Group has invested, in conjunction with the relevant Franchise Partners, in a joint venture in the Ukraine. The joint venture SPV has entered into franchise and development agreements with the Group's subsidiaries and is therefore also treated as a Franchise Partner.

In the periods under review, the profitability of the Group's International business has decreased as a result of the reduction in Franchise Partners' retail store portfolio (and trading space), together with continued like-for-like sales decrease in retail sales due to the difficult trading environment globally. The following table presents, as at the dates indicated, the trading space and the number of stores operated by Franchise Partners, broken down by region and by brand.

	As at	As at	As at
	24 March	25 March	26 March
	2018	2017	2016
		(square feet in thousands)
Trading space by region:
Europe	1,089	1,132	1,138
Middle East & Africa	892	847	811
Asia	851	908	901
Latin America	37	59	71
Trading space by brand:
mothercare(1)	2,503	2,575	2,553
ELC	366	371	368
Total International trading space	2,869	2,946	2,921
Number of stores by region:	––––––––	––––––––	––––––––
Europe	354	369	382
Middle East & Africa	354	351	336
Asia	382	380	372
Latin America	41	50	52
Number of stores by brand:
mothercare(1)	932	953	937
ELC	199	197	205
Total international stores:	1,131	1,150	1,142
	––––––––	––––––––	––––––––

(1) Includes ELC shop-in-shops in some mothercare stores.

Franchise Partners review their store portfolio on an ongoing basis, which can lead to store openings, closures and relocations in any given financial year.

The following table sets forth a breakdown of the reduction in retail sales of the Group's International business between the change in trading space and like-for-like sales reduction (on a constant currency basis).

Reduction in retail sales of the Group's International business(2)	(5.8) ––––––––	(2.4) ––––––––
	––––––––	––––––––
Like-for-like sales reduction(1)	(5.9)	(4.1)
Growth in trading space	0.1	1.7
	(per cent. change)
	2018	2017
	24 March	25 March
	ended	ended
	52 weeks	52 weeks
	For the	For the

(1) Please refer to paragraph 3.2 of this Part VI (Operating and Financial Review) for further details.

(2) Please refer to paragraph 3.1 of this Part VI (Operating and Financial Review) for further details.

As at 24 March 2018, the Group's International trading space was approximately 2.87 million square feet in 1,131 stores in 49 countries. Franchise Partners opened a total of 122 stores and closed 141 as part of the Group's rationalisation plan in certain territories. Global retail space was approximately 4.2 million square feet which was down from approximately 4.4 million square feet in the FY 2016/17, which reflects the planned store closure programme in the UK, where trading space was down 10.7 per cent. to approximately 1.3 million square feet (resulting in total UK stores of 137), and a reduction in International space of 2.6 per cent. to approximately 2.87 million square feet.

Moreover, the Group is committed to working with its Franchise Partners to assist them with further developing the online channel for their respective territories to complement their sales from physical locations. As at 24 March 2018, the Group traded online in 23 countries with 36 online channels and continues to work closely with its Franchise Partners to export its learnings and best practice from the UK in order to drive International performance. The Directors believe that the development of online channels in markets in which Franchise Partners operate could provide significant opportunity for future revenue growth for its Franchise Partners as international markets evolve and mature, and increase the barriers to entry for competitors seeking to penetrate the market. The Directors also believe that Franchise Partners have the potential to be at the forefront of developing multi-channel strategies in their territories. Once a Franchise Partner has established the requisite systems and logistics, the Group customarily provides assistance with the roll out of its online platform.

2.2 UK operations

In the periods under review, the Group's UK business has experienced like for like growth in FY 2015/16 and FY 2016/17. This growth continued into FY 2017/18, but in the second half of this year the UK business suffered a significant decline in trading performance impacted by softening of store footfall with margin impacted by higher levels of discounting to stimulate sales.

FY 2016/17 marked the third year of the Group's transformation plan and saw the UK returning to adjusted profit in the second half of the year for the first time in six years. UK LFL sales had increased by 1.1 per cent. with support from online sales which were up 7.8 per cent. year on year. Total UK sales were stable year on year, with underlying trading offsetting the impact of 21 planned store closures and 3 new store openings. The business continued to sell more at full price, and this along with improved buying margins and planned efficiencies improved profitability. The UK business reached breakeven on adjusted profit in the second half of FY 2016/17.

In FY 2017/18 and particularly in the second half the retail sector has been hit by a combination of headwinds that have had a profound impact on the sector as a whole, including subdued consumer spending as a result of rising inflation, a squeeze on household incomes and slowing wage growth.

Mothercare has not been immune from these pressures and after some sales growth in the first half, the UK business saw a lower footfall and digital traffic resulting in lower spend in both stores and online from the end of September onwards.

After an increase in UK gross margin year-on-year for three years and growth in the first half of FY 2017/18 of +34 basis points, the business saw full price sales and margin decline due to higher levels of discounting to stimulate sales.

The Group responded by taking a disciplined approach to cash management with a particular focus on controlling stock levels, together with stringent controls over capital expenditure and a review of central costs and its head office structure. Strict controls over buying and non-trade spend are being embedded throughout the business.

The UK trading environment remains unpredictable and one which requires the Group to focus on its price competitiveness as well as tactical, but proportionate discounting to offer tangible value to the consumer over and above the specialism the Group offers. The Directors are focussed on the need to be agile in the face of increasingly difficult retail market conditions and ever rising customer expectations.

The Group has made vast improvements to its website over recent years, particularly on increasing and improving content and imagery available on its products. Over the course of the FY 2017/18, it has been focused on simplifying and optimising the site to ensure the site is as navigable and intuitive as possible.

Delivery of the Group's strategy

At the start of the turnaround in 2014 and as part of a wider plan to return the UK business to a level of acceptable financial performance, the Group developed its six pillar strategy. The strategic pillars have served the Group well, with progress being made against each pillar, but in the face of challenging market dynamics the Group recognise the need to execute the initiatives at greater pace and the Directors have developed an accelerated plan.

The focus on being digitally led has delivered online sales growth over each of the periods under review with key initiatives being the re-platform of the website in FY 2016/17 and ongoing investment to improve the website to simplify and optimise the customer experience. Online sales now account for 43 per cent. of total UK retail sales (FY 2016/17: 41 per cent., FY 2015/16: 37 per cent.), with sales via tablet devices in stores contributing 39.3 per cent. of the mix. Mobile also continued to contribute to online and accounts for 86 per cent. of traffic (FY 2016/17: 83 per cent.), reflecting the ways in which customers are browsing and shopping for products. Click and Collect orders now account for approximately 24 per cent. of online sales giving customers the flexibility to collect in store, with the additional benefit of driving footfall.

The business continued to focus on right-sizing the UK store estate, continuing with the planned closure programme which led to the closure of 21 stores in FY 2016/17 and a further 17 stores in FY 2017/18. The Group has benefited from these closures by eliminating £2.2 million of trading losses from its store operations in FY 2016/17 and a further £0.9 million in FY 2017/18. The following table presents, as at the dates indicated, the number of retail stores operated by the Group in the UK and the amount of trading space.

Total trading space (square feet in thousands)	1,305 ––––––––	1,462 ––––––––	1,552 ––––––––
Trading space (ELC stores)	5 ––––––––	10 ––––––––	18 ––––––––
Trading space (mothercare stores)(1)	1,300	1,452	1,534
		(square feet in thousands)
	2018	2017	2016
	24 March	25 March	26 March
	–––––––– As at	–––––––– As at	–––––––– As at
Number of stores	–––––––– 137	–––––––– 152	–––––––– 170
ELC stores (high street)	3	5	8
mothercare stores (out of town)(1)	96	98	96
mothercare stores (high street)(1)	38	49	66
	2018	2017	2016
	24 March	25 March	26 March
	As at	As at	As at

(1) Includes ELC shop-in-shops in some mothercare stores.

The Group has also invested in refurbishing its stores over the period under review with 78 per cent. of the store estate now being in the modern 'club' format (98 stores).

In FY 2017/18 during a further review of the business, the Group identified a further 71 stores, including 68 mothercare stores and 3 ELC stores that are underperforming and/or on an unfavourable lease term or, in certain cases, are not expected to have significant strategic value going forward.

On 17 May 2018, the Group announced a set of comprehensive measures to restructure its UK store portfolio though company voluntary arrangements of its subsidiaries, Mothercare UK Limited and Early Learning Centre Limited. Following completion of the CVA Proposals and the entry into administration

Of the 38 stores that were closed in FY 2017/18 and FY 2016/17, 5 of these were ELC stores and 33 were mothercare stores, predominantly in high street locations. The primary focus on the closure of ELC stores stems from the highly seasonal nature of Toys and the high street location of such stores, which has presented more challenging margin pressure. While the Group has closed ELC high street stores, it has opened shop-in-shop ELC inserts in its larger mothercare stores (including both high street and out-of-town locations) and had 115 such inserts as at the Reference Date.

of Childrens World, the Group's UK portfolio of 137 stores has been or will have been restructured as follows:

• 60 stores have been, or will be, closed by June 2019 (instead of the 50 stores originally announced on 17 May 2018) (this comprises 58 stores closing pursuant to the CVA proposals and the entry into administration of Childrens World together with another 2 stores closing as a result of expiring leases which were not renewed);
• 19 stores remain open and have had rent reductions; and
• 58 stores remain open on substantially unchanged terms and/or rents.

The Group continues to rationalise its ranges, in particular in its Clothing and Toys businesses, to focus on its core markets of maternity, newborn, baby and toddler up to preschool. This will drive both and improvement in profitability as well as working capital through lower stockholding.

The business has worked with its suppliers to introduce new brands and exclusive ranges. In a price competitive environment, exclusivity is a key part of the Group's strategy with unique Clothing brands resonating well with customers and exclusivity of product in the Home & Travel business rising to approximately 40 per cent. in FY 2017/18.

In FY 2017/18 the business took decisive action to reduce the central cost base to become a leaner business. This resulted in a reduction of approximately 190 head office roles achieved through redundancy and natural attrition, giving an annualised cost of saving of approximately £10 million. There remains a tight control over costs and further cost reduction initiatives have been identified in order to accelerate business simplification and to drive further central overhead savings and efficiencies. There is also a focus on driving a significant improvement in working capital, supported by the range rationalisation and the upgraded planning and merchandising systems.

The business has invested in key areas such as warehousing, where the consolidation is now complete, and can now fulfil products for both stores and online from one single site. This has led to a reduction in transportation costs.

2.3 Foreign exchange movements

The Group reports its financial results in pounds sterling, but a significant part of its revenue and costs as well as certain of its assets and liabilities are recorded in other currencies. As such, the Group's results of operations may be affected by both transactional and translational foreign exchange movements. In FY 2017/18, adverse foreign exchange movements in the value of the pound sterling against other currencies, including the US dollars, Euro, Chinese renminbi, Kuwaiti dinar, Saudi riyal, Emirati dirham, Russian ruble, and Indonesian rupiah, have impacted the Group's results. For FY 2017/18, the net effect of currency translation caused year-on-year Worldwide Sales and adjusted operating profit to increase by £6.4 million and £0.1 million respectively (compared with an increase of £88.8 million and £1.3 million in FY 2016/17, respectively).

All International sales to Franchise Partners are invoiced in Pounds sterling or US dollars. International reported sales represent 33 per cent. of Group sales (FY 2016/17: 31 per cent.). Total International Worldwide Sales in the 52 week period represent 62 per cent. of Group Worldwide Sales (FY 2016/17: 62 per cent.). The Group therefore has some currency exposure on these sales, but they are used to offset or hedge in part the Group's US dollar denominated product purchases. The Group policy is that all material exposures are hedged by using forward currency contracts. In addition, the Group's results are impacted by foreign exchange movements as a result of its royalty income from its International business as local sales are translated into pounds sterling amounts on which royalties are calculated. To help mitigate against the currency impact on royalty receipts, the Group has hedged against its major market currency exposure.

2.4 Seasonality

While demand for the Group's Clothing & Footwear and Home & Travel products is not particularly seasonal in nature, the Group's sales of Toys (including ELC-branded products) are highly seasonal, particularly in the UK, with sales highest in the third quarter. Due to the diverse nature of the Group's International business and the significant number of territories in which the Group franchises its business, the Group does not consider its International business to be seasonal to any material degree in a particular quarter. Seasonality generally varies from one territory to another and may be affected by religious or other local holidays, climatic conditions or local shopping habits.

The Group's results of operations can also be affected by periods of abnormal, severe or unseasonal weather conditions, which can adversely impact revenue due to decreased footfall and/or lack of supply of appropriate products for the prevailing weather conditions, as well as by promotional activity and trading pressures in and around peak periods. For example, the unseasonable low temperatures in the UK in February and March 2018 (the Beast from the East). Any factors adversely affecting sales in the UK in the third quarter of any year, including adverse weather, incorrect stock forecasting or unfavourable economic conditions, could have a disproportionately adverse effect on the Group's financial performance or results of operations for the entire financial year.

2.5 Retirement Benefit Schemes

Defined Contribution Schemes

The Group operates defined contribution retirement schemes for all qualifying employees. The total cost of these schemes charged to the income statement in FY 2017/18 was £1.9 million (£2.0 million in FY 2016/17 and £2.0 million in FY 2015/16) representing contributions paid to these schemes by the Group at rates specified in the rules of the plan.

Historical Defined Benefit Schemes

The Group operates two defined benefit pension schemes for qualifying employees, which were closed to future accrual with effect from 30 March 2013. The DB Schemes expose the Group to longevity risk, interest rate risk and investment risk. The current recovery plan requires annual deficit contributions payable by the Company through to 2023. The last triennial valuation of the Group's DB Schemes was carried out as at 30 March 2017. Please refer to risk factor 3.14 of the section entitled "Risk Factors" of this document for a discussion about the factors that may affect the Group's funding needs or obligations in respect of these DB Schemes.

In aggregate, as at 24 March 2018, the Group's DB Schemes had a deficit of £37.7 million recognised as a liability on the Group's balance sheet, as compared with an aggregate deficit of £80.1 million as at 25 March 2017 and £74.4 million as at 26 March 2016. The total cost of DB Schemes charged to the income statement in FY 2017/18 was £5.4 million (£5.6 million in FY 2016/17, £5.4 million in FY 2015/16). The anticipated charge in FY 2018/19 is £3.6 million and the estimated amount of cash contributions expected to be paid to the DB Schemes in FY 2018/19 is £11.6 million, with no other anticipated obligations.

3. Key Performance Metrics

In evaluating the Group's results of operations, the Directors refer to various key financial measures relating to the performance of the Group's business. In addition to the Group's IFRS results of operations discussed in paragraph 5 of this Part VI (Operating and Financial Review), the principal non-IFRS measures used to evaluate the Group's performance include:

• Worldwide Sales (which includes retail sales of the Group's International business, also a non-IFRS measure);
• like-for-like sales; and
• adjusted profit before tax.

In addition, in this Part VI (Operating and Financial Review), the Directors have, where relevant, included reference to the effect of foreign exchange movements and have provided information in "constant currency". The term "constant currency" means that the Directors have translated financial data for a period into pounds sterling using the same foreign currency exchange rates that were used to translate financial data as at the end of the most recent financial year. For the purposes of calculating "constant currency" to compare data in FY 2017/18 to FY 2016/17 and FY 2016/17 to FY 2015/16, the Directors used the applicable foreign currency exchange rates for the period ended and as at 24 March 2018 and 25 March 2017 respectively.

These measures may not be comparable with similarly titled measures presented by other companies in the Group's sector or otherwise. Nevertheless, the Directors believe that such measures are important to understand the Group's performance from period to period and assist with the Group's evaluation of growth trends, preparation of budgets and analysis of the effectiveness of Franchise Partners' sales and marketing efforts. When viewed together with the Group's financial results prepared in accordance with IFRS, the Directors believe that these non-IFRS measures provide a more complete understanding of factors and trends affecting the Group's historical financial performance and projected future results of operations and greater comparability of results across periods.

Various factors can affect Worldwide Sales, like-for-like sales growth and Adjusted profit before tax, including the prevailing economic climate and trends; changes in the disposable income of the Group's customers; customer preferences, shopping habits and trends, including evolving shopping channels and the relationship between online and in-store retail channels; the Group's ability to anticipate and respond effectively to customer preferences; changes to the Group's product mix and pricing; changes in the competitive environment, including changes in the regulation of the markets in which the Group and its Franchise Partners operate; the level of customer service that the Group provides; sales mix among sales channels; continuity of supply and the Group's ability to source and distribute products efficiently; effectiveness of managing trading space; the number of days in a particular period in which the Group's stores are open and any change in the trading space between periods.

3.1 Worldwide Sales

Worldwide Sales, which represents total International sales plus total UK sales. Total International sales reflect the retail sales from mothercare and ELC-branded stores, outlets and online websites and sales to Wholesale Customers. International Stores refer to overseas franchise and joint venture stores.

The Group generates revenue differently in its UK business and International business. Total sales of the Group's International business is also a non-IFRS measure and reflects the estimated sales (as the sales are not actually recorded in the Group's reported results) based on the achieved sales by franchise operations outside the UK as reported by Franchise Partners to the Group, including for purposes of royalty calculation, plus the Group's actual sales to Wholesale Customers outside the UK.

In the UK, the Group's revenue consists of sales by Group-operated retail stores, sales achieved via the Group's online channels from orders placed in-store, sales achieved via the Group's online channels from orders generated outside of the Group's stores and sales achieved via the Group's wholesale operations in the UK.

The Directors believe that Worldwide Sales is an important measure for the purposes of understanding the Group's financial performance from period to period and the performance of its International business in particular, because Worldwide Sales reflect the true demand for goods both in the UK and in the Group's franchise markets. Sales of the Group's International business also form the basis on which the Group calculates and records franchised royalty income and are indicative of the financial health of the Franchise Partner base. The Directors also believe that Worldwide Sales provide a useful reflection of the Group's global scale.

The following table presents, for the periods indicated, Worldwide Sales for the International and UK business.

	For 52 weeks	For 52 weeks	For 52 weeks
	ended	ended	ended
	24 March	25 March	26 March
	2018	2017	2016
Worldwide Sales of the Group
UK Business	437.6	459.4	459.7
International business	725.3	762.5	689.7
Worldwide Sales	1,162.9	1,221.9	1,149.4

3.2 Like-for-like sales growth

UK like-for-like sales and International like-for-like sales are non-IFRS measures. UK like-for-like sales are defined as sales from stores that have been trading continuously from the same selling space for at least a year and include online sales. UK online sales include both website sales and sales taken on tablet devices in store. International retail sales, including online sales, are the estimated retail sales of overseas franchisees and the joint venture and associates to their customers. International like-for-like sales are the estimated franchisee retail sales from stores that have been trading continuously from the same selling space for at least a year. International sales in constant currency exclude the impact of movements in foreign exchange on translation. Worldwide Sales are total International sales plus total UK sales. Total International sales are International retail sales plus International wholesale sales.

The Directors believe that like-for-like sales supplements the Group's revenue data under IFRS as like-for-like sales growth seeks to capture the organic growth in the underlying trading performance of the Group's existing store portfolio and Direct business, enabling a comparison of performance against prior periods.

The following table presents, for the periods indicated, the like-for-like sales change in the Group's UK and International businesses.

	For the	For the	For the
	52 weeks	52 weeks	52 weeks
	ended	ended	ended
	24 March	25 March	26 March
	2018	2017	2016
		(per cent. change)
UK like-for-like sales (decline)/growth	(1.3)	1.1	3.6
International like-for-like sales (decline)/growth	(5.9)	(4.1)	4.5

UK

The trading environment in the UK deteriorated over the course of the year due to a significant slowing of consumer footfall to stores in light of wider pressures on customer spending and increasing competition. In this difficult environment the business responded through promotional activity to stimulate customer demand.

In FY 2017/18 total UK sales were down 4.7 per cent, partly reflecting the store closure programme, and like-for-like sales down, 1.3 per cent, although online sales were up 1.2 per cent.

International

International markets have been challenging for the previous 2 years in key markets, but the Group saw an improved performance in the second half of FY 2017/18 and a moderate return to growth in the Middle East, which was encouraging

3.3 Adjusted profit before tax

Adjusted profit before tax for the Group is a non-IFRS measure and reflects profits or losses adjusted to exclude items which the Group consider to be significant in both nature and/or quantum and where treatment as an adjusted item provides stakeholders with additional useful information to assess the year-on-year trading performance of the Group. Adjusted profit before tax is a measure used by management to monitor and report to the Board on the Group's financial performance (please refer to paragraphs 5.1 and 5.2 of this Part IV (Terms and Conditions of the Capital Raising) and note 6 to the Group's audited consolidated financial statements as included in the Group's Annual Report and Accounts for FY 2017/18 and the Group's Annual Report and Accounts for FY 2016/17, for further details of adjusted costs and other adjusted items).

Comparison of FY 2017/18 with FY 2016/17

24 March 2018	For the 52 weeks ended 25 March 2017 (£ million)	26 March 2016
		(6.4)
		40.3
(7.6)	(7.0)	(8.1)
		––––––––
6.2	23.8	25.8
		–––––––– (3.0)
(4.0)	(3.3)	(3.2)
2.3	19.7	–––––––– 19.6
		––––––––
		(10.2)
		1.2
(0.9)	(1.0)	(0.9)
(72.8)	7.1	–––––––– 9.7 ––––––––
	(19.8) 33.6 –––––––– –––––––– 0.1 –––––––– –––––––– (67.1) (7.1) –––––––– ––––––––	(4.4) 35.2 –––––––– –––––––– (0.8) –––––––– –––––––– (15.7) 4.1 –––––––– ––––––––

Notes:

• (1) The Group has two reportable segments, namely the UK and International segments. The UK segment comprises the Group's UK (retail in-store and Direct) and wholesale operations. The International segment comprises the Group's revenue from franchise operations outside the UK (which reflects the cost of goods sold (including warehousing, transportation and storage costs)), royalty income and mark-up (where appropriate) and from the sale of goods to Wholesale Customers. Unallocated corporate expenses represent board and company secretarial costs and other head office costs, including audit, professional fees, insurance and head office property. The adjusted profit/(loss) from each of the Group's segments as set forth in this document is equal to the Segment result (adjusted) for such segment as set forth in note 6 to the Group's audited consolidated financial statements, as included in the Group's Annual Reports and Accounts for FY 2017/18 and FY 2016/17
• (2) In FY 2017/18, adjusted costs relate to property and retail restructuring programmes, head office redundancies, store closure costs, store impairment and onerous lease charges, advisory costs relating to refinancing, impairment of intangible assets, and costs relating to the disposal of the China JV Target. Paragraph 5.1 of this Part VI (Operating and Financial Review) includes a breakdown of the pre-adjusted and adjusted split (and therefore constitute non-IFRS measures), which the Directors believe are helpful to understand the Group's performance. Please refer to paragraph 5.1 of this Part VI (Operating and Financial Review) for further details.
• (3) Included within cost of sales are other adjusted items including amortisation of intangible assets, and revaluation of assets, liabilities and outstanding forward contracts held in foreign currencies.

Group adjusted profit before tax increased by £0.1 million to £19.7 million in FY 2016/17, and fell by £17.4 million to £2.3 million in FY 2017/18. FY 2016/17 saw a decrease in International volumes and an increase in costs, partly offset by improvements in UK sales and margin. FY 2017/18 saw an improvement in International volumes, but a decline driven by a decrease in UK sales and margin along with inflationary pressures on costs and an increase in depreciation/amortisation following capital investments in stores, warehousing and IT infrastructure.

4. Current Trading and Prospects

Please refer to paragraph 9 of Part I (Letter from the Interim Executive Chairman of Mothercare plc) of this document.

5. Results of Operations

5.1 Results of operations for FY 2017/18 and FY 2016/17

The following table presents the Group's results from operations for the periods indicated.

	For the 52 weeks ended
	24 March	25 March
	2018	2017
	(£ million)
Revenue	654.5	667.4
Cost of sales	(620.5)	(608.6)
Gross Profit	–––––––– 34.0	–––––––– 58.8
Administrative expenses	(102.8)	(48.4)
(Loss)/profit from operations	–––––––– (68.8)	–––––––– 10.4
Net finance costs	(4.0) ––––––––	(3.3) ––––––––
(Loss)/profit before taxation	(72.8)	7.1
Taxation	(3.3)	1.1
(Loss)/profit for the period attributable to equity holders	––––––––	––––––––
of the parent	(76.1)	8.2
	––––––––	––––––––

Revenue

Group

The Group derives its revenue principally from the sale of goods to end-customers in the United Kingdom and to Franchise Partners elsewhere in the world. In the UK, the Group generates the majority of its revenue from retail sales directly to consumers be it through in-store sales or online sales. For revenue from franchise operations outside the UK, reported revenue reflects the cost of goods sold (including warehousing, transportation and storage costs), royalty income and mark-up (where appropriate). Please refer to paragraph 2.1 of this Part VI (Operating and Financial Review) for further details of the Group's royalty fees. In addition, the Group generates limited revenue from the sale of goods to Wholesale Customers in the UK and elsewhere.

The Group's revenue decreased £12.9 million, or 1.9 per cent., to £654.5 million in FY 2017/18, from £667.4 million in FY 2016/17, reflecting a decline in footfall, a decrease in UK space as a result of planned store closures and a challenging retail environment internationally.

United Kingdom

The following table sets out the contribution of the Group's sales channels to its UK revenue for the periods indicated.

	For the 52 weeks ended
	24 March	25 March
	2018	2017
	(£ million)
Reported sales
Retail sales	400.8	423.6
Wholesale Customer sales	36.8	35.8
Total UK reported sales	–––––––– 437.6	–––––––– 459.4
	––––––––	––––––––

The Group's UK revenue decreased £21.8 million, or 4.7 per cent., to £437.6 million in FY 2017/18, from £459.4 million in FY 2016/17. This was mainly due a decrease in UK space as a result of planned store closures and a decline in footfall in a challenging retail environment.

International

The following table sets out the contribution to the Group's Worldwide Sales from the International business for the periods indicated.

	For the 52 weeks ended
	24 March	25 March
	2018	2017
	(£ million)
Reported sales
Worldwide Sales by Franchise Partners	715.5	753.2
Sales to Wholesale Customers	9.8	9.3
Total International reported sales	–––––––– 725.3	–––––––– 762.5
	––––––––	––––––––

The Group's International revenue decreased £37.2 million, or 4.9 per cent., to £725.3 million in FY 2017/18, from £762.5 million in FY 2016/17. This decrease was primarily due to a decline in footfall resulting in lower like-for-like sales, partly offset by growth in wholesale business.

Cost of sales

The following table sets out the Group's cost of sales for the periods indicated.

	For the 52 weeks ended
	24 March	25 March
	2018	2017
	(£ million)
Cost of sales:
Cost of inventories	(417.0)	(407.2)
Stores	(108.2)	(114.2)
Distribution	(42.6)	(43.0)
Depreciation	(22.6)	(18.9)
Other	(20.1)	(22.9)
Total cost of sales (before adjusted items)	–––––––– (610.5)	–––––––– (606.2)
Cost of sales (adjusted):
Restructuring costs	(2.0)	(5.5)
Foreign currency adjustments	(7.1)	4.1
Amortisation of intangibles	(0.9)	(1.0)
Total cost of sales (adjusted)	–––––––– (10.0)	–––––––– (2.4)
Total cost of sales	–––––––– (620.5)	–––––––– (608.6)
	––––––––	––––––––

The Group's cost of sales principally comprises cost of inventories and other direct costs of sale, including store costs (which includes staff costs, rent on properties and store overhead costs), distribution costs, depreciation and other costs (which includes marketing and costs relating to the commercialisation of the Group's products such as design, procurement and merchandising costs).

Cost of sales (before adjusted items) have increased by £4.3 million, or 0.7 per cent. reflecting inflationary cost price pressures, impacts of the national living wage and the depreciation on capital investments.

Total reported costs of sales have increased by £11.9 million, or 2.0 per cent, driven by movements in foreign exchange. Cost of sales also includes restructuring costs of £2.0 million, relating to £0.9 million warehouse development project and a £1.1 million charge relating to the impairment of the Blooming Marvellous tradename.

Administrative expenses

The following table sets out the Group's administrative expenses for the periods indicated.

	For the 52 weeks ended
	24 March	25 March
	2018	2017
	(£ million)
Administrative expenses (before adjusted costs)	(37.7)	(38.2)
Administrative expenses (adjusted)
Property related costs included in administrative expenses	(55.6)	(0.5)
Non-property related restructuring costs included in
administrative expenses	(7.6)	(5.7)
Joint venture restructuring costs included in administrative expenses	(1.9)	(4.0)
Total administrative expenses (adjusted)	–––––––– (65.1)	–––––––– (10.2)
Total administrative expenses	–––––––– (102.8)	–––––––– (48.4)

–––––––– –––––––– Administrative expenses (before adjusted costs) have decreased £0.5 million, 1.3 per cent. reflecting central cost savings following the review of central costs and the head office restructure.

Total administrative expenses have increased by £54.4 million to £102.8 million due to adjusted items discussed below.

Property related costs included in administrative expenses

The property related charge of £55.6 million includes £5.8 million store closure provision for expected closure costs, £16.0 million UK store impairment, and £33.8 million onerous lease provision.

Non-property related restructuring costs included in administrative expenses

During the period the Group undertook a review of central costs and the head office structure. This resulted in a reduction of approximately 192 head office roles (14 deferred to the period ending 30 March 2019) achieved through redundancy and natural attrition. The reorganisation cost of £6.3 million comprised redundancy payments, legal, advisor fees and other one-off costs.

In January 2018 the Group entered into refinancing discussions and a review of additional funding sources. Costs of £1.3 million have been incurred relating to consultancy and other advisor costs.

Joint venture restructuring costs in administrative expenses

In December 2017 the Group fully disposed of the joint venture in China and entered into a new franchise agreement. A charge of £1.9 million has been recognised; £0.9 million for a loan, £0.5 million for gross trade receivables write-off and £0.5 million for legal fees. FY 2016/17 includes a £5.5 million provision for all of the receivable balance with Mothercare-Goodbaby China Retail Limited ("China JV Target").

For more detail on adjusted costs please refer to note 6 to the Group's audited consolidated financial statements as included in the Group's Annual Report and Accounts for FY 2017/18.

Net finance costs

The Group's net finance costs principally comprise interest payments and bank fees on interest-bearing bank loans and overdrafts and net interest on other liabilities or return on assets relating to pensions. Please refer to paragraph 2.5 of this Part VI (Operating and Financial Review) for further details.

The Group's total net finance costs increased £0.7 million, or 21.2 per cent., to £4.0 million in FY 2017/18, from £3.3 million in FY 2016/17. This increase was primarily due to higher level of average borrowings which reflects the investment of £24.1 million in the store refurbishment and infrastructure programme, and the difficult UK trading conditions and resulting performance of the UK business.

Taxation

The Group's effective tax rate on adjusted profit before tax was 156.5 per cent. in FY 2017/18, compared with 16.3 per cent. in FY 2016/17. The effective tax rate is higher than the standard tax rate of 19 per cent. mainly due to the impact of overseas taxes. A pre adjusted tax charge of £3.6 million (FY 2016/17: £3.2 million) has been included for the period within a total tax charge of £3.3 million (FY 2016/17: credit of £1.1 million). The cash tax payments were £2.0 million.

Mothercare has taken a prudent approach given the uncertainty around future profitability and has written off the deferred tax asset on retirement benefit obligations and the deferred tax liability on cash flow hedges, resulting in a charge of £21.4 million and a release of £1.4 million respectively to the other comprehensive income.

5.2 Results of operations for FY 2016/17 and FY 2015/16

The following table presents the Group's results from operations for the periods indicated.

	For the	For the
	52 weeks	52 weeks
	ended	ended
	25 March	26 March
	2017	2016
	(£ million)
Revenue	667.4	682.3
Cost of sales	(608.6)	(622.1)
Gross Profit	–––––––– 58.8	–––––––– 60.2
Administrative expenses	(48.4)	(46.2)
Profit from retail operations	–––––––– 10.4	–––––––– 14.0
Share of results of joint ventures and associates	–	(1.1)
Profit from operations	–––––––– 10.4	–––––––– 12.9
Net finance costs	(3.3)	(3.2)
Profit before taxation	–––––––– 7.1	–––––––– 9.7
Taxation	1.1	(3.3)
Profit for the period attributable to equity holders of the parent	–––––––– 8.2	–––––––– 6.4
	––––––––	––––––––

Revenue

Group

The Group's revenue decreased £14.9 million, or 2.2 per cent., to £667.4 million in FY 2016/17, from £682.3 million in FY 2015/16, primarily reflecting a decline in International volumes and lower royalties from China, partly offset by positive like-for-like sales growth in the UK of 1.1 per cent.

United Kingdom

The following table sets out the contribution of the Group's sales channels to its UK revenue for the periods indicated.

	For the	For the
	52 weeks	52 weeks
	ended	ended
	25 March	26 March
	2017	2016
		(£ million)
Reported sales
Retail sales	423.6	426.1
Wholesale Customer sales	35.8	33.6
Total UK reported sales	–––––––– 459.4	–––––––– 459.7
	––––––––	––––––––

The Group's UK revenue remained broadly flat at £459.4 million in FY 2016/17, from £459.7 million in FY 2015/16, with positive trends in underlying trading (stores and online) offsetting the impact of 21 planned store closures and 3 new store openings.

International

The following table sets out the contribution of the Group's reported sales from its International business.

	For the	For the
	52 weeks	52 weeks
	ended	ended
	25 March	26 March
	2017	2016
		(£ million)
Reported sales
Franchise Partners reported sales	198.7	215.9
Sales to Wholesale Customer	9.3 ––––––––	6.7 ––––––––
Total International reported sales	208.0	222.6
	––––––––	––––––––

The Group's International revenue decreased by £14.6 million, or 6.5 per cent., to £208.0 million in FY 2016/17, from £222.6 million in FY 2015/16 as the international markets saw a decline in footfall and a challenging retail environment.

The Group's sales to Wholesale Customers outside the United Kingdom increased 38.8 per cent. in FY 2016/17, primarily as a result of new Wholesale Customers, in particular Zalando.

Cost of sales

The following table sets out the Group's cost of sales for the periods indicated.

	For the	For the
	52 weeks	52 weeks
	ended	ended
	25 March	26 March
	2017	2016
	(£ million)
Cost of sales (before adjusted costs):
Cost of inventories	(407.2)	(420.1)
Stores	(114.2)	(118.6)
Distribution	(43.0)	(42.8)
Depreciation	(18.9)	(17.4)
Other	(22.9)	(23.2)
Total cost of sales (before adjusted costs)	–––––––– (606.2)	–––––––– (622.1)
Cost of sales (adjusted):
Restructuring costs (income)	(5.5)	(0.3)
Foreign currency adjustments	4.1	1.2
Amortisation of intangibles	(1.0)	(0.9)
Total cost of sales (adjusted)	–––––––– (2.4)	–––––––– –
Total cost of sales	–––––––– (608.6)	–––––––– (622.1)
	––––––––	––––––––

Cost of sales (before adjusted items) decreased 15.9 million, or 2.6 per cent., to £606.2 million in FY 2016/17. The decline reflects cost savings from store closures, offset by inflationary pressures from the national living wage across stores and distribution.

Total reported costs of sales decreased by £13.5 million, or 2.2 per cent., driven by restructuring costs of £5.5 million. £3.4 million related to costs associated with a significant range restructure in the International business. £1.1 million related to the planned development of warehouses in the UK and consists of incremental labour and warehouse storage costs. Approximately £1.0 million related to the planned closure of the online warehouse. These costs were partially offset by movements in foreign exchange.

Cost of sales also includes amortisation costs on the intangible assets which arose on the acquisition of the Early Learning Centre and Blooming Marvellous.

Administrative expenses

The following table sets out the Group's administrative expenses for the periods indicated.

	For the	For the
	52 weeks	52 weeks
	ended	ended
	25 March	26 March
	2017	2016
	(£ million)
Administrative expenses (before adjusted costs)	(38.2)	(36.3)
Administrative expenses (adjusted)
Property related costs included in other exceptional items	(0.5)	(0.1)
Non-property related restructuring costs included in
administrative expenses	(5.7)	(6.5)
Joint venture trade receivable provision included in
administrative expenses	(4.0)	–
Impairment of investment in joint venture in other exceptional items	– ––––––––	(3.3) ––––––––
Total administrative expenses (adjusted)	(10.2)	(9.9)
Total administrative expenses	–––––––– (48.4)	–––––––– (46.2)
	––––––––	––––––––

Administrative expenses increased £2.2 million, to £48.4 million in FY 2016/17, from £46.2 million in FY 2015/16, reflecting a £1.9 million increase in the Group's administrative expenses before adjusted costs and a £0.3 million increase in the Group's adjusted administrative expenses.

The Group's administrative expenses before adjusted costs increased by £1.9 million, or 5.0 per cent. to £38.2 million in FY 2016/17, from £36.3 million in FY 2015/16, principally due to central cost increases relating to ongoing IT contracts following capital investment.

The Group's adjusted administrative expenses increased £0.3 million, or 3.0 per cent. to £10.2 million in FY 2016/17, from £9.9 million in FY 2015/16, and include the following:

Property related costs included in administrative expenses

£0.5 million relating to onerous lease provisions. This was reclassified in FY 2017/18 from other adjusted items to property related costs included in administrative expenses.

Non-property related restructuring costs included in administrative expenses

The Group recognised £3.6 million associated to head office restructure. £2.1 million related to head office redundancies and £1.5 million related the Group strategy review. The strategy review continues to evolve the strategic six pillars, drive profitability and deliver effective and significant changes. Such costs will continue into FY 2018/19. A £1.9 million charge was recognised where the carrying value of property, plant and equipment was higher than net realisable value (2016: £1.8 million credit). This was mainly driven by an overall decline in store net present value.

Joint venture restructuring costs included in administrative expenses

Due to the challenging economic conditions and performance over the period in China, the Group took a prudent approach and provided for all outstanding debt at 26 March 2016, £4.0 million (charged to adjusted items) plus a provision of £1.5 million for overdue debt (charged to profit before adjusted items).

For more detail on adjusted costs please refer to note 6 to the Group's audited consolidated financial statements as included in the Group's Annual Report and Accounts for FY 2016/17.

Net finance costs

The Group's net finance costs increased £0.1 million, or 3.0 per cent., to £3.3 million in FY 2016/17, from £3.2 million in FY 2015/16 due to the increase in borrowings.

Taxation

The Group's effective tax rate was 16.3 per cent. (FY 2015/16: 16.4 per cent.). The effective tax rate was lower than the standard tax rate of 20 per cent. mainly due to the recognition of the deferred tax asset on the brought forward tax losses and further losses becoming available due to adoption of FRS 101 for statutory reporting. An underlying tax charge of £3.2 million (FY 2015/16: £3.2 million) was included for the period within a total tax credit of £1.1 million (FY 2015/16: charge of £3.3 million). The cash tax payments were £1.1 million.

6. Liquidity and Capital Resources

6.1 General

The Group relies primarily on cash flow from operating activities, available cash and cash equivalents and liquidity under the Group's unused New Debt Facilities to finance its operations and initiatives. Following completion of the Capital Refinancing Plan, these items, together with the net proceeds of the Placing and Open Offer, will continue to be the principal sources of liquidity for the Group. The Group's liquidity requirements primarily relate to funding its working capital requirements and, to a lesser degree, the Group's capital expenditures and meeting ongoing debt service obligations. The most significant components of the Group's working capital are product inventories, receivables, trade and other payables.

6.2 Cash flow

The following tables present the primary components of the Group's cash flow for the periods indicated.

	For the	For the	For the
	52 weeks	52 weeks	52 weeks
	ended	ended	ended
	24 March	25 March	26 March
	2018	2017	2016
		(£ million)
Net cash flow from operating activities	1.3	15.3	21.9
Net cash used in investing activities	(24.1)	(41.2)	(39.0)
Net cash raised in financing activities	25.0	12.8	(1.0)
Net increase/(decrease) in cash and cash equivalents (Debt)/Cash and cash equivalents at the start of the	–––––––– 2.2	–––––––– (13.1)	–––––––– (18.1)
financial year	(0.9)	13.5	31.5
Effect of foreign exchange rate changes	(2.9)	(1.3)	0.1
Net (debt)/cash and cash equivalents at the	––––––––	––––––––	––––––––
end of period	(1.6)	(0.9)	13.5
	––––––––	––––––––	––––––––

Net cash flow from operating activities

Net cash flow from operating activities was £14.0 million lower in FY 2017/18 compared with FY 2016/17, due principally to decline in sales year on year offset by improvements in working capital via stock reduction.

The following table presents changes in the Group's net working capital for the periods indicated.

	For the	For the	For the
	52 weeks	52 weeks	52 weeks
	ended	ended	ended
	24 March	25 March	26 March
	2018	2017	2016
		(£ million)
Decrease/(increase) in inventories	11.2	(0.5)	(12.9)
(Increase)/decrease in receivables	(1.7)	7.5	(1.1)
(Decrease)/increase in payables	(5.9)	(2.0)	13.3
Changes in net working capital	–––––––– 3.6	–––––––– 5.0	–––––––– (0.7)
	––––––––	––––––––	––––––––

In FY 2017/18 despite softening footfall and a difficult retail environment the Group generated additional cash from working capital management driven by the sell through of high volumes of stock.

Net cash used in investing activities

FY 2016/17 saw a continuation of capital investment in the store refurbishment and IT infrastructure programmes. This investment slowed in FY 2017/18 in line with store refurbishment plan, and tightening of cash spend.

Net cash raised in financing activities

The increase in cash raised from financing activities throughout the periods under review relates to the increases in the level of drawdown on the Group's revolving credit facility.

6.3 Capital Expenditure

Capital expenditure relates to property, plant and equipment and intangibles. The following table presents the Group's capital expenditures for the periods indicated.

	For the	For the	For the
	52 weeks	52 weeks	52 weeks
	ended	ended	ended
	24 March	25 March	26 March
	2018	2017	2016
		(£ million)
Capital expenditure:
Purchase of property, plant and equipment	(15.6)	(28.2)	(27.8)
Purchase of intangibles – software	(8.5)	(14.4)	(11.4)
Total capital expenditure	–––––––– (24.1)	–––––––– (42.6)	–––––––– (39.2)
	––––––––	––––––––	––––––––

The Group undertook capital expenditure relating to investments in the year in store refurbishment and IT infrastructure.

6.4 Financial Indebtedness

The Group had outstanding borrowings as at 24 March 2018 of £42.5 million, compared with £15.0 million as at 25 March 2017 and nil as at 26 March 2016. As at the Reference Date, the Group's total borrowings (gross of facility fees) were approximately £45.2 million. The Group's existing financial indebtedness primarily consists of the New Debt Facility.

The following table presents the Group's borrowings as at the dates indicated.

	As at 24 March 2018	As at 25 March 2017 (£ million)	As at 26 March 2016
Borrowings:
Secured borrowings at amortised cost: Revolving Credit Facility	(42.5)	(15.0)	–
Total borrowings	–––––––– (42.5) ––––––––	–––––––– (15.0) ––––––––	–––––––– – ––––––––

For further details of the Group's weighted average interest rate paid, please refer to note 20. to the Group's audited consolidated financial statements as included in the Group's Annual Report and Accounts for FY 2017/18, its Annual Report and Accounts for FY 2016/17 and its Annual Report and Accounts for FY 2015/16, respectively.

The following table presents the Group's Net Debt position as at the dates indicated

Total Net (Debt)/Cash position	(44.1)	(15.9)	13.5
	––––––––	––––––––	––––––––
Borrowings(1) (Bank overdrafts)/Cash	(42.5) (1.6) ––––––––	(15.0) (0.9) ––––––––	– 13.5 ––––––––
	2018	2017	2016
	As at	As at	As at
	24 March	25 March	26 March

(1) Borrowings include debt incurred due to restructuring, closure costs, store asset impairments and onerous leases.

Net debt at the end of the year was £44.1 million (FY 2016/17: £15.9 million), which reflects the investment of £24.1 million in the Group's store refurbishment and infrastructure programme, and the difficult UK trading conditions and resulting performance of the UK business.

6.5 Contractual Obligations and Commitments

The following table sets out, as at 24 March 2018, a summary of the Group's contractual obligations and commercial commitments.

	Not later than		More than
	one year	1-5 years	5 years	Total
			(£ million)
On balance sheet:
Long-term debt obligations(1)	1.6	42.5	–	44.1
Off balance sheet:
Operating leases(2)	42.4	101.3	63.1	206.8
Capital commitments(3)	2.6	–	–	2.6
Total contractual obligations	––––––––– 46.6	––––––––– 143.8	––––––––– 63.1	––––––––– 253.5

(1) Includes the revolving credit facility, and overdraft

(2) Comprises future minimum lease payments under non-cancellable operating leases. These operating lease commitments relate primarily to the Group's UK stores.

(3) Predominantly relates to projects for new store and resite investment in the UK.

The Group has long-term contractual obligations, primarily in the form of debt and lease obligations. Cash provided by the Group's operations (including cash from revenue under the Group's International franchise arrangements) along with utilisation of the Group's borrowing facilities will be used to satisfy the Group's contractual obligations.

The table above does not reflect obligations related to payments associated with the Group's DB Schemes. The pension schemes' assets are held in a separate trustee administered fund to meet long-term pension liabilities to past and present employees. The IAS 19 valuation conducted for the period ended 24 March 2018 disclosed a net defined pension deficit of £37.7 million (2017: £80.1 million)

6.6 Off-balance sheet arrangements

As at 24 March 2018, the Group had no material off-balance-sheet arrangements other than as specified above in paragraph 6.5 of this Part VI (Operating and Financial Review).

7. Critical Accounting Policies

The preparation of financial statements requires management to make key decisions in the application of the Group accounting policies. Where a significant risk of materially different outcomes exists due to management assumptions or sources of estimation uncertainty, this will represent a critical accounting estimate. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

The estimates and judgements which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are discussed below. For a detailed discussion of the application of these and other accounting policies as well as related estimates and judgments, please refer to notes 1 and 2 to the Group's audited consolidated financial statements included in the Group's Annual Report and Accounts for FY 2017/18 incorporated by reference in Part XI (Documents Incorporated by Reference) of this document.

Adjusted items

The Directors believe that the adjusted profit and earnings per share measures provide additional useful information for Shareholders on the performance of the business. These measures are consistent with how business performance is measured internally by the Board and Operating Board.

The adjusted profit before tax measure is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies. The classification of adjusted items requires significant management judgement after considering the nature and intentions of a transaction.

Deferred taxation

The Directors have to consider the recoverability of the deferred tax assets based on forecast profits and whether tax assets should be retained. To the extent that it is considered that there are future profits available to utilise the tax assets the value of the asset has been retained on the balance sheet.

Impairment of assets

The Group reviews the carrying value of assets on a periodic basis, and whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Such circumstances or events could include: a pattern of losses involving the fixed asset; a decline in the market value for the fixed asset; and an adverse change in the business or market in which the fixed asset is involved. Determining whether impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount and the asset's residual value, if any. Estimates of future cash flows and the selection of appropriate discount rates relating to particular assets or groups of assets involve the exercise of a significant amount of judgement.

Supplier funding

Supplier funding is recognised as a reduction in cost of sales in the year to which they relate. Volume and other rebates, require judgement to be made as to the quantum and timing of income recognised, which are dependent upon achieving pre-agreed purchasing targets over an extended period of time.

Retirement benefits

Retirement benefits are accounted for under IAS 19 'Employee Benefits'. For defined benefit plans, obligations are measured at discounted present value whilst plan assets are recorded at fair value.

Because of changing market and economic conditions, the expenses and liabilities actually arising under the plans in the future may differ materially from the estimates made on the basis of these actuarial assumptions. The plan assets are partially comprised of equity and fixed-income instruments. Therefore, declining returns on equity markets and markets for fixed-income instruments could necessitate additional contributions to the plans in order to cover future pension obligations. Also, higher or lower withdrawal rates or longer or shorter life expectancy of participants may have an impact on the amount of pension income or expense recorded in the future.

The interest rate used to discount post-employment benefit obligations to present value is derived from the yields of senior, high-quality corporate bonds at the balance sheet date. These generally include AA-rated securities. The discount rate is based on the yield of a portfolio of bonds whose weighted residual maturities approximately correspond to the duration necessary to cover the entire benefit obligation.

Pension and other post-retirement benefits are inherently long-term and future experience may differ from the actuarial assumptions used to determine the net charge for 'pension and other post-retirement charges'. The calculation of any charge relating to retirement benefits is clearly dependent on the assumptions used, which reflects the exercise of judgement. The assumptions adopted are based on prior experience, market conditions and the advice of plan actuaries.

Onerous leases

Provision has been made in respect of leasehold properties for vacant, partly let and loss-making trading stores for the shorter of the remaining period of the lease and the period until in the Directors' opinion they will be able to exit the lease commitment. The amount provided is based on future rental obligations together with other fixed outgoings, net of any sublease income and in the case of trading stores the expected future shortfall in contribution to cover the fixed outgoings. In determining the provision, the cash flows have been discounted on a pre-tax basis using a risk-free rate of return. Significant assumptions are used in making these calculations and changes in assumptions and future events could cause the value of these provisions to change.

Allowances against the carrying value of inventory

The Group reviews the market value of and demand for its inventories on a periodic basis to ensure that recorded inventory is stated at the lower of cost and net realisable value. In assessing the ultimate realisation of inventories, the Group is required to make judgements as to future demand requirements and to compare these with current inventory levels. Factors that could impact estimated demand and selling prices are timing and success of product ranges

8. Financial risk management

The Group's normal operating, investing and financing activities expose it to a variety of financial risks. The Group's overall risk management process is designed to identify, assess, manage, monitor and mitigate risks across the Group.

The Board approves treasury policies and senior management directly controls day-to-day operations within these policies. The major financial risks to which the Group is exposed relate to movements in foreign exchange rates and interest rates. Where appropriate, cost effective and practicable, the Group uses financial instruments and derivatives to manage these risks. No speculative use of derivatives, currency or other instruments is permitted.

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the returns to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of equity attributable to equity holders of the parent comprising issued capital, reserves and retained earnings.

Foreign exchange rate risk

Foreign exchange risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of the changes in foreign exchange rates. The Group uses UK pounds sterling as its reporting currency. As a result, the Group is exposed to foreign exchange rate risk on financial assets and liabilities that are denominated in a currency other than UK sterling, primarily in US dollars and Hong Kong dollars.

Consequently, it enters into various contracts that reflect the changes in the value of foreign exchange rates to preserve the value of assets, commitments and anticipated transactions. The Group also uses forward contracts and options, primarily in US dollars and Russian rubles.

Derivatives embedded in non-derivative host contracts have been recognised separately as derivative financial instruments when their risks and characteristics are not closely related to those of the host contract and the host contract is not stated at its fair value with changes in its fair value recognised in the income statement.

Credit risk

Credit risk is the risk that a counterparty may default on their obligation to the Group in relation to lending, hedging, settlement and other financial activities. The Group's credit risk is primarily attributable to its trade receivables. The Group has a credit policy in place and the exposure to counterparty credit risk is monitored. The Group mitigates its exposure to counterparty credit risk through minimum counterparty credit guidelines, diversification of counterparties, working within agreed counterparty limits and bank guarantees where appropriate.

The carrying amount of the financial assets represents the maximum credit exposure of the Group. The carrying amount is presented net of impairment losses recognised. The maximum exposure to credit risk comprises trade receivables, and cash and derivative financial assets. Debtor balances which are not provided for are either on payment plans and abide or pay to terms with exception of timing due to unforeseen circumstances. The historical level of customer default is minimal and as a result the 'credit quality' of year end trade receivables is considered to be high.

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows, and matching the maturity profiles of financial assets and liabilities and monitoring covenant compliance and headroom.

Market risk

The Group is exposed to market risk, primarily related to foreign exchange and interest rates. The Group's objective is to reduce, where it deems appropriate to do so, fluctuations in earnings and cash flows associated with changes in interest rates, foreign currency rates and of the currency exposure of certain net investments in foreign subsidiaries. It is the Group's policy and practice to use derivative financial instruments to manage exposures of fluctuations on exchange rates. The Group only sells existing assets or enters into transactions and future transactions (in the case of anticipatory hedges) that it confidently expects it will have in the future, based on past experience. The Group expects that any loss in value for these instruments generally would be offset by increases in the value of the underlying transactions.

9. Capitalisation and Indebtedness

The following tables do not reflect the impact of the Capital Raising on the Group's capitalisation and indebtedness. Please refer to Part VII (Historical Financial Information) for an analysis of the impact of the Capital Raising on the Group's consolidated net assets.

The table below sets out the Company's capitalisation as at 24 March 2018 and the Group's indebtedness as at 18 May 2018. The capitalisation information has been extracted without material adjustment from the Group's historical financial information incorporated by reference in Part XI (Documents Incorporated by Reference) of this document. The figures for the total gross and net indebtedness of the Group have been extracted without material adjustment from the Company's unaudited accounting records.

As at 18 May 2018 (£ million)

Total current debt Guaranteed – Secured – Unguaranteed/unsecured –

	As at 18 May 2018 (£ million)
Total non-current debt (excluding current portion of long-term debt)
Guaranteed Secured Unguaranteed/unsecured	– (37.2) (8.0)
Total gross indebtedness	––––––––– (45.2)
	––––––––– As at 24 March 2018 (£ million)
Shareholder's equity(1) Share capital Share premium Trading and hedging reserve Other reserves Retained loss	85.4 61.0 (11.3) (1.1) (129.4) –––––––––
Total capitalisation	4.6
(1) There has been no material change in the Company's capitalisation since 24 March 2018.	–––––––––
The following table sets out the Group's net indebtedness(1)(2)(3) as at 18 May 2018.
	As at 18 May 2018 (£ million)
Cash Cash equivalents Total liquidity Current financial receivable Current bank debt Other current financial debt	– – – – (8.0)
Net current financial indebtedness Non-current bank loans Other non-current loans	––––––––– (8.0) (37.2) –
Non-current financial indebtedness	––––––––– (37.2)
Net financial indebtedness	––––––––– (45.2)

(1) The Group's debt is shown net of unamortised issue costs.

(2) The Group has no indirect and contingent indebtedness.

(3) The Group also has derivative financial liabilities relating to forward foreign currency contracts not reflected in the table above, amounting to £1.7 million as at 18 May 2018.

–––––––––

PART VII

HISTORICAL FINANCIAL INFORMATION

1. Basis of Financial Information

The Group's audited consolidated financial statements included in the Group's Annual Report and Accounts for FY 2017/18, the Group's Annual Report and Accounts for FY 2016/17 and the Group's Annual Report and Accounts for FY 2015/16, respectively, together with the audit reports thereon, are incorporated by reference into this document. Deloitte LLP of 1 New Street Square, London EC4A 3HQ has issued unqualified audit opinions on the above consolidated financial statements, which are also incorporated by reference into this document as referred to in Part X (Additional Information). The Group's audited consolidated financial statements for FY 2017/18, FY 2016/17 and FY 2015/16 respectively, were prepared in accordance with IFRS.

2. Cross-reference list

2.1 Financial statements for the financial year ended 26 March 2016, together with the independent audit report thereon

The page numbers below refer to the relevant pages of Mothercare's Annual Report and Accounts for FY 2015/16:

Information incorporated by reference	Page numbers in such document
Audited remuneration information	Pages 66 to 91
Independent auditor's report	Pages 94 to 98
Consolidated income statement	Page 99
Consolidated statement of comprehensive income	Page 100
Consolidated balance sheet	Page 101
Consolidated statement of changes in equity	Page 102
Consolidated cash flow statement	Page 103
Notes to the consolidated financial statements	Pages 104 to 141

2.2 Financial statements for the financial year ended 25 March 2017, together with the independent audit report thereon

The page numbers below refer to the relevant pages of Mothercare's Annual Report and Accounts for FY 2016/17:

Information incorporated by reference	Page numbers in such document
Audited remuneration information	Pages 72 to 95
Independent auditor's report	Pages 98 to 104
Consolidated income statement	Page 105
Consolidated statement of comprehensive income	Page 106
Consolidated balance sheet	Page 107
Consolidated statement of changes in equity	Page 108
Consolidated cash flow statement	Page 109
Notes to the consolidated financial statements	Pages 106 to 149

2.3 Financial statements for the financial year ended 24 March 2018, together with the independent audit report thereon

The page numbers below refer to the relevant pages of Mothercare's Annual Report and Accounts for FY 2017/18:

Information incorporated by reference	Page numbers in such document
Audited remuneration information	Pages 53 to 78
Independent auditor's report	Pages 81 to 89
Consolidated income statement	Page 90
Consolidated statement of comprehensive income	Page 91
Consolidated balance sheet	Page 92
Consolidated statement of changes in equity	Page 93
Consolidated cash flow statement	Page 94
Notes to the consolidated financial statements	Pages 95 to 130

PART VIII

UNAUDITED PRO FORMA FINANCIAL INFORMATION

Section A

The unaudited pro forma financial information of the Group in this Part VIII (Unaudited Pro Forma Financial Information) (the "Pro forma financial information") is based on the consolidated net assets of the Group set out in the Group's Annual Report and Accounts for FY 2017/18. The Pro forma financial information has been prepared to illustrate the effect on the consolidated net assets of the Group as if the Capital Raising and the Shareholder Loans had taken place on 24 March 2018.

The Pro forma financial information has been prepared for illustrative purposes only and, because of its nature, addresses a hypothetical situation and, therefore, does not represent the Group's actual financial position.

The Pro forma financial information has been prepared on the basis set out in the notes below. The Pro forma financial information has been prepared in accordance with Annex II of the PD Regulation and in a manner consistent with the basis of the accounting policies adopted by the Company in preparing the Group's Annual Report and Accounts for FY 2017/18.

The Pro forma financial information does not constitute financial statements within the meaning of Section 434 of the Companies Act 2006. Shareholders should read the whole of this document and not rely solely on the summarised financial information contained in this Part VIII (Unaudited Pro Forma Financial Information).

Deloitte LLP's report on the Pro forma financial information is set out in Section B of this Part VIII.

Unaudited pro forma statement of net assets

–––––––––––––––––––––– Capital Raising and Other Group as at Shareholder adjustments 24 March 2018(1) Loans(2) Note 3	Pro forma Total £'m
£'m £'m £'m
Non-current assets
Goodwill 26.8 – –	26.8
Intangible assets 39.6 – –	39.6
Property, plant & equipment 55.0 – –	55.0
Investment in joint ventures – – –	–
Long-term receivable 0.1 – –	0.1
Deferred tax asset 3.6 – – –––––––– –––––––– ––––––––	3.6 ––––––––
Non-current assets 125.1 – – –––––––– –––––––– ––––––––	125.1 ––––––––
Current assets
Inventories 87.0 – –	87.0
Trade and other receivables 64.5 – –	64.5
Derivative financial instruments 0.1 – –	0.1
Cash and cash equivalents – – – –––––––– –––––––– ––––––––	– ––––––––
Current assets 151.6 – – –––––––– –––––––– ––––––––	151.6 ––––––––
Total assets 276.7 – –	276.7
–––––––– –––––––– –––––––– Current liabilities	––––––––
Trade and other payables (106.3) – –	(106.3)
Borrowings (1.6) (8.0)(2(a)) –	(9.6)
Current tax liabilities (0.3) – –	(0.3)
Derivative financial instruments (9.4) – –	(9.4)
Short-term provisions (16.8) – –	(16.8)
–––––––– –––––––– –––––––– Current liabilities (134.4) (8.0) – –––––––– –––––––– ––––––––	–––––––– (142.4) ––––––––

		Adjustments
	Group as at 24 March 2018(1)	–––––––––––––––––––––– Capital Raising and Shareholder Loans(2)	Other adjustments Note 3	Pro forma Total
	£'m	£'m	£'m	£'m
Non-current liabilities Trade and other payables	(20.1)	–	–	(20.1)
Borrowings	(42.5)	38.3	(6.3)	(10.5)
Derivative financial instruments	(0.6)	–	–	(0.6)
Retirement benefit obligations	(37.7)	–	–	(37.7)
Long-term provisions	(36.8)	–	–	(36.8)
Non-current liabilities	–––––––– (137.7)	–––––––– 38.3(2(b))	–––––––– (6.3)	–––––––– (105.7)
Total liabilities	–––––––– (272.1)	–––––––– 30.3	–––––––– (6.3)	–––––––– (248.1)
Net assets	–––––––– 4.6	–––––––– 30.3	–––––––– (6.3)	–––––––– 28.6
	––––––––	––––––––	––––––––	––––––––

Notes:

• (1) The net assets of the Group as at 24 March 2018 have been extracted without material adjustment from the Group's Annual Report and Accounts for FY 2017/18, as incorporated by reference by reference in Part XI (Documents Incorporated by Reference) of this document.
• (2) These adjustments reflect the net proceeds of the Capital Raising and the Shareholder Loans receivable by the Company consisting of the following (as explained in further detail in Part I of this document):
• (a) £8.0 million Shareholder Loans received in May 2018. The Pro forma financial information reflects £8.0 million as an adjustment to current borrowings, with the £8.0 million received reducing non-current borrowings (see note 2(b) below). Each Shareholder Loan is convertible into New Ordinary Shares at the option of the relevant shareholder, conditional upon, among other things, the approval by the Company's Shareholders of the conversion of the relevant Shareholder Loan as a related party transaction. This conversion, however, has not been reflected in the Pro forma financial information given that the Shareholder Loans are not convertible until November 2018 at the earliest and the conversion is not required.
• (b) The £38.3 million adjustment to non-current borrowings reflects:
  • £8.0 million cash received from Shareholder Loans (see note 2(a) above)
  • Plus: £32.5 million gross proceeds receivable from the Capital Raising
  • Less: £(2.2) million expenses of the Capital Raising
  • Total £38.3 million
• (3) Aside from the Capital Raising costs shown as an adjustment in note 2(b) above, £6.3 million refinancing and restructuring fees have been incurred since 24 March 2018. These costs consist of £1.8 million for refinancing (over and above £1.1 million incurred prior to 24 March 2018 which are already reflected in the audited Group balance sheet), £1.1 million for the CVAs and subsequent administration of Childrens World and £3.4 million for other restructuring advice.
• (4) The restructuring of the Group's UK store portfolio through CVAs (refer to Part I (Letter from the Interim Executive Chairman of Mothercare plc) of this document) will impact the Group's net assets. In particular, property related provisions for store closure costs and onerous leases. Given the uncertainty surrounding the timing and cost of store closures it is not possible to reliably estimate the value of this impact at the date of this document and therefore no adjustment has been made.
• (5) The CVA proposal in respect of Childrens World was not carried by creditors, and Childrens World was placed into administration on 9 July 2018 following the transfer of 13 of its 22 stores to other Group companies to continue trading. Given the uncertainty surrounding the timing and cost of store closures it is not possible to reliably estimate the value of this impact at the date of this document and therefore no adjustment has been made.
• (6) The unaudited Pro forma financial information does not take into account trading of the Group subsequent to the period end balance sheet date of 24 March 2018.

REPORT ON PRO FORMA FINANCIAL INFORMATION

Section B

Deloitte LLP 1 New Street Square London EC4A 3HQ

The Board of Directors on behalf of Mothercare plc Cherry Tree Road Watford Herts WD24 6SH

Numis Securities Limited 10 Paternoster Square London EC4M 7LT

9 July 2018

Dear Sirs,

Mothercare plc (the "Company")

We report on the pro forma financial information (the "Pro forma financial information") set out in Part VIII (Unaudited Pro Forma Financial Information) of the prospectus dated 9 July 2018 (the "Prospectus"), which has been prepared on the basis described in the notes 1 to 4, for illustrative purposes only, to provide information about how the proposed Capital Raising might have affected the financial information presented on the basis of the accounting policies adopted by the Company in preparing the financial statements for the period ended 24 March 2018. This report is required by the Commission Regulation (EC) No 809/2004 (the "Prospectus Directive Regulation") and is given for the purpose of complying with that requirement and for no other purpose.

Responsibilities

It is the responsibility of the directors of the Company (the "Directors") to prepare the Pro forma financial information in accordance with Annex II items 1 to 6 of the Prospectus Directive Regulation.

It is our responsibility to form an opinion, as to the proper compilation of the Pro forma financial information and to report that opinion to you in accordance with Annex II item 7 of the Prospectus Directive Regulation.

Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Annex I item 23.1 of the Prospectus Directive Regulation, consenting to its inclusion in the Prospectus.

In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro forma financial information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.

Basis of Opinion

We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro forma financial information with the Directors.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro forma financial information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Company.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in jurisdictions outside the United Kingdom, including the United States of America, and accordingly should not be relied upon as if it had been carried out in accordance with those standards or practices.

Opinion

In our opinion:

• (a) the Pro forma financial information has been properly compiled on the basis stated; and
• (b) such basis is consistent with the accounting policies of the Company.

Declaration

For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with Annex I item 1.2 of the Prospectus Directive Regulation.

Yours faithfully

Deloitte LLP

Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 1 New Street Square, London EC4A 3HQ, United Kingdom. Deloitte LLP is the United Kingdom affiliate of Deloitte NWE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NWE LLP do not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms.

PART IX

TAXATION

(a) General

The following statements do not constitute legal or tax advice and are intended to apply only as a general guide to the position under current UK tax law and the current published practice of HMRC (which may not be binding), either of which is subject to change at any time (possibly with retroactive effect). They are not intended to be exhaustive and in particular do not include a consideration of the potential UK inheritance tax consequences of holding shares. Except where otherwise expressly stated, they apply only to Qualifying Shareholders who are resident and (in the case of individuals) domiciled for tax purposes in (and only in) the UK to whom split-year treatment does not apply, who hold their Ordinary Shares as an investment, hold less than 10 per cent. of the Ordinary Shares and who are the absolute beneficial owners of their Ordinary Shares and any dividends paid on them. They may not apply to certain Qualifying Shareholders, such as dealers in securities, insurance companies, collective investment schemes, Qualifying Shareholders who are exempt from tax and Qualifying Shareholders who have (or are deemed to have) acquired their Ordinary Shares by virtue of an office or employment. Such persons may be subject to special rules.

Any person who is in any doubt as to his or her tax position or who may be subject to tax in any jurisdiction other than the United Kingdom is strongly advised to consult an appropriate professional tax adviser without delay.

(b) Taxation of chargeable gains

New Ordinary Shares acquired pursuant to the Open Offer

As a matter of UK law, the acquisition of Open Offer Shares by Qualifying Shareholders pursuant to the Open Offer may not be regarded as a reorganisation of the share capital of the Company for the purposes of UK taxation of chargeable gains. The published practice of HMRC to date has been to treat an acquisition of shares by an existing shareholder up to his pro-rata entitlement pursuant to the terms of an open offer as a reorganisation but it is understood that HMRC may not apply this practice in circumstances where an open offer is not made to all Qualifying Shareholders. Specific confirmation as to whether the Open Offer will be treated as a reorganisation has not been requested from HMRC.

To the extent that the issue of the New Ordinary Shares by the Company will be regarded as a reorganisation of the Company's share capital for the purposes of UK taxation on chargeable gains, Qualifying Shareholders will not be treated as acquiring a new asset nor as making a disposal of any part of their corresponding holding of Ordinary Shares by reason of taking up all or part of their entitlements to New Ordinary Shares. No liability to UK taxation on chargeable gains should arise in respect of the issue of New Ordinary Shares to the extent that a Shareholder takes up their Open Offer Entitlements. To the extent that a Qualifying Shareholder takes up the New Ordinary Shares allotted to them under the Open Offer, the New Ordinary Shares so allotted, will, for the purposes of UK tax on chargeable gains, be treated as having been acquired at the same time as the Shareholder's existing holding was acquired. The amount of subscription monies paid for such New Ordinary Shares will be added to the allowable expenditure for the Shareholder's existing holding(s).

If, or to the extent that, the acquisition of Open Offer Shares under the Open Offer is not regarded by HMRC as a reorganisation, the Open Offer Shares acquired by each Shareholder under the Open Offer will, for the purposes of UK taxation of chargeable gains, be treated as acquired as part of a separate acquisition of shares when computing any gain or loss on any subsequent disposal. When computing any gain or loss on a disposal of shares, for UK chargeable gains purposes, HMRC's share identification provisions will need to be taken into consideration.

New Ordinary Shares acquired pursuant to the Placing

The issue of New Ordinary Shares under the Placing will not constitute a reorganisation of share capital for the purposes of the UK taxation of chargeable gains and, accordingly, any New Ordinary Shares acquired pursuant to the Placing will be treated as acquired as part of a separate acquisition of shares.

Disposals

If a Shareholder sells or otherwise disposes of all or some of the New Ordinary Shares allotted to him, he may, depending on his circumstances, incur a liability to UK taxation on any chargeable gain realised.

(i) Individual Qualifying Shareholders

The current headline rates of capital gains tax for the 2018/19 tax year are 10 per cent. and 20 per cent. for individuals for gains other than those made which relate to disposals of residential property and/or carried interest receipts relating to investment management services provided. Certain reliefs or allowances may be available depending on the individual circumstances of the Shareholder, including the availability of an annual exempt amount which allows an individual to make a certain amount of gain each year before such gain become subject to tax in the UK. For 2018/19 this annual exempt amount is £11,700.

For these purposes, the same thresholds apply for Scottish taxpayer Shareholders as in respect of other Shareholders resident in the UK. Scottish taxpayer Shareholders may wish to consult their own professional advisers if they are in any doubt as to their tax position in respect of disposals.

(ii) Individual non-resident Qualifying Shareholders

Individuals who are temporarily non-resident may, in certain circumstances, be subject to tax in respect of gains realised while they are not resident in the UK. Temporary non-residence for these purposes refers to the situation in which the individual Shareholder ceases to be tax resident in the UK (or is treated as having ceased to be tax resident in the UK for the purposes of the double tax treaty) for a period of five tax years or fewer (or, for departures before 6 April 2013, ceases to be resident or ordinarily resident in the UK, or becomes treaty non-resident for a period of fewer than five tax years), and who disposes of his Open Offer Shares or New Ordinary Shares during that period of temporary non-residence. Such an individual may be liable to capital gains tax on a chargeable gain accruing on the disposal on his return to the UK under certain anti-avoidance rules.

Subject to the paragraph above, a Shareholder who is not resident in the UK for tax purposes and who realises a gain will not normally be liable to UK taxation on chargeable gains. However, such a Shareholder who is an individual may be liable to UK tax on chargeable gains if, at the relevant time that Shareholder carries on a trade, profession or vocation in the UK through a branch or agency and the New Ordinary Shares, as the case may be are, or have been, used, held or acquired for the purposes of such trade, profession or vocation or for the purposes of such branch or agency. Shareholders who are not UK resident for tax purposes may be subject to non-UK tax on any gains under local law.

(iii) Corporate Qualifying Shareholders

Corporate Qualifying Shareholders within the charge to UK corporation tax which realise a gain will, subject to the availability of any exemptions, reliefs and/or allowable losses, be subject to corporation tax (at a rate of 19 per cent. for the year 2018/19 decreasing to 17 per cent. from 1 April 2020).

(iv) Corporate non-resident Qualifying Shareholders

A corporate Shareholder which is not resident in the UK for tax purposes and which realises a gain will not normally be liable to UK taxation on chargeable gains.

However, a corporate Shareholder which is not UK resident but carries on a trade in the UK through a permanent establishment may be liable to UK tax on chargeable gains if it disposes of New Ordinary Shares, as the case may be which are, at or before the time the gain accrues, used in or for the purposes of that trade or for the purposes of the permanent establishment.

(v) Indexation

In the case of individuals, trustees and personal representatives, indexation allowance is not available.

Corporate Shareholders will be entitled to an indexation allowance in computing the amount of a chargeable gain accruing on a disposal of the New Ordinary Shares, which will provide relief for the effects of inflation by reference to movements in the UK retail price index up to December 2017 (but not from January 2018 onwards). This will be in point where the New Ordinary Shares are regarded as a reorganisation of the share capital of the Company as mentioned above.

(c) Stamp duty and SDRT

The comments below relating to stamp duty and SDRT apply whether or not a Qualifying Shareholder is resident in the UK, but it should be noted that certain categories of person, including market makers, brokers, dealers and other specified market intermediaries, are entitled to exemption from stamp duty and SDRT in respect of purchases of securities in specified circumstances.

There should be no liability to stamp duty or SDRT arising on the allotment of the Placing Shares or on the issue of the Open Offer Shares by the Company. The registration of and the issue of definitive share certificates to Qualifying Shareholders or the first registration of Placing Shares in the name of a member of CREST should not give rise to any liability to stamp duty or SDRT.

Any unconditional agreement (whether written or verbal) to sell Ordinary Shares will normally give rise to a liability on the purchaser to SDRT, at the rate of 0.5 per cent. of the actual consideration paid. If an instrument of transfer (usually a stock transfer form) is subsequently produced it will generally be subject to stamp duty at the rate of 0.5 per cent. of the actual consideration paid (rounded up to the nearest £5 if necessary). However, an exemption from stamp duty is available where the amount or value of the consideration is £1,000 or less, and it is certificated on the instrument that the transaction effected by the instrument does not form part of a larger transaction or series of transactions for which the aggregate amount or value of the consideration exceeds £1,000. When stamp duty is duly paid on the instrument, or it is certified as exempt, the SDRT charge will be cancelled and any SDRT already paid will be refunded. Stamp duty and SDRT are generally the liability of the purchaser.

Where Ordinary Shares are held in uncertificated form within CREST, a transfer of shares through CREST will generally be subject to SDRT (rather than stamp duty) at the rate of 0.5 per cent. of the value of the consideration given. CREST is obliged to collect SDRT on relevant transactions settled within the system. Deposits of Ordinary Shares into CREST will generally not be subject to SDRT or stamp duty, unless the transfer into CREST is itself for consideration. Special rules apply in connection with depositary arrangements and clearance services.

(d) Taxation of dividends

Under current UK tax law, the Company will not be required to withhold tax at source from dividend payments it makes. Liability to tax on dividends will depend upon the individual circumstances of the Shareholder.

A Shareholder resident outside the UK may be subject to non-UK taxation on dividend income under local law. A Shareholder who is resident outside the UK for tax purposes should consult their own tax adviser concerning their tax position on dividends received from the Company.

Individual Qualifying Shareholders

Different rates of tax apply to different bands of a UK tax resident individual Shareholder's dividend income, which for these purposes includes UK and non-UK source dividends and certain other distributions in respect of shares.

With effect from 6 April 2018, the first £2,000 of dividend income received by an individual Shareholder in a tax year (the "Nil Rate Amount") is exempt from UK income tax, regardless of what tax rate would otherwise apply to that dividend income. If an individual Shareholder receives dividends in excess of the Nil Rate Amount in a tax year, the excess is taxed at the following dividend rates for the year 2018/19: 7.5 per cent. (for individuals not liable to tax at a rate above the basic rate), 32.5 per cent. (for individuals subject to the higher rate of income tax) and 38.1 per cent. (for individuals subject to the additional rate of income tax).

For the purposes of individual tax on dividend income, the same thresholds apply for Scottish taxpayer Shareholders as in respect of other Shareholders resident in the UK. Scottish taxpayer Shareholders may wish to consult their own professional advisers if they are in any doubt as to their tax position in respect of dividends.

Dividend income that is within the dividend Nil Rate Amount counts towards an individual's basic or higher rate limits – and will therefore affect the level of savings allowance to which they are entitled, and the rate of tax that is due on any dividend income in excess of the Nil Rate Amount. In calculating into which tax band any dividend income over the nil rate amount falls, savings and dividend income are treated as the highest part of an individual's income. Where an individual has both savings and dividend income, the dividend income is treated as the top slice.

Corporate Qualifying Shareholders

It is likely that most dividends paid on the New Ordinary Shares to UK resident corporate Shareholders would fall within one or more of the classes of dividend qualifying for exemption from corporation tax. However, it should be noted that the exemptions are not comprehensive and are also subject to anti-avoidance rules. If a dividend paid on the Ordinary Shares to a UK resident corporate Shareholder does not fall within one of the exempt classes, the Shareholder will be subject to corporation tax on the gross amount of the dividend at a rate of 19 per cent., falling to 17 per cent. from 1 April 2020.

A corporate Shareholder that is not resident in the UK will not be subject to corporation tax on dividends received from the Company in the UK, unless such Shareholder carries on a trade in the UK through a permanent establishment and the shares are used by, for or held by or for, the permanent establishment. In these circumstances, the non-UK resident corporate Shareholder may, depending on its individual circumstances and if the exemption discussed above is not available, be chargeable to corporation tax on dividends received from the Company.

PART X

ADDITIONAL INFORMATION

1. Persons responsible

The Company and the Directors accept responsibility for information contained in this document. To the best of the knowledge and belief of the Company and the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

2. Company Details

The Company was incorporated and registered in England and Wales on 26 September 1985 as a company limited by shares with the name 15th Legibus plc and company number 1950509. The Company changed its name to Storehouse plc on 6 December 1985 and to Mothercare plc on 3 August 2000. The principal legislation under which the Company operates is the Companies Act and the regulations made thereunder.

The Company is a public limited company domiciled in England and Wales with its registered office at Cherry Tree Road, Watford, Hertfordshire WD24 6SH. The telephone number of the Company's registered office is +44 (0)1923 241 000.

3. Information on the share capital

3.1 Issued share capital

The issued and fully paid share capital of the Company as at the close of business on the Reference Date consists of:

		Nominal
	Number of	value of
Class of share capital	shares issued	shares issued
Ordinary Shares of 50 pence each	170,871,885	85,435,942.50

At the Reference Date, none of the Ordinary Shares were held in treasury.

The Existing Ordinary Shares are admitted to the premium listing segment of the Official List of the UK Listing Authority and admitted to trading on the main market for listed securities of the London Stock Exchange.

3.2 History of share capital

The following paragraphs provide information on the movements in issued share capital of the Company during the financial years ended 26 March 2016, 25 March 2017 and 24 March 2018 and the Reference Date:

• (a) as at 29 March 2015, the first day covered by the historical financial information, the Company's issued and fully paid share capital comprised 170,469,020 Ordinary Shares, with a nominal value of 50 pence each and a total nominal value of £85.2 million;
• (b) between 29 March 2015 and 26 March 2016, 393,843 Ordinary Shares were issued under the Share Schemes. As at 26 March 2016, the Company's issued and fully paid share capital comprised 170,862,863 Ordinary Shares of 50 pence each, with a total nominal value of £85.4 million;
• (c) between 27 March 2016 and 25 March 2017, 4,634 Ordinary Shares were issued under the Share Schemes. As at 25 March 2017, the Company's issued and fully paid share capital comprised 170,867,497 Ordinary Shares of 50 pence each, with a total nominal value of £85.4 million;
• (d) between 25 March 2017 and 24 March 2018, 9,022 Ordinary Shares were issued under the Share Schemes. As at 24 March 2018, the Company's issued and fully paid share capital

comprised 170,871,885 Ordinary Shares of 50 pence each, with a total nominal value of £85.4 million;

• (e) as at 24 March 2018 there was an own share reserve of £1.1 million representing the cost of shares in the Company purchased in the market and held by the Mothercare Employee Trusts to satisfy options under the Group's Share Schemes. As at 24 March 2018, the total shareholding was 1,019,693 with a market value of £0.2 million; and
• (f) between 24 March 2018 and the Reference Date, no Ordinary Shares were issued under the Share Schemes.

Save as disclosed in this paragraph 3, since 29 March 2015 no Ordinary Shares have been issued by the Company, fully or partly paid, either in cash or for other consideration and (other than in connection with the Placing and Open Offer and the vesting or exercise of awards under the Share Schemes) no such issues are proposed. Other than in connection with the Share Schemes, no share capital of the Company or any of its subsidiaries is under option or agreed conditionally or unconditionally to be put under option. The Company has not issued any convertible securities, exchangeable securities or securities with warrants, and there are no acquisition rights and/or obligations over unissued share capital or any undertakings to increase the share capital of the Company.

The number of Ordinary Shares outstanding as at 25 March 2017, being the first day of the Company's last complete financial year, and as at 24 March 2018, being the last day of the Company's last complete financial year, was:

Issued and fully paid 25 March 2017 170,867,497 24 March 2018 170,871,885

3.3 Issued Ordinary Share capital

The following tables show the existing issued ordinary share capital of the Company and the issued share capital as it is expected to be immediately following the Capital Reorganisation and immediately following Admission.

Existing Share Capital

	Issued and fully paid
Class of Shares	Amount (£)	Number
Ordinary Shares of 50 pence each	85,435,942.50	170,871,885

Immediately following the Capital Reorganisation

	Issued and fully paid
Class of Shares	Amount (£)	Number
Ordinary Shares of one penny each	1,708,718.85	170,871,885
Deferred Shares of 49 pence each	83,727,223.65	170,871,885

Immediately following the Capital Raising (taking into account the Capital Reorganisation)

	Issued and fully paid
Class of Shares	Amount (£)	Number
Ordinary Shares of one penny each	3,417,437.70	341,743,770
Deferred Shares of 49 pence each	83,727,223.65	170,871,885

Immediately following the Capital Raising and a full conversion of the Shareholder Loans on their maturity date of 30 June 2021 and on the assumption that no further Ordinary Shares are issued as a result of the exercise of any options or awards under the Share Schemes between the Reference Date and Admission

	Issued and fully paid
Class of Shares	Amount (£)	Number
Ordinary Shares of one penny each	4,044,281.70	404,428,170
Deferred Shares of 49 pence each	83,727,223.65	170,871,885

3.4 Dilution on Capital Raising

The New Ordinary Shares represent approximately 57.7 per cent. of the Ordinary Shares in issue immediately prior to the Capital Raising.

Qualifying Shareholders who do not take up any of their Open Offer Entitlements will suffer a dilution of:

• approximately 57.7 per cent. to their interests in the Company pursuant to the conversion of the Shareholder Loans (subject to approval of the Related Party Transactions) and the Capital Raising; or
• approximately 50 per cent. to their interests in the Company pursuant to the Capital Raising if the Shareholder Loans are not converted.

For these purposes, any dilution which may result from the vesting or exercise of any awards under the Share Schemes between the Reference Date and the Record Date has been disregarded.

3.5 Share Schemes

The Share Schemes are subject to overall dilution limits. No more than 10 per cent. of the Company's issued ordinary share capital may be committed to be issued in any 10 year period under all Share Schemes, and no more than 5 per cent. may be committed to be issued under all discretionary Share Schemes.

(a) Save As You Earn Schemes (SAYE)

The SAYE Scheme is a tax-advantaged share option scheme open to all eligible employees under which options may be granted with an exercise price of not less than the average market price for the three dealing days prior to the offer date, less 20 per cent. Share options can normally be exercised after a three year period using savings made by the employee into an employee SAYE savings contract over the three year period.

(b) Retention Share Plan (RSP)

The RSP was established in 2016 for the benefit of employees (other than executive directors) who held an award granted under the LTIP (see below) in December 2014 or March 2015. Awards under the RSP vest only if the LTIP awards do not vest above 20 per cent. Since those LTIP awards did not vest at all, the RSP awards will now vest. No other awards have been granted under the RSP.

(c) Company Share Option Plan (CSOP)

The CSOP is a tax-advantaged share option plan open to all eligible employees and allows for the grant of options with an exercise price equal to market value. There is a limit of £30,000 (measured at the date of grant) on the value of shares over which any participant may hold unexercised options at any one time. A grant of options was made in 2014 which have all lapsed due to failure to meet performance conditions. No options are currently outstanding under the CSOP.

(d) Value Creation Plan (VCP)

The VCP was adopted in 2017 as a one off designed to incentivise executive directors and a small number of executive directors immediately below the Board to execute the second phase of transformation plan and deliver a recovery in Mothercare's share price. Participants will only be able to receive a benefit if a 90 day average share price of £2.00 (adjusted for any dividends paid) is met prior to the end of FY 2019/20. If this hurdle is not met, the awards will lapse. The VCP is capped such that the maximum number of shares deliverable under the plan is 12.9 million, with a maximum of 4.5 million for Mark Newton-Jones. The VCP replaces future awards under the LTIP.

(e) 2017 Senior Management Incentive Plan (SMIP)

The SMIP was established as a one-off plan pursuant to which incentive awards were made to a small number of management below the Operating Board level (as they do not participate in the VCP). Payments are made under the SMIP in cash, subject to achievement of performance targets based on absolute total shareholder return ("TSR") over the three years to the end of FY 2019/20.

(f) Long-Term Incentive Plan (LTIP)

Awards have been made under the LTIP in each of the years 2013, 2014, 2015 and 2016 which vest subject to achievement of performance conditions. Awards made in 2013 and 2014 have subsequently lapsed in full due to failure to meet performance conditions. Awards made in 2015 and 2016 are currently outstanding. Since the adoption of the VCP, no further awards have been made under the LTIP.

(g) Short Term Incentive Plan (STIP)

The STIP is the plan under which annual bonuses are made and under which part of the bonus otherwise payable may be deferred into shares. Payment under the STIP is subject to a gateway level of financial performance being achieved. Awards were made in 2013 and 2015 (and 2015 deferred share awards vest in 2018). There was no annual bonus payable in respect of FY 2017/18. No annual bonus has yet been set for FY 2018/19.

Share schemes grants and awards

The outstanding awards as at 24 March 2018 under the LTIP, deferred annual bonuses and SAYE are set out in the table below.

			Number of				Number of		Date at which	Expiry
Director	Plan		Date of awards at award 25.03.17	Awards granted	Awards vested		Awards awards at Exercise lapsed 24.03.18	price	award vests	date of awards
Mark Newton-Jones		SAYE 22.12.16	20,000	–	–		20,000		90p 01.03.20 30.08.20 50% end FY17*
		LTIP 3 12.12.14	989,011	–	–	–	989,011		Nil 50% end	FY18* 12.12.24
									50% end FY18*
		LTIP 4 03.06.15	522,079	–	–	–	522,079		Nil 50% end	FY19* 03.06.25
									50% end FY19*
		LTIP 5 08.08.16	906,666	–	–	–	906,666		Nil 50% end	FY20 08.08.26
	Annual
		Bonus 03.06.15	31,545	–	–	–	31,545		Nil 03.06.18	n/a
Richard Smothers		SAYE 22.12.15	10,650	–	–	10,650	–		169p 01.03.19 30.08.19 50% end FY17*
		LTIP 3 23.03.15	354,167	–	–	354,167	–		Nil 50% end	FY18* 23.03.25
									50% end FY18*
		LTIP 4 03.06.15	258,864	–	–	258,864	–		Nil 50% end	FY19* 03.06.25
									50% end FY19*
		LTIP 5 08.08.16	460,185	–	–	460,185	–		Nil 50% end	FY20 08.08.26
	Annual
	Bonus	–	–	–	–	–	–	–	–	–
Glyn Hughes1	SAYE	–	–	–	–	–	–	–	–	–

The table above shows the maximum number of shares that could have been released if awards were to vest in full. However, all outstanding awards in this table have lapsed in line with the plan rules.

• * Vesting is determined by the Remuneration Committee following publication of the preliminary results for the respective financial year.
• 1 On his appointment as CFO Designate, Glyn Hughes was granted an award under the VCP of 1.75 per cent. (14 per cent. of the total 12.5 per cent. pool) of the value created above a starting share price of £1.50 if a hurdle share price of £2.00 is met up to a maximum of 1.8 million shares.

3.6 Shares held by or on behalf of the Company

As at the Reference Date, no Ordinary Shares were held by or on behalf of the Company. However, 5,986 Ordinary Shares are held by the employee share trust, Mothercare Employees' Share Trustee Limited, and may be subsequently transferred to employees and 1,013,707 Ordinary Shares are held by the Employee Benefit Trust.

3.7 Shareholder Authorities

At the General Meeting, Shareholders will be asked to consider and vote on the Resolutions. The Third Resolution authorises the Board to allot up to 233,556,285 Ordinary Shares, representing approximately 136.7 per cent. of the Company's current issued share capital as at 6 July 2018 (being the last Business Day prior to the announcement of the Capital Raising). The Fourth Resolution is a special resolution that, subject to the passing of the Third Resolution, authorises the Board to allot up to 233,556,285 Ordinary Shares for cash under the authority given by the Third Resolution as if statutory pre-emption rights under section 561 of the Companies Act did not apply to such allotment. This power will be limited to the allotment of New Ordinary Shares in connection with the Open Offer (on the terms and conditions set out in this document) and, if granted, these authorities will enable the Company to allot sufficient New Ordinary Shares to undertake the Open Offer and the Conversion of the Shareholder Loans. The authorities will expire on the date of the Company's annual general meeting in 2019. The authorities granted under the Resolutions are in addition to the authority to allot Ordinary Shares which was granted to the Board at the Company's annual general meeting in 2017, which the Board have no present intention of exercising, except pursuant to the Share Schemes, and which will expire at the Company's annual general meeting at the Company's annual general meeting on 19 July 2019 or 31 October 2018, whichever is the earlier. Accordingly, the New Ordinary Shares to be issued in connection with the Capital Raising will be created, allotted and issued pursuant to the authorities to be granted under the Resolutions proposed at the General Meeting. In addition, at the General Meeting, the Company is also seeking shareholder approval of the Seventh Resolution to Tenth Resolution representing the resolutions typically proposed by the Company at its annual general meeting, but where such authorities are revised based upon the Enlarged Share Capital. For further information on the Resolutions please see paragraph 17 of Part I (Letter from the Interim Executive Chairman of Mothercare plc) of this document.

4. DIRECTORS OF THE COMPANY

The Directors of the Company and their principal functions in respect of the Company are:

Directors	Position
Clive Whiley	Interim Executive Chairman
Mark Newton-Jones	Chief Executive Officer
David Wood	Group Managing Director
Glyn Hughes	Chief Financial Officer
Lee Ginsberg	Non-executive Director
Gillian Kent	Non-executive Director
Richard Rivers	Senior Independent Non-executive Director
Nick Wharton	Non-executive Director

The service address of each of the Directors is Cherry Tree Road, Watford, Hertfordshire WD24 6SH.

4.1 Details of the Directors

The name, business experience and principal activities outside the Group of each of the Directors, as well as the dates of his or her initial appointment as a Director, as applicable, are set out below, together with a list of any current and/or previous directorships or analogous roles held in the five years prior to the date of this document by each of the Directors.

Directors

Clive Whiley – Interim Executive Chairman

Clive Whiley was appointed as Interim Executive Chairman of the Company in April 2018. He has thirty five years' experience in regulated strategic management positions since becoming a Member of the London Stock Exchange. He has extensive main board executive director experience across a broad range of financial services, engineering, manufacturing, distribution & leisure businesses: encompassing the UK, Europe, North America, Australasia and the People's Republic of China.

Clive Whiley is a member of the Nomination Committee.

In addition to his directorship of the Company, Clive Whiley holds (or has, in the five year period immediately preceding the date of this document, held) the following directorships or has been a member of the following partnerships:

Name of Company	Status (Current/Previous)
Stanley Gibbons Group plc	Current
Camper & Nicholsons Marina Investments Limited	Current
Grand Harbour Marina plc	Current
Mallett Inc	Current
Y-Lee Limited	Current
China Venture Capital Management Limited	Current
First China Venture Capital Limited	Current
Evolution Securities China Limited	Previous
Evolution Securities Asia Limited	Previous
Dreweatts 1759 Limited	Previous

Mark Newton-Jones – Chief Executive Officer

Mark Newton Jones was re-appointed as Chief Executive Officer of the Company in May 2018. Mark Newton-Jones initially joined Mothercare in July 2014 acting as Chief Executive Officer of the Company until April 2018. Mark has 30 years' experience with and developing some of the industry's leading retail brands in both stores and online. Formerly, Mark has held directorships with companies within the Shop Direct Group where he was Chief Executive Officer. Mark was also a non-executive director of Boohoo plc from 2013 to 2016.

Mark is Chairman of Graduate Fashion Week and a board member of the INGKA Holding B.V. (Supervisory Board of the IKEA Group). Mark is also currently a director of Pockit Limited.

In addition to his directorship of the Company, Mark Newton-Jones holds (or has, in the five year period immediately preceding the date of this document, held) the following directorships or has been a member of the following partnerships:

	Status
Name of Company	(Current/Previous)
INGKA Holding B.V.	Current
Concentric Team Technology I Founder Partner LLP	Current
Pockit Limited	Current
Mothercare UK Limited	Previous
Mothercare Plc.	Previous
Early Learning Centre Limited	Previous
Boohoo.com plc	Previous

David Wood – Group Managing Director

David Wood was appointed Group Managing Director of the Company in May 2018, having been originally appointed as Chief Executive Officer of the Company in April 2018. David Wood has over 25 years' experience working in senior roles in international branded manufacturing and multi-channel retail businesses.

David Wood has held directorships at Kraft Foods and Tesco, being appointed to the operating board of Tesco UK as Chief Marketing Officer before becoming Group Managing Director for Tesco UK's newly created Global Health and Wellness Division.

Prior to joining the Company, David Wood was Group President of Kmart Holding Corp.

In addition to his directorship of the Company, David Wood holds (or has, in the five year period immediately preceding the date of this document, held) the following directorships or has been a member of the following partnerships:

Name of Company	(Current/Previous)
Early Learning Centre Limited	Current
Mothercare UK Limited	Current

Status

Glyn Hughes – Chief Financial Officer

Glyn Hughes was appointed Chief Financial Officer of the Company in December 2017 having previously held the roles of Chief Financial Officer and Chief Executive Officer with the Dairy Farm Group.

In addition to his directorship of the Company, Glyn Hughes holds (or has, in the five year period immediately preceding the date of this document, held) the following directorships or has been a member of the following partnerships:

	Status
Name of Company	(Current/Previous)
Mothercare UK Limited	Current
Early Learning Centre Limited	Current
Mothercare Finance Overseas Limited	Current
Dairy Farm Group	Previous

Lee Ginsberg – Non-executive Director

Lee Ginsberg was appointed as a Non-executive Director of the Company in July 2012. He was previously Chief Financial Officer of Domino's Pizza Group plc (until 2 April 2014) and, prior to that, Group Finance Director at Health Club Holdings Limited, formerly Holmes Place plc where he also served as Deputy Chief Executive. He is currently Non-executive director and chair of the audit committee at Reach Plc (formerly Trinity Mirror Plc), Deputy Chairman and Senior Independent Non-executive director at Patisserie Holdings plc, Non-executive chairman of Oriole Restaurants Limited, Senior Independent Non-executive director and chair of the audit committee at On the Beach plc and Senior Independent Non-executive director and chair of the audit committee at Softcat plc. Lee is a Chartered Accountant having qualified with PricewaterhouseCoopers.

Lee is Chairman of the Audit and Risk Committee and a member of the Nomination Committee.

In addition to his directorship of the Company, Lee Ginsberg holds (or has, in the five year period immediately preceding the date of this document, held) the following directorships or has been a member of the following partnerships:

	Status
Name of Company	(Current/Previous)
Oriole Restaurants Limited	Current
Patisserie Holdings plc	Current
Reach Plc	Current
Domino's Pizza Group plc	Previous
Softcat Plc	Current
On The Beach Group Plc	Current
Cantina Laredo (UK) Limited	Current
D.P. Newcastle Limited	Previous
Daht Limited	Previous
D A Hall Trading Limited	Previous
Domino's Pizza Germany (Holdings) Limited	Previous
Domino's Pizza Germany Limited	Previous
Domino's Leasing Limited	Previous
Dpg Holdings Limited	Previous
Dp Realty Limited	Previous

Domino's Pizza UK & Ireland Limited	Previous
Dp Group Developments Limited	Previous
Dp Capital Limited	Previous
Mls Ltd	Previous
Domino's Pizza West Country Limited	Previous
Live Bait Limited	Previous (company was dissolved on 05.11.13)
American Pizza Company Limited(The)	Previous (company was dissolved on 05.11.13)

Gillian Kent – Non-executive Director

Gillian Kent was appointed as a Non-executive Director of the Company in March 2017. Gillian Kent has had a broad executive career including being Chief Executive of real estate portal Propertyfinder until its acquisition by Zoopla, and 15 years with Microsoft including three years as Managing Director of MSN UK.

Gillian Kent also holds non-executive director roles at Pendragon Plc, National Accident Helpline Group Plc, Ascential Plc, and at two private companies, Coull Limited and No Agent Technologies Limited. She is also chair of the remuneration committee at the National Accident Helpline Group plc.

Gillian Kent is a member of the Audit and Risk Committee.

In addition to her directorship of the Company, Gillian Kent holds (or has, in the five year period immediately preceding the date of this document, held) the following directorships or has been a member of the following partnerships:

	Status
Name of Company	(Current/Previous)
National Accident Helpline Group plc	Current
No Agent Technologies Limited	Current
Ascential Plc	Current
Coull Limited	Current
Pendragon Plc	Current
Skadoosh Limited	Previous

Richard Rivers – Non-executive Director

Richard Rivers was appointed as a Non-executive director of the Company in July 2008. He was formerly Chief of Staff and Head of Corporate Strategy at Unilever, a Non-executive director of Channel 4 Television Corporation and a director of Articos AB. He is now a director of Lumene Oy, and a member of the Advisory Board of WPP plc.

Richard is a member of the Remuneration Committee.

In addition to his directorship of the Company, Richard Rivers holds (or has, in the five year period immediately preceding the date of this document, held) the following directorships or has been a member of the following partnerships:

Status
(Current/Previous)
Current
Previous
Previous

Nick Wharton – Non-executive Director

Nick Wharton was appointed as a Non-executive Director of the Company in November 2013. He was formerly Chief Financial Officer of Halfords Group plc, and held finance and international positions at The Boots Company plc and Cadbury Schweppes plc. Until 11 September 2014, he was Chief Executive Officer of Dunelm Group plc. Until 5 July 2018, Nick was the Chief Financial Officer of Superdry plc (formerly SuperGroup plc). Nick is a chartered accountant.

Nick is a member of the Audit and Risk Committee.

In addition to his directorship of the Company, Nick Wharton holds (or has, in the five year period immediately preceding the date of this document, held) the following directorships or has been a member of the following partnerships:

	Status
Name of Company	(Current/Previous)
Supergroup Limited	Current
Dkh Retail Limited	Current
C-Retail Limited	Current
Supergroup Internet Limited	Current
Supergroup Concessions Limited	Current
Superdry plc	Current
1104 Consulting Ltd	Current
Dunelm Group plc	Previous
Zoncolan Limited	Previous
Supergroup Internet North America Limited	Previous (company was dissolved on 23.08.16)
Fragrances 55 Limited	Previous (company was dissolved on 24.10.17)
Supergroup International Limited	Previous (company was dissolved on 24.10.17)

• 4.2 Within the period of five years preceding the date of this document, the Directors:
• (a) have no convictions in relation to fraudulent offences;
• (b) were not associated with any bankruptcies, receiverships or liquidations when acting in the capacity of director; and
• (c) have not received any official public incrimination and/or sanctions by statutory or regulatory authorities (including designated professional bodies) and have not been disqualified by a court from acting as a director of a company or from acting in the management or conduct of the affairs of a company.

Conflicts of interest and family relationships

The Directors have no actual or potential conflicts of interest between any duties to the Company and their private interests and/or other duties.

There are no family relationships between any of the Directors.

5. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE CAPITAL RAISING

Save as disclosed in this paragraph 5, none of the Directors has any interest, beneficial or non-beneficial, in the share capital of the Company or any of its subsidiaries.

The interests of the Directors in the issued share capital of the Company, including the interests of persons connected with the Directors for the purposes of DTR 5.1.2 of the Disclosure Guidance and Transparency Rules, as notified to the Company pursuant to DTR 5.1.2, as at the Reference Date are:

			STIP deferred
	Legally	LTIP awards	shares	SAYE
Director	owned	(unvested)	(unvested)	(unvested)
Executive Directors
Clive Whiley	Nil	Nil	N/A	Nil
Mark Newton-Jones	1,029,276	1,167,706	31,545	20,000
David Wood	500,000	Nil	N/A	Nil
Glyn Hughes	220,573	Nil	N/A	Nil
Non-executive Directors
Lee Ginsberg	10,830	N/A	N/A	N/A
Gillian Kent	Nil	N/A	N/A	N/A
Richard Rivers	210,869	N/A	N/A	N/A
Nick Wharton(1)	7,296	N/A	N/A	N/A

(1) Nick Wharton's interest is held by his spouse, a person closely associated with him for the purposes of the Disclosure Guidance and Transparency Rules.

The interests of the Directors in the issued share capital of the Company, including the interests of persons connected with the Directors for the purposes of DTR 5.1.2 of the Disclosure Guidance and Transparency Rules, as notified to the Company pursuant to DTR 5.1.2, on completion of the Capital Raising (assuming full acceptance by the Directors of the Capital Raising), would be as follows:

			STIP deferred
	Legally	LTIP awards	shares	SAYE
Director	owned	(unvested)	(unvested)	(unvested)
Executive Directors
Clive Whiley	Nil	Nil	N/A	Nil
Mark Newton-Jones	2,058,552	1,167,706	31,545	20,000
David Wood	1,000,000	Nil	N/A	Nil
Glyn Hughes	441,146	Nil	N/A	Nil
Non-executive Directors
Lee Ginsberg	21,660	N/A	N/A	N/A
Gillian Kent	Nil	N/A	N/A	N/A
Richard Rivers	421,738	N/A	N/A	N/A
Nick Wharton	14,592	N/A	N/A	N/A

The number of Ordinary Shares subject to outstanding options and/or the subscription price per share shall be subject to adjustment following the Capital Raising in accordance with the rules of the Company's Share Schemes.

No Director has or has had any interest in any transaction which is or was unusual in its nature or conditions or is or was significant to the business of the Group and which was effected by any member of the Group during the current or immediately preceding financial year or during any earlier financial year and remains in any respect outstanding or unperformed.

6. DIRECTOR REMUNERATION AND BENEFITS

6.1 Executive Directors Service Contracts, Remuneration and Emoluments

Each of the Executive Directors is employed under a service contract. These service contracts may be terminated by the Company or the individual, subject to the notice periods set out in the table below:

				Notice	Notice
				period	period
				by the	by the
	Date of	Appointment		Company	Director
Name	Contract	Date	Term	(months)	(months)
Clive Whiley	18 April 2018	19 April 2018	Rolling	12 weeks	12 weeks
				(subject to a
				9 month
				minimum
				term)
Mark Newton-Jones 9 July 2014		18 May 2018	Rolling	12	12
David Wood	4 April 2018	4 April 2018	Rolling	12	12
Glyn Hughes	8 September 2017	1 December 2017	Rolling	12	12

The appointment of Executive Directors can be terminated without notice and with immediate effect in the event of misconduct of the Executive Director.

Salary

The Group's policy when setting executive salary is to benchmark against mid-market levels of other similar companies. Any increases in salary will generally be in-line with salary increases awarded to the wider workforce and any increases beyond that will be awarded at the Remuneration Committee's discretion. The table set out on page 164 below sets out the Executive Directors' annual rates of base salary, as at 24 March 2018.

Salary will be reviewed annually in March each year by the Company's Remuneration Committee and any change in salary will be implemented with effect from 1 April. The Remuneration Committee is under no obligation to award an increase following a salary review.

Benefits

Benefits typically include a company car, medical insurance and pension. The Executive Directors are eligible to participate in the Company's Choices Flexible Benefits Plan. The allowance awarded by the Company to Executive Directors under this scheme in FY 2017/18 is set out in the table below:

Choices Flexible Benefits Name Plan Allowance (£) Mark Newton-Jones 13,000 Richard Smothers(1) 7,000 Glyn Hughes 4,000

Notes:

(1) Richard Smothers resigned from the Board on 1 December 2017.

The Company is entitled, in its absolute discretion, to amend or terminate the Choices Flexible Benefit Plan and/or benefits available under the plan (with or without replacement) at any time.

The Company provides Executive Directors with life insurance at a rate of four times their salary. This benefit is conditional on the relevant insurer accepting cover for the executive at normal rates and accepting liability for any particular claim.

Retirement Benefits

The Company pays a sum equivalent to up to 15 per cent. of salary into a registered pension scheme for each of the Executive Directors as a cash supplement, or a combination of cash and pension contributions. During the financial year ended 24 March 2018, Richard Smothers, Mark Newton-Jones and Glyn Hughes received 15 per cent. of their base salary as a pension contribution from the Company. Richard Smothers did not, and Glyn Hughes and Mark Newton-Jones does not have an entitlement to a defined benefit pension as the scheme closed to future accrual on 30 March 2013.

STIP/Annual Bonus

The STIP for FY 2017/18 incorporated both financial (75 per cent.) and strategic (25 per cent.) measures which were aligned to the Company's transformation plan. Further, these payments were subject to an overriding financial measure based on the Company's net quarterly cash/debt position such that payments cannot be made where the underlying financial position of the Company is unable to support them.

In FY 2017/18, the targets were not met and so no STIP was paid.

LTIP

LTIP awards (LTIP 3) were made in 2014 but the performance targets were not achieved and those awards have therefore now lapsed.

LTIP awards were made in 2015 (LTIP 4). 50 per cent. of LTIP 4 vests based on relative TSR and 50 per cent. based on Group profit before tax (ranging from £55 million to £70 million). The TSR target is no longer capable of being achieved and 50 per cent. of LTIP 4 has therefore now lapsed.

LTIP awards were also made in 2016 (LTIP 5). 50 per cent. of LTIP 4 vests based on relative TSR and 50 per cent. based on EPS of 25 per cent. to 35 per cent. CAGR.

The Executive Directors must also meet a minimum shareholding requirement for full vesting to occur.

Executive Directors' remuneration and emoluments in FY 2017/18

Details of remuneration and emoluments for the Executive Directors during the financial year ended 24 March 2018 are as follows:

	Basic salary/fees per annum
	as at 24 March	Pension	Benefits		LTIP	2018
	2018	allowance	in kind	Bonus	Bonus	Total
Name(1)(2)	£'000	£'000	£'000	£'000	£'000	£'000
Mark Newton-Jones(3)	618	96	13	0	0	727
Richard Smothers(4)	248	37	7	0	0	292
Glyn Hughes(5)	91	14	4	0	0	109

Notes:

• (1) Clive Whiley was appointed as Interim Executive Chairman of Mothercare on 19 April 2018 for a period of a minimum of nine months (and as such his remuneration is not included in the above table and figures for the financial year ended 24 March 2018).
• (2) David Wood was appointed as an Executive Director of the Company on 4 April 2018 (and as such his remuneration is not included in the above table and figures for the financial year ended 24 March 2018).
• (3) Mark Newton-Jones received an overpayment of £2,915 of his pension supplement in error. This is being recovered during FY 2018/19.
• (4) Richard Smothers resigned from the Board on 1 December 2017.
• (5) Glyn Hughes became an Executive Director on 1 December 2017. His salary, benefits and pension represent the actual amounts paid during the financial year.

Remuneration and emoluments of Mark Newton-Jones as Chief Executive Officer

The Group re-appointed Mark Newton-Jones as Chief Executive Officer with effect from 18 May 2018. Mark Newton-Jones' base annual salary is £480,000. Mark Newton-Jones' potential STIP award for FY 2019/20 will be in line with the requirements of the Group's Remuneration Policy

Termination Payments

Save as disclosed in this paragraph 6, there are no existing contracts between any Executive Director and the Company which provide for benefits upon termination of appointment. In the event of an Executive Director's departure from the Company, and subject to the 'good leaver' provisions and the change of control arrangements agreed with Mark Newton-Jones, the Company's policy on termination payments is as follows:

• (a) no cash bonus will be awarded or paid (nor will any deferred shares be awarded) following notice of termination (by either the employee or the Company);
• (b) any unvested annual bonus deferred shares will lapse on cessation of employment;
• (c) any unvested LTIP awards shall lapse on cessation of employment; LTIP awards that have vested may be retained; and
• (d) the Company may pay basic salary and the fair value of other benefits in lieu of notice for the duration of the notice period. The instalments may cease or be reduced proportionally if the director accepts alternative employment that starts before the end of the notice period.

The Company's Remuneration Committee applies a concept of a 'good leaver' in the event of termination of employment by reason of ill-health, permanent disability, statutory redundancy, agreed retirement, sale of employing company or business out of the Group or at the discretion of the Remuneration Committee. If the Executive Director in question is a good leaver, then the Remuneration Committee may exercise its discretion such that:

(a) a performance-related bonus will be paid at the normal time and this will be time pro rated based on the proportion of the bonus year for which the individual was employed; the bonus may be paid wholly in cash, or part cash and part shares;

• (b) unvested deferred shares will vest, normally with immediate effect and in full; and
• (c) the individual will receive a pro rated proportion of outstanding LTIP awards which can be exercised up to six months (or such longer period as the Remuneration Committee permits and up to 12 months in the case of death) after the performance period ends and provided that the relevant performance criteria are met for vesting. Exceptionally, the Remuneration Committee may use its discretion to release the LTIP shares, following cessation of employment but subject to the Remuneration Committee's assessment of performance, which can be exercised in the six months after the leaving date (or such longer period as the Remuneration Committee permits and up to 12 months in the case of death) and/or to allow a greater number of shares to vest than if the level of vesting was calculated on a pro rata basis. The provisions governing the vesting of LTIP awards under the legacy LTIP are broadly similar and these awards will vest on the terms set out in that plan. The Remuneration Committee, in determining the extent to which these shares should vest, will consider all of the facts of the executive's departure, including their performance and the extent to which their departure was at the instigation of the Company.

6.2 Non-executive Directors' Letters of Appointment

Each of the Non-executive Directors has been appointed pursuant to a letter of appointment, which contains a one month notice period.

Continuation of a Non-executive Director's appointment is subject to continued satisfactory performance in accordance with the terms of the letter of appointment and re-election by shareholders at forthcoming annual general meetings.

The following table contains more information about the Non-executive Directors' letters of appointment:

					Notice
				Notice	period
				period	by the
	Effective			by the	Non-executive
	date of	Date of letter	Term	Company	Director
Name	appointment	of appointment	(years)	(months)	(months)
Lee Ginsberg(1)	2 July 2012	22 June 2012	3	1	1
Gillian Kent	16 March 2017	16 March 2017	3	1	1
Richard Rivers(2)	17 July 2008	27 May 2008	3	1	1
Nick Wharton		14 November 2013 14 November 2013	3	1	1

Notes:

(1) Lee Ginsberg will resign from the Board following the Company's annual general meeting on 19 July 2018.

(2) Richard Rivers will resign from the Board following the Company's annual general meeting on 19 July 2018.

Non-executive Directors' remuneration and emoluments in FY 2017/18

The following table sets out details relating to the Non-executive Directors' emoluments for the year ended 24 March 2018.

Name	Salary/fees for FY 2017/18 £'000	Benefits in kind £'000	Total £'000
Alan Parker(1)	188	–	188
Lee Ginsberg(2)	56	–	56
Richard Rivers(3)	53	–	53
Nick Wharton(4)	48	2	50
Gillian Kent(5)	48	–	48
Tea Colaianni(6)	56	1	57

Notes:

⁽¹⁾ Alan Parker resigned from the Board on 19 April 2018. His salary was reduced from £200,000 per annum to £130,000 per annum since 1 February 2018. Under his contract he will continue to receive fees from 19 April 2018 until the end of his notice period on 18 October 2018.

• (2) Lee Ginsberg will resign from the Board following the Company's annual general meeting on 19 July 2018. His salary was reduced from £50,000 per annum to £40,000 per annum since 1 February 2018, but his salary from the position as the Chairman of the Audit and Risk Committee remains unchanged.
• (3) Richard Rivers will resign from the Board following the Company's annual general meeting on 19 July 2018. His salary was reduced from £50,000 per annum to £40,000 per annum since 1 February 2018.
• (4) Nick Wharton's salary was reduced from £50,000 per annum to £40,000 per annum since 1 February 2018.
• (5) Gillian Kent's salary was reduced from £50,000 per annum to £40,000 per annum since 1 February 2018.
• (6) Tea Colaianni resigned from the Board on 18 May 2018.

Non-executive Directors are not entitled to participate in any Company incentive schemes, are not eligible to join the Company's pension and benefits schemes (with the exception of colleague discount) and are not eligible for compensation for loss of office.

7. BOARD PRACTICES

The Company considers that it has complied with the relevant provisions set out in the UK Corporate Governance Code published by the Financial Reporting Council in 2016, having applied the main and supporting principles set out in sections A to E of the UK Corporate Governance Code.

7.1 Audit and Risk Committee

The current members of the Audit and Risk Committee are Lee Ginsberg (Chairman), Nick Wharton and Gillian Kent. The Group Company Secretary acts as secretary to the Audit and Risk Committee.

The Group's Chief Executive, Chief Financial Officer, Director of Finance, Head of Taxation and Head of Enterprise Risk & Assurance are invited to attend meetings of the Audit and Risk Committee. Other Directors and executives are also invited to attend from time to time.

The Audit and Risk Committee works closely with Deloitte LLP as its external auditors. The audit partner of Deloitte LLP is invited to attend all scheduled meetings. Deloitte LLP is engaged to provide internal audit consultancy and support specifically.

The responsibilities of the Committee include:

• (a) monitoring the integrity of the financial statements of the Company and any formal announcements relating to the Company's financial performance and reviewing and reporting to the Board on significant financial reporting issues and judgements contained therein;
• (b) reviewing and challenging the consistency of and any changes to significant accounting policies; reviewing and monitoring methods used for significant or unusual transactions where different approaches are possible; and monitoring compliance with accounting standards taking into account the views of the external auditor;
• (c) where requested by the Board, reviewing the content of the annual report and accounts and advising the Board on whether, taken as a whole, they are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy;
• (d) reviewing the Company's internal financial controls and internal control and risk management systems; and reviewing and approving the statements to be included in the annual report concerning internal controls and risk management;
• (e) reviewing the arrangements for the Group's employees to raise concerns, in confidence, about possible wrongdoings in financial reporting or other matters;
• (f) reviewing the Group's procedures for detecting fraud;
• (g) reviewing the Company's systems and controls in relation to the Group's code of conduct and anti-bribery policy;

• (h) monitoring and reviewing the effectiveness of the Company's internal audit function in the context of the overall risk management system;

• (i) making recommendations to the Board, in relation to the appointment of the external auditor and approving the remuneration and terms of engagement of the external auditor;

• (j) reviewing and monitoring the external auditor's independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements;
• (k) developing and implementing a policy for the engagement of the external auditor to supply nonaudit services, taking into account relevant ethical guidance regarding the provision of nonaudit services by the external audit firm;
• (l) reporting to the Board, identifying any matters in respect of which it considers that action or improvement is needed, and making recommendations as to the steps to be taken; and
• (m) reviewing compliance with the UK Corporate Governance Code, the UK Listing Authority's Listing, Prospectus and Transparency Rules and any other rules, as appropriate.

In addition, the Committee meets at least once a year with the external and internal auditors without the Executive Board members present.

7.2 Remuneration Committee

The current members of the Remuneration Committee are, Lee Ginsberg and Richard Rivers. The Board will consider the membership of the Remuneration Committee following the completion of the Capital Raising.

The Remuneration Committee is responsible for setting the remuneration policy for all Executive Directors and the Company's Chairman and senior management. It meets at least three times a year with other meetings scheduled as required.

The responsibilities of the Remuneration Committee include:

• (a) determining and advising the Board on the framework or broad policy for the remuneration of the Chief Executive and the Chairman of the Company, including pension rights and any compensation payments. It also monitors and ratifies the levels and structure of remuneration for other members of senior management;
• (b) setting the remuneration for all Executive Directors, the Chairman and the Company Secretary. The remuneration of Non-executive Directors is a matter for the Chairman and Executive Directors. No director or manager is involved in any decisions as to his or her own remuneration;
• (c) determining the total individual remuneration package of each Executive Director including, where appropriate, bonuses, incentive payments and performance-based incentives. In determining such packages and arrangements the committee gives due regard to relevant legal and regulatory requirements, appropriate codes of practice and associated guidance;
• (d) determining targets and monitoring performance against those targets for any performancerelated pay schemes operated by the Company;
• (e) appointing remuneration consultants;
• (f) approving the design of and determining targets for any performance-related pay schemes operated by the Company and approving the total annual payments made under such schemes;
• (g) reviewing the design of all share incentive plans for approval by the Board and shareholders;
• (h) ensuring that contractual terms on termination, and any payments made, are fair to the individual and the Company, that failure is not rewarded and that the duty to mitigate loss is fully recognised;
• (i) overseeing any major changes in employee benefit structures throughout the Company or Group; and

(j) agreeing the policy for authorising claims for expenses from the Directors.

7.3 Nomination Committee

The Nomination Committee currently comprises the Interim Executive Chairman and Lee Ginsberg.

The Nomination Committee will commence the search for a replacement Senior Non-executive Director following the announcement of the resignations of Richard Rivers and Lee Ginsberg from their positions as Senior Non-executive Director and Non-executive Director (respectively) with effect from the conclusion of the annual general meeting on July 2019.

The Nomination Committee meets at least once a year with other meetings scheduled as required and makes proposals for appointments to the Board and carries out the selection process.

The responsibilities of the Nomination Committee include:

• (a) reviewing and making recommendations to the Board on the structure, size and composition of the Board and making recommendations to the Board with regard to any changes including nominating candidates to fill Board vacancies;
• (b) reviewing succession planning for Directors and other senior executives taking into account the challenges and opportunities facing the Company and the skills and expertise needed on the Board in the future;
• (c) considering candidates from various sources, a wide range of backgrounds giving due regard to benefits of diversity on the Board including gender and taking care that appointees have enough time to devote to the position; and
• (d) ensuring that Non-executive Directors receive formal letters of appointment that provide clear parameters of expectation in time commitment, committee service and other involvement.

The Nomination Committee also makes recommendations to the Board on:

• (a) plans for succession for both Executive and Non-executive Directors;
• (b) the re-appointment of any Non-executive Director at the conclusion of their specified term of office;
• (c) the re-election by Shareholders of Directors under the annual re-election provisions of the UK Corporate Governance Code; and
• (d) any matters relating to the continuation in office of any Director at any time; and the appointment of any Director to Executive or other office other than the positions of Chairman and Chief Executive, the recommendation for which would be considered at a meeting of the Board.

7.4 Disclosure Committee

The Disclosure Committee is responsible for the establishment and maintenance of disclosure controls and procedures in the Company (and their evaluation), for the appropriateness of the disclosures made and for compliance with the Group's share trading rules. It is responsible to the Board.

The membership of the Committee comprises the Interim Executive Chairman, Senior Independent Director, Chief Executive Officer, Group Managing Director, Chief Financial Officer and Company Secretary.

The responsibilities of the Disclosure Committee include:

• (a) to determine on a timely basis the disclosure treatment (including the delayed disclosure) of inside information;

• (b) to consider generally the requirement for announcements in the case of rumours relating to the Company and in the case of a leak of inside information, and in particular the need to issue holding announcements;

• (c) to review any announcements dealing with any non-routine inside information, to ensure the accuracy of the same;

• (d) the identification of inside information for the purposes of securing this information and maintaining the insider list and alerting Company Secretariat to the existence of inside information giving rise to the need for amendments to the insider list;
• (e) to review financial reporting issues that are significant to the Company and other material reporting matters where the person primarily responsible for such matters made significant judgements (either independently or in consultation with others); and
• (f) to monitor and ensure compliance with the Group's share trading rules.

8. MAJOR SHAREHOLDERS

As at the Reference Date and on completion of the Capital Raising, in so far as is known to the Company, the name of each person who, directly or indirectly, is interested in voting rights representing 3 per cent. or more of the total voting rights in respect of the Company's issued ordinary share capital, and the amount of such person's holding, is, and immediately following the Capital Raising, would be as follows:

					Percentage of
					issued
					share capital
		Percentage of	Number of	Percentage of	following the
	Number of	issued	Ordinary	issued	Capital
	Ordinary	share capital	Shares	share capital	Raising(3)
	Shares prior	prior to the	following the	following the	and Related
	to the Capital	Capital	Capital	Capital	Party
Name	Raising(1)	Raising	Raising(2)	Raising(2)	Transactions
Richard Griffiths	27,030,148	15.82	54,060,296	15.82	23.1
M&G Investment
Management Limited(3)	21,652,186	12.67	43,304,372	12.67	10.7
UBS Asset Management	17,763,725	10.40	35,527,450	10.40	8.8
DC Thomson Pensions	17,695,691	10.36	35,391,382	10.36	12.6
Jupiter Asset
Management Majedie Asset	16,890,892	9.88	33,781,784	9.88	8.4
Management	12,000,000	7.02	24,000,000	7.02	5.9
Fidelity International	6,810,534	3.99	13,621,068	3.99	3.4

(1) Includes both direct and indirect shareholdings.

(2) Assuming full take up by all persons of their entitlements under the Open Offer.

(3) M&G Investment Management Limited has agreed to subscribe for up to 34,174,377 New Ordinary Shares pursuant to the Placing, which would result in M&G Investment Management Limited being interested in not more than 16.3 per cent. of the Enlarged Share Capital, assuming no clawback.

None of the Major Shareholders in the Company has different voting rights.

As at the Reference Date, the Company is not aware of any person who, directly or indirectly, jointly or severally, exercises or could exercise control over the Company.

As at Reference Date, the Company is not aware of any arrangements pursuant to which any person directly or indirectly, jointly or severally, will exercise or could exercise control over the Company.

9. EMPLOYEES

The Group's employees are employed by Mothercare UK Limited, Early Learning Centre Limited, Mini Club UK Limited and local subsidiaries.

Please see paragraph 11.3 of Part V (Information on the Group) of this document for further details on the employees of the Group.

10. PENSIONS

Defined contribution schemes

The Group operates defined contribution retirement benefit schemes for all qualifying employees of the Company, Early Learning Centre Limited, Mini Club UK Limited and Mothercare UK Limited. The Group satisfies its employer duties in relation to automatic enrolment by offering membership of the Legal & General Worksave Mastertrust (RAS) Pension Scheme.

Defined benefit schemes

The Group operates two defined benefit pension schemes for employees of Mothercare UK Limited, both of which were closed to future accrual with effect from 30 March 2013.

The DB Schemes' assets are held in separate trustee-administered funds to meet long-term pension liabilities to past and present employees. The Pension Trustees of the DB Schemes are required to act in the best interests of the beneficiaries of the DB Schemes.

For the protection of members' interests, the Group has appointed three trustees to each scheme, two of whom are independent of the Group. To maintain this independence, the Pension Trustees and not the Group are responsible for appointing their own successors.

The DB Schemes expose the Group to actuarial risks such as longevity risk, interest rate risk, and market (investment) risk. For the period ended 24 March 2018 the DB Schemes disclosed a net defined benefit pension deficit of £37.7 million when measured on an IAS 19 valuation basis.

There is an agreement in place with the Pension Trustees that if the Group agrees to pay cash dividends, additional deficit contributions will be paid to the DB Schemes calculated by reference to a formula based on the size of the dividend payments (see paragraph 15.6 of Part X (Additional Information)).

11. RELATED PARTY TRANSACTIONS

As at the Reference Date, save as disclosed in paragraph 15.5 of Part X (Additional Information) and save in respect of Group companies entering into sales of goods with joint ventures and associates with a total value of £209,000 and, save in respect of the nature of those related party transactions disclosed in note 30 to the Group's audited consolidated financial statements as included in the Group's Annual Report and Accounts for FY 2017/18 (which types of transaction take place on an ongoing basis throughout the year and the value of which fluctuate during the year), and save as disclosed in (i) note 30 to the audited consolidated financial statements as included in the Group's Annual Report and Accounts for FY 2016/17; (ii) note 30 to the audited consolidated financial statements as included in the Group's Annual Report and Accounts for FY 2015/16, all of which are incorporated by reference into this document, the Company has not entered into any related party transactions (which for these purposes are those set out in the standards adopted according to the Regulation (EC) No 1606/2002) with any related party.

12. SUMMARY OF THE ARTICLES OF ASSOCIATION OF THE COMPANY

The Articles of Association of the Company adopted pursuant to a resolution passed at the annual general meeting of the Company held on 18 July 2013 contain, among others, provisions to the following effect:

Objects

The objects of the Company are unrestricted.

Limited Liability

The liability of the Company's members is limited to the amount, if any, unpaid on the shares in the Company held by them.

Share Rights

Subject to any rights attached to existing shares, shares may be issued with such rights and restrictions as the Company may by ordinary resolution decide, or (if there is no such resolution or so far as it does not make specific provision) as the Board may decide. Such rights and restrictions shall apply as if they were set out in the Articles. Redeemable shares may be issued, subject to any rights attached to existing shares. The Board may determine the terms and conditions and the manner of redemption of any redeemable share so issued. Such terms and conditions shall apply to the relevant shares as if they were set out in the Articles.

Voting Rights

Subject to special rights and restrictions as to voting attached to any class of shares by or in accordance with the Articles, on a vote on a resolution:

• (a) on a show of hands every member present in person has one vote and every proxy present who has been duly appointed by one or more members will have one vote, except that a proxy has one vote for and one vote against if the proxy has been duly appointed by more than one member and the proxy has been instructed by one or more members to vote for and by one or more other members to vote against or by one or more members to vote in the same way (whether for or against) and one or more of those members has permitted the proxy discretion as to how to vote; and
• (b) on a poll every member has one vote per share held by him and he may vote in person or by one or more proxies.

This is subject to any special terms as to voting which are given to any shares or on which shares are held.

In the case of joint holders of a share the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the register in respect of the joint holding.

Restrictions

Unless the Board decides otherwise, no member shall be entitled to vote at any general meeting or class meeting in respect of any share held by him if any call or other sum then payable by him in respect of that share remains unpaid.

Dividends and Other Distributions

The Company may by ordinary resolution from time to time declare dividends not exceeding the amount recommended by the Board. Subject to the Companies Act, the Board may pay interim dividends, and also any fixed rate dividend, whenever the financial position of the Company, in the opinion of the Board, justifies its payment. If the Board acts in good faith, it is not liable to holders of shares with preferred rights for losses arising from the payment of interim or fixed dividends on other shares.

Except insofar as the rights attaching to, or the terms of issue of, any share otherwise provide, all dividends shall (i) be declared and paid according to amounts paid up on the shares in respect of which the dividend is declared and paid, but no amount paid up on a share in advance of a call may be treated as paid up on the share; and (ii) be apportioned and paid pro rata according to the amounts paid up on the share during any portion of the period in respect of which the dividend is paid. Except as set out above, dividends may be declared or paid in any currency.

The Board may, if authorised by an ordinary resolution of the Company, direct that payment of a dividend may be satisfied wholly or in part by the distribution of specific assets and in particular of paid-up shares or debentures in another company.

Any dividend unclaimed after a period of 12 years from the date when it was declared or became due for payment shall be forfeited and revert to the Company.

The Company may stop sending cheques, warrants or similar financial instruments in payment of dividends by post in respect of any shares or may cease to employ any other means of payment, including payment by means of a relevant system, for dividends if either (i) at least two consecutive payments have remained uncashed or are returned undelivered or that means of payment has failed or (ii) one payment remains uncashed or is returned undelivered or that means of payment has failed and reasonable enquiries have failed to establish any new postal address or account of the holder (although payments can resume if the Company is notified of an address or account to be used).

Variation of Rights

Subject to the Companies Act, rights attached to any class of shares may be varied with the written consent of the holders of not less than three-fourths in nominal value of the issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of the holders of those shares. At every such separate general meeting (except an adjourned meeting) the quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of the class.

The rights conferred upon the holders of any shares shall not, unless otherwise expressly provided in the rights attaching to those shares, be deemed to be varied by the creation or issue of further shares ranking pari passu with them or by the purchase or redemption by the Company of its own shares.

Transfer of Shares

Subject to the Articles, any member may transfer all or any of his certificated shares by an instrument of transfer in writing in any usual form or in any other form which the Board may approve. The instrument of transfer must be signed by or on behalf of the transferor and (in the case of a partly-paid share) the transferee.

The transferor of a share is deemed to remain the holder until the transferee's name is entered in the register.

The Board can decline to register any transfer of any share which is not a fully-paid share or the transfer of a share on which the Company has a lien. The Board may also decline to register a transfer of a certificated share unless the instrument of transfer:

• (a) is duly stamped (if required);
• (b) is in respect of only one class of share;
• (c) is in favour of (as the case may be) a single transferee or renouncee or not more than four joint transferees or renouncees; and
• (d) is delivered for registration to the office or such other place as the Board may decide, accompanied by the certificate for the shares to which it relates and such other evidence as the Board may reasonably require.

General Meetings

An annual general meeting must be called by notice of at least 21 clear days. All other meetings shall be called by not less than 14 clear days' notice. Notice of a general meeting must be given to the members, directors and auditors. It must state the time and date and the place of the meeting and the general nature of the business to be dealt with at the meeting. In addition, a notice calling an annual general meeting must state that the meeting is an annual general meeting.

Each director shall be entitled to attend and speak at any general meeting. The chairman of the meeting may invite any person to attend and speak at any general meeting where he considers that this will assist in the deliberations of the meeting.

Directors

(a) Number of directors

The directors shall be not less than two and not more than 12 in number. The Company may by ordinary resolution vary the minimum and/or maximum number of directors.

(b) Directors' shareholding qualification

A director shall not be required to hold any shares in the Company.

(c) Appointment of directors

Directors may be appointed by the Company by ordinary resolution or by the Board. A director appointed by the Board holds office only until the next annual general meeting of the Company and is then eligible for re-appointment.

The Board may from time to time appoint one or more directors to hold any employment or executive office for such period and on such terms as they may determine and may also revoke or terminate any such appointment.

(d) Retirement of directors

At every annual general meeting one third of the directors who are subject to retirement by rotation or, if their number is not three or a multiple of three, the number nearest to but not less than one third, shall retire from office provided that if there are fewer than three directors who are subject to retirement by rotation, one shall retire from office.

If any one or more directors:

• (i) were last appointed or reappointed three years or more prior to the meeting;
• (ii) were last appointed or reappointed at the third immediately preceding annual general meeting; or
• (iii) at the time of the meeting will have served more than eight years as a non-executive director of the Company (excluding as chairman of the Board),

he or they shall retire from office and shall be counted in obtaining the number required to retire at the meeting.

(e) Removal of directors by ordinary resolution

The Company may by ordinary resolution remove any director before the expiration of his period of office.

(f) Vacation of office

The office of a director shall be vacated if:

• (i) he resigns by notice delivered to the secretary at the office or tendered at a Board meeting;
• (ii) where he has been appointed for a fixed term, the term expires;
• (iii) he is removed by notice signed by all his co-directors;
• (iv) he is or has been suffering from mental ill health and the Board resolves that his office be vacated;
• (v) he and his alternate director (if any) are absent without the permission of the Board from meetings of the Board for six consecutive months and the Board resolves that his office is vacated;
• (vi) he becomes bankrupt or compounds with his creditors generally;
• (vii) he is prohibited by a law from being a director;
• (viii) he ceases to be a director by virtue of the Companies Act; or
• (ix) he is removed from office pursuant to the Company's Articles.

If the office of a director is vacated for any reason, he must cease to be a member of any committee of the Board.

(g) Alternate director

Any director may appoint as his alternate director (i) another director; or (ii) another person approved by the Board and willing to act, and may at his discretion remove such alternate director. If the alternate director is not already a director, the appointment, unless previously approved by the Board, shall have effect only upon and subject to being so approved.

(h) Proceedings of the Board

Subject to the provisions of the Articles, the Board may meet for the despatch of business, adjourn and otherwise regulate meetings as it thinks fit. The quorum necessary for the transaction of the business of the Board may be fixed by the Board and, unless so fixed at any other number, shall be two. A meeting of the Board at which a quorum is present shall be competent to exercise all the powers, authorities and discretions vested in or exercisable by the Board.

The Board may appoint a director to be the chairman or a deputy chairman and may at any time remove him from that office. Questions arising at any meeting of the Board shall be determined by a majority of votes. In the case of an equality of votes the chairman of the meeting shall have a second or casting vote.

All or any of the members of the Board may participate in a meeting of the Board by means of a conference telephone or any communication equipment which allows all persons participating in the meeting to speak to and hear each other. A person so participating shall be deemed to be present at the meeting and shall be entitled to vote and to be counted in the quorum.

The Board may delegate any of its powers, authorities and discretions to a committee. The meetings and proceedings of any committee consisting of two or more members shall be governed by the provisions contained in the Articles for regulating the meetings and proceedings of the Board so far as the same are applicable and are not superseded by any regulations imposed by the Board.

(i) Remuneration of directors

Each of the directors (but not alternate directors) shall be paid a fee at such rate as may from time to time be determined by the board, but the aggregate of all such fees so paid to the directors shall not exceed £750,000 per annum or such higher amount as may from time to time be decided by ordinary resolution of the Company. Any director who is appointed to any executive office shall, in addition, be entitled to receive such remuneration (whether by way of salary, commission, participation in profits or otherwise) pursuant to the Articles or otherwise.

In addition, any director who, at the request of the board, goes or resides abroad, makes a special journey or performs a special service on behalf of the Company may be paid such additional remuneration and expenses as the board may decide.

Each director may be paid his reasonable travelling, hotel and incidental expenses of attending meetings of the board, or committees of the board or of the Company or any other meeting which as a director he is entitled to attend and shall be paid all other costs and expenses properly and reasonably incurred by him in the conduct of the Company's business or in the discharge of his duties as a director.

(j) Pensions and gratuities for directors

The board may exercise the powers of the Company to provide pensions or other retirement or superannuation benefits and to provide death or disability benefits or other allowances or gratuities (by insurance or otherwise) for a person who is or has at any time been a director of (i) the Company; (ii) a company which is or was a subsidiary undertaking of the Company; (iii) a company which is or was allied to or associated with the Company or a subsidiary undertaking of the Company; or (iv) a predecessor in business of the Company or of a subsidiary undertaking of the Company, (or in each case, for any member of his family, including a spouse or former spouse or a person who is or was dependent on him).

(k) Directors' interests

The Board may authorise any matter which would otherwise involve a director breaching his duty under the Companies Act to avoid conflicts of interest.

The Board may give any such authorisation upon such terms as it thinks fit and may revoke or vary such authority at any time.

Subject to the provisions of the Companies Act, and provided he has declared the nature and extent of his interest to the Board as required by the Companies Act, a director may:

• (i) be party to, or otherwise interested in, any transaction or arrangement with the Company or in which the Company has a direct or indirect interest;

• (ii) act by himself or through a firm with which he is associated in a professional capacity for the Company or any other company in which the Company may be interested (otherwise than as auditor);

• (iii) be a director or other officer of, or employed by or a party to a transaction or arrangement with, or otherwise be interested in any body corporate in which the Company may be interested; and

• (iv) a director shall not, by reason of his office, be accountable to the Company for any remuneration or other benefit realised by reason of having an interest permitted as described above or by reason of having a conflict of interest authorised by the Board and no contract shall be liable to be avoided on the grounds of a director having any such interest.

(l) Restrictions on voting

Subject to certain exceptions set out in the Articles, no director may vote on or be counted in the quorum in relation to any resolution of the Board concerning a matter in which he has a direct or indirect interest which is, to his knowledge, a material interest.

No director may vote on, or be counted in a quorum in relation to, any resolution of the Board or committee concerning his own appointment.

Subject to the Companies Act, the Company may by ordinary resolution suspend or relax to any extent the provisions relating to directors' interests or the restrictions on voting or ratify any transaction not duly authorised by reason of a contravention of the provisions.

(m) Borrowing powers

Subject to the Articles, the Board may exercise all the powers of the Company to borrow money and to mortgage or charge all or part of the undertaking, property, and assets (present or future) and uncalled capital of the Company and, subject to the Companies Act, to issue debentures and other securities, whether outright or as collateral security for a debt, liability or obligation of the Company or of a third party.

The Board must restrict the borrowings of the Company and exercise all voting and other rights or powers of control exercisable by the Company in relation to its subsidiary undertakings so as to secure that, save with the previous sanction of an ordinary resolution, no money shall be borrowed if the aggregate principal amount outstanding of all borrowings by the Group then exceeds, or would as a result of such borrowing exceed, an amount equal to two times the adjusted capital and reserves (as defined in the Articles).

(n) Indemnity of directors

To the extent permitted by the Companies Act, the Company may indemnify any director or former director of the Company or any associated company against any liability and may purchase and maintain for any director or former director of the Company or any associated company insurance against any liability.

13. PROPERTY, PLANT AND EQUIPMENT

The Group operates from a number of freehold, long leasehold and short leasehold properties in the UK including its UK stores and its distribution centres and warehouses. For further details about the Group's property portfolio, please refer to paragraph 14 of Part V (Information on the Group) of this document.

14. PRINCIPAL SUBSIDIARIES AND ASSOCIATED UNDERTAKINGS

The Company is the holding company of the Group. The following is a list of the Company's significant subsidiaries, all of which are wholly-owned, as at the Reference Date:

Name	Principal activity	Country of incorporation
Mothercare UK Limited	retailing company	United Kingdom
Mothercare Procurement Limited	sourcing company	Hong Kong
Early Learning Centre Limited	retailing company	United Kingdom

15. MATERIAL CONTRACTS

The following is a summary of each contract (not being entered into in the ordinary course of business) which has been entered into by any member of the Group: (i) within the two years immediately preceding the date of this document and which is material; or (ii) which contains any provision under which any member of the Group has any obligation or entitlement which is material to the Group as at the date of this document:

15.1 Facilities Agreement

Background

The Company as borrower and guarantor entered into a term and multicurrency revolving facilities agreement (the "Facilities Agreement") originally dated 12 May 2003 with Barclays Bank plc and HSBC Bank plc currently acting as lenders under that agreement (the "Senior Lenders").

The Facilities Agreement has subsequently been amended and/or restated on various dates since 12 May 2003 to reflect the evolving commercial and financing requirements of the Group and underlying economic conditions during that period and was most recently amended and restated on 17 May 2018, and was further amended on 31 May 2018. The principal terms of the Facilities Agreement as amended are described below.

The Facilities Agreement provides for senior multicurrency revolving facilities comprising, as at the date of this prospectus, facility A commitments of £50,000,000 and facility B commitments of £17,500,000 (the "New Debt Facilities"). The New Debt Facilities are available for the general corporate purposes of the Group, including working capital requirements, and are capable of being utilised by way of redrawable cash loans or for the provision of ancillary facilities (subject to the provisions of the Facilities Agreement) as agreed bilaterally with the Senior Lenders in place of their New Debt Facilities commitments.

Mandatory prepayment

The New Debt Facilities are to be prepaid in full at the option of the Senior Lenders upon the occurrence of certain events, including:

• (a) a change of control (as more particularly described in the Facilities Agreement);
• (b) the Company having not received the net proceeds of the Capital Raising by 30 September 2018;
• (c) failure to publish a prospectus in respect of the Capital Raising by 10 September 2018;
• (d) failure to obtain approval of the Capital Raising by the requisite majority of shareholders of the Company;
• (e) termination, cancellation or withdrawal of the Standby Underwriting Letter entered into in respect of this Capital Raising without equivalent replacement;
• (f) the CVA Proposals in respect of Mothercare UK Limited not becoming effective in accordance with its terms by 30 September 2018; and
• (g) the CVA Proposals in respect of Mothercare UK Limited not being approved by the requisite majority of creditors or being otherwise cancelled or terminated.

For the avoidance of doubt, the CVA Proposals of ELC and the Childrens World CVA Proposal do not have equivalent mandatory prepayment conditions as (f) and (g) referred to above.

Maturity

The termination date for facility B is 5 November 2018, at which point an additional £5,000,000 uncommitted overdraft will be made available. In September 2020, the facility A commitments will step down to £30,000,000. The termination date of the facility A commitments is 31 December 2020.

The New Debt Facilities will cease to be available one month before the applicable termination date and are subject to a net clean down obligation requiring the New Debt Facilities to be reduced to agreed thresholds for not less than five consecutive business days in the financial years ending in March 2019 and March 2020.

Interest rates and fees

Utilisations under the Facilities Agreement bear interest for each interest period at a rate per annum equal to LIBOR or EURIBOR plus a margin.

The margin on the New Debt Facilities is subject to a margin "ratchet". The initial margin is 4 per cent. per annum. Pursuant to the margin ratchet, the margin is adjusted as the Company (on a consolidated basis) attains certain fixed charges cover ratios of consolidated EBITDA (after adding back rental and operating lease expenditure) to consolidated net interest payable and rental and operating lease expenditure from a maximum margin of 4.50 per cent. per annum to a minimum margin of 3.25 per cent. per annum. Any change in the margin takes effect 5 Business Days after the date of delivery of the relevant quarterly compliance certificate.

The New Debt Facilities also bear customary commitment, utilisation, agency and security fees.

Guarantees and security

The Company is required to have its material subsidiaries (excluding certain specified subsidiaries), being those members of the Group expressly identified in the Facilities Agreement together with any other member of the Group contributing 5 per cent. or more of the consolidated EBITDA, gross assets or turnover of the Group (excluding certain specified subsidiaries) provide guarantees and security for the benefit of the lenders. The Company is also required to ensure that the aggregate of the EBITDA, gross assets and turnover of the guarantors under the Facilities Agreement are not, at any time, less than 90 per cent. of the total consolidated EBITDA, gross assets and turnover of the Group (excluding certain specified subsidiaries).

Covenants and events of default

The Facilities Agreement requires the Company and certain subsidiaries to observe certain customary undertakings.

The Facilities Agreement also requires the Company and certain subsidiaries to comply with certain customary negative covenants and events of default.

The Facilities Agreement requires the Company to comply with (i) a minimum fixed charges cover ratio (calculated as consolidated EBITDA (after adding back rental and operating lease expenditure) to consolidated net interest payable and rental and operating lease expenditure); and (ii) a maximum gearing ratio (calculated as consolidated total net borrowings to consolidated EBITDA). These financial covenants are tested quarterly, beginning with the financial quarter date of the Company falling in October 2018. In addition, the Company is required to comply with annual limits on the amount of capital expenditure that can be incurred by the Group.

As part of the amendment and restatement of the Facilities Agreement in May 2018, the Facilities Agreement was amended to permit all aspects of the CVA Proposals referred to in the public announcement made on 17 May 2018.

15.2 China JV SPA

On 20 December 2017, Mothercare International (Hong Kong) Limited ("Mothercare HK") (the Company's subsidiary), entered into an agreement for the sale and purchase of certain shares in the capital of China JV Target to Richy Bright Limited ("RBL") ("China JV SPA").

Consideration

Pursuant to the China JV SPA, Mothercare HK agreed to sell 89,804,474 fully paid ordinary shares ("China JV Target Shares") in the capital of China JV Target in consideration for US\$1 to RBL.

Valuation

The China JV SPA provides that post-completion, Mothercare HK would carry out a valuation of the China JV Target Shares in order to ascertain whether a capital gain or loss had been made on the sale of the China JV Target Shares to RBL. In the event that a capital gain had been made, Mothercare HK was under an obligation to make the relevant filings with the competent tax authorities of the People's Republic of China. If it was established a capital loss had been made then no such filings were required.

Warranties

Under the China JV SPA, Mothercare HK provides certain warranties ("Warranties") to RBL covering:

• (i) title to the China JV Target Shares
• (ii) capacity and authority to enter into the China JV SPA and connected agreements;
• (iii) that there is no litigation pending or threatened which would adversely affect the validity or enforceability of Mothercare HK's obligation to transfer the China JV Target Shares; and
• (iv) that there are no insolvency proceedings effecting the China JV Target.

Save for in relation to (i) and (ii), Mothercare HK's liability under the Warranties is capped at US\$500,000.

Outstanding Agreements

On completion of the China JV SPA, Mothercare HK and RBL and the China JV Target agreed the following agreements would terminate:

• (i) joint venture agreement between RBL, Mothercare HK, China JV Target and Mothercare UK Limited dated 11 July 2007;
• (ii) trademark licence and technical assistance agreement between Mothercare UK Limited and Mothercare-Goodbaby Retailing Co. Limited ("Key Subsidiary") dated 11 July 2007 ("Mothercare TMLTA");
• (iii) e-commerce addendum agreement to the Mothercare TMLTA between Mothercare UK Limited and the Key Subsidiary dated 1 March 2014; and
• (iv) the intercompany loan agreement of US\$1,200,000 between Mothercare HK as lender and China JV Target as borrower from Mothercare HK to RBL dated 19 December 2016.

New Agreements

On completion of the China JV SPA, Mothercare HK and RBL and the China JV Target agreed the following agreements would be entered into:

• (i) the master franchise agreement (including rights to e-commerce) to be entered into between the China JV Target and Mothercare UK Limited;
• (ii) the supply agreement including terms and conditions of the supply to be entered into between Mothercare UK Limited and the Key Subsidiary;
• (iii) the brand licence agreement to be entered into Mothercare UK Limited and the Key Subsidiary;
• (iv) the rescheduling deed to be entered into between Mothercare UK Limited and Goodbaby China Holdings Limited and the Key Subsidiary;
• (v) the rescheduling deed to be entered into between Early Learning Centre Limited, Goodbaby China Holdings Limited and the Key Subsidiary; and
• (vi) deed of guarantee and indemnity of Goodbaby China Holdings Limited in respect of (iv) and (v) above.

15.3 Standby Underwriting Letter

On 17 May 2018, the Company entered into a standby underwriting letter ("the "Standby Underwriting Letter") with Numis, pursuant to which Numis agreed to underwrite a capital raising by the Company to raise aggregate gross proceeds of up to £28.0 million, on the terms of a placing agreement to be agreed between the Company and the Underwriters. In consideration of Numis entering into the Standby Underwriting Letter, the Company has agreed to pay Numis a standby underwriting commission of 0.2 per cent. of the maximum aggregate gross proceeds of the Capital Raising for each weekly period (or part thereof, as calculated on a per day basis) from 17 May 2018 until (and including) the earlier of: (a) the date of the execution of the Underwriting Agreement; or (b) the date on which the Standby Underwriting Letter is terminated. The Standby Underwriting Letter automatically terminated in accordance with its terms upon the execution of the Placing Agreement.

15.4 Placing Agreement

On 9 July 2018, the Company entered into a sponsor and placing agreement (the "Placing Agreement") with Numis and Shore Capital, (together the "Underwriters").

Pursuant to the Agreement, Numis has procured Placees for New Ordinary Shares at the Issue Price on the basis that such New Ordinary Shares for which Placees are procured shall be the subject of clawback to the extent they are taken up in the Open Offer. To the extent Numis is unable to place any such New Ordinary Shares which are not taken up in the Open Offer, each of the Underwriters has severally agreed to subscribe (in its due proportion) for any such New Ordinary Shares at the Issue Price. Pursuant to the Placing Agreement, Numis has also agreed to act as Sponsor in relation to Admission and to the Related Party Transactions.

In connection with the Capital Raising, the Company has agreed to pay the Underwriters an aggregate commission of 1.25 per cent. of the aggregate of the gross proceeds of the Capital Raising and the Shareholder Loans. The Company has also agreed to pay all expenses incurred by the Underwriters in connection with the Capital Raising, Admission and the arrangements contemplated by the Placing Agreement, irrespective of whether Admission occurs.

The Underwriters' obligations in relation to the Capital Raising and the Sponsor's obligations in relation to Admission and the Related Party Transactions are conditional on Admission occurring not later than 8.00 a.m. on 27 July 2018 and on certain customary and other conditions to be satisfied prior to Admission including, among others:

• (i) the passing without amendment of the First Resolution to Fifth Resolution at the General Meeting (and not, except with the prior written agreement of the Numis, at any adjournment of such meeting) and such Resolutions remaining in force;
• (ii) the Capital Reorganisation having been approved by the shareholders of the Company and taken effect prior to the allotment of New Ordinary Shares;
• (iii) none of the representations and warranties given by the Company under the Placing Agreement being untrue, inaccurate or misleading as at any time between the date of the Placing Agreement and Admission (by reference to the facts and circumstances from time to time subsisting);
• (iv) each of the agreements relating to the Shareholder Loans, the Debtor Financing, and the New Debt Facilities not having been revoked or terminated and remaining in full force and effect and the company not being in material breach of any of such agreements;
• (v) the Company having complied in all material respects with its obligations under this Sponsor and Placing Agreement or under the terms and conditions of the Placing and Open Offer which fall to be performed on or prior to Admission; and
• (vi) no matter referred to in Section 87G of FSMA arising in the period between the time of publication of this document and the time of Admission and no supplementary prospectus or circular being published or being required to be published by or on behalf of the Company before Admission.

If, by the time specified in the Placing Agreement (or such later time and/ or date as Numis may agree) any of the conditions have not been fulfilled or waived in writing by Numis, the Placing Agreement and all obligations of each of the parties thereunder shall immediately cease to have any effect save that certain provisions survive. Numis may in its discretion waive compliance with the whole or any part of certain of the conditions by notice in writing to the Company or extend the time provided for fulfilment of any such conditions but only prior to Admission.

In addition Numis may terminate the Placing Agreement in certain circumstances (such as a material adverse change or force majeure event) but only prior to Admission. Numis is not entitled to terminate the Placing Agreement after Admission.

The parties have agreed that in the event a supplementary prospectus is published two or fewer Business Days prior to the closing date for the Open Offer (or such later date as may be agreed by Numis), the closing date shall be extended to the date which is three Business Days after the date of publication of the supplementary prospectus.

The Company has given certain customary representations, warranties and undertakings to the Underwriters including, among other things, warranties in relation to the business, the historical financial information and the information contained in this document.

The Company has undertaken that it will not without the prior written consent of Numis, during the period ending six months from the date of Admission: (i) allot, offer, issue (or contract to allot or issue), or directly or indirectly lend, sell, transfer, pledge, lien, charge, grant any rights in respect of or security or an option over its Ordinary Shares, or enter into any other agreement or arrangement having a similar effect, or in any way, whether directly or indirectly, dispose of the legal title to or beneficial interest in its ordinary shares, including any New Ordinary Shares, or publicly disclose the intention to make any such allotment, issue, sale, transfer, pledge, lien, charge, grant or offer; or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly, or indirectly, the economic consequences of ownership of the Ordinary Shares (or publicly announce the same or any intention to do the same), whether any such swap or transaction described in (i) or (ii) above is to be settled by delivery of the Ordinary Shares or such other securities, in cash or otherwise.

The restrictions above shall not apply in relation to (i) the issuance of the New Ordinary Shares to be issued in the context of the Placing and Open Offer, (ii) the grant or award in the ordinary course of options or Ordinary Shares under, and issuances of Ordinary Shares of the Company pursuant to the Company's executive or employee share schemes or incentive plans existing on the date of the Placing Agreement (including, without limitation, the Share Schemes), and (iii) the entry into and any steps taken in relation to the Shareholder Loan Agreements and the Capital Reorganisation.

15.5 Shareholder Loan Agreements

The Company as borrower entered four separate unsecured convertible loan agreements, each dated 17 May 2018 (together referred as the "Shareholder Loan Agreements"), pursuant to which an aggregate of £8,000,000 has been made available. The Shareholder Loans have been provided by the following lenders (the "Lenders") in the following amounts:

• (a) Blake Holdings £5,000,000;
• (b) DC Thomson £2,000,000;
• (c) 1798 Volantis acting by Lombard Odier £500,000; and
• (d) LMAP Epsilon acting by Lombard Odier £500,000.

The Shareholder Loans are available for a three-year term to 30 June 2021 for use towards general corporate and working capital purposes of the Group and are fully utilised, having been conditional only on the public announcement made on 17 May 2018 of the CVA Proposals. The facilities of the Shareholder Loans have been fully drawn down.

The Shareholder Loan Agreements provide for a monthly interest rate of 0.8333 per cent., which is capitalised into principal each month.

At the option of each Lender, the outstanding principal amounts under each Shareholder Loan may be converted into ordinary shares of the Company on 31 May (other than 31 May 2018) and 30 November of each year during the term. Such conversion will take place at the price that is the lower of: (i) 19 pence per New Ordinary Share, and (ii) the lowest price per share at which, following the Company's entry into the Shareholder Loan Agreements, any shareholders have subscribed for newly issued equity shares in the Company.

The Shareholder Loans may only be converted into ordinary shares on satisfaction of conditions set out in the Shareholder Loan Agreements, including the passing and implementation of the First Resolution and the Company obtaining all necessary approvals from its shareholders which includes the passing of the Sixth Resolution.

On repayment or conversion of the Shareholder Loan(s), the Company must pay to the relevant Lender or calculate within the conversion a redemption premium in an amount of 10 per cent. of the principal amount outstanding under the relevant Shareholder Loan plus any accrued interest.

Under the Shareholder Loan Agreements, the Lenders (excluding DC Thomson) holding at least 51 per cent. in aggregate of the facility amount made available under the Shareholder Loan Agreements (excluding the Shareholder Loan Agreement with DC Thomson) are entitled to nominate a single director to the Directors of the Company if:

• (i) Mr. Clive Whiley ceases to be a Director at any time prior to 30 June 2021; and
• (ii) the Lenders (excluding DC Thomson) hold at least 5 per cent. in aggregate of the voting ordinary shares in the Company.

The Shareholder Loan Agreements require the Company to observe certain customary undertakings.

The Shareholder Loan Agreements also require the Company and certain subsidiaries to comply with certain customary negative covenants and events of default.

The undertakings, negative covenants and events of default set out in the Shareholder Loan Agreements mirror equivalent provisions under the Facilities Agreement.

15.6 Pension Deeds

The Company entered into: (i) a mitigation payment deed dated 31 May 2018 in its position as principal employer with: (i) the Trustees of the Mothercare Staff Pension Scheme, the PPF and Mothercare UK Limited as the company (the "Staff Deficit Contribution Deed"; and (ii) a mitigation payment deed dated 31 May 2018 in its position as employer with (i) the Trustees of the Mothercare Executive Pension Scheme, the PPF and Mothercare UK Limited as the company (the "Executive Deficit Contribution Deed"), (together, the "Deficit Contribution Deeds").

Subject to the terms and conditions of the Deficit Contribution Deeds, the Company has agreed to: (i) make a payment of £3 million to the Trustees of the Mothercare Staff Pension Scheme and £1.6 million to the Trustees of the Mothercare Executive Pension Scheme (each a "Mitigation Lump Sum Payment") one business day following the date on which the funds are received into the bank account of Mothercare UK Limited (and/or other companies in the Group, including the Company) pursuant to the Capital Raising (the "Equity Raise Date"): and (ii) to make four weekly-deficit contributions to the schemes (the "Mitigation Contribution Payments") during the period from the date of the Deficit Contribution Deeds to the date of the termination of the particular deed by way of the issuance of a withdrawal notice (if the scheme has been rescued), or a scheme failure notice (if the scheme rescue has been unsuccessful) issued under the Pensions Act 2004 (the "Mitigation Period"). Additionally, normal course deficit contributions are also to be paid in accordance with the schedule of contributions annexed to the Deficit Contribution Deeds but these payments will be reduced by amounts equal to the Mitigation Contribution Payments. Any such payments due under (ii) above will not have to be paid until the aggregate amount of those contributions that would have been due is equal to the amount of the respective Mitigation Lump Sum Payment payable under the Deficit Contribution Deeds.

Additionally, on and from the Equity Raise Date, Mothercare and Mothercare UK Limited will make deficit repair contributions to the part of the Mothercare Staff Pension Scheme which has liabilities attributable to Mothercare UK Limited of £1 million in 2018, £2 million in 2019 and £2 million in 2020 (the "Additional DRCs"). During the Mitigation Period, to the extent that the Additional DRCs cannot be paid by Mothercare UK Limited to the Mothercare Staff Pension Scheme as normal contributions due to the operation of section 133(3) of the Pensions Act 2004, Mothercare UK Limited will pay the Additional DRCs in addition to the Mitigation Contribution Payments. Mothercare UK Limited's obligation to pay further deficit repair contributions as normal contributions will be reduced by an amount equal to the aggregate of the additional Mitigation Contribution Payments which are made.

The Staff Deficit Contribution Deed contains an obligation on Mothercare and Mothercare UK Limited to pay to the trustees of the Staff Pension Scheme an amount equal to the amount by which a warrant or fee arrangement (being either an agreement by Mothercare or Mothercare UK Limited to: (i) issue warrants (or any similar form of instrument) to any party; (ii) increase a contractually agreed margin or fees of any party; or (iii) pay any fee to any party in connection with a waiver of deferral sought by Mothercare or Mothercare UK Limited)) issued or agreed under any amendment or refinancing of the Facilities Agreement or payable in connection with any refinancing of the Facility Agreement (except in the case of (i) any fee payable in the ordinary course in connection with the operation of Mothercare UK Limited's banking arrangements, such as a letter of credit fee or similar; or (ii) any ordinary course arrangement (of 100bps or less of the principal amount being refinanced) or upfront fee payable in connection with any refinancing)). Such payment obligation lasts up until 1 March 2023.

Following approval of the CVA Proposals, lump sum payments will be made to each pension scheme which will be equal to 8/12 of each scheme's 2018/19 levy. From November 2018 up to March 2023, an amount equal to 1/12 of the levy for levy years 2019/20 – 2022/23 will be paid to the Board of the Pension Protection Fund on the first business day of every month up to October 2022.

If Mothercare makes dividend payments to Shareholders before 31 December 2020 then it will make the following payments: (i) a cash payment to the Trustees of the Mothercare Staff Pension Scheme amounting to 75 per cent. of the aggregate dividend paid; and (ii) a cash payment to the Trustees of the Mothercare Executive Pension Scheme amounting to 25 per cent. of the aggregate dividend paid. If Mothercare makes dividend payments to Shareholders on or after 31 December 2020 then it will make the following payments: (i) a cash payment to the Trustees of the Mothercare Staff Pension Scheme amounting to 18.75 per cent. of the aggregate dividend paid for cash dividend payments up to 5.3 pence per Ordinary Share or amounting to 37.5 per cent. for any cash dividend payment in excess of 5.3 pence per Ordinary Share; and (ii) a cash payment to the Trustees of the Mothercare Executive Pension Scheme amounting to 6.25 per cent. of the aggregate dividend paid for cash dividend payments up to 5.3 pence per Ordinary Share or amounting to 12.5 per cent. for any cash dividend payment in excess of 5.3 pence per Ordinary Share. Additional dividend contributions will be subject to a limit of £3.03 million or £0.97 million (as per the Staff Deficit Contribution Deed and the Executive Deficit Contribution Deed respectively). Dividend contributions will also be due under the Deficit Contribution Deeds if any share buybacks are undertaken (other than buybacks to meet the obligations under incentive plans).

There is no restriction under this agreement that prevents the Company from creating security over its assets in connection with the incurrence of financial indebtedness.

Mothercare will pay all reasonable costs and expenses (including legal fees)(with any VAT) incurred by the Trustees in connection with the restructuring or preparation of the Deficit Contribution Deeds and the implementation of the arrangements in the Deficit Contribution Deeds or related documentation.

15.7 CVA Proposals

On 17 May 2018, the CVA Companies published the CVA Proposals, which set out the terms of the CVAs.

The principal objective of the CVA Proposals is to rationalise the CVA Companies' leasehold obligations, facilitate operational improvements and restore the viability of the business.

A summary of the key terms of the CVA Proposals are as follows:

• The Company carried out a comprehensive review of the Group's store portfolio to determine the actual and projected financial performance of each site. On the basis of this review, the leases have been categorised into four categories, and the CVAs have been structured so as to effect the necessary restructuring of each category of leases to implement the revised business plan. The CVAs distinguish between (i) the Category 1 Leases; (ii) the Category 2 Leases; (iii) the Category 3 Leases; and (iv) the Category 4 Leases.
• In respect of Category 1 Leases, the CVAs do not reduce the amount payable to Category 1 Landlords, but do require them to accept rent monthly in advance (rather than quarterly), and limit their right to forfeit by reason of the CVAs. The Company has identified 48 stores which are included in Category 1.
• In respect of Category 2 Leases, the CVA Proposals reduce the amounts payable to Category 2 Landlords by 50 per cent. , payable monthly in advance (rather than quarterly), and limit their right to forfeit by reason of the CVAs. In addition, the CVA Proposals give Category 2 Landlords the right to effect a forfeiture, surrender or assignment of a Category 2 Lease on 45 days' notice. This notice can only be given in the six month period following the first payment date under the relevant lease that arises after the Effective Date (as defined in the CVA Proposals). The Company has identified 16 stores which are included in Category 2.
• In respect of Category 3 Leases, the CVA Proposals reduce the amounts payable to the Category 3 Landlords by 65 per cent. (including a 70 per cent. reduction in contractual rent plus

a payment of 5 per cent. of contractual rent in lieu of dilapidations) for 12 months payable monthly in advance, following which the relevant CVA Company will be entitled to vacate the relevant premises. The CVA Proposals also limit the Category 3 Landlords' rights to forfeit by reason of the CVAs. In addition, the CVA Proposals give Category 3 Landlords the right to effect a forfeiture, surrender or assignment of a Category 3 Lease on 45 days' notice. This notice can only be given in the six month period following the first payment date under the relevant lease that arises after the Effective Date (as defined in the CVA Proposals). The Company has identified 50 stores which are included in Category 3.

• The CVA Proposals provide for an additional £1,000,000 to be placed into a fund and paid out to Category 3 Landlords within 30 days of the date falling 24 months after the Effective Date (as defined in the CVA Proposals).
• In respect of Category 4 Leases, the CVA Proposals compromise all dilapidations liabilities due to the Category 4 Landlords in return for the payment of 5 per cent. of the final monthly rent (being 33 per cent. of the last whole quarter's rent paid prior to the expiry of each Category 4 Lease) for a period of 12 months. The Company has identified 27 leases which are included in Category 4.
• The CVA Proposals also provide for the compromise of certain intra-group liabilities owed by the CVA Companies to other members of the Group. Each of these intra-group claims was compromised to 5 per cent. of the net amounts outstanding as at the Effective Date (as defined in the CVA Proposals).
• The Company also produced estimated outcome statements ("Estimated Outcome Statements") for each of the CVA Companies. The Estimated Outcome Statements compared the relevant outcomes for Landlords and other unsecured creditors of the CVA Companies under the successful implementation of the CVAs to the outcome for these creditors if the CVAs failed and the CVA Companies instead entered into administration or liquidation. Based on the comparison of the outcomes in the Estimated Outcome Statements, the Company considers the CVA Proposals to be a fair outcome for unsecured creditors and Landlords, especially when compared against the outcome for these creditors if the CVAs failed and the CVA Companies entered into administration or liquidation.
• Certain creditors will not have their claims compromised under the CVA Proposals, as the Company considers it necessary to pay them in full in order to keep the business operating. This is necessary for the successful implementation of the CVA Proposals.
• The CVA Proposals were approved at meetings of the CVA Companies' creditors and shareholders held on 1 June 2018. The challenge period under section 6(3) of the Insolvency Act 1986 in respect of the CVAs expired on 5 July 2018.
• The completion of the CVAs, and therefore the Capital Refinancing Plan as a whole, remains conditional only on the Capital Raising completing in accordance with the terms set out in this document.

The CVA Proposals were approved by the unsecured creditors and shareholders of the CVA Companies at the relevant creditor CVA meetings on 1 June 2018 and took effect following expiry of the statutory period, during which a challenge could be made to the relevant courts under the relevant legislation (the "Challenge Period"). The Challenge Period expired on 5 July 2018 without any such challenge having been successfully made and it is therefore expected that the CVA Proposals will complete imminently. Full implementation of the Capital Refinancing Plan is now solely conditional upon completion of the Capital Raising.

As announced by the Company on 4 June 2018, the company voluntary arrangement proposal in connection with the Company's subsidiary, Childrens World was not approved by the necessary 75 per cent. majority of unsecured creditors by a very narrow margin at 73.3 per cent. Accordingly, the company voluntary arrangement proposal for Childrens World Limited did not progress any further. After exploring all available options, the directors of Childrens World have decided to place Childrens World into administration. The directors of Childrens World have submitted a notice of intention to appoint administrators to the High Court and Childrens World is expected to enter formally into administration on 9 July 2018. Mothercare UK Limited has been assigned or assumed new leases of 13 stores previously leased in the name of Childrens World and 9 stores previously leased in the name of Childrens World will be closed. Mothercare UK Limited will temporarily occupy (under a licence) the 9 stores due to be closed in order to ensure they are closed down in an orderly fashion.

16. WORKING CAPITAL

In the opinion of the Company, taking into account the net proceeds from the Capital Refinancing Plan, the working capital available to the Group is sufficient for its present requirements (that is, for at least the next 12 months following the date of this document).

17. SIGNIFICANT CHANGE

There has been no significant change in the financial or trading position of the Group since 24 March 2018, the date to which the latest audited financial information of the Group was prepared, save and except for the following items:

• the ability to draw down against the £67.5 million New Debt Facilities entered into on 17 May 2018;
• the receipt of funds from the £8 million Shareholder Loans (each dated 17 May 2018);
• the working capital initiatives releasing up to £10 million from the Debtor Financing announced on 17 May 2018;
• the announcement and publication of the CVA Proposals on 17 May 2018;
• the entry into of the Standby Underwriting Letter on 17 May 2018;
• the approvals of the CVA Proposals on 1 June 2018; and
• the entry into administration of Childrens World as announced on 9 July 2018 and the leases over certain of Childrens World's properties have been assigned to, or assumed by, Mothercare UK Limited.

18. LEGAL AND ARBITRATION PROCEEDINGS

There are no governmental, legal or arbitration proceedings (including any such proceedings pending or threatened of which the Company is aware) during the year preceding the date of this document, which may have, or have had in the recent past, significant effects on the financial position or profitability of the Company and/or the Group.

19. CONSENT

Numis Securities Limited has given and has not withdrawn its written consent to the inclusion in this document of its name and the references to it in the form and context in which they are included.

Shore Capital Stockbrokers Limited has given and has not withdrawn its written consent to the inclusion in this document of its name and the references to it in the form and context in which they are included.

Deloitte LLP has given and has not withdrawn its written consent to the inclusion in this document of its report in Section B of Part VIII (Unaudited Pro Forma Financial Information) of this document and the references thereto and to its name in the form and context in which it is included and has authorised the contents of that part of this document for the purposes of paragraph 5.5.3R(2)(f) of the Prospectus Rules.

20. GENERAL

The registrars of the Company and the receiving agents for the Capital Raising are Equiniti Limited.

Deloitte LLP is registered to carry out audit work in the UK and Ireland and have audited the accounts of the Company for the years ended 24 March 2018, 25 March 2017 and 26 March 2016.

The total costs, charges and expenses of the Capital Raising are estimated to amount to approximately £2.2 million (excluding any amounts in respect of VAT thereon). The net proceeds of the Capital Raising are expected to amount to approximately £30.3 million.

Qualifying Shareholders who do not take up any of their Open Offer Entitlements will suffer a dilution of:

• approximately 57.7 per cent. to their interests in the Company pursuant to the conversion of the Shareholder Loans subject to approval of the Related Party Transactions and assuming conversion of the Shareholder Loans in full on their maturity date and the Capital Raising; or
• approximately 50 per cent. to their interests in the Company pursuant to the Capital Raising if the Shareholder Loans are not converted.

The New Ordinary Shares are not being marketed or made available to the public in whole or in part other than in connection with the Capital Raising.

Documents to be sent to Shareholders will be posted to their registered addresses and, in the case of joint holders, will be posted to the registered address of the first-named holder. In addition, appropriate public announcements and advertisements will be made in accordance with the Listing Rules.

21. SOURCES AND BASES OF FINANCIAL INFORMATION

Market and Industry Information

This document contains statistics, data and other information relating to markets, market sizes, market shares, market positions and other industry data pertaining to the Company's business and markets. This includes data from various companies and agencies including OC&C, Kantar, GfK, Conquest, Verdict, Mintel and Euromonitor.

Where third party information has been used in this document, the source of such information has been identified. The Company confirms that such information has been accurately reproduced and, so far as it is aware and has been able to ascertain from information published by such third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading.

Bases of Financial Information

The financial information contained in this document, which relates to the Company and/or the Group does not constitute statutory accounts as referred to in section 434(3) of the Companies Act. Statutory accounts for each of FY 2017/18, FY 2016/17 and FY 2015/16 have been delivered to the Registrar of Companies, and each includes an unqualified audit report.

22. ANNOUNCEMENT OF RESULTS OF THE CAPITAL RAISING

The Company will make an appropriate announcement to a Regulatory Information Service giving details of the results of the Capital Raising.

23. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours on any weekday (Saturdays and public holidays excepted) at the registered office of the Company at Cherry Tree Road, Watford, Hertfordshire WD24 6SH and at the offices of DLA Piper UK LLP at 3 Noble Street, London, EC2V 7EE, United Kingdom up to and including 8.00 a.m. on 27 July 2018:

• (a) Articles of Association of the Company;
• (b) Amended Articles of Association of the Company;
• (c) the audited consolidated accounts of the Company for FY 2015/16. FY 2016/17 and FY 2017/18;
• (d) the report prepared by Deloitte LLP on the unaudited pro forma financial information as set out in Part VIII (Unaudited Pro Forma Financial Information) of this document;
• (e) the Directors' service contracts and letters of appointment referred to in paragraph 6 above;
• (f) the written consents referred to in paragraph 19 above; and
• (g) this document.

Copies of this document are also available for inspection at the National Storage Mechanism at http://www.morningstar.co.uk//uk/nsm. In addition this document will be published in electronic form and available on the Company's website at www.mothercareplc.com, subject to certain access restrictions.

PART XI

DOCUMENTS INCORPORATED BY REFERENCE

This document should be read and construed in conjunction with the following documents which have been previously published and filed with the FCA and which shall be deemed to be incorporated in, and form part of, this document:

Information that is itself incorporated by reference in the above documents is not incorporated by reference into this document. It should be noted that, except as set out in the cross-reference list in Part VII (Historical Financial Information) of this document, no other portion of the above documents are incorporated by reference into this document and those portions which are not specifically incorporated by reference in this document are either not relevant for prospective investors or the relevant information is included elsewhere in this document.

Any statement contained in a document which is deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this document to the extent that a statement contained herein (or in a later document which is incorporated by reference herein) modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded for the purpose of this document shall not be deemed, except as so modified or superseded, to constitute a part of this document.

Copies of the documents which are incorporated by reference in this document are available as provided in paragraph 23 in Part X (Additional Information) of this document.

		Page number in the
Reference document	Information incorporated by reference	reference documents
Mothercare plc Annual Report	Independent Auditors' Report	Pages 81 to 89
and Accounts for the 52 week	Group Income Statement	Page 90
period ended 24 March 2018	Group Statement of Comprehensive Income	Page 91
	Group Statement of Balance Sheet	Page 92
	Group Statement of Changes in Equity	Page 93
	Group Cash Flow Statement	Page 94
	Notes to the Consolidated Financial Statements (including significant accounting policies)	Page 95 to 130
Mothercare plc Annual Report	Independent Auditors' Report	Pages 98 to 104
and Accounts for 52 week	Group Income Statement	Page 105
period ended 25 March 2017	Group Statement of Comprehensive Income	Page 106
	Group Statement of Balance Sheet	Page 107
	Group Statement of Changes in Equity	Page 108
	Group Cash Flow Statement	Page 109
	Notes to the Consolidated Financial Statements (including significant accounting policies)	Pages 110 to 149
Mothercare plc Annual Report	Independent Auditors' Report	Pages 94 to 98
and Accounts for the 52 week	Group Income Statement	Page 99
period ended 26 March 2016	Group Statement of Comprehensive Income	Page 100
	Group Statement of Balance Sheet	Page 101
	Group Statement of Changes in Equity	Page 102
	Group Cash Flow Statement	Page 103
	Notes to the Consolidated Financial Statements (including significant accounting policies)	Pages 104 to 141

APPENDIX I

DEFINITIONS

The definitions set out below apply throughout this document, unless the context requires otherwise.

"1798 Volantis"	1798 Volantis Fund Ltd;
"Admission"	admission of the New Ordinary Shares to the premium listing segment of the Official List and to trading on the main market for listed securities of the London Stock Exchange;
"Alshaya"	the Alshaya Group, the Group's most significant Franchise Partner;
"Amended Articles of Association"	the Articles of Association amended in the form proposed by the Second Resolution;
"Annual Report and Accounts for FY 2017/18"	the annual report and accounts for FY 2017/18;
"Annual Report and Accounts for FY 2016/17"	the annual report and accounts for FY 2016/17;
"Annual Report and Accounts for FY 2015/16"	the annual report and accounts for FY 2015/16;
"app"	mobile application;
"Application Form"	the personalised application form on which Qualifying Non-CREST Shareholders may apply for New Ordinary Shares under the Open Offer;
"Articles of Association" or "Articles"	the articles of association of the Company, as amended from time to time;
"Blake Holdings"	Blake Holdings Limited;
"Board"	the board of directors of the Company from time to time;
"Boots"	Boots UK Limited;
"Business Day"	any day on which banks are generally open in London for the transaction of business other than a Saturday or Sunday or public holiday;
"CAGR"	compound annual growth rate;
"Capital Raising"	the Placing and Open Offer;
"Capital Refinancing Plan"	has the meaning given to such term in paragraph 1 of Part I (Letter from the Interim Executive Chairman of Mothercare plc);
"Capital Reorganisation"	the proposed subdivision of the Existing Ordinary Shares into Ordinary Shares of 1 pence nominal value each and Deferred Shares of 49 pence nominal value each, further details of which are set out in paragraph 13 of Part I (Letter from the Interim Executive Chairman of Mothercare plc);
"Category 1 Landlords"	Landlords of the Category 1 Leases;
"Category 2 Landlords"	Landlords of the Category 2 Leases;
"Category 3 Landlords"	Landlords of the Category 3 Leases;
"Category 4 Landlords"	Landlords of the Category 4 Leases;

"Category 1 Leases"	those leases which were categorised as "Category 1 Leases" under the CVA Proposals, as further described in the second bullet point in paragraph 15.7 of Part X (Additional Information);
"Category 2 Leases"	those leases which were categorised as "Category 2 Leases" under the CVA Proposals, as further described in the third bullet point in paragraph 15.7 of Part X (Additional Information);
"Category 3 Leases"	those leases which were categorised as "Category 3 Leases" under the CVA Proposals, as further described in the fourth bullet point in paragraph 15.7 of Part X (Additional Information);
"Category 4 Leases"	those leases which were categorised as "Category 4 Leases" under the CVA Proposals, as further described in the sixth bullet point in paragraph 15.7 of Part X (Additional Information);
"certificated" or "in certificated form"	a share or other security which is not in uncertificated form (that is, not in CREST);
"China JV Target"	Mothercare-Goodbaby China Retail Limited;
"Childrens World"	Childrens World Limited, a company incorporated in England and Wales with registered number 00232232;
"Childrens World CVA Proposal"	the company voluntary arrangement of Childrens World Limited, announced on 17 May 2018;
"City Code"	the UK City Code on Takeovers and Mergers;
"Closing Price"	the closing, middle market quotation in pounds sterling of an Existing Ordinary Share, as published in the Daily Official List;
"Clothing & Footwear"	includes maternity clothing and clothing for infants and preschool children;
"Companies Act"	the Companies Act 2006, as amended, modified or re-enacted from time to time;
"Conversion Shares"	the Ordinary Shares to be issued by the Company pursuant to the Related Party Transactions
"CREST Deposit Form"	the CREST deposit form set out on page 4 of the Application Form;
"CREST Manual"	the rules governing the operation of CREST, consisting of the CREST Reference Manual, CREST International Manual, CREST Central Counterparty Service Manual, CREST Rules, Registrars Service Standards, Settlement Discipline Rules, CREST CCSS Operations Manual, Daily Timetable, CREST Application Procedure and CREST Glossary of Terms (all as defined in the CREST Glossary of Terms promulgated by Euroclear on 15 July 1996, as amended;
"CREST member"	a person who has been admitted by Euroclear as a system-member (as defined in the CREST Regulations);
"CREST Regulations"	the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended from time to time;
"CREST Shareholders"	Shareholders holding Ordinary Shares in CREST in uncertificated form;
"CREST sponsor"	a CREST participant admitted to CREST as a CREST sponsor;
"CREST sponsored member"	a CREST member admitted to CREST as a sponsored member;

"CVAs"	the company voluntary arrangements between the CVA Companies and their respective creditors under Part I of the Insolvency Act 1986 (as amended from time to time), as further described in paragraph 15.7 of Part X (Additional Information);
"CVA Companies"	Mothercare UK Limited and ELC;
"CVA Proposals"	the company voluntary arrangements under Part 1 of the Insolvency Act 1986 in respect of the CVA Companies;
"Daily Official List"	the daily official list of the London Stock Exchange;
"DB Schemes"	the Company's defined benefit pension schemes being (i) the Mothercare Executive Pension Scheme; and (ii) the Mothercare Staff Pension Scheme;
"DC Thomson"	DC Thomson & Co Limited;
"Dealing Day"	a day upon which dealings in domestic securities may take place on and with the authority of the London Stock Exchange;
"Debtor Financing"	a debtor backed facility of up to £10,000,000;
"Deferred Shares"	the deferred shares of 49 pence in the share capital of the Company which will be created as a result of the Capital Reorganisation;
"Direct business"	the Group's online channels of "Direct in Home", the channel through which customers order products outside of the store network, for delivery to a store or to the customer's home (or designated) address, and "Direct in Store", the channel through which customers order products while in-store, for delivery to a store or to the customer's home (or designated) address;
"Directors"	the directors of the Company at the date of this document and "Director" means any one of them;
"Disclosure Guidance and Transparency Rules"	the disclosure guidance and transparency rules made by the UK Listing Authority under Part VI of FSMA (as set out in the FCA Handbook), as amended;
"EBITDA"	earnings before taxation, net financing costs, depreciation and amortisation;
"EEA State"	any individual member state of the EEA;
"Eighth Resolution"	the resolution relating to the disapplication of pre-emption rights in respect of an allotment of Ordinary Shares to be proposed at the General Meeting;
"ELC"	Early Learning Centre;
"Employee Benefit Trust"	the Mothercare Employee Benefit Trust;
"Enlarged Share Capital"	the expected issued ordinary share capital of the Company immediately following the issue of the New Ordinary Shares pursuant to the Capital Raising;
"Equiniti"	Equiniti Limited;
"EU"	the European Union;
"euro" or "€"	the single currency of the member states of the EU that adopt or have adopted the euro as their lawful currency under the Treaty on the Functioning of the European Union;

"Euroclear"	Euroclear UK & Ireland Limited;
"European Economic Area" or "EEA"	the member states of the EU, Iceland, Norway and Liechtenstein;
"Excess Application Facility"	the facility for Qualifying Shareholders to apply for Excess Shares in excess of their Open Offer Entitlements;
"Excess Open Offer Entitlements"	in respect of each Qualifying CREST Shareholder who has taken up his Open Offer Entitlement in full, the entitlement (in addition to the Open Offer Entitlement) to apply for Excess Shares, up to the number of Open Offer Shares, credited to his stock account in CREST pursuant to the Excess Application Facility, which may be subject to scaling down at the absolute discretion of the Board in consultation with Numis;
"Excess Shares"	Open Offer Shares which may be applied for in addition to Open Offer Entitlements;
"Excluded Shareholders"	subject to certain exceptions, shareholders who have registered addresses in, who are incorporated in or otherwise resident or located in the United States or any of the other Excluded Territories;
"Excluded Territories"	the United States, Australia, Canada, Japan, South Africa, New Zealand and any other jurisdiction where the extension or availability of the Placing and Open Offer (and any other transaction contemplated thereby) would breach any applicable law (and "Excluded Territory" means any one of them);
"Executive Directors"	Clive Whiley, Mark Newton-Jones, David Wood and Glyn Hughes (and "Executive Director" means any one of them);
"Ex-Entitlements Date"	the date on which the Existing Ordinary Shares are marked ex entitlement, being 8.00 a.m. on 9 July 2018;
"Existing Ordinary Shares"	the ordinary shares of 50 pence each in the capital of the Company at the Record Date;
"Facilities"	the senior term facilities comprising the Term Facility and the Revolving Facility;
"Facilities Agreement"	the agreement entered into between the Company (as borrower and guarantor), Barclays Bank plc and HSBC Bank plc dated 12 May 2003 relating to the Term Facility and Revolving Facility, as amended and restated by the amendment and restatement agreement entered into between the Company and HSBC Bank plc and dated 17 May 2018, as more fully described in paragraph 15.1 of Part X (Additional Information) of this document;
"FCA" or "Financial Conduct Authority"	the Financial Conduct Authority of the United Kingdom or any successor body or bodies carrying out the functions currently carried out by the Financial Conduct Authority;
"Fifth Resolution"	the resolution to approve the Issue Price of 19 pence per New Ordinary Share;
"First Resolution"	the resolution relating to the sub-division of each Ordinary Share of 50 pence into one Ordinary Share of one penny and one deferred share of 49 pence to be proposed at the General Meeting;
"Form of Proxy"	the form of proxy for use at the General Meeting which accompanies this document;

"Fourth Resolution"	the resolution relating to the disapplication of pre-emption rights in respect of the allotment of the New Ordinary Shares to be proposed at the General Meeting;
"Franchise Partner"	the third parties with whom the Group has entered into franchise arrangements to sell its products in territories other than the UK (including, for the avoidance of doubt, the Group's joint venture in the Ukraine);
"FSMA"	the Financial Services and Markets Act 2000, as amended;
"FY 2014/15"	the financial year of the Company ended 28 March 2015;
"FY 2015/16"	the financial year of the Company ended 26 March 2016;
"FY 2016/17"	the financial year of the Company ended 25 March 2017;
"FY 2017/18"	the financial year of the Company ended 24 March 2018;
"FY 2018/19"	the financial year of the Company ending 30 March 2019;
"FY 2019/20"	the financial year of the Company ending 28 March 2020;
"FY 2020/21"	the financial year of the Company ending 27 March 2021;
"FY 2021/22"	the financial year of the Company ending 26 March 2022;
"GDPR"	the EU General Data Protection Regulation (EU) 2016/679;
"General Meeting"	the general meeting of the Company to be convened pursuant to the notice set out in this document (including any adjournment thereof);
"HMRC"	HM Revenue & Customs;
"HSBC"	HSBC Bank plc;
"Home & Travel"	includes nursery room sets, buggy and pushchair systems, car seats, bedding, and nurture categories such as feeding, babycare and bath items;
"IFRS"	International Financial Reporting Standards as adopted for use by the EU;
"International" or "International business"	the Group's international business comprising the operations of the Franchise Partners and the Wholesale Customers;
"Issue Price"	the price at which the New Ordinary Shares are issued;
"Listing Rules"	the listing rules made under Part VI of FSMA (as set out in the FCA Handbook), as amended from time to time;
"LMAP Epsilon"	LMAP Epsilon Limited;
"Lombard Odier"	Lombard Odier Asset Management (USA) Corp;
"London Stock Exchange"	London Stock Exchange plc or its successor(s);
"LTIP"	the Group's long term incentive plan;
"Money Laundering Regulations"	the Money Laundering Regulations 2007, as amended;
"mothercare"	the mothercare brand owned by the Group and under which it trades;
"Mothercare" or "the Company"	Mothercare plc, a company incorporated in England and Wales with registered number 01950509, whose registered office is at Cherry Tree Road, Watford, Hertfordshire WD24 6SH;

"Mothercare Group" or "the Group"	the Company together with its subsidiaries and subsidiary undertakings;
"Net Debt"	borrowings after deducting cash and cash equivalents;
"New Debt Facilities"	the Facilities as amended and restated by the amendment and restatement agreement entered into between the Company and HSBC Bank plc and dated 17 May 2018, concerning the revised committed debt facilities of £67,500,000 with a final maturity extended to December 2020 and certain interim step downs to be provided by the Company's existing Senior Lenders;
"New Ordinary Shares"	the Placing Shares, the Open Offer Shares and the Conversion Shares;
"Ninth Resolution"	the resolution relating to the disapplication of pre-emption rights in respect of an allotment of Ordinary Shares to be proposed at the General Meeting;
"Non-executive Directors"	Lee Ginsberg, Richard Rivers, Nick Wharton and Gillian Kent (and "Non-executive Director" means any one of them);
"Numis"	Numis Securities Limited;
"Official List"	the list maintained by the UK Listing Authority in accordance with section 74(1) of FSMA for the purposes of Part VI of FSMA;
"Open Offer"	the conditional invitation to Qualifying Shareholders to subscribe for the Open Offer Shares at the Issue Price on the terms and subject to the conditions set out in this document and in the case of Qualifying Non-CREST Shareholders only, the Application Form;
"Open Offer Entitlements"	entitlements to subscribe for the Open Offer Shares, allocated to a Qualifying Shareholder pursuant to the Open Offer;
"Open Offer Shares"	the 170,871,885 New Ordinary Shares for which Qualifying Shareholders are being invited to apply to be issued pursuant to the terms of the Open Offer;
"Operating Board"	collectively, the Executive Directors and the Non-executive Directors;
"Ordinary Shares"	ordinary shares of 50 pence each (and, following the Capital Reorganisation, one penny each) in the capital of the Company;
"Overseas Shareholders"	shareholders with registered addresses outside the United Kingdom or who are incorporated in, registered in or otherwise resident or located in, countries outside the United Kingdom;
"PD Amending Directive"	Directive 2010/73/EU of the European Parliament and of the Council;
"Pension Protection Fund" or "PPF"	the Board of the Pension Protection Fund as set up by section 107 of the Pensions Act 2004;
"Pension Trustees"	each of the trustees of the DB Schemes;
"Placee"	any person who has conditionally agreed to subscribe for the Placing Shares;
"Placing"	the conditional placing, by Numis, as agent of and on behalf of the Company, of the Placing Shares subject to clawback pursuant to the Open Offer, on the terms and subject to the conditions contained in the Placing Agreement;

"Placing Agreement"	the sponsor and placing agreement dated 9 July 2018 between the Company, Numis and Shore Capital described in paragraph 15.4 of Part X (Additional Information);
"Placing Commitment"	the number of Placing Shares notified by Numis to any Placee as being such Placee's allocated account of Placing Shares;
"Placing Shares"	the New Ordinary Shares proposed to be issued by the Company pursuant to the Placing;
"Pounds" or "£" or "pound sterling" or "pounds sterling"	the lawful currency of the United Kingdom;
"PRA" or "Prudential Regulation Authority"	the Prudential Regulation Authority of the United Kingdom, or any successor entity;
"Prospectus" or "this document"	this document dated 9 July 2018, comprising a prospectus relating to the Company for the purpose of the Capital Raising and the listing of the New Ordinary Shares on the London Stock Exchange (together with any supplements or amendments thereto);
"Prospectus Directive"	Directive 2003/71/EC of the European Parliament and the Council of the EU on the prospectus to be published when securities are to be offered to the public or admitted to trading, as amended (including pursuant to the PD Amending Directive);
"Prospectus Rules"	the prospectus rules made under Part VI of FSMA (as set out in the FCA Handbook), as amended;
"Qualifying CREST Shareholder"	Qualifying Shareholders holding Ordinary Shares in uncertificated form;
"Qualifying Non-CREST Shareholders"	Qualifying Shareholders holding Ordinary Shares in certificated form;
"Qualifying Shareholders"	holders of Existing Ordinary Shares on the register of members of the Company on the Record Date;
"Receiving Agent"	Equiniti Limited;
"Record Date"	the close of business in London on 5 July 2018;
"Reference Date"	6 July 2018, the last practicable date prior to publication of this document;
"Registrar"	Equiniti Limited;
"Registrar of Companies"	the Registrar of Companies in England and Wales;
"Regulation S"	Regulation S under the US Securities Act;
"Regulatory Information Service"	one of the regulatory information services authorised by the UK Listing Authority to receive, process and disseminate regulatory information from listed companies;
"Related Party Transactions"	the proposed conversion of the Shareholder Loans into New Ordinary Shares at the lower of: (i) 19 pence per New Ordinary Share; and (ii) the most recent price at which any Shareholders have subscribed for newly issued equity in the Company since entry into the Shareholder Loans;
"relevant member state"	each EEA State (except for the UK) which has implemented the Prospectus Directive;

"Resolutions"	the First Resolution, Second Resolution, Third Resolution, Fourth Resolution, Fifth Resolution, Sixth Resolution, Seventh Resolution, Eighth Resolution, Ninth Resolution and Tenth Resolution to be proposed at the General Meeting (and as further described in paragraph 17 of Part I (Letter from the Interim Executive Chairman of Mothercare plc);
"Restricted Shareholder"	subject to certain exceptions, Shareholders who have registered addresses in, who are incorporated in, registered in or otherwise resident or located in, the United States or any other Excluded Jurisdiction;
"Revolving Facility"	the multicurrency revolving facility of £60 million;
"Sales of the Group's UK business"	Total sales of the Group's UK business;
"SDRT"	stamp duty reserve tax;
"SEC"	United States Securities and Exchange Commission;
"Second Resolution"	the resolution relating to the amendment of Company's Articles of Association to be proposed at the General Meeting;
"Senior Lenders"	those lenders as described in paragraph 15.1 of Part X (Additional Information) of this document;
"Seventh Resolution"	the resolution granting the Directors general authority to allot Ordinary Shares to be proposed at the General Meeting;
"Share Schemes"	collectively, the Save As You Earn Scheme, the Company Share Option Plan, the Retention Share Plan, the Value Creation Plan, the 2017 Senior Management Incentive Plan, the Short Term Incentive Plan and the Long Term Incentive Plan;
"Shareholder Helpline"	the telephone helpline for Shareholders, details of which are set out at page 48 of this document;
"Shareholder Loans"	shareholder loans from DC Thomson, Lombard Odier (acting for LMAP Epsilon and 1798 Volantis) and Blake Holdings, each of which being convertible into New Ordinary Shares at the option of such shareholder, conditional upon, among other things, the approval of the Company's shareholders of the conversion of the relevant shareholder loan as a Related Party Transaction (and "Shareholder Loan" means any one of them), details of which are described in paragraph 15.5 of Part X (Additional Information) of this document;
"Shareholder(s)"	holder(s) of Ordinary Shares;
"Shore Capital"	Shore Capital Stockbrokers Limited;
"Sixth Resolution"	the resolution approving to approve the conversion by Blake Holdings, DC Thomson and Lombard Odier of the Shareholder Loans into New Ordinary Shares under the Shareholder Loan Agreements as related party transactions to be proposed at the General Meeting;
"Sponsor"	Numis;
"Standby Underwriting Letter"	the standby underwriting letter dated 17 May 2018 between the Company and Numis described in paragraph 15.3 of X (Additional Information) of this document;

"stock account"	an account within a member account in CREST to which a holding of a particular share or other security in CREST is credited;
"subsidiary"	has the meaning given in section 1159 of the Companies Act;
"subsidiary undertaking"	has the meaning given in section 1162 of the Companies Act;
"Tenth Resolution"	the resolution granting the Company the authority to purchase up to 10 per cent. of its issued Ordinary Shares to be proposed at the General Meeting;
"Term Facility"	the term loan facility of £40,000,000;
"Third Resolution"	the resolution granting the Directors authority to allot the New Ordinary Shares to be proposed at the General Meeting;
"Toys"	includes toys for babies and young children, including educational toys under the ELC brand;
"UK Listing Authority"	the Financial Conduct Authority acting in its capacity as the competent authority for the purposes of FSMA;
"UK Restructuring"	the restructuring of the Group's UK store portfolio through the CVA Proposals;
"UK RPI 2017"	the UK Retail Proposition Index 2017 produced by OC&C Strategy Consultants;
"uncertificated" or "in uncertificated form"	a share or other security recorded on the relevant register of the share or security concerned as being held in uncertificated form in CREST and title to which by virtue of the CREST Regulations may be transferred by means of CREST;
"Underwriters"	Numis and Shore Capital;
"United Kingdom" or "UK"	the United Kingdom of Great Britain and Northern Ireland;
"United States" or "US"	the United States of America, its territories and possessions, any state of the United States and the District of Columbia;
"US Securities Act"	the United States Securities Act of 1933, as amended;
"US\$", "US dollars" or "\$"	the lawful currency of the United States;
"Wholesale Customers"	those parties with whom the Group has entered into arrangements to sell its products on a wholesale basis;
"Worldwide Sales"	total sales of the Group's International business plus total sales of the Group's UK business;
"Worldwide Sales of the Group's International business"	Total sales of the Group's International business reflecting the retail sales from mothercare and ELC-branded stores, outlets and transactional websites and sales to Wholesale Customers. International Stores refer to overseas franchise and joint venture stores; and
"VAT"	value added tax.

NOTICE OF GENERAL MEETING

Mothercare plc

(Incorporated in England and Wales with registered number 01950509)

Notice is hereby given that a General Meeting of Mothercare plc (the "Company") will be held at 10.00 a.m. on 26 July 2018 at the offices of DLA Piper UK LLP, 3 Noble Street, London EC2V 7EE for the purpose of considering and, if thought fit, passing the First Resolution, Third Resolution, Fifth Resolution, Sixth Resolution and Seventh Resolution as ordinary resolutions and the Second Resolution, Fourth Resolution, Eighth Resolution, Ninth Resolution and Tenth Resolution as special resolutions.

1. Sub-division of Ordinary Shares

That, each Ordinary Share of 50 pence in the issued share capital of the Company be sub-divided into one Ordinary Share of 1 penny such shares having the same rights and being subject to the same restrictions (save as to nominal value) as the existing Ordinary Shares of 50 pence each in the capital of the Company as set out in the Company's articles of association as amended by the Second Resolution and one deferred share of 49 pence, having the rights and being subject to the restrictions set out in the Company's articles of association as amended by the Second Resolution.

2. Amendment to the Articles of Association

That, subject to and conditional upon the First Resolution being passed, the Articles of Association of the Company be amended by the insertion of a new Article 6A immediately after Article 6, as follows:

6A. Deferred Shares

"(A) The Deferred Shares of 49 pence each in the capital of the Company ("Deferred Shares") shall have the rights, and shall be subject to the restrictions, set out in Articles 6A (i) to (v) below:

• (i) A Deferred Share:
• (a) does not entitle its holder to receive any dividend or other distribution;
• (b) does not entitle its holder to receive a share certificate in respect of the relevant shareholding;
• (c) does not entitle its holder to receive notice of, nor to attend, speak or vote at, any general meeting of the Company;
• (d) entitles its holder on a return of capital on a winding up of the Company (but not otherwise) only to the repayment of the amount paid up on that share after payment of the capital paid up on each ordinary share in the share capital of the Company and the further payment of £10,000,000 on each such ordinary share;
• (e) does not entitle its holder to any further participation in the capital, profits or assets of the Company.
• (ii) The Deferred Shares shall not be capable of transfer at any time other than with the prior written consent of the directors of the Company.
• (iii) The Company may at its option and is irrevocably authorised at any time after the creation of the Deferred Shares to:
• (a) appoint any person to act on behalf of any or all holder(s) of a Deferred Share(s), without obtaining the sanction of the holder(s), to transfer any or all of such shares held by such holder(s) for nil consideration to any person appointed by the directors of the Company;

• (b) without obtaining the sanction of the holder(s), but subject to the Act and Uncertified Securities Regulations:

• (1) purchase any or all of the Deferred Shares then in issue and to appoint any person to act on behalf of all holders of Deferred Shares to transfer and to execute a contract of sale and a transfer of all the Deferred Shares to the Company for an aggregate consideration of one penny payable to one of the holders of Deferred Shares to be selected by lot (who shall not be required to account to the holders of the other Deferred Shares in respect of such consideration); and

• (2) cancel any Deferred Share without making any payment to the holder.
• (iv) Any offer by the Company to purchase the Deferred Shares may be made by the Directors of the Company depositing at the registered office of the Company a notice addressed to such person as the Directors shall have nominated on behalf of the holders of the Deferred Shares.
• (v) The rights attaching to the Deferred Shares shall not be, or be deemed to be, varied, abrogated or altered by:
• (a) the creation or issue of any shares ranking in priority to, or pari passu with, the Deferred Shares;
• (b) the Company reducing its share capital or share premium account;
• (c) the cancellation of any Deferred Share without any payment to the holder thereof; or
• (d) the redemption or purchase of any share, whether a Deferred Share or otherwise,

nor by the passing by the members of the Company or any class of members of any resolution, whether in connection with any of the foregoing or for any other purpose, and accordingly no consent thereto or sanction thereof by the holders of the Deferred Shares, or any of them, shall be required.";

3. Authority to allot (Capital Raising)

That, subject to and conditional upon the First Resolution and Second Resolution being duly passed, the Directors of the Company be and are hereby generally and unconditionally authorised to exercise all powers of the Company in accordance with section 551 of the Companies Act 2006 ("Companies Act") to allot shares in the Company and to grant rights to subscribe for or to convert any security into shares (all of which transactions are hereinafter referred to as an allotment of 'relevant securities') up to an aggregate nominal amount of £1,708,718.85 pursuant to (i) the placing and open offer of 170,871,885 new ordinary shares at 19 pence per share announced by the Company on 9 July 2018 (together "Capital Raising"), and (ii) the conversion of certain shareholder loan amounts and associated compounded interest amounts into a maximum of 62,684,400 new ordinary shares at 19 pence per share announced by the Company on 9 July 2018, which shall continue in full force and effect. The authority conferred by this resolution shall expire at the Company's next annual general meeting (unless previously revoked or varied by the Company in a general meeting), save that the Company may, before such expiry, revocation or variation, make an offer or agreement which would or might require relevant securities to be allotted after such expiry, revocation or variation and the Directors may allot relevant securities in pursuance of such offer or agreement as if the authority hereby conferred has not expired or been revoked or varied.

4. Disapplication of pre-emption rights (Capital Raising)

That, subject to and conditional upon the Third Resolution being duly passed, the Directors of the Company be and are hereby empowered pursuant to section 571 of the Act (in addition to all subsisting authorities under section 570 and section 573 of the Act to the usual extent), to allot equity securities (as defined in section 560 of the Act) in connection with the Capital Raising wholly for cash pursuant to the authority conferred by the Third Resolution above at any time up to the Company's next annual general meeting, in each case as if section 561 of the Act did not apply to any such allotment in connection with the Capital Raising, provided that this power shall expire at the Company's next annual general meeting (unless previously revoked or varied by the Company in a general meeting), save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such an offer or agreement as if the power hereby conferred had not expired.

5. Approval of issue price

That the issue of up to 233,556,285 New Ordinary Shares at an issue price of 19 pence per share which is a discount of 33.6 per cent. to the closing middle market quotation of an Existing Ordinary Share (as derived from the Daily Official List of the London Stock Exchange) of 28.6 pence per share on the business day prior to the date of the prospectus of the Company of which this Notice of General Meeting forms part (the "Prospectus") and otherwise on the terms as set out in the Prospectus be and is hereby approved.

6. Related party transactions

Subject to and conditional upon the Third Resolution and Fourth Resolution above, being duly passed, that:

• 6.1 pursuant to a loan agreement entered into by the Company (as borrower) and DC Thomson & Co Limited ("DC Thomson") (as lender) on 17 May 2018 ("DC Thomson Shareholder Loan"), up to £2,706,826, being the aggregate of the outstanding principal amount (plus the maximum potential accrued by unpaid interest) owed by the Company to DC Thomson pursuant to the DC Thomson Shareholder Loan, be converted into up to 15,671,100 ordinary shares in the capital of the Company ("DC Converted Shares"), be and is hereby approved for the purposes of Chapter 11 of the Listing Rules of the UK Listing Authority;
• 6.2 pursuant to a loan agreement entered into by the Company (as borrower) and Blake Holdings Limited ("Blake Holdings") (as lender) on 17 May 2018 ("Blake Holdings Shareholder Loan"), up to £6,767,066, being the aggregate of the outstanding principal amount (plus the accrued by unpaid interest) owed by the Company to Blake Holdings pursuant to the Blake Holdings Shareholder Loan, be converted into 39,177,750 ordinary shares in the capital of the Company ("Blake Holdings Converted Shares"), be and is hereby approved for the purposes of Chapter 11 of the Listing Rules of the UK Listing Authority;
• 6.3 pursuant to a loan agreement entered into by the Company (as borrower) and Lombard Odier Asset Management USA Corp ("Lombard") (as lender, acting on behalf of 1978 Volantis Fund Limited ("1978 Volantis")) on 17 May 2018 ("1978 Volantis Shareholder Loan"), up to £676,707, being the aggregate of the outstanding principal amount (plus accrued by unpaid interest) owed by the Company to Lombard Odier pursuant to the 1978 Volantis Shareholder Loan, be converted into 3,917,700 ordinary shares in the capital of the Company ("1978 Volantis Converted Shares"), be and is hereby approved for the purposes of Chapter 11 of the Listing Rules of the UK Listing Authority; and
• 6.4 pursuant to a loan agreement entered into by the Company (as borrower) and Lombard Odier Asset Management USA Corp ("Lombard") (as lender, acting on behalf of LMAP Epsilon Limited ("LMAP Epsilon")) on 17 May 2018 ("LMAP Epsilon Shareholder Loan"), up to £676,707, being the aggregate of the outstanding principal amount (plus accrued by unpaid interest) owed by the Company to Lombard Odier pursuant to the LMAP Epsilon Shareholder Loan, be converted into 3,917,750 ordinary shares in the capital of the Company ("LMAP Epsilon Converted Shares"), be and is hereby approved for the purposes of Chapter 11 of the Listing Rules of the UK Listing Authority.

7. Authority to allot (general authority)

• 7.1 That, subject to and conditional upon the First to Fifth Resolution being duly passed, the Directors of the Company be and are hereby generally and unconditionally authorised to allot shares in the Company and to grant rights to subscribe for or convert any security into shares in the Company:
• 7.1.1 up to a nominal amount of £1,139,145.90 (such amount to be reduced by the nominal amount allotted or granted under paragraph 7.1.2 below in excess of such sum); and

• 7.1.2 comprising equity securities (as defined in section 560(1) of the Companies Act 2006) up to a nominal amount of £2,278,291.80 (such amount to be reduced by any allotments or grants made under paragraph 7.1.1 above) in connection with an offer by way of a rights issue:

• 7.1.2.1 to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and

• 7.1.2.2 to holders of other equity securities as required by the rights of those securities or as the Board otherwise considers necessary,

and so that the Board may impose any limits or restrictions and make any arrangements which it considers necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter,

each such authority to apply until the end of next year's annual general meeting (or, if earlier, until the close of business on 31 October 2019) but, in each case, during this period the Company may make offers and enter into agreements which would, or might, require shares to be allotted or rights to subscribe for or convert securities into shares to be granted after the authority ends and the Board may allot shares or grant rights to subscribe for or convert securities into shares under any such offer or agreement as if the authority had not ended.

8. Disapplication of pre-emption rights (general authority)

• 8.1 That, subject to and conditional upon the Seventh Resolution being duly passed, the Board be given power to allot equity securities (as defined in section 560(1) of the Companies Act 2006) for cash under the authority given by that resolution and/or to sell ordinary shares held by the Company as treasury shares for cash as if section 561 of the Companies Act 2006 did not apply to any such allotment or sale, such power to be limited:
• 8.1.1 to the allotment of equity securities and sale of treasury shares for cash in connection with an offer of, or invitation to apply for, equity securities (but in the case of the authority granted under paragraph (B) of resolution 11, by way of a rights issue only):
• 8.1.1.1 to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
• 8.1.1.2 to holders of other equity securities, as required by the rights of those securities, or as the Board otherwise considers necessary,

and so that the Board may impose any limits or restrictions and make any arrangements which it considers necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter; and

8.1.2 to the allotment (otherwise than under paragraph (A) above) of equity securities or sale of treasury shares up to a nominal amount of £170,871.88,

such power to apply in each case until the end of next year's annual general meeting (or, if earlier, until the close of business on 31 October 2019) but, in each case, during this period the Company may make offers, and enter into agreements, which would, or might, require equity securities to be allotted (and treasury shares to be sold) after the power ends and the Board may allot equity securities (and sell treasury shares) under any such offer or agreement as if the power had not ended.

9. Disapplication of pre-emption rights (general authority)

• 9.1 That, subject to and conditional upon the Seventh Resolution being duly passed, the Board be given power in addition to any authority granted under resolution eight to allot equity securities (as defined in section 560(1) of the Companies Act 2006) for cash under the authority given by that resolution and/or to sell ordinary shares held by the Company as treasury shares for cash as if section 561 of the Companies Act 2006 did not apply to any such allotment or sale, such power to be:
• 9.1.1 limited to the allotment of equity securities or sale of treasury shares up to a nominal amount of £170,871.88; and

9.1.2 used only for the purposes of financing (or re-financing, if the authority is to be used within six months after the original transaction) a transaction which the Board determines to be an acquisition or other capital investment of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior to the date of this Notice,

such power to apply in each case until the end of next year's annual general meeting (or, if earlier, until the close of business on 31 October 2019) but, in each case, during this period the Company may make offers, and enter into agreements, which would, or might, require equity securities to be allotted (and treasury shares to be sold) after the power ends and the Board may allot equity securities (and sell treasury shares) under any such offer or agreement as if the power had not ended.

10. Purchase of own shares

• 10.1 That, subject to and conditional upon the First to Fifth Resolution being duly passed, the Company be authorised for the purposes of section 701 of the Companies Act 2006 to make one or more market purchases (as defined in section 693(4) of the Companies Act 2006) of its Ordinary Shares of 1 penny each, such power to be limited:
• 10.1.1 to a maximum number of 34,174,377 Ordinary Shares; and
• 10.1.2 by the condition that the minimum price which may be paid for an Ordinary Share is one penny per share and the maximum price which may be paid for an Ordinary Share is the highest of:
• 10.1.2.1 an amount equal to 5 per cent. above the average market value of an Ordinary Share for the five business days immediately preceding the day on which that Ordinary Share is contracted to be purchased; and
• 10.1.2.2 the higher of the price of the last independent trade and the highest current independent bid on the trading venues where the purchase is carried out,

in each case, exclusive of expenses;

such power to apply until the end of next year's annual general meeting (or, if earlier, until the close of business on 31 October 2019) but in each case so that the Company may enter into a contract to purchase Ordinary Shares which will or may be completed or executed wholly or partly after the power ends and the Company may purchase Ordinary Shares pursuant to any such contract as if the power had not ended.

By order of the Board Registered Office:

Lynne Medini WD24 6SH Company Secretary

9 July 2018

Registered in England and Wales No. 01950509

Cherry Tree Road Watford Hertfordshire

NOTES TO THE NOTICE OF GENERAL MEETING

• 1. The business to be conducted at the meeting is set out on the previous page of this notice of meeting (the "Notice").
• 1. Only those shareholders on the register of members of the Company as at 6.30 p.m. on 24 July 2018 (or, in the event of any adjournment, at 6.30 p.m. on the day, two days before the reconvened meeting) will be entitled to attend or vote at the general meeting and they may only vote in respect of the number of shares registered in their name at the relevant time. Changes to entries on the register of members after the relevant deadline will be disregarded in determining the rights of any person to attend or vote at the meeting.
• 1. Any member attending the meeting has the right to ask questions. The Company must cause to be answered any such question relating to the business being dealt with at the meeting but no such answer need be given if (a) to do so would interfere unduly with the preparation of the meeting or involve the disclosure of confidential information, (b) the answer has already been given on a website in the form of an answer to a question, or (c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
• 1. A member is entitled to appoint another person as his proxy to exercise all or any of his rights to attend, to speak and to vote at the meeting. A member may appoint more than one proxy in relation to the meeting, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by him. A proxy need not be a member of the Company. A form for appointing a proxy accompanies this Notice. To be effective, the form of proxy must be completed and reach the Company's registrars, Equiniti Limited, at Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA not later than 10.00 a.m. on 24 July 2018. You may also submit your proxy electronically; see your proxy card for details of how to register your vote. Completion of a form of proxy, other such instrument or any CREST Proxy Instruction will not preclude a member from attending and voting in person at the meeting. If you require additional forms of proxy, please contact the Registrars of the Company on +44(0)121 415 0950 if calling from outside the UK or if within the UK on 0333 207 6378. Lines are open 8:30 a.m. to 5:30 p.m., Monday to Friday (excluding bank holidays in England and Wales).
• 1. In the case of a shareholder which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of the company.
• 1. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included with the proxy form.
• 1. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company's register of members in respect of the joint holding (the first-named being the most senior).
• 1. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of the same powers as the corporation could exercise if it were an individual member provided they do not do so in relation to the same shares.
• 1. CREST members holding their shares in uncertificated form who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s) who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a 'CREST Proxy Instruction') must be properly authenticated in accordance with Euroclear's specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or relates to an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by the issuer's agent (CREST ID RA19) no later than 10.00 a.m. on 24 July 2018. For these purposes, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. No messages received through the CREST network after this time will be accepted. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
• 1. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear does not make available special procedures in CREST for any particular message. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s)) take(s) such actions as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service provider(s) are referred, in particular, to those sections of the CREST Manual concerning limitation of the CREST system and timings.
• 1. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. The CREST Manual can be reviewed at www.euroclear.com.
• 1. The Company cannot accept responsibility for loss or damage arising from the opening or use of any emails or attachments from the Company and recommends that shareholders subject all messages to virus checking procedures prior to opening or use. Any electronic communication received by the Company and/or Equiniti, including the lodgement of an electronic form of proxy, that is found to contain a computer virus will not be accepted.
• 1. A person who is not a shareholder of the Company, but has been nominated by a shareholder to enjoy information rights in accordance with section 146 of the Companies Act (a "nominated person") does not have a right to appoint any proxy. Nominated persons may have a right under an agreement with the shareholder to be appointed (or to have someone appointed) as a proxy for the meeting. Alternatively, if nominated persons do not have such a right, or do not wish to exercise it, they may have a right under an agreement with the relevant shareholder to give instructions as to the exercise of voting rights. The statement of the rights of shareholders in relation to the appointment of proxies in paragraph 4 above does not apply to nominated persons. The rights described in paragraph 4 can only be exercised by shareholders of the Company. If you have been nominated to receive general shareholder communications directly from the Company, it is important to remember that your main contact in terms of your investment remains the registered shareholder or custodian or broker who administers the investment on your behalf. Therefore, any changes or queries relating to your personal details and holding (including any administration) must continue to be directed to your existing contact at your investment manager or custodian. The Company cannot guarantee to deal with matters that are directed to them in error. The only exception to this is where the Company, in exercising one of its powers under the Companies Act, writes to you directly for a response.
• 1. As at 6 July 2018 (being the last practicable business day prior to the publication of this Notice) the Company's issued share capital consisted of 170,871,885 ordinary shares of 50 pence each, carrying one vote each. Therefore the total voting rights in the Company as at that date were 170,871,885.
• 1. A copy of this Notice and other information required by section 311A of the Companies Act can be found at www.mothercareplc.com.
• 1. Except as provided above, members who have general queries about the meeting should use the following means of communication (no other methods of communication will be accepted):
• calling the shareholder helpline on +44(0)121 415 0950 if calling from outside the UK or if within the UK on 0333 207 6378. Lines are open 8.30 a.m. to 5.30 p.m. (excluding bank holidays in England and Wales);
• by writing to Equiniti Limited, at Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA; or
• by sending an email to investorrelations@mothercare.com.
• 1. You may not use any electronic address provided either in this Notice or any related documents to communicate with the Company for any purposes other than those expressly stated.