Joint Administrators - A Summary Of Legal Matters In Japan

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1 TO ALL KNOWN CREDITORS 9 August 2013 Ref: CR/SJW/JS/PT/EG/NWM1137/PCF Direct line: DirectFax: Please ask for Emily Gilpin egilpin@uk.ey.com Dear Sirs Independent Service (Domestic Appliances) Limited (in Administration) ( ISDAL ) ( the Company ) I write in accordance with Rule 2.47 of The Insolvency Rules 1986, to provide creditors with a report on the progress of the Administration. This report covers the period from 26 March 2012 to 25 July 2013 and should be read in conjunction with the Joint Administrators previous progress report dated 24 April 2013 and the Joint Administrators Statement of Proposals dated 16 November 2012, ( the Proposals ). A summary of statutory information relating to the Company and the appointment of the Joint Administrators is provided at Appendix 1. Background The Company s principal trading activity was the servicing and repair of domestic appliances and the distribution of spare parts through its website to trade customers and consumers. The Company is a wholly owned subsidiary of HI Group plc ( Plc ). Plc and various of its subsidiaries (together the Companies ) all entered Administration on 26 September Summary of Progress for the period 26 March 2013 to 25 July 2013 Asset Realisations Book Debt Collections At the date of the Joint Administrators appointment the Company had book debts totalling circa 0.7m. Since our previous report, Winterhill Largo plc ( Largo ), our debt collection agents, have continued to pursue the collection of outstanding debts due to the Company. However, due to the continued challenges, it has only been possible to realise a further 1k, bringing total realisations to 279k. We now consider all collectable balances to have been realised and are in the process of concluding the collect out process. Motor Vehicles As previously reported the Company owned five cars at the date of the Joint Administrators appointment, all of which have been sold for total realisations of c. 15k. All funds relating to these sales have now been received in full. ADM09C11

2 2 Other Matters Directors Conduct Report In accordance with the provisions of the Insolvent Companies (Report on the Conduct of Directors) Rules 1996, the Joint Administrators have submitted their confidential final report to the Insolvency Service on the conduct of all persons who have been directors or shadow directors of the Company during the three years preceding their appointment. VAT Since our first progress report, we have submitted the second post appointment VAT return covering a period 1 March 2013 to 31 May 2013 showing a net liability payable of c. 1k. 195 of VAT bad debt relief has also been received during the period. Corporation Tax The Joint Administrators, with the assistance of Ernst and Young LLP tax specialists, are currently in the process of completing the post-appointment Corporation Tax return. It is unlikely that any postappointment Corporation Tax will become payable. Receipts and Payments Account I enclose a receipts and payments account for the period from 26 September 2012 to 25 July 2013 at Appendix 2. This does not reflect estimated future realisations or costs. Joint Administrators Remuneration and Disbursements The basis of the Joint Administrators remuneration was fixed by reference to the time properly incurred by the Joint Administrators and their staff by a resolution of the Creditor s Committee on 10 January As at 26 July 2013, the Joint Administrators have incurred time costs of 257,933, against which 188,000 has been drawn. An analysis of the time spent is attached at Appendix 3 to this report. At Appendix 4 there is a statement of the Joint Administrators policy in relation to charging time and disbursements. The Joint Administrators also received approval by resolution of the Committee on 10 January 2013 to draw Category 2 disbursements (those disbursements paid to the Joint Administrators firm). To date, 676 of Category 2 disbursements have been incurred but no amounts have been drawn to. There is an analysis of Category 2 disbursements at Appendix 3, none of which has been drawn to date. Secured Creditors At the date of appointment, HSBC Bank plc ( HSBC ) held secured debt of 18.8m (excluding postappointment interest and charges). HSBC holds a suite of security over various of the Companies assets including fixed charges over the Companies freehold properties, chattel mortgages over certain motor vehicles and cherished plates, a deed of assignment over certain of the Companies book debts (excluding the Company s book debts) and a floating charge over all other assets. HSBC also holds unlimited composite guarantees across the Companies. To date distributions of 2.6m have been paid to HSBC from realisations from other companies other than the Company.

3 3 Preferential Creditors As previously reported, we continue to estimate that preferential claims will total c. 7k which relates to accrued holiday pay and arrears of pay. We anticipate that preferential claims will be paid in full. Non-preferential Creditors The Directors Statement of Affairs estimated non preferential claims from suppliers of circa 0.9m as at the date of our appointment but did not include an estimate of non-preferential claims from employees or customers. We continue to receive claims in this respect and therefore we remain unable to quantify the total value of non-preferential claims. The Prescribed Part The Prescribed Part is a proportion of floating charge assets set aside for non-preferential creditors pursuant to Section 176A of the Insolvency Act The Prescribed Part applies to floating charges created on or after 15 September We remain of the view that the Prescribed Part will apply; however, in the event that HSBC is repaid in full and there are surplus funds available to non-preferential creditors, the Prescribed Part will not apply. It is not currently possible to accurately calculate the Prescribed Part. However, we consider it possible that HSBC will be paid in full and therefore the Prescribed Part would not apply. Distributions to non-preferential Creditors The outcome for non-preferential creditors remains largely dependent on the realisations of freehold properties owned by Hardman Isherwood Limited and H.I. Investments Limited as any shortfall to HSBC Bank plc under its fixed charge security over these properties may be made up from the floating charge realisations of the Company. The Joint Administrators of these companies continue to market the properties, and as such the outcome remains uncertain. We remain of the view that there may be sufficient realisations to enable a distribution to non-preferential creditors; however, it is too early to give any indication of dividend prospects. Payments to Other Professionals The Joint Administrators have continued to use the service of the following other professionals to assist them: Name of firm Nature of service How contracted to be paid DLA Piper UK LLP Lawyers Time costs basis Hilco Appraisal Limited Asset Valuation & Disposal Percentage of realisations Winterhill Largo plc Debt collectors Percentage of realisations During the period covered by this report, the Company has paid professional fees of 11k.

4 4 Future Conduct of the Administration There are no further asset realisations anticipated in respect of the Company. However, as explained above the outcome for creditors is dependent on the realisations of the four remaining freehold properties of the Companies. As HSBC Bank s secured debt may be repaid in full using the proceeds from the sale of the properties, it may be possible for surplus funds to be available for non preferential creditors. However, assessing the flow of funds between the Companies will be complex given their inter relationships and the nature of the Companies security and banking arrangements. As such, it will not be possible to conclude the Administration until the position regarding the properties is clear. Accordingly, we are applying to the Court for an extension to the Administration, pursuant to Paragraph 76(2) of Schedule B1 to the Act. Following the conclusion of these matters, it is anticipated that the Administration will move into Creditors Voluntary Liquidation or dissolution, whichever is appropriate, in line with the Proposals. I will report to you again at the conclusion of the Administrations or in six months time, whichever is the sooner. Should you have any queries please do not hesitate to contact Emily Gilpin, on Yours faithfully for the Company S J Woodward Joint Administrator Enc: Appendix 1: Summary of statutory information Appendix 2: Joint Administrators Receipts and Payments Account Appendix 3: Summary of Joint Administrators Time-Costs and Category 2 Disbursements Appendix 4: Office Holders charging policy for fees and disbursements Appendix 5: Creditors request for further information regarding administrators remuneration or expenses Samuel James Woodward and Thomas Andrew Jack are licensed in the United Kingdom to act as insolvency practitioners by The Institute of Chartered Accountants in England and Wales. Jonathan Peter Sumpton is licensed in the United Kingdom to act as an insolvency practitioner by the Association of Chartered Certified Accountants. The affairs, business and property of the Company are being managed by the Joint Administrators, Samuel James Woodward, Jonathan Peter Sumpton and Thomas Andrew Jack, who act as agents of the Company only and without personal liability. We may collect, use, transfer, store or otherwise process (collectively, 'Process') information that can be linked to specific individuals ('Personal Data'). We may Process Personal Data in various jurisdictions in accordance with applicable law and professional regulations including (without limitation) the Data Protection Act 1998.

5 Independent Service (Domestic Appliances) Limited (in Administration) Summary of statutory information Appendix 1 Company Information Company Name: Independent Service (Domestic Appliances) Limited Registered Office: 100 Barbirolli Square Manchester M2 3EY Registered Number: Trading Name(s): None Trading Address(es): Tuscany Way Castleford Normanton WF6 2UA Details of the Administrators and of their appointment Administrators: S J Woodward, J P Sumpton and T A Jack Date of appointment: 26 September 2012 Administrators Office Address: 100 Barbirolli Square, Manchester, M2 3EY By Whom Appointed: The Company s Directors under the provisions of paragraph 22(2) of Schedule B1 to the Insolvency Act Court Reference: High Court of Justice, Chancery Division, Leeds District Registry, 1286 of Any of the functions to be performed or powers exercisable by the Administrators may be carried out by any or all of them. Statement concerning the EC Regulation The EC Council Regulation on Insolvency Proceedings does apply to this Administration and the proceedings are main proceedings. This means that this Administration is conducted according to UK insolvency legislation and is not governed by the insolvency law of any other European Union Member State. Share Capital Class Authorised Issued and fully paid Number Number Ordinary 10,000 10,000 10,000 10,000 Directors and secretary and their shareholdings Name Director or Date appointed Date resigned Current shareholding ( ) David Isherwood Director Secretary 19/01/1994 n/a Nil Nicholas Isherwood Director 05/09/1994 n/a Nil Michael Turnbull Director 26/07/2000 n/a Nil Andrew Trotter Director 26/07/2000 n/a Nil Deborah Tennant Director 22/10/1992 n/a Nil Harold Jevons Secretary 05/03/1997 n/a Nil

6 Appendix 2 Independent Service (Domestic Appliances) Limited (in Administration) Joint Administrators Abstract of Receipts and Payments from 26 September 2012 to 25 July 2013 Estimated to Realise as per Directors' Statement of Affairs Notes 26 September to 25 March March to 25 July 2013 Total ( ) ( ) ( ) 1,2 Non Trading Receipts 6,257 Motor vehicles 8, , , ,370 Stock 116, (7,412.02) 108, ,067 Debtors not subject to fixed charge 280, (1,280.91) 279, ,631 Miscellanous 5, (104.34) 5, VAT bad debt relief ,320 Cash Total receipts 410, (1,352.45) 408, ,2 Non Trading Payments Administrators remuneration - 188, , Gross wages, NIC and pension 11, , Bank charges Telephone, telex, fax etc 3, , Legal fees 7, , Other professional fees 1, , Postage Public notices Hire of room Debt collection expenses - 1, , Refunds paid to customers Agents' fees - 2, , Total payments 25, , , Balances in hand 384, (193,185.50) 191, Notes 1. This receipts and payments account is shown net of VAT. 2. This receipts and payments account has been prepared on a cash basis and does not reflect debts not collected or liabilities not paid. 3. All funds are held in interest bearing accounts.

7 Independent Service (Domestic Appliances) Limited (in Administration) Appendix 3 Summary of Joint Administrators Time-Costs and Category 2 Disbursements from 26 September 2012 to 26 July 2013 Partner / Executive Director Assistant Director / Senior Manager Manager Executive Analyst Intern Total Hours Time Cost ( ) Average Hourly Rate ( ) Accounting and Administration , Bank & Statutory Reporting , Creditors , Debtors , Employee Matters , Immediate Tasks , Investigation/CDDA , Job Acceptance & Strategy , Other Assets , Other Matters , Retention of Title , Statutory Duties , VAT & Taxation , Total Hours ,118.4 Time Cost ( ) 19,967 20,200 41, ,254 38,447 7, ,933 Average Hourly Rate ( ) Category One Disbursements 2,910 Category Two Disbursements 755 Total Disbursements 3,665 Note: Time is charged in six minute intervals Current charge out rates From Grade From 1 July July 2012 to 30 June 2013 Corporate Restructuring Partner Director Assistant Director Senior Executive Executive Analyst Intern Indirect Tax Partner Assistant Director Manager Executive Transaction Tax Partner ,115 Assistant Director Senior Executive Analyst Fraud Investigation & Dispute Assistant Director

8 Independent Service (Domestic Appliances) Limited (in Administration) Office Holders Charging Policy for Fees Appendix 4 The Company s creditors committee has determined that the Joint Administrators remuneration should be fixed on the basis of time properly spent by the Joint Administrators and their staff in attending to matters arising in the Administration. The Joint Administrators have engaged a manager and other staff to work on the case. The work required is delegated to the most appropriate level of staff taking account of the nature of the work and the individual s experience. Additional assistance is provided by cashiers dealing with the Company s bank accounts and statutory compliance diaries, secretaries providing typing and other support services and filing clerks. Work carried out by all staff is subject to the overall supervision of the Joint Administrators. All time spent by staff working directly on case-related matters is charged to a separate time code established for each case. Each member of staff has a specific hourly rate, which is subject to change over time. The average hourly rate for each category of staff over the period is shown in Appendix 3, as are the current hourly rates used. The current hourly rates may be higher than the average rates, if hourly rates have increased over the period covered by this report. Office Holders Charging Policy for Disbursements Statement of Insolvency Practice No. 9 ( SIP 9 ) published by R3 (The Association of Business Recovery Professionals) divides disbursements into two categories. Category 1 disbursements comprise payments made by the office holders firm, which comprise specific expenditure relating to the administration of the insolvent s affairs and referable to payment to an independent third party. These disbursements can be paid from the insolvent s assets without approval from the Committee. In line with SIP 9, it is our policy to disclose such disbursements drawn but not to seek approval for their payment. Category 2 disbursements comprise payments made by the office holders firm which include elements of shared or overhead costs. Such disbursements are subject to approval from the Company s creditors committee as if they were remuneration. It is our policy, in line with SIP 9, to seek approval for this category of disbursement before they are drawn.

9 Appendix 5 Creditors request for further information regarding an administrators remuneration or expenses Rule 2.48A, Insolvency Rules ) If- (a) within 21 days of receipt of a progress report under Rule (i) a secured creditor, or (ii) an unsecured creditor with the concurrence of at least 5% in value of the unsecured creditors (including the creditor in question), or (b) with the permission of the court upon an application made within that period of 21 days, any unsecured creditor, makes a request in writing to the administrator for further information about remuneration or expenses (other than pre-administration costs) set out in a statement required by Rule 2.47(1)(db) or (dc), the administrator must, within 14 days of receipt of the request, comply with paragraph (2). (2) The administrator complies with this paragraph by either- (a) providing all of the information asked for, or (b) so far as the administrator considers that- (i) the time or cost of preparation of the information would be excessive, or (ii) disclosure of the information would be prejudicial to the conduct of the administration or might reasonably be expected to lead to violence against any person, or (iii) the administrator is subject to an obligation of confidentiality in respect of the information, giving reasons for not providing all of the information. (3) Any creditor, who need not be the same as the creditor who requested further information under paragraph (1), may apply to the court within 21 days of- (a) the giving by the administrator of reasons for not providing all of the information asked for, or (b) the expiry of the 14 days provided for in paragraph (1), and the court may make such order as it thinks just. (4) Without prejudice to the generality of paragraph (3), the order of the court under that paragraph may extend the period of 8 weeks provided for in Rule 2.109(1B) by such further period as the court thinks just. Creditors claim that remuneration is excessive extract from Rule of the Insolvency Rules 1986 (1) Any secured creditor, or any unsecured creditor with either the concurrence of at least 10% in value of the unsecured creditors (including that creditor) or the permission of the court, may apply to the court for one or more of the orders in paragraph (4). (1A) Application may be made on the grounds that (a) the remuneration charged by the administrator, (b) the basis fixed for the administrator s remuneration under Rule 2.106, or (c) expenses incurred by the administrator, is or are, in all the circumstances, excessive or, in the case of an application under sub-paragraph (b), inappropriate. (1B) The application must, subject to any order of the court under Rule 2.48A(4), be made no later than 8 weeks after receipt by the applicant of the progress report which first reports the charging of the remuneration or the incurring of the expenses in question ( the relevant report ).