matalan finance plc - perfect...

NOT FOR GENERAL DISTRIBUTION

OFFERING CIRCULAR IN THE UNITED STATES

Matalan Finance plc

£342,000,000

67/8% First Lien Secured Notes due 2019

£150,000,000

87/8% Second Lien Secured Notes due 2020

Matalan Finance plc, incorporated under the laws of England and Wales (the “Issuer”), is offering £342 million aggregate principal amount of its 67/8% First Lien Secured Notes due 2019 (the “First Lien Notes”) and £150 million aggregate principal amount of its 87/8% Second Lien Secured Notes due 2020 (the “Second Lien Notes”, and, together with the First Lien Notes, the “Notes”).

Interest on the First Lien Notes will be payable semi-annually on each May 30 and November 30, beginning on November 30, 2014. Prior to May 30, 2016, we may redeem the First Lien Notes at the applicable make-whole premium described in this offering circular (the “Offering Circular”). In addition, we may redeem up to 40% of the aggregate principal amount of the First Lien Notes prior to May 30, 2016, with the net proceeds of certain equity offerings. At any time on or after May 30, 2016, we may redeem all or a portion of the First Lien Notes by paying a specific premium to you as set forth in this Offering Circular. We may redeem all, but not less than all, of the First Lien Notes in the event of certain developments affecting taxation. If we undergo a change of control, each holder may require us to repurchase all or a portion of its First Lien Notes. The First Lien Notes will mature on June 1, 2019.

Interest on the Second Lien Notes will be payable semi-annually on each May 30 and November 30, beginning on November 30, 2014. Prior to May 30, 2017, we may redeem the Second Lien Notes at the applicable make-whole premium described in this Offering Circular. In addition, we may redeem up to 40% of the aggregate principal amount of the Second Lien Notes prior to May 30, 2017, with the net proceeds of certain equity offerings. At any time on or after May 30, 2017, we may redeem all or a portion of the Second Lien Notes by paying a specific premium to you as set forth in this Offering Circular. We may redeem all, but not less than all, of the Second Lien Notes in the event of certain developments affecting taxation. If we undergo a change of control, each holder may require us to repurchase all or a portion of its Second Lien Notes. The Second Lien Notes will mature on June 1, 2020.

The First Lien Notes will be senior obligations and will rank equally in right of payment with all other existing and future senior debt of the Issuer. The First Lien Notes will be guaranteed, jointly and severally, on a senior basis by Missouri TopCo Limited (“TopCo”) and certain of its subsidiaries (collectively, the “Guarantors”), including Matalan Retail Limited (“Matalan”), its principal operating subsidiary. The guarantee of the First Lien Notes by each Guarantor (each a “First Lien Guarantee” and, collectively, the “First Lien Guarantees”) will rank equally in right of payment to all existing and future senior debt of such Guarantor. The Second Lien Notes will be senior obligations and will rank equally in right of payment with all other existing and future senior debt of the Issuer. The Second Lien Notes will be guaranteed, jointly and severally, on a senior basis by the Guarantors. The guarantee of the Second Lien Notes by each Guarantor (each a “Second Lien Guarantee” and, collectively, the “Second Lien Guarantees” and, together with the First Lien Guarantees, the “Guarantees”) will rank equally in right of payment to all existing and future senior debt of such Guarantor.

The First Lien Notes and the First Lien Guarantees will be secured on a first-ranking basis by charges over substantially all of the property and assets of the Issuer and each Guarantor (the “Collateral”); provided that the lenders under our Revolving Credit Facility (as defined herein) and the counterparties under certain hedging obligations will receive priority to the proceeds from the Collateral in the event of any enforcement. The Second Lien Notes and the Second Lien Guarantees will be secured by liens over the Collateral on a second-ranking basis. In the event of enforcement of the Collateral, the holders of the Second Lien Notes will receive proceeds from the Collateral only after

the lenders under the Revolving Credit Facility, the counterparties under certain hedging obligations and the holders of the First Lien Notes have been repaid in full.

This Offering Circular includes information on the terms of the Notes and Guarantees, including redemption and repurchase prices, covenants and transfer restrictions.

Application has been made to list the Notes on the Official List of the Luxembourg Stock Exchange and for trading on the Euro MTF Market.

Investing in the Notes involves a high degree of risk. See “Risk Factors” beginning on page 17.

Price for the First Lien Notes: 100.00% plus accrued interest, if any, from the Issue Date.

Price for the Second Lien Notes: 100.00% plus accrued interest, if any, from the Issue Date.

Delivery of the Notes in book-entry form through a common depository of Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking société anonyme (“Clearstream”) was made on or about June 2, 2014 (the “Issue Date”).

The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the

“Securities Act”). The Notes may not be offered or sold within the United States or to U.S. persons, except to

qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A of the

Securities Act (“Rule 144A”) or to non- U.S. persons in offshore transactions in reliance on Regulation S of the

Securities Act (“Regulation S”). You are hereby notified that sellers of the Notes may be relying on the exemption

from Section 5 of the Securities Act provided by Rule 144A. For a description of certain restrictions on transfers

of the Notes, see “Plan of Distribution” and “Notice to Investors”.

This Offering Circular constitutes a Prospectus for the purpose of Luxembourg law dated July 10, 2005

on Prospectuses for Securities, as amended.

Joint Global Coordinators

Lloyds Bank Morgan Stanley Bookrunner

Barclays

Offering Circular dated October 1, 2014

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You should rely only on the information contained in this Offering Circular. Neither the Issuer nor any of Lloyds

Bank plc, Morgan Stanley & Co. International plc and Barclays Bank PLC (the “Initial Purchasers”) have

authorized anyone to provide prospective investors with different information, and you should not rely on any

such information. The Issuer is not, and the Initial Purchasers are not, making an offer of the Notes in any

jurisdiction where this offer is not permitted. You should not assume that the information contained in this

Offering Circular is accurate as of any date other than the date on the front of this Offering Circular.

TABLE OF CONTENTS

Contents Page

Summary ............................................................................................................................................................................. 1

Risk Factors ..................................................................................................................................................................... 17

Use of Proceeds ................................................................................................................................................................ 39

Capitalization .................................................................................................................................................................... 40

Selected Financial and Other Information ........................................................................................................................ 41

Operating and Financial Review and Prospects ................................................................................................................ 44

Industry Overview ............................................................................................................................................................ 59

Business ............................................................................................................................................................................ 63

Management ..................................................................................................................................................................... 75

Principal Shareholders ...................................................................................................................................................... 78

Certain Relationships and Related Party Transactions ..................................................................................................... 79

Description of Certain Financing Arrangements .............................................................................................................. 80

Description of First Lien Secured Notes ........................................................................................................................... 96

Description of Second Lien Secured Notes .................................................................................................................... 155

Book-Entry; Delivery and Form ..................................................................................................................................... 213

Tax Considerations ......................................................................................................................................................... 217

Plan of Distribution ......................................................................................................................................................... 223

Notice to Investors .......................................................................................................................................................... 226

Legal Matters .................................................................................................................................................................. 229

Independent Auditors ...................................................................................................................................................... 229

Enforcement of Civil Liabilities ..................................................................................................................................... 230

Available Information ..................................................................................................................................................... 233

Listing and General Information ..................................................................................................................................... 234

Index to Financial Statements .......................................................................................................................................... F-1

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IMPORTANT INFORMATION

In making an investment decision regarding the Notes offered by this Offering Circular, you must rely on your own examination of the Issuer and the terms of this offering (the “Offering”), including the merits and risks involved. The Offering is being made on the basis of this Offering Circular only. Any decision to purchase Notes in the Offering must be based on the information contained in this Offering Circular.

We have prepared this Offering Circular solely for use in connection with this Offering and for application of the Notes for listing on the Official List of the Luxembourg Stock Exchange and for trading on the Euro MTF Market. You may not distribute this Offering Circular or make photocopies of it without our prior written consent other than to people you have retained to advise you in connection with this Offering.

You are not to construe the contents of this Offering Circular as investment, legal or tax advice. You should consult your own counsel, accountants and other advisors as to legal, tax, business, financial and related aspects of a purchase of the Notes. You are responsible for making your own examination of the Issuer and your own assessment of the merits and risks of investing in the Notes. None of the Issuer, the Guarantors or the Initial Purchasers is making any representation to you regarding the legality of an investment in the Notes by you under appropriate legal investment or similar laws.

The information contained in this Offering Circular has been furnished by the Issuer and other sources we believe to be reliable. This Offering Circular contains summaries, believed to be accurate, of some of the terms of specific documents, but reference is made to the actual documents, copies of which will be made available upon request, for the complete information contained in those documents. You should contact the Issuer or the Initial Purchasers with any questions about this Offering or if you require additional information to verify the information contained in this Offering Circular. All summaries are qualified in their entirety by this reference. Copies of such documents and other information relating to the issuance of the Notes will be available at the specified offices of the listing agent in Luxembourg. See “Listing and General Information”.

The Initial Purchasers will provide prospective investors with a copy of this Offering Circular and any related amendments or supplements. By receiving this Offering Circular, you acknowledge that you have not relied on the Initial Purchasers in connection with your investigation of the accuracy of this information or your decision whether or not to invest in the Notes.

The information set out in those sections of this Offering Circular describing clearing and settlement is subject to any change or reinterpretation of the rules, regulations and procedures of Euroclear and Clearstream currently in effect. Investors wishing to use these clearing systems are advised to confirm the continued applicability of their rules, regulations and procedures. None of the Issuer or the Guarantors will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, book-entry interests held through the facilities of any clearing system or for maintaining, supervising or reviewing any records relating to such book- entry interests.

No person is authorized in connection with any offering made by this Offering Circular to give any information or to make any representation not contained in this Offering Circular and, if given or made, any other information or representation must not be relied upon as having been authorized by the Issuer, the Guarantors or the Initial Purchasers. The information contained in this Offering Circular is accurate as of the date hereof. Neither the delivery of this Offering Circular at any time nor any subsequent commitment to purchase the Notes shall, under any circumstances, create any implication that there has been no change in the information set forth in this Offering Circular or in the business of the Issuer or the Guarantors since the date of this Offering Circular.

The Issuer accepts responsibility for the information contained in this Offering Circular. The Issuer has made all reasonable inquiries and confirmed to the best of its knowledge, information and belief that the information contained in this Offering Circular with regard to itself and its affiliates and the Notes is true and accurate in all material respects, that the opinions and intentions expressed in this Offering Circular are honestly held, and the Issuer is not aware of any facts the omission of which would make this Offering Circular or any statement contained herein misleading in any material respect.

The Initial Purchasers make no representation or warranty, express or implied, as to, and assume no responsibility for, the accuracy or completeness of the information contained in this Offering Circular. Nothing contained in this Offering Circular is, or shall be relied upon as, a promise or representation by the Initial Purchasers as to the past or the future. The Issuer and the Guarantors have furnished the information contained in this Offering Circular.

The Notes are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and applicable securities laws. You should be aware that you may be required to bear

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the financial risks of this investment for an indefinite period of time. See “Plan of Distribution” and “Notice to Investors”.

The Issuer intends to list the Notes on the Official List of the Luxembourg Stock Exchange for trading on the Euro MTF Market, and will submit this Offering Circular to the competent authority in connection with the listing application. In the course of any review by the competent authority, the Issuer may be requested to make changes to the financial and other information included in this Offering Circular. Comments by the competent authority may require significant modification or reformulation of information contained in this Offering Circular or may require the inclusion of additional information, including financial information in respect of the Guarantors. The Issuer may also be required to update the information in this Offering Circular to reflect changes in our business, financial condition or results of operations and prospects. We cannot guarantee that our application for admission of the Notes to trading on the Euro MTF Market and to list the Notes on the Official List of the Luxembourg Stock Exchange will be approved as of the settlement date for the Notes or any date thereafter, and settlement of the Notes is not conditioned on obtaining this listing.

The Issuer reserves the right to withdraw this Offering at any time. The Issuer is making this Offering subject to the terms described in this Offering Circular and the purchase agreement relating to the Notes (the “Purchase Agreement”). The Issuer and the Initial Purchasers each reserve the right to reject any commitment to subscribe for the Notes in whole or in part and to allot to any prospective investor less than the full amount of the Notes sought by such investor. The Initial Purchasers and certain of their related entities may acquire, for their own accounts, a portion of the Notes.

The distribution of this Offering Circular and the offer and sale of the Notes are restricted by law in some jurisdictions. This Offering Circular does not constitute an offer to sell or an invitation to subscribe for or purchase any of the Notes in any jurisdiction in which such offer or invitation is not authorized or to any person to whom it is unlawful to make such an offer or invitation. Each prospective offeree or purchaser of the Notes must comply with all applicable laws and regulations in force in any jurisdiction in which it purchases, offers or sells the Notes or possesses or distributes this Offering Circular, and must obtain any consent, approval or permission required under any regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers or sales, and neither the Issuer nor the Initial Purchasers shall have any responsibility therefor. See “—Notice to Prospective Investors”, “—Notice to Investors in the United Kingdom”, “Plan of Distribution” and “Notice to Investors”.

Investing in the Notes involves risks. See “Risk Factors” beginning on page 17.

NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A

LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES

(“RSA 421-B”) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS

EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE

CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER

RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT

THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION

MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR

QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR

TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE

PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE

PROVISIONS OF THIS PARAGRAPH.

STABILIZATION

IN CONNECTION WITH THE ISSUANCE OF THE NOTES, MORGAN STANLEY & CO. INTERNATIONAL PLC (THE “STABILIZING MANAGER”) (OR ANY PERSON ACTING ON BEHALF OF THE STABILIZING MANAGER) MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO ASSURANCE THAT THE STABILIZING MANAGER (OR ANY PERSON ACTING ON BEHALF OF THE STABILIZING MANAGER) WILL UNDERTAKE STABILIZATION ACTION. ANY STABILIZATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE NOTES AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE NOTES.

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NOTICE TO PROSPECTIVE INVESTORS

This Offering is being made in the United States in reliance upon an exemption from registration under the Securities Act for an offer and sale of the Notes which does not involve a public offering. In making your purchase, you will be deemed to have made certain acknowledgments, representations and agreements. See “Notice to Investors”.

This Offering Circular is being provided (1) to a limited number of United States investors that the Issuer reasonably believes to be “qualified institutional buyers” under Rule 144A for informational use solely in connection with their consideration of the purchase of the Notes and (2) to investors outside the United States who are not U.S. persons in connection with offshore transactions complying with Rule 903 or Rule 904 of Regulation S. The Notes described in this Offering Circular have not been registered with, recommended by or approved by the U.S. Securities and Exchange Commission (the “SEC”), any state securities commission in the United States or any other securities commission or regulatory authority, nor has the SEC, any state securities commission in the United States or any such securities commission or authority passed upon the accuracy or adequacy of this Offering Circular. Any representation to the contrary is a criminal offence.

NOTICE TO INVESTORS IN THE UNITED KINGDOM

This issue and distribution of this Offering Circular is restricted by law. This Offering Circular is not being distributed by, nor has it been approved for the purposes of section 21 of the Financial Services and Markets Act 2000 (“FSMA”) by, a person authorized under the FSMA. This Offering Circular is for distribution only to, and is only directed at, persons who (i) are outside the United Kingdom or (ii) have professional experience in matters relating to investments (being investment professionals falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005, as amended (the “Financial Promotion Order”)); (iii) are persons falling within Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the Financial Promotion Order; or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) in connection with the issue or sale of any Notes may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). Accordingly, by accepting delivery of this Offering Circular, the recipient warrants and acknowledges that it is such a relevant person. The Notes are available only to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Notes will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this Offering Circular or any of its contents. No part of this Offering Circular should be published, reproduced, distributed or otherwise made available in whole or in part to any other person without our prior written consent. The Notes are not being offered or sold to any person in the United Kingdom, except in circumstances which will not result in an offer of securities to the public in the United Kingdom within the meaning of Part VI of the FSMA.

NOTICE TO INVESTORS IN THE EUROPEAN ECONOMIC AREA

This Offering Circular is not a prospectus and is being distributed to a limited number of recipients for the sole purpose of assisting such recipients in determining whether to proceed with a further investigation of the purchase of, or subscription for, the Notes. This Offering Circular has been prepared on the basis that all offers of the Notes will be made pursuant to an exemption under the Prospectus Directive, as implemented in Member States of the European Economic Area (the “EEA”), from the requirement to produce a prospectus for offers of the Notes. Accordingly, any person making or intending to make any offer within the EEA of the Notes, which are the subject of the placement contemplated in this Offering Circular, should only do so in circumstances in which no obligation arises for us or any of the Initial Purchasers to produce a prospectus for such offer. Neither we nor the Initial Purchasers have authorized, nor do they authorize, the making of any offer of Notes through any financial intermediary, other than offers made by the Initial Purchasers, which constitute the final placement of the Notes contemplated in this Offering Circular.

In relation to each Member State of the European Economic Area that has implemented the Prospectus Directive (each, a “Relevant Member State”), each Initial Purchaser has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of Notes that are the subject of this Offering Circular to the public in that Relevant Member State prior to the publication of a prospectus in relation to Notes that 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 that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of the Notes in the Relevant Member State at any time:

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

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(b) to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive; or

(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive.

provided that no such offer of Notes shall result in a requirement for the publication by the Issuer or the Initial Purchasers of a prospectus pursuant to Article 3 of the Prospectus Directive or a supplement to a prospectus pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of Notes to the public” in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe for the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

INDUSTRY AND MARKET DATA

Unless otherwise expressly indicated or noted below, all information regarding markets, market size, market share, market position, growth rates and other industry data pertaining to our business contained in this Offering Circular are based on estimates prepared by us based on certain assumptions and our knowledge of the industry in which we operate, as well as data from various market research, publicly available information and industry publications, including Verdict Retail reports and other reports published by various third-party sources. The Verdict Retail Reports used in this Offering Circular includes the reports titled Value Clothing, UK, Market size, April 25, 2014; Value Clothing, UK, Market forecast, April 25, 2014, Value Clothing, UK, Market shares, April 29, 2014; Clothing, UK, Market forecast; February 13, 2014, Online and Remote Shopping, E-retail in the UK; August 30, 2013, Store Locations, UK out of town retailing; February 26, 2014, Homewares, UK, Market forecast, February 18, 2014, Homewares, UK, Market shares; January 30, 2014, and Product Development, Sports retailing in the UK, January 24, 2014. Industry publications generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. We have not independently verified such data.

In many cases, there is no readily available external information (whether from trade associations, government bodies or other organizations) to validate market-related analyses and estimates, requiring us to rely on our own internally developed estimates regarding the retail clothing industry, our position in the industry, our market share and the market shares of various industry participants based on experience, our own investigation of market conditions and our review of industry publications, including information made available to the public by our competitors. While the Issuer has examined and relied upon certain market or other industry data from external sources as the basis of its estimates, neither the Issuer nor the Initial Purchasers have verified that data independently. The Issuer and the Initial Purchasers cannot assure you of the accuracy and completeness of, and take no responsibility for, such data. Similarly, while the Issuer believes its internal estimates to be reasonable, these estimates have not been verified by any independent sources and the Issuer and the Initial Purchasers cannot assure you as to their accuracy. The Issuer’s estimates involve risks and uncertainties and are subject to change based on various factors.

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FORWARD-LOOKING STATEMENTS

This Offering Circular includes forward-looking statements within the meaning of the securities laws of certain applicable jurisdictions. These forward-looking statements include, but are not limited to, the discussion of the changing dynamics of the marketplace and the Issuer’s outlook for growth in the clothing and homeware markets both within and outside of the United Kingdom. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “aim”, “anticipates”, “believes”, “continue”, “could”, “estimates”, “expects”, “forecasts”, “guidance”, “intends”, “may”, “plan”, “should” or “will” or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Offering Circular and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition and performance, liquidity, prospects, growth, strategies and the industry in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual financial condition, results of operations and cash flows, and the development of the industry in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this Offering Circular. In addition, even if our financial condition, results of operations and cash flows, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this Offering Circular, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to:

• our substantial leverage and ability to meet significant debt service obligations, including significant repayment requirements in the coming years, which are prior to the maturity date of the Notes;

• restrictions in our debt instruments that could impair our activities;

• the highly competitive nature of the business in which we operate;

• the impact on our revenue, profits and cash flow resulting from general economic conditions, consumer confidence and spending patterns;

• our ability to retain customers in the event of economic recovery;

• the availability and costs of raw materials and transportation and the ability of our third-party producers, most of whom are located outside the UK, to meet our requirements;

• the effect of the global economic crisis on our suppliers, other counterparties and our own liquidity and capital resources;

• our ability to protect our reputation and value associated with our name and brands;

• our ability to respond to fashion trends in a timely manner and adjust our product offer successfully;

• our ability to maintain proper inventory levels;

• our ability to successfully implement planned improvements to our supply chain;

• the interruption of operations at one of our distribution centers, including due to labor disputes;

• any disruption or other adverse event affecting our relationship with key operational suppliers;

• a disruption in our information technology systems;

• our ability to maintain volume of footfall, repeat visits, conversion and basket value;

• the availability of suitable lease space for our stores;

• the success of our store expansion program;

• our ability to develop online sales and our multi-channel customer base;

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• our ability to expand and improve our operations;

• the success of our advertising and marketing programs in generating customer awareness and traffic;

• the effect of increases labor costs;

• our exposure to hedging risk and currency fluctuations;

• the impact of extreme or unseasonable weather conditions on our sales;

• our performance during peak selling seasons;

• our dependence on third-party brands;

• our ability to protect our trademarks, other intellectual property and brands;

• statutes and regulations that affect our operations;

• our ability to maintain compliance with privacy and information laws and requirements;

• the occurrence of organized strikes or work stoppages;

• our ability to retain our senior management and key employees;

• our ability to retain personnel on relocation of our head office and distribution center;

• our ability to adequately maintain and protect the non-public data of our personal members, customers, business contacts and employees; and

• the occurrence of significant litigation.

The foregoing factors should not be construed as exhaustive. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. We urge you to read this Offering Circular, including the sections entitled “Risk Factors”, “Operating and Financial Review and Prospects” and “Business”, for a more complete discussion of the factors that could affect our future performance and the industry in which we operate.

Except as required by law or the rules and regulations of any stock exchange on which the Notes are listed, we undertake no obligation to publicly update or publicly revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this Offering Circular, including those set forth under “Risk Factors”.

CERTAIN DEFINITIONS

As used in this Offering Circular, the following terms have the following meanings:

“average basket value” refers to the average amount (excluding VAT) paid by customers for their total items purchased on a single visit to one of our stores (other than international franchises) and online, unless otherwise specified.

“average selling price” or “ASP” refers to the average sales price (excluding VAT) of items sold in our stores (other than international franchises) and online.

“Board” refers to the board of directors of the Issuer.

“bought-in margin” refers to the difference between the retail selling price (excluding VAT) of merchandise sold in our stores (before applying any discounts) and the purchase price we paid for such merchandise.

“Collateral” refers to all of the property and assets of the Issuer and the Guarantors that secures the Notes and the Guarantees and the indebtedness under the Revolving Credit Facility.

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“Company” or “TopCo” refers to Missouri TopCo Limited.

“Existing Notes” refers to the Issuer’s Existing Secured Notes and/or the Existing Senior Notes as the context requires.

“Existing Secured Notes” refers to the Issuer’s £250 million aggregate principal amount 87/8% Senior Secured Notes due 2016.

“Existing Senior Notes” refers to the Issuer’s £225 million aggregate principal amount 95/8% Senior Notes due 2017.

“Group”, “we”, “us” and “our” refer to TopCo and its consolidated subsidiaries.

“Indentures” refers to the indenture governing the First Lien Notes (the “First Lien Indenture”) and the indenture governing the Second Lien Notes (the “Second Lien Indenture”), each dated as of the Issue Date among the Issuer, the Guarantors, the Trustee and the Security Agent (each an “Indenture”).

“Initial Purchasers” refers to Lloyds Bank plc, Morgan Stanley & Co. International plc and Barclays Bank PLC.

“Intercreditor Agreement” refers to the Intercreditor Agreement dated March 30, 2010, as amended and restated on April 11, 2011 and to be further amended and restated on or about the Issue Date between, among others, the Issuer, the Guarantors, the Trustee on behalf of the holders of First Lien Notes, the trustee on behalf of the holders of the Second Lien Notes, the Security Agent and the administrative agent of the Revolving Credit Facility on behalf of the lenders and hedge counterparties thereunder.

“Issuer” refers to Matalan Finance plc, the issuer of the Notes offered hereby.

“like-for-like” refers to those sales generated from existing stores, including online, that have not (i) experienced any material interruption to trading or change in space in either the current or prior year or (ii) been impacted by sales deflecting to a new Matalan store opening during the current or prior year.

“Matalan” refers to Matalan Retail Limited.

“Refinancing” refers to the refinancing in full of the Existing Notes by way of the Tender Offers made pursuant to a separate tender offer memorandum and the subsequent redemption of any Existing Notes remaining outstanding following the completion of the Tender Offers, our entering into the amendment and restatement of the Revolving Credit Agreement, the Offering and the payment of fees and expenses in connection therewith. See “Use of Proceeds”.

“Revolving Credit Agreement” refers to the Multicurrency Revolving Facility Agreement, dated April 11, 2011, as amended and restated on February 23, 2012 and to be further amended and restated on or about the Issue Date, between the Issuer and certain of its subsidiaries as original borrowers, Missouri TopCo Limited and certain of its subsidiaries as original guarantors, Lloyds Bank plc as mandated lead arranger, agent and security agent and as lender party thereto, and certain persons as hedge counterparties party thereto.

“Revolving Credit Facility” refers to the super senior revolving facility made available under the Revolving Credit Agreement.

“Security Agent” refers to Lloyds Bank plc, as security agent under the Revolving Credit Agreement who will also act as security agent under the Intercreditor Agreement and the Indentures.

“Security Document” refers to the English law governed debenture under which the security interests in the Collateral will be created.

“Take Private Transaction” refers to the acquisition by Missouri TopCo Limited, through a wholly owned subsidiary, of all of the then outstanding shares of Matalan Limited (then named Matalan plc) in December 2006 that resulted in the delisting of Matalan plc and subsequent private ownership of the Group by the Hargreaves family and certain members of our management.

“Tender Offers” refers to the tender offers launched by the Issuer to purchase the Existing Notes described under “Summary—Recent Developments—Tender Offers”.

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“terminal stock” refers to merchandise in our stores and distribution centers which is out of season and to which we have applied significant discounts with the intention of liquidating such merchandise.

“Trustee” refers to Deutsche Trustee Company Limited as trustee on behalf of the holders of (i) the First Lien Notes and/or (ii) the Second Lien Notes as the context requires.

“UK value clothing market” refers to the mass market for low-priced, non-luxury clothing in the UK and excludes footwear, accessories and homeware.

PRESENTATION OF FINANCIAL DATA AND NON-GAAP MEASURES

Unless otherwise indicated, the financial information presented in this Offering Circular is the historical consolidated financial information of TopCo and its subsidiaries. We prepare our financial statements on the basis of a 52- or 53-week financial period, ending on the Saturday closest to February 28 of each year. The consolidated financial statements as of and for the 53 weeks ended March 1, 2014, the 52 weeks ended February 23, 2013 and the 52 weeks ended February 25, 2012 have been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union (“IFRS”). This Offering Circular contains:

• the consolidated financial statements of TopCo for the 53 weeks ended March 1, 2014 (with comparative data for the 52 weeks ended February 23, 2013), audited by KPMG LLP and the auditor’s report thereon;

• the consolidated financial statements of TopCo for the 52 weeks ended February 23, 2013 (with comparative data for the 52 weeks ended February 25, 2012), audited by KPMG LLP and the auditor’s report thereon; and

• the consolidated financial statements of TopCo for the 52 weeks ended February 25, 2012 (with comparative data for the 52 weeks ended February 26, 2011), audited by PricewaterhouseCoopers LLP and the auditor’s report thereon.

Our consolidated financial statements for the 53 weeks ended March 1, 2014, the 52 weeks ended February 23, 2013 and the 52 weeks ended February 25, 2012 have been extracted without material adjustments from our statutory annual reports and financial statements for 2014, 2013 and 2012, respectively, although page references have been modified solely for the convenience of the reader. The above-mentioned financial statements contain cross-references to other parts of such statutory annual reports and financial statements, however, such cross-referenced material is not part of, and is not incorporated by reference into, this Offering Circular and should be disregarded for the purpose of this Offering Circular.

This Offering Circular includes unaudited consolidated pro forma financial data which has been adjusted to reflect certain effects of the Refinancing on the financial position and net financial expenses of TopCo as of and for the 53 weeks ended March 1, 2014. The unaudited consolidated pro forma financial data has been prepared for illustrative purposes only and does not purport to represent what the actual consolidated financial position or net financial expenses of TopCo would have been if the Refinancing had occurred (i) on March 1, 2014 for the purposes of the calculation of net financial position and (ii) on February 24, 2013 for the purposes of the calculation of net financial expenses, nor does it purport to project TopCo’s consolidated financial position and net financial expenses at any future date. The unaudited pro forma adjustments and the unaudited pro forma financial data set forth in this Offering Circular are based on available information and certain assumptions and estimates that we believe are reasonable and may differ materially from the actual adjusted amounts.

For purposes of this Offering Circular, we refer to the 52 weeks ended February 25, 2012 as our “2012 Fiscal Year”, the 52 weeks ended February 23, 2013 as our “2013 Fiscal Year” and 53 weeks ended March 1, 2014 as our “2014 Fiscal Year”.

The financial information included in this Offering Circular includes some measures which are not accounting measures within the scope of IFRS. As used in this Offering Circular, the following terms have the following meanings:

“EBITDA” means operating profit before depreciation and amortization and exceptional items. In our financial statements included elsewhere in this Offering Circular we refer to EBITDA as “EBITDA before exceptional items”.

“EBITDAR” means EBITDA plus operating lease rentals payable related to land and buildings net of amortization of lease premiums and rent-free periods.

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“Adjusted EBITDA” means EBITDA plus additional items that we do not consider indicative of our ongoing operating performance.

“EBITDA margin” means EBITDA for the period divided by revenue for that period.

We believe that EBITDA is a useful indicator of our ability to incur and service our indebtedness and can assist securities analysts, investors and other parties to evaluate Matalan. We believe that EBITDAR is a common measure in the retail industry because it allows comparability across the sector for operations regardless of whether a retailer leases or owns its properties. We believe that Adjusted EBITDA is a relevant measure for assessing our performance because they are adjusted for certain items which, we believe, are not indicative of our underlying operating performance and thus aids in an understanding of EBITDA, respectively. We believe that EBITDA margin and EBITDAR margin are useful indicators to show how efficiently we convert revenue into profits.

EBITDA, EBITDAR, Adjusted EBITDA, EBITDA margin and similar measures are used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing EBITDA, EBITDAR, Adjusted EBITDA and EBITDA margin as reported by us to EBITDA, EBITDAR, Adjusted EBITDA and EBITDA margin of other companies. EBITDA as presented here differs from the definition of “Consolidated EBITDA” contained in the Indentures. None of EBITDA, EBITDAR, Adjusted EBITDA and EBITDA margin is a measurement of performance under IFRS and you should not consider EBITDA, EBITDAR, Adjusted EBITDA and EBITDA margin as an alternative to (a) operating profit or profit for the period (as determined in accordance with IFRS) as a measure of our operating performance, (b) cash flows from operating, investing and financing activities as a measure of our ability to meet our cash needs or (c) any other measures of performance under generally accepted accounting principles. EBITDA, EBITDAR, Adjusted EBITDA and EBITDA margin have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for an analysis of our results as reported under IFRS. Some of these limitations are:

• they do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

• they do not reflect changes in, or cash requirements for, our working capital needs;

• they do not reflect the significant interest expense, or the cash requirements necessary, to service interest or principal payments, on our debts;

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often need to be replaced in the future and EBITDA, EBITDAR, Adjusted EBITDA and EBITDA margin do not reflect any cash requirements that would be required for such replacements;

• some of the exceptional items that we eliminate in calculating EBITDA, EBITDAR, Adjusted EBITDA and EBITDA margin reflect cash payments that were made, or will in the future be made; and

• the fact that other companies in our industry may calculate EBITDA, EBITDAR, Adjusted EBITDA and EBITDA margin differently than we do, which limits their usefulness as comparative measures.

We present our annual accounts as of the Saturday closest to February 28 of each year, which occasionally results in a 53 week financial year. This was the case in the 2014 Fiscal Year, which means that results for that year are not directly comparable to results for the 2013 Fiscal Year or the 2012 Fiscal Year.

Certain amounts and percentages included in this Offering Circular have been rounded. Accordingly, in certain instances, the sum of the numbers in a column of a table may not exactly equal the total figure for that column.

The financial information included in this Offering Circular is not intended to comply with the applicable accounting requirements of the Securities Act and the related rules and regulations of the SEC which would apply if the Notes were being registered with the SEC.

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EXCHANGE RATE AND CURRENCY INFORMATION

Unless otherwise indicated, references in this Offering Circular to “euro” or “€” are to the single currency of the participating Member States in the Third Stage of European Economic and Monetary Union pursuant to the Treaty Establishing the European Community, as amended from time to time; references to “sterling”, “pounds sterling”, “GBP” or “£” are to the lawful currency of the United Kingdom; and references to “U.S. dollars”, “dollars”, “US$” or “$” are to the lawful currency of the United States of America.

The following table sets forth, for the periods set forth below, the high, low, average and period end Bloomberg Composite Rate expressed as U.S. dollars per £1.00. The Bloomberg Composite Rate (New York) is a “best market” calculation, in which, at any point in time, the bid rate is equal to the highest bid rate of all contributing bank indications and the ask rate is set to the lowest ask rate offered by these banks. The Bloomberg Composite Rate is a mid value rate between the applied highest bid rate and the lowest ask rate. The rates may differ from the actual rates used in the preparation of the consolidated financial statements and other financial information appearing in this Offering Circular. Neither we nor the Initial Purchasers represent that the U.S. dollar amounts referred to below could be or could have been converted into pounds sterling at any particular rate indicated or any other rate.

The average rate for a year means the average of the Bloomberg Composite Rates on the last day of each month during a year. The average rate for a month, or for any shorter period, means the average of the daily Bloomberg Composite Rates during that month, or shorter period, as the case may be.

The Bloomberg Composite Rate of pounds sterling on September 26, 2014 was $1.625 per £1.00.

U.S. dollars per £1.00

High Low Average Period

End

Year 2009 .......................................................................................................................... 1.6988 1.3753 1.5670 1.6173 2010 .......................................................................................................................... 1.6362 1.4334 1.5457 1.5612 2011 .......................................................................................................................... 1.6706 1.5343 1.6041 1.5549 2012 .......................................................................................................................... 1.6279 1.5317 1.5852 1.6248 2013 .......................................................................................................................... 1.6556 1.4867 1.5649 1.6556

Month ended November 30, 2013 .................................................................................................. 1.6368 1.5905 1.6114 1.6368 December 31, 2013 ................................................................................................... 1.6556 1.6264 1.6382 1.6556 January 31, 2014 ....................................................................................................... 1.6637 1.6354 1.6473 1.6441 February 28, 2014 ..................................................................................................... 1.6748 1.6304 1.6566 1.6743 March 31, 2014 ......................................................................................................... 1.6740 1.6487 1.6616 1.6662 April 30, 2014 ........................................................................................................... 1.6873 1.6574 1.6747 1.6873 May 30, 2014 ............................................................................................................ 1.6975 1.6711 1.6841 1.6754 June 30, 2014 ............................................................................................................ 1.7109 1.6738 1.6918 1.7109 July 31, 2014 ............................................................................................................. 1.7166 1.6886 1.7075 1.6886 August 29, 2014 ........................................................................................................ 1.6886 1.6540 1.6699 1.6598 September 2014 (through September 26, 2014) ....................................................... 1.6607 1.6105 1.6313 1.625

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SUMMARY

This summary contains information about this Offering and about us. It does not contain all the information that

may be important to you. Before making an investment decision, you should read this entire Offering Circular carefully,

including the financial statements and the notes thereto and the other financial information contained in this Offering

Circular, as well as the risks described under “Risk Factors”. Certain defined terms used herein are defined elsewhere

in this Offering Circular.

Overview

We are one of the leading value clothing, footwear and homeware retailers in the UK. We focus on providing a unique blend of attractive design, quality, value and a compelling customer shopping experience across our broad range in our “out-of-town” store locations. We define these locations as off the high street but within an easily accessible location to major town centers and based in a retail park with other brand name tenants or stand-alone locations. We operate the UK’s largest portfolio of out-of-town clothing retail stores comprising of 227 stores with over six million square feet of retail trading space. In 2013, we had an estimated 8.7% share of the £12.0 billion UK value clothing market. In the 2014 Fiscal Year, we generated revenue of £1,122.9 million and EBITDA of £95.4 million at an EBITDA margin of 8.5%. See “Summary—Summary Financial Data”.

Our range appeals to a broad spectrum of the UK population, with approximately one-third of UK households shopping in Matalan in the last 12 months. Over 80% of our customers are female, typically but not exclusively aged 35-55 and who visit Matalan regularly to purchase products for themselves, their family and their home and are from the lower middle class or skilled or unskilled working class. Our customers are fashion-conscious but not demanding of leading edge “fast fashion”. We maintain a customer database of nearly twelve million active customers who have transacted with Matalan in the last year through our Matalan Reward loyalty card, our loyalty card that offers customers a range or benefits, including exclusive promotional discounts on merchandise. Purchases by cardholders account for over 90% of our revenue and as such our card is an important element of our loyalty and marketing strategies and also supports our growing multi-channel business.

We offer a wide and authoritative range of clothing, footwear and homeware, uniquely covering a broad range of price points. In accordance with our quality, design, value and experience philosophy, we sell primarily our own branded products and to a lesser extent, third-party branded or licensed products. Our opening price point is in line with supermarkets for our “Good” products, while our “Better” and “Best” products are generally priced at a significant discount to mid-market high street retailers, with what we believe to be comparable or higher quality and design. As a result we attract a broad range of customers and compete successfully with a wide range of retailers, including supermarkets and discount and mid-market clothing retailers. Across our six main product categories we sell primarily our own branded products and, to a lesser extent, third-party branded or licensed products, which accounted for 8.1% of total sales in 2014 Fiscal Year. Our own branded products have been carefully constructed to support our broad price architecture focused on the entry and mid-level price points. For the 2014 Fiscal Year, approximately 38% of our revenue was generated by ladieswear, 23% by menswear, 19% by kidswear, 7% by footwear, 13% by homeware and less than 1% by our new Sporting Pro products launched in autumn 2013. For the 2014 Fiscal Year, the average selling price of our products and average basket value were £6.00 and £21.55, respectively.

The majority of our sales are carried out in store, although we also sell a growing percentage of our products online via our website. We have 227 stores in the UK, of which 213 are full-price Matalan stores, five are Matalan clearance stores and nine are standalone Sporting Pro stores. The average Matalan store size is 29,000 square feet. The average revenue and store EBITDA per Matalan store (excluding Sporting Pro and clearance stores) for the 2014 Fiscal Year was £5.0 million and £0.9 million, respectively. Additionally, a growing proportion of our sales are made via our website with online sales in the 53 weeks ended March 1, 2014 increasing by 32.9% to £43.6m, supported by the roll out of online ordering for collection in store (which we refer to as “click and collect”) in early 2013 (50% of online purchases are now collected in store). Our online sales accounted for 3.9% of our total turnover, with 9.4% of our customers shopping across multiple channels in the 53 weeks ending March 1, 2014. Customers who shopped across multiple channels spent an average of 81% more than store only shoppers. We have recently introduced two new store formats, a high street Matalan store and a new Sporting Pro concept which focuses on sporting apparel, footwear and equipment. As of March 1, 2014 we also had 14 franchise stores in the Middle East which for the 2014 Fiscal Year accounted for 1.3% of our revenue. These franchise stores operate under a wholesale supply arrangement, selling ranges sourced by Matalan and supplied at a mark-up.

Business Strengths

We believe that we benefit from the following key strengths:

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Scale position in a growing market

We are one of the UK’s leading value clothing, footwear and homeware retailers, capturing an estimated 8.7% share of the £12.0 billion UK value clothing market in the year ended December 31, 2013. Our scale allows us to compete effectively in a relatively consolidated market, in which the top five operators have a combined 63.2% market share. The UK value clothing market has experienced strong growth in recent years. In the five-year period to 2013 the value market grew by an estimated £2.5 billion to £12.0 billion, representing 30.0% of total clothing expenditure in the UK. This equates to growth of 27.1%, outperforming the total UK clothing market by 14.6 percentage points. Independent forecasts predict value clothing market annual growth of between 3.9% and 4.6% between 2014 and 2019. We believe that the growth seen in the value clothing market is a structural change in the market driven by increases in trading space, expansion in the range of products offered and improved quality. Additionally, we believe that consumers have realized that value retailers like Matalan deliver quality products at low price points while offering opportunities to step up to “Better” and “Best” products.

Strong, resilient brand and product authority combining value with quality and design

We have serviced the UK value fashion and homeware retail market since 1985 and have created an active customer database of nearly twelve million individuals, covering approximately a third of UK households. Our retail philosophy focuses on three dimensions: quality, design and value. We have specifically tailored offerings for different price points allowing us to compete with a range of different retailers that vary from supermarkets to specialist value and mid- market clothing retailers. We believe we offer better quality at a comparable price to our main competitors for core basic items, appealing designs at a competitive price for the more fashion-oriented ranges, and a price point that entices mid-market customers attracted by the quality and design of our products. In two Customer Satisfaction Index (“CSI”) reports on the clothing sector and the footwear sector, published by Verdict on April 23, 2014, we were awarded first overall for customer satisfaction in footwear and second overall for customer satisfaction in clothing, up from seventh place in the previous year. The CSI is based on customer satisfaction across range, price, convenience, quality, service, ambience, facilities and layout, with our position across a wide range of factors illustrative of our balanced proposition.

We believe that our quality and value positioning creates a resilience to this proposition, as demonstrated by the growth of our active cardholder base from 10.1 million at March 1, 2010 to 11.9 million at March 1, 2014.

Extensive data warehouse, with potential for further multi-channel development

Our customer database of nearly 12 million individuals is maintained via the Matalan Reward loyalty card that offers customers a range of benefits, including exclusive promotional discounts on merchandise. We believe that it would take significant investment and time for competitors who do not have such a database to build up the same data warehouse, which enables visibility and influence on customer behavior both in-store and on-line. This database has provided a basis to develop customer relationship management (“CRM”) initiatives that help us to understand the behavior and the lifestyle of our customers and to cost effectively target our marketing activities. Over 90% of our turnover is attributable to Matalan Reward loyalty card holders, in an increasingly multi-channel marketplace such a database and the customer insights it provides leaves us well placed to continue growing our multi-channel customer base. The average annual turnover generated from a multi-channel customer is £145 versus £80 for store only customers, making it an attractive growth opportunity that we can exploit with rapidly advancing technologies.

Direct sourcing model and strategic supplier relationships

We source the majority of our products directly from manufacturers, predominantly located in Asia and Eastern Europe. We believe that buying directly from suppliers provides us with a competitive advantage, as it allows us to minimize margin erosion through the elimination of supply chain intermediaries, while at the same time providing us high levels of oversight on the quality of our products, which is monitored via the presence of Matalan employees in the local territory. We have actively consolidated our supplier base in recent years, reducing the number of suppliers from 433 in 2011 to 335 by March 2014. We believe that this reduction allows us to better leverage our volume in the buying process while maintaining sufficient flexibility to adapt to the needs of our customers. The consolidation of suppliers has allowed us to gradually renegotiate commercial agreements with agents to remove terms that are unfavorable to us, such as cost price shifts among others. Working with fewer suppliers provides us greater leverage and allows these purveyors to add more value during the design process, and to collaborate with us to eliminate non-value adding costs and processes. The development of more strategic partnerships with certain suppliers is one of the key benefits stemming from our supplier consolidation process.

We have also changed our approach to buying. Previously our buyers were accountable for their own category performance and margins, negotiating individually with suppliers. We have now adopted a more holistic approach, with a leaner management team accountable for all ranges. This consolidated approach to buying across product categories means that there is only one negotiation with each supplier. We have also reduced our reliance on agents by appointing

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offshore country managers in certain locations. Moreover, an increased focus to share technical knowledge and best practices with the wider buying team has been applied by the quality management team. The quality management team are now involved from the initial garment design stage through to subsequent manufacturing to leverage their technical knowledge to drive an increase in quality and reduce inefficient and margin eroding practices in our supplier base.

We believe that the changes which we have implemented both in our supplier base and in our buying approach, together with our continued focus on streamlining our supply chain, will strengthen our ability to manage any future short-term fluctuations within our cost base through price negotiations and product engineering.

Unique store footprint with attractive low cost base

We have a store footprint across 227 locations, which is the largest portfolio of out-of-town clothing retail stores in the UK, with over six million square feet of retail sales space. This allows us to display our wide- ranging product offer while avoiding the high rental costs associated with many high street or shopping center locations. As our stores are larger than those of many of our competitors, we are able to offer a broader range of product categories. Due to our ability to trade profitably from large, out-of- town stores that are either located in retail parks or standalone locations, we believe that we have more options than our high street competitors when choosing a new location to lease. We lease all of our stores under long-term leases with an average remaining lease period of approximately 10 years. We believe this stable portfolio of low-cost space, in accessible locations with good car parking facilities, is a key strength that underpins a multi-channel strategy; 50% of our online sales are currently collected in-store, driving footfall, additional in-store purchases and lower levels of returns.

Experienced management team with appropriate breadth and depth

We have a strong and experienced management team led by Jason Hargreaves, consisting of ten individuals with an average of 9 years tenure within our business, and drawing on extensive previous experience across the retail, service and consumer goods sectors. Allan Leighton, John Mills, Jason Hargreaves, Stephen Hill and Arnu Misra together have over a century of retail experience. Furthermore, the recent appointment of Arnu Misra as Chief Operating Officer will, we believe, improve both our ability to work seamlessly across the business and our end-to end-execution.

Business Strategy

We have a clear strategy for growth, in keeping with our philosophy of offering customers an extensive range of quality products without compromising on design, value or shopping experience. These strategies are designed to both capitalize on our existing strengths and evolve our capabilities in adapting to the changing marketplace and trends in consumer behavior. We believe this will deliver a resilient and sustainable level of revenue growth, margin enhancement and improvement in profitability and cash generation.

To achieve these goals we have designed our strategy around the following four pillars:

1. consistently execute our offer and further develop our product range;

2. complete and capitalize on our Singles supply chain program;

3. deliver sustainable margin enhancement; and

4. establish and leverage an ability to operate across multiple channels and formats.

In addition to our four strategic pillars (outlined in further detail below), we will continue to optimize our cost base and maximize positive cash flow on an ongoing basis. We believe that the Singles supply chain program offers significant opportunities to further drive efficiencies, particularly the manner in which stock is processed and handled within stores. Initiatives to drive sales returns from existing space will also support improvements to the productivity of our fixed costs. Ongoing cost management and optimization is a key focus for the business. Upon completion of the Singles supply chain program and office relocation projects, our capital investment program will return to a more normalized annual level. We expect cost efficiencies and a reduction in capital investment outflows to contribute to the maximization of positive cash flow and de- leveraging.

Consistently execute our offer and further develop our range

We continue to optimize the balance between providing customers a choice of products and managing stock availability. We have consolidated several in-house brands over the past 12 months (a reduction from 18 to 13) in order to reduce duplication, while the number of options within each style of the core range continues to be reviewed and

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optimized with an emphasis on availability and better margin control. This change has supported improved ladies clothing availability and range, delivering sales growth of 8% in the second half of the 2014 Fiscal Year compared to the corresponding period in the 2013 Fiscal Year. We are also actively managing transitional seasonal phases through product range and mix, reducing the amount of short-life, weather-dependent products. Management of color palette, fabric weight and ability to layer multiple products are increasingly key design considerations and, we believe, will support a more stable trading performance through these transitional periods while continuing to showcase seasonal newness.

We believe that focusing on range optimization and availability in our core and newly implemented The

Statements collection, showcasing current trends and fashion credentials via our We Love collection and providing access to a growing offering of recognisable external brands provides clear segmentation, signposting and balance to our customer proposition. We intend to utilize this range structure in our communication programs, driving frequency and purpose of visit for a variety of family shopping trips. Improving clarity, execution and weight of buy across the upper end of the price architecture will allow the business to better mitigate movements in cost prices at the opening price point (“OPP”) level where the business acts primarily as a price follower within the market.

Complete and capitalize on our Singles supply chain program

Following an extensive review, we took the decision in 2011 to re-engineer our supply chain and to move approximately 45% of our range away from ratio pack stock replenishment into single unit replenishment, which we have called the Singles supply chain program. This will facilitate the sharing of stock across channels and more efficient placement of stock within the business. This will drive improved availability and sales conversion, reduce markdowns and enhance margins. It will also reduce stock holding within our existing formats and distribution centers, improving working capital management and support expansion into a variety of new formats that are more demanding of an efficient replenishment model.

These changes will be incorporated into both the new distribution center in Knowsley and our existing distribution center in Corby. The Supply chain program will also support the direct shipment of stock from our supply base to existing or future overseas franchisees or partners, providing a more cost-effective international supply chain. The first receipt of stock in this new form is intended to be in summer 2014 and will progress via a phased period of closely managed and low-risk transitions, with the increase in single unit replenished volume to be complete by summer 2015. We expect that benefits from the Supply chain program will begin to crystalize through the latter part of 2015.

Deliver sustainable margin enhancement

In January 2014, supported by Deloitte consultancy services, we began a strategic review of other opportunities to create sustainable margin improvement. The initial phase of work will complete in June 2014 and includes in its scope: option and depth of buy review across all lines, including the creation of new range analysis tools intended to improve both margins and product availability; price architecture, performance and profitability analysis tools, intended to optimize the price charged for each product; in-season promotion and liquidation management tools, intended to reduce the value of markdowns through the introduction of targeted and graded markdowns; and space and store grading optimization tools intended to increase individual local business unit profitability. These four work streams are believed to offer material opportunities to deliver sustainable improvements to sales and margin performance that will be phased into the business through late 2014 and 2015.

The consolidation of the supply base delivered over the last two years will support the quick and efficient implementation of the key outputs from this project. In addition, we believe that opportunities exist to develop an increasing number of more strategic supplier relationships, capitalizing on the skill set of those suppliers in areas, such as garment design and product engineering, to continuously improve product cost and performance.

Establish and leverage an ability to operate across multiple channels and formats

According to Verdict, the online clothing and footwear market is projected to grow by 84% between 2013 and 2019. We believe this presents an opportunity to convert a greater proportion of our nearly twelve million active customers into multi-channel shoppers, (currently 9.4% in the 53 weeks to March 1, 2014) providing significant sales growth potential. In the 2014 Fiscal Year our online business increased its sales by 32.9% to £43.6 million accounting for 3.9% of our total turnover. Customers who shopped across multiple channels spent an average of 81% more than store-only shoppers. Online sales were supported by the roll out of click and collect in early 2013, which now accounts for nearly 50% of online orders. We will further enhance our capability in this regard with the launch of a mobile loyalty application in the summer of 2014 which will allow us to target our customers with personalized communications and benefits. We believe this offers us new means of driving multi-channel behavior and reducing the cost of our CRM program via the digitization of some elements of customer communication. We have also installed free wi-fi in all of our

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stores to further support the use of the loyalty application and ordering of product via the mobile optimized website should it not be immediately available at the time a customer is in-store.

To help us encourage more of our customers to shop with us across multiple channels, we have developed the capability to monitor individual customer behavior across all channels. This includes the ability to update and capture customer details at the store till point as well as for store colleagues to be given customer-specific scripts and screen prompts at the checkout. We believe that this functionality will have a significant impact on email address capture and will effectively incentivize store customers to shop online via tailored voucher distribution at the till.

We also introduced a new Matalan high street format in October 2013, with the opening of a new 16,000 square foot store in Liverpool city center (over 40% smaller than the average Matalan store), located just off the main thoroughfare and next to major competitors. We believe that more central locations are now viable following the ladieswear range improvements introduced over the last 12 months (ladieswear taking a greater mix of sales in this store type). The store performed strongly in the second half of the 2014 fiscal year, with sales per square foot nearly twice that of the average of our other stores, and a 21.3% increase in the value of sales to existing customers who shopped at the Liverpool store during the 6 months after opening. We will continue to test sizes, formats and locations for a gradual store roll-out program, including our next opening in Cardiff city center in autumn 2014.

In autumn 2013, we launched our new sportswear concept, Sporting Pro, providing quality sportswear, equipment and accessories for the family at competitive prices in a high-quality, well serviced environment. The sports market is forecast to grow by 21.2% between 2014 and 2019 and we believe that there is sufficient room in the market for a new entrant competing not only on price, but equally on range and service. As of March 1, 2014, we had opened nine standalone Sporting Pro stores trading and a fully transactional website. We have also pursued expansion through the conversion of excess space in five of our existing Matalan stores, offering up an average of approximately 6,000 square feet of trading space to the sportswear offer. These stores are partitioned in a way that a customer would perceive them as a separate unit, allowing for clear brand distinction, while allowing us to increase revenue without incurring additional occupation costs. At present, these stores currently consist of branded ranges, however, going forward, we intend to introduce our own, in-house designed, sourced and branded sports and leisure apparel into Sporting Pro stores. We believe that this will complement the existing leading brands already carried and increase our market penetration, blended margin and returns on space.

Recent Developments

Tender Offers.

On May 13, 2014, we commenced tender offers (the “Tender Offers”) in respect of our outstanding Existing Notes. Under the terms of the Tender Offers, we are offering to purchase all of our Existing Notes held by holders outside the United States for cash, at the applicable tender prices, plus accrued and unpaid interest. To the extent any of the Existing Notes are not tendered in the Tender Offers, we intend to redeem the Existing Notes in accordance with the applicable indenture. We intend to use the net proceeds from the Offering to repurchase the Existing Notes tendered pursuant to the Tender Offers and to redeem any untendered Existing Notes. The consummation of the Tender Offers is subject to the satisfaction or waiver of certain conditions precedent including the completion of this Offering.

The Tender Offers are not being made, and will not be made, directly or indirectly in or into, or by the use of the mails of, or by any means or instrumentality of insterstate or foreign commerce of or by use of any facilities of a national securities exchange of, the United States. The Existing Notes may not be tendered in the Tender Offers by any such use, means, instrumentality or facility from or within the United States or by persons located or resident in the United States. Any purported tender of the Existing Notes in the Tender Offers resulting directly or indirectly from a violation of these restrictions will be invalid. The Tender Offers are being made pursuant to a separate tender offer memorandum and not pursuant to this Offering Circular.

SUMMARY CORPORATE AND FINANCING STRUCTURE

The net proceeds of the Offering will be used, in part, to consummate the refinancing in full of our Existing Notes. See “Use of Proceeds”. The following diagram summarizes our corporate structure and our material outstanding financing arrangements on a pro forma basis after giving effect to the Refinancing:

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(1) The Guarantee of TopCo and the security interests over its assets that secure the Notes may be released upon certain equity offerings as

provided under “Description of First Lien Secured Notes—Release of Note Guarantee and Liens on Collateral by Missouri TopCo Limited upon Certain Public Equity Offerings” and “Description of Second Lien Secured Notes—Release of Second Lien Note Guarantee and Liens on Collateral by Missouri TopCo Limited upon Certain Public Equity Offerings”.

(2) The First Lien Notes will be senior obligations and will rank equally in right of payment with all other existing and future senior debt of the Issuer. The First Lien Notes will be guaranteed, jointly and severally, on a senior basis by Missouri TopCo Limited (“TopCo”) and certain of its wholly-owned subsidiaries (collectively, the “Guarantors”), including Matalan Retail Limited (“Matalan”), its principal operating subsidiary. The guarantee of the First Lien Notes by each Guarantor (each, a “First Lien Guarantee” and, collectively, the “First Lien Guarantees”) will rank equally in right of payment to all existing and future senior debt of such Guarantor. The First Lien Notes and the First Lien Guarantees will be secured on a first-ranking basis by charges over substantially all of the property and assets of the Issuer and each Guarantor (the “Collateral”); provided that the lenders under our Revolving Credit Facility (as defined herein) and the counterparties under certain hedging obligations will receive priority to the proceeds from the Collateral in the event of any enforcement. See “Description of Certain Financing Arrangements—Intercreditor Agreement”.

(3) The Second Lien Notes will be senior obligations and will rank equally in right of payment with all other existing and future senior debt of the Issuer. The Second Lien Notes will be guaranteed, jointly and severally, on a senior basis by the Guarantors. The guarantee of the Second Lien Notes by each Guarantor (each, a “Second Lien Guarantee” and, collectively, the “Second Lien Guarantees” and, together with the First Lien Guarantees, the “Guarantees”) will rank equally in right of payment to all existing and future senior debt of such Guarantor. The Second Lien Notes and the Second Lien Guarantees will be secured by liens on a second- ranking basis over the Collateral. In the event of enforcement of the Collateral, the holders of the Second Lien Notes will receive proceeds from the Collateral only after the lenders under the Revolving Credit Facility, the counterparties under certain hedging obligations and the holders of the First Lien Notes have been repaid in full. See “Description of Certain Financing Arrangements—Intercreditor Agreement”.

(4) The Revolving Credit Facility consists of a £50 million revolving facility to initially be made available to the Issuer, Matalan Limited and Matalan Retail Limited. The Revolving Credit Facility is secured on a first- ranking basis by the Collateral. See “Description of Certain Financing Arrangements—Revolving Credit Facility”. Pursuant to the terms of the Intercreditor Agreement, the Revolving Credit Facility will be entitled to be repaid from the proceeds from an enforcement in respect of the Collateral before any proceeds will be applied to repay obligations under the Notes and the Guarantees. See “Description of Certain Financing Arrangements—Intercreditor Agreement”.

(5) Non-Guarantor subsidiaries include certain subsidiaries which are dormant or are otherwise not engaged in any material operations. For the 2014 Fiscal Year, the Issuer and Guarantors, collectively, represented 100% of our revenue and on March 1, 2014, the Issuer and Guarantors held 98% of our total assets on a consolidated basis. The Issuer and the Guarantors hold 103% of our total net assets/liabilities on a consolidated basis.

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THE OFFERING

The summary below describes the principal terms of the indenture governing the First Lien Secured Notes and

the indenture governing the Second Lien Secured Notes. Certain terms and conditions described below are subject to

important limitations and exceptions. The “Description of First Lien Secured Notes” and “Description of Second Lien

Secured Notes” section of this Offering Circular contains a more detailed description of the terms and conditions of the

Notes including the definitions of certain terms used in this summary.

Issuer ............................................... Matalan Finance plc.

Issue Date ........................................ On or about June 2, 2014.

Notes Offered: ................................ £342 million aggregate principal amount of 67/8% First Lien Secured Notes due 2019 (the “First Lien Notes”).

£150 million aggregate principal amount of 87/8% Second Lien Secured Notes due 2020 (the “Second Lien Notes” and, together with the First Lien Notes, the “Notes”).

Maturity Date ................................. The First Lien Notes will mature on June 1, 2019. The Second Lien Notes will mature on June 1, 2020. Interest Rate ................................... The First Lien Notes will bear interest at a rate of 6.875% per annum. The Second Lien Notes will bear interest at a rate of 8.875% per annum.

Interest Payment Dates ................. Interest on the Notes will be payable semi-annually in cash in arrears on May 30 and November 30 of each year, beginning on November 30, 2014.

Form and Denomination ............... The Issuer will issue the Notes on the Issue Date in global form in minimum denominations of £100,000 and integral multiples of £1,000 in excess thereof, maintained in book-entry form. Notes in denominations of less than £100,000 will not be available.

Guarantees ..................................... The Notes will be guaranteed on a senior basis by: • TopCo; • Matalan Group Limited; • Matalan Limited; • Matalan Retail Limited; and • Matalan Holding Company Limited. The Notes will also be guaranteed on a senior basis by each future restricted

subsidiary of the Issuer subject to certain conditions and only if and to the extent such restricted subsidiary of the Issuer will guarantee indebtedness outstanding under the Revolving Credit Facility and certain public and other indebtedness. See “Description of First Lien Secured Notes—the First Lien Note Guarantees”, “Description of Second Lien Secured Lien Notes—the Second Lien Note Guarantees”, “Description of First Lien Secured Notes—Limitation on Issuances of Guarantees of Indebtedness” and “Description of Second Lien Secured Notes—Limitation on Issuances of Guarantees of Indebtedness”.

Security First Lien Notes ............................... The First Lien Notes will be secured on a first-ranking basis by charges over

substantially all of the property and assets of the Issuer and each Guarantor (the “Collateral”); provided that lenders under the Revolving Credit Facility and the counterparties under certain hedging obligations will receive priority to the proceeds from the Collateral in the event of any enforcement. See “Description of First Lien Secured Notes—Security” and “Description of Certain Financing Arrangements—Intercreditor Agreement”.

Second Lien Notes ........................... The Second Lien Notes will be secured on a second-ranking basis by charges over the Collateral. In the event of enforcement of the Collateral, the holders of the Second Lien Notes will receive proceeds from the Collateral only after the lenders under the Revolving Credit Facility, the counterparties under certain hedging obligations and the holders of the First Lien Notes have been repaid in full. See “Description of Second Lien Secured Notes—Security” and”Description of Certain Financing Arrangements—Intercreditor Agreement”.

Ranking of the Notes First Lien Notes ............................... The First Lien Notes will be general obligations of the Issuer and will: • be senior obligations of the Issuer; • be secured by liens over the Collateral on a first-ranking basis, but will receive

proceeds from enforcement of security over the Collateral only after any obligations that are entitled to receive such proceeds on a super- priority basis, including lenders under the Revolving Credit Facility and counterparties to certain hedging obligations, have been paid in full;

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• rank pari passu in right of payment with all existing and future indebtedness of the Issuer that is not expressly subordinated to the First Lien Notes, including indebtedness under the Revolving Credit Facility and the Second Lien Notes;

• rank senior in right of payment to any and all future obligations of the Issuer that are expressly subordinated in right of payment to the First Lien Notes, if any;

• be unconditionally guaranteed by the Guarantors; • be effectively subordinated to the Issuer’s existing and future secured

indebtedness that is secured by property or assets that do not secure the First Lien Notes, to the extent of the value of such property and assets securing such indebtedness; and

• be structurally subordinated to all obligations of the Issuer’s subsidiaries that are not Guarantors.

Each First Lien Guarantee of the First Lien Notes to be provided by each Guarantor will be the general obligation of such First Lien Guarantor and will:

• be secured by liens over the Collateral on a first-ranking basis, but will receive proceeds from enforcement of security over the Collateral only after any obligations that are entitled to receive such proceeds on a super- priority basis, including lenders under the Revolving Credit Facility and counterparties to certain hedging obligations, have been paid in full;

• rank pari passu in right of payment with all existing and future senior indebtedness of such Guarantor that is not expressly subordinated in right of payment to its First Lien Guarantee, including its obligations under the Revolving Credit Facility and its guarantee of the Second Lien Notes;

• rank senior in right of payment to all future indebtedness of such Guarantor, if any, that is expressly subordinated in right of payment to its First Lien Guarantee;

• be effectively subordinated to such Guarantor’s existing and future secured indebtedness that is secured by property or assets that do not secure its First Lien Guarantee to the extent of the value of such property and assets securing such indebtedness; and

• be structurally subordinated to all existing and future Indebtedness of any Guarantor’s subsidiaries that do not guarantee the First Lien Notes.

Second Lien Notes ........................... The Second Lien Notes will be general obligations of the Issuer and will: • be senior obligations of the Issuer; • be secured by liens over the Collateral on a second-ranking basis, but in the

event of enforcement of the Collateral, the holders of the Second Lien Notes will receive proceeds from the Collateral only after the lenders under the Revolving Credit Facility, the counterparties under certain hedging obligations and the holders of the First Lien Notes have been repaid in full;

• rank pari passu in right of payment with all existing and future indebtedness of the Issuer that is not expressly subordinated to the Second Lien Notes, including indebtedness under the Revolving Credit Facility and the First Lien Notes;

• rank senior in right of payment to any and all future obligations of the Issuer that are expressly subordinated in right of payment to the Second Lien Notes, if any;

• be unconditionally guaranteed by the Guarantors; • be effectively subordinated to the Issuer’s existing and future secured

indebtedness that is secured by property or assets that do not secure the Second Lien Notes, to the extent of the value of such property and assets securing such indebtedness; and

• be structurally subordinated to all obligations of the Issuer’s subsidiaries that are not Guarantors.

Each Second Lien Guarantee of the Second Lien Notes to be provided by each Guarantor will be the general obligation of such Guarantor and will:

• be secured by liens over the Collateral on a second-ranking basis, but in the event of enforcement of the Collateral, the holders of the Second Lien Notes will receive proceeds from the Collateral only after the lenders under the Revolving Credit Facility, the counterparties under certain hedging obligations and the holders of the First Lien Notes have been repaid in full;

• rank pari passu in right of payment with all existing and future senior

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indebtedness of such Guarantor that is not expressly subordinated in right of payment to its Second Lien Guarantee, including its obligations under the Revolving Credit Facility and its guarantee of the First Lien Notes;

• rank senior in right of payment to all future indebtedness of such Guarantor, if any, that is expressly subordinated in right of payment to its Second Lien Guarantee;

• be effectively subordinated to such Guarantor’s existing and future secured indebtedness that is secured by property or assets that do not secure its Second Lien Guarantee to the extent of the value of such property and assets securing such indebtedness; and

• be structurally subordinated to all existing and future indebtedness of any Guarantor’s subsidiaries that do not guarantee the Second Lien Notes.

As at March 1, 2014, after giving pro forma effect to the Refinancing, the Issuer would have had on a consolidated basis, total debt (gross of debt issuance costs and any original issue discount) of £492.0 million, all of which is indebtedness under the Notes. In addition as of March 1, 2014, after giving effect to the Refinancing we would have had £50.0 million of availability under the Revolving Credit Facility (before giving effect to any outstanding letters of credit and bank guarantees, which at March 1, 2014, reduced availability by £11.0 million).

Use of Proceeds .............................. The Issuer expects to use all of the net proceeds from the sale of the Notes, together with cash on hand, to fund the refinancing in full of the Existing Notes and the payment of fees and expenses in connection with the Refinancing. See “Use of Proceeds”.

Optional Redemption First Lien Notes ............................... The Issuer may redeem the First Lien Notes: • in whole or in part at any time on or after May 30, 2016 at the redemption

prices described in this Offering Circular under the caption “Description of First Lien Secured Notes—Optional Redemption”, plus accrued and unpaid interest to the date of redemption;

• at any time and from time to time prior to May 30, 2016 in an aggregate principal amount not to exceed 40% of the aggregate principal amount of First Lien Notes originally issued, with the proceeds of one or more qualifying equity offerings, at a redemption price equal to 106.875% of the principal amount redeemed plus accrued and unpaid interest to the date of redemption; and

• in whole or in part at any time prior to May 30, 2016 at a redemption price equal to 100% of the principal and the applicable “make-whole” premium, plus accrued and unpaid interest, if any, to the date of redemption.

See “Description of First Lien Secured Notes—Optional Redemption”. Second Lien Notes ................................The Issuer may redeem the Second Lien Notes: • in whole or in part at any time on or after May 30, 2017 at the redemption

prices described in this Offering Circular under the caption “Description of Second Lien Secured Notes—Optional Redemption”, plus accrued and unpaid interest to the date of redemption;

• at any time and from time to time prior to May 30, 2017 in an aggregate principal amount not to exceed 40% of the aggregate principal amount of Second Lien Notes originally issued, with the proceeds of one or more qualifying equity offerings, at a redemption price equal to 108.875% of the principal amount redeemed plus accrued and unpaid interest to the date of redemption; and

• in whole or in part at any time prior to May 30, 2017 at a redemption price equal to 100% of the principal and the applicable “make-whole” premium, plus accrued and unpaid interest, if any, to the date of redemption.

See “Description of Second Lien Secured Notes—Optional Redemption”.

Additional Amounts; Tax

Redemption ................................ All payments in respect of the Notes or any Guarantee will be made without withholding or deduction on account of taxes, except to the extent required by law. If withholding or deduction is required by applicable law, subject to certain exceptions, the Issuer (or Guarantor, as appropriate) will pay additional amounts so that the net amount each holder receives is no less than the holder would have received in the absence of such withholding or deduction. See “Description of First Lien Secured Notes—Additional Amounts” and “Description of Second Lien Secured Notes—Additional Amounts”.

If certain changes in the law of any relevant taxing jurisdiction become effective

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that would impose withholding taxes or other deductions on the payments on the Notes, the Issuer may redeem the Notes in whole, but not in part, at any time, at a redemption price of 100% of the principal amount, plus accrued and unpaid interest and Additional Amounts, if any, to the date of redemption. See “Description of First Lien Secured Notes—Redemption for Changes in Taxes” and “Description of Second Lien Secured Notes—Redemption for Changes in Taxes”.

Change of Control .......................... If the Issuer experiences specific kinds of changes of control, each noteholder will have the right to require the Issuer to repurchase all or part of its notes at 101% of their principal amount, plus accrued and unpaid interest. See “Description of First Lien Secured Notes—Repurchase at the Option of Holders—Change of Control” and “Description of Second Lien Secured Notes—Repurchase at the Option of Holders—Change of Control”.

Certain Covenants ......................... Each of the Indentures governing the Notes and the Guarantees will, among other things, restrict the ability of the Issuer and its restricted subsidiaries to:

• borrow or guarantee additional indebtedness and issue certain preferred shares;

• make certain payments, including pay dividends or repurchase shares; • redeem or repurchase indebtedness junior in right of payment to the Notes; • make certain investments; • create certain liens; • merge or consolidate with other entities; • create encumbrances or restrictions on the payment of dividends or other

amounts to the Issuer from any of its restricted subsidiaries; • enter into certain transactions with affiliates; • impair the Collateral; • sell, lease or transfer certain assets, including shares of any restricted

subsidiary of the Issuer; and • guarantee certain types of other indebtedness of the Issuer and its restricted

subsidiaries without also guaranteeing the Notes. Each of the covenants is subject to significant exceptions and qualifications. See

“Description of First Lien Secured Notes—Certain Covenants” and “Description of Second Lien Secured Notes—Certain Covenants”.

Transfer Restrictions ..................... The Notes have not been, and will not be, registered under U.S. federal or state or any foreign securities laws and are subject to restrictions on resale. See “Notice to Investors”. We have not agreed to, or otherwise undertaken to, register the Notes in the United States (including by way of an exchange offer).

Absence of a Public Market for

the Notes/Allocation to

Shareholders ............................... There can be no assurances as to the development or liquidity of any market for the Notes.

In connection with the offering of the Notes, the Initial Purchasers will allocate to certain members of the Hargreaves family and/or related entities £11.334 million of First Lien Notes and £50.0 million of Second Lien Notes. See “Risk Factors—An active trading market may not develop for the Notes, in which case your ability to transfer the Notes will be more limited”.

Listing ............................................. The Issuer will apply to list the Notes on the Official List of the Luxembourg Stock Exchange for trading on the Euro MTF Market.

Governing Law............................... The Notes, each of the Indentures and the Guarantees will be governed by New York law. The Intercreditor Agreement and the Security Document will be governed by English law.

Trustee ............................................ Deutsche Trustee Company Limited.

Security Agent ................................ Lloyds Bank plc.

Transfer Agent and Paying Agent Deutsche Bank, AG London Branch.

Registrar, Transfer Agent and

Listing Agent .............................. Deutsche Bank Luxembourg S.A.

RISK FACTORS

Investing in the Notes involves substantial risks. Please see the section of this Offering Circular captioned

“Risk Factors” for a discussion of certain risks you should carefully consider before investing in the Notes.

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OTHER INFORMATION

Our principal administrative office and the Issuer’s registered office are at Gillibrands Road, Skelmersdale, West Lancashire WN8 9TB (telephone number: +44 (0)1695 552400). TopCo’s registered office is at 3rd Floor, Natwest House, Le Truchot, St Peter Port, Guernsey GY1 1WD (telephone number: +44 (0)1481 739773).

The registered office of Missouri TopCoLimited is 1st Floor Tudor House, Le Bordage, St Peter Port, Guernsey GY1 1DB and its field of activity is a holding company and its registered number is 00045618.

The registered office of Matalan Group Limited is at Gillibrands Road, Skelmersdale, West Lancashire WN8 9TB and its field of activity is a holding company.

The registered office of Matalan Limited is at Gillibrands Road, Skelmersdale, West Lancashire WN8 9TB and its field of activity is retail.

The registered office of Matalan Retail Limited is at Gillibrands Road, Skelmersdale, West Lancashire WN8 9TB and its field of activity is a holding company.

The registered office of Matalan Holding Company Limited is at Gillibrands Road, Skelmersdale, West Lancashire WN8 9TB and its field of activity is a holding company.

The independent auditor of TopCo and its subsidiaries is KPMG LLP.

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SUMMARY FINANCIAL DATA

The summary financial data provided below for TopCo has been derived from our consolidated financial statements as of and for the 52 weeks ended February 25, 2012, the 52 weeks ended February 23, 2013 and the 53 weeks ended March 1, 2014, each of which has been prepared in accordance with IFRS and included elsewhere in this Offering Circular.

The financial information below includes certain non-IFRS measures used to evaluate our economic and financial performance. These measures are not identified as accounting measures under IFRS and therefore should not be considered as an alternative measure to evaluate the performance of our Group. See “Presentation of Financial Data and Non-GAAP Measures”.

This Offering Circular includes unaudited consolidated pro forma financial data which has been adjusted to reflect certain effects of the Refinancing on the financial position and net financial expenses of TopCo as of and for the 53 weeks ended March 1, 2014 as if the Refinancing had occurred (i) on March 1, 2014 for the purposes of calculating net financial position and (ii) on February 24, 2013 for the purposes of calculating net finance costs. The unaudited consolidated pro forma financial data has been prepared for illustrative purposes only and does not purport to represent what the actual consolidated financial position or net financial expenses of TopCo would have been if the Refinancing had occurred (i) on March 1, 2014 for the purposes of the calculation of net financial position and (ii) on February 24, 2013 for the purposes of the calculation of net finance costs, nor does it purport to project TopCo’s consolidated financial position and net finance costs at any future date. The unaudited pro forma adjustments and the unaudited pro forma financial data set forth in this Offering Circular are based on available information and certain assumptions and estimates that we believe are reasonable and may differ materially from the actual adjusted amounts.

You should read this summary financial data in conjunction with “Operating and Financial Review and Prospects” and our consolidated financial statements included elsewhere in this Offering Circular.

52 weeks ended

February 25, 2012 52 weeks ended

February 23, 2013

53 weeks

ended

March 1,

2014

(in £ millions, except ratios or

percentages or as otherwise indicated)

Income Statement Data Revenue .................................................................................................... 1,117.5 1,125.4 1,122.9 Cost of sales .............................................................................................. (1,000.8) (997.8) (1,001.3)

Gross profit ............................................................................................. 116.7 127.6 121.6 Administrative expenses ........................................................................... (54.9) (60.4) (55.3) Exceptional items(1)................................................................................... (4.0) (2.0) (6.9)

Operating profit ...................................................................................... 57.8 65.2 59.4 Finance costs ............................................................................................. (48.0) (47.7) (48.0) Exceptional refinancing costs ................................................................... (8.3) (0.5) — Finance income ......................................................................................... 0.6 0.8 0.6

Profit on ordinary activities before taxation ........................................ 2.1 17.8 12.0 Taxation .................................................................................................... 0.9 (4.3) (2.1)

Profit for the period ................................................................................ 3.0 13.5 9.9

Cash Flow Data Net cash generated from operating activities ............................................ 30.1 45.5 7.6 Net cash used in investment activities ...................................................... (20.4) (21.0) (56.4) Net cash used in financing activities ......................................................... 3.4 — —

Balance Sheet Data (at end of period) Cash and cash equivalents(2) ..................................................................... 96.2 120.7 71.9 Total assets ............................................................................................... 431.6 476.2 438.5 Total liabilities .......................................................................................... (683.7) (700.4) (698.0)

Other Financial Data EBITDA(3)................................................................................................. 91.1 100.4 95.4 Adjusted EBITDA(4) ................................................................................. 92.5 101.6 95.0 Rent(5) ........................................................................................................ 91.5 95.3 98.1 EBITDAR(3) .............................................................................................. 182.6 195.7 193.5 EBITDA margin(6) .................................................................................... 8.2% 8.9% 8.5% EBITDAR margin(7) .................................................................................. 16.3% 17.4% 17.2% Net financial debt(8) ................................................................................... 378.8 354.3 403.1 Net finance costs ....................................................................................... 55.7 47.4 47.4

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Capital expenditure ................................................................................... 22.2 21.7 57.0

Pro Forma Financial Data Pro forma cash and cash equivalents(9) ..................................................... 64.5 Pro forma first lien financial debt(10) ........................................................ 342.0 Pro forma financial debt(11) ....................................................................... 492.0 Pro forma cash net finance costs(12) .......................................................... 37.0 Ratio of pro forma net first lien financial debt to Adjusted EBITDA(13) .. 2.9x Ratio of pro forma net financial debt to Adjusted EBITDA(14) ................ 4.5x Ratio of Adjusted EBITDA to pro forma cash net finance costs(4)(12) ...... 2.6x Selected Operating Data (at end of period)

(15) Number of stores....................................................................................... 214 216 227 Number of full price stores ....................................................................... 209 212 222 Number of clearance stores ....................................................................... 5 4 5 Total trading space (in thousands of square feet) ..................................... 6,206 6,257 6,392

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(1) For a description of these exceptional items see “Operating and Financial Review and Prospects—Results of Operations” for the periods

presented.

(2) Cash and cash equivalents excludes restricted cash of £10.0 million at March 1, 2014, £nil at February 23, 2013 and £nil at February 25, 2012.

(3) We define EBITDA to be operating profit before depreciation and amortization and exceptional items. We define EBITDAR as EBITDA plus rent as described in footnote (5) below. Neither EBITDA nor EBITDAR is a measure of performance under IFRS and you should not consider EBITDA or EBITDAR as an alternative to (i) operating profit or profit for the period (as determined in accordance with IFRS) as a measure of our operating performance, (ii) cash flows from operating, investing and financing activities as a measure of our ability to meet our cash needs or (iii) any other measures of performance under generally accepted accounting principles.

We believe that EBITDA is a useful indicator of our ability to incur and service our indebtedness and can assist securities analysts, investors and other parties to evaluate Matalan. We believe that EBITDAR is a common measure in the retail industry because it allows comparability across the sector for operations regardless of whether a retailer leases or owns its properties. EBITDA, EBITDAR and similar measures are used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing EBITDA and EBITDAR as reported by us to EBITDA or EBITDAR of other companies. EBITDA as presented here differs from the definition of “Consolidated EBITDA” contained in the Indenture.

The following table reconciles operating profit to EBITDA and EBITDAR for the periods indicated.

52 weeks ended

February 25,

2012

52 weeks ended

February 23,

2013

53 weeks

ended

March 1,

2014

(in £ millions) Operating profit ...................................................................................................................... 57.8 65.2 59.4 Depreciation and amortization .................................................................................................. 29.3 33.2 29.1 Exceptional items(a) ................................................................................................................... 4.0 2.0 6.9

EBITDA ................................................................................................................................... 91.1 100.4 95.4 Rent(b) ........................................................................................................................................ 91.5 95.3 98.1

EBITDAR ................................................................................................................................ 182.6 195.7 193.5

(a) The exceptional items in the 2014 Fiscal Year include a provision of £2.9 million for anticipated future

dilapidations costs, relating to the existing distribution center and head office site in Skelmersdale, an acceleration of IFRS 2 charges of £1.8 million following a board director resignation in the period, restructuring costs of £1.6 million and costs associated with the redevelopment of the supply chain of £1.1 million. The 2014 Fiscal Year includes a credit of £0.5 million relating to rental income received during the period and a revision of anticipated future costs, both in respect of properties on which onerous lease contracts were previously provided for.

The exceptional items in the 2013 Fiscal Year include £1.3 million of restructuring costs and £1.5 million of refinancing costs relating to the settlement of a dispute with the holders of an interest rate swap that the Group has previously entered into. The 2013 Fiscal Year includes an aggregate credit of £0.8 million relating to rental income received during the period and a revision of anticipated future costs, both in respect of properties on which onerous lease contracts were previously provided for.

The exceptional items in the 2012 Fiscal Year include a charge of £2.4 million relating to the recognition of a provision for an onerous lease on a property no longer used by the business. In addition, £1.5 million of restructuring costs and £0.1 million of refinancing costs were incurred in the period.

(b) See footnote (5) below.

(4) We define Adjusted EBITDA to be EBITDA as defined in footnote (3) plus additional items that we do not consider to be indicative of our ongoing operating performance. Adjusted EBITDA is not a measure of performance under IFRS and you should not consider Adjusted EBITDA as an alternative to (i) operating profit or profit for the period (as determined in accordance with IFRS) as a measure of our operating performance, (ii) cash flows from operating, investing and financing activities as a measure of our ability to meet our cash needs or (iii) any other measures of performance under generally accepted accounting principles.

We believe that Adjusted EBITDA is a relevant measure for assessing our performance because it is adjusted for certain items which, we believe, are not indicative of our underlying operating performance and thus aids in an

15

understanding of EBITDA. Adjusted EBITDA is used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing Adjusted EBITDA as reported by us to Adjusted EBITDA of other companies.

We encourage you to evaluate each adjustment and the reasons we consider it appropriate as a method of supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that, as an analytical tool, Adjusted EBITDA is subject to all of the limitations applicable to EBITDA. See “Presentation of Financial Data and Non-GAAP Measures”. In addition, you should be aware that we are likely to incur expenses similar to the adjustments in this presentation in the future and that certain of these items could be considered recurring in nature. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

The following table reconciles EBITDA to Adjusted EBITDA for the periods indicated.

52 weeks ended


February 23, 2013

53 weeks

ended

March 1,

2014

(in £ millions) EBITDA ................................................................................................................................ 91.1 100.4 95.4 Bonus payments(a) .................................................................................................................. — 0.2 0.5 B shares(b) ............................................................................................................................... 2.3 0.7 (2.3) Overheads in stock(c) .............................................................................................................. (0.2) (0.4) 0.4 Insurance recovery(d) .............................................................................................................. (1.2) — — Other adjustments(e) ................................................................................................................ 0.5 0.7 1.0

Adjusted EBITDA ................................................................................................................ 92.5 101.6 95.0

(a) This adjustment consists of amounts paid or accrued for discretionary bonuses paid (or to be paid) to

our employees for meeting certain targets.

(b) This adjustment represents amortization expense associated with our B growth shares. In the 2014 Fiscal Year, a revision of the expected B share vesting period in relation to IFRS 2 resulted in a credit. This is a non-cash item.

(c) This non-cash adjustment reallocates to the balance sheet a portion of the cash costs associated with handling stock at our distribution centers to the value of such stock remaining in inventory at period end. We believe this is an appropriate adjustment because it aligns the costs incurred during the period with the value of the stock at the end of the period.

(d) This cash adjustment relates to an insurance recovery on a claim made by the Group.

(e) Other adjustments include an adjustment to the calculation of foreign exchange rates in stock, store opening and closure costs, stock adjustments not normally booked outside the fiscal year end and a charitable donation.

(5) Rent consists of operating lease rentals payable related to land and buildings net of the amortization of lease premiums and rent-free periods.

(6) EBITDA margin consists of EBITDA (as defined in footnote (3) above) for the period divided by revenue for that period.

(7) EBITDAR margin consists of EBITDAR (as defined in footnote (3) above) for the period divided by revenue for that period.

(8) Net financial debt consists of current and non-current borrowings, gross of debt issuance costs, less cash and cash equivalents.

(9) Pro forma cash and cash equivalents include total cash and cash equivalents of £71.9 million as at March 1, 2014, adjusted to give effect to the Refinancing, as described in “Use of Proceeds”.

(10) Pro forma first lien financial debt consists of pro forma financial debt that is secured by a lien over the Collateral on a first-ranking basis, which at closing will consist of the First Lien Notes and the Revolving Credit Facility, but excludes hedging obligations.

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(11) Pro forma financial debt consists of current and non-current borrowings (gross of debt issuance costs and original issue discount) as at March 1, 2014, adjusted for the Refinancing, as described in “Use of Proceeds”. Under IFRS, borrowings are disclosed net of debt issue costs and we have estimated that we will have debt issuance costs of £7.0 million relating to the Refinancing. Pro forma financial debt also assumes that no cash drawings will be made under the £50.0 million Revolving Credit Facility at closing. At closing, the availability under our Revolving Credit Facility will be reduced by outstanding letters of credit and bank guarantees, which at March 1, 2014, equaled £11.0 million.

(12) Pro forma cash net finance costs reflects our finance costs, adjusted for the Refinancing, as described in “Use of Proceeds”. The amount includes interest on the Notes and the undrawn commitment fee related to the Revolving Credit Facility, but excludes non-cash finance costs relating to the amortization of estimated debt issuance costs and the amortization of original issue discount.

Pro forma cash net finance costs have been presented for illustrative purposes only and do not purport to represent what our finance costs would have actually been had the Refinancing occurred on the date assumed, nor do they purport to project our net finance costs for any future period or our financial condition at any future date.

(13) Represents the ratio of (i) pro forma first lien financial debt less pro forma cash and cash equivalents to (ii) Adjusted EBITDA. See notes (4), (9) and (10) above for further information.

(14) Represents the ratio of (i) pro forma financial debt less pro forma cash and cash equivalents to (ii) Adjusted EBITDA. See notes (4), (9) and (11) above for further information.

(15) Excludes overseas franchises.

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RISK FACTORS

An investment in the Notes involves risks. Before investing in the Notes, you should consider carefully the

following risk factors and all information contained in this Offering Circular. Additional risks and uncertainties of which

we are not aware or that we believe are immaterial may also adversely affect our business, financial condition, liquidity,

results of operations or prospects. If any of these events occurs, our business, financial condition, liquidity, results of

operations or prospects could be materially and adversely affected, the Issuer may not be able to pay interest or

principal on the Notes when due and you could lose all or part of your investment.

This Offering Circular also contains forward-looking statements that involve risks and uncertainties. Our actual

results may differ materially from those anticipated in these forward-looking statements as a result of various factors,

including the risks described below and elsewhere in this Offering Circular.

Risks Relating to Our Business

Our industry is highly competitive.

The UK retail clothing and homeware industry is highly competitive, particularly with respect to merchandise selection and quality, store location and design, inventory, price, customer service and advertising. We compete with a wide variety of retailers of varying sizes, covering different product categories across all geographic markets in which we operate. Our range of products is broader than most value apparel retailers and in our “Better” and “Best” products we compete with general retailers and other clothing retailers. In our “Good” products, we compete with supermarkets that are able to offer lower prices through larger volumes. We also compete more generally with local independent retailers, catalogs and various online retailers.

Some of our competitors may have greater financial resources, greater purchasing economies of scale and/or lower cost bases, any of which may give them a competitive advantage over us. Many of our competitors are also located in town centers or in primary retail parks which may have greater customer flow. See “Industry Overview—Competition in the UK Value Clothing Market”. Actions taken by our competitors, as well as actions taken by us to maintain our competitiveness and reputation, have placed and will continue to place pressure on our pricing strategy, margins and profitability. These factors have had in the past, and could have in the future, a material adverse effect on our business, results of operations and financial condition.

Our Matalan Reward loyalty card enables us to maintain an extensive customer database that we use as a key part of our marketing strategy. If our competitors were able to develop their own customer databases or loyalty programs on the same scale as ours then our competitive advantage may be eroded and our business, results of operations and financial condition may be adversely affected.

Our revenue, profit results, cash flow, liquidity and access to capital are sensitive to, and may be adversely affected by,

general economic conditions, consumer confidence and spending patterns.

Our growth, sales and profitability may be adversely affected by negative local, regional, national or international political or economic trends or developments that reduce consumers’ ability or willingness to spend, including periods of economic stagnation or disruption, rising energy costs and the effects of other national and international events, including war, terrorism or the threat thereof.

Purchases of apparel and homeware products often decline during periods when economic or market conditions are unsettled or weak. Continued economic uncertainty, or a further deterioration in economic conditions, along with continued or increasing unemployment levels, food price inflation and tax increases, may affect consumer spending and customers’ use of credit by causing shifts in disposable income and discretionary purchasing, which may adversely affect our revenues and profits through reduced purchases of our products. In such circumstances, we may increase the number of promotional sales, and our business, financial condition and results of operations may be adversely affected.

In the past several years, the general economic and capital market conditions in the United Kingdom and other parts of the world have undergone significant turmoil. These conditions generally affected access to capital and increased the cost of capital. Our liquidity may be affected by changes in the financial markets, or our capital resources may at times be insufficient to satisfy our liquidity needs. If there is an interruption to the global economic recovery, our future cost of debt and equity capital and access to the capital markets could be adversely affected.

Consumers may choose to reduce their purchases from value retailers.

Growth in the value clothing market has outperformed growth in the overall clothing market in recent years. However, there is a risk that consumers may choose to reduce their purchases from value retailers. Among other factors,

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a global economic recovery could result in increases in disposable income of our customers, prompting a shift away from value retailers. In addition, if we fail to adapt to changing consumer preferences in our product offerings, consumers may choose to switch to mid-market retailers who tend to have a higher fashion content, and our business, financial condition and results of operations may be adversely affected.

We are dependent upon the availability of raw materials and transportation and the ability of our third-party

producers, substantially all of whom are located in foreign countries, to meet our requirements.

We source substantially all of our products from non-exclusive, third-party independent manufacturers located in foreign countries. Generally we do not have long-term contracts with these suppliers but, instead, conduct business on an order-by-order basis. Therefore, we compete with other companies for the production capacity of these independent manufacturers. We regularly depend upon the ability of third-party producers to secure a sufficient supply of raw materials, adequately finance the production of goods ordered and maintain sufficient manufacturing and shipping capacity. We may experience operational difficulties with the manufacturers we depend on, such as a reduction in available production capacity, errors in complying with product specifications, insufficient quality control, failures to meet production deadlines or increases in manufacturing costs. Such difficulties may negatively impact our ability to deliver quality products to our stores on a timely basis, which may, in turn, have a negative impact on our customer relationships and result in lower sales, materially adversely affecting our business, financial condition and results of operations.

Additionally, because most of our products are manufactured in Asia and Eastern Europe, we face a variety of risks generally associated with doing business in foreign markets and importing merchandise from these regions. Such risks include, among others, political instability, increased security requirements applicable to foreign goods, imposition of taxes and other charges, restrictions on imports, currency and exchange rate fluctuations, risks related to labor practices, or other issues in the foreign countries or factories in which our merchandise is manufactured, delays in shipping and increased costs of transportation. Any of these risks, in isolation or in combination, could adversely affect our business, financial condition and results of operations.

We and our third-party suppliers rely on the availability of raw materials and transportation at reasonable prices. The principal fabrics used in our business are cotton, linens, wools, other natural fibers, synthetics and blends of these materials. The prices paid for these fabrics depend on the market price for raw materials and the cost of labor used to produce them. The price and availability of certain raw materials, particularly cotton, and the cost and availability of transportation have fluctuated in the past and may fluctuate in the future, depending on a variety of factors, including crop yields, weather, supply conditions, foreign exchange rate fluctuations, labor costs, government regulation, war, terrorism, labor unrest, global health concerns, economic climate, the cost of petroleum and other unpredictable factors. Additionally, costs of our third-party providers are impacted by many of these same factors as well as energy costs. Energy costs have increased in recent years and further increases may result in an increase in our transportation costs for distribution, utility costs for our retail stores and costs to purchase product from our manufacturers. Any significant increase in the price of products sold to us, raw materials or transportation or a decrease in the availability of raw materials or cost-efficient transportation could cause an increase in our average unit cost and negatively impact our gross margins. For example, if cotton prices were to increase significantly, we may have to increase the price of our products in order to offset the increased cost of cotton. Price is a key driver in consumers’ purchasing decisions in the value segment, and if we were unable to pass these cost increases on to our customers, we would expect our business, financial condition and results of operations to be adversely affected.

We also require third-party producers to meet certain standards, and have a management team in place to check the supply chain for working conditions, compliance with environmental regulations and other matters before placing business with them. As a result of costs relating to compliance with these standards, we may pay higher prices than our competitors, who may not insist on the same standards. In addition, the labor and business practices of independent apparel manufacturers have received increased attention from the media, non-governmental organizations, consumers and governmental agencies in recent years. Failure by us or our independent manufacturers (or any sub contractors hired by those manufacturers without our knowledge) to adhere to labor or other laws or business practices and standards accepted as ethical and may result in potential litigation, negative publicity and political pressure relating to any of these events, which could have a material adverse effect on our business, financial condition and results of operations.

Global or local economic conditions could impair the solvency of our suppliers and other counterparties.

There could be a number of effects from a challenging economic environment. The inability of suppliers to access liquidity, or the insolvency of suppliers, could lead to delivery delays or failures. In addition, failures of other counterparties, including banks, insurance providers and counterparties to contractual arrangements, could negatively impact our business.

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Any negative impact on the reputation of and value associated with our name could adversely affect our business.

The Matalan name is an important asset of our business. Maintaining the reputation of, and value associated with, the Matalan name is central to the success of our business. If our business strategy and its execution fails to accomplish this objective our brand could be adversely impacted. In addition, the international nature of our supply base makes us dependent on third-party suppliers to operate their businesses effectively, on ethical and commercially reasonable terms, and in a manner that does not negatively impact the reputation of the Matalan name. Substantial erosion in the reputation of, or value associated with, the Matalan name could have a material adverse effect on our business, financial condition and results of operations.

If we are not able to respond to fashion trends in a timely manner or adjust our product offer successfully, we may be

left with unsold inventory, decreased profits or losses.

Our success depends in part on our designers’ ability to anticipate and respond to changing fashion tastes and consumer demands and to translate market trends into an appropriate, saleable product offer. Customer tastes and fashion trends change rapidly. Since most of our products are manufactured in Asia and Eastern Europe, the lead times between ordering and delivery make it more important to accurately predict, and more difficult to fulfill, the demand for items. If we are unable to successfully identify or react to changing styles or trends and we misjudge the market for our product offer, our sales will be lower and we may be faced with a significant amount of unsold merchandise. We may be forced to increase our marketing promotions or price markdowns, which could have a material adverse effect on our financial condition and results of operations.

Our business could be harmed if we fail to maintain proper inventory levels

We seek to maintain appropriate inventory levels in our stores. Inventory levels in excess of customer demand may result in inventory markdowns or the sale of excess inventory at discounted prices. In the event that a product or group of products is successful, initial inventories will be sold and we will need to replenish our stock at one or more locations. Because a number of product ranges are continuing to be replenished in ratio packs, despite the implementation of single unit replenishment through the Singles supply chain program, we may not be able to replenish a particular store with the products, including sizes and colors, that need to be replenished and as a result we may end up with excess inventory in one location and insufficient inventory in another. In response, we may be forced to increase our marketing promotions or price markdowns, which could have a material adverse effect on our financial condition and results of operations. Conversely, we may experience inventory shortages, which might result in unfilled orders and lost revenues. Any failure to maintain appropriate inventory levels could have a material adverse effect on our financial condition and results of operation.

If we are unable to successfully implement planned improvements to our supply chain architecture, our growth and

profitability could be harmed.

Over the past several years, we have significantly consolidated our supplier base in order to increase stock efficiency and improve our margins by lowering costs, while still maintaining a diversity of supply. We have also relocated elements of our quality assurance and control functions offshore and closer to our suppliers, which has resulted in reduced lead times and failure costs. In order to improve the availability of stock, we are in the process of rolling out the Singles supply chain program, which will allow a portion of our stock to be replenished in specified sizes, thereby reducing the quantity of stock per store and frequency and size of markdowns.

Our implementation of the Singles supply chain program is dependent upon our distribution centers being ready to manage the receipt and processing of single unit items. It is possible that the new capability required at the distribution centers will not be fully operational at the point stock begins to arrive in the new format. Failure to adequately prepare our distribution centers by that time may necessitate the reprocessing of stock at additional cost to the business and cause a time delay in stock reaching stores. This could impact the availability of stock at stores, which could lead to dissatisfied customers, a loss of sales and damage to our reputation.

Failure to successfully complete the implementation of our planned improvements could have a material adverse effect on our business, financial condition and results of operations.

We depend on a limited number of facilities for distribution of our products to our stores and to our online customers

which, if affected, could have a material adverse effect on our operations.

We have two distribution centers, one is in West Lancashire (Skelmersdale) and one is in Northamptonshire (Corby). Any major breakdown of plant or equipment, or an accident such as a serious flood or fire, in either or both of our distribution centers might significantly impact both our ability to distribute products to our stores and maintain an adequate product supply chain and our ability to meet the requirements of our online customer orders. Such disruption

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could have an adverse effect on our in-store inventory and our online sales and therefore could materially adversely affect our revenue, results of operations and financial condition.

We currently lease our distribution center locations. If we are unable to renew our leases, our ability to lease a suitable replacement location on favorable terms is subject to many factors which are not within our control, such as conditions in the local real estate market, competition for desirable properties and our relationships with current and prospective landlords. If our lease payments increase or we are unable to renew existing leases or lease suitable alternative locations, our profitability may be significantly harmed.

We are currently in the process of relocating our Skelmersdale distribution center to Knowsley. We are undertaking the management of this project in line with best practice program management principles and supported by third-party experts. The program of change includes a phased transition into the new facility, with specific milestone points to review progress that are intended to manage the associated risks of change. If we are unable to transition to these new premises without significant delays, our business, financial condition and results of operations may be materially adversely affected.

Any disruption or other adverse event affecting our relationship with our key operational suppliers could adversely

affect our business.

We depend on Capgemini and other operational suppliers for information technology and other forms of support. Any significant disruption or other adverse event affecting our relationship with this service provider could have a material adverse effect on our business, financial condition and results of operations. If such events lead us to replace Capgemini, or our other operational suppliers, we may face risks and costs associated with a transfer of operations to different suppliers.

A disruption in our information technology systems could adversely affect our operations.

Our business activities rely to a significant degree on the efficient and uninterrupted operation of our various computer and communications systems and those of third parties. We have outsourced many of our information technology functions. Any significant breakdown of plant or equipment, accident such as a serious flood or fire or other significant disruption to the operations or the operations of our third-party vendor could significantly affect our ability to manage our information technology systems, which in turn could have a material adverse effect on our business, financial condition and results of operations.

One of our strategies is to increase the amount of online sales of our products. Any disruption to our computer or communications systems could have a disproportionate effect on online sales and negatively affect our reputation in this area.

We may be unable to maintain and upgrade our information technology systems in a manner that will avoid interruptions or disruptions of such systems. A failure or inability to maintain and upgrade our information technology systems may have an adverse effect on our business.

The majority of our sales depend on customers specifically travelling to our stores.

Most of our stores are located outside of town or city centers and thus require our customers to travel to our stores. Sales at our stores are derived, in part, from the high volume of traffic and, unlike stores in city centers or in retail parks, we must make our stores attractive destinations. Our stores must compensate for the ability of many of our competitors to generate consumer footfall due to the location of their stores. Because our customers have to travel to our stores, we have a higher level of conversion than high street retailers and our success is partly dependent on our ability to retain these higher conversion rates. Sales volume and retail traffic may be adversely affected by economic downturns in a particular area, higher transportation costs, competition from other retail and non-retail attractions and the perceived or actual difficulty in visiting our locations. Failure to make our stores an attractive “destination” or a significant decline in the volume of customer traffic or in the conversion rates associated with our customers would have a material adverse effect on our business, financial condition and results of operations.

We depend on the ability to lease space for our stores.

We currently lease all of our store locations. Our current leases expire at various dates ranging from less than one year to more than 15 years. Our leases provide for rent reviews, generally every five years, at which time our rents could increase. Our ability to maintain our existing rental rates during renewals or to renew any expired lease on favorable terms will depend on many factors which are not within our control, such as conditions in the local real estate market, competition for desirable properties and our relationships with current and prospective landlords. If we are unable to renew our leases, our ability to lease a suitable replacement location on favorable terms is subject to the same

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factors. If our lease payments increase or we are unable to renew existing leases or lease suitable alternate locations, this could have a material adverse effect on our business, financial condition and results of operations.

Our high street and Sporting Pro concept expansion program and plan to develop online sales may be unsuccessful.

An aspect of our growth strategy is to open high street and Sporting Pro stores in the United Kingdom. The success of this strategy will depend, in part, upon our ability to open and operate new stores on a timely and cost-effective basis while continuing to increase sales at our existing stores. The opening of new stores could result in the diversion of sales from our existing stores in certain cases, which may cause reductions in our operating profit and like-for-like sales. Additionally, our ability to enter the sportswear market successfully is underpinned by our ability to capitalize on our existing customer base and brand awareness.

Our ability to successfully open new stores also depends upon a number of other factors, including the identification of sites suitable for our stores in terms of proximity to our target demographic and distance from existing stores; the negotiation of acceptable lease terms; the hiring, training and retention of qualified personnel; the level of existing and future competition in areas where new stores are to be located; our ability to integrate new stores into our operations on a profitable basis; and the capability of our existing distribution system to accommodate new stores. In addition, the process of locating, fitting-out and opening new stores will require significant management time and attention, which may be diverted from other important activities. Because of these requirements we may be unable to open new stores on a timely or profitable basis, or be unable to secure store sites on acceptable terms. Failure to successfully implement our new store rollout strategy could have a material adverse effect on our business, financial condition and results of operations.

We may be unable to successfully implement our planned strategies to grow our online sales and our multi-channel

customer base.

Our ability to develop our online sales depends on a number of factors, including: successfully marketing our website; hiring, training and retaining qualified personnel; integrating our growing online operations on a profitable basis; our existing distribution centers accommodating our growing online operations; addressing the effect of any competition our online operations may have with our existing stores; reacting to increased competition from other clothing retailers as they introduce transactional websites or expand their existing online presence; and stocking an appropriate selection of products and sizes for online consumers, who tend to have different shopping needs than customers in our physical stores. Our efforts to expand online sales may not result in increased sales or profits. Failure to successfully implement our plan to develop online sales could have a material adverse effect on our business, financial condition and results of operations.

We intend to add to our multi-channel customer base by transitioning store and online-only customers into multi-channel customers. In order to achieve an effective transition of customers to our multi-channel customer base, we rely heavily on advertising and promotional campaigns to drive growth in our click and collect channel which in turn generates footfall in stores from online customers. These campaigns may not be as successful as expected, and customers may not transition to multi-channel at the desired rate, impacting the future growth of sales and profit and having a material adverse effect on our business, financial condition and results of operations.

Our growth strategy will require us to expand and improve our operations and could strain our existing resources and

cause the performance of our existing stores to suffer.

Our operating complexity will increase as our store base grows and our online sales increase. Such increased complexity will require that we continue to expand and improve our operating capabilities, and grow, train and manage our employee base. We will need to continually evaluate the adequacy of our information and distribution systems and controls and procedures related to financial reporting. Implementing new systems, controls and procedures and any changes to existing systems, controls and procedures could present challenges we do not anticipate and could negatively impact us.

In addition, we may be unable to hire, train and retain a sufficient number of personnel to successfully manage our growth. Moreover, our planned expansion will place increased demands on our existing operational, managerial, administrative and other resources. These increased demands could cause us to operate our business less effectively, which in turn could cause deterioration in the financial performance of our individual stores or our overall business. Furthermore, new stores and our growing transactional website could compete with our existing stores for customers, causing the number of customers who visit our existing stores to decline and the reduction of like-for-like sales.

Our growth could also make it difficult for us to adequately predict the expenditures we will need to make in the future. This growth may also place increased burdens on our suppliers, as we will likely increase the size of our merchandise orders. In addition, increased orders may negatively impact our approach of generally striving to minimize

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the time from purchase order to product delivery, and may increase our markdown risk. If we do not make the necessary capital or other expenditures necessary to accommodate our future growth, we may not be successful in our growth strategy. We may not be able to anticipate all of the demands that our expanding operations will impose on our business, personnel, systems and controls and procedures, and our failure to appropriately address such demands could have a material adverse effect on our business, financial condition and results of operations.

Our future growth and profitability could be adversely affected if our advertising and marketing programs are not

effective in generating sufficient levels of customer awareness and traffic.

We rely heavily on print advertising, especially direct mail, to promote new store openings, to increase consumer awareness of our product offer and pricing and to drive store and online traffic. In addition, we rely and will increasingly rely on other forms of media advertising including email communications. Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our advertising and marketing programs. In order for our advertising and marketing programs to be successful, we must manage advertising and marketing costs effectively in order to maintain acceptable operating margins and return on our marketing investment and convert customer awareness into actual store visits and product purchases.

Our advertising and marketing expenditures, including those associated with advertising campaigns, may not result in increased total or comparable sales or generate sufficient levels of product awareness. We may not be able to manage our advertising and marketing expenditures on a cost-effective basis.

There are a limited number of companies capable of distributing our direct mail advertising at the volume levels that we require. If any of these companies cease operations, or if their expenses (e.g., postage, printing and paper costs) increase substantially, then it is likely that our advertising expenses will increase, which will have a material adverse effect on our business, financial condition and results of operations.

Higher labor costs could adversely affect our business.

We compete with other retailers for good and dependable employees. The supply of such employees is limited and competition to hire and retain them could result in higher labor costs. In addition, our labor costs would be affected by changes in minimum wage laws, and an increase in the minimum wage in the United Kingdom would result in higher labor costs. If this happens and we are not able to pass on higher costs to our consumers, these higher labor costs could have a material adverse effect on our business, financial condition and results of operations.

Currency fluctuations and hedging risks could adversely affect our earnings and cash flow.

Our business is subject to risks due to fluctuations in currency exchange rates primarily related to U.S. dollars. A majority of our purchases from suppliers are denominated in U.S. dollars. Substantially all of our revenue is denominated in pounds sterling. The exchange rates between the U.S. dollar and other world currencies have fluctuated significantly in recent years and may continue to fluctuate significantly in the future. See “Exchange Rate and Currency Information”. Although we may benefit from any future weakening in the exchange rate of the U.S. dollar against the pound sterling, we could be adversely affected by future unfavorable shifts in currency exchange rates. We engage in foreign exchange hedging transactions, but our hedging strategies may not adequately protect our operating results from the effects of exchange rate fluctuations or may limit any benefit that we might otherwise receive from favorable movements in such rates. See “Operating and Financial Review and Prospects—Critical Accounting Policies—Derivative Financial Instruments”.

Our business could suffer as a result of weak sales during extreme or unseasonable weather conditions.

Our results are affected by periods of abnormal, severe or unseasonable weather conditions. Exceptionally cold or hot temperatures or other extreme weather conditions, such as storms or floods, may make it difficult for our employees and customers to travel to our stores located out-of-town. Temporary severe weather during one of our peak trading seasons, such as late spring or early summer, could adversely affect our sales and, in turn, have a material adverse effect on our business, financial condition and results of operations.

Periods of unseasonably warm or cold weather could render a portion of our inventory incompatible with the prevailing weather conditions, leading to a slowdown in sales at full margin followed by more extensive markdowns at the end of the season. An extended period of unpredictable and unseasonal weather could have a material adverse effect on our business, financial condition and results of operations.

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Our business could suffer as a result of weak sales during our peak selling seasons

Our business is subject to seasonal peaks. We traditionally perform well in terms of revenue, operating results and cash flow during late spring and early summer. We also have a material percentage of our sales in the Christmas season, although we are less dependent than high street retailers on the Christmas season. We incur additional expenses in anticipation of higher sales during that period, including for acquiring additional inventory and hiring additional employees. If revenue during our peak seasons is significantly lower than we expect for any reason, we may be unable to adjust our expenses in a timely fashion and may be left with a substantial amount of unsold inventory, especially in seasonal merchandise that is difficult to liquidate. In that event, we may be forced to rely on permanent markdowns or promotional sales to dispose of excess inventory, which could have a material adverse effect on our business, financial condition and results of operations. At the same time, if we do not have sufficient liquidity to increase our inventory, or if we otherwise fail to purchase a sufficient quantity of merchandise, we may not have an adequate supply of products to meet consumer demand. This may cause us to lose sales and could have a material adverse effect on our business, financial condition and results of operations.

We hold licenses for the use of other parties’ brands which may not be renewed.

We have entered into license and design agreements to use certain trademarks and trade names, such as Disney characters, to market and sell our products. These license and design agreements will expire at various dates in the future. We may be unable to renew these licenses on acceptable terms upon expiration or unable to acquire new licenses to use other popular trademarks. The termination or expiration of a license agreement could cause us to lose the sales and any associated profits generated pursuant to such license and in certain cases could result in an impairment charge for damages which could result in a material adverse effect to our business, financial condition and results of operations.

In addition to certain obligations to comply with the terms of the license agreement, most of our significant licenses provide minimum payment thresholds for royalty payments that we must pay regardless of the sales we are able to make of the licensed products. If these thresholds are not met, our licensors may be permitted contractually to terminate these agreements or seek payment of minimum royalties even if the minimum sales are not achieved. In addition, our licensors may license their trademarks to other third parties, and we are unable to control the quality of these goods that others produce. If licensors or others do not maintain the quality of these trademarks or if the brand image deteriorates, our sales and any associated profits generated by such brands may decline.

We may be unable to protect our trademarks and other intellectual property or may otherwise have our brand names

harmed.

We believe that our registered and common-law trademarks and other intellectual property, as well as other contractual arrangements, including licenses and other proprietary intellectual property rights, have significant value and are important to our continued success and our competitive position due to their recognition by retailers and consumers. Over 55% of our sales during the 2014 Fiscal Year were attributable to branded products for which we own the trademark. Therefore, our success depends to a significant degree upon our ability to protect and preserve our intellectual property. We rely on the enforcement of laws in the United Kingdom and other countries to protect our proprietary intellectual rights. We may not be able to sufficiently prevent third parties from using our intellectual property without our authorization, particularly in those countries where the laws do not protect our intellectual property rights as fully as in the United Kingdom. The use of our intellectual property or similar intellectual property by others could reduce or eliminate any competitive advantage we have developed, causing us to lose sales or otherwise harm the reputation of our brands.

Additionally, in the past third parties have claimed that products we sell infringe their intellectual property rights. The actions that we have taken may not be sufficient to prevent others from seeking to block sales of our products as violations of proprietary rights. Although we have not been materially inhibited from selling products in connection with trademark disputes, as we extend our brands into new product categories and new product lines, we could become subject to litigation based on allegations of the infringement of intellectual property rights of third parties. In the event a claim of infringement against us is successful, we may be required to pay damages, royalties or license fees to continue to use intellectual property rights that we had been using, or we may be unable to obtain necessary licenses from third parties at a reasonable cost or within a reasonable time. Litigation and other legal action of this type, regardless of whether it is successful, could result in substantial costs to us and diversion of our management and other resources.

We are subject to numerous statutes and regulations and complaints from customers and other third-parties that

could affect us.

We are subject to certain customs, truth-in-advertising, product safety, intellectual property protection, employee, health and safety, and other laws and regulations, including consumer credit and consumer protection regulations and zoning and occupancy ordinances, that regulate retailers generally and/or govern the importation,

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promotion and sale of merchandise. If we fail to comply with these laws and regulations, or to promptly implement any action required by any change in these laws or regulations, we could be subject to temporary or permanent closure of the affected stores, fines or other penalties under the controlling laws and regulations. In addition, if any such laws or regulations are violated by third-parties that supply goods or services to us, we could experience delays in shipments and receipt of goods. Any of these events could have a material adverse effect on our business, financial condition and results of operations.

We are also subject to numerous national and local environmental laws and regulations in the United Kingdom. These environmental laws and regulations are constantly changing, as are the priorities of those who enforce them. Environmental conditions relating to prior, existing or future properties may have a material adverse effect on our business, financial condition and results of operations.

We are also the subject of complaints and litigation from our customers, employees or other third parties, alleging health, environmental, safety or operational concerns, nuisance, negligence, or failure to comply with applicable laws and regulations. These claims, even if successfully disposed of without direct adverse financial effect, could have a material adverse effect on our reputation and divert our financial and management resources from more beneficial uses. If we were to be found liable under any such claims, it could result in a material adverse effect on our business, financial condition and results of operations. See “Business—Legal Proceedings”.

Legal requirements are subject to frequent changes and differing interpretations, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.

We collect extensive non-public data from customers, business contacts and employees, and the failure to adequately

maintain and protect such information, or failure to comply with applicable data protection law, could have a material

adverse effect on our business, financial condition and results of operations.

We regularly collect, process, store and handle non-public data (including name, address, date of birth and other personal data) from our customers, business contacts and employees as part of the operation of our business, and therefore we must comply with data protection laws in the United Kingdom and the European Union. Those laws impose certain requirements upon us in respect of the collection, use and processing of such personal data. Failure to comply with data protection laws could potentially lead to regulatory censure, fines, civil and criminal liability, as well as reputational and financial costs. In addition, the laws that would be applicable to such a failure are rapidly evolving and may become more burdensome and costly to comply with. The scope of the notification made to, and consents obtained from, data subjects may limit our ability to deal freely with the personal data in our databases. It may not be possible for us to lawfully use that data for purposes other than those notified to data subjects, or for which they have provided consent.

We are also exposed to the risk that the personal data we control could be wrongfully accessed or used, whether by employees or third parties, or otherwise lost or disclosed or processed in breach of applicable data protection law. There can be no assurance that no such breach has occurred in the past without our knowledge or may not occur in the future. If we, or any of the third-party service providers on which we rely, fail to process, store or protect such personal data in a secure manner or if any such theft or loss of personal data were otherwise to occur, we could face liability under data protection laws. This could also result in damage to our brand and reputation, as well as the loss of new or exiting personal members or customers, any of which could have a material adverse effect on our business, financial condition and results of operations.

Organized strikes or work stoppages by unionized employees may have a material adverse effect on our business,

financial condition and results of operations.

We have three agreements in place with the GMB union; one which covers the Skelmersdale distribution center and Knowsley warehouse, one which covers the Corby distribution center and the other which covers transport personnel. The agreements have been in place since 2003 and although they do not have expiry dates, we periodically review the terms for potential updates. Our inability to renegotiate acceptable terms with the GMB union could result in strikes by the affected workers and increased operating costs as a result of higher wages or benefits paid to union members. We believe our relations with our employees and the GMB union are both good and we have not experienced any significant labor disputes or work stoppages, however, our operations may be affected by problems in the future. If the unionized workers were to engage in a strike or other work stoppage, we could experience a significant disruption of operations and/or higher ongoing labor costs, which may have a material adverse effect on our business, financial condition and results of operations.

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We depend upon key management and other personnel, and the departure of any of such management or personnel

could adversely affect our business.

We are currently managed by certain key senior management personnel, particularly Allan Leighton, Jason Hargreaves, John Mills, Stephen Hill and Arnu Misra, and other members of our senior management. These personnel have extensive experience and knowledge of our industry and its potential, as well as of companies in our industry. Our business also requires us to hire and retain skilled employees, particularly designers and buyers, and our success depends in part on our ability to continue to attract, motivate and retain highly qualified employees. The location of our headquarters in Skelmersdale can have a negative impact on our ability to do so. This risk will not be removed by the relocation to our new headquarters in Knowsley. The loss of services of key personnel, or a failure to attract and retain qualified new personnel, could adversely affect our business.

We may not be able to retain all personnel on relocation of our head office and distribution center from Skelmersdale

to Knowsley.

Our head office and distribution function, currently located in Skelmersdale, is relocating to Knowsley during the 2014 Fiscal Year. Knowsley is located less than 10 miles from our current Skelmersdale location, however, a number of our staff reside locally to the Skelmersdale site and we acknowledge that they may choose not to transfer resulting in redundancy payments. There is a risk that the failure to transfer a large portion of our staff may lead to disruption in the operations of the business, resulting in additional recruitment efforts and costs. We are consulting with our employees and working with the unions to put in place measures to minimize this risk, including the provision of transport for staff from our current site to our new site. We currently do not anticipate that this risk will impact any of our senior management team or other key personnel.

Risks Relating to Our Indebtedness

Our high leverage and debt service obligations could adversely affect our business and prevent us from fulfilling our

obligations with respect to the Notes.

After completion of the Refinancing, we will be highly leveraged and have significant debt service obligations. On a pro forma basis, after giving effect to the Refinancing, as of March 1, 2014, we would have had total debt (gross of debt issuance costs and any original issue discount) of £492.0 million, all of which is senior secured indebtedness, including the Notes. See “Description of Certain Financing Arrangements”. In addition, we will have £50.0 million available for drawing under the Revolving Credit Facility (before giving effect to any outstanding letters of credit and bank guarantees, which at March 1, 2014 reduced availability by £11.0 million). At closing, we expect the availability under our Revolving Credit Facility to be reduced by £11.0 million relating to undrawn letters of credit and bank guarantees.

We anticipate that our high leverage will continue for the foreseeable future. Our high leverage could have important consequences to you, including, but not limited to:

• making it more difficult for us to satisfy our debt obligations;

• increasing our vulnerability to a continuing downturn in our business or economic and industry conditions;

• limiting our ability to obtain additional financing and increasing the cost of any such financing to fund future working capital requirements, capital expenditures, business opportunities and other corporate requirements;

• requiring the dedication of a substantial portion of our cash flow from operations to the payment of principal of, and interest on, our indebtedness, which means that this cash flow would not be available to fund our operations and for other corporate purposes;

• limiting our flexibility in planning for, or reacting to, changes in our business, the competitive environment and our industry; and

• placing us at a competitive disadvantage relative to a competitor with less leverage.

We are subject to restrictive debt covenants, which may limit our operating flexibility.

The Indentures contain covenants which impose significant restrictions on the way we can operate, including restrictions on the ability of the Company and its subsidiaries to:

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• borrow or guarantee additional indebtedness and issue certain preferred shares;

• make certain payments, including dividends or share repurchases;

• redeem or repurchase indebtedness junior to the Notes;

• make certain investments;

• create certain liens;

• merge or consolidate with other entities;

• create encumbrances or restrictions on the payment of dividends or other amounts to the Issuer from any of its restricted subsidiaries;

• enter into certain transactions with affiliates;

• sell, lease or transfer certain assets, including shares of any restricted subsidiary of the Issuer;

• guarantee certain types of other indebtedness of the Issuer and its restricted subsidiaries without also guaranteeing the Notes; and

• impair the Collateral.

All of these limitations will be subject to significant exceptions and qualifications. See “Description of First Lien Secured Notes—Certain Covenants” and “Description of Second Lien Secured Notes—Certain Covenants”.

These covenants could limit our ability to finance our future operations and capital needs and our ability to pursue acquisitions and other business activities that may be in our interest. In addition, we will also be subject to the affirmative and negative covenants contained in the Revolving Credit Agreement. The Revolving Credit Agreement also requires us to maintain a ratio of total net debt to EBITDA, as defined in the Revolving Credit Agreement. Our ability to meet this financial ratio may be affected by events beyond our control and, as a result, we may not be able to meet these ratios.

We may not have enough cash available to service our debt and to sustain our operations.

Our ability to make scheduled payments on the Notes and to meet our other debt service obligations when due and to fund our ongoing operations or to refinance our debt, depends on our future operating and financial performance and our ability to generate cash, which will be affected by our ability to successfully implement our business strategy as well as general economic, financial, competitive, regulatory, legal, technical and other factors, including those discussed in these “Risk Factors”, beyond our control. If we cannot generate sufficient cash to meet our debt service requirements, we may, among other things, need to refinance all or a portion of our debt, including the Notes, obtain additional financing, delay planned capital expenditures or sell assets. If we are not able to refinance any of our debt, obtain additional financing or sell assets on commercially reasonable terms or at all, we may not be able to satisfy our obligations with respect to our debt, including the Notes. In that event, borrowings under other debt agreements or instruments that contain cross-default or cross-acceleration provisions may become payable on demand, and we may not have sufficient funds to repay all of our debts, including the Notes. See “Description of Certain Financing Arrangements”.

Our failure to comply with the agreements relating to our outstanding indebtedness, including as a result of events

beyond our control, could result in an event of default that could materially and adversely affect our results of

operations and our financial condition.

The terms of our Revolving Credit Facility contain a financial covenant of total net debt to EBITDA, as defined in the Revolving Credit Agreement. If in the longer term such covenant is breached, due, for example, to a decline in our financial performance resulting from economic conditions, it may result in an event of default which, if not cured or waived, could result in the enforcement of security and/or the acceleration of such indebtedness, which would be an event of default under the Notes. In such circumstances we may not be able to obtain refinancing of our indebtedness. This in turn, would have an adverse effect on our results of operations and our financial condition.

If there were an event of default under any of the agreements relating to our outstanding indebtedness, including the Revolving Credit Agreement, the holders of the defaulted debt could cause all amounts outstanding with respect to

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that debt to be due and payable immediately. Our assets or cash flow may be insufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default. Further, if we are unable to repay, refinance or restructure our indebtedness under our secured debt, the holders of such debt could proceed against the Collateral securing that indebtedness. In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments.

Risks Relating to the Notes

Risks Related to the First Lien Notes

Creditors under the Revolving Credit Facility and certain priority hedging liabilities are entitled to be repaid with the

proceeds of the Collateral sold in any enforcement sale in priority to the holders of the First Lien Notes, and the

claims of the holders of the First Lien Notes will be effectively subordinated to the rights of our existing and future

secured creditors to the extent of the value of the assets securing such creditors which do not also secure the First

Lien Notes.

Lenders under our Revolving Credit Facility, certain hedge counterparties and the holders of certain debt we may incur in the future (including hedging obligations) will receive priority on the proceeds from an enforcement. See “Description of Certain Financing Arrangements—Intercreditor Agreement”. As a result, although the First Lien Notes are secured by first-priority liens on the Collateral, the claims of the holders of the First Lien Notes will be effectively subordinated to the rights of our existing and future secured creditors who have priority in respect of proceeds from enforcement of the liens over assets that constitute Collateral to the extent of the value of such assets. In the event we are subject to any foreclosure, dissolution, winding-up, liquidation, reorganization, administration or other bankruptcy or insolvency proceeding, lenders under our Revolving Credit Facility, certain hedge counterparties and the holders of any other such super-priority debt will receive payment in respect of their obligations prior to any payments in respect of the First Lien Notes. To the extent that after these priority creditors receive payment from enforcement proceeds, the remaining enforcement proceeds from Collateral are insufficient to repay holders of the First Lien Notes in their entirety, holders of the First Lien Notes will generally participate ratably with all creditors with respect to indebtedness of the relevant obligor (including holders of the Second Lien Notes), based upon the respective amounts owed to each creditor, in the remaining assets of the relevant obligor. As a result, holders of First Lien Notes may receive less, ratably, than holders of such super priority secured indebtedness.

In addition, claims of our secured creditors which are secured by assets that do not also secure the First Lien Notes will have priority with respect to such assets over the claims of holders of the First Lien Notes. As such, the claims of the holders of the First Lien Notes will be effectively subordinated to the claims of such secured creditors to the extent of the value of the assets securing such indebtedness.

As of March 1, 2014, after giving pro forma effect to the Refinancing, we would have had an aggregate principal amount of £342 million of secured indebtedness outstanding under the First Lien Notes. We will be permitted to borrow additional indebtedness in the future under the terms of each Indenture and can secure such indebtedness, including in certain cases, on a super-priority basis or on a pari passu basis. Our ability to incur additional debt in the future secured on the Collateral may have the effect of diluting the ratio of the value of such Collateral to the aggregate amount of the obligations secured by the Collateral.

Under the Intercreditor Agreement, the holders of the First Lien Notes are subject to certain limitations on their

ability to enforce the transaction security.

The Trustee for the First Lien Notes will enter into the Intercreditor Agreement with, among others, the Security Agent and representatives of the other debt secured by the Collateral, including the administrative agent for Revolving Credit Facility (the “Senior Agent”) and the trustee for the Second Lien Notes. Other creditors may become parties to the Intercreditor Agreement in the future. Each holder of a First Lien Note by accepting a First Lien Note will be deemed to have agreed to and be bound by the terms of the Intercreditor Agreement. Among other things, the Intercreditor Agreement governs the enforcement of the security documents, the sharing in any recoveries from such enforcement and the release of the Collateral by the Security Agent. The Intercreditor Agreement provides that the Security Agent shall act upon the instructions of the instructing group, which will be determined in accordance with the terms and conditions of the Intercreditor Agreement. The Intercreditor Agreement further provides that in the event that the classes of creditors entitled to provide enforcement instructions to the Security Agent provide conflicting instructions, such creditors must, subject to certain exceptions, consult with each other for a period of at least five business days (or such longer period that will end concurrently with a 30 day consultation period during which period no enforcement action may be taken unless certain insolvency events have occurred). Although enforcement instructions given by holders of the First Lien Notes will generally prevail after such consultation period, under certain circumstances enforcement instructions by the lenders under our Revolving Credit Facility will prevail. These arrangements could be disadvantageous to the holders of the First Lien Notes in a number of respects and may permit the lenders under the Revolving Credit Facility to control

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enforcement in circumstances in which their interests are different than those of the holders of the First Lien Notes. See “Description of Certain Financing Arrangements—Intercreditor Agreement—Proposed Enforcement Action; Consultation Period”.

Enforcement of the First Lien Notes and the First Lien Guarantees will be subject to a prior standstill period with the

creditors under our Revolving Credit Facility, certain hedging obligations and the Second Lien Notes.

The Intercreditor Agreement provides that no creditor or agent (including the Trustee) with respect to the First Lien Notes or First Lien Guarantees, the Revolving Credit Facility, certain hedging obligations or the Second Lien Notes may take enforcement action until the expiration of a 30-day standstill period. The Senior Agent, the Security Agent, the Trustee (in its capacity under both the First Lien Indenture and Second Lien Indenture) have agreed pursuant to the terms of the Intercreditor Agreement to consult with each other as to any proposed enforcement action during such 30-day standstill period. This enforcement standstill will end upon the expiration of such 30-day period (or such shorter period as the Senior Agent and the Trustee may agree in writing) or upon the occurrence of certain insolvency events. Prior to the termination of such 30-day standstill period, neither the Trustee nor the holders of the First Lien Notes will be able to take any action to enforce their claims under the First Lien Indenture, the First Lien Notes or the First Lien Guarantees. See “Description of Certain Financing Arrangements—Intercreditor Agreement—Proposed Enforcement Action; Consultation Period”.

Risks Related to the Second Lien Notes

Claims of our first-priority senior secured creditors will have priority with respect to their security over the claims of

the holders of the Second Lien Notes, and the claims of holders of the Second Lien Note will be effectively

subordinated the rights of our existing and future secured creditors to the extent of the value of the assets securing

such creditors which do not also secure the Second Lien Notes.

Pursuant to the terms of the Intercreditor Agreement, claims of our first-priority senior secured creditors including lenders under the Revolving Credit Facility, certain hedge counterparties and the holders of the First Lien Notes will have priority with respect to the assets securing their indebtedness over the claims of holders of the Second Lien Notes.

The Second Lien Indenture will permit us to incur additional first-priority senior secured indebtedness which will also have a prior claim on all proceeds realized from any enforcement of Collateral. As a result, holders of the Second Lien Notes may receive less, ratably, than the holders of our first-priority secured indebtedness, including the lenders under the Revolving Credit Facility, certain hedge counterparties and the holders of the First Lien Notes. If the proceeds realized from the enforcement or sale of such Collateral exceeds the amount owed under our first-priority senior secured indebtedness, any excess amount of such proceeds will be paid to the Trustee (in its capacity under the Second Lien Indenture) on behalf of itself and the registered holder of the Second Lien Notes for the benefit of the holders of the Second Lien Notes. If there are no excess proceeds, or if the amount of such excess proceeds is less than the aggregate amount of the obligations under the Second Lien Notes, the holders of Second Lien Notes will not fully recover (if at all) under such Collateral.

In addition, claims of our secured creditors which are secured by assets that do not also secure the Second Lien Notes will have priority with respect to such assets over the claims of holders of the Second Lien Notes. As such the claims of holders of the Second Lien Notes will be effectively subordinated to the clams of such secured creditors to the extent of the value of the assets securing such indebtedness.

Enforcement of the Second Lien Notes and the Second Lien Guarantees will be subject to a prior standstill period

with the creditors under our Revolving Credit Facility, certain hedging obligations and the First Lien Notes.

The Intercreditor Agreement provides that no creditor or agent (including the Trustee) with respect to the Second Lien Notes or Second Lien Guarantees, the Revolving Credit Facility, certain hedging obligations or the First Lien Notes may take enforcement action until the expiration of a 30-day standstill period. The Senior Agent, the Security Agent, the Trustee (in its capacity under both the Second Lien Indenture and First Lien Indenture) have agreed pursuant to the terms of the Intercreditor Agreement to consult with each other as to any proposed enforcement action during such 30-day standstill period. This enforcement standstill will end upon the expiration of such 30-day period (or such shorter period as the Senior Agent and the Trustee may agree in writing) or upon the occurrence of certain insolvency events. Prior to the termination of such 30-day standstill period, neither the Trustee nor the holders of the Second Lien Notes will be able to take any action to enforce their claims under the Second Lien Indenture, the Second Lien Notes or the Second Lien Guarantees. See “Description of Certain Financing Arrangements—Intercreditor Agreement—Proposed Enforcement Action; Consultation Period”.

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Enforcement of the Collateral with respect to Second Lien Notes and the Second Lien Guarantees will be subject to a

179-day prior standstill period.

The Intercreditor Agreement provides that no creditor or agent (including the Trustee) with respect to the Second Lien Notes or Second Lien Guarantees may take enforcement action with respect to the Collateral until the expiration of a 179-day standstill period or following certain circumstances occurs, except with the prior consent of the Majority Senior Creditors and the First Lien Required Holders (as defined below under “Description of Certain Financing Arrangements—Intercreditor Agreement”). Each holder of a Second Lien Note by accepting a Second Lien Note will be deemed to have agreed to and be bound by the terms of the Intercreditor Agreement. Prior to the termination of such 179-day standstill period, neither the Trustee nor the holders of the Second Lien Notes will be able to take any action to enforce the Collateral with respect to the Second Lien Indentures, the Second Lien Notes or the Second Lien Guarantees. This enforcement standstill will end upon the expiration of such 179-day period (or such shorter period as the Senior Agent, and the First Lien Trustee may agree) unless terminated earlier upon the occurrence of certain events. Notwithstanding the foregoing, neither the Second Lien Trustee nor the holders of the Second Lien Notes will be permitted to take any enforcement action with respect to the Collateral if the Instructing Group (as defined below under “Description of Certain Financing Arrangements—Intercreditor Agreement”) is taking any enforcement action. See “Description of Certain Financing Arrangements—Intercreditor Agreement—Enforcement—Second Lien Enforcement”.

Risks Relating to the Collateral securing the First Lien Notes and the Second Lien Notes

Applicable law and other limitations on the enforceability of the security may adversely affect its validity and

enforceability.

The obligations of the Issuer under the Notes and of the Guarantors under the Guarantees will be, subject to the restrictions and limitations detailed herein, secured by the Collateral. The security may be subject to claims that it should be limited or subordinated in favor of our existing and future creditors under English or other applicable law. In addition, enforcement of the security will be limited to the extent of the amount which can be secured by the Issuer and the Guarantors without rendering the security voidable or otherwise ineffective under applicable law. Enforcement of the security against the Issuer and the Guarantors will be subject to certain defenses available to security providers generally. These laws and defenses include those that relate to insolvency, voidable preference, financial assistance, corporate purpose or benefit, the preservation of share capital, thin capitalization and defenses affecting the rights of creditors generally.

The value of the Collateral securing the Notes may not be sufficient to satisfy the obligations under the Notes.

In order to secure the obligations under the Notes, we will grant a first-ranking lien with respect to the First Lien Notes and a second-ranking lien with respect to the Second Lien Notes over substantially all of the undertakings, goodwill, property, assets and rights of the Issuer and each Guarantor, including the shares in their subsidiaries, which Collateral also secures obligations under our Revolving Credit Facility and certain hedging obligations on a super-priority basis. The Collateral may also secure additional indebtedness to the extent permitted by each of the Indentures. To the extent that other security interests, pre-existing liens, liens permitted under the Indentures and other rights encumber the Collateral securing the Notes, those parties may have or may exercise rights and remedies with respect to the Collateral that could adversely affect the value of the security and the ability of the Security Agent to realize or foreclose on the security. No appraisal of the value of the Collateral has been made, and the fair market value of the Collateral may be subject to fluctuations based on factors that include, among others, general economic conditions, industry conditions and similar factors. The amount to be received upon a sale of the Collateral would be dependent on numerous factors, including, but not limited to, the actual fair market value of the Collateral at such time, the timing and the manner of the sale and the availability of buyers. By its nature, some of the assets that comprise the Collateral are illiquid and/or may have no readily ascertainable market value and its value to other parties may be less than its value to us. In addition, the value of the Collateral may decrease because of obsolescence, impairment or certain casualty events. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, the Collateral may not be sold in a timely or orderly manner, and the proceeds from any sale or liquidation of this Collateral may not be sufficient to repay the obligations under the First Lien Notes and/or the Second Lien Notes. In addition, lenders under our Revolving Credit Facility, certain hedge counterparties and the holders of certain debt we may incur in the future (and, with respect to the Second Lien Notes, the First Lien Notes) will receive priority to the proceeds from an enforcement, which may limit the proceeds available to satisfy obligations under the Notes. See “Description of Certain Financing Arrangements—Intercreditor Agreement”.

The Collateral securing the Notes will be subject to any and all exceptions, defects, encumbrances, liens and other imperfections permitted under the Indentures. The existence of any such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of the Collateral securing the Notes as well as the ability of the Security Agent to realize or foreclose on such security.

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The security interests of the Security Agent will be subject to practical problems generally associated with the realization of security interests over real or personal property such as the Collateral. For example, the Security Agent may need to obtain the consent of a third party to enforce a security interest. The Security Agent may be unable to obtain any such consents or that such consents will be given when required. Accordingly, the Security Agent may not have the ability to foreclose upon security and the value of the security may significantly decrease.

Certain of our material contracts terminate or may be terminated by the counterparties thereto upon the occurrence of certain insolvency events. If we, the holders of the Notes, the Trustee or any other party causes such an insolvency event, we would lose our rights under those contracts, which represent a material percentage of our expected turnover. As a consequence, the alternative methods available to the holders of the Notes for enforcing the security interests in the Collateral in certain of our material contracts may be limited.

The granting of the security interests in the Collateral may create hardening periods for such security Interests in

accordance with the law applicable in certain jurisdictions.

The granting of new security interests in connection with the issuance of the Notes and the amendment and restatement of the Revolving Credit Facility may create hardening periods for such security interests in certain jurisdictions. The applicable hardening period for these new security interests will run as from the moment each new security interest has been granted, perfected or recreated. At each time, if the security interest granted, perfected or recreated were to be enforced before the end of the respective hardening period applicable in such jurisdiction, it may be declared void and/or it may not be possible to enforce it.

The security over the Collateral will not be granted directly to the holders of the Notes.

The security interests in the Collateral that will secure our obligations under the Notes and the obligations of the Guarantors under the Guarantees will not be granted directly to the holders of the Notes, but will be granted only in favor of the Security Agent. The Trustee for the each of the First Lien Notes and Second Lien Notes will enter into the Intercreditor Agreement with among others, the Security Agent and representatives of the other indebtedness secured by the Collateral, including the Revolving Credit Facility and counterparties to certain hedging obligations. Other creditors may become parties to the Intercreditor Agreement in the future. Among other things, the Intercreditor Agreement governs the enforcement of the security documents, the sharing in any recoveries from such enforcement and the release of the Collateral by the Security Agent. As a consequence, holders of the Notes will not have direct security interests and will not be entitled to take enforcement action in respect of the Collateral securing the Notes, except through the Security Agent, who will follow instructions as set forth under the caption “Description of Certain Financing Arrangements—Intercreditor Agreement—Distressed Disposals”. In addition, in certain circumstances, lenders under the Revolving Credit Facility will have the right to direct the Security Agent in enforcement actions with respect to the Collateral.

The Issuer and the Guarantors will have control over the Collateral securing the Notes, and the sale of particular

assets could reduce the pool of assets securing the Notes.

The Security Document will allow the Issuer and the Guarantors to remain in possession of, retain exclusive control over, freely operate, and collect, invest and dispose of any income from the Collateral securing the Notes. So long as no default or event of default under the Indentures governing the Notes would result therefrom, the Issuer and the Guarantors may, among other things, without any release or consent by the Security Agent, conduct ordinary course activities with respect to the Collateral, such as selling, factoring, abandoning or otherwise disposing of Collateral and making ordinary course cash payments, including repayments of indebtedness.

Under the Intercreditor Agreement, the holders of the Notes have certain limitations on their ability to enforce the

transaction security and have agreed that the Collateral and Guarantees may be released in certain circumstances

without their consent.

The Trustee in its capacity as trustee for the First Lien Notes and as trustee for the Second Lien Notes will enter into the Intercreditor Agreement with, among others, the Security Agent and representatives of the other debt secured by the Collateral, including the administrative agent for the Revolving Credit Facility (the “Senior Agent”) and counterparties to certain hedging arrangements. Other creditors may become parties to the Intercreditor Agreement in the future. Each holder of a Note by accepting a Note will be deemed to have agreed to and be bound by the terms of the Intercreditor Agreement. Among other things, the Intercreditor Agreement governs the enforcement of the security documents, the sharing in any recoveries from such enforcement and the release of the Collateral by the Security Agent. The Intercreditor Agreement provides that the Security Agent shall act upon the instructions of the instructing group, which will be determined in accordance with the terms and conditions of the Intercreditor Agreement. The Intercreditor Agreement further provides that in the event that the classes of creditors entitled to provide enforcement instructions to the Security Agent provide conflicting instructions, such creditors must, subject to certain exceptions, consult with each other for a period of five business days (or such longer period that will end concurrently with a 30 day standstill period)

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before any enforcement action may be taken. Although enforcement instructions given by holders of the First Lien Notes will prevail after such consultation period, under certain circumstances enforcement instructions by the lenders under our Revolving Credit Facility will prevail. In addition, holders of the Second Lien Notes (or the Trustee for the Second Lien Notes) may not provide instruction to enforce the Collateral until the expiration of a 179-day standstill period (unless terminated earlier upon the occurrence of certain events) and only to the extent that the Instructing Group (as defined below under “Description of Certain Financing Arrangements—Intercreditor Agreement”) are not instructing the security agent with respect to the enforcement of the Collateral. These arrangements could be disadvantageous to the holders of the Notes in a number of respects and may permit the lenders under the Revolving Credit Facility to control enforcement in circumstances in which their interests are different than those of the holders of the First Lien Notes and/or Second Lien Notes. In addition, the interests of the holders of the First Lien Notes will be different than the interests of the holders of the Second Lien Notes.

If the creditors or the Security Agent sell the shares of any Guarantor that is a subsidiary of the Issuer pursuant to an enforcement action in accordance with the Intercreditor Agreement, the Guarantee of any such Guarantor (and any Guarantor that is a subsidiary of such Guarantor) and the liens over Collateral consisting of the shares of such Guarantor and its assets (and the assets of any of its subsidiaries) will automatically release provided that the disposal in question:

• is effected either (i) pursuant to a public auction or (ii) where an internationally recognized investment bank or international accountancy firm selected by the Security Agent has delivered to the creditor representatives an opinion that the disposal price of the relevant share capital or assets is fair from a financial point of view after taking into account all relevant circumstances;

• is for cash (or substantially all cash); and

• any liabilities owed to the creditors by any member of the Group whose shares are being disposed of and from any subsidiary of such member of the Group are also being released.

See “Description of Certain Financing Arrangements—Intercreditor Agreement—Distressed Disposals”.

Upon any release of a Guarantee by a Guarantor in connection with an enforcement sale as described above, the creditors of such Guarantor would be entitled to be paid in full before any payment may be made to the holders of the equity of such Guarantor. As a result, the holders of the Notes will be effectively subordinated to the liabilities of each Guarantor to the extent the Guarantee of such Guarantor is released. In addition, the Collateral available to secure the Notes could be reduced in connection with the sales of assets or otherwise, subject to the requirements of the financing documents and the Indentures.

Risks Relating to Our Structure

The Issuer and certain of the Guarantors are holding companies dependent upon cash flow from subsidiaries to meet

their obligations. on the Notes and the Guarantees, respectively. The Issuer has no turnover generating operations of

its own and will depend on cash from our operating subsidiaries to be able to make payments on the Notes.

The Issuer, TopCo, Matalan Group Limited, Matalan Limited and Matalan Holding Company Limited are each holding companies with no independent business operations or significant assets other than investments in their subsidiaries. Each of these holding companies depends upon the receipt of sufficient funds from its subsidiaries to meet its obligations. The Issuer is a wholly-owned holding company that does engage in operating activities. If our operating subsidiaries do not distribute cash to the Issuer to make scheduled payments on the Notes, we do not expect the Issuer to have any other source of funds that would allow it to make payments to the holders of the Notes.

Various agreements governing our debt may restrict the ability of these subsidiaries to move cash within their restricted group. Applicable tax laws may also subject such payments to further taxation. Applicable law may also limit the amounts that some of our subsidiaries will be permitted to pay as dividends or distributions on their equity interests, or even prevent such payments.

The inability to transfer cash among entities within their respective consolidated groups may mean that even though the entities, in aggregate, may have sufficient resources to meet their obligations, they may not be permitted to make the necessary transfers from one entity in their restricted group to another entity in their restricted group in order to make payments to the entity owing the obligations.

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The Notes and each of the Guarantees will be structurally subordinated to present and future liabilities of our

non-guarantor subsidiaries.

Not all of our subsidiaries will guarantee the Notes. Generally, claims of creditors of a non-guarantor subsidiary, including trade creditors and claims of preference shareholders (if any) of the subsidiary, will have priority with respect to the assets and earnings of the subsidiary over the claims of creditors of its parent entity, including claims by noteholders under the Guarantees. In the event of any foreclosure, dissolution, winding-up, liquidation, administration, reorganization or other insolvency or bankruptcy proceeding of any of our non-Guarantor subsidiaries, holders of their indebtedness and their trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to its parent entity. As such, the Notes and each Guarantee will each be structurally subordinated to the creditors (including trade creditors) and preference shareholders (if any) of our non-Guarantor subsidiaries. Although our non-Guarantor subsidiaries currently represent only a small portion of our revenues, the covenants in the Notes permit us to incur additional indebtedness at subsidiaries which do not guarantee the Notes and in the future the revenues and EBITDA of such entities could increase, possibly substantially.

The interests of our controlling shareholders may conflict with yours as a holder of the Notes.

The interests of our controlling shareholders may conflict with yours as a holder of outstanding Notes. The controlling shareholders have (directly or indirectly) the power to, among other things, affect our legal and capital structure and our day-to-day operations and may have an incentive to increase the value of their investments or cause us to distribute funds at the expense of our financial condition, which could impact our ability to make payments on the Notes. In addition, the controlling shareholders have the power to elect a majority of our board of directors and appoint new officers and management and, therefore, effectively control many other major decisions regarding our operations. The interests of the controlling shareholders may conflict with your interests as a holder of the Notes. For more information, see “Principal Shareholders” and “Certain Relationships and Related Party Transactions”.

We are subject to UK insolvency laws in England and Wales and, with respect to TopCo, Guernsey insolvency laws,

which may not be as favorable to unsecured creditors as insolvency laws in other jurisdictions.

The Issuer, Matalan Retail Limited and a number of the Group’s other subsidiaries are incorporated under the laws of England and Wales, and insolvency proceedings with respect to each of these companies could be required to proceed under the laws of the jurisdiction in which its “center of main interests”, as defined in the relevant European Union regulation, is situated at the time insolvency proceedings are commenced. Although there is a rebuttable presumption that the “center of main interests” will be in the jurisdiction of incorporation, this presumption is not conclusive. However, insolvency proceedings with respect to these companies would be likely to proceed under, and be governed by, English insolvency law. English insolvency law may not be as favorable to your interests as the laws of the United States or other jurisdictions with which you are familiar. In the event that we or any one or more of the Guarantors experiences financial difficulty, it is not possible to predict with certainty the outcome of insolvency or similar proceedings. Our obligations under the Notes will be guaranteed by the Guarantors and secured by security interests over the Collateral. English insolvency laws and other limitations could limit the enforceability of a Guarantee against a Guarantor and the enforceability of security interests. Below is a brief description of certain aspects of English insolvency law relating to certain limitations on the Guarantees or the security interests of the Notes. The application of these laws could adversely affect your ability to enforce your rights under the Guarantees or the collateral securing the Notes and limit any amounts that you may receive.

In respect of TopCo, the principles which underpin Guernsey company insolvency law under the Companies (Guernsey) Law, 2008 (as amended) are substantially the same as those which underpin UK company insolvency law, save that the European Union regulation referred to above regarding the “center of main interests” does not apply in Guernsey. In the event that insolvency proceedings with respect to a Guernsey company could proceed under the laws of more than one jurisdiction, a Guernsey Court would consider the question of which jurisdiction is the most appropriate center for the main insolvency proceedings and what level of international assistance may be appropriate to offer another jurisdiction seized of insolvency proceedings, based on common law principles. Save as set out above, and save to the extent that any relevant Guernsey customary law principles, if any, apply, the foregoing analysis in relation to the Guarantors incorporated in England and Wales is broadly correct in terms of the Guernsey-incorporated Guarantor.

Formal insolvency proceedings under the laws of England and Wales may be initiated in a number of ways, including by the company or a creditor making an application for administration, in or out of court, or by a creditor filing a petition to wind up the company or the company resolving to do so (in the case of liquidation). A company may be wound up if it is unable to pay its debts, and may be placed into administration if it is, or is likely, to become unable to pay its debts, and the administration is reasonably likely to achieve one of three statutory purposes.

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Under the Insolvency Act 1986, as amended (the “UK Insolvency Act”), a company is unable to pay its debts if it is insolvent on a “cash flow” basis (a company is deemed unable to pay its debts as they fall due, if it fails to satisfy a creditor’s statutory demand for a debt exceeding £750, if it fails to satisfy in full a judgment debt (or similar court order) or if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due) or if it is insolvent on a “balance sheet” basis (the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities).

Fixed versus Floating Charges

There are a number of ways in which fixed charge security has an advantage over floating charge security: (a) an administrator appointed to a charging company can convert floating charge assets to cash and use such cash, or use cash subject to a floating charge, to meet statutory administration expenses (which can include the costs of continuing to operate the business of the charging company) while in administration in priority to the claims of the floating charge holder; (b) a fixed charge, even if created after the date of a floating charge, may have priority as against the floating charge over the charged assets; (c) general costs and expenses (including the remuneration of the insolvency officeholder) properly incurred in a winding-up or administration are payable out of the assets of the charging company (including the assets the subject of the floating charge) in priority to floating charge claims; (d) until the floating charge security crystalizes, a company is entitled to deal with assets that are subject to floating charge security in the ordinary course of business, meaning that such assets can be effectively disposed of by the charging company so as to give a third-party good title to the assets free of the floating charge and so as to give rise to the risk of security being granted over such assets in priority to the floating charge security; (e) there are particular insolvency “clawback” risks in relation to floating charge security (please see “—Laws relating to preference, transactions at an undervalue, misfeasance and corporate benefit may adversely affect the validity and enforceability of payments under the senior guarantee of the notes by Matalan Retail Limited and the other Guarantors—Grant of Floating Charge”); and (f) floating charge security is subject to the claims of preferential creditors (such as occupational pension scheme contributions and salaries and holiday claims owed to employees (subject to a cap per employee)) and to ring-fencing for unsecured creditors (please see “—Administration and Floating Charges” below).

Under English insolvency law, there is a possibility that a court could find that the fixed security interests expressed to be created by a security document could take effect as floating charges because the description given to them as fixed charges is not determinative. Whether fixed security interests will be upheld as fixed rather than floating security interests will depend, among other things, on whether the chargee has the requisite degree of control over the ability of the relevant chargor to deal in the relevant assets and the proceeds thereof and, if so, whether such control is exercised by the chargee in practice. Where the chargor is free to deal with the secured assets without the consent of the chargee, the court is likely to hold that the security interest in question constitutes a floating charge, notwithstanding that it may be described as a fixed charge.

Administration and Floating Charges

The relevant English insolvency statutes empower English courts to make an administration order in respect of an English company or a company with its “centre of main interest” in England in certain circumstances. An administration order can be made if the court is satisfied that the relevant company is or is likely to become “unable to pay its debts” and that the administration order is reasonably likely to achieve the purpose of administration. An administrator can also be appointed out of court by the company, its directors or the holder of a qualifying floating charge which has become enforceable, and different procedures apply according to the identity of the appointor. The purpose of an administration is comprised of three parts that must be looked at successively: rescuing the company as a going concern or, if that is not reasonably practicable, achieving a better result for the company’s creditors as a whole than would be likely if the company were to enter into liquidation without first being in administration or, if neither of those objectives is reasonably practicable, and the interests of the creditors as a whole are not unnecessarily harmed thereby, realizing property to make a distribution to secured or preferential creditors. During the administration, in general no proceedings or other legal process may be commenced or continued against the debtor, or security enforced over the company’s property, except with leave of the court or the consent of the administrator (statutory moratorium). Certain creditors of a company in administration may be able to realize their security over that company’s property notwithstanding the statutory moratorium. This is by virtue of the disapplication of the moratorium in relation to security interests created or arising under a “financial collateral agreement” (generally, security/collateral in respect of cash or financial instruments, such as shares, bonds or tradeable capital market debt instruments) under the Financial Collateral Arrangements (No. 2) Regulations 2003. If an English company were to enter administration, it is likely that the security or the guarantee granted by it may not be enforced while it is in administration, without the leave of court or consent of the administrator. The Security Agent may not obtain this leave of court or consent of the administrator. In addition, other than in limited circumstances, no administrative receiver can be appointed by a secured creditor in preference to an administrator, and any already appointed must resign if requested to do so by the administrator. Where the company is already in administration no other receiver may be appointed.

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In order to empower the Security Agent to appoint an administrative receiver or an administrator to the company, the floating charge granted by the relevant English obligor must constitute a “qualifying floating charge” for purposes of English insolvency law and, in the case of the ability to appoint an administrative receiver, the qualifying floating charge must, unless the security document predates September 15, 2003, fall within one of the exceptions in the UK Insolvency Act to the prohibition on the appointment of administrative receivers. In order to constitute a qualifying floating charge, the floating charge must be created by an instrument which (a) states that the relevant statutory provision applies to it; (b) purports to empower the holder to appoint an administrator of the company or (c) purports to empower the holder to appoint an administrative receiver. The Security Agent will be the holder of a qualifying floating charge if such floating charge security, together (if necessary) with the fixed charge security interests, relate to the whole or substantially the whole of the property of the relevant English company and at least one such security interest is a qualifying floating charge. The most relevant exception to the prohibition on the appointment of an administrative receiver is the exception relating to “capital market arrangements” (as defined in the UK Insolvency Act), which will apply if the issue of the Notes creates a debt of at least £50 million for the relevant company during the life of the arrangement and the arrangement involves the issue of a “capital markets investment” (which is defined in the UK Insolvency Act, but is generally a rated, listed or traded debt instrument).

An administrator, receiver (including administrative receiver) or liquidator of the company will be required to ring-fence a certain percentage of the proceeds of enforcement of floating charge security for the benefit of unsecured creditors (the “prescribed part”). Under current law, this applies to 50% of the first £10,000 of floating charge realizations and 20% of the remainder over £10,000, with a maximum aggregate cap of £600,000. Whether the assets that are subject to the floating charges and other security will constitute substantially the whole of the relevant English company’s assets at the time that the floating charges are enforced will be a question of fact at that time.

Liquidation/Winding Up

Liquidation is a company dissolution procedure under which the assets of the company are realized and distributed by the liquidator to creditors in the statutory order of priority prescribed by the UK Insolvency Act. At the end of the liquidation process the company will be dissolved. In the case of a liquidation commenced by way of a court order, no proceedings or other actions may be commenced or continued against the company except by leave of the court and subject to such terms as the court may impose (although security enforcement is not affected).

Under English insolvency law, a liquidator has the power to disclaim any onerous property, which is any unprofitable contract and any other property of the company that cannot be sold, readily sold or may give rise to a liability to pay money or perform any other onerous act. A contract may be unprofitable if it gives rise to prospective liabilities and imposes continuing financial obligations on the company that may be detrimental to creditors. However, this power does not apply to a contract all the obligations under which have been performed nor can it be used to disturb accrued rights and liabilities.

Laws relating to preference, transactions at an undervalue, misfeasance and corporate benefit may adversely affect

the validity and enforceability of payments under the senior guarantee and pledge of security of the Notes by Matalan

Retail Limited and the other Guarantors.

Matalan Retail Limited and a number of the Group’s other subsidiaries are incorporated under the laws of England and Wales. Under insolvency law in England and Wales, the liquidator or administrator of a company may apply to the court to set aside a transaction entered into by that company within up to two years prior to it entering into relevant insolvency proceedings, if the company was unable to pay its debts, as defined in Section 123 of the Insolvency Act 1986, as amended, at the time of, or becomes unable to pay its debts as a consequence of, that transaction. The date a company “enters into” relevant insolvency proceedings (administration or liquidation) (“Onset of Insolvency”) is dealt with under the Insolvency Act 1986 and may be earlier than the date a company enters administration or is wound up. A transaction might be subject to a challenge if a company received consideration of significantly less value than the benefit given by that company or if it puts a person into a position which is better than the position that person would be in if the company proceeded into insolvent liquidation. A court generally will not intervene, however, if a company entered into the transaction in good faith for the purpose of carrying on its business and if at the time it did so there were reasonable grounds for believing the transaction would benefit the company. In the event of insolvency, the issuance of the Guarantee and pledging of security by Matalan Retail Limited or any of the Group’s other subsidiaries incorporated under the laws of England and Wales could be challenged by a liquidator or administrator or a court might not support our analysis that the Guarantee was entered into or the security granted in good faith for the purposes of carrying on the Group’s business and for the benefit of each company. In general terms, in such circumstances the Courts of England and Wales have the power to make void such transactions, or restore the position to what it would have been if the company had not entered into the transaction.

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If a court voided any Guarantee or any payment under any Guarantee or any pledge of security as a result of a transaction at an undervalue or preference, or held it unenforceable for any other reason, you may cease to have any claim against the Guarantor granting such guarantee and pledge of security.

Connected Persons

A connected person for the purposes of transactions at an undervalue, preferences and invalid floating charges, is a party who is a director, shadow director, an associate of such director, or an associate, of the relevant company. A party is associated with an individual if a relative of the individual or the individual’s husband, wife or civil partner, or the husband, wife or civil partner of a relative of the individual or the individual’s husband, wife or civil partner. A party is associated with a company if employed by that company. A company is associated with another company if the same person has control of both companies, or a person has control of one and persons who are his associates, or he and persons who are his associates, have control of the other, or if a group of two or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person of whom he is an associate. “Persons relative to an individual” and “Persons with control” are also defined by reference to provisions of the UK Insolvency Act.

Challenges to Guarantees and Security

There are circumstances under English insolvency law in which the granting by an English company of security and guarantees can be challenged. In most cases, this will only arise if the company is placed into administration or liquidation within a specified period of the granting of the guarantee or security. Therefore, if during the specified period an administrator or liquidator is appointed to an English company, the administrator or liquidator may challenge the validity of the security or guarantee given by such company.

The following potential grounds for challenge may apply to charges and guarantees:

Transaction at an Undervalue

Under English insolvency law, a liquidator or administrator of an English company could apply to the court for an order to set aside the creation of a security interest or a guarantee if such liquidator or administrator believes that the creation of such security interest or guarantee constituted a transaction at an undervalue. It will only be a transaction at an undervalue if at the time of the transaction or as a result of the transaction, the English company is or becomes insolvent (as defined in the Insolvency Act of 1986). The transaction can be challenged if the English company grants the security interest or the guarantee within a period of two years prior to the Onset of Insolvency. A transaction might be subject to being set aside as a transaction at an undervalue if the company makes a gift to a person, if the company receives no consideration or if the company receives consideration of significantly less value, in money or money’s worth, than the consideration given by such company. A court, however, generally will not intervene if it is satisfied that the company entered into the transaction in good faith and for the purpose of carrying on its business and that, at the time it did so, there were reasonable grounds for believing the transaction would benefit it. If the court determines that the transaction was a transaction at an undervalue, the court can make such order as it thinks fit to restore the position to what it would have been in if the transaction had not been entered into. In any proceedings, it is for the administrator or liquidator to demonstrate that the English company was insolvent unless a beneficiary of the transaction was a connected person (as defined in the UK Insolvency Act), in which case there is a presumption of insolvency and the connected person must demonstrate the solvency of the English company in such proceedings.

Preference

Under English insolvency law, a liquidator or administrator of an English company could apply to the court for an order to set aside the creation of a security interest or a guarantee if such liquidator or administrator believed that the creation of such security interest or such guarantee constituted a preference. It will only be a preference if at the time of the transaction or as a result of the transaction the English company is insolvent. The transaction can be challenged if the English company grants the security interest or the guarantee within a period of six months (if the beneficiary of the security or the guarantee is not a connected person) or two years (if the beneficiary is a connected person) prior to the Onset of Insolvency. A transaction may constitute a preference if it has the effect of putting a creditor of the English company (or a surety or guarantor for any of the company’s debts or liabilities) in a better position (in the event of the company going into insolvent liquidation) than such creditor, guarantor or surety would otherwise have been in had that transaction not been entered into. If the court determines that the transaction was a preference, the court has very wide powers for restoring the position to what it would have been if that preference had not been given, which could include reducing payments under the Notes and the Guarantees (although there is protection for a third-party who enters into a transaction in good faith and without notice). For the court to determine a preference, however, it must be shown that the English company was influenced by a desire to produce the preferential effect. In any proceedings, it is for the

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administrator or liquidator to demonstrate that the English company was insolvent and that the company was influenced by a desire to produce the preferential effect, unless the beneficiary of the transaction was a connected person, in which case there is a presumption that the company was influenced by a desire to produce the preferential effect and the connected person must demonstrate in such proceedings that there was no such influence.

Transaction Defrauding Creditors

Under English insolvency law, where it can be shown that a transaction was at an undervalue and was made for the purposes of putting assets beyond the reach of a person who is making, or may make, a claim against a company, or of otherwise prejudicing the interests of a person in relation to the claim that that person is making or may make, the transaction may be set aside by the court as a transaction defrauding creditors. This provision may be used by any person who claims to be a “victim” of the transaction and is not therefore limited to liquidators or administrators. There is no time limit in the English insolvency law within which the challenge must be made and the relevant company does not need to be insolvent at the time of the transaction. If the court determines that the transaction was a transaction defrauding creditors, the court can make such orders as it thinks fit to restore the position to what it would have been if the transaction had not been entered into and to protect the interests of the victims of the transaction. The relevant court order may affect the property of, or impose any obligation on, any person, whether or not he is the person with whom the transaction was entered into. However, such an order will not prejudice any interest in property which was acquired from a person other than the debtor company in good faith, for value and without notice of the relevant circumstances and will not require a person who received a benefit from the transaction in good faith, for value and without notice of the relevant circumstances, to pay any sum unless such person was a party to the transaction.

Grant of Floating Charge

Under English insolvency law, if an English company is insolvent at the time of (or as a result of) granting the floating charge then such floating charge is invalid except to the extent of the value of the money paid to, or goods or services supplied to, or any discharge or reduction of any debt of, the relevant English company at the same time as or after the creation of the floating charge. The requirement for the English company to be insolvent at the time of (or as a result of) granting the floating charge does not apply where the floating charge is granted to a connected person. If the floating charge is granted to a connected person then the floating charge is invalid except to the extent of the value of the money paid to, or goods or services supplied to, or any discharge or reduction of any debt of, the relevant English company at the same time as or after the creation of the floating charge, whether the relevant English company is solvent or insolvent. “Connected person” is defined by the Insolvency Act 1986. The transaction can be challenged if the English company grants the floating charge within a period of one year (if the beneficiary is not a connected person) or two years (if the beneficiary is a connected person) prior to the Onset of Insolvency. However, if the Floating Charge qualifies as a “security financial collateral agreement” under the Financial Collateral Arrangements (No. 2) Regulations 2003 (as amended), the floating charge will not be subject to challenge as described in this paragraph. An administrator, or a liquidator (as applicable), does not need to apply to court for an order declaring that a floating charge is invalid. Any floating charge created during the relevant time period is automatically invalid except to the extent of the value of the money paid to, or goods or services supplied to, or any discharge or reduction of any debt of, the relevant English company at the same time as or after the creation of the floating charge (plus certain interest), whether the relevant English company is solvent or insolvent at the time of grant.

Extortionate Credit Transaction

An administrator or a liquidator can apply to court to set aside an extortionate credit transaction. The court can review extortionate credit transactions entered into by an English obligor up to three years before the day on which the English obligor entered into administration or went into liquidation. A transaction is “extortionate” if, having regard to the risk accepted by the person providing the credit, the terms of it are (or were) such as to require grossly exorbitant payments to be made (whether unconditionally or in certain contingencies) in respect of the provision of the credit or it otherwise grossly contravened ordinary principles of fair dealing.

Limitation on Enforcement

The grant of a Guarantee or other form of security by any of the English obligors in respect of the obligations of another group company must satisfy certain legal requirements. More specifically, such a transaction must be allowed by the respective company’s memorandum and articles of association. To the extent that the above do not allow such an action, there is the risk that the grant of the guarantee or other security can be found to be void and the respective creditor’s rights unenforceable. Some comfort may be obtained for third parties if they are dealing with an English obligor in good faith; however, the relevant legislation is not without difficulties in its interpretation. Further, corporate benefit must be established for each English obligor in question by virtue of entering into the proposed transaction. Section 172 of the Companies Act 2006 provides that a director must act in the way that he considers, in good faith, would be most likely to promote the success of the English obligor for the benefit of its members as a whole. If the

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directors enter into a transaction where there is no or insufficient commercial benefit, they may be found as abusing their powers as directors and such a transaction may be vulnerable to being set aside by a court.

Currency of Debt

In addition, under English insolvency law any debt payable in a currency other than pounds sterling must be converted into pounds sterling at the “official exchange rate” prevailing at the date when the debtor went into liquidation or administration. This provision overrides any agreement between the parties. The “official exchange rate” for these purposes is the middle exchange rate on the London Foreign Exchange Markets as published for the date in question or, if no such rate is published, such rate as the court determines. Accordingly, in the event that the Issuer or a Guarantor goes into liquidation or administration, holders of the Notes may be subject to exchange rate risk between the date that the Issuer or such Guarantor (as the case may be) went into liquidation or administration and receipt of any amounts to which such holders of the Notes may become entitled.

Investors in the Notes may have limited recourse against the independent auditors.

See “Independent Auditors” for a description of the independent auditors’ reports, including language limiting the auditors’ scope of duty in relation to such reports and the consolidated financial statements to which they relate. In particular, in respect of the audit reports relating to the annual financial statements reproduced herein, KPMG LLP and PricewaterhouseCoopers LLP, in accordance with guidance issued by The Institute of Chartered Accountants in England and Wales, provide: “This report, including the opinion, has been prepared for and only for the company’s members as a body in accordance with Section 262 of The Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing”. The SEC would not permit such limiting language to be included in a registration statement or a prospectus used in connection with an offering of securities registered under the Securities Act or in a report filed under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). If a U.S. court (or any other court) were to give effect to the language quoted above, the recourse that investors in the Notes may have against the independent auditors based on their reports or the consolidated financial statements to which they relate could be limited.

We may not have the ability to raise the funds necessary to finance a change of control offer if required by the

Indentures.

Upon the occurrence of a change of control, as defined in each of the Indentures, the Issuer will be required to make an offer to purchase the Notes at a price in cash equal to 101% of their aggregate principal amount, plus any accrued and unpaid interest and certain other amounts, to the date of repurchase. Upon a change of control, we may be required to offer to repurchase or repay our outstanding indebtedness, including the Notes. We might not have sufficient resources to repurchase the Notes or repay our other indebtedness, if such debt is required to be repurchased or repaid, upon the occurrence of a change of control. In addition, restrictions in our then-existing contractual obligations, including the Revolving Credit Agreement, may not allow us to make such required repurchases upon the occurrence of certain events constituting a change of control. In any case, third-party financing most likely would be required in order to provide the funds necessary for the Issuer to make the change of control offer for the Notes and to refinance any other indebtedness that would become payable upon the occurrence of such events. We may not be able to obtain such additional financing on terms favorable to us or at all. See “Description of First Lien Secured Notes—Repurchase at the Option of Holders—Change of Control” and “Description of Second Lien Secured Notes—Repurchase at the Option of Holders—Change of Control”.

The change of control provisions contained in the Indentures may not necessarily afford you protection in the event of certain important corporate events, including a reorganization, restructuring, merger or other similar transaction involving us that may adversely affect you, because such corporate events may not involve a shift in voting power or beneficial ownership or, even if they do, may not constitute a “change of control” as defined in the Indentures. Except as described under “Description of First Lien Secured Notes—Repurchase at the Option of Holders—Change of Control” and “Description of Second Lien Secured Notes—Repurchase at the Option of Holders—Change of Control”, the Indentures will not contain provisions that would require the Issuer to offer to repurchase or redeem the Notes in the event of a reorganization, restructuring, merger, recapitalization or similar transaction.

The definition of “change of control” in the Indentures will include a disposition of all or substantially all of the properties or assets of TopCo and its subsidiaries taken as a whole to any person. Although there is a limited body of case law interpreting the phrase “all or substantially all”, there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of “all or substantially all” of the assets of TopCo and its subsidiaries taken as a whole. As a result, it may be unclear as to whether a change of control has occurred and whether the Issuer is required to make an offer to repurchase the Notes.

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An active trading market may not develop for the Notes, in which case your ability to transfer the Notes will be more

limited.

The Notes are new securities for which there is currently no market. A liquid market for the Notes may not develop and holders of the Notes may not be able to sell the Notes at fair value, or at all. Although application has been made for the Notes to be listed on the Official List of the Luxembourg Stock Exchange and admitted for trading on the Euro MTF Market, the Notes may not become or remain listed. Although no assurance is made as to the liquidity of the Notes as a result of the admission to trading on the Euro MTF Market, failure to be approved for listing or the delisting of the Notes, as applicable, from the Official List of the Luxembourg Stock Exchange may have a material effect on a holder’s ability to resell the Notes in the secondary market. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the Notes. Any market for the Notes will likely be subject to similar disruptions.

The liquidity of any market for the Notes will depend on the number of holders of the Notes, prevailing interest rates, the market for similar securities and other factors, including general economic conditions and our own financial condition, performance and prospects, as well as third-party recommendations. In connection with the offering of the Notes, certain members of the Hargreaves family and/or related entities will be allocated £11.334 million of First Lien Notes and £50.0 million of Second Lien Notes. As such, the amount of First Lien Notes and Second Lien Notes held by non-affiliated third parties will be £330.666 million and £100.0 million, respectively. Our shareholder’s substantial investment in the Notes may affect the liquidity of, and trading market for, the Notes. In addition, the Initial Purchasers have informed us that they intend to make a market in the Notes. However, they are not obligated to do so and may discontinue such market-making at any time without notice. As a result, an active trading market for the Notes may not develop or, if one does develop, such trading market may not be maintained. If no active trading market develops, holders of the Notes may not be able to resell Notes at fair value, if at all.

The liquidity of, and trading market for, the Notes may also be hurt by declines in the market for high yield securities generally. Such a decline may affect any liquidity and trading of the Notes independent of our or the Issuer’s financial performance and prospects.

Transfer of the Notes will be restricted, which may adversely affect the value of the Notes.

The Notes have not been and will not be registered under the Securities Act or the securities laws of any jurisdiction and, unless so registered, may not be offered or sold except pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act and any other applicable laws. The Issuer has not undertaken to effect any exchange offer for the Notes. You should read the discussions in “Notice to Investors” for further information about these and other transfer restrictions. It is your obligation to ensure that your offers and sales of Notes comply with applicable law.

Certain covenants may fall away upon the occurrence of a change in our ratings.

The Indentures will provide that, if at any time following the date of the Indentures, the Notes receive a rating of “Baa3” or better by Moody’s or a rating of “BBB−” or better from S&P and no default or event of default has occurred and is continuing, then beginning that day and continuing at all times thereafter regardless of any subsequent changes in the rating of the Notes, certain covenants will cease to be applicable to the Notes. See “Description of First Lien Secured Notes—Certain Covenants—Suspension of Covenants when Notes Rated Investment Grade” and “Description of Second Lien Secured Notes—Certain Covenants—Suspension of Covenants when Notes Rated Investment Grade”.

If these covenants were to cease to be applicable, we would be able to incur additional indebtedness or make payments, including dividends or investments, which may conflict with the interests of holders of the Notes. It is possible that the Notes will not achieve an investment grade rating or that any such rating may not be maintained.

39

USE OF PROCEEDS

We intend to use the net proceeds of the Offering for the refinancing in full of our Existing Notes.

On May 13, 2014, we commenced the Tender Offers in respect of our outstanding Existing Notes. Under the terms of the Tender Offers, we are offering to purchase all of our outstanding Existing Notes held by holders outside the United States for cash, at the applicable tender prices, plus accrued and unpaid interest. The Tender Offers are being made pursuant to a separate tender offer memorandum and not pursuant to this Offering Circular. To the extent any of the Existing Notes are not tendered in the Tender Offers, we intend to redeem the Existing Notes in accordance with the applicable indenture. We intend to use the net proceeds from the Offering to repurchase the Existing Notes tendered pursuant to the Tender Offers and to redeem any untendered Existing Notes. The consummation of the Tender Offers is subject to the satisfaction or waiver of certain conditions precedent including the completion of this Offering.

The table below sets forth a breakdown of the sources and uses of funds to consummate the refinancing in full of our Existing Notes.

Sources Amount Uses Amount

(in £ million) (in £ million)

Revolving Credit Facility(1).. —

Refinancing of Existing Notes(3) .................................. 475.0

Notes offered hereby:

Accrued interest and premium(3)(4) .......................... 17.4

First Lien Notes ............... 342.0 Fees and expenses(5) .............. 7.0 Second Lien Notes ........... 150.0

Cash(2) .................................. 7.4

Total Sources ...................... 499.4 Total Uses ............................ 499.4

(1) The Revolving Credit Facility provides for revolving borrowings of up to £50 million (before giving effect to any outstanding letters of

credit and bank guarantees, which at March 1, 2014, reduced availability by £11.0 million). See “Description of Certain Financing Arrangements—Revolving Credit Facility”. At closing, we expect that no cash drawings under the Revolving Credit Facility will be necessary to fund the purchase and/or redemption of our Existing Notes in full and the fees and expenses in connection with the Refinancing.

(2) Represents a portion of cash and cash equivalents that would be necessary, together with the net proceeds of the Notes, to fund the purchase and/or redemption of our Existing Notes in full and the fees and expenses in connection with the Refinancing.

(3) The Existing Notes will be refinanced in full using, in part, the proceeds of the Offering, by way of the Tender Offers and the subsequent redemption of any Existing Notes that remain outstanding following the completion of the Tender Offers.

(4) The amount of £17.4 million assumes that 100% of the aggregate principal amount of the Existing Notes will be purchased pursuant to the Tender Offers at the applicable tender prices plus accrued and unpaid interest. To the extent that any Existing Notes are not tendered in the Tender Offers, we intend to redeem such remaining aggregate principal amount of Existing Notes pursuant to the applicable indenture governing the Existing Notes plus any accrued and unpaid interest, which redemption will require the payment of additional amounts compared to the corresponding amount that would have been paid for such Existing Notes in the Tender Offers and would result in a greater use of cash on hand to fund the purchase and/or redemption of our Existing Notes in full and the fees and expenses in connection with the Refinancing.

(5) This amount reflects our estimate of fees and expenses we will pay in connection with the Refinancing, including discounts and other commissions, commitment, placement and other transaction costs and professional fees.

40

CAPITALIZATION

The following table sets forth (i) our consolidated capitalization and cash and cash equivalents as of March 1, 2014, and (ii) our consolidated capitalization and cash and cash equivalents as adjusted to give effect to the Refinancing, including the Offering and the use of proceeds thereof. This table should be read in conjunction with “Use of Proceeds” and our consolidated financial statements as of and for the 53 weeks ended March 1, 2014, included elsewhere in this Offering Circular.

As of

March 1,

2014

Actual Adjustments

As of March 1,

2014

As Adjusted

(in £ millions)

Cash and cash equivalents(1) ..................................................................... 71.9 (7.4) 64.5

Indebtedness (including current portion) Revolving Credit Facility(2).......................................................................... — — — First Lien Notes offered hereby(3) ................................................................ — 342.0 342.0 Second Lien Notes offered hereby(3) ............................................................ — 150.0 150.0 Senior Secured Notes due 2016(4) ................................................................ 250.0 (250.0) — Senior Notes due 2017(4) .............................................................................. 225.0 (225.0) — Unamortized debt issuance costs(5) .............................................................. (8.1) 1.1 (7.0)

Total debt .................................................................................................... 466.9 18.1 485.0

Shareholders’ equity

Total shareholders’ deficit(6) ..................................................................... (259.5) (8.1) (267.6)

Total capitalization .................................................................................... 207.4 10.0 217.4

(1) Represents cash and cash equivalents on our balance sheet as of March 1, 2014, which excludes £10.0 million of restricted cash. The

adjustment reflects the amount of cash to be utilized to consummate the refinancing in full of our Existing Notes and the fees and expenses in connection with the Refinancing, assuming that all of the outstanding Existing Notes will be purchased pursuant to the Tender Offers. To the extent that any Existing Notes are not purchased in the Tender Offers and are subsequently redeemed, we expect to use more cash on hand to consummate the refinancing in full of our Existing Notes. See “Use of Proceeds”.

(2) The Revolving Credit Facility provides for revolving borrowings of up to £50.0 million (before giving effect to any outstanding letters of credit and bank guarantees, which at March 1, 2014, reduced availability by £11.0 million). See “Description of Certain Financing Arrangements—Revolving Credit Facility”. We do not expect that any cash drawings under the Revolving Credit Facility will be necessary to fund the purchase and/or redemption of our Existing Notes in full and the fees and expenses in connection with the Refinancing. Any original issue discount and the issuance costs will be amortized over the expected term of the Revolving Credit Facility as additional interest expense.

(3) The First Lien Notes have been reflected in the table at their aggregate principal amount of £342 million and the Second Lien Notes have been reflected in the table at their aggregate principal amount of £150 million. The issuance costs and original issue discount, if any, associated with the Notes will be amortized over the respective life of the Notes as additional interest expense.

(4) We assume that all of the outstanding Existing Notes will be purchased pursuant to the Tender Offers at the applicable tender prices plus accrued and unpaid interest. To the extent that any Existing Notes are not tendered in the Tender Offers, we intend to redeem such remaining aggregate principal amount pursuant to the applicable indenture governing the Existing Notes. See “Use of Proceeds”. Completion of the Tender Offers and any such redemption of the Existing Notes is conditioned upon the completion of this Offering.

(5) The £8.1 million, actual, represents unamortized debt issuance costs as of March 1, 2014 relating to our Existing Notes. The adjustment reflects the refinancing in full of our Existing Notes (and write-off of such capitalized costs related to the Existing Notes) and the capitalization of estimated fees and expense of £7.0 million in connection with the Refinancing. Unamortized debt issuance costs do not include any original issue discount on the Notes.

(6) The adjustment reflects the reduction to retained earnings in connection with the write-off of unamortized debt issuance cost associated with the Existing Notes as of March 1, 2014.

41

SELECTED FINANCIAL AND OTHER INFORMATION

The selected financial data provided below for TopCo has been derived from our consolidated financial statements as of and for the 52 weeks ended February 25, 2012, the 52 weeks ended February 23, 2013 and the 53 weeks ended March 1, 2014, each of which has been prepared in accordance with IFRS.

The financial information below includes certain non-IFRS measures used to evaluate our economic and financial performance. These measures are not identified as accounting measures under IFRS and therefore should not be considered as an alternative measure to evaluate the performance of our Group. See “Presentation of Financial Data and Non-GAAP Measures”.

You should read this selected financial data in conjunction with “Operating and Financial Review and Prospects” and our consolidated financial statements included elsewhere in this Offering Circular.

52 weeks ended


February 23, 2013

53 weeks

ended

March 1,

2014

(in £ millions, except ratios or percentages or as

otherwise indicated)

Income Statement Data Revenue .................................................................................................... 1,117.5 1,125.4 1,122.9 Cost of sales .............................................................................................. (1,000.8) (997.8) (1,001.3)

Gross profit ............................................................................................. 116.7 127.6 121.6 Administrative expenses ........................................................................... (54.9) (60.4) (55.3) Exceptional items(1)................................................................................... (4.0) (2.0) (6.9)

Operating profit ...................................................................................... 57.8 65.2 59.4 Finance costs ............................................................................................. (48.0) (47.7) (48.0) Exceptional refinancing costs ................................................................... (8.3) (0.5) — Finance income ......................................................................................... 0.6 0.8 0.6

Profit on ordinary activities before taxation ........................................ 2.1 17.8 12.0 Taxation .................................................................................................... 0.9 (4.3) (2.1)

Profit for the period ................................................................................ 3.0 13.5 9.9

Cash Flow Data Net cash generated from operating activities ............................................ 30.1 45.5 7.6 Net cash used in investment activities ...................................................... (20.4) (21.0) (56.4) Net cash used in financing activities ......................................................... 3.4 — —

Balance Sheet Data (at end of period) Cash and cash equivalents(2) ..................................................................... 96.2 120.7 71.9 Total assets ............................................................................................... 431.6 476.2 438.5 Total liabilities .......................................................................................... (683.7) (700.4) (698.0)

Other Financial Data EBITDA(3)................................................................................................. 91.1 100.4 95.4 Adjusted EBITDA(4) ................................................................................. 92.5 101.6 95.0 Rent(5) ........................................................................................................ 91.5 95.3 98.1 EBITDAR(3) .............................................................................................. 182.6 195.7 193.5 EBITDA margin(6) .................................................................................... 8.2% 8.9% 8.5% EBITDAR margin(7) .................................................................................. 16.3% 17.4% 17.2% Net financial debt(8) ................................................................................... 378.8 354.3 403.1 Net finance costs ....................................................................................... 55.7 47.4 47.4 Capital expenditure ................................................................................... 22.2 21.7 57.0 Selected Operating Data (at end of period)

(9) Number of stores....................................................................................... 214 216 227 Number of full price stores ....................................................................... 209 212 222 Number of clearance stores ....................................................................... 5 4 5 Total trading space (in thousands of square feet) ..................................... 6,206 6,257 6,392

(1) For a description of these exceptional items see “Operating and Financial Review and Prospects—Results of Operations” for the periods

presented.

(2) Cash and cash equivalents excludes restricted cash of £10.0 million at March 1, 2014, £nil at February 23, 2013 and £nil at February 25 2012.

42

(3) We define EBITDA to be operating profit before depreciation and amortization and exceptional items. We define EBITDAR as EBITDA plus rent as described in footnote (5) below. Neither EBITDA nor EBITDAR is a measure of performance under IFRS and you should not consider EBITDA or EBITDAR as an alternative to (i) operating profit or profit for the period (as determined in accordance with IFRS) as a measure of our operating performance, (ii) cash flows from operating, investing and financing activities as a measure of our ability to meet our cash needs or (iii) any other measures of performance under generally accepted accounting principles.

We believe that EBITDA is a useful indicator of our ability to incur and service our indebtedness and can assist securities analysts, investors and other parties to evaluate Matalan. We believe that EBITDAR is a common measure in the retail industry because it allows comparability across the sector for operations regardless of whether a retailer leases or owns its properties. EBITDA, EBITDAR and similar measures are used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing EBITDA and EBITDAR as reported by us to EBITDA or EBITDAR of other companies. EBITDA as presented here differs from the definition of “Consolidated EBITDA” contained in the Indenture. The following table reconciles operating profit to EBITDA and EBITDAR for the periods indicated.

52 weeks ended

February 25,

2012

52 weeks ended

February 23,

2013

53 weeks

ended

March 1,

2014

(in £ millions) Operating profit ................................................................................................................... 57.8 65.2 59.4 Depreciation and amortization ............................................................................................... 29.3 33.2 29.1 Exceptional items(a) ................................................................................................................ 4.0 2.0 6.9

EBITDA ................................................................................................................................ 91.1 100.4 95.4 Rent(b) ..................................................................................................................................... 91.5 95.3 98.1

EBITDAR ............................................................................................................................. 182.6 195.7 193.5

(a) The exceptional items in the 2014 Fiscal Year include a provision of £2.9 million for anticipated future

dilapidations costs, relating to the existing distribution center and head office site in Skelmersdale, an acceleration of IFRS 2 charges of £1.8 million following a board director resignation in the period, restructuring costs of £1.6 million and costs associated with the redevelopment of the supply chain of £1.1 million. The 2014 Fiscal Year includes a credit of £0.5 million relating to rental income received during the period and a revision of anticipated future costs, both in respect of properties on which onerous lease contracts were previously provided for.

The exceptional items in the 2013 Fiscal Year include £1.3 million of restructuring costs and £1.5 million of refinancing costs relating to the settlement of a dispute with the holders of an interest rate swap that the Group has previously entered into. The 2013 Fiscal Year includes an aggregate credit of £0.8 million relating to rental income received during the period and a revision of anticipated future costs, both in respect of properties on which onerous lease contracts were previously provided for. The exceptional items in the 2012 Fiscal Year include a charge of £2.4 million relating to the recognition of a provision for an onerous lease on a property no longer used by the business. In addition, £1.5 million of restructuring costs and £0.1 million of refinancing costs were incurred in the period.

(b) See footnote (5) below.

(4) We define Adjusted EBITDA to be EBITDA as defined in footnote (3) plus additional items that we do not consider to be indicative of our ongoing operating performance. Adjusted EBITDA is not a measure of performance under IFRS and you should not consider Adjusted EBITDA as an alternative to (i) operating profit or profit for the period (as determined in accordance with IFRS) as a measure of our operating performance, (ii) cash flows from operating, investing and financing activities as a measure of our ability to meet our cash needs or (iii) any other measures of performance under generally accepted accounting principles.

We believe that Adjusted EBITDA is a relevant measure for assessing our performance because it is adjusted for certain items which, we believe, are not indicative of our underlying operating performance and thus aids in an understanding of EBITDA. Adjusted EBITDA is used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing Adjusted EBITDA as reported by us to Adjusted EBITDA of other companies. We encourage you to evaluate each adjustment and the reasons we consider it appropriate as a method of supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that, as an analytical tool, Adjusted EBITDA is subject to all of the limitations applicable to EBITDA. See “Presentation of Financial Data and Non-GAAP Measures”. In addition, you should be aware that we are likely to incur expenses similar to the adjustments in this presentation in the future and that certain of these items could be considered recurring in nature. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. The following table reconciles EBITDA to Adjusted EBITDA for the periods indicated.

52 weeks ended


February 23, 2013

53 weeks

ended

March 1,

2014

(in £ millions) EBITDA ............................................................................................................................. 91.1 100.4 95.4

43

Bonus payments(a) ............................................................................................................... — 0.2 0.5 B shares(b) ............................................................................................................................ 2.3 0.7 (2.3) Overheads in stock(c) ........................................................................................................... (0.2) (0.4) 0.4 Insurance recovery(d) ........................................................................................................... (1.2) — — Other adjustments(e) ............................................................................................................. 0.5 0.7 1.0

Adjusted EBITDA ............................................................................................................. 92.5 101.6 95.0

(a) This adjustment consists of amounts paid or accrued for discretionary bonuses paid (or to be paid) to

our employees for meeting certain targets.

(b) This adjustment represents amortization expense associated with our B growth shares. In the 2014 Fiscal Year, a revision of

the expected B share vesting period in relation to IFRS 2 resulted in a credit. This is a non-cash item.

(c) This non-cash adjustment reallocates to the balance sheet a portion of the cash costs associated with handling stock at our

distribution centers to the value of such stock remaining in inventory at period end. We believe this is an appropriate adjustment because it aligns the costs incurred during the period with the value of the stock at the end of the period.

(d) This cash adjustment relates to an insurance recovery on a claim made by the Group.

(e) Other adjustments include an adjustment to the calculation of foreign exchange rates in stock, store opening and closure costs, stock adjustments not normally booked outside the fiscal year end and a charitable donation.

(5) Rent consists of operating lease rentals payable related to land and buildings net of the amortization of lease premiums and rent-free periods.

(6) EBITDA margin consists of EBITDA (as defined in footnote (4) above) for the period divided by revenue for that period.

(7) EBITDAR margin consists of EBITDAR (as defined in footnote (4) above) for the period divided by revenue for that period.

(8) Net financial debt consists of current and non-current borrowings, gross of debt issuance costs, less cash and cash equivalents.


44

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis should be read in conjunction with the audited consolidated financial

statements as of and for the 52 weeks ended February 25, 2012, the 52 weeks ended February 23, 2013 and the 53 weeks

ended March 1, 2014 and the related notes thereto included elsewhere in this Offering Circular. Our financial statements

are prepared in accordance with the IFRS.

The following discussion contains forward-looking statements. Actual results could differ materially from those

discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are

not limited to, those discussed below and elsewhere in this Offering Circular, particularly under “Forward-Looking

Statements” and “Risk Factors”.

Introduction


Our range appeals to a broad spectrum of the UK population, with approximately one-third of UK households shopping in Matalan in the last 12 months. We cater to a broad range of ages, although our typical customer is female, aged 30+, who visits Matalan regularly to buy products for herself, her family and her home. Our customers are fashion-conscious but not demanding of leading edge “fast fashion”. We maintain a customer database of nearly twelve million active customers who have transacted with Matalan in the last year through our Matalan Reward loyalty card, our loyalty card that offers customers a range or benefits, including exclusive promotional discounts on merchandise. Purchases by cardholders account for over 90% of our revenue and as such our card is an important element of our loyalty and marketing strategies and also supports our growing multi-channel business.

We offer a wide and authoritative range of clothing, footwear and homeware, uniquely covering a broad range of price points. In accordance with our quality, design, value and experience philosophy, we sell primarily our own branded products and to a lesser extent, third-party branded or licensed products. Our opening price point is in line with supermarkets for our “Good” products, while our “Better” and “Best” products are generally priced at a significant discount to mid-market high street retailers, with what we believe to be comparable or higher quality and design. As a result, we attract a broad range of customers and compete successfully with a wide range of retailers, including supermarkets and discount and mid-market clothing retailers. Across our six main product categories we sell primarily our own branded products and, to a lesser extent, third-party branded or licensed products, which accounted for 8.1% of total sales in 2014 Fiscal Year. Our own branded products have been carefully constructed to support our broad price architecture focused on the entry and mid-level price points. For the 2014 Fiscal Year, approximately 38% of our revenue was generated by ladieswear, 23% by menswear, 19% by kidswear, 7% by footwear, 13% by homeware and less than 1% by our new Sporting Pro products launched in autumn 2013. For the 2014 Fiscal Year, the average selling price of our products and average basket value were £6.00 and £21.55, respectively.

The majority of our sales are carried out in store, although we also sell a growing percentage of our products online via our website. We have 227 stores in the UK, of which 213 are full-price Matalan stores, five are Matalan clearance stores and nine are standalone Sporting Pro stores. The average Matalan store size is 29,000 square feet. Average revenue and EBITDA per store (excluding clearance stores) for the 2014 Fiscal Year was £5.0 million and £0.9 million, respectively. Additionally, a growing proportion of our sales are made via our website with online sales in the 53 weeks ended March 1, 2014 increasing by 32.9% to £43.6m, supported by the roll out of online ordering for collection in store (which we refer to as “click and collect”) in early 2013 (50% of online purchases are now collected in store). Our online sales accounted for 3.9% of our total turnover, with 9.4% of our customers shopping across multiple channels in the 53 weeks ending March 1, 2014. Customers who shopped across multiple channels spent an average of 81% more than store only shoppers. We have recently introduced two new store formats, a high street Matalan store and a new Sporting Pro concept which focuses on sporting apparel, footwear and equipment. As of March 1, 2014 we also had 14 franchise stores in the Middle East which, for the 2014 Fiscal Year accounted for 1.3% of our revenue. These franchise stores operate under a wholesale supply arrangement, selling ranges sourced by Matalan and supplied at a mark-up.

45

Factors Affecting Our Results of Operations

Focus on Stabilization and Resilience of Operating Performance

Since 2011 the management team have focused on stabilizing and creating a resilience to business performance while establishing a clear growth strategy designed to further improve our operational effectiveness, market position, revenue and profitability. We have focused on the following areas:

• We began our supply base consolidation in 2011 and saw a reduction in the number of suppliers from 433 in 2011 to 335 by March 2014. A leaner supply base allows us to better leverage our volume during the buying process while maintaining sufficient flexibility to adapt to the needs of our customers. This exercise created the supplier and product agility necessary to be able to react to significant market shocks such as the spike in cotton prices in 2010 and 2011. Deeper strategic relationships position the business to work collaboratively and proactively with suppliers to manage such issues via product cost engineering, process efficiency, and product design enhancement.

• Re-organization of the internal buying process. Consolidated buying was introduced on our trading floor in 2013 enabling us to complete the entirety of the potential buy from each supplier in a single transaction. We believe that this will increase the effectiveness and results of the negotiation process. We have also implemented a more standardized approach to the management of product costing in order to provide better visibility of the individual cost components across comparable garments when determining the cost price architecture.

• Delivery of a clearer, more consistently designed ladieswear offer. By consolidating and re-organizing the senior management team in our trading function, we reduced complexity and duplication and began an option rationalization process. These changes took place between 2011, when our London ladieswear brands buying office was closed, and early 2013 with the elimination of the Commercial Director role. The structural changes and option reduction delivered an improvement in availability in our core ranges and also in the design and consistency in the “Better” and “Best” elements of the ladieswear range. This resulted in several categories performing well in 2013 including outerwear which delivered sales growth of 98% versus the previous year at an ASP of £20.81. Improvements at the upper end of our price architecture create a greater resilience to cost price movements as we migrate the weight of buy towards products at the upper end of our price architecture and have greater flexibility at these price points in managing our blended margins. These changes have been pivotal in delivering improvements in the clarity and performance of the ladieswear range in autumn 2013.

• Further development of our CRM capability. We extended our Matalan Reward loyalty card program, creating a tiered scheme via the Matalan “Black Card”, launched in 2012. The Black Card is awarded to our most valuable customers who pass a specific annual spend threshold, providing additional benefits and features over and above the standard Matalan Reward loyalty card. While further supporting the retention, frequency and value of those customers it also provides an incentive for customers to trade up in value to progress to Black Card status and privileges.

• Improvement in operational efficiency. Particular focus has been placed on the warehouse and transport functions and in-store labor model. In 2012 the operation and management of our Corby warehouse and transport function was brought in-house having previously been outsourced to a third-party. These changes delivered significant cost efficiencies. Within our stores we have focused heavily on improving labor productivity and mitigating the impacts of increases in the national minimum wage by changes to our back-of-house stock management operations and by reducing the frequency of changes in shop floor layout and configuration. This, along with upgraded point of sale systems and checkout hardware, has successfully maintained the store wage to sales ratio over the last 3 years despite inflation in the national minimum wage.

While stabilizing performance via the above strategies, we have also been developing a clear growth strategy based upon the following key pillars:





46

The commencement of our Singles supply chain program, being a key part of our strategic program, has resulted in a net cash outflow in the 2014 Fiscal Year, with associated capital expenditure of £31.8 million (as compared to £3.3 million in the 2013 Fiscal Year). The scale of capital investment made in the past year is anticipated to be one-off in nature, and we intend to return capital investment to a more normalized level in the current year, which we expect will result in a net cash inflow for the year ending February 28, 2015.

Fixture Innovation, Refurbishment and Store Openings

As a result of our decision to invest in the Singles supply chain program, we slowed the rate of investment in store fixture and refurbishment, as well as new store openings in 2012 and 2013. The following tables show our store capital expenditure by category and number of stores for each of the periods indicated.

53 weeks ended

February 25,

2012

52 weeks ended

February 23,

2013

52 weeks

ended

March 1,

2014

(in £ millions, except as otherwise indicated)

Capital Expenditure by Category: New store openings .................................................................................... 5.4 2.0 2.9 Extensions/resize/re-sites ........................................................................... 1.4 — 1.8 Refurbishment and fixture innovation ....................................................... 5.4 5.1 3.8 Sporting Pro concept .................................................................................. — — 6.8

Total store development capital expenditure ........................................ 12.2 7.1 15.3

Number of Stores:(1)

New store openings .................................................................................... 3 3 11 Total number of stores ............................................................................... 214 216 227


Store refurbishment and fixture innovation typically drive revenue growth at a faster rate than stores that have not received investment. While we still believed this to be the case, we deemed it necessary to focus on capital investments in other areas given the completion of an estate-wide refurbishment program in 2010 and the strategic importance of our Singles supply chain program. We intend to refocus material investment in store fixtures and refurbishment in 2015 and 2016 following the completion of the Singles supply chain program.

New stores are fitted out to what we believe is the optimum standard given their space and building configuration. New stores typically benefit from additional advertising and marketing support associated with their opening and then experience modest decline in their revenues throughout the first year after opening as this advertising and marketing support is gradually normalized. After the first anniversary of the store’s opening, the customer database for the new store has usually grown large enough such that we are then able to use it to drive revenue growth.

Variations in Quarterly Results, Seasonality and Weather

Our business is subject to seasonal peaks, although not to the same extent as retailers who are located predominantly on the high street or in shopping centers. During the four periods in our 2014 Fiscal Year, we generated 23%, 25%, 29% and 23% of our full year revenue, respectively, the period to August 31, 2013, being a 14 week period. Approximately 24% of our revenues for the 2014 Fiscal Year were generated from the beginning of November 2013 to the end of December 2013.

As is common among retailers, our results can be affected by periods of abnormal, severe or unseasonable weather conditions. For example, we and other retailers were adversely affected by the unusually cold weather that affected the UK in spring 2013. See “Risk Factors—Risks Relating to Our Business—Our business could suffer as a result of weak sales during extreme or unseasonable weather conditions”. Due to our out-of-town locations, we were somewhat more affected than retailers with stores that are more centrally located. In addition, extended periods of warm or cold weather could render a portion of our inventory incompatible with such unseasonable conditions.

Inflation

Inflation generally affects us by increasing our payroll costs, direct merchandise costs, including our supply and transportation costs, and the costs of goods and services not for resale that we purchase. Our leases provide for rent reviews. Many require such a review every five years, at which time our rents could increase (but not decrease) due to changes in market rental rates and other expenses. In the 2014 Fiscal Year, 30 rent reviews were agreed and settled with

47

£nil increase in the rents reviewed and 1 lease was subject to a fixed rental uplift of 15.9%. The average rental increase at the review points has reduced in recent years from the levels seen prior to the economic recession.

The general rate of inflation in the UK has been relatively low during the periods presented and we do not believe that inflation has had any identifiable effect on our results for the 2012 Fiscal Year, the 2013 Fiscal Year and the 2014 Fiscal Year. We have in the past been significantly impacted by material variations in the prices of certain commodities, particularly cotton. We believe that consolidating our supply base and improving our range quality and the upper end of our price architecture, offers us more opportunity to mitigate or pass on commodity driven cost increases going forward, thereby leaving us better placed to manage any similar commodity price pressure in the future. As a value retailer, we look to follow rather than establish sales prices in our opening price points. While this can restrict price flexibility at the opening end of our range, there is room to exhibit value more than simply price further up the price architecture. We also believe that a period of sales price inflation would potentially benefit our business by increasing the absolute differential between some of our competitors’ prices and our own, thus strengthening our competitive position. If inflation causes consumers to have less disposable income, they may reallocate their purchases to value retailers such as Matalan. However, if we are unable to pass on our increased costs to our customers, or are unable to increase our sales volumes, then our results of operations could be negatively impacted.

Financial Periods

We present our annual accounts as of the Saturday closest to February 28 of each year, which occasionally results in a 53 week financial year. This was the case in the 2014 Fiscal Year, which means that results for that year are not directly comparable to results for the 2013 Fiscal Year. We present our quarterly accounts as of the Saturday closest to May 31, August 31 and November 30 of each year. Occasionally, our quarterly financial period may include a public holiday that is not included in other comparable periods. Therefore, results for the financial periods presented may not always be directly comparable to results for other financial periods. For the 2014 Fiscal Year, we estimate the EBITDA impact of the 53rd week of trading to be £1.1 million.

Explanation of Key Income Statement Items

Revenue

Unless otherwise indicated, revenue represents the value of goods sold in our stores and online and to a lesser extent sales to our international franchise partners, net of returns, value added tax, markdowns and staff discounts. Retail revenue is recognized in the financial statements when the risks and rewards of ownership have passed to the customer. Substantially all of our revenue is derived from the UK.

Both in our stores and online, we primarily sell our own bought products, purchased by our buying teams where we take all of the risks and rewards of stock ownership. These products predominantly include our own brands but to a lesser extent also include third-party brands, in particular in the Sporting Pro stores. Occasionally, we may buy product and apply a third-party brand for which we hold a license for certain product categories and territories. The key product categories in our business are: ladieswear, menswear, kidswear, footwear and essentials and homeware.

Changes in revenue from period to period are generally affected by:

• the prices at which we sell our merchandise, which equal the original selling price less any price reductions and discounts (together referred to as “markdowns”);

• the volume of merchandise sold and changes in the mix of products sold;

• the price architecture under which we offer our merchandise and the mix of customer purchases across this architecture;

• the level and effectiveness of our advertising, marketing and promotions;

• the opening of new stores, store refurbishments, fixture innovation and allocation of space across product categories (see “—Factors Affecting Our Results of Operations—Fixture Innovation, Refurbishment and Store Openings”);

• general economic and market conditions;

• competition from our retail competitors, which may impact sales of our merchandise and our pricing policies;

48

• local events that restrict access to our stores, such as road works; and

• seasonality and weather.

Cost of Goods Sold and Gross Merchandise Margin

Our cost of goods sold consists of the cost of purchasing our own bought merchandise from our international and domestic suppliers, including freight and delivery charges, taxes and foreign exchange gains or losses. Sales of branded concessions, where we pay a fixed commission and have no stock ownership risk, are on the whole not material to our business. Our gross merchandise margin consists of our revenue less cost of goods sold and reflects the direct profit made from the sale of our products.

Changes in our gross merchandise margin and corresponding changes in our gross merchandise margin as a percentage of our revenue, from period to period, are primarily affected by the following factors:

• the price we negotiate with our suppliers, which in turn may be impacted by the volume of products we purchase from such suppliers and the territories in which the suppliers are located;

• the level of our markdowns, which include temporary promotional reductions designed to increase customer visits and growth in like-for-like revenue and clearance markdowns which are permanent reductions in price used to clear slower selling stock;

• changes in the mix of the product types that we sell, which produce different margins;

• the mix of suppliers from whom we purchase our products, especially as it relates to the lead times required to secure merchandise from, and the geographical location of, such suppliers;

• fluctuations in the exchange rates of the U.S. dollar, the currency in which we purchase over 70% of our products, against the pound sterling. On a relative basis, the value of our purchases in U.S. dollars has increased in recent periods. We set internal exchange rates at levels that we believe are sustainable for at least the next two seasons and hedge approximately 90% (of forecast purchases within 12 months) and approximately 60% (of purchases from 12 months to 24 months) of anticipated cash flows in respect of the purchase of inventory in U.S. dollars;

• freight and shipping costs for transport of merchandise to our distribution centers and, occasionally, directly to our stores; and

• other factors such as duties, import quotas, supplier discounts for settlement and distribution, and stock loss or shrinkage, which refers to our provision for theft, breakage and other stock losses.

We view gross merchandise margin and gross merchandise margin as a percentage of revenue as key measures of our performance. However, our statutory accounts only reflect gross profit, which is equivalent to revenue less total cost of sales, and total cost of sales, which is the sum of cost of goods sold and selling and distribution expenses.

Selling and Distribution Expenses and Gross Profit

Selling and distribution expenses include the costs of occupying and running our stores including establishment costs such as rent, amortization of landlord contributions received and rent free periods, rates, service charges and utility costs (which accounted for 41% of total overheads in the 2014 Fiscal Year); store labor (including wages and salaries, bonuses and social security costs) and depreciation charges; advertising and marketing costs; and distribution costs such as costs involved in operating our two distribution centers and warehouse facility transporting our product to our stores, fuel and depreciation charges.

Changes in our selling and distribution expenses from period to period are affected by the following factors:

• changes in the number of staff employed in our stores or at our distribution centers and warehouse;

• the mix between directly employed permanent staff and staff employed directly but on temporary contracts, typically during peak trading periods;

• the general level of payroll and benefit increases given to our employees in our stores and distribution centers;

49

• the impact on store labor of the volume and mix of products sold, the volume of till transactions, the number and timing of promotional events, the number of sales events, the extent of and number of changes to store layouts;

• costs relating to the volume and mix of products sold, particularly distribution and store labor, fuel and the number of cages, trailers and tractor units required by our distribution fleet;

• rental increases on our stores and distribution centers and warehouse negotiated with landlords;

• changes in the costs of heating and lighting our stores and distribution centers;

• the cost of opening new stores, including the related impact of amortization of rent free periods and other incentives received from landlords, as well as store refurbishments and fixture innovation;

• the level and type of advertising and marketing expenditure, including costs associated with market research; and

• the method of transport and distance traveled by our merchandise.

Our gross profit consists of revenue less total cost of sales. Total cost of sales consists of cost of goods sold and selling and distribution expenses.

Administrative Expenses

Administrative expenses consist primarily of the following:

• payroll for employees of selected head office departments, including wages and salaries, bonuses and social security costs;

• charges or credits associated with share based payments accounted for in accordance with IFRS 2;

• various corporate overhead costs associated with our personnel, finance, legal, information technology and secretarial departments;

• depreciation expense related to our head office and the amortization of goodwill and other intangible assets;

• depreciation and maintenance expense related to certain information technology systems; and

• other head office facility costs.

Changes in our administrative expenses from period to period are affected primarily by:

• the general level of payroll and benefits given to selected head office employees, including accruals of employee bonuses; and

• expenses related to new and revised information technology systems.

Total Trading Profit

We view total trading profit, which is equivalent to our operating profit before exceptional items, as a key measure of our performance. Total trading profit refers to gross merchandise margin less other direct cost of sales and administrative expenses.

Results of Operations

Results of operations for the 52 weeks ended February 23, 2013 compared to the 53 weeks ended March 1, 2014

The following table sets forth our main operating results extracted from our historical consolidated statements of operations for the 2013 Fiscal Year compared to the 2014 Fiscal Year:

50

52 weeks ended

February 23, 2013

53 weeks

ended

March 1,

2014 % change

(in £ millions)

Revenue .............................................................................................................. 1,125.4 1,122.9 (0.2) Cost of goods sold .............................................................................................. (626.6) (627.6) 0.2

Gross merchandise margin .............................................................................. 498.8 495.3 (0.7) Selling and distribution expenses........................................................................ (371.2) (373.7) 0.7

Gross profit ....................................................................................................... 127.6 121.6 (4.7) Administrative expenses ..................................................................................... (60.4) (55.3) (8.4)

Total trading profit ........................................................................................... 67.2 66.3 (1.3) Exceptional items ................................................................................................ (2.0) (6.9) n.m.

Operating profit ................................................................................................ 65.2 59.4 (8.9) Net finance costs ................................................................................................. (47.4) (47.4) 0.0

Profit before taxation........................................................................................ 17.8 12.0 (32.6) Taxation .............................................................................................................. (4.3) (2.1) (51.2)

Profit for the period .......................................................................................... 13.5 9.9 (26.7)

Revenue. Revenue fell by 0.2% to £1,122.9 million in the 2014 Fiscal Year, compared to £1,125.4 million in the 2013 Fiscal Year. Revenues were negatively impacted by the adverse weather conditions experienced in early spring with like-for-like sales declining by 7.4% in the first quarter of 2014 compared with the first quarter of 2013. Revenues steadily recovered from this challenging start to the 2014 Fiscal Year with smaller declines in like-for-like sales of 2.6% in the second quarter of 2014 and 0.4% in the third quarter of 2014, each compared to the corresponding period in the prior year. Within ladieswear, the removal of the Be Beau and Et Vous sub-brands and range improvement in some key areas, helped to clarify the offer and deliver positive revenue growth in ladies clothing. Dresses and outerwear performed particularly well. Revenue growth in ladies clothing and kidswear shifted the product mix, with homeware, menswear and ladies accessories taking a smaller percentage of revenue. The menswear range contributed to improved cash margins from reduced volumes. Strong Christmas performance delivered positive like-for-like growth of 0.5% in the final quarter coupled with incremental revenue growth driven by the opening of the Liverpool city center store. Online revenue growth was 32.9% in the 2014 Fiscal Year, with the channel contributing 3.9% of total revenue compare to 2.9% in the 2013 Fiscal Year. The introduction of the Sporting Pro concept contributed incremental revenue versus last year, following the opening of nine new standalone stores, five further stores within existing space and the launch of the Sporting Pro website. The additional week in the 2014 Fiscal Year also contributed towards incremental revenue compared to the 2013 Fiscal Year.

Cost of goods sold and gross merchandise margin. Cost of goods sold increased by 0.2% to £627.6 million in the 2014 Fiscal Year, from £626.6 million in the 2013 Fiscal Year, while our gross merchandise margin decreased by 0.7% to £495.3 million in the 2014 Fiscal Year from £498.8 million in the 2013 Fiscal Year. Our gross merchandise margin as a percentage of our revenue decreased to 44.1% in the 2014 Fiscal Year from 44.3% in the 2013 Fiscal Year. Reductions in cost of goods sold during the year were reflected through bought-in margin rate improvements facilitated by the supply base consolidation initiatives and, to a lesser extent, reduced freight charges following a reduction in the use of more expensive air and trailer freight in the supply chain. Foreign exchange gains in respect of our U.S. dollar purchases also increased. These margin gains were offset by increased product markdowns required to clear stock following the challenging spring season and deliver an improved closing terminal stock position. Additional markdown costs were also incurred to accelerate the removal of several sub-brands. The additional week in the 2014 Fiscal Year also contributed to an increase in cost of goods sold.

Selling and distribution costs and gross profit. Selling and distribution costs increased to £373.7 million in the 2014 Fiscal Year, from £371.2 million in the 2013 Fiscal Year. The increase is largely attributable to new store openings in Liverpool and Exeter, the two store relocations and the opening of the Sporting Pro stores. Personnel costs increased year on year due to increases in the national minimum wage. Other store costs increased as a result of provisions for outstanding rent reviews and inflationary increases for rates, computer costs and energy prices. There were further volume related cost increases driven by the growth of the online channel and the additional week in the 2014 Fiscal Year. Savings within the year came from labor efficiency gains in stores, as a result of improved back-of-house operations and fewer shop floor layout changes. Further savings were attributable to fuel, as a result of favorable fuel hedge rates as well as a reduction in repairs for the distribution centers. Our gross profit decreased by 4.7% to £121.6 million in the 2014 Fiscal Year from £127.6 million in the 2013 Fiscal Year. Our gross profit as a percentage of revenue decreased to 10.8% in the 2014 Fiscal Year from 11.3% in the 2013 Fiscal Year.

Administrative expenses. In the 2014 Fiscal Year, administrative expenses decreased by 8.4% to £55.3 million, from £60.4 million in the 2013 Fiscal Year. The decrease was driven by an accounting adjustment which resulted in a

51

credit within personnel costs following a revision of the expected B share vesting period in relation to IFRS 2. In addition, there was a saving as a result of an asset write off in the previous financial year.

Total trading profit. As a result of the factors discussed above, total trading profit decreased by 1.3% to £66.3 million in the 2014 Fiscal Year, from £67.2 million in the 2013 Fiscal Year.

Exceptional items. Exceptional items were a charge of £6.9 million in the 2014 Fiscal Year compared to a charge of £2.0 million in the 2013 Fiscal Year. The exceptional items in the 2014 Fiscal Year included a provision of £2.9 million for anticipated future dilapidations costs, relating to the existing distribution center and head office site in Skelmersdale, an acceleration of IFRS 2 charges of £1.8 million following a board director resignation in the period, restructuring costs of £1.6 million and costs associated with the redevelopment of the supply chain of £1.1 million. The 2014 Fiscal Year includes a credit of £0.5 million relating to rental income received during the period and a revision of anticipated future costs, both in respect of properties on which onerous lease contracts were previously provided for. In the 2013 Fiscal Year, the Group incurred £1.3 million of restructuring costs and £1.5 million of refinancing costs relating to the settlement of a dispute with the holders of an interest rate swap that the Group has previously entered into. The 2013 Fiscal Year includes a credit of £0.8 million relating to rental income received during the period and a revision of anticipated future costs, both in respect of properties on which onerous lease contracts were previously provided for.

Operating profit. Operating profit decreased by 8.9% to £59.4 million in the 2014 Fiscal Year, from £65.2 million in the 2013 Fiscal Year. The change in operating profit reflects the fall in total trading profit and the increase in exceptional items explained above.

Net finance costs. Net finance costs increased to £47.4 million in the 2014 Fiscal Year, compared to £46.9 million in the 2013 Fiscal Year (excluding refinancing exceptional items of £0.5 million). Net finance costs predominately relate to interest costs associated with the Existing Notes of £475.0 million and amortization of costs associated with the Existing Notes.

Financing exceptional items of £0.0 million were incurred in the 2014 Fiscal Year compared to £0.5 million in the 2013 Fiscal Year relating to a change in the discount rate applied to the onerous lease provision calculation.

Profit before taxation. As a result of the factors discussed above, profit before taxation reduced by 32.6% to £12.0 million in the 2014 Fiscal Year, compared to £17.8 million in the 2013 Fiscal Year.

Taxation. Taxation decreased to £2.1 million in the 2014 Fiscal Year, compared to £4.3 million in the 2013 Fiscal Year. The reduction was primarily due to the lower profit before taxation in the 2014 Fiscal Year. Taxation as a percentage of profit before taxation decreased to 17.5% in the 2014 Fiscal Year, from 24.2% in the 2013 Fiscal Year due to the impact of the change in the corporation tax rate coupled with prior period adjustments.

Profit for the period. For the reasons set forth above, profit for the period decreased by 26.7% to £9.9 million in the 2014 Fiscal Year, compared to £13.5 million in the 2013 Fiscal Year.

52

Results of operations for the 52 weeks ended February 25, 2012 compared to the 52 weeks ended February 23, 2013

The following table sets forth our main operating results extracted from our historical consolidated statements of operations for the 2012 Fiscal Year compared to the 2013 Fiscal Year:

52 weeks ended

February 25,

2012

52 weeks ended

February 23,

2013 % change

(in £ millions)

Revenue ..................................................................................................... 1,117.5 1,125.4 0.7 Cost of goods sold ..................................................................................... (647.5) (626.6) (3.2)

Gross merchandise margin ..................................................................... 470.0 498.8 6.1 Selling and distribution expenses............................................................... (353.3) (371.2) 5.1

Gross profit .............................................................................................. 116.7 127.6 9.3 Administrative expenses ............................................................................ (54.9) (60.4) 10.0

Total trading profit .................................................................................. 61.8 67.2 8.7 Exceptional items ....................................................................................... (4.0) (2.0) n.m.

Operating profit ....................................................................................... 57.8 65.2 12.8 Net finance costs ........................................................................................ (55.7) (47.4) 14.9

Profit before taxation............................................................................... 2.1 17.8 747.6 Taxation ..................................................................................................... 0.9 (4.3) (577.8)

Profit for the period ................................................................................. 3.0 13.5 350.0

Revenue. Revenue increased by 0.7% to £1,125.4 million in the 2013 Fiscal Year, compared to £1,117.5 million in the 2012 Fiscal Year. Three new store openings contributed incrementally to this revenue growth, which was further enhanced by growth of 45.2% in the online channel. From a range perspective, kidswear contributed the strongest year on year growth with menswear also experiencing growth. The sub-brand architecture review and consolidation process began in the period, particularly in ladieswear. Revenue in ladieswear declined in the period, a reduction in the level of markdown costs delivered an improved margin. Homeware also saw revenue decrease, although similarly to ladieswear, margin rate improvements were delivered, as range consolidation began in a market slowly recovering from the recession. Following its launch in 2011, the expansion of the “Matalan Black Card” continued to drive increased customer frequency and value, contributing customer-driven revenue growth. Like-for-like sales decreased by 1.4% in the 2013 Fiscal Year.

Cost of goods sold and gross merchandise margin. Cost of goods sold decreased by 3.2% to £626.6 million in the 2013 Fiscal Year from £647.5 million in the 2012 Fiscal Year. Gross merchandise margin increased by 6.1%, to £498.8 million, in the 2013 Fiscal Year from £470.0 million in the 2012 Fiscal Year. Gross merchandise margin as a percentage of revenue increased to 44.3% in the 2013 Fiscal Year from 42.1% in the 2012 Fiscal Year. The increase in gross merchandise margin was primarily due to a significant reduction in markdown costs. Bought-in margin rate improvements were delivered in the year, benefiting from reduced cost prices and the product mix shifting into kidswear and footwear. Further improvements came from carrying less terminal stock and foreign exchange rate changes which resulted in larger realized gains for the period. These were offset against increased freight charges and a reduction in volume-related rebates from our suppliers.

Selling and distribution expenses and Gross profit. Selling and distribution expenses increased by 5.1% to £371.2 million in the 2013 Fiscal Year from £353.3 million in the 2012 Fiscal Year. This increase was due to a number of factors including the launch of a national TV advertising campaign and the test of a seasonal catalog that was subsequently discontinued. Personnel costs increased due to an increase in the national minimum wage, new store openings and online growth. Rent costs saw increases, due to new store openings and the annualization of the lease commencement at the new Knowsley distribution center. Other property cost increases came from inflationary increases in business rates and energy prices. These increased costs have been partially offset against savings as a result of bringing the management of our transport function and the Corby Distribution center in house. For the reasons set forth above, gross profit increased by 9.3% to £127.6 million in the 2013 Fiscal Year from £116.7 million in the 2012 Fiscal Year. Gross profit as a percentage of revenue increased to 11.3% in the 2013 Fiscal Year from 10.4% in the 2012 Fiscal Year.

Administrative expenses. Administrative expenses increased by 10.0% to £60.4 million in the 2013 Fiscal Year from £54.9 million in the 2012 Fiscal Year. The increase was primarily due to an accelerated amortization charge relating to the commencement of systems architecture rationalization ahead of the launch of the Singles supply chain program. In addition, administrative expenses in the 2012 Fiscal Year included a credit associated with proceeds received from an insurance claim following a fire at a store in Grimsby.

53

Total trading profit. Total trading profit increased by 8.7% to £67.2 million in the 2013 Fiscal Year, from £61.8 million in the 2012 Fiscal Year. The increase in total trading profit reflects generally the increase in revenue and gross profit.

Exceptional items. Exceptional items were a charge of £2.0 million in the 2013 Fiscal Year, compared to a charge of £4.0 million in the 2012 Fiscal Year. In the 2013 Fiscal Year, £1.3 million of restructuring costs were incurred, together with £1.5 million of refinancing costs relating to the settlement of a dispute with the holders of an interest rate swap that the Group entered into previously. These exceptional charges were partially offset by a credit of £0.8 million relating to rental income received during the period and a revision of anticipated future costs, both in respect of properties on which onerous lease contracts were previously provided for. In the 2012 Fiscal Year, a charge of £2.4 million was incurred relating to the recognition of a provision for an onerous lease on a property no longer used by the business. In addition, £1.5 million of restructuring costs and £0.1 million of refinancing costs were incurred in the period.

Operating profit. Operating profit increased by £7.4 million to £65.2 million in the 2013 Fiscal Year, from £57.8 million in the 2012 Fiscal Year. The increase in operating profit reflects generally the improvement in gross profit and the change in exceptional items both of which are explained above.

Net finance costs. Net finance costs decreased to £47.4 million in the 2013 Fiscal Year, compared to £55.7 million in the 2012 Fiscal Year. This reduction was driven by exceptional financing costs incurred in the 2012 Fiscal Year, relating to the acceleration of the amortization of the outstanding loan issue costs of the senior debt facilities repaid as part of the April 2011 refinancing and the costs incurred in relation to the termination of interest rate swaps held by the Group.

Profit before taxation. As a result of the factors discussed above, profit before taxation increased by 747.6% to £17.8 million in the 2013 Fiscal Year, compared to £2.1 million in the 2012 Fiscal Year.

Taxation. Taxation increased to £4.3 million in the 2013 Fiscal Year, compared to a tax credit of £0.9 million in the 2012 Fiscal Year. The increase was primarily due to the higher profit before taxation in the 2013 Fiscal Year. Taxation as a percentage of profit before taxation increased to 24.2% in the 2013 Fiscal Year, from (42.9)% in the 2012 Fiscal Year. The increase is largely attributable to adjustments relating to prior periods recognized in the 2012 Fiscal Year.

Profit for the period. For the reasons set forth above, profit for the period increased to £13.5 million in the 2013 Fiscal Year, compared to £3.0 million in the 2012 Fiscal Year.

Liquidity and Capital Resources

During the periods presented, our primary sources of liquidity were cash generated from operations and drawings under the Revolving Credit Facility, which provided for aggregate drawings of up to £30.0 million (£50.0 million under our prior revolving credit facility which terminated in February 2012), in each case in the form of revolving loans, letters of credit and certain ancillary facilities including overdraft, guarantee and short-term loan facilities. The only drawings under the revolving facility during the periods related to letters of credit and guarantees. Our principal uses of funds are the payment of operating expenses, capital expenditures and the servicing of debt.

The following table summarizes our consolidated statements of cash flow for the periods indicated. Please refer to the relevant statements of cash flow included elsewhere in this Offering Circular for more detailed information.

52 weeks ended

February 25,

2012

52 weeks ended

February 23,

2013

53 weeks

ended

March 1,

2014

(in £ millions)

Net cash generated from operating activities ............................................. 30.1 45.5 7.6 Net cash used in investment activities ....................................................... (20.4) (21.0) (56.4) Net cash used in financing activities .......................................................... 3.4 — —

Net increase/(decrease) in cash and cash equivalents ................................ 13.1 24.5 (48.8) Cash and cash equivalents at the beginning of the period.......................... 83.1 96.2 120.7

Cash and cash equivalents at the end of the period .............................. 96.2 120.7 71.9

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Net Cash Flow from Operating Activities

The following table summarizes the principal components of our net cash flow from operating activities and taxation paid for the periods indicated:

52 weeks ended

February 25,

2012

52 weeks ended

February 23,

2013

53 weeks

ended

March 1,

2014

(in £ millions)

Cash flows from operating activities: Operating profit before exceptional items ................................................. 61.8 67.2 66.3 Exceptional items ....................................................................................... (4.0) (2.0) (6.9)

Operating profit ....................................................................................... 57.8 65.2 59.4 Depreciation ............................................................................................... 22.6 23.3 22.6 Amortization of intangibles ....................................................................... 6.7 9.9 6.5 Non cash exceptionals ............................................................................... 2.4 (0.7) 2.4 Share based compensation charge ............................................................. 2.3 0.7 (0.5) Hedge accounting ...................................................................................... (0.1) (0.1) 0.3 (Gain)/loss on disposal of property, plant and equipment ......................... (1.2) — — (Increase)/decrease in inventories .............................................................. (11.8) (9.2) 6.1 Increase in trade and other receivables ...................................................... (2.2) (3.3) (10.5) Increase/(decrease) in trade and other payables ......................................... 0.3 9.1 (28.7)

Total cash flow from operating activities ............................................... 76.8 94.9 57.6 Interest paid ............................................................................................... (38.6) (44.7) (43.4) Taxation paid ............................................................................................. (8.1) (4.7) (6.6)

Net cash generated from operating activities ........................................ 30.1 45.5 7.6

The principal factors affecting our net cash flows from operating activities in the periods presented are the movement in our profit from trading before exceptional items, the impact of exceptional items and changes in working capital.

The decrease in cash generated from operating activities from £45.5 million in the 2013 Fiscal Year to £7.6 million in the 2014 Fiscal Year was due to a decrease in trade and other payables as a result of a monthly supplier payment in February 2013 falling into the 2014 Fiscal Year rather than the 2013 Fiscal Year (see “Operating and Financial Review and Prospects—Financial Periods”). In addition, the increase in trade and other receivables includes an outflow associated with a restricted cash deposit placed in the period to secure additional forward foreign exchange contract facilities. An increase in exceptional items also contributed to the decrease in cash generated from operating activities.

The increase in cash generated from operating activities from £30.1 million in the 2012 Fiscal Year to £45.5 million in the 2013 Fiscal Year was largely due to the increased profit in the period coupled with an increase in trade and other payables as a result of a monthly supplier payment in February 2013 falling into the 2014 Fiscal Year as outlined above. This was partially offset by an increase in interest paid.

Net Cash Flow from Investment Activities

The following table summarizes the principal components of our net cash flow from investing activities for the periods indicated:

52 weeks ended

February 25,

2012

52 weeks ended

February 23,

2013

53 weeks

ended

March 1,

2014

(in £ millions)

Cash used in investment activities: Payments to acquire property, plant and equipment .................................. (17.9) (15.3) (46.1) Payments to acquire intangible assets ........................................................ (4.3) (6.4) (10.9) Proceeds from the sale of property, plant and equipment .......................... 1.2 — — Interest received ......................................................................................... 0.6 0.7 0.6

Net cash used in investment activities .................................................... (20.4) (21.0) (56.4)

55

Proceeds from the sale of property, plant and equipment in the 2012 Fiscal Year reflect the proceeds from an insurance claim following a fire at a store in Grimsby.

Further details of capital expenditure are included below.

Capital Expenditure

52 weeks ended


February 23, 2013

53 weeks

ended

March 1,

2014

(in £ millions)

Capital Expenditure by Category: New store openings ...................................................................................... 5.4 2.0 2.9 Extensions/resize/re-sites ............................................................................. 1.4 — 1.8 Refurbishment and fixture innovation ......................................................... 5.4 5.1 3.8 Sporting Pro concept .................................................................................... — — 6.8 Singles supply chain program ...................................................................... — 3.3 31.8 IT initiatives ................................................................................................. 5.1 5.3 7.1 Other ............................................................................................................ 4.9 5.9 2.8

Total capital expenditure .......................................................................... 22.2 21.7 57.0

During the 2012 Fiscal Year, the 2013 Fiscal Year and the 2014 Fiscal Year, our total capital expenditure payments were £22.2 million, £21.7 million and £57.0 million, respectively. The principal components of our capital expenditure were store refurbishments, fixture innovation, information technology systems and, more recently, the Singles supply chain program, the launch of the Sporting Pro concept and the opening of a store in Liverpool city center.

The expenditure on the Singles supply chain program of £3.3 million and £31.8 million in the 2013 and 2014 Fiscal Year respectively relate to the move to a “single unit” replenishment capability. The expenditure incorporates the associated information technology systems and physical distribution center, at both the existing site in Corby and the new distribution center in Knowsley. A further £14.9 million of expenditure is anticipated to bring the Singles supply chain program to completion resulting in a total capital outlay on the project of £50.0 million.

The expenditure on the Sporting Pro concept of £6.8 million in the 2014 Fiscal Year saw the launch of nine standalone stores in the period and a further five stores where space has been converted in existing Matalan stores. A fully transactional Sporting Pro website was also developed in the 2014 Fiscal Year.

Our capital expenditure varies from period to period, primarily based on the number of stores we refurbish or open in that period and, more recently, our investment in the Singles supply chain program.

Consistent with our strategy, following the completion of the Singles supply chain program, we anticipate that the mix of capital expenditure will shift toward more directly customer facing projects, including a prudent opening program of new high street and Sporting Pro stores in addition to an increased level of store refurbishments. We anticipate that the level of capital expenditure will reduce to a level that is financed by operational cash flows, supporting our underlying strategy of the business which includes financial de-leveraging.

Net Cash Flow from Financing Activities

The following table summarizes the principal components of our net cash flow from financing activities for the periods indicated:

52 weeks ended

February 25,

2012

52 weeks ended

February 23,

2013

53 weeks

ended

March 1,

2014

(in £ millions)

Cash used in financing activities: Proceeds from borrowings ......................................................................... 250.0 — — Fees associated with refinancing ............................................................... (15.6) — — Loan repayments ........................................................................................ (231.0) — —

Net cash used in financing activities ....................................................... 3.4 — —

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The cash generated from (used by) financing activities in the 2012 Fiscal Year reflects the issuance of £250.0 million senior secured notes to repay senior secured facilities of £231.0 million.

Contractual Obligations

The following table summarizes our contractual obligations as at March 1, 2014, as adjusted to give effect to the Refinancing. The table below does not reflect scheduled interest payments:

Less than

1 year 2-5 years More than

5 years Total

(in £ millions)

Contractual Obligations: Notes offered hereby ........................................................................ — — 492.0 492.0 Operating lease obligations .............................................................. 105.4 400.2 585.3 1,090.9

Total contractual obligations ........................................................ 105.4 400.2 1,077.3 1,582.9

On a pro forma basis as of March 1, 2014, assuming the completion of the Refinancing as described in this Offering Circular, substantially all of our financial indebtedness (represented by the Notes) will have maturities of five years or more.

Available Liquidity

We maintain cash balances to fund the daily cash requirements of our business. As of March 1, 2014, we held £71.9 million of unrestricted cash. In addition, we had undrawn availability under our existing revolving credit facility of £19.0 million as at March 1, 2014. Pro forma for the Refinancing as at March 1, 2014, on a consolidated basis TopCo and its consolidated subsidiaries would have had £64.5 million of cash and cash equivalents and £50 million available for drawing under the Revolving Credit Facility (before giving effect to any outstanding letters of credit and bank guarantees, which at March 1, 2014, reduced availability by £11.0 million). Assuming compliance with the conditions to drawing thereunder, amounts thereunder will be available until the date that is three months prior to the maturity date of the First Lien Notes. See “Description of Certain Financing Arrangements—Revolving Credit Facility”.

In addition to the Revolving Credit Facility, we anticipate that the principal source of our liquidity will be net cash generated from operating activities and, as a result, significant risks to our sources of liquidity include operational risks, such as the risk of stagnant or declining revenues. See “Risk Factors—Risks Relating to our Indebtedness” and “Risk Factors—Risks Relating to our Business”. We anticipate generating positive cash flow after deducting interest and taxes, but cannot assure you that this will be the case.

Following the Transactions, our principal uses of funds are anticipated to be for operating expenses, capital expenditures and debt service. Generally speaking, our need for working capital is greater at the beginning of each quarter when rent on our stores is typically paid. Our inventory level peaks in August and September each year as the autumn and winter stock is added to our inventory at a faster rate than we sell off our existing inventory. Our ability to fund our working capital and other funding needs will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under the Revolving Credit Facility and proceeds from future refinancing will be adequate to meet our future liquidity needs for the foreseeable future.

We cannot assure you, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the Revolving Credit Facility in an amount sufficient to enable us to repay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. To service our indebtedness, including the Notes, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

Off-Balance Sheet Arrangements

Historically, we have not used special purpose vehicles or similar financing arrangements. As of March 1, 2014, none of TopCo or any of its subsidiaries is a party to any off-balance sheet transaction other than operating leases as described above under “—Contractual Obligations”.

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Quantitative and Qualitative Disclosure about Market Risk

The following discussion should be read in conjunction with the notes to our consolidated financial statements contained elsewhere in this Offering Circular, which summarize our significant accounting policies with respect to, among other things, derivative financial instruments and credit risk, and provide certain information with respect to derivative financial instruments held by us.

In the normal course of business, the financial position of the Group is routinely subjected to interest rate and foreign exchange rate risks. These foreign exchange rate risks principally relate to our purchase of merchandise from suppliers. We enter into derivative contracts to hedge partially the foreign exchange rate risk. The Group’s exposure to interest rate risk will be significantly reduced due to the Notes being issued at a fixed rate of interest.

Market Risk Policy

We operate internationally and are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the U.S. dollar. Our policy requires all Group companies to manage their foreign exchange risk against their functional currency. Our functional currency is sterling. We substantially hedge our foreign exchange risk exposure with Group treasury. To manage our foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, we use forward contracts, transacted with Group treasury. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency.

We hedge future seasons’ purchases that are denominated in a foreign currency. Our Group treasury’s risk management policy is to hedge approximately 90% of forecast purchases within 12 months and approximately 60% of purchases from 12 to 24 months, in each case of anticipated cash flows in respect of the purchase of inventory in U.S. dollars.

Interest Rate Risk

As interest rates are currently low in respect of the cash and cash equivalents on the balance sheet and we have no other significant interest-bearing assets, our income and operating cash flows are substantially independent of changes in market interest rates. Our interest rate risk arises from long-term borrowing. The Group’s exposure to interest rate risk is significantly reduced due to the Existing Notes being issued at a fixed rate of interest.

Our policy is to maintain a minimum of 60% of our borrowings in fixed rate instruments using interest rate swaps to achieve this when necessary.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted under IFRS. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, turnover and expenses, and related disclosure of contingent assets and liabilities.

We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies described below.

Stock Valuation

We make various estimates that impact the value of our stock at the end of each financial period, and consequently, our cost of sales during that period.

Inventories are stated at the lower of cost and net realizable value. Cost is based on purchase cost on a first in, first out basis and includes appropriate overheads and direct expenditure incurred in the normal course of business in bringing them to their present location and condition. These costs include certain warehousing and distribution costs.

Net realizable value is the price at which stocks can be sold in the normal course of business after deducting costs of realization. Provisions are made as appropriate for obsolescence, markdown and shrinkage. Provisions for obsolescence and markdown are made after giving consideration to factors such as current and anticipated demand, customer preferences, age of the merchandise and fashion trends. We also estimate shrinkage, or stock loss, which refers

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to our provision for theft and losses, based on our past store experience and the results of our most recent physical stock counts. While it is not possible to quantify the impact of each cause of shrinkage, we have comprehensive loss prevention programs and policies that minimize shrinkage. Physical stock inventories are taken within each store at least once within a fifteen-month period and stock records are adjusted accordingly.

Costs of inventories include the transfer from equity of any gains or losses on qualifying cash flow hedges relating to the purchase of goods for resale.

Derivative Financial Instruments

The Group uses derivative financial instruments to manage its exposure to foreign exchange risks arising from operational activities. These instruments include forward contracts and options. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for speculative or trading purposes.

Derivative financial instruments are initially recognized and measured at fair value on the date a derivative financial contract is entered into and subsequently measured at fair value at each balance sheet date. The gain or loss on re-measurement is taken to the income statement except where the derivative is a designated cash flow hedging instrument under IAS 39 in which case fair value changes are initially recognized directly in equity and then recycled to the income statement when the underlying hedged cash flow arises.

The Group accounts for those derivative financial instruments used to manage its exposure to foreign exchange risk on foreign currency stock purchases as cash flow hedges under IAS 39. In order to qualify for this hedge accounting, the Group is required to document in advance the relationship between the item being hedged and the hedging instrument and its risk management objectives and strategy for undertaking various hedging transactions. The Group is also required to document and demonstrate an assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge will be highly effective on an ongoing basis. The assessment of the effectiveness of each hedge is re-performed at each period end to ensure that the hedge remains highly effective. In addition the Group is also required to document its risk management objectives and strategy for undertaking various hedging transactions.

Gains or losses on cash flow hedges that are regarded as highly effective are recognized in equity. On completion of the forecast purchase transaction, the effective part of any gain or loss previously deferred in equity on the derivative instrument is recognized as part of the carrying amount of the underlying non-financial asset, the ineffective part is recognized immediately in the income statement. The effective gain or loss is recognized in cost of sales in the income statement in the same period during which the underlying asset affects the income statement.

If the hedged transaction is no longer expected to take place, then the cumulative unrealized gain or loss is recognized immediately in the income statement. Where a hedge no longer meets the effectiveness criteria, previous gains and losses remain in equity and are then recognized when transactions are ultimately recognized in the income statement; future gains and losses are recognized immediately in cost of sales in the income statement as they arise.

Derivatives are deemed to be current unless the financial instrument is due to mature more than 12 months after the balance sheet date, in which case they are then deemed to be non-current.

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INDUSTRY OVERVIEW

Generally, the market information presented below in this section is taken or derived from reports prepared by

Verdict Retail, these reports are detailed in “Industry and Market Data”. Market data are inherently forward-looking

and subject to uncertainty and do not necessarily reflect actual market conditions. They are based on market research,

which itself is based on sampling and subjective judgments by both the researchers and respondents, including judgments

about what types of products and competitors should be included in the relevant market. In addition, certain statements

below are based on our own information, insights, subjective opinions or internal estimates, and not on any third-party

or independent source; these statements contain words such as “we estimate”, “we expect”, “we believe” or “in our

view”, and as such do not purport to cite to or summarize any third-party or independent source and should not be so

read. See “Industry and Market Data”.

Overview of the UK Value Clothing Market

Matalan operates within the value segment of the overall clothing market, which we define as traditional discount retailers and retailers who have adopted a low price, high volume strategy as the main driver of their business, including specialists and non-specialists such as grocers. This market has seen attractive growth rates and relative economic resilience over the last few years.

According to Verdict, in the year ended December 31, 2013, the UK value clothing and accessories market (excluding footwear) generated £12.0 billion in gross transaction value (including VAT). The UK value clothing market has experienced strong growth over the last decade, consistently increasing its share of the overall clothing market. From a share of less than 11% in 1998, the UK value clothing market has grown to represent an estimated 30% of the overall UK clothing market in 2013. In the five-year period to December 2013 it is estimated that the value clothing market grew by a total of 27.1%, outperforming the total clothing market by 14.6 percentage points.

The recent economic downturn was in many ways positive for the value sector, with significant outperformance compared to the mainstream clothing sector. In 2009, the shift to the value sector accelerated as consumers traded down. From 2010 onwards, the recovery in overall consumer expenditure drove growth in the overall clothing market but the value segment continued to outperform, despite some more affluent consumers trading up. As a result, the overall clothing market increased by an estimated 2.5% in calendar year 2013 year-on- year while the value clothing sector delivered growth of 3.8%.

The overall clothing market is projected to grow by an estimated 2.9% in calendar year 2014, primarily driven by price inflation. The value clothing market is expected to grow faster, by an estimated 4.4% in the same period. The outlook for consumer expenditure is positive with the overall clothing market projected to grow between approximately 2.9% to 4.9% per annum and the value clothing market projected to grow between approximately 3.9% to 4.6% per annum from 2014 to 2019. The value clothing market is forecast to outperform the overall clothing market to 2018, as the previously anticipated “trade-up” risk is slow to materialize. We believe that this demonstrates that customers who, through economic circumstance, traded down and had a positive experience with value retailing, offer a degree of resilience to a general “trade up” risk faced by the value retail sector, particularly from value retailers like Matalan who focus on quality.

UK Value Clothing Market Size (£ billion)

31%30%30%29%29%29%28%

27%26%

23%

22%20%

25%

0

2

4

6

8

10

12

14

% Share Total Clothing Market

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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Source: derived from “Value Clothing UK: Market Size” April 25, 2014, Verdict, and “Value Clothing UK: Market Forecast” April 25, 2014, Verdict.

Overview of the UK Online Clothing Market

The UK online clothing and footwear market has more than doubled in size from 2009 to 2013 driven by the rapid expansion in the number of online shoppers and the increased number of online shoppers buying clothing. Although the growth rate for the online clothing and footwear market is forecast to slow in the near future, it is still forecast to deliver 84% growth between 2014 and 2018, driving online share of the UK clothing market to 22%. In recent years, the most popular websites where UK consumers bought clothing and footwear include Amazon, eBay, Marks & Spencer and Next.

Greater focus and investment by traditional high street clothing and footwear retailers on multi-channel operations has seen increased use of the online channel, with widening ranges, better website functionality, improved delivery options (including free delivery) and improved online technologies. Two large value clothing and footwear market participants, Sainsbury’s and Primark, are yet to launch their own transactional websites for their clothing and footwear ranges.

We believe that a broad range of delivery options will become increasingly important to consumers, with convenience playing a large part of customer retail preference. An increased focus on free click and collect services, which are already offered by Matalan and contribute to approximately 50% of our online sales, will also lead to increased add-on sales in-store as customers collect their orders. Retailers such as Next offer a breadth of delivery options including same-day home delivery (for orders before 12 p.m.) and next-day home delivery (for orders before 10 p.m.), both at a cost, as well as next day in-store delivery for free. This is a trend of offering varying levels of convenience for consumers, which we believe will eventually alter the offerings of retailers who currently do not provide these services.

Factors Affecting the UK Clothing Market

Demand for clothing in the UK is influenced by wider levels of consumer spending, which in turn are influenced by factors such as unemployment levels, consumer confidence and disposable income. The decline in consumer expenditure during the recession resulted in a decline in the UK clothing market in 2009. There are a number of factors that have supported the increase in the overall UK clothing market since 2010, including the sustained popularity of value retailers, the demand for faster and more affordable fashion and increased supply. The ongoing recovery in consumer expenditure should continue to support the growth of the sector.

Set against this backdrop, the UK value clothing market has benefited from a number of longer term structural changes. The main factors affecting the growth of the value market have been:

• a substantial increase in the availability and supply of value clothing: The increased availability and supply has come from both an increase in space devoted to clothing and from the growth in online sales. Retailers, including chain stores, have rapidly opened new stores and existing retailers, including supermarkets, have allocated more space to clothing within existing stores;

• improvements in the supply chain: Improvements in both the efficiency and quality of the supply chain have increased the profitability of value clothing over the last 10 years and thus its appeal to retailers. In particular, improved relationships and practices with overseas manufacturers and suppliers have contributed to this trend;

• a growth in productivity: In addition to the increase in total space, retailers have also increased average sales productivity. This has resulted from retailers expanding consumer choice by serving more categories (e.g. accessories, kidswear), a greater number of occasions (e.g. not just casualwear, but fashionwear, evening wear, smart casualwear, and work wear), and a broader range of price points (e.g. not just basics but “Better” and “Best”). This has given shoppers more reasons to make a purchase and has increased retailers’ average basket value;

• increasing consumer acceptance of “value” retail brands: Driven by improved levels of quality (materials, trim, durability and fit), and fashion credentials, consumers who would previously have shopped outside of the value clothing market have directed their purchases to this market; and

• expansion of the online retail channel: The online retail channel has grown significantly over the past five years and is expected to increasingly contribute to the overall growth of the UK value clothing market. Currently, the online clothing market is mainly driven by mass market and catalogue customers switching to online.

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Competition in the UK Value Clothing Market

The UK value clothing market is competitive, with specialist clothing retailers competing with grocers for the “value” component of consumer spending, and the overall sector competing with mainstream clothing retailers (specialists, department stores, mail order retailers) for share of the overall consumer clothing budget. See “Risk Factors—Risks Relating to Our Business—Our industry is highly competitive”.

According to Verdict, we have an estimated market share of approximately 8.7% of the UK value clothing market for 2013. The top five value clothing retailers in the UK accounted for 63.2% of the total UK value clothing market in 2013 (up from 61.3% in 2009). The following table sets forth the estimated 2013 market shares:

Primark ................................................................................................................................................................................ 21.1% ASDA .................................................................................................................................................................................. 13.3% Tesco ................................................................................................................................................................................... 10.1% TK Maxx ............................................................................................................................................................................. 10.0% Matalan ............................................................................................................................................................................... 8.7% Other ................................................................................................................................................................................... 36.8%

We primarily compete with national value clothing chains, such as Primark, New Look and H&M, as well as with national diversified retail chains with significant value clothing offerings who operate within a similar “out- of-town” geographic space, such as ASDA and Tesco. The market leader is Primark, which had an estimated market share of approximately 21.1%. Primark differs from us in that it has predominately prime high street locations and its core customer is younger and more fashion forward and it does not offer a transactional online service.

ASDA and Tesco are diversified retail chains that offer a broad comprehensive range of food and non-food products (including value clothing) from within their extensive UK store networks and from their fully transactional websites. ASDA and Tesco appeal to a similar customer base as Matalan but do not offer as wide a range or the quality of shopping experience. In 2013, they captured approximately 13.3% and 10.1%, respectively, of the UK value clothing market.

While we compete with TK Maxx for market share, we consider their offer to be different to our own as they primarily sell branded products at a discount to the RRP. They do not focus on own branded clothing.

Competition in the Online Retail Market. Competition within the Online Retail Market is strong, with almost all major retailers having an online presence (the exceptions being Sainsbury’s and Primark) and the presence of online “pure-play” retailers such as ASOS and Boohoo.com who are able to offer a range of their own and third-party brands through their websites.

Other Sources of Competition. As a result of the variety of our product categories, we also face significant competition from outside of the value clothing sector, from retailers of different sizes and with different sales strategies (including online). Among others, we compete against fashion retailers such as Topshop and Zara; specialty retailers such as Mothercare (kidswear), Burton (menswear) and Dunelm (homeware); department stores such as Marks & Spencer and Debenhams; warehouse clubs; local independent retailers; catalogues; and various online retailers. We compete with all of these entities for the same customers and they together impact our pricing strategies and sales.

Overview of the UK Homeware Market

The UK homeware market generated sales of approximately £11 billion in the year ended December 31, 2013, growing by 1.5% over 2012. This represents a second successive year of growth following three years of decline between 2009 and 2011. In a recession, homeware purchases are easy items to cut from customer spend, as they are generally discretionary. Current trends now show that recovery in the homeware market mirrors recovery in the general economy and housing market.

The homeware market is highly fragmented with the largest single share held by Dunelm with an estimated 7.6%, a significant increase in recent years following an aggressive store opening program. The homeware market is forecast to grow between 2.6% per annum and 3.9% per annum between 2014 and 2019. Our share of this market is estimated at 2.1% for 2013, with the largest market shares held by Dunelm (7.6%), John Lewis (7.2%) and Home Retail Group comprising Argos & Homebase (7.0%).

Competition within the UK homeware market is extremely fragmented, but starting to consolidate with the top 10 players taking market share from independent retailers. The major supermarkets have all experienced strong growth in this segment in the last 10 years. Other competitors include specialist retailers like Dunelm and Ikea, department stores

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such as M&S, John Lewis, Debenhams, House of Fraser and Bhs, clothing retailers such as Next and TK Maxx, and generalists such as Argos and Wilkinson. The market itself fell sharply in 2009 and did not return to growth until 2012.

Overview of the UK Sportswear Market

The sportswear market is a higher growth segment of the market and is forecast to grow by 21.2% from £9.1bn in 2014 to £11.0bn in 2019, a compound annual growth rate of 3.9% compared to 2.9% in the overall clothing and footwear market.

The sportswear sector has remained fragmented over recent years, with a small number of key players including Sports Direct, who concentrate on a value proposition, and JD Sports, who focus on a fashion proposition. The remainder of the sportswear market is serviced largely by smaller chains and independents. Recently there have been new entrants to the market in the form of fashion retailers, including H&M and Primark, who promise high-performance sportswear for the fashion-conscious sportsperson. Competition in the market also comes from growth in branded stores, such as Nike and Adidas.

Out-of-town locations

Out of town locations remain the dominant format for Matalan stores. Our out-of-town stores are located in standalone retail units or in destination retail parks shared with other retailers, away from high street locations in town or city centers. It is estimated that the out-of-town locations will exhibit the strongest growth across the physical sales channel for the retail sector at 2.4% in 2014. This growth is partly supported by new entrants to out-of-town locations such as Schuh, Simply Be and Jacamo which improve the breadth of offer at out-of-town sites and increase footfall.

While this growth is anticipated to slow from 2016 onwards, this decrease in growth is expected to be primarily driven by a slowdown in food sales, with continued growth in non-food sales positively impacting the channel.

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BUSINESS

Our Business


Our range appeals to a broad spectrum of the UK population, with approximately one-third of UK households shopping in Matalan in the last 12 months. We cater to a broad range of ages, although our typical customer is female, aged 30+, who visits Matalan regularly to buy products for herself, her family and her home. Our customers are fashion-conscious but not demanding of leading edge “fast fashion”. We maintain a customer database of nearly twelve million active customers who have transacted with Matalan in the last year through our Matalan Reward loyalty card, our loyalty card that offers customers a range or benefits, including exclusive promotional discounts on merchandise. Purchases by cardholders account for over 90% of our revenue and as such our card is an important element of our loyalty and marketing strategies and also supports our growing multi-channel business.

We offer a wide and authoritative range of clothing, footwear and homeware, uniquely covering a broad range of price points. In accordance with our quality, design, value and experience philosophy, we sell primarily our own branded products and to a lesser extent, third-party branded or licensed products. Our opening price point is in line with supermarkets for our “Good” products, while our “Better” and “Best” products are generally priced at a significant discount to mid-market high street retailers, with what we believe to be comparable or higher quality and design. As a result, we attract a broad range of customers and compete successfully with a wide range of retailers, including supermarkets and discount and mid-market clothing retailers. Across our six main product categories we sell primarily our own branded products and, to a lesser extent, third-party branded or licensed products, which accounted for 8.1% of total sales in 2014 Fiscal Year. Our own branded products have been carefully constructed to support our broad price architecture focused on the entry and mid-level price points. For the 2014 Fiscal Year, approximately 38% of our revenue was generated by ladieswear, 23% by menswear, 19% by kidswear, 7% by footwear, 13% by homeware and less than 1% by our new Sporting Pro products launched in autumn 2013. For the 2014 Fiscal Year, the average selling price of our products and average basket value were £6.00 and £21.55, respectively.

The majority of our sales are carried out in store, although we also sell a growing percentage of our products online via our website. We have 227 stores in the UK, of which 213 are full-price Matalan stores, five are Matalan clearance stores and nine are standalone Sporting Pro stores. The average Matalan store size is 29,000 square feet. Average revenue and EBITDA per store (excluding clearance stores) for the 2014 Fiscal Year was £5.0 million and £0.9 million, respectively. Additionally, a growing proportion of our sales are made via our website with online sales in the 53 weeks ended March 1, 2014 increasing by 32.9% to £43.6m, supported by the roll out of online ordering for collection in store (which we refer to as “click and collect”) in early 2013 (50% of online purchases are now collected in store). Our online sales accounted for 3.9% of our total turnover, with 9.4% of our customers shopping across multiple channels in the 53 weeks ending March 1, 2014. Customers who shopped across multiple channels spent an average of 81% more than store only shoppers. We have recently introduced two new store formats, a high street Matalan store and a new Sporting Pro concept which focuses on sporting apparel, footwear and equipment. As of March 1, 2014 we also had 14 franchise stores in the Middle East which for the 2014 Fiscal Year accounted for 1.3% of our revenue. These franchise stores operate under a wholesale supply arrangement, selling ranges sourced by Matalan and supplied at a mark-up.

Our History

We were founded by John Hargreaves in 1985 based on an out-of-town value retail store model from the U.S. Mr. Hargreaves pioneered the same retail concept in the UK and opened the first Matalan store in Preston, England in 1985. We grew significantly following our foundation and by 1995 had opened 50 stores across the U.K. In order to manage our growing operations, we relocated our headquarters from Preston to Skelmersdale in 1997 and opened a new distribution center at the same premises. We became a public company in May 1998 when we commenced trading our shares on the Main Market of the London Stock Exchange. Matalan was taken private in October 2006 in a transaction led by our founder John Hargreaves, who remains our largest shareholder.

Over the last three years, we have focused on structural investments in the supply chain in order to underpin a future growth strategy across multiple channels and formats. In the last twelve months, we have particularly focused on

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the consistency of our execution, clarification and improvement of the product offering which included the creation of a Chief Operating Officer role.

Matalan now trades from over six million square feet in 227 UK retail stores and had approximately 15,500 employees at March 1, 2014. We have expanded our product offering beyond clothing to include homeware and other non-clothing items, more recently sports equipment through our Sporting Pro brand. Our store opening program has been selective in the 53 weeks to March 1, 2014, with the opening of our first city center concept store in Liverpool, a new Matalan store in Exeter and nine standalone Sporting Pro stores. We also have a franchise agreement with Business Trading Company that, as of March 1, 2014, owned and operated 14 Matalan stores across several Middle Eastern countries, with the intention to increase this number. Our online presence, which started to trade in November 2008, now offers both click and collect and delivery to home.

The established out-of-town value retail store concept, our direct sourcing model and core retail philosophy continue to be as relevant in today’s value retail market as when the business was founded. The key strengths of our business coupled with our clear strategy underpin growth opportunities.

Business Strengths

We believe that we benefit from the following key strengths:

Scale position in a growing market

We are one of the UK’s leading value clothing, footwear and homeware retailers, capturing an estimated 8.7% share of the £12.0 billion UK value clothing market in the year ended December 31, 2013. Our scale allows us to compete effectively in a relatively consolidated market, in which the top five operators have a combined 63.2% market share. The UK value clothing market has experienced strong growth in recent years. In the five-year period to 2013 the value market grew by an estimated £2.5 billion to £12.0 billion, representing 30.0% of total clothing expenditure in the UK. This equates to growth of 27.1%, outperforming the total UK clothing market by 14.6 percentage points. Independent forecasts predict value clothing market annual growth of between 3.9% and 4.6% between 2014 and 2019. We believe that the growth seen in the value clothing market is a structural change in the market driven by increases in trading space, expansion in the range of products offered and improved quality. Additionally, we believe that consumers have realized that value retailers like Matalan deliver quality products at low price points while offering opportunities to step up to “Better” and “Best” products.

Strong, resilient brand and product authority combining value with quality and design

We have serviced the UK value fashion and homeware retail market since 1985 and have created an active customer database of nearly twelve million individuals, covering approximately a third of UK households. Our retail philosophy focuses on three dimensions: quality, design and value. We have specifically tailored offerings for different price points allowing us to compete with a range of different retailers that vary from supermarkets to specialist value and mid- market clothing retailers. We believe we offer better quality at a comparable price to our main competitors for core basic items, appealing designs at a competitive price for the more fashion-oriented ranges, and a price point that entices mid-market customers attracted by the quality and design of our products. In two CSI reports on the clothing sector and the footwear sector, published by Verdict on April 23, 2014, we were awarded first overall for customer satisfaction in footwear and second overall for customer satisfaction in clothing, up from seventh place in the previous year. The CSI is based on customer satisfaction across range, price, convenience, quality, service, ambience, facilities and layout, with our position across a wide range of factors illustrative of our balanced proposition.

We believe that our quality and value positioning creates a resilience to this proposition, as demonstrated by the growth of our active cardholder base from 10.1 million at March 1, 2010 to 11.9 million at March 1, 2014.

Extensive data warehouse, with potential for further multi-channel development

Our customer database of nearly 12 million individuals is maintained via the Matalan Reward loyalty card that offers customers a range of benefits, including exclusive promotional discounts on merchandise. We believe that it would take significant investment and time for competitors who do not have such a database to build up the same data warehouse, which enables visibility and influence on customer behavior both in-store and on-line. This database has provided a basis to develop CRM initiatives that help us to understand the behavior and the lifestyle of our customers and to cost effectively target our marketing activities. Over 90% of our turnover is attributable to Matalan Reward loyalty card holders, in an increasingly multi-channel marketplace such a database and the customer insights it provides leaves us well placed to continue growing our multi-channel customer base. The average annual turnover generated from a multi-channel customer is £145 versus £80 for store only customers, making it an attractive growth opportunity that we can exploit with rapidly advancing technologies.

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Direct sourcing model and strategic supplier relationships

We source the majority of our products directly from manufacturers, predominantly located in Asia and Eastern Europe. We believe that buying directly from suppliers provides us with a competitive advantage, as it allows us to minimize margin erosion through the elimination of supply chain intermediaries, while at the same time providing us high levels of oversight on the quality of our products, which is monitored via the presence of Matalan employees in the local territory. We have actively consolidated our supplier base in recent years, reducing the number of suppliers from 433 in 2011 to 335 by March 2014. We believe that this reduction allows us to better leverage our volume in the buying process while maintaining sufficient flexibility to adapt to the needs of our customers. The consolidation of suppliers has allowed us to gradually renegotiate commercial agreements with agents to remove terms that are unfavorable to us, such as cost price shifts among others. Working with fewer suppliers provides us greater leverage and allows these purveyors to add more value during the design process, and to collaborate with us to eliminate non-value adding costs and processes. The development of more strategic partnerships with certain suppliers is one of the key benefits stemming from our supplier consolidation process.

We have also changed our approach to buying. Previously our buyers were accountable for their own category performance and margins, negotiating individually with suppliers. We have now adopted a more holistic approach, with a leaner management team accountable for all ranges. This consolidated approach to buying across product categories means that there is only one negotiation with each supplier. We have also reduced our reliance on agents by appointing offshore country managers in certain locations. Moreover, an increased focus to share technical knowledge and best practices with the wider buying team has been applied by the quality management team. The quality management team are now involved from the initial garment design stage through to subsequent manufacturing to leverage their technical knowledge to drive an increase in quality and reduce inefficient and margin eroding practices in our supplier base.

We believe that the changes which we have implemented both in our supplier base and in our buying approach, together with our continued focus on streamlining our supply chain, will strengthen our ability to manage any future short-term fluctuations within our cost base through price negotiations and product engineering.

Unique store footprint with attractive low cost base

We have a store footprint across 227 locations, which is the largest portfolio of out-of-town clothing retail stores in the UK, with over six million square feet of retail sales space. This allows us to display our wide- ranging product offer while avoiding the high rental costs associated with many high street or shopping center locations. As our stores are larger than those of many of our competitors, we are able to offer a broader range of product categories. Due to our ability to trade profitably from large, out-of- town stores that are either located in retail parks or standalone locations, we believe that we have more options than our high street competitors when choosing a new location to lease. We lease all of our stores under long-term leases with an average remaining lease period of approximately 10 years. We believe this stable portfolio of low-cost space, in accessible locations with good car parking facilities, is a key strength that underpins a multi-channel strategy; 50% of our online sales are currently collected in-store, driving footfall, additional in-store purchases and lower levels of returns.

Experienced management team with appropriate breadth and depth

We have a strong and experienced management team led by Jason Hargreaves, consisting of ten individuals with an average of 9 years tenure within our business, and drawing on extensive previous experience across the retail, service and consumer goods sectors. Allan Leighton, John Mills, Jason Hargreaves, Stephen Hill and Arnu Misra together have over a century of retail experience. Furthermore, the recent appointment of Arnu Misra as Chief Operating Officer will, we believe, improve both our ability to work seamlessly across the business and our end-to end-execution.

Business Strategy

We have a clear strategy for growth, in keeping with our philosophy of offering customers an extensive range of quality products without compromising on design, value or shopping experience. These strategies are designed to both capitalize on our existing strengths and evolve our capabilities in adapting to the changing marketplace and trends in consumer behavior. We believe this will deliver a resilient and sustainable level of revenue growth, margin enhancement and improvement in profitability and cash generation.

To achieve these goals we have designed our strategy around the following four pillars:



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In addition to our four strategic pillars (outlined in further detail below), we will continue to optimize our cost base and maximize positive cash flow on an ongoing basis. We believe that the Singles supply chain program offers significant opportunities to further drive efficiencies, particularly the manner in which stock is processed and handled within stores. Initiatives to drive sales returns from existing space will also support improvements to the productivity of our fixed costs. Ongoing cost management and optimization is a key focus for the business. Upon completion of the Singles supply chain program and office relocation projects, our capital investment program will return to a more normalized annual level. We expect cost efficiencies and a reduction in capital investment outflows to contribute to the maximization of positive cash flow and de- leveraging.

Consistently execute our offer and further develop our range

We continue to optimize the balance between providing customers a choice of products and managing stock availability. We have consolidated several in-house brands over the past 12 months (a reduction from 18 to 13) in order to reduce duplication, while the number of options within each style of the core range continues to be reviewed and optimized with an emphasis on availability and better margin control. This change has supported improved ladies clothing availability and range, delivering sales growth of 8% in the second half of the 2014 Fiscal Year compared to the corresponding period in the 2013 Fiscal Year. We are also actively managing transitional seasonal phases through product range and mix, reducing the amount of short-life, weather-dependent products. Management of color palette, fabric weight and ability to layer multiple products are increasingly key design considerations and, we believe, will support a more stable trading performance through these transitional periods while continuing to showcase seasonal newness.

We believe that focusing on range optimization and availability in our core and newly implemented The

Statements collection, showcasing current trends and fashion credentials via our We Love collection and providing access to a growing offering of recognisable external brands provides clear segmentation, signposting and balance to our customer proposition. We intend to utilize this range structure in our communication programs, driving frequency and purpose of visit for a variety of family shopping trips. Improving clarity, execution and weight of buy across the upper end of the price architecture will allow the business to better mitigate movements in cost prices at the OPP level where the business acts primarily as a price follower within the market.

Complete and capitalize on our Singles supply chain program

Following an extensive review, we took the decision in 2011 to re-engineer our supply chain and to move approximately 45% of our range away from ratio pack stock replenishment into single unit replenishment, which we have called the Singles supply chain program. This will facilitate the sharing of stock across channels and more efficient placement of stock within the business. This will drive improved availability and sales conversion, reduce markdowns and enhance margins. It will also reduce stock holding within our existing formats and distribution centers, improving working capital management and support expansion into a variety of new formats that are more demanding of an efficient replenishment model.

These changes will be incorporated into both the new distribution center in Knowsley and our existing distribution center in Corby. The Singles supply chain program will also support the direct shipment of stock from our supply base to existing or future overseas franchisees or partners, providing a more cost-effective international supply chain. The first receipt of stock in this new form is intended to be in summer 2014 and will progress via a phased period of closely managed and low-risk transitions, with the increase in single unit replenished volume to be complete by summer 2015. We expect that benefits from the Singles supply chain program will begin to crystalize through the latter part of 2015.

Deliver sustainable margin enhancement

In January 2014, supported by Deloitte consultancy services, we began a strategic review of other opportunities to create sustainable margin improvement. The initial phase of work will complete in June 2014 and includes in its scope: option and depth of buy review across all lines, including the creation of new range analysis tools intended to improve both margins and product availability; price architecture, performance and profitability analysis tools, intended to optimize the price charged for each product; in-season promotion and liquidation management tools, intended to reduce the value of markdowns through the introduction of targeted and graded markdowns; and space and store grading optimization tools intended to increase individual local business unit profitability. These four work streams are believed to offer material opportunities to deliver sustainable improvements to sales and margin performance that will be phased into the business through late 2014 and 2015.

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The consolidation of the supply base delivered over the last two years will support the quick and efficient implementation of the key outputs from this project. In addition, we believe that opportunities exist to develop an increasing number of more strategic supplier relationships, capitalizing on the skill set of those suppliers in areas such as garment design and product engineering to continuously improve product cost and performance.


According to Verdict, the online clothing and footwear market is projected to grow by 84% between 2013 and 2019. We believe this presents an opportunity to convert a greater proportion of our nearly twelve million active customers into multi-channel shoppers (currently 9.4% in the 53 weeks to March 1, 2014), providing significant sales growth potential. In the 2014 Fiscal Year our online business increased its sales by 32.9% to £43.6 million accounting for 3.9% of our total turnover. Customers who shopped across multiple channels spent an average of 81% more than store-only shoppers. Online sales were supported by the roll out of click and collect in early 2013, which now accounts for nearly 50% of online orders. We will further enhance our capability in this regard with the launch of a mobile loyalty application in the summer of 2014 which will allow us to target our customers with personalized communications and benefits. We believe this offers us new means of driving multi-channel behavior and reducing the cost of our CRM program via the digitization of some elements of customer communication. We have also installed free wi-fi in all of our stores to further support the use of the loyalty application and ordering of product via the mobile optimized website should it not be immediately available at the time a customer is in-store.

To help us encourage more of our customers to shop with us across multiple channels, we have developed the capability to monitor individual customer behavior across all channels. This includes the ability to update and capture customer details at the store till point as well as for store colleagues to be given customer-specific scripts and screen prompts at the checkout. We believe that this functionality will have a significant impact on email address capture and will effectively incentivize store customers to shop online via tailored voucher distribution at the till.

We also introduced a new Matalan high street format in October 2013, with the opening of a new 16,000 square foot store in Liverpool city center (over 40% smaller than the average Matalan store), located just off the main thoroughfare and next to major competitors. We believe that more central locations are now viable following the ladieswear range improvements introduced over the last 12 months (ladieswear taking a greater mix of sales in this store type). The store performed strongly in the second half of the 2014 fiscal year, with sales per square foot nearly twice that of the average of our other stores, and a 21.3% increase in the value of sales to existing customers who shopped at the Liverpool store during the 6 months after opening. We will continue to test sizes, formats and locations for a gradual store roll-out program, including our next opening in Cardiff city center in autumn 2014.

In autumn 2013, we launched our new sportswear concept, Sporting Pro, providing quality sportswear, equipment and accessories for the family at competitive prices in a high-quality, well serviced environment. The sports market is forecast to grow by 21.2% between 2014 and 2019 and we believe that there is sufficient room in the market for a new entrant competing not only on price, but equally on range and service. As of March 1, 2014, we had opened nine standalone Sporting Pro stores trading and a fully transactional website. We have also pursued expansion through the conversion of excess space in five of our existing Matalan stores, offering up an average of approximately 6,000 square feet of trading space to the sportswear offer. These stores are partitioned in a way that a customer would perceive them as a separate unit, allowing for clear brand distinction, while allowing us to increase revenue without incurring additional occupation costs. At present, these stores currently consist of branded ranges, however, going forward, we intend to introduce our own, in-house designed, sourced and branded sports and leisure apparel into Sporting Pro stores. We believe that this will complement the existing leading brands already carried and increase our market penetration, blended margin and returns on space.

Our Customers

We have one of the largest customer databases of UK retailers, with nearly twelve million unique customers transacting in our stores in the 2014 Fiscal Year. Attracting such a large number of customers requires appealing to all age groups and to customers across the socio-demographic spectrum. Over 80% of our customers are female, typically but not exclusively aged 35-55 and who visit Matalan regularly to purchase products for themselves, their family and their home and are from the lower middle class or skilled or unskilled working class. Our customers are fashion-conscious but not demanding of leading edge “fast fashion”.

The customer database stores information regarding each customer’s name, address, email address, age, gender and transaction history, including the stores visited and products purchased. We also track other socio-demographic and segmentation model classifications and customers’ shopping behavior (frequency and value) and shopping mission (how they shop the Matalan departments). We collect this information in our stores from customers who use our Matalan Reward loyalty cards (Red and Black) and online. We have used this information to create a “Single Customer View,” segmenting our customer base into eleven types of consumers to ensure that our direct marketing efforts are tailored to

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individual customers. Over 90% of our turnover comes from customers who use the Matalan Reward loyalty card when purchasing items at our stores. Cardholders have the benefit of exclusive in-store promotional discounts; advanced notice of promotional activities and new product launches; periodic offers from other organizations; and the opportunity to win prizes.

Our Brands and Product Categories

Our product categories are divided among six main departments: ladieswear, menswear, kidswear, footwear, homeware and sports. For the financial year ending February 2014, approximately 38% of our revenue was generated by our ladieswear products, 23% by menswear, 19% by kidswear, 7% by footwear, 13% by homeware and less than 1% by sports.

Each department offers our core value products, branded products that are targeted toward specific customer groups and designer-endorsed ranges at the top of our price architecture: our “Good,” “Better” and “Best” price points. For example, our opening price point is in line with supermarkets for our “Good” products, while our “Better” and “Best” products are generally priced at a significant discount to mid-market high street retailers, with what we believe to be comparable or higher quality and design.

Ladieswear. Ladieswear is our largest department. Our ladieswear products include formalwear such as suits, trousers and blouses; casual wear ranges, including denim, knitwear and jersey tops; outerwear, such as coats and jackets; occasion wear, such as dresses and eveningwear; nightwear; lingerie; accessories and swimwear. Our ladieswear brands include Papaya, our core range of everyday wear that comprises the majority of our ladieswear sales; Soon, for more mature women; Rogers & Rogers, our line for plus-size women; and Falmer Heritage, a range of denim and casual clothing. We Love was introduced in late autumn 2013 and is a collection of more reactive, fashion-forward products which is updated regularly throughout a season, to ensure that the collection reflects the latest trends. We also introduced in late autumn 2013 a range of occasion wear designed in collaboration with celebrity Abbey Clancy.

Menswear. Our menswear products include formalwear such as suits, jackets, trousers, shirts and ties; casual wear such as denim, shirts, knitwear, tee shirts and shorts; and outerwear such as coats and jackets. Our menswear brands include Easy, our core range of everyday wear; Easy Classic and Farah Classic, for the more mature of our male customer; Taylor & Wright, our business and formalwear line; 24/7 by Jeff Banks, a smart fashion line for young men; and W10 by Julien Macdonald, a range of formal and occasion wear.

Kidswear. Our kidswear department sells baby/toddler, boyswear and girlswear for children up to age 16, and schoolwear. All age groups comprise fashion and essentials ranges, sleepwear and accessories. Kidswear includes Disney and Candy Couture. Disney ranges comprise of clothing, nightwear and accessories and Candy Couture is a girl’s teen range targeted at girls aged 8 to 16 years.

Footwear. This department sells ladies, mens and kids footwear. Across the ranges are boots and wellingtons, workwear, occasion wear, sandals and slippers.

Homeware. Homeware products include bathmats, towels, pillows, sheets, blankets, rugs, throws, cushions, glassware, dinnerware, nursery and children’s bedroom ranges, luggage and storage items.

Sports. Our Sporting Pro concept was introduced in autumn 2013 and encompasses a range of ladies, mens and kids fitness and leisure apparel, football, running, rugby, swimming and tennis apparel, accessories and fitness equipment. The sports range is available under the Sporting Pro concept only. It currently consists of branded ranges, such as Nike and Adidas, with the planned introduction of own brand apparel for autumn/winter 2014. Branded products are sourced via Intersport, a large European sportswear distributor, and our own branded products will be sourced from the existing Matalan supplier base, with the intention that Sporting Pro apparel products will eventually comprise one-third of our own brands.

Design, Purchasing and Pricing

Our merchandising philosophy is to offer quality products at attractive prices for the entire value-conscious family. We have an in-house design team that designs the majority of our product mix as well as celebrity designers who we collaborate with on a small mix of our range. We focus on sourcing our products directly from manufacturers and have been actively consolidating our supply base to better leverage our purchasing volume in our supplier negotiations.

Product Design. Our design teams either design the products themselves or, occasionally, incorporate the product designs of a supplier. The majority of our products are designed by our in-house design teams. In certain product lines, we also work in collaboration with famous designers and celebrities, such as Jeff Banks and Julien Macdonald in menswear and Abbey Clancy in ladieswear. We design products specifically for three phases in both of our

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spring/summer and autumn/winter seasons, for a total of six different selling periods each year: early spring, high spring and summer, late summer, early autumn, the holiday season and late winter.

We begin designing our products eight months in advance of the time that they will be delivered to our stores for sale. We typically start the process by reviewing the prior season’s fashions and identifying current fashion trends that will fit within the brand image. Within one to two months, we will have formulated a design strategy, signed off on our range selection and agreed on the quantity of product that we will order from our suppliers. We place orders with our suppliers five months prior to the products first going on sale. The suppliers send us sample products shortly after we place our orders and we test the samples for safety, fit, quality and consistency. If the samples pass our rigorous quality assurance tests, the actual production run commences three months prior to the products’ delivery to our stores and usually takes about one month to complete. However, we can turn around high trend fashion lines less than six weeks prior to their delivery to our stores. We then subject the products to at least one more quality control check before they are shipped to the UK and then to our distribution centers.

Pricing. As a value clothing and homeware retailer, we seek to maintain affordable prices for our customers that are competitive at their respective price points. The ASP of our products for the 2014 Fiscal Year was £6.00 (excluding VAT), which represented an increase of 5.9% compared to the previous year. We are currently undertaking a review of our price and range architecture with the help of Deloitte that we believe will create margin enhancing opportunities by optimizing our option breadth and depth of buy across our price architecture. Despite a higher price point, we have experienced increased sales on higher ASP areas such as ladies & mens outerwear, and luggage. Ladies outerwear had an ASP £20.81 compared to the company average £6.00 yet delivered turnover growth of 98% in 2014, versus the previous year.

We employ two types of price markdowns: temporary promotional discounting, which usually coincides with a specific event or occurs in connection with an advertising campaign, and more permanent distressed markdown, which is designed to sell slow-moving inventory. Distressed sales typically start at a 50% reduction from the original price and occur during two mid-season and two end-of-season sales each year. Product that remains unsold after distressed sales is then sent to one of our clearance stores, which then sells the product initially at 50% off and then at more aggressive discounts over a subsequent period. The amount of markdown and the manner in which it is executed is currently under strategic review via the sustainable margin enhancement workstream of our growth strategy.

Sourcing, Supply Chain and Distribution

In recent years we have reduced the number of our suppliers from 433 in 2011 to 335 as at March 1, 2014. While we have recently consolidated our supplier base, we believe that we still maintain adequate diversity of supply, and have little reliance on any single supplier. Approximately 46% of goods sold are sourced from the Far East, approximately 45% are sourced from the Near East and 9% from countries such as Turkey, the enlarged EU and the UK in order to take advantage of shorter lead times. Currently, the majority of our products are supplied directly from the manufacturer. In addition to our UK quality control team, we also have our own quality assurance staff located in Turkey, India, China and Pakistan and quality control functions at our distribution hubs in China, Sri Lanka, Cambodia and Turkey. We believe our off shore quality assurance and quality control hubs reduce both lead times and failure costs by enabling us to identify potential production errors at the manufacturer rather than at our UK distribution centers upon receipt of the product shipment.

We have two operational distribution centers located in Northamptonshire (Corby) and Skelmersdale. We also have a warehouse in Merseyside (Knowsley). On average, we ship products from our distribution centers to each of our stores throughout the UK three times per week. Transport is managed in-house via our leased fleet of vehicles.

We are currently in the process of completing the implementation of our Singles supply chain program, which we expect to cost approximately £50.0 million over three years and of which £35.1 million was spent as of March 1, 2014. Through our Singles supply chain program we are implementing a single unit replenishment capability for 45% of our stock intake, with the balance continuing to be via ratio replenishment. In addition, we are effecting changes to our existing Corby warehouse and relocating our northern warehouse from Skelmersdale to Knowsley. We have already implemented changes to our product and purchase order system and developed a new warehouse management system. In January 2014, we placed our first orders with suppliers for delivery through the Singles supply chain program and we expect the first receipt of stock in this new form will be in summer 2014. We initially intend to roll out single unit replenishment capability for 10% of our product through the Corby warehouse in summer 2014. The Knowsley warehouse is scheduled to go live as a distribution center in winter 2014 after which we plan to ramp up single unit stock intake to 25% of our product. Subsequently, we plan to decommission our Skelmersdale warehouse in spring 2015 and to commence a full ramp up of single unit volumes to 45% in spring/summer 2015.

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As part of the Singles supply chain program we have undertaken new leases at a new site in Knowsley, with the existing Skelmersdale leases due to expire over the next two years. The following table sets forth the size and lease expiry date for our distribution centers and head office:

Location Size

(square feet) Expiry Date of Lease

Merseyside (Knowsley New Site) ............................................................. 577,835 September 30, 2036 Northamptonshire (Corby) ......................................................................... 353,069 May 9, 2030 Merseyside (Knowsley) ............................................................................. 198,300 July 31, 2015 Skelmersdale:

Bulk storage warehouse ......................................................................... 100,800 December 24, 2014 Administrative offices............................................................................ 14,800 March 12, 2015 Main distribution center, trailer parking bays and administrative

offices ................................................................................................ 407,790 April 30, 2016

To coincide with the move to the new Knowsley warehouse and the transition away from the Skelmersdale site, we plan to move into a new head office building on the same site as the new Knowsley warehouse. This will allow us to maintain the efficiencies that we benefited from while sharing the site at Skelmersdale.

Our Stores and Locations

We have the largest portfolio of out-of-town clothing retail stores in the UK, operating from 213 full price Matalan stores, five clearance stores and nine Sporting Pro across the UK as of March 1, 2014, with a total of approximately six million square feet of retail sales space. The average revenue and store EBITDA per Matalan store (excluding Sporting Pro and clearance stores) for the 2014 Fiscal Year was £5.0 million and £0.9 million, respectively. All but two of our full price Matalan stores were profitable for the 2014 Fiscal Year.

Store Environment. Our Matalan stores are typically single-floor, open plan spaces and average 29,000 square feet in size. Ladieswear is generally presented first and may consume up to half of our floor space. Generally, after ladieswear and to the left are our footwear and essentials and our kidswear departments. To the right of ladieswear are our homeware and menswear departments. In our stores that have two floors, ladieswear, kidswear, footwear and essentials are usually on the ground floor, with menswear and homeware located on the floor above. Each department displays our core including The Statements collection and also showcase “Better” and “Best” ranges. Our We Love collection, which showcases contemporary fashion, is located towards the entrance, highlighting key trends to the customer.

The collection of online click and collect orders is typically managed in-store by the customer service desk. Parcels are stored in the stock room and referenced via order details to unique locations. Customers are enticed to shop the store while their parcel is being collected and we estimate that one-third of our online click and collect orders have resulted in an additional in-store purchase. This concept is being further encouraged in a select number of stores, where parcel collection is being trialed from the rear fitting room, thereby increasing customer flow through the store.

Store Locations. Our format is particularly flexible in that it can deliver strong performance from standalone stores, out-of-town retail parks, edge-of-town retail parks, a small number of off-prime city center locations and, more recently, city center locations. Approximately 67% of our stores are located in retail parks, 26% of our stores are standalone stores and 7% of our stores are located in shopping centers or city centers. Stores in these locations generated approximately 65%, 29% and 6%, respectively, of our store sales for the 2014 Fiscal Year. All Matalan sites are leased, with an average remaining lease term of approximately 10 years.

In the 2014 Fiscal Year, we opened our first city center concept store in Liverpool and a new full price Matalan store in Exeter. We believe that city center locations offer a great opportunity for us to expand our reach, following our enhanced multi-channel capabilities and improved product offer. We will open our second city center store in Cardiff in autumn 2014 (approximately 40,000 square feet) which will have a strong family focus and give us a significant point of difference from local competitors. In addition to our new store openings we re-sited two of our existing stores and converted the existing Exeter site into a Matalan clearance store.

Aside from the focus on potential city center locations, our in-house property team works closely with external consultants to identify more traditional potential new store locations. We use an economic model based on customer demographics, market capacity, proximity to existing Matalan stores and other key revenue drivers to generate a list of priority target regions. Our agents scout locations within these catchment areas for facilities of a suitable size and layout. We target stores that we estimate would pay back our fit out costs within two years.

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Supporting the launch of our new Sporting Pro concept, we opened eight new Sporting Pro stores in retail parks and one on Kensington High Street in London during the 2014 Fiscal Year. These have an average trading space of approximately 10,000 square feet and showcase sportswear, equipment and accessories for customers of all ages in a comfortable and well serviced environment. Supplementing this portfolio, we converted excess space in five of our existing Matalan stores, offering up an average of approximately 6,000 square feet of trading space to the Sporting Pro concept. These stores are partitioned in a way that a customer would perceive them as a separate unit, allowing for clear brand distinction. These shared space stores allow us to increase revenue per square foot and target increased spend by new and existing customers, without incurring additional occupation costs.

Overseas Franchises. In 2009, Matalan entered into a franchise agreement with Business Trading Company in Qatar to open Matalan branded franchise stores across the Middle East. With 14 stores trading as at March 1, 2014, there are plans to open a number of additional stores exclusively in the Middle East over the coming years pursuant to the terms of the franchise agreement. We currently ship our products to these franchises from our UK distribution centers with a modest mark-up and at the franchisee’s risk. The re-engineering of the supply chain will allow for direct shipment from overseas hubs.

Matalan Online

Since the launch of our transactional website in 2008, there has been steady and significant revenue growth from our online business. In the 2014 Fiscal Year sales increased by 32.9% to £43.6 million. The introduction of “click and collect” functionality in early 2013, has allowed us to meet customers’ demands of convenience, through an improved offer of multiple delivery methods. Our out-of-town locations, the majority of which offer ample free parking, offer an opportunity for customers to collect their online order in a way that is convenient and accessible to them. This improved convenience enhances customer frequency and allows us to exploit the benefits of both physical and online shopping. For the 2014 Fiscal Year the average click and collect order size was £19.28 with click and collect customers purchasing an average of an additional £4.39 at the time of collection in store resulting in a total average basket value for click and collect customers of £23.67. Our delivery options now include standard delivery to home (42% of online sales), next day delivery to home (8% of online sales) and click and collect from store (50% of online sales).

The improved multi-channel offer, together with an enhanced platform, has contributed to considerable year-on-year increases of both customer traffic and conversion. Our online sales accounted for 3.9% of our total turnover, with 9.4% of our customers shopping across multiple channels in the 2014 Fiscal Year. In the 53 weeks to March 1, 2014 the annual spend of a multi-channel customer was over four times that of an online only customer, with over a third of customers making a store purchase at the point of collection in store. Our conversion rate for online visitors increased from 1.9% in 2013 Fiscal Year to 2.4% in 2014 Fiscal Year, with our number of online visitors growing from 60.0 million in 2013 Fiscal Year to 78.6 million in 2014 Fiscal Year.

The introduction of a fully mobile-optimized website has further contributed towards year on year revenue growth and improvements in conversion. For the 2014 Fiscal Year, 25% of traffic was via a mobile, with 22% via a tablet and 53% via PC. Conversion for this period has improved by 0.5 percentage points year on year.

We believe that continued marketing of our multi-channel offer through our customer database, which contains over 3.7 million email addresses for our twelve million active customers, presents an opportunity to convert a greater proportion of our customer base into multi-channel shoppers, providing significant sales growth potential. In the 2014 Fiscal Year, customers who shopped across multiple channels spent an average of 81% more than store-only shoppers. We believe that further range improvements at the upper end of our price architecture offer additional opportunities for online growth. The ASP of products purchased online was 14% higher than stores for the 2014 Fiscal Year, demonstrating the willingness of customers to purchase higher priced lines in order to justify delivery charges. For the 2014 Fiscal Year, Matalan online, including both click and collect and home delivery generated a higher average basket value, net of returns, of £24.79 compared to £21.42 for our physical stores (excluding Sporting Pro and international stores). Customers can return goods free of charge if they take them to a Matalan store, mitigating the risk of high returns that could reduce profitability levels. Offering free returns in-store further encourages customers to make a replacement or additional purchase.

Advertising and Marketing

Our primary form of advertising is through direct mailings of mini-catalogues that we distribute up to eight times per year. This enables our extensive product offer to be showcased, driving customer footfall, both into store and to the website. Exploiting our database of nearly twelve million active customers, we are able to send targeted mailers to specific customers to promote particular products in which they may be interested. In the 2014 Fiscal Year, over 90% of turnover included customer data capture through the use of our loyalty card, the Matalan Reward loyalty card, providing high quality customer data to support an effective communication program.

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In 2011, we launched a further segmentation of our Matalan Reward loyalty cardholder database with the introduction of the “Matalan Black Card”. Initially issued to one million of our customers, its early success warranted roll out to 28% of our active customer base whose annual spend is £150 or more, as at March 1, 2014. Strategic communication with our Black Card customers has meant that for the 2014 Fiscal Year, their average customer annual spend is 3.6 times that of the standard Red Card customer. Customer value is driven by frequency of purchase, which is 6.6 purchases per year compared to 2.3 purchases for Red Card holders, further enhanced by a larger average basket spend, which is 23% higher than red card holders. 57% of cardholder revenue for the 2014 Fiscal Year came from Black Card holders.

Effective strategic analysis and utilization of our extensive customer database allows for a targeted communication program via both direct mail and e-mail. Against this backdrop, we have developed and launched a series of customer relationship management (CRM) initiatives. These allow us to understand behaviour and lifestyles and target marketing activities more cost effectively. These initiatives build on our knowledge of customer segmentation and lifecycles, enabling direct marketing to be tailored to each individual customer, including through the use of online channels. These techniques are used to manage customer attrition rates, frequency of purchase and drive additional spend from existing active customers. National advertising is also a key part of our marketing strategy, attracting new customers and promoting brand awareness. We believe that once new customers visit our stores or website and sample our extensive product offer, they will become loyal Matalan customers. A national TV campaign in autumn 2013 focused heavily on our multi-channel offer, highlighting the convenience for customers of shopping online and collecting their items in-store at a time suitable to them. Additional forms of advertising include billboards at key locations, radio and local press.

As we have further improved the clarity and strength of our offer, positive brand and product non-paid media coverage has become increasingly visible and is something that we actively manage as part of maintaining an effective communication mix. We believe that independent recognition of the quality and style of our offer within the influential mainstream media serves to reinforce advertising messages communicated directly by the company. Titles to feature positive product coverage in recent months include Vogue, Grazia, the Sunday Times and You magazine in addition to ITV’s This Morning television program. In 2013, Mumsnet named us a Gold Award winner for our dedication to family friendliness across the business at its Family Friendly Awards.

Additionally, in 2014 we plan to introduce our mobile loyalty app for mobile devices along with free in-store Wi-Fi via O2. The app is intended to enhance loyalty and drive sales by targeting users both online and in-store with personalized offers. The app provides a lower cost-to-serve model for tactical markdowns as compared with the current direct mail method and also promotes customer engagement by including brand and content features.

Information Technology

We have information systems in place to support each of our business functions. We have outsourced the management of these systems to global IT provider Capgemini. Our primary enterprise software is Nova, a merchandising system that we use to manage the portfolio of products for each store, including price, stock availability and sales information. Nova allocates stock to be replenished as well as balancing stock across our distribution centers. It interfaces with our other key business systems to enable customer sales both in our stores and online. We own the source code for our bespoke version of Nova.

Our stores use point-of-sale software from Retail Java to run the store’s cash registers and collate till sales across all stores. The till software is supported by a back office set-up version which consolidates the store information and interfaces with Nova to extract updated stock, pricing and promotion information and provide updated sales information. We are in the process of rolling out hand held stock management terminals to the stores. This rollout will complete in May 2014 and will support store operational efficiency and effectiveness in terms of sales preparation and price checking.

Our Matalan ecommerce platform is provided by CTG. However, we have been informed by CTG that they will be exiting the e-commerce platform business in 2015. We are currently planning alternative support arrangements for the platform and reviewing the optimal medium term strategic platform solution. Hosting of the servers is outsourced to Rackspace, payments are processed by Secure Trading and fraud checking via Red. The Sporting Pro ecommerce platform is provided by Magento. Hosting of the servers is outsourced to UKFast, payments are processed by Sage Pay and fraud checking via DataCash.

Our distribution centers use WMoS to manage inventory. WMoS is designed to improve order fulfilment and reduce order cycle time through efficient picking. This is currently being upgraded as part of the Singles supply chain program.

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We use Capgemini to manage our information security, including the backup of the data stored in our customer database and other key business systems.

We have visibility of customer activity and can differentiate how a customer behaves across different channels. This “single customer view” capability further extends to the tills, where store colleagues can capture real time information about customers, customer registrations and targeted marketing. The platforms that deliver this capability are SAS, Epos and SQL Server.

Intellectual Property

We own the rights to the Matalan name, which is our most important trademark and which we have registered in over 15 countries and with the European Community Trademark and International Trademark Registration. We use the Matalan name as a trade name, as a trademark in connection with certain merchandise and as a service mark. We have also registered numerous trademarks in connection with our own brands and related products in the UK and abroad. We license our registered trademarks to our franchise partners as appropriate for use in their franchise territories. We also license certain brands from third parties, including the Disney brand. We have registered variations of the “Matalan” domain name and other domain names with the appropriate authorities in the UK and abroad. In general, we own the copyrights in the designs created or commissioned by us. We also own certain intellectual property rights with respect to our customer database. We have no material patents. We regard our trademarks and other intellectual property as valuable assets in the marketing of our products and take appropriate action when necessary to protect them.

Employees

Our Workforce. As of March 1, 2014, we employed approximately 15,500 employees across our business, with approximately 710 employees working from our head office in Skelmersdale, approximately 1,050 working at our distribution centers/transport division and the remainder working in our store locations. Over the course of the 2013 Christmas period, we employed approximately 3,750 additional temporary employees at various stages. Our workforce is comprised of approximately 25% full-time employees, with the remainder working a variety of part-time schedules.

Employee and Labor Relations. We have three agreements in place with the GMB union; one which covers the Skelmersdale distribution center and Knowsley warehouse, another which covers the Southern distribution center in Corby and the third covering our transport staff. The agreements have been in place since 2003 and although they do not have expiry dates, we periodically review the terms for potential updates. We believe our relations with our employees and the GMB union are both good and have not experienced any significant labor disputes or work stoppages.

In July 2012, we commenced consultation with the unions regarding the proposed move to the new Knowsley site and are meeting with the union and employee representatives regularly.

Salary, Benefits and Pension Scheme. We pay competitive wages within our sector, and evaluate employees for increases in salary on the basis of the individual’s performance, with pay rises being awarded on the basis of increased responsibility either though an expansion of their current role or through promotion. In addition to their salary, all permanent staff are eligible for a bonus or incentives each year that are based on our overall profits. We offer a pension scheme to all eligible employees in accordance with the Government’s auto-enrollment provisions. We operate a scheme with Friends Life for head office staff, distribution center and transport management and store management. A scheme is provided with The People’s Pension for retail and distribution operations staff. We currently contribute 1% of salary for all employees who have not opted out of the applicable scheme, in accordance with the legislative requirements.

Insurance

We maintain insurance to cover risks associated with the ordinary operation of our business, including general liability, property coverage, terrorism and workers’ compensation insurance. We insure our headquarters, distribution centers and stores against such hazards as fire, explosion, theft, flood, mischief and accidents. All of our policies are underwritten with reputable insurance providers and we conduct periodic reviews of our insurance coverage, both in terms of coverage limits and deductibles. We believe that our insurance coverage is sufficient for the risks associated with our operations.

Environmental Matters

We are subject to numerous supra-national, national and local environmental laws and regulations. We believe that we are currently in substantial compliance with all applicable environmental and safety regulations. These environmental, health and safety laws and regulations are constantly changing, however, as are the priorities of those who enforce them. See “Risk Factors—Risks Relating to Our Business—We are subject to numerous statutes and regulations and complaints from customers and other third parties that could affect us”.

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Regulatory Matters

Our customer database is subject to numerous laws, including laws in relation to data protection. It is uncertain what impact, if any, further changes to data protection regulations could have on our operations, and future changes in the requirements or enforcement and interpretation of these regulations may have a material adverse effect on our business, financial condition or results of operations.

We are also subject to governmental regulation from UK, European Union and other international regulatory authorities concerning, among other things, export and import quotas and other customs regulations; consumer and data protection; the advertisement, promotion and sale of merchandise; product safety; the health, safety and working conditions of our employees; the safety of our stores and their accessibility for the disabled; and our competitive and marketplace conduct. We believe that we are in compliance in all material respects with these regulations. We cannot assure you, however, that any future changes in the requirements or mode of enforcement of these laws and regulations will not have a material adverse effect on our business, financial condition or results of operations. See “Risk Factors—Risks Relating to Our Business—We are subject to numerous statutes and regulations and complaints from customers and other third-parties that could affect us”.

Legal Proceedings

We become involved from time to time in various claims and lawsuits arising in the ordinary course of our business, such as employee claims, disputes with our suppliers and intellectual property disputes. Like other fashion retailers, we sell products which are influenced by the work of various designers. As a result, from time to time, allegations of intellectual property infringement, particularly copyright and design right infringement are made against us. We are not currently involved in any legal proceedings which, either individually or in the aggregate, are expected to have a material adverse effect on our financial position or results of operations. We note, however, that the outcome of legal proceedings can be extremely difficult to predict, and we offer no assurances in this regard.

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MANAGEMENT

Board of Directors

The Board of Directors of TopCo is appointed by the shareholders at the annual general meeting. The Board of Directors of the Issuer consists of the same members as the Board of TopCo.

On the date of this Offering Circular, the Board comprised the following members:

Office Name First appointment date

Chairman ........................................................................................... Allan Leighton February 18, 2013 Deputy Chairman ............................................................................... John Mills January 1, 2007 Managing Director ............................................................................. Jason Hargreaves July 12, 2013 Chief Financial Officer ...................................................................... Stephen Hill September 16, 2013 Chief Operating Officer ..................................................................... Arnu Misra March 7, 2013

Allan Leighton—Chairman. Allan Leighton has served as Chairman of Matalan since 2013. Mr. Leighton has 40 years experience in the retail sector, performing a number of roles including Chairman at Royal Mail, Chief Executive at Asda and Chief Executive Officer of Wal-Mart Europe. More recently he has worked in an advisory and non-executive capacity with both national and global retailers and his current roles include Chief Executive Officer at Pandora Jewelry, Chairman at Office, Pace and Entertainment One, and a non-executive director at Bigham’s. Mr. Leighton completed the Advanced Management Program at Harvard University and was awarded an Honorary Degree at Cranfield University in 2004 and an Honorary Fellowship at the University of Lancashire, in 2010.

John Mills—Deputy Chairman. John Mills has served as Deputy Chairman of Matalan since 2013, prior to which he served as Chairman from 2007. Mr. Mills qualified as a chartered Accountant and Associate of the Chartered Institute of Taxation after graduating with a mathematics degree from Nottingham University. He retired as a partner in PricewaterhouseCoopers in 2005 after nearly 30 years in the profession to work with the Hargreaves family. He has been an advisor to the Matalan and the Hargreaves family since 1989. He structured Matalan’s public-to-private transaction in 2006 and became Chairman in early 2007. John has held and currently holds directorships in a number of small to medium-sized enterprises. John is President of Nottingham University Governing Council and is one of its two Pro Chancellors. He is also a Director of the Torch Academy Gateway Trust.

Jason Hargreaves—Managing Director. Jason Hargreaves has served as the Managing Director of Matalan since July 2013. He is the son of Matalan founder John Hargreaves. Mr. Hargreaves has held various positions within Matalan since its inception in 1985, starting in the ladieswear buying team. Mr. Hargreaves then moved into the sourcing department in 2004 before becoming Sourcing Director in 2007. From 2010, Mr. Hargreaves undertook an overseas sourcing role focusing on materials and supplier function before being promoted to Managing Director in July 2013.

Stephen Hill—Chief Financial Officer. Stephen Hill has served as Chief Financial Officer of Matalan since 2013, having worked in the business since 2001. Mr. Hill graduated from Warwick University Business School in 1998 with a degree in Management Sciences before becoming an Associate of the Chartered Institute of Management Accountants in 2003, following time spent working as an Accountant in the NHS. During his 13 years with Matalan, Mr. Hill has undertaken roles across the Finance function, including Financial Planning Controller, Head of Finance and Director of Finance. In addition, he undertook roles within the Risk Management function (Business Risk Manager) and Retail (Retail Commercial Manager) areas of the business.

Arnu Misra—Chief Operating Officer. Arnu Misra has served as Chief Operating Officer of the Group since 2013, having joined the company earlier that year as Supply Chain Director. Mr. Misra received a first class Bachelor of Engineering degree in 1984, an MBA in 1988 and completed the Executive Development Program for Senior Asda Executives in 2002 and Insead Advanced Management Program in 2005. Mr. Misra has over 27 years experience within the retail and leisure industry, including 16 years with Asda, his most recent roles being Senior Executive Director of New Business and Chairman of Asda Financial Services, Executive Vice President of Loblaw Companies in Canada, and Chief Executive Officer at Cannons Health and Fitness Group.

The business address of each member of the Board is Gillibrands Road, Skelmersdale, West Lancashire, WN8 9TB United Kingdom (telephone number: +44 (0)1695 552400).

For the 2014 Fiscal Year, the Group paid the members of the Board an aggregate remuneration (including benefits) of £1.0 million (including a £1.7 million credit in respect of charges for equity settled B Shares).

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General Management

The following table sets forth the senior management of Matalan:

Office Name

Chief Financial Officer ....................................................................................................................... Stephen Hill Chief Operating Officer ...................................................................................................................... Arnu Misra Sports Managing Director ................................................................................................................... Thomas Knight IT Director .......................................................................................................................................... Michelle Barkess Multi-Channel Marketing Director ..................................................................................................... Lee Pinnington Retail and HR Director ....................................................................................................................... Mike Jeans Sourcing and Technical Director ........................................................................................................ David Mellett Merchandising Director ...................................................................................................................... Andrew Scott Buying Director .................................................................................................................................. Mitchell Hughes

Thomas Knight—Sports Managing Director. Thomas Knight has served as the Managing Director of Sporting Pro since January 2013. Mr. Knight has over 38 years experience and a proven track record within the sports retail industry. In 1983, Mr. Knight established Monument Sports, which he sold to Blacks Leisure in 1987. Following the sale, Mr. Knight joined Blacks Leisure for 15 years as Managing Director before joining JJB Sports as Chief Executive in 2002. Mr. Knight left JJB Sports in 2007 to establish the consultancy firm Knight Consultancy through which he advised a number of sports organizations.

Michelle Barkess—IT Director. Michelle Barkess has served as IT Director of Matalan since 2013. She graduated from Sunderland University in 1995 with a degree in Accountancy and Computing before part-qualifying as a Chartered Certified Accountant. Ms Barkess has over 19 years experience managing and implementing information systems. She has worked at Matalan since 2004 and has held a number of positions within the IT and Business Development teams. Prior to Matalan, Ms Barkess worked at Acxiom for 4 years as International Systems Accountant and Program Manager and SCS Plc for 5 years as a Financial Accountant.

Lee Pinnington—Multi-Channel Marketing Director. Lee Pinnington has served as Head of Marketing and most recently Multi-Channel Marketing Director for Matalan since 2008. Mr. Pinnington received a Bachelor of Arts degree in Business Studies specializing in marketing from Liverpool John Moores University in 1993 and a Post Graduate Certificate and Post Graduate Diploma in Marketing from John Moores University in 1998. Prior to joining Matalan, Mr. Pinnington worked at Baugur Group for five years, during which time he was responsible for the relaunch and rebranding of the Iceland Retail business. Mr. Pinnington has also held positions at organizations such as Sainsbury’s, GUS Home Shopping Group, MBNA and Royal Sun Alliance.

Mike Jeans—Retail Director. Mike Jeans has served as Retail Director of Matalan since January 2011. He completed Asda’s internal management program in 1986 and started as a sales manager. He worked at Asda for 17 years, rising through various roles to become Head of Central Operations and then Head of Retail Financial Services (Operations), in which capacity he worked until he left in 2002. He then joined Matalan as a Regional Controller before being appointed Regional Director.

David Mellett—Sourcing and Technical Director. David Mellet has served as Technical Director at Matalan since 2006 before becoming Sourcing and Technical Director in 2013. He has worked at Matalan since 2003 in various sourcing and technical roles including Corporate Purchasing and Technical Director. He studied clothing engineering at the Hollings Faculty from 1985 - 1988, Manchester Metropolitan. Prior to Matalan, Mr. Mellett worked for a World leading industrial thread and consumer textile crafts business, responsible for technical advisory services on sewing and production solutions. Mr. Mellett has served as an Executive Committee Member for the Association of Suppliers to the British Clothing Industry since 2008.

Andrew Scott—Merchandising Director. Andrew Scott has served as a Merchandising Director of the Matalan since 2013. He graduated from Staffordshire University in 2000 with a degree in Business Studies. Mr. Scott has over 13 years experience in the value retail sector including 8 years within Matalan in various merchandising roles, and, prior to this, 3 years within the Peacock Group where he worked to establish a Merchandising function for Bon Marche and leading Group change programs.

Mitchell Hughes—Buying Director. Mitchell Hughes has served as Buying Director of Matalan since 2012. He graduated from Manchester Metropolitan University in 1997 with a degree in Clothing Marketing and Distribution. Mr. Hughes has worked at Matalan since 2005, starting as a senior buyer in menswear, and then promoted to buying manager. In 2010 he took on the role of head buying for Kids/Mens Division and in 2012 he was promoted to Buying Director Clothing and Home. Within this new role, he took over responsibility for the development of Matalan’s

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ladieswear, contributing to the transformation of the product offering. Prior to this he worked at Marks and Spencer for 7 years, starting as a Graduate Trainee in retail and working through to buyer within menswear.

The business address for the senior managers is Gillibrands Road, Skelmersdale, West Lancashire, WN8 9TB United Kingdom (telephone number: +44 (0)1695 552400).

For the 2014 Fiscal Year, Matalan paid its senior managers aggregate remuneration and other benefits of £1.9 million.

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PRINCIPAL SHAREHOLDERS

The following table sets forth the principal shareholders’ equity ownership of TopCo as of the date of this Offering Circular:

Shareholder

Number of

ordinary

A shares

Percentage

holding of

ordinary

A shares

Number of

ordinary

B shares

John Hargreaves........................................................................................... 82,541,449 47.78% — Abacus Trust Company Limited and Colyb Limited(1) ................................ 73,394,756 42.48% — Abacus Trust Company Limited(2) ............................................................... 7,995,069 4.63% — John Jason Hargreaves ................................................................................. 4,444,643 2.57% — Jamey Hargreaves ........................................................................................ 4,387,778 2.54% — Alistair McGeorge(3) .................................................................................... — — 96,000 Matalan Retail Employee Benefit Trust(3)(4) ................................................ — — 60,000 John Mills .................................................................................................... — — 64,000 Paul Gilbert(5) ............................................................................................... — — 40,000 Jeff Banks .................................................................................................... — — 40,000

Total ............................................................................................................ 172,763,695 100.00% 300,000

(1) Abacus Trust Company Limited and Colyb Limited hold these shares as trustees of the John Hargreaves Children’s Trust. Mr. Hargreaves

and each of the trustees disclaim any beneficial interest in these shares.

(2) Abacus Trust Company Limited hold these shares as trustees of the John Hargreaves No.2 Settlement. The trustees disclaim any beneficial interest in these shares.

(3) On November 1, 2010, Mr. McGeorge ceased to be Chief Executive Officer, thereby triggering an automatic conversion of his 96,000 ordinary B shares into 96,000 Series B1 ordinary shares (retained by Mr. McGeorge) and 96,000 Series B2 ordinary shares (transferred to the Matalan Retail Employee Benefit Trust). The Series B1 ordinary shares and the Series B2 ordinary shares, combined, continue to represent a 32% holding in the ordinary B Shares currently outstanding with the Series B1 ordinary shares embodying the value accrued in Mr. McGeorge’s original ordinary B Shares as at November 1, 2010. The Series B2 ordinary shares represent the economic rights allocated to ordinary B Shares after that date. Matalan Retail Employee Benefit Trust holds the 96,000 Series B2 ordinary shares in trust pending a decision to transfer to other members of the existing or future management team.

(4) On April 16, 2013, Mr. Gilbert ceased to be Finance Director, thereby triggering an automatic conversion of his 40,000 ordinary B Shares into 40,000 Series B1 ordinary shares (retained by Mr. Gilbert) and 40,000 Series B2 ordinary shares (transferred to the Matalan Retail Employee Benefit Trust). The Series B1 ordinary shares and the Series B2 ordinary shares, combined, continue to represent a 13.33% holding in the ordinary B Shares currently outstanding with the Series B1 ordinary shares embodying the value accrued in Mr. Gilbert’s original ordinary B Shares as at April 16, 2013. The Series B2 ordinary shares represent the economic rights allocated to ordinary B Shares after that date. Matalan Retail Employee Benefit Trust holds the 40,000 Series B2 ordinary shares in trust pending a decision to transfer to other members of the existing or future management team.

Share Classes

As at March 1, 2014, TopCo had a total outstanding issued share capital of £17,300,369.50, consisting of four classes of ordinary shares, 172,763,695 ordinary A Shares with a par value of £0.10 per share, 164,000 ordinary B shares with a par value of £0.10 per share, 136,000 Series B1 ordinary shares with a par value of £0.05 per share and 136,000 Series B2 ordinary shares with a par value of £0.05 per share.

The A Shares have voting rights whereas the B Shares do not. The majority consent of the holders of the A Shares is required to distribute a dividend. If the holders of the A Shares consent to a dividend payment, the holders of the B shares may be entitled to a proportion of that dividend, subject to the application of a formula set forth in the Articles of Association (the holders of the A Shares receive the balance of profits available for distribution). This formula provides that the B Shares are entitled to a proportion of the dividend only where, after multiplying the previous year’s EBIT by 12.5 and subtracting total borrowings, the resulting figure exceeds the equity value at the time of the Take Private Transaction. On a return of capital, the surplus assets and retained profits are distributed according to a similar formula whereby the relative entitlement of the B Shares as a class (including the B1 and B2 shares referred to below) represents 10% of the growth in the value of the A Shares since the Take Private Transaction. This formula is reflected in the entitlement of holders of the B Shares to share in the proceeds of a sale of the company. Since the first issue of the B Shares both Alistair McGeorge and Paul Gilbert have ceased to be employed. These resignations triggered an automatic split of their B Shares into B1 and B2 Shares. Each retained his B1 shares (which embody an entitlement reflecting the growth in the B share value up to his date of departure), while transferring to the Matalan Retail Limited Employee Benefit Trust the B2 Shares (which carry the entitlement to a proportionate entitlement to future growth of their original tranche of B Shares). See “Principal Shareholders”.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

During the 2014 Fiscal Year, a member of the Hargreaves family was paid £0.1 million by the Group as compensation for overseas sourcing and buying services provided to the Group.

The Group continues to lease a building in London from a company associated with the Hargreaves family. A portion of the building continues to be leased to three companies associated with the Hargreaves family. The rental paid in the 2014 Fiscal Year was £0.7 million. The rental income in the 2014 Fiscal Year was £0.3 million. £0.4 million was outstanding as of March 1, 2014, which has subsequently been paid in full. The buying team previously housed in this building was relocated to head office in Skelmersdale. The Group has no further current use for this building, nor does it expect to for the remainder of the lease term. Therefore, a provision was recognized in relation to the onerous element of this lease. This provision was treated as exceptional in nature and is being released over the remaining lease term.

The Group continues to lease a new distribution center from a company associated with the Hargreaves family. The rental paid in the 2014 Fiscal Year was £1.1 million. This company also provided construction services for the new distribution center of £5.0 million during the 2014 Fiscal Year.

The Group purchased IT services from a company that, during the 2014 Fiscal Year, became associated with the Hargreaves family. The expenditure incurred in the 2014 Fiscal Year was £0.9 million of which £0.6 million was outstanding as of March 1, 2014.

The Group used the agency services of a company associated with the Hargreaves family. The expenditure incurred and paid in the 2014 Fiscal Year was £0.4 million.

The Group purchased clothing for resale from a company associated with the Hargreaves family. Purchases in the 2014 Fiscal Year totalled £0.9 million, of which £0.0 million was outstanding as of March 1, 2014.

The Group used the clothing design services of a company associated with the Hargreaves family. The expenditure incurred in the 2014 Fiscal Year was £0.1 million of which £0.1 million was outstanding as of March 1, 2014.

The Group incurred costs relating to the Hargreaves family and associated companies in the 2014 Fiscal Year of £0.1 million. £0.1 million was paid by the Hargreaves family to the Group after March 1, 2014.

All of the above transactions have taken place on terms not materially different than contracts entered into in the ordinary course of business.

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DESCRIPTION OF CERTAIN FINANCING ARRANGEMENTS

In addition to the Notes offered hereby, Missouri TopCo Limited, Matalan Group Limited, Matalan Finance plc

and certain other subsidiaries expect to enter into the amended and restated Revolving Credit Agreement, at or prior to

the closing of the offering of the Notes. Simultaneously, the Issuer and the Guarantors will enter into the Intercreditor

Agreement.

The terms of the Revolving Credit Facility, Hedging Arrangements and the Intercreditor Agreement are summarized below.

Revolving Credit Facility

The following is a summary of provisions of the amended and restated Revolving Credit Facility.

On or about the date of issuance of the Notes, the Issuer and the Guarantors will enter into the amendment and restatement of the Revolving Credit Agreement between (among others) Lloyds Bank plc as lender and as agent and security trustee, for TopCo and Matalan Group Limited (the borrowers of which will include the Issuer, Matalan Limited, Matalan Retail Limited and any other wholly owned restricted subsidiary of TopCo that accedes as a borrower) to borrow up to £50,000,000 (or its equivalent in an optional currency, including euros and U.S. dollars). The Revolving Credit Facility is guaranteed by the Issuer and the Guarantors and, if applicable, certain other members of the restricted Group (as described below under “Description of First Lien Secured Notes” and “Description of Second Lien Secured Notes”) and secured by the assets of such entities as described below under “—Guarantees” and “—Security”. The Revolving Credit Facility will be available to finance our general corporate and working capital requirements of the restricted Group (but not for acquisitions or the prepayment of certain indebtedness or payment of financing transaction costs).

Repayments and Prepayments

The Revolving Credit Facility will terminate on the date falling three months prior to the original maturity date of the First Lien Notes. Any amount still outstanding under that facility at that time will be due in full immediately on that date. The amended and restated Revolving Credit Agreement contains an annual minimum 10-day net clean down to zero.

Subject to certain conditions, we may voluntarily prepay and/or permanently cancel all or part of the available commitment under the Revolving Credit Facility by giving five business days’ prior notice to the agent. Each loan drawn under the Revolving Credit Facility is required to be repaid on the last day of each of its interest periods. Amounts repaid may (subject to the terms of the amended and restated Revolving Credit Agreement) be reborrowed.

In addition to voluntary prepayments, the Revolving Credit Facility requires mandatory cancellation and, if applicable, prepayment in full or in part in certain circumstances, including:

• with respect to any lender if it is or will become unlawful for such lender to perform any of its obligations under the Revolving Credit Facility;

• upon the occurrence of a change of control or a sale of the whole or substantially all of the restricted Group’s assets. Change of control means a “Change of Control” as defined in the Indentures.

Interest and Commitment Fees

Loans under the Revolving Credit Facility bear interest at a rate per annum equal to LIBOR (or in relation to a loan in euro, EURIBOR) plus the applicable margin. The applicable margin initially means 3.00% per annum, except if no event of default has occurred and is continuing, the applicable margin will be subject to decrease or increase based on our Total Net Leverage Ratio. While an event of default is continuing, the margin shall be 3.00% per annum.

A commitment fee is payable on the available but undrawn amount of the Revolving Credit Facility, at a rate equal to 30% per annum of the applicable margin.

Guarantees

The Revolving Credit Facility will be guaranteed by the Issuer and the Guarantors and each other material company that is a member of the restricted Group and whose EBITDA, gross assets or turnover (excluding intra-restricted Group items) represents 5% or more of the consolidated EBITDA, gross assets or turnover of the restricted Group, together with any holding companies of such companies which sit within the Group.

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We must maintain a guarantor coverage of not less than 85% of the consolidated EBITDA, gross assets and turnover of the restricted Group.

Security

Each Guarantor will give full asset security over all of its assets to secure the obligations of each borrower and guarantor under the Revolving Credit Facility. The holders of the Notes and the hedge counterparties will also benefit from this security package. All of the lenders under the Revolving Credit Facility, the hedge counterparties and the Trustee of the Notes (among others) will be party to an amended and restated intercreditor agreement pursuant to which the lenders under the Revolving Credit Facility and the hedge counterparties under certain hedging arrangements will have a super-priority right to the receipt of any enforcement proceeds from the security (see “—Intercreditor Agreement”).

Representations

The amended and restated Revolving Credit Agreement will include standard Loan Market Association style representations, which will include, amongst others, valid power and authority to enter into the agreement, no default under the amended and restated Revolving Credit Agreement, compliance with applicable laws, no misleading information and that we have good title to our assets.

Financial Covenants

In addition to the general covenants described below, the amended and restated Revolving Credit Agreement contains a “springing” financial covenant requiring TopCo to ensure that (i) total net debt to consolidated EBITDA does not exceed a maximum specified ratio tested quarterly initially set at 6.75 to 1 and stepping down over the life of the Revolving Credit Facility (provided that a breach of such financial covenant shall only be an event of default under the amended and restated Revolving Credit Agreement if on the last day of the testing period the Revolving Credit Facility the aggregate of all outstandings under the Revolving Credit Facility is equal to or more than 35% of the total amount of the Revolving Credit Facility.).

General Covenants

The amended and restated Revolving Credit Agreement contains affirmative and negative covenants typical in facilities of this type. The restrictions on investments, negative pledge, disposals, affiliate transactions, indebtedness, dividends and share capital will (save for certain agreed deviations) follow the relevant provisions of the Notes, as described in more detail in “Description of First Lien Secured Notes” and “Description of Second Lien Secured Notes”.

The amended and restated Revolving Credit Agreement also prohibits our ability to prepay, purchase, defease, redeem or otherwise retire for value the Notes unless certain conditions are met.

Events of Default

In addition, the Revolving Credit Facility provides events of default typical in facilities of this type, including, among others, the following:

• non payment, subject to a three business day grace period for administrative and technical errors;

• breach of financial covenant (provided that a breach of such financial covenant shall only be an event of default under the amended and restated Revolving Credit Agreement if on the last day of the testing period the aggregate amount of all outstandings under the Revolving Credit Facility is equal to or more than 30% of the total amount of the Revolving Credit Facility) and certain key undertakings with no grace period;

• breach of certain undertakings relating to the provision of information, subject to a 5 business day grace period;

• breach of other obligations, subject to a 15 business day grace period;

• misrepresentation, subject to a 15 business day grace period;

• cross default subject to carve outs for a de minimis amount of £2,500,000 or if the indebtedness is owed between members of the Group;

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• default under the notes;

• insolvency, insolvency proceedings and creditor process, subject (where relevant) to a 14 day grace period;

• unlawfulness and invalidity;

• breach of the intercreditor agreement subject to a 10 Business Day grace period;

• repudiation and rescission;

• cessation of business;

• change of ownership;

• expropriation;

• audit qualification;

• litigation which is reasonably likely to be adversely determined and which if adversely determined would be reasonably likely to have a material adverse effect; and

• material adverse change.

Hedging Arrangements

The Issuer currently maintains certain foreign exchange forward contracts. For a description of our current hedging arrangements, please see the section entitled “Operating and Financial Review and Prospects—Quantitative and Qualitative Disclosure about Market Risk” and note 22 to our audited financial statements as of and for the 53 weeks ended March 1, 2014.

Intercreditor Agreement

To establish the relative rights of certain of our creditors under our financing arrangements, the Issuer, certain other Group entities and other intergroup creditors and obligors under our indebtedness will enter into an amended and restated intercreditor agreement, to be dated on or about the Issue Date (the “Intercreditor Agreement”), with, among others, the lenders under the Revolving Credit Facility (the “RCF Lenders”) and agent under the Revolving Credit Facility (the “Senior Agent”), certain hedge counterparties (collectively such lenders, agents and counterparties, the “Senior Creditors”) and the Trustee (in its capacity under the First Lien Indenture on behalf of itself and the holders of the First Lien Notes (the “First Lien Trustee”) the Trustee (in its capacity under the Second Lien Indenture on behalf of itself and the holders of the Second Lien Notes (the “Second Lien Trustee”) and Lloyds Bank plc, as the Security Agent.

By accepting a First Lien Note, holders of First Lien Notes (the “First Lien Noteholders”) shall be deemed to have agreed to and accepted the terms and conditions of the Intercreditor Agreement. By accepting a Second Lien Note, holders of Second Lien Notes (the “Second Lien Noteholders”) shall be deemed to have agreed to and accepted the terms and conditions of the Intercreditor Agreement.

The following description is a summary of certain provisions, among others, contained in the Intercreditor Agreement that relate to the rights and obligations of the First Lien Noteholders and Second Lien Noteholders. It does not restate the Intercreditor Agreement in its entirety nor does it describe provisions relating to the rights and obligations of holders of other classes of our debt or capital expenditures. As such, we urge you to read the Intercreditor Agreement in its entirety because it, and not the discussion that follows, defines certain rights of the First Lien Noteholders and Second Lien Noteholders.

The Intercreditor Agreement will distinguish between liabilities under certain hedging agreements (the “Hedging Agreements”) (“Hedging Liabilities”) that are “Interest Rate/Currency Liabilities” and those that are “Other Hedging Liabilities”, in each case, which have been entered into by hedge counterparties (the “Hedging Counterparties”).

“Other Hedging Liabilities” are Hedging Liabilities which are not Interest Rate/Hedging Liabilities.

“Interest Rate/Hedging Liabilities” are all Hedging Liabilities in relation to interest rate and/or currency Hedging Agreements.

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“Secured Hedging Liabilities” means Interest Rate/Hedging Liabilities and Other Hedging Liabilities.

Ranking and Priority

Liabilities Owed to Creditors

The liabilities owed by the Issuer and Guarantors to the Senior Creditors, the First Lien Trustee, the First Lien Noteholders, the Second Lien Trustee, the Second Lien Noteholders, the holders (“Additional Second Lien Debtholders”) of any future indebtedness that is has the benefit of a lien on the Collateral ranking pari passu with the lien securing the Second Lien Notes (“Additional Second Lien Debt”) shall rank in right and priority of payment in the following order and are postponed and subordinated to any prior ranking liabilities as follows:

(a) as regards the security under the Revolving Credit Facility, any hedging agreements, the First Lien Notes and the Second Lien Notes (the “Transaction Security”) and the Security Agent’s interest in, or other amounts or property held on, trust in accordance with the Intercreditor Agreement and/or all amounts received or recovered by the Security Agent from time to time in connection with the realization or enforcement of all or any part of such Transaction Security:

(i) first, the liabilities under the Revolving Credit Facility, Secured Hedging Liabilities, the liabilities under the First Lien Notes and the First Lien Indenture pari passu and without any preference between them but in the case of any recoveries in connection with the realization or enforcement of the Transaction Security with the order of application described in the first paragraph under the caption “—Application of Proceeds”; and

(ii) second, the liabilities under the Second Lien Notes, the Second Lien Indenture and any Additional Second Lien Debt pari passu and without any preference between; and

(b) otherwise as regards to the liabilities owed by the Issuer and the Guarantors to the Senior Creditors, the First Lien Noteholders, the Second Lien Noteholders and the Additional Second Lien Debtholders, pari

passu and without any preference between them.

Transaction Security

The Transaction Security shall rank and secure (i) first the liabilities owed by the Issuer and the Guarantors to the Senior Creditors and the First Lien Noteholders pari passu and without any preference between them (but only to the extent that such Transaction Security is expressed to secure those Liabilities) but with the order of application described in the first paragraph under the caption “—Application of Proceeds” and (ii) second the liabilities owed by the Issuer and the Guarantors to the Second Lien Noteholders and the Additional Second Lien Debtholders (together with the Senior Creditors, the First Lien Noteholders and the Second Lien Noteholders, the “Secured Creditors”) pari passu and without any preference between them (but only to the extent that such Transaction Security is expressed to secure those Liabilities).

Intra-Group Liabilities

Certain intra-group liabilities (the “Intra-Group Liabilities”) are postponed and subordinated to the liabilities owed by the Issuer and the Guarantors to the Secured Creditors (the “Secured Liabilities”).

Shareholder Liabilities

Certain Liabilities of the Issuer and Gurantors owed to any director or indirect Shareholder of the Issuer (the “Shareholder Liabilities”) are postponed and subordinated to the Secured Liabilities.

The Intra-Group Liabilities and Shareholder Liabilities shall together be the “Subordinated Liabilities” and any party to which Subordinated Liabilities are owed shall be a “Subordinated Creditor”.

Security

As between the Secured Creditors, the Secured Creditors may take, accept or receive the benefit of (a) any additional security if and to the extent legally possible, at the same time it is also offered either:

(i) to the Security Agent as trustee for the other Secured Creditors in respect of their liabilities; or

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(ii) in the case of any jurisdiction in which effective security cannot be granted in favor of the Security Agent as trustee for the Secured Creditors:

(1) to the other Secured Creditors in respect of their liabilities; or

(2) to the Security Agent under a parallel debt structure for the benefit of the other Secured Creditors,

and ranks in the same order of priority as that contemplated under the caption “—Ranking and Priority—Transaction Security”; and (b) any guarantee, indemnity or other assurance against loss in addition to those in the Revolving Credit Agreement, the First Lien Indenture, the Second Lien Indenture, the Intercreditor Agreement or any document governing Additional Second Lien Debt or any other guarantee, indemnity or assurance given to the Secured Creditors if and to the extent legally possible, at the same time it is also offered to the other Secured Creditors in respect of their liabilities and ranks in the same order of priority as described under the caption “—Ranking and Priority”.

Proposed Enforcement Action; Consultation Period

No agent (including the First Lien Trustee, the Second Lien Trustee and the Senior Agent), Security Agent or other Secured Creditor shall take any Enforcement Action (as defined below) unless either:

(a) an insolvency event has occurred in respect of the Issuer or a Guarantor, which under the terms of the First Lien Indenture, Second Lien Indenture, any hedging agreement, the Revolving Credit Agreement or any document governing Additional Second Lien Debt (as the case may be) entitles it to take Enforcement Action (as defined below); or

(b) following compliance with the following paragraph, the relevant 30-day standstill period has expired.

Where the Security Agent, Senior Agent, First Lien Trustee, First Lien Noteholder, Second Lien Trustee, Second Lien Noteholder or Additional Second Lien Debtholder (or its representative) proposes to take any Enforcement Action which under the terms of the Revolving Credit Agreement, hedging agreements, First Lien Indenture, Second Lien Indenture or document governing Additional Second Lien Debt (as the case may be) it is otherwise entitled to take, save in the circumstances set out in clause (a) of the prior paragraph, it shall prior to taking any Enforcement Action (as defined below):

(a) (in the case of the First Lien Trustee or a First Lien Noteholder) give 30 days’ prior written notice of its intention to take Enforcement Action to the Senior Agent, the Security Agent, the Second Lien Trustee and the representative for each series of Additional Second Lien Debt;

(b) (in the case of the Second Lien Trustee or a Second Lien Noteholder) give 30 days’ prior written notice of its intention to take Enforcement Action to the Senior Agent, the Security Agent, the First Lien Trustee and the representative for each series of Additional Second Lien Debt;

(c) (in the case of the Senior Agent, the Security Agent or a lender under the Revolving Credit Agreement) give 30 days’ prior written notice of its intention to take Enforcement Action to the First Lien Trustee, the Second Lien Trustee and the representative for each series of Additional Second Lien Debt; or

(d) (in the case of a representative for a series of Additional Second Lien Debt) give 30 days’ prior written notice of its intention to take Enforcement Action to the Senior Agent, the Security Agent, the First Lien Trustee and the Second Lien Trustee,

and on expiry of such 30-day period (or such shorter period if any as the Senior Agent, the First Lien Trustee, the Second Lien Trustee and the representative for each series of Additional Second Lien Debt may agree in writing) each of the Security Agent, Senior Agent, First Lien Trustee, the Second Lien Trustee and the representative for each series of Additional Second Lien Debt shall be permitted to take such Enforcement Action as it is otherwise entitled to take, regardless of whether it or another party gave the notice.

During any such 30-day period the Senior Agent, the Security Agent, First Lien Trustee, the Second Lien Trustee and the representative for each series of Additional Second Lien Debt agree in good faith (but without prejudice to their respective rights at the end of such 30-day period) to consult with each other as to any proposed Enforcement Action.

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As between the Secured Creditors only, the provisions described under the caption “—Enforcement—Enforcement Instructions” shall also apply as regards proposed Enforcement (as defined below).

“Enforcement” is defined under the Intercreditor Agreement as the enforcement of the Transaction Security, the requesting of a Distressed Disposal (as defined below under the caption “—Distressed Disposals”) and/or the release of claims and/or such security on a Distressed Disposal, the giving of instructions as to actions in respect of any such security following an insolvency event and the taking of any other actions consequential on (or necessary to effect) the enforcement of the Transaction Security.

“Enforcement Action” is defined under the Intercreditor Agreement as:

(a) in relation to any liabilities under the Intercreditor Agreement, any agreement entered into with a hedge counterparty, the Revolving Credit Agreement and any other super senior finance document, the Notes and the Indentures, any Additional Second Lien Debt, the security documents and any intra-group liabilities (the “Liabilities”):

(i) the acceleration of any Liabilities or the making of any declaration that any Liabilities are prematurely due and payable (other than as a result of illegality);

(ii) the making of any declaration that any Liabilities are payable on demand;

(iii) the making of a demand in relation to a Liability that is payable on demand;

(iv) the making of any demand against any member of the Group in relation to any guarantee liabilities of that member of the Group;

(v) the exercise of any right to require any member of the Group to acquire any Liability (including exercising any put or call option against that member of the Group for the redemption or purchase of any Liability but excluding any such right that arises under certain debt purchase transactions permitted under the Revolving Credit Agreement, the Indentures and any document governing Additional Second Lien Debt and excluding any mandatory offer to purchase the Notes arising as a result of a change of control or asset sale under the Indentures or any document governing Additional Second Lien Debt);

(vi) subject to certain exceptions, the exercise of any right of set-off, account combination or payment netting against any member of the Group in respect of any Liabilities other than the exercise of any such right; or

(vii) the suing for, commencing or joining of any legal or arbitration proceedings against any member of the Group to recover any Liabilities;

(b) the premature termination or close-out of any hedging transaction under any hedging agreement (subject to certain exceptions);

(c) the taking of any steps to enforce or require the enforcement of any Transaction Security (including the crystalization of any floating charge forming part of the security thereunder);

(d) the entering into of any composition, compromise, assignment or arrangement with any member of the Group that owes any Liabilities, or has given any security, guarantee or indemnity or other assurance against loss in respect of the Liabilities (other than (i) any action permitted upon assignment of Liabilities or (ii) any debt buy-backs pursuant to open market debt repurchases, tender offers or exchange offers not undertaken as part of an announced restructuring or turnaround plan or while an event of default was outstanding under the relevant debt documents); or

(e) the petitioning, applying or voting for, or the taking of any steps (including the appointment of any liquidator, receiver, administrator or similar officer) in relation to, the winding up, dissolution, administration or reorganization of any member of the Group at owes any Liabilities, or has given any security, guarantee, indemnity or other assurance against loss in respect of any of the Liabilities, or any member of the Group’s assets or any suspension of payments or moratorium of any indebtedness of any member of the Group, or any analogous procedure or step in any jurisdiction,

except that the following shall not constitute Enforcement Action:

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(a) the taking of any action falling within paragraphs (a)(ii), (a)(iii), (a)(iv), (a)(vii) or (e) above which is necessary (but only to the extent necessary) to preserve the validity, existence or priority of claims in respect of Liabilities, including the registration of such claims before any court or governmental authority and the bringing, supporting or joining of proceedings to prevent any loss of the right to bring, support or join proceedings by reason of applicable limitation periods;

(b) an ancillary lender or hedge counterparty under the Revolving Credit Facility (or their respective representatives), any First Lien Noteholder, Second Lien Noteholder or Additional Second Lien Debtholder (or their respective representatives) bringing legal proceedings against any person solely for the purpose of:

(i) obtaining injunctive relief (or any analogous remedy outside England and Wales) to restrain any actual or putative breach of the Revolving Credit Agreement, any hedging agreement, the Indentures or the Existing Indenture, as applicable;

(ii) obtaining specific performance (other than specific performance of an obligation to make a payment) with no claim for damages; or

(iii) requesting judicial interpretation of any provision of any debt document to which it is party with no claim for damages;

(c) allegations of material misstatements or omissions made in connection with the Offering Circular or in reports furnished to the First Lien Trustee or the First Lien Noteholders or any exchange on which the First Lien Notes are listed by any member of the Group pursuant to information and reporting requirements under the First Lien Indenture;

(d) allegations of material misstatements or omissions made in connection with the Offering Circular or in reports furnished to the Second Lien Trustee or the Second Lien Noteholders or any exchange on which the Second Lien Notes are listed by any member of the Group pursuant to information and reporting requirements under the Second Lien Indenture;

(e) allegations of material misstatements or omissions made in connection with the offering materials related to any Additional Second Lien Debt or in reports furnished to the Additional Second Lien Debtholders (or their respective representatives) or on any exchange on which the Additional Second Lien Debt is listed by any member of the Group pursuant to information and reporting requirements under any documents governing Additional Second Lien Debt;

(f) bringing legal proceedings against any person in connection with any fraud, securities violation or securities or listing regulations;

(g) to the extent entitled by law, the taking of action against any creditor (or any agent, trustee or receiver acting on behalf of such creditor) to challenge the basis on which any sale or disposal is to take place pursuant to powers granted to such persons under any security documentation; or

(h) any discussion or consultation between, or proposals made by, any of the lenders under the Revolving Credit Facility, the First Lien Noteholders, the Second Lien Noteholders, the Additional Second Lien Debtholders, the hedge counterparties and the intra-Group creditors during the 30-day standstill period prior to enforcement or as contemplated in the other consultation periods in the Intercreditor Agreement.

Enforcement

The Secured Creditors shall not give instructions to the Security Agent as to the enforcement of the Transaction Security other than in accordance with the Intercreditor Agreement.

Enforcement Instructions

The Security Agent may refrain from enforcing the Transaction Security or taking any other Enforcement unless instructed otherwise by the Instructing Group (as defined below under the caption “—Distressed Disposals”) in accordance with the provisions described under the caption “—Consultation Periods”.

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Subject to the Transaction Security having become enforceable in accordance with its terms and subject to the provisions described under the caption “—Consultation Periods”, the Instructing Group may give instructions to the Security Agent as to the Enforcement of the Transaction Security as they see fit; provided that the instructions as to Enforcement given by the Instructing Group are consistent with the provisions described under the caption “—Security Enforcement Principles” and provided further that if Enforcement Action has been taken which appears likely to result in the occurrence of an insolvency event, the Instructing Group or the Second Lien Notes/Additional Second Lien Required Holders (to the extent permitted below) shall instruct the Security Agent to commence Enforcement sufficiently promptly so as not to frustrate the Security Enforcement Objective.

“Security Enforcement Objective” is defined under the Intercreditor Agreement as the maximizing, so far as is consistent with prompt and expeditious realization of value from enforcement of the Transaction Security, the recovery by the Secured Creditors.

The Security Agent is entitled to rely on and comply with instructions given in accordance with the relevant provisions of the Intercreditor Agreement.

Consultation Periods

If either of the Majority Senior Creditors (as defined under “—Distressed Disposals”) or the First Lien Note Required Holders (as defined below) wish to instruct the Security Agent to commence Enforcement of any Transaction Security, such group of creditors must deliver a copy of the proposed instructions as to Enforcement to the Security Agent and the creditor representative of the Senior Creditors and/or the First Lien Trustee (the “Creditor Representative”) (as appropriate) at least 5 business days prior to the proposed date of issuance of instructions under such Enforcement proposal. For the avoidance of doubt, an Enforcement proposal can be delivered during the 30-day standstill period described above.

Until the discharge of the liabilities owed by the Issuer and the Guarantors to the RCF Lenders and Hedge Counterparties in respect of Interest Rate/Currency Hedging Liabilities and subject to the following two paragraphs, if the Security Agent has received conflicting enforcement instructions, the Security Agent shall promptly notify the Creditor Representatives and such Creditor Representatives will consult with each other and the Security Agent in good faith for a period of not less than 5 business days (or until the end of the 30-day standstill period, if later) from the earlier of (i) the date of the latest such conflicting enforcement instruction and (ii) the date falling 5 business days after the date the original enforcement proposal is delivered, with a view to co-ordinating instructions as to Enforcement.

The Creditor Representatives shall not be obliged to consult (or, in the case where the Creditor Representatives are in agreement with regard to any proposed Enforcement, no consultation period or such shorter consultation period as determined by the Creditor Representatives shall apply) in accordance with this section if:

• the Transaction Security has become enforceable as a result of an insolvency event;

• the Majority Senior Creditors and First Lien Note Required Holders (as defined below) determine in good faith (and notify the Creditor Representatives of the Senior Creditors and the First Lien Noteholders and the Security Agent) that to enter into such consultations and thereby delay the commencement of enforcement of the Transaction Security could reasonably be expected to have a material adverse effect on the Security Agent’s ability to enforce any of the Transaction Security or the realization of proceeds of any enforcement of the Transaction Security in any material respect; or

• a period of no less than six months has elapsed since the proposed enforcement instruction date and no enforcement is being effected by the Security Agent or the First Lien Trustee and the Senior Agent agree no initial consultation period is required.

If consultation has taken place for the initial consultation period as set out above (or such shorter period as contemplated above) (or was not required to occur as provided for above) there shall be no further obligation to consult, the Security Agent may act in accordance with the instructions as to Enforcement previously received from the Instructing Group (as defined below in “—Distressed Disposals”) and the Instructing Group (as defined below in “—Distressed Disposals”) may issue instructions as to Enforcement to the Security Agent at any time thereafter.

Manner of Enforcement

If the Transaction Security is being enforced or other action as to Enforcement is being taken pursuant to the provisions under the caption “—Enforcement Instructions”, the Security Agent shall enforce the Transaction Security or take other action as to Enforcement in such manner (including, without limitation, the selection of any administrator of any debtor to be appointed by the Security Agent) as the Instructing Group (as defined below in “—Distressed

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Disposals”) (or the Second Lien Note/Additional Second Lien Required Holders (as defined below below in “Distressed Disposals”) then entitled to instruct or, pursuant to “—Second Lien Enforcement” below) shall instruct, provided any such instructions are consistent with the principles described under the caption “—Security Enforcement Principles”.

After the Security Agent has commenced an Enforcement of the Transaction Security it shall not accept any subsequent instructions as to Enforcement from anyone other than the Instructing Group that instructed it in respect of such Enforcement (save in the case where permitted under the definition of Instructing Group) regarding any other Enforcement over or relating to the Transaction Security directly or indirectly the subject of the Enforcement which has been commenced (in the context of an Enforcement relating to the shares in a company, for example, this paragraph would restrict the giving of any instructions as to Enforcement of the Transaction Security over those shares or to the assets of that company or the shares in or assets of any direct or indirect subsidiary of that company).

The immediately preceding paragraph shall not restrict the right of any subsequent Instructing Group to instruct the Security Agent as to Enforcement of the Transaction Security that includes any shares or assets which are not directly or indirectly the subject of a prior instruction as to Enforcement, subject to compliance with the provisions described under the caption “—Consultation Periods”.

If the Majority Senior Creditors (as defined below in “—Distressed Disposals”), the First Lien Required Holders or Second Lien Note/Additional Second Lien Required Holders (each as defined below in “—Distressed Disposals”) consider that the Security Agent is enforcing the Transaction Security in a manner which is not consistent with the Security Enforcement Principles, the representatives for the relevant Secured Creditors shall give notice to the Senior Agent, First Lien Trustee, Second Lien Trustee and the representative under any Additional Second Lien Debt (as appropriate) after which such representatives shall consult with the Security Agent for a period of 10 days (or such lesser period as such representatives may agree) with a view to agreeing the manner of Enforcement provided that such representatives shall not be obliged to consult under this paragraph more than once in relation to each Enforcement.

Second Lien Enforcement

Until the later of (i) the date on which the liabilities under the Revolving Credit Facility and any Hedging Agreement in respect of Interest Rate/Currency Hedging Liabilities are repaid and discharged in full and (ii) the date on which the liabilities under the First Lien Notes and the First Lien Indenture are repaid and discharged in full, except with the prior consent of the Majority Senior Creditors and the First Lien Required Holders (as defined below in “—Distressed Disposals”), neither the Second Lien Trustee (for itself and on behalf of the Second Lien Noteholders) nor any Additional Second Lien Debtholder shall direct the Security Agent to enforce or otherwise (to the extent applicable), require Enforcement of, any Transaction Security, except as permitted under the next succeeding paragraph.

The restriction in the immediately preceding paragraph will not apply if:

(i) provided that the Instructing Group are not enforcing the Transaction Security;

(iii) and:

(A) an event of default under the Second Lien Indenture or any document governing Additional Second Lien Debt has occurred for failure to pay principal at the original scheduled maturity of the Second Lien Notes or the relevant Additional Second Lien Debt;

(B) lenders under the Revolving Credit Agreement or the First Lien Noteholders have accelerated the liabilities under the Revolving Credit Agreement or the First Lien Notes and First Lien Indenture (as applicable);

(C) (unless (x) otherwise directed by the Security Agent or (y) the Security Agent has taken or given notice that it intends to take action on behalf of the Second Lien Noteholders and the Additional Second Lien Debtholders) any insolvency has occurred in respect of any member of the Group Debtor, other than where such insolvency occurred as a result of any action by the Second Lien Noteholders and/or the Additional Second Lien Debtholders; or

(D) the Second Lien Trustee or any representative under any Additional Second Lien Debt has given notice in writing (an “Enforcement Notice”) to the Topco or the Issuer, the First Lien Trustee and the representatives for the other Secured Creditors specifying that an event of default under the Second Lien Indenture or any document governing Additional Second Lien Debt (the “Relevant Second Lien Default”) is continuing and a period (a “Second Lien Standstill Period”) of not less than 179 days has elapsed since the date the First Lien Trustee and each representative for each class of Secured Creditor received such Enforcement Notice

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relating to such Relevant Second Lien Default and provided that the Relevant Second Lien Default is continuing at the end of such period.

Security Enforcement Principles

It shall be the primary and over-riding aim of any enforcement of the Transaction Security to achieve the Security Enforcement Objective.

The principles set forth under this caption may be amended, varied or waived with the prior written consent of the Majority Senior Creditors, the majority of the First Lien Noteholders, the majority of the Second Lien Noteholders and the majority of the Additional Second Lien Debtholders.

The Transaction Security will be enforced and other action as to Enforcement will be taken such that either:

(a) all proceeds of Enforcement are received by the Security Agent in cash for distribution in accordance with the provisions described under the caption “—Application of Proceeds”; or

(b) sufficient proceeds from Enforcement will be received by the Security Agent in cash to ensure that when the proceeds are applied in accordance with the provisions described under the caption “—Application of Proceeds” the liabilities under the Revolving Credit Facility and any hedging agreement are repaid and discharged in full (unless the Majority Senior Creditors agree otherwise).

The Enforcement must be prompt and expeditious it being acknowledged that, subject to the other provisions of this Agreement, the time frame for the realization of value from the Enforcement of the Transaction Security or Distressed Disposal pursuant to Enforcement will be determined by the Instructing Group provided that it is consistent with the Security Enforcement Objective.

On:

(a) a proposed Enforcement of any of the Transaction Security over assets other than shares in a member of the Group, where the aggregate book value of such assets exceeds £5,000,000 (or its equivalent); or

(b) a proposed Enforcement of any of the Transaction Security over some or all of the shares in a member of the Group over which Transaction Security exists,

the Security Agent shall (unless it is incompatible with enforcement proceedings in a relevant jurisdiction) appoint a “big four” accounting firm, any reputable and independent international investment bank or other reputable and independent professional services firm with experience in restructuring and enforcement to opine as expert on:

(1) the optimal method of enforcing the Transaction Security so as to achieve the principles set forth in this section and maximize the recovery of any such Enforcement;

(2) that the proceeds received from any such Enforcement is fair from a financial point of view after taking into account all relevant circumstances; and

(3) that such sale is otherwise in accordance with the Security Enforcement Objective.

The Security Agent shall be under no obligation to appoint a financial advisor or to seek the advice of a financial advisor, unless expressly required to do so by the paragraph above or any other provision of the Intercreditor Agreement.

The financial advisor’s opinion (or any equivalent opinion obtained by the Security Agent in relation to any other Enforcement of the Transaction Security that such action is fair from a financial point of view after taking into account all relevant circumstances) will be conclusive evidence that the Security Enforcement Objective has been met.

In the event that an Enforcement of the Transaction Security is over assets other than shares of a member of the Group and such Enforcement is conducted by way of public auction, any equity investors of the Group shall be entitled to participate in such auction. Nothing in this paragraph shall require Enforcement of Transaction Security to take place by way of public auction.

In the absence of written notice from a creditor or group of creditors that are not part of the relevant Instructing Group that such creditor(s) object to any Enforcement of the Transaction Security on the grounds that such Enforcement

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does not aim to achieve the Security Enforcement Objective, the Security Agent is entitled to assume that such Enforcement of the Transaction Security is in accordance with the Security Enforcement Objective.

If the Security Agent receives an objection (and without prejudice to the ability of the Security Agent to rely on other advisers and/or exercise its own judgment in accordance with this Agreement), a financial advisor’s opinion to the effect that the particular action could reasonably be said to be aimed at achieving the Security Enforcement Objective will be conclusive evidence that the requirement of the first paragraph of this section has been met.

If no financial advisor is willing to give an opinion (for reasons other than that the proposed Enforcement does not satisfy the requirements of set forth in this section), the Security Agent may nonetheless effect an Enforcement as directed by an Instructing Group provided such Enforcement is by way of public auction.

Waiver of Rights

To the extent permitted under applicable law and subject to the provisions described under the captions “—Proposed Enforcement Action; Consultation Period”, “—Enforcement”, “—Application of Proceeds” and “—Distressed Disposals”, each of the Secured Creditors waives all rights it may otherwise have to require that the Transaction Security be enforced in any particular order or manner or at any particular time or that any sum received or recovered from any person, or by virtue of the enforcement of any of the Transaction Security or of any other security interest, which is capable of being applied in or towards discharge of any of the secured obligations is so applied.

Option to Purchase the First Lien Notes by the Second Lien Noteholders

Subject to the terms and conditions of the Intercreditor Agreement, at any time during the 30-day standstill period described above, all or a portion of the Second Lien Noteholders (having given all of the Second Lien Noteholders the opportunity) may, by giving not less than ten days’ notice to the Security Agent, require the transfer to them of all, but not part, of the then outstanding First Lien Notes by paying the First Lien Noteholders the aggregate principal amount of the First Lien Notes together with accrued and unpaid interest (including any default interest) thereon through the date of payment and all costs and expenses incurred by the Trustee and/or the First Lien Noteholders as a consequence of giving effect to that transfer. Upon exercising such option, the Second Lien Noteholders will also be required to purchase all of the liabilities under the Revolving Credit Facility and to purchase amounts owing to the Hedge Counterparties in respect of the Interest Rate/Currency Hedging Liabilities.

Option to Purchase the RCF by the First Lien Noteholders

Subject to the terms and conditions of the Intercreditor Agreement, at any time during the 30-day standstill period described above, all or a portion of the First Lien Noteholders (having given all of the First Lien Noteholders the opportunity) may, by giving not less than ten days’ notice to the Security Agent, require the transfer to them of all, but not part, of the then outstanding liabilities owed to all of the RCF Lenders by paying the RCF Lenders the aggregate principal amount of the liabilities owed to the RCF Lenders through the date of payment and all costs and expenses incurred by the Senior Agent and RCF Lenders as a consequence of giving effect to that transfer. Upon exercising such option, the First Lien Noteholders will also be required to purchase amounts owing to the Hedge Counterparties in respect of the Interest Rate/Currency Hedging Liabilities.

Filing of Claims

After the occurrence of an insolvency event in relation to any member of the Group, each Subordinated Creditor irrevocably authorizes the Security Agent (acting in accordance with the provision of the next succeeding paragraph), on its behalf, to:

(a) take any Enforcement Action (in accordance with the terms of the Intercreditor Agreement) against that member of the Group;

(b) demand, sue, prove and give receipt for any or all of that member of the Group’s liabilities;

(c) collect and receive all distributions on, or on account of, any or all of that member of the Group’s liabilities; and

(d) file claims, take proceedings and do all other things the Security Agent considers reasonably necessary to recover that member of the Group’s liabilities, in each case only as the Security Agent considers necessary or advisable in relation to an Enforcement, and the Secured Agent shall distribute monies

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received by it as a result in accordance with the provisions described under the caption “—Application of Proceeds”.

For the purposes of the preceding paragraph, the Security Agent shall act in accordance with the provisions described under the caption “—Enforcement” or in the absence of any such instructions, as the Security Agent sees fit.

Turnover of Receipts

If any Secured Creditor receives or recovers the proceeds from any Enforcement of any Transaction Security (whether before or after an insolvency event) except in accordance with the provisions described under the caption “—Application of Proceeds”, that Secured Creditor will:

(a) hold an amount of that receipt or recovery equal to the relevant Liabilities (or if less, the amount received or recovered) in trust for the Security Agent and promptly pay that amount to the Security Agent for application in accordance with the terms of Intercreditor Agreement; and

(b) promptly pay an amount equal to the amount (if any) by which the receipt or recovery exceeds the relevant Liabilities to the Security Agent for application in accordance with the terms of the Intercreditor Agreement.

The Subordinated Creditors are also subject to customary turnover obligations.

Distressed Disposals

If a Distressed Disposal (as defined below) of shares in the capital of any Guarantor that is a subsidiary of the Issuer (each, a “Subsidiary Guarantor”) is being effected, the Security Agent is irrevocably authorized to release the relevant Transaction Security and such Subsidiary Guarantor and any subsidiary of such Subsidiary Guarantor from all or any part of its Guarantee on behalf of all Secured Creditors, the Subordinated Creditors and the Issuer and the Guarantors. The net proceeds of each such Distressed Disposal shall be paid to the Security Agent for application in accordance with application of proceeds provisions of the Intercreditor Agreement as if those proceeds were the proceeds of an Enforcement of the Transaction Security. In connection with such Enforcement, the Security Agent shall:

(a) act on the instructions of:

(A) prior to the later to occur of the discharge of all liabilities under the Revolving Credit Facility and any Interest Rate/Currency Hedging Liabilities in full and the discharge of all liabilities under the First Lien Notes and the First Lien Indenture in full:

(i) 662/3% of the lenders under the Revolving Credit Facility and the counterparties under hedging agreements in relation to the Interest Rate/Currency Hedging Liabilities (the “Majority Senior Creditors”) and the majority of First Lien Noteholders; or

(ii) in relation to instructions with respect to Enforcement, the Majority Senior Creditors and the First Lien Note Required Holders (acting through the relevant Creditor Representative), provided that if the Security Agent has received instructions (or proposed instructions) by or on behalf of both the Majority Senior Creditors and the First Lien Note Required Holders that are inconsistent as to the manner of such Enforcement (including any inconsistency as to the timeframe for realizing value from an enforcement of the Transaction Security or a Distressed Disposal), then:

(i) if the instructions with respect such enforcement from the majority of the Noteholders:

(1) comply with the provisions described under the caption “—Enforcement—Consultation Periods”; and

(2) are instructions to enforce the Transaction Security or otherwise require a Distressed Disposal of property,

then such instructions on enforcement from the First Lien Note Required Holders will prevail; and

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(ii) provided further that, in the event that the Liabilities in respect of the Revolving Credit Agreement and the Interest Rate/Currency Hedging Liabilities have not been fully discharged within six months of the date the first such instructions as to Enforcement were issued, the instructions with respect to Enforcement from the Majority Senior Creditors will prevail, and

(B) after the later to occur of the discharge of all liabilities under the Revolving Credit Facility and the Interest Rate/Currency Hedging Liabilities in full and the discharge of all liabilities under the First Lien Notes and the First Lien Indenture in full, the Second Lien/Additional Second Lien Required Holders,

(the “Instructing Group”); or;

(b) in the absence of any such instructions, act as the Security Agent sees fit.

“First Lien Note Required Holders” means holders of the principal amount of Notes required to vote in favour of the relevant direction, approval, consent or waiver under the terms of the indenture governing the First Lien Notes or, if the required amount is not specified, the holders holding at least the majority of the principal amount of the then outstanding First Lien Notes.

“Second Lien Note Required Holders” means holders of the principal amount of Second Lien Notes required to vote in favour of the relevant direction, approval, consent or waiver under the terms of the indenture governing the Second Lien Notes or, if the required amount is not specified, the holders holding at least the majority of the principal amount of the then outstanding Second Lien Notes.

“Additional Second Lien Required Holders” means holders of the principal amount of Additional Second Lien Debt required to vote in favour of the relevant direction, approval, consent or waiver under the terms of the indenture governing the Additional Second Lien Debt or, if the required amount is not specified, the holders holding at least the majority of the principal amount of the then Additional Second Lien Debt.

“Second Lien Note/Additional Second Lien Required Holders” means at any time the Second Lien Note Required Holders and Additional Second Lien Required Holders whose participations at that time aggregate to more than 50% of the total aggregate amount of Second Lien Notes and Additional Second Lien Debt.

Notwithstanding the above:

(a) no release of the Issuer’s liabilities under the First Lien Notes, the Second Lien Notes or any Additional Second Lien Debt may take place without the First Lien Trustee’s, Second Lien Trustee’s or the representative’s under such Additional Second Lien Debt (as the case may be) prior written consent;

(b) no release of the Guarantees of TopCo or Matalan Group Limited in respect of the First Lien Notes, the Second Lien Notes or any Additional Second Lien Debt may take place without the Trustee’s or the Existing Trustee’s (as the case may be) prior written consent; and

(c) no other release of the Guarantees of the First Lien Notes, the Second Lien Notes or any Additional Second Lien Debt may take place without First Lien Trustee’s, Second Lien Trustee’s or the representative’s under such Additional Second Lien Debt (as the case may be) prior written consent unless the relevant Distressed Disposal:

(1) is effected either (i) pursuant to a public auction or (ii) where an internationally recognized investment bank or international accountancy firm selected by the Security Agent has delivered to the First Lien Trustee, the Second Lien Trustee and the representative under any Additional Second Lien Debt an opinion that the disposal price of the relevant share capital or assets is fair from a financial point of view after taking into account all relevant circumstances; and

(2) is for cash (or substantially all cash);

and unless any liabilities to Secured Creditors from the Subsidiary Guarantor whose shares are being disposed of and from any Subsidiary of such Subsidiary Guarantor are also being released by the Security Agent.

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As defined in the Intercreditor Agreement, “Distressed Disposal” means a disposal of any asset that secures the liabilities under the Revolving Credit Facility, the First Lien Notes, the Second Lien Notes, Additional Second Lien Debt and certain hedging obligations that is:

(a) being effected at the request of the Instructing Group in circumstances where the Transaction Security under the Revolving Credit Facility and/or the Notes has become enforceable;

(b) being effected by enforcement of the Transaction Security; or

(c) being effected, after the occurrence of an acceleration event under the Revolving Credit Agreement, the First Lien Indenture, the Second Lien Indenture or any document governing Additional Second Lien Debt or the enforcement of the security under the Revolving Credit Agreement, the First Lien Indenture, the Second Lien Indenture or any document governing Additional Second Lien Debt, by a member of the Group to a person or persons which is not a member of the Group.

Each creditor, the Issuer and each Guarantor will:

• do all things that the Security Agent requests in order to give effect to the provision described in the prior paragraph (which shall include, without limitation, the execution of any assignments, transfers, releases or other documents that the Security Agent may consider to be necessary to give effect to the releases or disposals contemplated thereby); and

• if the Security Agent is not entitled to take any of the actions contemplated by this section or if the Security Agent requests that any creditor, the Issuer or any Guarantor take any such action, take that action itself in accordance with the instructions of the Security Agent, provided that the proceeds of those disposals are applied in accordance with the provisions described under the caption “—Application of Proceeds”.

Application of Proceeds

Subject to certain exceptions, all amounts from time to time received or recovered by the Security Agent in connection with the realization or enforcement of all or any part of the Transaction Security or being derived from assets over which the Transaction Security created security and being expressly provided in the Intercreditor Agreement as being payable to the Security Agent for application in accordance with this paragraph (the “Recoveries”) shall be held by the Security Agent on trust to apply them at any time as the Security Agent (acting reasonably) sees fit, to the extent permitted by applicable law (and subject to the provisions described in this paragraph), in the following order of priority:

(a) in discharging any sums owing to the Security Agent, the First Lien Trustee, the Second Lien Trustee, any trustee or other agent for any Additional Second Lien Debt, any receiver or any delegate, each on a pari passu basis;

(b) in payment of all costs and expenses incurred by the Senior Agent, the First Lien Trustee, the Second Trustee, any lender under the Revolving Credit Facility or any Additional Second Lien Debtholder or any representative for any Additional Second Lien Debtholders in connection with any realization or enforcement of the Transaction Security taken in accordance with the terms of the Intercreditor Agreement;

(c) in payment to:

(i) the Senior Agent on its own behalf and on behalf of the arrangers and lenders under the Revolving Credit Facility towards the discharge of liabilities owed to them under the Revolving Credit Facility; and

(ii) certain Hedge Counterparties towards the discharge of Interest Rate/Hedging Liabilities owed to them under secured hedging agreements relating to interest rate and currency hedging arrangements (on a pro rata basis between the Interest Rate/Hedging Liabilities of each Hedge Counterparty),

on a pro rata basis between paragraph (i) above and paragraph (ii) above; and thereafter but only after payment and full discharge in full of the Liabilities and to the Senior Agent, lenders and arrangers under the Revolving Credit Facility and Hedge Counterparties referred to in (c)(i) and (c)(ii),

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(iii) in payment to the First Lien Trustee on its own behalf and on behalf of the First Lien Noteholders and to the relevant Hedge Counterparties for application:

(1) towards the discharge of the liabilities owed to the First Lien Noteholders under the First Lien Indenture and the First Lien Notes (in accordance with the terms of the First Lien Indenture); and

(2) towards the discharge of certain Other Hedging Liabilities;

on a pro rata basis between paragraph (1) above and paragraph (2) above;

(d) in payment to

(i) the Second Lien Trustee on its own behalf and on behalf of the Second Lien Noteholders for application (in accordance with the terms of the Second Lien Indenture) towards the discharge of the liabilities owed to the Second Lien Trustee and the Second Lien Noteholders under the Second Lien Indenture and the Second Lien Notes, and pro rata to any other person other than a member of the Group who the Security Agent is obliged to pay pro rata pari passu with the Existing Trustee; and

(ii) the representative of any Additional Second Lien Debt on its own behalf and on behalf of the Additional Second Lien Debtholders for application (in accordance with the terms of the documents governing such Additional Second Lien Debt) towards the discharge of the liabilities owed to the Additional Second Lien Debtholders;

on a pro rata basis between paragraph (1) and paragraph (2) above;

(e) following repayment and discharge of the obligations owing to all of the Secured Creditors, in payment to any Subordinated Creditor as entitled thereto; and

(f) the balance, if any, in payment to the Issuer or relevant Guarantor.

The Secured Creditors agree that any amounts other than recoveries of the Transaction Security applied in accordance with the immediately preceding paragraph which they may recover from a member of the Group following an insolvency event in respect of such member of the Group shall be shared by them pro rata pari passu.

Following an acceleration event or the enforcement of any Transaction Security, the Security Agent may, in its discretion, hold any amount of the recoveries or such security in an interest bearing suspense or impersonal account(s) in the name of the Security Agent with such financial institution (including itself) and for so long as the Security Agent shall think fit (the interest being credited to the relevant account) for later application under the provisions of this “—Application of Proceeds” in respect of any sum to (a) any Security Agent, any receiver or any delegate; and (b) any part of the Liabilities owed by the Issuer and the Guarantors to the Secured Creditors, in each case, that the Security Agent reasonably considers might become due or owing at any time in the future.

New or replacement secured debt instruments

TopCo shall procure that prior to the entering into by any member of the Group of any senior secured debt facilities or First Lien Notes, whether in full or partial replacement of or in addition to (and pari passu with) the Revolving Credit Facility, or whether in full or partial replacement of or in addition to (and pari passu with) the First Lien Notes, it shall procure that the relevant parties to such new facilities accede to the Intercreditor Agreement as senior agent, senior arranger, lenders, hedge counterparties and/or secured note trustee (as the case may be). If the Security Agent reasonably requires any amendments to the Intercreditor Agreement to be executed by the parties to reflect such new facilities or notes, or such accession, and the Indentures and Revolving Credit Agreement permit such issue (or any requisite approval under such documents has been obtained), (i) the lenders under the Revolving Credit Facility agree that the Senior Agent may so execute on their behalf, (ii) the First Lien Noteholders hereby agree that the First Lien Trustee may so execute on their behalf and, (iii) the Second Lien Noteholders hereby agree that the Second Lien Trustee may so execute on their behalf.

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Consents, Amendments and Override

Required Consents

Subject to certain exceptions, the Intercreditor Agreement may be amended or waived only with the consent of the Senior Agent, the Majority Senior Creditors, the First Lien Trustee, the Second Lien Trustee and the Security Agent.

An amendment or waiver that has the effect of changing or which relates to, among other things, the provisions described under the caption “—Application of Proceeds” or the order or priority or subordination under the Intercreditor Agreement shall not be made without the consent of the Senior Agent, the RCF Lenders, the First Lien Trustee, the Second Lien Trustee, each hedge counterparty (to the extent that the amendment or waiver would adversely affect the hedge counterparty) the representative for the Additional Second Lien Debtholders and the Security Agent.

Amendments and Waivers: Transaction Security Documents

Subject to the immediately following paragraph and the provisions described under the caption “—Exceptions” and unless the provisions of the Revolving Credit Agreement, the First Lien Indenture, the Second Lien Indenture or any document governing Additional Second Lien Debt expressly provides otherwise, the Security Agent may, if authorized by the Majority Senior Creditors and the Trustee, and if TopCo consents, amend the terms of, waive any of the requirements of or grant consents under, any security document which shall be binding on each party.

Subject to the provisions described under the caption “—Exceptions”, the prior consent of the Majority Senior Creditors and the Trustee is required to authorize any amendment or waiver of, or consent under, any security document which would affect the manner in which the proceeds of enforcement of the Transaction Security are distributed.

Exceptions

Subject to the immediately following paragraph, if the amendment, waiver or consent may impose new or additional obligations on or withdraw or reduce the rights of any party other than:

• in the case of a creditor, in a way which affects or would affect creditors of that party’s class generally; or

• in the case of the Issuer or a Guarantor, to the extent consented to by TopCo under the provisions described under the caption “—Amendments and Waivers: Transaction Security Documents”,

the consent of that party is required.

Neither the immediately preceding paragraph nor the provisions described in the second paragraph under the caption “—Amendments and Waivers: Transaction Security Documents” shall apply:

• to any release of Transaction Security, claim or Liabilities; or

• to any consent which, in each case, the Security Agent gives in accordance with the provisions described under the caption “—Distressed Disposals”.

Agreement to Override

Unless expressly stated otherwise in the Intercreditor Agreement, the Intercreditor Agreement overrides anything in the debt documents to the contrary.

Notwithstanding anything to the contrary in the Intercreditor Agreement or the Revolving Credit Agreement, the immediately preceding paragraph as between any creditor and any obligor or any member of the Group will not cure, postpone, waive or negate in any manner any default or event of default under any debt document as provided in the relevant debt document.

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DESCRIPTION OF FIRST LIEN SECURED NOTES

Matalan Finance plc (the “Issuer”) will issue the First Lien Notes under an indenture (the “First Lien

Indenture”) between, among others, the Issuer, Deutsche Trustee Limited Company, as the trustee (the “Trustee”), and Lloyds Bank plc, as security agent (the “Security Agent”), in a private transaction that is not subject to the registration requirements of the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”). Unless the context requires otherwise, references in this “Description of First Lien Secured Notes” to the First Lien Notes include the First Lien Notes issued on the Issue Date and any Additional First Lien Notes (as defined below) that are issued. The terms of the First Lien Notes include those set forth in the First Lien Indenture. The First Lien Indenture will not incorporate or include any of, or otherwise be subject to, the provisions of the U.S. Trust Indenture Act of 1939, as amended.

The following description is a summary of the material provisions of the First Lien Indenture and the First Lien Notes and refers to the Intercreditor Agreement and the Security Documents. This does not restate those agreements in their entirety. We urge you to read the First Lien Indenture, the First Lien Notes, the Intercreditor Agreement and the Security Documents because they, and not this description, define your rights as holders of the First Lien Notes. Copies of the First Lien Indenture, the form of First Lien Note, the Security Documents and the Intercreditor Agreement are available as set forth below under “—Additional Information”.

Certain defined terms used in this description but not defined below under “—Certain Definitions” have the meanings assigned to them in the First Lien Indenture. You can find the definitions of certain terms used in this description under the subheading “—Certain Definitions”. In this description, the term “Company” refers only to Missouri TopCo Limited and not to any of its Subsidiaries and the term “Issuer” refers only to Matalan Finance plc and not to any of its Subsidiaries.

The registered holder of a First Lien Note will be treated as the owner of it for all purposes. Only registered holders will have rights under the First Lien Indenture.

Brief Description of the First Lien Notes and the First Lien Note Guarantees

The First Lien Notes:

• will be senior obligations of the Issuer;

• will be secured by first-priority Liens over the Collateral, but will receive proceeds from enforcement of security over the Collateral only after any obligations that are entitled to receive such proceeds on a super-priority basis, including lenders under the Revolving Credit Facility and counterparties to certain Hedging Obligations, have been paid in full;

• will be pari passu in right of payment with all existing and future Indebtedness of the Issuer that is not expressly subordinated to the First Lien Notes, including Indebtedness under the Revolving Credit Facility and the Second Lien Notes;

• will be senior in right of payment to any and all future obligations of the Issuer that are expressly subordinated in right of payment to the First Lien Notes, if any;

• will be unconditionally guaranteed by the Guarantors;

• will be effectively subordinated to the Issuer’s existing and future secured Indebtedness that is secured by property or assets that do not secure the First Lien Notes, to the extent of the value of such property and assets securing such Indebtedness; and

• will be structurally subordinated to all obligations of the Issuer’s subsidiaries that are not Guarantors.

The First Lien Note Guarantees

The First Lien Notes will initially be guaranteed by Missouri TopCo Limited, Matalan Group Limited, Matalan Limited, Matalan Retail Limited and Matalan Holding Company Limited, each of which are guarantors of the Second Lien Notes and obligors under the Revolving Credit Facility. Each First Lien Note Guarantee:

• will be a general obligation of that Guarantor;

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• will be secured by first-priority Liens over the Collateral, but will receive proceeds from enforcement of security over the Collateral only after any obligations that are entitled to receive such proceeds on a super-priority basis, including lenders under the Revolving Credit Facility and counterparties to certain Hedging Obligations, have been paid in full;

• will be pari passu in right of payment with all existing and future senior Indebtedness of such Guarantor that is not expressly subordinated in right of payment to its First Lien Note Guarantee, including its obligations under the Revolving Credit Facility and its guarantee of the Second Lien Notes;

• will be senior to all future Indebtedness of such Guarantor, if any, that is expressly subordinated in right of payment to its First Lien Note Guarantee;

• will be effectively subordinated to such Guarantor’s existing and future secured Indebtedness that is secured by property or assets that do not secure its First Lien Note Guarantee to the extent of the value of such property and assets securing such Indebtedness; and

• will be structurally subordinated to all existing and future Indebtedness of any Guarantor’s subsidiaries that do not guarantee the First Lien Notes.

Not all of the Company’s Subsidiaries will guarantee the First Lien Notes. However, as of the Issue Date each of the Company’s subsidiaries that guarantee the Second Lien Notes or are an obligor under the Revolving Credit Facility (other than the Issuer) will also guarantee the First Lien Notes. In the event of a bankruptcy, liquidation or reorganization of any of these non-guarantor Subsidiaries, the non-guarantor Subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to the Issuer or a Guarantor. During the 53 weeks ended March 1, 2014, the Issuer and the Guarantors, collectively, represented 98% of our total revenue and as of March 1, 2014, represented 100% of our total assets, in each case, on a consolidated basis.

The operations of the Issuer are conducted through its Subsidiaries and, therefore the Issuer depends on the cash flow of its Subsidiaries to meet its obligations, including its obligations under the First Lien Notes. The First Lien Notes will be effectively subordinated in right of payment to all Indebtedness and other liabilities and commitments (including trade payables and lease obligations) of the Issuer’s non-guarantor Subsidiaries. Any right of the Issuer or any Guarantor to receive assets of any of its non-guarantor Subsidiaries upon that non-guarantor Subsidiary’s liquidation or reorganization (and the consequent right of the holders of the First Lien Notes to participate in those assets) will be effectively subordinated to the claims of that non-guarantor Subsidiary’s creditors, except to the extent that the Issuer or such Guarantor is itself recognized as a creditor of the non- guarantor Subsidiary, in which case the claims of the Issuer or such Guarantor, as the case may be, would still be subordinated in right of payment to any security in the assets of the non-guarantor Subsidiary and any Indebtedness of the non-guarantor Subsidiary senior to that held by the Issuer or such Guarantor. As of March 1, 2014, after giving effect to the Refinancing, on a consolidated basis, the non-guarantor Subsidiaries of the Company would not have had any third-party debt outstanding.

As of the Issue Date, all of the Company’s Subsidiaries will be “Restricted Subsidiaries” for the purposes of the First Lien Indenture. However, under the circumstances described below under the caption “—Certain Covenants—Designation of Restricted and Unrestricted Subsidiaries”, the Company will be permitted to designate Restricted Subsidiaries as “Unrestricted Subsidiaries” other than the Issuer and any Parent Holdco of the Issuer. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants contained in the First Lien Indenture. The Company’s Unrestricted Subsidiaries will not guarantee the First Lien Notes.

Principal, Maturity and Interest

The Issuer will issue £342.0 million in aggregate principal amount of First Lien Notes in this offering. The Issuer may issue additional First Lien Notes under the First Lien Indenture from time to time after this offering (“Additional First Lien Notes”). The First Lien Notes may be issued in one or more series under the First Lien Indenture. Any issuance of Additional First Lien Notes is subject to all of the covenants in the First Lien Indenture, including the covenant described below under the caption “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”. The First Lien Notes and any Additional First Lien Notes subsequently issued under the First Lien Indenture will be treated as a single class for all purposes under the First Lien Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase, except as otherwise provided in the First Lien Indenture. The Issuer will issue First Lien Notes in denominations of £100,000 and integral multiples of £1,000 in excess thereof. The First Lien Notes will mature on June 1, 2019.

Interest on the First Lien Notes will accrue at the rate of 6.875% per annum. Interest on the First Lien Notes will be payable semi-annually in arrears on May 30 and November 30 commencing on November 30, 2014. Interest on overdue principal and interest, including Additional Amounts (as defined herein), if any, will accrue at a rate that is 1%

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per annum higher than the interest rate on the First Lien Notes. The Issuer will make each interest payment to the holders of record on the immediately preceding May 15 and November 15.

Interest on the First Lien Notes will accrue from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

Paying Agent and Registrar for the First Lien Notes

The Issuer will maintain one or more paying agents (each, a “Paying Agent”) for the First Lien Notes in the City of London. The Issuer will maintain a Paying Agent in a member state of the European Union that will not be obliged to withhold or deduct tax pursuant to the European Union Directive 2003/48/EC (as amended from time to time) or any other directive implementing the conclusions of the ECOFIN Council meeting of 26 and 27 November 2000 on the taxation of savings income, or any law implementing, or complying with or introduced in order to conform to, such directive. The initial Paying Agent will be Deutsche Bank AG, London Branch in London.

The Issuer will also maintain one or more registrars (each, a “Registrar”). The initial Registrar will be Deutsche Bank Luxembourg, S.A. The initial transfer agent will be Deutsche Bank Luxembourg, S.A. The Registrar will maintain a register reflecting ownership of Definitive Registered Notes (as defined herein) outstanding from time to time and will make payments on and facilitate transfer of Definitive Registered Notes on the behalf of the Issuer.

The Issuer may change the Paying Agents, the Registrars or the transfer agents without prior notice to the holders. For so long as the First Lien Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted for trading on the Euro MTF Market, the Issuer will publish a notice of any change of Paying Agent, Registrar or transfer agent in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger

Wort) or, to the extent and in the manner permitted by such rules, post such notice on the official website of the Luxembourg Stock Exchange (www.bourse.lu).

Additional Amounts

All payments made by or on behalf of the Issuer under or with respect to the First Lien Notes (whether or not in the form of Definitive Registered Notes) or any of the Guarantors with respect to any First Lien Note Guarantee will be made free and clear of and without withholding or deduction for, or on account of, any present or future Taxes unless the withholding or deduction of such Taxes is then required by law. If any deduction or withholding for, or on account of, any Taxes imposed or levied by or on behalf of (1) any jurisdiction in which the Issuer or any Guarantor is then incorporated or organized, engaged in business for tax purposes or resident for tax purposes or any political subdivision thereof or therein or (2) any jurisdiction from or through which payment is made by or on behalf of the Issuer or any Guarantor (including the jurisdiction of any Paying Agent) or any political subdivision thereof or therein (each, a “Tax

Jurisdiction”) will at any time be required to be made from any payments made by the Issuer under or with respect to the First Lien Notes or any of the Guarantors under or with respect to any First Lien Note Guarantee, including payments of principal, redemption price, interest or premium, the Issuer or the relevant Guarantor, as applicable, will pay such additional amounts (the “Additional Amounts”) as may be necessary in order that the net amounts received in respect of such payments by each holder after such withholding or deduction (including any such withholding or deduction from such Additional Amounts) will equal the respective amounts that would have been received in respect of such payments in the absence of such withholding or deduction; provided, however, that no Additional Amounts will be payable with respect to:

(1) any Taxes, to the extent such Taxes would not have been imposed but for the existence of any actual or deemed present or former connection between the holder or the beneficial owner of the First Lien Notes and the relevant Tax Jurisdiction (including being a resident of such jurisdiction for Tax purposes), other than the holding of such First Lien Note, the enforcement of rights under such First Lien Note or under a First Lien Note Guarantee or the receipt of any payments in respect of such First Lien Note or a First Lien Note Guarantee;

(2) any Taxes, to the extent such Taxes were imposed as a result of the presentation of a First Lien Note for payment (where presentation is required) more than 30 days after the relevant payment is first made available for payment to the holder (except to the extent that the holder would have been entitled to Additional Amounts had the First Lien Note been presented on the last day of such 30 day period);

(3) any estate, inheritance, gift, sales, transfer or similar Taxes;

(4) any Taxes withheld, deducted or imposed on a payment to an individual that are required to be made pursuant to European Council Directive 2003/48/EC or any other directive implementing the

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conclusions of the ECOFIN Council meeting of November 26 and 27, 2000 on the taxation of savings income, or any law implementing or complying with or introduced in order to conform to, such directive;

(5) any Taxes imposed on or with respect to a payment made to a holder or beneficial owner of First Lien Notes who would have been able to avoid such withholding or deduction by presenting the relevant First Lien Note to another Paying Agent in a member state of the European Union;

(6) any Taxes payable other than by deduction or withholding from payments under, or with respect to, the First Lien Notes or with respect to any First Lien Note Guarantee;

(7) any Taxes to the extent such Taxes are imposed or withheld by reason of the failure of the holder or beneficial owner of First Lien Notes to comply with any reasonable written request of the Issuer addressed to the holder or beneficial owner and made at least 60 days before any such withholding or deduction would be payable to satisfy any certification, identification, information or other reporting requirements, whether required by statute, treaty, regulation or administrative practice of a Tax Jurisdiction, as a precondition to exemption from, or reduction in the rate of deduction or withholding of, Taxes imposed by the Tax Jurisdiction (including, without limitation, a certification that the holder or beneficial owner is not resident in the Tax Jurisdiction), but in each case, only to the extent the holder or beneficial owner is legally eligible to provide such certification or documentation; or

(8) any Taxes withheld or deducted pursuant to Sections 1471 through 1474 of the Code, as in effect as of the Issue Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future Treasury regulations issued thereunder, any other official interpretations thereof or any intergovernmental agreements (including any law implementing an intergovernmental agreement) implementing the foregoing (“FATCA”), except to the extent that such Taxes result from a failure of a Paying Agent to comply with FATCA; or

(9) any combination of items (1) through (8) above.

In addition to the foregoing, the Issuer and the Guarantors will also pay and indemnify the holder for any present or future stamp, issue, registration, court or documentary Taxes, or any other similar excise or property Taxes, charges or similar levies (including penalties, interest and any other reasonable expenses related thereto) which are levied by any Tax Jurisdiction on the execution, delivery, issuance, or registration of any of the First Lien Notes, the First Lien Indenture, any First Lien Note Guarantee or any other document or instrument referred to therein, or the receipt of any payments with respect thereto, or enforcement of, any of the First Lien Notes or any First Lien Note Guarantee (limited, solely in the case of taxes attributable to the receipt of any payments with respect thereto, to any such taxes imposed in a Tax Jurisdiction that are not excluded under clauses (1) through (5) or (7) or (8) above or any combination thereof).

If the Issuer or any Guarantor, as the case may be, becomes aware that it will be obligated to pay Additional Amounts with respect to any payment under or with respect to the First Lien Notes or any First Lien Note Guarantee, the Issuer or the relevant Guarantor, as the case may be, will deliver to the Trustee on a date that is at least 30 days prior to the date of that payment (unless the obligation to pay Additional Amounts arises less than 45 days prior to that payment date, in which case the Issuer or the relevant Guarantor shall notify the Trustee promptly thereafter) an Officer’s Certificate stating the fact that Additional Amounts will be payable and the amount estimated to be so payable. The Officer’s Certificate(s) must also set forth any other information reasonably necessary to enable the Paying Agents to pay Additional Amounts to holders on the relevant payment date. The Trustee shall be entitled to rely solely on such Officer’s Certificate as conclusive proof that such payments are necessary.

The Issuer or the relevant Guarantor will make all withholdings and deductions required by law and will remit the full amount deducted or withheld to the relevant Tax authority in accordance with applicable law. The Issuer or the relevant Guarantor will use its reasonable efforts to obtain Tax receipts from each Tax authority evidencing the payment of any Taxes so deducted or withheld. The Issuer or the relevant Guarantor will furnish to the Trustee (or to a holder or beneficial owner upon written request), within a reasonable time after the date the payment of any Taxes so deducted or withheld is made, certified copies of Tax receipts evidencing payment by the Issuer or a Guarantor, as the case may be, or if, notwithstanding such entity’s efforts to obtain receipts, receipts are not obtained, other evidence of payments (reasonably satisfactory to the Trustee) by such entity. Upon reasonable request, copies of Tax receipts or other evidence of payments, as the case may be, will be made available by the Trustee to the holders or beneficial owners of the First Lien Notes.

Whenever in the First Lien Indenture or in this “Description of First Lien Secured Notes” there is mentioned, in any context, the payment of amounts based upon the principal amount of the First Lien Notes or of principal, interest or of any other amount payable under, or with respect to, any of the First Lien Notes or any First Lien Note Guarantee, such

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mention shall be deemed to include mention of the payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

The above obligations will survive any termination, defeasance or discharge of the First Lien Indenture, any transfer by a holder or beneficial owner of its First Lien Notes, and will apply, mutatis mutandis, to any jurisdiction in which any successor Person to the Issuer or any Guarantor is incorporated or organized, engaged in business for tax purposes or resident for tax purposes or any jurisdiction from or through which any payment on the First Lien Notes or any First Lien Note Guarantee is made by or on behalf of such Person and any political subdivision thereof or therein.

Security

The First Lien Notes and the First Lien Note Guarantees will be secured by fixed and floating charges over substantially all of the property and assets of the Issuer and each Guarantor, subject to certain exceptions. The Liens on the Collateral will secure the Obligations under the First Lien Notes and the First Lien Note Guarantees on a first ranking basis; provided that pursuant to the Intercreditor Agreement, the creditors under the Revolving Credit Facility and certain Hedging Obligations will be entitled to receive the proceeds from the sale of Collateral in the event of any enforcement of the same to discharge such Obligations before any amounts will be available to discharge Obligations under the First Lien Notes and First Lien Note Guarantees. The Second Lien Notes will be secured by second-ranking liens over the Collateral. See “Description of Second Lien Secured Notes—Security”.

Subject to certain conditions, including compliance with the covenant described under “—Certain Covenants—No Impairment of Security Interest”, the Issuer and the Guarantors are permitted to pledge the Collateral in connection with future issuances of Indebtedness of the Company or its Restricted Subsidiaries, including any Additional First Lien Notes and additional Second Lien Notes, in each case, permitted under the First Lien Indenture and other Indebtedness of the Company and its Restricted Subsidiaries and on terms consistent with the relative priority of such Indebtedness. The amount of such additional Indebtedness secured by the Collateral could be significant.

Any additional security interests that may in the future be granted to secure obligations under the First Lien Notes, any First Lien Note Guarantee and the First Lien Indenture would also constitute Collateral.

The Collateral is pledged pursuant to the Security Documents to the Security Agent on behalf of the holders of the secured obligations that are secured by the Collateral, including holders of the First Lien Notes, creditors under the Revolving Credit Facility and creditors under certain Hedging Obligations permitted to be secured by the Collateral pursuant to the terms of the Intercreditor Agreement.

Subject to certain exceptions, the Issuer and the Guarantors will have the right to remain in possession and retain exclusive control of the Collateral securing the First Lien Notes, to collect, invest and dispose of any income therefrom and to vote pledged shares. The Issuer and the Guarantors may, among other things, without any release or consent by the Trustee or the Security Agent, conduct ordinary course activities with respect to the Collateral, including, without limitation, (1) selling or otherwise disposing of, in any transaction or series of related transactions, any property and assets subject to Liens under the Security Documents, which has become worn out, defective or obsolete or no longer used or useful in the business, and (2) selling, transferring or otherwise disposing of assets in the ordinary course of business.

No appraisal of any of the Collateral has been prepared by or on behalf of the Issuer in connection with the issuance of the First Lien Notes. There can be no assurance that the proceeds from the sale of the Collateral remaining after sharing with any other creditors entitled to share in such proceeds would be sufficient to satisfy the obligations owed to the holders of the First Lien Notes. By its nature, some or all of the Collateral will be illiquid and may have no readily ascertainable market value. Accordingly, there can be no assurance that the Collateral will be able to be sold in a short period of time, if at all. See “Risk Factors—Risks Relating to the Collateral securing the First Lien Notes and the Second Lien Notes—The value of the Collateral securing the Notes may not be sufficient to satisfy the obligations under the Notes”.

The First Lien Indenture will provide that each holder, by accepting a First Lien Note, shall be deemed to have agreed to and accepted the terms and conditions of the Security Documents and the Intercreditor Agreement.

Priority

The relative priority among (i) the lenders under the Revolving Credit Facility, (ii) the counterparties under certain Hedging Obligations, (iii) the Trustee and the holders of the First Lien Notes under the First Lien Indenture and (iv) the trustee in respect of, and the holders of, the Second Lien Notes, with respect to the Collateral and the security interest securing obligations under the First Lien Notes created by the Security Documents (the “Security Interest”) is established by the terms of the Intercreditor Agreement, which provides, among other things, that the obligations under

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the Revolving Credit Facility, certain Hedging Obligations and the First Lien Notes are secured equally and ratably by a first-ranking security interest granted in the Collateral; provided that the proceeds of any recovery from the enforcement of any security interest will be applied to satisfy obligations under the Revolving Credit Facility and such Hedging Obligations with respect to interest rate and foreign currency exchange rate hedging before being applied to satisfy any obligations to the holders under the First Lien Notes and the First Lien Indenture.

For a description of security enforcement and other intercreditor provisions, please see “Description of Certain Financing Arrangements—Intercreditor Agreement”.

Release of Collateral

The Issuer and the Guarantors will be entitled to the release of the Liens over the property and other assets constituting Collateral securing the First Lien Notes and the First Lien Note Guarantees under any one or more of the following circumstances:

(1) other than with respect to any Liens over the Capital Stock of the Issuer or any Parent Guarantor, in connection with any sale or other disposition of Collateral to a Person that is not a Parent Guarantor or a Restricted Subsidiary (but excluding any transaction subject to “—Certain Covenants—Merger, Consolidation or Sale of Assets”), if such sale or other disposition does not violate the “Asset Sale” provisions of the First Lien Indenture or is otherwise permitted in accordance with the First Lien Indenture;

(2) with respect to any Liens on assets of any Guarantor, in the case of a Guarantor that is released from its First Lien Note Guarantee pursuant to the terms of the First Lien Indenture, the release of the property and assets, and Capital Stock, of such Guarantor;

(3) if the Company designates any Restricted Subsidiary to be an Unrestricted Subsidiary in accordance with the applicable provisions of the First Lien Indenture, the release of the property, assets and Capital Stock of such Unrestricted Subsidiary;

(4) in connection with certain enforcement actions taken by the creditors under certain of our Indebtedness in accordance with the Intercreditor Agreement or any Additional Intercreditor Agreement as described below under “—Intercreditor Agreement” or “—Additional Intercreditor Agreements”;

(5) as described under the captions “—Amendment, Supplement and Waiver” and “—Certain Covenants—No Impairment of Security Interest”;

(6) upon release of the Lien that resulted in the creation of the Lien under the covenant described below under the caption “—Certain Covenants—Liens”;

(7) in order to effectuate a merger, consolidation, conveyance or transfer conducted in compliance with the covenant described under “—Certain Covenants—Merger, Consolidation or Sale of Assets”; provided that following such merger, consolidation, conveyance or transfer, a Lien of at least equivalent ranking over the same assets or property is granted in favor of the Security Agent (on its own behalf and on behalf of the Trustee for the holders of First Lien Notes) to the extent such assets or property continue to exist as assets or property of the Parent Guarantor or a Restricted Subsidiary (or the Person formed by or surviving such transaction);

(8) upon legal defeasance, covenant defeasance or satisfaction or discharge of the Indenture as provided below under the captions “—Legal Defeasance and Covenant Defeasance” and “—Satisfaction and Discharge”;

(9) upon the full and final payment of the First Lien Notes and performance of all obligations of the Issuer and the Guarantors under the First Lien Indenture and the First Lien Notes; or

(10) as otherwise permitted in accordance with the First Lien Indenture.

The Security Agent and the Trustee (only if required) will take all necessary action requested by the Issuer to effectuate any release of Collateral securing the First Lien Notes and the First Lien Note Guarantees, in accordance with the provisions of the First Lien Indenture, the relevant Security Documents, the Intercreditor Agreement or any Additional Intercreditor Agreement. Each of the releases set forth above shall be effected by the Security Agent without the consent of the holders of the First Lien Notes or any action on the part of the Trustee.

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In addition to the release provisions described above, the security interests in the Collateral will cease to exist by operation of law or will be released, depending on the type of security interest, upon the defeasance or discharge of the First Lien Notes as provided in “—Legal Defeasance and Covenant Defeasance” or “—Satisfaction and Discharge”, in each case in accordance with the terms and conditions of the First Lien Indenture. In addition, the terms of the Security Documents themselves provide for assets to cease to become subject to security in certain circumstances without need for a formal release, such as the sale of assets which are subject to a charge, or the exclusion of certain assets from intended Collateral if such assets may not be subject to security (such as, for example, assets that may not be validly pledged, or assets that are subject to a Permitted Lien).

Security Agent

Lloyds Bank plc will act as Security Agent under the Security Documents and the Intercreditor Agreement until such time, if any, that a new Security Agent is appointed under the relevant provisions of the Security Documents and/or the Intercreditor Agreement and/or any Additional Intercreditor Agreement.

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Neither the Trustee nor the Security Agent nor any of their respective officers, directors, employees, attorneys or agents will be responsible or liable for the existence, genuineness, value or protection of any property securing the First Lien Notes or any First Lien Note Guarantee, for the legality, enforceability, effectiveness or sufficiency of the Security Documents, for the creation, perfection, priority, sufficiency or protection of any Lien, or for any defect or deficiency as to any such matters, or for any failure to demand, collect, foreclose or realize upon or otherwise enforce any of the Liens or Security Documents or any delay in doing so.

First Lien Note Guarantees

The First Lien Notes will be guaranteed by each Parent Guarantor and each Subsidiary Guarantor. These First Lien Note Guarantees will be joint and several obligations of the Guarantors. Each First Lien Note Guarantee is a full and unconditional guarantee of the Issuer’s obligations under the First Lien Notes, subject to the contractual limitations discussed below.

The obligations of the Guarantors will be contractually limited under the applicable First Lien Note Guarantees to reflect limitations under applicable law with respect to maintenance of share capital, corporate benefit, fraudulent conveyance and other legal restrictions applicable to the Guarantors and their respective shareholders, directors and general partners.

For a description of such contractual limitations, see “Risk Factors—Risks Relating to our Structure—Laws relating to preference, transactions at an undervalue, misfeasance and corporate benefit may adversely affect the validity and enforceability of payments under the senior guarantee of the Notes by Matalan Retail Limited and the other Guarantors”. The First Lien Notes will initially be guaranteed on a senior basis by the following Guarantors: Missouri TopCo Limited, Matalan Group Limited, Matalan Limited, Matalan Retail Limited and Matalan Holding Company Limited.

Release of First Lien Note Guarantee of Subsidiary Guarantors

The First Lien Note Guarantee of a Subsidiary Guarantor will be released:

(1) in connection with any sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger, consolidation, amalgamation or combination) to a Person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary, if the sale or other disposition does not violate the “Asset Sale” provisions of the First Lien Indenture;

(2) in connection with any sale or other disposition of Capital Stock of that Guarantor to a Person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary, if the sale or other disposition does not violate the “Asset Sale” provisions of the First Lien Indenture and the Guarantor ceases to be a Restricted Subsidiary as a result of the sale or other disposition;

(3) if the Company designates any Restricted Subsidiary that is a Guarantor to be an Unrestricted Subsidiary in accordance with the applicable provisions of the First Lien Indenture;

(4) upon release of the guarantee or Indebtedness that resulted in the creation of the First Lien Note Guarantee under the covenant described below under the caption “—Certain Covenants—Limitation on Issuances of Guarantees of Indebtedness” so long as no Default or Event of Default would arise as a result;

(5) as described under “—Amendments, Supplement and Waiver”;

(6) with respect to any Guarantor which is not the continuing or surviving Person in the relevant consolidation or merger, as a result of a transaction permitted by the second paragraph under the caption “—Certain Covenants—Merger, Consolidation or Sale of Assets”;

(7) upon the full and final payment of the First Lien Notes and performance of all obligations of the Issuer and the Guarantors under the First Lien Indenture and the First Lien Notes;

(8) upon legal defeasance, covenant defeasance or satisfaction and discharge of the Indenture as provided below under the captions “—Legal Defeasance and Covenant Defeasance” and “—Satisfaction and Discharge”; or

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(9) in connection with certain enforcement actions taken by the creditors under certain of our secured Indebtedness as provided under the Intercreditor Agreement or any Additional Intercreditor Agreement as described below under “—Intercreditor Agreement” or “—Additional Intercreditor Agreements”.

In addition, the First Lien Note Guarantee by a Parent Guarantor will be released in the circumstances described in clause (5), (6), (7) or (8) above (including, in the case of Matalan Group Limited (or its successor entity), as set forth below under “Release of Note Guarantee and Liens on Collateral by Missouri TopCo Limited upon Certain Public Equity Offerings”). Upon any occurrence giving rise to a release of a First Lien Note Guarantee, as specified above, the Trustee, subject to receipt of certain documents from the Issuer and/or Guarantor, will execute any documents reasonably required in order to evidence or effect such release, discharge and termination in respect of such First Lien Note Guarantee without the consent of the holders of First Lien Notes. Neither the Issuer, the Trustee nor any Guarantor will be required to make a notation on the First Lien Notes to reflect any such release, discharge or termination.

Release of First Lien Note Guarantee and Liens on Collateral by Missouri TopCo Limited upon Certain Public

Equity Offerings

Substantially simultaneously with the Initial Public Offering of Matalan Group Limited (or its successor entity), at the request of the Issuer, (a) Missouri Topco Limited may be released from its First Lien Note Guarantee and shall be discharged from all of its obligations under the First Lien Notes, its First Lien Note Guarantee and the First Lien Indenture and (b) Missouri TopCo Limited will be entitled to release the Liens over its property and assets constituting Collateral securing the First Lien Notes and the First Lien Note Guarantees (other than Liens on the Capital Stock of the Issuer or any Guarantor (provided that Liens on the Capital Stock of Matalan Group Limited shall be released)); provided that:

(1) Matalan Group Limited is an entity organized or existing under the laws of any member state of the Pre-Expansion European Union, Switzerland, Guernsey, any state of the United States or the District of Columbia;

(2) immediately after such transaction, no Default or Event of Default exists;

(3) the Issuer would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period (i) be permitted to incur at least £1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” or (ii) have a Fixed Charge Coverage Ratio not less than it was immediately prior to giving effect to such transaction;

(4) Missouri Topco Limited will not, on the date of such transaction after giving pro forma effect thereto, have (i) any assets other than shares in Matalan Group Limited, and (ii) any other assets (other than Identified Assets) that are (a) not material to, or reasonably necessary for the operation of, the business of Matalan Group Limited and its Restricted Subsidiaries and (b) to the extent such assets were transferred from, or purchased or acquired with funds received from, Matalan Group Limited and/or any of its Restricted Subsidiaries, the transfer, payment or other distribution of such assets or funds would have been permitted pursuant to the covenant described above under the caption “—Certain Covenants—Restricted Payments” having assumed that Matalan Group Limited was the Company on the date of such transaction and the amount available for Restricted Payments under such covenant will reduce accordingly as if such Restricted Payment was made on such date;

(5) on the date of such transaction after giving pro forma effect thereto, (i) any Indebtedness owed by Matalan Group Limited or any of its Restricted Subsidiaries to Missouri Topco Limited is permitted under the covenant described under the caption “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” and (ii) Missouri Topco Limited will have no Indebtedness other than Non-Recourse Debt; and

(6) the Issuer delivers to the Trustee an Officer’s Certificate and opinion of counsel, in each case, stating that such transaction complies with this provision.

Thereafter Matalan Group Limited shall be substituted for the Company so that from and after such date, the provisions of the First Lien Indenture referring to the “Company” shall refer instead to Matalan Group Limited and not to Missouri Topco Limited, and Matalan Group Limited may exercise every right and power of the Company under the First Lien Indenture with the same effect as if it had been named as the Company in the First Lien Indenture and Company shall thereafter refer only to Matalan Group Limited.

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If the creditors or the Security Agent sell the shares of any Subsidiary Guarantor pursuant to an enforcement action, in accordance with the Intercreditor Agreement, the Guarantee of any such Guarantor (and any Guarantor that is a subsidiary of such Guarantor) will automatically release; provided that the disposal in question:

• is effected either (i) pursuant to a public auction or (ii) where an internationally recognized investment bank selected by the Security Agent has delivered to the Trustee an opinion that the disposal price of the relevant share capital or assets is fair from a financial point of view after taking into account all relevant circumstances;


• any liabilities owed to the creditors under our Revolving Credit Facility or the Second Lien Notes by any member of the Group whose shares are being disposed of and from any subsidiary of such member of the Group are also being released.

To establish the relative rights of certain creditors of the Issuer under its financing arrangements, including, without limitation, the First Lien Notes, the Revolving Credit Facility, the Second Lien Notes and certain Hedging Obligations, the Issuer, each Guarantor, the agent under the Revolving Credit Facility, the Security Agent, the Trustee and the trustee under the Second Lien Notes will enter into the Intercreditor Agreement. Pursuant to the terms of the Intercreditor Agreement, any liabilities in respect of obligations under the Revolving Credit Facility and Hedging Obligations with respect to interest rate and foreign currency exchange rate hedging that are permitted to be incurred by clause (8) of the definition of “Permitted Debt” and are secured by the Collateral will receive priority with respect to any proceeds received from the sale of any Collateral in the event of any enforcement of the same. Any proceeds received upon any enforcement over any Collateral, after all Obligations under the Revolving Credit Facility and such Hedging Obligations have been repaid from such recoveries, will be applied pro rata in repayment of all Obligations under the First Lien Indenture and the First Lien Notes and any other Indebtedness of the Issuer and the Guarantors permitted to be secured by the Collateral on a pari passu basis with the First Lien Notes pursuant to the First Lien Indenture and the Intercreditor Agreement. Please see “Description of Certain Financing Arrangements—Intercreditor Agreement—Distressed Disposals”.

Additional Intercreditor Agreements

The First Lien Indenture will provide that, at the request of the Company, in connection with the incurrence by the Company or any Restricted Subsidiary of any Indebtedness that is permitted to share the Collateral pursuant to the definition of “Permitted Collateral Liens” (other than with respect to clause (2) of such definition), the Issuer, the relevant Guarantors, the Trustee and the Security Agent shall enter into with the holders of such Indebtedness (or their duly authorized Representatives) an intercreditor agreement, or a restatement, amendment or other modification of an existing intercreditor agreement (an “Additional Intercreditor Agreement”), on substantially the same terms as the Intercreditor Agreement (or terms not materially less favorable to the holders of the First Lien Notes); provided, further, that such Additional Intercreditor Agreement will not impose any personal obligations on the Trustee or the Security Agent or adversely affect the personal rights, duties, liabilities or immunities of the Trustee and the Security Agent under the First Lien Indenture or the Intercreditor Agreement. For the avoidance of doubt, subject to the foregoing and the succeeding paragraph, any such Additional Intercreditor Agreement may provide for pari passu security interests in respect of any such Indebtedness (to the extent such Indebtedness is permitted to share the Collateral pursuant to the definition of “Permitted Collateral Liens”) or any junior security interests in respect of any such Indebtedness (to the extent such Indebtedness was permitted to be incurred under the First Lien Indenture). If more than one such intercreditor agreement is outstanding at any one time, the collective terms of such intercreditor agreements must not conflict and must be no more disadvantageous to the holders of the First Lien Notes than if all such Indebtedness was a party to one such agreement.

At the direction of the Company and without the consent of the holders of the First Lien Notes, the Trustee and the Security Agent will from time to time enter into one or more amendments and/or restatements to the Intercreditor Agreement or any Additional Intercreditor Agreement to: (i) cure any ambiguity, omission, defect or inconsistency therein; (ii) add Guarantors or other parties (such as representatives of new issuances of Indebtedness) thereto; (iii) further secure the First Lien Notes (including Additional First Lien Notes); (iv) make provision for equal and ratable grants of Liens on the Collateral to secure Additional First Lien Notes or to implement any Permitted Collateral Liens to the extent permitted by the First Lien Indenture; (v) subject to the preceding paragraph, to provide for additional Indebtedness (including with respect to any Intercreditor Agreement or Additional Intercreditor Agreement, the addition of provisions relating to new Indebtedness ranking junior in right of payment to the First Lien Notes) to the extent permitted under the First Lien Indenture) or any other obligations that are permitted by the terms of the First Lien Indenture to be incurred and secured by a Lien on the Collateral on a senior, pari passu or junior basis with the Liens

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securing the First Lien Notes or the Guarantees; (vi) add Restricted Subsidiaries to the Intercreditor Agreement or an Additional Intercreditor Agreement; (vii) amend the Intercreditor Agreement or any Additional Intercreditor Agreement in accordance with the terms thereof; (viii) increase the amount of the Credit Facilities covered by any such agreement, the incurrence of which is not prohibited by the First Lien Indenture; or (ix) make any other change thereto that does not adversely affect the rights of the holders of the First Lien Notes in any material respect. The Company will not otherwise direct the Trustee or the Security Agent to enter into any amendment and/or restatement to the Intercreditor Agreement or, if applicable, any Additional Intercreditor Agreement, without the consent of the holders of a majority in aggregate principal amount of the First Lien Notes then outstanding, except as otherwise permitted below under “—Amendments and Waivers”, and the Company may only direct the Trustee and the Security Agent to enter into any amendment to the extent such amendment does not impose any personal obligations on the Trustee or Security Agent.

Each holder of a First Lien Note, by accepting such First Lien Note, will be deemed to have:

(1) appointed and authorized the Trustee and the Security Agent from time to time to give effect to such provisions;

(2) authorized each of the Trustee and the Security Agent from time to time to become a party to any additional intercreditor arrangements described above;

(3) agreed to be bound by such provisions and the provisions of any additional intercreditor arrangements described above; and

(4) irrevocably appointed the Trustee and the Security Agent to act on its behalf from time to time to enter into and comply with such provisions and the provisions of any additional intercreditor arrangements described above, in each case, without the need for the consent of the holders of First Lien Notes.

The First Lien Indenture will also provide that, prior to any “Acceleration Event” (as defined in the Intercreditor Agreement), in relation to the Intercreditor Agreement or an Additional Intercreditor Agreement, the Trustee (and the Security Agent, if applicable) shall consent on behalf of the holders of First Lien Notes to the payment, repayment, purchase, repurchase, defeasance, acquisition, retirement or redemption of any obligations subordinated to the First Lien Notes thereby; provided, however, that such transaction would comply with the covenant described under “—Certain Covenants—Restricted Payments”.

Optional Redemption

At any time prior to May 30, 2016, the Issuer may on any one or more occasions redeem up to 40% of the aggregate principal amount of First Lien Notes issued under the First Lien Indenture, upon not less than 10 nor more than 60 days’ notice, at a redemption price equal to 106.875% of the principal amount of the First Lien Notes redeemed, in each case, plus accrued and unpaid interest and Additional Amounts, if any, to the date of redemption (subject to the rights of holders of First Lien Notes on the relevant record date to receive interest on the relevant interest payment date), with the net cash proceeds of a Public Equity Offering of (i) the Company or (ii) any Parent Holdco of the Company to the extent the proceeds from such Public Equity Offering are contributed to the Company’s common equity capital or are paid to the Company as consideration for the issuance of ordinary shares of the Company; provided that:

(1) at least 60% of the aggregate principal amount of the First Lien Notes originally issued under the First Lien Indenture remains outstanding immediately after the occurrence of such redemption; and

(2) the redemption occurs within 120 days of the date of the closing of such Public Equity Offering.

Any redemption notice given in respect of the redemption referred to in the preceding paragraph may be given prior to completion of the related Public Equity Offering, and any such redemption or notice may, at the Issuer’s discretion, be subject to the satisfaction of one or more conditions precedent, including the completion of the related Public Equity Offering.

At any time prior to May 30, 2016, the Issuer may on any one or more occasions redeem all or a part of the First Lien Notes upon not less than 10 nor more than 60 days’ notice, at a redemption price equal to 100% of the principal amount of the First Lien Notes redeemed, plus the Applicable Premium as of, and accrued and unpaid interest and Additional Amounts, if any, to the date of redemption, subject to the rights of holders of the First Lien Notes on the relevant record date to receive interest due on the relevant interest payment date. Any such redemption and notice may, at the Issuer’s discretion, be subject to the satisfaction of one or more conditions precedent.

Except pursuant to the preceding three paragraphs and except pursuant to “—Redemption for Changes in Taxes”, the First Lien Notes will not be redeemable at the Issuer’s option prior to May 30, 2016.

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On or after May 30, 2016, the Issuer may on any one or more occasions redeem all or a part of the First Lien Notes upon not less than 10 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Amounts, if any, on the First Lien Notes redeemed, to the applicable date of redemption, if redeemed during the twelve-month period beginning on May 30 of the years indicated below, subject to the rights of holders of First Lien Notes on the relevant record date to receive interest on the relevant interest payment date:

Year Redemption

Price

2016 ......................................................................................................................................................................... 103.438% 2017 ......................................................................................................................................................................... 101.719% 2018 and thereafter .................................................................................................................................................. 100.000%

Unless the Issuer defaults in the payment of the redemption price, interest will cease to accrue on the First Lien Notes or portions thereof called for redemption on the applicable redemption date. Any such redemption and notice may, in the Issuer’s discretion, be subject to the satisfaction of one or more conditions precedent.

Redemption for Changes in Taxes

The Issuer may redeem the First Lien Notes, in whole but not in part, at its discretion at any time upon giving not less than 10 nor more than 60 days’ prior notice to the holders of the First Lien Notes (which notice will be irrevocable and given in accordance with the procedures described in “—Selection and Notice”), at a redemption price equal to 100% of the aggregate principal amount thereof, together with accrued and unpaid interest, if any, to the date fixed by the Issuer for redemption (a “Tax Redemption Date”) and all Additional Amounts (if any) then due and which will become due on the Tax Redemption Date as a result of the redemption or otherwise (subject to the right of holders of the First Lien Notes on the relevant record date to receive interest due on the relevant interest payment date and Additional Amounts (if any) in respect thereof), if on the next date on which any amount would be payable in respect of the First Lien Notes, the Issuer is or would be required to pay Additional Amounts, and the Issuer cannot avoid any such payment obligation by taking reasonable measures available to it, and the requirement arises as a result of:

(1) any amendment to, or change in, the laws, treaties or any regulations or rulings promulgated thereunder of a relevant Tax Jurisdiction which change or amendment is announced and becomes effective on or after the Issue Date (or, if the applicable Tax Jurisdiction became a Tax Jurisdiction on a date after the Issue Date, such later date); or

(2) any amendment to, or change in, an official written interpretation or application of such laws, treaties, regulations or rulings (including by virtue of a holding, judgment, order by a court of competent jurisdiction or a change in published administrative practice) which amendment or change is announced and becomes effective on or after the Issue Date (or, if the applicable Tax Jurisdiction became a Tax Jurisdiction on a date after the Issue Date, such later date).

The Issuer will not give any such notice of redemption earlier than 60 days prior to the earliest date on which the Issuer would be obligated to pay Additional Amounts if a payment in respect of the First Lien Notes was then due, and the obligation to pay Additional Amounts must be in effect at the time such notice is given. Prior to the publication or, where relevant, mailing of any notice of redemption of the First Lien Notes pursuant to the foregoing, the Issuer will deliver to the Trustee an opinion of independent tax counsel of recognized standing to the effect that there has been such amendment or change which would require the Issuer to pay Additional Amounts. In addition, before the Issuer publishes or mails notice of redemption of the First Lien Notes as described above, it will deliver to the Trustee an Officer’s Certificate to the effect that it cannot avoid its obligation to pay Additional Amounts by the Issuer taking reasonable measures available to it.

The Trustee will accept and shall be entitled to rely on such Officer’s Certificate and opinion of counsel as sufficient evidence of the existence and satisfaction of the conditions precedent as described above, in which event it will be conclusive and binding on the holders.

For the avoidance of doubt, the implementation of European Council Directive 2003/48/EC or any other directive implementing the conclusions of the ECOFIN Council meeting of 26 and 27 November 2000 on the taxation of savings income or any law implementing or complying with or introduced in order to conform to, such directive will not be a change or amendment for such purposes.

The foregoing will apply mutatis mutandis to any jurisdiction in which any successor Person to the Issuer, applicable, is incorporated or organized, engaged in business or resident for tax purposes or any jurisdiction from or

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through which any payment on the First Lien Notes is made by or on behalf of such Person and any political subdivision thereof or therein.

Mandatory Redemption

The Issuer is not required to make mandatory redemption or sinking fund payments with respect to the First Lien Notes.

Repurchase at the Option of Holders

Change of Control

If a Change of Control occurs, each holder of First Lien Notes will have the right to require the Issuer to repurchase all or any part (equal to £100,000 or in integral multiples of £1,000 in excess thereof) of that holder’s First Lien Notes pursuant to an offer (a “Change of Control Offer”) on the terms set forth in the First Lien Indenture. In the Change of Control Offer, the Issuer will offer, which offer shall be open for a period of no less than 20 days, a payment in cash equal to 101% of the aggregate principal amount of First Lien Notes repurchased, plus accrued and unpaid interest and Additional Amounts, if any, on the First Lien Notes repurchased to the date of purchase (the “Change of

Control Payment”), subject to the rights of holders of First Lien Notes on the relevant record date to receive interest due on the relevant interest payment date. Within 30 days following any Change of Control, the Issuer will mail a notice to each holder of the First Lien Notes at such holder’s registered address or otherwise deliver a notice in accordance with the procedures described under “—Selection and Notice”, stating that a Change of Control Offer is being made and offering to repurchase First Lien Notes on the date (the “Change of Control Payment Date”) specified in the notice, which date will be no earlier than 10 days and no later than 60 days from the date such notice is mailed or delivered, pursuant to the procedures required by the First Lien Indenture and described in such notice. The Issuer will comply with the requirements of any applicable securities laws and regulations to the extent those laws and regulations are applicable in connection with the repurchase of the First Lien Notes as a result of a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the First Lien Indenture, the Issuer will comply with any applicable securities laws and regulations and will not be deemed to have breached its obligations under the First Lien Indenture by virtue of such compliance.

On the Change of Control Payment Date, the Issuer will, to the extent lawful:

(1) accept for payment all First Lien Notes or portions of First Lien Notes properly tendered pursuant to the Change of Control Offer;

(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all First Lien Notes or portions of First Lien Notes properly tendered; and

(3) deliver or cause to be delivered to the Trustee the First Lien Notes properly accepted together with an Officer’s Certificate stating the aggregate principal amount of First Lien Notes or portions of First Lien Notes being purchased by the Issuer.

The Paying Agent will promptly mail (or cause to be delivered) to each holder of First Lien Notes properly tendered the Change of Control Payment for such First Lien Notes, and the Trustee (or an authentication agent approved by it) will promptly authenticate and mail (or cause to be transferred by book- entry) to each holder a new First Lien Note equal in principal amount to any unpurchased portion of the First Lien Notes surrendered, if any. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

The provisions described above that require the Issuer to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of the First Lien Indenture are applicable. Except as described above with respect to a Change of Control, the First Lien Indenture does not contain provisions that permit the holders of the First Lien Notes to require that the Issuer repurchase or redeem the First Lien Notes in the event of a takeover, recapitalization or similar transaction.

The Issuer will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the First Lien Indenture applicable to a Change of Control Offer made by the Issuer and purchases all First Lien Notes properly tendered and not withdrawn under the Change of Control Offer, or (2) a notice of redemption has been given pursuant to the First Lien Indenture as described above under the caption “—Optional Redemption”, unless and until there is a default in payment of the applicable redemption price. Notwithstanding anything to the contrary contained herein, a Change of Control Offer may be made in advance of a Change of Control, conditioned upon the consummation

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of such Change of Control, if a definitive agreement is in place for the Change of Control at the time the Change of Control Offer is made.

The definition of “Change of Control” includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all”, there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of First Lien Notes to require the Issuer to repurchase its First Lien Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Restricted Subsidiaries taken as a whole to another Person or group may be uncertain.

The provisions under the First Lien Indenture relating to the Issuer’s obligation to make an offer to repurchase the First Lien Notes as a result of a Change of Control may be waived or modified with the consent of the holders of a majority in principal amount of the First Lien Notes prior to the occurrence of the Change of Control.

If and for so long as the First Lien Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted for trading on the Euro MTF Market, the Issuer will publish notices relating to the Change of Control Offer in a leading newspaper of general circulation in Luxembourg (which is expected to be the Luxemburger Wort) or, to the extent and in the manner permitted by such rules, post such notices on the official website of the Luxembourg Stock Exchange (www.bourse.lu).

Asset Sales

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, consummate an Asset Sale unless:

(1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of; and

(2) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this provision, each of the following will be deemed to be cash:

(a) any liabilities, as recorded on the balance sheet (or the notes thereto) of the Company or any Restricted Subsidiary (other than contingent liabilities), that are assumed by the transferee of any such assets and as a result of which the Company and its Restricted Subsidiaries are no longer obligated with respect to such liabilities or are indemnified against further liabilities;

(b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents within 180 days following the closing of the Asset Sale, to the extent of the cash or Cash Equivalents received in that conversion;

(c) any Capital Stock or assets of the kind referred to in clauses (2) or (4) of the next paragraph of this covenant;

(d) Indebtedness of any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset Sale, to the extent that the Company and each other Restricted Subsidiary are released from any Guarantee of such Indebtedness in connection with such Asset Sale; and

(e) consideration consisting of Indebtedness of the Company or any Guarantor received from Persons who are not the Company or any Restricted Subsidiary.

Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company (or the applicable Restricted Subsidiary, as the case may be) may apply such Net Proceeds (at the option of the Company or Restricted Subsidiary):

(1) to purchase First Lien Notes pursuant to an offer to all holders of First Lien Notes, plus accrued and unpaid interest to (but not including) the date of purchase (a “Notes Offer”);

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(2) to acquire all or substantially all of the assets of, or any Capital Stock of, another Permitted Business, if, after giving effect to any such acquisition of Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary;

(3) to make a capital expenditure;

(4) to acquire other assets (other than Capital Stock) not classified as current assets under IFRS that are used or useful in a Permitted Business;

(5) to repurchase, prepay, redeem or repay (a) Senior Secured Debt outstanding under clause (1) of the second paragraph of the covenant described under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”, (b) Senior Secured Debt that is Pari Passu Indebtedness so long as the Company (or the applicable Restricted Subsidiary, as the case may be) makes an offer on a pro rata basis to all holders of First Lien Notes at a purchase price equal to 100% of the principal amount of the First Lien Notes plus accrued and unpaid interest, if any, (c) Indebtedness of a Restricted Subsidiary that is not a Guarantor (other than Indebtedness owed to the Company or another Restricted Subsidiary), (d) Indebtedness secured by a Lien on the asset which is the subject of the relevant Asset Sale; provided that such asset does not constitute Collateral or (e) the First Lien Notes pursuant to an offer to all holders of First Lien Notes at a purchase price in cash equal to at least 100% of the principal amount of the First Lien Notes, plus accrued and unpaid interest to, but not including, the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date); or

(6) to enter into a binding commitment to apply the Net Proceeds pursuant to clause (2), (3) or (4) of this paragraph; provided that such binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment until the earlier of (x) the date on which such acquisition or expenditure is consummated, and (y) the 180th day following the expiration of the aforementioned 365 day period.

Pending the final application of any Net Proceeds, the Company (or the applicable Restricted Subsidiary) may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by the First Lien Indenture.

Any Net Proceeds from Asset Sales that are not applied or invested as provided in the second paragraph of this covenant will constitute “Excess Proceeds.” When the aggregate amount of Excess Proceeds exceeds £20.0 million, within ten Business Days thereof, the Issuer will make an offer (an “Asset Sale Offer”) to all holders of First Lien Notes and may make an offer, which offer shall be open for a period of no less than 20 days, to all holders of other Indebtedness that is pari passu with the First Lien Notes or any First Lien Note Guarantees to purchase, prepay or redeem with the proceeds of sales of assets to purchase, prepay or redeem the maximum principal amount of First Lien Notes and such other Pari Passu Indebtedness (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith) that may be purchased, prepaid or redeemed out of the Excess Proceeds. The offer price for the First Lien Notes in any Asset Sale Offer will be equal to 100% of the principal amount, plus accrued and unpaid interest and Additional Amounts, if any, to the date of purchase, prepayment or redemption, subject to the rights of holders of First Lien Notes on the relevant record date to receive interest due on the relevant interest payment date, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by the First Lien Indenture. If the aggregate principal amount of First Lien Notes and other Pari Passu Indebtedness tendered into (or to be prepaid or redeemed in connection with) such Asset Sale Offer exceeds the amount of Excess Proceeds or if the aggregate principal amount of First Lien Notes tendered pursuant to a Notes Offer exceeds the amount of the Net Proceeds so applied, the Trustee will select the First Lien Notes and such other Pari Passu Indebtedness, if applicable, to be purchased on a pro rata basis (or in the manner described under “—Selection and Notice”), based on the amounts tendered or required to be prepaid or redeemed. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

The Issuer will comply with the requirements of any applicable securities laws and regulations to the extent those laws and regulations are applicable in connection with each repurchase of First Lien Notes pursuant to an Asset Sale Offer or a Notes Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale or Notes Offer provisions of the First Lien Indenture, the Issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale or Notes Offer provisions of the First Lien Indenture by virtue of such compliance.

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Selection and Notice

If less than all of the First Lien Notes are to be redeemed at any time, the Trustee or the Registrar will select Notes for redemption on a pro rata basis (or, in the case of First Lien Notes issued in global form as discussed under “Book-Entry; Delivery and Form”, based on a method that most nearly approximates a pro rata selection as the Trustee or the Registrar deems fair and appropriate), unless otherwise required by law or applicable stock exchange or depository requirements. Neither the Trustee nor the Registrar shall be liable for selections made by it in accordance with this paragraph.

No First Lien Notes of £100,000 or less can be redeemed in part. Notices of redemption will be mailed by first class mail at least 10 but not more than 60 days before the redemption date to each holder of First Lien Notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the First Lien Notes or a satisfaction and discharge of the First Lien Indenture.

If any First Lien Note is to be redeemed in part only, the notice of redemption that relates to that First Lien Note will state the portion of the principal amount of that First Lien Note that is to be redeemed. A new First Lien Note in principal amount equal to the unredeemed portion of the original First Lien Note will be issued in the name of the holder of First Lien Notes upon cancellation of the original First Lien Note. First Lien Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on First Lien Notes or portions of First Lien Notes called for redemption.

For First Lien Notes which are represented by global certificates held on behalf of Euroclear, notices may be given by delivery of the relevant notices to Euroclear for communication to entitled account holders in substitution for the aforesaid mailing. So long as any First Lien Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted for trading on the Euro MTF Market, any such notice to the holders of the relevant First Lien Notes shall also be published in a newspaper having a general circulation in Luxembourg or, to the extent and in the manner permitted by such rules, posted on the official website of the Luxembourg Stock Exchange and, in connection with any redemption, the Company will notify the Luxembourg Stock Exchange of any change in the principal amount of First Lien Notes outstanding.

Certain Covenants

Restricted Payments

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly:

(1) declare or pay any dividend or make any other payment or distribution on account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company’s or any of its Restricted Subsidiaries’ Equity Interests in their capacity as holders (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or any of its Restricted Subsidiaries and other than dividends or distributions payable to the Company or a Restricted Subsidiary);

(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any Parent Holdco of the Company;

(3) make any principal payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Issuer or any Guarantor that is expressly contractually subordinated in right of payment to the First Lien Notes or to any First Lien Note Guarantee (excluding any intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries), except (i) a payment of principal at the Stated Maturity thereof or (ii) the purchase, repurchase or other acquisition of Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or scheduled maturity, in each case due within one year of the date of such purchase, repurchase or other acquisition; or

(4) make any Restricted Investment,

(all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as “Restricted Payments”), unless, at the time of any such Restricted Payment:

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(a) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;

(b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least £1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock”; and

(c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries since the Issue Date (including Restricted Payments permitted by clauses (1) (without duplication of amounts paid pursuant to any other clause of the next succeeding paragraph), (8), (9), (12) and (14) of the next succeeding paragraph but excluding all other Restricted Payments permitted by the next succeeding paragraph), is less than the sum, without duplication, of:

(i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the first day of the fiscal quarter in which the Issue Date occurs to the end of the Company’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus

(ii) 100% of the aggregate net cash proceeds and the Fair Market Value of property or assets or marketable securities received by the Company since the Issue Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock of the Company or convertible or exchangeable debt securities of the Company, in each case that have been converted into or exchanged for Equity Interests of the Company (other than (w) Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company, (x) from the issuance or sale of Subordinated Shareholder Debt (other than an issuance or sale to a Restricted Subsidiary of the Company), (y) from the issuance or sale of Equity Interests of the Company from treasury stock used for repurchases pursuant to clause (9) of the next succeeding paragraph or (z) Excluded Contributions); plus

(iii) to the extent that any Restricted Investment that was made since the Issue Date is (a) sold, disposed of or otherwise cancelled, liquidated or repaid, 100% of the aggregate amount received in cash and the Fair Market Value of the property or assets or marketable securities received by the Company or any Restricted Subsidiary, or (b) made in an entity that subsequently becomes a Restricted Subsidiary, 100% of the Fair Market Value of the Restricted Investment of the Company and its Restricted Subsidiaries as of the date such entity becomes a Restricted Subsidiary; plus

(iv) to the extent that any Unrestricted Subsidiary of the Company designated as such since the Issue Date is redesignated as a Restricted Subsidiary or is merged or consolidated into the Company or a Restricted Subsidiary, or all of the assets of such Unrestricted Subsidiary are transferred to the Company or a Restricted Subsidiary, the Fair Market Value of the property received by the Company or Restricted Subsidiary or the Company’s Restricted Investment in such Subsidiary as of the date of such redesignation, merger, consolidation or transfer of assets, to the extent such investments reduced the restricted payments capacity under this clause (c) and were not previously repaid or otherwise reduced; plus

(v) 100% of any dividends or distributions received by the Company or a Restricted Subsidiary since the Issue Date from an Unrestricted Subsidiary, to the extent that such dividends or distributions were not otherwise included in the Consolidated Net Income of the Company for such period.

The preceding provisions will not prohibit:

(1) the payment of any dividend or the consummation of any redemption within 60 days after the date of declaration of the dividend or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend or redemption payment would have complied with the provisions of the First Lien Indenture;

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(2) the making of any Restricted Payment in exchange for, or out of or with the net cash proceeds of the substantially concurrent sale or issuance (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock), Subordinated Shareholder Debt or from the substantially concurrent contribution of common equity capital to the Company (other than through the issuance of Disqualified Stock or through an Excluded Contribution); provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (c)(ii) of the preceding paragraph and will not be considered Excluded Contributions or to be net cash proceeds from a Public Equity Offering for purposes of the “Optional Redemption” provisions of the First Lien Indenture;

(3) the repurchase, redemption, defeasance or other acquisition or retirement for value of Indebtedness of the Company, or any Restricted Subsidiary that is contractually subordinated to the First Lien Notes or to any First Lien Note Guarantee with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;

(4) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary held by any current or former officer, director, employee or consultant of the Company or any of its Restricted Subsidiaries pursuant to any equity subscription agreement, stock option agreement, restricted stock grant, shareholders’ agreement or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed £5.0 million in any calendar year (with unused amounts in any calendar year being carried over to succeeding calendar years); and provided, further, that such amount in any calendar year may be increased by an amount not to exceed the cash proceeds from the sale of Equity Interests of the Company or a Restricted Subsidiary received by the Company or a Restricted Subsidiary during such calendar year, in each case to members of management, directors or consultants of the Company, any of its Restricted Subsidiaries or any of its direct or indirect parent companies to the extent the cash proceeds from the sale of Equity Interests have not otherwise been applied to the making of Restricted Payments pursuant to clause (c)(ii) of the preceding paragraph or clause (2) of this paragraph;

(5) the repurchase of Equity Interests deemed to occur upon the exercise of stock options to the extent such Equity Interests represent a portion of the exercise price of those stock options;

(6) the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Stock of the Company or any preferred stock of any Restricted Subsidiary issued on or after the Issue Date in accordance with the covenant described below under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock”;

(7) payments of cash, dividends, distributions, advances or other Restricted Payments by the Company or any of its Restricted Subsidiaries to allow the payment of cash in lieu of the issuance of fractional shares upon (x) the exercise of options or warrants or (y) the conversion or exchange of Capital Stock of any such Person;

(8) advances or loans to (a) any future, present or former officer, director, employee or consultant of the Company or a Restricted Subsidiary to pay for the purchase or other acquisition for value of Equity Interests of the Company (other than Disqualified Stock), or any obligation under a forward sale agreement, deferred purchase agreement or deferred payment arrangement pursuant to any management equity plan or stock option plan or any other management or employee benefit or incentive plan or other agreement or arrangement or (b) any management equity plan or stock option plan or any other management or employee benefit or incentive plan or unit trust or the trustees of any such plan or trust to pay for the purchase or other acquisition for value of Equity Interests of the Company (other than Disqualified Stock); provided that the total aggregate amount of Restricted Payments made under this clause (8) does not exceed £5.0 million in any calendar year with unused amounts from such calendar year (but not including unused amounts from any prior calendar year) being available for use during the immediately succeeding calendar year;

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(9) the repurchase of Equity Interests of the Company to be held as treasury stock; provided that the total aggregate amount of Restricted Payments made under this clause (9) does not exceed £5.0 million plus the cash proceeds from the sale of such Equity Interests of the Company from treasury stock since the Issue Date;

(10) Restricted Payments in an aggregate amount outstanding not to exceed the aggregate cash amount of Excluded Contributions, or consisting of non- cash Excluded Contributions, or Investments in exchange for or using as consideration Investments previously made under this clause (10);

(11) the payment of any dividend (or, in the case of any partnership or limited liability company, any similar distribution) by a Restricted Subsidiary to the holders of its Equity Interests (other than the Company or any Restricted Subsidiary) then entitled to participate in such dividends on a pro rata basis;

(12) so long as no Default or Event of Default has occurred and is continuing (or would result therefrom), the declaration and payment by the Company of, or loans, advances, dividends or distributions to any Parent Holdco of the Company to pay, dividends on the common stock or common equity interests of the Company or any Parent Holdco of the Company following a Public Equity Offering of such common stock or common equity interests, in an amount not to exceed in any calendar year the greater of (a) 6% of the Net Cash Proceeds received by the Company from such Public Equity Offering or contributed to the equity (other than through the issuance of Disqualified Stock or through an Excluded Contribution) of the Company or contributed as Subordinated Shareholder Debt to the Company and (b) following the Initial Public Offering, an amount equal to the greater of (i) 5% of the Market Capitalization and (ii) 5% of the IPO Market Capitalization; provided that after giving pro forma effect to such loans, advances, dividends or distributions, the Consolidated Leverage Ratio of the Company shall be equal to or less than 3.50 to 1.00;

(13) Permitted Parent Payments; or

(14) so long as no Default or Event of Default has occurred and is continuing (or would result therefrom), (i) other Restricted Payments in an aggregate amount not to exceed £60.0 million since the Issue Date and (ii) any other Restricted Payment if the Consolidated Leverage Ratio of the Company on a pro

forma basis after giving effect to such Restricted Payment does not exceed 2.50 to 1.00.

The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. Unsecured Indebtedness shall not be deemed to be subordinate or junior to secured Indebtedness by virtue of its nature as unsecured Indebtedness.

Incurrence of Indebtedness and Issuance of Preferred Stock

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, “incur”) any Indebtedness (including Acquired Debt), and the Company will not and will not permit any Restricted Subsidiary to, issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries that are not Guarantors to issue any shares of preferred stock; provided, however, that the Issuer and the Guarantors may incur Indebtedness (including Acquired Debt), or issue Disqualified Stock, and the Restricted Subsidiaries that are not Guarantors may issue preferred stock if for the Company’s most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or such preferred stock is issued, as the case may be, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the Disqualified Stock or the preferred stock had been issued, as the case may be, at the beginning of such four quarter period, the Fixed Charge Coverage Ratio of the Company would have been at least 2.0 to 1.0.

The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, “Permitted Debt”):

(1) the incurrence by the Company and any of its Restricted Subsidiaries of Indebtedness under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) not to exceed £60.0 million, plus in the case of any refinancing of any Indebtedness permitted under this clause (1) or any portion thereof, the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such refinancing;

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(2) Indebtedness of the Company or any Restricted Subsidiary outstanding on the Issue Date after giving pro forma effect to the use of proceeds of the First Lien Notes and the Second Lien Notes as set forth in the Offering Circular;

(3) the incurrence by the Issuer and the Guarantors of Indebtedness represented by the Second Lien Notes (and the related Guarantees (including any future Guarantees)), the First Lien Notes issued on the Issue Date and the related First Lien Note Guarantees (including any future First Lien Note Guarantees);

(4) Indebtedness or Disqualified Stock of the Issuer or any Guarantor and Indebtedness, Disqualified Stock or preferred stock of any Restricted Subsidiary that is not a Guarantor, in each case, representing Capital Lease Obligations, mortgage financings or purchase money obligations incurred for the purpose of financing all or any part of the purchase price, lease expense, rental payments or cost of design, construction, installation or improvement of property, plant or equipment or other assets (including Capital Stock) used in the business of the Company or any of its Restricted Subsidiaries, in an aggregate principal amount, including all Permitted Refinancing Indebtedness, Disqualified Stock and preferred stock incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness, Disqualified Stock and preferred stock incurred pursuant to this clause (4), not to exceed £5.0 million at any time outstanding;

(5) Permitted Refinancing Indebtedness or Disqualified Stock of the Issuer or any Guarantor and Permitted Refinancing Indebtedness, Disqualified Stock or preferred stock of any Restricted Subsidiary that is not a Guarantor in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness, Disqualified Stock and preferred stock (other than intercompany Indebtedness) that was permitted by the First Lien Indenture to be incurred by the Issuer, a Guarantor or a Restricted Subsidiary, as the case may be, under the first paragraph of this covenant or clause (2), (3), (5) or (13) of this paragraph;

(6) the incurrence by the Company or any Restricted Subsidiary of intercompany Indebtedness between or among the Company or any Restricted Subsidiary; provided that:

(a) if the Issuer or any Guarantor is the obligor on such Indebtedness and the payee is not the Issuer or a Guarantor, such Indebtedness must be unsecured and ((i) except in respect of the intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of the Company and its Restricted Subsidiaries and (ii) only to the extent legally permitted (the Company and its Restricted Subsidiaries having completed all procedures required in the reasonable judgment of directors of officers of the obligee or obligor to protect such Persons from any penalty or civil or criminal liability in connection with the subordination of such Indebtedness)) expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the First Lien Notes, in the case of the Issuer, or the First Lien Note Guarantee, in the case of a Guarantor; and

(b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary, will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6);

(7) the issuance by any Restricted Subsidiary to the Company or to any of its Restricted Subsidiaries of preferred stock; provided that:

(a) any subsequent issuance or transfer of Equity Interests that results in any such preferred stock being held by a Person other than the Company or a Restricted Subsidiary; and

(b) any sale or other transfer of any such preferred stock to a Person that is not either the Company or a Restricted Subsidiary,

will be deemed, in each case, to constitute an issuance of such preferred stock by such Restricted Subsidiary that was not permitted by this clause (7);

(8) the incurrence by the Company or any Restricted Subsidiary of Hedging Obligations not for speculative purposes (as determined in good faith by the Company);

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(9) the Guarantee by the Company or any Restricted Subsidiary of Indebtedness of the Company or any Restricted Subsidiary to the extent that the guaranteed Indebtedness was permitted to be incurred by another provision of this covenant; provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the First Lien Notes or a First Lien Note Guarantee, then the Guarantee must be subordinated or pari passu, as applicable, to the same extent as the Indebtedness guaranteed;

(10) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in respect of workers’ compensation claims, self-insurance obligations, captive insurance companies, bankers’ acceptances, performance and surety bonds in the ordinary course of business;

(11) (a) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within 30 Business Days;

(b) customer deposits and advance payments received in the ordinary course of business from customers for goods or services purchased in the ordinary course of business;

(c) Indebtedness owned on a short-term basis of no longer than 30 days to banks and other financial institutions incurred in the ordinary course of business of the Company and its Restricted Subsidiaries with such banks or financial institutions that arises in connection with ordinary banking arrangements to manage cash balances of the Company and its Restricted Subsidiaries; and

(d) Indebtedness incurred in connection with bankers acceptance, discounted bills of exchange or the discounting or factoring of receivables for credit management of bad debt purposes, in each case, incurred or undertaken in the ordinary course of business;

(12) Indebtedness represented by Guarantees of any Management Advances;

(13) Indebtedness (x) of the Issuer or any Guarantor used to finance an acquisition or (y) of any Person outstanding on the date on which such Person becomes a Restricted Subsidiary or is merged, consolidated, amalgamated or otherwise combined with (including pursuant to any acquisition of assets and assumption of related liabilities) the Company or any Restricted Subsidiary (other than, in the case of this clause (y), Indebtedness incurred to provide all or a portion of the funds used to consummate the transaction or series of related transactions pursuant to which such Person became a Restricted Subsidiary or was otherwise acquired by the Company or a Restricted Subsidiary); provided, however, with respect to this clause (13), that at the time of the acquisition, merger, consolidation or amalgamation (a) the Company would have been able to incur £1.00 of additional Indebtedness pursuant to the first paragraph of this covenant after giving effect to the incurrence of such Indebtedness pursuant to this clause (13) or (b) the Fixed Charge Coverage Ratio would not be less than it was immediately prior to giving effect to such acquisition or other transaction;

(14) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for customary indemnification, obligations in respect of earnouts or other adjustments of purchase price or, in each case, similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition of any business or assets or Person or any Equity Interests of a Subsidiary; provided that the maximum liability of the Company and its Restricted Subsidiaries in respect of all such Indebtedness shall at no time exceed the gross proceeds, including the Fair Market Value of non-cash proceeds (measured at the time received and without giving effect to any subsequent changes in value), actually received by the Company and its Restricted Subsidiaries in connection with such disposition;

(15) Indebtedness of the Company and its Restricted Subsidiaries in respect of (a) letters of credit, surety, performance or appeal bonds, completion guarantees, judgment, advance payment, customs, VAT or other tax guarantees or similar instruments issued in the ordinary course of business of such Person and not in connection with the borrowing of money, including letters of credit or similar instruments in respect of self-insurance and workers compensation obligations, and (b) any customary cash management, cash pooling or netting or setting off arrangements; provided, however, that upon the drawing of such letters of credit or other instrument, such obligations are reimbursed within 30 days following such drawing;

(16) Guarantees by the Company or any Restricted Subsidiary granted to any trustee of any management equity plan or stock option plan or any other management or employee benefit or incentive plan or unit

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trust scheme approved by the Board of Directors of the Company, so long as the proceeds of the Indebtedness so Guaranteed are used to purchase Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any net cash proceeds from the sale of such Equity Interests of the Company will be excluded from clause (c)(ii) of the first paragraph of the covenant described above under the caption “—Restricted Payments” and will not be considered to be net cash proceeds from an Equity Offering for purposes of the “Optional Redemption” provisions of the First Lien Indenture;

(17) Indebtedness of the Issuer or any Guarantor in an aggregate outstanding principal amount which, when taken together with any Permitted Refinancing Indebtedness in respect thereof and the principal amount of all other Indebtedness incurred pursuant to this clause (17) and then outstanding, will not exceed 100% of the Net Cash Proceeds received by the Company from the issuance or sale (other than to a Restricted Subsidiary) of its Subordinated Shareholder Debt or Capital Stock (other than Disqualified Stock or an Excluded Contribution) or otherwise contributed to equity (other than through the issuance of Disqualified Stock or an Excluded Contribution) of the Company, in each case, subsequent to the Issue Date; provided, however, that (i) any such Net Cash Proceeds that are so received or contributed shall be excluded for purposes of making Restricted Payments under clause (c)(ii) of the first paragraph and clauses (2), (4), (9) and (12) of the second paragraph of the covenant described above under “—Restricted Payments” to the extent the Company and its Restricted Subsidiaries incur Indebtedness in reliance thereon and (ii) any Net Cash Proceeds that are so received or contributed shall be excluded for purposes of incurring Indebtedness pursuant to this clause (17) to the extent the Company or any of its Restricted Subsidiaries makes a Restricted Payment under clause (c)(ii) of the first paragraph or clauses (2), (4), (9) and (12) of the second paragraph of the covenant described above under “—Restricted Payments” in reliance thereon;

(18) Indebtedness consisting of Guarantees of Indebtedness incurred by joint ventures of the Company or any of its Restricted Subsidiaries that, together with the outstanding aggregate amount of Investments made pursuant to clause (14) of the definition of “Permitted Investments”, does not exceed £10.0 million in the aggregate at any one time outstanding; and

(19) Indebtedness, Disqualified Stock or preferred stock of the Company or any Restricted Subsidiary in an aggregate principal amount at any time outstanding, including all Indebtedness, Disqualified Stock and preferred stock incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness, Disqualified Stock and preferred stock incurred pursuant to this clause (19), not to exceed £50.0 million.

For purposes of determining compliance with this “Incurrence of Indebtedness and Issuance of Preferred Stock” covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (19) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company, in its sole discretion, will be permitted to classify such item of Indebtedness on the date of its incurrence and only be required to include the amount and type of such Indebtedness in one of such clauses and will be permitted on the date of such incurrence to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described in the first and second paragraphs of this covenant, from time to time to reclassify all or a portion of such item of Indebtedness, in any manner that complies with this covenant. Indebtedness under the Revolving Credit Facility outstanding on the Issue Date will initially be deemed to have been incurred on such date in reliance on the exception provided in clause (1) of the definition of “Permitted Debt”.

The accrual of interest or preferred stock dividends, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness, the reclassification of preferred stock as Indebtedness due to a change in accounting principles, and the payment of dividends on preferred stock or Disqualified Stock in the form of additional shares of the same class of preferred stock or Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of preferred stock or Disqualified Stock for purposes of this covenant. For purposes of determining compliance with any pound-denominated restriction on the incurrence of Indebtedness, the pound-equivalent principal amount of Indebtedness denominated in a different currency shall be utilized, calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred; provided, however, that (i) if such Indebtedness denominated in non-pound currency is subject to a Currency Exchange Protection Agreement with respect to pounds the amount of such Indebtedness expressed in pounds will be calculated so as to take account of the effects of such Currency Exchange Protection Agreement; and (ii) the pound- equivalent of the principal amount of any such Indebtedness outstanding on the Issue Date shall be calculated based on the relevant currency exchange rate in effect on the Issue Date. The principal amount of any refinancing Indebtedness incurred in the same currency as the Indebtedness being refinanced will be the pound-equivalent of the Indebtedness refinanced determined on the date such Indebtedness was originally incurred, except that to the extent that:

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(1) such pound-equivalent was determined based on a Currency Exchange Protection Agreement, in which case the refinancing Indebtedness will be determined in accordance with the preceding sentence; and

(2) the principal amount of the refinancing Indebtedness exceeds the principal amount of the Indebtedness being refinanced, in which case the pound- equivalent of such excess will be determined on the date such refinancing Indebtedness is being incurred.

Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values.

The amount of any Indebtedness outstanding as of any date will be:

(1) in the case of any Indebtedness issued with original issue discount, the amount of the liability in respect thereof determined in accordance with IFRS;

(2) the principal amount of the Indebtedness, in the case of any other Indebtedness; and

(3) in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of:

(i) the Fair Market Value of such assets at the date of determination; and

(ii) the amount of the Indebtedness of the other Person.

Liens

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind securing Indebtedness upon any of their property or assets, now owned or hereafter acquired (such Lien, the “Initial Lien”), except (1) in the case of any property or asset that does not constitute Collateral, (a) Permitted Liens or (b) Liens on property or assets that are not Permitted Liens if the First Lien Notes and the First Lien Indenture (or a First Lien Note Guarantee in the case of Liens of a Guarantor) are directly secured equally and ratably with, or prior to in the case of Liens with respect to Indebtedness that is (x) expressly contractually subordinated in right of payment to the First Lien Notes or to any First Lien Note Guarantee (excluding any intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries) or (y) secured by a Lien on assets of the Issuer or any Guarantor that ranks junior to the Liens securing the First Lien Notes or the First Lien Note Guarantees, or in the case of Liens securing Indebtedness pursuant to clauses (1) or (8) of the definition of “Permitted Debt”, pari passu with (except that such Indebtedness may receive priority in respect of distributions of proceeds of any enforcement of Collateral), the Indebtedness secured by such Initial Lien for so long as such Indebtedness is so secured, and (2) in the case of any property or asset that constitutes Collateral, Permitted Collateral Liens.

Any such Lien created in favor of the First Lien Notes will be automatically and unconditionally released and discharged upon (i) the release and discharge of the Initial Lien to which it relates, and (ii) otherwise as set forth under “—Security—Release of Collateral”.

Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

(1) pay dividends or make any other distributions on its Capital Stock to the Company or any Restricted Subsidiary, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any Restricted Subsidiary;

(2) make loans or advances to the Company or any Restricted Subsidiary; or

(3) sell, lease or transfer any of its properties or assets to the Company or any Restricted Subsidiary;

provided that (x) the priority of any preferred stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common stock and (y) the subordination of (including the application of any

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standstill period to) loans or advances made to the Company or any Restricted Subsidiary to other Indebtedness incurred by the Company or any Restricted Subsidiary, in each case, shall not be deemed to constitute such an encumbrance or restriction.

However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:

(1) agreements governing Indebtedness as in effect on the Issue Date, including without limitation, the Second Lien Notes (and related Guarantees thereof), and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the Issue Date, as applicable (as determined in good faith by the Company) or would not, in the good faith determination of the Company, materially impair the Issuer from making payments on the First Lien Notes;

(2) the First Lien Indenture, the First Lien Notes, the First Lien Note Guarantees, the Revolving Credit Facility, the Intercreditor Agreement, any Additional Intercreditor Agreement and the Security Documents;

(3) agreements governing other Indebtedness permitted to be incurred under the provisions of the covenant described above under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock” and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the restrictions therein are not materially less favorable to the holders of the First Lien Notes than is customary in comparable financings (as determined in good faith by the Company);

(4) applicable law, rule, regulation or order or the terms of any license, authorization, concession or permit;

(5) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the First Lien Indenture to be incurred;

(6) customary non-assignment and similar provisions in contracts, leases and licenses entered into in the ordinary course of business;

(7) purchase money obligations for property acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased or leased of the nature described in clause (3) of the preceding paragraph;

(8) any agreement for the sale or other disposition of the Capital Stock or all or substantially all of the property and assets of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition;

(9) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced as determined in good faith by the Company or would not in the good faith determination of the Company, materially impair the ability of the Issuer to make payments on the First Lien Notes;

(10) Liens permitted to be incurred under the provisions of the covenant described above under the caption “—Liens” that limit the right of the debtor to dispose of the assets subject to such Liens;

(11) provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements (including agreements entered into in connection with a Restricted Investment), which limitation is applicable only to the assets that are the subject of such agreements;

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(12) restrictions on cash or other deposits or net worth imposed by customers or suppliers or required by insurance, surety or bonding companies, in each case, under contracts entered into in the ordinary course of business; and

(13) any encumbrance or restriction existing under any agreement that extends, renews, refinances or replaces the agreements containing the encumbrances or restrictions in the foregoing clauses (1) through (12), or in this clause (13); provided that the terms and conditions of any such encumbrances or restrictions are no more restrictive in any material respect than those under or pursuant to the agreement so extended, renewed, refinanced or replaced or would not in the good faith determination of the Company, materially impair the ability of the Issuer to make payments on the First Lien Notes.

Merger, Consolidation or Sale of Assets

Neither any Parent Guarantor nor the Issuer will, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not one of the Parent Guarantors or the Issuer (as applicable) is the surviving corporation), or (2) sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the properties or assets of either the Parent Guarantors and their Subsidiaries taken as a whole or the Issuer and its Subsidiaries which are Restricted Subsidiaries taken as a whole, in either case, in one or more related transactions, to another Person, unless:

(1) either: (a) the relevant Parent Guarantor or the Issuer (as applicable) is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than a Parent Guarantor or the Issuer (as applicable)) or to which such sale, assignment, transfer, conveyance, lease or other disposition has been made is an entity organized or existing under the laws of any member state of the Pre-Expansion European Union, Switzerland, Guernsey, any state of the United States or the District of Columbia;

(2) the Person formed by or surviving any such consolidation or merger with one of the Parent Guarantors (if other than a Parent Guarantor or the Issuer) or the Person to which such sale, assignment, transfer, conveyance, lease or other disposition has been made assumes all the obligations of such Parent Guarantor under the First Lien Notes, the First Lien Indenture, the Intercreditor Agreement, any Additional Intercreditor Agreement and each Security Document to which such Parent Guarantor is a party;

(3) the Person formed by or surviving any such consolidation or merger with the Issuer (if other than the Issuer) or the Person to which such sale, assignment, transfer, conveyance, lease or other disposition has been made assumes all the obligations of the Issuer under the First Lien Notes, the First Lien Indenture, the Intercreditor Agreement, any Additional Intercreditor Agreement and each Security Document to which the Issuer is a party;


(5) the relevant Parent Guarantor, the Issuer or the Person (as applicable) formed by or surviving any such consolidation or merger (if other than one of the Parent Guarantors or the Issuer (as applicable)), or to which such sale, assignment, transfer, conveyance, lease or other disposition has been made would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period (i) be permitted to incur at least £1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock” or (ii) have a Fixed Charge Coverage Ratio not less than it was immediately prior to giving effect to such transaction; and

(6) the Company delivers to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officer’s Certificate and opinion of counsel, in each case, stating that such consolidation, merger or transfer and such supplemental indenture and other transfer or accession documents comply with this covenant and that all conditions precedent in the First Lien Indenture relating to such transaction have been satisfied and that the First Lien Indenture and the First Lien Notes constitute legal, valid and binding obligations of the Issuer or the Surviving Entity enforceable in accordance with their terms.

A Subsidiary Guarantor (other than a Subsidiary Guarantor whose First Lien Note Guarantee is to be released in accordance with the terms of the First Lien Note Guarantee and the First Lien Indenture as described under “—First Lien Note Guarantees”) will not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not such Subsidiary Guarantor is the surviving corporation), or (2) sell, assign, transfer, lease, convey or otherwise dispose of

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all or substantially all of the properties or assets of such Subsidiary Guarantor and its Subsidiaries which are Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person, unless:

(1) either:

(a) such Subsidiary Guarantor is the surviving corporation; or

(b) the Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) or the Person to which such sale, assignment, transfer, conveyance, lease or other disposition has been made assumes all the obligations of such Subsidiary Guarantor under its First Lien Note Guarantee, the Intercreditor Agreement, any Additional Intercreditor Agreement and each Security Document to which the Guarantor is a party;

(2) immediately after giving pro forma effect to such transaction or transactions (and treating any Indebtedness which becomes an obligation of the surviving corporation as a result of such transaction as having been incurred by the surviving corporation at the time of such transaction or transactions), no Default or Event of Default exists; and

(3) the Company delivers to the Trustee an Officer’s Certificate and opinion of counsel, in each case, stating that such consolidation, merger or transfer and such supplemental indenture and other transfer or accession documents comply with this covenant.

This “Merger, Consolidation or Sale of Assets” covenant will not apply to (a) any consolidation or merger of any Restricted Subsidiary that is not a Guarantor into the Issuer or a Guarantor, (b) any consolidation or merger among Parent Guarantors, (c) any consolidation or merger among Subsidiary Guarantors, (d) any consolidation or merger among the Issuer and any Subsidiary Guarantor; provided that, if the Issuer is not the surviving entity of such merger or consolidation, the relevant Subsidiary Guarantor is an entity organized or existing under the laws of any member state of the Pre-Expansion European Union, Switzerland, any state of the United States or the District of Columbia and clauses (3) and (6) of the first paragraph of this covenant will be complied with or (e) any sale, assignment, transfer, conveyance, lease or other disposition of assets among the Company and its Restricted Subsidiaries. Clauses (4) and (5) of the first paragraph and clause (2) of the second paragraph of this covenant will not apply to any merger or consolidation of the Issuer or any Guarantors with or into an Affiliate solely for the purpose of reincorporating the Issuer or such Guarantor in another jurisdiction.

Transactions with Affiliates

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, make any payment to or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Company (each, an “Affiliate Transaction”) involving aggregate payments or consideration in excess of £2.0 million, unless:

(1) the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and

(2) the Company delivers to the Trustee:

(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of £5.0 million, a resolution of the Board of Directors of the Company set forth in an Officer’s Certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors of the Company; and, in addition,

(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of £20.0 million, a written opinion of an accounting, appraisal or investment banking firm of international standing, or other recognized independent expert of international standing with experience appraising the terms and conditions of the type of transaction or series of related transactions for which an opinion is required, stating that the transaction or series of related transactions is (i) fair from a financial point of view taking into account all relevant circumstances or (ii) on terms not less favorable

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than might have been obtained in a comparable transaction at such time on an arm’s-length basis from a Person who is not an Affiliate.

The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph:

(1) any employment agreement, collective bargaining agreement, consultant, employee benefit arrangements with any employee, consultant, officer or director of the Company or any Restricted Subsidiary, including under any stock option, stock appreciation rights, stock incentive or similar plans, entered into in the ordinary course of business;

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(2) transactions between or among the Company and/or its Restricted Subsidiaries;

(3) transactions with a Person (other than an Unrestricted Subsidiary of the Company) that is an Affiliate of the Company solely because the Company owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such Person;

(4) payment of reasonable and customary fees and reimbursements of expenses (pursuant to indemnity arrangements or otherwise) of Officers, directors, employees or consultants of the Company or any of its Restricted Subsidiaries;

(5) any issuance of Equity Interests (other than Disqualified Stock) of the Company to Affiliates of the Company;

(6) any Investment (other than a Permitted Investment) or other Restricted Payment, in either case, that does not violate the provisions of the First Lien Indenture described above under the caption “—Restricted Payments”;

(7) any Permitted Investment described in clauses (5), (6), (7), (9) and (11) of the definition thereof;

(8) the issuance of any Subordinated Shareholder Debt;

(9) transactions pursuant to, or contemplated by any agreement in effect on the Issue Date and transactions pursuant to any amendment, modification or extension to such agreement, so long as such amendment, modification or extension, taken as a whole, is not-materially more disadvantageous to the holders of the First Lien Notes than the original agreement as in effect on the Issue Date (as determined in good faith by the Company) and transactions and agreements described in the Offering Circular under the heading “Certain Relationships and Related Party Transactions”;

(10) Management Advances;

(11) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services or providers of employees or other labor, in each case in the ordinary course of business and otherwise in compliance with the terms of this First Lien Indenture that are fair to the Company or the Restricted Subsidiaries, in the reasonable determination of the members of the Board of Directors of the Company or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated Person; and

(12) payment to any Permitted Holder of all reasonable out-of- pocket expenses (but, for the avoidance of doubt, excluding any income or capital gains taxes) incurred by such Permitted Holder in connection with its direct or indirect investment in the Company and its Subsidiaries in an amount not to exceed £2.0 million in any calendar year.

Limitation on Issuances of Guarantees of Indebtedness

The Company will not permit any of its Restricted Subsidiaries, directly or indirectly, to guarantee the payment of any Indebtedness under the Revolving Credit Facility, any Public Debt or any Material Indebtedness incurred pursuant to a Credit Facility unless such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture providing for a First Lien Note Guarantee of the payment of the First Lien Notes by such Restricted Subsidiary, which First Lien Note Guarantee will be senior to or pari passu with such Restricted Subsidiary’s guarantee of such other Indebtedness.

Each additional First Lien Note Guarantee will be limited as necessary to recognize certain defenses generally available to guarantors (including those that relate to fraudulent conveyance or transfer, voidable preference, financial assistance, corporate purpose, capital maintenance or similar laws, regulations or defenses affecting the rights of creditors generally) or other considerations under applicable law.

Notwithstanding the foregoing, the Company shall not be obligated to cause such Restricted Subsidiary to Guarantee the First Lien Notes to the extent that such Guarantee by such Restricted Subsidiary would reasonably be expected to give rise to or result in a violation of applicable law which, in any case, cannot be prevented or otherwise avoided through measures reasonably available to the Company or the Restricted Subsidiary or any liability for the officers, directors or shareholders of such Restricted Subsidiary; provided that the Company will procure that the relevant Restricted Subsidiary becomes a Guarantor at such time as such restriction would no longer apply to the providing of the

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First Lien Note Guarantee or no longer would prohibit such Restricted Subsidiary from becoming a Guarantor (or prevent the Company from causing such Restricted Subsidiary to become a Guarantor).

No Impairment of Security Interest

The Company shall not, and shall not permit any Restricted Subsidiary to, take or knowingly or negligently omit to take any action that would have the result of materially impairing the Security Interest with respect to the Collateral (it being understood, subject to the proviso below, that the incurrence of Permitted Collateral Liens shall under no circumstances be deemed to materially impair the Liens with respect to the Collateral) for the benefit of the Trustee and the holders of the First Lien Notes, and the Company shall not, and shall not permit any of its Restricted Subsidiaries to, grant to any Person other than the Security Agent, for the benefit of the Trustee and the holders of the First Lien Notes and the other beneficiaries described in the Security Documents and the Intercreditor Agreement or any Additional Intercreditor Agreement, any interest whatsoever in any of the Collateral, except that the Company and its Restricted Subsidiaries may incur Permitted Collateral Liens and the Collateral may be discharged and released in accordance with the First Lien Indenture, the applicable Security Documents and/or the Intercreditor Agreement or any Additional Intercreditor Agreement; provided, however, that, except with respect to any discharge or release in accordance with the First Lien Indenture or the Intercreditor Agreement or any Additional Intercreditor Agreement, the incurrence of Permitted Collateral Liens or any action expressly permitted by the First Lien Indenture or the Intercreditor Agreement or any Additional Intercreditor Agreement, the Security Documents may not be amended, extended, renewed, restated, supplemented, released or otherwise modified or replaced, unless contemporaneously with any such action, the Company delivers to the Trustee, either (1) a solvency opinion, in form and substance reasonably satisfactory to the Trustee from an Independent Financial Advisor confirming the solvency of the Company and its Subsidiaries, taken as a whole, after giving effect to any transactions related to such amendment, extension, renewal, restatement, supplement, release, modification or replacement, (2) a certificate from the Board of Directors or an Officer of the relevant Person that confirms the solvency of the person granting such Security Interest after giving effect to any transactions related to such amendment, extension, renewal, restatement, supplement, modification or replacement, or (3) an Opinion of Counsel, in form and substance reasonably satisfactory to the Trustee, confirming that, after giving effect to any transactions related to such amendment, extension, renewal, restatement, supplement, modification or replacement, the Lien or Liens created under the Security Documents, so amended, extended, renewed, restated, supplemented, modified or replaced are valid Liens not otherwise subject to any limitation, imperfection or new hardening period, in equity or at law, that such Lien or Liens were not otherwise subject to immediately prior to such amendment, extension, renewal, restatement, supplement, modification or replacement. In the event that the Company complies with the requirements of this covenant, the Trustee and the Security Agent shall (subject to customary protections and indemnifications) consent to such amendments without the need for instructions from the holders of the First Lien Notes.

Designation of Restricted and Unrestricted Subsidiaries

The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary designated as an Unrestricted Subsidiary will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the covenant described above under the caption “—Restricted Payments” or under one or more clauses of the definition of Permitted Investments, as determined by the Company. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Company may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if that redesignation would not cause a Default.

Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a copy of a resolution of the Company’s Board of Directors giving effect to such designation and an Officer’s Certificate certifying that such designation complies with the preceding conditions and was permitted by the covenant described above under the caption “—Restricted Payments”. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of the First Lien Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock”, the Company will be in default of such covenant. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary, and such designation will only be permitted if (1) such Indebtedness is permitted under the covenant described under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock”, calculated on a pro forma basis as if such designation had occurred at the beginning of the applicable reference period; and (2) no Default or Event of Default would be in existence following such designation.

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Maintenance of Listing

The Company will use its commercially reasonable efforts to obtain and maintain the listing of the First Lien Notes on the Euro MTF market for so long as such First Lien Notes are outstanding; provided that if at any time the Company determines that it will not maintain such listing, it will obtain prior to the delisting of the First Lien Notes from the Euro MTF Market, and thereafter use its best efforts to maintain, a listing of such First Lien Notes on another “recognised stock exchange” as defined in Section 1005 of the Income Tax Act 2007 of the United Kingdom.

Reports

For so long as any First Lien Notes are outstanding, the Company will furnish to the Trustee the following reports:

(1) within 120 days after the end of each fiscal year of the Company, annual reports containing the following information with a level of detail that is substantially comparable to the Offering Circular and the following information: (a) audited consolidated balance sheet of the Company as of the end of the two most recent fiscal years and audited consolidated income statements and statements of cash flow of the Company for the two most recent fiscal years, including complete footnotes to such financial statements and the report of the independent auditors on the financial statements; (b) pro

forma income statement and balance sheet information of the Company (which need not comply with Article 11 of Regulation S-X under the U.S. Exchange Act), together with explanatory footnotes, for any material acquisitions, dispositions or recapitalizations that have occurred since the beginning of the most recently completed fiscal year as to which such annual report relates (unless such pro forma information has been provided in a previous report pursuant to clause (2) or (3) below (provided that such pro forma financial information will be provided only to the extent available without unreasonable expense, in which case, the Company will provide, in the case of a material acquisition, acquired company financials)); (c) an operating and financial review of the audited financial statements, including a discussion of the results of operations (including a discussion by business segment), financial condition and liquidity and capital resources, and a discussion of material commitments and contingencies and critical accounting policies; (d) a description of the business, management and shareholders of the Company, material affiliate transactions and material debt instruments; and (e) material risk factors and material recent developments;

(2) within 60 days following the end of each of the first three fiscal quarters in each fiscal year of the Company beginning with the first fiscal quarter ending after the Issue Date, quarterly reports containing the following information: (a) an unaudited condensed consolidated balance sheet as of the end of such quarter and unaudited condensed statements of income and cash flow for the quarterly and year to date periods ending on the unaudited condensed balance sheet date, and the comparable prior year periods for the Company, together with condensed footnote disclosure; (b) pro forma income statement and balance sheet information of the Company (which need not comply with Article 11 of Regulation S-X under the U.S. Exchange Act), together with explanatory footnotes, for any acquisitions, dispositions or recapitalizations (with a Fair Market Value of at least £50 million) that have occurred since the beginning of the most recently completed fiscal quarter as to which such quarterly report relates (provided that such pro forma financial information will be provided only to the extent available without unreasonable expense, in which case, the Company will provide, in the case of a material acquisition, acquired company financials); (c) an operating and financial review of the unaudited financial statements (including a discussion by business segment), including a discussion of the consolidated financial condition and results of operations of the Company and any material change between the current quarterly period and the corresponding period of the prior year; and (d) material recent developments; and

(3) promptly after the occurrence of any material acquisition, disposition or restructuring of the Company and the Restricted Subsidiaries, taken as a whole, or any changes of the Chief Executive Officer or Chief Financial Officer at the Company or change in auditors of the Company or any other material event that the Company announces publicly, a report containing a description of such event;

provided, however, that the reports set forth in clauses (1), (2) and (3) above will not be required to (i) contain any reconciliation to U.S. generally accepted accounting principles or (ii) include separate financial statements for any Guarantors or non- guarantor Subsidiaries of the Company.

In addition, if the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries and such Subsidiaries are Significant Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph will include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes

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thereto, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company.

All financial statements shall be prepared in accordance with IFRS. Except as provided for above, no report need include separate financial statements for the Company or Subsidiaries of the Company or any disclosure with respect to the results of operations or any other financial or statistical disclosure not of a type included in the Offering Circular.

In addition, for so long as any First Lien Notes remain outstanding, the Company has agreed that it will furnish to the holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the U.S. Securities Act.

Contemporaneously with the furnishing of each such report discussed above, the Company will also (a) file a press release with the appropriate internationally recognized wire services in connection with such report and (b) post such report on the Company’s website. If and for so long as the First Lien Notes are listed on the Official List of the Luxembourg Stock Exchange for trading on the Euro MTF Market, and the rules of that exchange so require, copies of the Company’s organizational documents and the First Lien Indenture and the most recent consolidated financial statements published by the Company may be inspected and obtained at the office of the Paying Agent in Luxembourg. See “Listing and general information.”

Suspension of Covenants when First Lien Notes Rated Investment Grade

If on any date following the Issue Date:

(1) the First Lien Notes have achieved Investment Grade Status; and

(2) no Default or Event of Default shall have occurred and be continuing on such date,

then, beginning on that day and continuing until such time, if any, at which the First Lien Notes cease to have Investment Grade Status (such period, the “Suspension Period”), the covenants specifically listed under the following captions in the Offering Circular will no longer be applicable to the First Lien Notes and any related default provisions of the First Lien Indenture will cease to be effective and will not be applicable to the Company and its Restricted Subsidiaries:

(1) “—Repurchase at the Option of Holders—Asset Sales”;

(2) “—Restricted Payments”;

(3) “—Incurrence of Indebtedness and Issuance of Preferred Stock”;

(4) “—Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries”;

(5) “—Designation of Restricted and Unrestricted Subsidiaries”;

(6) “—Transactions with Affiliates”; and

(7) clause (5) of the first paragraph of the covenant described under “—Merger, Consolidation or Sale of Assets”.

Such covenants will not, however, be of any effect with regard to the actions of Company and the Restricted Subsidiaries properly taken during the continuance of the Suspension Period; provided that (1) with respect to the Restricted Payments made after any such reinstatement, the amount of Restricted Payments will be calculated as though the covenant described under the caption “—Restricted Payments” had been in effect prior to, but not during, the Suspension Period and (2) all Indebtedness incurred, or Disqualified Stock or preferred stock issued, during the Suspension Period will be classified to have been incurred or issued pursuant to clause (2) of the second paragraph of the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock”. Upon the occurrence of a Suspension Period, the amount of Excess Proceeds shall be reset at zero.

The Company shall notify the Trustee that the conditions set forth in the first paragraph under this caption has been satisfied; provided that no such notification shall be a condition for the suspension of the covenants described under this caption to be effective. The Trustee shall be under no obligation to notify the holders of the First Lien Notes that the conditions set forth in the first paragraph have been satisfied.

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There can be no assurance that the First Lien Notes will ever achieve or maintain Investment Grade Status.

Events of Default and Remedies

Each of the following is an “Event of Default”:

(1) default for 30 days in the payment when due of interest or Additional Amounts, if any, with respect to the First Lien Notes;

(2) default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the First Lien Notes;

(3) failure by the Issuer or relevant Guarantor to comply with the provisions described under the caption “—Certain Covenants—Merger, Consolidation or Sale of Assets”;

(4) failure by the Issuer or relevant Guarantor for 60 days after written notice to the Company by the Trustee or the holders of at least 25% in aggregate principal amount of the First Lien Notes then outstanding voting as a single class to comply with any of the agreements in the First Lien Indenture (other than a default in performance, or breach, or a covenant or agreement which is specifically dealt with in clauses (1), (2) or (3)), or the Intercreditor Agreement (or any Additional Intercreditor Agreement entered into pursuant to the terms of the Intercreditor Agreement or the First Lien Indenture);

(5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created after the Issue Date, if that default:

(a) is caused by a failure to pay principal of such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”); or

(b) results in the acceleration of such Indebtedness prior to its express maturity,

and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates £20.0 million or more;

(6) failure by the Company or any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, to pay final judgments entered by a court or courts of competent jurisdiction aggregating in excess of £20.0 million (exclusive of any amounts that an insurance company has acknowledged liability for), which judgments shall not have been discharged or waived and there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of an appeal, waiver or otherwise, shall not have been in effect;

(7) except as permitted by the First Lien Indenture (including with respect to any limitations), any First Lien Note Guarantee of the Company or a Significant Subsidiary or any group of its Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect, or the Issuer or any Guarantor which is a Significant Subsidiary or any group of its Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, or any Person acting on behalf of any such Guarantor, denies or disaffirms its obligations under its First Lien Note Guarantee;

(8) any security interest under the Security Documents shall, at any time, cease to be in full force and effect (other than in accordance with the terms of the relevant Security Document, the Intercreditor Agreement, any Additional Intercreditor Agreement and the First Lien Indenture) with respect to Collateral having a Fair Market Value in excess of £15.0 million for any reason other than the satisfaction in full of all obligations under the First Lien Indenture or the release of any such security interest in accordance with the terms of the First Lien Indenture, the Intercreditor Agreement, any Additional Intercreditor Agreement or the Security Documents or any such security interest created thereunder shall be declared invalid or unenforceable or the Company or any of its Restricted

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Subsidiaries shall assert in writing that any such security interest is invalid or unenforceable and any such Default continues for ten consecutive Business Days; and

(9) certain events of bankruptcy or insolvency described in the First Lien Indenture with respect to the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of its Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary.

In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Issuer or any Guarantor that is a Significant Subsidiary or any group of Guarantors that, taken together, would constitute a Significant Subsidiary, all outstanding First Lien Notes will become due and payable immediately without further action or notice or other act on the part of the Trustee or any holders of First Lien Notes. If any other Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding First Lien Notes by written notice to the Issuer (and to the Trustee if such notice is given by the holders) may and the Trustee, upon the written request of such holders, shall declare all amounts in respect of the First Lien Notes to be due and payable immediately.

The Intercreditor Agreement provides for a 30-day consultation period with the creditors under the Revolving Credit Facility and certain hedge counterparties prior to the Trustee or the holders of First Lien Notes being permitted to take certain enforcement actions, including causing the First Lien Notes to become due and payable. See “Description of Certain Financing Arrangements—Intercreditor Agreement—Distressed Disposals”.

Subject to certain limitations, holders of a majority in aggregate principal amount of the then outstanding First Lien Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from holders of the First Lien Notes notice of any continuing Default or Event of Default if it determines that withholding notice is in their interest, except a Default or Event of Default relating to the payment of principal, interest or Additional Amounts or premium, if any.

Subject to the provisions of the First Lien Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the First Lien Indenture at the request or direction of any holders of First Lien Notes unless such holders have offered to the Trustee indemnity or security satisfactory to it against any loss, liability or expense. Except (subject to the provisions described under “—Amendment, Supplement and Waiver”) to enforce the right to receive payment of principal, premium, if any, or interest or Additional Amounts when due, no holder of a First Lien Note may pursue any remedy with respect to the First Lien Indenture or the First Lien Notes unless:

(1) such holder has previously given the Trustee notice that an Event of Default is continuing;

(2) holders of at least 25% in aggregate principal amount of the then outstanding First Lien Notes have requested, in writing, that the Trustee pursue the remedy;

(3) such holders have offered the Trustee security or indemnity satisfactory to it against any loss, liability or expense;

(4) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of such security or indemnity; and

(5) holders of a majority in aggregate principal amount of the then outstanding First Lien Notes have not given the Trustee a direction inconsistent with such request within such 60-day period.

The holders of not less than a majority in aggregate principal amount of the First Lien Notes outstanding may, on behalf of the holders of all outstanding First Lien Notes, waive any past default under the First Lien Indenture and its consequences, except a continuing default in the payment of the principal of premium, if any, any Additional Amounts or interest on any First Lien Note held by a non-consenting holder (which may only be waived with the consent of each holder of First Lien Notes affected).

The Company is required to deliver to the Trustee annually a statement regarding compliance with the First Lien Indenture.

No Personal Liability of Directors, Officers, Employees and Stockholders

No director, officer, employee, incorporator or stockholder of the Issuer or any Guarantor, as such, will have any liability for any obligations of the Issuer or the Guarantors under the First Lien Notes, the First Lien Indenture, the

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First Lien Note Guarantees, the Intercreditor Agreement, the Security Documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of First Lien Notes by accepting a First Lien Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the First Lien Notes. The waiver may not be effective to waive liabilities under applicable securities laws.

Legal Defeasance and Covenant Defeasance

The Issuer may at any time, at the option of its Board of Directors evidenced by a resolution set forth in an Officer’s Certificate, elect to have all of its obligations discharged with respect to the outstanding First Lien Notes and all obligations of the Guarantors discharged with respect to their First Lien Note Guarantees (“Legal Defeasance”) except for:

(1) the rights of holders of outstanding First Lien Notes to receive payments in respect of the principal of, or interest (including Additional Amounts) or premium, if any, on, such First Lien Notes when such payments are due from the trust referred to below;

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(2) the Issuer’s obligations with respect to the First Lien Notes concerning issuing temporary First Lien Notes, registration of First Lien Notes, mutilated, destroyed, lost or stolen First Lien Notes and the maintenance of an office or agency for payment and money for security payments held in trust;

(3) the rights, powers, trusts, duties and immunities of the Trustee, and the Issuer’s and the Guarantors’ obligations in connection therewith; and

(4) the Legal Defeasance and Covenant Defeasance provisions of the First Lien Indenture.

In addition, the Issuer may, at its option and at any time, elect to have the obligations of the Issuer and the Guarantors released with respect to certain covenants (including its obligation to make Change of Control Offers and Asset Sale Offers) that are described in the First Lien Indenture (“Covenant Defeasance”) and thereafter any omission to comply with those covenants will not constitute a Default or Event of Default with respect to the First Lien Notes. In the event Covenant Defeasance occurs, all Events of Default described under “—Events of Default and Remedies” (except those relating to payments on the First Lien Notes or, solely with respect to the Issuer, bankruptcy or insolvency events) will no longer constitute an Event of Default with respect to the First Lien Notes. Subject to the foregoing, if the Issuer exercises its Legal Defeasance option, the Security Documents and the rights of the Trustee and the holders of First Lien Notes under the Intercreditor Agreement or any Additional Intercreditor Agreement in effect at such time will terminate (other than with respect to the defeasance trust).

In order to exercise either Legal Defeasance or Covenant Defeasance:

(1) the Issuer must irrevocably deposit with the Trustee (or such other entity designated or appointed (as agent) by it for such purpose), in trust, for the benefit of the holders of the First Lien Notes, cash in pounds, non- callable UK Government Securities or a combination of cash in pounds and non-callable UK Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, or interest (including Additional Amounts and premium, if any) on the outstanding First Lien Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Issuer must specify whether the First Lien Notes are being defeased to such stated date for payment or to a particular redemption date;

(2) in the case of Legal Defeasance, the Issuer must deliver to the Trustee an opinion of counsel reasonably acceptable to the Trustee of United States counsel confirming that (a) the Issuer has received from, or there has been published by, the U.S. Internal Revenue Service a ruling or (b) since the Issue Date, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such opinion of counsel will confirm that, the holders of the outstanding First Lien Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3) in the case of Covenant Defeasance, the Issuer must deliver to the Trustee an opinion reasonably acceptable to the Trustee of United States counsel confirming that the holders of the outstanding First Lien Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4) the Issuer must deliver to the Trustee an Officer’s Certificate stating that the deposit was not made by the Issuer with the intent of preferring the holders of First Lien Notes over the other creditors of the Issuer or the Guarantors with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuer, the Guarantors or others; and

(5) the Company must deliver to the Trustee an Officer’s Certificate and an opinion of counsel, subject to customary assumptions and qualifications, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Amendment, Supplement and Waiver

Except as provided otherwise in the succeeding paragraphs, the First Lien Indenture, the First Lien Notes, any First Lien Note Guarantee, the Intercreditor Agreement or any Security Document may be amended or supplemented with the consent of the holders of at least a majority in aggregate principal amount of the First Lien Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or

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exchange offer for, First Lien Notes), and any existing Default or Event of Default or compliance with any provision of the First Lien Indenture, the First Lien Notes, the First Lien Note Guarantees, the Intercreditor Agreement or any Security Document may be waived with the consent of the holders of a majority in aggregate principal amount of the then outstanding First Lien Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, First Lien Notes); provided that, if any amendment, waiver or other modification will only affect one series of the First Lien Notes, only the consent of a majority in principal amount of the then outstanding First Lien Notes of such series shall be required.

Unless consented to by the holders of at least 90% of the aggregate principal amount of then outstanding First Lien Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, First Lien Notes), without the consent of each holder of First Lien Notes affected, an amendment, supplement or waiver may not (with respect to any First Lien Notes held by a non-consenting holder):

(1) reduce the principal amount of First Lien Notes whose holders must consent to an amendment, supplement or waiver;

(2) reduce the principal of or change the fixed maturity of any First Lien Note or alter the provisions with respect to the redemption of the First Lien Notes (other than provisions relating to the covenants described above under the caption “—Repurchase at the Option of Holders”);

(3) reduce the rate of or change the time for payment of interest, including default interest, on any First Lien Note;

(4) impair the right of any holder of First Lien Notes to receive payment of principal of and interest on such holder’s First Lien Notes on or after the due dates therefore or to institute suit for the enforcement of any payment on or with respect to such holder’s First Lien Notes or any First Lien Note Guarantee in respect thereof;

(5) waive a Default or Event of Default in the payment of principal of, or interest, Additional Amounts or premium, if any, on, the First Lien Notes (except a rescission of acceleration of the First Lien Notes by the holders of at least a majority in aggregate principal amount of the then outstanding First Lien Notes and a waiver of the Payment Default that resulted from such acceleration);

(6) make any First Lien Note payable in money other than that stated in the First Lien Notes;

(7) make any change in the provisions of the First Lien Indenture relating to waivers of past Defaults or the rights of holders of First Lien Notes to receive payments of principal of, or interest, Additional Amounts or premium, if any, on, the First Lien Notes;

(8) waive a redemption payment with respect to any First Lien Note (other than a payment required by one of the covenants described above under the caption “—Repurchase at the Option of Holders”);

(9) release all or substantially all of the Guarantors from any of their obligations under their respective First Lien Note Guarantees or the First Lien Indenture, except in accordance with the terms of the First Lien Indenture;

(10) release all or substantially all the security interests granted for the benefit of the holders of the First Lien Notes in the Collateral other than in accordance with the terms of the Security Documents, the Intercreditor Agreement, any applicable Additional Intercreditor Agreement and/or the First Lien Indenture;

(11) make any change to any provision of the First Lien Indenture or the Intercreditor Agreement (or any applicable Additional Intercreditor Agreement) affecting the ranking or priority of the First Lien Notes or the First Lien Note Guarantees, in each case, in a manner that adversely affects the rights of the holders of the First Lien Notes; or

(12) make any change in the preceding amendment and waiver provisions.

Notwithstanding the preceding, without the consent of any holder of First Lien Notes, the Company, the Issuer, the Trustee and the Security Agent (as applicable and to the extent each is a party to the document in question) may amend or supplement the First Lien Indenture, the First Lien Notes, any First Lien Note Guarantee, the Intercreditor Agreement and any Security Document:

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(1) to cure any ambiguity, defect or inconsistency;

(2) to provide for uncertificated First Lien Notes in addition to or in place of certificated First Lien Notes;

(3) to provide for the assumption of the Issuer’s or a Guarantor’s obligations to holders of First Lien Notes and First Lien Note Guarantees in the case of a merger or consolidation or sale of all or substantially all of the Issuer’s or such Guarantor’s assets, as applicable;

(4) to make any change that would provide any additional rights or benefits to the holders of First Lien Notes or that does not adversely affect the legal rights under the First Lien Indenture of any such holder in any material respect;

(5) to conform the text of the First Lien Indenture, the First Lien Note Guarantees, the First Lien Notes or any supplemental indenture to any provision of this “Description of First Lien Secured Notes” to the extent that such provision in this “Description of First Lien Secured Notes” was intended to be a verbatim recitation of a provision of the First Lien Indenture, the First Lien Note Guarantees, the First Lien Notes or any supplemental indenture;

(6) to release Collateral in accordance with the terms of the First Lien Indenture, the Intercreditor Agreement and the Security Documents or to release any First Lien Note Guarantee in accordance with the terms of the First Lien Indenture and the Intercreditor Agreement;

(7) to provide for the issuance of Additional First Lien Notes in accordance with the limitations set forth in the First Lien Indenture as of the Issue Date;

(8) to allow any Guarantor to execute a supplemental indenture and/or a First Lien Note Guarantee with respect to the First Lien Notes;

(9) to provide for uncertificated First Lien Notes in addition to or in place of certificated First Lien Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated First Lien Notes are described in Section 163(f)(2)(B) of the Code);

(10) to enter into additional or supplemental Security Documents or to add additional parties to the Intercreditor Agreement, any Additional Intercreditor Agreement or any Security Document to the extent permitted thereunder and under the First Lien Indenture; or

(11) to evidence and provide for the acceptance and appointment under the First Lien Indenture or the Intercreditor Agreement or any Additional Intercreditor Agreement of a successor Trustee or Security Agent pursuant to the requirements thereof or to provide for the accession by the Trustee or Security Agent to any Security Documents.

The consent of the holders of First Lien Notes is not necessary under the First Lien Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment.

In formulating its opinion on such matters, the Trustee shall be entitled to rely absolutely on such evidence as it deems appropriate, including an opinion of counsel and an Officer’s Certificate.

Satisfaction and Discharge

The First Lien Indenture will be discharged and will cease to be of further effect as to all First Lien Notes issued thereunder, when:

(1) either:

(a) all First Lien Notes that have been authenticated, except lost, stolen or destroyed First Lien Notes that have been replaced or paid and First Lien Notes for whose payment money has been deposited in trust and thereafter repaid to the Issuer, have been delivered to the Trustee for cancellation; or

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(b) all First Lien Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Issuer or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee (or such other entity designated or appointed (as agent) by it for such purpose) as trust funds in trust solely for the benefit of the holders, cash in pounds, non-callable UK Government Securities or a combination of cash in pounds and non-callable UK Government Securities, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the First Lien Notes not delivered to the Trustee for cancellation of principal, premium and Additional Amounts, if any, and accrued interest to the date of maturity or redemption;

(2) the Issuer or any Guarantor has paid or caused to be paid all sums payable by it under the First Lien Indenture; and

(3) the Issuer has delivered irrevocable instructions to the Trustee under the First Lien Indenture to apply the deposited money toward the payment of the First Lien Notes at maturity or on the redemption date, as the case may be.

In addition, the Company must deliver an Officer’s Certificate and an opinion of counsel to the Trustee stating that all conditions precedent in the First Lien Indenture relating to satisfaction and discharge of the First Lien Indenture have been satisfied; provided that any such counsel may rely on any Officer’s Certificate as to matters of fact (including as to compliance with the foregoing clauses (1), (2) and (3)).

Judgment Currency

Any payment on account of an amount that is payable in pounds which is made to or for the account of any holder or the Trustee in lawful currency of any other jurisdiction (the “Judgment Currency”), whether as a result of any judgment or order or the enforcement thereof or the liquidation of the Company or any Guarantor, shall constitute a discharge of the Company or the Guarantor’s obligation under the First Lien Indenture and the First Lien Notes or First Lien Note Guarantee, as the case may be, only to the extent of the amount of pounds that such holder or the Trustee, as the case may be, could purchase in the London foreign exchange markets with the amount of the Judgment Currency in accordance with normal banking procedures at the rate of exchange prevailing on the first Business Day following receipt of the payment in the Judgment Currency. If the amount of pounds that could be so purchased is less than the amount of pounds originally due to such holder or the Trustee, as the case may be, the Company and the Guarantors shall indemnify and hold harmless the holder or the Trustee, as the case may be, from and against all loss or damage arising out of, or as a result of, such deficiency. This indemnity shall constitute an obligation separate and independent from the other obligations contained in the First Lien Indenture or the First Lien Notes, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by any holder or the Trustee from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or under any judgment or order.

Concerning the Trustee

The Issuer shall deliver written notice to the Trustee within thirty (30) days of becoming aware of the occurrence of a Default or an Event of Default. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days or resign as Trustee.

The holders of a majority in aggregate principal amount of the then outstanding First Lien Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The First Lien Indenture provides that in case an Event of Default occurs and is continuing, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the First Lien Indenture at the request of any holder of First Lien Notes, unless such holder has offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

The Issuer and the Guarantors jointly and severally will indemnify the Trustee for certain claims, liabilities and expenses incurred without gross negligence, willful default or fraud on its part, arising out of or in connection with its duties.

Listing

Application has been made to list the First Lien Notes on the Official List of the Luxembourg Stock Exchange and to admit the First Lien Notes to trading on the Euro MTF Market. There can be no assurance that the application to

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list the First Lien Notes on the Official List of the Luxembourg Stock Exchange and to admit the First Lien Notes on the Euro MTF Market will be approved and settlement of the First Lien Notes is not conditioned on obtaining this listing.

Additional Information

Anyone who receives the Offering Circular may, following the Issue Date, obtain a copy of the First Lien Indenture, the form of First Lien Note, the Security Documents, or the Intercreditor Agreement without charge by contacting the Company, care of the Company secretary (+44 (0)1695 552400).

So long as the First Lien Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted for trading on the Euro MTF Market, copies, current and future, of all of the Company’s annual audited consolidated financial statements and the Company’s unaudited consolidated interim financial statements may be obtained, free of charge, during normal business hours at the offices of the Paying Agent or, to the extent and in the manner permitted by such rules, on the official website of the Luxembourg Stock Exchange (www.bourse.lu).

Consent to Jurisdiction and Service of Process

The First Lien Indenture will provide that the Issuer and, upon accession to the First Lien Indenture, each Guarantor, will appoint CT Corporation System as its agent for service of process in any suit, action or proceeding with respect to the First Lien Indenture, the First Lien Notes and the First Lien Note Guarantees brought in any U.S. federal or New York state court located in the City of New York and will submit to such jurisdiction.

Enforceability of Judgments

Since a substantial portion of the assets of the Issuer and the Guarantors are outside the United States, any judgment obtained in the United States against the Issuer or any Guarantor, may not be collectable within the United States. See “Enforcement of Civil Liabilities”.

Prescription

Claims against the Issuer or any Guarantor for the payment of principal or Additional Amounts, if any, on the First Lien Notes will be prescribed ten years after the applicable due date for payment thereof. Claims against the Issuer or any Guarantor for the payment of interest on the First Lien Notes will be prescribed six years after the applicable due date for payment of interest.

Certain Definitions

Set forth below are certain defined terms used in the First Lien Indenture. Reference is made to the First Lien Indenture for a full disclosure of all defined terms used therein, as well as any other capitalized terms used herein for which no definition is provided.

“Acquired Debt” means, with respect to any specified Person:

(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary; and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control”, as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms “controlling”, “controlled by” and “under common control with” have correlative meanings.

“Applicable Premium” means, with respect to any First Lien Note on any redemption date, the greater of:

(1) 1.0% of the principal amount of the First Lien Note; or

(2) the excess of:

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(a) the present value at such redemption date of (i) the redemption price of the First Lien Note at May 30, 2016, (such redemption price being set forth in the table appearing above under the caption “—Optional Redemption”) plus (ii) all required interest payments due on the First Lien Note through May 30, 2016 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Gilt Rate as of such redemption date plus 50 basis points; over

(b) the principal amount of the First Lien Note,

as calculated by the Issuer or on behalf of the Issuer by such Person as the Issuer shall designate. For the avoidance of doubt, calculation of the Applicable Premium shall not be a duty or obligation of the Trustee or Paying Agent.

“Asset Sale” means:

(1) the sale, lease, conveyance or other disposition of any assets by the Company or any of its Restricted Subsidiaries; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the First Lien Indenture described above under the caption “—Repurchase at the Option of Holders—Change of Control” and/or the provisions described above under the caption “—Certain Covenants—Merger, Consolidation or Sale of Assets” and not by the provisions described under the caption “—Repurchase at the Option of Holders—Asset Sales”; and

(2) the issuance of Equity Interests by any Restricted Subsidiary or the sale by the Company or any of its Restricted Subsidiaries of Equity Interests in any of the Restricted Subsidiaries (in each case, other than directors’ qualifying shares).

Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale:

(1) any single transaction or series of related transactions that involves assets having a Fair Market Value of less than £5.0 million;

(2) a transfer of assets or Equity Interests between or among the Company and any Restricted Subsidiary;

(3) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to a Restricted Subsidiary or the issuance, sale or disposition of Capital Stock, Indebtedness or other securities of an Unrestricted Subsidiary;

(4) the sale, lease or other transfer of accounts receivable, inventory or other assets in the ordinary course of business and any sale or other disposition of damaged, worn-out or obsolete assets or assets that are no longer used or useful in the conduct of the business of the Company and its Restricted Subsidiaries;

(5) licenses and sublicenses by the Company or any of its Restricted Subsidiaries in the ordinary course of business;

(6) any surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims in the ordinary course of business;

(7) the granting of Liens not prohibited by the covenant described above under the caption “—Certain Covenants—Liens”;

(8) the sale or other disposition of cash or Cash Equivalents;

(9) a Restricted Payment that does not violate the covenant described above under the caption “—Certain Covenants—Restricted Payments”, a Permitted Investment or any transaction specifically excluded from the definition of Restricted Payment;

(10) the disposition of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings and exclusive of factoring or similar arrangements;

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(11) the foreclosure, condemnation or any similar action with respect to any property or other assets or a surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind; and

(12) the disposition of assets to a Person who is providing services (the provision of which have been or are to be outsourced by the Company or any Restricted Subsidiary to such Person) related to such assets.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the U.S. Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the U.S. Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have corresponding meanings.

“Board of Directors” means:

(1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;

(2) with respect to a partnership, the board of directors of the general partner of the partnership;

(3) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and

(4) with respect to any other Person, the board or committee of such Person serving a similar function.

“Business Day” means a day other than a Saturday, Sunday or other day on which banking institutions in London, Luxembourg or New York or a place of payment under the First Lien Indenture are authorized or required by law to close.

“Capital Lease Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet (excluding the footnotes thereto) prepared in accordance with IFRS (as in effect on the Issue Date for purposes of determining whether a lease is a capital lease), and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty.

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“Capital Stock” means:

(1) in the case of a corporation, corporate stock;

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

“Cash Equivalents” means:

(1) direct obligations (or certificates representing an interest in such obligations) issued by, or unconditionally guaranteed by, the government of a member state of the Pre-Expansion European Union, the United States of America or Switzerland (including, in each case, any agency or instrumentality thereof), as the case may be, the payment of which is backed by the full faith and credit of the relevant member state of the Pre-Expansion European Union or the United States of America or Switzerland, as the case may be, and which are not callable or redeemable at the Company’s option;

(2) overnight bank deposits, time deposit accounts, certificates of deposit, banker’s acceptances and money market deposits with maturities (and similar instruments) of 12 months or less from the date of acquisition issued by a bank or trust company which is organized under, or authorized to operate as a bank or trust company under, the laws of a member state of the Pre- Expansion European Union or of the United States of America or any state thereof or Switzerland; provided that such bank or trust company has capital, surplus and undivided profits aggregating in excess of £250 million (or the foreign currency equivalent thereof as of the date of such investment) and whose long-term debt is rated “A−1” or higher by Moody’s or “A+” or higher by S&P or the equivalent rating category of another internationally recognized rating agency;

(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clauses (1) and (2) above entered into with any financial institution meeting the qualifications specified in clause (2) above;

(4) commercial paper having one of the two highest ratings obtainable from Moody’s or S&P and, in each case, maturing within one year after the date of acquisition; and

(5) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (4) of this definition.

“Change of Control” means the occurrence of any of the following:

(1) the Company becomes aware of (by way of a report or any other filing pursuant to any regulatory filing, proxy, vote, written notice or otherwise) any “person” or “group” of related persons (as such terms are used in Sections 13(d) and 14(d) of the U.S. Exchange Act as in effect on the Issue Date), other than one or more Permitted Holders, is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the U.S. Exchange Act as in effect on the Issue Date), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company;

(2) the sale, lease, transfer, conveyance or other disposition (other than by way of merger, consolidation or other business combination transaction), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to a Person, other than a Restricted Subsidiary or one or more Permitted Holders;

(3) prior to an Initial Public Offering, the Principal and its Related Parties cease to be the Beneficial Owner, directly or indirectly, of more than 50% of the issued and outstanding Voting Stock of the Company measured by voting power rather than number of shares, whether as a result of issuance of securities of the Company, any merger, amalgamation, consolidation, liquidation or dissolution of any

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Parent Guarantor or the Issuer, or any direct or indirect transfer of securities by the Principal and its Related Parties or otherwise; or

(4) the first day that the Company ceases to own, directly or indirectly, 100% of the outstanding Equity Interests of the Issuer.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Collateral” means (1) the assets of each of the Issuer and each Guarantor for which a Lien has been created to secure the First Lien Notes and the First Lien Note Guarantees pursuant to the Security Documents and (2) any other asset in which a security interest has been or will be granted pursuant to any Security Document to secure the Obligations under the First Lien Indenture, the First Lien Notes or any First Lien Note Guarantee.

“Company” means Missouri TopCo Limited and not to any of its Subsidiaries.

“Consolidated EBITDA” means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus the following to the extent deducted in calculating such Consolidated Net Income, without duplication:

(1) provision for taxes based on income or profits of such Person and its Subsidiaries which are Restricted Subsidiaries for such period; plus

(2) the Fixed Charges of such Person and its Subsidiaries which are Restricted Subsidiaries for such period; plus

(3) depreciation, amortization (including, without limitation, amortization of intangibles and deferred financing fees) and other non-cash charges and expenses (including without limitation write-downs and impairment of property, plant, equipment and intangibles and other long-lived assets and the impact of purchase accounting on the Company and its Restricted Subsidiaries for such period) of the Company and its Restricted Subsidiaries (excluding any such non-cash charge or expense to the extent that it represents an accrual of or reserve for cash charges or expenses in any future period or amortization of a prepaid cash charge or expense that was paid in a prior period) for such period; plus

(4) any fees, expenses, charges or other costs related to the issuance of any Capital Stock, any Permitted Investment, acquisition, disposition, recapitalization, listing or the incurrence of Indebtedness permitted to be incurred under the covenant described above under the caption “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” (including refinancing thereof) whether or not successful, including (i) such fees, expenses or charges related to any incurrence of Indebtedness and (ii) any amendment or other modification of any Indebtedness; plus

(5) any foreign currency translation losses (including losses related to currency remeasurements of Indebtedness) of the Company and its Restricted Subsidiaries; plus

(6) the amount of any minority interest expense consisting of subsidiary income attributable to minority equity interests of third parties in any non-wholly owned Restricted Subsidiary in such period or any prior period, except to the extent of dividends declared or paid on, or other cash payments in respect of, Equity Interests held by such parties; minus

(7) non-cash items increasing such Consolidated Net Income for such period (other than any non-cash items increasing such Consolidated Net Income pursuant to clauses (1) through (7) of the definition of Consolidated Net Income), other than the reversal of a reserve for cash charges in a future period in the ordinary course of business,

in each case, on a consolidated basis and determined in accordance with IFRS.

“Consolidated Leverage” means, with respect to any Person as of any date of determination, the sum without duplication of the total amount of Indebtedness (excluding Hedging Obligations that are permitted to be incurred by clause (8) of the definition of “Permitted Debt”) of such Person and its Restricted Subsidiaries on a consolidated basis determined in accordance with IFRS.

“Consolidated Leverage Ratio” means, with respect to any specified Person as of any date of determination, the ratio of (i) the Consolidated Leverage of such Person on such date (the “Calculation Date”) to (ii) the Consolidated

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EBITDA of such Person for the four most recent full fiscal quarters ending immediately prior to such date for which internal financial statements are available; provided, however, that for purposes of calculating the Consolidated EBITDA for such period:

(1) acquisitions and Investments that have been made by the specified Person or any of its Subsidiaries which are Restricted Subsidiaries, including through mergers or consolidations, or any Person or any of its Subsidiaries which are Restricted Subsidiaries acquired by the specified Person or any of its Subsidiaries which are Restricted Subsidiaries, and including all related financing transactions and including increases in ownership of Subsidiaries which are Restricted Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date, or that are to be made on the Calculation Date, will be given pro forma effect (as determined in good faith by a responsible accounting or financial officer of the Company and may include anticipated expense and cost reduction synergies) as if they had occurred on the first day of the four- quarter reference period;

(2) the Consolidated EBITDA attributable to discontinued operations, as determined in accordance with IFRS, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded as if such disposition occurred on the first day of the four-quarter reference period;

(3) operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date will be excluded as if such disposition occurred on the first day of the four-quarter reference period;

(4) any Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter reference period; and

(5) any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter reference period.

“Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the net income (loss) of such Person and its Subsidiaries which are Restricted Subsidiaries for such period, on a consolidated basis (excluding the net income (loss) of any Unrestricted Subsidiary), determined in accordance with IFRS and without any reduction in respect of preferred stock dividends; provided that:

(1) any goodwill or other intangible asset impairment charge will be excluded;

(2) the net income (loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or similar distributions paid in cash to the specified Person or a Restricted Subsidiary which is a Subsidiary of the Person;

(3) solely for the purpose of determining the amount available for Restricted Payments under clause(c)(i) of the first paragraph under the caption “—Certain Covenants—Restricted Payments”, any net income (loss) of any Restricted Subsidiary (other than any Guarantor) will be excluded if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company (or any Guarantor that holds the Equity Interests of such Restricted Subsidiary, as applicable) by operation of the terms of such Restricted Subsidiary’s charter or any agreement, instrument, judgment, decree, order, statute or governmental rule or regulation applicable to such Restricted Subsidiary or its shareholders (other than (a) restrictions that have been waived or otherwise released, (b) restrictions pursuant to the First Lien Notes or the First Lien Indenture, (c) contractual restrictions in effect on the Issue Date with respect to the Restricted Subsidiary and other restrictions with respect to such Restricted Subsidiary that taken as a whole, are not materially less favorable to the holders of the First Lien Notes than such restrictions in effect on the Issue Date and (d) any restriction listed under clauses (2), (3), (4), (9) or (13) of the second paragraph of the covenant described above under the caption “—Certain Covenants—Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries”) except that the Company’s equity in the net income of any such Restricted Subsidiary for such period will be included in such Consolidated Net Income up to the aggregate amount of cash or Cash Equivalents actually distributed or that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend to another Restricted Subsidiary (other than any Guarantor), to the limitation contained in this clause);

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(4) any net gain (or loss) realized upon the sale or other disposition of any asset or disposed operations of the Company or any Restricted Subsidiaries (including pursuant to any sale leaseback transaction) which is not sold or otherwise disposed of in the ordinary course of business (as determined in good faith by the Company) or in connection with the sale or disposition of securities will be excluded;

(5) (a) any extraordinary, exceptional or unusual gain, loss or charge, (b) any asset impairments charges, or the financial impacts of natural disasters (including fire, flood and storm and related events), (c) any non-cash charges or reserves in respect of any restructuring, redundancy, integration or severance or (d) any expenses, charges, reserves or other costs related to the Refinancing, in each case, will be excluded;

(6) any non-cash compensation charge or expense arising from any grant of stock, stock options or other equity-based awards will be excluded;

(7) all deferred financing costs written off and premium paid or other expenses incurred directly in connection with any early extinguishment of Indebtedness and any net loss from any write-off or forgiveness of Indebtedness will be excluded;

(8) any one time non-cash charges or any increases in amortization or depreciation resulting from purchase accounting, in each case, in relation to any acquisition of another Person or business or resulting from any reorganization or restructuring involving the Company or its Subsidiaries will be excluded;

(9) any unrealized gains or losses in respect of Hedging Obligations or any ineffectiveness recognized in earnings related to qualifying hedge transactions or the fair value or changes therein recognized in earnings for derivatives that do not qualify as hedge transactions, in each case, in respect of Hedging Obligations will be excluded;

(10) any unrealized foreign currency transaction gains or losses in respect of Indebtedness of any Person denominated in a currency other than the functional currency of such Person and any unrealized foreign exchange gains or losses relating to translation of assets and liabilities denominated in foreign currencies will be excluded;

(11) any unrealized foreign currency translation or transaction gains or losses in respect of Indebtedness or other obligations of the Company or any Restricted Subsidiary owing to the Company or any Restricted Subsidiary will be excluded; and

(12) the cumulative effect of a change in accounting principles will be excluded.

“Consolidated Total Assets” means, with respect to any specified Person at any time, the total assets of such Person and its Subsidiaries which are Restricted Subsidiaries, in each case as shown on the most recent balance sheet of such Person, determined on a consolidated basis in accordance with IFRS.

“Contingent Obligations” means, with respect to any Person, any obligation of such Person guaranteeing in any manner, whether directly or indirectly, any operating lease, dividend or other obligation that, in each case, does not constitute Indebtedness (“primary obligations”) of any other Person (the “primary obligor”), including any obligation of such Person, whether or not contingent:

(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor;

(2) to advance or supply funds:

(a) for the purchase or payment of any such primary obligation; or

(b) to maintain the working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; or

(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

“continuing” means, with respect to any Default or Event of Default, that such Default or Event of Default has not been cured or waived.

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“Credit Facility” means one or more debt facilities, arrangements, instruments, trust deeds, indentures or other facilities (including the Revolving Credit Facility or commercial paper facilities and overdraft facilities) with banks, institutions or investors providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such institutions or to special purpose entities formed to borrow from such institutions against such receivables), notes, letters of credit, bank guarantees or other Indebtedness, in each case, as amended, restated, modified, renewed, refunded, replaced, restructured, refinanced, repaid, increased or extended in whole or in part from time to time (and whether in whole or in part and whether or not with the original administrative agent and lenders or another administrative agent or agents or other banks, institutions or investors and whether provided under the original Revolving Credit Facility or one or more other credit or other agreements, indentures, financing agreements or otherwise) and, in each case, including all agreements, instruments and documents executed and delivered pursuant to or in connection with the foregoing (including any notes and letters of credit issued pursuant thereto and any Guarantee and collateral agreement, patent and trademark security agreement, mortgages or letter of credit applications and other Guarantees, pledges, agreements, security agreements and collateral documents). Without limiting the generality of the foregoing, the term “Credit Facility” shall include any agreement or instrument which otherwise qualifies as a “Credit Facility” (1) changing the maturity of any Indebtedness incurred thereunder or contemplated thereby, (2) adding Subsidiaries of the Company as additional borrowers or guarantors thereunder, (3) increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder or (4) otherwise altering the terms and conditions thereof.

“Currency Exchange Protection Agreement” means, in respect of any Person, any foreign exchange contract, currency swap agreement, currency option, cap, floor, ceiling or collar or agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in currency exchange rates as to which such Person is a party.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case, at the option of the holder of the Capital Stock), or upon the happening of any event, (1) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the six-month anniversary of the date that the First Lien Notes mature or (2) provides for, either mandatorily or at the option of the holder of the Capital Stock, the payment of dividends or distributions (other than in the form of Equity Interests that are not Disqualified Stock). Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the issuer thereof to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the issuer thereof may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption “—Certain Covenants—Restricted Payments”. For purposes hereof, the amount of Disqualified Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the First Lien Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Disqualified Stock, such Fair Market Value to be determined as set forth herein.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

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“Excluded Contribution” means Net Cash Proceeds or property or assets received by the Company as capital contributions to the equity (other than through the issuance of Disqualified Stock) of the Company after the Issue Date or from the issuance or sale (other than to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Company or any Subsidiary of the Company for the benefit of its employees to the extent funded by the Company or any Restricted Subsidiary) of Capital Stock (other than Disqualified Stock) or Subordinated Shareholder Debt of the Company, in each case, to the extent designated as an Excluded Contribution pursuant to an Officer’s Certificate of the Company substantially concurrent with the contribution.

“Fair Market Value” means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress of either party, determined in good faith by the Company’s Chief Executive Officer, Chief Financial Officer or responsible accounting or financial officer of the Company.

“Finance Subsidiary” means a wholly owned subsidiary that is formed for the purpose of borrowing funds or issuing securities and lending the proceeds to the Company or a Guarantor and that conducts no business other than as may be reasonably incidental to, or related to, the foregoing.

“First Lien Note Guarantee” means the Guarantee by each Guarantor of the Company’s obligations under the First Lien Indenture and the First Lien Notes, executed (including by way of supplemental indenture, if applicable) pursuant to the provisions of the First Lien Indenture.

“Fixed Charge Coverage Ratio” means, with respect to any specified Person for any period, the ratio of the Consolidated EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Subsidiaries which are Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases, redeems, defeases or otherwise discharges any Indebtedness or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect (as determined in good faith by a responsible accounting or financial officer of the Company), including in respect of anticipated expense and cost reduction synergies, to such incurrence, assumption, guarantee, repayment, repurchase, redemption, defeasance or other discharge of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom, as if the same had occurred at the beginning of the applicable four-quarter reference period; provided, however, that the pro forma calculation of Fixed Charges shall not give effect to (i) any Indebtedness incurred on the Calculation Date pursuant to the provisions described in the second paragraph under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” (other than with respect to the incurrence of Indebtedness pursuant to clause (13) of such paragraph) or (ii) the discharge on the Calculation Date of any Indebtedness to the extent that such discharge results from the proceeds incurred pursuant to the provisions described in the second paragraph under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”.

In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

(1) acquisitions that have been made by the specified Person or any of its Subsidiaries which are Restricted Subsidiaries, including through mergers or consolidations, or any Person or any of its Subsidiaries which are Restricted Subsidiaries acquired by the specified Person or any of its Subsidiaries which are Restricted Subsidiaries, and including all related financing transactions and including increases in ownership of Subsidiaries which are Restricted Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date, or that are to be made on the Calculation Date, will be given pro forma effect (as determined in good faith by a responsible accounting or financial officer of the Company and may include anticipated expense and cost reduction synergies) as if they had occurred on the first day of the four-quarter reference period;

(2) the Consolidated EBITDA attributable to discontinued operations, as determined in accordance with IFRS, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded;

(3) the Fixed Charges attributable to discontinued operations, as determined in accordance with IFRS, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Subsidiaries which are Restricted Subsidiaries following the Calculation Date;

(4) any Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period;

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(5) any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period; and

(6) if any Indebtedness bears a floating rate of interest, the interest expense on such Indebtedness will be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligation applicable to such Indebtedness if such Hedging Obligation has a remaining term as at the Calculation Date in excess of 12 months, or, if shorter, at least equal to the remaining term of such Indebtedness).

“Fixed Charges” means, with respect to any specified Person for any period, the sum, without duplication, of:

(1) the consolidated interest expense (net of interest income) of such Person and its Subsidiaries which are Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt discount (but not debt issuance costs, commissions, fees and expenses), non- cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark-to-market valuation of Hedging Obligations or other derivative instruments), the interest component of deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings; plus

(2) the consolidated interest expense (but excluding such interest on Subordinated Shareholder Debt) of such Person and its Subsidiaries which are Restricted Subsidiaries that was capitalized during such period; plus

(3) any interest on Indebtedness of another Person that is guaranteed by such Person or one of its Subsidiaries which are Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Subsidiaries which are Restricted Subsidiaries; plus

(4) net payments and receipts (if any) pursuant to interest rate Hedging Obligations (excluding amortization of fees) with respect to Indebtedness; plus

(5) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of any Restricted Subsidiary, other than dividends on Equity Interests payable to the Company or a Restricted Subsidiary.

“Gilt Rate” means, with respect to any redemption date, the yield to maturity as of such redemption date of UK Government Securities with a fixed maturity (as compiled by the Office for National Statistics and published in the most recent Financial Statistics that have become publicly available at least two Business Days in London prior to such redemption date (or, if such Financial Statistics are no longer published, any publicly available source of similar market data)) most nearly equal to the period from such redemption date to May 30, 2016; provided, however, that if the period from such redemption date to May 30, 2016 is less than one year, the weekly average yield on actually traded UK Government Securities denominated in pounds adjusted to a fixed maturity of one year shall be used.

“Guarantee” means a guarantee other than by endorsement of negotiable instruments for collection or deposit in the ordinary course of business, of all or any part of any Indebtedness (whether arising by agreements to keep-well, to take or pay or to maintain financial statement conditions, pledges of assets or otherwise).

“Guarantors” means, collectively, the Parent Guarantors and the Subsidiary Guarantors.

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:

(1) interest rate swap agreements, (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements;

(2) other agreements or arrangements designed to manage interest rates or interest rate risk; and

(3) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates, including Currency Exchange Protection Agreements, or commodity prices.

“Identified Assets” means (1) any intellectual property relating to the Matalan name and (2) Equity Interests in the Issuer and any of its Restricted Subsidiaries.

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“IFRS” means International Financial Reporting Standards as endorsed by the European Union and in effect on the date of any calculation or determination required hereunder.

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables):

(1) in respect of borrowed money;

(2) evidenced by bonds, notes, debentures or similar instruments for which such Person is responsible or liable;

(3) representing reimbursement obligations in respect of letters of credit, bankers’ acceptances or similar instruments (except to the extent such reimbursement obligations relate to trade payables and such obligations are satisfied within 30 days of incurrence);

(4) representing Capital Lease Obligations;

(5) representing the balance deferred and unpaid of the purchase price of any property or services due more than one year after such property is acquired or such services are completed; and

(6) representing any Hedging Obligations;

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of the specified Person prepared in accordance with IFRS. In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person.

The term “Indebtedness” shall not include:

(1) Subordinated Shareholder Debt;

(2) any lease of property which would be considered an operating lease under IFRS as in effect on the Issue Date;

(3) Contingent Obligations in the ordinary course of business;

(4) in connection with the purchase by the Company or any Restricted Subsidiary of any business, any post-closing payment adjustments to which the seller may become entitled to the extent such payment is determined by a final closing balance sheet or such payment depends on the performance of such business after the closing; or

(5) the avoidance of doubt, any contingent obligations in respect of workers’ compensation claims, early retirement or termination obligations, pension fund obligations or contributions or similar claims, obligations or contributions or social security or wage Taxes.

“Initial Public Offering” means an Public Equity Offering of common stock or other common equity interests of the Company or any Parent Holdco of the Company or any successor of the Company or any Parent Holdco of the Company (the “IPO Entity”) following which there is a Public Market and, as a result of which, the shares of common stock or other common equity interests of the IPO Entity in such offering are listed on an internationally recognized exchange or traded on an internationally recognized market.

“Intercreditor Agreement” means the intercreditor agreement, dated March 30, 2010 (as amended and restated on April 11, 2011 and as amended and restated on or around the Issue Date), between, among others, the Issuer, the Guarantors, the Trustee, the trustee on behalf of the holders of the Second Lien Notes, the Security Agent and the administrative agent of the Revolving Credit Facility on behalf of the lenders and hedge counterparties thereunder, as amended, amended and restated or otherwise modified from time to time.

“Investment Grade Status” shall occur when the First Lien Notes are rated “Baa3” or better by Moody’s and “BBB−” or better by S&P (or, if either such entity ceases to rate the First Lien Notes, the equivalent investment grade credit rating from any other “nationally recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the U.S. Exchange Act selected by the Company as a replacement agency).

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“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations, but excluding advances or extensions of credit to customers or suppliers made in the ordinary course of business), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as Investments on a balance sheet (excluding the footnotes) prepared in accordance with IFRS. If the Company or any Restricted Subsidiary sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary, the Company will be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Company’s Investments in such Restricted Subsidiary that were not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption “—Certain Covenants—Restricted Payments”. The acquisition by the Company or any Restricted Subsidiary of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investments held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of the covenant described above under the caption “—Certain Covenants—Restricted Payments”. The amount of an Investment will be determined at the time the Investment is made and without giving effect to subsequent changes in value and, to the extent applicable, shall be determined based on the equity value of such Investment.

“IPO Market Capitalization” means an amount equal to (1) the total number of issued and outstanding shares of common stock or common equity interests of the IPO Entity at the time of closing of the Initial Public Offering multiplied by (2) the price per share at which such shares of common stock or common equity interests are sold in such Initial Public Offering.

“Issue Date” means the date of issuance of the First Lien Notes (other than any Additional First Lien Notes).

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement or any lease in the nature thereof.

“Management Advances” means loans or advances made to, or Guarantees with respect to loans or advances made to, directors, officers or employees of any Company or any Restricted Subsidiary: (1) in respect of travel, entertainment or moving related expenses incurred in the ordinary course of business; (2) in respect of moving related expenses incurred in connection with any closing or consolidation of any facility or office; and (3) other loans and advances not exceeding £2.0 million in the aggregate outstanding at any time.

“Market Capitalization” means an amount equal to (1) the total number of issued and outstanding shares of common stock or common equity interests of the IPO Entity on the date of the declaration of the relevant dividend multiplied by (2) the arithmetic mean of the closing prices per share of such common stock or common equity interests for the 30 consecutive trading days immediately preceding the date of declaration of such dividend.

“Material Indebtedness” means Indebtedness with aggregate commitments and outstanding obligations at the time of initial incurrence in excess of £20.0 million (including the amount of all undrawn commitments and matured and contingent reimbursement obligations pursuant to letters of credit thereunder).

“Moody’s” means Moody’s Investors Service, Inc.

“Net Cash Proceeds” means, with respect to any issuance or sale of Capital Stock or Subordinated Shareholder Debt, the cash proceeds of such issuance or sale net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, listing fees, discounts or commissions and brokerage, consultant and other fees and charges actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result of such issuance or sale (after taking into account any available tax credit or deductions and any tax sharing arrangements).

“Net Proceeds” means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration or Cash Equivalents substantially concurrently received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale, taxes paid or payable as a result of the Asset Sale, and all distributions and other payments required to be made to minority interest holders (other than the Company or any Subsidiary) in Subsidiaries or joint ventures as a result of such Asset Sale, and any reserve for adjustment or indemnification obligations in respect of the sale price of such asset or assets established in accordance with IFRS.

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“Non-Recourse Debt” means Indebtedness as to which neither the Company nor any of its Restricted Subsidiaries (1) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) or (2) is directly or indirectly liable as a guarantor or otherwise.

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Offering Circular” means the offering circular dated May 16, 2014, relating to the sale of the First Lien Notes and the Second Lien Notes.

“Officer” means, with respect to any Person, the Chief Executive Officer and the Chief Financial Officer of such Person or a responsible accounting or financial officer of such Person.

“Officer’s Certificate” means a certificate signed by an Officer.

“Parent Guarantors” means each of the Company and Matalan Group Limited and any other Subsidiary of the Company (other than the Issuer or any Subsidiary of the Issuer) that executes a First Lien Note Guarantee in accordance with the provisions of the First Lien Indenture, and their respective successors and assigns, in each case, until the First Lien Note Guarantee of such Person has been released in accordance with the provisions of the First Lien Indenture.

“Parent Holdco” means, with respect to any Person, any Person (other than a natural person) which legally and beneficially owns more than 50% of the Voting Stock and/or Capital Stock of such Person, either directly or through one or more Subsidiaries.

“Pari Passu Indebtedness” means (1) any Indebtedness of the Issuer that is pari passu in right of payment to the First Lien Notes and (2) with respect to any First Lien Note Guarantee, Indebtedness which ranks pari passu in right of payment to such First Lien Note Guarantee.

“Permitted Business” means (1) any businesses, services or activities engaged in by the Company or any of the Restricted Subsidiaries on the Issue Date and (2) any businesses, services and activities engaged in by the Company or any of the Restricted Subsidiaries that are related, complementary, incidental, ancillary or similar to any of the foregoing or are extensions or developments of any thereof.

“Permitted Collateral Lien” means:

(1) Liens on the Collateral to secure the First Lien Notes on the Issue Date and the First Lien Note Guarantees and any Permitted Refinancing Indebtedness in respect thereof (and any Permitted Refinancing Indebtedness in respect of Permitted Refinancing Indebtedness); provided that each of the parties thereto will have entered into the Intercreditor Agreement or an Additional Intercreditor Agreement;

(2) Liens on the Collateral that are described in one or more of clauses (2), (3), (4) (provided that such Liens may rank senior to the Liens securing the First Lien Notes with respect to distributions of proceeds of any enforcement of Collateral), (5), (6), (7), (8), (9), (12), (13), (14), (15), (16), (17), (18), (20), (21), (22), (23), (24), (25), (26), (29) and (30) (but in the case of clause (30) only to the extent it relates to any of the foregoing) of the definition of “Permitted Liens”;

(3) Liens on the Collateral to secure any Indebtedness (including any Additional First Lien Notes) that are permitted to be incurred under (a) the first paragraph of the covenant described under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” or clause (13) of the second paragraph of the covenant described under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”, (b) clause (17) of the second paragraph of the covenant described under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” and (c) any Permitted Refinancing Indebtedness in respect of Indebtedness specified in clause (a) above (and any Permitted Refinancing Indebtedness in respect of Permitted Refinancing Indebtedness); provided that, in the case of clause (a) or (b) only, on the date of such incurrence after giving pro forma effect thereto and the application of proceeds therefrom, the Senior Secured Leverage Ratio of the Company would have been no more than 3.5 to 1.0;

(4) Liens on the Collateral to secure any Indebtedness that is permitted to be incurred under clauses (1), (5) (to the extent the Indebtedness refinanced was secured by Liens on the Collateral on a pari passu or priority basis to the First Lien Notes or the First Lien Note Guarantees), (8), (9) (in the case of clause (9), to the extent such Guarantee is in respect of Indebtedness otherwise permitted to be secured

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and specified in clauses (3) and (4) of the definition of “Permitted Collateral Liens”) and (19) of the second paragraph of the covenant described under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” and any Permitted Refinancing Indebtedness in respect of any of the foregoing (and any Permitted Refinancing Indebtedness in respect of Permitted Refinancing Indebtedness); and

(5) any Lien securing Indebtedness on a basis junior to the First Lien Notes; provided that each of the parties in respect thereto will have entered into the Intercreditor Agreement or an Additional Intercreditor Agreement as an Additional Second Lien Representative (as defined in the Intercreditor Agreement) or an Additional Second Lien Creditor (as defined in the Intercreditor Agreement);

provided, however, in the case of clauses (3) and (4), that:

(A) any such Indebtedness is subject to the Intercreditor Agreement or to an Additional Intercreditor Agreement; and

(B) the Collateral securing such Indebtedness shall also secure the First Lien Notes or the First Lien Note Guarantees on a senior or pari passu basis; provided that with respect to Indebtedness that is incurred under clauses (1) and (8) of the second paragraph of the covenant described under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”, such Indebtedness may receive priority with respect to distributions of proceeds of any enforcement of Collateral.

“Permitted Holders” means, collectively, (1) the Principal and Related Parties and (2) any Person who is acting as an underwriter in connection with a public or private offering of Capital Stock of any Parent Holdco of the Company or the Company, acting in such capacity. Any person or group whose acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of the First Lien Indenture will thereafter, together with its Affiliates, constitute an additional Permitted Holder.

“Permitted Investments” means:

(1) any Investment in the Company or in a Restricted Subsidiary;

(2) any Investment in cash and Cash Equivalents;

(3) any Investment by the Company or any Restricted Subsidiary in a Person, if as a result of such Investment:

(a) such Person becomes a Restricted Subsidiary; or

(b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary;

(4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption “—Repurchase at the Option of Holders—Asset Sales”;

(5) any acquisition of assets or Capital Stock solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company or Subordinated Shareholder Debt;

(6) any Investments received in compromise or resolution of (a) obligations of trade creditors or customers that were incurred in the ordinary course of business of the Company or any of its Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (b) litigation, arbitration or other disputes;

(7) Investments in receivables owing to the Company or any Restricted Subsidiary created or acquired in the ordinary course of business;

(8) Investments represented by Hedging Obligations, which obligations are permitted by clause (8) of the second paragraph of the covenant entitled “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”;

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(9) Investments in the First Lien Notes and any other Indebtedness of the Company or any Restricted Subsidiary;

(10) any Guarantee of Indebtedness permitted to be incurred by the covenant described above under the caption “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”;

(11) any Investment existing on, or made pursuant to binding commitments existing on, the Issue Date and any Investment consisting of an extension, modification or renewal of any Investment existing on, or made pursuant to a binding commitment existing on, the Issue Date; provided that the amount of any such Investment may be increased (a) as required by the terms of such Investment as in existence on the Issue Date or (b) as otherwise permitted under the First Lien Indenture;

(12) Investments acquired after the Issue Date as a result of the acquisition by the Company or any Restricted Subsidiary of another Person, including by way of a merger, amalgamation or consolidation with or into the Company or any of its Restricted Subsidiaries in a transaction that is not prohibited by the covenant described above under the caption “—Certain Covenants—Merger, Consolidation or Sale of Assets” after the Issue Date to the extent that such Investments were not made in contemplation of such acquisition, merger, amalgamation or consolidation and were in existence on the date of such acquisition, merger, amalgamation or consolidation;


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(14) Investments in joint ventures of the Company or any of its Restricted Subsidiaries that, together with any Indebtedness incurred pursuant to clause (18) of the definition of “Permitted Debt” does not exceed £10.0 million in the aggregate at any one time outstanding; provided, however, that if any Investment made pursuant to this clause (14) is made in any Person that is not a Restricted Subsidiary of the Company at the date of the making of such Investment and such Person becomes a Restricted Subsidiary of the Company after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) or (3) above and shall cease to have been made pursuant to this clause (14) for so long as such Person continues to be a Restricted Subsidiary; and

(15) other Investments in any Person having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (15) that are at the time outstanding not to exceed the greater of £10.0 million and 2.5% of Consolidated Total Assets of the Company; provided that if an Investment is made pursuant to this clause in a Person that is not a Restricted Subsidiary and such Person subsequently becomes a Restricted Subsidiary or is subsequently designated a Restricted Subsidiary pursuant to the covenant described above under the caption “—Certain Covenants—Restricted Payments”, such Investment shall thereafter be deemed to have been made pursuant to clause (1) or (3) of the definition of “Permitted Investments” and not this clause (15).

“Permitted Liens” means:

(1) Liens in favor of the Company or any of the Restricted Subsidiaries;

(2) Liens on property (including Capital Stock) of a Person existing at the time such Person becomes a Restricted Subsidiary or is merged with or into or consolidated with the Company or any Restricted Subsidiary; provided that such Liens were in existence prior to the contemplation of such Person becoming a Restricted Subsidiary or such merger or consolidation, were not incurred in contemplation thereof and do not extend to any assets other than those of the Person that becomes a Restricted Subsidiary or is merged with or into or consolidated with the Company or any Restricted Subsidiary;

(3) Liens to secure the performance of statutory obligations, trade contracts, insurance, surety or appeal bonds, workers compensation obligations, leases, performance bonds or other obligations of a like nature incurred in the ordinary course of business (including Liens to secure letters of credit issued to assure payment of such obligations);

(4) Liens to secure Indebtedness permitted by clause (4) of the second paragraph of the covenant entitled “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” covering only the assets acquired with or financed by such Indebtedness;

(5) Liens existing on the Issue Date after giving pro forma effect to the use of proceeds of the First Lien Notes and Second Lien Notes as set forth in the Offering Circular;

(6) Liens for taxes, assessments or governmental charges or claims that (a) are not yet due and payable or (b) are being contested in good faith by appropriate proceedings;

(7) Liens imposed by law, such as carriers’, warehousemen’s, landlord’s and mechanics’ Liens, in each case, incurred in the ordinary course of business;

(8) survey exceptions, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

(9) Liens created for the benefit of (or to secure) the First Lien Notes (or the First Lien Note Guarantees);

(10) Liens securing Indebtedness under Hedging Obligations, which obligations are permitted by clause (8) of the second paragraph of the covenant described above under the caption “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”;

(11) Liens to secure any Permitted Refinancing Indebtedness (excluding Liens to secure Permitted Refinancing Indebtedness initially secured pursuant to clause (19) of this definition) permitted to be incurred under the First Lien Indenture; provided, however, that:

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(a) the new Lien is limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements and accessions to such property or proceeds or distributions thereof); and

(b) the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the Indebtedness renewed, refunded, refinanced, replaced, defeased or discharged with such Permitted Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge;

(12) Liens on insurance policies and proceeds thereof, or other deposits, to secure insurance premium financings;

(13) filing of Uniform Commercial Code financing statements under U.S. state law (or similar filings under applicable jurisdiction) in connection with operating leases in the ordinary course of business;

(14) bankers’ Liens, rights of setoff or similar rights and remedies as to deposit accounts, Liens arising out of judgments or awards not constituting an Event of Default and notices of lis pendens and associated rights related to litigation being contested in good faith by appropriate proceedings;

(15) Liens on cash, Cash Equivalents or other property arising in connection with the defeasance, discharge or redemption of Indebtedness;

(16) Liens on specific items of inventory or other goods (and the proceeds thereof) of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created in the ordinary course of business for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(17) leases, licenses, subleases and sublicenses of assets in the ordinary course of business;

(18) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of assets entered into in the ordinary course of business;

(19) Liens incurred by the Company or any Restricted Subsidiary to secure Indebtedness in an aggregate amount not to exceed £20.0 million at any one time outstanding;

(20) (a) mortgages, liens, security interests, restrictions, encumbrances or any other matters of record that have been placed by any developer, landlord or other third party on property over which the Company or any Restricted Subsidiary has easement rights or on any real property leased by the Company or any Restricted Subsidiary and subordination or similar agreements relating thereto and (b) any condemnation or eminent domain proceedings or compulsory purchase order affecting real property;

(21) Liens on property or assets under construction (and related rights) in favor of a contractor or developer or arising from progress or partial payments by a third party relating to such property or assets;

(22) Liens securing or arising by reason of any netting or set-off arrangement entered into in the ordinary course of banking or other trading activities;

(23) Liens (including put and call arrangements) on Capital Stock or other securities of any Unrestricted Subsidiary that secure Indebtedness of such Unrestricted Subsidiary;

(24) pledges of goods, the related documents of title and/or other related documents arising or created in the ordinary course of the Company or any Restricted Subsidiary’s business or operations as Liens only for Indebtedness to a bank or financial institution directly relating to the goods or documents on or over which the pledge exists;

(25) Liens over cash paid into an escrow account pursuant to any purchase price retention arrangement as part of any permitted disposal by the Company or a Restricted Subsidiary on condition that the cash paid into such escrow account in relation to a disposal does not represent more than 15% of the net proceeds of such disposal;

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(26) limited recourse Liens in respect of the ownership interests in, or assets owned by, any joint ventures which are not Restricted Subsidiaries securing obligations of such joint ventures;

(27) Liens on any proceeds loan made by the Company or any Restricted Subsidiary in connection with any future incurrence of Indebtedness permitted under the First Lien Indenture and securing that Indebtedness;

(28) Liens created on any asset of the Company or a Restricted Subsidiary established to hold assets of any stock option plan or any other management or employee benefit or incentive plan or unit trust of the Company or a Restricted Subsidiary securing any loan to finance the acquisition of such assets;

(29) Liens over treasury stock of the Company or a Restricted Subsidiary purchased or otherwise acquired for value by the Company or such Restricted Subsidiary pursuant to a stock buy-back scheme or other similar plan or arrangement; and

(30) any extension, renewal, refinancing or replacement, in whole or in part, of any Lien described in the foregoing clauses (1) through (29) (but excluding clauses (4) and (19)); provided that any such Lien is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Lien arose, could secure) the Indebtedness being refinanced.

“Permitted Parent Payments” means, without duplication as to amounts, payments to any parent company of the Company to permit such entity to pay reasonable franchise taxes and other amounts required to maintain the corporate existence, accounting, legal and administrative expenses of such entity; provided that the aggregate amount of such Permitted Parent Payments does not exceed £1.0 million in any 12-month period.

“Permitted Refinancing Indebtedness” means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, exchange, defease or discharge other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness (other than any proceeds loan)); provided that:

(1) the aggregate principal amount (or accreted value, if applicable), or if issued with original issue discount, aggregate issue price) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable, or if issued with original issue discount, aggregate issue price) of the Indebtedness renewed, refunded, refinanced, replaced, exchanged, defeased or discharged (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith);

(2) such Permitted Refinancing Indebtedness has (a) a final maturity date that is either (i) no earlier than the final maturity date of the Indebtedness being renewed, refunded, refinanced, replaced, exchanged, defeased or discharged or (ii) after the final maturity date of the First Lien Notes and (b) has a Weighted Average Life to Maturity that is equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged;

(3) if the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged is expressly, contractually subordinated in right of payment to the First Lien Notes or the First Lien Note Guarantees, as the case may be, such Permitted Refinancing Indebtedness is subordinated in right of payment to the First Lien Notes or the First Lien Note Guarantees, as the case may be, on terms at least as favorable to the holders of First Lien Notes or the First Lien Note Guarantees, as the case may be, as those contained in the documentation governing the Indebtedness being renewed, refunded, refinanced, replaced, exchanged, defeased or discharged; and

(4) if the Company or any Guarantor was the obligor on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged, such Indebtedness is incurred either by the Company, a Finance Subsidiary or by a Guarantor.

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“pounds” means British pounds sterling, the lawful currency of the United Kingdom.

“Pre-Expansion European Union” means the European Union as of January 1, 2004, including the countries of Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal,

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Spain, Sweden and the United Kingdom, but not including any country which became or becomes a member of the European Union after January 1, 2004.

“Principal” means John Hargreaves.

“Public Debt” means any Indebtedness consisting of bonds, debentures, notes or other similar debt securities issued in (1) a public offering registered under the Securities Act or (2) a private placement to institutional investors that is underwritten for resale in accordance with Rule 144A or Regulation S under the Securities Act, whether or not it includes registration rights entitling the holders of such debt securities to registration thereof with the SEC for public resale.

“Public Equity Offering” means, with respect to any Person, a bona fide underwritten primary public offering of the ordinary shares or common equity of such Person, either:

(1) pursuant to a flotation on the London Stock Exchange or any other nationally recognized stock exchange or listing authority in a member state of the Pre-Expansion European Union; or

(2) pursuant to an effective registration statement under the U.S. Securities Act (other than a registration statement on Form S-8 or otherwise relating to Equity Interests issued or issuable under any employee benefit plan).

“Public Market” means any time after:

(1) a Public Equity Offering has been consummated; and

(2) shares of common stock or other common equity interests of the IPO Entity having a market value of at least £100 million on the date of such Public Equity Offering have been distributed pursuant to such Public Equity Offering.

“Refinancing” has the meaning given to such term in the Offering Circular.

“Related Parties” means:

(1) the parents or spouse of any Principal, the parents of any Principal’s spouse and any of any Principal’s, his/her spouse’s or their parents’ direct descendants; or

(2) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, shareholders, partners, members, owners or Persons beneficially holding a 50.1% or more controlling interest of which consist of any one or more Principal and/or such other Persons referred to in the immediately preceding clause (1) (including Abacus Trust Company Limited and Colyb Limited).

“Representative” means any trustee, agent or representative (if any) for an issue of Indebtedness or the provider of Indebtedness (if provided on a bilateral basis), as the case may be.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Subsidiary” means any Subsidiary of the Company that is not an Unrestricted Subsidiary.

“Revolving Credit Facility” means the revolving credit facility agreement entered into on or prior to the Issue Date among the Issuer, as borrower, certain of the Company’s Subsidiaries, as guarantors, and certain financial institutions, with aggregate availability on the Issue Date of up to £50.0 million, as amended, restated, supplemented, waived, replaced (whether or not upon termination, and whether with the original lenders or otherwise), restructured, repaid, refunded, refinanced or otherwise modified from time to time, including any agreement, indenture, trust deed or other facility providing for revolving credit loans, term loans, receivables financing, letters of credit, bonds, notes debentures or other corporate debt instruments or other Indebtedness, in each case, extending the maturity thereof, refinancing, replacing or otherwise restructuring all or any portion of the Indebtedness under such agreement or agreements (including any indenture, trust deed or credit facility) or any successor or replacement agreement or agreements (including any indenture, trust deed or credit facility) or increasing the amount loaned thereunder (subject to compliance with the covenant described under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”) or altering the maturity thereof.

“S&P” means Standard & Poor’s Ratings Group.

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“SEC” means the United States Securities and Exchange Commission.

“Second Lien Notes” means the £150.0 million aggregate principal amount of the 87/8% Second Lien Secured Notes due 2020 to be issued by the Issuer on or about the Issue Date.

“Securities Act” means the United States Securities Act of 1933, as amended.

“Security Agent” means Lloyds Bank plc, as security agent pursuant to the Intercreditor Agreement, or any successor or replacement security agent acting in such capacity.

“Security Documents” means the debenture, dated on or around the Issue Date, among the Company and certain of its Subsidiaries, as chargors, and the Security Agent, and any other document that provides for a Lien over any Collateral for the benefit of the holders of the First Lien Notes, in each case, as amended, supplemented or restated from time to time.

“Senior Secured Debt” means, with respect to any Person as of any date of determination, any Indebtedness of such Person and its Restricted Subsidiaries that (1) is secured by a Permitted Collateral Lien pursuant to clauses (1), (2) (other than with respect to clause (4) of the definition of “Permitted Liens”), (3) and (4) of the definition thereof determined on a consolidated basis in accordance with IFRS (other than any Indebtedness secured by such a Lien on a junior priority basis) or (2) is incurred by a Restricted Subsidiary that is not the Issuer or a Guarantor pursuant to clause (1), (13)(y) (including any Permitted Refinancing Indebtedness in respect thereof incurred by a Restricted Subsidiary that is not the Issuer or a Guarantor) or (19) of the second paragraph of the covenant entitled “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”.

“Senior Secured Leverage” means the sum of aggregate amount of Senior Secured Debt of the Company and its Restricted Subsidiaries (excluding Hedging Obligations that are permitted to be incurred by clause (8) of the definition of “Permitted Debt”).

“Senior Secured Leverage Ratio” means the Consolidated Leverage Ratio with respect to any specified Person as of any date of determination, but calculated by replacing “Consolidated Leverage” with “Senior Secured Leverage” in clause (i) of the definition of “Consolidated Leverage Ratio”.

“Significant Subsidiary” means, at the date of determination, any Restricted Subsidiary that together with its Subsidiaries which are Restricted Subsidiaries (1) for the most recent fiscal year, accounted for more than 10% of the consolidated revenues of the Company or (2) as of the end of the most recent fiscal year, was the owner of more than 10% of the consolidated assets of the Company.

“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness as of the Issue Date, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

“Subordinated Shareholder Debt” means Indebtedness of the Company held by one or more of its shareholders; provided that such Indebtedness (and any security into which such Indebtedness is convertible or for which it is exchangeable at the option of the holder) (1) does not mature or require any amortization, redemption or other repayment of principal or any sinking fund payment prior to the first anniversary of the Stated Maturity of the First Lien Notes, (2) does not pay cash interest, (3) contains no change of control provisions and has no right to declare a default or event of default or take any enforcement action prior to the first anniversary of the Stated Maturity of the First Lien Notes, (4) is unsecured and (5) is fully subordinated and junior in right of payment to the First Lien Notes.

“Subsidiary” means, with respect to any specified Person:

(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(2) any partnership or limited liability company of which (a) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general and limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof, whether in the form of membership, general,

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special or limited partnership interests or otherwise, and (b) such Person or any Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

“Subsidiary Guarantors” means each of (1) Matalan Limited, (2) Matalan Retail Limited, (3) Matalan Holding Company Limited and (4) any other Subsidiary of the Company that executes a First Lien Note Guarantee in accordance with the provisions of the First Lien Indenture, and their respective successors and assigns, in each case, until the First Lien Note Guarantee of such Person has been released in accordance with the provisions of the First Lien Indenture.

“Tax” means any tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and any other additions thereto, and, for the avoidance of doubt, including any withholding or deduction for or on account of Tax).

“Taxes” and “Taxation” shall be construed to have corresponding meanings.

“UK Government Securities” means direct obligations of, or obligations guaranteed by, the United Kingdom, and the payment for which the United Kingdom pledges its full faith and credit.

“Unrestricted Subsidiary” means any Subsidiary of the Company (other than the Issuer or any Parent Guarantor or any successor to the Issuer or any Parent Guarantor) that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors but only to the extent that such Subsidiary:

(1) has no Indebtedness other than Non-Recourse Debt;

(2) except as permitted by the covenant described above under the caption “—Certain Covenants—Transactions with Affiliates”, is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; and

(3) is a Person with respect to which neither the Company nor any Restricted Subsidiary has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results.

“Voting Stock” of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one- twelfth) that will elapse between such date and the making of such payment; by

(2) the then outstanding principal amounts of such Indebtedness.

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DESCRIPTION OF SECOND LIEN SECURED NOTES

Matalan Finance plc (the “Issuer”) will issue the Second Lien Notes under an indenture (the “Second Lien

Indenture”) between, among others, the Issuer, Deutsche Trustee Limited Company, as the trustee (the “Trustee”), and Lloyds Bank plc, as security agent (the “Security Agent”), in a private transaction that is not subject to the registration requirements of the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”). Unless the context requires otherwise, references in this “Description of Second Lien Secured Notes” to the Second Lien Notes include the Second Lien Notes issued on the Issue Date and any Additional Second Lien Notes (as defined below) that are issued. The terms of the Second Lien Notes include those set forth in the Second Lien Indenture. The Second Lien Indenture will not incorporate or include any of, or otherwise be subject to, the provisions of the U.S. Trust Indenture Act of 1939, as amended.

The following description is a summary of the material provisions of the Second Lien Indenture and the Second Lien Notes and refers to the Intercreditor Agreement and the Security Documents. This does not restate those agreements in their entirety. We urge you to read the Second Lien Indenture, the Second Lien Notes, the Intercreditor Agreement and the Security Documents because they, and not this description, define your rights as holders of the Second Lien Notes. Copies of the Second Lien Indenture, the form of Second Lien Note, the Security Documents and the Intercreditor Agreement are available as set forth below under “—Additional Information”.

Certain defined terms used in this description but not defined below under “—Certain Definitions” have the meanings assigned to them in the Second Lien Indenture. You can find the definitions of certain terms used in this description under the subheading “—Certain Definitions”. In this description, the term “Company” refers only to Missouri TopCo Limited and not to any of its Subsidiaries and the term “Issuer” refers only to Matalan Finance plc and not to any of its Subsidiaries.

The registered holder of a Second Lien Note will be treated as the owner of it for all purposes. Only registered holders will have rights under the Second Lien Indenture.

Brief Description of the Second Lien Notes and the Second Lien Note Guarantees

The Second Lien Notes:

• will be senior obligations of the Issuer;

• will be secured by second-priority Liens over the Collateral, but in the event of enforcement of the Collateral, the holders of the Second Lien Notes will receive proceeds from the Collateral only after the lenders under the Revolving Credit Facility, the counterparties under certain Hedging Obligations, the holders of the First Lien Notes and creditors under any other Indebtedness secured by a First Priority Lien have been repaid in full;

• will be pari passu in right of payment with all existing and future Indebtedness of the Issuer that is not expressly subordinated to the Second Lien Notes, including Indebtedness under the Revolving Credit Facility and the First Lien Notes;

• will be senior in right of payment to any and all future obligations of the Issuer that are expressly subordinated in right of payment to the Second Lien Notes, if any;

• will be unconditionally guaranteed by the Guarantors;

• will be effectively subordinated to the Issuer’s existing and future secured Indebtedness that is secured by property or assets that do not secure the Second Lien Notes or secure the Second Lien Notes on a junior basis, to the extent of the value of such property and assets securing such Indebtedness; and

• will be structurally subordinated to all obligations of the Issuer’s subsidiaries that are not Guarantors.

The Second Lien Note Guarantees

The Second Lien Notes will initially be guaranteed by Missouri TopCo Limited, Matalan Group Limited, Matalan Limited, Matalan Retail Limited and Matalan Holding Company Limited, each of which are guarantors of the First Lien Notes and obligors under the Revolving Credit Facility. Each Second Lien Note Guarantee:

• will be a general obligation of that Guarantor;

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• will be secured by second-priority Liens over the Collateral, but in the event of enforcement of the Collateral, the holders of the Second Lien Notes will receive proceeds from the Collateral only after the lenders under the Revolving Credit Facility, the counterparties under certain Hedging Obligations, the holders of the First Lien Notes and creditors under any other Indebtedness secured by a First Priority Lien have been repaid in full;

• will be pari passu in right of payment with all existing and future senior Indebtedness of such Guarantor that is not expressly subordinated in right of payment to its Second Lien Note Guarantee, including its obligations under the Revolving Credit Facility and its guarantee of the First Lien Notes;

• will be senior to all future Indebtedness of such Guarantor, if any, that is expressly subordinated in right of payment to its Second Lien Note Guarantee;

• will be effectively subordinated to such Guarantor’s existing and future secured Indebtedness that is secured by property or assets that do not secure its Second Lien Note Guarantee or secure its Second Lien Note Guarantee on a junior basis, to the extent of the value of such property and assets securing such Indebtedness; and

• will be structurally subordinated to all existing and future Indebtedness of any Guarantor’s subsidiaries that do not guarantee the Second Lien Notes.

Not all of the Company’s Subsidiaries will guarantee the Second Lien Notes. However, as of the Issue Date each of the Company’s subsidiaries that guarantee the First Lien Notes or are an obligor under the Revolving Credit Facility (other than the Issuer) will also guarantee the Second Lien Notes. In the event of a bankruptcy, liquidation or reorganization of any of these non-guarantor Subsidiaries, the non-guarantor Subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to the Issuer or a Guarantor. During the 53 weeks ended March 1, 2014, the Issuer and the Guarantors, collectively, represented 100% of our total revenue and as of March 1, 2014, represented 98% of our total assets, in each case, on a consolidated basis.

The operations of the Issuer are conducted through its Subsidiaries and, therefore the Issuer depends on the cash flow of its Subsidiaries to meet its obligations, including its obligations under the Second Lien Notes. The Second Lien Notes will be effectively subordinated in right of payment to all Indebtedness and other liabilities and commitments (including trade payables and lease obligations) of the Issuer’s non-guarantor Subsidiaries. Any right of the Issuer or any Guarantor to receive assets of any of its non-guarantor Subsidiaries upon that non-guarantor Subsidiary’s liquidation or reorganization (and the consequent right of the holders of the Second Lien Notes to participate in those assets) will be effectively subordinated to the claims of that non-guarantor Subsidiary’s creditors, except to the extent that the Issuer or such Guarantor is itself recognized as a creditor of the non- guarantor Subsidiary, in which case the claims of the Issuer or such Guarantor, as the case may be, would still be subordinated in right of payment to any security in the assets of the non-guarantor Subsidiary and any Indebtedness of the non-guarantor Subsidiary senior to that held by the Issuer or such Guarantor. As of March 1, 2014, after giving effect to the Refinancing, on a consolidated basis, the non-guarantor Subsidiaries of the Company would not have had any third-party debt outstanding.

As of the Issue Date, all of the Company’s Subsidiaries will be “Restricted Subsidiaries” for the purposes of the Second Lien Indenture. However, under the circumstances described below under the caption “—Certain Covenants—Designation of Restricted and Unrestricted Subsidiaries”, the Company will be permitted to designate Restricted Subsidiaries as “Unrestricted Subsidiaries” other than the Issuer and any Parent Holdco of the Issuer. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants contained in the Second Lien Indenture. The Company’s Unrestricted Subsidiaries will not guarantee the Second Lien Notes.

Principal, Maturity and Interest

The Issuer will issue £150.0 million in aggregate principal amount of Second Lien Notes in this offering. The Issuer may issue additional Second Lien Notes under the Second Lien Indenture from time to time after this offering (“Additional Second Lien Notes”). The Second Lien Notes may be issued in one or more series under the Second Lien Indenture. Any issuance of Additional Second Lien Notes is subject to all of the covenants in the Second Lien Indenture, including the covenant described below under the caption “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”. The Second Lien Notes and any Additional Second Lien Notes subsequently issued under the Second Lien Indenture will be treated as a single class for all purposes under the Second Lien Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase, except as otherwise provided in the Second Lien Indenture. The Issuer will issue Second Lien Notes in denominations of £100,000 and integral multiples of £1,000 in excess thereof. The Second Lien Notes will mature on June 1, 2020.

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Interest on the Second Lien Notes will accrue at the rate of 8.875% per annum. Interest on the Second Lien Notes will be payable semi-annually in arrears on May 30 and November 30 commencing on November 30, 2014. Interest on overdue principal and interest, including Additional Amounts (as defined herein), if any, will accrue at a rate that is 1% per annum higher than the interest rate on the Second Lien Notes. The Issuer will make each interest payment to the holders of record on the immediately preceding May 15 and November 15.

Interest on the Second Lien Notes will accrue from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

Paying Agent and Registrar for the Second Lien Notes

The Issuer will maintain one or more paying agents (each, a “Paying Agent”) for the Second Lien Notes in the City of London. The Issuer will maintain a Paying Agent in a member state of the European Union that will not be obliged to withhold or deduct tax pursuant to the European Union Directive 2003/48/EC (as amended from time to time) or any other directive implementing the conclusions of the ECOFIN Council meeting of 26 and 27 November 2000 on the taxation of savings income, or any law implementing, or complying with or introduced in order to conform to, such directive. The initial Paying Agent will be Deutsche Bank AG, London Branch in London.

The Issuer will also maintain one or more registrars (each, a “Registrar”). The initial Registrar will be Deutsche Bank Luxembourg, S.A. The initial transfer agent will be Deutsche Bank Luxembourg, S.A. The Registrar will maintain a register reflecting ownership of Definitive Registered Notes (as defined herein) outstanding from time to time and will make payments on and facilitate transfer of Definitive Registered Notes on the behalf of the Issuer.

The Issuer may change the Paying Agents, the Registrars or the transfer agents without prior notice to the holders. For so long as the Second Lien Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted for trading on the Euro MTF Market, the Issuer will publish a notice of any change of Paying Agent, Registrar or transfer agent in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger

Wort) or, to the extent and in the manner permitted by such rules, post such notice on the official website of the Luxembourg Stock Exchange (www.bourse.lu).

Additional Amounts

All payments made by or on behalf of the Issuer under or with respect to the Second Lien Notes (whether or not in the form of Definitive Registered Notes) or any of the Guarantors with respect to any Second Lien Note Guarantee will be made free and clear of and without withholding or deduction for, or on account of, any present or future Taxes unless the withholding or deduction of such Taxes is then required by law. If any deduction or withholding for, or on account of, any Taxes imposed or levied by or on behalf of (1) any jurisdiction in which the Issuer or any Guarantor is then incorporated or organized, engaged in business for tax purposes or resident for tax purposes or any political subdivision thereof or therein or (2) any jurisdiction from or through which payment is made by or on behalf of the Issuer or any Guarantor (including the jurisdiction of any Paying Agent) or any political subdivision thereof or therein (each, a “Tax Jurisdiction”) will at any time be required to be made from any payments made by the Issuer under or with respect to the Second Lien Notes or any of the Guarantors under or with respect to any Second Lien Note Guarantee, including payments of principal, redemption price, interest or premium, the Issuer or the relevant Guarantor, as applicable, will pay such additional amounts (the “Additional Amounts”) as may be necessary in order that the net amounts received in respect of such payments by each holder after such withholding or deduction (including any such withholding or deduction from such Additional Amounts) will equal the respective amounts that would have been received in respect of such payments in the absence of such withholding or deduction; provided, however, that no Additional Amounts will be payable with respect to:

(1) any Taxes, to the extent such Taxes would not have been imposed but for the existence of any actual or deemed present or former connection between the holder or the beneficial owner of the Second Lien Notes and the relevant Tax Jurisdiction (including being a resident of such jurisdiction for Tax purposes), other than the holding of such Second Lien Note, the enforcement of rights under such Second Lien Note or under a Second Lien Note Guarantee or the receipt of any payments in respect of such Second Lien Note or a Second Lien Note Guarantee;

(2) any Taxes, to the extent such Taxes were imposed as a result of the presentation of a Second Lien Note for payment (where presentation is required) more than 30 days after the relevant payment is first made available for payment to the holder (except to the extent that the holder would have been entitled to Additional Amounts had the Second Lien Note been presented on the last day of such 30 day period);

(3) any estate, inheritance, gift, sales, transfer or similar Taxes;

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(4) any Taxes withheld, deducted or imposed on a payment to an individual that are required to be made pursuant to European Council Directive 2003/48/EC or any other directive implementing the conclusions of the ECOFIN Council meeting of November 26 and 27, 2000 on the taxation of savings income, or any law implementing or complying with or introduced in order to conform to, such directive;

(5) any Taxes imposed on or with respect to a payment made to a holder or beneficial owner of Second Lien Notes who would have been able to avoid such withholding or deduction by presenting the relevant Second Lien Note to another Paying Agent in a member state of the European Union;

(6) any Taxes payable other than by deduction or withholding from payments under, or with respect to, the Second Lien Notes or with respect to any Second Lien Note Guarantee;

(7) any Taxes to the extent such Taxes are imposed or withheld by reason of the failure of the holder or beneficial owner of Second Lien Notes to comply with any reasonable written request of the Issuer addressed to the holder or beneficial owner and made at least 60 days before any such withholding or deduction would be payable to satisfy any certification, identification, information or other reporting requirements, whether required by statute, treaty, regulation or administrative practice of a Tax Jurisdiction, as a precondition to exemption from, or reduction in the rate of deduction or withholding of, Taxes imposed by the Tax Jurisdiction (including, without limitation, a certification that the holder or beneficial owner is not resident in the Tax Jurisdiction), but in each case, only to the extent the holder or beneficial owner is legally eligible to provide such certification or documentation;

(8) any Taxes withheld or deducted pursuant to Sections 1471 through 1474 of the Code, as in effect as of the Issue Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future Treasury regulations issued thereunder, any other official interpretations thereof or any intergovernmental agreements (including any law implementing an intergovernmental agreement) implementing the foregoing (“FATCA”), except to the extent that such Taxes result from a failure of any Paying Agent to comply with FATCA; or

(9) any combination of items (1) through (8) above.

In addition to the foregoing, the Issuer and the Guarantors will also pay and indemnify the holder for any present or future stamp, issue, registration, court or documentary Taxes, or any other excise or property Taxes, charges or similar levies (including penalties, interest and any other reasonable expenses related thereto) which are levied by any Tax Jurisdiction on the execution, delivery, issuance, or registration of any of the Second Lien Notes, the Second Lien Indenture, any Second Lien Note Guarantee or any other document or instrument referred to therein, or the receipt of any payments with respect thereto, or enforcement of, any of the Second Lien Notes or any Second Lien Note Guarantee (limited, solely in the case of taxes attributable to the receipt of any payments with respect thereto, to any such taxes imposed in a Tax Jurisdiction that are not excluded under clauses (1) through (5) or (7) or (8) above or any combination thereof).

If the Issuer or any Guarantor, as the case may be, becomes aware that it will be obligated to pay Additional Amounts with respect to any payment under or with respect to the Second Lien Notes or any Second Lien Note Guarantee, the Issuer or the relevant Guarantor, as the case may be, will deliver to the Trustee on a date that is at least 30 days prior to the date of that payment (unless the obligation to pay Additional Amounts arises less than 45 days prior to that payment date, in which case the Issuer or the relevant Guarantor shall notify the Trustee promptly thereafter) an Officer’s Certificate stating the fact that Additional Amounts will be payable and the amount estimated to be so payable. The Officer’s Certificate(s) must also set forth any other information reasonably necessary to enable the Paying Agents to pay Additional Amounts to holders on the relevant payment date. The Trustee shall be entitled to rely solely on such Officer’s Certificate as conclusive proof that such payments are necessary.

The Issuer or the relevant Guarantor will make all withholdings and deductions required by law and will remit the full amount deducted or withheld to the relevant Tax authority in accordance with applicable law. The Issuer or the relevant Guarantor will use its reasonable efforts to obtain Tax receipts from each Tax authority evidencing the payment of any Taxes so deducted or withheld. The Issuer or the relevant Guarantor will furnish to the Trustee (or to a holder or beneficial owner upon written request), within a reasonable time after the date the payment of any Taxes so deducted or withheld is made, certified copies of Tax receipts evidencing payment by the Issuer or a Guarantor, as the case may be, or if, notwithstanding such entity’s efforts to obtain receipts, receipts are not obtained, other evidence of payments (reasonably satisfactory to the Trustee) by such entity. Upon reasonable request, copies of Tax receipts or other evidence of payments, as the case may be, will be made available by the Trustee to the holders or beneficial owners of the Second Lien Notes.

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Whenever in the Second Lien Indenture or in this “Description of Second Lien Secured Notes” there is mentioned, in any context, the payment of amounts based upon the principal amount of the Second Lien Notes or of principal, interest or of any other amount payable under, or with respect to, any of the Second Lien Notes or any Second Lien Note Guarantee, such mention shall be deemed to include mention of the payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

The above obligations will survive any termination, defeasance or discharge of the Second Lien Indenture, any transfer by a holder or beneficial owner of its Second Lien Notes, and will apply, mutatis mutandis, to any jurisdiction in which any successor Person to the Issuer or any Guarantor is incorporated or organized, engaged in business for tax purposes or resident for tax purposes or any jurisdiction from or through which any payment on the Second Lien Notes or any Second Lien Note Guarantee is made by or on behalf of such person and any department or political subdivision thereof or therein.

Security

The Second Lien Notes and the Second Lien Note Guarantees will be secured by fixed and floating charges over substantially all of the property and assets of the Issuer and each Guarantor, subject to certain exceptions. The Liens on the Collateral will secure the Obligations under the Second Lien Notes and the Second Lien Note Guarantees on a second ranking basis. The First Lien Notes and the creditors under the Revolving Credit Facility and certain Hedging Obligations will be secured by first-ranking liens over the Collateral. See “Description of First Lien Secured Notes—Security”. In the event of enforcement of the Collateral, the holders of the Second Lien Notes will receive proceeds from the Collateral only after the lenders under the Revolving Credit Facility, the counterparties under certain Hedging Obligations, the holders of the First Lien Notes and creditors under any other Indebtedness secured by a First Priority Lien have been repaid in full.

Subject to certain conditions, including compliance with the covenant described under “—Certain Covenants—No Impairment of Security Interest”, the Issuer and the Guarantors are permitted to pledge the Collateral in connection with future issuances of Indebtedness of the Company or its Restricted Subsidiaries, including any Additional Second Lien Notes and additional First Lien Notes, in each case, permitted under the Second Lien Indenture and other Indebtedness of the Company and its Restricted Subsidiaries and on terms consistent with the relative priority of such Indebtedness. The amount of such additional Indebtedness secured by the Collateral (including by a First Priority Lien) could be significant.

Any additional security interests that may in the future be granted to secure obligations under the Second Lien Notes, any Second Lien Note Guarantee and the Second Lien Indenture would also constitute Collateral.

The Collateral is pledged pursuant to the Security Documents to the Security Agent on behalf of the holders of the secured obligations that are secured by the Collateral, including holders of the Second Lien Notes, creditors under the Revolving Credit Facility and creditors under certain Hedging Obligations permitted to be secured by the Collateral pursuant to the terms of the Intercreditor Agreement.

Subject to certain exceptions, the Issuer and the Guarantors will have the right to remain in possession and retain exclusive control of the Collateral securing the Second Lien Notes, to collect, invest and dispose of any income therefrom and to vote pledged shares. The Issuer and the Guarantors may, among other things, without any release or consent by the Trustee or the Security Agent, conduct ordinary course activities with respect to the Collateral, including, without limitation, (1) selling or otherwise disposing of, in any transaction or series of related transactions, any property and assets subject to Liens under the Security Documents, which has become worn out, defective or obsolete or no longer used or useful in the business, and (2) selling, transferring or otherwise disposing of assets in the ordinary course of business.

No appraisal of any of the Collateral has been prepared by or on behalf of the Issuer in connection with the issuance of the Second Lien Notes. There can be no assurance that the proceeds from the sale of the Collateral remaining after sharing with any other creditors entitled to share in such proceeds would be sufficient to satisfy the obligations owed to the holders of the Second Lien Notes. By its nature, some or all of the Collateral will be illiquid and may have no readily ascertainable market value. Accordingly, there can be no assurance that the Collateral will be able to be sold in a short period of time, if at all. See “Risk Factors—Risks Relating to the Collateral securing the First Lien Notes and the Second Lien Notes—The value of the Collateral securing the Notes may not be sufficient to satisfy the obligations under the Notes”.

The Second Lien Notes are subject to certain restrictions on enforcement of the Collateral, including a standstill period of 179 days (unless terminated earlier upon the occurrence of certain events). Even upon the expiry of such standstill period, the creditors under Indebtedness secured by a First Priority Lien, including the First Lien Notes and the Revolving Credit Facility, will have (subject to limited exceptions) the exclusive right to make all decisions with respect

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to the enforcement of the Collateral and the Trustee and the holders of the Second Lien Notes may only take enforcement action to the extent such first-priority creditors are not actively instructing the Security Agent to enforce on the Collateral. For a description of security enforcement and other intercreditor provisions, please see “Description of Certain Financing Arrangements—Intercreditor Agreement”.

The Second Lien Indenture will provide that each holder, by accepting a Second Lien Note, shall be deemed to have agreed to and accepted the terms and conditions of the Security Documents and the Intercreditor Agreement.

Priority

The relative priority among (i) the lenders under the Revolving Credit Facility, (ii) the counterparties under certain Hedging Obligations, (iii) the Trustee and the holders of the Second Lien Notes under the Second Lien Indenture and (iv) the trustee in respect of, and the holders of, the First Lien Notes, with respect to the Collateral and the security interest securing obligations under the Second Lien Notes created by the Security Documents (the “Security Interest”) is established by the terms of the Intercreditor Agreement, which provides, among other things, that in the event of an enforcement of the Collateral, the holders of the Second Lien Notes will receive proceeds from the Collateral only after the lenders under the Revolving Credit Facility, the counterparties under certain hedging obligations and the holders of the First Lien Notes have been repaid in full.

The Second Lien Notes are subject to certain restrictions on enforcement, including a standstill period of 179 days (unless terminated earlier upon the occurrence of certain events). Even upon the expiry of such standstill period, the creditors under Indebtedness secured by a First Priority Lien, including the First Lien Notes and the Revolving Credit Facility, will have (subject to limited exceptions) the exclusive right to make all decisions with respect to the enforcement of the Collateral and the Trustee and the holders of the Second Lien Notes may only instruct the Security Agent to enforce the Collateral to the extent such first-priority creditors are not actively instructing the Security Agent to enforce on the Collateral. For a description of security enforcement and other intercreditor provisions, please see “Description of Certain Financing Arrangements—Intercreditor Agreement”.

Release of Collateral

The Issuer and the Guarantors will be entitled to the release of the Liens over the property and other assets constituting Collateral securing the Second Lien Notes and the Second Lien Note Guarantees under any one or more of the following circumstances:

(1) other than with respect to any Liens over the Capital Stock of the Issuer or any Parent Guarantor, in connection with any sale or other disposition of Collateral to a Person that is not a Parent Guarantor or a Restricted Subsidiary (but excluding any transaction subject to “—Certain Covenants—Merger, Consolidation or Sale of Assets”), if such sale or other disposition does not violate the “Asset Sale” provisions of the Second Lien Indenture or is otherwise permitted in accordance with the Second Lien Indenture;

(2) with respect to any Liens on assets of any Guarantor, in the case of a Guarantor that is released from its Second Lien Note Guarantee pursuant to the terms of the Second Lien Indenture, the release of the property and assets, and Capital Stock, of such Guarantor;

(3) if the Company designates any Restricted Subsidiary to be an Unrestricted Subsidiary in accordance with the applicable provisions of the Second Lien Indenture, the release of the property, assets and Capital Stock of such Unrestricted Subsidiary;

(4) in connection with certain enforcement actions taken by the creditors under certain of our Indebtedness in accordance with the Intercreditor Agreement or any Additional Intercreditor Agreement as described below under “—Intercreditor Agreement” or “—Additional Intercreditor Agreements”;

(5) as described under the captions “—Amendment, Supplement and Waiver” and “—Certain Covenants—No Impairment of Security Interest”;

(6) upon release of the Lien that resulted in the creation of the Lien under the covenant described below under the caption “—Certain Covenants—Liens”;

(7) in order to effectuate a merger, consolidation, conveyance or transfer conducted in compliance with the covenant described under “—Certain Covenants—Merger, Consolidation or Sale of Assets”; provided that following such merger, consolidation, conveyance or transfer, a Lien of at least equivalent ranking over the same assets or property is granted in favor of the Security Agent (on its own behalf and on

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behalf of the Trustee for the holders of Second Lien Notes) to the extent such assets or property continue to exist as assets or property of the Parent Guarantor or a Restricted Subsidiary (or the Person formed by or surviving such transaction);

(8) upon legal defeasance, covenant defeasance or satisfaction or discharge of the Indenture as provided below under the captions “—Legal Defeasance and Covenant Defeasance” and “—Satisfaction and Discharge”;

(9) upon the full and final payment of the Second Lien Notes and performance of all obligations of the Issuer and the Guarantors under the Second Lien Indenture and the Second Lien Notes; or

(10) as otherwise permitted in accordance with the Second Lien Indenture.

The Security Agent and the Trustee (only if required) will take all necessary action requested by the Issuer to effectuate any release of Collateral securing the Second Lien Notes and the Second Lien Note Guarantees, in accordance with the provisions of the Second Lien Indenture, the relevant Security Documents, the Intercreditor Agreement or any Additional Intercreditor Agreement. Each of the releases set forth above shall be effected by the Security Agent without the consent of the holders of the Second Lien Notes or any action on the part of the Trustee.

In addition to the release provisions described above, the security interests in the Collateral will cease to exist by operation of law or will be released, depending on the type of security interest, upon the defeasance or discharge of the Second Lien Notes as provided in “—Legal Defeasance and Covenant Defeasance” or “—Satisfaction and Discharge”, in each case in accordance with the terms and conditions of the Second Lien Indenture. In addition, the terms of the Security Documents themselves provide for assets to cease to become subject to security in certain circumstances without need for a formal release, such as the sale of assets which are subject to a charge, or the exclusion of certain assets from intended Collateral if such assets may not be subject to security (such as, for example, assets that may not be validly pledged, or assets that are subject to a Permitted Lien).

Security Agent

Lloyds Bank plc will act as Security Agent under the Security Documents and the Intercreditor Agreement until such time, if any, that a new Security Agent is appointed under the relevant provisions of the Security Documents and/or the Intercreditor Agreement and/or any Additional Intercreditor Agreement.

Neither the Trustee nor the Security Agent nor any of their respective officers, directors, employees, attorneys or agents will be responsible or liable for the existence, genuineness, value or protection of any property securing the Second Lien Notes or any Second Lien Note Guarantee, for the legality, enforceability, effectiveness or sufficiency of the Security Documents, for the creation, perfection, priority, sufficiency or protection of any Lien, or for any defect or deficiency as to any such matters, or for any failure to demand, collect, foreclose or realize upon or otherwise enforce any of the Liens or Security Documents or any delay in doing so.

Second Lien Note Guarantees

The Second Lien Notes will be guaranteed by each Parent Guarantor and each Subsidiary Guarantor. These Second Lien Note Guarantees will be joint and several obligations of the Guarantors. Each Second Lien Note Guarantee is a full and unconditional guarantee of the Issuer’s obligations under the Second Lien Notes, subject to the contractual limitations discussed below.

The obligations of the Guarantors will be contractually limited under the applicable Second Lien Note Guarantees to reflect limitations under applicable law with respect to maintenance of share capital, corporate benefit, fraudulent conveyance and other legal restrictions applicable to the Guarantors and their respective shareholders, directors and general partners.

For a description of such contractual limitations, see “Risk Factors—Risks Relating to our Structure—Laws relating to preference, transactions at an undervalue, misfeasance and corporate benefit may adversely affect the validity and enforceability of payments under the senior guarantee of the Notes by Matalan Retail Limited and the other Guarantors”. The Second Lien Notes will initially be guaranteed on a senior basis by the following Guarantors: Missouri TopCo Limited, Matalan Group Limited, Matalan Limited, Matalan Retail Limited and Matalan Holding Company Limited.

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Release of Second Lien Note Guarantee of Subsidiary Guarantors

The Second Lien Note Guarantee of a Subsidiary Guarantor will be released:

(1) in connection with any sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger, consolidation, amalgamation or combination) to a Person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary, if the sale or other disposition does not violate the “Asset Sale” provisions of the Second Lien Indenture;

(2) in connection with any sale or other disposition of Capital Stock of that Guarantor to a Person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary, if the sale or other disposition does not violate the “Asset Sale” provisions of the Second Lien Indenture and the Guarantor ceases to be a Restricted Subsidiary as a result of the sale or other disposition;

(3) if the Company designates any Restricted Subsidiary that is a Guarantor to be an Unrestricted Subsidiary in accordance with the applicable provisions of the Second Lien Indenture;

(4) upon release of the guarantee or Indebtedness that resulted in the creation of the Second Lien Note Guarantee under the covenant described below under the caption “—Certain Covenants—Limitation on Issuances of Guarantees of Indebtedness” so long as no Default or Event of Default would arise as a result;

(5) as described under “—Amendments, Supplement and Waiver”;

(6) with respect to any Guarantor which is not the continuing or surviving Person in the relevant consolidation or merger, as a result of a transaction permitted by the second paragraph under the caption “—Certain Covenants—Merger, Consolidation or Sale of Assets”;

(7) upon the full and final payment of the Second Lien Notes and performance of all obligations of the Issuer and the Guarantors under the Second Lien Indenture and the Second Lien Notes;

(8) upon legal defeasance, covenant defeasance or satisfaction and discharge of the Indenture as provided below under the captions “—Legal Defeasance and Covenant Defeasance” and “—Satisfaction and Discharge”; or

(9) in connection with certain enforcement actions taken by the creditors under certain of our secured Indebtedness as provided under the Intercreditor Agreement or any Additional Intercreditor Agreement as described below under “—Intercreditor Agreement” or “—Additional Intercreditor Agreements”.

In addition, the Second Lien Note Guarantee by a Parent Guarantor will be released in the circumstances described in clause (5), (6), (7) or (8) above (including, in the case of Matalan Group Limited (or its successor entity), as set forth below under “Release of Note Guarantee and Liens on Collateral by Missouri TopCo Limited upon Certain Public Equity Offerings”). Upon any occurrence giving rise to a release of a Second Lien Note Guarantee, as specified above, the Trustee, subject to receipt of certain documents from the Issuer and/or Guarantor, will execute any documents reasonably required in order to evidence or effect such release, discharge and termination in respect of such Second Lien Note Guarantee without the consent of the holders of Second Lien Notes. Neither the Issuer, the Trustee nor any Guarantor will be required to make a notation on the Second Lien Notes to reflect any such release, discharge or termination.

Release of Second Lien Note Guarantee and Liens on Collateral by Missouri TopCo Limited upon Certain Public

Equity Offerings

Substantially simultaneously with the Initial Public Offering of Matalan Group Limited (or its successor entity), at the request of the Issuer, (a) Missouri Topco Limited may be released from its Second Lien Note Guarantee and shall be discharged from all of its obligations under the Second Lien Notes, its Second Lien Note Guarantee and the Second Lien Indenture and (b) Missouri TopCo Limited will be entitled to release the Liens over its property and assets constituting Collateral securing the Second Lien Notes and the Second Lien Note Guarantees (other than Liens on the Capital Stock of the Issuer or any Guarantor (provided that Liens on the Capital Stock of Matalan Group Limited shall be released)); provided that:

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(1) Matalan Group Limited is an entity organized or existing under the laws of any member state of the Pre-Expansion European Union, Switzerland, Guernsey, any state of the United States or the District of Columbia;


(3) the Issuer would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period (i) be permitted to incur at least £1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” or (ii) have a Fixed Charge Coverage Ratio not less than it was immediately prior to giving effect to such transaction;

(4) Missouri Topco Limited will not, on the date of such transaction after giving pro forma effect thereto, have (i) any assets other than shares in Matalan Group Limited, and (ii) any other assets (other than Identified Assets) that are (a) not material to, or reasonably necessary for the operation of, the business of Matalan Group Limited and its Restricted Subsidiaries and (b) to the extent such assets were transferred from, or purchased or acquired with funds received from, Matalan Group Limited and/or any of its Restricted Subsidiaries, the transfer, payment or other distribution of such assets or funds would have been permitted pursuant to the covenant described above under the caption “—Certain Covenants—Restricted Payments” having assumed that Matalan Group Limited was the Company on the date of such transaction and the amount available for Restricted Payments under such covenant will reduce accordingly as if such Restricted Payment was made on such date;

(5) on the date of such transaction after giving pro forma effect thereto, (i) any Indebtedness owed by Matalan Group Limited or any of its Restricted Subsidiaries to Missouri Topco Limited is permitted under the covenant described under the caption “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” and (ii) Missouri Topco Limited will have no Indebtedness other than Non-Recourse Debt; and

(6) the Issuer delivers to the Trustee an Officer’s Certificate and opinion of counsel, in each case, stating that such transaction complies with this provision.

Thereafter Matalan Group Limited shall be substituted for the Company so that from and after such date, the provisions of the Second Lien Indenture referring to the “Company” shall refer instead to Matalan Group Limited and not to Missouri Topco Limited, and Matalan Group Limited may exercise every right and power of the Company under the Second Lien Indenture with the same effect as if it had been named as the Company in the Second Lien Indenture and Company shall thereafter refer only to Matalan Group Limited.


If the creditors or the Security Agent sell the shares of any Subsidiary Guarantor pursuant to an enforcement action, in accordance with the Intercreditor Agreement, the Guarantee of any such Guarantor (and any Guarantor that is a subsidiary of such Guarantor) will automatically release; provided that the disposal in question:

• is effected either (i) pursuant to a public auction or (ii) where an internationally recognized investment bank selected by the Security Agent has delivered to the Trustee an opinion that the disposal price of the relevant share capital or assets is fair from a financial point of view after taking into account all relevant circumstances;


• any liabilities owed to the creditors under our Revolving Credit Facility or the First Lien Notes by any member of the Group whose shares are being disposed of and from any subsidiary of such member of the Group are also being released.

To establish the relative rights of certain creditors of the Issuer under its financing arrangements, including, without limitation, the Second Lien Notes, the Revolving Credit Facility, the First Lien Notes and certain Hedging Obligations, the Issuer, each Guarantor, the agent under the Revolving Credit Facility, the Security Agent, the Trustee and the trustee under the First Lien Notes will enter into the Intercreditor Agreement. Pursuant to the terms of the Intercreditor Agreement, any liabilities in respect of Indebtedness secured by a First Priority Lien, including obligations under the Revolving Credit Facility, Hedging Obligations with respect to interest rate and foreign currency exchange rate

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hedging that are permitted to be incurred by clause (8) of the definition of “Permitted Debt” and are secured by the Collateral and the First Lien Notes will receive priority with respect to any proceeds received from the sale of any Collateral in the event of any enforcement of the same. Any proceeds received upon any enforcement over any Collateral, after all Obligations under such Indebtedndess secured by a First Priority Lien have been repaid from such recoveries, will be applied pro rata in repayment of all Obligations under the Second Lien Indenture and the Second Lien Notes and any other Indebtedness of the Issuer and the Guarantors permitted to be secured by the Collateral on a pari

passu basis with the Second Lien Notes pursuant to the Second Lien Indenture and the Intercreditor Agreement. Please see “Description of Certain Financing Arrangements—Intercreditor Agreement—Distressed Disposals”.

Additional Intercreditor Agreements

The Second Lien Indenture will provide that, at the request of the Company, in connection with the incurrence by the Company or any Restricted Subsidiary of any Indebtedness that is permitted to be secured by the Collateral pursuant to the definition of “Permitted Collateral Liens” (other than with respect to clause (2) of such definition), the Issuer, the relevant Guarantors, the Trustee and the Security Agent shall enter into with the holders of such Indebtedness (or their duly authorized Representatives) an intercreditor agreement, or a restatement, amendment or other modification of an existing intercreditor agreement (an “Additional Intercreditor Agreement”), on substantially the same terms as the Intercreditor Agreement (or terms not materially less favorable to the holders of the Second Lien Notes); provided, further, that such Additional Intercreditor Agreement will not impose any personal obligations on the Trustee or the Security Agent or adversely affect the personal rights, duties, liabilities or immunities of the Trustee and the Security Agent under the Second Lien Indenture or the Intercreditor Agreement. For the avoidance of doubt, subject to the foregoing and the succeeding paragraph, any such Additional Intercreditor Agreement may provide for senior security interests in respect of any such Indebtedness (to the extent such Indebtedness is permitted to be secured by the Collateral pursuant to the definition of “Permitted Collateral Liens”) or any pari passu or junior security interests in respect of any such Indebtedness (to the extent such Indebtedness was permitted to be incurred under the Second Lien Indenture); provided that such Additional Intercreditor Agreement shall not provide for any additional standstill periods as it relates to the enforcement of the Collateral by the Security Agent on behalf of the Trustee and the holders of the Second Lien Notes. If more than one such intercreditor agreement is outstanding at any one time, the collective terms of such intercreditor agreements must not conflict and must be no more disadvantageous to the holders of the Second Lien Notes than if all such Indebtedness was a party to one such agreement.

At the direction of the Company and without the consent of the holders of the Second Lien Notes, the Trustee and the Security Agent will from time to time enter into one or more amendments and/or restatements to the Intercreditor Agreement or any Additional Intercreditor Agreement to: (i) cure any ambiguity, omission, defect or inconsistency therein; (ii) add Guarantors or other parties (such as representatives of new issuances of Indebtedness) thereto; (iii) further secure the Second Lien Notes (including Additional Second Lien Notes); (iv) make provision for equal and ratable grants of Liens on the Collateral to secure Additional Second Lien Notes or to implement any Permitted Collateral Liens to the extent permitted by the Second Lien Indenture; (v) subject to the preceding paragraph, to provide for additional Indebtedness (including with respect to any Intercreditor Agreement or Additional Intercreditor Agreement, the addition of provisions relating to new Indebtedness ranking junior in right of payment to the Second Lien Notes) to the extent permitted under the Second Lien Indenture) or any other obligations that are permitted by the terms of the Second Lien Indenture to be incurred and secured by a Lien on the Collateral on a senior, pari passu or junior basis with the Liens securing the Second Lien Notes or the Guarantees; (vi) add Restricted Subsidiaries to the Intercreditor Agreement or an Additional Intercreditor Agreement; (vii) amend the Intercreditor Agreement or any Additional Intercreditor Agreement in accordance with the terms thereof; (viii) increase the amount of the Credit Facilities covered by any such agreement, the incurrence of which is not prohibited by the Second Lien Indenture; or (ix) make any other change thereto that does not adversely affect the rights of the holders of the Second Lien Notes in any material respect. The Company will not otherwise direct the Trustee or the Security Agent to enter into any amendment and/or restatement to the Intercreditor Agreement or, if applicable, any Additional Intercreditor Agreement, without the consent of the holders of a majority in aggregate principal amount of the Second Lien Notes then outstanding, except as otherwise permitted below under “—Amendments and Waivers”, and the Company may only direct the Trustee and the Security Agent to enter into any amendment to the extent such amendment does not impose any personal obligations on the Trustee or Security Agent.

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Each holder of a Second Lien Note, by accepting such Second Lien Note, will be deemed to have:

(1) appointed and authorized the Trustee and the Security Agent from time to time to give effect to such provisions;

(2) authorized each of the Trustee and the Security Agent from time to time to become a party to any additional intercreditor arrangements described above;

(3) agreed to be bound by such provisions and the provisions of any additional intercreditor arrangements described above; and

(4) irrevocably appointed the Trustee and the Security Agent to act on its behalf from time to time to enter into and comply with such provisions and the provisions of any additional intercreditor arrangements described above, in each case, without the need for the consent of the holders of Second Lien Notes.

The Second Lien Indenture will also provide that, prior to any “Acceleration Event” (as defined in the Intercreditor Agreement), in relation to the Intercreditor Agreement or an Additional Intercreditor Agreement, the Trustee (and the Security Agent, if applicable) shall consent on behalf of the holders of Second Lien Notes to the payment, repayment, purchase, repurchase, defeasance, acquisition, retirement or redemption of any obligations subordinated to the Second Lien Notes thereby; provided, however, that such transaction would comply with the covenant described under “—Certain Covenants—Restricted Payments”.

Optional Redemption

At any time prior to May 30, 2017, the Issuer may on any one or more occasions redeem up to 40% of the aggregate principal amount of Second Lien Notes issued under the Second Lien Indenture, upon not less than 10 nor more than 60 days’ notice, at a redemption price equal to 108.875% of the principal amount of the Second Lien Notes redeemed, in each case, plus accrued and unpaid interest and Additional Amounts, if any, to the date of redemption (subject to the rights of holders of Second Lien Notes on the relevant record date to receive interest on the relevant interest payment date), with the net cash proceeds of a Public Equity Offering of (i) the Company or (ii) any Parent Holdco of the Company to the extent the proceeds from such Public Equity Offering are contributed to the Company’s common equity capital or are paid to the Company as consideration for the issuance of ordinary shares of the Company; provided that:

(1) at least 60% of the aggregate principal amount of the Second Lien Notes originally issued under the Second Lien Indenture remains outstanding immediately after the occurrence of such redemption; and

(2) the redemption occurs within 120 days of the date of the closing of such Public Equity Offering.

Any redemption notice given in respect of the redemption referred to in the preceding paragraph may be given prior to completion of the related Public Equity Offering, and any such redemption or notice may, at the Issuer’s discretion, be subject to the satisfaction of one or more conditions precedent, including the completion of the related Public Equity Offering.

At any time prior to May 30, 2017, the Issuer may on any one or more occasions redeem all or a part of the Second Lien Notes upon not less than 10 nor more than 60 days’ notice, at a redemption price equal to 100% of the principal amount of the Second Lien Notes redeemed, plus the Applicable Premium as of, and accrued and unpaid interest and Additional Amounts, if any, to the date of redemption, subject to the rights of holders of the Second Lien Notes on the relevant record date to receive interest due on the relevant interest payment date. Any such redemption and notice may, at the Issuer’s discretion, be subject to the satisfaction of one or more conditions precedent.

Except pursuant to the preceding three paragraphs and except pursuant to “—Redemption for Changes in Taxes”, the Second Lien Notes will not be redeemable at the Issuer’s option prior to May 30, 2017.

On or after May 30, 2017, the Issuer may on any one or more occasions redeem all or a part of the Second Lien Notes upon not less than 10 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Amounts, if any, on the Second Lien Notes redeemed, to the applicable date of redemption, if redeemed during the twelve-month period beginning on May 30 of the years indicated below, subject to the rights of holders of Second Lien Notes on the relevant record date to receive interest on the relevant interest payment date:

Year Redemption

Price

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2017 ......................................................................................................................................................................... 104.438% 2018 ......................................................................................................................................................................... 102.219% 2019 and thereafter .................................................................................................................................................. 100.000%

Unless the Issuer defaults in the payment of the redemption price, interest will cease to accrue on the Second Lien Notes or portions thereof called for redemption on the applicable redemption date. Any such redemption and notice may, in the Issuer’s discretion, be subject to the satisfaction of one or more conditions precedent.

Redemption for Changes in Taxes

The Issuer may redeem the Second Lien Notes, in whole but not in part, at its discretion at any time upon giving not less than 10 nor more than 60 days’ prior notice to the holders of the Second Lien Notes (which notice will be irrevocable and given in accordance with the procedures described in “—Selection and Notice”), at a redemption price equal to 100% of the aggregate principal amount thereof, together with accrued and unpaid interest, if any, to the date fixed by the Issuer for redemption (a “Tax Redemption Date”) and all Additional Amounts (if any) then due and which will become due on the Tax Redemption Date as a result of the redemption or otherwise (subject to the right of holders of the Second Lien Notes on the relevant record date to receive interest due on the relevant interest payment date and Additional Amounts (if any) in respect thereof), if on the next date on which any amount would be payable in respect of the Second Lien Notes, the Issuer is or would be required to pay Additional Amounts, and the Issuer cannot avoid any such payment obligation by taking reasonable measures available to it, and the requirement arises as a result of:

(1) any amendment to, or change in, the laws, treaties or any regulations or rulings promulgated thereunder of a relevant Tax Jurisdiction which change or amendment is announced and becomes effective on or after the Issue Date (or, if the applicable Tax Jurisdiction became a Tax Jurisdiction on a date after the Issue Date, such later date); or

(2) any amendment to, or change in, an official written interpretation or application of such laws, treaties, regulations or rulings (including by virtue of a holding, judgment, order by a court of competent jurisdiction or a change in published administrative practice) which amendment or change is announced and becomes effective on or after the Issue Date (or, if the applicable Tax Jurisdiction became a Tax Jurisdiction on a date after the Issue Date, such later date).

The Issuer will not give any such notice of redemption earlier than 60 days prior to the earliest date on which the Issuer would be obligated to pay Additional Amounts if a payment in respect of the Second Lien Notes was then due, and the obligation to pay Additional Amounts must be in effect at the time such notice is given. Prior to the publication or, where relevant, mailing of any notice of redemption of the Second Lien Notes pursuant to the foregoing, the Issuer will deliver to the Trustee an opinion of independent tax counsel of recognized standing to the effect that there has been such amendment or change which would require the Issuer to pay Additional Amounts hereunder. In addition, before the Issuer publishes or mails notice of redemption of the Second Lien Notes as described above, it will deliver to the Trustee an Officer’s Certificate to the effect that it cannot avoid its obligation to pay Additional Amounts by the Issuer taking reasonable measures available to it.

The Trustee will accept and shall be entitled to rely on such Officer’s Certificate and opinion of counsel as sufficient evidence of the existence and satisfaction of the conditions precedent as described above, in which event it will be conclusive and binding on the holders.

For the avoidance of doubt, the implementation of European Council Directive 2003/48/EC or any other directive implementing the conclusions of the ECOFIN Council meeting of 26 and 27 November 2000 on the taxation of savings income or any law implementing or complying with or introduced in order to conform to, such directive will not be a change or amendment for such purposes.

The foregoing will apply mutatis mutandis to any jurisdiction in which any successor Person to the Issuer, as applicable, is incorporated or organized, engaged in business or resident for tax purposes or any jurisdiction from or through which any payment on the Second Lien Notes is made by or on behalf of such Person and any political subdivision thereof or therein.

Mandatory Redemption

The Issuer is not required to make mandatory redemption or sinking fund payments with respect to the Second Lien Notes.

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Repurchase at the Option of Holders

Change of Control

If a Change of Control occurs, each holder of Second Lien Notes will have the right to require the Issuer to repurchase all or any part (equal to £100,000 or in integral multiples of £1,000 in excess thereof) of that holder’s Second Lien Notes pursuant to an offer (a “Change of Control Offer”) on the terms set forth in the Second Lien Indenture. In the Change of Control Offer, the Issuer will offer, which offer shall be open for a period of no less than 20 days, a payment in cash equal to 101% of the aggregate principal amount of Second Lien Notes repurchased, plus accrued and unpaid interest and Additional Amounts, if any, on the Second Lien Notes repurchased to the date of purchase (the “Change of

Control Payment”), subject to the rights of holders of Second Lien Notes on the relevant record date to receive interest due on the relevant interest payment date. Within 30 days following any Change of Control, the Issuer will mail a notice to each holder of the Second Lien Notes at such holder’s registered address or otherwise deliver a notice in accordance with the procedures described under “—Selection and Notice”, stating that a Change of Control Offer is being made and offering to repurchase Second Lien Notes on the date (the “Change of Control Payment Date”) specified in the notice, which date will be no earlier than 10 days and no later than 60 days from the date such notice is mailed or delivered, pursuant to the procedures required by the Second Lien Indenture and described in such notice. The Issuer will comply with the requirements of any applicable securities laws and regulations to the extent those laws and regulations are applicable in connection with the repurchase of the Second Lien Notes as a result of a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the Second Lien Indenture, the Issuer will comply with any applicable securities laws and regulations and will not be deemed to have breached its obligations under the Second Lien Indenture by virtue of such compliance.

On the Change of Control Payment Date, the Issuer will, to the extent lawful:

(1) accept for payment all Second Lien Notes or portions of Second Lien Notes properly tendered pursuant to the Change of Control Offer;

(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Second Lien Notes or portions of Second Lien Notes properly tendered; and

(3) deliver or cause to be delivered to the Trustee the Second Lien Notes properly accepted together with an Officer’s Certificate stating the aggregate principal amount of Second Lien Notes or portions of Second Lien Notes being purchased by the Issuer.

The Paying Agent will promptly mail (or cause to be delivered) to each holder of Second Lien Notes properly tendered the Change of Control Payment for such Second Lien Notes, and the Trustee (or an authentication agent approved by it) will promptly authenticate and mail (or cause to be transferred by book- entry) to each holder a new Second Lien Note equal in principal amount to any unpurchased portion of the Second Lien Notes surrendered, if any. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

The provisions described above that require the Issuer to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of the Second Lien Indenture are applicable. Except as described above with respect to a Change of Control, the Second Lien Indenture does not contain provisions that permit the holders of the Second Lien Notes to require that the Issuer repurchase or redeem the Second Lien Notes in the event of a takeover, recapitalization or similar transaction.

The Issuer will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Second Lien Indenture applicable to a Change of Control Offer made by the Issuer and purchases all Second Lien Notes properly tendered and not withdrawn under the Change of Control Offer, or (2) a notice of redemption has been given pursuant to the Second Lien Indenture as described above under the caption “—Optional Redemption”, unless and until there is a default in payment of the applicable redemption price. Notwithstanding anything to the contrary contained herein, a Change of Control Offer may be made in advance of a Change of Control, conditioned upon the consummation of such Change of Control, if a definitive agreement is in place for the Change of Control at the time the Change of Control Offer is made.

The definition of “Change of Control” includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all”, there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of Second Lien Notes to require the Issuer to repurchase its Second Lien Notes as a result of a sale, lease, transfer,

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conveyance or other disposition of less than all of the assets of the Company and its Restricted Subsidiaries taken as a whole to another Person or group may be uncertain.

The provisions under the Second Lien Indenture relating to the Issuer’s obligation to make an offer to repurchase the Second Lien Notes as a result of a Change of Control may be waived or modified with the consent of the holders of a majority in principal amount of the Second Lien Notes prior to the occurrence of the Change of Control.

If and for so long as the Second Lien Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted for trading on the Euro MTF Market, the Issuer will publish notices relating to the Change of Control Offer in a leading newspaper of general circulation in Luxembourg (which is expected to be the Luxemburger Wort) or, to the extent and in the manner permitted by such rules, post such notices on the official website of the Luxembourg Stock Exchange (www.bourse.lu).

Asset Sales

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, consummate an Asset Sale unless:

(1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of; and

(2) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this provision, each of the following will be deemed to be cash:

(a) any liabilities, as recorded on the balance sheet (or the notes thereto) of the Company or any Restricted Subsidiary (other than contingent liabilities), that are assumed by the transferee of any such assets and as a result of which the Company and its Restricted Subsidiaries are no longer obligated with respect to such liabilities or are indemnified against further liabilities;

(b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents within 180 days following the closing of the Asset Sale, to the extent of the cash or Cash Equivalents received in that conversion;

(c) any Capital Stock or assets of the kind referred to in clauses (2) or (4) of the next paragraph of this covenant;

(d) Indebtedness of any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset Sale, to the extent that the Company and each other Restricted Subsidiary are released from any Guarantee of such Indebtedness in connection with such Asset Sale; and

(e) consideration consisting of Indebtedness of the Company or any Guarantor received from Persons who are not the Company or any Restricted Subsidiary.

Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company (or the applicable Restricted Subsidiary, as the case may be) may apply such Net Proceeds (at the option of the Company or Restricted Subsidiary):

(1) to purchase Second Lien Notes pursuant to an offer to all holders of Second Lien Notes, plus accrued and unpaid interest to (but not including) the date of purchase (a “Notes Offer”);

(2) to acquire all or substantially all of the assets of, or any Capital Stock of, another Permitted Business, if, after giving effect to any such acquisition of Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary;

(3) to make a capital expenditure;

(4) to acquire other assets (other than Capital Stock) not classified as current assets under IFRS that are used or useful in a Permitted Business;

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(5) to repurchase, prepay, redeem or repay (a) Indebtedness secured by a First Priority Lien, (b) Pari Passu Indebtedness subject to a Lien on the Collateral on a pari passu basis with the Second Lien Notes or Second Lien Note Guarantees, so long as the Company (or the applicable Restricted Subsidiary, as the case may be) makes an offer on a pro rata basis to all holders of Second Lien Notes at a purchase price equal to 100% of the principal amount of the Second Lien Notes plus accrued and unpaid interest, if any, (c) Indebtedness of a Restricted Subsidiary that is not a Guarantor (other than Indebtedness owed to the Company or another Restricted Subsidiary), (d) Indebtedness secured by a Lien on the asset which is the subject of the relevant Asset Sale; provided that such asset does not constitute Collateral or (e) the Second Lien Notes pursuant to an offer to all holders of Second Lien Notes at a purchase price in cash equal to at least 100% of the principal amount of the Second Lien Notes, plus accrued and unpaid interest to, but not including, the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date); or

(6) to enter into a binding commitment to apply the Net Proceeds pursuant to clause (2), (3) or (4) of this paragraph; provided that such binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment until the earlier of (x) the date on which such acquisition or expenditure is consummated, and (y) the 180th day following the expiration of the aforementioned 365 day period.

Pending the final application of any Net Proceeds, the Company (or the applicable Restricted Subsidiary) may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by the Second Lien Indenture.

Any Net Proceeds from Asset Sales that are not applied or invested as provided in the second paragraph of this covenant will constitute “Excess Proceeds.” When the aggregate amount of Excess Proceeds exceeds £20.0 million, within ten Business Days thereof, the Issuer will make an offer (an “Asset Sale Offer”) to all holders of Second Lien Notes and may make an offer, which offer shall be open for a period of no less than 20 days, to all holders of other Indebtedness that is pari passu with the Second Lien Notes or any Second Lien Note Guarantees to purchase, prepay or redeem with the proceeds of sales of assets to purchase, prepay or redeem the maximum principal amount of Second Lien Notes and such other Pari Passu Indebtedness (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith) that may be purchased, prepaid or redeemed out of the Excess Proceeds. The offer price for the Second Lien Notes in any Asset Sale Offer will be equal to 100% of the principal amount, plus accrued and unpaid interest and Additional Amounts, if any, to the date of purchase, prepayment or redemption, subject to the rights of holders of Second Lien Notes on the relevant record date to receive interest due on the relevant interest payment date, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by the Second Lien Indenture. If the aggregate principal amount of Second Lien Notes and other Pari Passu Indebtedness tendered into (or to be prepaid or redeemed in connection with) such Asset Sale Offer exceeds the amount of Excess Proceeds or if the aggregate principal amount of Second Lien Notes tendered pursuant to a Notes Offer exceeds the amount of the Net Proceeds so applied, the Trustee will select the Second Lien Notes and such other Pari Passu Indebtedness, if applicable, to be purchased on a pro rata basis (or in the manner described under “—Selection and Notice”), based on the amounts tendered or required to be prepaid or redeemed. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

The Issuer will comply with the requirements of any applicable securities laws and regulations to the extent those laws and regulations are applicable in connection with each repurchase of Second Lien Notes pursuant to an Asset Sale Offer or a Notes Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale or Notes Offer provisions of the Second Lien Indenture, the Issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale or Notes Offer provisions of the Second Lien Indenture by virtue of such compliance.

Selection and Notice

If less than all of the Second Lien Notes are to be redeemed at any time, the Trustee or the Registrar will select Notes for redemption on a pro rata basis (or, in the case of Second Lien Notes issued in global form as discussed under “Book-Entry; Delivery and Form”, based on a method that most nearly approximates a pro rata selection as the Trustee or the Registrar deems fair and appropriate), unless otherwise required by law or applicable stock exchange or depository requirements. Neither the Trustee nor the Registrar shall be liable for selections made by it in accordance with this paragraph.

No Second Lien Notes of £100,000 or less can be redeemed in part. Notices of redemption will be mailed by first class mail at least 10 but not more than 60 days before the redemption date to each holder of Second Lien Notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a

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redemption date if the notice is issued in connection with a defeasance of the Second Lien Notes or a satisfaction and discharge of the Second Lien Indenture.

If any Second Lien Note is to be redeemed in part only, the notice of redemption that relates to that Second Lien Note will state the portion of the principal amount of that Second Lien Note that is to be redeemed. A new Second Lien Note in principal amount equal to the unredeemed portion of the original Second Lien Note will be issued in the name of the holder of Second Lien Notes upon cancellation of the original Second Lien Note. Second Lien Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Second Lien Notes or portions of Second Lien Notes called for redemption.

For Second Lien Notes which are represented by global certificates held on behalf of Euroclear, notices may be given by delivery of the relevant notices to Euroclear for communication to entitled account holders in substitution for the aforesaid mailing. So long as any Second Lien Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted for trading on the Euro MTF Market, any such notice to the holders of the relevant Second Lien Notes shall also be published in a newspaper having a general circulation in Luxembourg or, to the extent and in the manner permitted by such rules, posted on the official website of the Luxembourg Stock Exchange and, in connection with any redemption, the Company will notify the Luxembourg Stock Exchange of any change in the principal amount of Second Lien Notes outstanding.

Certain Covenants

Restricted Payments

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly:

(1) declare or pay any dividend or make any other payment or distribution on account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company’s or any of its Restricted Subsidiaries’ Equity Interests in their capacity as holders (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or any of its Restricted Subsidiaries and other than dividends or distributions payable to the Company or a Restricted Subsidiary);

(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any Parent Holdco of the Company;

(3) make any principal payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Issuer or any Guarantor that is expressly contractually subordinated in right of payment to the Second Lien Notes or to any Second Lien Note Guarantee (excluding any intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries), except (i) a payment of principal at the Stated Maturity thereof or (ii) the purchase, repurchase or other acquisition of Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or scheduled maturity, in each case due within one year of the date of such purchase, repurchase or other acquisition; or

(4) make any Restricted Investment,

(all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as “Restricted Payments”), unless, at the time of any such Restricted Payment:

(a) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;

(b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least £1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock”; and

(c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries since the Issue Date (including Restricted Payments permitted by clauses (1) (without duplication of amounts paid pursuant to any other clause of the next

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succeeding paragraph), (8), (9), (12) and (14) of the next succeeding paragraph but excluding all other Restricted Payments permitted by the next succeeding paragraph), is less than the sum, without duplication, of:

(i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the first day of the fiscal quarter in which the Issue Date occurs to the end of the Company’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus

(ii) 100% of the aggregate net cash proceeds and the Fair Market Value of property or assets or marketable securities received by the Company since the Issue Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock of the Company or convertible or exchangeable debt securities of the Company, in each case that have been converted into or exchanged for Equity Interests of the Company (other than (w) Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company, (x) from the issuance or sale of Subordinated Shareholder Debt (other than an issuance or sale to a Restricted Subsidiary of the Company), (y) from the issuance or sale of Equity Interests of the Company from treasury stock used for repurchases pursuant to clause (9) of the next succeeding paragraph or (z) Excluded Contributions); plus

(iii) to the extent that any Restricted Investment that was made since the Issue Date is (a) sold, disposed of or otherwise cancelled, liquidated or repaid, 100% of the aggregate amount received in cash and the Fair Market Value of the property or assets or marketable securities received by the Company or any Restricted Subsidiary, or (b) made in an entity that subsequently becomes a Restricted Subsidiary, 100% of the Fair Market Value of the Restricted Investment of the Company and its Restricted Subsidiaries as of the date such entity becomes a Restricted Subsidiary; plus

(iv) to the extent that any Unrestricted Subsidiary of the Company designated as such since the Issue Date is redesignated as a Restricted Subsidiary or is merged or consolidated into the Company or a Restricted Subsidiary, or all of the assets of such Unrestricted Subsidiary are transferred to the Company or a Restricted Subsidiary, the Fair Market Value of the property received by the Company or Restricted Subsidiary or the Company’s Restricted Investment in such Subsidiary as of the date of such redesignation, merger, consolidation or transfer of assets, to the extent such investments reduced the restricted payments capacity under this clause (c) and were not previously repaid or otherwise reduced; plus

(v) 100% of any dividends or distributions received by the Company or a Restricted Subsidiary since the Issue Date from an Unrestricted Subsidiary, to the extent that such dividends or distributions were not otherwise included in the Consolidated Net Income of the Company for such period.

The preceding provisions will not prohibit:

(1) the payment of any dividend or the consummation of any redemption within 60 days after the date of declaration of the dividend or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend or redemption payment would have complied with the provisions of the Second Lien Indenture;

(2) the making of any Restricted Payment in exchange for, or out of or with the net cash proceeds of the substantially concurrent sale or issuance (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock), Subordinated Shareholder Debt or from the substantially concurrent contribution of common equity capital to the Company (other than through the issuance of Disqualified Stock or through an Excluded Contribution); provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (c)(ii) of the preceding paragraph and will not be considered Excluded Contributions or to be net cash proceeds from a Public Equity Offering for purposes of the “Optional Redemption” provisions of the Second Lien Indenture;

(3) the repurchase, redemption, defeasance or other acquisition or retirement for value of Indebtedness of the Company, or any Restricted Subsidiary that is contractually subordinated to the Second Lien Notes

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or to any Second Lien Note Guarantee with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;

(4) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary held by any current or former officer, director, employee or consultant of the Company or any of its Restricted Subsidiaries pursuant to any equity subscription agreement, stock option agreement, restricted stock grant, shareholders’ agreement or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed £5.0 million in any calendar year (with unused amounts in any calendar year being carried over to succeeding calendar years); and provided, further, that such amount in any calendar year may be increased by an amount not to exceed the cash proceeds from the sale of Equity Interests of the Company or a Restricted Subsidiary received by the Company or a Restricted Subsidiary during such calendar year, in each case to members of management, directors or consultants of the Company, any of its Restricted Subsidiaries or any of its direct or indirect parent companies to the extent the cash proceeds from the sale of Equity Interests have not otherwise been applied to the making of Restricted Payments pursuant to clause (c)(ii) of the preceding paragraph or clause (2) of this paragraph;

(5) the repurchase of Equity Interests deemed to occur upon the exercise of stock options to the extent such Equity Interests represent a portion of the exercise price of those stock options;

(6) the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Stock of the Company or any preferred stock of any Restricted Subsidiary issued on or after the Issue Date in accordance with the covenant described below under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock”;

(7) payments of cash, dividends, distributions, advances or other Restricted Payments by the Company or any of its Restricted Subsidiaries to allow the payment of cash in lieu of the issuance of fractional shares upon (x) the exercise of options or warrants or (y) the conversion or exchange of Capital Stock of any such Person;

(8) advances or loans to (a) any future, present or former officer, director, employee or consultant of the Company or a Restricted Subsidiary to pay for the purchase or other acquisition for value of Equity Interests of the Company (other than Disqualified Stock), or any obligation under a forward sale agreement, deferred purchase agreement or deferred payment arrangement pursuant to any management equity plan or stock option plan or any other management or employee benefit or incentive plan or other agreement or arrangement or (b) any management equity plan or stock option plan or any other management or employee benefit or incentive plan or unit trust or the trustees of any such plan or trust to pay for the purchase or other acquisition for value of Equity Interests of the Company (other than Disqualified Stock); provided that the total aggregate amount of Restricted Payments made under this clause (8) does not exceed £5.0 million in any calendar year with unused amounts from such calendar year (but not including unused amounts from any prior calendar year) being available for use during the immediately succeeding calendar year;

(9) the repurchase of Equity Interests of the Company to be held as treasury stock; provided that the total aggregate amount of Restricted Payments made under this clause (9) does not exceed £5.0 million plus the cash proceeds from the sale of such Equity Interests of the Company from treasury stock since the Issue Date;

(10) Restricted Payments in an aggregate amount outstanding not to exceed the aggregate cash amount of Excluded Contributions, or consisting of non- cash Excluded Contributions, or Investments in exchange for or using as consideration Investments previously made under this clause (10);

(11) the payment of any dividend (or, in the case of any partnership or limited liability company, any similar distribution) by a Restricted Subsidiary to the holders of its Equity Interests (other than the Company or any Restricted Subsidiary) then entitled to participate in such dividends on a pro rata basis;

(12) so long as no Default or Event of Default has occurred and is continuing (or would result therefrom), the declaration and payment by the Company of, or loans, advances, dividends or distributions to any Parent Holdco of the Company to pay, dividends on the common stock or common equity interests of the Company or any Parent Holdco of the Company following a Public Equity Offering of such common stock or common equity interests, in an amount not to exceed in any calendar year the greater of (a) 6% of the Net Cash Proceeds received by the Company from such Public Equity Offering or

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contributed to the equity (other than through the issuance of Disqualified Stock or through an Excluded Contribution) of the Company or contributed as Subordinated Shareholder Debt to the Company and (b) following the Initial Public Offering, an amount equal to the greater of (i) 5% of the Market Capitalization and (ii) 5% of the IPO Market Capitalization; provided that after giving pro forma effect to such loans, advances, dividends or distributions, the Consolidated Leverage Ratio of the Company shall be equal to or less than 3.50 to 1.00;

(13) Permitted Parent Payments; or

(14) so long as no Default or Event of Default has occurred and is continuing (or would result therefrom), (i) other Restricted Payments in an aggregate amount not to exceed £60.0 million since the Issue Date and (ii) any other Restricted Payment if the Consolidated Leverage Ratio of the Company on a pro

forma basis after giving effect to such Restricted Payment does not exceed 2.50 to 1.00.

The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. Unsecured Indebtedness shall not be deemed to be subordinate or junior to secured Indebtedness by virtue of its nature as unsecured Indebtedness.

Incurrence of Indebtedness and Issuance of Preferred Stock

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, “incur”) any Indebtedness (including Acquired Debt), and the Company will not and will not permit any Restricted Subsidiary to, issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries that are not Guarantors to issue any shares of preferred stock; provided, however, that the Issuer and the Guarantors may incur Indebtedness (including Acquired Debt), or issue Disqualified Stock, and the Restricted Subsidiaries that are not Guarantors may issue preferred stock if for the Company’s most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or such preferred stock is issued, as the case may be, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the Disqualified Stock or the preferred stock had been issued, as the case may be, at the beginning of such four quarter period, the Fixed Charge Coverage Ratio of the Company would have been at least 2.0 to 1.0.

The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, “Permitted Debt”):

(1) the incurrence by the Company and any of its Restricted Subsidiaries of Indebtedness under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) not to exceed £60.0 million, plus in the case of any refinancing of any Indebtedness permitted under this clause (1) or any portion thereof, the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such refinancing;

(2) Indebtedness of the Company or any Restricted Subsidiary outstanding on the Issue Date after giving pro forma effect to the use of proceeds of the Second Lien Notes and the First Lien Notes as set forth in the Offering Circular;

(3) the incurrence by the Issuer and the Guarantors of Indebtedness represented by the First Lien Notes (and the related Guarantees (including any future Guarantees)), the Second Lien Notes issued on the Issue Date and the related Second Lien Note Guarantees (including any future Second Lien Note Guarantees);

(4) Indebtedness or Disqualified Stock of the Issuer or any Guarantor and Indebtedness, Disqualified Stock or preferred stock of any Restricted Subsidiary that is not a Guarantor, in each case, representing Capital Lease Obligations, mortgage financings or purchase money obligations incurred for the purpose of financing all or any part of the purchase price, lease expense, rental payments or cost of design, construction, installation or improvement of property, plant or equipment or other assets (including Capital Stock) used in the business of the Company or any of its Restricted Subsidiaries, in an aggregate principal amount, including all Permitted Refinancing Indebtedness, Disqualified Stock and preferred stock incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness, Disqualified Stock and preferred stock incurred pursuant to this clause (4), not to exceed £5.0 million at any time outstanding;

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(5) Permitted Refinancing Indebtedness or Disqualified Stock of the Issuer or any Guarantor and Permitted Refinancing Indebtedness, Disqualified Stock or preferred stock of any Restricted Subsidiary that is not a Guarantor in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness, Disqualified Stock and preferred stock (other than intercompany Indebtedness) that was permitted by the Second Lien Indenture to be incurred by the Issuer, a Guarantor or a Restricted Subsidiary, as the case may be, under the first paragraph of this covenant or clause (2), (3), (5) or (13) of this paragraph;

(6) the incurrence by the Company or any Restricted Subsidiary of intercompany Indebtedness between or among the Company or any Restricted Subsidiary; provided that:

(a) if the Issuer or any Guarantor is the obligor on such Indebtedness and the payee is not the Issuer or a Guarantor, such Indebtedness must be unsecured and ((i) except in respect of the intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of the Company and its Restricted Subsidiaries and (ii) only to the extent legally permitted (the Company and its Restricted Subsidiaries having completed all procedures required in the reasonable judgment of directors of officers of the obligee or obligor to protect such Persons from any penalty or civil or criminal liability in connection with the subordination of such Indebtedness)) expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the Second Lien Notes, in the case of the Issuer, or the Second Lien Note Guarantee, in the case of a Guarantor; and

(b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary, will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6);

(7) the issuance by any Restricted Subsidiary to the Company or to any of its Restricted Subsidiaries of preferred stock; provided that:

(a) any subsequent issuance or transfer of Equity Interests that results in any such preferred stock being held by a Person other than the Company or a Restricted Subsidiary; and

(b) any sale or other transfer of any such preferred stock to a Person that is not either the Company or a Restricted Subsidiary,

will be deemed, in each case, to constitute an issuance of such preferred stock by such Restricted Subsidiary that was not permitted by this clause (7);

(8) the incurrence by the Company or any Restricted Subsidiary of Hedging Obligations not for speculative purposes (as determined in good faith by the Company);

(9) the Guarantee by the Company or any Restricted Subsidiary of Indebtedness of the Company or any Restricted Subsidiary to the extent that the guaranteed Indebtedness was permitted to be incurred by another provision of this covenant; provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the Second Lien Notes or a Second Lien Note Guarantee, then the Guarantee must be subordinated or pari passu, as applicable, to the same extent as the Indebtedness guaranteed;

(10) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in respect of workers’ compensation claims, self-insurance obligations, captive insurance companies, bankers’ acceptances, performance and surety bonds in the ordinary course of business;

(11) (a) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within 30 Business Days;

(b) customer deposits and advance payments received in the ordinary course of business from customers for goods or services purchased in the ordinary course of business;

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(c) Indebtedness owned on a short-term basis of no longer than 30 days to banks and other financial institutions incurred in the ordinary course of business of the Company and its Restricted Subsidiaries with such banks or financial institutions that arises in connection with ordinary banking arrangements to manage cash balances of the Company and its Restricted Subsidiaries; and

(d) Indebtedness incurred in connection with bankers acceptance, discounted bills of exchange or the discounting or factoring of receivables for credit management of bad debt purposes, in each case, incurred or undertaken in the ordinary course of business;

(12) Indebtedness represented by Guarantees of any Management Advances;

(13) Indebtedness (x) of the Issuer or any Guarantor used to finance an acquisition or (y) of any Person outstanding on the date on which such Person becomes a Restricted Subsidiary or is merged, consolidated, amalgamated or otherwise combined with (including pursuant to any acquisition of assets and assumption of related liabilities) the Company or any Restricted Subsidiary (other than, in the case of this clause (y), Indebtedness incurred to provide all or a portion of the funds used to consummate the transaction or series of related transactions pursuant to which such Person became a Restricted Subsidiary or was otherwise acquired by the Company or a Restricted Subsidiary); provided, however, with respect to this clause (13), that at the time of the acquisition, merger, consolidation or amalgamation (a) the Company would have been able to incur £1.00 of additional Indebtedness pursuant to the first paragraph of this covenant after giving effect to the incurrence of such Indebtedness pursuant to this clause (13) or (b) the Fixed Charge Coverage Ratio would not be less than it was immediately prior to giving effect to such acquisition or other transaction;

(14) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for customary indemnification, obligations in respect of earnouts or other adjustments of purchase price or, in each case, similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition of any business or assets or Person or any Equity Interests of a Subsidiary; provided that the maximum liability of the Company and its Restricted Subsidiaries in respect of all such Indebtedness shall at no time exceed the gross proceeds, including the Fair Market Value of non-cash proceeds (measured at the time received and without giving effect to any subsequent changes in value), actually received by the Company and its Restricted Subsidiaries in connection with such disposition;

(15) Indebtedness of the Company and its Restricted Subsidiaries in respect of (a) letters of credit, surety, performance or appeal bonds, completion guarantees, judgment, advance payment, customs, VAT or other tax guarantees or similar instruments issued in the ordinary course of business of such Person and not in connection with the borrowing of money, including letters of credit or similar instruments in respect of self-insurance and workers compensation obligations, and (b) any customary cash management, cash pooling or netting or setting off arrangements; provided, however, that upon the drawing of such letters of credit or other instrument, such obligations are reimbursed within 30 days following such drawing;

(16) Guarantees by the Company or any Restricted Subsidiary granted to any trustee of any management equity plan or stock option plan or any other management or employee benefit or incentive plan or unit trust scheme approved by the Board of Directors of the Company, so long as the proceeds of the Indebtedness so Guaranteed are used to purchase Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any net cash proceeds from the sale of such Equity Interests of the Company will be excluded from clause (c)(ii) of the first paragraph of the covenant described above under the caption “—Restricted Payments” and will not be considered to be net cash proceeds from an Equity Offering for purposes of the “Optional Redemption” provisions of the Second Lien Indenture;

(17) Indebtedness of the Issuer or any Guarantor in an aggregate outstanding principal amount which, when taken together with any Permitted Refinancing Indebtedness in respect thereof and the principal amount of all other Indebtedness incurred pursuant to this clause (17) and then outstanding, will not exceed 100% of the Net Cash Proceeds received by the Company from the issuance or sale (other than to a Restricted Subsidiary) of its Subordinated Shareholder Debt or Capital Stock (other than Disqualified Stock or an Excluded Contribution) or otherwise contributed to equity (other than through the issuance of Disqualified Stock or an Excluded Contribution) of the Company, in each case, subsequent to the Issue Date; provided, however, that (i) any such Net Cash Proceeds that are so received or contributed shall be excluded for purposes of making Restricted Payments under clause (c)(ii) of the first paragraph and clauses (2), (4), (9) and (12) of the second paragraph of the

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covenant described above under “—Restricted Payments” to the extent the Company and its Restricted Subsidiaries incur Indebtedness in reliance thereon and (ii) any Net Cash Proceeds that are so received or contributed shall be excluded for purposes of incurring Indebtedness pursuant to this clause (17) to the extent the Company or any of its Restricted Subsidiaries makes a Restricted Payment under clause (c)(ii) of the first paragraph or clauses (2), (4), (9) and (12) of the second paragraph of the covenant described above under “—Restricted Payments” in reliance thereon;

(18) Indebtedness consisting of Guarantees of Indebtedness incurred by joint ventures of the Company or any of its Restricted Subsidiaries that, together with the outstanding aggregate amount of Investments made pursuant to clause (14) of the definition of “Permitted Investments”, does not exceed £10.0 million in the aggregate at any one time outstanding; and

(19) Indebtedness, Disqualified Stock or preferred stock of the Company or any Restricted Subsidiary in an aggregate principal amount at any time outstanding, including all Indebtedness, Disqualified Stock and preferred stock incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness, Disqualified Stock and preferred stock incurred pursuant to this clause (19), not to exceed £50.0 million.

For purposes of determining compliance with this “Incurrence of Indebtedness and Issuance of Preferred Stock” covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (19) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company, in its sole discretion, will be permitted to classify such item of Indebtedness on the date of its incurrence and only be required to include the amount and type of such Indebtedness in one of such clauses and will be permitted on the date of such incurrence to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described in the first and second paragraphs of this covenant, from time to time to reclassify all or a portion of such item of Indebtedness, in any manner that complies with this covenant. Indebtedness under the Revolving Credit Facility outstanding on the Issue Date will initially be deemed to have been incurred on such date in reliance on the exception provided in clause (1) of the definition of “Permitted Debt”.

The accrual of interest or preferred stock dividends, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness, the reclassification of preferred stock as Indebtedness due to a change in accounting principles, and the payment of dividends on preferred stock or Disqualified Stock in the form of additional shares of the same class of preferred stock or Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of preferred stock or Disqualified Stock for purposes of this covenant. For purposes of determining compliance with any pound-denominated restriction on the incurrence of Indebtedness, the pound-equivalent principal amount of Indebtedness denominated in a different currency shall be utilized, calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred; provided, however, that (i) if such Indebtedness denominated in non-pound currency is subject to a Currency Exchange Protection Agreement with respect to pounds the amount of such Indebtedness expressed in pounds will be calculated so as to take account of the effects of such Currency Exchange Protection Agreement; and (ii) the pound- equivalent of the principal amount of any such Indebtedness outstanding on the Issue Date shall be calculated based on the relevant currency exchange rate in effect on the Issue Date. The principal amount of any refinancing Indebtedness incurred in the same currency as the Indebtedness being refinanced will be the pound-equivalent of the Indebtedness refinanced determined on the date such Indebtedness was originally incurred, except that to the extent that:

(1) such pound-equivalent was determined based on a Currency Exchange Protection Agreement, in which case the refinancing Indebtedness will be determined in accordance with the preceding sentence; and

(2) the principal amount of the refinancing Indebtedness exceeds the principal amount of the Indebtedness being refinanced, in which case the pound- equivalent of such excess will be determined on the date such refinancing Indebtedness is being incurred.

Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values.

The amount of any Indebtedness outstanding as of any date will be:

(1) in the case of any Indebtedness issued with original issue discount, the amount of the liability in respect thereof determined in accordance with IFRS;

(2) the principal amount of the Indebtedness, in the case of any other Indebtedness; and

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(3) in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of:

(i) the Fair Market Value of such assets at the date of determination; and

(ii) the amount of the Indebtedness of the other Person.

Liens

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind securing Indebtedness upon any of their property or assets, now owned or hereafter acquired (such Lien, the “Initial Lien”), except (1) in the case of any property or asset that does not constitute Collateral, (a) Permitted Liens; or (b) Liens on property or assets that are not Permitted Liens if the Second Lien Notes and the Second Lien Indenture (or a Second Lien Note Guarantee in the case of Liens of a Guarantor) are either (A) directly secured equally and ratably with the Indebtedness secured by such Initial Lien, (B) if the Initial Lien relates to Indebtedness secured on the Collateral on a priority basis pursuant to clause (3) or (4) of the definition of “Permitted Collateral Lien”, secured on at least a junior basis with the Indebtedness secured by such Initial Lien or (C) if the Initial Lien relates to Indebtedness that is (x) expressly contractually subordinated in right of payment to the Second Lien Notes or to any Second Lien Note Guarantee (excluding any intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries) or (y) secured by a Lien on assets of the Issuer or any Guarantor that ranks junior to the Liens securing the Second Lien Notes or the Second Lien Note Guarantees, secured on a priority basis with the Indebtedness secured by such Initial Lien, in the case of each of clause (A), (B) or (C), for so long as such Indebtedness is so secured, and (2) in the case of any property or asset that constitutes Collateral, Permitted Collateral Liens.

Any such Lien created in favor of the Second Lien Notes will be automatically and unconditionally released and discharged upon (i) the release and discharge of the Initial Lien to which it relates, and (ii) otherwise as set forth under “—Security—Release of Collateral”.

Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

(1) pay dividends or make any other distributions on its Capital Stock to the Company or any Restricted Subsidiary, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any Restricted Subsidiary;

(2) make loans or advances to the Company or any Restricted Subsidiary; or

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(3) sell, lease or transfer any of its properties or assets to the Company or any Restricted Subsidiary;

provided that (x) the priority of any preferred stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common stock and (y) the subordination of (including the application of any standstill period to) loans or advances made to the Company or any Restricted Subsidiary to other Indebtedness incurred by the Company or any Restricted Subsidiary, in each case, shall not be deemed to constitute such an encumbrance or restriction.

However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:

(1) agreements governing Indebtedness as in effect on the Issue Date, including without limitation, the First Lien Notes (and related Guarantees thereof), and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the Issue Date, as applicable (as determined in good faith by the Company) or would not, in the good faith determination of the Company, materially impair the Issuer from making payments on the Second Lien Notes;

(2) the Second Lien Indenture, the Second Lien Notes, the Second Lien Note Guarantees, the Revolving Credit Facility, the Intercreditor Agreement, any Additional Intercreditor Agreement and the Security Documents;

(3) agreements governing other Indebtedness permitted to be incurred under the provisions of the covenant described above under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock” and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the restrictions therein are not materially less favorable to the holders of the Second Lien Notes than is customary in comparable financings (as determined in good faith by the Company);

(4) applicable law, rule, regulation or order or the terms of any license, authorization, concession or permit;

(5) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Second Lien Indenture to be incurred;

(6) customary non-assignment and similar provisions in contracts, leases and licenses entered into in the ordinary course of business;

(7) purchase money obligations for property acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased or leased of the nature described in clause (3) of the preceding paragraph;

(8) any agreement for the sale or other disposition of the Capital Stock or all or substantially all of the property and assets of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition;

(9) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced as determined in good faith by the Company or would not in the good faith determination of the Company, materially impair the ability of the Issuer to make payments on the Second Lien Notes;

(10) Liens permitted to be incurred under the provisions of the covenant described above under the caption “—Liens” that limit the right of the debtor to dispose of the assets subject to such Liens;

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(11) provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements (including agreements entered into in connection with a Restricted Investment), which limitation is applicable only to the assets that are the subject of such agreements;

(12) restrictions on cash or other deposits or net worth imposed by customers or suppliers or required by insurance, surety or bonding companies, in each case, under contracts entered into in the ordinary course of business; and

(13) any encumbrance or restriction existing under any agreement that extends, renews, refinances or replaces the agreements containing the encumbrances or restrictions in the foregoing clauses (1) through (12), or in this clause (13); provided that the terms and conditions of any such encumbrances or restrictions are no more restrictive in any material respect than those under or pursuant to the agreement so extended, renewed, refinanced or replaced or would not in the good faith determination of the Company, materially impair the ability of the Issuer to make payments on the Second Lien Notes.

Merger, Consolidation or Sale of Assets

Neither any Parent Guarantor nor the Issuer will, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not one of the Parent Guarantors or the Issuer (as applicable) is the surviving corporation), or (2) sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the properties or assets of either the Parent Guarantors and their Subsidiaries taken as a whole or the Issuer and its Subsidiaries which are Restricted Subsidiaries taken as a whole, in either case, in one or more related transactions, to another Person, unless:

(1) either: (a) the relevant Parent Guarantor or the Issuer (as applicable) is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than a Parent Guarantor or the Issuer (as applicable)) or to which such sale, assignment, transfer, conveyance, lease or other disposition has been made is an entity organized or existing under the laws of any member state of the Pre-Expansion European Union, Switzerland, Guernsey, any state of the United States or the District of Columbia;

(2) the Person formed by or surviving any such consolidation or merger with one of the Parent Guarantors (if other than a Parent Guarantor or the Issuer) or the Person to which such sale, assignment, transfer, conveyance, lease or other disposition has been made assumes all the obligations of such Parent Guarantor under the Second Lien Notes, the Second Lien Indenture, the Intercreditor Agreement, any Additional Intercreditor Agreement and each Security Document to which such Parent Guarantor is a party;

(3) the Person formed by or surviving any such consolidation or merger with the Issuer (if other than the Issuer) or the Person to which such sale, assignment, transfer, conveyance, lease or other disposition has been made assumes all the obligations of the Issuer under the Second Lien Notes, the Second Lien Indenture, the Intercreditor Agreement, any Additional Intercreditor Agreement and each Security Document to which the Issuer is a party;


(5) the relevant Parent Guarantor, the Issuer or the Person (as applicable) formed by or surviving any such consolidation or merger (if other than one of the Parent Guarantors or the Issuer (as applicable)), or to which such sale, assignment, transfer, conveyance, lease or other disposition has been made would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period (i) be permitted to incur at least £1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock” or (ii) have a Fixed Charge Coverage Ratio not less than it was immediately prior to giving effect to such transaction; and

(6) the Company delivers to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officer’s Certificate and opinion of counsel, in each case, stating that such consolidation, merger or transfer and such supplemental indenture and other transfer or accession documents comply with this covenant and that all conditions precedent in the Second Lien Indenture relating to such transaction have been satisfied and that the Second Lien Indenture and the Second Lien Notes constitute legal,

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valid and binding obligations of the Issuer or the Surviving Entity enforceable in accordance with their terms.

A Subsidiary Guarantor (other than a Subsidiary Guarantor whose Second Lien Note Guarantee is to be released in accordance with the terms of the Second Lien Note Guarantee and the Second Lien Indenture as described under “—Second Lien Note Guarantees”) will not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not such Subsidiary Guarantor is the surviving corporation), or (2) sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the properties or assets of such Subsidiary Guarantor and its Subsidiaries which are Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person, unless:

(1) either:

(a) such Subsidiary Guarantor is the surviving corporation; or

(b) the Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) or the Person to which such sale, assignment, transfer, conveyance, lease or other disposition has been made assumes all the obligations of such Subsidiary Guarantor under its Second Lien Note Guarantee, the Intercreditor Agreement, any Additional Intercreditor Agreement and each Security Document to which the Guarantor is a party;

(2) immediately after giving pro forma effect to such transaction or transactions (and treating any Indebtedness which becomes an obligation of the surviving corporation as a result of such transaction as having been incurred by the surviving corporation at the time of such transaction or transactions), no Default or Event of Default exists; and

(3) the Company delivers to the Trustee an Officer’s Certificate and opinion of counsel, in each case, stating that such consolidation, merger or transfer and such supplemental indenture and other transfer or accession documents comply with this covenant.

This “Merger, Consolidation or Sale of Assets” covenant will not apply to (a) any consolidation or merger of any Restricted Subsidiary that is not a Guarantor into the Issuer or a Guarantor, (b) any consolidation or merger among Parent Guarantors, (c) any consolidation or merger among Subsidiary Guarantors, (d) any consolidation or merger among the Issuer and any Subsidiary Guarantor; provided that, if the Issuer is not the surviving entity of such merger or consolidation, the relevant Subsidiary Guarantor is an entity organized or existing under the laws of any member state of the Pre-Expansion European Union, Switzerland, any state of the United States or the District of Columbia and clauses (3) and (6) of the first paragraph of this covenant will be complied with or (e) any sale, assignment, transfer, conveyance, lease or other disposition of assets among the Company and its Restricted Subsidiaries. Clauses (4) and (5) of the first paragraph and clause (2) of the second paragraph of this covenant will not apply to any merger or consolidation of the Issuer or any Guarantors with or into an Affiliate solely for the purpose of reincorporating the Issuer or such Guarantor in another jurisdiction.

Transactions with Affiliates

The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, make any payment to or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Company (each, an “Affiliate Transaction”) involving aggregate payments or consideration in excess of £2.0 million, unless:

(1) the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and

(2) the Company delivers to the Trustee:

(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of £5.0 million, a resolution of the Board of Directors of the Company set forth in an Officer’s Certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors of the Company; and, in addition,

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(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of £20.0 million, a written opinion of an accounting, appraisal or investment banking firm of international standing, or other recognized independent expert of international standing with experience appraising the terms and conditions of the type of transaction or series of related transactions for which an opinion is required, stating that the transaction or series of related transactions is (i) fair from a financial point of view taking into account all relevant circumstances or (ii) on terms not less favorable than might have been obtained in a comparable transaction at such time on an arm’s-length basis from a Person who is not an Affiliate.

The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph:

(1) any employment agreement, collective bargaining agreement, consultant, employee benefit arrangements with any employee, consultant, officer or director of the Company or any Restricted Subsidiary, including under any stock option, stock appreciation rights, stock incentive or similar plans, entered into in the ordinary course of business;

(2) transactions between or among the Company and/or its Restricted Subsidiaries;

(3) transactions with a Person (other than an Unrestricted Subsidiary of the Company) that is an Affiliate of the Company solely because the Company owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such Person;

(4) payment of reasonable and customary fees and reimbursements of expenses (pursuant to indemnity arrangements or otherwise) of Officers, directors, employees or consultants of the Company or any of its Restricted Subsidiaries;

(5) any issuance of Equity Interests (other than Disqualified Stock) of the Company to Affiliates of the Company;

(6) any Investment (other than a Permitted Investment) or other Restricted Payment, in either case, that does not violate the provisions of the Second Lien Indenture described above under the caption “—Restricted Payments”;

(7) any Permitted Investment described in clauses (5), (6), (7), (9) and (11) of the definition thereof;

(8) the issuance of any Subordinated Shareholder Debt;

(9) transactions pursuant to, or contemplated by any agreement in effect on the Issue Date and transactions pursuant to any amendment, modification or extension to such agreement, so long as such amendment, modification or extension, taken as a whole, is not-materially more disadvantageous to the holders of the Second Lien Notes than the original agreement as in effect on the Issue Date (as determined in good faith by the Company) and transactions and agreements described in the Offering Circular under the heading “Certain Relationships and Related Party Transactions”;


(11) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services or providers of employees or other labor, in each case in the ordinary course of business and otherwise in compliance with the terms of this Second Lien Indenture that are fair to the Company or the Restricted Subsidiaries, in the reasonable determination of the members of the Board of Directors of the Company or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated Person; and

(12) payment to any Permitted Holder of all reasonable out-of- pocket expenses (but, for the avoidance of doubt, excluding any income or capital gains taxes) incurred by such Permitted Holder in connection with its direct or indirect investment in the Company and its Subsidiaries in an amount not to exceed £2.0 million in any calendar year.

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Limitation on Issuances of Guarantees of Indebtedness

The Company will not permit any of its Restricted Subsidiaries, directly or indirectly, to guarantee the payment of any Indebtedness under the Revolving Credit Facility, any Public Debt or any Material Indebtedness incurred pursuant to a Credit Facility unless such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture providing for a Second Lien Note Guarantee of the payment of the Second Lien Notes by such Restricted Subsidiary, which Second Lien Note Guarantee will be senior to or pari passu with such Restricted Subsidiary’s guarantee of such other Indebtedness.

Each additional Second Lien Note Guarantee will be limited as necessary to recognize certain defenses generally available to guarantors (including those that relate to fraudulent conveyance or transfer, voidable preference, financial assistance, corporate purpose, capital maintenance or similar laws, regulations or defenses affecting the rights of creditors generally) or other considerations under applicable law.

Notwithstanding the foregoing, the Company shall not be obligated to cause such Restricted Subsidiary to Guarantee the Second Lien Notes to the extent that such Guarantee by such Restricted Subsidiary would reasonably be expected to give rise to or result in a violation of applicable law which, in any case, cannot be prevented or otherwise avoided through measures reasonably available to the Company or the Restricted Subsidiary or any liability for the officers, directors or shareholders of such Restricted Subsidiary; provided that the Company will procure that the relevant Restricted Subsidiary becomes a Guarantor at such time as such restriction would no longer apply to the providing of the Second Lien Note Guarantee or no longer would prohibit such Restricted Subsidiary from becoming a Guarantor (or prevent the Company from causing such Restricted Subsidiary to become a Guarantor).

No Impairment of Security Interest

The Company shall not, and shall not permit any Restricted Subsidiary to, take or knowingly or negligently omit to take any action that would have the result of materially impairing the Security Interest with respect to the Collateral (it being understood, subject to the proviso below, that the incurrence of Permitted Collateral Liens shall under no circumstances be deemed to materially impair the Liens with respect to the Collateral) for the benefit of the Trustee and the holders of the Second Lien Notes, and the Company shall not, and shall not permit any of its Restricted Subsidiaries to, grant to any Person other than the Security Agent, for the benefit of the Trustee and the holders of the Second Lien Notes and the other beneficiaries described in the Security Documents and the Intercreditor Agreement or any Additional Intercreditor Agreement, any interest whatsoever in any of the Collateral, except that the Company and its Restricted Subsidiaries may incur Permitted Collateral Liens and the Collateral may be discharged and released in accordance with the Second Lien Indenture, the applicable Security Documents and/or the Intercreditor Agreement or any Additional Intercreditor Agreement; provided, however, that, except with respect to any discharge or release in accordance with the Second Lien Indenture or the Intercreditor Agreement or any Additional Intercreditor Agreement, the incurrence of Permitted Collateral Liens or any action expressly permitted by the Second Lien Indenture or the Intercreditor Agreement or any Additional Intercreditor Agreement, the Security Documents may not be amended, extended, renewed, restated, supplemented, released or otherwise modified or replaced, unless contemporaneously with any such action, the Company delivers to the Trustee, either (1) a solvency opinion, in form and substance reasonably satisfactory to the Trustee from an Independent Financial Advisor confirming the solvency of the Company and its Subsidiaries, taken as a whole, after giving effect to any transactions related to such amendment, extension, renewal, restatement, supplement, release, modification or replacement, (2) a certificate from the Board of Directors or an Officer of the relevant Person that confirms the solvency of the person granting such Security Interest after giving effect to any transactions related to such amendment, extension, renewal, restatement, supplement, modification or replacement, or (3) an Opinion of Counsel, in form and substance reasonably satisfactory to the Trustee, confirming that, after giving effect to any transactions related to such amendment, extension, renewal, restatement, supplement, modification or replacement, the Lien or Liens created under the Security Documents, so amended, extended, renewed, restated, supplemented, modified or replaced are valid Liens not otherwise subject to any limitation, imperfection or new hardening period, in equity or at law, that such Lien or Liens were not otherwise subject to immediately prior to such amendment, extension, renewal, restatement, supplement, modification or replacement. In the event that the Company complies with the requirements of this covenant, the Trustee and the Security Agent shall (subject to customary protections and indemnifications) consent to such amendments without the need for instructions from the holders of the Second Lien Notes.

Designation of Restricted and Unrestricted Subsidiaries

The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary designated as an Unrestricted Subsidiary will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the covenant described above under the caption “—Restricted Payments” or under one or more clauses of the definition of Permitted

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Investments, as determined by the Company. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Company may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if that redesignation would not cause a Default.

Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a copy of a resolution of the Company’s Board of Directors giving effect to such designation and an Officer’s Certificate certifying that such designation complies with the preceding conditions and was permitted by the covenant described above under the caption “—Restricted Payments”. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of the Second Lien Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock”, the Company will be in default of such covenant. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary, and such designation will only be permitted if (1) such Indebtedness is permitted under the covenant described under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock”, calculated on a pro forma basis as if such designation had occurred at the beginning of the applicable reference period; and (2) no Default or Event of Default would be in existence following such designation.

Maintenance of Listing

The Company will use its commercially reasonable efforts to obtain and maintain the listing of the Second Lien Notes on the Euro MTF market for so long as such Second Lien Notes are outstanding; provided that if at any time the Company determines that it will not maintain such listing, it will obtain prior to the delisting of the Second Lien Notes from the Euro MTF Market, and thereafter use its best efforts to maintain, a listing of such Second Lien Notes on another “recognised stock exchange” as defined in Section 1005 of the Income Tax Act 2007 of the United Kingdom.

Reports

For so long as any Second Lien Notes are outstanding, the Company will furnish to the Trustee the following reports:

(1) within 120 days after the end of each fiscal year of the Company, annual reports containing the following information with a level of detail that is substantially comparable to the Offering Circular and the following information: (a) audited consolidated balance sheet of the Company as of the end of the two most recent fiscal years and audited consolidated income statements and statements of cash flow of the Company for the two most recent fiscal years, including complete footnotes to such financial statements and the report of the independent auditors on the financial statements; (b) pro

forma income statement and balance sheet information of the Company (which need not comply with Article 11 of Regulation S-X under the U.S. Exchange Act), together with explanatory footnotes, for any material acquisitions, dispositions or recapitalizations that have occurred since the beginning of the most recently completed fiscal year as to which such annual report relates (unless such pro forma information has been provided in a previous report pursuant to clause (2) or (3) below (provided that such pro forma financial information will be provided only to the extent available without unreasonable expense, in which case, the Company will provide, in the case of a material acquisition, acquired company financials)); (c) an operating and financial review of the audited financial statements, including a discussion of the results of operations (including a discussion by business segment), financial condition and liquidity and capital resources, and a discussion of material commitments and contingencies and critical accounting policies; (d) a description of the business, management and shareholders of the Company, material affiliate transactions and material debt instruments; and (e) material risk factors and material recent developments;

(2) within 60 days following the end of each of the first three fiscal quarters in each fiscal year of the Company beginning with the first fiscal quarter ending after the Issue Date, quarterly reports containing the following information: (a) an unaudited condensed consolidated balance sheet as of the end of such quarter and unaudited condensed statements of income and cash flow for the quarterly and year to date periods ending on the unaudited condensed balance sheet date, and the comparable prior year periods for the Company, together with condensed footnote disclosure; (b) pro forma income statement and balance sheet information of the Company (which need not comply with Article 11 of Regulation S-X under the U.S. Exchange Act), together with explanatory footnotes, for any acquisitions, dispositions or recapitalizations (with a Fair Market Value of at least £50 million) that

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have occurred since the beginning of the most recently completed fiscal quarter as to which such quarterly report relates (provided that such pro forma financial information will be provided only to the extent available without unreasonable expense, in which case, the Company will provide, in the case of a material acquisition, acquired company financials); (c) an operating and financial review of the unaudited financial statements (including a discussion by business segment), including a discussion of the consolidated financial condition and results of operations of the Company and any material change between the current quarterly period and the corresponding period of the prior year; and (d) material recent developments; and

(3) promptly after the occurrence of any material acquisition, disposition or restructuring of the Company and the Restricted Subsidiaries, taken as a whole, or any changes of the Chief Executive Officer or Chief Financial Officer at the Company or change in auditors of the Company or any other material event that the Company announces publicly, a report containing a description of such event;

provided, however, that the reports set forth in clauses (1), (2) and (3) above will not be required to (i) contain any reconciliation to U.S. generally accepted accounting principles or (ii) include separate financial statements for any Guarantors or non- guarantor Subsidiaries of the Company.

In addition, if the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries and such Subsidiaries are Significant Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph will include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company.

All financial statements shall be prepared in accordance with IFRS. Except as provided for above, no report need include separate financial statements for the Company or Subsidiaries of the Company or any disclosure with respect to the results of operations or any other financial or statistical disclosure not of a type included in the Offering Circular.

In addition, for so long as any Second Lien Notes remain outstanding, the Company has agreed that it will furnish to the holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the U.S. Securities Act.

Contemporaneously with the furnishing of each such report discussed above, the Company will also (a) file a press release with the appropriate internationally recognized wire services in connection with such report and (b) post such report on the Company’s website. If and for so long as the Second Lien Notes are listed on the Official List of the Luxembourg Stock Exchange for trading on the Euro MTF Market, and the rules of that exchange so require, copies of the Company’s organizational documents and the Second Lien Indenture and the most recent consolidated financial statements published by the Company may be inspected and obtained at the office of the Paying Agent in Luxembourg. See “Listing and general information.”

Suspension of Covenants when Second Lien Notes Rated Investment Grade

If on any date following the Issue Date:

(1) the Second Lien Notes have achieved Investment Grade Status; and

(2) no Default or Event of Default shall have occurred and be continuing on such date,

then, beginning on that day and continuing until such time, if any, at which the Second Lien Notes cease to have Investment Grade Status (such period, the “Suspension Period”), the covenants specifically listed under the following captions in the Offering Circular will no longer be applicable to the Second Lien Notes and any related default provisions of the Second Lien Indenture will cease to be effective and will not be applicable to the Company and its Restricted Subsidiaries:

(1) “—Repurchase at the Option of Holders—Asset Sales”;

(2) “—Restricted Payments”;

(3) “—Incurrence of Indebtedness and Issuance of Preferred Stock”;

(4) “—Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries”;

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(5) “—Designation of Restricted and Unrestricted Subsidiaries”;

(6) “—Transactions with Affiliates”; and

(7) clause (5) of the first paragraph of the covenant described under “—Merger, Consolidation or Sale of Assets”.

Such covenants will not, however, be of any effect with regard to the actions of Company and the Restricted Subsidiaries properly taken during the continuance of the Suspension Period; provided that (1) with respect to the Restricted Payments made after any such reinstatement, the amount of Restricted Payments will be calculated as though the covenant described under the caption “—Restricted Payments” had been in effect prior to, but not during, the Suspension Period and (2) all Indebtedness incurred, or Disqualified Stock or preferred stock issued, during the Suspension Period will be classified to have been incurred or issued pursuant to clause (2) of the second paragraph of the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock”. Upon the occurrence of a Suspension Period, the amount of Excess Proceeds shall be reset at zero.

The Company shall notify the Trustee that the conditions set forth in the first paragraph under this caption has been satisfied; provided that, no such notification shall be a condition for the suspension of the covenants described under this caption to be effective. The Trustee shall be under no obligation to notify the holders of the Second Lien Notes that the conditions set forth in the first paragraph have been satisfied.

There can be no assurance that the Second Lien Notes will ever achieve or maintain Investment Grade Status.

Events of Default and Remedies

Each of the following is an “Event of Default”:

(1) default for 30 days in the payment when due of interest or Additional Amounts, if any, with respect to the Second Lien Notes;

(2) default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the Second Lien Notes;

(3) failure by the Issuer or relevant Guarantor to comply with the provisions described under the caption “—Certain Covenants—Merger, Consolidation or Sale of Assets”;

(4) failure by the Issuer or relevant Guarantor for 60 days after written notice to the Company by the Trustee or the holders of at least 25% in aggregate principal amount of the Second Lien Notes then outstanding voting as a single class to comply with any of the agreements in the Second Lien Indenture (other than a default in performance, or breach, or a covenant or agreement which is specifically dealt with in clauses (1), (2) or (3)), or the Intercreditor Agreement (or any Additional Intercreditor Agreement entered into pursuant to the terms of the Intercreditor Agreement or the Second Lien Indenture);

(5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created after the Issue Date, if that default:

(a) is caused by a failure to pay principal of such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”); or

(b) results in the acceleration of such Indebtedness prior to its express maturity,

and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates £20.0 million or more;

(6) failure by the Company or any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, to pay final judgments entered by a court or courts of competent jurisdiction aggregating in excess of £20.0 million

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(exclusive of any amounts that an insurance company has acknowledged liability for), which judgments shall not have been discharged or waived and there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of an appeal, waiver or otherwise, shall not have been in effect;

(7) except as permitted by the Second Lien Indenture (including with respect to any limitations), any Second Lien Note Guarantee of the Company or a Significant Subsidiary or any group of its Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect, or the Issuer or any Guarantor which is a Significant Subsidiary or any group of its Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, or any Person acting on behalf of any such Guarantor, denies or disaffirms its obligations under its Second Lien Note Guarantee;

(8) any security interest under the Security Documents shall, at any time, cease to be in full force and effect (other than in accordance with the terms of the relevant Security Document, the Intercreditor Agreement, any Additional Intercreditor Agreement and the Second Lien Indenture) with respect to Collateral having a Fair Market Value in excess of £15.0 million for any reason other than the satisfaction in full of all obligations under the Second Lien Indenture or the release of any such security interest in accordance with the terms of the Second Lien Indenture, the Intercreditor Agreement, any Additional Intercreditor Agreement or the Security Documents or any such security interest created thereunder shall be declared invalid or unenforceable or the Company or any of its Restricted Subsidiaries shall assert in writing that any such security interest is invalid or unenforceable and any such Default continues for ten consecutive Business Days; and

(9) certain events of bankruptcy or insolvency described in the Second Lien Indenture with respect to the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of its Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary.

In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Issuer or any Guarantor that is a Significant Subsidiary or any group of Guarantors that, taken together, would constitute a Significant Subsidiary, all outstanding Second Lien Notes will become due and payable immediately without further action or notice or other act on the part of the Trustee or any holders of Second Lien Notes. If any other Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding Second Lien Notes by written notice to the Issuer (and to the Trustee if such notice is given by the holders) may and the Trustee, upon the written request of such holders, shall declare all amounts in respect of the Second Lien Notes to be due and payable immediately.

The Intercreditor Agreement provides for a 30-day consultation period with the creditors under the Revolving Credit Facility, certain hedge counterparties and the trustee of the holders of the First Lien Notes prior to the Trustee being permitted to take certain enforcement actions, including causing the First Lien Notes to become due and payable. See “Description of Certain Financing Arrangements—Intercreditor Agreement—Distressed Disposals”.

Subject to certain limitations, holders of a majority in aggregate principal amount of the then outstanding Second Lien Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from holders of the Second Lien Notes notice of any continuing Default or Event of Default if it determines that withholding notice is in their interest, except a Default or Event of Default relating to the payment of principal, interest or Additional Amounts or premium, if any.

Subject to the provisions of the Second Lien Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Second Lien Indenture at the request or direction of any holders of Second Lien Notes unless such holders have offered to the Trustee indemnity or security satisfactory to it against any loss, liability or expense. Except (subject to the provisions described under “—Amendment, Supplement and Waiver”) to enforce the right to receive payment of principal, premium, if any, or interest or Additional Amounts when due, no holder of a Second Lien Note may pursue any remedy with respect to the Second Lien Indenture or the Second Lien Notes unless:

(1) such holder has previously given the Trustee notice that an Event of Default is continuing;

(2) holders of at least 25% in aggregate principal amount of the then outstanding Second Lien Notes have requested, in writing, that the Trustee pursue the remedy;

(3) such holders have offered the Trustee security or indemnity satisfactory to it against any loss, liability or expense;

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(4) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of such security or indemnity; and

(5) holders of a majority in aggregate principal amount of the then outstanding Second Lien Notes have not given the Trustee a direction inconsistent with such request within such 60-day period.

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The holders of not less than a majority in aggregate principal amount of the Second Lien Notes outstanding may, on behalf of the holders of all outstanding Second Lien Notes, waive any past default under the Second Lien Indenture and its consequences, except a continuing default in the payment of the principal of premium, if any, any Additional Amounts or interest on any Second Lien Note held by a non-consenting holder (which may only be waived with the consent of each holder of Second Lien Notes affected).

The Company is required to deliver to the Trustee annually a statement regarding compliance with the Second Lien Indenture.

No Personal Liability of Directors, Officers, Employees and Stockholders

No director, officer, employee, incorporator or stockholder of the Issuer or any Guarantor, as such, will have any liability for any obligations of the Issuer or the Guarantors under the Second Lien Notes, the Second Lien Indenture, the Second Lien Note Guarantees, the Intercreditor Agreement, the Security Documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of Second Lien Notes by accepting a Second Lien Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Second Lien Notes. The waiver may not be effective to waive liabilities under applicable securities laws.

Legal Defeasance and Covenant Defeasance

The Issuer may at any time, at the option of its Board of Directors evidenced by a resolution set forth in an Officer’s Certificate, elect to have all of its obligations discharged with respect to the outstanding Second Lien Notes and all obligations of the Guarantors discharged with respect to their Second Lien Note Guarantees (“Legal Defeasance”) except for:

(1) the rights of holders of outstanding Second Lien Notes to receive payments in respect of the principal of, or interest (including Additional Amounts) or premium, if any, on, such Second Lien Notes when such payments are due from the trust referred to below;

(2) the Issuer’s obligations with respect to the Second Lien Notes concerning issuing temporary Second Lien Notes, registration of Second Lien Notes, mutilated, destroyed, lost or stolen Second Lien Notes and the maintenance of an office or agency for payment and money for security payments held in trust;

(3) the rights, powers, trusts, duties and immunities of the Trustee, and the Issuer’s and the Guarantors’ obligations in connection therewith; and

(4) the Legal Defeasance and Covenant Defeasance provisions of the Second Lien Indenture.

In addition, the Issuer may, at its option and at any time, elect to have the obligations of the Issuer and the Guarantors released with respect to certain covenants (including its obligation to make Change of Control Offers and Asset Sale Offers) that are described in the Second Lien Indenture (“Covenant Defeasance”) and thereafter any omission to comply with those covenants will not constitute a Default or Event of Default with respect to the Second Lien Notes. In the event Covenant Defeasance occurs, all Events of Default described under “—Events of Default and Remedies” (except those relating to payments on the Second Lien Notes or, solely with respect to the Issuer, bankruptcy or insolvency events) will no longer constitute an Event of Default with respect to the Second Lien Notes. Subject to the foregoing, if the Issuer exercises its Legal Defeasance option, the Security Documents and the rights of the Trustee and the holders of Second Lien Notes under the Intercreditor Agreement or any Additional Intercreditor Agreement in effect at such time will terminate (other than with respect to the defeasance trust).

In order to exercise either Legal Defeasance or Covenant Defeasance:

(1) the Issuer must irrevocably deposit with the Trustee (or such other entity designated or appointed (as agent) by it for such purpose), in trust, for the benefit of the holders of the Second Lien Notes, cash in pounds, non- callable UK Government Securities or a combination of cash in pounds and non-callable UK Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, or interest (including Additional Amounts and premium, if any) on the outstanding Second Lien Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Issuer must specify whether the Second Lien Notes are being defeased to such stated date for payment or to a particular redemption date;

(2) in the case of Legal Defeasance, the Issuer must deliver to the Trustee an opinion of counsel reasonably acceptable to the Trustee of United States counsel confirming that (a) the Issuer has received from, or

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there has been published by, the U.S. Internal Revenue Service a ruling or (b) since the Issue Date, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such opinion of counsel will confirm that, the holders of the outstanding Second Lien Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3) in the case of Covenant Defeasance, the Issuer must deliver to the Trustee an opinion reasonably acceptable to the Trustee of United States counsel confirming that the holders of the outstanding Second Lien Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4) the Issuer must deliver to the Trustee an Officer’s Certificate stating that the deposit was not made by the Issuer with the intent of preferring the holders of Second Lien Notes over the other creditors of the Issuer or the Guarantors with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuer, the Guarantors or others; and

(5) the Company must deliver to the Trustee an Officer’s Certificate and an opinion of counsel, subject to customary assumptions and qualifications, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Amendment, Supplement and Waiver

Except as provided otherwise in the succeeding paragraphs, the Second Lien Indenture, the Second Lien Notes, any Second Lien Note Guarantee, the Intercreditor Agreement or any Security Document may be amended or supplemented with the consent of the holders of at least a majority in aggregate principal amount of the Second Lien Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Second Lien Notes), and any existing Default or Event of Default or compliance with any provision of the Second Lien Indenture, the Second Lien Notes, the Second Lien Note Guarantees, the Intercreditor Agreement or any Security Document may be waived with the consent of the holders of a majority in aggregate principal amount of the then outstanding Second Lien Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Second Lien Notes); provided that, if any amendment, waiver or other modification will only affect one series of the Second Lien Notes, only the consent of a majority in principal amount of the then outstanding Second Lien Notes of such series shall be required.

Unless consented to by the holders of at least 90% of the aggregate principal amount of then outstanding Second Lien Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Second Lien Notes), without the consent of each holder of Second Lien Notes affected, an amendment, supplement or waiver may not (with respect to any Second Lien Notes held by a non-consenting holder):

(1) reduce the principal amount of Second Lien Notes whose holders must consent to an amendment, supplement or waiver;

(2) reduce the principal of or change the fixed maturity of any Second Lien Note or alter the provisions with respect to the redemption of the Second Lien Notes (other than provisions relating to the covenants described above under the caption “—Repurchase at the Option of Holders”);

(3) reduce the rate of or change the time for payment of interest, including default interest, on any Second Lien Note;

(4) impair the right of any holder of Second Lien Notes to receive payment of principal of and interest on such holder’s Second Lien Notes on or after the due dates therefore or to institute suit for the enforcement of any payment on or with respect to such holder’s Second Lien Notes or any Second Lien Note Guarantee in respect thereof;

(5) waive a Default or Event of Default in the payment of principal of, or interest, Additional Amounts or premium, if any, on, the Second Lien Notes (except a rescission of acceleration of the Second Lien Notes by the holders of at least a majority in aggregate principal amount of the then outstanding Second Lien Notes and a waiver of the Payment Default that resulted from such acceleration);

(6) make any Second Lien Note payable in money other than that stated in the Second Lien Notes;

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(7) make any change in the provisions of the Second Lien Indenture relating to waivers of past Defaults or the rights of holders of Second Lien Notes to receive payments of principal of, or interest, Additional Amounts or premium, if any, on, the Second Lien Notes;

(8) waive a redemption payment with respect to any Second Lien Note (other than a payment required by one of the covenants described above under the caption “—Repurchase at the Option of Holders”);

(9) release all or substantially all of the Guarantors from any of their obligations under their respective Second Lien Note Guarantees or the Second Lien Indenture, except in accordance with the terms of the Second Lien Indenture;

(10) release all or substantially all the security interests granted for the benefit of the holders of the Second Lien Notes in the Collateral other than in accordance with the terms of the Security Documents, the Intercreditor Agreement, any applicable Additional Intercreditor Agreement and/or the Second Lien Indenture;

(11) make any change to any provision of the Second Lien Indenture or the Intercreditor Agreement (or any applicable Additional Intercreditor Agreement) affecting the ranking or priority of the Second Lien Notes or the Second Lien Note Guarantees, in each case, in a manner that adversely affects the rights of the holders of the Second Lien Notes; or

(12) make any change in the preceding amendment and waiver provisions.

Notwithstanding the preceding, without the consent of any holder of Second Lien Notes, the Company, the Issuer, the Trustee and the Security Agent (as applicable and to the extent each is a party to the document in question) may amend or supplement the Second Lien Indenture, the Second Lien Notes, any Second Lien Note Guarantee, the Intercreditor Agreement and any Security Document:

(1) to cure any ambiguity, defect or inconsistency;

(2) to provide for uncertificated Second Lien Notes in addition to or in place of certificated Second Lien Notes;

(3) to provide for the assumption of the Issuer’s or a Guarantor’s obligations to holders of Second Lien Notes and Second Lien Note Guarantees in the case of a merger or consolidation or sale of all or substantially all of the Issuer’s or such Guarantor’s assets, as applicable;

(4) to make any change that would provide any additional rights or benefits to the holders of Second Lien Notes or that does not adversely affect the legal rights under the Second Lien Indenture of any such holder in any material respect;

(5) to conform the text of the Second Lien Indenture, the Second Lien Note Guarantees, the Second Lien Notes or any supplemental indenture to any provision of this “Description of Second Lien Secured Notes” to the extent that such provision in this “Description of Second Lien Secured Notes” was intended to be a verbatim recitation of a provision of the Second Lien Indenture, the Second Lien Note Guarantees, the Second Lien Notes or any supplemental indenture;

(6) to release Collateral in accordance with the terms of the Second Lien Indenture, the Intercreditor Agreement and the Security Documents or to release any Second Lien Note Guarantee in accordance with the terms of the Second Lien Indenture and the Intercreditor Agreement;

(7) to provide for the issuance of Additional Second Lien Notes in accordance with the limitations set forth in the Second Lien Indenture as of the Issue Date;

(8) to allow any Guarantor to execute a supplemental indenture and/or a Second Lien Note Guarantee with respect to the Second Lien Notes;

(9) to provide for uncertificated Second Lien Notes in addition to or in place of certificated Second Lien Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Second Lien Notes are described in Section 163(f)(2)(B) of the Code);

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(10) to enter into additional or supplemental Security Documents or to add additional parties to the Intercreditor Agreement, any Additional Intercreditor Agreement or any Security Document to the extent permitted thereunder and under the Second Lien Indenture; or

(11) to evidence and provide for the acceptance and appointment under the Second Lien Indenture or the Intercreditor Agreement or any Additional Intercreditor Agreement of a successor Trustee or Security Agent pursuant to the requirements thereof or to provide for the accession by the Trustee or Security Agent to any Security Documents.

The consent of the holders of Second Lien Notes is not necessary under the Second Lien Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment.

In formulating its opinion on such matters, the Trustee shall be entitled to rely absolutely on such evidence as it deems appropriate, including an opinion of counsel and an Officer’s Certificate.

Satisfaction and Discharge

The Second Lien Indenture will be discharged and will cease to be of further effect as to all Second Lien Notes issued thereunder, when:

(1) either:

(a) all Second Lien Notes that have been authenticated, except lost, stolen or destroyed Second Lien Notes that have been replaced or paid and Second Lien Notes for whose payment money has been deposited in trust and thereafter repaid to the Issuer, have been delivered to the Trustee for cancellation; or

(b) all Second Lien Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Issuer or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee (or such other entity designated or appointed (as agent) by it for such purpose) as trust funds in trust solely for the benefit of the holders, cash in pounds, non-callable UK Government Securities or a combination of cash in pounds and non-callable UK Government Securities, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the Second Lien Notes not delivered to the Trustee for cancellation of principal, premium and Additional Amounts, if any, and accrued interest to the date of maturity or redemption;

(2) the Issuer or any Guarantor has paid or caused to be paid all sums payable by it under the Second Lien Indenture; and

(3) the Issuer has delivered irrevocable instructions to the Trustee under the Second Lien Indenture to apply the deposited money toward the payment of the Second Lien Notes at maturity or on the redemption date, as the case may be.

In addition, the Company must deliver an Officer’s Certificate and an opinion of counsel to the Trustee stating that all conditions precedent in the Second Lien Indenture relating to satisfaction and discharge of the Second Lien Indenture have been satisfied; provided that any such counsel may rely on any Officer’s Certificate as to matters of fact (including as to compliance with the foregoing clauses (1), (2) and (3)).

Judgment Currency

Any payment on account of an amount that is payable in pounds which is made to or for the account of any holder or the Trustee in lawful currency of any other jurisdiction (the “Judgment Currency”), whether as a result of any judgment or order or the enforcement thereof or the liquidation of the Company or any Guarantor, shall constitute a discharge of the Company or the Guarantor’s obligation under the Second Lien Indenture and the Second Lien Notes or Second Lien Note Guarantee, as the case may be, only to the extent of the amount of pounds that such holder or the Trustee, as the case may be, could purchase in the London foreign exchange markets with the amount of the Judgment Currency in accordance with normal banking procedures at the rate of exchange prevailing on the first Business Day following receipt of the payment in the Judgment Currency. If the amount of pounds that could be so purchased is less than the amount of pounds originally due to such holder or the Trustee, as the case may be, the Company and the Guarantors shall indemnify and hold harmless the holder or the Trustee, as the case may be, from and against all loss or

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damage arising out of, or as a result of, such deficiency. This indemnity shall constitute an obligation separate and independent from the other obligations contained in the Second Lien Indenture or the Second Lien Notes, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by any holder or the Trustee from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or under any judgment or order.

Concerning the Trustee

The Issuer shall deliver written notice to the Trustee within thirty (30) days of becoming aware of the occurrence of a Default or an Event of Default. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days or resign as Trustee.

The holders of a majority in aggregate principal amount of the then outstanding Second Lien Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Second Lien Indenture provides that in case an Event of Default occurs and is continuing, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Second Lien Indenture at the request of any holder of Second Lien Notes, unless such holder has offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

The Issuer and the Guarantors jointly and severally will indemnify the Trustee for certain claims, liabilities and expenses incurred without gross negligence, willful default or fraud on its part, arising out of or in connection with its duties.

Listing

Application has been made to list the Second Lien Notes on the Official List of the Luxembourg Stock Exchange and to admit the Second Lien Notes to trading on the Euro MTF Market. There can be no assurance that the application to list the Second Lien Notes on the Official List of the Luxembourg Stock Exchange and to admit the Second Lien Notes on the Euro MTF Market will be approved and settlement of the Second Lien Notes is not conditioned on obtaining this listing.

Additional Information

Anyone who receives the Offering Circular may, following the Issue Date, obtain a copy of the Second Lien Indenture, the form of Second Lien Note, the Security Documents, or the Intercreditor Agreement without charge by contacting the Company, care of the Company secretary (+44 (0)1695 552400).

So long as the Second Lien Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted for trading on the Euro MTF Market, copies, current and future, of all of the Company’s annual audited consolidated financial statements and the Company’s unaudited consolidated interim financial statements may be obtained, free of charge, during normal business hours at the offices of the Paying Agent or, to the extent and in the manner permitted by such rules, on the official website of the Luxembourg Stock Exchange (www.bourse.lu).

Consent to Jurisdiction and Service of Process

The Second Lien Indenture will provide that the Issuer and, upon accession to the Second Lien Indenture, each Guarantor, will appoint CT Corporation System as its agent for service of process in any suit, action or proceeding with respect to the Second Lien Indenture, the Second Lien Notes and the Second Lien Note Guarantees brought in any U.S. federal or New York state court located in the City of New York and will submit to such jurisdiction.

Enforceability of Judgments

Since a substantial portion of the assets of the Issuer and the Guarantors are outside the United States, any judgment obtained in the United States against the Issuer or any Guarantor, may not be collectable within the United States. See “Enforcement of Civil Liabilities”.

Prescription

Claims against the Issuer or any Guarantor for the payment of principal or Additional Amounts, if any, on the Second Lien Notes will be prescribed ten years after the applicable due date for payment thereof. Claims against the

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Issuer or any Guarantor for the payment of interest on the Second Lien Notes will be prescribed six years after the applicable due date for payment of interest.

Certain Definitions

Set forth below are certain defined terms used in the Second Lien Indenture. Reference is made to the Second Lien Indenture for a full disclosure of all defined terms used therein, as well as any other capitalized terms used herein for which no definition is provided.

“Acquired Debt” means, with respect to any specified Person:

(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary; and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control”, as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms “controlling”, “controlled by” and “under common control with” have correlative meanings.

“Applicable Premium” means, with respect to any Second Lien Note on any redemption date, the greater of:

(1) 1.0% of the principal amount of the Second Lien Note; or

(2) the excess of:

(a) the present value at such redemption date of (i) the redemption price of the Second Lien Note at May 30, 2017, (such redemption price being set forth in the table appearing above under the caption “—Optional Redemption”) plus (ii) all required interest payments due on the Second Lien Note through May 30, 2017 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Gilt Rate as of such redemption date plus 50 basis points; over

(b) the principal amount of the Second Lien Note,

as calculated by the Issuer or on behalf of the Issuer by such Person as the Issuer shall designate. For the avoidance of doubt, calculation of the Applicable Premium shall not be a duty or obligation of the Trustee or Paying Agent.

“Asset Sale” means:

(1) the sale, lease, conveyance or other disposition of any assets by the Company or any of its Restricted Subsidiaries; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the Second Lien Indenture described above under the caption “—Repurchase at the Option of Holders—Change of Control” and/or the provisions described above under the caption “—Certain Covenants—Merger, Consolidation or Sale of Assets” and not by the provisions described under the caption “—Repurchase at the Option of Holders—Asset Sales”; and

(2) the issuance of Equity Interests by any Restricted Subsidiary or the sale by the Company or any of its Restricted Subsidiaries of Equity Interests in any of the Restricted Subsidiaries (in each case, other than directors’ qualifying shares).

Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale:

(1) any single transaction or series of related transactions that involves assets having a Fair Market Value of less than £5.0 million;

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(2) a transfer of assets or Equity Interests between or among the Company and any Restricted Subsidiary;

(3) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to a Restricted Subsidiary or the issuance, sale or disposition of Capital Stock, Indebtedness or other securities of an Unrestricted Subsidiary;

(4) the sale, lease or other transfer of accounts receivable, inventory or other assets in the ordinary course of business and any sale or other disposition of damaged, worn-out or obsolete assets or assets that are no longer used or useful in the conduct of the business of the Company and its Restricted Subsidiaries;

(5) licenses and sublicenses by the Company or any of its Restricted Subsidiaries in the ordinary course of business;

(6) any surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims in the ordinary course of business;

(7) the granting of Liens not prohibited by the covenant described above under the caption “—Certain Covenants—Liens”;

(8) the sale or other disposition of cash or Cash Equivalents;

(9) a Restricted Payment that does not violate the covenant described above under the caption “—Certain Covenants—Restricted Payments”, a Permitted Investment or any transaction specifically excluded from the definition of Restricted Payment;

(10) the disposition of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings and exclusive of factoring or similar arrangements;

(11) the foreclosure, condemnation or any similar action with respect to any property or other assets or a surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind; and

(12) the disposition of assets to a Person who is providing services (the provision of which have been or are to be outsourced by the Company or any Restricted Subsidiary to such Person) related to such assets.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the U.S. Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the U.S. Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have corresponding meanings.

“Board of Directors” means:

(1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;

(2) with respect to a partnership, the board of directors of the general partner of the partnership;

(3) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and

(4) with respect to any other Person, the board or committee of such Person serving a similar function.

“Business Day” means a day other than a Saturday, Sunday or other day on which banking institutions in London, Luxembourg or New York or a place of payment under the Second Lien Indenture are authorized or required by law to close.

“Capital Lease Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet (excluding the footnotes thereto) prepared in accordance with IFRS (as in effect on the Issue Date for purposes of determining whether a lease is a

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capital lease), and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty.

“Capital Stock” means:

(1) in the case of a corporation, corporate stock;

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

“Cash Equivalents” means:

(1) direct obligations (or certificates representing an interest in such obligations) issued by, or unconditionally guaranteed by, the government of a member state of the Pre-Expansion European Union, the United States of America or Switzerland (including, in each case, any agency or instrumentality thereof), as the case may be, the payment of which is backed by the full faith and credit of the relevant member state of the Pre-Expansion European Union or the United States of America or Switzerland, as the case may be, and which are not callable or redeemable at the Company’s option;

(2) overnight bank deposits, time deposit accounts, certificates of deposit, banker’s acceptances and money market deposits with maturities (and similar instruments) of 12 months or less from the date of acquisition issued by a bank or trust company which is organized under, or authorized to operate as a bank or trust company under, the laws of a member state of the Pre- Expansion European Union or of the United States of America or any state thereof or Switzerland; provided that such bank or trust company has capital, surplus and undivided profits aggregating in excess of £250 million (or the foreign currency equivalent thereof as of the date of such investment) and whose long-term debt is rated “A-1” or higher by Moody’s or “A+” or higher by S&P or the equivalent rating category of another internationally recognized rating agency;

(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clauses (1) and (2) above entered into with any financial institution meeting the qualifications specified in clause (2) above;

(4) commercial paper having one of the two highest ratings obtainable from Moody’s or S&P and, in each case, maturing within one year after the date of acquisition; and

(5) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (4) of this definition.

“Change of Control” means the occurrence of any of the following:

(1) the Company becomes aware of (by way of a report or any other filing pursuant to any regulatory filing, proxy, vote, written notice or otherwise) any “person” or “group” of related persons (as such terms are used in Sections 13(d) and 14(d) of the U.S. Exchange Act as in effect on the Issue Date), other than one or more Permitted Holders, is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the U.S. Exchange Act as in effect on the Issue Date), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company;

(2) the sale, lease, transfer, conveyance or other disposition (other than by way of merger, consolidation or other business combination transaction), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to a Person, other than a Restricted Subsidiary or one or more Permitted Holders;

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(3) prior to an Initial Public Offering, the Principal and its Related Parties cease to be the Beneficial Owner, directly or indirectly, of more than 50% of the issued and outstanding Voting Stock of the Company measured by voting power rather than number of shares, whether as a result of issuance of securities of the Company, any merger, amalgamation, consolidation, liquidation or dissolution of any Parent Guarantor or the Issuer, or any direct or indirect transfer of securities by the Principal and its Related Parties or otherwise; or

(4) the first day that the Company ceases to own, directly or indirectly, 100% of the outstanding Equity Interests of the Issuer.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Collateral” means (1) the assets of each of the Issuer and each Guarantor for which a Lien has been created to secure the Second Lien Notes and the Second Lien Note Guarantees pursuant to the Security Documents and (2) any other asset in which a security interest has been or will be granted pursuant to any Security Document to secure the Obligations under the Second Lien Indenture, the Second Lien Notes or any Second Lien Note Guarantee.

“Company” means Missouri TopCo Limited and not to any of its Subsidiaries.

“Consolidated EBITDA” means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus the following to the extent deducted in calculating such Consolidated Net Income, without duplication:

(1) provision for taxes based on income or profits of such Person and its Subsidiaries which are Restricted Subsidiaries for such period; plus

(2) the Fixed Charges of such Person and its Subsidiaries which are Restricted Subsidiaries for such period; plus

(3) depreciation, amortization (including, without limitation, amortization of intangibles and deferred financing fees) and other non-cash charges and expenses (including without limitation write-downs and impairment of property, plant, equipment and intangibles and other long-lived assets and the impact of purchase accounting on the Company and its Restricted Subsidiaries for such period) of the Company and its Restricted Subsidiaries (excluding any such non-cash charge or expense to the extent that it represents an accrual of or reserve for cash charges or expenses in any future period or amortization of a prepaid cash charge or expense that was paid in a prior period) for such period; plus

(4) any fees, expenses, charges or other costs related to the issuance of any Capital Stock, any Permitted Investment, acquisition, disposition, recapitalization, listing or the incurrence of Indebtedness permitted to be incurred under the covenant described above under the caption “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” (including refinancing thereof) whether or not successful, including (i) such fees, expenses or charges related to any incurrence of Indebtedness and (ii) any amendment or other modification of any Indebtedness; plus

(5) any foreign currency translation losses (including losses related to currency remeasurements of Indebtedness) of the Company and its Restricted Subsidiaries; plus

(6) the amount of any minority interest expense consisting of subsidiary income attributable to minority equity interests of third parties in any non-wholly owned Restricted Subsidiary in such period or any prior period, except to the extent of dividends declared or paid on, or other cash payments in respect of, Equity Interests held by such parties; minus

(7) non-cash items increasing such Consolidated Net Income for such period (other than any non-cash items increasing such Consolidated Net Income pursuant to clauses (1) through (7) of the definition of Consolidated Net Income), other than the reversal of a reserve for cash charges in a future period in the ordinary course of business,

in each case, on a consolidated basis and determined in accordance with IFRS.

“Consolidated Leverage” means, with respect to any Person as of any date of determination, the sum without duplication of the total amount of Indebtedness (excluding Hedging Obligations that are permitted to be incurred by

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clause (8) of the definition of “Permitted Debt”) of such Person and its Restricted Subsidiaries on a consolidated basis determined in accordance with IFRS.

“Consolidated Leverage Ratio” means, with respect to any specified Person as of any date of determination, the ratio of (i) the Consolidated Leverage of such Person on such date (the “Calculation Date”) to (ii) the Consolidated EBITDA of such Person for the four most recent full fiscal quarters ending immediately prior to such date for which internal financial statements are available; provided, however, that for purposes of calculating the Consolidated EBITDA for such period:

(1) acquisitions and Investments that have been made by the specified Person or any of its Subsidiaries which are Restricted Subsidiaries, including through mergers or consolidations, or any Person or any of its Subsidiaries which are Restricted Subsidiaries acquired by the specified Person or any of its Subsidiaries which are Restricted Subsidiaries, and including all related financing transactions and including increases in ownership of Subsidiaries which are Restricted Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date, or that are to be made on the Calculation Date, will be given pro forma effect (as determined in good faith by a responsible accounting or financial officer of the Company and may include anticipated expense and cost reduction synergies) as if they had occurred on the first day of the four- quarter reference period;

(2) the Consolidated EBITDA attributable to discontinued operations, as determined in accordance with IFRS, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded as if such disposition occurred on the first day of the four-quarter reference period;

(3) operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date will be excluded as if such disposition occurred on the first day of the four-quarter reference period;

(4) any Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter reference period; and

(5) any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter reference period.

“Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the net income (loss) of such Person and its Subsidiaries which are Restricted Subsidiaries for such period, on a consolidated basis (excluding the net income (loss) of any Unrestricted Subsidiary), determined in accordance with IFRS and without any reduction in respect of preferred stock dividends; provided that:

(1) any goodwill or other intangible asset impairment charge will be excluded;

(2) the net income (loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or similar distributions paid in cash to the specified Person or a Restricted Subsidiary which is a Subsidiary of the Person;

(3) solely for the purpose of determining the amount available for Restricted Payments under clause(c)(i) of the first paragraph under the caption “—Certain Covenants—Restricted Payments”, any net income (loss) of any Restricted Subsidiary (other than any Guarantor) will be excluded if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company (or any Guarantor that holds the Equity Interests of such Restricted Subsidiary, as applicable) by operation of the terms of such Restricted Subsidiary’s charter or any agreement, instrument, judgment, decree, order, statute or governmental rule or regulation applicable to such Restricted Subsidiary or its shareholders (other than (a) restrictions that have been waived or otherwise released, (b) restrictions pursuant to the Second Lien Notes or the Second Lien Indenture, (c) contractual restrictions in effect on the Issue Date with respect to the Restricted Subsidiary and other restrictions with respect to such Restricted Subsidiary that taken as a whole, are not materially less favorable to the holders of the Second Lien Notes than such restrictions in effect on the Issue Date and (d) any restriction listed under clauses (2), (3), (4), (9) or (13) of the second paragraph of the covenant described above under the caption “—Certain Covenants—Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries”) except that the Company’s equity in the net income of any such Restricted Subsidiary for such period will be included in such Consolidated Net Income up to the aggregate amount of cash or Cash Equivalents

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actually distributed or that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend to another Restricted Subsidiary (other than any Guarantor), to the limitation contained in this clause);

(4) any net gain (or loss) realized upon the sale or other disposition of any asset or disposed operations of the Company or any Restricted Subsidiaries (including pursuant to any sale leaseback transaction) which is not sold or otherwise disposed of in the ordinary course of business (as determined in good faith by the Company) or in connection with the sale or disposition of securities will be excluded;

(5) (a) any extraordinary, exceptional or unusual gain, loss or charge, (b) any asset impairments charges, or the financial impacts of natural disasters (including fire, flood and storm and related events), (c) any non-cash charges or reserves in respect of any restructuring, redundancy, integration or severance or (d) any expenses, charges, reserves or other costs related to the Refinancing, in each case, will be excluded;

(6) any non-cash compensation charge or expense arising from any grant of stock, stock options or other equity-based awards will be excluded;

(7) all deferred financing costs written off and premium paid or other expenses incurred directly in connection with any early extinguishment of Indebtedness and any net loss from any write-off or forgiveness of Indebtedness will be excluded;

(8) any one time non-cash charges or any increases in amortization or depreciation resulting from purchase accounting, in each case, in relation to any acquisition of another Person or business or resulting from any reorganization or restructuring involving the Company or its Subsidiaries will be excluded;

(9) any unrealized gains or losses in respect of Hedging Obligations or any ineffectiveness recognized in earnings related to qualifying hedge transactions or the fair value or changes therein recognized in earnings for derivatives that do not qualify as hedge transactions, in each case, in respect of Hedging Obligations will be excluded;

(10) any unrealized foreign currency transaction gains or losses in respect of Indebtedness of any Person denominated in a currency other than the functional currency of such Person and any unrealized foreign exchange gains or losses relating to translation of assets and liabilities denominated in foreign currencies will be excluded;

(11) any unrealized foreign currency translation or transaction gains or losses in respect of Indebtedness or other obligations of the Company or any Restricted Subsidiary owing to the Company or any Restricted Subsidiary will be excluded; and

(12) the cumulative effect of a change in accounting principles will be excluded.

“Consolidated Total Assets” means, with respect to any specified Person at any time, the total assets of such Person and its Subsidiaries which are Restricted Subsidiaries, in each case as shown on the most recent balance sheet of such Person, determined on a consolidated basis in accordance with IFRS.

“Contingent Obligations” means, with respect to any Person, any obligation of such Person guaranteeing in any manner, whether directly or indirectly, any operating lease, dividend or other obligation that, in each case, does not constitute Indebtedness (“primary obligations”) of any other Person (the “primary obligor”), including any obligation of such Person, whether or not contingent:

(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor;

(2) to advance or supply funds:

(a) for the purchase or payment of any such primary obligation; or

(b) to maintain the working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; or

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(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

“continuing” means, with respect to any Default or Event of Default, that such Default or Event of Default has not been cured or waived.

“Credit Facility” means one or more debt facilities, arrangements, instruments, trust deeds, indentures or other facilities (including the Revolving Credit Facility or commercial paper facilities and overdraft facilities) with banks, institutions or investors providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such institutions or to special purpose entities formed to borrow from such institutions against such receivables), notes, letters of credit, bank guarantees or other Indebtedness, in each case, as amended, restated, modified, renewed, refunded, replaced, restructured, refinanced, repaid, increased or extended in whole or in part from time to time (and whether in whole or in part and whether or not with the original administrative agent and lenders or another administrative agent or agents or other banks, institutions or investors and whether provided under the original Revolving Credit Facility or one or more other credit or other agreements, indentures, financing agreements or otherwise) and, in each case, including all agreements, instruments and documents executed and delivered pursuant to or in connection with the foregoing (including any notes and letters of credit issued pursuant thereto and any Guarantee and collateral agreement, patent and trademark security agreement, mortgages or letter of credit applications and other Guarantees, pledges, agreements, security agreements and collateral documents). Without limiting the generality of the foregoing, the term “Credit Facility” shall include any agreement or instrument which otherwise qualifies as a “Credit Facility” (1) changing the maturity of any Indebtedness incurred thereunder or contemplated thereby, (2) adding Subsidiaries of the Company as additional borrowers or guarantors thereunder, (3) increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder or (4) otherwise altering the terms and conditions thereof.

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“Currency Exchange Protection Agreement” means, in respect of any Person, any foreign exchange contract, currency swap agreement, currency option, cap, floor, ceiling or collar or agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in currency exchange rates as to which such Person is a party.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case, at the option of the holder of the Capital Stock), or upon the happening of any event, (1) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the six-month anniversary of the date that the Second Lien Notes mature or (2) provides for, either mandatorily or at the option of the holder of the Capital Stock, the payment of dividends or distributions (other than in the form of Equity Interests that are not Disqualified Stock). Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the issuer thereof to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the issuer thereof may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption “—Certain Covenants—Restricted Payments”. For purposes hereof, the amount of Disqualified Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Second Lien Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Disqualified Stock, such Fair Market Value to be determined as set forth herein.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“Excluded Contribution” means Net Cash Proceeds or property or assets received by the Company as capital contributions to the equity (other than through the issuance of Disqualified Stock) of the Company after the Issue Date or from the issuance or sale (other than to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Company or any Subsidiary of the Company for the benefit of its employees to the extent funded by the Company or any Restricted Subsidiary) of Capital Stock (other than Disqualified Stock) or Subordinated Shareholder Debt of the Company, in each case, to the extent designated as an Excluded Contribution pursuant to an Officer’s Certificate of the Company substantially concurrent with the contribution.

“Fair Market Value” means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress of either party, determined in good faith by the Company’s Chief Executive Officer, Chief Financial Officer or responsible accounting or financial officer of the Company.

“Finance Subsidiary” means a wholly owned subsidiary that is formed for the purpose of borrowing funds or issuing securities and lending the proceeds to the Company or a Guarantor and that conducts no business other than as may be reasonably incidental to, or related to, the foregoing.

“First Lien Notes” means the £342.0 million aggregate principal amount of the 67/8% First Lien Secured Notes due 2019 to be issued by the Issuer on or about the Issue Date.

“First Priority Lien” means any Lien on some or all of the Collateral that ranks or is intended to rank senior to the Liens on the Collateral securing the Second Lien Notes and the Second Lien Note Guarantees, including any Lien that ranks senior by virtue of the Intercreditor Agreement or any Additional Intercreditor Agreement or any other agreement or instrument (including, for the avoidance of doubt, the Revolving Credit Facility and the First Lien Notes).

“Fixed Charge Coverage Ratio” means, with respect to any specified Person for any period, the ratio of the Consolidated EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Subsidiaries which are Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases, redeems, defeases or otherwise discharges any Indebtedness or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect (as determined in good faith by a responsible accounting or financial officer of the Company), including in respect of anticipated expense and cost reduction synergies, to such incurrence, assumption, guarantee, repayment, repurchase, redemption, defeasance or other discharge of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom, as if the same had occurred at the beginning of the applicable four-quarter reference period;

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provided, however, that the pro forma calculation of Fixed Charges shall not give effect to (i) any Indebtedness incurred on the Calculation Date pursuant to the provisions described in the second paragraph under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” (other than with respect to the incurrence of Indebtedness pursuant to clause (13) of such paragraph) or (ii) the discharge on the Calculation Date of any Indebtedness to the extent that such discharge results from the proceeds incurred pursuant to the provisions described in the second paragraph under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”.

In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

(1) acquisitions that have been made by the specified Person or any of its Subsidiaries which are Restricted Subsidiaries, including through mergers or consolidations, or any Person or any of its Subsidiaries which are Restricted Subsidiaries acquired by the specified Person or any of its Subsidiaries which are Restricted Subsidiaries, and including all related financing transactions and including increases in ownership of Subsidiaries which are Restricted Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date, or that are to be made on the Calculation Date, will be given pro forma effect (as determined in good faith by a responsible accounting or financial officer of the Company and may include anticipated expense and cost reduction synergies) as if they had occurred on the first day of the four-quarter reference period;

(2) the Consolidated EBITDA attributable to discontinued operations, as determined in accordance with IFRS, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded;

(3) the Fixed Charges attributable to discontinued operations, as determined in accordance with IFRS, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Subsidiaries which are Restricted Subsidiaries following the Calculation Date;

(4) any Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period;

(5) any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period; and

(6) if any Indebtedness bears a floating rate of interest, the interest expense on such Indebtedness will be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligation applicable to such Indebtedness if such Hedging Obligation has a remaining term as at the Calculation Date in excess of 12 months, or, if shorter, at least equal to the remaining term of such Indebtedness).

“Fixed Charges” means, with respect to any specified Person for any period, the sum, without duplication, of:

(1) the consolidated interest expense (net of interest income) of such Person and its Subsidiaries which are Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt discount (but not debt issuance costs, commissions, fees and expenses), non- cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark-to-market valuation of Hedging Obligations or other derivative instruments), the interest component of deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings; plus

(2) the consolidated interest expense (but excluding such interest on Subordinated Shareholder Debt) of such Person and its Subsidiaries which are Restricted Subsidiaries that was capitalized during such period; plus

(3) any interest on Indebtedness of another Person that is guaranteed by such Person or one of its Subsidiaries which are Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Subsidiaries which are Restricted Subsidiaries; plus

(4) net payments and receipts (if any) pursuant to interest rate Hedging Obligations (excluding amortization of fees) with respect to Indebtedness; plus

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(5) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of any Restricted Subsidiary, other than dividends on Equity Interests payable to the Company or a Restricted Subsidiary.

“Gilt Rate” means, with respect to any redemption date, the yield to maturity as of such redemption date of UK Government Securities with a fixed maturity (as compiled by the Office for National Statistics and published in the most recent Financial Statistics that have become publicly available at least two Business Days in London prior to such redemption date (or, if such Financial Statistics are no longer published, any publicly available source of similar market data)) most nearly equal to the period from such redemption date to May 30, 2017; provided, however, that if the period from such redemption date to May 30, 2017 is less than one year, the weekly average yield on actually traded UK Government Securities denominated in pounds adjusted to a fixed maturity of one year shall be used.

“Guarantee” means a guarantee other than by endorsement of negotiable instruments for collection or deposit in the ordinary course of business, of all or any part of any Indebtedness (whether arising by agreements to keep-well, to take or pay or to maintain financial statement conditions, pledges of assets or otherwise).

“Guarantors” means, collectively, the Parent Guarantors and the Subsidiary Guarantors.

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:

(1) interest rate swap agreements, (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements;

(2) other agreements or arrangements designed to manage interest rates or interest rate risk; and

(3) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates, including Currency Exchange Protection Agreements, or commodity prices.

“Identified Assets” means (1) any intellectual property relating to the Matalan name and (2) Equity Interests in the Issuer and any of its Restricted Subsidiaries.

“IFRS” means International Financial Reporting Standards as endorsed by the European Union and in effect on the date of any calculation or determination required hereunder.

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables):

(1) in respect of borrowed money;

(2) evidenced by bonds, notes, debentures or similar instruments for which such Person is responsible or liable;

(3) representing reimbursement obligations in respect of letters of credit, bankers’ acceptances or similar instruments (except to the extent such reimbursement obligations relate to trade payables and such obligations are satisfied within 30 days of incurrence);

(4) representing Capital Lease Obligations;

(5) representing the balance deferred and unpaid of the purchase price of any property or services due more than one year after such property is acquired or such services are completed; and

(6) representing any Hedging Obligations;

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of the specified Person prepared in accordance with IFRS. In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person.

The term “Indebtedness” shall not include:

(1) Subordinated Shareholder Debt;

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(2) any lease of property which would be considered an operating lease under IFRS as in effect on the Issue Date;

(3) Contingent Obligations in the ordinary course of business;

(4) in connection with the purchase by the Company or any Restricted Subsidiary of any business, any post-closing payment adjustments to which the seller may become entitled to the extent such payment is determined by a final closing balance sheet or such payment depends on the performance of such business after the closing; or

(5) the avoidance of doubt, any contingent obligations in respect of workers’ compensation claims, early retirement or termination obligations, pension fund obligations or contributions or similar claims, obligations or contributions or social security or wage Taxes.

“Initial Public Offering” means an Public Equity Offering of common stock or other common equity interests of the Company or any Parent Holdco of the Company or any successor of the Company or any Parent Holdco of the Company (the “IPO Entity”) following which there is a Public Market and, as a result of which, the shares of common stock or other common equity interests of the IPO Entity in such offering are listed on an internationally recognized exchange or traded on an internationally recognized market.

“Intercreditor Agreement” means the intercreditor agreement, dated March 30, 2010 (as amended and restated on April 11, 2011 and as amended and restated on or around the Issue Date), between, among others, the Issuer, the Guarantors, the Trustee, the trustee on behalf of the holders of the First Lien Notes, the Security Agent and the administrative agent of the Revolving Credit Facility on behalf of the lenders and hedge counterparties thereunder, as amended, amended and restated or otherwise modified from time to time.

“Investment Grade Status” shall occur when the Second Lien Notes are rated “Baa3” or better by Moody’s and “BBB−” or better by S&P (or, if either such entity ceases to rate the Second Lien Notes, the equivalent investment grade credit rating from any other “nationally recognized statistical rating organization” within the meaning of Rule 15c3- 1(c)(2)(vi)(F) under the U.S. Exchange Act selected by the Company as a replacement agency).

“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations, but excluding advances or extensions of credit to customers or suppliers made in the ordinary course of business), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as Investments on a balance sheet (excluding the footnotes) prepared in accordance with IFRS. If the Company or any Restricted Subsidiary sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary, the Company will be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Company’s Investments in such Restricted Subsidiary that were not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption “—Certain Covenants—Restricted Payments”. The acquisition by the Company or any Restricted Subsidiary of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investments held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of the covenant described above under the caption “—Certain Covenants—Restricted Payments”. The amount of an Investment will be determined at the time the Investment is made and without giving effect to subsequent changes in value and, to the extent applicable, shall be determined based on the equity value of such Investment.

“IPO Market Capitalization” means an amount equal to (1) the total number of issued and outstanding shares of common stock or common equity interests of the IPO Entity at the time of closing of the Initial Public Offering multiplied by (2) the price per share at which such shares of common stock or common equity interests are sold in such Initial Public Offering.

“Issue Date” means the date of issuance of the Second Lien Notes (other than any Additional Second Lien Notes).

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement or any lease in the nature thereof.

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“Management Advances” means loans or advances made to, or Guarantees with respect to loans or advances made to, directors, officers or employees of any Company or any Restricted Subsidiary: (1) in respect of travel, entertainment or moving related expenses incurred in the ordinary course of business; (2) in respect of moving related expenses incurred in connection with any closing or consolidation of any facility or office; and (3) other loans and advances not exceeding £2.0 million in the aggregate outstanding at any time.

“Market Capitalization” means an amount equal to (1) the total number of issued and outstanding shares of common stock or common equity interests of the IPO Entity on the date of the declaration of the relevant dividend multiplied by (2) the arithmetic mean of the closing prices per share of such common stock or common equity interests for the 30 consecutive trading days immediately preceding the date of declaration of such dividend.

“Material Indebtedness” means Indebtedness with aggregate commitments and outstanding obligations at the time of initial incurrence in excess of £20.0 million (including the amount of all undrawn commitments and matured and contingent reimbursement obligations pursuant to letters of credit thereunder).

“Moody’s” means Moody’s Investors Service, Inc.

“Net Cash Proceeds” means, with respect to any issuance or sale of Capital Stock or Subordinated Shareholder Debt, the cash proceeds of such issuance or sale net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, listing fees, discounts or commissions and brokerage, consultant and other fees and charges actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result of such issuance or sale (after taking into account any available tax credit or deductions and any tax sharing arrangements).

“Net Proceeds” means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration or Cash Equivalents substantially concurrently received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale, taxes paid or payable as a result of the Asset Sale, and all distributions and other payments required to be made to minority interest holders (other than the Company or any Subsidiary) in Subsidiaries or joint ventures as a result of such Asset Sale, and any reserve for adjustment or indemnification obligations in respect of the sale price of such asset or assets established in accordance with IFRS.

“Non-Recourse Debt” means Indebtedness as to which neither the Company nor any of its Restricted Subsidiaries (1) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) or (2) is directly or indirectly liable as a guarantor or otherwise.

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Offering Circular” means the offering circular dated May 16, 2014, relating to the sale of the Second Lien Notes and the First Lien Notes.

“Officer” means, with respect to any Person, the Chief Executive Officer and the Chief Financial Officer of such Person or a responsible accounting or financial officer of such Person.

“Officer’s Certificate” means a certificate signed by an Officer.

“Parent Guarantors” means each of the Company and Matalan Group Limited and any other Subsidiary of the Company (other than the Issuer or any Subsidiary of the Issuer) that executes a Second Lien Note Guarantee in accordance with the provisions of the Second Lien Indenture, and their respective successors and assigns, in each case, until the Second Lien Note Guarantee of such Person has been released in accordance with the provisions of the Second Lien Indenture.

“Parent Holdco” means, with respect to any Person, any Person (other than a natural person) which legally and beneficially owns more than 50% of the Voting Stock and/or Capital Stock of such Person, either directly or through one or more Subsidiaries.

“Pari Passu Indebtedness” means (1) any Indebtedness of the Issuer that is pari passu in right of payment to the Second Lien Notes and (2) with respect to any Second Lien Note Guarantee, Indebtedness which ranks pari passu in right of payment to such Second Lien Note Guarantee.

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“Permitted Business” means (1) any businesses, services or activities engaged in by the Company or any of the Restricted Subsidiaries on the Issue Date and (2) any businesses, services and activities engaged in by the Company or any of the Restricted Subsidiaries that are related, complementary, incidental, ancillary or similar to any of the foregoing or are extensions or developments of any thereof.

“Permitted Collateral Lien” means:

(1) Liens on the Collateral to secure the Second Lien Notes on the Issue Date and the Second Lien Note Guarantees and any Permitted Refinancing Indebtedness in respect thereof (and any Permitted Refinancing Indebtedness in respect of Permitted Refinancing Indebtedness); provided that each of the parties thereto will have entered into the Intercreditor Agreement or an Additional Intercreditor Agreement;

(2) Liens on the Collateral that are described in one or more of clauses (2), (3), (4) (provided that such Liens may rank senior to the Liens securing the First Lien Notes with respect to distributions of proceeds of any enforcement of Collateral), (5), (6), (7), (8), (9), (12), (13), (14), (15), (16), (17), (18), (20), (21), (22), (23), (24), (25), (26), (29) and (30) (but in the case of clause (30) only to the extent it relates to any of the foregoing) of the definition of “Permitted Liens”;

(3) Liens on the Collateral to secure any Indebtedness (including any Additional Second Lien Notes) that are permitted to be incurred under (a) the first paragraph of the covenant described under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” or clause (13) of the second paragraph of the covenant described under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”, (b) clause (17) of the second paragraph of the covenant described under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” and (c) any Permitted Refinancing Indebtedness in respect of Indebtedness specified in clause (a) above (and any Permitted Refinancing Indebtedness in respect of Permitted Refinancing Indebtedness); provided that, in the case of clause (a) or (b) only if such Indebtedness is secured by a First Priority Lien, on the date of such incurrence after giving pro forma effect thereto and the application of proceeds therefrom, the Senior Secured Leverage Ratio of the Company would have been no more than 3.5 to 1.0;

(4) Liens on the Collateral to secure (a) the First Lien Notes on the Issue Date and the related Guarantees thereof and any Permitted Refinancing in respect thereof (and Permitted Refinancing Indebtedness in respect of Permitted Refinancing Indebtedness) and (b) any Indebtedness that is permitted to be incurred under clauses (1), (5) (to the extent the Indebtedness refinanced was secured by Liens on the Collateral on a pari passu or priority basis to the Second Lien Notes or the Second Lien Note Guarantees), (8), (9) (in the case of clause (9), to the extent such Guarantee is in respect of Indebtedness otherwise permitted to be secured and specified in clauses (3) and (4) of the definition of “Permitted Collateral Liens”) and (19) of the second paragraph of the covenant described under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” and any Permitted Refinancing Indebtedness in respect of any of the foregoing (and any Permitted Refinancing Indebtedness in respect of Permitted Refinancing Indebtedness); and

(5) any Lien securing Indebtedness on a pari passu or junior basis to the Second Lien Notes (and if such Indebtedness is not Pari Passu Indebtedness, on a junior basis) ; provided that each of the parties in respect thereto will have entered into the Intercreditor Agreement or an Additional Intercreditor Agreement as an Additional Second Lien Representative (as defined in the Intercreditor Agreement) or an Additional Second Lien Creditor (as defined in the Intercreditor Agreement) or otherwise as required by the terms thereof;

provided, however, in the case of clauses (3) and (4), that

(A) any such Indebtedness is subject to the Intercreditor Agreement or to an Additional Intercreditor Agreement; and

(B) the Collateral securing such Indebtedness shall also secure the Second Lien Notes or the Second Lien Note Guarantees on a junior basis.

“Permitted Holders” means, collectively, (1) the Principal and Related Parties and (2) any Person who is acting as an underwriter in connection with a public or private offering of Capital Stock of any Parent Holdco of the Company or the Company, acting in such capacity. Any person or group whose acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of the Second Lien Indenture will thereafter, together with its Affiliates, constitute an additional Permitted Holder.

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“Permitted Investments” means:

(1) any Investment in the Company or in a Restricted Subsidiary;

(2) any Investment in cash and Cash Equivalents;

(3) any Investment by the Company or any Restricted Subsidiary in a Person, if as a result of such Investment:

(a) such Person becomes a Restricted Subsidiary; or

(b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary;

(4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption “—Repurchase at the Option of Holders—Asset Sales”;

(5) any acquisition of assets or Capital Stock solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company or Subordinated Shareholder Debt;

(6) any Investments received in compromise or resolution of (a) obligations of trade creditors or customers that were incurred in the ordinary course of business of the Company or any of its Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (b) litigation, arbitration or other disputes;

(7) Investments in receivables owing to the Company or any Restricted Subsidiary created or acquired in the ordinary course of business;

(8) Investments represented by Hedging Obligations, which obligations are permitted by clause (8) of the second paragraph of the covenant entitled “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”;

(9) Investments in the Second Lien Notes and any other Indebtedness of the Company or any Restricted Subsidiary;

(10) any Guarantee of Indebtedness permitted to be incurred by the covenant described above under the caption “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”;

(11) any Investment existing on, or made pursuant to binding commitments existing on, the Issue Date and any Investment consisting of an extension, modification or renewal of any Investment existing on, or made pursuant to a binding commitment existing on, the Issue Date; provided that the amount of any such Investment may be increased (a) as required by the terms of such Investment as in existence on the Issue Date or (b) as otherwise permitted under the Second Lien Indenture;

(12) Investments acquired after the Issue Date as a result of the acquisition by the Company or any Restricted Subsidiary of another Person, including by way of a merger, amalgamation or consolidation with or into the Company or any of its Restricted Subsidiaries in a transaction that is not prohibited by the covenant described above under the caption “—Certain Covenants—Merger, Consolidation or Sale of Assets” after the Issue Date to the extent that such Investments were not made in contemplation of such acquisition, merger, amalgamation or consolidation and were in existence on the date of such acquisition, merger, amalgamation or consolidation;


(14) Investments in joint ventures of the Company or any of its Restricted Subsidiaries that, together with any Indebtedness incurred pursuant to clause (18) of the definition of “Permitted Debt” does not exceed £10.0 million in the aggregate at any one time outstanding; provided, however, that if any Investment made pursuant to this clause (14) is made in any Person that is not a Restricted Subsidiary of the Company at the date of the making of such Investment and such Person becomes a Restricted Subsidiary of the Company after such date, such Investment shall thereafter be deemed to have been

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made pursuant to clause (1) or (3) above and shall cease to have been made pursuant to this clause (14) for so long as such Person continues to be a Restricted Subsidiary; and

(15) other Investments in any Person having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (15) that are at the time outstanding not to exceed the greater of £10.0 million and 2.5% of Consolidated Total Assets of the Company; provided that if an Investment is made pursuant to this clause in a Person that is not a Restricted Subsidiary and such Person subsequently becomes a Restricted Subsidiary or is subsequently designated a Restricted Subsidiary pursuant to the covenant described above under the caption “—Certain Covenants—Restricted Payments”, such Investment shall thereafter be deemed to have been made pursuant to clause (1) or (3) of the definition of “Permitted Investments” and not this clause (15).

“Permitted Liens” means:

(1) Liens in favor of the Company or any of the Restricted Subsidiaries;

(2) Liens on property (including Capital Stock) of a Person existing at the time such Person becomes a Restricted Subsidiary or is merged with or into or consolidated with the Company or any Restricted Subsidiary; provided that such Liens were in existence prior to the contemplation of such Person becoming a Restricted Subsidiary or such merger or consolidation, were not incurred in contemplation thereof and do not extend to any assets other than those of the Person that becomes a Restricted Subsidiary or is merged with or into or consolidated with the Company or any Restricted Subsidiary;

(3) Liens to secure the performance of statutory obligations, trade contracts, insurance, surety or appeal bonds, workers compensation obligations, leases, performance bonds or other obligations of a like nature incurred in the ordinary course of business (including Liens to secure letters of credit issued to assure payment of such obligations);

(4) Liens to secure Indebtedness permitted by clause (4) of the second paragraph of the covenant entitled “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” covering only the assets acquired with or financed by such Indebtedness;

(5) Liens existing on the Issue Date after giving pro forma effect to the use of proceeds of the Second Lien Notes and First Lien Notes as set forth in the Offering Circular;

(6) Liens for taxes, assessments or governmental charges or claims that (a) are not yet due and payable or (b) are being contested in good faith by appropriate proceedings;

(7) Liens imposed by law, such as carriers’, warehousemen’s, landlord’s and mechanics’ Liens, in each case, incurred in the ordinary course of business;

(8) survey exceptions, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

(9) Liens created for the benefit of (or to secure) the Second Lien Notes (or the Second Lien Note Guarantees);

(10) Liens securing Indebtedness under Hedging Obligations, which obligations are permitted by clause (8) of the second paragraph of the covenant described above under the caption “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”;

(11) Liens to secure any Permitted Refinancing Indebtedness (excluding Liens to secure Permitted Refinancing Indebtedness initially secured pursuant to clause (19) of this definition) permitted to be incurred under the Second Lien Indenture; provided, however, that:

(a) the new Lien is limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements and accessions to such property or proceeds or distributions thereof); and

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(b) the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the Indebtedness renewed, refunded, refinanced, replaced, defeased or discharged with such Permitted Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge;

(12) Liens on insurance policies and proceeds thereof, or other deposits, to secure insurance premium financings;

(13) filing of Uniform Commercial Code financing statements under U.S. state law (or similar filings under applicable jurisdiction) in connection with operating leases in the ordinary course of business;

(14) bankers’ Liens, rights of setoff or similar rights and remedies as to deposit accounts, Liens arising out of judgments or awards not constituting an Event of Default and notices of lis pendens and associated rights related to litigation being contested in good faith by appropriate proceedings;

(15) Liens on cash, Cash Equivalents or other property arising in connection with the defeasance, discharge or redemption of Indebtedness;

(16) Liens on specific items of inventory or other goods (and the proceeds thereof) of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created in the ordinary course of business for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(17) leases, licenses, subleases and sublicenses of assets in the ordinary course of business;

(18) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of assets entered into in the ordinary course of business;

(19) Liens incurred by the Company or any Restricted Subsidiary to secure Indebtedness in an aggregate amount not to exceed £20.0 million at any one time outstanding;

(20) (a) mortgages, liens, security interests, restrictions, encumbrances or any other matters of record that have been placed by any developer, landlord or other third party on property over which the Company or any Restricted Subsidiary has easement rights or on any real property leased by the Company or any Restricted Subsidiary and subordination or similar agreements relating thereto and (b) any condemnation or eminent domain proceedings or compulsory purchase order affecting real property;

(21) Liens on property or assets under construction (and related rights) in favor of a contractor or developer or arising from progress or partial payments by a third party relating to such property or assets;

(22) Liens securing or arising by reason of any netting or set-off arrangement entered into in the ordinary course of banking or other trading activities;

(23) Liens (including put and call arrangements) on Capital Stock or other securities of any Unrestricted Subsidiary that secure Indebtedness of such Unrestricted Subsidiary;

(24) pledges of goods, the related documents of title and/or other related documents arising or created in the ordinary course of the Company or any Restricted Subsidiary’s business or operations as Liens only for Indebtedness to a bank or financial institution directly relating to the goods or documents on or over which the pledge exists;

(25) Liens over cash paid into an escrow account pursuant to any purchase price retention arrangement as part of any permitted disposal by the Company or a Restricted Subsidiary on condition that the cash paid into such escrow account in relation to a disposal does not represent more than 15% of the net proceeds of such disposal;

(26) limited recourse Liens in respect of the ownership interests in, or assets owned by, any joint ventures which are not Restricted Subsidiaries securing obligations of such joint ventures;

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(27) Liens on any proceeds loan made by the Company or any Restricted Subsidiary in connection with any future incurrence of Indebtedness permitted under the Second Lien Indenture and securing that Indebtedness;

(28) Liens created on any asset of the Company or a Restricted Subsidiary established to hold assets of any stock option plan or any other management or employee benefit or incentive plan or unit trust of the Company or a Restricted Subsidiary securing any loan to finance the acquisition of such assets;

(29) Liens over treasury stock of the Company or a Restricted Subsidiary purchased or otherwise acquired for value by the Company or such Restricted Subsidiary pursuant to a stock buy-back scheme or other similar plan or arrangement; and

(30) any extension, renewal, refinancing or replacement, in whole or in part, of any Lien described in the foregoing clauses (1) through (29) (but excluding clauses (4) and (19)); provided that any such Lien is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Lien arose, could secure) the Indebtedness being refinanced.

“Permitted Parent Payments” means, without duplication as to amounts, payments to any parent company of the Company to permit such entity to pay reasonable franchise taxes and other amounts required to maintain the corporate existence, accounting, legal and administrative expenses of such entity; provided that the aggregate amount of such Permitted Parent Payments does not exceed £1.0 million in any 12-month period.

“Permitted Refinancing Indebtedness” means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, exchange, defease or discharge other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness (other than any proceeds loan)); provided that:

(1) the aggregate principal amount (or accreted value, if applicable), or if issued with original issue discount, aggregate issue price) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable, or if issued with original issue discount, aggregate issue price) of the Indebtedness renewed, refunded, refinanced, replaced, exchanged, defeased or discharged (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith);

(2) such Permitted Refinancing Indebtedness has (a) a final maturity date that is either (i) no earlier than the final maturity date of the Indebtedness being renewed, refunded, refinanced, replaced, exchanged, defeased or discharged or (ii) after the final maturity date of the Second Lien Notes and (b) has a Weighted Average Life to Maturity that is equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged;

(3) if the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged is expressly, contractually subordinated in right of payment to the Second Lien Notes or the Second Lien Note Guarantees, as the case may be, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Second Lien Notes or the Second Lien Note Guarantees, as the case may be, on terms at least as favorable to the holders of Second Lien Notes or the Second Lien Note Guarantees, as the case may be, as those contained in the documentation governing the Indebtedness being renewed, refunded, refinanced, replaced, exchanged, defeased or discharged; and

(4) if the Company or any Guarantor was the obligor on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged, such Indebtedness is incurred either by the Company, a Finance Subsidiary or by a Guarantor.

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“pounds” means British pounds sterling, the lawful currency of the United Kingdom.

“Pre-Expansion European Union” means the European Union as of January 1, 2004, including the countries of Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom, but not including any country which became or becomes a member of the European Union after January 1, 2004.

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“Principal” means John Hargreaves.

“Public Debt” means any Indebtedness consisting of bonds, debentures, notes or other similar debt securities issued in (1) a public offering registered under the Securities Act or (2) a private placement to institutional investors that is underwritten for resale in accordance with Rule 144A or Regulation S under the Securities Act, whether or not it includes registration rights entitling the holders of such debt securities to registration thereof with the SEC for public resale.

“Public Equity Offering” means, with respect to any Person, a bona fide underwritten primary public offering of the ordinary shares or common equity of such Person, either:

(1) pursuant to a flotation on the London Stock Exchange or any other nationally recognized stock exchange or listing authority in a member state of the Pre-Expansion European Union; or

(2) pursuant to an effective registration statement under the U.S. Securities Act (other than a registration statement on Form S-8 or otherwise relating to Equity Interests issued or issuable under any employee benefit plan).

“Public Market” means any time after:

(1) a Public Equity Offering has been consummated; and

(2) shares of common stock or other common equity interests of the IPO Entity having a market value of at least £100 million on the date of such Public Equity Offering have been distributed pursuant to such Public Equity Offering.

“Refinancing” has the meaning given to such term in the Offering Circular.

“Related Parties” means:

(1) the parents or spouse of any Principal, the parents of any Principal’s spouse and any of any Principal’s, his/her spouse’s or their parents’ direct descendants; or

(2) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, shareholders, partners, members, owners or Persons beneficially holding a 50.1% or more controlling interest of which consist of any one or more Principal and/or such other Persons referred to in the immediately preceding clause (1) (including Abacus Trust Company Limited and Colyb Limited).

“Representative” means any trustee, agent or representative (if any) for an issue of Indebtedness or the provider of Indebtedness (if provided on a bilateral basis), as the case may be.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Subsidiary” means any Subsidiary of the Company that is not an Unrestricted Subsidiary.

“Revolving Credit Facility” means the revolving credit facility agreement entered into on or prior to the Issue Date among the Issuer, as borrower, certain of the Company’s Subsidiaries, as guarantors, and certain financial institutions, with aggregate availability on the Issue Date of up to £50.0 million, as amended, restated, supplemented, waived, replaced (whether or not upon termination, and whether with the original lenders or otherwise), restructured, repaid, refunded, refinanced or otherwise modified from time to time, including any agreement, indenture, trust deed or other facility providing for revolving credit loans, term loans, receivables financing, letters of credit, bonds, notes debentures or other corporate debt instruments or other Indebtedness, in each case, extending the maturity thereof, refinancing, replacing or otherwise restructuring all or any portion of the Indebtedness under such agreement or agreements (including any indenture, trust deed or credit facility) or any successor or replacement agreement or agreements (including any indenture, trust deed or credit facility) or increasing the amount loaned thereunder (subject to compliance with the covenant described under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”) or altering the maturity thereof.

“S&P” means Standard & Poor’s Ratings Group.

“SEC” means the United States Securities and Exchange Commission.

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“Second Lien Note Guarantee” means the Guarantee by each Guarantor of the Company’s obligations under the Second Lien Indenture and the Second Lien Notes, executed (including by way of supplemental indenture, if applicable) pursuant to the provisions of the Second Lien Indenture.

“Securities Act” means the United States Securities Act of 1933, as amended.

“Security Agent” means Lloyds Bank plc, as security agent pursuant to the Intercreditor Agreement, or any successor or replacement security agent acting in such capacity.

“Security Documents” means the debenture, dated on or around the Issue Date, among the Company and certain of its Subsidiaries, as chargors, and the Security Agent, and any other document that provides for a Lien over any Collateral for the benefit of the holders of the Second Lien Notes, in each case, as amended, supplemented or restated from time to time.

“Senior Secured Debt” means, with respect to any Person as of any date of determination, any Indebtedness of such Person and its Restricted Subsidiaries that (1) is secured by a Permitted Collateral Lien pursuant to clauses (1), (2) (other than with respect to clause (4) of the definition of “Permitted Liens”), (3) and (4) of the definition thereof determined on a consolidated basis in accordance with IFRS that is also a First Priority Lien or (2) is incurred by a Restricted Subsidiary that is not the Issuer or a Guarantor pursuant to clause (1), (13)(y) (including any Permitted Refinancing Indebtedness in respect thereof incurred by a Restricted Subsidiary that is not the Issuer or a Guarantor) or (19) of the second paragraph of the covenant entitled “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”.

“Senior Secured Leverage” means the sum of aggregate amount of Senior Secured Debt of the Company and its Restricted Subsidiaries (excluding Hedging Obligations that are permitted to be incurred by clause (8) of the definition of “Permitted Debt”).

“Senior Secured Leverage Ratio” means the Consolidated Leverage Ratio with respect to any specified Person as of any date of determination, but calculated by replacing “Consolidated Leverage” with “Senior Secured Leverage” in clause (i) of the definition of “Consolidated Leverage Ratio”.

“Significant Subsidiary” means, at the date of determination, any Restricted Subsidiary that together with its Subsidiaries which are Restricted Subsidiaries (1) for the most recent fiscal year, accounted for more than 10% of the consolidated revenues of the Company or (2) as of the end of the most recent fiscal year, was the owner of more than 10% of the consolidated assets of the Company.

“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness as of the Issue Date, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

“Subordinated Shareholder Debt” means Indebtedness of the Company held by one or more of its shareholders; provided that such Indebtedness (and any security into which such Indebtedness is convertible or for which it is exchangeable at the option of the holder) (1) does not mature or require any amortization, redemption or other repayment of principal or any sinking fund payment prior to the first anniversary of the Stated Maturity of the Second Lien Notes, (2) does not pay cash interest, (3) contains no change of control provisions and has no right to declare a default or event of default or take any enforcement action prior to the first anniversary of the Stated Maturity of the Second Lien Notes, (4) is unsecured and (5) is fully subordinated and junior in right of payment to the Second Lien Notes.

“Subsidiary” means, with respect to any specified Person:

(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(2) any partnership or limited liability company of which (a) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general and limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof, whether in the form of membership, general,

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special or limited partnership interests or otherwise, and (b) such Person or any Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

“Subsidiary Guarantors” means each of (1) Matalan Limited, (2) Matalan Retail Limited, (3) Matalan Holding Company Limited and (4) any other Subsidiary of the Company that executes a Second Lien Note Guarantee in accordance with the provisions of the Second Lien Indenture, and their respective successors and assigns, in each case, until the Second Lien Note Guarantee of such Person has been released in accordance with the provisions of the Second Lien Indenture.

“Tax” means any tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and any other additions thereto, and, for the avoidance of doubt, including any withholding or deduction for or on account of Tax).

“Taxes” and “Taxation” shall be construed to have corresponding meanings.

“UK Government Securities” means direct obligations of, or obligations guaranteed by, the United Kingdom, and the payment for which the United Kingdom pledges its full faith and credit.

“Unrestricted Subsidiary” means any Subsidiary of the Company (other than the Issuer or any Parent Guarantor or any successor to the Issuer or any Parent Guarantor) that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors but only to the extent that such Subsidiary:

(1) has no Indebtedness other than Non-Recourse Debt;

(2) except as permitted by the covenant described above under the caption “—Certain Covenants—Transactions with Affiliates”, is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; and

(3) is a Person with respect to which neither the Company nor any Restricted Subsidiary has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results.

“Voting Stock” of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one- twelfth) that will elapse between such date and the making of such payment; by

(2) the then outstanding principal amounts of such Indebtedness.

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BOOK-ENTRY; DELIVERY AND FORM

General

First Lien Notes sold to qualified institutional buyers in reliance on Rule 144A under the Securities Act will be represented by a global note in registered form without interest coupons attached (the “Rule 144A First Lien Global Note”). Second Lien Notes sold to qualified institutional buyers in reliance on Rule 144A under the Securities Act will be represented by a global note in registered form without interest coupons attached (the “Rule 144A Second Lien Global Note”, together, with the Rule 144A First Lien Global Note, the “Rule 144A Global Notes”). First Lien Notes sold to non-U.S. persons in reliance on Regulation S under the Securities Act will be represented by a global note in registered form without interest coupons attached (the “Regulation S First Lien Global Note”). Second Lien Notes sold to non-U.S. persons in reliance on Regulation S under the Securities Act will be represented by a global note in registered form without interest coupons attached (the “Regulation S Second Lien Global Note”, together, with the Regulation S First Lien Global Note, the “Regulation S Global Notes,” and, collectively with the Rule 144A Global Notes, the “Global Notes”). The Global Notes will be deposited, on the Issue Date, with a common depositary and registered in the name of the nominee of the common depositary for the accounts of Euroclear and Clearstream.

Ownership of interests in the Rule 144A Global Notes (“Rule 144A Book-Entry Interests”) and in the Regulation S Global Notes (the “Regulation S Book-Entry Interests” and, together with the Rule 144A Book-Entry Interests, the “Book-Entry Interests”) will be limited to persons that have accounts with Euroclear and/or Clearstream or persons that hold interests through such participants. Euroclear and Clearstream will hold interests in the Global Notes on behalf of their participants through customers’ securities accounts in their respective names on the books of their respective depositaries. Except under the limited circumstances described below, Book- Entry Interests will not be held in definitive certificated form. The Book- Entry Interests in the Global Notes will be issued only in denominations of £100,000 and in integral multiples of £1,000 in excess thereof.

Book-Entry Interests will be shown on, and transfers thereof will be done only through, records maintained in book-entry form by Euroclear and Clearstream and their participants. The laws of some jurisdictions, including certain states of the United States, may require that certain purchasers of securities take physical delivery of such securities in definitive certificated form. The foregoing limitations may impair the ability to own, transfer or pledge Book-Entry Interests. In addition, while the Notes are in global form, holders of Book-Entry Interests will not be considered the owners or “holders” of Notes for any purpose.

So long as the Notes are held in global form, the common depositary for Euroclear and/or Clearstream, as applicable (or its nominee), will be considered the sole holders of the Global Notes for all purposes under the Indentures governing the Notes. In addition, participants must rely on the procedures of Euroclear and/or Clearstream, and indirect participants must rely on the procedures of Euroclear, Clearstream and the participants through which they own Book-Entry Interests, to transfer their interests or to exercise any rights of holders under the Indentures.

Neither the Issuer, the Guarantors nor the Trustee the Paying agent, Transfer agent or Registrar will have any responsibility, or be liable, for any aspect of the records relating to the Book-Entry Interests.

Redemption of the Global Notes

In the event that any Global Note (or any portion thereof) is redeemed, Euroclear and/or Clearstream, as applicable, will redeem an equal amount of the Book-Entry Interests in such Global Note from the amount received by it in respect of the redemption of such Global Note. The redemption price payable in connection with the redemption of such Book-Entry Interests will be equal to the amount received by Euroclear and/or Clearstream, as applicable, in connection with the redemption of such Global Note (or any portion thereof). The Issuer understands that, under the existing practices of Euroclear and Clearstream, if fewer than all of the Notes are to be redeemed at any time, Euroclear and Clearstream will credit their respective participants’ accounts on a proportionate basis (with adjustments to prevent fractions), by lot or on such other basis as they deem fair and appropriate, provided, however, that no Book-Entry Interest of less than £100,000 principal amount may be redeemed in part.

Payments on Global Notes

The Issuer will make payments of any amounts owing in respect of the Global Notes (including principal, premium, if any, interest, and any additional interest and Additional Amounts) to the common depositary or its nominee for Euroclear and Clearstream, which will distribute such payments to participants in accordance with their customary procedures. The Issuer expects that standing customer instructions and customary practices will govern payments by participants to owners of Book-Entry Interests held through such participants.

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Under the terms of the Indentures, the Issuer and the Trustee will treat the registered holder of the Global Notes (i.e., the common depositary for Euroclear or Clearstream (or its nominee)) as the owner thereof for the purpose of receiving payments and for all other purposes. Consequently, none of the Issuer, the Trustee or any of its or their respective agents has or will have any responsibility or liability for:

• any aspect of the records of Euroclear, Clearstream or any participant or indirect participant relating to, or payments made on account of, a Book- Entry Interest or for maintaining, supervising or reviewing the records of Euroclear, Clearstream or any participant or indirect participant relating to, or payments made on account of, a Book-Entry Interest; or

• maintaining, supervising or reviewing the records of Euroclear, Clearstream or any participant or indirect participant.

Currency of Payment for the Global Notes

The principal of, premium, if any, and interest on, and all other amounts payable in respect of, the Global Notes will be paid in pounds sterling.

Action by Owners of Book-Entry Interests

Euroclear and Clearstream have advised the Issuer that they will take any action permitted to be taken by a holder of Notes (including the presentation of Notes for exchange as described above) only at the direction of one or more participants to whose account the Book-Entry Interests in the Global Notes are credited and only in respect of such portion of the aggregate principal amount of Notes as to which such participant or participants has or have given such direction. Euroclear and Clearstream will not exercise any discretion in the granting of consents, waivers or the taking of any other action in respect of the Global Notes. However, if there is an event of default under the Notes, Euroclear and Clearstream each reserve the right to exchange the Global Notes for definitive registered Notes in certificated form (“Definitive Registered Notes”), and to distribute Definitive Registered Notes to their participants.

Transfers

Transfers between participants in Euroclear and Clearstream will be effected in accordance with Euroclear and Clearstream rules and will be settled in immediately available funds. If a holder requires physical delivery of Definitive Registered Notes for any reason, including to sell Notes to persons in states which require physical delivery of securities or to pledge such securities, such holder must transfer its interests in the Global Notes in accordance with the normal procedures of Euroclear and Clearstream and in accordance with the procedures set forth in the Indentures governing the Notes.

The Rule 144A Global Notes will have a legend to the effect set forth under “Notice to Investors”. Book-Entry Interests in the Global Notes will be subject to the restrictions on transfers and certification requirements discussed under “Notice to Investors”.

Rule 144A Book-Entry Interests may be transferred to a person who takes delivery in the form of a Regulation S Book-Entry Interest only upon delivery to the Trustee by the transferor of a written certification (in the form provided in the Indentures) to the effect that such transfer is being made in accordance with Regulation S or Rule 144 under the Securities Act or any other exemption (if available under the Securities Act).

Regulation S Book-Entry Interests may be transferred to a person who takes delivery in the form of a Rule 144A Book-Entry Interest denominated in the same currency only upon delivery to the Trustee by the transferor of a written certification (in the form provided in the Indentures) to the effect that such transfer is being made to a person who the transferor reasonably believes is a “qualified institutional buyer” within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or otherwise in accordance with the transfer restrictions described under “Notice to Investors” and in accordance with any applicable securities laws of any other jurisdiction.

In connection with transfers involving an exchange of a Regulation S Book-Entry Interest for a Rule 144A Book-Entry Interest, appropriate adjustments will be made to reflect a decrease in the principal amount of the Regulation S Global Note and a corresponding increase in the principal amount of the Rule 144A Global Note.

Any Book-Entry Interest in one of the Global Notes that is transferred to a person who takes delivery in the form of a Book-Entry Interest in any other Global Note will, upon transfer, cease to be a Book-Entry Interest in the first-mentioned Global Note and become a Book-Entry Interest in such other Global Note, and accordingly will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to Book-Entry Interests in such other Global Note for as long as it remains such a Book- Entry Interest.

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Definitive Registered Notes

Under the terms of the Indentures, owners of the Book-Entry Interests will receive Definitive Registered Notes:

• if Euroclear or Clearstream notifies the Issuer that it is unwilling or unable to continue to act as depositary and a successor depositary is not appointed by the Issuer within 120 days; or

• if Euroclear or Clearstream so requests following an Event of Default under the Indentures.

In the case of the issuance of Definitive Registered Notes, the holder of a Definitive Registered Note may transfer such note by surrendering it to the registrar or a transfer agent. In the event of a partial transfer or a partial redemption of a holding of Definitive Registered Notes represented by one Definitive Registered Note, a Definitive Registered Note will be issued to the transferee in respect of the part transferred and a new Definitive Registered Note in respect of the balance of the holding not transferred or redeemed will be issued to the transferor or the holder, as applicable; provided that no Definitive Registered Note in a denomination less than £100,000 will be issued. The Issuer will bear the cost of preparing, printing, packaging and delivering the Definitive Registered Notes.

The Issuer will not be required to register the transfer or exchange of Definitive Registered Notes for a period of 15 calendar days preceding (i) the record date for any payment of interest on the Notes, (ii) any date fixed for redemption of the Notes or (iii) the date fixed for selection of the Notes to be redeemed in part. Also, the Issuer is not required to register the transfer or exchange of any Notes selected for redemption or which the holder has tendered (and not withdrawn) for repurchase in connection with a change of control offer or asset sale offer. In the event of the transfer of any Definitive Registered Note, the trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents as described in the Indentures. The Issuer may require a holder to pay any transfer taxes and fees required by law and permitted by the Indentures and the Notes.

If Definitive Registered Notes are issued and a holder thereof claims that such a Definitive Registered Note has been lost, destroyed or wrongfully taken, or if such Definitive Registered Note is mutilated and is surrendered to the registrar or at the office of a transfer agent, the Issuer will issue and the Trustee will authenticate a replacement Definitive Registered Note if the Trustee’s and the Issuer’s requirements are met. The Issuer or the Trustee may require a holder requesting replacement of a Definitive Registered Note to furnish an indemnity bond sufficient in the judgment of both to protect themselves, the Trustee or the paying agent appointed pursuant to the Indentures from any loss which any of them may suffer if a Definitive Registered Note is replaced. The Issuer may charge for any expenses incurred by the Issuer in replacing a Definitive Registered Note.

In case any such mutilated, destroyed, lost or stolen Definitive Registered Note has become or is about to become due and payable, or is about to be redeemed or purchased by the Issuer pursuant to the provisions of the Indentures, the Issuer, in its discretion, may, instead of issuing a new Definitive Registered Note, pay, redeem or purchase such Definitive Registered Note, as the case may be.

Definitive Registered Notes may be transferred and exchanged only after the transferor first delivers to the Trustee a written certification (in the form provided in the Indentures) to the effect that such transfer will comply with the transfer restrictions applicable to such Notes. See “Notice to Investors”.

For so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange and admitted for trading on the Euro MTF Market, the Issuer will publish a notice of any issuance of Definitive Registered Notes in a newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort) or, to the extent and in the manner permitted by such rules, post such notice on the official website of the Luxembourg Stock Exchange (www.bourse.lu).

Information Concerning Euroclear and Clearstream

All Book-Entry Interests will be subject to the operations and procedures of Euroclear and Clearstream, as applicable. The Issuer provides the following summaries of those operations and procedures solely for the convenience of investors. The operations and procedures of each settlement system are controlled by that settlement system and may be changed at any time. Neither the Issuer nor the initial purchasers are responsible for those operations or procedures.

The Issuer understands as follows with respect to Euroclear and Clearstream. Euroclear and Clearstream hold securities for participating organizations. They also facilitate the clearance and settlement of securities transactions between their respective participants through electronic book-entry changes in accounts of such participants. Euroclear and Clearstream provide various services to their participants, including the safekeeping, administration, clearance, settlement, lending and borrowing of internationally traded securities. Euroclear and Clearstream interface with domestic securities markets. Euroclear and Clearstream participants are financial institutions such as underwriters, securities

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brokers and dealers, banks, trust companies and certain other organizations. Indirect access to Euroclear and Clearstream is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodian relationship with a Euroclear or Clearstream participant, either directly or indirectly.

Because Euroclear and Clearstream can only act on behalf of participants, who in turn act on behalf of indirect participants and certain banks, the ability of an owner of a beneficial interest to pledge such interest to persons or entities that do not participate in the Euroclear or Clearstream systems, or otherwise take actions in respect of such interest, may be limited by the lack of a definite certificate for that interest. The laws of some jurisdictions require that certain persons take physical delivery of securities in definitive form. Consequently, the ability to transfer beneficial interests to such persons may be limited. In addition, owners of beneficial interests through the Euroclear or Clearstream systems will receive distributions attributable to the 144A Global Notes only through Euroclear or Clearstream participants.

Global Clearance and Settlement Under the Book-Entry System

The Notes represented by the Global Notes are expected to be listed on the Official List of the Luxembourg Stock Exchange and admitted for trading on the Euro MTF Market. Transfers of interests in the Global Notes between participants in Euroclear and Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures.

Although Euroclear and Clearstream currently follow the foregoing procedures in order to facilitate transfers of interests in the Global Notes among participants in Euroclear or Clearstream, as the case may be, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued or modified at any time. None of the Issuer, the Trustee or the Paying Agent will have any responsibility for the performance by Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

Initial Settlement

Initial settlement for the Notes will be made in pounds sterling. Book-Entry Interests owned through Euroclear or Clearstream accounts will follow the settlement procedures applicable to conventional bonds in registered form. Book-Entry Interests will be credited to the securities custody accounts of Euroclear and Clearstream holders on the business day following the settlement date against payment for value on the settlement date.

Secondary Market Trading

The Book-Entry Interests will trade through participants of Euroclear or Clearstream and will settle in same-day funds. Since the purchase determines the place of delivery, it is important to establish at the time of trading of any Book-Entry Interests where both the purchaser’s and the seller’s accounts are located to ensure that settlement can be made on the desired value date.

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TAX CONSIDERATIONS

European Tax Considerations

European Union Savings Tax Directive

Under EC Council Directive 2003/48/EC on the taxation of savings income (the “Tax Directive”), Member States are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments, (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). The rate of such withholding is currently 35%.

The Luxembourg Government has recently passed a bill implementing the automatic exchange of information with regards to savings income as from 1 January 2015, based on the current scope of the Tax Directive, in favor of automatic information exchange under the Tax Directive. A number of non-EU countries and territories including Switzerland and certain dependent or associated territories of certain Member States have adopted or agreed to adopt similar measures (a withholding system in the case of Switzerland). In addition, the Member States have entered into reciprocal provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or collected by such a person for, an individual resident in one of those territories. On 24 March 2014, the Council of the European Union adopted a Council Directive amending and broadening the scope of the requirements described above. Member States are required to apply these new requirements from 1 January 2017. In particular, the changes will expand the range of payments covered by the Tax Directive and will apply a “look through approach” to certain payments where an individual resident in a Member State is regarded as the beneficial owner of that payment for the purposes of the Tax Directive. This approach may apply to payments made to or by, or secured for or by, persons, entities or legal arrangements (including trusts), where certain conditions are satisfied, and may in some cases apply where the person, entity or arrangement is established or effectively managed outside of the European Union. These changes will also broaden the types of payments subject to withholding in those Member States which still operate a withholding system when they are implemented (i.e., Luxembourg and Austria).

On May 14, 2013 the Council of the European Union gave a mandate to the EU Commission to negotiate amended savings tax agreements with Switzerland, Liechtenstein, Monaco and San Marino to ensure that these five countries continue to apply measures that are equivalent to the Tax Directive, as amended. In March 2014, the Council of the European Union confirmed this mandate and asked the EU Commission to continue the negotiations with a view to concluding them until the end of year 2014.

If a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any paying agent nor any other person would be obliged to pay additional amounts to the noteholders or to otherwise compensate noteholders for the reduction in the amounts that they will receive as a result of the imposition of such withholding tax. However, the Issuer is required to maintain a paying agent in a Member State that will not be obliged to withhold or deduct tax pursuant to the Tax Directive (if such a state exists).

Certain United States Federal Income Tax Considerations to U.S. Holders

TO COMPLY WITH INTERNAL REVENUE SERVICE CIRCULAR 230, PROSPECTIVE

INVESTORS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF U.S. FEDERAL TAX ISSUES

CONTAINED OR REFERRED TO IN THIS OFFERING CIRCULAR IS NOT INTENDED OR WRITTEN TO

BE USED, AND CANNOT BE USED, BY PROSPECTIVE INVESTORS FOR THE PURPOSES OF AVOIDING

PENALTIES THAT MAY BE IMPOSED ON THEM UNDER THE U.S. INTERNAL REVENUE CODE

OF 1986, AS AMENDED; (B) SUCH DISCUSSION IS BEING USED IN CONNECTION WITH THE

PROMOTION OR MARKETING BY US OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN;

AND (C) PROSPECTIVE INVESTORS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR

CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

The following discussion is a summary of certain U.S. federal income tax consequences of the purchase, ownership and disposition of the Notes by a U.S. holder (as defined below), but does not purport to be a complete analysis of all potential tax effects. This summary is based upon the U.S. Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations issued thereunder, and judicial and administrative interpretations thereof, each as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. No rulings from the Internal Revenue Service (“IRS”) have been or are expected to be sought with respect to the matters discussed below.

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There can be no assurance that the IRS will not take a different position concerning the tax consequences of the purchase, ownership or disposition of the Notes or that any such position would not be sustained.

This discussion summary does not address all aspects of U.S. federal income tax consequences, does not address any U.S. federal tax consequences other than U.S. federal income tax consequences (such as estate or gift taxes or the Medicare tax on certain investment income) and does not deal with any foreign, state, local or other tax considerations that may be relevant to U.S. holders in light of their particular circumstances. This discussion also does not address all of the U.S. federal income tax consequences that may be relevant to a U.S. holder in light of such U.S. holder’s particular circumstances or to U.S. holders subject to special rules, such as financial institutions, U.S. expatriates, insurance companies, dealers in securities or currencies, traders in securities, U.S. holders whose functional currency is not the U.S. dollar, tax-exempt entities, regulated investment companies, real estate investment trusts, partnerships or other pass through entities (or investors in such entities), persons liable for alternative minimum tax and persons holding the Notes as part of a “straddle”, “hedge”, “conversion transaction” or other integrated transaction. In addition, this discussion is limited to persons who purchase the Notes for cash at original issue and at their “issue price” (generally, the first price at which a substantial amount of the Notes is sold to investors for cash, excluding sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) and who hold the Notes as capital assets within the meaning of section 1221 of the Code.

For purposes of this discussion, a “U.S. holder” is a beneficial owner of a Note that is, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States; (ii) a corporation organized under the laws of the United States, any state thereof or the District of Columbia; (iii) any estate the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) any trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or if a valid election is in place to treat the trust as a U.S. person.

If any entity treated as a partnership for U.S. federal income tax purposes holds the Notes, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A U.S. holder that is a partnership considering an investment in the Notes, and partners in such partnerships, should consult their tax advisors regarding the tax consequences of the purchase, ownership and disposition of the Notes.

Prospective purchasers of the Notes should consult their tax advisors concerning the U.S. federal tax

consequences of purchasing, owning and disposing of Notes in light of their particular circumstances, as well as

the tax consequences to you arising under the laws of any other tax jurisdiction.

Characterization of the Notes

In certain circumstances, the Notes provide for the payment of amounts in excess of stated interest or principal. Our obligation to pay such excess amounts may implicate the provisions of the Treasury regulations relating to “contingent payment debt instruments”. However, the possibility of such excess amounts being paid will not cause the Notes to be treated as contingent payment debt instruments if there is only a “remote” chance that any of these contingencies will occur or if such contingencies in the aggregate, are considered to be “incidental”. We intend to take the position that these contingencies are remote and/or incidental and, therefore, should not cause the Notes to be treated as contingent payment debt instruments. Our determination that these contingencies are remote and/or incidental will be binding on a holder unless the holder explicitly discloses its contrary position to the IRS in the manner required by applicable Treasury regulations. However, our determination is not binding on the IRS, and if the IRS successfully challenged this determination, it could adversely affect the amount, timing and character of the income that a U.S. holder must recognize (including, for example, by requiring a holder to accrue income at a rate greater than the stated interest rate on the Notes and by treating any gain recognized by a U.S. holder upon a disposition of a Note as ordinary income (rather than capital gain)). The remainder of this discussion assumes that the Notes will not be treated as contingent payment debt instruments.

Payments of Interest

Subject to the foreign currency rules discussed below, interest on a Note generally will be taxable to a U.S. holder as ordinary income at the time it is paid or accrued in accordance with such U.S. holder’s regular method of accounting for U.S. federal income tax purposes. In addition to interest on the Notes (without reduction for any foreign tax withheld from the interest payments received), a U.S. holder will be required to include in income any additional amounts paid in respect of such tax withheld.

A U.S. holder may be entitled to deduct or credit any tax withheld, subject to certain limitations (including that the election to deduct or credit foreign taxes applies to all of a U.S. holder’s applicable foreign taxes for a particular tax year). Interest income on a Note (including any additional amounts) generally will be considered foreign source income and, for purposes of the U.S. foreign tax credit, generally will be considered passive category income or, in the case of

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certain U.S. holders, general category income. A U.S. holder generally will be denied a foreign tax credit for foreign taxes imposed with respect to the Notes where such U.S. holder does not meet a minimum holding period requirement during which such U.S. holder is not protected from risk of loss. The rules governing the foreign tax credit are complex. U.S. holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

A U.S. holder that uses the cash method of accounting for U.S. federal income tax purposes and that receives a payment of stated interest will be required to include in income (as ordinary income) the U.S. dollar value of the sterling interest payment (determined by translating the sterling received at the spot rate of exchange in effect on the date such payment is received) regardless of whether the payment is in fact converted to U.S. dollars. A cash method U.S. holder will not recognize foreign currency exchange gain or loss with respect to the receipt of such stated interest, but may recognize exchange gain or loss attributable to the actual disposition of the sterling so received.

A U.S. holder that uses the accrual method of accounting for U.S. federal income tax purposes will be required to include in income (as ordinary income) the U.S. dollar value of the amount of interest income in sterling that has accrued with respect to a Note during an accrual period. The U.S. dollar value of such sterling denominated accrued income will be determined by translating such interest into U.S. dollars at the average spot rate of exchange for the accrual period or, with respect to an accrual period that spans two taxable years, at the average spot rate for the partial period within each taxable year. A U.S. holder may elect, however, to translate such accrued interest income into U.S. dollars using the spot rate of exchange on the last day of the accrual period or, with respect to an accrual period that spans two taxable years, using the spot rate of exchange on the last day of the portion of the accrual period within each taxable year. If the last day of an accrual period is within five business days of the date of receipt of the accrued interest, a U.S. holder may also translate such interest using the spot rate of exchange on the date of receipt. The above election will apply to all other obligations held by the U.S. holder from year to year and may not be changed without the consent of the IRS. U.S. holders are urged to consult their tax advisors regarding the advisability of making such election.

Upon receipt of an interest payment on a Note (including amounts received upon the sale, exchange, redemption, retirement or other taxable disposition of a Note attributable to accrued but unpaid interest), a U.S. holder that uses the accrual method of accounting for U.S. federal income tax purposes will recognize foreign currency exchange gain or loss in an amount equal to the difference, if any, between the U.S. dollar value of the sterling payment received (determined by translating the sterling received at the spot rate of exchange in effect on the date such payment is received) in respect of such accrual period and the U.S. dollar value of interest income that has accrued during such accrual period (as determined above), regardless of whether the payment is in fact converted to U.S. dollars at such time. Any such gain or loss will generally constitute ordinary income or loss and generally be treated, for U.S. foreign tax credit purposes, as U.S. source income or as an offset to U.S. source income, respectively and generally will not be treated as an adjustment to interest income or expense.

Sale, Exchange, Redemption, Retirement or Other Taxable Disposition of Notes

Subject to the foreign currency rules discussed below, upon the sale, exchange, redemption, retirement or other taxable disposition of a Note, a U.S. holder will generally recognize taxable gain or loss equal to the difference, if any, between the amount realized on such disposition (less any amount attributable to accrued but unpaid stated interest, which will be taxable as such to the extent not previously so taxed) and such U.S. holder’s adjusted tax basis in the Note. If a U.S. holder receives foreign currency on such a sale, exchange, redemption, retirement or other taxable disposition of a Note, the amount realized generally will be based on the U.S. dollar value of the foreign currency received based on the spot rate in effect on the date of such disposition. However, if the Notes are traded on an established securities market, a cash basis U.S. holder and, if it so elects, an accrual basis U.S. holder, will generally determine the U.S. dollar value of such foreign currency received by translating such amount at the spot rate in effect on the settlement date of the disposition. The settlement date election available to accrual basis U.S. holders in regard to the sale of Notes traded on an established securities market must be applied consistently to all debt instruments held by such U.S. holder from year to year and cannot be changed without the consent of the IRS. If a Note is not traded on an established securities market (or, if a Note is so traded, but a U.S. holder is an accrual basis taxpayer that has not made the settlement date election), a U.S. holder will recognize foreign currency exchange gain or loss (taxable as ordinary income or loss) if there are exchange rate fluctuations between the disposition date and the settlement date.

A U.S. holder’s adjusted tax basis in a Note will generally equal the U.S. dollar cost of such Note to such U.S. holder. If a U.S. holder uses foreign currency to purchase a Note, the cost of the Note generally will be the U.S. dollar value of the foreign currency purchase price determined on the spot rate on the date of purchase.

Any gain or loss recognized by a U.S. holder upon the sale, exchange, redemption, retirement or other taxable disposition of a Note generally will be U.S. source gain or loss and, except as discussed below with respect to foreign currency gain or loss, generally will be capital gain or loss and generally will be long-term capital gain or loss if at the time of the sale, exchange, redemption, retirement or other taxable disposition the Note has been held by such

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U.S. holder for more than one year. Long-term capital gain realized by a non-corporate U.S. holder will generally be subject to taxation at a reduced rate. The deductibility of capital losses is subject to limitations.

Any gain or loss realized upon the sale, exchange, redemption, retirement or other taxable disposition of a Note that is attributable to fluctuations in currency exchange rates will be ordinary income or loss and will generally be treated as U.S. source income or as an offset to U.S. source income, respectively. Gain or loss attributable to fluctuations in exchange rates generally will equal the difference between the U.S. dollar value of the U.S. holder’s sterling purchase price for the Note, determined at the spot rate on the date such Note is disposed of (or on the settlement date, if the Notes are traded on an established securities market and the holder is either a cash basis U.S. holder or an electing accrual basis U.S. holder), and the U.S. dollar value of such sterling purchase price for the Note, determined at the spot rate on the date the U.S. holder acquired such Note. In addition, upon the sale, exchange, redemption, retirement or other taxable disposition of a Note, an accrual method U.S. holder may realize exchange gain or loss attributable to amounts received in respect of accrued and unpaid stated interest. Any such exchange gain or loss with respect to accrued interest will be determined as discussed under “—Payments of Interest”. However, upon a sale, exchange, redemption, retirement or other taxable disposition of a Note, a U.S. holder will realize exchange gain or loss with respect to principal and accrued interest only to the extent of the total gain or loss realized on the disposition.

Disposition of Sterling Received

On a sale or other taxable disposition of sterling, a U.S. holder generally will recognize gain or loss in an amount equal to the difference, if any, between (i) the amount of U.S. dollars, or the fair market value in U.S. dollars of any other property, received by such U.S. holder in such disposition and (ii) such U.S. holder’s tax basis in the euros. A U.S. holder will have a tax basis in any sterling received as interest or upon the disposition of a Note equal to the U.S. dollar value of such sterling at the spot rate in effect on the date the interest is received or, in the case of a payment received in consideration of the disposition, on the date used to compute exchange gain or loss with respect to such disposition (as discussed above under “—Sale, Exchange, Redemption, Retirement or Other Taxable Disposition of Notes”).

Any gain or loss recognized by a U.S. holder on a sale or other disposition of sterling, including their exchange for U.S. dollars, generally will be ordinary income or loss and generally will be U.S. source gain or loss for U.S. foreign tax credit purposes.

Tax Return Disclosure Requirement

Treasury regulations meant to require the reporting of certain tax shelter transactions could be interpreted to cover certain transactions generally not regarded as tax shelters, including certain foreign currency transactions. Such transactions will include, in certain circumstances, a sale, exchange, redemption, retirement or other taxable disposition of a foreign currency Note or foreign currency received in respect of a Note to the extent that such sale, exchange, redemption, retirement or other taxable disposition results in a tax loss in excess of a threshold amount. U.S. holders should consult their tax advisors to determine the tax return obligations, if any, with respect to an investment in the Notes, including any requirement to file IRS Form 8886 (Reportable Transaction Disclosure Statement) as part of their U.S. federal income tax return.

Certain U.S. holders are required to report information relating to ownership of our Notes, subject to certain exceptions (including an exception for Notes held in accounts maintained by U.S. financial institutions), by attaching a complete IRS Form 8938, Statement of Specified Foreign Financial Assets to their tax return for each year in which they hold an interest in the Notes. U.S. holders should consult their tax advisors regarding the effect, if any, of these requirements on their ownership of the Notes, including the significant penalties for non-compliance.

Information Reporting and Backup Withholding

In general, payments of interest and the proceeds from sales or other dispositions (including retirements or redemptions) of Notes will be reported to the IRS, unless the U.S. holder is a corporation or other exempt recipient and, when required, demonstrates this fact. In addition, a U.S. holder that is not an exempt recipient may be subject to backup withholding with respect to the foregoing amounts unless it provides a taxpayer identification number and otherwise complies with applicable certification requirements.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. holder’s U.S. federal income tax liability and may entitle a U.S. holder to a refund, provided that the appropriate information is timely furnished to the IRS.

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Material United Kingdom Tax Considerations

The following is a general guide to UK tax considerations relating to the Notes based on the Issuer’s

understanding of current UK law and practice. It does not purport to be a complete analysis of all UK tax

considerations relating to the Notes. It applies only to persons who are the absolute beneficial owners of Notes and

some aspects do not apply to some classes of taxpayer (such as dealers and persons connected with the Issuer), to

whom special rates may apply. The UK tax treatment of prospective holders of Notes depends on their individual

circumstances and may be subject to change in the future. Prospective holders of Notes who may be subject to tax

in a jurisdiction other than the UK or who are in any doubt as to their tax position should consult their own

professional advisers.

Payment of Interest

The Notes will constitute “quoted Eurobonds” within the meaning of section 987 of the Income Tax Act 2007 (the “2007 Act”), as long as they are and continue to be listed on a “recognized stock exchange” within the meaning of section 1005 of the 2007 Act. The Luxembourg Stock Exchange is such a recognized stock exchange. The Notes will satisfy this requirement if they are officially listed in Luxembourg in accordance with provisions corresponding to those generally applicable in EEA states and are admitted to trading on the Euro MTF Market in accordance with the rules of the Luxembourg Stock Exchange. Provided, therefore, that the Notes are and remain so listed, payments of interest on the Notes may be made without withholding or deduction on account of UK tax.

In the event that the Notes fail to be or cease to be listed on a recognized stock exchange, payments of interest must be made under deduction of income tax at the basic rate, currently 20%, subject to any direction to the contrary by HM Revenue & Customs under an applicable double taxation treaty, unless payments are made to some categories of recipients, including companies who the Issuer reasonably believes are subject to UK corporation tax (provided HM Revenue & Customs has not given a direction that interest should be paid under deduction of tax). If, in such circumstances, the beneficial owner is not within the charge of UK corporation tax as regards the payment of interest, the right to pay without deduction is treated as never having applied to any such payment. Any premium payable on redemption may be treated as a payment of interest for UK tax purposes and may accordingly be subject to the tax withholding treatment described above.

Interest on the Notes constitutes UK source income for tax purposes and, as such, may be subject to income tax by direct assessment even where paid without deduction or withholding on account of UK income tax. Interest on the Notes received will not be chargeable to UK tax in the hands of a holder of Notes who is not resident for tax purposes in the UK (other than in the case of certain trustees) unless that holder of Notes carries on a trade, profession or vocation in the UK through a UK branch or agency, or for holders of Notes who are companies trading through a UK permanent establishment, in connection with which the interest is received or to which the Notes are attributable. There are exemptions from UK tax for interest received by certain categories of agent, such as some brokers and investment managers. The provisions of any applicable double tax treaty may also be relevant to such a holder of Notes.

The provisions relating to additional payments referred to under “Description of First Lien Secured Notes—Additional Amounts” and “Description of Second Lien Secured Notes—Additional Amounts” would not apply if HM Revenue & Customs successfully sought to assess the person entitled to the interest directly to UK income or corporation tax. Exemption from or reduction of UK tax liability might be available under an applicable double taxation treaty.

Payments by a Guarantor

If a Guarantor makes any payments in respect of interest on the Notes (or other amounts due under the Notes other than the repayment of amounts subscribed for the Notes), it is possible that such payments may be subject to UK withholding tax at a rate of 20%, subject to any claim which could be made under an applicable double taxation treaty or any other exemption which may apply. Such payments by a Guarantor may not be eligible for the quoted Eurobonds exemption described above.

Provision of Information

Holders of Notes should note that where any interest on Notes is paid to them (or to any person acting on their behalf) by the Issuer or any person in the UK acting on behalf of the Issuer (a “paying agent”), or is received by any person in the UK acting on behalf of the relevant holder of Notes (other than solely by clearing or arranging the clearing of a cheque) (a “collecting agent”), then the Issuer, the paying agent or the collecting agent (as the case may be) may, in certain cases, be required to supply to HM Revenue & Customs details of the payment and certain details relating to the beneficial owner of the interest (including such person’s name and address). These provisions will apply whether or not the interest has been paid subject to withholding or deduction for or on account of UK income tax and whether or not the

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holder of Notes is resident in the UK for UK taxation purposes. Where the holder of Notes is not so resident, the details provided to HM Revenue & Customs may, in certain cases, be passed by HM Revenue & Customs to the tax authorities of the jurisdiction in which the holder of Notes is resident for taxation purposes.

For the above purposes, “interest” should be taken, for practical purposes, to include payments made by a Guarantor in respect of interest on the Notes. Similar provisions apply to amounts paid on redemption of the Notes if they constitute “deeply discounted securities” as defined in Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005.

Sale, Exchange and Redemption of Notes

UK corporation taxpayers

In general, a holder of Notes which is subject to UK corporation tax will be treated for UK tax purposes as realizing profits, gains or losses in respect of the Notes under the “loan relationship” rules in Part 5 of the Corporation Tax Act 2009 on a basis reflecting the treatment in its statutory accounts, calculated in accordance with generally accepted accounting practice. These profits, gains or losses will be taken into account in computing income for UK corporation tax purposes.

Exchange gains and losses on the Notes will be treated for UK tax purposes as included within the profits, gains and losses realized in respect of the notes and thereby taxable under the loan relationship rules referred to above.

Other UK Taxpayers

Taxation of Chargeable Gains

The Notes should constitute “qualifying corporate bonds” within the meaning of section 117 of the Taxation of Chargeable Gains Act 1992. Accordingly, a disposal of Notes by a holder should not give rise to a chargeable gain or an allowable loss for UK taxation of chargeable gains purposes.

Taxation of Discount

Notwithstanding the paragraph entitled “—Taxation of Chargeable Gains” above, if the Notes constitute “deeply discounted securities” for the purposes of Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005 then any gain realized on redemption or transfer of the Notes by a holder of Notes who is within the charge to UK income tax in respect of the Notes will generally be taxable as income but such holder of Notes will not be able to claim relief from income tax in respect of costs incurred on the acquisition, transfer or redemption, or losses incurred on the transfer or redemption, of the Notes. The Notes would generally be treated as deeply discounted securities for these purposes if, as at the Issue Date, the amount payable on maturity or other occasion of redemption, other than an Optional Redemption, Redemption for Changes in Tax or on a Change of Control, (“A”) exceeds, or may exceed, the issue price of the Notes by more than A × 0.5% × Y, where Y is the number of years between the Issue Date and redemption.

Accrued Income Scheme

On a disposal of Notes by a holder of Notes, any interest which has accrued since the last interest payment date may be chargeable to tax as income under the rules of the accrued income scheme as set out in Part 12 of the Income Tax Act 2007, if that holder of Notes is resident or ordinarily resident in the UK or carries on a trade in the UK through a branch or agency to which the Notes are attributable. The accrued income scheme will not apply if the Notes are deeply discounted securities for the purposes of Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005, as to which see the paragraph entitled “—Taxation of Discount” above.

Holders who are not Resident in the UK

A body corporate, that is neither resident in the UK nor carrying on a trade in the UK through a permanent establishment will not be liable for UK corporation tax on profits, gains and losses on, or fluctuations in value of, the Notes. Other holders of Notes who are neither resident nor ordinarily resident for tax purposes in the UK and who do not carry on a trade, profession or vocation in the UK through a branch or agency to which the Notes are attributable will not be liable to UK tax on chargeable gains realized on or profits arising on the disposal of their Notes.

Stamp Duty and Stamp Duty Reserve Tax

No UK stamp duty or stamp duty reserve tax is payable on the issue of the Notes or on a transfer of the Notes.

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PLAN OF DISTRIBUTION

The Issuer, each Guarantor and the Initial Purchasers will enter into a purchase agreement to be dated May 16, 2014 (the “Purchase Agreement”). Subject to the terms and conditions contained in the Purchase Agreement, the Issuer has agreed to sell to the Initial Purchasers, and the Initial Purchasers have agreed, severally and not jointly, to purchase from the Issuer, First Lien Notes in an aggregate principal amount of £342 million and Second Lien Notes in an aggregate principal amount of £150 million. The Initial Purchasers may make offers and sales in the United States through U.S. broker-dealers.

The Purchase Agreement provides that the obligations of the Initial Purchasers to pay for and accept delivery of the Notes are subject to, among other conditions, the delivery of certain legal opinions by their counsel.

The Notes will initially be offered at the price indicated on the cover page of this Offering Circular. After the initial offering, the offering price and other selling terms of the Notes may from time to time be varied by the Initial Purchasers without notice.

The Purchase Agreement provides that the Issuer and each Guarantor will indemnify the Initial Purchasers against certain liabilities, including liabilities under the Securities Act, and will contribute to payments that the Initial Purchasers may be required to make in respect thereof.

None of the Issuer, the Guarantors or any of their subsidiaries will for a period of 90 days after the date of this Offering Circular, without the prior written consent of the Initial Purchasers, offer, sell or contract to sell, or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the Issuer, the Guarantors or any affiliate thereof or any person in privity with the Issuer, the Guarantors or any affiliate thereof), directly or indirectly, including through an “orphan” special purpose vehicle structure, or announce the offering of, any debt securities issued or guaranteed by the Issuer (other than the Notes), the Guarantors or any of their subsidiaries.

The Notes have not been and will not be registered under the Securities Act. The Initial Purchasers have agreed that they will only offer or sell the Notes (A) in the United States to qualified institutional buyers in reliance on Rule 144A under the Securities Act, and (B) outside the United States to non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act. Terms used above have the meanings given to them by Rule 144A and Regulation S under the Securities Act.

In connection with sales outside the United States, the Initial Purchasers have agreed that they will not offer, sell or deliver the Notes to, or for the account or benefit of, U.S. persons (i) as part of the Initial Purchasers’ distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering or the date the Notes are originally issued. The Initial Purchasers will send to each distributor, dealer or person to whom they sell such Notes during such 40-day period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons.

In addition, with respect to Notes initially sold pursuant to Regulation S, until 40 days after the later of the commencement of this Offering or the date the Notes are originally issued, an offer or sale of such Notes within the United States by a dealer that is not participating in the Offering may violate the registration requirements of the Securities Act.

Each Initial Purchaser will represent, warrant and agree in the Purchase Agreement that it:

• has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer or the Guarantors; and

• has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

No action has been taken in any jurisdiction, including the United States and the United Kingdom, by us or the Initial Purchasers that would permit a public offering of the Notes or the possession, circulation or distribution of this Offering Circular or any other material relating to us or the Notes in any jurisdiction where action for this purpose is required. Accordingly, the Notes may not be offered or sold, directly or indirectly, and neither this Offering Circular nor any other offering material or advertisements in connection with the Notes may be distributed or published, in or from any country or jurisdiction, except in compliance with any applicable rules and regulations of any such country or jurisdiction. This Offering Circular does not constitute an offer to sell or a solicitation of an offer to purchase in any

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jurisdiction where such offer or solicitation would be unlawful. Persons into whose possession this Offering Circular comes are advised to inform themselves about and to observe any restrictions relating to the offering of the Notes, the distribution of this Offering Circular and resale of the Notes. See “Notice to Investors.”

The Notes will constitute a new class of securities with no established trading market. Application has been made to list the Notes on the Official List of the Luxembourg Stock Exchange and to trade the Notes on the Euro MTF Market of the Luxembourg Stock Exchange. However, there can be no assurance that the prices at which the Notes will sell in the market after this Offering will not be lower than the initial offering price or that an active trading market for the Notes will develop and continue after this Offering. The Initial Purchasers (or persons acting on their behalf) have advised the Issuer that they currently intend to make a market in the Notes. However, the Initial Purchasers are not obligated to do so, and may discontinue any market-making activities with respect to the Notes at any time without notice. In addition, market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act, and may be limited. Accordingly, there can be no assurance as to the liquidity of or the trading market for the Notes. See “Risk Factors—Risks Relating to the Notes—An active trading market may not develop for the Notes, in which case your ability to transfer the Notes will be more limited”.

Buyers of the Notes sold by the Initial Purchasers may be required to pay stamp taxes and other charges in accordance with the laws and practice of the country of purchase in addition to the initial offering price set forth on the cover of this Offering Circular.

In connection with the issue of the Notes, Morgan Stanley & Co. International plc or persons acting on its behalf may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that Morgan Stanley & Co. International plc or persons acting on its behalf will undertake stabilization action. Any stabilization action may begin on or after the date on which adequate public disclosure of the terms of the offer of Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes.

We expect that delivery of the Notes will be made against payment on the Notes on or about the date specified on the cover page of this Offering Circular, which will be ten business days (as such term is used for purposes of Rule 15c6-1 of the U.S. Exchange Act) following the date of pricing of the Notes (this settlement cycle is being referred to as “T + 10”). Under Rule 15c6-1 of the U.S. Exchange Act, trades in the secondary market generally are required to settle in three business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes on the date of this Offering Circular or the next six succeeding business days will be required, by virtue of the fact that the Notes initially will settle in T + 10, to specify an alternative settlement cycle at the time of any such trade to prevent a failed settlement. Purchasers of the Notes who wish to make such trades should consult their own advisors.

A material proportion of the Existing Senior Notes are held by certain shareholders of the Company. In connection with the offering of the Notes, the Initial Purchasers will allocate to certain members of the Hargreaves family and/or related entities £11.334 million of First Lien Notes and £50.0 million of Second Lien Notes. See “Risk Factors—An active trading market may not develop for the Notes, in which case your ability to transfer the Notes will be more limited”. In addition, certain members of our board of directors will also invest in the Second Lien Notes in this offering.

The Initial Purchasers or their respective affiliates have engaged in, and may in the future engage in, investment banking, financial advisory, consulting, commercial banking and other commercial dealings in the ordinary course of business with the Issuer, its principal shareholders or its affiliates. They have received, and expect to receive, customary fees, commissions and expense reimbursements for these transactions. In addition, in the ordinary course of their business activities, the Initial Purchasers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and trading activities may involve securities and/or instruments of the Issuer or Issuer’s affiliates (including the Notes). Certain of the Initial Purchasers or their affiliates that have a lending relationship with the Issuer routinely hedge their credit exposure to the Issuer consistent with their customary risk management policies. Typically, such Initial Purchasers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities (including potentially the Notes). Any such short positions could adversely affect future trading prices of the Notes. The Initial Purchasers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

In addition, Lloyds Bank plc is the mandated lead arranger, agent, security agent, bookrunner and lender under the Revolving Credit Agreement and receives customary fees for its service in such capacities. Lloyds Bank plc will also act as lender under the Revolving Credit Facility under the Revolving Credit Agreement that is expected to be entered

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into on or prior to the Issue Date and will receive customary fees for its services in such capacity. Lloyds Bank plc and Barclays Bank PLC and/or certain of their affiliates also provide the Issuer with hedging services and certain other Initial Purchasers may act as counterparties in any hedging arrangements entered into in connection with or following the Refinancing and such parties receive or will receive customary fees for their services in such capacities.

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NOTICE TO INVESTORS

You are advised to consult legal counsel prior to making any offer, resale, pledge or other transfer of any of the

Notes offered hereby.

The Notes and the Guarantees have not been and will not be registered under the Securities Act, or any state securities laws, and, unless so registered, may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and state or other applicable securities laws. Accordingly, the Notes offered hereby are being offered and sold only to qualified institutional buyers (as defined in Rule 144A under the Securities Act) in reliance on Rule 144A under the Securities Act and in offshore transactions in reliance on Regulation S under the Securities Act.

We use the terms “offshore transaction”, “U.S. person” and “United States” with the meanings given to them in Regulation S.

Each purchaser of Notes, by its acceptance thereof, will be deemed to have acknowledged, represented to and agreed with the Issuer, each Guarantor and the Initial Purchasers as follows:

(1) You understand and acknowledge that the Notes and the Guarantees have not been registered under the Securities Act or any other applicable securities laws and that the Notes are being offered for resale in transactions not requiring registration under the Securities Act or any other securities laws, including sales pursuant to Rule 144A under the Securities Act, and, unless so registered, may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act or any other applicable securities laws, pursuant to an exemption therefrom or in any transaction not subject thereto and in each case in compliance with the conditions for transfer set forth in paragraphs (4) and (5) below.

(2) You are not our “affiliate” (as defined in Rule 144 under the Securities Act), you are not acting on our behalf and you are either:

(a) a person in the United States or a U.S. person who is a QIB, within the meaning of Rule 144A under the Securities Act and are aware that any sale of these Notes to you will be made in reliance on Rule 144A under the Securities Act, and such acquisition will be for your own account or for the account of another QIB; or

(b) you are not a U.S. person and you are purchasing the Notes in an offshore transaction in accordance with Regulation S under the Securities Act.

(3) You acknowledge that none of the Issuer, the Guarantors, or the Initial Purchasers, nor any person representing any of them, has made any representation to you with respect to us or the offer or sale of any of the Notes, other than the information contained in this Offering Circular, which Offering Circular has been delivered to you and upon which you are relying in making your investment decision with respect to the Notes. You acknowledge that neither the Initial Purchasers nor any person representing the Initial Purchasers make any representation or warranty as to the accuracy or completeness of this Offering Circular. You have had access to such financial and other information concerning us and the Notes as you have deemed necessary in connection with your decision to purchase any of the Notes, including an opportunity to ask questions of, and request information from, the Issuer and the Initial Purchasers.

(4) You are purchasing the Notes for your own account, or for one or more investor accounts for which you are acting as a fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or any state or other securities laws, subject to any requirement of law that the disposition of your property or the property of such investor account or accounts be at all times within its or their control and subject to your or their ability to resell such Notes pursuant to Rule 144A or any other exemption from registration available under the Securities Act, or in any transaction not subject to the Securities Act.

(5) You agree on your own behalf and on behalf of any investor account for which you are purchasing the Notes, and each subsequent holder of the Notes by its acceptance thereof will be deemed to agree, to offer, sell or otherwise transfer such Notes prior to the date (the “Resale Restriction Termination Date”) that is one year (in the case of Rule 144A Notes) or 40 days (in the case of Regulation S Notes) after the later of the date of the original issue and the last date on which we or any of our affiliates were the owner of such Notes (or any predecessor thereto) only (i) to us, (ii) pursuant to a registration statement

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that has been declared effective under the Securities Act, (iii) for so long as the Notes are eligible for resale pursuant to Rule 144A under the Securities Act, to a person you reasonably believe is a QIB that purchases for its own account or for the account of a QIB to whom notice is given that the transfer is being made in reliance on Rule 144A under the Securities Act, (iv) pursuant to offers and sales that occur outside the United States in compliance with Regulation S under the Securities Act or (v) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control and to compliance with any applicable state securities laws, and any applicable local laws and regulations, and further subject to our and the trustee’s rights prior to any such offer, sale or transfer (I) pursuant to clause (v) to require the delivery of an opinion of counsel, certification and/or other information satisfactory to each of them and (II) in each of the foregoing cases, to require that a certificate of transfer in the form appearing on the reverse of the security is completed and delivered by the transferor to the Trustee. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date.

Each purchaser acknowledges that each Note will contain a legend substantially to the following effect:

THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE U.S. SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON ACQUIRING THIS NOTE IN AN “OFFSHORE TRANSACTION” PURSUANT TO RULE 144A OR RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, (2) AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR FOR WHICH IT HAS PURCHASED SECURITIES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) WHICH IS [IN THE CASE OF RULE 144A NOTES: ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY)] [IN THE CASE OF REGULATION S NOTES: 40 DAYS AFTER THE LATER OF THE DATE WHEN THE SECURITIES WERE FIRST OFFERED TO PERSONS OTHER THAN DISTRIBUTORS IN RELIANCE ON REGULATION S AND THE DATE OF THE COMPLETION OF THE DISTRIBUTION] ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE U.S. SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE U.S. SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS AND ANY APPLICABLE LOCAL LAWS AND REGULATIONS AND FURTHER SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHTS PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE

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AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

If you purchase Notes, you will also be deemed to acknowledge that the foregoing restrictions apply to holders of beneficial interests in these Notes as well as to holders of these Notes.

(6) You agree that you will give to each person to whom you transfer the Notes notice of any restrictions on the transfer of such Notes.

(7) You acknowledge that the Registrar will not be required to accept for registration or transfer any Notes acquired by you except upon presentation of evidence satisfactory to the Issuer and the Registrar that the restrictions set forth therein have been complied with.

(8) You acknowledge that the Issuer, the Initial Purchasers and others will rely upon the truth and accuracy of your acknowledgements, representations, warranties and agreements and agree that if any of the acknowledgements, representations, warranties and agreements deemed to have been made by your purchase of the Notes are no longer accurate, you shall promptly notify the Initial Purchasers. If you are acquiring any Notes as a fiduciary or agent for one or more investor accounts, you represent that you have sole investment discretion with respect to each such investor account and that you have full power to make the foregoing acknowledgements, representations and agreements on behalf of each such investor account.

(9) You understand that no action has been taken in any jurisdiction (including the United States) by the Issuer or the Initial Purchasers that would result in a public offering of the Notes or the possession, circulation or distribution of this Offering Circular or any other material relating to us or the Notes in any jurisdiction where action for such purpose is required.

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LEGAL MATTERS

The validity of the Notes and certain other legal matters are being passed upon for the Issuer by Cahill Gordon & Reindel LLP, United States counsel to the Issuer, and DLA Piper LLP, English counsel to the Issuer. Certain legal matters will be passed upon for the Initial Purchasers by Latham & Watkins (London) LLP, United States and English counsel to the Initial Purchasers.

INDEPENDENT AUDITORS

Our consolidated financial statements as of and for the 52 weeks ended February 23, 2013 and the 53 weeks ended March 1, 2014, appearing in this Offering Circular, have been audited by KPMG LLP, independent auditors, as set forth in their reports appearing herein. Our consolidated financial statements as of and for the 52 weeks ended February 25, 2012, appearing in this Offering Circular, have been audited by PricewaterhouseCoopers LLP and independent auditors, as set forth in their reports appearing herein.

The audit reports of KPMG LLP with respect to such audited consolidated financial statements, in accordance with guidance issued by The Institute of Chartered Accountants in England and Wales, provide: “This report is made solely to the Company’s members, as a body, in accordance with Section 262 of The Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or the opinions we have formed”. Investors in the Notes should understand these statements are intended to disclaim any liability to parties (such as the purchasers of the Notes) other than TopCo and its shareholders with respect to those reports. In the context of the offering of the Notes, Matalan’s auditors have reconfirmed to the Issuer that they do not intend their duty of care to extend to any party other than those to whom their reports were originally addressed (i.e., the TopCo and its shareholders). The SEC would not permit the language quoted in the above paragraph to be included in a registration statement or a prospectus used in connection with an offering of securities registered under the Securities Act or in a report filed under the Exchange Act. The effect of such language is untested by a U.S. court (or any other court) and thus may or may not be effective to limit the direct liability of the auditors under U.S. law or under any other law to persons such as investors in the Notes.

The audit reports of PricewaterhouseCoopers LLP with respect to such audited consolidated financial statements, in accordance with guidance issued by The Institute of Chartered Accountants in England and Wales, provide: “This report, including the opinion, has been prepared for and only for the company’s members as a body in accordance with Section 262 of The Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing”. Investors in the Notes should understand these statements are intended to disclaim any liability to parties (such as the purchasers of the Notes) other than TopCo and its shareholders with respect to those reports. In the context of the offering of the Notes, Matalan’s auditors have reconfirmed to the Issuer that they do not intend their duty of care to extend to any party other than those to whom their reports were originally addressed (i.e., the TopCo and its shareholders). The SEC would not permit the language quoted in the above paragraph to be included in a registration statement or a prospectus used in connection with an offering of securities registered under the Securities Act or in a report filed under the Exchange Act. The effect of such language is untested by a U.S. court (or any other court) and thus may or may not be effective to limit the direct liability of the auditors under U.S. law or under any other law to persons such as investors in the Notes.

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ENFORCEMENT OF CIVIL LIABILITIES

The Issuer is a private limited company organized under the laws of England and the Guarantors of the Notes have been incorporated in England or Wales or Guernsey. All of their directors and executive officers are non-residents of the U.S. and a substantial portion of the Issuer’s assets and those of such persons are located outside the U.S. Although we will appoint an agent for service of process in the U.S. and will submit to the jurisdiction of New York courts, in each case, in connection with any action under U.S. securities laws, you may not be able to effect service of process on such persons or the Issuer within the U.S. in any action, including actions predicated on civil liability provisions of the U.S. federal and state securities laws or other laws.

England and Wales

The following discussion with respect to the enforceability of certain U.S. court judgments in England and Wales is based upon advice provided to us by our English counsel, DLA Piper UK LLP. There is currently no treaty between the U.S. and the United Kingdom providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters (although the U.S. and the United Kingdom are both parties to the New York Convention on the Recognition and Enforcement of Arbitral Awards). Any judgment rendered by any federal or state court in the U.S. based on civil liability, whether or not predicated solely upon U.S. federal securities law (“U.S. judgment”), would not be automatically recognized or immediately directly enforceable in England and Wales. In order to enforce any such judgment in England and Wales, proceedings must be initiated by way of civil law action on the judgment debt before a court of competent jurisdiction in England and Wales (“English court”). The judgment creates an obligation that is actionable in England and Wales. In this type of action, an English court generally will not (subject to the matters identified below) reinvestigate the merits of the original matter decided by a U.S. court if:

• the relevant U.S. court had, at the time when proceedings were initiated, jurisdiction over the original proceedings according to English rules of private international law give the judgment; and

• the U.S. judgment is final and conclusive on the merits in the sense of being final and unalterable in the court that pronounced it and is for a definite sum of money (not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty or otherwise based on a U.S. law that an English court considers to be a penal, revenue or other public law).

Once proceedings have been commenced in an English court, an application for summary judgment would need to be made on the basis there is no defence to the newly initiated claim. A successful application will result in an enforceable judgment.

An English court may refuse to enforce such a judgment for reasons, including but not limited to, if it is established that:

• the relevant U.S. court lacked jurisdiction over the original proceedings at the time when the proceedings were initiated (according to English rules of private international law) or the U.S. judgment is not final and conclusive on the merits;

• the U.S. judgment is for a sum payable in respect of taxes, or other charges of a like nature or is in respect of a fine or other penalty or otherwise based on a U.S. law that an English court considers to relate to a penal, revenue or other public law;

• the enforcement of the U.S. judgment would contravene public policy or statute in England and Wales;

• the enforcement of the U.S. judgment is prohibited by statute (including, without limitation, if the amount of the judgment has been arrived at by doubling, trebling or otherwise multiplying a sum assessed as compensation for the loss or damage sustained or is a judgment that is otherwise specified in Section 5 of the Protection of Trading Interests Act 1980, or is a judgment based on measures designated by the Secretary of State under Section 1 of that Act);

• the English proceedings were not commenced within the relevant limitation period;

• before the date on which the U.S. court gave judgment, the issues in question had been the subject of a final judgment of an English court or of a court of another jurisdiction whose judgment is enforceable in England;

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• the judgment has been obtained by fraud or in proceedings in which the principles of natural justice were breached fraud must have been operative in obtaining the foreign judgment, so that without the fraud, the order would not have been made, or there was a real possibility that it would not have been made;

• the judgment to be enforced is not for a fixed sum of money;

• the bringing of proceedings in the relevant U.S. court was contrary to an agreement under which the dispute in question was to be settled otherwise than by proceedings in that court (to whose jurisdiction the judgment debtor did not submit);

• an order has been made and remains effective under section 9 of the UK Foreign Judgments (Reciprocal Enforcement) Act 1933 applying that section to U.S. courts including the relevant U.S. court; or

• the judgment involves the enforcement of a foreign penal or revenue law.

Only subject to the foregoing may investors be able to enforce in England judgments that have been obtained from U.S. federal or state courts. Notwithstanding the foregoing, we cannot assure you that those judgments will be recognized or enforceable in England.

The English court has power to award interest on a US judgment following a successful application for summary judgment, even if the US court which gave the judgment had no power to do so.

If an English court gives judgment for the sum payable under a U.S. judgment, the English judgment will be enforceable by methods generally available for this purpose. These methods generally permit the court discretion to prescribe the manner of enforcement. In addition, it may not be possible to obtain an English judgment or to enforce that judgment if the judgment debtor is or becomes subject to any insolvency or similar proceedings, or if the judgment debtor has any set-off or counterclaim against the judgment creditor. Also note that, in any enforcement proceedings, the judgment debtor may raise any counterclaim that could have been brought if the action had been originally brought in England unless the subject of the counterclaim was in issue and denied in the U.S. proceedings.

Guernsey

The following discussion with respect to the enforceability of certain U.S. court judgments in Guernsey is based upon advice provided to us by our Guernsey counsel, AO Hall. The U.S. and Guernsey do not have a treaty providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters (although the New York Convention on Arbitral Awards has been extended to Guernsey). Any judgment rendered by any federal or state court in the U.S. based on civil liability, whether or not predicated solely upon U.S. federal securities law, would not be directly enforceable in Guernsey. In order to enforce any such judgment in Guernsey, proceedings must be initiated by way of civil law action on the judgment debt before a court of competent jurisdiction in Guernsey (“Guernsey court”). In this type of action, a Guernsey court generally will not (subject to the matters identified below) reinvestigate the merits of the original matter decided by a U.S. court if:

• the relevant U.S. court had jurisdiction (under Guernsey rules of private international law) to give the judgment and;

• the judgment is final and conclusive on the merits and is for a definite sum of money (not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty or otherwise based on a U.S. law that a Guernsey court considers to be a penal, revenue or other public law).

A Guernsey court may refuse to enforce such a judgment for reasons, including, if it is established that:

• the enforcement of such judgment would contravene public policy or statute in Guernsey;

• the enforcement of the judgment is prohibited by statute;

• the Guernsey proceedings were not commenced within the relevant prescription period;

• before the date on which the U.S. court gave judgment, the issues in question had been the subject of a final judgment of a Guernsey court or of a court of another jurisdiction whose judgment is enforceable in Guernsey;

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• the judgment has been obtained by fraud or in proceedings in which the principles of natural justice were breached;

• the bringing of proceedings in the relevant U.S. court was contrary to an agreement under which the dispute in question was to be settled otherwise than by proceedings in that court (to whose jurisdiction the judgment debtor did not submit); or

• an Ordinance has been made and remains effective under section 10 of the Judgments (Reciprocal Enforcement) (Guernsey) Law, 1957 applying that section to the U.S.

If a Guernsey court gives judgment for the sum payable under a U.S. judgment, the Guernsey judgment will be enforceable by methods generally available for this purpose. In addition, it may not be possible to obtain a Guernsey judgment or to enforce that judgment if the judgment debtor is or becomes subject to any insolvency or similar proceedings, or if the judgment debtor has any set-off or counterclaim against the judgment creditor.

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AVAILABLE INFORMATION

Each purchaser of the Notes from the Initial Purchasers will be furnished a copy of this Offering Circular and any related amendments or supplements to this Offering Circular. Each person receiving this Offering Circular and any related amendments or supplements to this Offering Circular acknowledges that:

(1) such person has been afforded an opportunity to request from us, and to review and has received, all additional information considered by it to be necessary to verify the accuracy and completeness of the information herein;

(2) such person has not relied on the Initial Purchasers or any person affiliated with the Initial Purchasers in connection with its investigation of the accuracy of such information or its investment decision; and

(3) except as provided pursuant to (1) above, no person has been authorized to give any information or to make any representation concerning the Notes offered hereby other than those contained herein and, if given or made, such other information or representation should not be relied upon as having been authorized by us or the Initial Purchasers.

For so long as any of the Notes are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, we will, during any period in which we are neither subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, nor exempt from the reporting requirements under Rule 12g3-2(b) of the Exchange Act, provide to the holder or beneficial owner of such restricted securities or to any prospective purchaser of such restricted securities designated by such holder or beneficial owner, in each case upon the written request of such holder, beneficial owner or prospective purchaser, the information required to be provided by Rule 144A(d)(4) under the Securities Act.

We are not currently subject to the periodic reporting and other information requirements of the Exchange Act. However, pursuant to the Indentures governing the Notes and so long as the Notes are outstanding, we will furnish periodic information to holders of the Notes. See “Description of First Lien Secured Notes—Certain Covenants—Reports” and “Description of Second Lien Secured Notes—Certain Covenants—Reports”.

Upon request, we will provide you with copies of the Indentures, the form of the Notes and the Intercreditor Agreement. You may request copies of such document by contacting the Company secretary (+44 (0) 1695 552400).

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LISTING AND GENERAL INFORMATION

Listing Information

Application has been made to list the Notes on the Official List of the Luxembourg Stock Exchange and to trading on the Euro MTF Market of the Luxembourg Stock Exchange. Notice of any optional redemption, change of control or any change in the rate of interest payable on the Notes will be published in a Luxembourg newspaper of general circulation (which is expected to be the Luxemburger Wort) or, to the extent and in the manner permitted by such rules, posted on the official website of the Luxembourg Stock Exchange (www.bourse.lu).

For so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of that exchange require, copies of the following documents may be inspected and obtained at the specified office of the listing agent in Luxembourg during normal business hours on any weekday:

• the organizational documents of the Issuer and the Guarantors;

• our most recent audited consolidated financial statements, and any interim quarterly financial statements published by us;

• the most recent audited consolidated financial statements of the Issuer, and any interim quarterly financial statements published by the Issuer;

• the purchase agreement relating to the Notes;

• the indenture and any supplemental indenture thereto relating to the Notes (which includes the form of the Notes); and

• the guarantees.

According to Chapter 3, Section 2, Article 19(1) of the Rules and Regulations of the Luxembourg Stock Exchange, the Notes will be freely transferable on the Luxembourg Stock Exchange in accordance with applicable law.

Clearing Information

The First Lien Notes have been accepted for clearance through the facilities of Clearstream and Euroclear. The Rule 144A First Lien Global Note has a common code of 107070923 and an international securities identification number (“ISIN”) of XS1070709230 and the Regulation S First Lien Global Note has a common code of 107070834 and an ISIN of XS1070708349.The Second Lien Notes have been accepted for clearance through the facilities of Clearstream and Euroclear. The Rule 144A Second Lien Global Note has a common code of 107070940 and an international securities identification number (“ISIN”) of XS1070709404 and the Regulation S Second Lien Global Note has a common code of 107070931 and an ISIN of XS1070709313.

General Information

The Issuer accepts responsibility for the information contained in this Offering Circular. To the best of its knowledge, the information given in this Offering Circular is in accordance with the facts and contains no omissions likely to affect the import of this Offering Circular. Except as described in this Offering Circular (including the footnotes to the financial statements herein), neither the Issuer nor the Guarantors are involved in any pending litigation or arbitration proceedings that are material in the context of the Notes, nor so far as they are aware, is any such litigation or arbitration pending or threatened. Except as described in this Offering Circular therein (including the footnotes to the financial statements herein) there has been no material adverse change in the consolidated financial position of the Group since March 1, 2014.

The creation and issuance of the Notes will be authorized by the Issuer’s board of directors prior to the Issue Date. The creation and issuance of the Guarantees will be authorized by the respective board of directors of each Guarantor prior to the Issue Date.

The Issuer’s registered office and principal administrative office are at Gillibrands Road, Skelmersdale, West Lancashire WN8 9TB (telephone number: +44 (0) 1695 552400). The Issuer was formed as a private company under the Companies Act of 1985 on October 10, 2006. It was re-registered as a public limited company under the Companies Act of 2006 on March 25, 2010. The Issuer is registered with Companies House under Company No. 5962488. The Issuer prepares audited financial statements on an annual basis. The unconsolidated audited financial statements of the Issuer

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for the 53 weeks ended March 1, 2014 and for the 52 weeks ended February 23, 2013 are included in this Offering Circular.

The Issuer is an indirectly wholly owned subsidiary of TopCo. As of March 1, 2014, the Issuer had an issued share capital of £21,868,822.20 represented by 218,688,222 shares with a par value of £0.10 each. Its share capital of is fully paid and wholly owned by Matalan Group Limited, a direct subsidiary of TopCo. The Issuer is a holding company that does not engage in operating activities.

Matalan Retail Limited is a private limited company under the laws of England, incorporated on February 25, 1987 with company number 02103564. Its registered office is Gillibrands Road, Skelmersdale, West Lancashire WN8 9TB, United Kingdom. Its field of activity is consistent with that of the Group. See “Business”. As of March 1, 2014, Matalan Retail Limited had an issued share capital of £1,000 represented by 1000 shares with a par value of £1 each. The share capital is fully paid and wholly owned by Matalan Limited.The last published accounts for Matalan Retail Limited were for the Fiscal Year ended 23 February 2013 and at that time it had reserves of £291 million and after tax profit of £13.2 million. For the Fiscal Year ended February 23, 2013, no dividends were received in respect of shares held.

F-1

INDEX TO FINANCIAL STATEMENTS

Audited consolidated financial statements for Missouri TopCo Limited as of and for the 53 weeks ended

1 March 2014 ....................................................................................................................................................... F-2 Directors and advisers ............................................................................................................................................... F-4 Directors’ report........................................................................................................................................................ F-8 Independent auditors’ report to the members of Missouri Topco Limited ............................................................... F-11 Income statement ...................................................................................................................................................... F-13 Statement of comprehensive income ........................................................................................................................ F-14 Statement of financial position ................................................................................................................................. F-15 Statement of cash flows ............................................................................................................................................ F-16 Statement of changes in shareholders’ equity ........................................................................................................... F-17 Notes to the financial statements .............................................................................................................................. F-20


23 February 2013 ................................................................................................................................................ F-47 Directors and advisers ............................................................................................................................................... F-49 Directors’ report........................................................................................................................................................ F-50 Independent auditors’ report to the members of Missouri Topco Limited ............................................................... F-56 Income statement ...................................................................................................................................................... F-58 Statement of comprehensive income ........................................................................................................................ F-59 Statement of financial position ................................................................................................................................. F-60 Statement of cash flows ............................................................................................................................................ F-61 Statement of changes in shareholders’ equity ........................................................................................................... F-62 Notes to the financial statements .............................................................................................................................. F-65


25 February 2012 ................................................................................................................................................ F-93 Directors and advisers ............................................................................................................................................... F-95 Directors’ report........................................................................................................................................................ F-96 Independent auditors’ report to the members of Missouri Topco Limited ............................................................... F-103 Income statement ...................................................................................................................................................... F-105 Statement of comprehensive income ........................................................................................................................ F-106 Statement of financial position ................................................................................................................................. F-107 Statement of cash flows ............................................................................................................................................ F-108 Statement of changes in shareholders’ equity ........................................................................................................... F-109 Notes to the financial statements .............................................................................................................................. F-112

Directors’ Report and Financial Statements of Matalan Finance plc as of and for the 52 weeks ended

23 February 2013 ................................................................................................................................................ F-132 Directors and advisers ............................................................................................................................................... F-134 Directors’ report........................................................................................................................................................ F-134 Independent auditors’ report to the members of Matalan Finance plc ...................................................................... F-137 Income statement ...................................................................................................................................................... F-139 Statement of financial position ................................................................................................................................. F-140 Statement of cash flows ............................................................................................................................................ F-141 Statement of changes in shareholders’ equity ........................................................................................................... F-142 Notes to the financial statements .............................................................................................................................. F-143

Directors’ Report and Financial Statements of Matalan Finance plc as of and for the 53 weeks ended

1 March 2014 ....................................................................................................................................................... F-156 Directors and advisers ............................................................................................................................................... F-158 Strategic report.......................................................................................................................................................... F-159 Directors’ report........................................................................................................................................................ F-160 Statement of Directors’ responsibilities in respect of the Strategic Report, Directors’ Report and the financial statements ......................................................................................................... F-162 Independent auditors’ report to the members of Matalan Finance plc ...................................................................... F-163 Income statement ...................................................................................................................................................... F-165 Statement of financial position ................................................................................................................................. F-166 Statement of cash flows ............................................................................................................................................ F-167 Statement of changes in shareholders’ equity ........................................................................................................... F-168 Notes to the financial statements .............................................................................................................................. F-169

Missouri Topco Limited Condensed Conslidated Interim Financial Statements for the 13 weeks ended 31

May 2014 ............................................................................................................................................................. F-180

Results of operations ................................................................................................................................................. F-182 Condensed consolidated income statement............................................................................................................... F-184 Statement of comprehensive income ........................................................................................................................ F-185

F-2

Condensed consolidated balance sheet ..................................................................................................................... F-186 Condensed consolidated cash flow statement ........................................................................................................... F-187 Condensed consolidated statement of changes in shareholders’ equity .................................................................... F-188 Notes to the financial statements .............................................................................................................................. F-190

F-3

Missouri Topco Limited

Directors’ Report and Financial Statements

53 weeks ended 1 March 2014

F-4

MISSOURI TOPCO LIMITED

CONTENTS

Pages

Directors and advisers ............................................................................................................................................... F-3 Strategic report.......................................................................................................................................................... F-5 Directors’ report........................................................................................................................................................ F-8 Statement of Directors’ responsibilities in respect of the Strategic Report, Directors’ Report and the financial

statements ............................................................................................................................................................. F-10 Independent auditor’s report to the members of Missouri Topco Limited ............................................................... F-11 Income statement ...................................................................................................................................................... F-13 Statement of comprehensive income ........................................................................................................................ F-14 Statement of financial position ................................................................................................................................. F-15 Statement of cash flows ............................................................................................................................................ F-16 Statement of changes in shareholders’ equity ........................................................................................................... F-17 Notes to the financial statements .............................................................................................................................. F-20

F-5


DIRECTORS AND ADVISERS

Directors

A Leighton J N Mills J J Hargreaves (appointed 13 December 2013) S Hill (appointed 16 September 2013) A Misra (appointed 7 March 2014) D Blackhurst (resigned 16 September 2013) P J T Gilbert (resigned 16 April 2013)

Company secretary

J N Mills

Registered office

3rd Floor Natwest House Le Truchot St Peter Port Guernsey GY1 1WD

Independent Auditor

KPMG LLP Chartered Accountants and Statutory Auditor St James’ Square Manchester M2 6DS

Solicitors

DLA Piper LLP 101 Barbirolli Square Lower Mosley Street Manchester M2 3DL A O HALL Advocates Le Marchant House Le Marchant Street St Peter Port Guernsey GY1 2JJ

Banker

Lloyds Bank plc King Street Manchester M2 4LQ

F-6


STRATEGIC REPORT FOR THE 53 WEEKS ENDED 1 MARCH 2014

The directors present their annual strategic report and the audited financial statements for the 53 weeks ended 1 March 2014.

OVERVIEW

Trading conditions in the UK retail market continue to be challenging. The group delivered a solid trading performance in the period to 1 March 2014 and is well placed in its growth strategy to improve operational effectiveness, revenue and profitability.

Business Review

Revenue for the period was £1,122.9m (2013: £1,125.4m), a 0.2% decrease compared to the previous period. Revenues were negatively impacted by the adverse weather conditions experienced in early spring. Trading improved over the course of the year, benefiting from availability and range improvements, in particular in Ladieswear.

Gross profit was £121.6m (2013: £127.6m), a 4.7% decrease on the previous period. The conditions experienced in early spring resulted in an increased level of markdowns. Whilst this adversely impacted gross margins, we exited the season with significantly lower levels of terminal stocks than the previous year.

Administrative expenses, pre exceptional items, were £55.3m (2013: £60.4m). The fall in administrative expenses relates to a fair value credit for subscription for ‘B’ shares (see note 10) and an accelerated amortisation charge incurred in the prior year relating to the commencement of systems architecture rationalization ahead of the launch of the new supply chain program.

Exceptional items, included within administrative expenses, of £6.9m were incurred in the period (2013: £2.0m) refer to note 31.

Operating profit, pre exceptional items, of £66.3m (2013: £67.2m) was a 1.3% decrease on the prior period.

Net finance costs were £47.4m (2013: £46.9m) pre exceptionals.

Additions to property, plant and equipment of £47.2m (2013: £15.3m) and intangible assets of £9.9m (2013: £7.6m) during the period reflect the group’s investment in its supply chain, in particular its new distribution centre in Knowsley.

DEVELOPMENT AND PERFORMANCE OF THE BUSINESS

The group’s growth strategy is focused on a number of areas, including:

• Consistent execution of our offer and further development of our range proposition

• Complete and capitalise on our supply chain program

• Delivery of sustainable margin enhancement

• Establish and leverage an ability to operate across multiple channels and formats

Consistent execution of our offer and further development of our range proposition

The range architecture has been consolidated over the last 12 months to reduce duplication. This change has provided clarity to the customer of the Matalan offer whilst providing an opportunity for improved stock management and availability.

In the period, the group launched “The Statements” in ladieswear and menswear, a capsule collection of versatile, easy-to-wear, quality pieces, designed to mix and match with minimal effort. Complimenting “The Statements” offer is the “We Love” range which clearly signposts our fashion inspired offer to the customer.

F-7

Complete and capitalise on our supply chain program

The group sources the majority of products directly from manufacturers, predominantly based in the Far East and Turkey. A direct relationship with suppliers allows improved negotiations to obtain better prices for products whilst at the same time ensuring high levels of quality.

Work continues on the re-engineering of the group’s supply chain to move to single stock unit replenishment, creating opportunities for both improved stock management and margin growth. During the period to 1 March 2014, the group continued the development of a new distribution centre based in Knowsley. The new distribution centre is leased (see note 30) and expenditure on the centre has been capitalised (see note 12).

Development of the group’s Southern distribution facility continues with the establishment of a temporary secondary site to enable the redevelopment of the existing site. The costs associated with the temporary site have been expensed and treated as exceptional (see note 31).

Delivery of sustainable margin enhancement

During the period, the group initiated a strategic review of opportunities to generate margin improvement in the business. The group engaged an external consultancy firm to assist in the review which will initially focus on price architecture, performance and profitability analysis tools, in-season promotion and store grading optimisation tools. The sustainable improvements to both sales and margin performance are anticipated to be realised in late 2014 and 2015.


The group’s online channel recorded a 32.9% increase in revenues on the previous period with 50% of online turnover now via the “Click and Collect” capability where online orders are collected in store. The introduction of a fully mobile optimised website has contributed to year on year revenue growth and improvements in sale conversion rates.

Online sales now represent 3.9% of turnover. Work has commenced on the launch of a new mobile loyalty application which will further strengthen the group’s multichannel offering.

In October 2013, the group opened a new concept store in Liverpool city centre. The store sits just off the main thoroughfare, next to major competitors and trades from a net space of over 40% less than the average Matalan store. The success of this store, coupled with range improvements, has been encouraging with an additional city centre store signed and due to open in Cardiff in 2014.

In addition, in autumn 2013, the group launched its new sports concept, Sporting Pro, a new UK sports retail brand. Sporting Pro provides sportswear, equipment and accessories for the whole family both in store and through its e-commerce channel.

At 1 March 2014, there were 9 new standalone Sporting Pro stores trading and segmented space in a further 5 existing Matalan stores converted over to Sporting Pro. These sites have their own entrance, facilities and branding.

In the 53 weeks ended 1 March 2014, we changed the location of 2 Matalan stores and opened a new full price Matalan store in Exeter, converting the existing Exeter site into a clearance store.

PRINCIPAL RISKS AND UNCERTAINTIES

The responsibility of monitoring financial risk management and treasury responsibilities and procedures lie with the board of directors. The policies set by the board of directors are implemented by the group’s finance department.

The risks below are the principal risks that may impact the group achieving its strategic objectives.

Economic Conditions—the group operates in a highly competitive industry. The outlook for the UK and global economy, consumer confidence and spending patterns may impact our ability to deliver growth.

The board of directors reviews performance and ensures that management is focused on key priorities and cost control to mitigate this risk.

Brand & Reputation—failure to meet our customer and/or stakeholder expectations impacts the Matalan brand, customer loyalty and market share.

F-8

The group has an ethical sourcing policy and works closely with customers, performing frequent surveys and feedback sessions, to understand how to best meet their needs.

Suppliers or Third Parties—failure of a key supplier or third party would impact the service that the group can provide to its customers. Sustained supplier cost price increases as a result of rising raw material costs, labour costs and transport costs would place pressure on margins.

The group manages its exposure by working closely with its suppliers and third parties to ensure it can offer the best value to its customers. The group monitors the stability of its supply base closely and works with suppliers and third parties to identify any issues on a timely basis.

Supply Chain—the group is currently engaged in a significant program of change, in particular the re-engineering its supply chain to move to single stock unit replenishment and the relocation of its existing distribution centre in Skelmersdale to a new centre in Knowsley.

To mitigate risks of change, the program is being managed in line with best practice program management principles and supported by third-party experts. The program of change includes a phased transition into the new distribution centre, with specific milestone points to review progress against plan.

Liquidity Risk—any impact on available cash and liquidity could have a material effect on the business and its result.

The group actively maintains a mixture of long-term and short-term debt finance, which is designed to ensure that the group has access to sufficient available funds for ongoing working capital needs as well as planned capital investment and expansion. The amount of debt finance required is monitored and reviewed at least annually by the board of directors.

Foreign Exchange Risk—The group is exposed to risk of fluctuating foreign exchange rates as a result of its overseas purchases. The principal currency with which this exposure lies is US dollar.

The group uses forward foreign exchange contracts in order to manage its exposure to foreign exchange risk and wherever possible these are hedge accounted under IAS 39. The group has a treasury policy in place which limits how much can be purchased on a rolling 12 month basis. In accordance with this policy, the group does not hold or issue derivative financial instruments for speculative or trading purposes.

Interest Rate Risk—fluctuating interest rates could have an impact on cashflows and profit.

The group has long term interest bearing debt liabilities which are subject to fixed rates of interest. This fixed rate debt structure has significantly lowered interest rate risk faced by the group.

Commodity Risk—As the group’s principal activity is the purchase and sale of clothes, it is exposed to a cost base which is heavily influenced by the market price of cotton.

The group monitors trends in the cotton market to manage this risk and, by agreeing purchase contracts with suppliers six to nine months in advance, provides a degree of advance knowledge of the cost base.

Key Performance Indicators

The directors consider EBITDA before exceptional items to be the main financial KPI for the business. EBITDA before exceptional items reduced by 5% to £95.4m (2013: £100.4m).

By order of the board

S Hill

Director 30 April 2014

F-9


DIRECTORS’ REPORT FOR THE 53 WEEKS ENDED 1 MARCH 2014

The directors present their report for the 53 weeks ended 1 March 2014.

DIRECTORS

The company’s directors who served during the period up to the date of signing the financial statements are noted on page 1.

PRINCIPAL ACTIVITIES

The principal activity of Missouri Topco Limited is that of a holding company.

The principal activities of the group are the sale of clothing and homewares through out-of-town retail outlets, primarily through the Matalan fascia.

DIVIDENDS

No dividend has been paid by the company in the period.

DIRECTORS’ INDEMNITIES

During the period and up to the date of signing the financial statements, the company maintained third party indemnity insurance for its directors and officers as defined by Section 234 of the Companies Act 2006.

GOING CONCERN

After reviewing the group’s and company’s budget for the next financial year, and other long term plans, the directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements. Further details around the borrowings held by the group and the revolving credit facility available but not drawn down on at year end are provided in note 19.

Whilst the maturity profile of the existing Senior Secured and Senior notes (see note 19) extends into 2016 and 2017 respectively, the business continues to review its long term funding strategy.

The group Statement of Financial Position shows a net liability position as a result of the decision to adopt merger accounting to reflect the change in ownership of Matalan in 2007, which resulted in the creation of a merger reserve in equity rather than acquisition goodwill. The accounts of Matalan Retail Limited, the principal subsidiary of the group, show the profitability and balance sheet strength of the trading group.

EMPLOYEES

Information on matters of concern to employees is given through information bulletins and reports. Monthly meetings are held with head office employees which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group’s performance.

The Group’s policy is to recruit disabled workers for those vacancies they are able to fill. All necessary assistance with initial training courses is given. Once employed, a career plan is developed so as to ensure suitable opportunities for each disabled person. Arrangements are made, where possible, for retaining employees who become disabled, to enable them to perform work identified as appropriate to their aptitudes and abilities.

DONATIONS

During the period the group made charitable donations of £178,418 (2013: £28,536).

CREDITOR PAYMENT POLICY

UK suppliers are paid at the end of the month following invoice or to the specific terms agreed with the supplier. Foreign suppliers are paid within an agreed number of days from either shipment date or document date.

F-10

It is the group’s policy to ensure the suppliers are aware of the company’s terms of payment and that terms of payment are agreed at the commencement of business with each supplier. Payments are made in accordance with the payment terms and conditions agreed. Trade creditor days at 1 March 2014 were 33 days (2013: 46 days) based on average daily purchases.

DISCLOSURE OF INFORMATION TO THE AUDITOR

For all persons who are directors at the time of the approval of the directors’ report and financial statements:

a) so far as each director is aware, there is no relevant audit information of which the group’s auditor is unaware, and

b) each director has taken all the steps necessary as a director in order to make himself aware of any relevant audit information and to establish that the group’s auditor is aware of that information.

INDEPENDENT AUDITOR

In accordance with Companies (Guernsey) Law 2008, the auditor will be deemed to be reappointed and KPMG LLP will therefore continue in office.


S Hill Director

30 April 2014

F-11


STATEMENT OF DIRECTORS’ RESPONSIBILTIES IN RESPECT OF THE STRATEGIC REPORT,

DIRECTORS’ REPORT AND FINANCIAL STATEMENTS

The directors are responsible for preparing financial statements for each financial year which give a true and fair view, in accordance with applicable Guernsey law and International Financial Reporting Standards, of the state of affairs of the company and the group and of the profit or loss of the company and the group for that period.

In preparing those financial statements the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company and the group will continue in business.

The directors confirm that they have complied with the above requirements in preparing the financial statements.

The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements comply with The Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

F-12


INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MISSOURI TOPCO LIMITED

We have audited the Group and Company financial statements (the “financial statements”) of Missouri Topco Limited (the “Company”) for the period ended 1st March 2014 which comprise the group and parent company Income Statements, the group and parent company Statement of Comprehensive Income, the group and parent company Statements of Financial Position, the group Statement of Cash Flows, the group and Parent company Statement of Changes in Shareholders’ Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the EU.

This report is made solely to the Company’s members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Statement of Directors’ Responsibilities set out on page 9, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Board of Directors; and the overall presentation of the financial statements. In addition we read all the financial and non-financial information in the Strategic Report and the Directors Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report

Opinion on financial statements

In our opinion the financial statements:

• give a true and fair view of the state of the Group’s and Company’s affairs as at 1 March 2014 and of its profit for the period then ended;

• are in accordance with International Financial Reporting Standards as adopted by the EU; and

• comply with the Companies (Guernsey) Law, 2008.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where The Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

• the Company has not kept proper accounting records; or

• the financial statements are not in agreement with the accounting records; or

• we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit.

Jonathan Hurst for and on behalf of

KPMG LLP

F-13

Chartered Accountants and Recognised Auditor

St James Square Manchester M2 6DS

1 May 2014

F-14


INCOME STATEMENT

Group Company

Note

53 weeks ended

1 March

2014

£’m

52 weeks ended

23 February

2013

£’m

53 weeks

ended

1 March

2014

£’m

52 weeks ended

23 February

2013

£’m

Revenue ................................................ 5 1,122.9 1,125.4 — — Cost of sales .......................................... 5 (1,001.3) (997.8) — —

Gross profit ......................................... 5 121.6 127.6 — — Administrative expenses (including

exceptional items) ............................. 5 (62.2) (62.4) 0.1 (0.3)

Operating profit/(loss) ........................ 5 59.4 65.2 0.1 (0.3)

Operating profit/(loss) pre exceptional items.................................................. 66.3 67.2 0.1 (0.3)

Exceptional items .................................. 31 (6.9) (2.0) — —

Operating profit/(loss) ........................ 59.4 65.2 0.1 (0.3) Finance costs ......................................... 6 (48.0) (47.7) — — Exceptional financing costs .................. 6, 31 — (0.5) — — Finance income ..................................... 6 0.6 0.8 — —

Net finance costs ......................................... (47.4) (47.4) — —

Profit/(loss) before income tax ........... 10 12.0 17.8 0.1 (0.3)

Income tax expense ............................... 11 (2.1) (4.3) — —

Profit/(loss) for the period .................. 9.9 13.5 0.1 (0.3)

F-15


STATEMENT OF COMPREHENSIVE INCOME

Group

53 weeks

ended

1 March

2014

£’m

52 weeks ended

23 February

2013

£’m

Profit for the period ................................................................................................................ 9.9 13.5

Other comprehensive (expenditure)/income:

Cash flow hedges ...................................................................................................................... (56.7) 17.7 Tax element of cash flow hedges .............................................................................................. 12.0 (4.0)

Other comprehensive (expenditure)/income for the period, net of tax ..................................... (44.7) 13.7

Total comprehensive (expenditure)/income for the period ................................................. (34.8) 27.2

The company has no other comprehensive expenditure other than the profit for the period.

F-16


STATEMENT OF FINANCIAL POSITION

Group Company

Note 2014 £’m 2013 £’m 2014

£’m 2013

£’m

Assets Property, plant and equipment ................................................................... 12 176.6 152.0 — — Intangible assets ......................................................................................... 13 21.1 17.7 — — Investments ................................................................................................ 14 — — 457.2 457.7 Deferred income tax asset .......................................................................... 11 — 0.4 — — Financial assets—derivative financial instruments .................................... 22 — 4.8 — — Trade and other receivables ....................................................................... 16 5.2 — — —

Total non-current assets .......................................................................... 202.9 174.9 457.2 457.7

Inventories—goods for resale .................................................................... 15 135.3 140.7 — — Trade and other receivables ....................................................................... 17 28.4 23.0 30.0 30.0 Financial assets—derivative financial instruments .................................... 22 — 16.9 — — Cash and cash equivalents ......................................................................... 18 71.9 120.7 — —

Total current assets .................................................................................. 235.6 301.3 30.0 30.0

Total assets ............................................................................................... 438.5 476.2 487.2 487.7

Liabilities Financial liabilities—derivative financial instruments .............................. 22 (26.2) — — — Trade and other payables ........................................................................... 20 (139.0) (171.0) (59.6) (59.7) Current income tax liabilities ..................................................................... (3.0) (4.8) — — Provisions for other liabilities and charges ................................................ 23 (4.1) (1.3) — —

Total current liabilities ............................................................................ (172.3) (177.1) (59.6) (59.7)

Financial liabilities—borrowings............................................................... 19 (466.9) (463.7) — — Financial liabilities—derivative financial instruments .............................. 22 (13.2) — — — Trade and other payables ........................................................................... 21 (42.0) (40.0) — — Deferred income tax liabilities ................................................................... 11 (0.6) (15.6) — — Provisions for other liabilities and charges ................................................ 23 (3.0) (4.0) — —

Total non-current liabilities .................................................................... (525.7) (523.3) — —

Total liabilities .......................................................................................... (698.0) (700.4) (59.6) (59.7)

Net (liabilities)/assets ............................................................................... (259.5) (224.2) 427.6 428.0

Shareholders’ (deficit)/equity Share capital .............................................................................................. 24 17.3 17.3 17.3 17.3 Share premium ........................................................................................... 385.6 385.6 385.6 385.6 Hedge reserve ............................................................................................ (29.4) 15.3 — — Merger reserve ........................................................................................... (774.3) (774.3) — — Warrant reserve .......................................................................................... 3.1 3.1 — — Capital redemption reserve ........................................................................ 5.7 5.7 4.6 4.6 Retained earnings ....................................................................................... 132.5 123.1 20.1 20.5

Total shareholders’ (deficit)/equity ........................................................ (259.5) (224.2) 427.6 428.0

The financial statements on pages 12 to 53 were approved by the Board of Directors on 30 April 2014 and signed on its behalf by:

J Mills Director

S Hill Director

Missouri Topco Limited Registered number: 00045618

F-17


STATEMENT OF CASH FLOWS

Group

Note 2014

£’m 2013

£’m

Cash flows from operating activities Cash generated from operations...................................................................................................... 25 57.6 94.9 Interest paid .................................................................................................................................... (43.4) (44.7) Tax paid .......................................................................................................................................... (6.6) (4.7)

Net cash generated from operating activities ............................................................................. 7.6 45.5

Cash flows from investing activities Purchases of property, plant and equipment ................................................................................... (46.1) (15.3) Purchases of intangible assets ......................................................................................................... (10.9) (6.4) Interest received .............................................................................................................................. 0.6 0.7

Net cash used in investing activities ............................................................................................ (56.4) (21.0)

Net (decrease)/increase in cash and cash equivalents ..................................................................... (48.8) 24.5 Cash and cash equivalents at the beginning of the period............................................................... 120.7 96.2

Cash and cash equivalents at the end of the period ................................................................... 18 71.9 120.7

The company had no cash flows in 2014 (2013: none)

F-18


STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Group

Share

capital

£’m

Share

premium

£’m

Merger

reserve

£’m

Hedge

reserve

£’m

Capital

redemption

reserve

£’m

Warrant

reserve

£’m

Retained

earnings

£’m

Total

equity

£’m

As at 26 February 2012 ........................ 17.3 385.6 (774.3) 1.6 5.7 3.1 108.9 (252.1)

Comprehensive

income Profit for the period .... — — — — — — 13.5 13.5

Total profit for the

period ..................... — — — — — — 13.5 13.5

Other comprehensive

expenditure Cash flow hedges —fair value gain in the

period ...................... — — — 19.5 — — — 19.5

—transfers to inventory ................. — — — (1.8) — — — (1.8)

—tax element of cash flow hedges ............. — — — (4.0) — — — (4.0)

Total cash flow hedges, net of tax .... — — — 13.7 — — — 13.7

Total other

comprehensive

expenditure, net of

tax ........................... — — — 13.7 — — — 13.7

Transactions with

owners Fair value charge for

subscription for ‘B’ shares ...................... — — — — — — 0.7 0.7

Total transactions

with owners............ — — — — — — 0.7 0.7

As at 23 February 2013 ........................ 17.3 385.6 (774.3) 15.3 5.7 3.1 123.1 (224.2)

F-19



Group

Share

capital

£’m

Share

premium

£’m

Merger

reserve

£’m

Hedge

reserve

£’m

Capital

redemption

reserve

£’m

Warrant

reserve

£’m

Retained

earnings

£’m Total equity

£’m

As at 24 February 2013 ... 17.3 385.6 (774.3) 15.3 5.7 3.1 123.1 (224.2) Comprehensive income Profit for the period ........ — — — — — — 9.9 9.9


period ......................... — — — — — — 9.9 9.9

Other comprehensive

income Cash flow hedges —fair value gain in the

period .......................... — — — (61.1) — — — (61.1) —transfers to inventory .. — — — 4.4 — — — 4.4

—tax element of cash flow hedges ................. — — — 12.0 — — — 12.0

Total cash flow hedges, net of tax ..................... — — — (44.7) — — — (44.7)

Total other

comprehensive

income, net of tax ...... — — — (44.7) — — — (44.7)

Transactions with

owners Fair value credit for

subscription for ‘B’ shares .......................... — — — — — — (0.5) (0.5)

Total transactions with

owners ........................ — — — — — — (0.5) (0.5)

As at 1 March 2014 ....... 17.3 385.6 (774.3) (29.4) 5.7 3.1 132.5 (259.5)

F-20



Company

Share

capital

£’m

Share

premium

£’m

Capital

redemption

reserve

£’m

Retained

earnings

£’m

Total

equity

£’m

As at 26 February 2012 ...................................................... 17.3 385.6 4.6 20.1 427.6

Comprehensive expenditure Loss for the period ............................................................. — — — (0.3) (0.3)

Total comprehensive expenditure .................................. — — — (0.3) (0.3)

Transactions with owners Fair value charge to group undertakings for subscription

for ‘B’ shares ................................................................. — — — 0.7 0.7

Total transactions with owners ....................................... — — — 0.7 0.7

As at 23 February 2013 ...................................................... 17.3 385.6 4.6 20.5 428.0

As at 24 February 2013 ...................................................... 17.3 385.6 4.6 20.5 428.0 Comprehensive income Profit for the period ........................................................... — — — 0.1 0.1

Total comprehensive income ........................................... — — — 0.1 0.1


for ‘B’ shares ................................................................. — — — (0.5) (0.5)

Total transactions with owners ....................................... — — — (0.5) (0.5)

As at 1 March 2014 .......................................................... 17.3 385.6 4.6 20.1 427.6

F-21


NOTES TO THE FINANCIAL STATEMENTS

1. General information

The company is incorporated and domiciled in Guernsey. All subsidiary companies are incorporated and domiciled in the UK. The company is limited by shares. The financial statements are presented in sterling, which is the group’s functional and presentational currency. The group’s principal place of business is Gillibrands Road, Skelmersdale, West Lancashire, WN8 9TB.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated.

Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and IFRIC interpretations. The financial statements have been prepared on the going concern basis under the historical cost convention as modified by financial assets and financial liabilities (including derivative instruments) which are recognised at fair value through the income statement.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company’s accounting policies. There are no areas involving a higher degree of judgement of complexity, or where assumptions and estimates are significant to the financial statements.

New standards, amendments to standards or interpretations

There are no new IFRSs or IFRIC interpretations that are effective for the first time for the financial year that would be expected to have a material impact on the company.

The Company has not early adopted the following standards and statements which are not yet effective. The adoption of these standards is not expected to have a material impact on the Company’s accounts when adopted, except where stated:

• IFRS 9 Financial Instruments: Classification and Measurement (2010)

• IFRS 10 Consolidated Financial Statements (2011)

• IAS 27 Separate Financial Statements (2011)

• Amendments to IAS 32 Offsetting financial assets and financial liabilities

• Amendments to IAS 39 Continuing hedge accounting after derivative novations

The company intends to adopt the new standards and amendments no later than their applicable date, subject to endorsement by the EU.

Going concern

After reviewing the group’s and company’s budget for the next financial period and other long term plans, the directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements. Further details around the borrowings held by the group and the revolving credit facility available but not drawn down on at year end are provided in note 19.

The group statement of financial position shows a net liability position as a result of the requirement to apply merger accounting to reflect the change in ownership of Matalan, which resulted in the creation of a merger reserve in equity rather than acquisition goodwill. As at 1 March 2014, the group is in a net current asset position and therefore has

F-22

adequate liquid resources to pay its liabilities as they fall due. The financial statements of Matalan Retail Limited, the principal subsidiary of the group, show the profitability and balance sheet strength of the trading group.

Basis of consolidation

Missouri Topco Limited, the ultimate parent company of Matalan Group Limited is 100% owned by the Hargreaves family. A group reconstruction, which took place in 2007, was accounted for using merger accounting principles as the controlling interests of the company has remained unchanged.

Subsidiaries are all entities over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred.

Revenue

Revenue, which excludes value added tax and trade discounts, represents the value of goods sold through retail shops and online.

Retail revenue, which is net of returns, is recognised in the financial statements when the risks and rewards of ownership have passed to the customer at the point of sale. Sale of goods online are recognised when goods are despatched and title has passed.

Finance income

Finance income is recognised on a time apportion basis using the effective interest method.

Intangible assets

(a) Computer software

Software and associated costs are capitalised as intangible assets where it is not an integral part of the related hardware at purchase cost and amortised in the income statement to administrative expenses on a straight line basis over its estimated useful life which is generally 3 to 5 years.

(b) Brands

Purchased brands are capitalised at historical cost as intangible assets and amortised over its estimated useful life which is generally 5 years.

Property, plant and equipment

Items of property, plant and equipment are stated at purchase cost or deemed purchase cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items.

Depreciation is charged to the income statement on a straight line basis over the estimated useful economic lives of each component of an item of property, plant and equipment. The estimated useful lives are as follows:

F-23

Alterations to leasehold premises shorter of remaining life and 25 years Fixtures, fittings and IT hardware 3 - 10 years Motor vehicles 3 - 5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised net in the income statement.

Depreciation of property, plant and equipment is charged to cost of sales and administrative expenses in the income statement.

Assets under construction

Assets that are not yet in use are classified as ‘assets under construction’. When the related asset is brought into use the asset will be transferred out of this classification and depreciation or amortisation will commence based on the estimated useful life as defined by the accounting policies specified above.

Investments

Investments in subsidiaries are stated at cost, where cost is the aggregate nominal value of the relevant number of the company’s shares and the fair value of any other consideration given to acquire the share capital of the subsidiary undertakings.

The net book value of investments in subsidiaries is increased by the fair value of employee services for those employees of those subsidiaries receiving share based payments granted by this company, in accordance with IFRS 2 “Share based payments” with a corresponding credit to equity.

Foreign currency transactions

Transactions in foreign currencies are translated into sterling at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into sterling at rates ruling at the balance sheet date. Foreign exchange differences arising on translation are dealt with in the income statement except when deferred in equity as qualifying cash flow hedges.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is based on purchase cost on a first in, first out basis and includes appropriate overheads and direct expenditure incurred in the normal course of business in bringing them to their present location and condition. Net realisable value is the price at which inventories can be sold in the normal course of business after deducting costs of realisation. Provisions are made as appropriate for obsolescence, markdown and shrinkage. Costs of inventories include the transfer from equity of any gains or losses on qualifying cash flow hedges relating to the purchase of goods for resale. It is assumed that control of stock purchased from overseas passes once the goods are received into the UK port and inventories are recognised at this point.

Operating leases

Costs in respect of operating leases are charged to the income statement on a straight-line basis over the lease term.

Lease incentives to enter into new operating leases are deferred and released to the income statement on a straight-line basis over the lease term.

Current and non-current deferred income arises from rent free period and reverse premium incentives received on property leases which are held on the statement of financial position and released to the income statement on a straight line basis over the lease term.

F-24

Current income tax

Current income tax charge is calculated on the basis of the tax laws enacted at the balance sheet date in the UK. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected.

Deferred income tax

Deferred income tax is provided in full using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the tax bases of assets and liabilities. The following temporary differences are not provided for: goodwill not deductible for tax purposes and the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. The amount of deferred income tax provided is based on the expected manner of realisation or settlement of carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date and that are expected to apply when the related deferred tax liability is settled or asset is realised.

A deferred income tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred income tax assets are reduced to the extent it is no longer probable that the related tax benefit will be realised.

Deferred income tax is charged or credited to the income statement when the liability is settled or the asset is realised. Deferred income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised directly in equity.

Derivative financial instruments

The group uses forward foreign currency contracts to manage its exposure to fluctuating interest and foreign exchange rates. In accordance with its Treasury policy, the group does not hold or issue derivative financial instruments for speculative or trading purposes. These instruments are initially recognised and measured at fair value on the date the contracts are entered into and subsequently re-measured at their fair value at the balance sheet date. The fair value is calculated using mathematical models and is based upon the duration of the derivative instrument together with quoted market data including foreign exchange rates at the balance sheet date.

The method of recognising the resulting gain or loss is dependant upon whether the derivative is designated as an effective hedging instrument and the nature of the item being hedged. The group accounts for those derivative financial instruments used to manage its exposure to foreign exchange risk on highly probable foreign currency stock purchases as cashflow hedges under IAS 39. At inception of a contract the group documents the relationship between the hedging instrument and the hedged item as well as its risk management objective and strategy for undertaking various hedging transactions. The group also documents its assessment of the effectiveness at inception and on an ongoing basis to ensure that the instrument remains an effective hedge of the transaction. The assessment of effectiveness is re-performed at each quarter end to ensure that the hedge remains highly effective.

The effective portion of the changes in fair value of cashflow hedges is recognised in equity. On completion of the forecast purchase transaction, the effective part of any gain or loss previously deferred in equity is recognised as part of the carrying amount of the underlying non-financial asset. The effective gain or loss is recognised in cost of sales in the income statement in the same period during which the underlying asset affects the income statement.

If the hedge transaction is no longer expected to take place, then the cumulative unrealised gain or loss is recognised immediately in the income statement. The gain or loss relating to the ineffective portion of all hedges is recognised immediately in the income statement. Cumulative gains or losses remain in equity and are then recognised when transactions are ultimately recognised in the income statement.

Derivatives are deemed to be current unless the financial instrument is due to mature more than 12 months after the balance sheet date then they are deemed to be non-current.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the cash flow statement.

F-25

Borrowings

Interest bearing borrowings are recognised initially at fair value less attributable issue costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement within finance costs over the period of the borrowings on an effective interest basis. The fair values of trade and other receivables, loans and overdrafts and trade and other payables with a maturity of less than one year are assumed to approximate to their book values. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

Impairment of non-financial assets

Non financial assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

F-26




Dividends

Final dividends payable to the group’s shareholders are recognised in the group’s financial statements in the period in which the dividends are approved by the group’s shareholders. Interim dividends payable are recognised in the period in which the dividends are paid.

Termination benefits

Termination benefits are payable when employment is terminated by the group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits when it is demonstrably committed to the termination of the employment of current employees according to a detailed formal plan without possibility of withdrawal. These benefits are disclosed in the financial statements where material.

Exceptional items

Items that are material in size and/or non-recurring in nature are presented as exceptional items in the income statement. The directors are of the opinion that the separate recording of exceptional items provides helpful information about the group’s underlying business performance. Events which may give rise to the classification of items as exceptional include restructuring of businesses, gains or losses on the disposal or impairment of assets and other significant non recurring gains or losses.

Share based payments

At the date of acquisition Missouri Topco Limited, the group’s ultimate parent, entered into agreements with selected individuals which enabled them to subscribe for 300,000 of the B shares in that company. These agreements were considered to be within the scope of IFRS 2 “Share Based Payments”.

The agreements provide that B shareholders would participate in the increase in fair value of the group from the date of merger with Matalan plc and until either a specified exit event or liquidation occurs. The agreements were treated as a share based payment transaction in accordance with IFRS 2. The fair value of the subscription agreement was valued at the date of the agreement using a Black Scholes model and spread across the expected term of the agreement, reviewed at each balance sheet date. The resulting charge or credit is accounted for as an employee expense or income with a corresponding increase or decrease in equity. The shares covered by the subscription agreements have all now been fully paid up and issued.

Warrants

Warrants issued to subscribe for ‘A’ ordinary shares in the company are valued at fair value at the date of grant. Fair value is calculated using a Black Scholes model. Where warrants are issued in conjunction with debt financing, they are treated as an attributable transaction cost of the related debt, accordingly their cost is treated as a deduction in borrowings and is amortised in the income statement as a finance cost over the term of borrowings.

Share capital policy

Ordinary shares are classified as equity.

Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is

F-27

reduced and the amount of the loss is recognised in the income statement within ‘selling and marketing costs’. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against ‘selling and marketing costs’ in the income statement.

Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Current and non-current deferred income arises from rent free period and reverse premium incentives received on property leases which are held on the statement of financial position and released to the income statement over the lease term.

Provisions

Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that the group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

3. Financial risk management

3.1 Financial risk factors

The group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group’s financial performance. The group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by the group treasury department under policies approved by the board of directors. Group treasury identifies, evaluates and hedges financial risks.

(a) Market risk

(i) Foreign exchange risk

The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, the Euro and the Hong Kong Dollar.

Group policy requires all group companies to manage their foreign exchange risk against their functional currency. The functional currency of all group companies is sterling. The group companies are required to substantially hedge their foreign exchange risk exposure with group treasury. To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, entities in the group use forward contracts, transacted with group treasury. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

The group hedges future seasons’ purchases denominated in US dollars. The group treasury’s risk management policy is to hedge circa 90% of forecast purchases within 12 months and circa 60% of purchases over 12 months of anticipated cash flows in respect of the purchase of inventory. 100% (2013: 100%) of projected purchases in US dollars qualify as ‘highly probable’ forecast transactions for hedge accounting purposes.

At 1 March 2014, if sterling had weakened/strengthened by 10% against the US dollar with all other variables held constant, there would be a £2.3m impact on post-tax profit for the year, (2013: £0.3m higher/lower), mainly as a result of foreign exchange gains/losses on translation of US dollar—denominated stock commitments.

(ii) Cash flow and fair value interest rate risk

F-28

As the group has no significant interest-bearing assets, the group’s income and operating cash flows are substantially independent of changes in market interest rates. The effective rate of interest applicable to the group’s cash balances in the year is 0.79% (2013: 0.90%).

The group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk. Borrowings issued at fixed rates expose the group to fair value interest rate risk. The group’s long-term borrowings are all fixed rate instruments which significantly reduces the group’s exposure to interest rate risk.

The impact on profit or loss of a 10 basis-point shift in LIBOR with all other variables held constant would be a maximum increase/decrease of £nil (2013: £nil).

During 2013 and 2014, the group’s borrowings at fixed rates were denominated in sterling.

(b) Credit risk

Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are dealt with in relation to placing cash deposits.

If wholesale customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. Management monitors the utilisation of credit limits regularly.

Sales to retail customers are settled in cash or using major credit cards (it is company policy not to accept cheques).

No credit limits were exceeded during the reporting period and management does not expect any losses from non-performance by counterparties. The main counterparties dealt with in the period include Lloyds Bank plc, Barclays Bank plc and The Royal Bank of Scotland plc.

The ageing of receivables has not been disclosed as receivables are not deemed to be material to the group.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, group treasury aims to maintain flexibility in funding by keeping committed credit lines available.

Management monitors rolling forecasts of the group’s liquidity reserve comprising borrowing facilities (note 19) and cash and cash equivalents (note 18) on the basis of expected cash flow. This is generally carried out at a local level in the operating companies of the group in accordance with practice and limits set by the group. In addition, the group’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these.

The table below analyses the group’s financial liabilities before issue costs into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Less than

1 year

£’m

Between 1

and 2

years

£’m

Between 2

and 5

years

£’m

Over

5 years

£’m

At 23 February 2013 Borrowings (before deduction of £11.3m issue costs) including interest

payable .............................................................................................................. (43.9) (43.9) (562.4) — Derivative financial instruments ................................................................ — — — — Trade and other payables ........................................................................... (171.0) (3.2) (11.6) (25.2) Provisions for other liabilities and charges ................................................ (1.3) (1.2) (1.2) (1.6)

F-29

(216.2) (48.3) (575.2) (26.8)

At 1 March 2014 Borrowings (before deduction of £8.1m issue costs) including interest

payable .............................................................................................................. (43.9) (43.9) (518.6) — Derivative financial instruments ................................................................ (26.2) (13.2) — — Trade and other payables ........................................................................... (139.0) (4.4) (13.4) (24.2) Provisions for other liabilities and charges ................................................ (4.1) (0.8) (1.2) (1.0)

(213.2) (62.3) (533.2) (25.2)

The table below analyses the value of the group’s derivative financial instruments into relevant maturity groupings based on the remaining period at the contractual maturity date as at the balance sheet date. Inflows from gains and outflows from losses on these instruments are presented separately.

Less than

1 year

£’m

Between 1

and 2

years

£’m

Between 2

and 5

years

£’m

Over

5 years

£’m

At 23 February 2013 Cash flow hedges: Inflows ....................................................................................................... 16.9 4.8 — — Outflows .................................................................................................... — — — —

16.9 4.8 — —

At 1 March 2014 Cash flow hedges: Inflows ....................................................................................................... — — — — Outflows .................................................................................................... (26.2) (13.2) — —

(26.2) (13.2) — —

3.2 Capital risk management

The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

Consistent with others in the industry, the group monitors capital on the basis of a gearing ratio. This ratio is calculated as net debt divided by adjusted total capital.

Net debt is calculated as total borrowings less cash and cash equivalents. Adjusted total capital is calculated as ‘equity’ as shown in the consolidated statement of financial position and excluding the merger reserve.

2014

£’m 2013

£’m

Group net debt Total borrowings (net of issue costs) ...................................................................................................... 466.9 463.7 Less: Cash and cash equivalents ............................................................................................................. (71.9) (120.7)

Net debt .................................................................................................................................................. 395.0 343.0

Adjusted total capital ........................................................................................................................... 514.8 550.1

Gearing ratio ......................................................................................................................................... 77% 62%

The gearing ratio excludes the creation of a merger reserve and the group considers this a more appropriate measure to be used as it takes account of underlying assets and equity generated in the course of business. The group was required to meet specific bank covenants, interest cover and debt cover, during the year. The group has complied with bank covenants throughout the year.

3.3 Fair value estimation

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2—Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is derived from prices)

F-30

Level 3—Inputs for the asset or liability that are not based on observable market data (that is unobservable inputs)

The following represents the group’s assets and liabilities that are measured at fair value at 1 March 2014:

Level 1

£’m Level 2

£’m Level 3

£’m Total

£’m

Assets Cash flow hedges ................................................................................................ — — — —

Total assets ................................................................................................ — — — —

Liabilities Cash flow hedges ..................................................................................... — (39.4) — (39.4)

Total liabilities ........................................................................................ — (39.4) — (39.4)

The following represents the group’s assets and liabilities that are measured at fair value at 23 February 2013:

Level 1

£’m Level 2

£’m Level 3

£’m Total

£’m

Assets Cash flow hedges ................................................................................................ — 21.7 — 21.7

Total assets ........................................................................................................ — 21.7 — 21.7

Liabilities Cash flow hedges ................................................................................................ — — — —

Total liabilities ................................................................................................... — — — —

The fair value of financial instruments that are not traded in an active market (for example, over-the counter derivatives) is determined by using valuation techniques.

The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the balance sheet date by reference to contract rate and the market forward exchange rates at the balance sheet date.

4. Critical accounting estimates and judgements

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. Estimates and judgements applied will affect the reported values of assets, liabilities, revenues and expenses in the financial statements. Accounting estimates will, by definition, seldom equal the related actual results.

As at the 1 March 2014, the group has not applied any estimates or assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

5. Operating profit

2014

£’m 2013

£’m

Revenue.......................................................................................................................................... 1,122.9 1,125.4

Cost of goods sold .......................................................................................................................... (627.6) (626.6) Selling expenses.............................................................................................................................. (336.7) (333.3) Distribution expenses ...................................................................................................................... (37.0) (37.9)

Total cost of sales ........................................................................................................................... (1,001.3) (997.8)

Gross profit ................................................................................................................................... 121.6 127.6

Administrative expenses pre exceptional items .............................................................................. (55.3) (60.4) Exceptional items (note 31) ............................................................................................................ (6.9) (2.0)

Administrative expenses ................................................................................................................. (62.2) (62.4)

Operating profit ............................................................................................................................ 59.4 65.2

6. Net finance costs

Group

2014

£’m 2013

£’m

Finance costs and similar charges: Interest payable on notes......................................................................................................................... (44.7) (42.9)

F-31

Amortisation of finance costs: Notes costs .......................................................................................................................................... (3.3) (3.2)

Other interest payable ............................................................................................................................. 0.4 (0.9) Unwinding of discounts on provision ..................................................................................................... (0.4) (0.7)

Finance costs ......................................................................................................................................... (48.0) (47.7)

Exceptional financing costs .................................................................................................................. — (0.5)

Finance income: Interest receivable on short term cash deposits ....................................................................................... 0.6 0.8

Finance income...................................................................................................................................... 0.6 0.8

Net finance costs .................................................................................................................................... (47.4) (47.4)

Unwinding of discounts on provisions arises on the onerous lease provision.

7. Directors’ emoluments

The remuneration paid or payable to the directors of Missouri Topco Limited, as part of their service contract with Matalan Retail Limited, was:

2014

£’m 2013

£’m

Aggregate emoluments and fees (including benefits in kind) ..................................................................... 1.7 1.1 Performance bonuses and other emoluments .............................................................................................. (0.7) 0.9

1.0 2.0

No directors have benefits accruing under defined benefit or defined contribution pension schemes. Under arrangements for selected individuals to subscribe for equity settled “B” shares, a credit has been made to the income statement of £(0.5m) (2013: £0.7m charge). The £(0.5m) credit to the income statement comprises a credit of £(2.3m) within administrative expenses and a charge of £1.8m within exceptional items (see note 31). Of the £(2.3m) credit within administrative expenses, £(1.3m) credit is included in performance bonuses and other emoluments above.

Amounts paid to the highest paid director:

2014

£’m 2013

£’m

Aggregate emoluments ................................................................................................................................... 1.0 0.7 Performance bonuses and other emoluments .................................................................................................. 0.8 0.9

1.8 1.6

F-32



8. Employee information

The average number of persons (including executive directors) employed during the period was:

2014

Number 2013

Number

By function Selling and distribution ........................................................................................................................... 15,324 15,726 Administration ........................................................................................................................................ 671 647

15,995 16,373

2014

£’m 2013

£’m

Staff costs (for the above persons) Wages and salaries ...................................................................................................................................... 142.6 141.4 Social security costs .................................................................................................................................... 6.5 6.7 Other pension costs ..................................................................................................................................... 0.8 — Share based compensation charge .............................................................................................................. (0.5) 0.7 Termination payments ................................................................................................................................ 1.6 1.3

151.0 150.1

The company does not have any employees (2013: none).

9. Segment reporting

IFRS 8 Operating Segments requires that the segments should be reported on the same basis as the internal reporting information that is provided to the chief operating decision-maker. The group adopts this policy and the chief operating decision-maker has been identified as the Board of Directors. The Directors consider there to be one operating and reportable segment, being that of the sale of clothing and homewares through out of town retail outlets, primarily through the Matalan fascia, in the United Kingdom.

Internal reports reviewed regularly by the Board provide information to allow the chief operating decision-maker to allocate resources and make decisions about the operations. The internal reporting focuses on the group as a whole and does not identify individual segments.

The chief operating decision maker relies primarily on EBITDA before exceptional items to assess the performance of the group and make decisions about resources to be allocated to the segment. EBITDA before exceptional items for the period was £95.4m (2013: £100.4m). This can be reconciled to statutory operating profit as follows:

2014

£’m 2013

£’m

Operating profit ............................................................................................................................................ 59.4 65.2 Depreciation and amortisation ...................................................................................................................... 29.1 33.2 Exceptional items .......................................................................................................................................... 6.9 2.0

EBITDA before exceptional items ............................................................................................................. 95.4 100.4

The performance of the group is subject to seasonal peaks. The group traditionally performs well during the late spring and early summer and over the Christmas season.

Whilst the e-commerce business represents a significant opportunity for future growth within the group, it does not yet represent a significant portion of the operating results of the group. E-commerce is therefore not reported as a separate operating segment by the group for internal or external reporting purposes.

10. Profit before income tax

Group

2014

£’m 2013

£’m

F-33

Profit on ordinary activities before tax is stated after charging/(crediting): Cost of inventories recognised as an expense (included in cost of sales) ................................................... 650.0 645.1 Depreciation charge for the period on property, plant and equipment ........................................................ 22.6 23.3 Amortisation of intangible assets ................................................................................................................ 6.5 9.9 Fair value credit for subscription for ‘B’ shares ......................................................................................... (2.7) — Exceptional items (note 31) ........................................................................................................................ 6.9 2.0 Foreign exchange differences ..................................................................................................................... (26.1) (24.9) Fees payable to the group’s Auditor:

for the audit of the parent company and consolidated financial statements and subsidiary companies .. 0.1 0.1 for taxation compliance services ............................................................................................................. 0.1 0.1 for taxation advisory services ................................................................................................................. 0.2 — for all other services ................................................................................................................................ — 0.1

Operating lease rentals payable .................................................................................................................. 100.9 97.7

The fair value credit for subscription for ‘B’ shares arose following a revision in the expected vesting period of the shares held by the B shareholders.

The audit fee for the company amounting to £2,000 (2013: £2,000) is borne by a fellow group company. The total group audit fee is £0.1m (2013: £0.1m). Amounts paid to the company’s auditor and its associates in respect of services to the company, other than the audit of the company’s financial statements, have not been disclosed as the information is required instead to be disclosed on a consolidated basis.

11. Income tax expense

Analysis of expense

Group

2014

£’m 2013

£’m

Current income tax UK corporation tax—current year .......................................................................................................... 5.1 8.4 UK corporation tax—prior year .............................................................................................................. (0.3) (1.4)

4.8 7.0

Deferred income tax Deferred income tax relating to the origination and reversal of temporary differences .......................... (0.5) (1.4) Effect of change in income tax rates ....................................................................................................... (1.2) (1.0) Adjustment in respect of prior periods .................................................................................................... (1.0) (0.3)

(2.7) (2.7)

Total income tax expense ..................................................................................................................... 2.1 4.3

The group income tax charge for the period is lower than (2013: same as) the rate of corporation tax of 23.10% (2013: 24.17%). The rate of corporation tax is based on a weighted average rate. The standard rate of Corporation Tax reduced from 24% to 23% on 1 April 2013 (26% to 24% on 1 April 2012).

The differences are explained below:

Group

2014

£’m 2013

£’m

Profit on ordinary activities before income tax ............................................................................................... 12.0 17.8

Profit on ordinary activities multiplied by the rate of corporation tax of 23.10% (2013: 24.17%) ................ 2.7 4.3 Effects of: Non deductible expenses ................................................................................................................................ 1.6 2.3 Adjustments to income tax in respect of prior periods ................................................................................... (1.3) (1.7) Change in rate of income tax on deferred income tax .................................................................................... (1.2) (1.0) Deferred income tax not recognised ............................................................................................................... 0.3 0.4

Total income tax expense in the period ....................................................................................................... 2.1 4.3

Deferred income tax

Deferred income tax is calculated in full on temporary differences on assets and liabilities using a tax rate of 20% (2013: 23%).

F-34

The movement on the deferred income tax account is shown below:

Group

2014

£’m 2013

£’m

At the beginning of the period ................................................................................................................ (15.2) (13.9) Taken to equity: —hedge reserve ...................................................................................................................................... 12.0 (4.0) Taken to income statement: —prior year movement ........................................................................................................................... 1.0 0.3 —depreciation in advance of capital allowances .................................................................................... 0.3 1.4 —other temporary differences ................................................................................................................ — — – change in rate of income tax 1.3 1.0

At the end of the period ........................................................................................................................ (0.6) (15.2)

Deferred income tax assets and liabilities are attributable to the following:

Assets Liabilities Net

2014

£’m 2013

£’m 2014

£’m 2013

£’m 2014

£’m 2013

£’m

Property, plant and equipment ........................................................... — — (6.6) (9.0) (6.6) (9.0) Rolled over capital gain ..................................................................... — — (1.7) (2.0) (1.7) (2.0) Short-term temporary differences ...................................................... 0.3 0.4 — — 0.3 0.4 Financial derivatives .......................................................................... 7.4 — — (4.6) 7.4 (4.6)

Net deferred income tax assets/(liabilities) .................................... 7.7 0.4 (8.3) (15.6) (0.6) (15.2)

In his budget of 20 March 2013, the Chancellor of the Exchequer announced tax changes including phased reductions in the corporation tax rate to 20% from 1 April 2015.

At 1 March 2014 the rate change to 20% from 1 April 2015 had been substantively enacted and it is this rate which is reflected in the disclosure of the deferred income tax.

A deferred income tax asset of £1.2m in relation to losses has not been recognised on the basis that there is uncertainty regarding its future recoverability.

The movement in deferred income tax assets and liabilities during the period, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Deferred income tax assets

Financial

derivatives

£’m

Short term

temporary

differences

£’m Total

£’m

At 26 February 2012 ................................................................................................ — 0.5 0.5 Expensed to the income statement ...................................................................... — (0.1) (0.1) Taken directly to equity ...................................................................................... — — —

At 23 February 2013 ........................................................................................... — 0.4 0.4

At 24 February 2013 ........................................................................................... — 0.4 0.4 Expensed to the income statement ...................................................................... — (0.1) (0.1) Taken directly to equity ...................................................................................... 7.4 — 7.4

At 1 March 2014 ................................................................................................ 7.4 0.3 7.7

The directors consider it probable that there will be sufficient taxable profits in the future such as to recognise the deferred income tax asset.

Deferred income tax liabilities

Accelerated tax

depreciation

£’m

Rolled over

capital gain

£’m

Financial

derivatives

£’m Total

£’m

At 26 February 2012 .......................................................... (12.0) (1.8) (0.6) (14.4) Credited to the income statement ....................................... 3.0 (0.2) — 2.8 Taken directly to equity ..................................................... — — (4.0) (4.0)

F-35

At 23 February 2013 .......................................................... (9.0) (2.0) (4.6) (15.6)

At 24 February 2013 .......................................................... (9.0) (2.0) (4.6) (15.6) Credited to the income statement ....................................... 2.4 0.3 — 2.7 Taken directly to equity ..................................................... — — 4.6 4.6

At 1 March 2014 ............................................................... (6.6) (1.7) — (8.3)

12. Property, plant and equipment

Group

Alterations to

leasehold premises

£’m

Motor

vehicles

£’m

Fixtures, fittings

and IT hardware

£’m

Assets under

construction

£’m Total

£’m

Cost At 26 February 2012 ...................................... 153.4 1.5 210.2 — 365.1 Additions ....................................................... 4.9 — 10.4 — 15.3 Disposals ........................................................ — — (1.4) — (1.4)

At 23 February 2013 ...................................... 158.3 1.5 219.2 — 379.0

At 24 February 2013 ...................................... 158.3 1.5 219.2 — 379.0 Additions ....................................................... 6.3 — 17.0 23.9 47.2 Disposals ........................................................ — — — — —

At 1 March 2014 ........................................... 164.6 1.5 236.2 23.9 426.2

Accumulated depreciation At 26 February 2012 ...................................... 63.0 1.4 140.7 — 205.1 Charge for the period ..................................... 6.6 0.1 16.6 — 23.3 Eliminated in respect of disposals.................. — — (1.4) — (1.4)

At 23 February 2013 ...................................... 69.6 1.5 155.9 — 227.0

At 24 February 2013 ...................................... 69.6 1.5 155.9 — 227.0 Charge for the period ..................................... 6.9 — 15.7 — 22.6 Eliminated in respect of disposals.................. — — — — —

At 1 March 2014 ........................................... 76.5 1.5 171.6 — 249.6

Net book value

At 1 March 2014 ........................................... 88.1 — 64.6 23.9 176.6 Net book value At 23 February 2013 ...................................... 88.7 — 63.3 — 152.0

Net book value At 25 February 2012 ...................................... 90.4 0.1 69.5 — 160.0


The company has no property, plant and equipment.

F-36



13. Intangible assets

Group

Brands

£’m

Computer

software and

associated costs

£’m

Assets under

construction

£’m Total

£’m

Cost At 26 February 2012 .................................................................................. 1.7 71.6 — 73.3 Additions ......................................................................................... — 7.6 — 7.6

At 23 February 2013 ........................................................................ 1.7 79.2 — 80.9

At 24 February 2013 ........................................................................ 1.7 79.2 — 80.9 Additions ......................................................................................... — 7.1 2.8 9.9

At 1 March 2014 ............................................................................. 1.7 86.3 2.8 90.8

Aggregate amortisation At 26 February 2012 ........................................................................ 1.7 51.6 — 53.3 Charge for the period ....................................................................... — 9.9 — 9.9

At 23 February 2013 ........................................................................ 1.7 61.5 — 63.2

At 24 February 2013 ........................................................................ 1.7 61.5 — 63.2 Charge for the period ....................................................................... — 6.5 — 6.5

At 1 March 2014 ............................................................................. 1.7 68.0 — 69.7

Net book value

At 1 March 2014 ............................................................................. — 18.3 2.8 21.1 Net book value At 23 February 2013 ........................................................................ — 17.7 — 17.7

Net book value At 25 February 2012 ........................................................................ — 20.0 — 20.0

Amortisation of intangible assets is charged to administrative expenses in the income statement.

The company has no intangible assets.

14. Investments

Company

Investment in

subsidiaries

£’m

Cost and net book value At 26 February 2012 ................................................................................................................................. 457.0 Fair value charge to group undertakings for subscription for ‘B’ shares .................................................. 0.7

At 23 February 2013 ................................................................................................................................. 457.7

At 24 February 2013 ................................................................................................................................. 457.7 Fair value credit to group undertakings for subscription for ‘B’ shares ................................................... (0.5)

At 1 March 2014 ...................................................................................................................................... 457.2

A list of principal subsidiary undertakings is given in note 32.

The directors believe that the book value of investments is supported by their underlying net assets and the future discounted cash flows of the trading subsidiaries of the investment.

The investment is wholly owned and has a coterminous period end with the company.

15. Inventories

Group

F-37

2014

£’m 2013

£’m

Finished goods ............................................................................................................................................ 135.3 140.7

135.3 140.7

The cost of inventories recognised as an expense and included in ‘cost of sales’ amounted to £650.0m (2013: £645.1m). During the period the group has written down £nil (2013: £nil) of inventories. No amounts have been written back during the current or prior periods.

The company has no inventories.

16. Trade and other receivables—non current

Group

2014

£’m 2013

£’m

Non current Restricted cash ................................................................................................................................................ 5.2 —

5.2 —

The restricted cash balance of £5.2m (2013: £nil) relates to cash placed on deposit with one of the group’s providers of forward contracts. The deposit is fully accessible by September 2015 when the final forward contract matures.

17. Trade and other receivables—current

Group

2014

£’m 2013

£’m

Trade receivables ............................................................................................................................................ 7.3 4.3 Prepayments and accrued income ................................................................................................................... 16.3 18.7 Restricted cash ................................................................................................................................................ 4.8 —

28.4 23.0

The restricted cash balance of £4.8m (2013: £nil) relates to cash placed on deposit with one of the group’s providers of forward contracts. The cash becomes available in the coming 12 months as the related forward contracts mature.

The company is owed £30.0m by group undertakings at period end (2013: £30.0m).

18. Cash and cash equivalents

Group

2014

£’m 2013

£’m

Cash at bank and in hand .............................................................................................................................. 71.9 120.7

The company has no cash and cash equivalents.

The effective interest rate on short-term deposits entered into in the financial period was 0.79% (2013: 0.90%) and these deposits have an average maturity period of 1 day (2013: 1 day). All short-term deposits had matured at 1 March 2014 (2013: all). The group’s cash and cash equivalents are denominated in sterling.

19. Financial liabilities—borrowings

Group

2014

£’m 2013

£’m

Non current Senior notes (net of £3.6m issue costs (2013: £4.7m)) maturity date 2017 ........................................ (221.4) (220.3) Senior secured notes (net of £4.5m issue costs (2013: £6.6m)) maturity date 2016 ........................... (245.5) (243.4)

(466.9) (463.7)

The company has no borrowings.

F-38

Borrowings are all denominated in sterling at 1 March 2014. The group had no short-term borrowings during the period (2013: £nil).

The senior notes have a maturity value of £225m at a fixed interest rate of 95/8% per annum and the senior secured notes have a maturity value of £250m at a fixed interest rate of 87/8% per annum. A proportion of the senior notes are held by shareholders of the Company.

During a prior period, fees of £10.5m associated with the refinancing were incurred and are being amortised over the terms of the facilities.

At the period end the Senior secured notes were trading at a bid price of 102 and the Senior notes were trading at a bid price of 100.

Maturity of Senior Notes and Senior Secured Notes

Group

2014

£’m 2013

£’m

Less than one year ......................................................................................................................................... — — One to five years ............................................................................................................................................ 475.0 475.0

475.0 475.0 Unamortised issue costs ................................................................................................................................. (8.1) (11.3)

466.9 463.7

Current ........................................................................................................................................................... — — Non current .................................................................................................................................................... 466.9 463.7

466.9 463.7

Borrowing facilities

At 1 March 2014 the table below reflects the usage of the RCF (revolving credit facility). These facilities are subject to an annual review and incur fees at market rates.

Group

2014

£’m 2013

£’m

Letters of credit ................................................................................................................................................... 2.7 3.0 Guarantees .......................................................................................................................................................... 8.3 8.2 Unused ................................................................................................................................................................ 19.0 18.8

30.0 30.0

An unlimited guarantee under a composite accounting agreement operates for all group company bank accounts. Group bank loans and overdraft are secured by fixed and floating charges on all assets of the group.

20. Trade and other payables—current

Group

2014

£’m 2013

£’m

Trade payables .................................................................................................................................... (64.0) (92.9) Other tax and social security payable ................................................................................................. (20.8) (20.7) Other creditors .................................................................................................................................... (6.1) (8.4) Accruals .............................................................................................................................................. (44.4) (44.6) Deferred income ................................................................................................................................. (3.4) (4.1) Dividends payable .............................................................................................................................. (0.3) (0.3)

(139.0) (171.0)

The company owes group undertakings £59.6m at the period end (2013: £59.4m). Amounts owed to group undertakings are repayable on demand and therefore presented as current.

21. Trade and other payables—non-current

Group

F-39

2014

£’m 2013

£’m

Accruals and deferred income ................................................................................................................ (42.0) (40.0)

The company has no non-current trade and other payables.

22. Derivative financial instruments

Group

2014 2013

Assets

£’m Liabilities

£’m Assets

£’m Liabilities

£’m

Forward foreign exchange contracts ................................................ — (39.4) 21.7 —

Total ................................................................................................. — (39.4) 21.7 —

Less non-current portion: Forward foreign exchange contracts ................................................ — (13.2) 4.8 —

Non-current portion ......................................................................... — (13.2) 4.8 —

Current portion................................................................................. — (26.2) 16.9 —

The company has no derivative financial instruments.

The amount that was recognised in the Statement of Comprehensive Income during the period net of tax was £(44.7)m (2013: £13.7m). The amount that was transferred from equity to profit and loss in the period was £0.7m (2013: £(0.9)m). The ineffective portion recognised in the income statement that arises from cash flow hedges amounts to £nil (2013: £nil).

Forward foreign exchange contracts

The total principal value of forward foreign exchange contracts at 1 March 2014 was £556.6m (23 February 2013: £452.7m).

The total principal value of forward foreign exchange contacts is due to mature as follows:

2014

£’m 2013

£’m

Maturing within one year ............................................................................................................................ 349.9 358.1 Maturing between one to two years ............................................................................................................ 206.7 94.6

556.6 452.7

The net fair value of losses as at 1 March 2014 on open forward foreign exchange contracts that hedge the foreign currency risk of purchases are £39.4m (2013: gains of £21.7m). These are transferred at their current fair value as an inventory based adjustment on receipt of the underlying inventory.

The fair value of open forward foreign exchange contracts is due to mature as follows:

2014

£’m 2013

£’m

Maturing within one year ............................................................................................................................ (26.2) 16.9 Maturing between one to two years ............................................................................................................ (13.2) 4.8

(39.4) 21.7

23. Provisions for other liabilities and charges

Group

Onerous

contracts

£’m

Dilapidations

provision

£’m Total

£’m

At 24 February 2013 ............................................................................................. (5.3) — (5.3) Utilised in the period ............................................................................................ 1.0 — 1.0 Credited/(charged) to the income statement ......................................................... 0.1 (2.9) (2.8)

At 1 March 2014 .................................................................................................. (4.2) (2.9) (7.1)

2014

£’m 2013

£’m

F-40

Analysis of total provisions: Non-current ................................................................................................................................................ (3.0) (4.0) Current ....................................................................................................................................................... (4.1) (1.3)

(7.1) (5.3)

Two leases previously assigned to another retailer were returned to the company in 2009 on privity of contract after they entered administration. A provision was created at that time to recognise that the leases were onerous and this was treated as exceptional in nature. During a previous period a provision for an onerous lease was recognised on a property no longer used by the business. This provision has been treated as exceptional and is being released over the remaining life of the lease.

During the period, the group established a provision for anticipated future dilapidations costs.

F-41



24. Share capital and reserves

Ordinary share capital

Group and company

10p ‘A’ ordinary

shares Number

Total

value

£’m

10p ‘B’

ordinary

shares

Number

Total

value

£’m

5p ‘B1’

ordinary

shares

Number

Total

value

£’m

5p ‘B2’

ordinary

shares

Number

Total

value

£’m

Issued and fully paid At 25 February 2012 ................ 172,763,695 17.3 204,000 — 96,000 — 96,000 — At 23 February 2013 ................ 172,763,695 17.3 204,000 — 96,000 — 96,000 —

At 1 March 2014 ..................... 172,763,695 17.3 164,000 — 136,000 — 136,000 —

Reserves

Merger reserve

In accordance with merger accounting principles, the shares issued in connection with the scheme of arrangement to Matalan Finance plc created the merger reserve at the time of issue.

Hedge reserve

The hedge reserve of a £29.4m loss (2013: £15.3m gain) comprises the effective portion of the cumulative net change in fair value of qualifying cash flow hedging instruments relating to hedged transactions, which have not yet occurred.

Capital redemption reserve

The capital redemption reserve of £5.7m (2013: £5.7m) comprises the cost over the nominal value of the company’s ordinary 10p shares purchased at market value and then cancelled in 2011 (£1.1m) and the value of the ‘A’ shares repurchased in 2011 (£4.6m).

Warrant reserve

Warrants to subscribe for 0.75% of the issued ‘A’ ordinary shares in the company were granted on 22 December 2006. The warrants have an exercise price of 10p per share. The warrants are exercisable on the earlier of a change in control of the group, repayment of the PIK debt and liquidation. The fair value of the warrants was valued at the date of grant using a Black Scholes model and spread across the expected term, with the resulting charge accounted for as a finance cost. The key inputs into the valuation were: fair value at grant date of £2, expected volatility of 40%, expected term of 5 years, expected dividend yield of nil and a risk free interest rate of 5.66%. The volatility assumption of 40% was based upon historic volatility data. The fair value of the total number of warrants was calculated at £3.1m. The remaining unamortised charge was accelerated when the PIK debt was repaid on 30 March 2010. £1.1m was charged to exceptional refinancing costs during 2011. The warrants have not yet been exercised.

B share subscription agreement

Agreements to subscribe for 300,000 B shares in the company were agreed with selected individuals at the date of acquisition. The agreements provide that B shareholders will participate in the increase in fair value of the group from the date of merger with Matalan Limited (formerly Matalan plc) and until either a specified exit event or liquidation occurs. The agreements have been treated as a share based payment transaction in accordance with IFRS 2. The fair value of the subscription agreement was valued at the date of the agreement using a Black Scholes model and spread across the expected term of the agreement, reviewed at each Balance Sheet date, with the resulting charge/(credit) accounted for as an employee expense. The key inputs into the original valuation were: expected volatility of 40%, expected term of 5 years, expected dividend yield of nil and risk free interest rate of 5.66%. The volatility assumption of 40% was based upon historic volatility data. The fair value of each subscription was calculated at £38.45 per share.

F-42

The credit in the period was £(0.5)m (2013: £0.7m charge). The credit in the current period included £1.8m (2013: £nil) of exceptional charges (refer to note 31) and a £2.7m credit (2013: £nil) included in administrative expenses resulting from a change in the expected vesting period.

The full disclosures required under IFRS 2 have not been included as the value of these employee benefits is not deemed to be material to the group.

25. Cash flows from operating activities

Reconciliation of operating profit to net cash inflow from operating activities:

Group

2014

£’m 2013

£’m

Cash generated from continuing operations Operating profit .......................................................................................................................................... 59.4 65.2 Adjustments for: Depreciation ................................................................................................................................................ 22.6 23.3 Amortisation of intangibles ........................................................................................................................ 6.5 9.9 Non cash exceptional items ........................................................................................................................ 2.4 (0.7) Share based compensation charge .............................................................................................................. (0.5) 0.7 Hedge accounting ....................................................................................................................................... 0.3 (0.1)

Operating cash flows before movements in working capital ................................................................. 90.7 98.3 Movements in working capital Decrease/(increase) in inventories .............................................................................................................. 6.1 (9.2) Increase in trade and other receivables ....................................................................................................... (10.5) (3.3) (Decrease)/increase in trade and other payables ......................................................................................... (28.7) 9.1

Net cash flows from operating activities ................................................................................................. 57.6 94.9

26. Reconciliation of net debt

Net debt incorporates borrowings (together with related fair value movements of derivatives on the debt), less cash and cash equivalents.

Net debt at

24 February

2013

£’m Cashflows

£’m

Non cash

movements

£’m

Net debt at

1 March 2014

£’m

Cash and cash equivalents ..................................................... 120.7 (48.8) — 71.9 Debt due within 1 year ........................................................... — — — —

Debt due after 1 year .............................................................. (463.7) — (3.2) (466.9)

(343.0) (48.8) (3.2) (395.0)

27. Operating lease commitments

Group

At 1 March 2014 the group had total future aggregate minimum lease payments under non-cancellable operating leases which fall due as follows:

2014

£’m 2013

£’m

Within one year................................................................................................................................... 105.4 102.6 Between two and five years inclusive ................................................................................................. 400.2 386.1 Over five years .................................................................................................................................... 585.3 646.4

1,090.9 1,135.1

The group leases various retail outlets, offices and warehouses under non- cancellable operating lease agreements. Average remaining lease terms are 10 years, and the majority of lease agreements are renewable at the end of the lease period at market rate.

The company had no operating lease commitments during the period (2013: £nil).

F-43

28. Capital commitments

The capital expenditure for the group that has been contracted for but not provided at 1 March 2014 was £2.7m (2013: £1.3m). The company has no capital commitments at 1 March 2014 (2013: £nil).

29. Contingent liabilities

An unlimited guarantee under a composite accounting agreement operates for all group company bank accounts. Group bank loans and overdrafts as disclosed in note 19 are secured by fixed and floating charges on all the assets of the group.

30. Related party transactions

The company has a related party relationship with other group undertakings and with its directors and executive officers.

The company is party to a group cash pooling arrangement with other group companies. The company does not settle transactions in cash, instead amounts are settled by other group companies on its behalf with a corresponding adjustment to intercompany receivables/payables. £0.2m was settled on its behalf in the period (2013: £nil). The balance of the related transactions outstanding at 1 March 2014 is £29.6m (2013: £29.4m).

The company considers the Hargreaves family to be the ultimate controlling party. During the period a member of the Hargreaves family was paid £0.1m by the group as a compensation for overseas sourcing and buying services provided to the group (2013: £0.2m).

Key management is the directors of the company. The compensation paid or payable to key management for employee services is included in note 7.

The group continues to lease a building in London from a company associated with the Hargreaves family. A portion of the building continues to be leased to three companies associated with the Hargreaves family. The rental paid in the period was £0.7m (2013: £0.7m). The rental income in the period was £0.3m (2013: £0.2m). £0.4m was outstanding at the year end (2013: £0.2m) which has been paid in full after the year end.

During a previous period, the buying team previously housed in this building was relocated to head office in Skelmersdale. The group has no further current use for this building nor does it expect to for the remainder of the lease term. Therefore a provision was recognised in relation to the onerous element of this lease. This provision was treated as exceptional in nature and is being released over the remaining lease term.

The group continues to lease a new distribution centre from a company associated with the Hargreaves family. The rental paid in the period was £1.1m (2013: £1.1m). This company also provided construction services for the new distribution centre of £5.0m (2013: £nil).

The group purchased IT services from a company that, during the period, became associated with the Hargreaves family. The expenditure incurred in the period was £0.9m (2013: £0.4m) of which £0.6m was outstanding at 1 March 2014 (2013: £nil).

The group used the sourcing agency services of a company associated with the Hargreaves family. The expenditure incurred and paid in the period was £0.4m (2013: £0.3m).

The group purchased clothing for resale from a company associated with the Hargreaves family. Purchases in the period totalled £0.9m (2013: £0.7m) of which £nil was outstanding at 1 March 2014 (2013: £nil).

The group used the clothing design services of a company associated with the Hargreaves family. The expenditure incurred in the period was £0.1m (2013: £nil) of which £0.1m was outstanding at 1 March 2014 (2013: £nil).

The group incurred costs relating to the Hargreaves family and associated companies in the period of £0.1m. £0.1m was paid by the Hargreaves family to the group after the year end.

During the prior year, a trading receivable was returned to the group via a related party at face value.

All of the above transactions have taken place at levels not materially different to commercial terms.

F-44

31. Exceptional items

Exceptional items are comprised as follows:

2014

£’m 2013

£’m

Restructuring costs ...................................................................................................................................... (1.6) (1.3) Onerous contract provision ......................................................................................................................... 0.5 0.8 Supply chain costs ...................................................................................................................................... (1.1) — Dilapidations ............................................................................................................................................... (2.9) — Acceleration of IFRS 2 charge .................................................................................................................... (1.8) — Refinancing costs ........................................................................................................................................ — (1.5)

Exceptional items—administrative expenses .......................................................................................... (6.9) (2.0)

Financing costs ........................................................................................................................................... — (0.5)

Exceptional items—finance costs ............................................................................................................. — (0.5)

Total exceptional items ............................................................................................................................. (6.9) (2.5)

Restructuring costs

Following a number of employment contracts being terminated in the period, restructuring costs of £1.6m (2013: £1.3m) have been incurred in the year.

Onerous contract provision

During a prior period a provision for an onerous lease was recognised on a property no longer used by the business. This provision was treated as exceptional.

Leases previously assigned to another retailer were returned to the company in 2009 on privity of contract after they entered administration. A provision was created at that time to recognise that the leases were onerous and this was treated as exceptional in nature.

In the current period, there is a £0.5m (2013: £0.8m) credit to exceptional items relating to rental income received during the year of £0.3m (2013: £0.2m) and a true-up of anticipated rent and rates costs of £0.2m (2013: £0.6m) in respect of properties on which onerous provisions are held in full. As the initial provision on these properties was created through exceptional items, the corresponding offsetting income is also recognised as exceptional.

Supply chain costs

During the period, the group continued the redevelopment of its supply chain which resulted in the establishment of a temporary secondary site at its southern distribution centre. The costs associated with this temporary site have been treated as exceptional.

Dilapidations

During the period, the group established a provision for anticipated future dilapidations costs.

Acceleration of IFRS 2 charge

During the period, an acceleration of the IFRS 2 charge resulted from the resignation of Darren Blackhurst as a director of the board.

Refinancing costs

In the prior period £1.5m of refinancing costs were incurred relating to the settlement of a dispute with the holders of an interest rate swap that the group had previously entered into. These costs have been expensed as an exceptional item within administrative expenses.

Financing costs

In the prior period financing exceptional costs of £0.5m arose from a change in the discount rate applied to the onerous lease provision calculation.

F-45

32. Principal subsidiary companies and ultimate controlling party

Principal activity Country of incorporation

UK companies Matalan Finance plc ................................................................................. Holding company England and Wales Matalan Group Limited ........................................................................... Holding company England and Wales Matalan Limited....................................................................................... Holding company England and Wales Matalan Retail Limited ............................................................................ Retail England and Wales Jonmar Limited ........................................................................................ Property England and Wales Matalan Holding Company Limited ........................................................ Holding company England and Wales Matalan Investments Limited .................................................................. Holding company England and Wales Matalan Travel Limited ........................................................................... Travel services England and Wales HP01 Nominees Limited ......................................................................... Distribution England and Wales Guild Acquisition Limited ....................................................................... Non trading England and Wales

All of the above companies are wholly owned with 100% ordinary share capital being held. Except for Matalan Group Limited, which is a wholly owned subsidiary of Missouri Topco Limited, all other companies are held via subsidiary undertakings.

The directors regard the Hargreaves family as the ultimate controlling party throughout the period.

F-46



52 weeks ended 23 February 2013

F-47


CONTENTS

Pages

Directors and advisers ............................................................................................................................................... F-49 Directors’ report........................................................................................................................................................ F-50 Independent Auditor’s report to the members of Missouri Topco Limited .............................................................. F-56 Income statement ...................................................................................................................................................... F-58 Statement of comprehensive income ........................................................................................................................ F-59 Statement of financial position ................................................................................................................................. F-60 Statement of cash flows ............................................................................................................................................ F-61 Statement of changes in shareholders’ equity ........................................................................................................... F-62 Notes to the financial statements .............................................................................................................................. F-65

F-48



Directors

A Leighton (appointed 18 February 2013) J N Mills D Blackhurst P J T Gilbert (resigned 16 April 2013)

Company secretary

J N Mills

Registered office


Independent Auditor


Solicitors

DLA Piper LLP 101 Barbirolli Square Lower Mosley Street Manchester M2 3DL

A O HALL Advocates Le Marchant House Le Marchant Street St Peter Port Guernsey GY1 2JJ

Banker

Lloyds TSB Bank Plc King Street Manchester M2 4LQ

F-49


DIRECTORS’ REPORT FOR THE 52 WEEKS ENDED 23 FEBRUARY 2013

The directors present their report and the audited consolidated financial statements for the 52 weeks ended 23 February 2013.

DIRECTORS





REVIEW OF BUSINESS

Overview

Trading conditions in the UK retail market were very challenging during the period and are likely to remain so for the foreseeable future. Despite this, the Company achieved revenue growth and improved operating profit. Cash performance during the period has remained strong, reflecting management’s ongoing focus to maximise cash balances.

Three new stores were opened during the 52 weeks ended 23 February 2013: Camberley, Ipswich and Dunfermline. A clearance store in Scunthorpe was closed which had come to the end of its lease.

During the period the Company’s online channel achieved 45% revenue growth year on year and now represents 6 times the average store in revenue terms. The Company will continue to focus on and develop its online sales channel in the coming year alongside its multi-channel offering.

The Company’s growth strategy is focused on the following key areas:

• Initiatives to drive sales and margin growth

• More progressive exploitation of online, multichannel and click and collect opportunities

• Investment in customer recruitment and retention

• Range development

• Space utilisation efficiencies

The Company will continue to work with a franchise partner in the Middle East. In the current financial period they have 9 franchise stores based in Dubai, Jordan, Abu Dhabi and Fujairah. Since the period end another franchise store has opened in Sarjah taking the total number of franchise stores to 10.

Financial Performance

Against a very challenging market and economic backdrop, Matalan delivered a robust performance. Sales for the period were £1,125.4m (2012: £1,117.5m), a 0.7% increase compared to the previous period.

Focusing on the quality of earnings via tight control of stock and markdown reductions has resulted in a gross profit of £127.6m (2012: £116.7m) a 9.3% increase compared to the previous period.

Administrative expenses, pre exceptional items, were £60.4m (2012: £54.9m). Although there has been investment in on-line growth, costs within our core business continue to be tightly controlled.

F-50

Exceptional items, included within administrative expenses, of £2.0m were incurred (2012: £4.0m). £1.5m of the £2.0m recognised related to the settlement of a dispute with the holders of an interest rate swap that the group had previously entered into.

Operating profit, pre exceptional items, of £67.2m (2012: £61.8m) was a 8.7% increase on the prior period.

Net finance costs were £46.9m (2012: £47.4m) pre exceptionals. The decrease is mainly due to a reduction in interest payable on loans.

Additions to property, plant and equipment of £15.3m (2012: £17.8m) and intangible assets of £7.6m (2012: £4.3m) during the period reflect the company’s ongoing investment in the existing store portfolio and IT systems.

Management considers EBITDA (earnings before interest, tax, depreciation and amortisation) before exceptional items to be the main financial KPI (key performance indicator) for the business. EBITDA before exceptional items of £100.4m (2012: £91.1m) in the current financial period shows a 10.2% increase compared to the prior period.

Business Review

The Company is continuing to make strong progress across a range of key growth initiatives:

Sourcing and Supply chain

The Company sources the majority of products directly from manufacturers, predominantly based in the Far East and Turkey. A direct relationship with suppliers allows improved negotiation to obtain better prices for products whilst at the same time ensuring high levels of quality.

During the year, the Company’s transport function was successfully in- sourced and this has generated savings as a result.

Planning has commenced on a new warehouse and supply chain process with physical work commencing in the New Year.

E-commerce and Multichannel

Online sales represent a significant opportunity for future growth. The Company has grown its online business, with sales now representing 6 times an average store. The online shopping experience is continuing to be enhanced and the Company actively markets the website to its database of customers which will help to drive future sales growth.

Matalan has invested in and grown its multichannel capability and customer base. Investment has been made during the period in a mobile optimised site together with the launch of the Matalan catalogue. Multichannel customers are particularly valuable to the business and typically spend twice as much as store-only customers.

In January 2013 click and collect was launched offering free delivery to store for on-line customers. There has been strong uptake for this service and in addition, customers using the click and collect service have proceeded to make additional purchases when in store for collection.

Stores

The Company believes that a controlled store portfolio expansion program is appropriate given the current climate. As a consequence 3 stores were opened in the current financial period bringing the total number of stores to 216, comprising 212 full-price stores and 4 clearance stores.

Marketing

Through the Matalan card, a unique customer card that offers customers a range of benefits including exclusive promotional discounts on Matalan merchandise, the Company maintains one of the largest transactional databases of any UK retailer. The Company holds transactional details of approximately 11.5 million active customers which is used for direct marketing, representing an additional 0.5million active customers in comparison to last year. The transactional nature of the database enables the Company to identify its customer demographics and spending patterns which allows the business to tailor its direct marketing accordingly. The Company believes that there are further benefits to be gained

F-51

by better utilising its customer database to target a greater share of its customers’ total spending through tailored marketing and further development of the Matalan card program.

During the current period the Company launched a Matalan spring/summer catalogue. Due to the success of this a second autumn/winter catalogue was launched. Investment has also been made in a prime time Christmas TV advertising campaign together with sponsorship of high profile TV features. These campaigns, together with the Company’s wider, multi-channel marketing campaigns, have led to many new customers registering with the Company which has raised the profile of the brand significantly.

Outlook

The business remains cautious about the outlook for consumer spending and confidence and expects trading conditions to continue to be challenging.

Though remaining cautious the Company believes that it is well placed to meet these challenges as the UK consumer continues to embrace the relevance of Matalan’s brand and offer. Customers are continuing to respond well to the strategy of offering outstanding value and choice in a pleasant and convenient shopping environment.

The Company believes that there is scope for sales growth through the improved multi-channel offering together with a carefully controlled new store opening program.

The business will continue to focus on enhancing the quality of earnings and driving margin improvement during the forthcoming year.

The Company’s team of highly committed and motivated employees remains integral to its success and the Company continues to look forward to the future with great enthusiasm and confidence.







The group has an ethical sourcing policy and works closely with customers to understand how to best meet their needs.

Suppliers or Third Parties—failure of a key supplier or third party would impact the service that the group can provide to its customers. Sustained supplier cost price increases as a result of rising raw material costs, labour costs, and transport costs would place pressure on margins.




F-52




The group has long term interest bearing debt liabilities which are subject to fixed rates of interest. This fixed rate debt structure has significantly lowered interest rate risk faced by the group (refer to note 21).

Commodity Risk—As the group’s principal activity is the purchase and sale of clothes, it is exposed to a cost base which is heavily influenced by the market price of cotton. This risk is managed through monitoring trends in the cotton market, and by agreeing purchase contracts with suppliers six to nine months in advance, thereby providing a degree of advance knowledge of the cost base.

DIVIDENDS


RESULTS

The results for the period are shown in the statement of comprehensive income.



GOING CONCERN

After reviewing the group’s and company’s budget for the next financial year, and other long term plans, the directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements. Further details around the borrowings held by the group and the revolving credit facility available but not drawn down on at year end are provided in note 18.

The group Statement of Financial Position shows a net liability position as a result of the decision to adopt merger accounting to reflect the change in ownership of Matalan in 2007, which resulted in the creation of a merger reserve in equity rather than acquisition goodwill. The accounts of Matalan Retail Limited, the principal subsidiary of the group, show the profitability and balance sheet strength of the trading group.

The group completed an issue of Senior secured notes on 11 April 2011 (refer to note 18).

The group completed a renegotiation of its RCF (revolving credit facility) on 23 February 2012.

EMPLOYEES


In addition, in March 2012, the company asked employees to complete a questionnaire to get feedback on their view of the company. This assists management in maintaining effective employee relations.

The Group’s policy is to recruit disabled workers for those vacancies they are able to fill. All necessary assistance with initial training courses is given. Once employed, a career plan is developed so as to ensure suitable opportunities for each disabled person. Arrangements are made, where possible, for retaining employees who become disabled, to enable them to perform work identified as appropriate to their aptitudes and abilities.

F-53

DONATIONS

During the period the group made charitable donations of £28,536 (2012: £73,560). Individual donations include £23,005 to The Retail Trust and £5,531 to the England Netball Team.


UK suppliers are paid at the end of the month following invoice or to the specific terms agreed with the supplier. Foreign suppliers are paid on average within 34 days (2012: 32 days) of the receipt of invoice or delivery confirmation.

It is the group’s policy to ensure the suppliers are aware of the company’s terms of payment and that terms of payment are agreed at the commencement of business with each supplier. Payments are made in accordance with the payment terms and conditions agreed. Trade creditor days at 23 February 2013 were 46 days (2012: 38 days) based on average daily purchases.

DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS











a) so far as each director is aware, there is no relevant audit information of which the group’s Auditor is unaware, and

b) each director has taken all the steps necessary as a director in order to make himself aware of any relevant audit information and to establish that the group’s Auditor is aware of that information.

INDEPENDENT AUDITOR

PricewaterhouseCoopers LLP resigned as auditors during the year and KPMG LLP were appointed to fill the vacancy arising. Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and KPMG LLP will therefore continue in office.

On behalf of the Board

D Blackhurst

F-54

Director

4 June 2013

F-55


INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MISSOURI TOPCO LIMITED

We have audited the Group and Company financial statements (the “financial statements”) of Missouri Topco Limited (the “Company”) for the period ended 23 February 2013 which comprise the group and parent company Income Statements, the group Statement of Comprehensive Income, the group and parent company Statements of Financial Position, the group Statement of Cash Flows, the group and Parent company Statement of Changes in Shareholders’ Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the EU.

This report is made solely to the Company’s members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Statement of Directors’ Responsibilities set out on page 7, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.


An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Board of Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Directors Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements


• give a true and fair view of the state of the Group’s and Company’s affairs as at 23 February 2013 and of its profit for the period then ended;

• are in accordance with International Financial Reporting Standards as adopted by the EU; and

• comply with the Companies (Guernsey) Law, 2008.

Other matter

The Group’s and Company’s financial statements for the period ended 25 February 2012 were audited by another auditor who expressed an unmodified opinion on those financial statements on 16 May 2012.



• the Company has not kept proper accounting records; or

• the financial statements are not in agreement with the accounting records; or

F-56

• we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit.

Jonathan Hurst for and on behalf of

KPMG LLP

Chartered Accountants and Recognised Auditor

4 June 2013

F-57


INCOME STATEMENT

Group Company

Note

52 weeks ended

23 February

2013

£’m

52 weeks ended

25 February

2012

£’m

52 weeks ended

23 February

2013

£’m

52 weeks ended

25 February

2012

£’m

Revenue ........................................................... 5 1,125.4 1,117.5 — — Cost of sales ..................................................... 5 (997.8) (1,000.8) — —

Gross profit .................................................... 5 127.6 116.7 — — Administrative expenses (including

exceptional items) ........................................ 5 (62.4) (58.9) (0.3) —

Operating profit/(loss) ................................... 5 65.2 57.8 (0.3) —

Operating profit/(loss) pre exceptional items ... 67.2 61.8 (0.3) — Exceptional items ............................................. 30 (2.0) (4.0) — —

Operating profit/(loss) ................................... 65.2 57.8 (0.3) — Finance costs .................................................... 6 (47.7) (48.0) — — Exceptional financing costs ............................. 6, 30 (0.5) (8.3) — — Finance income ................................................ 6 0.8 0.6 — —

Net finance costs ............................................. (47.4) (55.7) — —

Profit/(loss) before income tax ...................... 10 17.8 2.1 (0.3) —

Income tax (expense)/credit ............................. 11 (4.3) 0.9 — —

Profit/(loss) for the period ............................. 13.5 3.0 (0.3) —

F-58



Group

52 weeks ended

23 February

2013

£’m

52 weeks ended

25 February

2012

£’m

Profit for the period .......................................................................................................... 13.5 3.0 Other comprehensive income : Cash flow hedges ................................................................................................................ 17.7 15.3 Tax element of cash flow hedges ........................................................................................ (4.0) (4.1)

Other comprehensive income for the period, net of tax ...................................................... 13.7 11.2

Total comprehensive income for the period ................................................................... 27.2 14.2

The company has no other comprehensive expenditure other than loss for the period.

F-59



Group Company

Note 2013

£’m 2012

£’m 2013

£’m 2012

£’m

Assets Property, plant and equipment ................................................................... 12 152.0 160.0 — — Intangible assets ......................................................................................... 13 17.7 20.0 — — Investments ................................................................................................ 14 — — 457.7 457.0 Deferred income tax asset .......................................................................... 11 0.4 0.5 — — Financial assets—derivative financial instruments .................................... 21 4.8 0.7 — —


Inventories—goods for resale .................................................................... 15 140.7 131.8 — — Trade and other receivables ....................................................................... 16 23.0 19.7 30.0 30.0 Financial assets—derivative financial instruments .................................... 21 16.9 2.7 — — Cash and cash equivalents ......................................................................... 17 120.7 96.2 — —


Total assets ............................................................................................... 476.2 431.6 487.7 487.0

Liabilities Financial liabilities—borrowings............................................................... 18 — — — — Financial liabilities—derivative financial instruments .............................. 21 — (1.2) — — Trade and other payables ........................................................................... 19 (171.0) (157.7) (59.7) (59.4) Current income tax liabilities ..................................................................... (4.8) (2.6) — — Provisions for other liabilities and charges ................................................ 22 (1.3) (1.3) — —


Financial liabilities—borrowings............................................................... 18 (463.7) (460.4) — — Financial liabilities—derivative financial instruments .............................. 21 — — — — Trade and other payables ........................................................................... 20 (40.0) (41.6) — — Deferred income tax liabilities ................................................................... 11 (15.6) (14.4) — — Provisions for other liabilities and charges ................................................ 22 (4.0) (4.5) — —




Shareholders’ (deficit)/equity Share capital .............................................................................................. 23 17.3 17.3 17.3 17.3 Share premium ........................................................................................... 385.6 385.6 385.6 385.6 Hedge reserve ............................................................................................ 15.3 1.6 — — Merger reserve ........................................................................................... (774.3) (774.3) — — Warrant reserve .......................................................................................... 3.1 3.1 — — Capital redemption reserve ........................................................................ 5.7 5.7 4.6 4.6 Retained earnings ....................................................................................... 123.1 108.9 20.5 20.1


The financial statements on pages 11 to 52 were approved by the Board of Directors on 4 June 2013 and signed on its behalf by:

D Blackhurst J N Mills Director Director


F-60



Group

Note 2013

£’m 2012

£’m

Cash flows from operating activities Cash generated from continuing operations ................................................................................ 24 94.9 76.8 Interest paid ................................................................................................................................ (44.7) (38.6) Tax paid ...................................................................................................................................... (4.7) (8.1)

Net cash generated from operating activities ......................................................................... 45.5 30.1

Cash flows from investing activities Purchases of property, plant and equipment ............................................................................... (15.3) (17.9) Proceeds from sale of property, plant and equipment ................................................................. — 1.2 Purchases of intangible assets ..................................................................................................... (6.4) (4.3) Interest received .......................................................................................................................... 0.7 0.6

Net cash used in investing activities ........................................................................................ (21.0) (20.4)

Cash flows from financing activities Repayment of previous facilities ................................................................................................ — (231.0) Proceeds from borrowings .......................................................................................................... — 250.0 Fees associated with refinancing ................................................................................................ — (15.6)

Net cash generated from/(used) in financing activities .......................................................... — 3.4

Net increase in cash and cash equivalents .................................................................................. 24.5 13.1 Cash and cash equivalents at the beginning of the period........................................................... 96.2 83.1

Cash and cash equivalents at the end of the period ............................................................... 17 120.7 96.2


In the prior year the £15.6m ‘Fees associated with refinancing’ incurred includes £4.7m in relation to the termination of the interest rate swaps and £10.5m in relation to issue costs associated with the April 2011 refinancing exercise. £0.3m of costs associated with the February 2012 RCF (revolving credit facility) renegotiation and £0.1m of other costs have also been incurred.

F-61



Group

Share

capital

£’m

Share

premium

£’m

Merger

reserve

£’m

Hedge

reserve

£’m

Capital

redemption

reserve

£’m

Warrant

reserve

£’m

Retained

earnings

£’m

Total

equity

£’m

As at 27 February 2011 ........................ 17.3 385.6 (774.3) (9.6) 5.7 3.1 103.6 (268.6)

Comprehensive

income Profit for the period

from continuing operations ................ — — — — — — 3.0 3.0


period ..................... — — — — — — 3.0 3.0

Other comprehensive

expenditure Cash flow hedges – fair value gain in

the period — — — 15.8 — — — 15.8

– transfers to inventory — — — (0.5) — — — (0.5)

– tax element of cash flow hedges — — — (4.1) — — — (4.1)

Total cash flow hedges, net of tax .... — — — 11.2 — — — 11.2

Total other

comprehensive

expenditure, net of

tax ........................... — — — 11.2 — — — 11.2

Transactions with


subscription for ‘B’ shares ...................... — — — — — — 2.3 2.3

Total transactions

with owners............ — — — — — — 2.3 2.3

As at 25 February 2012 ........................ 17.3 385.6 (774.3) 1.6 5.7 3.1 108.9 (252.1)

F-62



Group

Share

capital

£’m

Share

premium

£’m

Merger

reserve

£’m

Hedge

reserve

£’m

Capital

redemption

reserve

£’m

Warrant

reserve

£’m

Retained

earnings

£’m Total equity

£’m

As at 26 February 2012 ... 17.3 385.6 (774.3) 1.6 5.7 3.1 108.9 (252.1) Comprehensive income Profit for the period ........ — — — — — — 13.5 13.5


period ......................... — — — — — — 13.5 13.5

Other comprehensive

income Cash flow hedges – fair value gain in the

period — — — 19.5 — — — 19.5 – transfers to

inventory — — — (1.8) — — — (1.8)


Total cash flow hedges, net of tax ..................... — — — 13.7 — — — 13.7

Total other

comprehensive

income, net of tax ...... — — — 13.7 — — — 13.7

Transactions with


subscription for ‘B’ shares .......................... — — — — — — 0.7 0.7


owners ........................ — — — — — — 0.7 0.7

As at 23 February 2013 17.3 385.6 (774.3) 15.3 5.7 3.1 123.1 (224.2)

F-63



Company

Share

capital

£’m

Share

premium

£’m

Capital

redemption

reserve

£’m

Retained

earnings

£’m

Total

equity

£’m

As at 27 February 2011 ...................................................... 17.3 385.6 4.6 17.8 425.3

Comprehensive income Profit for the period ........................................................... — — — — —

Total other comprehensive income ................................. — — — — —


for ‘B’ shares ................................................................. — — — 2.3 2.3


As at 25 February 2012 ...................................................... 17.3 385.6 4.6 20.1 427.6 As at 26 February 2012 ...................................................... 17.3 385.6 4.6 20.1 427.6

Comprehensive income Result for the period .......................................................... — — — (0.3) (0.3)

Total comprehensive income ........................................... — — — (0.3) (0.3)


for ‘B’ shares ................................................................. 0.7 0.7


As at 23 February 2013 ................................................... 17.3 385.6 4.6 20.5 428.0

F-64













• IFRS 13 Fair value measurement (2011)

• Amended IAS 1 Presentation of items of other comprehensive income (2010)

• Amended IAS 12 Income taxes: Deferred Tax—Recovery of underlying assets (2010)

• Revised IAS 19 Employee Benefits (2011)


• Amendments to IFRS 7 Disclosures offsetting financial assets and liabilities


The company intends to adopt the new standards and amendments no later than their applicable date, subject to endorsement by the EU. The company has yet to assess the full impact of adopting these new standards and amendments.

Going concern

After reviewing the group’s and company’s budget for the next financial period and other long term plans, the directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements. Further details around the borrowings held by the group and the revolving credit facility available but not drawn down on at year end are provided in note 18.

F-65

The group statement of financial position sheet shows a net liability position as a result of the requirement to apply merger accounting to reflect the change in ownership of Matalan, which resulted in the creation of a merger reserve in equity rather than acquisition goodwill. The financial statements of Matalan Retail Limited, the principal subsidiary of the group, show the profitability and balance sheet strength of the trading group.


The group completed a renegotiation of its RCF (revolving credit facility) on 23 February 2012.


Missouri Topco Limited, the ultimate parent company of Matalan Group Limited is 100% owned by the Hargreaves family. This group reconstruction, which took place in 2007, has been accounted for using merger accounting principles as the controlling interests of the company have remained unchanged.



Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred.

Revenue



Finance income


Intangible assets



(b) Brands


F-66




Alterations to leasehold premises shorter of remaining life and 25 years Fixtures, fittings and IT hardware 3 - 10 years Motor vehicles 3 - 5 years





Investments





Inventories


Operating leases



Current and non-current deferred income arises from rent free period and reverse premium incentives received on property leases which are held on the statement of financial position and released to the income statement on a straight line basis over the lease term.

F-67

Current income tax


Deferred income tax








If the hedge transaction is no longer expected to take place, then the cumulative unrealised gain or loss is recognised immediately in the income statement. The gain or loss relating to the ineffective portion of all hedges is recognised immediately in the income statement. Cumulative gains or losses remain in equity and are then recognised when transactions are ultimately recognised in the income statement.




F-68

Borrowings

Interest bearing bank borrowings are recognised initially at fair value less attributable issue costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement within finance costs over the period of the borrowings on an effective interest basis. The fair values of trade and other receivables, loans and overdrafts and trade and other payables with a maturity of less than one year are assumed to approximate to their book values. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.



F-69




Dividends




Exceptional items




The agreements provide that B shareholders would participate in the increase in fair value of the group from the date of merger with Matalan plc and until either a specified exit event or liquidation occurs. The agreements were treated as a share based payment transaction in accordance with IFRS 2. The fair value of the subscription agreement was valued at the date of the agreement using a Black Scholes model and spread across the expected term of the agreement. The resulting charge is accounted for as an employee expense with a corresponding increase in equity. The shares covered by the subscription agreements have all now been fully paid up and issued.

Warrants





Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement within ‘selling and marketing costs’. When a

F-70

trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against ‘selling and marketing costs’ in the income statement.



Current and non-current deferred income arises from rent free period and reverse premium incentives received on property leases which are held on the statement of financial position and released to the income statement over the lease term.

Provisions






(a) Market risk




The group hedges future seasons’ purchases denominated in US dollars. The group treasury’s risk management policy is to hedge circa 90% (of forecast purchases within 12 months) and circa 40% (of purchases over 12 months) of anticipated cash flows in respect of the purchase of inventory in each major foreign currency. 100% (2012: 100%) of projected purchases in each major currency qualify as ‘highly probable’ forecast transactions for hedge accounting purposes.

At 23 February 2013, if sterling had weakened/strengthened by 10% against the US dollar with all other variables held constant, there would be a £0.3m impact on post-tax profit for the year, (2012: £1.2m higher/lower), mainly as a result of foreign exchange gains/losses on translation of US dollar-denominated stock commitments.

F-71



The group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk. Borrowings issued at fixed rates expose the group to fair value interest rate risk.

On 11 April 2011, the group completed a refinancing exercise whereby the existing Senior secured facilities (subject to a fluctuating rate of interest based on LIBOR) were repaid and Senior secured notes were issued at a fixed rate of interest. The unsecured Senior notes, also issued at a fixed rate of interest in March 2010, are still in issue. This exercise therefore significantly reduces the group’s exposure to interest rate risk.

In the prior period, the group managed its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Group policy is to maintain a minimum of 60% of its borrowings in fixed rate instruments using interest rate swaps to achieve this when necessary. As part of the April 2011 refinancing exercise, the interest rate swaps held by the group were terminated.

The impact on profit or loss of a 10 basis-point shift in LIBOR with all other variables held constant would be a maximum increase/decrease of £nil (2012: £0.1m).

During 2012 and 2013, the group’s borrowings at fixed and variable rates were denominated in sterling.

(b) Credit risk




No credit limits were exceeded during the reporting period and management does not expect any losses from non-performance by counterparties. The main counterparties dealt with in the period include Lloyds TSB plc, The Royal Bank of Scotland plc and Barclays Bank plc.


(c) Liquidity risk




F-72

Less than

1 year

£’m

Between 1

and 2 years

£’m

Between 2

and 5 years

£’m

Over

5 years

£’m

At 25 February 2012 Borrowings (before deduction of £14.6m issue costs) including

interest payable .............................................................................. (43.9) (43.9) (370.5) (235.8) Derivative financial instruments ........................................................ (1.2) — — — Trade and other payables ................................................................... (157.7) (3.1) (10.9) (27.6) Provisions for other liabilities and charges ........................................ (1.3) (1.1) (2.1) (1.3)

(160.2) (4.2) (263.0) (253.9)

At 23 February 2013 Borrowings (before deduction of £11.3m issue costs) including

interest payable .............................................................................. (43.9) (43.9) (562.4) — Derivative financial instruments ........................................................ — — — — Trade and other payables ................................................................... (171.0) (3.2) (11.6) (25.2) Provisions for other liabilities and charges ........................................ (1.3) (1.2) (1.2) (1.6)

(172.3) (4.4) (487.8) (26.8)

The table below analyses the value of the group’s derivative financial instruments into relevant maturity groupings based on the remaining period at the contractual maturity date as at the balance sheet date. Inflows from gains and outflows from losses on these instruments are presented separately.

Less than

1 year

£’m

Between 1

and 2 years

£’m

Between 2

and 5 years

£’m

Over

5 years

£’m

At 25 February 2012 Cash flow hedges: Inflows ............................................................................................... 2.7 0.7 — — Outflows ............................................................................................ (1.2) — — —

1.5 0.7 — —

At 23 February 2013 Cash flow hedges: Inflows ............................................................................................... 16.9 4.8 — — Outflows ............................................................................................ — — — —

16.9 4.8 — —




Net debt is calculated as total borrowings less cash and cash equivalents. Adjusted total capital is calculated as ‘equity’ as shown in the consolidated statement of financial position and excluding the merger reserve.

2013

£’m 2012

£’m

Group net debt Total borrowings (net of issue costs) ...................................................................................................... 463.7 460.4 Less: Cash and cash equivalents ............................................................................................................. (120.7) (96.2)

Net debt .................................................................................................................................................. 343.0 364.2

Adjusted total capital ........................................................................................................................... 550.1 522.2

Gearing ratio ......................................................................................................................................... 62% 70%

The gearing ratio excludes the creation of a merger reserve and the group considers this a more appropriate measure to be used as it takes account of underlying assets and equity generated in the course of business. The gearing ratio has reduced since 2012. The group was required to meet specific bank covenants, interest cover and debt cover, during the year. The group has complied with bank covenants throughout the year.

F-73







Level 1

£’m Level 2

£’m Level 3

£’m Total

£’m

Assets Cash flow hedges ................................................................................................ — 21.7 — 21.7

Total assets ........................................................................................................ — 21.7 — 21.7

Liabilities Cash flow hedges ................................................................................................ — — — —

Total liabilities ................................................................................................... — — — —


Level 1

£’m Level 2

£’m Level 3

£’m Total

£’m

Assets Cash flow hedges .............................................................................................. — 3.4 — 3.4

Total assets ...................................................................................................... — 3.4 — 3.4

Liabilities Cash flow hedges .............................................................................................. — (1.2) — (1.2)

Total liabilities ................................................................................................. — (1.2) — (1.2)


The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on the valuation provided by the counter party with which the contracts are held.




As at the 23 February 2013, the group has not applied any estimates or assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

5. Operating profit

2013

£’m 2012

£’m

Revenue.......................................................................................................................................... 1,125.4 1,117.5

Cost of goods sold .......................................................................................................................... (626.6) (647.5) Selling expenses.............................................................................................................................. (333.3) (315.0) Distribution expenses ...................................................................................................................... (37.9) (38.3)

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Total cost of sales ........................................................................................................................... (997.8) (1,000.8)

Gross profit ................................................................................................................................... 127.6 116.7





Group

2013

£’m 2012

£’m

Finance costs and similar charges: Interest payable on loans......................................................................................................................... — (2.0) Interest payable on notes......................................................................................................................... (42.9) (41.7) Amortisation of finance costs:

Debt costs ........................................................................................................................................... — (0.3) Notes costs .......................................................................................................................................... (3.2) (3.0)

Interest payable on bank borrowings ...................................................................................................... (0.9) (1.0) Unwinding of discounts on provision ..................................................................................................... (0.7) —

Finance costs ......................................................................................................................................... (47.7) (48.0)

Exceptional financing costs .................................................................................................................. (0.5) (8.3) Finance income: Interest receivable on short term cash deposits ....................................................................................... 0.8 0.6

Finance income...................................................................................................................................... 0.8 0.6


Unwinding of discounts on provisions arises on the onerous lease provision. In the prior year the unwinding of discounts on provisions of £0.2m credit was included in exceptional administration expenses.

F-75




The remuneration paid to the directors of Missouri Topco Limited, as part of their service contract with Matalan Retail Limited, was:

2013

£’m 2012

£’m

Aggregate emoluments and fees (including benefits in kind) ......................................................................... 1.1 1.0 Performance bonuses and other emoluments .................................................................................................. 0.9 1.8

2.0 2.8

No directors have benefits accruing under defined benefit or defined contribution pension schemes. Under arrangements for selected individuals to subscribe for equity settled ‘B’ shares, charges have been made to the income statement of £0.7m (2012: £1.8m) in respect of directors. £0.7m (2012: £1.8m) of this amount is included in performance bonuses and other emoluments above.


2013

£’m 2012

£’m


1.6 1.1


The average monthly number of persons (including executive directors) employed during the period was:

2013

Number 2012

Number


16,373 15,858

2013

£’m 2012

£’m

Staff costs (for the above persons) Wages and salaries ...................................................................................................................................... 141.4 131.3 Social security costs .................................................................................................................................... 6.7 6.3 Share based compensation charge .............................................................................................................. 0.7 2.3 Termination payments ................................................................................................................................ 1.3 1.1

150.1 141.0





F-76


2013

£’m 2012

£’m


EBITDA before exceptional items ............................................................................................................. 100.4 91.1




Group

2013

£’m 2012

£’m

Profit on continuing ordinary activities before tax is stated after charging/(crediting): Cost of inventories recognised as an expense (included in cost of sales) ................................................... 645.1 669.2 Depreciation charge for the period on property, plant and equipment ........................................................ 23.3 22.6 Amortisation of intangible assets ................................................................................................................ 9.9 6.7 Exceptional items (note 30) ........................................................................................................................ 2.0 4.0 Foreign exchange differences ..................................................................................................................... (24.9) (19.4) Fees payable to the group’s Auditor:

for the audit of the parent company and consolidated financial statements and subsidiary companies .. 0.1 0.1 for taxation compliance/advisory services .............................................................................................. 0.1 — for services in relation to refinancing ..................................................................................................... — 0.2 for all other services ................................................................................................................................ 0.1 —

Gain on disposal of property, plant and equipment .................................................................................... — 1.2 Operating lease rentals payable .................................................................................................................. 97.7 92.3

The audit fee for the company amounting to £2,000 (2012: £2,000) is borne by a fellow group company. The total group fee is £0.1m (2012: £0.1m). Amounts paid to the company’s auditor and its associates in respect of services to the company, other than the audit of the company’s financial statements, have not been disclosed as the information is required instead to be disclosed on a consolidated basis.

The amounts paid to the prior year auditor was PwC and not KPMG.

11. Income tax expense/(credit)

Analysis of expense/(credit)

Group

2013

£’m 2012

£’m

Continuing operations

Current income tax UK corporation tax—current year .............................................................................................................. 8.4 2.4 UK corporation tax—prior year .................................................................................................................. (1.4) (4.0)

7.0 (1.6)

Deferred income tax Deferred income tax relating to the origination and reversal of temporary differences .............................. (1.4) 1.6 Effect of change in income tax rates ........................................................................................................... (1.0) (1.0) Adjustment in respect of prior periods ........................................................................................................ (0.3) 0.1

(2.7) 0.7

Total income tax expense/(credit) ............................................................................................................ 4.3 (0.9)

F-77

The company has been granted exemption from Guernsey Income Tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 and hence will be liable only for a payment of a Guernsey exemption fee at a fixed rate of £600 per annum.

The group income tax charge for the period is the same as (2012: lower than) the rate of corporation tax of 24.17% (2012: 26.17%). The rate of corporation tax is based on a weighted average rate. The standard rate of Corporation Tax reduced from 26% to 24% on 1 April 2012.


Group

2013

£’m 2012

£’m

Profit on ordinary activities before income tax ............................................................................................. 17.8 2.1

Profit on ordinary activities multiplied by the rate of corporation tax of 24.17% (2012: 26.17%) .............. 4.3 0.6 Effects of: Non deductible expenses .............................................................................................................................. 2.3 2.7 Adjustments to income tax in respect of prior periods ................................................................................. (1.7) (3.9) Change in rate of income tax on deferred income tax .................................................................................. (1.0) (1.0) Deferred income tax not recognised ............................................................................................................. 0.4 0.7

Total income tax expense/(credit) in the period ....................................................................................... 4.3 (0.9)

Deferred income tax



Group

2013

£’m 2012

£’m

At the beginning of the period ................................................................................................................ (13.9) (9.1) Taken to equity: – hedge reserve (4.0) (4.1) Taken to income statement: —prior year movement ........................................................................................................................... 0.3 (0.1) —depreciation in advance of capital allowances .................................................................................... 1.4 — —other temporary differences ................................................................................................................ — (1.6) —change in rate of income tax ............................................................................................................... 1.0 1.0


Deferred income tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.



2013

£’m 2012

£’m 2013

£’m 2012

£’m 2013

£’m 2012

£’m

Property, plant and equipment ....................................................... — — (9.0) (12.0) (9.0) (12.0) Rolled over capital gain ................................................................. — — (2.0) (1.8) (2.0) (1.8) Short-term temporary differences .................................................. 0.4 0.5 — — 0.4 0.5 Financial derivatives ...................................................................... — — (4.6) (0.6) (4.6) (0.6)

Net deferred income tax assets/(liabilities) ................................ 0.4 0.5 (15.6) (14.4) (15.2) (13.9)

In his budget of 20th March 2013, the Chancellor of the Exchequer announced tax changes including phased reductions in the corporation tax rate to 20% from 1 April 2015.

As at 23 February 2013, only the rate change to 23% from 1 March 2013 had been substantively enacted and it is this rate which is reflected in the disclosure of the deferred income tax. The estimated effect of the proposed reduction in the income tax rate from 23% to 20% on the company’s deferred income tax liability is to reduce the liability by £2.0m.

F-78




Financial

derivatives

£’m

Short term

temporary

differences

£’m Total

£’m

At 27 February 2011 ........................................................................................... 3.5 2.4 5.9 Expensed to the income statement ...................................................................... — (1.9) (1.9) Taken directly to equity ...................................................................................... (3.5) — (3.5)

At 25 February 2012 ........................................................................................... — 0.5 0.5

At 26 February 2012 ........................................................................................... — 0.5 0.5 Expensed to the income statement ...................................................................... — (0.1) (0.1) Taken directly to equity ...................................................................................... — — —

At 23 February 2013 ......................................................................................... — 0.4 0.4



Accelerated tax

depreciation

£’m

Rolled over

capital gain

£’m

Financial

derivatives

£’m Total

£’m

At 27 February 2011 ............................................................ (13.0) (2.0) — (15.0) Credited to the income statement ......................................... 1.0 0.2 — 1.2 Taken directly to equity ....................................................... — — (0.6) (0.6)

At 25 February 2012 ............................................................ (12.0) (1.8) (0.6) (14.4)

At 26 February 2012 ............................................................ (12.0) (1.8) (0.6) (14.4) Credited to the income statement ......................................... 3.0 (0.2) — 2.8 Taken directly to equity ....................................................... — — (4.0) (4.0)

At 23 February 2013 .......................................................... (9.0) (2.0) (4.6) (15.6)


Group

Alterations to

leasehold premises

£’m

Motor

vehicles

£’m

Fixtures, fittings

and IT hardware

£’m Total

£’m

Cost At 27 February 2011 .................................................................... 146.9 1.5 202.2 350.6 Additions ..................................................................................... 6.5 — 11.3 17.8 Disposals ...................................................................................... — — (3.3) (3.3)

At 25 February 2012 .................................................................... 153.4 1.5 210.2 365.1

At 26 February 2012 .................................................................... 153.4 1.5 210.2 365.1 Additions ..................................................................................... 4.9 — 10.4 15.3 Disposals ...................................................................................... — — (1.4) (1.4)

At 23 February 2013 .................................................................. 158.3 1.5 219.2 379.0

Accumulated depreciation At 27 February 2011 .................................................................... 56.6 1.3 127.9 185.8 Charge for the period ................................................................... 6.4 0.1 16.1 22.6 Eliminated in respect of disposals................................................ — — (3.3) (3.3)

At 25 February 2012 .................................................................... 63.0 1.4 140.7 205.1

At 26 February 2012 .................................................................... 63.0 1.4 140.7 205.1 Charge for the period ................................................................... 6.6 0.1 16.6 23.3 Eliminated in respect of disposals................................................ — — (1.4) (1.4)

At 23 February 2013 .................................................................. 69.6 1.5 155.9 227.0

F-79

Net book value

At 23 February 2013 .................................................................. 88.7 — 63.3 152.0 Net book value At 25 February 2012 .................................................................... 90.4 0.1 69.5 160.0

Net book value At 26 February 2011 .................................................................... 90.3 0.2 74.3 164.8



F-80




Group

Brands

£’m

Computer

software and

associated costs

£’m Total

£’m

Cost At 27 February 2011 ........................................................................................................ 1.7 67.3 69.0 Additions ......................................................................................................................... — 4.3 4.3

At 25 February 2012 ........................................................................................................ 1.7 71.6 73.3

At 26 February 2012 ........................................................................................................ 1.7 71.6 73.3 Additions ......................................................................................................................... — 7.6 7.6

At 23 February 2013 ...................................................................................................... 1.7 79.2 80.9

Aggregate amortisation At 27 February 2011 ........................................................................................................ 1.7 44.9 46.6 Charge for the period ....................................................................................................... — 6.7 6.7

At 25 February 2012 ........................................................................................................ 1.7 51.6 53.3

At 26 February 2012 ........................................................................................................ 1.7 51.6 53.3 Charge for the period ....................................................................................................... — 9.9 9.9

At 23 February 2013 ...................................................................................................... 1.7 61.5 63.2

Net book value

At 23 February 2013 ...................................................................................................... — 17.7 17.7 Net book value At 25 February 2012 ........................................................................................................ — 20.0 20.0

Net book value At 26 February 2011 ........................................................................................................ — 22.4 22.4



14. Investments

Company

Investment in

subsidiaries

£’m


At 25 February 2012 ................................................................................................................................. 457.0

At 26 February 2012 ................................................................................................................................. 457.0 Fair value charge to group undertakings for subscription for ‘B’ shares .................................................. 0.7

At 23 February 2013 ............................................................................................................................... 457.7




15. Inventories

Group

F-81

2013

£’m 2012

£’m

Finished goods ............................................................................................................................................ 140.7 131.8

140.7 131.8



16. Trade and other receivables

Group

2013

£’m 2012

£’m

Trade receivables ............................................................................................................................................ 4.3 4.4 Prepayments and accrued income ................................................................................................................... 18.7 15.3

23.0 19.7

The company is owed £30m by group undertakings at period end (2012: £30m).


Group

2013

£’m 2012

£’m

Cash at bank and in hand .............................................................................................................................. 120.7 96.2


The effective interest rate on short-term deposits entered into in the financial period was 0.90% (2012: 0.89%) and these deposits have an average maturity period of 1 day (2012: 1 day). All short-term deposits had matured at 23 February 2013 (2012: all). The group’s cash and cash equivalents are denominated in sterling.


Group

2013

£’m 2012

£’m

Non current Senior notes (net of £4.7m issue costs (February 2012: £5.9m)) maturity date 2015 ......................... (220.3) (219.1) Senior secured notes (net of £6.6m issue costs (February 2012: £8.7m)) maturity date 2016 ............ (243.4) (241.3)

(463.7) (460.4)

The company has no financial liabilities.

Bank borrowings are all denominated in sterling at 23 February 2013. The group had no short-term borrowings during the period (2012: £nil).

On 11 April 2011, the group completed an issue of £250.0m Senior secured notes, over 5 years at a fixed rate of 87/8%. The existing Senior secured facilities of £231.0m, that were subject to a floating rate of interest based on LIBOR, were repaid on 12 April 2011. The Senior notes of £225.0m issued in March 2010, over 7 years at a fixed rate of 95/8%, are still in issue.

Bank loan amounts include rolled up interest charges as appropriate to the instrument and also include an element of borrowing costs in accordance with IAS39. Average interest rates on bank loans during the period were nil (2012: 7.3%).

During the prior period, fees of £10.5m associated with the refinancing were incurred and are being amortised over the terms of the facilities.

At the period end the Senior secured notes were trading at 101 and the Senior notes were trading at 94.

F-82

Maturity of Senior notes and Senior secured notes

Group

2013

£’m 2012

£’m

Less than one year ......................................................................................................................................... — — One to five years ............................................................................................................................................ 475.0 250.0 Five to ten years ............................................................................................................................................. — 225.0


463.7 460.4

Current ........................................................................................................................................................... — — Non current .................................................................................................................................................... 463.7 460.4

463.7 460.4


At 23 February 2013 the table below reflects the usage of the RCF (revolving credit facility). These facilities are subject to an annual review and incur fees at market rates.

Group

2013

£’m 2012

£’m


30.0 30.0


In February 2012 the group renegotiated its RCF whereby an agreement was made to cancel £20m of committed facilities the directors’ considered to be unnecessary.


Group

2013

£’m 2012

£’m


(171.0) (157.7)

The company owes group undertakings £59.4m at the period end (2012: £59.4m). Amounts owed to group undertakings are repayable on demand and therefore presented as current.


Group

2013

£’m 2012

£’m




2013 2012

Group Assets

£’m Liabilities

£’m Assets

£’m Liabilities

£’m

F-83

Forward foreign exchange contracts .................................................... 21.7 — 3.4 (1.2)

Total ..................................................................................................... 21.7 — 3.4 (1.2)

Less non-current portion: Forward foreign exchange contracts .................................................... 4.8 — 0.7 —

Non-current portion ............................................................................. 4.8 — 0.7 —

Current portion..................................................................................... 16.9 — 2.7 (1.2)


The amount that was recognised in the Statement of Comprehensive Income during the period net of tax was £13.7m (2012: £11.2m). The amount that was transferred from equity to profit and loss in the period was £(0.9)m (2012: £0.2m). The ineffective portion recognised in the income statement that arises from cash flow hedges amounts to £nil (2012: £nil).


The total principal value of forward foreign exchange contracts at 23 February 2013 was £452.7m (25 February 2012: £429.7m).


2013

£’m 2012

£’m


452.7 429.7

The net fair value of gains as at 23 February 2013 on open forward foreign exchange contracts that hedge the foreign currency risk of purchases are £21.7m (2012: gains of £2.2m). These are transferred at their current fair value as an inventory based adjustment on receipt of the underlying inventory.


2013

£’m 2012

£’m

Maturing within one year ................................................................................................................................ 16.9 1.5 Maturing between one to two years ................................................................................................................ 4.8 0.7

21.7 2.2


Group

Onerous

contracts

£m

At 26 February 2012 ......................................................................................................................................... (5.8) Utilised in the period ........................................................................................................................................ 0.9 Charged to the income statement as an exceptional item—see note 30 ............................................................ (0.4)

At 23 February 2013 ....................................................................................................................................... (5.3)

2013

£’m 2012

£’m

Analysis of total provisions: Non-current .................................................................................................................................................... (4.0) (4.5) Current ........................................................................................................................................................... (1.3) (1.3)

(5.3) (5.8)

Two leases previously assigned to another retailer were returned to the company in 2009 on privity of contract after they entered administration. A provision was created at that time to recognise that the leases were onerous and this was treated as exceptional in nature. During the previous period a provision for an onerous lease was recognised on a property no longer used by the business. This provision has been treated as exceptional and is being released over the remaining life of the lease.

F-84





Group and company


shares Number

Total

value

£’m

10p ‘B’

ordinary

shares

Number

Total

value

£’m

5p ‘B1’

ordinary

shares

Number

Total

value

£’m

5p ‘B2’

ordinary

shares

Number

Total

value

£’m

Issued and fully paid At 26 February 2011 ................ 172,763,695 17.3 204,000 — 96,000 — 96,000 — At 25 February 2012 ................ 172,763,695 17.3 204,000 — 96,000 — 96,000 —

At 23 February 2013 .............. 172,763,695 17.3 204,000 — 96,000 — 96,000 —

Reserves

Merger reserve


Hedge reserve

The hedge reserve of a £15.3m gain (2012: £1.6m gain) comprises the effective portion of the cumulative net change in fair value of qualifying cash flow hedging instruments relating to hedged transactions, which have not yet occurred.



Warrant reserve

Warrants to subscribe for 0.75% of the issued ‘A’ ordinary shares in the company were granted on 22 December 2006. The warrants have an exercise price of 10p per share. The warrants are exercisable on the earlier of a change in control of the group, repayment of the PIK debt and liquidation. The fair value of the warrants was valued at the date of grant using a Black Scholes model and spread across the expected term, with the resulting charge accounted for as a finance cost. The key inputs into the valuation were: fair value at grant date of £2, expected volatility of 40%, expected term of 5 years, expected dividend yield of nil and a risk free interest rate of 5.66%. The volatility assumption of 40% was based upon historic volatility data. The fair value of the total number of warrants was calculated at £3.1m. The remaining unamortised charge was accelerated when the PIK debt was repaid on 30 March 2010. £1.1m was charged to exceptional refinancing costs during 2011. The warrants have not yet been exercised.


Agreements to subscribe for 300,000 B shares in the company were agreed with selected individuals at the date of acquisition. The agreements provide that B shareholders will participate in the increase in fair value of the group from the date of merger with Matalan plc and until either a specified exit event or liquidation occurs. The agreements have been treated as a share based payment transaction in accordance with IFRS 2. The fair value of the subscription agreement has been valued at the date of the agreement using a Black Scholes model and spread across the expected term of the agreement, with the resulting charge accounted for as an employee expense. The key inputs into the valuation were: expected volatility of 40%, expected term of 5 years, expected dividend yield of nil and risk free interest rate of 5.66%. The volatility assumption of 40% was based upon historic volatility data. The fair value of each subscription was calculated at £38.45 per share.

F-85

The charge in the period was £0.7m (2012: £2.3m).




Group

2013

£’m 2012

£’m

Cash generated from continuing operations Operating profit ...................................................................................................................................... 65.2 57.8 Adjustments for: Depreciation ............................................................................................................................................ 23.3 22.6 Amortisation of intangibles .................................................................................................................... 9.9 6.7 Profit on disposal of property, plant and equipment ............................................................................... — (1.2) Non cash exceptional items .................................................................................................................... (0.7) 2.4 Share based compensation charge .......................................................................................................... 0.7 2.3 Hedge accounting ................................................................................................................................... (0.1) (0.1)

Operating cash flows before movements in working capital ............................................................. 98.3 90.5 Movements in working capital Increase in inventories ............................................................................................................................ (9.2) (11.8) Increase in trade and other receivables ................................................................................................... (3.3) (2.2) Increase in trade and other payables ....................................................................................................... 9.1 0.3

Net cash flows from operating activities ............................................................................................. 94.9 76.8



Net debt at

26 February

2012

£’m Cashflows

£’m

Non cash

movements

£’m

Net debt at

23 February

2013

£’m

Cash and cash equivalents ..................................................... 96.2 24.5 — 120.7

Debt due within 1 year ........................................................... — — — — Debt due after 1 year .............................................................. (460.4) — (3.3) (463.7)

(364.2) 24.5 (3.3) (343.0)


Group

At 23 February 2013 the group had total future aggregate minimum lease payments under non-cancellable operating leases which fall due as follows:

2013

£’m 2012

£’m

Within one year................................................................................................................................... 102.6 102.7 Between two and five years inclusive ................................................................................................. 386.1 397.9 Over five years .................................................................................................................................... 646.4 745.6

1,135.1 1,246.2

The group leases various retail outlets, offices and warehouses under non- cancellable operating lease agreements. Average remaining lease terms are 11 years, and the majority of lease agreements are renewable at the end of the lease period at market rate.


F-86


The capital expenditure for the group that has been contracted for but not provided at 23 February 2013 was £1.3m (2012: £1.0m). The company has no capital commitments at 23 February 2013 (2012: £nil).




The company has a related party relationship with other group undertakings and with its directors and executive officers. The company has recharged fees to other group companies to the value of £nil (2012: £nil). The balance of the related transactions outstanding at 23 February 2013 is £29.4 m (2012: £29.4m).

The company is party to a group cash pooling arrangement with other group companies. The company does not settle transactions in cash, instead amounts are settled by other group companies on its behalf with a corresponding adjustment to intercompany receivables/payables.



The group continues to lease a building in London from a company associated with the Hargreaves family. A portion of the building continues to be leased to three companies associated with the Hargreaves family. The rental paid in the period was £0.7m (2012: £0.7m). The rental income in the period was £0.2m (2012: £0.2m). There are no material amounts outstanding/due as at 23 February 2013 (2012: £nil).

During the current and prior period the group leased a new distribution centre from a company associated with the Hargreaves family. The rental paid in the period was £1.1m (2012: £0.4m). These transactions have taken place at levels not materially different to commercial terms.

During the year a trading receivable was returned to the group via a related party at face value.



2013

£’m 2012

£’m

Restructuring costs .................................................................................................................................... (1.3) (1.5) Onerous contract provision ....................................................................................................................... 0.8 (2.4) Refinancing costs ...................................................................................................................................... (1.5) (0.1)

Exceptional items—administrative expenses ........................................................................................ (2.0) (4.0)

Financing costs ......................................................................................................................................... (0.5) (8.3)

Exceptional items—finance costs ........................................................................................................... (0.5) (8.3)

Total exceptional items ........................................................................................................................... (2.5) (12.3)

Restructuring costs

Restructuring costs of £1.3m (2012: £1.5m) have been incurred in the year.


£0.8m of income has been received during the year from properties in respect of which onerous lease provisions are held in full. As the initial provision on these properties was created through exceptional items, the corresponding offseting income is also recognised as exceptional.

F-87

During the prior period a provision for an onerous lease was recognised on a property no longer used by the business. This provision was treated as exceptional.

Two leases previously assigned to another retailer were returned to the company in 2009 on privity of contract after they entered administration. A provision was created at that time to recognise that the leases were onerous and this was treated as exceptional in nature. In the previous period, one of these leases had been assigned to another retailer resulting in a £1.5m release of this provision. This release was also treated as exceptional for consistency.

Refinancing costs

£1.5m of refinancing costs were incurred during the period relating to the settlement of a dispute with the holders of an interest rate swap that the group had previously entered into. These costs have been expensed as an exceptional item within administrative expenses. In the prior period £0.1m of refinancing costs were expensed as exceptional items within administrative expenses.

Financing costs

Current year financing costs of £0.5m arises from a change in the discount rate applied to the onerous lease provision calculation.

In the prior period, £8.0m of finance costs associated with the April 2011 refinancing exercise were expensed as an exceptional item. An additional £0.3m was incurred in relation to the RCF (revolving credit facility) renegotiation also in the prior period.


UK companies Principal activity Country of incorporation

Matalan Finance plc ................................................................................. Holding company England and Wales Matalan Group Limited ........................................................................... Holding company England and Wales Matalan Limited....................................................................................... Holding company England and Wales Matalan Retail Limited ............................................................................ Retail England and Wales Jonmar Limited ........................................................................................ Property England and Wales Matalan Holding Company Limited ........................................................ Holding company England and Wales Matalan Investments Limited .................................................................. Holding company England and Wales Matalan Travel Limited ........................................................................... Travel services England and Wales HP01 Nominees Limited ......................................................................... Distribution England and Wales



F-88




F-89


CONTENTS

Pages

Directors and advisers ............................................................................................................................................... F-95 Directors’ report........................................................................................................................................................ F-96 Independent Auditors’ report to the members of Missouri Topco Limited .............................................................. F-103 Income statements .................................................................................................................................................... F-105 Statement of comprehensive income ........................................................................................................................ F-106 Balance sheets ........................................................................................................................................................... F-107 Cash flow statement .................................................................................................................................................. F-108 Statement of changes in shareholders’ equity ........................................................................................................... F-109 Notes to the financial statements .............................................................................................................................. F-112

F-90



Directors

J N Mills (Chairman) P J T Gilbert D Blackhurst (appointed 9 May 2011)

Non-executive directors

A K McGeorge (appointed as Non-Executive Director 4 January 2011 and resigned 30 April 2011)

Company secretary

J N Mills

Registered office


Independent Auditors

PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors 101 Barbirolli Square Lower Mosley Street Manchester M2 3PW

Solicitors


A O HALL Advocates Le Marchant House Le Marchant Street St Peter Port Guernsey GY1 2JJ

Banker

Lloyds TSB Bank Plc King Street Manchester M2 4LQ

F-91



The directors present their report and the audited consolidated financial statements for the 52 weeks ended 25 February 2012.

DIRECTORS


REFINANCING

On 11 April 2011, the group completed an issue of £250.0m Senior secured notes, over 5 years at a fixed rate of 87/8%. The existing Senior secured facilities of £231.0m were repaid on 12 April 2011. The unsecured fixed rate Senior notes of £225.0m issued in March 2010, over 7 years at a fixed rate of 95/8%, are still in issue.




REVIEW OF BUSINESS

Overview

Trading conditions in the UK retail market were very challenging during the period and are likely to remain so for the foreseeable future. Despite this, the group delivered robust revenue growth and strong cash position in the period. Christmas trading significantly improved compared to last year. This was a direct result of our strong seasonal product offering, the positive response to our Christmas TV advertising campaign and the weather impact in last year’s results. Trading in December showed a Like-For-Like (LFL) sales increase of 9.9%. The business also achieved its best sales week ever during this period, beating our previous record set in 2005.

We maintained cost base efficiency (excluding exceptional items) whilst at the same time allowing for additional investment in other selective key areas. This provides a strong platform from which to grow. We will continue to manage our cost base tightly going forward.

Our cash performance during the period has remained strong, reflecting management’s ongoing focus to maximise cash balances.

Our growth strategy is focused on the following key areas:

• Initiatives to drive like for like sales and margin growth

• Controlled expansion of the store portfolio

• More progressive exploitation of online and multichannel opportunities

• Investment in customer recruitment and retention

We opened 3 new stores during the 52 weeks ended 25 February 2012: Trowbridge, Crawley and Newtownards. We also relocated our Scunthorpe store and reopened our Grimsby store.

We plan to continue our selective store roll-out plan and are planning on opening 3 new stores in the 52 weeks ending 23 February 2013, concentrating on opening stores in larger catchment areas where we have historically not had a presence. 2 of these 3 stores opened in March 2012 (Ipswich and Camberley). The third store (Dunfermline) is expected to open in June 2012.

F-92

We launched a transactional website in November 2008. Our online offer commenced with a subset of the full store product range but focused primarily on the more fashionable products from within our ladieswear range. Our online offering, whilst remaining focused on selected product lines, has now been extended to all departments. During the period our online channel has achieved over 100% revenue growth and now represents 4 times our average store in revenue terms. We will continue to focus on and develop our online sales channel in the coming year and to improve our online shopping experience for our customers.

We continue to work with a franchise partner in the Middle East. They now have 7 franchise stores based in Dubai, Jordan, Abu Dhabi and Fujairah.

Financial Performance

Against a very challenging market and economic backdrop, Matalan delivered a robust performance. Sales for the period were £1,117.5m (2011: £1,096.5m), a 1.9% increase compared to the previous period, which is an encouraging result in the current climate.

We continue to focus on improving margins and lowering costs, however, over the course of the year our margins have been impacted by four key factors: higher input prices (primarily cotton prices and wages), promotional markdown, the January 2011 VAT increase and lower currency gains. Conscious of the tough economic climate, we took the decision to protect our customers and not fully pass on the increase in input prices. Consequently, we have delivered robust sales growth from a growing customer base. However, this has resulted in a gross profit of £116.7m (2011: £175.5m) which reflects a decrease of 33.5% compared to the previous period.

Administrative expenses, pre exceptional items, are comparable to the previous period at £54.9m (2011: £54.5m). We consider maintaining a broadly flat cost base in an increasingly inflationary economy to be an achievement. We continue to focus heavily on our controllable costs and the effectiveness of our cost base.

Exceptional items, included within administrative expenses, of £4.0m were incurred (2011: £6.4m). £2.4m of the £4.0m recognised relates to the recognition of an onerous lease provision in relation to a building no longer used by the group.

Operating profit, pre exceptional items, of £61.8m (2011: £121.0m) was a 48.9% decrease on the prior period largely driven by the tough trading conditions and increased margin pressures.

Net finance costs, excluding exceptional items, of £47.4m (2011: £41.6m) are higher than last period due to the refinancing exercise that happened in April 2011 whereby total debt increased from £456.0m to £475.0m. Total net debt in the period increased from £356.5m to £364.2m.

Refinancing exceptional items of £8.3m (2011: £11.3m) were incurred and are shown within net finance costs. These exceptional refinancing costs relate to the acceleration of the amortisation of the outstanding loan issue costs of the Senior debt facilities repaid as part of the April 2011 refinancing exercise and the costs incurred in relation to the termination of the interest rate swaps held by the group.

In February 2012 the group renegotiated its Revolving Credit Facility (RCF) whereby an agreement was made to cancel £20m of committed facilities the directors’ considered to be unnecessary. The group is confident that sufficient levels of liquidity remain in the business from cash balances and the remaining £30m RCF. The group has complied with RCF covenants throughout the year and the new covenants negotiated in February 2012 allow the business sufficient headroom.

Additions to property, plant and equipment of £17.8m (2011: £22.4m) and intangible assets of £4.3m (2011: £9.1m) during the period reflect the group’s ongoing investment in the existing store portfolio and IT systems. We continue to invest in our IT systems to ensure that they are fit for purpose, particularly with regard to merchandising capabilities.

Management consider EBITDA (earnings before interest, tax, depreciation and amortisation) before exceptional items to be the main financial KPI (key performance indicator) for the business. EBITDA before exceptional items of £91.1m (2011: £153.6m) in the current financial period shows 40.7% decrease compared to the prior period, largely reflecting the challenging trading conditions and increased margin pressures.

Business Review

We are continuing to make strong progress across a range of key growth initiatives:

F-93

Sourcing and Supply chain

We source the majority of our products directly from manufacturers, predominantly based in the Far East and Turkey. We believe that our direct relationship with our suppliers allows us to negotiate better prices for our products whilst at the same time ensuring high levels of quality. This allows us to preserve our reputation for offering outstanding value and quality to customers.

During the year we have undertaken a strategic review of our supply chain. Through this exercise we have identified a number of areas to improve that will increase stock availability and improve the efficiency of our product distribution. Specific initiatives will be implemented with the aim of improving our terms of trade, optimise the prices of the goods we buy, reduce lead times and minimise failure costs.

During the coming year we will begin the re-design of our supply chain. This will include how, when and where stock arrives into and flows through the business. We are also insourcing the Wincanton warehouse and transport teams.

Product ranging and price architecture

We have continued to build on the significant improvements made to our product ranges which continue to offer fantastic value across a broad ‘Good, Better, Best’ price architecture, delivering greater real choice to our customers. This has enabled most product categories to deliver performance improvements.

Stores

We have substantially completed the refurbishment programme which we started after the Take Private Transaction in 2006. This has resulted in an improved shopping experience for our customers and a better working environment for our staff and we continue to be proud of the improved retail execution standards in our stores. In addition, our improved point of sale and shop fit continue to deliver a more consistent and appealing shopping environment.

We believe that a controlled store portfolio expansion program is appropriate given the current climate. We opened 3 stores in the current financial period bringing our total number of stores to 214, comprising 209 full-price stores and 5 clearance stores, and plan to open 3 new stores in the coming financial period, 2 of which were opened in March 2012.

Marketing

Through the Matalan card, our unique customer card that offers customers a range of benefits including exclusive promotional discounts on our merchandise, we maintain one of the largest transactional databases of any UK retailer. We hold transactional details of approximately 11 million active customers which we use for direct marketing. The transactional nature of the database enables us to identify our customer demographics, spending patterns and to tailor our direct marketing accordingly. During the period, through the use of this database we were able to identify and reward our most loyal customers with additional offers through the introduction of the ‘Black card’. We believe that there are further benefits to be gained by better utilising our customer database to target a greater share of our customers’ total spending through tailored marketing and further development of the Matalan card program.

Following the success of our TV campaign last year, we launched Spring/ Summer and Christmas TV campaigns this year. These campaigns, together with our wider, multi-channel marketing campaigns, have led to many new customers registering with us and raise the profile of our brand significantly.

We believe that our loyal customer base is responsible for our high conversion rate. Our offer appeals to a broad section of the UK population, although our typical customer is female, aged 30+, who visits Matalan to purchase products for herself, her family and her home. Our customers are fashion conscious but less demanding of leading-edge ‘fast fashion’. Our more flexible buying plan will cater for our more fashion conscious customers by allowing us to be more responsive to fashion trends.

Matalan continues to support the “Matalan Sporting Promise” (a partnership between Matalan and the Youth Sport Trust to bring professional sports trainers into schools across the UK) which was launched last year. We are sponsoring a training program in primary and secondary schools, resulting in the Matalan name and brand being broadcast to parents and teachers around the country. This program contributes toward the UK’s promise to the International Olympic Committee of ensuring a “sporting ethos” in the UK.

F-94

E-commerce

Online sales represent a significant opportunity for future growth. Starting from a platform offering a range of limited ladieswear in November 2008, we have grown our online business, with its sales now representing 4 times our average store. Our online offering, whilst remaining focused on selected product lines, has now extended to all departments. With online, we target more fashion conscious customers and so ensure the product lines included within our online offering are relevant to this customer base. This has led to significantly higher average basket values for Matalan online compared to our stores. We continue to enhance the online shopping experience and actively market the website to our database of customers and we are confident that this will help to drive future sales growth. Online growth is complementary to our store based business as it seeks to gain a greater share of spend from those customers currently already spending online. Many of these customers may be new to Matalan.

Outlook

Given the uncertainty surrounding the condition of and prospects for the UK economy, we are cautious about the outlook for consumer spending and confidence. We expect the trading conditions to continue to be challenging with consumers subject to increasing pressures on their disposable income. In addition, we will continue to experience input price pressures (from cotton prices and wages) which we expect to dilute margins into the first half of the coming financial year. We expect these pressures to ease into the second half of the coming financial year. Committed product volumes are now much tighter and there is more flexibility around open to buy, both of which should ease some of the pressures on promotional markdown despite the outlook for the competitive environment remaining tough.

Though remaining cautious we believe that Matalan is well placed to meet these challenges as the UK consumer continues to embrace the relevance of Matalan’s brand and offer. Customers are continuing to respond well to our strategy of offering more real choice in a pleasant shopping environment and the outstanding value that we offer.

We believe there is significant scope for LFL sales growth and this will be complemented by a carefully controlled new store opening program and online growth. Overseas growth will be limited to our franchise partner for the foreseeable future and will consequently remain modest.

We have identified a number of initiatives to support us in further improving the effectiveness of our merchandising processes through improved supply chain, inventory management and believe that these initiatives collectively will allow us to increase sales while significantly reducing permanent markdowns and therefore improve our margins.

Our team of highly committed and motivated employees remain integral to our success and we continue to look forward to the future with great enthusiasm and confidence.

RISK MANAGEMENT






The group has an ethical sourcing policy and works closely with customers to understand how to best meet their needs.

Suppliers or Third Parties—failure of a key supplier or third party would impact the service that the group can provide to its customers. Sustained supplier cost price increases as a result of rising raw material costs, labour costs, and transport costs would place pressure on margins.

F-95







The group has long term interest bearing debt liabilities which are subject to fixed rates of interest. This fixed rate debt structure has significantly lowered interest rate risk faced by the group (refer to note 21).

DIVIDENDS


RESULTS

The results for the period are shown in the statement of comprehensive income.



GOING CONCERN

After reviewing the group’s and company’s budget for the next financial year, and other long term plans, the directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements.

The group balance sheet shows a net liability position as a result of the decision to adopt merger accounting to reflect the change in ownership of Matalan in 2007, which resulted in the creation of a merger reserve in equity rather than acquisition goodwill. The accounts of Matalan Retail Limited, the principal subsidiary of the group, show the profitability and balance sheet strength of the trading group.


The group completed a renegotiation of its RCF on 23 February 2012.

EMPLOYEES


In addition, in March 2012, the company asked employees to complete a questionnaire to get feedback on their view of the company. This assists management in maintaining effective employee relations.

F-96

The group’s policy is to recruit disabled workers for those vacancies that they are able to fill. Arrangements are made, wherever possible, for retraining employees who become disabled, to enable them to perform work identified as appropriate to their aptitudes and abilities.

DONATIONS

During the period the group made charitable donations of £73,560 (2011: £378,243). Individual donations include £46,000 to Breast Cancer Campaign Trading Ltd, £20,100 to The Retail Trust and £5,000 to the England Netball Team.



It is the group’s policy to ensure the suppliers are aware of the company’s terms of payment and that terms of payment are agreed at the commencement of business with each supplier. Payments are made in accordance with the payment terms and conditions agreed. Trade creditor days at 25 February 2012 were 38 days (2011: 38 days) based on average daily purchases.

DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS









DISCLOSURE OF INFORMATION TO AUDITORS


a) so far as each director is aware, there is no relevant audit information of which the group’s Auditors are unaware, and

b) each director has taken all the steps necessary as a director in order to make himself aware of any relevant audit information and to establish that the group’s Auditors are aware of that information.

INDEPENDENT AUDITORS

The Auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office and a resolution concerning their reappointment will be proposed at the next annual general meeting.

F-97

On behalf of the Board

P J T Gilbert

Director 16 May 2012

F-98


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF MISSOURI TOPCO LIMITED

We have audited the group and parent company financial statements of Missouri Topco Limited for the period ended 25 February 2012 which comprise the group and parent company Income Statements, the group Statement of Comprehensive Income, the group and parent company Balance Sheets, the group Cash Flow Statement, the group and parent company Statement of Changes in Shareholders’ Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union.

Respective responsibilities of directors and auditors

As explained more fully in the Directors’ Responsibilities for the Financial Statements the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Section 262 of The Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.


An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non- financial information in the Annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Basis of audit opinion


• give a true and fair view of the state of the group’s and parent company’s affairs as at 25 February 2012 and of the group’s profit and the parent company’s result and cash flows for the period then ended;

• have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union; and

• have been properly prepared in accordance with the requirements of The Companies (Guernsey) Law, 2008.

Opinion on other matter

In our opinion the information given in the Directors’ Report for the financial period for which financial statements are prepared is consistent with the financial statements.



• proper accounting records have not been kept or returns adequate for our audit have not been received from branches not visited by us; or

• the financial statements are not in agreement with the accounting records and returns; or

F-99

• we have not received all the information and explanations we require for our audit.

PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Manchester 16 May 2012

F-100


INCOME STATEMENTS

Group Company

Note

52 weeks ended

25 February

2012

£’m

52 weeks ended

26 February

2011

£’m

52 weeks ended

25 February

2012

£’m

52 weeks ended

26 February

2011

£’m

Continuing operations Revenue ........................................................... 5 1,117.5 1,096.5 — — Cost of sales ..................................................... 5 (1,000.8) (921.0) — —

Gross profit .................................................... 5 116.7 175.5 — — Administrative expenses (including

exceptional items) ........................................ 5 (58.9) (60.9) — —

Operating profit ............................................. 5 57.8 114.6 — —

Operating profit pre exceptional items ............ 61.8 121.0 — — Exceptional items ............................................. 30 (4.0) (6.4) — —

Operating profit ............................................. 57.8 114.6 — — Finance costs ........................................................... 6 (48.0) (43.1) — — Exceptional refinancing costs .......................... 6, 30 (8.3) (11.3) — — Finance income ................................................ 6 0.6 1.5 — —

Net finance costs ............................................. (55.7) (52.9) — —

Income from shares in group undertakings ...... — — — 235.5

Profit before income tax ................................ 10 2.1 61.7 — 235.5

Income tax credit/(expense) ............................. 11 0.9 (20.8) — —

Profit for the period from continuing

operations ................................................... 3.0 40.9 — 235.5

Loss for the period from discontinued operations ..................................................... 32 — (0.2) — —

Profit for the period ....................................... 3.0 40.7 — 235.5

F-101



Group

52 weeks ended

25 February

2012

£’m

52 weeks ended

26 February

2011

£’m

Profit for the period from continuing operations........................................................... 3.0 40.9 Loss for the period from discontinued operations............................................................... — (0.2)

Other comprehensive income/(expenditure): Cash flow hedges ................................................................................................................ 15.3 (31.6) Tax element of cash flow hedges ........................................................................................ (4.1) 8.8

Other comprehensive income/(expenditure) for the period, net of tax ............................... 11.2 (22.8)

Total comprehensive income for the period ................................................................... 14.2 17.9

The company has no other comprehensive income other than profit for the period.

F-102


BALANCE SHEETS

Group Company

Note 2012

£’m 2011

£’m 2012

£’m 2011

£’m

Assets Property, plant and equipment ................................................................... 12 160.0 164.8 — — Intangible assets ......................................................................................... 13 20.0 22.4 — — Investments ................................................................................................ 14 — — 457.0 454.7 Deferred income tax asset .......................................................................... 11 0.5 5.9 — — Financial assets—derivative financial instruments .................................... 21 0.7 — — —


Inventories—goods for resale .................................................................... 15 131.8 120.0 — — Trade and other receivables ....................................................................... 16 19.7 17.5 30.0 30.0 Financial assets—derivative financial instruments .................................... 21 2.7 1.3 — — Cash and cash equivalents ......................................................................... 17 96.2 83.1 — —


Total assets ............................................................................................... 431.6 415.0 487.0 484.7

Liabilities Financial liabilities—borrowings............................................................... 18 — (15.9) — — Financial liabilities—derivative financial instruments .............................. 21 (1.2) (18.2) — — Trade and other payables ........................................................................... 19 (157.7) (152.8) (59.4) (59.4) Current income tax liabilities ..................................................................... (2.6) (12.3) — — Provisions for other liabilities and charges ................................................ 22 (1.3) (0.7) — —


Financial liabilities—borrowings............................................................... 18 (460.4) (423.7) — — Financial liabilities—derivative financial instruments .............................. 21 — (2.5) — — Trade and other payables ........................................................................... 20 (41.6) (38.8) — — Deferred income tax liabilities ................................................................... 11 (14.4) (15.0) — — Provisions for other liabilities and charges ................................................ 22 (4.5) (3.7) — —




Shareholders’ (deficit)/equity Share capital .............................................................................................. 23 17.3 17.3 17.3 17.3 Share premium ........................................................................................... 385.6 385.6 385.6 385.6 Hedge reserve ............................................................................................ 1.6 (9.6) — — Merger reserve ........................................................................................... (774.3) (774.3) — — Warrant reserve .......................................................................................... 3.1 3.1 — — Capital redemption reserve ........................................................................ 5.7 5.7 4.6 4.6 Retained earnings ....................................................................................... 108.9 103.6 20.1 17.8


The financial statements on pages 13 to 53 were approved by the Board of Directors on 16 May 2012 and signed on its behalf by:

D Blackhurst P J T Gilbert Director Director


F-103


CASH FLOW STATEMENT

Group

Note 2012

£’m 2011

£’m

Cash flows from operating activities Cash generated from continuing operations ............................................................................ 24 76.8 140.2 Interest paid ............................................................................................................................ (38.6) (30.2) Tax paid .................................................................................................................................. (8.1) (32.1) Cash generated from discontinued operations ........................................................................ — (1.8)

Net cash generated from operating activities ..................................................................... 30.1 76.1

Cash flows from investing activities Purchases of property, plant and equipment ........................................................................... (17.9) (22.7) Proceeds from sale of property, plant and equipment ............................................................. 1.2 0.1 Purchases of intangible assets ................................................................................................. (4.3) (10.3) Cash received on sale of subsidiaries ...................................................................................... — 10.0 Interest received ...................................................................................................................... 0.6 0.5

Net cash used in investing activities .................................................................................... (20.4) (22.4)

Cash flows from financing activities Repayment of Senior loan facilities ........................................................................................ — (19.0) Repayment of previous facilities ............................................................................................ (231.0) (259.9) ‘A’ share buy back .................................................................................................................. — (233.2) Warrant fees charge ................................................................................................................ — (1.8) Proceeds from borrowings ...................................................................................................... 250.0 475.0 Fees associated with refinancing ............................................................................................ (15.6) (19.6) Purchase of ‘B’ shares through the EBT ................................................................................. — (12.0) Share premium associated with ‘B’ shares ............................................................................. — 0.1

Net cash generated from/(used) in financing activities ...................................................... 3.4 (70.4)

Net increase/(decrease) in cash and cash equivalents ............................................................. 13.1 (16.7) Cash and cash equivalents at the beginning of the period....................................................... 83.1 99.8

Cash and cash equivalents at the end of the period ........................................................... 17 96.2 83.1


The £15.6m ‘Fees associated with refinancing’ incurred in the current period includes £4.7m in relation to the termination of the interest rate swaps (see note 21) and £10.5m in relation to issue costs associated with the April 2011 refinancing exercise. £0.3m of costs associated with the February 2012 RCF renegotiation and £0.1m of other costs have also been incurred.

F-104



Group

Share

capital

£’m

Share

premium

£’m

Merger

reserve

£’m

Hedge

reserve

£’m

Capital

redemption

reserve

£’m

Warrant

reserve

£’m

Retained

earnings

£’m

Total

equity

£’m

As at 28 February 2010 ........................ 21.9 385.5 (774.3) 13.2 1.1 3.1 304.6 (44.9)

Comprehensive

income Profit for the period

from continuing operations ................ — — — — — — 40.9 40.9

Loss for the period from discontinued operations ................ — — — — — — (0.2) (0.2)


period ..................... — — — — — — 40.7 40.7

Other comprehensive

expenditure Cash flow hedges – fair value loss in

the period — — — (34.7) — — — (34.7)

– transfers to inventory — — — 3.1 — — — 3.1

– tax element of cash flow hedges — — — 8.8 — — — 8.8

Total cash flow hedges, net of tax .... — — — (22.8) — — — (22.8)

Total other

comprehensive

expenditure, net of

tax ........................... — — — (22.8) — — — (22.8)

Transactions with

owners Purchase of ‘B’ shares

through the EBT ..... — — — — — — (12.0) (12.0) Share premium

associated with ‘B’ shares ...................... — 0.1 — — — — — 0.1

‘A’ share buy back ...... (4.6) — — — 4.6 — (233.2) (233.2) Warrant fees charge .... — — — — — — (1.8) (1.8)

Fair value charge for subscription for ‘B’ shares ...................... — — — — — — 5.3 5.3

Total transactions

with owners............ (4.6) 0.1 — — 4.6 — (241.7) (241.6)

As at 26 February 2011 ........................ 17.3 385.6 (774.3) (9.6) 5.7 3.1 103.6 (268.6)

F-105



Group

Share

capital

£’m

Share

premium

£’m

Merger

reserve

£’m

Hedge

reserve

£’m

Capital

redemption

reserve

£’m

Warrant

reserve

£’m

Retained

earnings

£’m Total equity

£’m

As at 27 February 2011 ... 17.3 385.6 (774.3) (9.6) 5.7 3.1 103.6 (268.6)

Comprehensive income Profit for the period from

continuing operations .. — — — — — — 3.0 3.0


period ......................... — — — — — — 3.0 3.0

Other comprehensive

income Cash flow hedges – fair value gain in the

period — — — 15.8 — — — 15.8

– transfers to inventory — — — (0.5) — — — (0.5)


Total cash flow hedges, net of tax ..................... — — — 11.2 — — — 11.2

Total other

comprehensive

income, net of tax ...... — — — 11.2 — — — 11.2

Transactions with


subscription for ‘B’ shares .......................... — — — — — — 2.3 2.3


owners ........................ — — — — — — 2.3 2.3

As at 25 February 2012 17.3 385.6 (774.3) 1.6 5.7 3.1 108.9 (252.1)

F-106



Company

Share

capital

£’m

Share

premium

£’m

Capital

redemption

reserve

£’m

Retained

earnings

£’m

Total

equity

£’m

As at 28 February 2010 .................................................... 21.9 385.5 — 12.0 419.4

Comprehensive income Profit for the period ......................................................... — — — 235.5 235.5

Total other comprehensive income ............................... — — — 235.5 235.5

Transactions with owners Share premium associated with ‘B’ shares ...................... — 0.1 — — 0.1

‘A’ share buy back ........................................................... (4.6) — 4.6 (233.2) (233.2) Warrant fees charge ......................................................... — — — (1.8) (1.8) Fair value charge to group undertakings for subscription

for ‘B’ shares ............................................................... — — — 5.3 5.3

Total transactions with owners ..................................... (4.6) 0.1 4.6 (229.7) (229.6)

As at 26 February 2011 .................................................... 17.3 385.6 4.6 17.8 425.3

As at 27 February 2011 .................................................... 17.3 385.6 4.6 17.8 425.3

Comprehensive income Result for the period ........................................................ — — — — —

Total comprehensive income ......................................... — — — — —


for ‘B’ shares ............................................................... — — — 2.3 2.3

Total transactions with owners ..................................... — — — 2.3 2.3

As at 25 February 2012 ................................................. 17.3 385.6 4.6 20.1 427.6

F-107





2. Summary of accounting policies







At the date of authorisation of these financial statements, the IASB and IFRIC have issued new or amended standards and interpretations which were in issue but not effective for the financial year and not early adopted:

• IFRS 7, ‘Financial instruments—disclosures’ (effective 1 January 2013)

• IFRS 9, ‘Financial instruments’ (effective 1 January 2015)

• IFRS 10, ‘Consolidated financial statements’ (effective 1 January 2013)

• IFRS 12, ‘Disclosures of interests in other entities’ (effective 1 January 2013)

• IFRS 13, ‘Fair value measurement’ (effective 1 January 2013)

• IAS 19 (revised 2011), ‘Employee benefits’ (effective 1 July 2012)

• IAS 27 (revised 2011), ‘Separate financial statements’ (effective 1 January 2013)

• IAS 32 ‘Financial instruments—presentation’ (effective 1 January 2014)

• Amendment to IAS 12, ‘Income taxes’ on deferred tax (effective 1 January 2012)

• Amendment to IAS 1, ‘Presentation of financial statements’ on other comprehensive income (effective 1 July 2012)


F-108

Going concern

After reviewing the group’s and company’s budget for the next financial period and other long term plans, the directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements.

The group balance sheet shows a net liability position as a result of the requirement to apply merger accounting to reflect the change in ownership of Matalan, which resulted in the creation of a merger reserve in equity rather than acquisition goodwill. The accounts of Matalan Retail Limited, the principal subsidiary of the group, show the profitability and balance sheet strength of the trading group.


Missouri Topco Limited, the ultimate parent company of Matalan Group Limited is 100% owned by the Hargreaves family. This group reconstruction, which took place in 2007, has been accounted for using merger accounting principles as the controlling interests of the company have remained unchanged.



Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

Revenue



Finance income


Intangible assets



(b) Brands


F-109




Alterations to leasehold premises 25 years Fixtures, fittings and IT hardware 3 - 10 years Motor vehicles 3 - 5 years





Investments





Inventories


Operating leases



Current and non-current deferred income arises from rent free period and reverse premium incentives received on property leases which are held on the balance sheet and released to the income statement on a straight line basis over the lease term.

F-110

Current income tax


Deferred income tax








If the hedge transaction is no longer expected to take place, then the cumulative unrealised gain or loss is recognised immediately in the income statement. Where a hedge no longer meets the effectiveness criteria, the gain or loss relating to the ineffective portion is recognised immediately in the income statement. Cumulative gains or losses remain in equity and are then recognised when transactions are ultimately recognised in the income statement.


Borrowings

Interest bearing bank borrowings are recognised initially at fair value less attributable issue costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement within finance costs over the period of the borrowings on an effective interest basis. The fair values of trade and other receivables, loans and overdrafts and trade and other payables with a maturity of less than one year are assumed to approximate to their book values. Borrowings are classified as

F-111

current liabilities unless the group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.



F-112




Dividends




Exceptional items




The agreements provide that B shareholders would participate in the increase in fair value of the group from the date of merger with Matalan plc and until either a specified exit event or liquidation occurs. The agreements were treated as a share based payment transaction in accordance with IFRS 2. The fair value of the subscription agreement was valued at the date of the agreement using a Black Scholes model and spread across the expected term of the agreement. The resulting charge is accounted for as an employee expense with a corresponding increase in equity. The shares covered by the subscription agreements have all now been fully paid up and issued.

Warrants





Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement within ‘selling and marketing costs’. When a

F-113

trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against ‘selling and marketing costs’ in the income statement.



Current and non-current deferred income arises from rent free period and reverse premium incentives received on property leases which are held on the balance sheet and released to the income statement over the lease term.

Provisions






(a) Market risk




The group hedges future seasons’ purchases denominated in US dollars. The group treasury’s risk management policy is to hedge circa 90% (of forecast purchases within 12 months) and circa 40% (of purchases over 12 months) of anticipated cash flows in respect of the purchase of inventory in each major foreign currency. Approximately 100% (2011: 100%) of projected purchases in each major currency qualify as ‘highly probable’ forecast transactions for hedge accounting purposes.

At 25 February 2012, if sterling had weakened/strengthened by 10% against the US dollar with all other variables held constant, post-tax profit for the year would have been £1.2m (2011: £0.3m) higher/lower, mainly as a result of foreign exchange gains/losses on translation of US dollar—denominated stock commitments.

F-114



The group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk. Borrowings issued at fixed rates expose the group to fair value interest rate risk.

On 11 April 2011, the group completed a refinancing exercise whereby the existing Senior secured facilities (subject to a fluctuating rate of interest based on LIBOR) were repaid and Senior secured notes were issued at a fixed rate of interest. The unsecured Senior notes, also issued at a fixed rate of interest in March 2010, are still in issue. This exercise therefore significantly reduces the group’s exposure to interest rate risk.

In the prior period, the group managed its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Group policy is to maintain a minimum of 60% of its borrowings in fixed rate instruments using interest rate swaps to achieve this when necessary. As part of the April 2011 refinancing exercise, the interest rate swaps held by the group were terminated.

The impact on profit or loss of a 10 basis-point shift in LIBOR with all other variables held constant would be a maximum increase/decrease of £0.1m (2011: £0.2m).

During 2011 and 2012, the group’s borrowings at fixed and variable rates were denominated in sterling.

(b) Credit risk






(c) Liquidity risk




F-115

Less than

1 year

£’m

Between 1

and 2 years

£’m

Between 2

and 5 years

£’m

Over

5 years

£’m

At 26 February 2011 Borrowings (before deduction of £16.4m issue costs) ....................... (18.0) (18.0) (54.0) (366.0) Derivative financial instruments ........................................................ (18.2) (2.5) — — Trade and other payables ................................................................... (152.8) (2.7) (9.4) (26.7) Provisions for other liabilities and charges ........................................ (0.7) (0.6) (1.2) (1.9)

(189.7) (23.8) (64.6) (394.6)

At 25 February 2012 Borrowings (before deduction of £14.6m issue costs) ....................... — — (250.0) (225.0) Derivative financial instruments ........................................................ (1.2) — — — Trade and other payables ................................................................... (157.7) (3.1) (10.9) (27.6) Provisions for other liabilities and charges ........................................ (1.3) (1.1) (2.1) (1.3)

(160.2) (4.2) (263.0) (253.9)

The table below analyses the gross value of the group’s derivative financial instruments which will be settled on a gross basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date.

Less than

1 year

£’m

Between 1

and 2 years

£’m

Between 2

and 5 years

£’m

Over

5 years

£’m

At 26 February 2011 Cash flow hedges: Inflows ............................................................................................... 1.3 — — — Outflows ............................................................................................ (18.2) (2.5) — —

(16.9) (2.5) — —

At 25 February 2012 Cash flow hedges: Inflows ............................................................................................... 2.7 0.7 — — Outflows ............................................................................................ (1.2) — — —

1.5 0.7 — —




Net debt is calculated as total borrowings less cash and cash equivalents. Adjusted total capital is calculated as ‘equity’ as shown in the consolidated balance sheet and excluding the merger reserve.

Group net debt 2012

£’m 2011

£’m

Total borrowings (net of issue costs) ........................................................................................................... 460.4 439.6 Less: Cash and cash equivalents .................................................................................................................. (96.2) (83.1)

Net debt ....................................................................................................................................................... 364.2 356.5

Adjusted total capital ................................................................................................................................ 522.2 505.7 Gearing ratio .............................................................................................................................................. 70% 70%

The gearing ratio excludes the creation of a merger reserve and the group considers this a more appropriate measure to be used as it takes account of underlying assets and equity generated in the course of business. The gearing ratio remains consistent with 2011. The group was required to meet specific bank covenants, interest cover and debt cover, during the year. The group has complied with bank covenants throughout the year and the new covenants negotiated in February 2012 allow the business sufficient headroom.

F-116







Level 1

£’m Level 2

£’m Level 3

£’m Total

£’m


Total assets ...................................................................................................... — 3.4 — 3.4

Liabilities Cash flow hedges .............................................................................................. — (1.2) — (1.2)



Level 1

£’m Level 2

£’m Level 3

£’m Total

£’m


Total assets ...................................................................................................... — 1.3 — 1.3

Liabilities Cash flow hedges .............................................................................................. — (14.8) — (14.8) Interest rate swap .............................................................................................. — (5.9) — (5.9)



The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on the valuation provided by the counter party with which the contracts are held.




As at the 25 February 2012, the group has not applied any estimates or assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

5. Operating profit

2012

£’m 2011

£’m

Revenue.......................................................................................................................................... 1,117.5 1,096.5

Cost of goods sold .......................................................................................................................... (647.5) (569.0) Selling expenses.............................................................................................................................. (315.0) (314.4)

F-117

Distribution expenses ...................................................................................................................... (38.3) (37.6)

Total cost of sales ........................................................................................................................... (1,000.8) (921.0)

Gross profit ................................................................................................................................... 116.7 175.5





Group

2012

£’m 2011

£’m

Finance costs and similar charges: Interest payable on loans......................................................................................................................... (2.0) (18.9) Interest payable on notes......................................................................................................................... (41.7) (20.0) Amortisation of finance costs:

Debt costs ........................................................................................................................................... (0.3) (2.1) Notes costs .......................................................................................................................................... (3.0) (1.0)

Interest payable on bank borrowings ...................................................................................................... (1.0) (1.1)

Finance costs ......................................................................................................................................... (48.0) (43.1)

Exceptional refinancing costs............................................................................................................... (8.3) (11.3)

Finance income: Fair value gains—interest rate swaps held at fair value through the income statement .......................... — 1.0 Interest receivable on short term cash deposits ....................................................................................... 0.6 0.5

Finance income...................................................................................................................................... 0.6 1.5


F-118




The remuneration paid to the directors of Missouri Topco Limited, as part of their service contract with Matalan Retail Limited, was:

2012

£’m 2011

£’m

Aggregate emoluments and fees (including benefits in kind) ......................................................................... 1.0 0.8 Performance bonuses and other emoluments .................................................................................................. 1.8 5.8

2.8 6.6

No directors have benefits accruing under defined benefit or defined contribution pension schemes. Under arrangements for selected individuals to subscribe for equity settled ‘B’ shares, charges have been made to the income statement of £1.8m (2011: £4.8m) in respect of directors. £1.8m (2011: £2.3m) of this amount is included in performance bonuses and other emoluments above. The remaining £2.5m of the prior year charge represents an acceleration of the charge following the March 2010 refinancing exercise and the resignation of Alistair McGeorge as a director of the board. This £2.5m is included in prior year exceptional items (refer to note 30).


2012

£’m 2011

£’m


1.1 2.8


The average monthly number of persons (including executive directors) employed during the period was:

2012

Number 2011

Number


15,858 16,144

2012

£’m 2011

£’m

Staff costs (for the above persons) Wages and salaries ...................................................................................................................................... 131.3 128.3 Social security costs .................................................................................................................................... 6.3 6.2 Share based compensation charge .............................................................................................................. 2.3 5.3 Termination payments ................................................................................................................................ 1.1 0.8

141.0 140.6

The figures given above include directors who are considered the key management of the group.




F-119



2012

£’m 2011

£’m


EBITDA ....................................................................................................................................................... 91.1 153.6




Group

2012

£’m 2011

£’m

Profit on continuing ordinary activities before tax is stated after charging/(crediting): Cost of inventories recognised as an expense (included in cost of sales) ................................................... 669.2 599.2 Depreciation charge for the period on property, plant and equipment ........................................................ 22.6 25.3 Amortisation of intangible assets ................................................................................................................ 6.7 7.3 Exceptional items (note 30) ........................................................................................................................ 4.0 6.4 Foreign exchange differences ..................................................................................................................... (19.4) (32.9) Fees payable to the group’s Auditor:

for the audit of the parent company and consolidated financial statements and subsidiary companies .. 0.1 0.1 for non-audit services.............................................................................................................................. 0.2 0.4

Gain on disposal of property, plant and equipment .................................................................................... 1.2 0.1 Operating lease rentals payable .................................................................................................................. 92.3 91.6

The audit fee for the company amounting to £2,000 (2011: £2,000) is borne by a fellow group company. The total group fee is £0.1m (2011: £0.1m).

Fees paid to the Auditors during the period for non-audit services are as follows:

Group

2012

£’m 2011

£’m

Services in relation to refinancing .................................................................................................................. 0.2 0.4

0.2 0.4

11. Income tax (credit)/expense

Analysis of (credit)/expense in the period

Group

2012

£’m 2011

£’m

Continuing operations

Current income tax UK corporation tax—current year .............................................................................................................. 2.4 21.1 UK corporation tax—prior year .................................................................................................................. (4.0) 0.4

(1.6) 21.5

F-120

Deferred income tax Deferred income tax relating to the origination and reversal of temporary differences .............................. 1.6 (0.7) Effect of change in income tax rates ........................................................................................................... (1.0) (0.5) Adjustment in respect of prior periods ........................................................................................................ 0.1 0.5

0.7 (0.7)

Total income tax (credit)/expense from continuing operations ............................................................ (0.9) 20.8

The company has been granted exemption from Guernsey Income Tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 and hence will be liable only for a payment of a Guernsey exemption fee at a fixed rate of £600 per annum.

The group income tax charge for the period is lower than (2011: higher than) the rate of corporation tax of 26.17% (2011: 28%). The rate of corporation tax is based on a weighted average rate. The standard rate of Corporation Tax reduced from 28% to 26% on 1 April 2011.


Group

2012

£’m 2011

£’m

Profit on ordinary activities before income tax ........................................................................................... 2.1 61.7

Profit on ordinary activities multiplied by the rate of corporation tax of 26.17% (2011: 28%) ................. 0.6 17.3 Effects of: Non deductible expenses ............................................................................................................................ 2.7 3.0 Adjustments to income tax in respect of prior periods ............................................................................... (3.9) 0.9 Origination and reversal of temporary differences ..................................................................................... — (1.0) Change in rate of income tax on deferred income tax ................................................................................ (1.0) (0.5) Depreciation in excess of capital allowances .............................................................................................. — 1.1 Deferred income tax not recognised ........................................................................................................... 0.7 —

Total income tax (credit)/expense in the period from continuing operations ...................................... (0.9) 20.8

Deferred income tax



Group

2012

£’m 2011

£’m

At the beginning of the period ................................................................................................................ (9.1) (18.6) Taken to equity: – hedge reserve (4.1) 8.8 Taken to income statement: —prior year movement ........................................................................................................................... (0.1) (0.5) —depreciation in advance of capital allowances .................................................................................... — 1.1 —other temporary differences ................................................................................................................ (1.6) (0.4) —change in rate of income tax ............................................................................................................... 1.0 0.5


Deferred income tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.



2012

£’m 2011

£’m 2012

£’m 2011

£’m 2012

£’m 2011

£’m

Property, plant and equipment ....................................................... — — (12.0) (13.0) (12.0) (13.0) Rolled over capital gain ................................................................. — — (1.8) (2.0) (1.8) (2.0) Short-term temporary differences .................................................. 0.5 2.4 — — 0.5 2.4 Financial derivatives ...................................................................... — 3.5 (0.6) — (0.6) 3.5

F-121

Net deferred income tax assets/(liabilities) ................................ 0.5 5.9 (14.4) (15.0) (13.9) (9.1)

In his budget of 21 March 2012, the Chancellor of the Exchequer announced certain tax changes. The proposals included phased reductions in the corporation tax rate. The rate reduced to 24% from 1 April 2012 and further reductions were proposed to 23% effective from 1 April 2013 and to 22% effective from 1 April 2014.

As at 26 February 2012, the above proposals had not been substantively enacted. A rate change to 25% from 1 March 2012 had previously been substantively enacted and it is this rate which is reflected in the disclosure of the deferred income tax. The estimated effect of the proposed reduction in the income tax rate from 25% to 22% on the company’s deferred income tax liability is to reduce the liability by £1.7m.




Financial

derivatives

£’m

Short term

temporary

differences

£’m Total

£’m

At 28 February 2010 ......................................................................................... — 2.8 2.8 Expensed to the income statement .................................................................... — (0.4) (0.4) Taken directly to equity .................................................................................... 3.5 — 3.5

At 26 February 2011 ......................................................................................... 3.5 2.4 5.9

At 27 February 2011 ......................................................................................... 3.5 2.4 5.9 Expensed to the income statement .................................................................... — (1.9) (1.9) Taken directly to equity .................................................................................... (3.5) — (3.5)

At 25 February 2012 ....................................................................................... — 0.5 0.5



Accelerated tax

depreciation

£’m

Rolled over capital

gain

£’m

Financial

derivatives

£’m Total

£’m

At 28 February 2010 .......................................................... (14.1) (2.0) (5.3) (21.4) Credited to the income statement ....................................... 1.1 — — 1.1 Taken directly to equity ..................................................... — — 5.3 5.3

At 26 February 2011 .......................................................... (13.0) (2.0) — (15.0)

At 27 February 2011 .......................................................... (13.0) (2.0) — (15.0) Credited to the income statement ....................................... 1.0 0.2 — 1.2 Taken directly to equity ..................................................... — — (0.6) (0.6)

At 25 February 2012 ........................................................ (12.0) (1.8) (0.6) (14.4)


Group

Alterations to

leasehold premises

£’m

Motor

vehicles

£’m

Fixtures, fittings

and IT hardware

£’m Total

£’m

Cost At 28 February 2010 ...................................................................... 140.8 1.4 193.2 335.4 Additions ....................................................................................... 8.2 0.1 14.1 22.4 Disposals ........................................................................................ (0.8) — (4.3) (5.1) Wolsey Limited disposals .............................................................. (1.3) — (0.8) (2.1)

At 26 February 2011 ...................................................................... 146.9 1.5 202.2 350.6

At 27 February 2011 ...................................................................... 146.9 1.5 202.2 350.6

F-122

Additions ....................................................................................... 6.5 — 11.3 17.8 Disposals ........................................................................................ — — (3.3) (3.3)

At 25 February 2012 .................................................................... 153.4 1.5 210.2 365.1

Accumulated depreciation At 28 February 2010 ................................................................................ 51.3 1.3 114.4 167.0 Charge for the period ..................................................................... 6.9 — 18.4 25.3 Eliminated in respect of disposals.................................................. (0.8) — (4.3) (5.1) Eliminated in respect of the Wolsey Limited disposal................... (0.8) — (0.6) (1.4)

At 26 February 2011 ...................................................................... 56.6 1.3 127.9 185.8

At 27 February 2011 ...................................................................... 56.6 1.3 127.9 185.8 Charge for the period ..................................................................... 6.4 0.1 16.1 22.6 Eliminated in respect of disposals.................................................. — — (3.3) (3.3)

At 25 February 2012 .................................................................... 63.0 1.4 140.7 205.1

Net book value

At 25 February 2012 .................................................................... 90.4 0.1 69.5 160.0

Net book value At 26 February 2011 ...................................................................... 90.3 0.2 74.3 164.8

Net book value At 27 February 2010 ...................................................................... 89.5 0.1 78.8 168.4



F-123




Group

Brands

£’m

Computer

software and

associated costs

£’m Total

£’m

Cost At 28 February 2010 ........................................................................................................ 1.7 58.2 59.9 Additions ......................................................................................................................... — 9.1 9.1

At 26 February 2011 ........................................................................................................ 1.7 67.3 69.0

At 27 February 2011 ........................................................................................................ 1.7 67.3 69.0 Additions ......................................................................................................................... — 4.3 4.3

At 25 February 2012 ...................................................................................................... 1.7 71.6 73.3

Aggregate amortisation At 28 February 2010 ........................................................................................................ 1.7 37.6 39.3 Charge for the period ....................................................................................................... — 7.3 7.3

At 26 February 2011 ........................................................................................................ 1.7 44.9 46.6

At 27 February 2011 ........................................................................................................ 1.7 44.9 46.6 Charge for the period ....................................................................................................... — 6.7 6.7

At 25 February 2012 ...................................................................................................... 1.7 51.6 53.3

Net book value

At 25 February 2012 ...................................................................................................... — 20.0 20.0 Net book value At 26 February 2011 ........................................................................................................ — 22.4 22.4

Net book value At 27 February 2010 ........................................................................................................ — 20.6 20.6



14. Investments

Company

Investment in

subsidiaries

£’m


At 26 February 2011 ................................................................................................................................. 454.7

At 27 February 2011 ................................................................................................................................. 454.7 Fair value charge to group undertakings for subscription for ‘B’ shares .................................................. 2.3

At 25 February 2012 ............................................................................................................................... 457.0




15. Inventories

Group

F-124

2012

£’m 2011

£’m

Finished goods ............................................................................................................................................ 131.8 120.0

131.8 120.0



16. Trade and other receivables

Group

2012

£’m 2011

£’m

Trade receivables ............................................................................................................................................ 4.4 2.9 Prepayments and accrued income ................................................................................................................... 15.3 14.6

19.7 17.5

The company is owed £30.0m by group undertakings at period end (2011: £30m).


Group

2012

£’m 2011

£’m

Cash at bank and in hand ................................................................................................................................ 96.2 83.1


The effective interest rate on short-term deposits entered into in the financial period was 0.89% (2011: 0.87%) and these deposits have an average maturity period of 1 day (2011: 1 day). All short-term deposits had matured at 25 February 2012 (2011: all). The group’s cash and cash equivalents are denominated in sterling.


Group

2012

£’m 2011

£’m

Current Senior facilities (net of £nil issue costs (February 2011: £2.1m)) ...................................................... — (15.9)

— (15.9)

Non current Senior facilities (net of £nil issue costs (February 2011: £7.3m)) ...................................................... — (205.7) Unsecured notes (net of £5.9m issue costs (February 2011: £7.0m)) ................................................. (219.1) (218.0) Secured notes (net of £8.7m issue costs) ............................................................................................ (241.3) —

(460.4) (423.7)

The company has no financial liabilities.

Bank borrowings are all denominated in sterling at 25 February 2012. The group had no short-term borrowings during the period (2011: £nil).

On 11 April 2011, the group completed an issue of £250.0m Senior secured notes, over 5 years at a fixed rate of 87/8%. The existing Senior secured facilities of £231.0m, that were subject to a floating rate of interest based on LIBOR, were repaid on 12 April 2011. The unsecured fixed rate Senior notes of £225.0m issued in March 2010, over 7 years at a fixed rate of 95/8%, are still in issue.

Bank loan amounts include rolled up interest charges as appropriate to the instrument and also include an element of borrowing costs in accordance with IAS39. Average interest rates on bank loans during the period were 7.3% (2011: 5.6%).

F-125

During the period, £8.0m of finance costs associated with the April 2011 refinancing exercise have been expensed as exceptional items (2011: £11.3m of finance costs associated with the March 2010 refinancing exercise). An additional £0.3m (2011: £nil) was incurred in relation to the RCF renegotiation (refer to note 30).

During the period, fees of £10.5m associated with the refinancing were incurred and will be amortised over the terms of the facilities.

Maturity of bank loans, Senior facilities, Senior notes and secured notes

Group

2012

£’m 2011

£’m

Less than one year ......................................................................................................................................... — 18.0 One to five years ............................................................................................................................................ 250.0 72.0 Five to ten years ............................................................................................................................................. 225.0 366.0


460.4 439.6

Current ........................................................................................................................................................... — 15.9 Non current .................................................................................................................................................... 460.4 423.7

460.4 439.6


At 25 February 2012 the table below reflects the usage of the RCF. These facilities are subject to an annual review and incur fees at market rates.

Group

2012

£’m 2011

£’m


30.0 50.0


In February 2012 the group renegotiated its RCF whereby an agreement was made to cancel £20m of committed facilities the directors’ considered to be unnecessary.


Group

2012

£’m 2011

£’m


(157.7) (152.8)

The company owes group undertakings £59.4m at the period end (2011: £59.4m).


Group

2012

£’m 2011

£’m


F-126



2012 2011

Group Assets

£’m Liabilities

£’m Assets

£’m Liabilities

£’m

Forward foreign exchange contracts ............................................................ 3.4 (1.2) 1.3 (14.8) Interest rate swaps ................................................................................ — — — (5.9)

Total ..................................................................................................... 3.4 (1.2) 1.3 (20.7)

Less non-current portion: Forward foreign exchange contracts .................................................... 0.7 — — 2.5 Interest rate swaps ................................................................................ — — — —

Non-current portion ............................................................................. 0.7 — — 2.5

Current portion..................................................................................... 2.7 (1.2) 1.3 (18.2)


The ineffective portion recognised in the income statement that arises from cash flow hedges amounts to £nil (2011: £nil).


The total principal value of forward foreign exchange contracts at 25 February 2012 was £429.7m (26 February 2011: £448.6m).


2012

£’m 2011

£’m


429.7 448.6

The net fair value of gains as at 25 February 2012 on open forward foreign exchange contracts that hedge the foreign currency risk of purchases are £2.2m (2011: losses of £13.5m). These are transferred at their current fair value as an inventory based adjustment on receipt of the underlying inventory.


2012

£’m 2011

£’m

Maturing within one year ............................................................................................................................ 1.5 (11.0) Maturing between one to two years ............................................................................................................ 0.7 (2.5)

2.2 (13.5)

Interest rate swap

During prior years the group has entered into interest rate swaps which were executed to partially hedge the group’s interest rate exposure against unfavourable movements in LIBOR. The directors did not seek to apply hedge accounting under IAS39 to these derivatives, consequently the changes in their fair value at each period end was recognised in the income statement.

During the 52 week period ended 27 February 2010 the holders of the interest rate swap defaulted on the contract. We continue to be in dispute with the holders of this instrument. New floating to fixed rate swaps were then entered into during the 52 week period ended 27 February 2010. These had an initial notional principal of £238.3m which was being amortised over the period of the swaps. The start dates were 28 August 2009 and the final maturity date was to be 31 March 2013. The weighted average fixed rate payable under these swaps was 3.16%.

During the 52 week period ended 26 February 2011, the group entered into basis swaps to align the interest rate swaps with expected cash flows. The basis swaps had an initial notional amount of £198.4m which was being amortised over the period of the swaps. The contract start dates were 31 August 2010 and the final maturity date was to be 31 August 2012. The group was paying three month LIBOR and was receiving one month LIBOR plus 0.1805%.

F-127

On 11 April 2011, the group completed a refinancing of existing debt and issue of Senior secured notes. The interest rate swaps entered into during the 52 week period ending 27 February 2010 and basis swaps entered into during the 52 week period ending 26 February 2011 were terminated as part of this exercise resulting in the group making settlement payments of £4.7m. This is included within ‘Fees associated with refinancing’ in the cashflow statement. The fair value of the interest rate swaps in place as at 26 February 2011 was a £5.9m loss. The directors based their assessment of the fair value of these derivatives on the market valuation provided by independent third parties.


Group

Onerous

contracts

£m

At 27 February 2011 ......................................................................................................................................... (4.4) Utilised in the period ........................................................................................................................................ 1.0 Charged to the income statement as an exceptional item—see note 30 ............................................................ (2.4)

At 25 February 2012 ....................................................................................................................................... (5.8)

2012

£’m 2011

£’m

Analysis of total provisions: Non-current .................................................................................................................................................... (4.5) (3.7) Current ........................................................................................................................................................... (1.3) (0.7)

(5.8) (4.4)

Two leases previously assigned to another retailer were returned to the company in 2009 on privity of contract after they entered administration. A provision was created at that time to recognise that the leases were onerous and this was treated as exceptional in nature. In the prior period, one of these leases was assigned to another retailer resulting in a £1.5m release of this provision. This release was also treated as exceptional for consistency (refer to note 30). During the current period a provision for an onerous lease was recognised on a property no longer used by the business. This provision has been treated as exceptional and will be released over the remaining life of the lease.

F-128





Group and company


shares Number

Total

value

£’m

10p ‘B’

ordinary

shares

Number Total value

£’m

5p ‘B1’

ordinary

shares

Number Total value

£’m

5p ‘B2’

ordinary

shares

Number Total value

£’m

Allotted, called up

and fully paid At 27 February

2010 ..................... 218,688,222 21.9 300,000 — — — — — At 26 February

2011 .................. 172,763,695 17.3 204,000 — 96,000 — 96,000 —

At 25 February

2012 .................. 172,763,695 17.3 204,000 — 96,000 — 96,000 —

Reserves

Merger reserve


Hedge reserve

The hedge reserve of a £1.6m gain (2011: £9.6m loss) comprises the effective portion of the cumulative net change in fair value of qualifying cash flow hedging instruments relating to hedged transactions, which have not yet occurred.



Warrant reserve

Warrants to subscribe for 0.75% of the issued ‘A’ ordinary shares in the company were granted on 22 December 2006. The warrants have an exercise price of 10p per share. The warrants are exercisable on the earlier of a change in control of the group, repayment of the PIK debt and liquidation. The fair value of the warrants as valued at the date of grant using a Black Scholes model and spread across the expected term, with the resulting charge accounted for as a finance cost. The key inputs into the valuation were: fair value at grant date of £2, expected volatility of 40%, expected term of 5 years, expected dividend yield of nil and a risk free interest rate of 5.66%. The volatility assumption of 40% was based upon historic volatility data. The fair value of the total number of warrants was calculated at £3.1m. The remaining unamortised charge was accelerated when the PIK debt was repaid on 30 March 2010. £1.1m was charged to exceptional refinancing costs during 2011. The warrants have not yet been exercised.


Agreements to subscribe for 300,000 B shares in the company were agreed with selected individuals at the date of acquisition. The agreements provide that B shareholders will participate in the increase in fair value of the group from the date of merger with Matalan plc and until either a specified exit event or liquidation occurs. The agreements have been treated as a share based payment transaction in accordance with IFRS 2. The fair value of the subscription agreement has been valued at the date of the agreement using a Black Scholes model and spread across the expected term of the agreement, with the resulting charge accounted for as an employee expense. The key inputs into the valuation

F-129

were: expected volatility of 40%, expected term of 5 years, expected dividend yield of nil and risk free interest rate of 5.66%. The volatility assumption of 40% was based upon historic volatility data. The fair value of each subscription was calculated at £38.45 per share.

The charge in the period was £2.3m (2011: £5.3m). The charge in the current period included £nil (2011: £2.5m) of exceptional charges (refer to note 30).




Group

2012

£’m 2011

£’m

Cash generated from continuing operations Operating profit ........................................................................................................................................ 57.8 114.6 Adjustments for: Depreciation .............................................................................................................................................. 22.6 25.3 Amortisation of intangibles ...................................................................................................................... 6.7 7.3 Profit on disposal of property, plant and equipment ................................................................................. (1.2) — Non cash exceptional items ...................................................................................................................... 2.4 (1.4) Share based compensation charge ............................................................................................................ 2.3 5.3 Hedge accounting ..................................................................................................................................... (0.1) 0.1

Operating cash flows before movements in working capital ............................................................... 90.5 151.2 Movements in working capital Increase in inventories .............................................................................................................................. (11.8) (13.4) Increase in trade and other receivables ..................................................................................................... (2.2) (2.0) Increase in trade and other payables ......................................................................................................... 0.3 4.4

Net cash flows from operating activities ............................................................................................... 76.8 140.2

Share based compensation charge

£nil non cash share based compensation charge (2011: £2.5m of the £5.3m) relates to non cash exceptional items.



Net debt at

27 February

2011

£’m Cashflows

£’m

Non cash

movements

£’m

Net debt at

25 February

2012

£’m

Cash and cash equivalents ..................................................... 83.1 13.1 — 96.2 Debt due within 1 year ........................................................... (15.9) 18.0 (2.1) —

Debt due after 1 year .............................................................. (423.7) (26.5) (10.2) (460.4)

(356.5) 4.6 (12.3) (364.2)


Group

At 25 February 2012 the group had total future aggregate minimum lease payments under non-cancellable operating leases as follows:

2012

£’m 2011

£’m

Expiring within one year..................................................................................................................... 1.0 1.1 Expiring between two and five years inclusive .................................................................................. 28.0 12.1

F-130

Expiring in over five years .................................................................................................................. 1,217.2 1,286.5

1,246.2 1,299.7

The company leases various retail outlets, offices and warehouses under non-cancellable operating lease agreements. Average remaining lease terms are 13 years, and the majority of lease agreements are renewable at the end of the lease period at market rate.



The capital expenditure for the group that has been contracted for but not provided at 25 February 2012 was £1.0m (2011: £0.7m). The company has no capital commitments at 25 February 2012 (2011: £nil).




The company has a related party relationship with other group undertakings and with its directors and executive officers. The company has recharged fees to other group companies to the value of £nil (2011: £0.4m). The balance of the related transactions outstanding at 25 February 2012 is £29.4m (2011: £29.4m).

The company is party to a group cash pooling arrangement with other group companies. The company does not settle transactions in cash, instead amounts are settled by other group companies on its behalf with a corresponding adjustment to intercompany receivables/payables.

The company received a dividend of £235.5m in the prior year from Matalan Group Limited as part of the March 2010 refinancing exercise.



The group continues to lease a building in London from a company associated with the Hargreaves family. A portion of the building continues to be leased to three companies associated with the Hargreaves family. The rental paid in the period was £0.7m (2011: £0.7m). The rental income in the period was £0.2m (2011: £0.2m). There are no material amounts outstanding/due as at 25 February 2012 (2011: £nil). During the period, the ladies buying team previously housed in this building was relocated to head office in Skelmersdale. The group has no further current use for this building nor does it expect to for the remainder of the lease term. Therefore, during the period a provision was recognised in relation to the onerous element of this lease. This provision has been treated as exceptional in nature (refer to note 30).

During the period the company has leased a new distribution centre from a company associated with the Hargreaves family. The rental paid to date is £0.4m. These transactions have taken place at levels not materially different to commercial terms.



2012

£’m 2011

£’m

Restructuring costs .................................................................................................................................. (1.5) (0.9) Onerous contract provision ..................................................................................................................... (2.4) 1.9 Refinancing costs .................................................................................................................................... (0.1) (6.1) Acceleration of IFRS 2 charge ................................................................................................................ — (1.2)

F-131

Wolsey Limited disposal costs ............................................................................................................... — (0.1)

Exceptional items—administrative expenses ...................................................................................... (4.0) (6.4)

Refinancing costs .................................................................................................................................... (8.3) (11.3)

Exceptional items—finance costs ......................................................................................................... (8.3) (11.3)

Total exceptional items ......................................................................................................................... (12.3) (17.7)

Restructuring costs

Restructuring costs of £1.5m (2011: £0.9m) have been incurred in the year.


During the period a provision for an onerous lease was recognised on a property no longer used by the business. This provision has been treated as exceptional.

Two leases previously assigned to another retailer were returned to the company in 2009 on privity of contract after they entered administration. A provision was created at that time to recognise that the leases were onerous and this was treated as exceptional in nature. In the previous period, one of these leases had been assigned to another retailer resulting in a £1.5m release of this provision. This release was also treated as exceptional for consistency.

Also in the prior period, £0.4m of the remaining Lee Cooper provision was released to the income statement. The Lee Cooper provision had been created in 2007 to take account of the onerous element of the supply agreement that the group had entered into as a condition of the sale of the Lee Cooper business.

Refinancing costs

£0.1m of refinancing costs have been expensed as exceptional items within administrative expenses during the period. In the prior period, £6.1m of costs associated with the March 2010 refinancing were expensed as exceptional items within administrative expenses This included a £1.3m acceleration of IFRS 2 charges.

During the period, £8.0m of finance costs associated with the April 2011 refinancing exercise have been expensed as exceptional items within net finance costs (2011: £11.3m of finance costs associated with the March 2010 refinancing exercise). An additional £0.3m (2011: £nil) was incurred in relation to the RCF renegotiation.

Acceleration of IFRS 2 charge

In the prior period, an acceleration of the IFRS 2 charge resulted from the resignation of Alistair McGeorge as a director of the board on 1 November 2010.

Wolsey Limited disposal costs

Costs amounting to £0.1m were incurred in the prior period as part of the Wolsey Limited disposal process.


UK companies Principal activity Country of incorporation

Matalan Finance plc ................................................................................. Holding company England and Wales Matalan Group Limited ........................................................................... Holding company England and Wales Matalan Limited....................................................................................... Holding company England and Wales Matalan Retail Limited ............................................................................ Retail England and Wales Jonmar Limited ........................................................................................ Property England and Wales Matalan Holding Company Limited ........................................................ Holding company England and Wales Matalan Investments Limited .................................................................. Holding company England and Wales Matalan Travel Limited ........................................................................... Travel services England and Wales HP01 Nominees Limited ......................................................................... Distribution England and Wales



F-132

32. Discontinued operations

In the prior period, Wolsey Limited, a wholly owned group subsidiary, was disposed of on 20 October 2010. This disposal was documented as a permitted disposal in our financing documents and the proceeds were used to prepay bank debt.

Wolsey Limited’s results have been disclosed under discontinued operations in the prior periods reported in this document.

2012

£’m 2011

£’m

Revenue .................................................................................................................................................................. — 6.7

Profit before tax ..................................................................................................................................................... — 0.6 Tax ......................................................................................................................................................................... — (0.2)

Profit for the period ................................................................................................................................................ — 0.4 Loss of sale of Wolsey Limited.............................................................................................................................. — (0.6)

(Loss)/Profit for the period from discontinued operations ..................................................................................... — (0.2)

F-133

REGISTERED NUMBER: 05962488

MATALAN FINANCE PLC


52 WEEKS ENDED 23 FEBRUARY 2013

F-133

CONTENTS

Pages

DIRECTORS AND ADVISERS ........................................................................................................................ 134

DIRECTORS’ REPORT FOR THE 52 WEEKS ENDED 23 FEBRUARY 2013 ............................................. 134

INDEPENDENT AUDITOR’S REPORT TO TH E MEMBERS OF MATALAN FINANCE PLC ................ 137

INCOME STATEMENT .................................................................................................................................... 139

STATEMENT OF FINANCIAL POSITON ...................................................................................................... 140

STATEMENT OF CASH FLOWS .................................................................................................................... 141

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY .................................................................... 142

NOTES TO THE FINANCIAL STATEMENTS ............................................................................................... 143

F-134


DIRECTORS

J N Mills D Blackhurst P J T Gilbert (resigned 16 April 2013)

COMPANY SECRETARY

P J T Gilbert (resigned 16 April 2013) W G Lodder (appointed 25 April 2013)

REGISTERED OFFICE

Gillibrands Road Skelmersdale West Lancashire WN8 9TB

INDEPENDENT AUDITOR


BANKERS

Lloyds TSB Bank PLC King Street Manchester M2 4LQ

SOLICITORS



The directors present their report and the audited financial statements for the 52 weeks ended 23 February 2013.

DIRECTORS

The company’s directors who served during the period and up to the date of signing the financial statements are noted on page 1.

F-135


The principal activity of the company is that of a holding company to Matalan Limited and its subsidiary companies. The company holds external debt and recharges the cost of the debt to a subsidiary company. The company expects to continue as a holding company going forward.

REVIEW OF BUSINESS

The company holds external debt and recharges the cost of the debt to a subsidiary company.

REFINANCING

On 11 April 2011, the Matalan group completed an issue of £250.0m Senior secured notes, over 5 years at a fixed rate of 8 7/8%. The new notes were issued by the company. The existing Senior secured facilities held by the company of £231.0m were repaid on 12 April 2011 and the interest rate swap contracts entered into during the 52 week periods ending 27 February 2010 and 26 February 2011, also held by the company, were terminated on 12 April 2011, resulting in settlement payments of £4.7m. These payments were settled through the group cash pooling arrangement by Matalan Retail Limited and not by the company itself.

In February 2012 the group renegotiated its Revolving Credit Facility (RCF) whereby an agreement was made to cancel £20m of committed facilities the Directors’ considered to be unnecessary. This facility is held by the company. The group is confident that sufficient levels of liquidity remain in the business from group cash balances and the remaining £30m RCF held by this company.

RESULTS

The result for the period was £nil (2012: Joss £ 10.2m) and the company has net assets of £228.7m (2012: £228.7m). Loss for the prior period includes £8.3m exceptional refinancing costs.

GOING CONCERN

After reviewing the company’s budget for the next financial year, and other Jong term plans, the directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements.


The responsibility of monitoring financial risk management and treasury responsibilities and procedures lies with the board of directors. The policies set by the board of directors are implemented by the company’s finance department.

DIRECTORS’ REPORT (CONTINUED)

The risks below are the principle risks that may impact the company achieving its strategic objectives.

Interest Rate Risk

Following the repayment of the company’s Senior secured facilities as part of the April 2011 refinancing exercise, the debt held by the company is now subject to fixed rates of interest only. This fixed rate debt structure has significantly lowered interest rate risk faced by the company. The company is also impacted to a lessor extent by market, credit and liquidity risks. These risks have been addressed in section 3.1 of the Notes to the Financial Statements.

F-136

DIVIDENDS

The company did not issue a dividend in the current or prior period.

POLITICAL & CHARITABLE DONATIONS

The company did not make any political or charitable donations in the current or prior period.





It is the group’s policy to ensure the suppliers are aware of the company’s terms of payment and that terms of payment are agreed at the commencement of business with each supplier. Payments are made in accordance with the payment terms and conditions agreed. Trade creditor days at 23 February 2013 were 46 days (20l2: 38 days) based on average daily purchases.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE DIRECTORS’ REPORT

AND THE FINANCIAL STATEMENTS

The directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with IFRSs as adopted by the EU and applicable law. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.

In preparing these financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;

make judgements and estimates that are reasonable and prudent;

state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities.

We confirm that to the best of our knowledge:

F-137

the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

the directors’ report includes a fair view of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.



(a) so far as each director is aware, there is no relevant audit information of which the company’s Auditor is unaware, and

(b) each director has taken all the steps necessary as a director in order to make himself aware of any relevant audit information and to establish that the company’s Auditor is aware of that information.

INDEPENDENT AUDITOR

PricewaterhouseCoopers LLP resigned as auditors during the year and KPMG LLP were appointed to fill the vacancy arising. Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and KPMG LLP will therefore continue in office.

On behalf of the board D. Blackhurst

Director 04 June 2013

INDEPENDENT AUDITOR’S REPORT TO TH E MEMBERS OF MATALAN FINANCE PLC

We have audited the financial statements of Matalan Finance pie for the period ended 23 February 2013 set out on pages 7 to 22. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR

As explained more fully in the Directors’ Responsibilities Statement set out on page 3, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable Jaw and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards tor Auditors.

F-138

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.

OPINION ON FINANCIAL STATEMENTS


give a true and fair view of the state of the company’s affairs as at 23 February 2013 and of its result for the period then ended;

have been properly prepared in accordance with IFRSs as adopted by the EU; and

have been prepared in accordance with the requirements of the Companies Act 2006

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MATALAN FINANCE PLC

(CONTINUED)

MATTERS ON WHICH WE REPORT BY EXCEPTION

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you it; in our opinion:

adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

the financial statements are not in agreement with the accounting records and returns; or

certain disclosures of directors’ remuneration specified by law are not made; or

we have not received all the information and explanations we require for our audit.

Jonathan Hurst (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

St James’ Square Manchester M2 6DS 04 June 2013

F-139

INCOME STATEMENT

Note

52 weeks ended 23

February 2013

£’m


£’m

Administrative expenses -

-

-

-

Operating result

Finance costs 5 (46.1) (47.0) Exceptional refinancing costs 5, 18 (8.3) Finance income 5 46.1 47.0

Net finance costs 5 -

(8.3)

Result/(loss) before income tax 8 -

(8.3)

Income tax expense 9 -

(1.9)

Result/(loss) for the period -

(10.2)

The company has no other comprehensive income/ (expenditure) other than the result for the period.

F-140


Note

2013

£’m

2012 £’m

Non-current assets Investments 10 817.2 817.2

Deferred income tax assets 9 - -

Total non-current assets 817.2 817.2

Current assets Receivables 11 59.9 59.9

Total current assets 59.9 59.9

Total assets 877.l 877.1

Current liabilities Financial liabilities – borrowings 12 - - Payables 13 (184.7) (188.0)

Total current liabilities (184.7) (188.0)

Non-current liabilities Financial liabilities – borrowings 12 (463.7) (460.4)

Total non-current liabilities (463.7) (460.4)

Total liabilities (648.4) (648.4)

Net assets 228.7 228.7

Capital and reserves Share capital 14 21.9 21.9 Retained earnings 206.8 206.8

Total shareholders’ equity 228.7 228.7

The financial statements on pages 7 to 22 were approved by the board of directors on 04 June 2013 and signed on its behalf by:

D. Blackhurst Director Matalan Finance plc Registered number: 05962488

F-141


2013

£’m

2012 £’m

Net cash used in operating activities (a) - (3.4)

Cash flows from financing activities

Proceeds from borrowings - 250.0

Repayment of previous facilities (231.0)

Fees associated with refinancing - (15.6)

Net cash generated from financing activities - 3.4

Net movement in cash and cash equivalents - -

Cash and cash equivalents at the beginning of the period - -

Cash and cash equivalents at the end of the period - -

(a) In the prior period the company provided £3.4m to Matalan Retail Limited to settle the refinancing exercise. This

amount is included within amounts owed to group undertakings.

The £15.6m ‘Fees associated with refinancing’ incurred in the prior period includes £4.7m in relation to the termination of the interest rate swaps and £ 10.5m in relation to issue costs associated with the April 2011 refinancing exercise. £0.3m of costs associated with the February 2012 RCF renegotiation and £0.1 m of other costs were also incurred in the prior period.

F-142


Share

capital

£’m

Share

premium

£’m

Retained

earnings

£’m

Total

equity

£’m As at 27 February 2011 21.9 - 217.0 238.9

Comprehensive income Loss for the period - - (10.2) (10.2)

As at 25 February 2012 21.9 - 206.8 228.7

As at 25 February 2012 21.9 - 206.8 228.7

Comprehensive expenditure Result for the period - - - -

As at 23 February 2013 21.9 - 206.8 228.7

F-143


General information

The company is a public limited company, wholly owned by Matalan Group Limited. The company is incorporated and domiciled in the UK. The address of its registered pollice is Gillibrands Road, Skelmersdale, West Lancashire, WN8 9TB.

Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated.


These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and JFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared on the going concern basis under the historical cost convention as modified by financial assets and financial liabilities (including derivative instruments) which are recognised at fair value through the income statement.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company’s accounting policies. There are no areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements.

The financial statements contain information about Matalan Finance plc as an individual company and do not contain consolidated financial information as the parent of the group. The company is exempt under section 401 of the Companies Act 2006 from the requirement to prepare consolidated financial statements as it and its subsidiary undertakings are included by full consolidation in the consolidated financial statements of its ultimate parent, Missouri Topco Limited, a company incorporated in Guernsey.


There are no new JFRSs or IFRIC interpretations that are effective for the first time for the financial year that would be expected to have a material impact on the company.


JFRS 13 Fair value measurement (2011)

Amended IAS 1 Presentation of items of other comprehensive income (2010)

Amended IAS 12 Income taxes: Deferred Tax – Recovery of underlying assets (2010)

Revised IAS 19 Employee Benefits (2011)

IFRS 9 Financial Instruments: Classification and Measurement (2010)

Amendments to IFRS 7 Disclosures offsetting financial assets and liabilities

F-144

Amendments to IAS 32 Offsetting financial assets and financial liabilities


2. Summary of significant accounting policies (continued) Finance income

Finance income is recognised on a time-proportioned basis using the effective interest method.

Investments

Investments in subsidiaries are stated at cost, where cost is the aggregate nominal value of the relevant number of the company’s shares and the fair value of any other consideration given to acquire the share capital of the subsidiary undertakings. Investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Current income tax

Current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the UK. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected.

Deferred income tax

Deferred income tax is provided in full using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the financial statements and the amounts used for tax purposes. Temporary differences not provided include initial recognition of assets or liabilities that affect neither accounting nor taxable profit. The amount of deferred income tax provided is based on the expected manner of realisation or settlement of carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date and that are expected to apply when the related deferred income tax liability is settled or asset is realised.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent it is no longer probable that the related income tax benefit will be realised.


Borrowings

Interest bearing bank borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. The fair values of trade and other receivables, loans and overdrafts and trade and other payables with a maturity of less than one year are assumed to approximate to their book values. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

F-145

Dividends

Final dividends payable to the company’s shareholders are recognised in the company’s financial statements in the period in which the dividends are approved by the company’s shareholders. Interim dividends payable are recognised in the period in which the dividends are paid.

Summary of significant accounting policies (continued) Exceptional items

Items that are material in size and/or non-recurring in nature are presented as exceptional items in the income statement. The directors are of the opinion that the separate recording of exceptional items provides helpful information about the company’s underlying business performance. Events which may give rise to the classification of items as exceptional include restructuring of businesses, gains or losses on the disposal or impairment of assets and other significant nonrecurring gains or losses.

Share capital


Receivables

Other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.



Payables

Other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Segmental reporting

The entire operations of the company are considered part of a single segment.

Financial risk management

Financial risk factors

The financial and capital risk management of the company is managed by group. The company’s activities expose it to market risk, credit risk and liquidity risk. The company’s risk management is managed by the group programme that focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the company’s financial performance. The group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by the group treasury department under policies approved by the group board of directors. Group treasury identifies, evaluates and hedges financial risks.

Market risk

Cashflow and fair value interest rate risk

F-146

The company has no interest bearing assets. The company’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk. Borrowings issued at fixed rates expose the group to fair value interest rate risk.

On 11 April 2011, the company completed a refinancing exercise whereby the existing senior secured facilities (subject to a fluctuating rate of interest based on LIBOR) were repaid and Senior secured notes were issued at a fixed rate of interest. The unsecured senior notes, also issued at a fixed rate of interest in March 2010, are still in issue. This exercise therefore significantly reduces the company’s exposure to interest rate risk.

Credit risk

Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are dealt with in relation to placing cash deposits.


The majority of receivables held by the company are inter-company balances. There is no credit risk in relation to these balances as they are supported by the group.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(c) Liquidity risk


The company is party to a group cash pooling arrangement with other group companies. The company does not settle transactions in cash, instead amounts are settled by other group companies on its behalf with a corresponding adjustment to intercompany receivables/payables. The only cash flows within the company during the current year relate to the refinancing exercise.

The table below analyses the company’s financial liabilities before issue costs into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Less than

1 year

£’m

Between 1

and 2 years

£’m

Between 2

and 5

years

£’m

Over 5

Years

£’m At 25 February 2012 Borrowings (before deduction of £14.6m issue (43.9) (43.9) (370.5) 238.9

costs) including interest payable

Trade and other payables (188.0) - - -

(188.0) - (250.0) (225.0)

At 23 February 2013 Borrowings (before deduction of £11.3m issue (43.9) (43.9) (562.4) - costs) including interest payable

F-147

Trade and other payables (184.7) - - -

(184.7) - (475.0) -


Critical accounting estimates and judgements


As at the 23 February 2013, the company has not applied any estimates or assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

F-148

Net Finance Costs

2013

£’m

2012 £’m

Finance costs and similar charges: - (2.0)

Interest payable on loans (42.9) (41.7)

Interest payable on notes

Amortisation of finance costs:

Debt costs - (0.3)

Notes costs (3.2) (3.0)

Finance costs (46.1) (47.0)

Exceptional refinancing costs (note 18) - (8.3)

Finance income: Loan interest and other finance costs recharged to group companies 46.1 47.0

Finance income 46.1 47.0

Net finance costs - (8.3)

Directors’ emoluments

The directors’ remuneration for their services to the company has been borne by another group company.

Employee information

There were no employees during the period (2012: none).

Profit before income tax

The audit fee for the company amounting to £8,000 (2012: £8,000) is borne by a fellow group company. The total fee for the group is £0.1m (2012: £0.1 m).


Income tax expense

Analysis of expense in the period

2013

£’m

2012 £’m

Current income tax UK corporation tax – current period - -

- -

Deferred income tax

Deferred income tax relating to the origination and reversal of temporary differences - 1.6

F-149

2013

£’m 2012 £’m

Adjustment in respect of prior periods - 0.3

- 1.9

Total income tax expense - 1.9

The income tax expense for the period is equal to (2012: lower than) the rate of corporation tax of 24.17% (2012: 26.17%). The rate of corporation tax is based on a weighted average rate. The standard rate of corporation tax reduced from 26% to 24% on 1 April 2012. The differences are explained below: 2013

£’m

2012 £’m

Loss before income tax - (8.3)

Loss before income tax multiplied by a rate of corporation tax of 24.17%

(2012:26.17%) - (2.2)

Effects of: Non taxable income (11.4) (12.2) Group relief surrendered 11.4 15.9 Prior period adjustment - 0.3 Change in rate of income tax - 0.1

Total income tax expense in the period - 1.9

Deferred income tax

Deferred income tax is calculated in full on temporary differences under the liability method using a tax rate of 23% (2012: 25%).

The company has no recognised or unrecognised deferred income tax assets or liabilities at either the end of the current or prior period.

Deferred income tax assets and liabilities are only offset where there is a legally enforceable right of offset and the deferred income taxes relate to the same fiscal authority.

F-150


9. Income tax expense (continued)

Deferred income tax assets are expected to be recoverable after more than one year and are attributable to the following:


Financial

derivatives

£’m Total

£’m

At 27 February 2011 1.9 1.9

Expensed to the income statement (1.9) (1.9)

At 25 February 2012 - -


Expensed to the income statement - -


In his budget of 20th March 2013, the Chancellor of the Exchequer announced tax changes including phased reductions in the corporation tax rate to 20% from 1 April 2015. As at February 2013, only the reduction in rate to 23% had been substantively enacted with no material impact on the deferred income tax of the company.


Investments

Investment

in

subsidiaries

Cost and net book value

At 27 February 2011 817.2

investment in subsidiary undertaking -



investment in subsidiary undertaking -


The company holds 100% of the ordinary share capital of Matalan Limited. The principal activity of Matalan Limited is to act as a holding company and it is incorporated in England and Wales. The directors believe that the book value of the investment is supported by the underlying net assets and die future discounted cash flows of the trading subsidiaries of the investment. The investment has a coterminous year end with the company. The company also has an indirect interest in the following subsidiary companies:

F-151

Name Principal activity Country of

incorporation % interest held

and voting rights

Matalan Retail Limited Retail England and Wales 100

Jonmar Limited Property England and Wales 100

Matalan Travel Limited Travel services England and Wales 100

Matalan Investments Limited Holding company England and Wales 100

HP01 Nominees Limited Distribution England and Wales 100

Matalan Holding Company Limited Holding company England and Wales 100

F-152

Receivables – current

2013

£’m

2012 £’m

Amounts due from group undertakings 59.5 9.5

59.9 59.9


Financial liabilities – borrowings

2013

£’m

2012 £’m

Non current Senior unsecured notes (net of £4.7m issue costs (2012: £5.9m)) maturity date 2015 (220.03) (219.1)

Senior secured notes (net of £6.6m issue costs (2012: £8.7m)) maturity date 2016 (243.4) (241.3)

(463.7) (460.4)

Bank borrowings are all denominated in sterling at 23 February 2013. Senior unsecured and secured notes are subject to fixed rates of interest of 9 5/8% and 8 7/8% respectively. The group had no short-term borrowings during the period (2012: £nil).

On 11 April 2011,the Matalan group completed an issue of £250.0m Senior secured notes, over 5 years at a fixed rate of 8 7/8%. The new notes were issued by the company. The existing Senior secured facilities held by the company of £231. Om were repaid on 12 April 2011 and the interest rate swap contracts entered into during the 52 week periods ending 27 February 2010 and 26 February 2011, also held by the company, were terminated on 12 April 2011, resulting in settlement payments of £4.7m. These payments were settled through the group cash pooling arrangement by another group company and not by the company itself.

Security over the secured debt comprises a charge over substantially all of the property and assets of the company and each guarantor. The guarantors are the ultimate parent company Missouri Topco Limited and fellow group entities Matalan Group Limited, Matalan Limited, Matalan Retail Limited and Matalan Holding Company Limited.

Bank loan amounts include rolled up interest charges as appropriate to the instrument and also include an element of borrowing costs in accordance with IAS39. Average interest rates on bank loans during the period were £nil (2012: 7.3%).

The company is no longer exposed to interest rate risk. No interest rate swaps are held.


2013

£’m 2012 £’m

Less than one year - - One to five years 475.0 250.0 Five to ten years - 225.0

475.0 475.0

F-153

2013

£’m 2012 £’m

Issue costs (11.3) (14.6)

Current - -

Non-current (463.7) (460.4)

(463.7) (460.4)


Payables – current

2013

£’m

2012 £’m

Amounts owed to group undertakings (168.7) (170.9)

Accruals and deferred income (16.0) (17.9)

(184.7) (188.0)

Amounts owed to group undertakings are repayable on demand and therefore presented as current.

Share capital

10p ‘A’

ordinary

shares

Number

Total

value

£’m

Issued and fully paid

At 23 February 2013 and 25 February 2012 218,688,222 21.9

Cash flows from operating activities

The company is party to a group cash pooling arrangement with other group companies. The company does not settle transactions in cash, instead amounts are settled by Matalan Retail Limited on its behalf with a corresponding adjustment to intercompany receivables/payables.

Contingent liabilities

An unlimited guarantee under a composite accounting agreement operates for all group company bank accounts. Group bank loans and overdrafts are secured by fixed and floating charges on all the assets of the group.

Related party transactions

The company has a related party relationship with other group undertakings, its parent company and with its directors and executive officers. During the financial period the company entered into transactions, in the ordinary course of business, with other related parties as follows:

F-154

2013

£’m 2012 £’m

Transactions with group undertakings:

Funds borrowed (43.9) (284.2)

Funds provided - (250.0

Dividend received - -

Interest receivable 46.1 47.0

2.2 12.8

Amounts owed to parent (290.6) (282.1)

Amounts owed from group undertakings 181.8 171.1

At 23 February 2013 and 25 February 2012 218,688,222 12.8

Related party transactions (continued)

The company is party to a group cash pooling arrangement with other group companies. The company does not settle transactions in cash, instead amounts are settled by Matalan Retail Limited on its behalf with a corresponding adjustment to intercompany receivables/payables.

Net liabilities settled by Matalan Retail Limited under the cash pooling arrangement:

2013

£’m

2012 £’m

Transactions with subsidiary undertakings:

Net proceeds from borrowings - 19.0

Notes/loan interest payments (43.9) (35.6)

Fees paid by other group undertakings - (15.6)

Other interest payments - (2.0)

(43.9) (34.2)

The company considers the Hargreaves family to be the ultimate controlling party. Key management is the directors of the company. The compensation paid or payable to key management for employee services to die company has been borne by another group company (refer to note 6). Exceptional items


2013 £’m

2012 £’m

Refinancing costs - (8.3)

Exceptional refinancing costs - (8.3)

F-155

Total exceptional items - (8.3)

Ultimate parent company

The directors regard Matalan Group Limited a company registered in England and Wales, as the immediate parent company. According to the register kept by the company, Matalan Group Limited has a 100% interest in the equity capital of Matalan Finance plc at 23 February 2013. The directors regard Missouri Topco Limited, a company registered in Guernsey, as the ultimate parent company.


The parent of the largest and smallest group to consolidate these financial statements at 23 February 2013 is the ultimate parent company Missouri Topco Limited. The consolidated financial statements of Missouri Topco Limited are available from Matalan, Gillibrands Road, Skelmersdale, West Lancashire, WN8 9TB.

F-156

REGISTERED NUMBER: 05962488

MATALAN FINANCE PLC


53 WEEKS ENDED 1 MARCH 2014

MATALAN FINANCE PLC

F-157

CONTENTS Pages

Directors and advisers ...........................................................................................................................................................1

Strategic report ...................................................................................................................................................................... 2

Directors’ report ............................................................................................................................................................................. 3

Statement of Directors’ responsibilities in respect of the Strategic Report, Directors’ Report and the financial statements ................................................................................................................... 5

Independent Auditor’s report to the members of Matalan Finance plc ................................................................................. 6

Income statement .................................................................................................................................................................................... 8

Statement of financial position ............................................................................................................................................ 9

Statement of cash flows ...................................................................................................................................................... 10

Statement of changes in shareholders’ equity ................................................................................................................... 11

Notes to the financial statements ....................................................................................................................................... 12

MATALAN FINANCE PLC

F-158


DIRECTORS

J N Mills J J Hargreaves (appointed 13 December 2013) S Hill (appointed 29 July 2013) A Misra (appointed 7 March 2014) D Blackhurst (resigned 16 September 2013) P J T Gilbert (resigned 16 April 2013)

COMPANY SECRETARY

P J T Gilbert (resigned 16 April 2013) W G Lodder (appointed 25 April 2013)

REGISTERED OFFICE

Gillibrands Road Skelmersdale West Lancashire WN8 9TB

INDEPENDENT AUDITOR


BANKER

Lloyds Bank plc King Street Manchester M2 4LQ

SOLICITOR


F-159

STRATEGIC REPORT FOR THE 53 WEEKS ENDED 1 MARCH 2014

The directors present their annual strategic report and the audited financial statements for the 53 weeks ended 1 March 2014.

REVIEW OF BUSINESS

The Company holds external debt and recharges the cost of the debt to a subsidiary company.

RESULTS

The result for the period was £nil (2013: £nil) and the Company has net assets of £228.7m (2013: £228.7m).

POST BALANCE SHEET EVENT

On 2 June 2014, Matalan Finance plc completed an issue of £342m first lien secured notes, over 5 years at a fixed rate of 6⅞%, and an issue of £150m second lien secured notes, over 6 years at a fixed rate of 8⅞%. The proceeds were used to repay in full the Senior secured notes of £250m issued in 2011 and Senior notes of £225m issued in 2010.


The responsibility of monitoring financial risk management and treasury responsibilities and procedures lies with the board of directors. The policies set by the board of directors are implemented by the Company’s finance department.

The risks below are the principal risks that may impact the Company achieving its strategic objectives.

Interest Rate Risk - Fluctuating interest rates could have an impact on cashflows and profit. The Company has long term interest-bearing debt liabilities which are subject to fixed rates of interest. This fixed rate debt structure has significantly lowered interest rate risk faced by the Company.


S Hill

Director 6 August 2014

F-160

DIRECTORS’ REPORT FOR THE 53 WEEKS ENDED 1 MARCH 2014

The directors present their report for the 53 weeks ended 1 March 2014.

DIRECTORS

The Company’s directors who served during the period and up to the date of signing the financial statements are noted on page 1.


The principal activity of the Company is that of a holding company to Matalan Limited and its subsidiary companies. The Company holds external debt and recharges the cost of the debt to a subsidiary company. The Company expects to continue as a holding company going forward.

GOING CONCERN

After reviewing the Company’s budget for the next financial year, and other long-term plans, the directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements.

DIVIDENDS

The Company did not issue a dividend in the current or prior period.

POLITICAL & CHARITABLE DONATIONS

The Company did not make any political or charitable donations in the current or prior period.


During the period and up to the date of signing the financial statements, the Company maintained third party indemnity insurance for its directors and officers as defined by Section 234 of the Companies Act 2006.



a) so far as each director is aware, there is no relevant audit information of which the Company’s Auditor is unaware, and

b) each director has taken all the steps necessary as a director in order to make himself aware of any relevant audit information and to establish that the Company’s Auditor is aware of that information.

F-161

DIRECTORS’ REPORT (CONTINUED)

INDEPENDENT AUDITOR

Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and KPMG LLP will therefore continue in office.


S Hill

Director 6 August 2014

F-162

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE STRATEGIC REPORT,


The directors are responsible for preparing the Strategic Report, Directors’ Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with IFRSs as adopted by the EU and applicable law. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;

make judgements and estimates that are reasonable and prudent;

state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

We confirm that to the best of our knowledge:

the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

the directors’ report includes a fair view of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

F-163


We have audited the financial statements of Matalan Finance plc for the period ended 1 March 2014 set out on pages 8 to 22. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR

As explained more fully in the Directors’ Responsibilities Statement set out on page 3, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.ric.org.uk/auditscopeukprivate.

OPINION ON FINANCIAL STATEMENTS


give a true and fair view of the state of the Company’s affairs as at 1 March 2014 and of its result for the period then ended;

have been properly prepared in accordance with IFRSs as adopted by the EU; and

have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

F-164


(CONTINUED)

MATTERS ON WHICH WE REPORT BY EXCEPTION

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

the financial statements are not in agreement with the accounting records and returns; or

certain disclosures of directors’ remuneration specified by law are not made; or

we have not received all the information and explanations we require for our audit.

Jonathan Hurst (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants

St James’ Square Manchester M2 6DS 11 August 2014

F-165

INCOME STATEMENT

Note 53 weeks

ended 1

March

2014

£’m

52 weeksended 23February

2013£’m

Administrative expenses - -

Operating result - -

Finance costs 5 (48.0) (46.1) Finance income 5 48.0 46.1

Net finance costs 5 - -

Result before income tax 8 - -

Income tax 9 - -

Result for the period - -

The Company has no other comprehensive income/ (expenditure) other than the result for the period.

F-166


Note 2014

£’m

2013 £’m

Non-current assets Investments 10 817.2 817.2

Total non-current assets 817.2 817.2

Current assets 59.9 Receivables 11 59.9

Total current assets 59.9 59.9

Total assets 877.1 877.1

Current liabilities

Financial liabilities - borrowings 12 - - Payables 13 (181.5) (184.7)

Total current liabilities (181.5) (184.7)

Non-current liabilities

Financial liabilities -borrowings 12 (466.9) (463.7)

Total non-current liabilities (466.9) (463.7)

Total liabilities (648.4) (648.4)

Net assets 228.7 228.7

Capital and reserves

Share capital 14 21.9 21.9 Retained earnings 206.8 206.8

Total shareholders’ equity 228.7 228.7

The financial statements on pages 8 to 22 were approved by the board of directors on 6 August 2014 and signed on its behalf by:

S Hill

Director

Matalan Finance plc Registered number: 05962488

F-167


2014

£’m

2013 £’m

Cash flows from operating activities

Cash generated from operations - -

Net cash generated from operating activities - -

Net movement in cash and cash equivalents - -

Cash and cash equivalents at the beginning of the period - -

Cash and cash equivalents at the end of the period

F-168


Share

capital

£’m

Share

premium

£’m

Retained

earnings

£’m

Total

equity

£’m

As at 26 February 2012 21.9 - 206.8 228.7

Comprehensive income Result for the period

- - - -

As at 23 February 2013 21.9 - 206.8 228.7

As at 24 February 2013 21.9 - 206.8 228.7

Comprehensive expenditure Result for the period

- - - -

As at 1 March 2014 21.9 - 206.8 228.7

F-169



The Company is a public limited company, wholly owned by Matalan Group Limited. The Company is incorporated and domiciled in the UK. The address of its registered office is Gillibrands Road, Skelmersdale, West Lancashire, WN8 9TB.


The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated.


These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared on the going concern basis under the historical cost convention as modified by financial assets and financial liabilities (including derivative instruments) which are recognised at fair value through the income statement.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. There are no areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements.

The financial statements contain information about Matalan Finance plc as an individual company and do not contain consolidated financial information as the parent of the Group. The Company is exempt under section 401 of the Companies Act 2006 from the requirement to prepare consolidated financial statements as it and its subsidiary undertakings are included by full consolidation in the consolidated financial statements of its ultimate parent, Missouri Topco Limited, a company incorporated in Guernsey.

New standards, amendments to standards or interpretations There are no new IFRSs or IFRIC interpretations that are effective for the first time for the financial year that would be expected to have a material impact on the Company.


IFRS 9 Financial Instruments: Classification and Measurement (2010)

IFRS 10 Consolidated Financial Statements (2011)

IAS 27 Separate Financial Statements (2011)

Amendments to IAS 32 Offsetting financial assets and financial liabilities

Amendments to IAS 39 Continuing hedge accounting after derivative novations

The Company intends to adopt the new standards and amendments no later than their applicable date, subject to endorsement by the EU.

F-170


2. Summary of significant accounting policies (continued)

Finance income

Finance income is recognised on a time-proportioned basis using the effective interest method.

Investments

Investments in subsidiaries are stated at cost, where cost is the aggregate nominal value of the relevant number of the Company’s shares and the fair value of any other consideration given to acquire the share capital of the subsidiary undertakings. Investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Current income tax

Current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the UK. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected.

Deferred income tax

Deferred income tax is provided in full using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the tax bases of assets and liabilities. The following temporary differences are not provided for: goodwill not deductible for tax purposes and the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. The amount of deferred income tax provided is based on the expected manner of realisation or settlement of carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date and that are expected to apply when the related deferred income tax liability is settled or asset is realised.

A deferred income tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent it is no longer probable that the related income tax benefit will be realised.


Borrowings

Interest bearing borrowings are recognised initially at fair value less attributable issue costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement within finance costs over the period of the borrowings on an effective interest basis. The fair values of trade and other receivables, loans and overdrafts and trade and other payables with a maturity of less than one year are assumed to approximate to their book values. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

Dividends

Final dividends payable to the Company’s shareholders are recognised in the Company’s financial statements in the period in which the dividends are approved by the Company’s shareholders. Interim dividends payable are recognised in the period in which the dividends are paid.

F-171


2. Summary of significant accounting policies (continued)

Share capital


Receivables

Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.



Payables

Payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Segmental reporting

The entire operations of the Company are considered part of a single segment.

F-172




The financial risk management of the Company is managed by the Group. The Company’s activities expose it to a variety of financial risks: market risk (including fair value interest rate risk and cashfow interest rate risk, credit risk and liquidity risk. The Company’s risk management is managed by the Group programme that focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by the Group’s treasury department under policies approved by the Group board of directors. Group treasury identifies, evaluates and hedges financial risks.

(a) Market risk

Cash flow and fair value interest rate risk

The Company has no interest bearing assets. The Company’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Company’s long-term borrowings are all fixed rate instruments which significantly reduces the Group’s exposure to interest rate risk.

(b) Credit risk

Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are dealt with in relation to placing cash deposits.

No credit limits were exceeded during the reporting period and management does not expect any losses from non-performance by counterparties. The main counterparties dealt with in the period include Lloyds Bank plc, The Royal Bank of Scotland plc and Barclays Bank plc.

The majority of receivables held by the Company are inter-company balances. Therefore, the credit risk of the Company is significantly reduced as these balances are supported by the Group.

F-173


(c) Liquidity risk

Liquidity risk is managed on a group basis.


Management monitors rolling forecasts of the Group’s liquidity reserve comprising borrowing facilities and cash and cash equivalents on the basis of expected cash flow. This is generally carried out at a local level in the operating companies of the Group in accordance with practice and limits set by the Group. In addition, the Group’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these.

The Company is party to a group cash pooling arrangement with other group companies. The Company does not settle transactions in cash, instead amounts are settled by other group companies on its behalf with a corresponding adjustment to inter-company receivables / payables.

The table below analyses the Company’s financial liabilities before issue costs into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Less than

1 year

£’m

Between 1

and 2 years

£’m

Between 2

and 5 years

£’m

Over 5 years

£’m

At 23 February 2013 Borrowing (before deduction of £11.3 issue costs) including interest payable

(43.9)

(43.9)

(562.4)

-

Trade and other payable (184.7) - - -

(228.6) (43.9) (562.4) -

At 1 March 2014 Borrowings (before deduction of £8.1m issue costs) including interest payable

(43.9) (43.9) (518.6) -

Trade and other payables (181.5) - -

(225.4) (43.9) (518.6) -

F-174




As at the 1 March 2014, the Company has not applied any estimates or assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

5. Net Finance Costs

2014

£’m

2013 £’m

Finance costs and similar charges: Interest payable on notes (44.7) (42.9) Amortization of finance costs: Notes costs (3.3) (3.2)

Finance costs (48.0) (46.1)

Finance income: Loan interest and other finance costs recharged to group companies

(48.0)

(46.1)

Finance income 48.0 46.1

Net finance costs - -


The directors’ remuneration for their services to the Company has been borne by a fellow group company.


The Company had no employees during the period (2013: none).


The audit fee for the Company amounting to £8,000 (2013: £8,000) is borne by a fellow group company. The total fee for the Group is £0.1m (2013: £0.l m). A detailed breakdown of all audit and non-audit fees payable to the auditor can be found in the financial statements of Missouri Topco Limited.

F-175


9. Income tax expense

Analysis of expense in the period

2014

£’m

2013 £’m

Total income tax expenses - -

The income tax expense for the period is equal to (2013: equal to) the rate of corporation tax in the UK of 23.10% (2013: 24.17%). The rate of corporation tax is based on a weighted average rate. The standard rate of corporation tax reduced from 24% to 23% on 1 April 2013 (26% to 24% on 1 April 2012).

2014

£’m

2013 £’m

Results before income tax - -

Result before income tax multiplied by a rate of corporation tax of 23.10 (2013: 24.17%)

- -

Effects of: Non taxable income (11.4) (11.4) Group relief surrendered 11.4 11.4

Total income tax expense in the period - -

Deferred income tax

The Company has no recognised or unrecognised deferred income tax assets or liabilities at either the end of the current or prior period.

F-176


10. Investments

Investment

in

subsidiaries

£’ m

Cost and net book value

At 26 February 2012 817.2Investment in subsidiary undertaking - At 23 February 2013 817.2

At 24 February 2013 817.2Investment in subsidiary undertaking -

At 1 March 2014 817.2

The Company holds 100% of the ordinary share capital of Matalan Limited. The principal activity of Matalan Limited is to act as a holding company and it is incorporated in England and Wales. The directors believe that the book value of the investment is supported by the underlying net assets and the future discounted cash flows of the trading subsidiaries of the investment. The investment has a coterminous year end with the Company.

The Company also has an indirect interest in the following subsidiary companies:

Name Principal activity Country of incorporation

% interest held and voting rights

Matalan Retail Limited Retail England and Wales 100 Jonmar Limited Property England and Wales 100 Matalan Travel Limited Travel services England and Wales 100 Matalan Investments Limited Holding company England and Wales 100 HP01 Nominees Limited Distribution England and Wales 100 Matalan Holding Company Limited Holding company England and Wales 100 Guild Acquisition Limited Non Trading England and Wales 100

11. Receivables – current

2014

£’m

2013£’m

Amounts owed by group undertakings 59.9 59.9 59.9 59.9

F-177


12. Financial liabilities - borrowings

2014

£’m

2013£’m

Non current Senior notes (net of £3.6m issue costs (2013: £4.7m)) maturity date 2017

(221.4) (220.3)

Senior secured notes (net of £4.5m issue costs (2013: £6.6m)) maturity date 2016

(245.5) (243.4)

(466.9) (463.7)

Borrowings are all denominated in sterling at 1 March 2014. The Company had no short-term borrowings during the period (2013: £nil).

The senior notes have a maturity value of £225m at a fixed interest rate of 9 5/8% per annum and the senior secured notes have a maturity value of £250m at a fixed interest rate of 8 7/8% per annum. A proportion of the senior notes are held by shareholders of the ultimate parent company (see note 18).

Security over the secured debt comprises a charge over substantially all of the property and assets of the Company and each guarantor. The guarantors are the ultimate parent company Missouri Topco Limited and fellow group entities Matalan Group Limited, Matalan Limited, Matalan Retail Limited and Matalan Holding Company Limited.

The Company is no longer exposed to interest rate risk. No interest rate swaps are held.


2014

£’m

2013£’m

Less than one year - - One to five years 475.0 475.0 475.0 475.0Issue costs (8.1) (11.3) 466.9 463.7

Current - - Non-current 466.9 463.7 466.9 463.7

13. Payables – current

2014

£’m

2013 £’m

Amounts owed to group undertakings (164.6) (168.7) Accruals and deferred income (16.9) (16.0)

(181.5) (184.7)

Amounts owed to group undertakings are repayable on demand and therefore presented as current.

F-178


14. Share capital

10p

‘A’ ordinary

shares

Number

Total

value

£’m

Issued and fully paid

At 1 March 2014 and 23 February 2013 218,688,222 21.9


The Company has entered into a cash pooling arrangement with other group companies. The Company does not settle transactions in cash, instead amounts are settled by other group companies on its behalf with a corresponding adjustment to inter-company receivables / payables.


An unlimited guarantee under a composite accounting agreement operates for all company bank accounts. Bank loans and overdrafts are secured by fixed and floating charges on all the assets of the Group.


The Company has a related party relationship with other group undertakings, its parent company and with its directors and executive officers. During the financial period the Company entered into transactions, in the ordinary course of business, with other related parties as follows:

2014

£’m

2013£’m

Transactions with group undertakings: Funds borrowed (43.9) (43.9)Interest receivable 48.0 46.1

4.1 2.2

Amounts owed to parent (290.6) (290.6)Amounts owed from group undertakings 185.9 181.8 The Company has entered into a cash pooling arrangement with other group companies.

The Company does not settle transactions in cash, instead amounts are settled by other group companies on its behalf with a corresponding adjustment to inter-company receivables / payables.

F-179


17. Related party transactions (continued)

Net liabilities settled by other group companies on behalf of the Company under the cash pooling arrangement are as follows:

2014

£’m

2013£’m

Transactions with subsidiary undertakings: Notes/ loan interest payments (43.9) (43.9) (43.9) (43.9) The Company considers the Hargreaves family to be the ultimate controlling party.

Key management is the directors of the Company. The directors’ remuneration for their services to the Company has been bourne by a fellow group company (refer to note 6).

18. Post balance sheet events

On 2 June 2014, Matalan Finance plc completed an issue of £342m first lien secured notes, over 5 years at a fixed rate of 6⅞% and an issue of £150m second lien secured notes, over 6 years at a fixed rate of 8⅞%. The proceeds were used to repay in full the Senior secured notes of £250m issued in 2011 and Senior notes of £225m issued in 2010.

19. Ultimate parent company

The directors regard Matalan Group Limited a company registered in England and Wales, as the immediate parent company. According to the register kept by the Company, Matalan Group Limited has a 100% interest in the equity capital of Matalan Finance plc at 1 March 2014. The directors regard Missouri Topco Limited, a company registered in Guernsey, as the ultimate parent company.

The Company regards the Hargreaves family as the ultimate controlling party throughout the period.

Missouri Topco Limited is the parent undertaking of the largest and smallest group of undertakings to consolidate these financial statements at 1 March 2014. The consolidated financial statements of Missouri Topco Limited are available from Matalan, Gillibrands Road, Skelmersdale, West Lancashire, WN8 9TB.

F-180

Registered No: 00045618


Condensed Consolidated Interim Financial Statements

13 weeks ended 31 May 2014

F-181


Contents Page

Results of operations .......................................................................................................................... 1

Condensed consolidated income statement ........................................................................................ 3

Statement of comprehensive income .................................................................................................. 4

Condensed consolidated balance sheet ............................................................................................... 5

Condensed consolidated cash flow statement ..................................................................................... 6

Condensed consolidated statement of changes in shareholders’ equity .............................................. 7

Notes to the financial statements ........................................................................................................ 9

F-182


Results of operations for the 13 weeks ended 31 May 2014

Revenue Revenue increased by 5.6% to £273.2m in the 13 week period ended 31 May 2014 (13 week period ended 25 May 2013: £258.6m; 53 week period ended 1 March 2014: £1,122.9m).

Cost of sales and gross profit Cost of sales increased by 2.9% to £239.9m in the 13 week period ended 31 May 2014 (13 week period ended 25 May 2013: £233.1m; 53 week period ended 1 March 2014: £1,001.3m).

Gross profit increased by 30.6% to £33.3m in the 13 week period ended 31 May 2014 (13 week period ended 25 May 2013: £25.5m; 53 week period ended 1 March 2014: £121.6m).

Gross profit as a percentage of revenue increased to 12.2% in the 13 weeks ended 31 May 2014 (13 week period ended 25 May 2013: 9.9%; 53 week period ended 1 March 2014: 10.8%).

Administrative expenses (including exceptional items) Administrative expenses (including exceptional items) increased by £3.0m to £17.1m in the 13 week period ended 31 May 2014 (13 week period ended 25 May 2013: £14.1m; 53 week period ended 1 March 2014: £62.2m).

Exceptional items of £0.3m were incurred in the 13 week period ended 31 May 2014 (13 week period ended 25 May 2013: £0.7m; 53 week period ended 1 March 2014: £6.9m).

Operating profit Operating profit pre exceptional items increased by £4.4m to £16.5m in the 13 week period ended 31 May 2014 (13 week period ended 25 May 2013: £12.1m; 53 week period ended 1 March 2014: £66.3m).

Net finance costs Net finance costs (excluding exceptional items) remained the same at £11.8m in the 13 week period ended 31 May 2014 (13 week period ended 25 May 2013: £11.8m; 53 week period ended 1 March 2014: £47.4m).

Taxation Taxation increased to £1.1m in the 13 week period ended 31 May 2014 (13 week period ended 25 May 2013: £0.2m; 53 week period ended 1 March 2014: £2.1m).

Profit/(loss) for the period The profit for the period was £3.3m in the 13 week period ended 31 May 2014 (13 week period ended 25 May 2013: £(0.6)m loss; 53 week period ended 1 March 2014: £9.9m profit).

F-183


Results of operations for the 13 weeks ended 31 May 2014 (continued)

Cash flow Cash flows from operating activities increased by £33.8m to £29.4m in the 13 week period ended 31 May 2014 (13 week period ended 25 May 2013: £(4.4)m; 53 week period ended 1 March 2014: £57.6m).

Net cash used in investing activities was £5.7m in the 13 week period ended 31 May 2014 (13 week period ended 25 May 2013: £6.3m; 53 week period ended 1 March 2014: £56.4m).

Cash increased by £0.4m in the 13 week period ended 31 May 2014 (13 week period ended 25 May 2013: £34.9m decrease; 53 weeks ended 1 March 2014: £48.8m decrease). The cash balance as at 31 May 2014 was £72.3m.

The cash balance of £72.3m does not include £10.0m of cash placed on deposit with one of the Group’s providers of forward contracts. The deposit is included within current and non current trade and other receivables and is fully accessible by September 2015 when the final forward contract matures.

Post balance sheet events On 2 June 2014, the Group completed an issue of £342m first lien secured notes, over 5 years at a fixed rate of 6 7/8%, and an issue of £150m second lien secured notes, over 6 years at a fixed rate of 8 7/8%. The proceeds were used to repay in full the Senior secured notes of £250m issued in 2011 and Senior notes of £225m issued in 2010.

On 2 June 2014, the Group entered into an amendment and restatement of the Revolving Credit Agreement with Lloyds Bank plc which resulted in the available facility increasing to £50.0m.

F-184


Condensed consolidated income statement

13 weeks

ended 31

May 2014



Note £’m £’m £’m

Revenue ............................................................................ 3 273.2 258.6 1,122.9

Cost of sales ...................................................................... 3 (239.9) (233.1) (1,001.3)

Gross profit ..................................................................... 3 33.3 25.5 121.6

Administrative expenses (including exceptional items) .... 3 (17.1) (14.1) (62.2)

Operating profit .............................................................. 3 16.2 11.4 59.4

Operating profit pre exceptional items .............................. 16.5 12.1 66.3

Exceptional items.............................................................. 13 (0.3) (0.7) (6.9)

Operating profit .............................................................. 16.2 11.4 59.4

Finance costs ..................................................................... (11.9) (12.0) (48.0)

Finance income ................................................................. 0.1 0.2 0.6

Net finance costs .............................................................. (11.8) (11.8) (47.4)

Profit before income tax and exceptional items ............ 4.7 0.3 18.9

Total exceptional items ..................................................... 13 (0.3) (0.7) (6.9)

Profit/(loss) before income tax ....................................... 4.4 (0.4) 12.0

Income tax ........................................................................ 5 (1.1) (0.2) (2.1)

Profit/(loss) for the period .............................................. 3.3 (0.6) 9.9

The notes on pages 9 to 18 form an integral part of this condensed consolidated interim financial information.

F-185


Statement of comprehensive income

13 weeks

ended 31

May 2014



£’m £’m £’m Profit/(loss) for the period ................................................................. 3.3 (0.6) 9.9

Other comprehensive income:

Cash flow hedges .............................................................................. 3.0 – (56.7)

Income tax element of cash flow hedges .......................................... (0.6) – 12.0

Total other comprehensive income, net of income tax ................. 2.4 – (44.7)

Total comprehensive income/(expenditure) .................................. 5.7 (0.6) (34.8)


F-186


Condensed consolidated balance sheet

31 May 2014 25 May 2013 1 March 2014


Assets

Property, plant and equipment ...................................... 175.0 150.3 176.6 Intangible assets ............................................................ 22.1 17.7 21.1 Deferred income tax asset ............................................. – 0.4 – Financial assets – derivative financial instruments ....... 7 0.1 1.4 – Trade and other receivables .......................................... 3.1 – 5.2

Total non-current assets ............................................. 200.3 169.8 202.9

Inventories – goods for resale ....................................... 139.0 151.8 135.3 Trade and other receivables .......................................... 37.3 26.6 28.4 Financial assets – derivative financial instruments 7 – 19.7 – Cash and cash equivalents ............................................ 72.3 85.8 71.9

Total current assets ..................................................... 248.6 283.9 235.6

Total assets .................................................................. 448.9 453.7 438.5

Liabilities Financial liabilities – derivative financial instruments .. 7 (27.5) – (26.2) Trade and other payables .............................................. (146.7) (151.4) (139.0) Current income tax liabilities ........................................ (3.1) (3.0) (3.0) Provisions for other liabilities and charges ................... 8 (4.1) (1.3) (4.1)

Total current liabilities (181.4) (155.7) (172.3)

Financial liabilities – borrowings .................................. 6 (467.8) (464.5) (466.9) Financial liabilities – derivative financial instruments .. 7 (8.6) (0.1) (13.2) Trade and other payables .............................................. (41.0) (39.1) (42.0) Deferred income tax liabilities ...................................... (1.1) (15.4) (0.6) Provisions for other liabilities and charges ................... 8 (2.7) (3.6) (3.0)

Total non-current liabilities ....................................... (521.2) (522.7) (525.7)

Total liabilities ............................................................. (702.6) (678.4) (698.0)

Net liabilities ................................................................ (253.7) (224.7) (259.5)

Shareholders’ deficit

Share capital ................................................................. 17.3 17.3 17.3 Share premium .............................................................. 385.6 385.6 385.6 Hedge reserve ............................................................... (27.0) 15.3 (29.4) Merger reserve .............................................................. (774.3) (774.3) (774.3) Warrant reserve ............................................................. 3.1 3.1 3.1 Capital redemption reserve ........................................... 5.7 5.7 5.7 Retained earnings .......................................................... 135.9 122.6 132.5

Total shareholders’ deficit ......................................... (253.7) (224.7) (259.5)


F-187


Condensed consolidated cash flow statement

13 weeks

ended 31

May 2014




Cash flows from operating activities ....................................

Cash generated ......................................................................... 9 29.4 (4.4) 57.6

Interest paid ............................................................................. (22.1) (22.2) (43.4)

Income tax paid........................................................................ (1.2) (2.0) (6.6)

Net cash generated from/(used in) operating activities ....... 6.1 (28.6) 7.6

Cash flows from investing activities

Purchases of property, plant and equipment ............................ (4.8) (3.9) (46.1)

Purchases of intangible assets .................................................. (1.1) (2.6) (10.9)

Interest received ....................................................................... 0.2 0.2 0.6

Net cash used in investing activities ...................................... (5.7) (6.3) (56.4)

Net increase/(decrease) in cash and cash equivalents .............. 0.4 (34.9) (48.8)

Cash and cash equivalents at the beginning of the period ........ 71.9 120.7 120.7

Cash and cash equivalents at the end of the period .................. 72.3 85.8 71.9


MATALAN FINANCE PLC

F-188


Condensed consolidated statement of changes in shareholders’ equity

Share

capital

Share

premium

Merger

Reserve

Hedge

reserve

Capital

redemption

reserve

Warrant

reserve

Retained

earnings

Total

reserves

£’m £’m £’m £’m £’m £’m £’m £’m

As at 24 February 2013 ................................................... 17.3 385.6 (774.3) 15.3 5.7 3.1 123.1 (224.2)

Comprehensive income:

Loss for period ................................................................ – – – – – – (0.6) (0.6)

Total loss for the period ................................................ – – – – – – (0.6) (0.6)

Other comprehensive income:

Cash flow hedges:

- fair value losses in the period ....................................... – – – (0.6) – – – (0.6)

- transfers to inventory .................................................... – – – 0.6 – – – 0.6

- income tax element of cash flow hedges ...................... – – – – – – – – Total cash flow hedges, net of income tax ...................... – – – – – – – – Total other comprehensive income .............................. – – – – – – – –

Transactions with owners:

Fair value charge for subscription for ‘B’ shares ............ – – – – – – 0.1 0.1

Total transactions with owners .................................... – – – – – – 0.1 0.1

As at 25 May 2013 ......................................................... 17.3 385.6 (774.3) 15.3 5.7 3.1 122.6 (224.7)

MATALAN FINANCE PLC

F-189


Condensed consolidated statement of changes in shareholders’ equity

Share

capital

Share

premium

Merger

Reserve

Hedge

reserve

Capital

redemption

reserve

Warrant

reserve

Retained

earnings

Total

reserves

£’m £’m £’m £’m £’m £’m £’m £’m

As at 2 March 2014

17.3 385.6 (774.3) (29.4) 5.7 3.1 132.5 (259.5)

Comprehensive income:

Profit for the period – – – – – – 3.3 3.3

Total profit for the period – – – – – – 3.3 3.3

Other comprehensive income: – – – – – – Cash flow hedges: - fair value gains in the period – – – 3.4 – – – 3.4 - transfers to inventory – – – (0.4) – – – (0.4) - income tax element of cash flow hedges – – – (0.6) – – – (0.6)

Total cash flow hedges, net of income tax – – – 2.4 – – – 2.4

Total other comprehensive income – – – 2.4 – – – 2.4

Transactions with owners: Fair value charge for subscription for `B’ shares – – – – – – 0.1 0.1

Total transactions with owners – – – – – – 0.1 0.1

As at 31 May 2014 17.3 385.6 (774.3) (27.0) 5.7 3.1 135.9 (253.7)

F-190


Notes to the financial statements


The Company is incorporated and domiciled in Guernsey, all subsidiary companies are incorporated and domiciled in the UK. The Company is limited by shares. The financial statements are presented in sterling, which is the Group’s functional and presentational currency. The Group’s principal place of business is Gillibrands Road, Skelmersdale, West Lancashire, WN8 9TB.

These condensed consolidated interim financial statements were approved for issue on 4 July 2014.



These condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the 53 weeks ended 1 March 2014, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and IFRIC interpretations.

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the 53 weeks ended 1 March 2014, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

There are no new IFRSs or IFRIC interpretations that are effective for the first time for this financial period that would be expected to have a material impact on the Group.

At the date of approval of these condensed consolidated interim financial statements, the IASB and IFRIC have issued new or amended standards and interpretations which were in issue but not effective for the financial period and not early adopted:



• IFRS 10 Consolidated Financial Statements (2011)

• IAS 27 Separate Financial Statements (2011)


• Amendments to IAS 39 Continuing hedge accounting after derivative novations

The Group intends to adopt the new standards and amendments no later than their applicable date, subject to endorsement by the EU.

F-191


Notes to the financial statements (continued)

3. Operating profit

13 weeks

ended 31

May 2014


53 weeks ended 1

March 2014

£’m £’m £’m

Revenue............................................................................ 273.2 258.6 1,122.9 Cost of goods sold ............................................................ (143.7) (142.3) (627.6) Selling expenses................................................................ (86.5) (82.4) (336.7) Distribution expenses ........................................................ (9.7) (8.4) (37.0)

Total cost of sales ............................................................ (239.9) (233.1) (1,001.3)

Gross profit ..................................................................... 33.3 25.5 121.6

Administrative expenses pre exceptional items ................ (16.8) (13.4) (55.3) Exceptional items (note 13) .............................................. (0.3) (0.7) (6.9

Administrative expenses ................................................... (17.1) (14.1) (62.2)

Operating profit ................................................................ 16.2 11.4 59.4

F-192



4. Segment Reporting

The chief operating decision-maker has been identified as the Board of Directors. The Directors consider there to be one operating and reportable segment, being that of the sale of clothing and homewares through out of town retail outlets, primarily through the Matalan fascia, in the United Kingdom.

Internal reports reviewed regularly by the Board provide information to allow the chief operating decision-maker to allocate resources and make decisions about the operations. The internal reporting focuses on the Group as a whole and does not identify individual segments. This set of condensed consolidated interim financial statements is therefore presented as a single reportable segment.

The chief operating decision-maker relies primarily on EBITDA before exceptional items to assess the performance of the Group and make decisions about resources to be allocated to the segment. This can be reconciled to statutory operating profit as follows:

13 weeks

ended 31

May 2014


53 weeks ended 1

March 2014

£’m £’m £’m Operating profit ......................................................................... 16.2 11.4 59.4

Depreciation ............................................................................... 6.4 5.5 22.6

Amortisation .............................................................................. 1.5 1.8 6.5

Exceptional items ....................................................................... 0.3 0.7 6.9

EBITDA .................................................................................... 24.4 19.4 95.4

Rent expense .............................................................................. 23.4 24.1 98.1

EBITDAR ................................................................................. 47.8 43.5 193.5

The performance of the Group is subject to seasonal peaks. The Group traditionally performs well during the late spring and early summer and over the Christmas season.

Whilst the e-commerce business represents a significant opportunity for future growth within the Group, it does not yet represent a significant portion of the operating results of the Group. E-commerce is therefore not reported as a separate operating segment by the Group for internal or external reporting purposes.

5. Income tax

Income tax for the 13 week period ended 31 May 2014 is charged at 26.3% (13 weeks ended 25 May 2013: 29.8%; 53 weeks ended 1 March 2014: 17.6%) of profit representing the best estimate of the effective annual income tax rate expected for the full year, applied to the pre-tax income for the 13 week period.

The total income tax charge for the quarter is higher than the UK rate of 21.0% at the end of May 2014. (May 2013: 23.0%, March 2014: 23.0%). The key reconciling items relate to non-deductible expenses.

F-193



6. Financial liabilities – borrowings

31 May 2014 25 May 2013 1 March 2014

£’m £’m £’m Non-current

Senior notes (net of £3.3m of issue costs (May 2013: £4.5m; March 2014: £3.6m)) ............................................... (221.7) (220.5) (221.4)

Senior secured notes (net of £3.9m of issue costs (May 2013: £6.0m, March 2014 £4.5m)) ................................................. (246.1) (244.0) (245.5)

(467.8) (464.5) (466.9)

Borrowings are all denominated in sterling as at 31 May 2014. The Group had no short term borrowings during any of the reported periods.

The Senior notes have a maturity value of £225m at a fixed interest rate of 9 5/8% per annum and the Senior secured notes have a maturity value of £250m at a fixed interest rate of 8 7/8% per annum. A proportion of the Senior notes are held by shareholders of the Company.

During a prior period, fees of £10.5m associated with the refinancing were incurred and are being amortised over the terms of the facilities.

On 2 June 2014, the Group completed an issue of £342m first lien secured notes, over 5 years at a fixed rate of 6 7/8%, and an issue of £150m second lien secured notes, over 6 years at a fixed rate of 8 7/8%. The proceeds were used to repay in full the Senior secured notes of £250m issued in 2011 and Senior notes of £225m issued in 2010.

Maturity of notes

31 May 2014 25 May 2013 1 March 2014

£’m £’m £’m

Less than one year .......................................... – – –

One to five years ............................................ 475.0 475.0 475.0 475.0 475.0 475.0

Issue costs ...................................................... (7.2) (10.5) (8.1)

467.8 464.5 466.9

Current ........................................................... – – –

Non-current .................................................... 467.8 464.5 466.9

467.8 464.5 466.9

F-194



6. Financial liabilities – borrowings (continued)


At 31 May 2014 the table below reflects the usage of the Revolving Credit Facilities (RCF). These facilities are subject to an annual review and incur fees at market rates.

31 May 2014 25 May 2013 1 March 2014

£’m £’m £’m

Letters of credit ................................................. 1.7 2.1 2.7

Guarantees ........................................................ 8.3 8.2 8.3

Unused .............................................................. 20.0 19.7 19.0

Total available .................................................. 30.0 30.0 30.0

An unlimited guarantee under a composite accounting agreement operates for all Group company bank accounts. Notes in issue as disclosed are guaranteed by the assets of the guarantor Group.

On 2 June 2014, the Group entered into an amendment and restatement of the Revolving Credit Agreement with Lloyds Bank plc which resulted in the available facility increasing to £50.0m



The total principal value of forward foreign exchange contracts at 31 May 2014 is £501.6m (25 May 2013: £550.1m; 1 March 2014: £556.6m).

The net fair value of losses as at 31 May 2014 on open forward foreign exchange contracts that hedge the foreign currency risk of purchases are £36.0m (25 May 2013: gains of £21.0m; 1 March 2014: losses of £39.4m). These are transferred at their current fair value as an inventory based adjustment on receipt of the underlying inventory.

F-195




Onerous

contracts

Dilapidations

provision Total

£’m £’m £’m

At 2 March 2014 .................................................................. (4.2) (2.9) (7.1) Utilised in the period ........................................................... 0.3 – 0.3

At 31 May 2014 ................................................................... (3.9) (2.9) (6.8)

31 May 2014 25 May 2013 1 March 2014

£’m £’m £’m

Analysis of total provisions: Non-current .......................................................................... (2.7) (3.6) (3.0) Current ................................................................................. (4.1) (1.3) (4.1) (6.8) (4.9) (7.1)

Two leases previously assigned to another retailer were returned to the Company in 2009 on privity of contract after they entered administration. A provision was created at that time to recognise that the leases were onerous and this was treated as exceptional in nature and is being released over the remaining life of the lease.

During a previous period a provision for an onerous lease was recognised on a property no longer used by the business. This provision was treated as exceptional in nature and is being released over the remaining life of the lease.

During the previous period, the Group established a provision for anticipated future dilapidations costs.

F-196

Missouri Topeo Limited


9. Cash flow from operating activities

Reconciliation of operating profit to net cash flow from operating activities:

13 weeks

ended

31 May 2014

13 weeks ended

25 May 2013

53 weeks ended 1

March 2014

£’m £’m £’m

Cash generated from operations

Operating profit .................................................................. 16.2 11.4 59.4

Adjustments for:

Depreciation ....................................................................... 6.4 5.5 22.6

Amortisation of intangibles ................................................ 1.5 1.8 6.5

Non cash exceptional items ................................................ – – 2.4

Share based compensation charge ...................................... 0.1 0.2 (0.5)

Hedge accounting ............................................................... – 0.1 0.3

Operating cash flows before movements in working

capital ............................................................................... 24.2 19.0 90.7

Movements in working capital:

(Increase)/decrease in inventories ...................................... (7.1) (10.5) 6.1

Increase in trade and other receivables .............................. (6.8) (3.6) (10.5)

Increase/(decrease) in trade and other payables ................. 19.1 (9.3) (28.7)

Net cash flows from operating activities ........................ 29.4 (4.4) 57.6

F-197




Net funds incorporate notes in issue, less cash and cash equivalents.

Net debt at 2 March 2014

Cash movements

Non cash movements

Net debt at

31 May 2014

£’m £’m £’m £’m

Cash and cash equivalents ................... 71.9 0.4 – 72.3

Debt due after 1 year ............................ (466.9) – (0.9) (467.8)

(395.0) 0.4 (0.9) (395.5)


An unlimited guarantee under a composite accounting agreement operates for all Group company bank accounts. Notes in issue as disclosed in note 6 are guaranteed by the assets of the guarantor Group.

F-198




The Group continues to lease a building in London from a company associated with the Hargreaves family. A portion of the building continues to be leased to companies associated with the Hargreaves family. The rental paid in the 13 week period ending 31 May 2014 was £0.2m (13 weeks ended 25 May 2013: £0.2m; 53 weeks ended 1 March 2014: £0.7m). The rental income in the 13 week period ending 31 May 2014 was £nil (13 weeks ending 25 May 2013: £0.1m; 53 weeks ended 1 March 2014: £0.3m). During a previous period, the buying team previously housed in this building was relocated to head office in Skelmersdale. The Group has no further current use for this building nor does it expect to for the remainder of the lease term. Therefore a provision was recognised in relation to the onerous element of this lease. This provision was treated as exceptional in nature and is being released over the remaining lease term (refer to note 13).

During a previous period the Group leased a new distribution centre from a company associated with the Hargreaves family. During the 13 week period ended 31 May 2014 the rental paid was £0.4m (13 weeks ended 25 May 2013: £0.3m; 53 weeks ended 1 March 2014: £1.1m). This company also provided construction services for the new distribution centre of £1.5m during the 13 week period ended 31 May 2014 (13 weeks ended 25 May 2013: £0.lm; 53 weeks ended 1 March 2014: £5.0m)

The Group purchased IT services from a company associated with the Hargreaves family. The expenditure incurred during the 13 week period ended 31 May 2014 was £0.2m (13 weeks ending 25 May 2013: £0.1m; 53 weeks ended 1 March 2014: £0.9m) of which £0.lm was outstanding at 31 May 2014 (25 May 2013: £0.3m; 1 March 2014: £0.6m).

The Group used the sourcing agency services of a company associated with the Hargreaves family. The expenditure incurred during the 13 week period ended 31 May 2014 was £0.2m (13 weeks ending 25 May 2013: £0.1m; 53 weeks ended 1 March 2014: £0.4m) of which £0.2m was outstanding at 31 May 2014 (25 May 2013: £0.lm; 1 March 2014: £nil).

The Group purchased clothing for resale from a company associated with the Hargreaves family. Purchases during the 13 week period ended 31 May 2014 was £0.lm (13 weeks ending 25 May 2013: £nil; 53 weeks ended 1 March 2014: £0.9m) of which £nil was outstanding at 31 May 2014 (25 May 2013: £nil; 1 March 2014: £nil).

The Group used the clothing design services of a company associated with the Hargreaves family. The expenditure incurred during the 13 week period ended 31 May 2014 was £nil (13 weeks ending 25 May 2013: £nil; 53 weeks ended I March 2014: £0.1m) of which £nil was outstanding at 31 May 2014 (25 May 2013: £nil; 1 March 2014: £0.1m).

The Group incurred costs relating to the Hargreaves family and associated companies. The expenditure incurred during the 13 week period ended 31 May 2014 was £nil (13 weeks ending 25 May 2013: £0.1m; 53 weeks ended 1 March 2014: £0.1m). £0.lm was paid by the Hargreaves family to the Group during the 13 weeks ended 31 May 2014.

All of the above transactions have taken place at levels not materially different to commercial terms.

F-199





13 weeks

ended 31

May 2014


53 weeks ended 1

March 2014

£’m £’m £’m

Restructuring costs ............................................................ – (0.7) (1.6)

Onerous contract provision ............................................... – – 0.5

Supply chain costs ............................................................. (0.3) – (1.1)

Dilapidations ..................................................................... – – (2.9)

Acceleration of IFRS2 charge ........................................... – – (1.8)

Total exceptional items ................................................... (0.3) (0.7) (6.9)

Restructuring costs

Restructuring costs of £nil were incurred in the 13 week period ended 31 May 2014 (13 week period 25 May 2013: £0.7m; 53 week period ended 1 March 2014: £1.6m).


During the 53 week period ended 1 March 2014 £0.5m of income was received from properties in respect of which onerous lease provisions are held in full. As the initial provision on these properties was created through exceptional items, the corresponding offsetting income was also recognised as exceptional.

Supply chain costs Supply chain costs of £0.3m were incurred in the 13 week period ended 31 May 2014 (13 week period 25 May 2013: £nil; 53 week period ended 1 March 2014: £1.1m). Supply chain costs relate to the redevelopment of the Group’s southern distribution centre.

Dilapidations

During the 53 week period ended 1 March 2014, the Group established a provision for anticipated future dilapidations costs.

Acceleration of IFRS 2 charge During the 53 week period ended 1 March 2014, an acceleration of the IFRS 2 charge resulted from the resignation of Darren Blackhurst as a director of the board.

ISSUER

Registered Office of the Issuer

Matalan Finance plc Gillibrands Road

Skelmersdale West Lancashire WN8 9TB

United Kingdom

Initial Purchasers Joint Global Co-ordinators

Lloyds Bank

Morgan Stanley

Bookrunner

Barclays

Legal Advisors to the Issuer

as to U.S. law as to English law

Cahill Gordon & Reindel LLP Augustine House 6A Austin Friars

London EC2N 2HA United Kingdom


United Kingdom

Legal Advisors to the Initial Purchasers

as to U.S. law as to English law

Latham & Watkins 99 Bishopsgate

London EC2M 3XF United Kingdom

Latham & Watkins 99 Bishopsgate

London EC2M 3XF United Kingdom

Independent Auditors

KPMG LLP St James’ Square

Manchester M2 3DL United Kingdom

Trustee Transfer Agent and Paying Agent Luxembourg Listing Agent,

Registrar and Transfer Agent Deutsche Trustee

Company Limited Winchester House

1 Great Winchester Street London EC2N 2DB

United Kingdom

Deutsche Bank AG,

London Branch Winchester House

1 Great Winchester Street London EC2N 2DB

United Kingdom

Deutsche Bank Luxembourg S.A. 2, boulevard Konrad Adenauer

L-1115 Luxembourg Luxembourg

Legal Advisor to the Trustee

White & Case LLP 5 Old Broad Street

London EC2N 1DW United Kingdom

Matalan Finance plc

£342,000,000

6⅞% First Lien Secured Notes due 2019

£150,000,000

8⅞% Second Lien Secured Notes due 2020

_

OFFERING CIRCULAR

May 16, 2014

_

Joint Global Coordinators

Lloyds Bank Morgan Stanley

Bookrunner

Barclays

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